QNB Corp. Reports Earnings

Jan 26, 2016, 17:06 ET from QNB Corp.

QUAKERTOWN, Pa., Jan. 26, 2016 /PRNewswire/ -- 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 2015 of $1,943,000, or $0.58 per share on a diluted basis. This compares to net income of $2,486,000, or $0.75 per share on a diluted basis, for the same period in 2014.  For the year ended December 31, 2015, QNB reported net income of $8,233,000, or $2.46 per share on a diluted basis. This compares to net income of $8,998,000, or $2.72 per share on a diluted basis, reported for 2014.

For the year 2015 the rate of return on average assets and average shareholders' equity was 0.83% and 9.29%, respectively, compared with 0.95% and 10.89%, respectively, for the year 2014.

Total assets as of December 31, 2015 were $1,020,936,000 compared with $977,135,000 at December 31, 2014. Loans receivable at December 31, 2015 were $615,270,000 compared with $555,282,000 at December 31, 2014, an increase of $59,988,000, or 10.8%, with commercial lending as the largest contributor to the growth.  Total deposits at December 31, 2015 were $889,786,000, an increase of 4.5% compared with $851,592,000 at December 31, 2014, due to strong growth in non-time deposits.

David W. Freeman, President and Chief Executive Officer stated, "Loan, deposit and household growth for the fourth quarter and the entire year contributed to our results.  We continue to see trends in asset quality improvement as well.  The decline in net interest margin slowed in 2015, as we continue to experience net interest margin pressure, due to the rate environment and competition."

Net Interest Income and Net Interest Margin

Net interest income for the quarter and twelve months ended December 31, 2015 totaled $7,025,000 and $27,369,000, respectively, an increase of $374,000 and $1,243,000, respectively, from the same periods in 2014. The net interest margin for the fourth quarter of 2015 was 3.00% compared to 2.96% for the fourth quarter of 2014.  Net interest margin for the twelve months ended December 31, 2015 was 3.05%, a decrease of two basis points compared to the same period in 2014.  While the prolonged low interest rate environment and loan rate competition continues to exert pressure on asset yields, the growth in loans as a percent of earning assets as well as growth in non-interest bearing deposits during 2015 contributed to the Company's ability to maintain net interest margin.  The yield on earning assets increased one basis point from 3.45% for the fourth quarter of 2014 to 3.46% for the fourth quarter of 2015. For the twelve months ended December 31, 2015, the yield on earning assets declined four basis points, from 3.57% in 2014 to 3.53% in 2015.  The cost of interest-bearing liabilities was 0.56% for the fourth quarter and the year ended December 31, 2015, compared with 0.57% and 0.58% for the same periods in 2014.

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

QNB recorded a $140,000 provision for loan losses in the fourth quarter of 2015, compared to $400,000 for the fourth quarter 2014.  For the year 2015, QNB recorded $200,000 in provision, compared to $400,000 for the year 2014.   QNB's allowance for loan losses of $7,554,000 represents 1.23% of loans receivable at December 31, 2015 compared to an allowance for loan losses of $8,001,000, or 1.44% of loans receivable at December 31, 2014. Net loan charge-offs were $255,000 for the fourth quarter of 2015, or 0.17% annualized of total average loans, compared with net charge-offs of $765,000 for the fourth quarter of 2014, or 0.56% of total average loans. For the years ended December 31, 2015 and 2014 net loan charge-offs were $647,000, or 0.11%, and $1,324,000, or 0.25%, of total average loans, respectively. The majority of charge-offs recorded during both 2015 and 2014 had specific reserves established during the allowance for loan loss calculation process prior to the decision to charge-off the loan.

Asset quality improved over the past year with total non-performing assets of $13,372,000 at December 31, 2015 compared with $18,152,000 as of December 31, 2014. Included in this classification are non-performing loans, other real estate owned (OREO) and repossessed assets, and non-performing pooled trust preferred securities. 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 $10,719,000, or 1.74% of loans receivable at December 31, 2015, compared with $12,667,000, or 2.28% of loans receivable at December 31, 2014. 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, 2015, $7,395,000, or approximately 79% of the loans classified as non-accrual are current or past due less than 30 days. Commercial loans classified as substandard or doubtful, which includes non-performing loans, also improved. At December 31, 2015 substandard or doubtful loans totaled $27,325,000, a reduction of $7,029,000, or 20.5%, from the $34,354,000 reported at December 31, 2014.

QNB had no other real estate owned and other repossessed assets as of December 31, 2015 compared with five properties with a carrying value of $3,046,000 at December 31, 2014.  Included in the December 31, 2014 amount was one property with a fair value of $2,325,000, which was sold in January 2015.  For the twelve months ended December 31, 2015, a total of six OREO properties were sold, one of which was acquired during the year and subsequently sold. Non-accrual pooled trust preferred securities are carried at fair value of $2,653,000, and $2,439,000, at December 31, 2015 and December 31, 2014, respectively.  The increase in the carrying value of these securities reflects an improvement in their fair value.

Non-Interest Income

Total non-interest income was $1,263,000 for the fourth quarter of 2015, and $6,032,000 for the year ended December 31, 2015, a decrease of $1,325,000 and $1,510,000, compared to the same periods in 2014, respectively.  On November 26, 2014, QNB transferred its former internet domain name to a third party for a purchase price of $1.0 million, as disclosed in a Form 8-k filing dated December 2, 2014. The Company also received a life insurance benefit totaling $158,000 during the fourth quarter 2014.  Excluding these two non-recurring items, the Company's non-interest income declined $167,000, or 11.7%, and $352,000, or 5.5%, when comparing the quarters and years ended December 31, 2015 and 2014, respectively.

Net gains on investment securities decreased $42,000 for the quarter and $329,000 for the year ended December 31, 2015, primarily due to market conditions which resulted in fewer opportunities for sales in 2015 compared to 2014.   QNB recorded net gains in trading activity of $16,000 for the quarter and $33,000 for year ended December 31, 2015, compared with net gains from trading activity of $1,000 and $156,000 for the fourth quarter and year ended December 31, 2014, respectively.  Net gains on the sale of residential mortgage loans for the fourth quarter and year ended December 31, 2015 were $54,000 and $356,000, respectively, a decrease of $33,000 for the fourth quarter 2015, and an increase of $98,000 for the year 2015, respectively, compared to the same periods in 2014.  Growth in QNB Financial Services resulted in an additional $29,000 in retail brokerage and advisory income for the year ended December 31, 2015, while fourth quarter 2015 saw a decline of $75,000, when compared to the same periods in 2014. Increased debit card usage resulted in an increase in income of $46,000 for the quarter and $86,000 for the year 2015 compared to the same periods in 2014.

Non-Interest Expense

Total non-interest expense was $5,634,000 for the fourth quarter of 2015, an increase of $12,000, or 0.2%, compared with $5,622,000 for the fourth quarter of 2014.  For year ended December 31, 2015, total non-interest expense increased $772,000, or 3.6%, to $22,398,000, compared to the same period in 2014.  Salaries and benefits expense increased $61,000, or 2.0%, for the quarter ended December 31, 2015, compared to the same period in 2014. For the year ended December 31, 2015 salaries and benefits expense increased $427,000, or 3.7%, compared to the same period in 2014.  Salary expense decrease of $14,000 for the fourth quarter 2015 compared to the same period in 2014 was offset by increased benefits costs of $75,000, primarily medical insurance premiums.  For the year ended December 31, 2015, salary expense increase of $574,000, or 6.4%, was offset by a reduction in net benefits costs. The reduction in benefits expense is due primarily to insurance reimbursements for medical claims paid in prior periods.  Net occupancy and furniture and equipment expense declined $10,000, or 1.1%, for the fourth quarter 2015 compared to the same period in 2014.  For year ended December 31, 2015, net occupancy and furniture and equipment costs increased $30,000 compared to the same period in 2014, due primarily to increased software maintenance and rental expense, offset in part by lower depreciation expense.  Other operating expenses for the three months ended December 31, 2015 decreased $39,000.  Other operating expenses for the twelve months ended December 31, 2015 increased $315,000, or 4.8%, as increased taxes, third party services, collection costs and  debit card expenses  were partially offset by a decline in marketing, and FDIC insurance expense.  Debit card expenses include a $208,000 contract termination fee related to card platform upgrades anticipated to occur during 2016.

About the Company

QNB Corp. is the holding company for QNB Bank, which is headquartered in Quakertown, Pennsylvania. QNB Bank currently operates eleven 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 Investment Professionals, Inc., 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, 2014. 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)

12/31/15

9/30/15

6/30/15

3/31/15

12/31/14

Assets

$ 1,020,936

$ 1,039,317

$  955,245

$  992,918

$  977,135

Investment securities

Trading

4,189

3,625

3,871

4,183

4,207

Available-for-sale

361,915

362,568

330,231

350,810

375,219

Held-to-maturity

147

147

146

146

146

Loans held-for-sale

987

320

466

884

380

Loans receivable

615,270

582,255

578,256

570,708

555,282

Allowance for loan losses

(7,554)

(7,669)

(7,655)

(7,978)

(8,001)

Net loans

607,716

574,586

570,601

562,730

547,281

Deposits

889,786

908,674

826,081

864,465

851,592

Demand, non-interest bearing

98,543

98,092

97,060

100,493

86,920

Interest-bearing demand, money market and savings

563,867

581,488

494,877

526,427

521,425

Time

227,376

229,094

234,144

237,545

243,247

Short-term borrowings

37,163

32,588

32,896

35,868

35,189

Shareholders' equity

90,443

90,996

88,537

89,159

86,354

Asset Quality Data (Period End)

Non-accrual loans

$        9,420

$        8,082

$      9,823

$      7,847

$    10,770

Loans past due 90 days or more and still accruing

11

52

90

-

-

Restructured loans

1,288

626

2,177

2,432

1,897

Non-performing loans

10,719

8,760

12,090

10,279

12,667

Other real estate owned and repossessed assets

-

-

235

664

3,046

Non-accrual pooled trust preferred securities

2,653

2,600

2,694

2,574

2,439

Non-performing assets

$      13,372

$      11,360

$    15,019

$    13,517

$    18,152

Allowance for loan losses

$     7,554

$     7,669

$   7,655

$   7,978

$   8,001

Non-performing loans / Loans excluding held-for-sale

1.74%

1.50%

2.09%

1.80%

2.28%

Non-performing assets / Assets

1.31%

1.09%

1.57%

1.36%

1.86%

Allowance for loan losses / Loans excluding held-for-sale

1.23%

1.32%

1.32%

1.40%

1.44%

 

 

QNB Corp.

Consolidated Selected Financial Data (unaudited)

(Dollars in thousands, except per share data)

Three months ended,

Year ended,

For the period:

12/31/15

9/30/15

6/30/15

3/31/15

12/31/14

12/31/15

12/31/14

Interest income

$        8,184

$    8,138

$    7,746

$    7,807

$    7,814

$   31,875

$   30,670

Interest expense

1,159

1,123

1,104

1,120

1,163

4,506

4,544

Net interest income

7,025

7,015

6,642

6,687

6,651

27,369

26,126

Provision for loan losses

140

-

60

-

400

200

400

Net interest income after provision     for loan losses

6,885

7,015

6,582

6,687

6,251

27,169

25,726

Non-interest income:

Fees for services to customers

417

434

404

402

446

1,657

1,687

ATM and debit card

418

397

394

362

372

1,571

1,485

Retail brokerage and advisory income

129

180

204

173

204

686

657

Net (loss) gain on investment securities     available-for-sale

(17)

83

214

503

25

783

1,112

Net gain (loss) from trading activity

16

36

(34)

15

1

33

156

Net gain on sale of loans

54

120

119

63

87

356

258

Other

246

243

298

159

1,453

946

2,187

Total non-interest income

1,263

1,493

1,599

1,677

2,588

6,032

7,542

Non-interest expense:

Salaries and employee benefits

3,116

2,911

3,053

2,996

3,055

12,076

11,649

Net occupancy and furniture and equipment

867

851

887

883

877

3,488

3,458

Other

1,651

1,811

1,724

1,648

1,690

6,834

6,519

Total non-interest expense

5,634

5,573

5,664

5,527

5,622

22,398

21,626

Income before income taxes

2,514

2,935

2,517

2,837

3,217

10,803

11,642

Provision for income taxes

571

715

583

701

731

2,570

2,644

Net income

$        1,943

$    2,220

$    1,934

$    2,136

$    2,486

$     8,233

$     8,998

Share and Per Share Data:

Net income - basic

$          0.58

$      0.66

$      0.58

$      0.64

$      0.75

$       2.47

$       2.73

Net income - diluted

$          0.58

$      0.66

$      0.58

$      0.64

$      0.75

$       2.46

$       2.72

Book value

$        26.92

$    27.16

$    26.49

$    26.76

$    26.04

$     26.92

$     26.04

Cash dividends

$          0.29

$      0.29

$      0.29

$      0.29

$      0.28

$       1.16

$       1.12

Average common shares outstanding - basic

3,351,909

3,343,011

3,333,018

3,321,688

3,308,265

3,337,505

3,291,939

Average common shares outstanding - diluted

3,366,566

3,356,789

3,346,533

3,333,802

3,321,849

3,350,539

3,302,574

Selected Ratios:

Return on average assets

0.75%

0.88%

0.81%

0.89%

1.00%

0.83%

0.95%

Return on average shareholders' equity

8.50%

9.86%

8.83%

10.00%

11.61%

9.29%

10.89%

Net interest margin (tax equivalent)

3.00%

3.08%

3.06%

3.08%

2.96%

3.05%

3.07%

Efficiency ratio (tax equivalent)

64.43%

62.22%

65.29%

62.75%

57.97%

63.66%

60.80%

Average shareholders' equity to total average assets

8.87%

8.98%

9.14%

8.92%

8.61%

8.97%

8.72%

Net loan charge-offs (recoveries)

$           255

$        (14)

$       383

$         23

$       765

$        647

$     1,324

Net loan charge-offs (recoveries) - annualized /       Average loans excluding held-for-sale

0.17%

-0.01%

0.27%

0.02%

0.56%

0.11%

0.25%

Balance Sheet (Average)

Assets

$ 1,023,365

$995,282

$961,077

$971,403

$987,535

$ 987,894

$ 947,864

Investment securities (Trading, AFS & HTM)

370,780

343,520

339,508

366,161

378,946

354,973

367,268

Loans receivable

589,096

575,944

573,766

558,190

542,859

574,339

524,127

Deposits

896,730

870,751

839,586

847,520

867,870

863,801

829,084

Shareholders' equity

90,725

89,340

87,803

86,650

84,982

88,642

82,623

 

SOURCE QNB Corp.



RELATED LINKS

http://www.qnbbank.com