QNB Corp. Reports Earnings For First Quarter 2024
QUAKERTOWN, Pa., April 23, 2024 (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 first quarter of 2024 of $2,594,000, or $0.71 per share on a diluted basis. This compares to net income of $4,118,000, or $1.15 per share on a diluted basis, for the same period in 2023.
For the quarter ended March 31, 2024, the annualized rate of return on average assets and average shareholders’ equity was 0.59% and 6.53%, respectively, compared with 0.96% and 11.11%, respectively, for the first quarter 2023.
The operating performance of the Bank, a wholly-owned subsidiary of QNB Corp., declined for the quarter ended March 31, 2024, in comparison with the same period in 2023, due primarily to interest margin compression causing a $298,000 decline in net interest income, a decrease in the amount of reversal in the provision for credit losses on loans and commitments of $1,719,000 and an increase in non-interest expense of $635,000. The change in contribution from QNB Corp. for the quarter ended March 31, 2024, compared with the same period in 2023, is primarily due to gains on sales from the equities portfolio held at the holding company.
The following table presents disaggregated net income:
| Three months ended, | |||||||||||
| 3/31/2024 | 3/31/2023 | Variance | |||||||||
| QNB Bank | $ | 2,331,000 | $ | 4,287,000 | $ | (1,956,000 | ) | ||||
| QNB Corp | 263,000 | (169,000 | ) | 432,000 | |||||||
| Consolidated net income | $ | 2,594,000 | $ | 4,118,000 | $ | (1,524,000 | ) | ||||
Total assets as of March 31, 2024 were $1,716,081,000 compared with $1,706,318,000 at December 31, 2023. Total available-for-sale debt securities decreased $8,585,000, or 1.8%, to $481,596,000, primarily due to payments. Loans receivable increased $29,083,000, or 2.7%, to approximately $1,122,616,000, or 2.7%. Total deposits increased $47,475,000, or 3.2%, to $1,536,188,000. Short-term borrowing declined $39,006,000, or 41.5%.
"Looking at our fundamentals, the Bank showed solid core performance for the first quarter of 2024, including deposit growth, loan growth, and a significant reduction in short-term borrowings,” stated David W. Freeman, President and Chief Executive Officer. Freeman continued, “We are seeing an equilibrium in the demand for higher rates paid on deposits, and our variable rate loans are beginning to reprice from historic lows, which should help with the interest margin pressure we have been experiencing. The credit quality of our loan book remains consistently strong. Areas impacting our earnings include our securities portfolio, increased expenses for salaries and benefits, and necessary fixed expenses. We are stewarding the company in the best interest of our stakeholders, focusing on continued core performance in alignment with long-term strategic objectives.”
Net Interest Income and Net Interest Margin
Net interest income for the quarter ended March 31, 2024 totaled $10,168,000, a decrease of $249,000, from the same period in 2023. Net interest margin was 2.39% for the first quarter of 2024 and 2.55% for the same period in 2023.
The yield on earning assets was 4.57% for the first quarter 2024, compared with 3.77% in the first quarter of 2023; an increase of 80 basis points. The cost of interest-bearing liabilities was 2.66% for the quarter ended March 31, 2024, compared with 1.53% for the same period in 2023, an increase of 133 basis points.
Proceeds from the growth in average deposits and proceeds from payments received on investment securities over the past year were invested in loans and other interest earning assets, and used to pay down short-term borrowings. Loan growth was primarily in commercial real estate, which comprised 45% of average earning assets in the first quarter of 2024 compared with 41% for the same period in 2023, and the increases in both rates and volume in commercial real estate loans majorly contributed to the 48 basis-point increase in the yield on loans. The decline in the available-for-sale portfolio was primarily in mortgage-backed securities, which comprised 21% of average earnings assets in the first quarter of 2024 compared with 25% for the same period in 2023. The 92-basis point increase in rate on investments was primarily due to the impact of the interest rate swap entered into at the end of the second quarter of 2023. The 125 basis-point increase in the rate paid on deposits was the primary contributor to the increase in the cost of funds of 113 basis points, contributing to the decrease in net interest margin.
Asset Quality, Provision for Credit Losses on Loans and Allowance for Credit Losses
QNB reversed $93,000 in provision for credit losses on loans in the first quarter of 2024 compared to a reversal in provision of $1,783,000 in the first quarter of 2023. QNB's allowance for credit losses on loans of $8,738,000 represents 0.78% of loans receivable at March 31, 2024, compared to $8,852,000, or 0.81% of loans receivable at December 31, 2023. Net loan charge-offs were $21,000 for the quarter ended March 31, 2024, compared with recoveries of $532,000 for the same period in 2023, the recoveries in 2023 were primarily due to one large commercial customer. Annualized net loan charge-offs for the quarter ended March 31, 2024 were 0.01% and annualized net loan recoveries were 0.21% for the quarter ended March 31, 2023, 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 modified loans, were $2,001,000, or 0.18% of loans receivable at March 31, 2024, compared with $1,940,000, or 0.18% of loans receivable at December 31, 2023. In cases where there is a collateral shortfall on non-accrual loans, specific 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 March 31, 2024, $1,192,000, or approximately 60% 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 $11,582,000 at March 31, 2024, compared with $11,747,000 at December 31, 2023; these were comprised primarily of commercial real estate loans.
Non-Interest Income
Total non-interest income was $1,836,000 for the first quarter of 2024 compared with $1,219,000 for the same period in 2023. There was a net realized gain of $377,000 on the sale of investments for the quarter ended March 31, 2024 compared to a net loss of $465,000 on the sales of securities in the same period in 2023. Unrealized net loss on investment equity securities was $30,000 for the quarter ended March 31, 2024 compared to a net gain of $57,000 for the same period in 2023. The equities portfolio comprises blue-chip large-capitalized stocks, providing a taxable equivalent dividend yield of 3.71%.
Fees for service to customers increased $18,000 for the quarter ended March 31, 2024, as overdraft fees increased $6,000 and other deposit-related fees increase $12,000. ATM and debit card income decreased $23,000 to $636,000 for the quarter ended March 31, 2024, income is related to card usage. Retail brokerage and advisory income decreased $141,000 to $93,000 for the same period, due to a decrease in customer balances following employee turnover. Net gains on sales of loans increased $9,000 for the same period due to volume. Bank-owned life insurance increased $8,000 for the same period.
Non-Interest Expense
Total non-interest expense was $8,833,000 for the first quarter of 2024 compared with $8,200,000 for the same period in 2023. Salaries and benefits expense increased $411,000, or 9.0%, to $4,974,000 when comparing the two quarters. Salary expense and related payroll taxes increased $178,000, or 4.5%, to $4,145,000 during the first quarter of 2024 compared to the same period in 2023. Benefits expense increased $233,000, or 39.1%, when comparing the two periods primarily due to medical costs and retirement plans.
Net occupancy and furniture and equipment expense increased $138,000, or 10.0%, to $1,515,000 for the first quarter of 2024 due to software maintenance costs. Other non-interest expense increased $84,000, or 3.7%, when comparing first quarter of 2024 with the same period in 2023 due to an increase in FDIC insurance of $170,000, an increase in marketing expense of $63,000, an increase in debit card expense of $53,000 and third-party services of $15,000, partly offset by decreases in Bank shares tax of $24,000, in telephone, postage and supplies of $41,000, and a reduction in write-offs due to fraud on customer accounts of $161,000.
Provision for income taxes decreased $460,000 to $663,000 in the first quarter of 2024 due to decreased pre-tax income, compared with the same period in 2023. The effective tax rates for the quarter ended March 31, 2024 was 20.4% compared with 21.4% for the same period in 2022.
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, 2023. 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) | 3/31/24 | 12/31/23 | 9/30/23 | 6/30/23 | 3/31/23 | ||||||||||||||
| Assets | $ | 1,716,081 | $ | 1,706,318 | $ | 1,684,392 | $ | 1,650,586 | $ | 1,626,499 | |||||||||
| Cash and cash equivalents | 50,963 | 62,657 | 55,141 | 34,824 | 14,201 | ||||||||||||||
| Investment securities | |||||||||||||||||||
| Debt securities, AFS | 481,596 | 490,181 | 505,390 | 527,741 | 537,904 | ||||||||||||||
| Equity securities | 6,217 | 5,910 | 4,765 | 5,424 | 11,908 | ||||||||||||||
| Loans held-for-sale | — | 549 | 446 | 810 | 388 | ||||||||||||||
| Loans receivable | 1,122,616 | 1,093,533 | 1,060,450 | 1,029,744 | 1,011,956 | ||||||||||||||
| Allowance for loan losses | (8,738 | ) | (8,852 | ) | (8,542 | ) | (8,365 | ) | (8,191 | ) | |||||||||
| Net loans | 1,113,878 | 1,084,681 | 1,051,908 | 1,021,379 | 1,003,765 | ||||||||||||||
| Deposits | 1,536,188 | 1,488,713 | 1,483,333 | 1,449,765 | 1,424,590 | ||||||||||||||
| Demand, non-interest bearing | 188,260 | 185,098 | 192,226 | 212,396 | 212,259 | ||||||||||||||
| Interest-bearing demand, money market and savings | 990,451 | 988,634 | 1,000,921 | 962,042 | 962,315 | ||||||||||||||
| Time | 357,477 | 314,981 | 290,186 | 275,327 | 250,016 | ||||||||||||||
| Short-term borrowings | 55,088 | 94,094 | 96,703 | 90,845 | 110,192 | ||||||||||||||
| Long-term debt | 20,000 | 20,000 | 20,000 | 20,000 | — | ||||||||||||||
| Shareholders' equity | 93,686 | 90,824 | 74,081 | 80,945 | 83,874 | ||||||||||||||
| Asset Quality Data (Period End) | |||||||||||||||||||
| Non-accrual loans | $ | 2,001 | $ | 1,940 | $ | 1,893 | $ | 4,794 | $ | 4,561 | |||||||||
| Loans past due 90 days or more and still accruing | — | — | — | — | — | ||||||||||||||
| Modified/restructured loans | — | — | — | — | — | ||||||||||||||
| Non-performing loans | 2,001 | 1,940 | 1,893 | 4,794 | 4,561 | ||||||||||||||
| Other real estate owned and repossessed assets | — | — | — | — | — | ||||||||||||||
| Non-performing assets | $ | 2,001 | $ | 1,940 | $ | 1,893 | $ | 4,794 | $ | 4,561 | |||||||||
| Allowance for loan losses | $ | 8,738 | $ | 8,852 | $ | 8,542 | $ | 8,365 | $ | 8,191 | |||||||||
| Non-performing loans / Loans excluding held-for-sale | 0.18 | % | 0.18 | % | 0.18 | % | 0.47 | % | 0.45 | % | |||||||||
| Non-performing assets / Assets | 0.12 | % | 0.11 | % | 0.11 | % | 0.29 | % | 0.28 | % | |||||||||
| Allowance for loan losses / Loans excluding held-for-sale | 0.78 | % | 0.81 | % | 0.81 | % | 0.81 | % | 0.81 | % | |||||||||
| QNB Corp. | |||||||||||||||
| Consolidated Selected Financial Data (unaudited) | |||||||||||||||
| (Dollars in thousands, except per share data) | Three months ended, | ||||||||||||||
| For the period: | 3/31/24 | 12/31/23 | 9/30/23 | 6/30/23 | 3/31/23 | ||||||||||
| Interest income | $ | 19,569 | $ | 19,257 | $ | 18,497 | $ | 15,865 | $ | 15,463 | |||||
| Interest expense | 9,401 | 9,065 | 8,284 | 6,532 | 5,046 | ||||||||||
| Net interest income | 10,168 | 10,192 | 10,213 | 9,333 | 10,417 | ||||||||||
| Provision for credit losses | (86 | ) | 293 | 459 | 209 | (1,805 | ) | ||||||||
| Net interest income after provision for credit losses | 10,254 | 9,899 | 9,754 | 9,124 | 12,222 | ||||||||||
| Non-interest income: | |||||||||||||||
| Fees for services to customers | 420 | 414 | 421 | 414 | 402 | ||||||||||
| ATM and debit card | 636 | 687 | 685 | 704 | 659 | ||||||||||
| Retail brokerage and advisory income | 93 | 207 | 219 | 202 | 234 | ||||||||||
| Net realized (loss) gain on investment securities | 377 | (2,262 | ) | 131 | 519 | (465 | ) | ||||||||
| Unrealized gain (loss) on equity securities | (30 | ) | 904 | (138 | ) | (573 | ) | 57 | |||||||
| Net gain on sale of loans | 15 | 11 | 4 | (5 | ) | 6 | |||||||||
| Other | 325 | 322 | 433 | 319 | 326 | ||||||||||
| Total non-interest income | 1,836 | 283 | 1,755 | 1,580 | 1,219 | ||||||||||
| Non-interest expense: | |||||||||||||||
| Salaries and employee benefits | 4,974 | 4,717 | 4,971 | 4,775 | 4,563 | ||||||||||
| Net occupancy and furniture and equipment | 1,515 | 1,477 | 1,504 | 1,467 | 1,377 | ||||||||||
| Other | 2,344 | 2,552 | 2,196 | 2,250 | 2,260 | ||||||||||
| Total non-interest expense | 8,833 | 8,746 | 8,671 | 8,492 | 8,200 | ||||||||||
| Income before income taxes | 3,257 | 1,436 | 2,838 | 2,212 | 5,241 | ||||||||||
| Provision for income taxes | 663 | 302 | 494 | 325 | 1,123 | ||||||||||
| Net income | $ | 2,594 | $ | 1,134 | $ | 2,344 | $ | 1,887 | $ | 4,118 | |||||
| Share and Per Share Data: | |||||||||||||||
| Net income - basic | $ | 0.71 | $ | 0.31 | $ | 0.65 | $ | 0.52 | $ | 1.15 | |||||
| Net income - diluted | $ | 0.71 | $ | 0.31 | $ | 0.65 | $ | 0.52 | $ | 1.15 | |||||
| Book value | $ | 25.57 | $ | 24.86 | $ | 20.35 | $ | 22.42 | $ | 23.32 | |||||
| Cash dividends | $ | 0.37 | $ | 0.37 | $ | 0.37 | $ | 0.37 | $ | 0.37 | |||||
| Average common shares outstanding -basic | 3,655,176 | 3,642,096 | 3,613,230 | 3,598,545 | 3,588,363 | ||||||||||
| Average common shares outstanding -diluted | 3,655,176 | 3,642,096 | 3,613,230 | 3,598,545 | 3,588,363 | ||||||||||
| Selected Ratios: | |||||||||||||||
| Return on average assets | 0.59 | % | 0.25 | % | 0.54 | % | 0.44 | % | 0.96 | % | |||||
| Return on average shareholders' equity | 6.53 | % | 2.85 | % | 5.93 | % | 4.90 | % | 11.11 | % | |||||
| Net interest margin (tax equivalent) | 2.39 | % | 2.38 | % | 2.27 | % | 2.55 | % | 2.68 | % | |||||
| Efficiency ratio (tax equivalent) | 72.73 | % | 82.39 | % | 71.58 | % | 76.78 | % | 69.57 | % | |||||
| Average shareholders' equity to total average assets | 8.98 | % | 8.91 | % | 9.12 | % | 8.99 | % | 8.65 | % | |||||
| Net loan charge-offs (recoveries) | $ | 21 | $ | (19 | ) | $ | 275 | $ | 38 | $ | (532 | ) | |||
| Net loan charge-offs (recoveries) - annualized / Average loans excluding held-for-sale | 0.01 | % | -0.01 | % | 0.11 | % | 0.01 | % | -0.21 | % | |||||
| Balance Sheet (Average) | |||||||||||||||
| Assets | $ | 1,778,585 | $ | 1,773,138 | $ | 1,719,368 | $ | 1,719,167 | $ | 1,737,679 | |||||
| Investment securities (AFS & Equities) | 578,615 | 624,423 | 636,110 | 649,231 | 673,117 | ||||||||||
| Loans receivable | 1,108,836 | 1,039,351 | 1,026,881 | 1,021,265 | 1,020,102 | ||||||||||
| Deposits | 1,497,692 | 1,488,632 | 1,427,238 | 1,414,764 | 1,462,654 | ||||||||||
| Shareholders' equity | 159,739 | 158,063 | 156,890 | 154,503 | 150,281 | ||||||||||
| QNB Corp. (Consolidated) | |||||||||||||||
| Average Balances, Rate, and Interest Income and Expense Summary (Tax-Equivalent Basis) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||||||
| Average | Average | Average | Average | ||||||||||||
| Balance | Rate | Interest | Balance | Rate | Interest | ||||||||||
| Assets | |||||||||||||||
| Investment securities: | |||||||||||||||
| U.S. Treasury | $ | 6,782 | 5.33 | % | $ | 90 | $ | 269 | 1.49 | % | $ | 1 | |||
| U.S. Government agencies | 84,951 | 1.17 | 248 | 101,943 | 1.11 | 283 | |||||||||
| State and municipal | 108,173 | 3.42 | 924 | 111,150 | 2.23 | 621 | |||||||||
| Mortgage-backed and CMOs | 365,983 | 2.59 | 2,373 | 417,137 | 1.62 | 1,685 | |||||||||
| Corporate debt securities and mutual funds | 6,707 | 5.59 | 94 | 6,636 | 4.40 | 73 | |||||||||
| Equities | 6,019 | 3.71 | 56 | 12,096 | 3.39 | 101 | |||||||||
| Total investment securities | 578,615 | 2.62 | 3,785 | 649,231 | 1.70 | 2,764 | |||||||||
| Loans: | |||||||||||||||
| Commercial real estate | 775,135 | 5.34 | 10,300 | 681,615 | 4.52 | 7,602 | |||||||||
| Residential real estate | 108,922 | 3.92 | 1,066 | 105,698 | 3.55 | 937 | |||||||||
| Home equity loans | 62,269 | 6.81 | 1,055 | 56,645 | 6.23 | 870 | |||||||||
| Commercial and industrial | 140,293 | 7.50 | 2,615 | 152,756 | 8.22 | 3,096 | |||||||||
| Consumer loans | 3,644 | 8.10 | 73 | 4,089 | 6.73 | 68 | |||||||||
| Tax-exempt loans | 18,641 | 3.82 | 177 | 20,591 | 3.49 | 177 | |||||||||
| Total loans, net of unearned income* | 1,108,904 | 5.54 | 15,286 | 1,021,394 | 5.06 | 12,750 | |||||||||
| Other earning assets | 46,645 | 5.51 | 639 | 7,001 | 5.71 | 99 | |||||||||
| Total earning assets | 1,734,164 | 4.57 | 19,710 | 1,677,626 | 3.77 | 15,613 | |||||||||
| Cash and due from banks | 12,769 | 12,881 | |||||||||||||
| Allowance for loan losses | (8,946 | ) | (9,937 | ) | |||||||||||
| Other assets | 40,598 | 38,597 | |||||||||||||
| Total assets | $ | 1,778,585 | $ | 1,719,167 | |||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||
| Interest-bearing deposits: | |||||||||||||||
| Interest-bearing demand | $ | 321,904 | 0.80 | % | 643 | $ | 317,615 | 0.39 | % | 302 | |||||
| Municipals | 131,887 | 4.81 | 1,577 | 111,954 | 3.89 | 1,075 | |||||||||
| Money market | 227,872 | 3.56 | 2,015 | 130,627 | 1.06 | 342 | |||||||||
| Savings | 298,353 | 1.28 | 949 | 406,072 | 1.08 | 1,077 | |||||||||
| Time < $100 | 157,712 | 3.76 | 1,473 | 101,208 | 1.53 | 382 | |||||||||
| Time $100 through $250 | 127,613 | 4.34 | 1,377 | 97,617 | 3.02 | 727 | |||||||||
| Time > $250 | 49,756 | 4.22 | 522 | 27,723 | 1.80 | 123 | |||||||||
| Total interest-bearing deposits | 1,315,097 | 2.62 | 8,556 | 1,192,816 | 1.37 | 4,028 | |||||||||
| Short-term borrowings | 87,441 | 2.88 | 625 | 134,918 | 2.99 | 995 | |||||||||
| Long-term debt | 20,000 | 4.36 | 220 | 5,833 | 1.57 | 23 | |||||||||
| Total interest-bearing liabilities | 1,422,538 | 2.66 | 9,401 | 1,333,567 | 1.53 | 5,046 | |||||||||
| Non-interest-bearing deposits | 182,595 | 221,948 | |||||||||||||
| Other liabilities | 13,713 | 9,149 | |||||||||||||
| Shareholders' equity | 159,739 | 154,503 | |||||||||||||
| Total liabilities and | |||||||||||||||
| shareholders' equity | $ | 1,778,585 | $ | 1,719,167 | |||||||||||
| Net interest rate spread | 1.91 | % | 2.24 | % | |||||||||||
| Margin/net interest income | 2.39 | % | $ | 10,309 | 2.55 | % | $ | 10,567 | |||||||
| Tax-exempt securities and loans were adjusted to a tax-equivalent basis and are based on the Federal corporate tax rate of 21% | |||||||||||||||
| Non-accrual loans and investment securities are included in earning assets. | |||||||||||||||
| * Includes loans held-for-sale | |||||||||||||||
Contacts: David W. Freeman President & Chief Executive Officer 215-538-5600 x-5619 Jeffrey Lehocky Chief Financial Officer 215-538-5600 x-5716
