QNB CORP. REPORTS EARNINGS FOR SECOND QUARTER 2022

Rhea-AI Summary

QNB Corp. (OTC: QNBC) reported a net income of $3,349,000 or $0.94 per share for Q2 2022, down from $3,869,000 or $1.09 per share in Q2 2021. For the first half of 2022, net income was $7,059,000 ($1.98 per share) compared to $8,919,000 ($2.51 per share) in 2021. Total assets decreased to $1,646,695,000, while total deposits grew by $17,983,000 to $1,467,728,000. Net interest income rose to $11,103,000, however, net interest margin fell to 2.73%. Non-interest income decreased significantly, mainly due to changes in the equities portfolio's fair value.

Positive

• Net interest income increased by $885,000 year-over-year for Q2.
• Total deposits grew by $17,983,000 to $1,467,728,000.

Negative

• Net income decreased by $520,000 for Q2 2022 compared to Q2 2021.
• Total assets dropped by $26,645,000 since December 31, 2021.
• Non-interest income fell significantly by $1,895,000 in Q2 due to portfolio value changes.

Quakertown, PA, July 26, 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 second quarter of 2022 of $3,349,000, or $0.94 per share on a diluted basis. This compares to net income of $3,869,000, or $1.09  per share on a diluted basis, for the same period in 2021.  For the six months ended June 30, 2022, QNB reported net income of $7,059,000, or $1.98 per share on a diluted basis. This compares to net income of $8,919,000 or $2.51 per share on a diluted basis, reported for the same period in 2021.

For the quarter ended June 30, 2022, the annualized rate of return on average assets and average shareholders’ equity was 0.79% and 9.28%, respectively, compared with 0.98% and 11.53%, respectively, for the second quarter 2021. 

The operating performance of the Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter ended June 30, 2022, in comparison with the same period in 2021 due to growth in net interest income.  The change in contribution from QNB Corp. for the quarter ended June 30, 2022, compared with the same period in 2021, 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,												Six months ended,
	6/30/2022				6/30/2021				Variance				6/30/2022				6/30/2021				Variance
QNB Bank	$	4,082,000			$	3,303,000			$	779,000			$	7,790,000			$	7,341,000			$	449,000
QNB Corp		(733,000)				566,000				(1,299,000)				(731,000)				1,578,000				(2,309,000)
Consolidated net income	$	3,349,000			$	3,869,000			$	(520,000)			$	7,059,000			$	8,919,000			$	(1,860,000)

Total assets as of June 30, 2022 were $1,646,695,000 compared with $1,673,340,000 at December 31, 2021.  Total available for sale debt securities decreased $82,793,000, or 12.0%, to  $609,567,000, due primarily to the reduction in fair value of the portfolio, in response to the rise in interest rates during the period.  Total deposits increased $17,983,000 to $1,467,728,000.  The Bank participated in both rounds of the Small Business Administration’s Paycheck Protection Program (“PPP”).  Loans receivable, excluding PPP, grew $47,149,000 to approximately $959,774,000 since December 31, 2021.  

“We continue to see growth and good performance, with solid net income and a return of $0.94 per share earnings on a diluted basis for our shareholders.  The second quarter experienced continued household growth, deposit and loan growth, and good credit quality,” said David W. Freeman, President and Chief Executive Officer.

Net Interest Income and Net Interest Margin

Net interest income for the quarter and six months ended June 30, 2022 totaled $11,103,000 and $21,839,000 respectively, an increase of $885,000 and $1,104,000, respectively from the same periods in 2021. Net interest margin was 2.73% for the second quarter of 2022 and 2.74% for the same period in 2021.  Net interest margin was 2.72% for the six months ended June 30, 2022, compared with 2.89% for the same period in 2021.

The yield on earning assets was 3.02% for the second quarter 2022, compared with 3.04% in the second quarter of 2021. For the six-month period ended June 30, 2022, yield on earning assets was 3.00%, compared with 3.22% for the same period in 2021.  The cost of interest-bearing liabilities was 0.38% for the quarter and 0.36% for the six months ended June 30, 2022, compared with 0.39% and 0.42% for the same periods in 2021.  

Proceeds from average deposit growth, PPP loan forgiveness and excess cash over the past year were invested in available-for-sale securities, primarily mortgage-backed securities, which comprised 43% of average earnings assets in the first six months of 2022, compared with 33% for the same period in 2021.  This increase in marketable securities as a percent of earnings assets is the primary reason for the reduction in net interest margin, as these securities yield less than loans.

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

QNB recorded no provision for loan losses in the second quarter of 2022 compared with $183,000 in the second quarter 2021.  QNB's allowance for loan losses of $11,297,000 represents 1.17% of loans receivable at June 30, 2022 compared to $11,184,000, or 1.21% of loans receivable at December 31, 2021, and $11,202,000, or 1.22% of loans receivable at June 30, 2021.  Excluding the PPP loans, which are expected to be fully forgiven within the several months, and are 100% guaranteed by the SBA, the allowance represents 1.18% of loans receivable.  Net loan recoveries were $66,000 and $113,000 for the quarter and six months ended June 30, 2022, respectively, compared with charge-offs of $96,000 and $82,000 for the same periods in 2021, respectively.   Annualized net loan recoveries for the quarter and six months ended June 30, 2022 were 0.03% and 0.02% 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 restructured loans, were $11,394,000, or 1.18% of loans receivable at June 30, 2022, compared with $11,672,000, or 1.26% of loans receivable at December 31, 2021, and $12,515,000, or 1.36% of loans receivable at June 30, 2021.  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 June 30, 2022, $3,987,000, or approximately 56% 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 $18,836,000 at June 30, 2022, compared with $18,531,000 reported at December 31, 2021, and $22,533,000 at June 30, 2021. 

Non-Interest Income

Total non-interest income was $639,000 for the second quarter of 2022, compared with $2,534,000 for  the same period in 2021, due primarily to a $2,025,000 change the fair value of the equity securities portfolio compared with the same period in 2021.  Net realized gain on investments increased $163,000 to $457,000 for the quarter ended June 30, 2022, compared with the same period in 2021.   The equities portfolio comprises blue-chip large-capitalized stocks, providing a taxable equivalent dividend yield of 3.22%.    

Fees for services to customers increased $107,000, to $403,000 for the second quarter 2022 compared with the same period in 2021 due primarily to increased overdraft occurrences.  Retail brokerage and advisory income increased $12,000 to $205,000 attributable to increased advisory income. 

Net gain on sale of loans decreased $120,000 when comparing the second quarter of 2022 with the same period in 2021, as there was a decrease in mortgage originations when comparing the periods.  Other non-interest income decreased $28,000 when comparing the two periods due primarily to reduced title insurance income, letter of credit fees and miscellaneous fees of $23,000, $11,000, and $6,000 offset in part to increased mortgage loan servicing income and credit card fees of $14,000 and $6,000, respectively.  ATM and debit card income declined slightly to $705,000 for the same period due to reduced card usage when comparing the two periods.

For the six months ended June 30, 2022, non-interest income was $2,250,000 a decrease of $3,688,000 compared to the same period in 2021, primarily due to the change in fair value of the equities portfolio totaling $3,129,000.  Realized gain on sale of securities was $493,000, a decline of $143,000 for the six months ended June 30, 2022, compared with the same period in 2021.  Net gain on sale of loans decreased $472,000 when comparing the six months ended June 30, 2022 with the same period in 2021, as there was a decrease in mortgage originations.  Increases in non-interest income for the six months ended June 30, 2022 compared to the same period in 2021 comprise:  fees for services to customers, ATM and debit card fees, and retail brokerage and advisory income, which increased $192,000, $44,000, and $50,000, respectively.  Other non-interest income decreased $230,000 due primarily to a life insurance benefit of $193,000 realized during the first quarter of 2021.     

Non-Interest Expense

Total non-interest expense was $7,746,000 for the second quarter of 2022, compared with $7,749,000  for the same period in 2021.  Salaries and benefits expense decreased $137,000, or 3.2%, to $4,205,000 when comparing the two quarters.  Salary expense and related payroll taxes decreased $129,000, to $3,536,000 during the second quarter 2022 compared to the same period in 2021 with decreases in incentive bonus and related taxes of $172,000 and stock-based compensation expense of $12,000, offset in part by increased salary expense and related taxes of $58,000 and a reversal of $12,000 in accrued vacation expense that occurred in 2021.  Benefits expense decreased $8,000, when comparing the two periods.

Net occupancy and furniture and equipment expense increased $69,000, or 5.7%, to $1,274,000 for the second quarter 2022 due to increased software maintenance and amortization of $67,000, increased building maintenance expenses of $13,000, increased rent of $3,000 and increased equipment expense of $4,000, offset in part by decreased depreciation expense of $22,000. 

Other non-interest expense increased $65,000, or 3%, when comparing second quarter 2022 with the same period in 2021 due to increased marketing, travel and entertainment, and ATM and check card expense, offset in part by decreased FDIC insurance and state tax.

For the six months ended June 30, 2022, non-interest expense was $15,559,000, an increase of $487,000, or 3.2%, compared to the same period in 2021.

Provision for income taxes decreased $304,000 to $647,000 in the second quarter 2022 due to decreased pre-tax income and a lower effective tax rate,  compared with the same period in 2021.  The effective tax rates for the quarter and six months ended June 30, 2022 were 16.2% and 17.2%, respectively, compared with 19.7% and 20.0%, respectively, for the same periods in 2021. 

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, 2021. 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	Mary E. Liddle
	President & Chief Executive Officer	Acting Chief Financial Officer
	215-538-5600 x-5619	215-538-5600 x-5718
	dfreeman@qnbbank.com	mliddle@qnbbank.com

 

QNB Corp.
Consolidated Selected Financial Data (unaudited)
(Dollars in thousands)
Balance Sheet (Period End)	6/30/22			3/31/22			12/31/21			9/30/21			6/30/21
Assets	$	1,646,695		$	1,647,986		$	1,673,340		$	1,658,544		$	1,575,353
Cash and cash equivalents		17,094			13,260			13,390			24,160			56,621
Investment securities
Debt securities, AFS		609,567			656,846			692,360			664,053			549,385
Equity securities		11,617			12,652			12,410			15,084			15,445
Loans held-for-sale		-			-			-			2,706			5,018
Loans receivable		963,414			926,369			926,470			923,778			920,923
Allowance for loan losses		(11,297)			(11,231)			(11,184)			(11,214)			(11,202)
Net loans		952,117			915,138			915,286			912,564			909,721
Deposits		1,467,728			1,451,753			1,449,745			1,431,825			1,343,733
Demand, non-interest bearing		240,281			242,024			243,006			248,282			235,548
Interest-bearing demand, money market and savings		1,065,638			1,046,074			1,038,366			1,010,547			931,724
Time		161,809			163,655			168,373			172,996			176,461
Short-term borrowings		77,836			76,738			68,476			71,426			75,021
Long-term debt		10,000			10,000			10,000			10,000			10,000
Shareholders' equity		83,738			102,498			136,494			135,968			137,340
Asset Quality Data (Period End)
Non-accrual loans	$	7,085		$	7,272		$	7,530		$	7,827		$	8,185
Loans past due 90 days or more and still accruing		-			-			-						-
Restructured loans		4,309			4,375			4,142			4,317			4,330
Non-performing loans		11,394			11,647			11,672			12,144			12,515
Other real estate owned and repossessed assets		-			-			-			-			-
Non-performing assets	$	11,394		$	11,647		$	11,672		$	12,144		$	12,515
Allowance for loan losses	$	11,297		$	11,231		$	11,184		$	11,214		$	11,202
Non-performing loans / Loans excluding held-for-sale		1.18	%		1.26	%		1.26	%		1.31	%		1.36	%
Non-performing assets / Assets		0.69	%		0.71	%		0.70	%		0.73	%		0.79	%
Allowance for loan losses / Loans excluding held-for-sale		1.17	%		1.21	%		1.21	%		1.21	%		1.22	%

 

 

QNB Corp.
Consolidated Selected Financial Data (unaudited)
(Dollars in thousands, except per share data)	Three months ended,																Six months ended
For the period:	6/30/22			3/31/22			12/31/21			9/30/21			6/30/21				6/30/22			6/30/21
Interest income	$	12,327		$	11,809		$	11,938		$	11,721		$	11,380			$	24,136		$	23,111
Interest expense		1,224			1,073			1,130			1,137			1,162				2,297			2,376
Net interest income		11,103			10,736			10,808			10,584			10,218				21,839			20,735
Provision for loan losses		-			-			-			-			183				-			458
Net interest income after provision for loan losses		11,103			10,736			10,808			10,584			10,035				21,839			20,277
Non-interest income:
Fees for services to customers		403			384			368			363			296				787			595
ATM and debit card		705			641			693			687			709				1,346			1,302
Retail brokerage and advisory income		205			205			208			218			193				410			360
Net realized gain on investment securities		457			36			766			404			294				493			636
Unrealized gain (loss) on  equity securities		(1,446)			(8)			87			(836)			579				(1,454)			1,675
Net gain on sale of loans		-			-			58			65			120				-			472
Other		315			353			348			414			343				668			898
Total non-interest income		639			1,611			2,528			1,315			2,534				2,250			5,938
Non-interest expense:
Salaries and employee benefits		4,205			4,266			4,540			4,554			4,342				8,471			8,359
Net occupancy and furniture and equipment		1,274			1,265			1,273			1,249			1,205				2,539			2,493
Other		2,267			2,282			2,322			1,987			2,202				4,549			4,220
Total non-interest expense		7,746			7,813			8,135			7,790			7,749				15,559			15,072
Income before income taxes		3,996			4,534			5,201			4,109			4,820				8,530			11,143
Provision for income taxes		647			824			1,052			685			951				1,471			2,224
Net income	$	3,349		$	3,710		$	4,149		$	3,424		$	3,869			$	7,059		$	8,919
Share and Per Share Data:
Net income - basic	$	0.94		$	1.04		$	1.17		$	0.96		$	1.09			$	1.99		$	2.51
Net income - diluted	$	0.94		$	1.04		$	1.17		$	0.96		$	1.09			$	1.98		$	2.51
Book value	$	23.47		$	28.81		$	38.41		$	38.25		$	38.58			$	23.47		$	38.58
Cash dividends	$	0.36		$	0.36		$	0.35		$	0.35		$	0.35			$	0.72		$	0.70
Average common shares outstanding    - basic		3,559,185			3,552,854			3,549,584			3,554,664			3,556,550				3,556,037			3,555,804
Average common shares outstanding   - diluted		3,559,185			3,554,456			3,550,542			3,555,832			3,557,243				3,556,568			3,555,804
Selected Ratios:
Return on average assets		0.79	%		0.90	%		0.98	%		0.84	%		0.98	%			0.84	%		1.18	%
Return on average shareholders' equity		9.28	%		10.60	%		11.82	%		9.92	%		11.53	%			9.93	%		13.57	%
Net interest margin (tax equivalent)		2.73	%		2.71	%		2.68	%		2.72	%		2.74	%			2.72	%		2.89	%
Efficiency ratio (tax equivalent)		64.98	%		62.35	%		59.29	%		64.47	%		59.95	%			63.63	%		55.80	%
Average shareholders' equity to total average assets		8.51	%		8.47	%		8.33	%		8.43	%		8.53	%			8.49	%		8.71	%
Net loan charge-offs (recoveries)	$	(66)		$	(47)		$	30		$	(12)		$	96			$	(113)		$	82
Net loan charge-offs (recoveries) -  annualized / Average loans excluding  held-for-sale		-0.03	%		-0.02	%		0.01	%		-0.01	%		0.04	%			-0.02	%		0.02	%
Balance Sheet (Average)
Assets	$	1,700,600		$	1,675,385		$	1,672,267		$	1,623,704		$	1,577,417			$	1,688,061		$	1,522,251
Investment securities (AFS &  Equities)		710,856			710,109			690,792			600,355			522,204				710,485			484,954
Loans receivable		944,773			918,602			918,631			922,187			938,849				931,760			935,750
Deposits		1,458,921			1,444,049			1,440,611			1,389,149			1,345,498				1,451,526			1,302,395
Shareholders' equity		144,688			141,986			139,227			136,888			134,594				143,344			132,545

 

 

FAQ

What was QNB Corp's net income for Q2 2022?

QNB Corp reported a net income of $3,349,000 for Q2 2022.

How does QNB's Q2 2022 earnings compare to Q2 2021?

In Q2 2021, QNB's net income was $3,869,000, which is $520,000 higher than Q2 2022.

What were the total assets of QNB Corp as of June 30, 2022?

Total assets were $1,646,695,000 as of June 30, 2022.

How much did QNB Corp's deposits increase in Q2 2022?

Deposits increased by $17,983,000 in Q2 2022.

What is the current net interest margin for QNB Corp?

The net interest margin for Q2 2022 is 2.73%.