QNB Corp. Reports Earnings For Fourth Quarter 2019
QUAKERTOWN, Pa., Jan. 30, 2020 /PRNewswire/ -- QNB Corp. (the "Company" or "QNB") (OTC Bulletin Board: QNBC), the parent company of QNB Bank (the "Bank"), reported net income for the quarter of 2019 of $2,745,000, or $0.78 per share on a diluted basis. This compares to net income of $2,327,000, or $0.67 per share on a diluted basis, for the same period in 2018. For the twelve months ended December 31, 2019, QNB reported net income of $12,357,000, or $3.53 per share on a diluted basis. This compares to net income of $11,335,000, or $3.25 per share on a diluted basis, reported for the same period in 2018.
For the quarter ended December 31, 2019, the annualized rate of return on average assets and average shareholders' equity was 0.88% and 9.06%, respectively, compared with 0.78%% and 8.29%, respectively, for the fourth quarter 2018. For the twelve months ended December 31, 2019, the return on average assets and average shareholders' equity was 1.02% and 10.58%, respectively, compared with 0.96% and 10.47%, respectively, for the same period in 2018.
QNB is pleased to report increased net income and earnings per share for the quarter, and record net income and earnings per share for the year ended December 31, 2019. Loan, deposit and household growth remained strong throughout 2019. In addition to opening a 12th location -- our Allentown Office late in the third quarter -- in December we relocated our full-service branch within the Pennsburg Square Shopping Center to a free-standing pad site in the same center. Our newly named Upper Perkiomen Valley Office provides improved visibility and convenience of access to customers.
Net Interest Income and Net Interest Margin
Net interest income for the quarter and twelve months ended December 31, 2019 totaled $9,165,000 and $36,294,000, respectively, an increase of $345,000 and $1,279,000, respectively, from the same periods in 2018. The net interest margin for the fourth quarter of 2019 and 2018 was 3.11%. Net interest margin for the twelve months ended December 31, 2019 was 3.16%, an increase of three basis point compared to the same period in 2018. The yield on average earning assets increased one basis point to 3.92% for the fourth quarter of 2019, compared with the fourth quarter of 2018. For the twelve months ended December 31, 2019, the yield on average earning assets was 4.02%, compared with 3.85% for the same period in 2018. The cost of interest-bearing liabilities increased to 1.02% and 1.07% for the quarter and twelve months ended December 31, 2019, respectively, compared with 1.01% and 0.88% for the same periods in 2018.
Asset Quality, Provision for Loan Loss and Allowance for Loan Loss
QNB recorded a $375,000 provision for loan losses in the fourth quarter of 2019, compared with $187,000 for the same period in 2018. For the twelve months ended December 31, 2019 and 2018, QNB recorded $1,300,000 and $1,130,000, respectively, in provision for loan losses. QNB's allowance for loan losses of $9,887,000 represents 1.20% of loans receivable at December 31, 2019 compared to $8,834,000, or 1.12% of loans receivable at December 31, 2018. Net loan charge-offs were $247,000 for 2019, or 0.03% of total average loans, compared with net charge-offs of $137,000, or 0.02% of total average loans, for the same periods in 2018.
Total non-performing loans, which represent loans on non-accrual status, loans past due 90 days or more and still accruing interest and restructured loans were $16,464,000, or 2.01% of loans receivable at December 31, 2019, compared with $9,638,000, or 1.23% of loans receivable at December 31, 2018. In cases where there is a collateral shortfall on impaired loans, specific impairment 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 December 31, 2019, $7,245,000, or approximately 62% of the loans classified as non-accrual are current or past due less than 30 days. At December 31, 2019 commercial substandard or doubtful loans totaled $15,922,000, compared with $18,339,000 reported at December 31, 2018.
Non-Interest Income
Total non-interest income was $2,210,000 for the fourth quarter of 2019, an increase of $2,066,000 compared with the same period in 2018, due largely to combined realized and unrealized net gains on investment securities totaling $696,000 in 2019 compared to a loss of $1,252,000 in 2018. Non-interest income for the twelve months ended December 31, 2019 was $8,317,000, an increase of $3,425,000, or 70.0%, compared to the same period in 2018, of which $2,937,000 is attributable to increased realized and unrealized investment gains. ATM and debit card income increased $46,000 due to increased card activity when comparing the two quarterly periods. Retail brokerage income increased $75,000 due to increased penetration due to increased assets under management. Net gain on sale of loans increased $60,000, due to increased mortgage loan originations and secondary market sales, the result of lower interest rates in the fourth quarter 2019. Fees for services to customers declined $7,000 during fourth quarter 2019 compared to fourth quarter 2018, due to less overdraft income and service charges on deposits accounts. Other non-interest income declined $56,000, due primarily to a reduction in income for sale of checks, and disposal of fixed assets related to the relocation of the Pennsburg location.
Non-Interest Expense
Total non-interest expense was $7,632,000 for the fourth quarter of 2019, increasing $843,000, or 12.4%, from $6,789,000 for the same period in 2018. For the twelve months ended December 31, 2019, non-interest expense increased $2,219,000, or 8.6%, from the same period in 2018. Salaries and benefits expense increased $625,000, or 16.3%, to $4,452,000 when comparing the two quarters. Salary expense and related payroll taxes increased $510,000 to $3,759,000, or 15.7%, during the fourth quarter of 2019 compared to the same period in 2018, due, in part, to the addition of branch staff in our new Allentown location and increased expense for incentive compensation. Benefits expense increased $115,000, or 20.1%, due primarily to medical insurance claims reimbursements and increased retirement plan costs, when comparing the two periods.
Net occupancy and furniture and equipment expense increased $186,000, or 17.4%, to $1,254,000 for the fourth quarter 2019, due primarily to increased building and furniture depreciation expense, increased rent expense and computer software amortization and maintenance expense. Other non-interest expense increased $32,000 when comparing the fourth quarter of 2019 with the fourth quarter of 2018, with increased marketing, state taxes, travel and entertainment, check charge-offs and check card expenses offset in part by decreased FDIC insurance costs. During the fourth quarter 2019, we received a "small bank assessment credit", applicable for our third quarter FDIC insurance assessment in the amount of $136,000. The FDIC insurance fund was determined to have a surplus, and small institutions were eligible for a payment credit.
Provision for income taxes increased $962,000 in the fourth quarter 2019, compared with the same period in 2018. During the fourth quarter of 2018, the Company recorded a $418,000 income tax benefit to tax provision. This one-time tax benefit was related to an elected change in accounting for deferred loan origination fees and nonaccrual interest income, taking advantage of the reduction in the federal tax rate from 34% to 21%, resulting from the Tax Cuts and Jobs Act, effective January 1, 2018.
The effective tax rates for the quarter and twelve months ended December 31, 2019 were 18.5% and 18.7%, respectively. This compares with effective tax rates for the same periods in 2018 of -17.1% and 12.1%, respectively.
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 www.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, 2018. 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) | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | ||||||||||
Assets | $ | 1,225,023 | $ | 1,245,863 | $ | 1,212,005 | $ | 1,203,126 | $ | 1,175,452 | |||||
Cash and cash equivalents | 17,608 | 20,787 | 14,068 | 13,708 | 13,458 | ||||||||||
Investment securities | |||||||||||||||
Debt securities | 349,710 | 361,157 | 347,728 | 344,367 | 344,221 | ||||||||||
Equity securities | 9,164 | 5,850 | 6,898 | 10,482 | 9,421 | ||||||||||
Loans held-for-sale | 977 | 240 | - | - | - | ||||||||||
Loans receivable | 820,616 | 830,556 | 817,593 | 804,528 | 785,448 | ||||||||||
Allowance for loan losses | (9,887) | (9,494) | (9,164) | (9,015) | (8,834) | ||||||||||
Net loans | 810,729 | 821,062 | 808,429 | 795,513 | 776,614 | ||||||||||
Deposits | 1,037,860 | 1,048,189 | 1,030,661 | 1,034,614 | 1,015,598 | ||||||||||
Demand, non-interest bearing | 146,270 | 150,944 | 149,591 | 139,970 | 128,615 | ||||||||||
Interest-bearing demand, money market | 656,014 | 661,414 | 646,759 | 671,925 | 663,195 | ||||||||||
Time | 235,576 | 235,831 | 234,311 | 222,719 | 223,788 | ||||||||||
Short-term borrowings | 55,931 | 69,945 | 59,048 | 49,897 | 50,872 | ||||||||||
Shareholders' equity | 120,717 | 118,985 | 115,878 | 110,360 | 104,348 | ||||||||||
Asset Quality Data (Period End) | |||||||||||||||
Non-accrual loans | $ | 11,704 | $ | 12,445 | $ | 7,668 | $ | 7,706 | $ | 7,478 | |||||
Loans past due 90 days or more and still | - | - | - | - | - | ||||||||||
Restructured loans | 4,760 | 1,643 | 2,009 | 2,047 | 2,160 | ||||||||||
Non-performing loans | 16,464 | 14,088 | 9,677 | 9,753 | 9,638 | ||||||||||
Non-performing assets | $ | 16,464 | $ | 14,088 | $ | 9,677 | $ | 9,753 | $ | 9,638 | |||||
Allowance for loan losses | $ | 9,887 | $ | 9,494 | $ | 9,164 | $ | 9,015 | $ | 8,834 | |||||
Non-performing loans / Loans excluding | 2.01 | % | 1.70 | % | 1.18 | % | 1.21 | % | 1.23 | % | |||||
Non-performing assets / Assets | 1.34 | % | 1.13 | % | 0.80 | % | 0.81 | % | 0.82 | % | |||||
Allowance for loan losses / Loans | 1.20 | % | 1.14 | % | 1.12 | % | 1.12 | % | 1.12 | % | |||||
QNB Corp. | ||||||||||||||||||||||
Consolidated Selected Financial Data (unaudited) | ||||||||||||||||||||||
(Dollars in thousands, except per | Three months ended, | Year ended, | ||||||||||||||||||||
For the period: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | 12/31/19 | 12/31/18 | |||||||||||||||
Interest income | $ | 11,600 | $ | 11,817 | $ | 11,712 | $ | 11,289 | $ | 11,203 | $ | 46,418 | $ | 43,200 | ||||||||
Interest expense | 2,435 | 2,635 | 2,601 | 2,453 | 2,383 | 10,124 | 8,185 | |||||||||||||||
Net interest income | 9,165 | 9,182 | 9,111 | 8,836 | 8,820 | 36,294 | 35,015 | |||||||||||||||
Provision for loan losses | 375 | 550 | 150 | 225 | 187 | 1,300 | 1,130 | |||||||||||||||
Net interest income after | 8,790 | 8,632 | 8,961 | 8,611 | 8,633 | 34,994 | 33,885 | |||||||||||||||
Non-interest income: | ||||||||||||||||||||||
Fees for services to customers | 444 | 432 | 422 | 393 | 451 | 1,691 | 1,699 | |||||||||||||||
ATM and debit card | 548 | 533 | 519 | 470 | 502 | 2,070 | 1,895 | |||||||||||||||
Retail brokerage and advisory | 141 | 145 | 133 | 141 | 66 | 560 | 370 | |||||||||||||||
Net gain (loss) on investment | 192 | 973 | 584 | 6 | (390) | 1,755 | (76) | |||||||||||||||
Unrealized gain (loss) on equity | 504 | (305) | (405) | 976 | (862) | 770 | (336) | |||||||||||||||
Net gain on sale of loans | 83 | 63 | 28 | 21 | 23 | 195 | 105 | |||||||||||||||
Other | 298 | 303 | 373 | 302 | 354 | 1,276 | 1,235 | |||||||||||||||
Total non-interest income | 2,210 | 2,144 | 1,654 | 2,309 | 144 | 8,317 | 4,892 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||||
Salaries and employee benefits | 4,452 | 4,063 | 3,790 | 3,781 | 3,827 | 16,086 | 14,411 | |||||||||||||||
Net occupancy and furniture and | 1,254 | 1,123 | 1,097 | 1,062 | 1,068 | 4,536 | 4,037 | |||||||||||||||
Other | 1,926 | 1,769 | 1,906 | 1,881 | 1,894 | 7,482 | 7,437 | |||||||||||||||
Total non-interest expense | 7,632 | 6,955 | 6,793 | 6,724 | 6,789 | 28,104 | 25,885 | |||||||||||||||
Income before income taxes | 3,368 | 3,821 | 3,822 | 4,196 | 1,988 | 15,207 | 12,892 | |||||||||||||||
Provision (benefit) for income taxes | 623 | 731 | 679 | 817 | (339) | 2,850 | 1,557 | |||||||||||||||
Net income | $ | 2,745 | $ | 3,090 | $ | 3,143 | $ | 3,379 | $ | 2,327 | $ | 12,357 | $ | 11,335 | ||||||||
Share and Per Share Data: | ||||||||||||||||||||||
Net income - basic | $ | 0.78 | $ | 0.88 | $ | 0.90 | $ | 0.97 | $ | 0.67 | $ | 3.53 | $ | 3.27 | ||||||||
Net income - diluted | $ | 0.78 | $ | 0.88 | $ | 0.90 | $ | 0.97 | $ | 0.67 | $ | 3.53 | $ | 3.25 | ||||||||
Book value | $ | 34.30 | $ | 33.92 | $ | 33.09 | $ | 31.59 | $ | 29.95 | $ | 34.30 | $ | 29.95 | ||||||||
Cash dividends | $ | 0.33 | $ | 0.33 | $ | 0.33 | $ | 0.33 | $ | 0.32 | $ | 1.32 | $ | 1.28 | ||||||||
Average common shares outstanding - basic | 3,509,766 | 3,501,771 | 3,494,620 | 3,486,786 | 3,473,965 | 3,498,326 | 3,463,450 | |||||||||||||||
Average common shares outstanding - diluted | 3,515,830 | 3,508,317 | 3,502,111 | 3,494,429 | 3,492,060 | 3,504,150 | 3,482,509 | |||||||||||||||
Selected Ratios: | ||||||||||||||||||||||
Return on average assets (quarterly | 0.88 | % | 1.00 | % | 1.05 | % | 1.15 | % | 0.78 | % | 1.02 | % | 0.96 | % | ||||||||
Return on average shareholders' | 9.06 | % | 10.39 | % | 10.91 | % | 12.09 | % | 8.29 | % | 10.58 | % | 10.47 | % | ||||||||
Net interest margin (tax equivalent) | 3.11 | % | 3.14 | % | 3.20 | % | 3.18 | % | 3.11 | % | 3.16 | % | 3.13 | % | ||||||||
Efficiency ratio (tax equivalent) | 66.01 | % | 60.34 | % | 61.97 | % | 59.28 | % | 74.03 | % | 61.92 | % | 63.56 | % | ||||||||
Average shareholders' equity to total average assets | 9.75 | % | 9.63 | % | 9.61 | % | 9.54 | % | 9.38 | % | 9.63 | % | 9.20 | % | ||||||||
Net loan charge-offs (recoveries) | $ | (18) | $ | 220 | $ | 1 | $ | 44 | $ | (2) | $ | 247 | $ | 137 | ||||||||
Net loan charge-offs (recoveries) - annualized / Average loans held-for-sale | -0.01 | % | 0.11 | % | 0.00 | % | 0.02 | % | 0.00 | % | 0.03 | % | 0.02 | % | ||||||||
Balance Sheet (Average) | ||||||||||||||||||||||
Assets | $ | 1,232,071 | $ | 1,225,776 | $ | 1,202,406 | $ | 1,187,374 | $ | 1,186,456 | $ | 1,212,041 | $ | 1,176,910 | ||||||||
Investment securities (AFS & | 360,403 | 359,549 | 357,836 | 360,640 | 366,469 | 359,606 | 372,803 | |||||||||||||||
Loans receivable | 827,103 | 822,738 | 805,538 | 789,737 | 784,372 | 811,413 | 766,692 | |||||||||||||||
Deposits | 1,046,835 | 1,044,094 | 1,021,925 | 1,008,060 | 1,018,141 | 1,030,373 | 1,003,154 | |||||||||||||||
Shareholders' equity | 120,158 | 117,984 | 115,551 | 113,304 | 111,312 | 116,771 | 108,241 | |||||||||||||||
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SOURCE QNB Corp.
