QNB Corp. Reports Earnings for Fourth Quarter 2021

Wednesday, 26. January 2022 01:12

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. FreemanJanice S. McCracken Erkes
 President & Chief Executive OfficerChief Financial Officer
 215-538-5600 x-5619215-538-5600 x-5716
 dfreeman@qnbbank.comjmccracken@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 
                       

 


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