QNB Corp. Reports Earnings for Fourth Quarter 2022
01/24/2023 - 04:00 PM
QUAKERTOWN, Pa., Jan. 24, 2023 (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 2022 of $5,447,000 , or $1.52 per share on a diluted basis. This compares to net income of $4,149,000 , or $1.17 per share on a diluted basis, for the same period in 2021. For the twelve months ended December 31, 2022, QNB reported net income of $15,921,000 , or $4.47 per share on a diluted basis. This compares to net income of $16,492,000 or $4.64 per share on a diluted basis, reported for the same period in 2021.
For the quarter ended December 31, 2022, the annualized rate of return on average assets and average shareholders’ equity was 1.24% and 14.38% , respectively, compared with 0.98% and 11.82% , respectively, for the fourth quarter 2021.
The operating performance of the Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter ended December 31, 2022, in comparison with the same period in 2021 due to growth in net interest income and the reversal of $850,000 in provision loan losses. The change in contribution from QNB Corp. for the quarter ended December 31, 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, Twelve months ended, 12/31/2022 12/31/2021 Variance 12/31/2022 12/31/2021 Variance QNB Bank $ 4,408,000 $ 3,537,000 $ 871,000 $ 16,445,000 $ 14,607,000 $ 1,838,000 QNB Corp 1,039,000 612,000 427,000 (524,000 ) 1,885,000 (2,409,000 ) Consolidated net income $ 5,447,000 $ 4,149,000 $ 1,298,000 $ 15,921,000 $ 16,492,000 $ (571,000 )
Total assets as of December 31, 2022 were $1,668,497,000 compared with $1,673,340,000 at December 31, 2021. Total available-for-sale debt securities decreased $145,835,000 , or 21.1% , to $546,525,000 , due primarily to the reduction in fair value of the portfolio, in response to the rise in interest rates during the period. The Bank participated in both rounds of the Small Business Administration’s Paycheck Protection Program (“PPP”). Loans receivable, excluding PPP, grew $124,470,000 t o approximately $1,037,095,000 since December 31, 2021. Total deposits decreased $31,376,000 t o $1,418,369,000. Short-term borrowing grew $92,851,000 t o support loan growth.
“2022 ended well with continued solid performance results and growth at the Bank. Our earnings were the direct result of our core banking operations and were not supported by gains on the sale of investments, as in 2021,” stated David W. Freeman, President, and Chief Executive Officer, continuing, “the quarter also showed improvement in net interest income and improved margins. Plus, loan outstandings, fueled by commercial growth, exceeded one billion for the first time in the bank’s history.”
Net Interest Income and Net Interest Margin
Net interest income for the quarter and twelve months ended December 31, 2022 totaled $11,279,000 and $44,497,000 , respectively, an increase of $471,000 and $2,370,000 , respectively, from the same periods in 2021. Net interest margin was 2.68% for the fourth quarter of 2022 and for the same period in 2021. Net interest margin was 2.71% for the twelve months ended December 31, 2022 compared with 2.79% for the same period in 2021.
The yield on earning assets was 3.49% for the fourth quarter 2022 compared with 2.95% in the fourth quarter of 2021. For the twelve-month period ended December 31, 2022, the yield on earning assets was 3.18% , compared with 3.09% for the same period in 2021. The cost of interest-bearing liabilities was 1.03% for the quarter and 0.60% for the twelve months ended December 31, 2022 compared with 0.35% and 0.39% for the same periods in 2021.
Proceeds from average deposit growth, PPP loan forgiveness and short-term borrowings over the past year were invested in loans. Loan growth was primarily in commercial real estate, which comprised 38% of average earning assets in the twelve months of 2022 compared with 36% for the same period in 2021 and was the major contributor to the 11 basis-point increase in the yield on loans. Growth in the available-for-sale portfolio was primarily in mortgage-backed securities, which comprised 27% of average earnings assets in the twelve months of 2022 compared with 23% for the same period in 2021. This increase in marketable securities as a percent of earnings assets also contributed to the increase in net interest margin.
Asset Quality, Provision for Loan Loss and Allowance for Loan Loss
QNB reversed $850,000 in provision for loan losses in the fourth quarter of 2022 compared to no provision in the fourth of quarter 2021. QNB received over $1,000,000 in payments on a non-performing loan during the fourth quarter of 2022. QNB's allowance for loan losses of $10,531,000 represents 1.01% of loans receivable at December 31, 2022, compared to $11,184,000 , or 1.21% of loans receivable at December 31, 2021, and $10,826,000 , or 1.18% of loans receivable at December 31, 2020. Excluding the PPP loans, which are expected to be fully forgiven within the next several months and are 100% guaranteed by the SBA, the allowance represents 1.02% of loans receivable. Net loan recoveries were $43,000 and $197,000 for the quarter and twelve months ended December 31, 2022, respectively, compared with charge-offs of $30,000 and $100,000 for the same periods in 2021, respectively. Annualized net loan recoveries for the quarter and twelve months ended December 31, 2022 were both 0.02% of average loans receivable.
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 $9,121,000 , or 0.88% of loans receivable at December 31, 2022, compared with $11,672,000 , or 1.26% of loans receivable at December 31, 2021, and $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, 2022, $3,435,000 , or approximately 71% 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 $13,684,000 at December 31, 2022, compared with $18,531,000 reported at December 31, 2021, and $22,193,000 at December 31, 2020.
Non-Interest Income
Total non-interest income was $2,997,000 for the fourth quarter of 2022 compared with $2,528,000 for the same period in 2021. There was a net realized loss of $227,000 on the sale of investments for the quarter ended December 31, 2022 compared with a gain of $766,000 for the same period in 2021. Unrealized gain on the investment equity securities was $1,602,000 for the quarter ended December 31, 2022 compared to a gain of $87,000 for the same period in 2021. The equities portfolio comprises blue-chip large-capitalized stocks, providing a taxable equivalent dividend yield of 3.32% .
Fees for services to customers increased $36,000 t o $404,000 for the fourth quarter 2022 compared with the same period in 2021, due primarily to increased overdraft occurrences. ATM and debit card income increased $11,000 t o $704,000 for the same period, due to card usage when comparing the two periods. Retail brokerage and advisory income decreased $24,000 t o $184,000 attributable to decreased advisory income.
Net gain on sales of loans decreased $58,000 when comparing the fourth 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 $18,000 when comparing the two periods due primarily to reduced merchant fee income of $14,000.
For the twelve months ended December 31, 2022, non-interest income was $5,731,000 , a decrease of $4,050,000 compared to the same period in 2021, primarily due to a negative change in fair value of the equity portfolio of $1,952,000. Realized gains on sales of securities was $266,000 , a decline of $993,000 for the twelve months ended December 31, 2022 compared with the same period in 2021. Net gain on sale of loans decreased $589,000 when comparing the twelve months ended December 31, 2022 with the same period in 2021, as there was a decrease in mortgage originations. Increases in non-interest income for the twelve months ended December 31, 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 $288,000 , $37,000 , and $2,000 , respectively. Other non-interest income decreased $296,000 due primarily to a life insurance benefit of $193,000 realized during the first quarter of 2021 compared to $46,000 realized in the third quarter of 2022, and a $57,000 decrease in merchant income.
Non-Interest Expense
Total non-interest expense was $8,119,000 for the fourth quarter of 2022 compared with $8,135,000 for the same period in 2021. Salaries and benefits expense decreased $76,000 , or 1.7% , to $4,464,000 when comparing the two quarters. Salary expense and related payroll taxes increased $158,000 , to $3,870,000 during the fourth quarter 2022 compared to the same period in 2021 with increases in salaries of $268,000 partly offset by decreases om incentive bonus and related taxes of $150,000. B enefits expense decreased $234,000 , when comparing the two periods.
Net occupancy and furniture and equipment expense decreased $14,000 , to $1,259,000 for the fourth quarter 2022 due to security expense and equipment maintenance partially offset by increased software maintenance.
Other non-interest expense decreased $18,000 , or 5.2% , when comparing fourth quarter 2022 with the same period in 2021 due to decreased FDIC insurance and marketing expense, partly offset by increased in third-party services.
For the twelve months ended December 31, 2022, non-interest expense was $31,492,000 , an increase of $495,000 , or 1.6% , compared to the same period in 2021.
Provision for income taxes increased $508,000 t o $1,560,000 in the fourth quarter 2022 due to increased pre-tax income and a higher effective tax rate, compared with the same period in 2021. The effective tax rates for the quarter and twelve months ended December 31, 2022 were 22.3% and 18.7% , respectively, compared with 20.2% and 19.4% , 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.
QNB Corp. Consolidated Selected Financial Data (unaudited) (Dollars in thousands) Balance Sheet (Period End) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Assets $ 1,668,497 $ 1,645,068 $ 1,646,695 $ 1,647,986 $ 1,673,340 Cash and cash equivalents 15,899 17,218 17,094 13,260 13,390 Investment securities Debt securities, AFS 546,525 555,710 609,567 656,846 692,360 Equity securities 12,056 10,444 11,617 12,652 12,410 Loans held-for-sale - - - - - Loans receivable 1,039,385 1,008,306 963,414 926,369 926,470 Allowance for loan losses (10,531 ) (11,338 ) (11,297 ) (11,231 ) (11,184 ) Net loans 1,028,854 996,968 952,117 915,138 915,286 Deposits 1,418,369 1,476,668 1,467,728 1,451,753 1,449,745 Demand, non-interest bearing 231,849 236,167 240,281 242,024 243,006 Interest-bearing demand, money market and savings 1,011,071 1,065,472 1,065,638 1,046,074 1,038,366 Time 175,449 175,029 161,809 163,655 168,373 Short-term borrowings 161,327 92,896 77,836 76,738 68,476 Long-term debt 10,000 10,000 10,000 10,000 10,000 Shareholders' equity 70,958 58,124 83,738 102,498 136,494 Asset Quality Data (Period End) Non-accrual loans $ 4,820 $ 6,337 $ 7,085 $ 7,272 $ 7,530 Loans past due 90 days or more and still accruing - - - - - Restructured loans 4,301 4,357 4,309 4,375 4,142 Non-performing loans 9,121 10,694 11,394 11,647 11,672 Other real estate owned and repossessed assets - - - - - Non-performing assets $ 9,121 $ 10,694 $ 11,394 $ 11,647 $ 11,672 Allowance for loan losses $ 10,531 $ 11,338 $ 11,297 $ 11,231 $ 11,184 Non-performing loans / Loans excluding held-for-sale 0.88 % 1.06 % 1.18 % 1.26 % 1.26 % Non-performing assets / Assets 0.55 % 0.65 % 0.69 % 0.71 % 0.70 % Allowance for loan losses / Loans excluding held-for-sale 1.01 % 1.12 % 1.17 % 1.21 % 1.21 %
QNB Corp. Consolidated Selected Financial Data (unaudited) (Dollars in thousands, except per share data) Three months ended, Twelve months ended For the period: 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 12/31/22 12/31/21 Interest income $ 14,739 $ 13,546 $ 12,327 $ 11,809 $ 11,938 $ 52,421 $ 46,770 Interest expense 3,460 2,167 1,224 1,073 1,130 7,924 4,643 Net interest income 11,279 11,379 11,103 10,736 10,808 44,497 42,127 Provision for loan losses (850 ) - - - - (850 ) 458 Net interest income after provision for loan losses 12,129 11,379 11,103 10,736 10,808 45,347 41,669 Non-interest income: Fees for services to customers 404 423 403 384 368 1,614 1,326 ATM and debit card 704 669 705 641 693 2,719 2,682 Retail brokerage and advisory income 184 194 205 205 208 788 786 Net realized gain on investment securities (227 ) - 457 36 766 266 1,806 Unrealized gain (loss) on equity securities 1,602 (1,174 ) (1,446 ) (8 ) 87 (1,026 ) 926 Net gain on sale of loans - 6 - - 58 6 595 Other 330 366 315 353 348 1,364 1,660 Total non-interest income 2,997 484 639 1,611 2,528 5,731 9,781 Non-interest expense: Salaries and employee benefits 4,464 4,371 4,205 4,266 4,540 17,306 17,453 Net occupancy and furniture and equipment 1,259 1,314 1,274 1,265 1,273 5,112 5,015 Other 2,396 2,129 2,267 2,282 2,322 9,074 8,529 Total non-interest expense 8,119 7,814 7,746 7,813 8,135 31,492 30,997 Income before income taxes 7,007 4,049 3,996 4,534 5,201 19,586 20,453 Provision for income taxes 1,560 634 647 824 1,052 3,665 3,961 Net income $ 5,447 $ 3,415 $ 3,349 $ 3,710 $ 4,149 $ 15,921 $ 16,492 Share and Per Share Data: Net income - basic $ 1.52 $ 0.96 $ 0.94 $ 1.04 $ 1.17 $ 4.47 $ 4.64 Net income - diluted $ 1.52 $ 0.96 $ 0.94 $ 1.04 $ 1.17 $ 4.47 $ 4.64 Book value $ 19.84 $ 16.25 $ 23.47 $ 28.81 $ 38.41 $ 19.84 $ 38.41 Cash dividends $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.35 $ 1.44 $ 1.40 Average common shares outstanding 3,577,587 3,567,987 3,559,185 3,552,854 3,549,584 3,564,481 3,553,949 Average common shares outstanding 3,577,587 3,567,987 3,559,185 3,554,456 3,550,542 3,564,481 3,554,138 QNB Corp. Consolidated Selected Financial Data (unaudited) (Dollars in thousands, except per share data) Three months ended, Twelve months ended For the period: 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 12/31/22 12/31/21 Selected Ratios: Return on average assets 1.24 % 0.78 % 0.79 % 0.90 % 0.98 % 0.93 % 1.04 % Return on average shareholders' equity 14.38 % 9.20 % 9.28 % 10.60 % 11.82 % 10.90 % 12.19 % Net interest margin (tax equivalent) 2.68 % 2.72 % 2.73 % 2.71 % 2.68 % 2.71 % 2.79 % Efficiency ratio (tax equivalent) 56.20 % 64.88 % 64.98 % 62.35 % 59.29 % 61.82 % 58.69 % Average shareholders' equity to total 8.65 % 8.53 % 8.51 % 8.43 % 8.53 % 8.54 % 8.53 % Net loan charge-offs (recoveries) $ (43 ) $ (41 ) $ (66 ) $ (47 ) $ 30 $ (197 ) $ 100 Net loan charge-offs (recoveries) - annualized / Average loans excluding held-for-sale -0.02 % -0.02 % -0.03 % -0.02 % 0.01 % -0.02 % 0.01 % Balance Sheet (Average) Assets $ 1,737,679 $ 1,727,132 $ 1,700,600 $ 1,675,385 $ 1,672,267 $ 1,710,449 $ 1,585,627 Investment securities (AFS & Equities) 673,117 691,010 710,856 710,109 690,792 696,158 565,924 Loans receivable 1,020,102 984,968 944,773 918,602 918,631 967,438 928,017 Deposits 1,462,654 1,475,668 1,458,921 1,444,049 1,440,611 1,460,416 1,359,100 Shareholders' equity 150,281 147,296 144,688 141,986 139,227 146,088 135,324
QNB Corp. (Consolidated) Average Balances, Rate, and Interest Income and Expense Summary (Tax-Equivalent Basis) Three Months Ended December 31, 2022 December 31, 2021 Average Average Average Average Balance Rate Interest Balance Rate Interest Assets Investment securities: U.S. Treasury $ 298 1.50 % $ 1 $ - 0.00 % $ - U.S. Government agencies 101,941 1.11 283 97,975 1.07 262 State and municipal 124,514 2.35 731 127,969 2.39 766 Mortgage-backed and CMOs 428,186 1.62 1,737 444,048 1.33 1,472 Corporate debt securities 6,647 4.38 73 6,710 4.33 72 Equities 11,531 3.50 102 14,090 3.14 111 Total investment securities 673,117 1.74 2,927 690,792 1.55 2,683 Loans: Commercial real estate 678,061 4.43 7,578 585,184 4.06 5,988 Residential real estate 106,045 3.47 920 98,233 3.35 823 Home equity loans 58,860 5.63 835 56,232 3.27 462 Commercial and industrial 152,183 6.14 2,357 154,080 4.90 1,903 Consumer loans 4,298 6.65 72 4,873 5.11 63 Tax-exempt loans 20,655 3.44 179 22,093 3.29 183 Total loans, net of unearned income* 1,020,102 4.64 11,941 920,695 4.06 9,422 Other earning assets 4,360 3.93 43 18,740 0.39 18 Total earning assets 1,697,579 3.49 14,911 1,630,227 2.95 12,123 Cash and due from banks 12,854 14,364 Allowance for loan losses (11,351 ) (11,220 ) Other assets 38,597 38,896 Total assets $ 1,737,679 $ 1,672,267 Liabilities and Shareholders' Equity Interest-bearing deposits: Interest-bearing demand $ 351,283 0.46 412 $ 329,406 0.19 154 Municipals 127,252 2.91 933 140,378 0.32 113 Money market 132,282 0.65 216 138,309 0.32 110 Savings 433,930 0.79 863 413,047 0.30 309 Time < $100 91,196 0.88 201 94,801 0.83 198 Time $100 t hrough $250 60,200 1.38 209 51,425 0.74 96 Time > $250 25,103 1.05 66 24,673 0.77 48 Total interest-bearing deposits 1,221,246 0.94 2,900 1,192,039 0.34 1,028 Short-term borrowings 106,295 1.94 520 72,820 0.34 62 Long-term debt 10,000 1.57 40 10,000 1.57 40 Total interest-bearing liabilities 1,337,541 1.03 3,460 1,274,859 0.35 1,130 Non-interest-bearing deposits 241,408 248,572 Other liabilities 8,449 9,609 Shareholders' equity 150,281 139,227 Total liabilities and shareholders' equity $ 1,737,679 $ 1,672,267 Net interest rate spread 2.46 % 2.60 % Margin/net interest income 2.68 % $ 11,451 2.68 % $ 10,993 21% .Non-accrual loans and investment securities are included in earning assets. * Includes loans held-for-sale
QNB Corp. (Consolidated) Average Balances, Rate, and Interest Income and Expense Summary (Tax-Equivalent Basis) Year Ended December 31, 2022 December 31, 2021 Average Average Average Average Balance Rate Interest Balance Rate Interest Assets Investment securities: U.S. Treasury $ 524 1.18 % $ 6 $ - 0.00 % $ - U.S. Government agencies 101,455 1.10 1,119 80,340 1.05 842 State and municipal 128,126 2.39 3,056 112,011 2.47 2,765 Mortgage-backed and CMOs 447,369 1.58 7,059 351,801 1.29 4,540 Corporate debt securities 6,673 4.37 291 7,291 4.01 292 Equities 12,011 3.32 399 14,481 3.02 437 Total investment securities 696,158 1.71 11,930 565,924 1.57 8,876 Loans: Commercial real estate 637,023 4.20 26,759 556,822 4.15 23,098 Residential real estate 104,397 3.34 3,484 95,241 3.41 3,244 Home equity loans 56,155 4.38 2,459 57,311 3.29 1,886 Commercial and industrial 145,579 5.10 7,432 193,491 4.75 9,189 Consumer loans 4,512 5.63 254 5,097 4.98 254 Tax-exempt loans 19,778 3.42 676 24,026 3.47 835 Total loans, net of unearned income* 967,444 4.24 41,064 931,988 4.13 38,506 Other earning assets 5,782 2.42 140 36,715 0.26 94 Total earning assets 1,669,384 3.18 53,134 1,534,627 3.09 47,476 Cash and due from banks 13,803 23,408 Allowance for loan losses (11,287 ) (11,157 ) Other assets 38,549 38,749 Total assets $ 1,710,449 $ 1,585,627 Liabilities and Shareholders' Equity Interest-bearing deposits: Interest-bearing demand $ 345,054 0.27 933 $ 307,258 0.20 624 Municipals 122,824 1.43 1,758 127,828 0.32 411 Money market 137,830 0.45 617 122,361 0.31 381 Savings 443,104 0.49 2,175 386,630 0.30 1,178 Time < $100 91,216 0.79 723 98,986 0.93 921 Time $100 t hrough $250 52,314 0.93 489 52,693 0.86 454 Time > $250 25,296 0.83 209 26,833 0.96 257 Total interest-bearing deposits 1,217,638 0.57 6,904 1,122,589 0.38 4,226 Short-term borrowings 106,295 1.00 861 72,820 0.36 258 Long-term debt 10,000 1.57 159 10,000 1.57 159 Total interest-bearing liabilities 1,333,933 0.60 7,924 1,205,409 0.39 4,643 Non-interest-bearing deposits 242,778 236,511 Other liabilities 8,069 9,545 Shareholders' equity 146,088 135,324 Total liabilities and shareholders' equity $ 1,730,868 $ 1,586,789 Net interest rate spread 2.58 % 2.70 % Margin/net interest income 2.71 % $ 45,210 2.79 % $ 42,833 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
