QNB Corp. Reports Earnings for Fourth Quarter 2021

·16 min read

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


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