QUAKERTOWN, Pa., July 24 /PRNewswire-FirstCall/ -- QNB Corp. (the "Company" or "QNB") (BULLETIN BOARD: QNBC) , the holding company for QNB Bank (the "Bank"), reported net income for the second quarter of 2009 of $1,227,000, or $0.40 per share on a diluted basis. This compares to $1,606,000, or $0.51 per share on a diluted basis, for the same period in 2008. For the six month period ended June 30, 2009, QNB reported net income of $2,321,000, or $0.75 per share on a diluted basis. This compares to net income of $3,316,000, or $1.05 per shared on a diluted basis, for the six month period ended June 30, 2008.
Results for the three and six month periods ended June 30, 2009 were impacted by higher industry-wide FDIC insurance premiums plus a special FDIC assessment. This special assessment impacted the results for both periods by $219,000 ($332,000 pretax), or $0.07 per diluted share. These FDIC actions were a result of bank failures which have significantly impacted the level of the Deposit Insurance Fund.
"Our second quarter and six month core operating performance was sound," said Thomas J. Bisko, President and Chief Executive Officer. "Strong growth in both loans and deposits resulted in higher net interest income. Our asset quality continues to compare favorably to the industry and our peers, although like our peers, our results have been negatively impacted by the challenging economic environment. We had to increase our provision for loan losses, recognize other-than-temporary-impairment charges in our investment securities portfolio, and record higher FDIC insurance costs. Despite these issues, both the Company and the Bank remain well capitalized by all regulatory standards."
Net interest income increased $264,000, or 5.2%, to $5,320,000 for the second quarter of 2009 compared to the second quarter of 2008 and $239,000, or 4.7% compared to the first quarter of 2009. Included in net interest income in the second quarter of 2008 was the recognition of $156,000 in non-recurring income resulting from the collection of a prepayment penalty on a commercial loan and the recovery of interest and fees on a non-accrual loan that was repaid. Adjusting 2008 for these non-recurring items, net interest income for the second quarter of 2009 increased $420,000, or 8.6%, compared to the second quarter of 2008. The improvement in net interest income comparing the three month periods ending June 30, 2009 and 2008 is a result of 13.5% growth in average earning assets. Comparing the second quarter of 2009 to the same period in 2008, average loans increased $40,142,000, or 10.4%, and average investment securities increased $43,571,000, or 21.8%. The growth in the loan portfolio was primarily in commercial loans secured by commercial and residential real estate, while the growth in the investment portfolio was primarily in high-quality U.S. Government agency and agency mortgage-backed securities.
On the funding side average total deposits increased $79,021,000, or 15.4%, to $591,111,000 comparing the second quarter of 2009 to the same period in 2008. In comparison to prior periods, the current growth reflects increases in both lower-cost core deposits, including checking, savings and money market accounts, as well as higher-cost time deposits. Comparing the two quarters, average transaction account balances increased 8.4% while average time deposit balances increased 21.6%.
The net interest margin was 3.40% for the second quarter of 2009 compared to 3.67% for the second quarter of 2008 and 3.48% for the first quarter of 2009. Excluding the non-recurring items in the second quarter of 2008 the net interest margin would have been 3.56%. The decline in the net interest margin from the second quarter of 2008 and the first quarter of 2009 is mainly the result of the yield earned on loans and investment securities declining to a greater degree than the cost of deposits as well as a small change in the mix of earning assets, from higher yielding loans to lower yielding investment securities, and the mix of deposits from lower-cost transaction accounts to higher-cost time deposits. The reduction in treasury rates and the prime lending rate over the past year has had a greater impact on the rates earned on loans and investment securities than it has had on the rates paid on deposits.
Net interest income increased $731,000, or 7.6%, to $10,401,000 comparing the first six months of 2009 and 2008 and $887,000, or 9.3%, excluding the non-recurring items recorded in 2008. Over this time period, average loans and investment securities increased 9.6% and 18.5%, respectively, and average total deposits increased 13.8%. The net interest margin for the first half of 2009 was 3.44% compared to 3.57% for the first half of 2008, and 3.51% excluding the non-recurring items.
As a result of the significant growth in loans, a small increase in net charge-offs and non-performing loans and current economic conditions, QNB recorded a provision for loan losses of $500,000 in the second quarter of 2009 and $1,100,000 for the first half of 2009. This compares to a provision of $200,000 for the second quarter of 2008 and $425,000 for the first half of 2008. Net loan charge-offs were $352,000 for the first half of 2009 compared with $231,000 for the first half of 2008.
Total non-performing loans, which represent loans on non-accrual status and loans past due more than 90 days, were $2,271,000, or 0.52% of total loans, at June 30, 2009, compared to $823,000, or 0.21% of total loans, at June 30, 2008 and $743,000, or 0.18%, at March 31, 2009. QNB's non-performing loans to total loans experience continues to compare extremely favorably with the average 1.61% of total loans for Pennsylvania commercial banks with assets between $500 million and $1 billion, as reported by the FDIC using March 31, 2009 data. QNB's allowance for loan losses of $4,584,000 represents 1.05% of total loans at June 30, 2009 compared to an allowance for loan losses of $3,473,000, or 0.90% of total loans, at June 30, 2008 and $4,220,000, or 1.01% of total loans, at March 31, 2009. Other real estate owned and other repossessed assets were $380,000 at June 30, 2009 compared with $104,000 at June 30, 2008 and $437,000 at March 31, 2009.
Total non-interest income was $1,067,000 for the second quarter of 2009, an increase of $238,000 compared with the same period in 2008. Gains on the sale of residential mortgages increased $194,000 comparing these same periods, as the low interest rate environment has resulted in an increase in mortgage refinancing activity. Net losses on other real estate owned and repossessed assets increased $97,000, while losses recognized in the equity securities portfolio decreased $92,000 comparing the three month periods.
Total non-interest income for the six month periods ending June 30, 2009 and 2008 was $1,800,000 and $2,213,000, respectively. Positively impacting non-interest income for the first half of 2008 was the recognition of $230,000 of income as a result of the Visa initial public offering and $48,000 from the proceeds of life insurance. For the six-month period, gains on the sale of residential mortgages increased $330,000 while net losses on other real estate owned and repossessed assets increased $141,000.
Net investment securities losses were $280,000 for the six months ended June 30, 2009. This compares to $104,000 of net securities gains in the first half of 2008. The net securities losses for 2009 include a $515,000 charge related to other-than-temporary impairment (OTTI) in the carrying value of holdings in the equity investment portfolio and an $8,000 OTTI charge on one of the Company's pooled trust preferred securities.
Total non-interest expense was $4,384,000 for the second quarter of 2009, an increase of $801,000 from the second quarter of 2008. The largest contributing factor to the increase in non-interest expense was FDIC insurance premium expense which increased $464,000 to $539,000, comparing the second quarter of 2009 to 2008. The higher expense is a result of the special assessment mentioned previously and an increased assessment rate which were both levied on all insured institutions by the FDIC in order to replenish the Deposit Insurance Fund. Salary and benefit expense increased $123,000, or 6.3%, to $2,078,000 for the second quarter of 2009. Additional commercial lending personnel and the staffing of the Wescosville branch, opened in November 2008, account for the majority of the increase.
Total non-interest expense was $8,313,000 for the six month period ended June 30, 2009. This represents an increase of $1,187,000 from the same period in 2008. Higher FDIC premiums account for $623,000 of this increase and higher salary and benefit expense contributed $230,000.
QNB Corp. offers commercial and retail banking services through the nine banking offices of its subsidiary, QNB Bank. In addition, QNB provides retail brokerage services through Raymond James Financial Services, Inc. and title insurance as a member of Laurel Abstract Company LLC.
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, 2008. 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) 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 ----------------------------------------------------------------------- Assets $717,735 $683,944 $664,394 $638,327 $636,480 Investment securities (AFS & HTM) 241,277 227,124 223,195 223,273 207,081 Loans receivable 435,521 417,062 403,579 380,105 387,205 Allowance for loan losses (4,584) (4,220) (3,836) (3,492) (3,473) Net loans 430,937 412,842 399,743 376,613 383,732 Deposits 600,954 573,749 549,790 526,919 520,616 Demand, non-interest bearing 57,140 55,428 53,280 49,125 56,464 Interest-bearing demand, money market and savings 212,893 189,185 185,208 190,221 189,474 Time 330,921 329,136 311,302 287,573 274,678 Short-term borrowings 22,843 16,822 21,663 19,557 23,083 Long-term debt 35,000 35,000 35,000 35,000 35,000 Shareholders' equity 53,808 53,766 53,909 52,297 52,309 Asset Quality Data (Period End) ----------------------- Non-accrual loans $1,991 $523 $830 $1,120 $625 Loans past due 90 days or more and still accruing 280 220 478 70 198 Other real estate owned and repossessed assets 380 437 319 142 104 ---------------------------------------------- Non-performing assets 2,651 1,180 1,627 1,332 927 Allowance for loan losses 4,584 4,220 3,836 3,492 3,473 Non-performing loans / Loans 0.52% 0.18% 0.32% 0.31% 0.21% Non-performing assets / Assets 0.37% 0.17% 0.24% 0.21% 0.15% Allowance for loan losses / Loans 1.05% 1.01% 0.95% 0.92% 0.90% QNB Corp. Consolidated Selected Financial Data (unaudited) (Dollars in thousands, except per share data) For the three months ended, ------------------------------------------------ For the period: 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 ----------------------------------------------------------------------- Interest income $8,859 $8,626 $8,825 $8,832 $8,838 Interest expense 3,539 3,545 3,574 3,787 3,782 ------------------------------------------------ Net interest income 5,320 5,081 5,251 5,045 5,056 Provision for loan losses 500 600 750 150 200 ------------------------------------------------ Net interest income after provision for loan losses 4,820 4,481 4,501 4,895 4,856 Non-interest income: Fees for services to customers 423 395 456 474 428 ATM and debit card 256 228 231 237 242 Net gain (loss) on investment securities available-for-sale (26) (254) (610) (103) (118) Other 414 364 195 207 277 ------------------------------------------------ Total non-interest income 1,067 733 272 815 829 Non-interest expense: Salaries and employee benefits 2,078 2,078 2,052 1,999 1,955 Net occupancy and furniture and fixture 644 649 707 619 619 FDIC insurance premiums 539 193 83 81 75 Other 1,123 1,009 992 969 934 ------------------------------------------------ Total non-interest expense 4,384 3,929 3,834 3,668 3,583 ------------------------------------------------ Income before income taxes 1,503 1,285 939 2,042 2,102 Provision for income taxes 276 191 68 476 496 ------------------------------------------------ Net income $1,227 $1,094 $871 $1,566 $1,606 ================================================ Share and Per Share Data: ------------------------- Net income - basic $0.40 $0.35 $0.28 $0.50 $0.51 Net income - diluted $0.40 $0.35 $0.28 $0.50 $0.51 Book value $17.42 $17.44 $17.21 $16.67 $16.68 Cash dividends $0.24 $0.24 $0.23 $0.23 $0.23 Average common shares outstanding - basic 3,084,824 3,113,730 3,136,078 3,136,423 3,135,214 Average common shares outstanding - diluted 3,095,836 3,126,683 3,154,238 3,161,840 3,163,809 Selected Ratios: ---------------- Return on average assets 0.70% 0.67% 0.53% 0.97% 1.04% Return on average shareholders' equity 9.04% 8.16% 6.32% 11.55% 12.15% Net interest margin (tax equivalent) 3.40% 3.48% 3.62% 3.49% 3.67% Efficiency ratio (tax equivalent) 64.55% 63.25% 64.94% 58.88% 57.30% Average shareholders' equity to total average assets 7.75% 8.17% 8.46% 8.39% 8.52% Net loan charge-offs $136 $216 $407 $130 $138 Net loan charge-offs (annualized) / Average loans 0.13% 0.21% 0.42% 0.14% 0.14% Balance Sheet (Average) ----------------------- Assets $702,665 $666,040 $648,112 $647,045 $623,393 Investment securities (AFS & HTM) 243,487 223,327 226,142 222,344 199,916 Loans receivable 424,694 410,119 389,198 380,758 384,552 Deposits 591,111 553,856 528,990 531,891 512,090 Shareholders' equity 54,441 54,403 54,848 53,918 53,141 (Dollars in thousands, except per share data) For the six months ended, ------------------------- For the period: 6/30/09 6/30/08 ------------------------------------------------------------------------- Interest income $17,485 $17,628 Interest expense 7,084 7,958 ------------------------- Net interest income 10,401 9,670 Provision for loan losses 1,100 425 ------------------------- Net interest income after provision for loan losses 9,301 9,245 Non-interest income: Fees for services to customers 818 873 ATM and debit card 484 461 Net gain (loss) on investment securities available-for-sale (280) 104 Other 778 775 ------------------------- Total non-interest income 1,800 2,213 Non-interest expense: Salaries and employee benefits 4,156 3,926 Net occupancy and furniture and fixture 1,293 1,248 FDIC insurance premiums 732 109 Other 2,132 1,843 ------------------------- Total non-interest expense 8,313 7,126 ------------------------- Income before income taxes 2,788 4,332 Provision for income taxes 467 1,016 ------------------------- Net income $2,321 $3,316 ========================= Share and Per Share Data: ------------------------- Net income - basic $0.75 $1.06 Net income - diluted $0.75 $1.05 Book value $17.42 $16.68 Cash dividends $0.48 $0.46 Average common shares outstanding - basic 3,099,198 3,134,959 Average common shares outstanding - diluted 3,109,613 3,165,424 Selected Ratios: ---------------- Return on average assets 0.68% 1.08% Return on average shareholders' equity 8.60% 12.68% Net interest margin (tax equivalent) 3.44% 3.57% Efficiency ratio (tax equivalent) 63.93% 56.45% Average shareholders' equity to total average assets 7.95% 8.54% Net loan charge-offs $352 $231 Net loan charge-offs (annualized) / Average loans 0.17% 0.12% Balance Sheet (Average) ---------------------- Assets $684,454 $615,632 Investment securities (AFS & HTM) 233,463 197,082 Loans receivable 417,447 380,995 Deposits 572,587 503,297 Shareholders' equity 54,422 52,578
QNB Corp.
CONTACT: Thomas J. Bisko, President/CEO, +1-215-538-5600, ext. 5612,
tbisko@qnb.com, or Bret H. Krevolin, CFO, +1-215-538-5600, ext. 5716,
bkrevolin@qnb.com, both of QNB Corp.
Web Site: http://www.qnb.com/
