QUAKERTOWN, Pa., Jan. 24, 2017 /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 2016 of $2,269,000, or $0.66 per share on a diluted basis, compared with $1,943,000, or $0.58 per share on a diluted basis during the same period in 2015. For the year ended December 31, 2016, QNB reported net income of $8,924,000, or $2.63 per share on a diluted basis. This compares to net income of $8,233,000, or $2.46 per share on a diluted basis, reported for 2015.
For the year 2016 the rate of return on average assets and average shareholders' equity was 0.87% and 9.45%, respectively, compared with 0.83% and 9.29%, respectively, for the year 2015.
Total assets as of December 31, 2016 were $1,063,141,000 compared with $1,020,936,000 at December 31, 2015. Loans receivable at December 31, 2016 were $633,079,000 compared with $615,270,000 at December 31, 2015, an increase of $17,809,000, or 2.9%, with commercial lending as the largest contributor to the growth. Total deposits at December 31, 2016 were $913,355,000, an increase of 2.6% compared with $889,786,000 at December 31, 2015, due to strong growth in non-interest bearing deposits.
David W. Freeman, President and Chief Executive Officer, stated, "Our improved results reflect loan, deposit and household growth for the fourth quarter and the entire year. Our retail brokerage business, QNB Financial Services, achieved a milestone during the quarter, with over $100 million in assets under management. Asset quality is strong. Net interest margin declined slightly in 2016, as we continue to experience 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, 2016 totaled $7,279,000 and $28,504,000, respectively, an increase of $254,000 and $1,135,000, respectively, from the same periods in 2015. The net interest margin for the fourth quarter of 2016 was 2.97% compared to 3.00% for the fourth quarter of 2015. Net interest margin for the twelve months ended December 31, 2016 was 3.03%, a decrease of two basis points compared to 2015. The yield on earning assets decreased two basis points from 3.46% for the fourth quarter of 2015 to 3.44% for the fourth quarter of 2016. For the twelve months ended December 31, 2016, the yield on earning assets declined three basis points, from 3.53% in 2015 to 3.50% in 2016. The cost of interest-bearing liabilities was 0.57% for the fourth quarter and the year ended December 31, 2016, compared with 0.56% for the same periods in 2015.
Asset Quality, Provision for Loan Loss and Allowance for Loan Loss
QNB reversed $95,000 in provision for loan losses in the fourth quarter of 2016. In October 2016, the Company sold its interest in its indirect lease finance portfolio, recording a loss on sale of $223,000. The allowance for loan losses associated with this sold portfolio, totaling $220,000, was reversed, while provisions for loan losses for the rest of the commercial and retail loan portfolio totaling $125,000 were recorded during the quarter. A provision of $140,000 was recorded for the fourth quarter 2015. For the year 2016, QNB recorded $30,000 in provision, compared to $200,000 for the year 2015. QNB's allowance for loan losses of $7,394,000 represents 1.17% of loans receivable at December 31, 2016 compared to an allowance for loan losses of $7,554,000, or 1.23% of loans receivable at December 31, 2015. Net loan charge-offs were $104,000 for the fourth quarter of 2016, or 0.07% annualized of total average loans, compared with net charge-offs of $255,000 for the fourth quarter of 2015, or 0.17% of total average loans. For the years ended December 31, 2016 and 2015 net loan charge-offs were $190,000, or 0.03%, and $647,000, or 0.11%, of total average loans, respectively. The majority of charge-offs recorded during both 2016 and 2015 had specific reserves established prior to the decision to charge off the loan.
Non-performing assets totaled $14,219,000 at December 31, 2016 compared with $13,372,000 as of December 31, 2015. 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 $11,938,000, or 1.89% of loans receivable at December 31, 2016, compared with $10,719,000, or 1.74% of loans receivable at December 31, 2015. 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, 2016, $7,749,000, or approximately 77% of the loans classified as non-accrual are current or past due less than 30 days. At December 31, 2016 substandard or doubtful loans totaled $22,204,000, a reduction of $5,121,000, or 18.7%, from the $27,325,000 reported at December 31, 2015.
QNB had no other real estate owned and other repossessed assets as of December 31, 2016 and December 31, 2015. Non-accrual pooled trust preferred securities are carried at fair value of $2,281,000, and $2,653,000, at December 31, 2016 and December 31, 2015, respectively.
Non-Interest Income
Total non-interest income was $1,073,000 for the fourth quarter of 2016, and $5,667,000 for the year ended December 31, 2016, a decrease of $190,000 and $365,000, compared to the same periods in 2015, respectively. Net gain on sale of loans declined $220,000, due to a loss on sale of the indirect lease finance portfolio during the fourth quarter 2016. Losses in the trading portfolio for the fourth quarter, resulting from the increase in interest rates, contributed $103,000 to the decline. These decreases in income were offset in part by increases in retail brokerage and advisory fees, gain on investment securities and other non-interest income of $49,000, $41,000, and $40,000, respectively.
Non-Interest Expense
Total non-interest expense was $5,435,000 for the fourth quarter of 2016, a decrease of $199,000, or 3.5%, compared with $5,634,000 for the fourth quarter of 2015. For year ended December 31, 2016, total non-interest expense decreased $235,000, or 1.0%, to $22,163,000, compared to the year 2015. Salaries and benefits expense decreased $219,000, or 7.0%, for the quarter ended December 31, 2016, compared to the same period in 2015, due to reduced medical insurance claims of $124,000, a $99,000 reduction in accrued bonus expense, and $32,000 in lower 401k expenses, offset in part by increased salary expense of $77,000. For the year ended December 31, 2016 salaries and benefits expense decreased $65,000, or 0.5%, compared to the same period in 2015. Net occupancy and furniture and equipment expense increased $29,000, or 3.3%, for the fourth quarter 2016 compared to the same period in 2015, due to increases in software and building maintenance. For year ended December 31, 2016, net occupancy and furniture and equipment costs increased $15,000 compared to the same period in 2015, due primarily to increased software maintenance, building maintenance and security expense, offset in part by lower depreciation expense. Other operating expenses for the three months ended December 31, 2016 decreased $10,000, with increases in debit card expense and supplies and telecommunications expense of $141,000 and $23,000, respectively, offset by decreased FDIC insurance of $73,000, third party expense of $23,000 and marketing expense of $84,000. Other operating expenses for the twelve months ended December 31, 2016 decreased $186,000, or 2.7%, due to the same reasons detailed for expense increases and decreases for the quarter. Debit card expenses in 2015 included a contract termination fee related to card platform upgrades, which took place during 2016. Provision for income taxes increased in the fourth quarter and year ended December 31, 2016, due to the increase in taxable net income, as well as the effective tax rate. The increase in effective tax rate in 2016 reflects lower proportionate tax-free income in 2016, compared to 2015.
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, 2015. 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) 12/31/16 9/30/16 6/30/16 3/31/16 12/31/15
------------------------- -------- ------- ------- ------- --------
Assets $1,063,141 $1,071,931 $1,030,238 $1,004,552 $1,020,936
Cash and cash equivalents 10,721 69,428 57,949 32,138 16,991
Investment securities
Trading 3,596 4,312 3,459 4,006 4,189
Available-for-sale 390,475 368,834 344,253 345,118 361,915
Held-to-maturity - 147 147 147 147
Loans held-for-sale 789 456 184 90 987
Loans receivable 633,079 608,231 604,478 601,686 615,270
Allowance for loan losses (7,394) (7,593) (7,550) (7,556) (7,554)
Net loans 625,684 600,638 596,928 594,130 607,716
Deposits 913,355 926,712 893,285 865,360 889,786
Demand, non-interest bearing 119,010 105,029 117,650 105,660 98,543
Interest-bearing demand, money market and 568,763 593,307 547,262 532,597 563,867
savings
Time 225,582 228,376 228,373 227,103 227,376
Short-term borrowings 52,660 41,179 36,693 40,426 37,163
Shareholders' equity 93,567 97,996 97,207 94,955 90,443
Asset Quality Data (Period End)
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Non-accrual loans $10,119 $8,237 $8,685 $8,834 $9,420
Loans past due 90 days or more and still accruing - 150 65 8 11
Restructured loans 1,819 1,149 1,433 1,268 1,288
----- ----- ----- ----- -----
Non-performing loans 11,938 9,536 10,183 10,110 10,719
Other real estate owned and repossessed assets - - - - -
Non-accrual pooled trust preferred securities 2,281 2,275 2,400 2,655 2,653
----- ----- ----- ----- -----
Non-performing assets $14,219 $11,811 $12,583 $12,765 $13,372
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Allowance for loan losses $7,394 $7,593 $7,550 $7,556 $7,554
Non-performing loans / Loans excluding held-for- 1.89% 1.57% 1.68% 1.68% 1.74%
sale
Non-performing assets / Assets 1.34% 1.10% 1.22% 1.27% 1.31%
Allowance for loan losses / Loans excluding held- 1.17% 1.25% 1.25% 1.26% 1.23%
for-sale
QNB Corp.
Consolidated Selected Financial Data (unaudited)
(Dollars in thousands, except per share data) Three months ended, Year ended,
------------------- -----------
For the period: 12/31/16 9/30/16 6/30/16 3/31/16 12/31/15 12/31/16 12/31/15
--------------- -------- ------- ------- ------- -------- -------- --------
Interest income $8,486 $8,287 $8,184 $8,280 $8,184 $33,237 $31,875
Interest expense 1,207 1,202 1,165 1,159 1,159 4,733 4,506
----- ----- ----- ----- ----- ----- -----
Net interest income 7,279 7,085 7,019 7,121 7,025 28,504 27,369
(Credit) provision for loan losses (95) - - 125 140 30 200
--- --- --- --- --- --- ---
Net interest income after provision 7,374 7,085 7,019 6,996 6,885 28,474 27,169
for loan losses
Non-interest income:
Fees for services to customers 416 425 397 383 417 1,621 1,657
ATM and debit card 422 419 422 388 418 1,651 1,571
Retail brokerage and advisory income 178 129 126 170 129 603 686
Net gain (loss) on investment securities 24 316 15 319 (17) 674 783
available-for-sale
Net (loss) gain from trading activity (87) (39) 52 34 16 (40) 33
Net (loss) gain on sale of loans (166) 143 71 49 54 97 356
Other 286 251 291 233 246 1,061 946
--- --- --- --- --- ----- ---
Total non-interest income 1,073 1,644 1,374 1,576 1,263 5,667 6,032
----- ----- ----- ----- ----- ----- -----
Non-interest expense:
Salaries and employee benefits 2,897 3,072 2,988 3,054 3,116 12,011 12,076
Net occupancy and furniture and equipment 896 875 866 866 867 3,503 3,488
Other 1,642 1,669 1,739 1,599 1,651 6,649 6,834
----- ----- ----- ----- ----- ----- -----
Total non-interest expense 5,435 5,616 5,593 5,519 5,634 22,163 22,398
----- ----- ----- ----- ----- ------ ------
Income before income taxes 3,012 3,113 2,800 3,053 2,514 11,978 10,803
Provision for income taxes 743 821 702 788 571 3,054 2,570
--- --- --- --- --- ----- -----
Net income $2,269 $2,292 $2,098 $2,265 $1,943 $8,924 $8,233
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Share and Per Share Data:
-------------------------
Net income - basic $0.67 $0.68 $0.62 $0.67 $0.58 $2.64 $2.47
Net income - diluted $0.66 $0.67 $0.62 $0.67 $0.58 $2.63 $2.46
Book value $27.43 $28.82 $28.66 $28.08 $26.92 $27.43 $26.92
Cash dividends $0.30 $0.30 $0.30 $0.30 $0.29 $1.20 $1.16
Average common shares outstanding - basic 3,402,479 3,391,471 3,383,109 3,369,782 3,351,909 3,386,766 3,337,505
Average common shares outstanding - diluted 3,416,117 3,404,039 3,391,875 3,377,936 3,366,566 3,395,839 3,350,539
Selected Ratios:
----------------
Return on average assets 0.85% 0.86% 0.84% 0.91% 0.75% 0.87% 0.83%
Return on average shareholders' equity 9.34% 9.57% 9.01% 9.88% 8.50% 9.45% 9.29%
Net interest margin (tax equivalent) 2.97% 2.93% 3.08% 3.14% 3.00% 3.03% 3.05%
Efficiency ratio (tax equivalent) 62.17% 61.49% 63.52% 60.43% 64.43% 61.89% 63.66%
Average shareholders' equity to total average 9.10% 9.04% 9.30% 9.21% 8.87% 9.16% 8.97%
assets
Net loan charge-offs (recoveries) $104 $(43) $6 $123 $255 $190 $647
Net loan charge-offs (recoveries) - annualized / 0.07% -0.03% 0.00% 0.08% 0.17% 0.03% 0.11%
Average loans excluding held-for-sale
Balance Sheet (Average)
----------------------
Assets $1,061,980 $1,054,001 $1,007,036 $1,001,189 $1,023,365 $1,031,198 $987,894
Investment securities (Trading, AFS & HTM) 386,374 351,102 342,132 357,428 370,780 359,410 354,973
Loans receivable 615,853 602,645 600,761 600,808 589,096 605,040 574,339
Deposits 919,623 916,366 871,379 862,239 896,730 892,541 863,801
Shareholders' equity 96,660 95,255 93,688 92,251 90,725 94,472 88,642
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SOURCE QNB Corp.
