[QNB LOGO] P.O. Box 9005
Quakertown, PA 18951-9005
TEL 215-538-5600
FAX 215-538-5765
www.QNB.com
FOR IMMEDIATE RELEASE
QNB CORP. REPORTS SECOND QUARTER RESULTS
QUAKERTOWN, PA (21 July 2004) QNB Corp. (OTC Bulletin Board: QNBC) the parent
company of The Quakertown National Bank (QNB), reported net income for the
second quarter 2004 of $1,519,000 or $.48 per share on a diluted basis. This
compares to $1,630,000 or $.52 per share on a diluted basis for the same period
in 2003. Net income for the first six months of 2004 was $3,241,000 or $1.02 per
share diluted, an increase over the $3,161,000 or $1.01 per share diluted for
the comparable period in 2003. All earnings per share amounts have been restated
to reflect the two-for-one stock split effective on October 14, 2003.
The decline in net income when comparing the two quarters is primarily a result
of a decrease in non-interest income. Total non-interest income for the three
months ended June 30, 2004 and 2003 was $1,173,000 and $1,426,000, respectively.
This decline reflects the impact of the slowdown in residential mortgage
activity resulting from the increase in interest rates during 2004. Included in
last year's second quarter results were $489,000 in gains on the sale of loans.
This compares to a loss of $2,000 for the second quarter of 2004. During the
second quarter of 2003, QNB originated over $15 million in mortgage loans. This
compares to slightly over $2 million during the same period in 2004. For the
six-month period ended June 30, 2004 and 2003, gains on the sale of loans were
$98,000 and $850,000, respectively.
Also included in non-interest income are net gains on the sale of investment
securities. Gains for the second quarter of 2004 were $217,000 compared with
$147,000 for the same period in 2003. For the six-month periods ended June 30,
2004 and 2003, gains on the sale of investment securities were $696,000 and
$302,000, respectively.
Net interest income increased $183,000 or 4.9 percent when comparing the two
quarters as a 6.5 percent increase in average earning assets more than offset a
4 basis point decline in the net interest margin. Average loans and average
investment securities increased 3.7 percent and 13.2 percent, respectively.
Average loans for the quarter were $243,426,000, with much of the growth in
total loans occurring late in the quarter. Total loans at June 30, 2004 were
$260,319,000. This compares to $237,530,000 and $235,124,000 at June 30, 2003
and March 31, 2004, respectively.
The net interest margin was 3.38 percent for the second quarter of 2004 compared
to 3.42 percent for the same period in 2003. The net interest margin should
begin to increase during the second half of the year as a result of rising
interest rates, growth in loans, which tend to have higher yields than
investment securities and some repositioning of the investment portfolio to
improve the yield. On June 30, the Federal Reserve Board raised the Federal
Funds target rate by .25%. This was followed by a corresponding increase in the
prime lending rate, a rate to which many of the bank's loans are indexed.
"Despite the decline in net income when comparing the two quarters, there were
several positive events that occurred during the second quarter of 2004, said
Thomas J. Bisko, President and CEO. "We achieved strong growth in the loan
portfolio, increasing outstanding loans by 10.7 percent since March 31, 2004,
while maintaining asset quality. During the same period we have also seen our
deposits exhibit strong growth. In addition, we opened our first supermarket
branch in the Quakertown Commons GIANT Food Store, offering extended banking
hours with seven day a week convenience. We remain on target to reach our 2004
financial goals."
QNB Corp. offers commercial and retail banking services through the eight
banking offices of its subsidiary, The Quakertown National Bank. In addition,
QNB provides trust and investment management services in conjunction with The
Trust Company of Lehigh Valley and retail brokerage services through Raymond
James Financial Service, Inc.
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.
QNB CORP.
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
INCOME:
Total interest income $ 6,172 $ 6,241 $12,308 $12,574
Total interest expense 2,219 2,471 4,429 4,976
Net interest income 3,953 3,770 7,879 7,598
Provision for loan losses - - - -
Total non-interest income 1,173 1,426 2,543 2,664
Total non-interest expense 3,181 3,077 6,259 6,156
Income before income taxes 1,945 2,119 4,163 4,106
Provision for income taxes 426 489 922 945
Net income $ 1,519 $ 1,630 $ 3,241 $ 3,161
NET INCOME PER SHARE:
Basic $ 0.49 $ 0.53 $ 1.05 $ 1.02
Diluted 0.48 0.52 1.02 1.01
Dividends 0.185 0.165 0.37 0.33
SELECTED PERIOD END BALANCES:
Total assets $558,070 $528,462
Federal funds sold - 12,042
Investments 255,394 235,267
Loans held-for sale 125 2,356
Total loans 260,194 235,174
Allowance for loan losses 2,898 2,937
Deposits 443,569 417,383
Borrowed funds 70,043 62,946
Shareholders' equity 41,778 43,463
SELECTED RATIOS:
Return on average assets 1.12% 1.27% 1.20% 1.25%
Return on average shareholders' equity 14.39% 16.83% 15.50% 16.61%
Net interest margin-tax 3.38% 3.42% 3.40% 3.52%
equivalent
Efficiency ratio-tax equivalent 58.03% 55.63% 56.21% 56.19%
Average shareholders' equity to total 7.76% 7.55% 7.74% 7.56%
average assets
Nonperforming assets to total assets 08% .10%
Allowance as a % of loans 1.11% 1.24%
# # #
Contact: Thomas J. Bisko, CEO 215-538-5600 ext. 5612 or
Bret H. Krevolin, CFO ext. 5716
8:30 AM - 5:00 PM