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Form 8-K QNB CORP For: Jul 27

July 27, 2021 3:55 PM EDT

Ex 99.1

PO Box 9005

Quakertown, PA 18951-9005

215.538.5600

800.491.9070

Qnbbank.com

 

 

FOR IMMEDIATE RELEASE

 

 

QNB CORP. REPORTS RECORD EARNINGS

 

 

QUAKERTOWN, PA (July 27, 2021) QNB Corp. (the “Company” or “QNB”) (OTC Bulletin Board: QNBC), the parent company of QNB Bank, reported net income for the second quarter of 2021 of $3,869,000, or $1.09 per share on a diluted basis, compared to net income of $3,934,000, or $1.11 per share on a diluted basis, for the same period in 2020.  For the six months ended June 30, 2021, QNB reported net income of $8,919,000, or $2.51 per share on a diluted basis. This compares to net income of $4,154,000, or $1.18 per share on a diluted basis, reported for the same period in 2020.

  

The operating performance of QNB Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter and six months ended June 30, 2021 in comparison with the same periods in 2020.  The change in contribution from QNB Corp. for the quarter and six months ended June 30, 2021 compared to the same periods in 2020 is due to the change in fair value of the equities portfolio held at the holding company.

 

The following table presents disaggregated net income:  

 

 

3 months ended

 

 

 

 

6 months ended

 

 

 

 

 

6/30/2021

 

6/30/2020

 

variance

 

6/30/2021

 

6/30/2020

 

variance

 

QNB Bank

$

3,303,000

 

$

3,020,000

 

$

283,000

 

$

7,341,000

 

$

5,336,000

 

$

2,005,000

 

QNB Corp

 

566,000

 

 

914,000

 

 

(348,000

)

 

1,578,000

 

 

(1,182,000

)

$

2,760,000

 

Consolidated net income

$

3,869,000

 

$

3,934,000

 

$

(65,000

)

$

8,919,000

 

$

4,154,000

 

$

4,765,000

 

 

 

Total assets as of June 30, 2021 were $1,575,353,000 compared with $1,440,229,000 at December 31, 2020. Loans receivable at June 30, 2021  were $920,923,000 compared with $920,042,000 at December 31, 2020.  Total available for sale debt securities increased $113,739,000, or 26.1%, to  $549,385,000, as excess funds from deposit growth were deployed into higher-yielding securities instead of cash.  Total deposits increased $115,666,000 or 9.4% to $1,343,733,000.  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 for non-Community Developement Financial Institutions after May 12, 2021. Loans receivable, excluding PPP, grew $19.0 million, or 2.2%, to approximately $868,000,000 since December 31, 2020.  

 

“We are pleased to report record six-month earnings during the first half of 2021. In addition to record earnings, our QNB Financial Services reached a milestone of $170 million in assets under management. The Bank continues to experience household and deposit growth as well as asset quality improvement,” stated David W. Freeman, President and Chief Executive Officer. “We are very proud to have been here


for our customers and the community during the height of the pandemic. Moving forward, QNB stands ready to serve our customers banking needs in-person, via drive-in or online 24/7.”

 

Net Interest Income and Net Interest Margin

Net interest income for the quarter and six months ended June 30, 2021 totaled $10,218,000 and $20,735,000 respectively, an increase of $984,000 and $2,338,000, respectively from the same periods in 2020. Net interest margin was 2.74% for the second quarter of 2021 and 2.95% for the same period in 2020.  Net interest margin was 2.89% for the six months ended June 30, 2021, compared with 3.06% for the same period in 2020.

 

The yield on earning assets was 3.04% for the second quarter 2021, a decrease of 38 basis points from 3.42% in the second quarter of 2020. For the six-month period ended June 30, 2021, yield on earning assets was 3.22%, compared with 3.66% for the same period in 2020.  The cost of interest-bearing liabilities decreased 21 basis points to 0.39% for the quarter and 34 basis points to 0.42% for the six months ended June 30, 2021, compared with the same period in 2020.  

 

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

QNB recorded a $183,000 provision for loan losses in the second quarter of 2021 compared with $250,000 in the second quarter 2020.  QNB's allowance for loan losses of $11,202,000 represents 1.22% of loans receivable at June 30, 2021 compared to $10,826,000, or 1.18% of loans receivable at December 31, 2020, and $10,464,000, or 1.19% of loans receivable at June 30, 2020.  Excluding the PPP loans, which are expected to be fully forgiven within the next six to twelve months, and are 100% guaranteed by the SBA, the allowance represents 1.29% of loans receivable.  Net loan charge offs were $96,000 and $82,000 for the quarter and six months ended June 30, 2021, respectively, compared with $120,000 and $173,000 for the same periods in 2020, respectively.   Annualized net loan charge-offs for the quarter and six months ended June 30, 2021 were 0.04% 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 $12,515,000, or 1.36% of loans receivable at June 30, 2021, compared with $14,109,000, or 1.53% of loans receivable at December 31, 2020, and $15,060,000, or 1.71% of loans receivable at June 30, 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 June 30, 2021, $4,841,000, or approximately 59% 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 $22,533,000 at June 30, 2021, an increase of $340,000 from the $22,193,000 reported at December 31, 2020, and an increase of $8,265,000, or 57.9%, from the $14,268,000 reported at June 30, 2020.  

 

Non-Interest Income

Total non-interest income was $2,534,000 for the second quarter of 2021, a decrease of $283,000, or 10.0%, compared with the same period in 2020, due primarily to a combined $462,000 less improvement in realized and unrealized gain of the equity securities portfolio for the quarter ended June 30, 2021, compared with the same period in 2020.   The equities portfolio comprises blue-chip large-capitalized stocks, providing a taxable equivalent dividend yield of 3.05%.   The performance of


the portfolio during the quarter and six months ended June 30, 2021 is commensurate with the overall performance of the U.S. stock market.   Net gain on sale of loans also decreased $245,000 when comparing the second quarter of 2021 with the same period in 2020, as there was a decrease in mortgage origination when comparing the periods.  

 

Increases in non-interest income for the quarter ended June 30, 2021 comprise; ATM and debit card income, fees for services to customers and retail brokerage and advisory income, which increased $193,000, $54,000 and $24,000, respectively, when compared to the same period in 2020.    

 

Other non-interest income increased $153,000 when comparing the two periods due to a recovery of the fair value of mortgage servicing rights totaling $63,000 and increased letter of credit, title insurance, merchant, credit card, sale of checks and bank-owned life insurance of $26,000, $23,000, $22,000, $8,000, $8,000 and $4,000, respectively.

 

For the six months ended June 30, 2021, non-interest income was $5,938,000, an increase of $4,692,000 compared to the same period in 2020, primarily due improved fair value of the equities portfolio totaling $3,449,000.  In addition to the improvement in fair value, the company realized an additional gain on sale of equities of $631,000 for the six months ended June 30, 2021, compared with $168,000 in gains on sale of equities for the same period in 2020.  

 

Excluding the realized gain and change in fair value of equities, net interest income increased $780,000, when comparing the two periods, primarily for the same reasons those described in the quarterly results, as well as a life insurance benefit claim of $193,000 received during the first quarter 2021.

 

Non-Interest Expense

Total non-interest expense was $7,749,000 for the second quarter of 2021, increasing $880,000, or 12.8% from $6,869,000  for the same period in 2020.  Salaries and benefits expense increased $357,000, or 9.0%, to $4,342,000 when comparing the two quarters.  Salary expense and related payroll taxes increased $470,000, to $3,665,000 during the second quarter 2021 compared to the same period in 2020 with increases in salary expense and incentive bonus of $89,000 and $246,000, respectively, as well as a reduction in deferred compensation related to loan originations of $127,000.  Medical premiums expense decreased $167,000 due to decreased medical claims when comparing the two periods.  Net occupancy and furniture and equipment expense increased $25,000, or 2.1%, to $1,205,000 for the second quarter 2021.  

 

Other non-interest expense increased $498,000, or 29.2%, when comparing second quarter 2021 with the same period in 2020.   Other non-operating expense increases comprise:  marketing, legal and accounting and other third party processing costs, FDIC insurance, state tax, travel and entertainment and director compensation of $106,000, $91,000, $69,000, $68,000, $50,000, and $18,000, respectively.  Marketing and travel and entertainment expense increases are due to the resumption of events, seminars and travel due the COVID-19 pandemic.  Increased state taxes are due to the increase in the Bank’s equity in the second quarter of 2021 compared to 2020 and a greater amount of tax credits received in 2020.  

 

For the six months ended June 30, 2021, non-interest expense was $15,072,000, an increase of $925,000, or 6.5%, compared to the same period in 2020.

 


 

Provision for income taxes decreased $47,000 to $951,000 in the second quarter 2021 due to decreased pre-tax income and a lower effective tax rate,  compared with the same period in 2020.  The effective tax rates for the quarter and six months ended June 30, 2021 were 19.7% and 20.0%, respectively, compared with 20.2% and 12.5%, respectively, for the same periods in 2020.  The low effective tax rate of 12.5% for six months ended June 30, 2020 is due to the decrease in fair value of the equities investments during that period.

 

 

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.  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

 

[email protected]

[email protected]

 

 

 

 

 

 

 


 

QNB Corp.

 

Consolidated Selected Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet (Period End)

6/30/21

 

3/31/21

 

12/31/20

 

9/30/20

 

6/30/20

 

Assets

$

1,575,353

 

$

1,570,519

 

$

1,440,229

 

$

1,417,073

 

$

1,390,479

 

Cash and cash equivalents

 

56,621

 

 

108,733

 

 

39,331

 

 

37,520

 

 

66,773

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities, AFS

 

549,385

 

 

469,103

 

 

435,646

 

 

444,616

 

 

403,620

 

Equity securities

 

15,445

 

 

14,522

 

 

12,849

 

 

11,691

 

 

10,744

 

Loans held-for-sale

 

5,018

 

 

3,210

 

 

6,570

 

 

9,077

 

 

3,679

 

Loans receivable

 

920,923

 

 

945,645

 

 

920,042

 

 

887,792

 

 

878,620

 

Allowance for loan losses

 

(11,202

)

 

(11,115

)

 

(10,826

)

 

(10,765

)

 

(10,464

)

Net loans

 

909,721

 

 

934,530

 

 

909,216

 

 

877,027

 

 

868,156

 

Deposits

 

1,343,733

 

 

1,341,616

 

 

1,228,067

 

 

1,214,463

 

 

1,183,188

 

Demand, non-interest bearing

 

235,548

 

 

253,857

 

 

204,584

 

 

205,492

 

 

209,581

 

Interest-bearing demand, money market and savings

 

931,724

 

 

905,766

 

 

826,398

 

 

805,217

 

 

765,855

 

Time

 

176,461

 

 

181,993

 

 

197,085

 

 

203,754

 

 

207,752

 

Short-term borrowings

 

75,021

 

 

64,947

 

 

58,838

 

 

52,406

 

 

57,412

 

Long-term debt

 

10,000

 

 

10,000

 

 

10,000

 

 

10,000

 

 

10,000

 

Shareholders' equity

 

137,340

 

 

131,996

 

 

134,445

 

 

130,995

 

 

128,563

 

Asset Quality Data (Period End)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-accrual loans

$

8,185

 

$

8,887

 

$

9,640

 

$

10,001

 

$

10,355

 

Loans past due 90 days or more and still accruing

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructured loans

 

4,330

 

 

4,379

 

 

4,469

 

 

4,665

 

 

4,705

 

Non-performing loans

 

12,515

 

 

13,266

 

 

14,109

 

 

14,666

 

 

15,060

 

Other real estate owned and repossessed assets

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Non-performing assets

$

12,515

 

$

13,266

 

$

14,109

 

$

14,666

 

$

15,060

 

 

 

 

 

 

-

 

 

-

 

 

-

 

 

-

 

Allowance for loan losses

$

11,202

 

$

11,115

 

$

10,826

 

$

10,765

 

$

10,464

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing loans / Loans excluding held-for-sale

 

1.36

%

 

1.40

%

 

1.53

%

 

1.65

%

 

1.71

%

Non-performing assets / Assets

 

0.79

%

 

0.84

%

 

0.98

%

 

1.03

%

 

1.08

%

Allowance for loan losses / Loans excluding held-for-sale

 

1.22

%

 

1.18

%

 

1.18

%

 

1.21

%

 

1.19

%

 

 

 

 

 

 

 


 

QNB Corp.

 

Consolidated Selected Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

Three months ended,

 

 

Six months ended,

 

For the period:

6/30/21

 

3/31/21

 

12/31/20

 

9/30/20

 

6/30/20

 

 

6/30/21

 

6/30/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

11,380

 

$

11,731

 

$

10,859

 

$

10,763

 

$

10,740

 

 

$

23,111

 

$

22,071

 

Interest expense

 

1,162

 

 

1,214

 

 

1,338

 

 

1,433

 

 

1,506

 

 

 

2,376

 

 

3,674

 

Net interest income

 

10,218

 

 

10,517

 

 

9,521

 

 

9,330

 

 

9,234

 

 

 

20,735

 

 

18,397

 

Provision for loan losses

 

183

 

 

275

 

 

250

 

 

250

 

 

250

 

 

 

458

 

 

750

 

Net interest income after provision

    for loan losses

 

10,035

 

 

10,242

 

 

9,271

 

 

9,080

 

 

8,984

 

 

 

20,277

 

 

17,647

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees for services to customers

 

296

 

 

299

 

 

363

 

 

299

 

 

242

 

 

 

595

 

 

653

 

ATM and debit card

 

709

 

 

593

 

 

593

 

 

598

 

 

516

 

 

 

1,302

 

 

1,004

 

Retail brokerage and advisory income

 

193

 

 

167

 

 

158

 

 

141

 

 

169

 

 

 

360

 

 

282

 

Net realized gain (loss) on investment securities

 

294

 

 

342

 

 

242

 

 

198

 

 

169

 

 

 

636

 

 

169

 

Unrealized gain (loss) on  equity securities

 

579

 

 

1,096

 

 

1,100

 

 

627

 

 

1,166

 

 

 

1,675

 

 

(1,774

)

Net gain on sale of loans

 

120

 

 

352

 

 

689

 

 

589

 

 

365

 

 

 

472

 

 

446

 

Other

 

343

 

 

555

 

 

402

 

 

357

 

 

190

 

 

 

898

 

 

466

 

Total non-interest income

 

2,534

 

 

3,404

 

 

3,547

 

 

2,809

 

 

2,817

 

 

 

5,938

 

 

1,246

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

4,342

 

 

4,017

 

 

4,302

 

 

4,182

 

 

3,985

 

 

 

8,359

 

 

8,057

 

Net occupancy and furniture and

   equipment

 

1,205

 

 

1,288

 

 

1,297

 

 

1,239

 

 

1,180

 

 

 

2,493

 

 

2,378

 

Other

 

2,202

 

 

2,018

 

 

2,012

 

 

1,776

 

 

1,704

 

 

 

4,220

 

 

3,712

 

Total non-interest expense

 

7,749

 

 

7,323

 

 

7,611

 

 

7,197

 

 

6,869

 

 

 

15,072

 

 

14,147

 

Income before income taxes

 

4,820

 

 

6,323

 

 

5,207

 

 

4,692

 

 

4,932

 

 

 

11,143

 

 

4,746

 

Provision for income taxes

 

951

 

 

1,273

 

 

1,056

 

 

914

 

 

998

 

 

 

2,224

 

 

592

 

Net income

$

3,869

 

$

5,050

 

$

4,151

 

$

3,778

 

$

3,934

 

 

$

8,919

 

$

4,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share and Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income - basic

$

1.09

 

$

1.42

 

$

1.17

 

$

1.07

 

$

1.11

 

 

$

2.51

 

$

1.18

 

Net income - diluted

$

1.09

 

$

1.42

 

$

1.17

 

$

1.07

 

$

1.11

 

 

$

2.51

 

$

1.18

 

Book value

$

38.58

 

$

37.10

 

$

37.79

 

$

36.89

 

$

36.29

 

 

$

38.58

 

$

36.29

 

Cash dividends

$

0.35

 

$

0.35

 

$

0.34

 

$

0.34

 

$

0.34

 

 

$

0.70

 

$

0.68

 

Average common shares outstanding

   - basic

 

3,556,550

 

 

3,555,028

 

 

3,551,524

 

 

3,542,805

 

 

3,532,079

 

 

 

3,555,804

 

 

3,527,373

 


Average common shares outstanding

  - diluted

 

3,557,243

 

 

3,555,028

 

 

3,551,524

 

 

3,542,805

 

 

3,532,079

 

 

 

3,555,804

 

 

3,528,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

0.98

%

 

1.40

%

 

1.16

%

 

1.06

%

 

1.19

%

 

 

1.18

%

 

0.66

%

Return on average shareholders' equity

 

11.53

%

 

15.70

%

 

12.95

%

 

11.94

%

 

12.78

%

 

 

13.57

%

 

6.81

%

Net interest margin (tax equivalent)

 

2.74

%

 

3.07

%

 

2.82

%

 

2.78

%

 

2.95

%

 

 

2.89

%

 

3.06

%

Efficiency ratio (tax equivalent)

 

59.95

%

 

52.00

%

 

57.52

%

 

58.47

%

 

56.17

%

 

 

55.80

%

 

70.75

%

Average shareholders' equity to total

   average assets

 

8.53

%

 

8.90

%

 

8.98

%

 

8.92

%

 

9.34

%

 

 

8.71

%

 

9.64

%

Net loan charge-offs (recoveries)

$

96

 

$

(14

)

$

189

 

$

(51

)

$

120

 

 

$

82

 

$

173

 

Net loan charge-offs (recoveries) -

   annualized / Average loans excluding

   held-for-sale

 

0.04

%

 

-0.01

%

 

0.08

%

 

-0.02

%

 

0.06

%

 

 

0.02

%

 

0.04

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet (Average)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

$

1,577,417

 

$

1,466,520

 

$

1,419,412

 

$

1,411,477

 

$

1,325,979

 

 

$

1,522,251

 

$

1,273,727

 

Investment securities (AFS &  Equities)

 

522,204

 

 

447,290

 

 

438,202

 

 

424,075

 

 

357,177

 

 

 

484,954

 

 

352,124

 

Loans receivable

 

938,849

 

 

932,617

 

 

904,474

 

 

880,582

 

 

866,567

 

 

 

935,750

 

 

844,132

 

Deposits

 

1,345,498

 

 

1,258,815

 

 

1,218,170

 

 

1,211,726

 

 

1,132,735

 

 

 

1,302,395

 

 

1,085,165

 

Shareholders' equity

 

134,594

 

 

130,473

 

 

127,496

 

 

125,889

 

 

123,815

 

 

 

132,545

 

 

122,749

 

 



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