QNB Corp. Reports Earnings For Third Quarter 2019
QUAKERTOWN, Pa., Oct. 25, 2019 /PRNewswire/ -- QNB Corp. (the "Company" or "QNB") (OTC Bulletin Board: QNBC), the parent company of QNB Bank (the "Bank"), reported net income for the third quarter of 2019 of $3,090,000, or $0.88 per share on a diluted basis. This compares to net income of $3,211,000, or $0.92 per share on a diluted basis, for the same period in 2018. For the nine months ended September 30, 2019, QNB reported net income of $9,612,000, or $2.75 per share on a diluted basis. This compares to net income of $9,008,000, or $2.59 per share on a diluted basis, reported for the same period in 2018.
For the quarter ended September 30, 2019, the annualized rate of return on average assets and average shareholders' equity was 1.00% and 10.39%, respectively, compared with 1.07% and 11.64%, respectively, for the third quarter 2018. For the nine months ended September 30, 2019, the annualized rate of return on average assets and average shareholders' equity was 1.07% and 11.11%, respectively, compared with 1.03% and 11.23%, respectively, for the same period in 2018.
"QNB is pleased to report increased net income and earnings per share for the nine-month period ending September 30, 2019," said David W. Freeman, President and Chief Executive Officer. "During this time, the Bank has experienced strong loan, deposit, and household growth. In August, we opened a full-service branch in Allentown. We are pleased to establish a physical presence in Allentown, already serving the Lehigh Valley from our Wescosville and Coopersburg locations."
Net Interest Income and Net Interest Margin
Net interest income for the quarter and nine months ended September 30, 2019 totaled $9,182,000 and $27,129,000, respectively, an increase of $478,000 and $934,000, respectively, from the same periods in 2018. The net interest margin for the third quarter of 2019 was 3.14% compared with 3.06% for the third quarter of 2018. Net interest margin for the nine months ended September 30, 2019 was 3.17%, an increase of three basis points compared to the same period in 2018. The yield on average earning assets increased 19 basis points to 4.02% for the third quarter of 2019, compared with the third quarter of 2018. For the nine months ended September 30, 2019, the yield on average earning assets was 4.05%, compared with 3.82% for the same period in 2018. The cost of interest-bearing liabilities increased to 1.10% and 1.09% for the quarter and nine months ended September 30, 2019, respectively, compared with 0.93% and 0.83% for the same periods in 2018.
Asset Quality, Provision for Loan Loss and Allowance for Loan Loss
QNB recorded a $550,000 provision for loan losses in the third quarter of 2019, compared with $568,000 for the same period in 2018. For the nine months ended September 30, 2019 and 2018, QNB recorded $925,000 and $943,000, respectively, in provision for loan losses. QNB's allowance for loan losses of $9,494,000 represents 1.14% of loans receivable at September 30, 2019 compared to $8,834,000, or 1.12% of loans receivable at December 31, 2018, and $8,645,000, or 1.10% of loans receivable at September 30, 2018. Net loan charge-offs were $265,000 for the first nine months of 2019, or 0.04% annualized of total average loans, compared with net charge-offs of $139,000, or 0.02% annualized of total average loans, for the same period 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 $14,088,000, or 1.70% of loans receivable at September 30, 2019, compared with $9,638,000, or 1.23% of loans receivable at December 31, 2018, and $10,890,000, or 1.39% of loans receivable at September 30, 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 September 30, 2019, $7,507,000, or approximately 60% of the loans classified as non-accrual are current or past due less than 30 days. At September 30, 2019 commercial substandard or doubtful loans totaled $16,985,000, compared with $18,339,000 reported at December 31, 2018 and $20,103,000 reported at September 30, 2018. The change from year-end 2018 reflects an upgrade to pass ratings due to improved financial performance of two large commercial relationships, a payoff of a classified loan due to the sale of the collateral by the borrower during the second quarter of 2019, and a large commercial relationship downgrade during the third quarter 2019.
Non-Interest Income
Total non-interest income was $2,144,000 for the third quarter of 2019, a decrease of $83,000, or 3.7%, compared with the same period in 2018, due to combined realized and unrealized net gains on investment securities totaling $668,000 in 2019 compared to $912,000 in 2018. Non-interest income for the nine months ended September 30, 2019 was $6,107,000, an increase of $1,359,000, or 28.6%, compared to the same period in 2018. All other categories of fee income increased during the third quarter 2019, when compared to the third quarter 2018.
Non-Interest Expense
Total non-interest expense was $6,955,000 for the third quarter of 2019, increasing $570,000, or 8.9%, from $6,385,000 for the same period in 2018. For the nine months ended September 30, 2019, non-interest expense increased $1,376,000, or 7.2%, from the same period in 2018. Salaries and benefits expense increased $451,000, or 12.5%, to $4,063,000 when comparing the two quarters. Salary expense and related payroll taxes increased $339,000 to $3,508,000, or 9.6%, during the third quarter of 2019 compared to the same period in 2018, due, in part, to the addition of branch staff in our new Allentown location. Benefits expense increased $112,000, or 25.3%, 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 $123,000, or 12.3%, to $1,123,000 for the third quarter 2019 compared with the same period in 2018, due primarily to increased building and furniture depreciation expense, increased rent expense and computer software amortization and maintenance expense. Other non-interest expense decreased $4,000 when comparing the third quarter of 2019 with the third quarter of 2018, with increased marketing, travel and entertainment and check card expenses offset by decreased FDIC insurance costs. During the third quarter 2019, we received a "small bank assessment credit", applicable for our second quarter FDIC insurance assessment in the amount of $135,000. The FDIC insurance fund was determined to be over-funded, and small institutions were eligible for a payment credit.
Provision for income taxes decreased $36,000, or 4.7%, to $731,000 in the third quarter 2019, due to reduced taxable income when comparing the two periods. The effective tax rates for the quarter and nine months ended September 30, 2019 were 19.1% and 18.8%, respectively. This compares with effective tax rates for the same periods in 2018 of 19.3% and 17.4%, respectively. The increase in the tax rates is due to the proportional increase of taxable income, a result of reduced municipal bonds and increased securities realized and unrealized gains, when comparing the two periods.
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) | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | 9/30/18 | ||||||||||
Assets | $ | 1,245,863 | $ | 1,212,005 | $ | 1,203,126 | $ | 1,175,452 | $ | 1,184,389 | |||||
Cash and cash equivalents | 20,787 | 14,068 | 13,708 | 13,458 | 13,982 | ||||||||||
Investment securities | |||||||||||||||
Debt securities | 361,157 | 347,728 | 344,367 | 344,221 | 347,392 | ||||||||||
Equity securities | 5,850 | 6,898 | 10,482 | 9,421 | 10,436 | ||||||||||
Loans held-for-sale | 240 | - | - | - | 154 | ||||||||||
Loans receivable | 830,556 | 817,593 | 804,528 | 785,448 | 785,962 | ||||||||||
Allowance for loan losses | (9,494) | (9,164) | (9,015) | (8,834) | (8,645) | ||||||||||
Net loans | 821,062 | 808,429 | 795,513 | 776,614 | 777,317 | ||||||||||
Deposits | 1,048,189 | 1,030,661 | 1,034,614 | 1,015,598 | 1,024,565 | ||||||||||
Demand, non-interest bearing | 150,944 | 149,591 | 139,970 | 128,615 | 128,089 | ||||||||||
Interest-bearing demand, money market | 661,414 | 646,759 | 671,925 | 663,195 | 672,467 | ||||||||||
Time | 235,831 | 234,311 | 222,719 | 223,788 | 224,009 | ||||||||||
Short-term borrowings | 69,945 | 59,048 | 49,897 | 50,872 | 55,923 | ||||||||||
Shareholders' equity | 118,985 | 115,878 | 110,360 | 104,348 | 98,834 | ||||||||||
Asset Quality Data (Period End) | |||||||||||||||
Non-accrual loans | $ | 12,445 | $ | 7,668 | $ | 7,706 | $ | 7,478 | $ | 9,631 | |||||
Loans past due 90 days or more and still | - | - | - | - | - | ||||||||||
Restructured loans | 1,643 | 2,009 | 2,047 | 2,160 | 1,259 | ||||||||||
Non-performing loans | 14,088 | 9,677 | 9,753 | 9,638 | 10,890 | ||||||||||
Other real estate owned and repossessed | - | - | - | - | - | ||||||||||
Non-performing assets | $ | 14,088 | $ | 9,677 | $ | 9,753 | $ | 9,638 | $ | 10,890 | |||||
Allowance for loan losses | $ | 9,494 | $ | 9,164 | $ | 9,015 | $ | 8,834 | $ | 8,645 | |||||
Non-performing loans / Loans excluding | 1.70 | % | 1.18 | % | 1.21 | % | 1.23 | % | 1.39 | % | |||||
Non-performing assets / Assets | 1.13 | % | 0.80 | % | 0.81 | % | 0.82 | % | 0.92 | % | |||||
Allowance for loan losses / Loans | 1.14 | % | 1.12 | % | 1.12 | % | 1.12 | % | 1.10 | % | |||||
QNB Corp. | ||||||||||||||||||||||
Consolidated Selected Financial Data (unaudited) | ||||||||||||||||||||||
(Dollars in thousands, | Three months ended, | Nine months ended, | ||||||||||||||||||||
For the period: | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | 9/30/18 | 9/30/19 | 9/30/18 | |||||||||||||||
Interest income | $ | 11,817 | $ | 11,712 | $ | 11,289 | $ | 11,203 | $ | 10,926 | $ | 34,818 | $ | 31,997 | ||||||||
Interest expense | 2,635 | 2,601 | 2,453 | 2,383 | 2,222 | 7,689 | 5,802 | |||||||||||||||
Net interest income | 9,182 | 9,111 | 8,836 | 8,820 | 8,704 | 27,129 | 26,195 | |||||||||||||||
Provision for loan losses | 550 | 150 | 225 | 187 | 568 | 925 | 943 | |||||||||||||||
Net interest income | 8,632 | 8,961 | 8,611 | 8,633 | 8,136 | 26,204 | 25,252 | |||||||||||||||
Non-interest income: | ||||||||||||||||||||||
Fees for services to | 432 | 422 | 393 | 451 | 419 | 1,247 | 1,248 | |||||||||||||||
ATM and debit card | 533 | 519 | 470 | 502 | 476 | 1,522 | 1,393 | |||||||||||||||
Retail brokerage and | 145 | 133 | 141 | 66 | 96 | 419 | 304 | |||||||||||||||
Net gain (loss) on | 973 | 584 | 6 | (390) | 181 | 1,563 | 314 | |||||||||||||||
Unrealized gain (loss) | (305) | (405) | 976 | (862) | 731 | 266 | 526 | |||||||||||||||
Net gain (loss) from | - | - | - | - | - | - | - | |||||||||||||||
Net gain on sale of | 63 | 28 | 21 | 23 | 38 | 112 | 82 | |||||||||||||||
Other | 303 | 373 | 302 | 354 | 286 | 978 | 881 | |||||||||||||||
Total non-interest | 2,144 | 1,654 | 2,309 | 144 | 2,227 | 6,107 | 4,748 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||||
Salaries and employee | 4,063 | 3,790 | 3,781 | 3,827 | 3,612 | 11,634 | 10,584 | |||||||||||||||
Net occupancy and | 1,123 | 1,097 | 1,062 | 1,068 | 1,000 | 3,282 | 2,969 | |||||||||||||||
Other | 1,769 | 1,906 | 1,881 | 1,894 | 1,773 | 5,556 | 5,543 | |||||||||||||||
Total non-interest | 6,955 | 6,793 | 6,724 | 6,789 | 6,385 | 20,472 | 19,096 | |||||||||||||||
Income before | 3,821 | 3,822 | 4,196 | 1,988 | 3,978 | 11,839 | 10,904 | |||||||||||||||
Provision for income | 731 | 679 | 817 | (339) | 767 | 2,227 | 1,896 | |||||||||||||||
Net income | $ | 3,090 | $ | 3,143 | $ | 3,379 | $ | 2,327 | $ | 3,211 | $ | 9,612 | $ | 9,008 | ||||||||
Share and Per Share Data: | ||||||||||||||||||||||
Net income - basic | $ | 0.88 | $ | 0.90 | $ | 0.97 | $ | 0.67 | $ | 0.93 | $ | 2.75 | $ | 2.60 | ||||||||
Net income - diluted | $ | 0.88 | $ | 0.90 | $ | 0.97 | $ | 0.67 | $ | 0.92 | $ | 2.75 | $ | 2.59 | ||||||||
Book value | $ | 33.92 | $ | 33.09 | $ | 31.59 | $ | 29.95 | $ | 28.47 | $ | 33.92 | $ | 28.47 | ||||||||
Cash dividends | $ | 0.33 | $ | 0.33 | $ | 0.33 | $ | 0.32 | $ | 0.32 | $ | 0.99 | $ | 0.96 | ||||||||
Average common shares - basic | 3,501,771 | 3,494,620 | 3,486,786 | 3,473,965 | 3,466,672 | 3,494,471 | 3,459,906 | |||||||||||||||
Average common shares - diluted | 3,508,317 | 3,502,111 | 3,494,429 | 3,492,060 | 3,489,061 | 3,501,507 | 3,480,980 | |||||||||||||||
Selected Ratios: | ||||||||||||||||||||||
Return on average assets | 1.00 | % | 1.05 | % | 1.15 | % | 0.78 | % | 1.07 | % | 1.07 | % | 1.03 | % | ||||||||
Return on average | 10.39 | % | 10.91 | % | 12.09 | % | 8.29 | % | 11.64 | % | 11.11 | % | 11.23 | % | ||||||||
Net interest margin (tax | 3.14 | % | 3.20 | % | 3.18 | % | 3.11 | % | 3.06 | % | 3.17 | % | 3.14 | % | ||||||||
Efficiency ratio (tax | 60.34 | % | 61.97 | % | 59.28 | % | 74.03 | % | 57.31 | % | 60.52 | % | 60.52 | % | ||||||||
Average shareholders' average assets | 9.63 | % | 9.61 | % | 9.54 | % | 9.38 | % | 9.20 | % | 9.59 | % | 9.13 | % | ||||||||
Net loan charge-offs | $ | 220 | $ | 1 | $ | 44 | $ | (2) | $ | 115 | $ | 265 | $ | 139 | ||||||||
Net loan charge-offs annualized / Average held-for-sale | 0.11 | % | 0.00 | % | 0.02 | % | 0.00 | % | 0.06 | % | 0.04 | % | 0.02 | % | ||||||||
Balance Sheet | - | |||||||||||||||||||||
Assets | $ | 1,225,776 | $ | 1,202,406 | $ | 1,187,374 | $ | 1,186,456 | $ | 1,190,132 | $ | 1,205,326 | $ | 1,173,695 | ||||||||
Investment securities | 359,549 | 357,836 | 360,640 | 366,469 | 368,807 | 359,338 | 374,938 | |||||||||||||||
Loans receivable | 822,738 | 805,538 | 789,737 | 784,372 | 780,221 | 806,126 | 760,733 | |||||||||||||||
Deposits | 1,044,094 | 1,021,925 | 1,008,060 | 1,018,141 | 1,023,227 | 1,024,826 | 998,104 | |||||||||||||||
Shareholders' equity | 117,984 | 115,551 | 113,304 | 111,312 | 109,433 | 115,629 | 107,206 | |||||||||||||||
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SOURCE QNB Corp.
