[QNB LETTERHEAD]
FOR IMMEDIATE RELEASE
QNB CORP. FOURTH QUARTER EARNINGS INCREASE SIGNIFICANTLY
NINTH CONSECUTIVE YEAR OF RECORD EARNINGS
QUAKERTOWN, PA (28 January 2005) QNB Corp. (OTC Bulletin Board: QNBC), the
parent company of The Quakertown National Bank (QNB), reported net income for
the fourth quarter 2004 of $1,509,000, a 40.4% increase over fourth quarter 2003
earnings of $1,075,000. Net income for the twelve months ended December 31, 2004
was $6,203,000, a 9.8% increase over the $5,648,000 earned for the twelve months
ended December 31, 2003.
For the quarter ending December 31, 2004, diluted earnings per share of $.47
increased 38.2% over the $.34 earned during the fourth quarter of 2003, while
basic earnings per share increased 40.0%, from $.35 for the fourth quarter of
2003 to $.49 for the fourth quarter of 2004. For the year ended December 31,
2004, diluted earnings per share of $1.95 represents an increase of 8.9% from
the $1.79 reported for 2003, while basic earnings per share of $2.00 represents
an increase of 9.3% over the $1.83 reported for the year ended December 31,
2003.
Total assets at December 31, 2004 were $583,644,000, an increase of 6.0%, or
$32,813,000, over total assets of $550,831,000 at December 31, 2003. During this
same period total loans increased $34,794,000, or 14.9%, to $268,360,000, and
total deposits increased $27,849,000, or 6.3%, to $466,488,000.
"I am extremely pleased to report QNB Corp's ninth consecutive year of record
earnings," said Thomas J. Bisko, President and CEO. "Once again we have been
able to achieve strong loan and deposit growth while maintaining excellent asset
quality."
Net interest income increased $103,000, or 2.6% when comparing the fourth
quarter of 2004 to the same period in 2003, and increased $680,000, or 4.4%,
when comparing the twelve-month periods. For the quarter, a 6.5% increase in
average earning assets offset an 11 basis point decrease in the net interest
margin. Average loans increased 13.3% when comparing the two quarters, with most
of this increase concentrated in loans to businesses and home equity loans. This
loan growth was funded in part by an increase in average deposits of 7.4%,
primarily money market deposits and time deposits. For the twelve-month period
average earning assets increased 6.8%, with average loans and investment
securities increasing 8.6% and 7.3%, respectively. During this same period
average deposits increased 7.3%. This growth offset an 8 basis point decline in
the net interest margin for the year.
The net interest margin for the fourth quarter of 2004 was 3.21%, compared to
3.32% for the fourth quarter of 2003, and was 3.32% for the twelve month period
ended December 31, 2004 compared to 3.40% for the same period in 2003. The
decline in the net interest margin for the quarter is due to lower yields on
loans and investment securities and higher funding costs, particularly money
market accounts and short-term borrowings.
Total non-interest income for the three months ended December 31, 2004 increased
$555,000 to $1,153,000. Net securities gains account for $450,000 of the
increase in non-interest income. QNB recorded securities gains of $87,000 during
the fourth quarter of 2004 and securities losses of $363,000 during the fourth
quarter of 2003. Also contributing to the increase in non-interest income was a
$141,000 gain on the liquidation of assets relinquished by a borrower during the
third quarter of 2004. This gain partially offsets the $350,000 charge-off QNB
recorded through the allowance for loan losses in the third quarter of 2004,
related to this loan. For the twelve month period non-interest income increased
$487,000 to $4,687,000. Net securities gains increased $983,000 during this
period, while gains on the sale of loans decreased $790,000. The significant
gain on the sale of loans in 2003 was a result of the refinancing boom that took
place when interest rates reached historical lows. An increase in deposit
service charge income, checkcard income and mortgage servicing income also
contributed to the increase in non-interest income when comparing the
twelve-month periods.
Total non-interest expense increased $19,000, or .6 %, to $3,340,000 for the
three-month period ending December 31, 2004 and $162,000, or 1.28%, to
$12,845,000 for the twelve-month period. During 2004, QNB opened its first
supermarket branch to support a growing Quakertown market. The costs associated
with the new branch were a contributing factor in the increase in non-interest
expense. QNB's overhead efficiency ratio, which represents non-interest expense
divided by net operating revenue on a tax-equivalent basis, improved from 60.5%
for 2003 to 57.9% for 2004.
Non-performing assets decreased to $469,000 at December 31, 2004. This compares
to $829,000 at December 31, 2003 and $1,552,000 at September 30, 2004. The
significant decrease from September 30, 2004 to December 31, 2004 was a result
of the asset liquidation mentioned previously. Non-performing assets as a
percentage of total assets improved to .08% at December 31, 2004 from .15% at
December 31, 2003 and .26% at September 30, 2004. As a result of the growth in
loans and the previously mentioned charge-off, the allowance for loan losses as
a percentage of total loans declined to .97% at December 31, 2004 from 1.25% at
December 31, 2003. QNB determined no provision for loan losses was necessary for
either the three-month or twelve-month periods ended December 31, 2004 or 2003
as non-performing assets and delinquent loans remained at low levels relative to
the allowance for loan losses.
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, 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.
QNB CORP.
(Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
INCOME:
Total interest income $ 6,744 $ 6,362 $25,571 $25,139
Total interest expense 2,652 2,373 9,506 9,754
Net interest income 4,092 3,989 16,065 15,385
Provision for loan losses - - - -
Total non-interest income 1,153 598 4,687 4,200
Total non-interest expense 3,340 3,321 12,845 12,683
Income before income taxes 1,905 1,266 7,907 6,902
Provision for income taxes 396 191 1,704 1,254
Net income $ 1,509 $ 1,075 $ 6,203 $ 5,648
NET INCOME PER SHARE:
Basic $ 0.49 $ 0.35 $ 2.00 $ 1.83
Diluted 0.47 0.34 1.95 1.79
Dividends 0.185 0.165 0.74 0.66
SELECTED PERIOD END BALANCES:
Total assets $583,644 $550,831
Federal funds sold 3,159 4,532
Investments 273,763 272,643
Loans held-for sale 312 1,439
Total loans 268,048 232,127
Allowance for loan losses 2,612 2,929
Deposits 466,488 438,639
Borrowed funds 68,374 65,416
Shareholders' equity 45,774 43,440
SELECTED RATIOS:
Return on average assets 1.02% .77% 1.10% 1.07%
Return on average shareholders' equity 13.54% 10.50% 14.43% 14.38%
Net interest margin-tax equivalent 3.21% 3.32% 3.32% 3.40%
Efficiency ratio-tax equivalent 59.54% 67.21% 57.87% 60.48%
Average shareholders' equity to total 7.51% 7.32% 7.64% 7.46%
average assets
Nonperforming assets to total assets .08% .15%
Allowance as a % of loans .97% 1.25%
# # #
Contact: Thomas J. Bisko
215-538-5612
tbisko@qnb.com