QNB Corp. Reports Earnings for Fourth Quarter 2021

Rhea-AI Summary

QNB Corp. (QNBC) reported a strong financial performance for the fourth quarter and full year of 2021, with net income of $4,149,000 ($1.17 per share) for Q4, slightly down from $4,151,000 in Q4 2020. For the year, net income surged to $16,492,000 ($4.64 per share), up from $12,083,000 in 2020. Total assets increased to $1.67 billion, and total deposits rose by 18.1% to $1.45 billion. Nonetheless, the net interest margin declined, reflecting lower yields on earning assets. The bank also reported a decrease in non-interest income for Q4, but overall non-interest income grew by 28.7% for the year.

Positive

• Record annual net income of $16,492,000, up 36.5% from 2020.
• Total deposits increased by 18.1% to $1,449,745,000.
• Loans receivable (excluding PPP) grew by 7.5% to approximately $912,533,000.
• Non-interest income rose by 28.7% for the year, totaling $9,781,000.

Negative

• Net interest margin decreased to 2.68% in Q4 2021 from 2.82% in Q4 2020.
• Non-interest income for Q4 dropped by $1,019,000 compared to Q4 2020.

QUAKERTOWN, Pa., Jan. 25, 2022 (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 fourth quarter of 2021 of $4,149,000, or $1.17 per share on a diluted basis. This compares to net income of $4,151,000, or $1.17 per share on a diluted basis, for the same period in 2020. For the year ended December 31, 2021, QNB reported net income of $16,492,000, or $4.64 per share on a diluted basis. This compares to net income of $12,083,000, or $3.42 per share on a diluted basis, reported for the same period in 2020.

For the quarter ended December 31, 2021, the annualized rate of return on average assets and average shareholders’ equity was 0.98% and 11.82%, respectively, compared with 1.16% and 12.95%, respectively, for the fourth quarter 2020. For the year ended December 31, 2021, the return on average assets and average shareholders’ equity was 1.04% and 12.19%, respectively, compared with 0.90% and 9.76%, respectively, for the same period in 2020.

The operating performance of QNB Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter and year ended December 31, 2021 in comparison with the same periods in 2020. The change in contribution from QNB Corp. for the quarter and year ended December 31, 2021 compared to the same periods in 2020 is primarily due to the change in fair value of the equities portfolio held at the holding company.

The following table presents disaggregated net income:

	Three months ended,												Twelve months ended,
	12/31/2021				12/31/2020				Variance				12/31/2021				12/31/2020				Variance
QNB Bank	$	3,537,000			$	3,210,000			$	327,000			$	14,607,000			$	11,753,000			$	2,854,000
QNB Corp		612,000				941,000				(329,000	)			1,885,000				330,000				1,555,000
Consolidated net income	$	4,149,000			$	4,151,000			$	(2,000	)		$	16,492,000			$	12,083,000			$	4,409,000

Total assets as of December 31, 2021 were $1,673,340,000 compared with $1,440,229,000 at December 31, 2020. Total available for sale debt securities increased $256,714,000, or 58.9%, to $692,360,000, as excess funds from deposit growth and loan repayments were deployed into higher-yielding securities instead of cash. Total deposits increased $221,678,000 or 18.1% to $1,449,745,000. QNB Bank participated in both rounds of the Small Business Administration’s (“SBA’s”) Paycheck Protection Program (“PPP”), originating 315 loans totaling $35,021,000 during round two in 2021. The SBA discontinued the program May 31, 2021. Loans receivable, excluding PPP, grew $63.6 million, or 7.5%, to approximately $912,533,000 since December 31, 2020.

“QNB finished 2021 strong. We reported record net income and earnings per share for the year, and saw substantial growth in deposits, loans and total households. Our ability to continue to serve the community, despite the difficult environment, resulted in significant acquisition of new retail and business relationships,” stated David W. Freeman, President and Chief Executive Officer.

Net Interest Income and Net Interest Margin

Net interest income for the quarter and year ended December 31, 2021 totaled $10,808,000 and $42,127,000, respectively, an increase of $1,287,000 and $4,879,000, respectively, from the same periods in 2020. The net interest margin for the fourth quarters of 2021 and 2020 was 2.68% and 2.82%, respectively. Net interest margin for the years ended December 31, 2021 and 2020 was 2.79% and 2.92%, respectively. The yield on average earning assets decreased 25 basis points to 2.95% for the fourth quarter of 2021, compared with the fourth quarter of 2020. For the year ended December 31, 2021, the yield on average earning assets was 3.09%, compared with 3.42% for the same period in 2020. The cost of interest-bearing liabilities decreased to 0.35% for the quarter and 0.39% for the year ended December 31, 2021, respectively, compared with 0.50% and 0.63% for the same periods in 2020. The decrease in margin is due to repricing loans and prepayment of available for sale investments, and reinvesting in bonds with lower rates.

Asset Quality, Provision for Loan Loss and Allowance for Loan Loss

QNB recorded no provision for loan losses in the fourth quarter of 2021, compared with $250,000 for the same period in 2020. For the years ended December 31, 2021 and 2020, QNB recorded $458,000 and $1,250,000, respectively, in provision for loan losses. QNB's allowance for loan losses of $11,184,000 represents 1.21% of loans receivable at December 31, 2021 compared to $10,826,000, or 1.18% of loans receivable at December 31, 2020. Net loan charge-offs for the year ended December 31, 2021 were $100,000 for 2021, or 0.01% of total average loans, compared with net charge-offs of $311,000, or 0.04% of total average loans, for the same period in 2020.

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 $11,672,000, or 1.26% of loans receivable at December 31, 2021, compared with $14,109,000, or 1.53% of loans receivable at December 31, 2020. 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, 2021, $4,499,000, or approximately 60% of the loans classified as non-accrual are current or past due less than 30 days. At December 31, 2021 commercial substandard or doubtful loans totaled $18,531,000, compared with $22,193,000 reported at December 31, 2020.

Non-Interest Income

Total non-interest income was $2,528,000 for the fourth quarter of 2021, a decrease of $1,019,000 compared with the same period in 2020, due largely to a $1,013,000 decrease in unrealized net gains on investment securities to $87,000, and decreased net gains on sale of loans of $631,000, to $58,000, when comparing the two periods. Net realized gain on securities increased $524,000 when comparing the two quarters.

ATM and debit card income increased $100,000, or 16.9% when comparing the fourth quarter 2021 to the same period in 2020, due to increased card activity when comparing the two periods. Retail brokerage income increased $50,000 due to increased assets under management. Other non-interest income decreased $54,000; merchant fee income decreased $12,000 (decreased volume), sale of checks to depositors decreased $31,000 (instant issue debit card machines were provided in 2020 from the check vendor), and bank owned life insurance declined $14,000 and gain on sale of equipment decreased $5,000 (equipment trade-in value in 2020). These decreases were offset in part by a $7,000 increase in title insurance income and a $6,000 increase in credit card income. Fees for services to customers declined $5,000 during fourth quarter 2021 compared to fourth quarter 2020, due to less overdraft income and service charges on deposits accounts.

Non-interest income for the year ended December 31, 2021 was $9,781,000, an increase of $2,179,000, or 28.7%, compared to the same period in 2020, of which $2,176,000 is attributable to increased combined realized and unrealized gain on equity securities. This increase was partially offset by net gain on sale of loans which decreased $1,129,000, due to decreased mortgage secondary market sales. Other income increased $435,000, or 35.5% when comparing the two periods. Bank owned life insurance increased $203,000, due primarily to a life insurance benefit of $193,000 realized during the first quarter of 2021. Title insurance income increased $79,000 due to increased mortgage origination activity and an increased ownership percentage in Laurel Abstract; year-to-date improved fair value of mortgage servicing rights and servicing income increased $60,000; letter of credit fees increased $45,000; merchant income increased $34,000; credit card income increased $19,000; miscellaneous income increased $30,000 due a settlement from the student loan insurer and mortgage-backed securities brokers. Excluding the realized gain on investments and loans, and change in fair value of equities, non-interest income increased $1,132,000, when comparing the two periods.

Non-Interest Expense

Total non-interest expense was $8,135,000 for the fourth quarter of 2021, increasing $524,000 from $7,611,000 for the same period in 2020. Salaries and benefits expense increased $238,000, or 5.5%, to $4,540,000 when comparing the two quarters. Salary expense and related payroll taxes increased $42,000 to $3,712,000, or 1.1%, during the fourth quarter of 2021 compared to the same period in 2020, due to decreased deferred loan origination cost of $45,000, increased salary and related taxes of $77,000, offset in part by decreased incentive compensation of $79,000. Benefits expense increased $195,000, or 30.8%, due primarily to increased medical insurance claims expense., when comparing the two periods.

Net occupancy and furniture and equipment expense decreased $24,000, or 1.9%, to $1,273,000 for the fourth quarter 2021, due primarily to decreased building repair expense and decreased leasehold and furniture depreciation and computer software amortization expense, offset in part by increased software maintenance expense. Other non-interest expense increased $310,000, or 15.4% when comparing the fourth quarter of 2021 with the fourth quarter of 2020, due to increases in state tax expense, FDIC insurance costs, check fraud cost, and check card expense.

For the year ended December 31, 2021, non-interest expense increased $2,042,000, or 7.1%, from the same period in 2020, primarily for the same reasons as detailed in the quarter.

Provision for income taxes decreased $4,000, to $1,052,000 in the fourth quarter 2021, compared with the same period in 2020, due to the small decrease in pre-tax income. The effective tax rates for the quarter and year ended December 31, 2021 were 20.2% and 19.4%, respectively. This compares with effective tax rates for the same periods in 2020 of 20.3% and 17.5%, 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, 2020. 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.
  

Contacts:	David W. Freeman	Janice S. McCracken Erkes
	President & Chief Executive Officer	Chief Financial Officer
	215-538-5600 x-5619	215-538-5600 x-5716
	dfreeman@qnbbank.com	jmccracken@qnbbank.com

QNB Corp.
Consolidated Selected Financial Data (unaudited)
(Dollars in thousands)
Balance Sheet (Period End)	12/31/21			9/30/21			6/30/21			3/31/21			12/31/20
Assets	$	1,673,340		$	1,658,544		$	1,575,353		$	1,570,519		$	1,440,229
Cash and cash equivalents		13,390			24,160			56,621			108,733			39,330
Investment securities
Debt securities, AFS		692,360			664,053			549,385			469,103			435,646
Equity securities		12,410			15,084			15,445			14,522			12,849
Loans held-for-sale		-			2,706			5,018			3,210			6,570
Loans receivable		926,470			923,778			920,923			945,645			920,042
Allowance for loan losses		(11,184	)		(11,214	)		(11,202	)		(11,115	)		(10,826	)
Net loans		915,286			912,564			909,721			934,530			909,216
Deposits		1,449,745			1,431,825			1,343,733			1,341,616			1,228,067
Demand, non-interest bearing		243,006			248,282			235,548			253,857			204,584
Interest-bearing demand, money market and savings		1,038,366			1,010,547			931,724			905,766			826,398
Time		168,373			172,996			176,461			181,993			197,085
Short-term borrowings		68,476			71,426			75,021			64,947			58,838
Long-term debt		10,000			10,000			10,000			10,000			10,000
Shareholders' equity		136,494			135,968			137,340			131,996			134,445
Asset Quality Data (Period End)
Non-accrual loans	$	7,530		$	7,827		$	8,185		$	8,887		$	9,640
Loans past due 90 days or more and still accruing		-						-
Restructured loans		4,142			4,317			4,330			4,379			4,469
Non-performing loans		11,672			12,144			12,515			13,266			14,109
Other real estate owned and repossessed assets		-			-			-			-			-
Non-performing assets	$	11,672		$	12,144		$	12,515		$	13,266		$	14,109
Allowance for loan losses	$	11,184		$	11,214		$	11,202		$	11,115		$	10,826
Non-performing loans / Loans excluding held-for-sale		1.26	%		1.31	%		1.36	%		1.40	%		1.53	%
Non-performing assets / Assets		0.70	%		0.73	%		0.79	%		0.84	%		0.98	%
Allowance for loan losses / Loans excluding held-for-sale		1.21	%		1.21	%		1.22	%		1.18	%		1.18	%

 

QNB Corp.
Consolidated Selected Financial Data (unaudited)
(Dollars in thousands, except per share data)	Three months ended,																		Year ended,
For the period:	12/31/21			9/30/21			6/30/21			3/31/21			12/31/20							12/31/21			12/31/20
Interest income	$	11,938		$	11,721		$	11,380		$	11,731		$	10,859						$	46,770		$	43,693
Interest expense		1,130			1,137			1,162			1,214			1,338							4,643			6,445
Net interest income		10,808			10,584			10,218			10,517			9,521							42,127			37,248
Provision for loan losses		-			-			183			275			250							458			1,250
Net interest income after provision for loan losses		10,808			10,584			10,035			10,242			9,271							41,669			35,998
Non-interest income:
Fees for services to customers		368			363			296			299			363							1,326			1,315
ATM and debit card		693			687			709			593			593							2,682			2,195
Retail brokerage and advisory income		208			218			193			167			158							786			581
Net realized gain on investment securities		766			404			294			342			242							1,806			609
Unrealized gain (loss) on equity securities		87			(836	)		579			1,096			1,100							926			(47		)
Net gain on sale of loans		58			65			120			352			689							595			1,724
Other		348			414			343			555			402							1,660			1,225
Total non-interest income		2,528			1,315			2,534			3,404			3,547							9,781			7,602
Non-interest expense:
Salaries and employee benefits		4,540			4,554			4,342			4,017			4,302							17,453			16,541
Net occupancy and furniture and equipment		1,273			1,249			1,205			1,288			1,297							5,015			4,914
Other		2,322			1,987			2,202			2,018			2,012							8,529			7,500
Total non-interest expense		8,135			7,790			7,749			7,323			7,611							30,997			28,955
Income before income taxes		5,201			4,109			4,820			6,323			5,207							20,453			14,645
Provision for income taxes		1,052			685			951			1,273			1,056							3,961			2,562
Net income	$	4,149		$	3,424		$	3,869		$	5,050		$	4,151						$	16,492		$	12,083
Share and Per Share Data:
Net income - basic	$	1.17		$	0.96		$	1.09		$	1.42		$	1.17						$	4.64		$	3.42
Net income - diluted	$	1.17		$	0.96		$	1.09		$	1.42		$	1.17						$	4.64		$	3.42
Book value	$	38.41		$	38.25		$	38.58		$	37.10		$	37.79						$	38.41		$	37.79
Cash dividends	$	0.35		$	0.35		$	0.35		$	0.35		$	0.34						$	1.40		$	1.36
Average common shares outstanding - basic		3,549,584			3,554,664			3,556,550			3,555,028			3,551,524							3,553,949			3,537,323
Average common shares outstanding - diluted		3,550,542			3,555,832			3,557,243			3,555,028			3,551,524							3,554,138			3,537,360
Selected Ratios:
Return on average assets		0.98	%		0.84	%		0.98	%		1.40	%		1.16		%					1.04	%		0.90		%
Return on average shareholders' equity		11.82	%		9.92	%		11.53	%		15.70	%		12.95		%					12.19	%		9.76		%
Net interest margin (tax equivalent)		2.68	%		2.72	%		2.74	%		3.07	%		2.82		%					2.79	%		2.92		%
Efficiency ratio (tax equivalent)		59.29	%		64.47	%		59.95	%		52.00	%		57.51		%					58.69	%		63.58		%
Average shareholders' equity to total average assets		8.33	%		8.43	%		8.53	%		8.90	%		8.98		%					8.53	%		9.21		%
Net loan charge-offs (recoveries)	$	30		$	(12	)	$	96		$	(14	)	$	189						$	100		$	311
Net loan charge-offs (recoveries) - annualized / Average loans excluding held-for-sale		0.01	%		-0.01	%		0.04	%		-0.01	%		0.08		%					0.01	%		0.04		%
Balance Sheet (Average)
Assets	$	1,672,267		$	1,623,704		$	1,577,417		$	1,466,520		$	1,419,412						$	1,585,627		$	1,343,984
Investment securities (AFS & Equities)		690,792			600,355			522,204			447,290			438,202							565,924			390,906
Loans receivable		918,631			922,187			938,849			932,617			904,474							928,017			868,461
Deposits		1,440,611			1,389,149			1,345,498			1,258,815			1,218,170							1,359,100			1,150,411
Shareholders' equity		139,227			136,888			134,594			130,473			127,496							135,324			123,790

 

FAQ

What were QNB Corp.'s net income results for Q4 2021?

QNB Corp. reported net income of $4,149,000, or $1.17 per share for Q4 2021.

How did QNB Corp. perform in terms of annual net income for 2021?

In 2021, QNB Corp. achieved an annual net income of $16,492,000, an increase of 36.5% from 2020.

What was the total assets amount for QNB Corp. at the end of 2021?

Total assets for QNB Corp. reached $1,673,340,000 as of December 31, 2021.

What changes occurred in QNB Corp.'s deposits in 2021?

QNB Corp.'s total deposits increased by 18.1%, amounting to $1,449,745,000 at the end of 2021.

How did QNB Corp.'s net interest margin change in Q4 2021?

The net interest margin decreased to 2.68% in Q4 2021 from 2.82% in Q4 2020.