QNB Corp. Reports Earnings for Second Quarter 2024


QUAKERTOWN, Pa., July 23, 2024 (GLOBE NEWSWIRE) -- QNB Corp. (the “Company” or “QNB”) (OTC Bulletin Board: QNBC), the parent company of QNB Bank (the “Bank”), reported net income for the second quarter of 2024 of $2,465,000, or $0.67 per share on a diluted basis. This compares to net income of $1,887,000, or $0.52 per share on a diluted basis, for the same period in 2023. For the six months ended June 30, 2024, QNB reported net income of $5,059,000, or $1.38 per share on a diluted basis. This compares to net income of $6,005,000, or $1.67 per share on a diluted basis, reported for the same period in 2023.

For the quarter ended June 30, 2024, the annualized rate of return on average assets and average shareholders’ equity was 0.55% and 6.14%, respectively, compared with 0.44% and 4.90%, respectively, for the second quarter 2023.

The operating performance of the Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter ended June 30, 2024, in comparison with the same period in 2023, due primarily to improvement in the interest margin causing a $1,246,000 increase in net interest income, decreased provision for credit losses on loans and unfunded commitments of $95,000; and an increase in non-interest income of $172,000; this was partly offset by an increase in non-interest expense of $479,000. The change in contribution from QNB Corp. for the quarter ended June 30, 2024, compared with the same period in 2023, is primarily due to less gains on sales from the equities portfolio held at the holding company.

The following table presents disaggregated net income:

 Three months ended,     Six months ended,    
 6/30/2024  6/30/2023  Variance  6/30/2024  6/30/2023  Variance 
QNB Bank$2,741,000  $1,947,000  $794,000  $5,072,000  $6,234,000  $(1,162,000)
QNB Corp (276,000)  (60,000)  (216,000)  (13,000)  (229,000)  216,000 
Consolidated net income$2,465,000  $1,887,000  $578,000  $5,059,000  $6,005,000  $(946,000)
                        

Total assets as of June 30, 2024 were $1,761,487,000 compared with $1,706,318,000 at December 31, 2023. Total available-for-sale debt securities decreased $29,763,000, or 6.1%, to $460,418,000, primarily due to sales of lower yielding securities and payments. Loans receivable increased $68,777,000, or 6.3%, to $1,162,310. Total deposits increased $84,126,000, or 5.7%, to $1,572,839,000. Short-term borrowing declined $45,028,000, or 47.9%.

“I am pleased with the improved operating performance of the bank; we registered the highest quarterly net interest income since 2022, stated David W. Freeman, President and Chief Executive Officer. Freeman continued, “We believe we have reached an equilibrium in deposit rates offered, and as our floating rate loans continue to reprice at higher rates, we will benefit from this trend.” Freeman stated, “We continue to see good deposit and loan growth, which points to our stable market area and customer base. Last, we took the strategic opportunity to better position our Company’s future earnings by selling lower-yielding securities in the quarter at a $1,096,000 loss and reinvesting the proceeds in higher-yielding assets. The loss was offset by an unrealized gain of $1,354,000 million for the exchange of Visa C-shares.”

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended June 30, 2024 totaled $10,592,000, an increase of $1,259,000, from the same period in 2023. Net interest margin was 2.46% for the second quarter of 2024 and 2.27% for the same period in 2023. Net interest margin was 2.43% for the six months ended June 30, 2024, compared with 2.41% for the same period in 2023.  

The yield on earning assets was 4.70% for the second quarter 2024, compared with 3.83% in the second quarter of 2023; an increase of 87 basis points. For the six-month period ended June 30, 2024, yield on earning assets was 4.64%, compared with 3.80% for the same period in 2022.  The cost of interest-bearing liabilities was 2.73% for the quarter ended June 30, 2024, compared with 1.96% for the same period in 2023, an increase of 77 basis points. For the six-month period ended June 30, 2024, the cost of interest-bearing liabilities was 2.70% compared with 1.75% for the same period in 2023,

Proceeds from the growth in average deposits and proceeds from the sale and payments received on investment securities over the past year were invested in loans and other interest earning assets, and used to pay down short-term borrowings. Loan growth was primarily in commercial real estate, which comprised 46% of average earning assets in the second quarter of 2024 compared with 42% for the same period in 2023, and the increases in both rates and volume in commercial real estate loans majorly contributed to the 62 basis-point increase in the yield on loans. The decline in the available-for-sale portfolio was primarily in mortgage-backed securities, which comprised 20% of average earnings assets in the second quarter of 2024 compared with 24% for the same period in 2023. The 88-basis point increase in rate on investments was primarily due to the impact of the interest rate swaps entered into at the end of the second quarter of 2023, contributing to the increase in net interest margin. The 90 basis-point increase in the rate paid on deposits was the primary contributor to the increase in the cost of funds of 77 basis points.

Asset Quality, Provision for Credit Losses on Loans and Allowance for Credit Losses

QNB recorded $132,000 in provision for credit losses on loans in the second quarter of 2024 compared to $212,000 in provision in the second quarter of 2023. QNB's allowance for credit losses on loans of $8,858,000 represents 0.76% of loans receivable at June 30, 2024, compared to $8,852,000, or 0.81% of loans receivable at December 31, 2023. Net loan charge-offs were $12,000 for the quarter ended June 30, 2024, compared with $38,000 for the same period in 2023. Annualized net loan charge-offs for the quarter ended June 30, 2024 were 0.00% and 0.01% for the quarter ended June 30, 2023, of average loans receivable, respectively. Net loan charge-offs were $33,000 for the six months ended June 30, 2024, compared with recoveries of $494,000 for the same period in 2023 were primarily due to two large commercial customers. Annualized net loan charge-offs for the six months ended June 30, 2024 were 0.01% compared to annualized net recoveries of 0.10% for the same period in 2023, of average loans receivable, respectively.

Total non-performing loans, which represent loans on non-accrual status, loans past due 90 days or more and still accruing interest and modified loans, were $2,078,000, or 0.18% of loans receivable at June 30, 2024, compared with $1,940,000, or 0.18% of loans receivable at December 31, 2023. In cases where there is a collateral shortfall on non-accrual loans, specific reserves have been established based on updated collateral values even if the borrower continues to pay in accordance with the terms of the agreement. At June 30, 2024, $1,188,000, or approximately 57% of the loans classified as non-accrual, are current or past due less than 30 days. Commercial loans classified as substandard or doubtful loans totaled $32,710,000 at June 30, 2024, compared with $11,747,000 at December 31, 2023; these were comprised primarily of commercial real estate loans. The increase was primarily to two commercial relationships being downgraded to the Bank's "Special Mention" risk category.

Non-Interest Income

Total non-interest income was $1,465,000 for the second quarter of 2024 compared with $1,580,000 for the same period in 2023. There was a net realized loss of $1,096,000 on the sale of investments for the quarter ended June 30, 2024 compared to a net gain of $519,000 on the sales of securities in the same period in 2023. Unrealized net gain on investment equity securities was $1,016,000 for the quarter ended June 30, 2024 compared to a net loss of $573,000 for the same period in 2023. During the second quarter of 2024 the Bank sold lower yielding securities to better position its net interest margin. The Bank also completed the exchange offer to convert its Visa B-1 shares to B-2 and C shares; the Bank recorded a $1,354,000 unrealized gain on the Visa C shares.

Fees for service to customers increased $13,000 for the quarter ended June 30, 2024, as overdraft fees decreased $5,000 and other deposit-related fees increased $18,000. Retail brokerage and advisory income decreased $76,000 to $126,000 for the same period, due to a decrease in customer balances following employee turnover. Merchant fees decreased $23,000 for the same period due to volume.

For the six months ended June 30, 2024, non-interest income was $3,301,000 an increase of $502,000 compared to the same period in 2023, primarily due to the change in fair value of the equities portfolio of $1,502,000; primarily related to the Visa stock conversion discussed above.  Realized loss on sale of securities was $719,000, a decline of $773,000 for the six months ended June 30, 2024, compared with the same period in 2023.  Net gain on sale of loans increased $12,000 when comparing the six months ended June 30, 2024 with the same period in 2023. Increases in non-interest income for the six months ended June 30, 2024 compared to the same period in 2023 comprise: fees for services to customers and bank-owned life insurance which increased $31,000 and $8,000, respectively. Decreases in non-interest income comprised: ATM and debit card fees, retail brokerage and advisory income, and merchant income which decreased $22,000, $217,000 and $17,000. Other non-interest income decreased $22,000 due primarily to mortgage servicing fees and letter of credit fees.    

Non-Interest Expense

Total non-interest expense was $8,934,000 for the second quarter of 2024 compared with $8,492,000 for the same period in 2023. Salaries and benefits expense increased $263,000, or 5.5%, to $5,038,000 when comparing the two quarters. Salary expense and related payroll taxes increased $118,000, or 3.0%, to $4,097,000 during the second quarter of 2024 compared to the same period in 2023. Benefits expense increased $145,000, or 18.2%, when comparing the two periods primarily due to medical costs.

Net occupancy and furniture and equipment expense increased $14,000, or 1.0%, to $1,481,000 for the second quarter of 2024 primarily due to software maintenance costs partly offset by a reduction in depreciation expense. Other non-interest expense increased $165,000, or 7.3%, when comparing second quarter of 2024 with the same period in 2023 due to an increase in Bank shares tax of $156,000, due to the timing of tax credits received, the recording of a potential expense of $85,000 related to the Visa stock exchange make-whole agreement, an increase of $67,000 in debit card expense, an increase in FDIC insurance of $46,000, an increase in third-party services of $25,000, partly offset by decreases in telephone, postage and supplies of $10,000, an increase in marketing expense of $31,000 and a reduction in write-offs due to fraud on customer accounts of $146,000 as the Bank was able to recover some losses from prior periods.

For the six months ended June 30, 2024, non-interest expense was $17,767,000, an increase of $1,075,000, or 6.4%, compared to the same period in 2023.

Provision for income taxes increased $219,000 to $544,000 in the second quarter of 2024 due to increased pre-tax income, compared with the same period in 2023. The effective tax rates for the quarter ended June 30, 2024 was 18.1% compared with 14.7% for the same period in 2023. The effective tax rates for the six months ended June 30, 2024 was 19.3% compared with 19.4% for the same period in 2023.

About the Company

QNB Corp. is the holding company for QNB Bank, which is headquartered in Quakertown, Pennsylvania. QNB Bank currently operates twelve branches in Bucks, Montgomery and Lehigh Counties and offers commercial and retail banking services in the communities it serves. In addition, the Company provides securities and advisory services under the name of QNB Financial Services through a registered Broker/Dealer and Registered Investment Advisor, and title insurance as a member of Laurel Abstract Company LLC. More information about QNB Corp. and QNB Bank is available at QNBBank.com.

Forward Looking Statement

This press release may contain forward-looking statements as defined in the Private Securities Litigation Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various factors. Such factors include the possibility that increased demand or prices for the Company’s financial services and products may not occur, changing economic and competitive conditions, technological developments, and other risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission, including "Item lA. Risk Factors," set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release.

 


QNB Corp. 
Consolidated Selected Financial Data (unaudited) 
(Dollars in thousands)          
Balance Sheet (Period End)6/30/24 3/31/24 12/31/23 9/30/23 6/30/23 
Assets$1,761,487 $1,716,081 $1,706,318 $1,684,392 $1,650,586 
Cash and cash equivalents 76,909  50,963  62,657  55,141  34,824 
Investment securities          
Debt securities, AFS 460,418  481,596  490,181  505,390  527,741 
Equity securities 7,233  6,217  5,910  4,765  5,424 
Loans held-for-sale 786    549  446  810 
Loans receivable 1,162,310  1,122,616  1,093,533  1,060,450  1,029,744 
Allowance for loan losses (8,858) (8,738) (8,852) (8,542) (8,365)
Net loans 1,153,452  1,113,878  1,084,681  1,051,908  1,021,379 
Deposits 1,572,839  1,536,188  1,488,713  1,483,333  1,449,765 
Demand, non-interest bearing 190,333  188,260  185,098  192,226  212,396 
Interest-bearing demand, money market and savings 1,003,813  990,451  988,634  1,000,921  962,042 
Time 378,693  357,477  314,981  290,186  275,327 
Short-term borrowings 49,066  55,088  94,094  96,703  90,845 
Long-term debt 30,000  20,000  20,000  20,000  20,000 
Shareholders' equity 96,885  93,686  90,824  74,081  80,945 
           
Asset Quality Data (Period End)          
Non-accrual loans$2,078 $2,001 $1,940 $1,893 $4,794 
Loans past due 90 days or more and still accruing          
Non-performing loans 2,078  2,001  1,940  1,893  4,794 
Other real estate owned and repossessed assets          
Non-performing assets$2,078 $2,001 $1,940 $1,893 $4,794 
           
Allowance for loan losses$8,858 $8,738 $8,852 $8,542 $8,365 
           
Non-performing loans / Loans excluding held-for-sale 0.18% 0.18% 0.18% 0.18% 0.47%
Non-performing assets / Assets 0.12% 0.12% 0.11% 0.11% 0.29%
Allowance for loan losses / Loans excluding held-for-sale 0.76% 0.78% 0.81% 0.81% 0.81%



QNB Corp.
Consolidated Selected Financial Data (unaudited)
(Dollars in thousands, except per share data)Three months ended, Six months ended,
For the period:6/30/243/31/2412/31/239/30/236/30/23 6/30/246/30/23
Interest income$20,345 $19,569 $19,257 $18,497 $15,865  $39,914 $31,328 
Interest expense 9,753  9,401  9,065  8,284  6,532   19,154  11,578 
Net interest income 10,592  10,168  10,192  10,213  9,333   20,760  19,750 
Provision for credit losses 114  (86) 293  459  209   28  (1,596)
Net interest income after provision for credit losses 10,478  10,254  9,899  9,754  9,124   20,732  21,346 
Non-interest income:        
Fees for services to customers 427  420  414  421  414   847  816 
ATM and debit card 705  636  687  685  704   1,341  1,363 
Retail brokerage and advisory income 126  93  207  219  202   219  436 
Net realized (loss) gain on investment securities (1,096) 377  (2,262) 131  519   (719) 54 
Unrealized gain (loss) on equity securities 1,016  (30) 904  (138) (573)  986  (516)
Net gain on sale of loans (2) 15  11  4  (5)  13  1 
Other 289  325  322  433  319   614  645 
Total non-interest income 1,465  1,836  283  1,755  1,580   3,301  2,799 
Non-interest expense:        
Salaries and employee benefits 5,038  4,974  4,717  4,971  4,775   10,012  9,338 
Net occupancy and furniture and equipment 1,481  1,515  1,477  1,504  1,467   2,996  2,844 
Other 2,415  2,344  2,552  2,196  2,250   4,759  4,510 
Total non-interest expense 8,934  8,833  8,746  8,671  8,492   17,767  16,692 
Income before income taxes 3,009  3,257  1,436  2,838  2,212   6,266  7,453 
Provision for income taxes 544  663  302  494  325   1,207  1,448 
Net income$2,465 $2,594 $1,134 $2,344 $1,887  $5,059 $6,005 
         
Share and Per Share Data:        
Net income - basic$0.67 $0.71 $0.31 $0.65 $0.52  $1.38 $1.67 
Net income - diluted$0.67 $0.71 $0.31 $0.65 $0.52  $1.38 $1.67 
Book value$26.34 $25.57 $24.86 $20.35 $22.42  $26.34 $22.42 
Cash dividends$0.37 $0.37 $0.37 $0.37 $0.37  $0.74 $0.74 
Average common shares outstanding -basic 3,665,695  3,655,176  3,642,096  3,613,230  3,598,545   3,660,435  3,593,482 
Average common shares outstanding -diluted 3,665,695  3,655,176  3,642,096  3,613,230  3,598,545   3,660,435  3,593,482 
Selected Ratios:        
Return on average assets 0.55% 0.59% 0.25% 0.52% 0.44%  0.57% 0.70%
Return on average shareholders' equity 6.14% 6.53% 2.83% 5.88% 4.82%  6.34% 7.78%
Net interest margin (tax equivalent) 2.46% 2.39% 2.36% 2.38% 2.27%  2.43% 2.41%
Efficiency ratio (tax equivalent) 73.26% 72.73% 82.38% 71.59% 76.77%  73.00% 73.06%
Average shareholders' equity to total average assets 8.97% 8.98% 8.93% 8.91% 9.12%  8.98% 9.06%
Net loan charge-offs (recoveries)$12 $21 $(19)$275 $38  $33 $(494)
Net loan charge-offs (recoveries) - annualized / Average loans excluding held-for-sale 0.00% 0.01% -0.01% 0.10% 0.01%  0.01% -0.10%
Balance Sheet (Average)        
Assets$1,798,040 $1,778,585 $1,779,627 $1,773,138 $1,719,368  $1,788,312 $1,719,268 
Investment securities (AFS & Equities) 569,135  578,615  604,292  624,423  636,110   573,876  642,635 
Loans receivable 1,139,874  1,108,836  1,072,616  1,039,170  1,026,881   1,124,354  1,024,088 
Deposits 1,542,661  1,497,692  1,490,244  1,488,632  1,427,238   1,520,176  1,421,035 
Shareholders' equity 161,340  159,739  158,987  158,063  156,890   160,539  155,704 



QNB Corp. (Consolidated) 
Average Balances, Rate, and Interest Income and Expense Summary (Tax-Equivalent Basis) 
              
 Three Months Ended 
 June 30, 2024  June 30, 2023 
 Average Average    Average Average   
 Balance Rate Interest  Balance Rate Interest 
Assets             
Investment securities:             
U.S. Treasury$6,824  5.19%$88  $3,398  4.81%$41 
U.S. Government agencies 84,558  1.17  246   101,945  1.11  283 
State and municipal 107,881  3.51  947   109,345  2.38  651 
Mortgage-backed and CMOs 356,650  2.73  2,436   406,442  1.76  1,786 
Corporate debt securities and mutual funds 6,721  5.72  96   6,625  4.42  73 
Equities 6,501  3.55  57   8,355  4.65  97 
Total investment securities 569,135  2.72  3,870   636,110  1.84  2,931 
Loans:             
Commercial real estate 801,691  5.46  10,876   696,223  4.72  8,201 
Residential real estate 108,693  4.07  1,106   107,402  3.66  984 
Home equity loans 65,575  6.83  1,114   57,601  6.44  925 
Commercial and industrial 142,174  7.60  2,686   142,438  7.14  2,538 
Consumer loans 3,781  7.50  71   3,918  7.22  70 
Tax-exempt loans 18,284  3.87  176   19,742  3.50  172 
Total loans, net of unearned income* 1,140,198  5.65  16,029   1,027,324  5.03  12,890 
Other earning assets 43,200  5.44  584   11,555  6.69  192 
Total earning assets 1,752,533  4.70  20,483   1,674,989  3.83  16,013 
Cash and due from banks 13,313       13,547     
Allowance for loan losses (8,885)      (8,297)    
Other assets 41,079       39,129     
Total assets$1,798,040      $1,719,368     
              
Liabilities and Shareholders' Equity             
Interest-bearing deposits:             
Interest-bearing demand$334,017  0.84% 702  $305,067  0.43% 325 
Municipals 132,762  4.81  1,587   114,965  4.36  1,251 
Money market 229,984  3.58  2,049   175,243  2.39  1,044 
Savings 290,172  1.28  924   359,733  1.22  1,093 
Time < $100 170,640  4.03  1,708   111,455  2.27  631 
Time $100 through $250 143,315  4.59  1,636   109,462  3.49  953 
Time > $250 53,316  4.63  614   38,005  2.82  267 
Total interest-bearing deposits 1,354,206  2.74  9,220   1,213,930  1.84  5,564 
Short-term borrowings 52,383  1.52  199   108,117  2.90  783 
Long-term debt 28,132  4.70  334   16,813  4.35  185 
Total interest-bearing liabilities 1,434,721  2.73  9,753   1,338,860  1.96  6,532 
Non-interest-bearing deposits 188,455       213,308     
Other liabilities 13,524       10,310     
Shareholders' equity 161,340       156,890     
Total liabilities and             
shareholders' equity$1,798,040      $1,719,368     
Net interest rate spread   1.97%      1.87%  
Margin/net interest income   2.46%$10,730     2.27%$9,481 
Tax-exempt securities and loans were adjusted to a tax-equivalent basis and are based on the Federal corporate tax rate of 21% 
Non-accrual loans and investment securities are included in earning assets. 
* Includes loans held-for-sale 


QNB Corp. (Consolidated) 
Average Balances, Rate, and Interest Income and Expense Summary (Tax-Equivalent Basis) 
              
 Six Months Ended 
 June 30, 2024  June 30, 2023 
 Average Average    Average Average   
 Balance Rate Interest  Balance Rate Interest 
Assets             
Investment securities:             
U.S. Treasury$6,803  5.26%$178  $1,842  4.57%$42 
U.S. Government agencies 84,755  1.17  494   101,944  1.11  566 
State and municipal 108,027  3.46  1,871   110,243  2.31  1,272 
Mortgage-backed and CMOs 361,317  2.66  4,809   411,760  1.69  3,471 
Corporate debt securities and mutual funds 6,714  5.66  190   6,631  4.41  146 
Equities 6,260  3.63  113   10,215  3.91  198 
Total investment securities 573,876  2.67  7,655   642,635  1.77  5,695 
Loans:             
Commercial real estate 788,413  5.40  21,176   688,959  4.63  15,803 
Residential real estate 108,808  2.00  2,172   106,555  1.80  1,921 
Home equity loans 63,922  6.82  2,169   57,126  6.34  1,795 
Commercial and industrial 141,233  7.55  5,301   147,568  7.70  5,634 
Consumer loans 3,712  7.80  144   4,003  6.97  138 
Tax-exempt loans 18,462  3.85  353   20,164  3.49  349 
Total loans, net of unearned income* 1,124,550  5.60  31,315   1,024,375  5.05  25,640 
Other earning assets 44,922  5.48  1,223   9,290  6.32  291 
Total earning assets 1,743,348  4.64  40,193   1,676,300  3.80  31,626 
Cash and due from banks 13,041       13,216     
Allowance for loan losses (8,916)      (9,113)    
Other assets 40,839       38,865     
Total assets$1,788,312      $1,719,268     
              
Liabilities and Shareholders' Equity             
Interest-bearing deposits:             
Interest-bearing demand$327,961  0.82% 1,345  $311,306  0.41% 627 
Municipals 132,325  4.81  3,164   113,468  4.13  2,326 
Money market 228,928  3.57  4,064   153,058  1.83  1,386 
Savings 294,262  1.28  1,873   382,775  1.14  2,170 
Time < $100 164,175  3.90  3,181   106,360  1.92  1,013 
Time $100 through $250 135,464  4.47  3,013   103,570  3.27  1,680 
Time > $250 51,536  4.43  1,136   32,894  2.39  390 
Total interest-bearing deposits 1,334,651  2.68  17,776   1,203,431  1.61  9,592 
Short-term borrowings 69,912  2.37  824   121,443  2.95  1,778 
Long-term debt 24,066  4.56  554   11,354  3.64  208 
Total interest-bearing liabilities 1,428,629  2.70  19,154   1,336,228  1.75  11,578 
Non-interest-bearing deposits 185,525       217,604     
Other liabilities 13,619       9,732     
Shareholders' equity 160,539       155,704     
Total liabilities and             
shareholders' equity$1,788,312      $1,719,268     
Net interest rate spread   1.94%      2.05%  
Margin/net interest income   2.43%$21,039     2.41%$20,048 
Tax-exempt securities and loans were adjusted to a tax-equivalent basis and are based on the Federal corporate tax rate of 21% 
Non-accrual loans and investment securities are included in earning assets. 
* Includes loans held-for-sale             
 

Coordonnées