QNB Corp. Reports Earnings for Second Quarter 2022

QNB Corp

QUAKERTOWN, PA — QNB Corp. (OTC Bulletin Board: QNBC), the parent company of QNB Bank, recently reported net income for the second quarter of 2022 of $3,349,000, or $0.94 per share on a diluted basis. This compares to net income of $3,869,000, or $1.09  per share on a diluted basis, for the same period in 2021.  For the six months ended June 30, 2022, QNB reported net income of $7,059,000, or $1.98 per share on a diluted basis. This compares to net income of $8,919,000 or $2.51 per share on a diluted basis, reported for the same period in 2021.

For the quarter ended June 30, 2022, the annualized rate of return on average assets and average shareholders’ equity was 0.79% and 9.28%, respectively, compared with 0.98% and 11.53%, respectively, for the second quarter 2021.

The operating performance of the Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter ended June 30, 2022, in comparison with the same period in 2021 due to growth in net interest income.  The change in contribution from QNB Corp. for the quarter ended June 30, 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, Six months ended,
6/30/2022 6/30/2021 Variance 6/30/2022 6/30/2021 Variance
QNB Bank $ 4,082,000 $ 3,303,000 $ 779,000 $ 7,790,000 $ 7,341,000 $ 449,000
QNB Corp (733,000) 566,000 (1,299,000) (731,000) 1,578,000 (2,309,000)
Consolidated net income $ 3,349,000 $ 3,869,000 $ (520,000) $ 7,059,000 $ 8,919,000 $ (1,860,000)
Total assets as of June 30, 2022 were $1,646,695,000 compared with $1,673,340,000 at December 31, 2021.  Total available for sale debt securities decreased $82,793,000, or 12.0%, to  $609,567,000, due primarily to the reduction in fair value of the portfolio, in response to the rise in interest rates during the period.  Total deposits increased $17,983,000 to $1,467,728,000.  The Bank participated in both rounds of the Small Business Administration’s Paycheck Protection Program (“PPP”).  Loans receivable, excluding PPP, grew $47,149,000 to approximately $959,774,000 since December 31, 2021.

“We continue to see growth and good performance, with solid net income and a return of $0.94 per share earnings on a diluted basis for our shareholders.  The second quarter experienced continued household growth, deposit and loan growth, and good credit quality,” said David W. Freeman, President and Chief Executive Officer.

Net Interest Income and Net Interest Margin

Net interest income for the quarter and six months ended June 30, 2022 totaled $11,103,000 and $21,839,000 respectively, an increase of $885,000 and $1,104,000, respectively from the same periods in 2021. Net interest margin was 2.73% for the second quarter of 2022 and 2.74% for the same period in 2021.  Net interest margin was 2.72% for the six months ended June 30, 2022, compared with 2.89% for the same period in 2021.

READ:  Optinose Announces Reporting Date for Second Quarter 2022 Financial Results

The yield on earning assets was 3.02% for the second quarter 2022, compared with 3.04% in the second quarter of 2021. For the six-month period ended June 30, 2022, yield on earning assets was 3.00%, compared with 3.22% for the same period in 2021.  The cost of interest-bearing liabilities was 0.38% for the quarter and 0.36% for the six months ended June 30, 2022, compared with 0.39% and 0.42% for the same periods in 2021.

Proceeds from average deposit growth, PPP loan forgiveness and excess cash over the past year were invested in available-for-sale securities, primarily mortgage-backed securities, which comprised 43% of average earnings assets in the first six months of 2022, compared with 33% for the same period in 2021.  This increase in marketable securities as a percent of earnings assets is the primary reason for the reduction in net interest margin, as these securities yield less than loans.

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

QNB recorded no provision for loan losses in the second quarter of 2022 compared with $183,000 in the second quarter 2021.  QNB’s allowance for loan losses of $11,297,000 represents 1.17% of loans receivable at June 30, 2022 compared to $11,184,000, or 1.21% of loans receivable at December 31, 2021, and $11,202,000, or 1.22% of loans receivable at June 30, 2021.  Excluding the PPP loans, which are expected to be fully forgiven within the several months, and are 100% guaranteed by the SBA, the allowance represents 1.18% of loans receivable.  Net loan recoveries were $66,000 and $113,000 for the quarter and six months ended June 30, 2022, respectively, compared with charge-offs of $96,000 and $82,000 for the same periods in 2021, respectively.   Annualized net loan recoveries for the quarter and six months ended June 30, 2022 were 0.03% 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 $11,394,000, or 1.18% of loans receivable at June 30, 2022, compared with $11,672,000, or 1.26% of loans receivable at December 31, 2021, and $12,515,000, or 1.36% of loans receivable at June 30, 2021.  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, 2022, $3,987,000, or approximately 56% 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 $18,836,000 at June 30, 2022, compared with $18,531,000 reported at December 31, 2021, and $22,533,000 at June 30, 2021.

READ:  Berwyn-based AMETEK Announces Record Sales for Second Quarter 2022

Non-Interest Income

Total non-interest income was $639,000 for the second quarter of 2022, compared with $2,534,000 for  the same period in 2021, due primarily to a $2,025,000 change the fair value of the equity securities portfolio compared with the same period in 2021.  Net realized gain on investments increased $163,000 to $457,000 for the quarter ended June 30, 2022, compared with the same period in 2021.   The equities portfolio comprises blue-chip large-capitalized stocks, providing a taxable equivalent dividend yield of 3.22%.

Fees for services to customers increased $107,000, to $403,000 for the second quarter 2022 compared with the same period in 2021 due primarily to increased overdraft occurrences.  Retail brokerage and advisory income increased $12,000 to $205,000 attributable to increased advisory income.

Net gain on sale of loans decreased $120,000 when comparing the second 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 $28,000 when comparing the two periods due primarily to reduced title insurance income, letter of credit fees and miscellaneous fees of $23,000, $11,000, and $6,000 offset in part to increased mortgage loan servicing income and credit card fees of $14,000 and $6,000, respectively.  ATM and debit card income declined slightly to $705,000 for the same period due to reduced card usage when comparing the two periods.

For the six months ended June 30, 2022, non-interest income was $2,250,000 a decrease of $3,688,000 compared to the same period in 2021, primarily due to the change in fair value of the equities portfolio totaling $3,129,000.  Realized gain on sale of securities was $493,000, a decline of $143,000 for the six months ended June 30, 2022, compared with the same period in 2021.  Net gain on sale of loans decreased $472,000 when comparing the six months ended June 30, 2022 with the same period in 2021, as there was a decrease in mortgage originations.  Increases in non-interest income for the six months ended June 30, 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 $192,000, $44,000, and $50,000, respectively.  Other non-interest income decreased $230,000 due primarily to a life insurance benefit of $193,000 realized during the first quarter of 2021.

READ:  Baudax Bio Reports Second Quarter 2022 Financial Results and Business Highlights

Non-Interest Expense

Total non-interest expense was $7,746,000 for the second quarter of 2022, compared with $7,749,000  for the same period in 2021.  Salaries and benefits expense decreased $137,000, or 3.2%, to $4,205,000 when comparing the two quarters.  Salary expense and related payroll taxes decreased $129,000, to $3,536,000 during the second quarter 2022 compared to the same period in 2021 with decreases in incentive bonus and related taxes of $172,000 and stock-based compensation expense of $12,000, offset in part by increased salary expense and related taxes of $58,000 and a reversal of $12,000 in accrued vacation expense that occurred in 2021.  Benefits expense decreased $8,000, when comparing the two periods.

Net occupancy and furniture and equipment expense increased $69,000, or 5.7%, to $1,274,000 for the second quarter 2022 due to increased software maintenance and amortization of $67,000, increased building maintenance expenses of $13,000, increased rent of $3,000 and increased equipment expense of $4,000, offset in part by decreased depreciation expense of $22,000.

Other non-interest expense increased $65,000, or 3%, when comparing second quarter 2022 with the same period in 2021 due to increased marketing, travel and entertainment, and ATM and check card expense, offset in part by decreased FDIC insurance and state tax.

For the six months ended June 30, 2022, non-interest expense was $15,559,000, an increase of $487,000, or 3.2%, compared to the same period in 2021.

Provision for income taxes decreased $304,000 to $647,000 in the second quarter 2022 due to decreased pre-tax income and a lower effective tax rate,  compared with the same period in 2021.  The effective tax rates for the quarter and six months ended June 30, 2022 were 16.2% and 17.2%, respectively, compared with 19.7% and 20.0%, respectively, for the same periods in 2021.

More information about QNB Corp. and QNB Bank is available at QNBBank.com.

You May Also Be Interested In…

Thanks for visiting! Looking for some Chester County pride? We got you covered! Shop our MyChesCo store and show your love for Chester County, Pennsylvania. We got shirts, hats, and more – all with a unique ChesCo flair. Plus, proceeds from each purchase helps support our mission of bringing reliable information and resources to the people of Chester County.