QNB CORP.
For the period ended Sep 30, 2025. Filed Nov 6, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 6, 2025
QNBC$47.46+1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-12.
0000950170-25-106928
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-06.
0001193125-25-268178
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 138 previous paragraphs and 141 current paragraphs.
48 unchanged; 82 reworded; 10 added; 8 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
The Company uses non-GAAP financial information in its analysis of performance. These non-GAAP ratios and calculations provide a better understanding of ongoing operations and comparability with prior period results by showing the effects of significant gains and charges in the periods presented. The Company believes that investors may use these non-GAAP measures to analyze the Company's financial performance without the impact of unusual items or events that may obscure trends. This non-GAAP data is not a substitute for GAAP results and should be considered in addition to results prepared in accordance with GAAP. Non-GAAP financial measures include risks as companies might calculate these measures differently and persons might disagree as to the appropriateness of items included in these measures. Please see table under the RESULTS OF OPERATIONS - OVERVIEW section,"Impact of Merger-Related Costs--GAAP to Non-GAAP Measure Reconciliation."
Current report
On September 23, 2025, QNB Corp. and The Victory Bancorp, Inc. (Victory) announced they have entered into a definitive agreement under which QNB will acquire Victory in an all-stock transaction, creating a bank holding company with nearly $2.4 billion in assets. Upon the completion of the merger, the pro-forma post-merger shareholder ownership split would be approximately 76.4% for QNB and 23.6% for Victory. The transaction is expected to close in the fourth quarter of 2025 or first quarter of 2026, subject to satisfaction of customary closing conditions, including regulatory approvals and approval from both QNB and Victory shareholders.
Current report
Results for the third quarter and nine months ending September 30, 2025 included significant merger-related costs that are non-recurring of $519,000; the costs are not normal recurring operating expenses. The following table shows calculated impact of the merger-related costs on net income and ratios, reconciling GAAP to non-GAAP measurements:
Current report
Net interest income increased $1,871,000, or 16.8%, to $12,998,000 and increased $5,300,000, or 16.6%, to $37,187,000 for the three and nine months ended September 30, 2025, respectively.
Current report
Non-interest expense increased $1,546,000 to $10,182,000 for the third quarter of 2025 and increased $2,710,000, to $29,113,000 for the nine months ended September 30, 2025 compared with the same periods in 2024. Non-interest expense, excluding merger-related costs increased $1,027,000, or 11.9% to $9,663,000 for the third quarter of 2025 and increased $2,191,000, or 8.3%,to $28,594,000 for the nine months ended September 30, 2025 compared with the same periods in 2024.
Current report
Average long-term borrowings decreased $30,000,000 as there were no long-term borrowings for the third quarter of 2024.
Current report
Nine-Month Comparison
Current report
Total non-interest expense was $10,182,000 for the third quarter of 2025, an increase of $1,546,000 compared to the second quarter of 2024. For both the three- and nine-month periods of 2025, non-interest expense included merger-related cost of $519,000. Excluding merger-related costs, noninterest expense increased $1,027,000 or 11.9% for the third quarter of 2025, compared to the same period in 2024.
Current report
Nine-Month Comparison
Current report
Total non-interest expense was $29,113,000 for the nine-month period ended September 30, 2025, an increase of $2,710,000, or 10.3%, compared to the nine months ended September 30, 2024. Excluding merger-related costs, noninterest expense increased $2,191,000 or 8.3% for the nine months ended September 30, 2025, compared to the same period in 2024.
Removed paragraphs (8)
Previous report
Net interest income increased $2,060,000, or 19.45%, to $12,652,000 and increased $3,429,000, or 16.52%, to $24,189,000 for the three and six months ended June 30, 2025, respectively.
Previous report
Non-interest expense increased $628,000 to $9,562,000 for the second quarter of 2025 and increased $1,164,000, to $18,931,000 for the six months ended June 30, 2025 compared with the same periods in 2024.
Previous report
2024, primarily due to a 48-basis point increase in rate from 5.46% in 2024 to 5.94% and increased average balances of $61,405,000, or 7.7%.
Previous report
Average long-term borrowings decreased $22,637,000 and the interest rate increased nine basis points when comparing the second quarter of 2025 to the same period in 2024.
Previous report
Six-Month Comparison
Previous report
Total non-interest expense was $9,562,000 for the second quarter of 2025, an increase of $628,000 compared to the second quarter of 2024.
Previous report
Six-Month Comparison
Previous report
Total non-interest expense was $18,931,000 for the six-month period ended June 30, 2025, an increase of $1,164,000, or 6.6%, compared to the six months ended June 30, 2024.
Reworded paragraphs (82)
Previous wording
QNB reported net income for the second quarter of 2025 of $3,883,000, or $1.04 per share on a diluted basis, compared to net income of $2,465,000, or $0.67 per share on a diluted basis, for the same period in 2024. For the six-month period ended June 30, 2025, QNB reported net income of $6,461,000, or $1.74 per share on a diluted basis, compared to net income of $5,059,000, or $1.38 per share on a diluted basis, for the same period in 2024. The Bank contributed $7,971,000 to net income for the six months ended June 30, 2025 compared to $5,072,000 for the same period 2024; and the holding company had a negative contribution of $1,510,000 to net income for the six months ended June 30, 2025 compared to a negative contribution of $13,000 for the same period 2024. The results at the Bank were primarily due to an increase in the net interest income, partly offset by increases in non-interest expense and the provision for credit losses. The results at the holding company are due primarily to interest expense on the subordinated debt issued in the third quarter of 2024.
Current wording
Excluding the impact of the merger-related costs net of tax, diluted earnings per share were $1.09 and $2.83 for the three and nine month periods of 2025, respectively. The Bank contributed $12,808,000 to net income for the nine months ended September 30, 2025 compared to $8,466,000 for the same period 2024; and the holding company had a negative contribution of $2,699,000 to net income for the nine months ended September 30, 2025 compared to a negative contribution of $69,000 for the same period 2024. The improved results at the Bank were primarily due to improvement in the interest margin causing a $7,612,000 increase in net interest income and a $140,000 increase in non-interest income; this was partly offset by and an increase in the provision for credit losses on loans and unfunded commitments of $310,000 and an increase in non-interest expense of $1,931,000. The change in contribution from QNB Corp. is primarily due to a decrease in net interest income of $2,312,000, related to the subordinated debt issuance at the end of the third quarter of 2024, an increase in non-interest expense of $793,000, primarily due to merger-related expenses and a decrease of $311,000 in non-interest income due to realized and unrealized gain on the equity portfolio in 2024 compared to none in 2025.
Previous wording
Net income expressed as an annualized rate of return on average assets and average shareholders’ equity was 0.83% and 14.25%, respectively, for the quarter ended June 30, 2025 compared with 0.57% and 10.73%, respectively, for the quarter ended June 30, 2024. Net income expressed as an annualized rate of return on average assets and average shareholders’ equity was 0.69% and 12.02%, respectively, for the six months ended June 30, 2025 compared with 0.59% and 11.05%, respectively, for the six months ended June 30, 2024.
Current wording
Net income expressed as an annualized rate of return on average assets and average shareholders’ equity was 0.76% and 12.49%, respectively, for the quarter ended September 30, 2025 compared with 0.74% and 13.25%, respectively, for the quarter ended September 30, 2024. Net income expressed as an annualized rate of return on average assets and average shareholders’ equity was 0.72% and 12.18%, respectively, for the nine months ended September 30, 2025 compared with 0.64% and 11.83%, respectively, for the nine months ended September 30, 2024. . Return on average assets, excluding the impact of the merger-related cost, for the three- and nine-month periods of 2025 was 0.85% and 0.74%, respectively. Return on average equity,excluding the impact of the merger-related cost, for the three- and nine-month periods of 2025 was 0.13.89% and 12.68%, respectively.
Previous wording
Total assets as of June 30, 2025 were $1,884,828,000, compared with $1,870,894,000 at December 31, 2024. Loans receivable at June 30, 2025 were $1,218,539,000, a $2,491,000 increase from $1,216,048,000 at December 31, 2024. Total deposits of $1,651,667,000 at June 30, 2025 increased $23,126,000 compared with total deposits of $1,628,541,000 at December 31, 2024.
Current wording
Total assets as of September 30, 2025 were $1,903,244,000, compared with $1,870,894,000 at December 31, 2024. Loans receivable at September 30, 2025 were $1,246,529,000, a $30,481,000 increase from $1,216,048,000 at December 31, 2024. Total deposits of $1,681,540,000 at September 30, 2025 increased $52,999,000 compared with total deposits of $1,628,541,000 at December 31, 2024.
Previous wording
Results for the three and six months ended June 30, 2025 include the following significant components:
Current wording
Results for the three and nine months ended September 30, 2025 include the following significant components:
Previous wording
Net interest margin on a tax-equivalent basis increased 23 basis points for the quarter to 2.69% compared to 2.46% for the same period in 2024. Net interest margin on a tax-equivalent basis increased 17 basis points for the six months ended June 30, 2025 to 2.60% compared to 2.43% for the same period in 2024.
Current wording
Net interest margin on a tax-equivalent basis increased 24 basis points for the quarter to 2.72% compared to 2.48% for the same period in 2024. Net interest margin on a tax-equivalent basis increased 19 basis points for the nine months ended September 30, 2025 to 2.64% compared to 2.45% for the same period in 2024.
Previous wording
QNB recorded a $145,000 reversal of its provision for credit losses on loans for the second quarter of 2025, compared with additional provision of $132,000 for the same period in 2024. QNB recorded $406,000 in its provision for credit losses on loans for the six months ended June 30, 2025, compared with $39,000 for the same period in 2024.
Current wording
QNB recorded a $98,000 provision for credit losses on loans for the third quarter of 2025, compared with a provision of $154,000 for the same period in 2024. QNB recorded $504,000 in its provision for credit losses on loans for the nine months ended September 30, 2025, compared with $193,000 for the same period in 2024.
Previous wording
Non-interest income increased $187,000, to $1,652,000 for the second quarter and decreased $65,000, to $3,236,000 for the six months ended June 30, 2025 compared with the same periods in 2024. Excluding realized and unrealized gains (losses) on securities, non-interest income increased $107,000, or 6.9%, to $1,652,000 for the second quarter of 2025 compared to $1,545,000 for the same period in 2024; and increased $202,000, to $3,236,000 for the six months ended June 30, 2025 compared with $3,034,000 the same period in 2024.
Current wording
Non-interest income decreased $120,000, to $1,847,000 for the third quarter and decreased $185,000, to $5,083,000 for the nine months ended September 30, 2025 compared with the same periods in 2024. Excluding realized and unrealized gains (losses) on securities, non-interest income increased $247,000, or 15.4%, to $1,847,000 for the third quarter of 2025 compared to $1,600,000 for the same period in 2024; and increased $449,000, to $5,083,000 for the nine months ended September 30, 2025 compared with $4,634,000 the same period in 2024.
Previous wording
Total non-performing loans, comprised of loans on non-accrual status, were $8,947,000, or 0.73% of loans receivable at June 30, 2025, compared to $1,975,000, or 0.16% of loans receivable at December 31, 2024. Net loan recoveries for the six months ended June 30, 2025 were $19,000, compared with net charge-offs of $33,000 for the same period in 2024.
Current wording
Total non-performing loans, comprised of loans on non-accrual status, were $8,947,000, or 0.72% of loans receivable at September 30, 2025, compared to $1,975,000, or 0.16% of loans receivable at December 31, 2024. Net loan recoveries for the nine months ended September 30, 2025 were $7,000, compared with net charge-offs of $58,000 for the same period in 2024.
Previous wording
The following table presents the adjustment to convert net interest income to net interest income on a fully taxable-equivalent basis for the three- and six-month periods ended June 30, 2025 and 2024.
Current wording
The following table presents the adjustment to convert net interest income to net interest income on a fully taxable-equivalent basis for the three- and nine-month periods ended September 30, 2025 and 2024.
Previous wording
Tax-exempt securities and loans were adjusted to a tax-equivalent basis and are based on the marginal Federal corporate tax rate of 21 percent for three and six months ended June 30, 2025 and 2024.
Current wording
Tax-exempt securities and loans were adjusted to a tax-equivalent basis and are based on the marginal Federal corporate tax rate of 21 percent for three and nine months ended September 30, 2025 and 2024.
Previous wording
Average earning assets for the second quarter of 2025 were $1,898,808,000, an increase of $146,275,000, or 8.3%, from the second quarter of 2024, with average loans increasing $76,127,000, or 6.7%, and average investment securities increasing $51,993,000, or 9.1%, over the same period in 2024. Proceeds from the growth in average deposits and the issuance of subordinated debt over the past year were invested in loans and higher-yielding securities. Average loans as a percentage of average earning assets was 64.1% for the second quarter of 2025, compared with 65.1% for the second quarter of 2024. On the funding side, average deposits increased $105,329,000, or 6.8%, to $1,647,990,000 for the second quarter of 2025 primarily due to an increase in interest-bearing and non-interest-bearing demand, money market products and time deposits. Average short-term borrowed funds, which consisted primarily of average commercial repurchase agreements and FHLB borrowings, increased $18,559,000 to $70,942,000 for the second quarter of 2025 compared to $52,383,000 for the same period in 2024. During the third quarter of 2024, QNB Corp. issued $40,000,000 of subordinated debt; the carrying value net of deferred costs was $39,168,000 at June 30, 2025.
Current wording
Average earning assets for the third quarter of 2025 were $1,911,088,000, an increase of $103,997,000, or 5.8%, from the third quarter of 2024, with average loans increasing $65,842,000, or 5.7%, and average investment securities increasing $59,881,000, or 10.8%, over the same period in 2024. Proceeds from the growth in average deposits and the issuance of subordinated debt over the past year were invested in loans and higher-yielding securities. Average loans as a percentage of average earning assets was 64.1% for the third quarter of 2025, unchanged from 64.1% for the third quarter of 2024. On the funding side, average deposits increased $77,193,000, or 4.8%, to $1,678,118,000 for the third quarter of 2025 primarily due to an increase in interest-bearing demand, municipal deposits, money market products and time deposits. Average short-term borrowed funds, which consisted primarily of average commercial repurchase agreements and FHLB borrowings, increased $22,985,000 to $57,063,000 for the third quarter of 2025 compared to $34,078,000 for the same period in 2024. Proceeds from the issuance of short-term debt were used to payoff long-term debt which decreased on average $30,000,000. During the third quarter of 2024, QNB Corp. issued $40,000,000 of subordinated debt; the carrying value net of deferred costs was $39,218,000 at September 30, 2025.
Previous wording
The net interest margin for the second quarter of 2025 increased 23 basis points to 2.69% from 2.46% for the same period in 2024. Competition for quality loans and deposits in our local market continues to exert pressure on the net interest margin. Repricing strategies on loans and deposits and the sale of lower-yielding investments have had a positive impact on the net interest margin. The net interest margin is expected to improve as loans and deposits reprice.
Current wording
The net interest margin for the third quarter of 2025 increased 24 basis points to 2.72% from 2.48% for the same period in 2024. Competition for quality loans and deposits in our local market continues to exert pressure on the net interest margin. Repricing strategies on loans and deposits have had a positive impact on the net interest margin.
Previous wording
The Rate-Volume Analysis tables, as presented on a tax-equivalent basis, highlight the impact of changing rates and volumes on interest income and interest expense. Total interest income on a tax-equivalent basis increased $2,727,000, or 13.3%, to $23,210,000 for the second quarter of 2025; total interest expense increased $705,000 to $10,458,000.
Current wording
The Rate-Volume Analysis tables, as presented on a tax-equivalent basis, highlight the impact of changing rates and volumes on interest income and interest expense. Total interest income on a tax-equivalent basis increased $1,545,000, or 7.0%, to $23,627,000 for the third quarter of 2025; total interest expense decreased $298,000 to $10,520,000.
Previous wording
The yield on earning assets on a tax-equivalent basis increased 20 basis points to 4.90% for the second quarter of 2025, from 4.70% for the second quarter of 2024. The cost of interest-bearing liabilities was 2.68% for the second quarter of 2025, compared with 2.73% for the same period in 2024.
Current wording
The yield on earning assets on a tax-equivalent basis increased five basis points to 4.91% for the third quarter of 2025, from 4.86% for the third quarter of 2024. The cost of interest-bearing liabilities was 2.64% for the third quarter of 2025, compared with 2.90% for the same period in 2024.
Previous wording
Interest income on investment securities (available-for-sale and equity) increased $548,000 when comparing the second quarters of 2025 and 2024. The average yield on the investment portfolio was 2.84% for the second quarter of 2025 compared with 2.72% for the same period in 2024, an increase of 12 basis points.
Current wording
Interest income on investment securities (available-for-sale and equity) increased $361,000 when comparing the third quarters of 2025 and 2024. The average yield on the investment portfolio was 2.85% for the third quarter of 2025 compared with 2.90% for the same period in 2024, a decrease of five basis points.
Previous wording
The yield on U.S. Treasury securities was 4.24% for the second quarter of 2025 compared to 5.19% for the same period in 2024; the decline in rate was more than offset by the average balances increase of $14,208,000 for a net increase in interest income of $135,000. The average balances of U.S. Government agency securities decreased $8,595,000 as the average rate slightly increased for a net reduction in interest income of $22,000.
Current wording
The yield on U.S. Treasury securities was 4.18% for the second quarter of 2025 compared to 4.94% for the same period in 2024; the decline in rate was more than offset by the average balances increase of $7,745,000 for a net increase in interest income of $57,000. The average balances of U.S. Government agency securities increased $9,000 as the average rate remained unchanged at 1.18%.
Previous wording
Interest income on municipal securities, which are primarily tax-exempt, decreased $191,000 due to a 63 basis-point decrease in rate, and a $2,791,000 decrease in average balances. Typically, QNB purchases municipal bonds with 10- to 20-year maturities and may have call dates between 2-10 years.
Current wording
Interest income on municipal securities, which are primarily tax-exempt, decreased $235,000 due to an 87 basis-point decrease in rate, and a $740,000 decrease in average balances. Typically, QNB purchases municipal bonds with 10- to 20-year maturities and may have call dates between 2-10 years.
Previous wording
Interest income on mortgage-backed securities and CMOs decreased $252,000 and average balances decreased $2,301,000 and the yield decreased 27 basis points. This portfolio generally provides higher yields relative to agency bonds and also provides monthly cash flow which can be used for liquidity purposes or can be reinvested as interest rates increase. Since most of these securities were purchased at a premium, any prepayments result in a shorter amortization period of this premium and therefore a reduction in income.
Current wording
Interest income on mortgage-backed securities and CMOs decreased $301,000 and average balances decreased $905,000 and the yield decreased 34 basis points. This portfolio generally provides higher yields relative to agency bonds and also provides monthly cash flow which can be used for liquidity purposes or can be reinvested as interest rates increase. Since most of these securities were purchased at a premium, any prepayments result in a shorter amortization period of this premium and therefore a reduction in income.
Previous wording
Interest income on corporate debt and mutual funds increased $935,000 as average balances increased $57,973,000 and the average yield increased 66 basis points. Proceeds from the issuance of subordinated debt were invested in high-yielding securities.
Current wording
Interest income on corporate debt and mutual funds increased $886,000 as average balances increased $57,731,000 and the average yield increased 14 basis points. Proceeds from the issuance of subordinated debt were invested in high-yielding securities.
Previous wording
Average balances on equities decreased $6,501,000 as the portfolio was sold during 2024; this was the cause of the $57,000 decrease in dividends comparing the second quarter of 2025 to the same period in 2024. Proceeds from sales of equities in 2024 were reinvested in higher yielding treasury securities.
Current wording
Average balances on equities decreased $3,959,000 as the portfolio was sold during 2024; this was the cause of the $46,000 decrease in dividends comparing the third quarter of 2025 to the same period in 2024. Proceeds from sales of equities in 2024 were reinvested in higher yielding treasury securities.
Previous wording
Income on loans increased $2,083,000 to $18,112,000 when comparing the second quarters of 2025 and 2024, with a $76,127,000 increase in average balances contributing to an increase in interest income of $1,085,000 and a 32-basis point increase in yield contributing to a $998,000 increase in interest income. Higher interest rates during the repricing period were partially offset by competitive pressures that compressed the yields on new loans.
Current wording
Income on loans increased $1,656,000 to $18,429,000 when comparing the Third quarters of 2025 and 2024, with a $65,842,000 increase in average balances contributing to an increase in interest income of $894,000 and a 21-basis point increase in yield contributing to a $762,000 increase in interest income. Higher interest rates during the repricing period were partially offset by competitive pressures that compressed the yields on new loans.
Previous wording
The largest category of the loan portfolio is commercial real estate loans. This category of loans includes commercial purpose loans secured by either commercial properties such as office buildings, factories, warehouses, hotels and restaurants, medical facilities and retail establishments, or residential real estate, usually the residence of the business owner. The category also includes construction and land development loans. Income on commercial real estate loans increased $1,899,000 when comparing the second quarters of 2025 and
Current wording
The largest category of the loan portfolio is commercial real estate loans. This category of loans includes commercial purpose loans secured by either commercial properties such as office buildings, factories, warehouses, hotels and restaurants, medical facilities and retail establishments, or residential real estate, usually the residence of the business owner. The category also includes construction and land development loans. Income on commercial real estate loans increased $1,760,000 when comparing the third quarters of 2025 and 2024, primarily due to a 35-basis point increase in rate from 5.60% in 2024 to 5.95% and increased average balances of $66,544,000, or 8.1%.
Previous wording
Income on commercial and industrial loans decreased $4,000 when comparing the second quarters of 2025 and 2024. The average yield on these loans decreased 19 basis points to 7.41% resulting in a decrease in income of $69,000; average balances increased $3,087,000, to $145,261,000 for the second quarter of 2025 resulting in a $65,000 increase in interest income. Many of the loans in this category are indexed to the prime interest rate.
Current wording
Income on commercial and industrial loans decreased $278,000 when comparing the third quarters of 2025 and 2024. The average yield on these loans decreased 16 basis points to 7.45% resulting in a decrease in income of $51,000; average balances decreased $12,236,000, to $128,744,000 for the third quarter of 2025 resulting in a $227,000 decrease in interest income. Many of the loans in this category are indexed to the prime interest rate.
Previous wording
Tax-exempt loan income increased $29,000 for the second quarter of 2025 compared to the same period in 2024. Average balances increased $1,063,000 to $19,347,000 for the second quarter of 2025. The yield on municipal loans increased 36 basis points, to 4.23% for the second quarter of 2025, compared with the same period in 2024.
Current wording
Tax-exempt loan income increased $32,000 for the third quarter of 2025 compared to the same period in 2024. Average balances increased $1,324,000 to $19,629,000 for the third quarter of 2025. The yield on municipal loans increased 40 basis points, to 4.28% for the third quarter of 2025, compared with the same period in 2024.
Previous wording
QNB desires to be the “local consumer lender of choice”, focusing its retail lending efforts on product offerings and marketing and promotion. Interest income on residential mortgage loans secured by first lien 1-4 family increased $149,000 when comparing the second quarter of 2025 to the same period in 2024. Average residential mortgage loan balances increased by $5,907,000, or 5.4%, to $114,600,000 for the second quarter of 2025 compared to the same period in 2024, which contributed a $60,000 increase in interest income. The average yield on the portfolio increased 31 basis points and contributed an increase of $89,000 to interest income. QNB chose to retain certain mortgage loans instead of selling them in the secondary market, as the yield on our originated mortgages was higher than comparable mortgage-backed securities. Average home equity loans increased during the 2025 period by $5,091,000 to $70,666,000 and the average yield decreased 42 basis points to 6.41% resulting in a $16,000 net increase in interest income. The yield on the consumer portfolio increased 20 basis points to 7.70% for the second quarter of 2025 and there was a $426,000 decrease in average balances resulting in a net $6,000 decrease in interest income. The decrease in consumer loans was primarily due to the repayment of student loan balances.
Current wording
QNB desires to be the “local consumer lender of choice”, focusing its retail lending efforts on product offerings and marketing and promotion. Interest income on residential mortgage loans secured by first lien 1-4 family increased $151,000 when comparing the third quarter of 2025 to the same period in 2024. Average residential mortgage loan balances increased by $5,790,000, or 5.2%, to $116,550,000 for the third quarter of 2025 compared to the same period in 2024, which contributed a $61,000 increase in interest income. The average yield on the portfolio increased 31 basis points and contributed an increase of $90,000 to interest income. QNB chose to retain certain mortgage loans instead of selling them in the secondary market, as the yield on our originated mortgages was higher than comparable mortgage-backed securities. Average home equity loans increased during the 2025 period by $4,851,000 to $71,090,000 and the average yield decreased 50 basis points to 6.34% resulting in a $3,000 net decrease in interest income. The yield on the consumer portfolio increased 31 basis points to 8.06% for the third quarter of 2025 and there was a $431,000 decrease in average balances resulting in a net $6,000 decrease in interest income. The decrease in consumer loans was primarily due to the repayment of student loan balances.
Previous wording
Earning assets are funded by deposits and borrowed funds. Interest expense increased $705,000, when comparing the second quarter of 2025 to the same period in 2024. QNB experienced average balance increases in all deposit categories except savings accounts. Average savings balances decreased $9,096,000 to $281,076,000. QNB offered several new interest-bearing demand and money market products offering higher yields to retain large depositors and reduce the reliance on higher-cost short-term borrowings. Average non-interest-bearing demand accounts increased $9,620,000 to $198,075,000 for the second quarter of 2025. Average interest-bearing demand accounts increased $42,718,000, or 12.8%, to $376,735,000 for the second quarter of 2025 and the average rate paid on these deposits increased ten basis points; interest expense on interest-bearing demand accounts increased $186,000 to $888,000 for the same period. Average money market accounts increased $29,637,000, or 12.9%, to $259,621,000 for the second quarter of 2025 compared with the same period in 2024. Interest expense on money market accounts decreased $187,000 to $1,862,000, and the average interest rate paid on money market accounts decreased 70 basis points to 2.88% for the second quarter of 2025. Most of the balances in this category are in products that pay tiered rates based on account balances.
Current wording
Earning assets are funded by deposits and borrowed funds. Interest expense decreased $298,000, when comparing the third quarter of 2025 to the same period in 2024. QNB experienced average balance increases in all deposit categories except savings accounts. Average savings balances decreased $439,000 to $277,808,000. QNB offered several new interest-bearing demand and money market products offering higher yields to retain large depositors and reduce the reliance on higher-cost short-term borrowings. Average non-interest-bearing demand accounts increased $2,697,000 to $195,349,000 for the third quarter of 2025. Average interest-bearing demand accounts increased $20,710,000, or 5.8%, to $377,473,000 for the third quarter of 2025 and the average rate paid on these deposits decreased two basis points; interest expense on interest-bearing demand accounts increased $35,000 to $933,000 for the same period. Average money market accounts increased $17,795,000, or 7.5%, to $256,289,000 for the third quarter of 2025 compared with the same period in 2024. Interest expense on money market accounts decreased $280,000 to $1,852,000, and the average interest rate paid on money market accounts decreased 69 basis points to 2.87% for the third quarter of 2025. Most of the balances in this category are in products that pay tiered rates based on account balances.
Previous wording
Interest expense on municipal interest-bearing demand accounts decreased $160,000 to $1,427,000 for the second quarter of 2025. The average interest rate paid on municipal interest-bearing demand accounts decreased 89 basis points to 3.92% for the second quarter of 2025 over the same quarter of 2024, and average balances increased $13,452,000 to $146,214,000. Many of these accounts are indexed to the Federal funds rate with rate floors. Municipal deposits are seasonal in nature and are received during the second and third quarters as tax receipts are collected and are withdrawn over the course of the year.
Current wording
Interest expense on municipal interest-bearing demand accounts decreased $126,000 to $1,697,000 for the third quarter of 2025. The average interest rate paid on municipal interest-bearing demand accounts decreased 93 basis points to 3.76% for the third quarter of 2025 over the same quarter of 2024, and average balances increased $24,542,000 to $179,161,000. Many of these accounts are indexed to the Federal funds rate with rate floors. Municipal deposits are seasonal in nature and are received during the second and third quarters as tax receipts are collected and are withdrawn over the course of the year.
Previous wording
Interest expense on savings accounts decreased $23,000 when comparing the second quarter of 2025 to the same quarter of 2024. The average interest rate paid on savings accounts increased one basis point to 1.29% for the second quarter of 2025. When comparing these same periods, average savings accounts decreased $9,096,000, or 3.1%, to $281,076,000 for the second quarter of 2025. QNB’s online e-Savings product is the largest category of savings deposits, with average balances for the second quarter of 2025 of $208,239,000 compared to $211,598,000 in the same period of 2024. The average yield paid on these accounts was 1.70% for the second quarter of 2025 compared to 1.71% for the same period in 2024. Traditional statement savings accounts, passbook savings and club accounts are also included in the savings category and average balances in these types of savings accounts decreased $5,737,000 when comparing the second quarter of 2025 to the same period in 2024.
Current wording
Interest expense on savings accounts increased $3,000 when comparing the third quarter of 2025 to the same quarter of 2024. The average interest rate paid on savings accounts remained the same at 1.28% for the third quarter of 2025. When comparing these same periods, average savings accounts decreased $439,000, or 0.2%, to $277,808,000 for the third quarter of 2025. QNB’s online e-Savings product is the largest category of savings deposits, with average balances for the third quarter of 2025 of $206,099,000 compared to $202,810,000 in the same period of 2024. The average yield paid on these accounts was 1.69% for the third quarter of 2025 compared to 1.72% for the same period in 2024. Traditional statement savings accounts, passbook savings and club accounts are also included in the savings category and average balances in these types of savings accounts decreased $3,728,000 when comparing the third quarter of 2025 to the same period in 2024.
Previous wording
Interest expense on time deposits totaled $3,686,000 for the second quarter of 2025 compared to $3,958,000 in 2024. Average total time deposits increased $18,998,000 to $386,269,000 for the second quarter of 2025. As with fixed-rate loans and investment securities, these deposits reprice over time and, therefore, have less of an immediate impact on costs in either a rising or falling rate environment; however, the maturity and repricing characteristics of time deposits tend to be shorter.
Current wording
Interest expense on time deposits totaled $3,688,000 for the third quarter of 2025 compared to $4,196,000 in 2024. Average total time deposits increased $11,888,000 to $392,038,000 for the third quarter of 2025. As with fixed-rate loans and investment securities, these deposits reprice over time and, therefore, have less of an immediate impact on costs in either a rising or falling rate environment; however, the maturity and repricing characteristics of time deposits tend to be shorter.
Previous wording
Approximately $369,830,000, or 95%, of time deposits at June 30, 2025 will mature over the next 12 months. The average rate paid on these time deposits is approximately 3.63%. The yield on the time deposit portfolio may change in the next quarter as short-term time deposits reprice; however, given the short-term nature of these deposits, interest expense may increase if short-term time deposit rates were to increase suddenly or if customers select higher paying time deposits.
Current wording
Approximately $370,048,000, or 96%, of time deposits at September 30, 2025 will mature over the next 12 months. The average rate paid on these time deposits is approximately 3.09%. The yield on the time deposit portfolio may change in the next quarter as short-term time deposits reprice; however, given the short-term nature of these deposits, interest expense may increase if short-term time deposit rates were to increase suddenly or if customers select higher paying time deposits.
Previous wording
Short-term borrowings are comprised of sweep accounts structured as repurchase agreements with our commercial customers and short-term FHLB borrowing. Interest expense on short-term borrowings increased $490,000 for the second quarter of 2025 to $689,000 when compared to the same period in 2024. When comparing these same periods, average balances increased $18,559,000 to $70,942,000. The yield on customer repos increased 103 basis points for the second quarter of 2025 to 2.55%. There were no FHLB borrowings during 2024 and $52,418,000 in average balance in the second quarter of 2025 at an average rate of 4.37%.
Current wording
Short-term borrowings are comprised of sweep accounts structured as repurchase agreements with our commercial customers and short-term FHLB borrowing. Interest expense on short-term borrowings increased $328,000 for the third quarter of 2025 to $514,000 when compared to the same period in 2024. When comparing these same periods, average balances increased $22,985,000 to $57,063,000. The yield on customer repos increased 29 basis points for the third quarter of 2025 to 2.47%. FHLB borrowings increased $35,867,000 over the third quarter of 2024 and interest increased $383,000 in the third quarter of 2025 at an average rate of 4.24%.
Previous wording
During the third quarter of 2024, the QNB Corp. issued $40,000,000 of subordinated debt; the average carrying value net of deferred costs was $39,141,000 for the second quarter of 2025. The average yield of 9.58% includes the amortization of the deferred costs. The subordinated debt will initially bear interest at 8.875% per annum from and including the original issue date of the subordinated notes to but excluding September 1, 2029, payable semi-annually in arrears. From September 1, 2029, through maturity or up to an early redemption date, the interest rate resets quarterly to an interest rate per annum equal to the then current three-month SOFR plus a spread, payable quarterly in arrears. On or after the fifth anniversary of the original issue date through maturity, the QNB has the option to redeem the subordinated debt, in whole or in part, on any scheduled interest payment date. QNB may also redeem the subordinated debt in whole at any time in the event of certain specified events. The subordinated debt will mature on September 1, 2034.
Current wording
During the third quarter of 2024, the QNB Corp. issued $40,000,000 of subordinated debt; the average carrying value net of deferred costs was $39,191,000 for the third quarter of 2025 compared to $13,716,000 for same period in 2024. The average yield increased 15 basis points from 9.42% to 9.57% includes the amortization of the deferred costs. The subordinated debt will initially bear interest at 8.875% per annum from and including the original issue date of the subordinated notes to but excluding September 1, 2029, payable semi-annually in arrears. From September 1, 2029, through maturity or up to an early redemption date, the interest rate resets quarterly to an interest rate per annum equal to the then current three-month SOFR plus a spread, payable quarterly in arrears. On or after the fifth anniversary of the original issue date through maturity, the QNB has the option to redeem the subordinated debt, in whole or in part, on any scheduled interest payment date. QNB may also redeem the subordinated debt in whole at any time in the event of certain specified events. The subordinated debt will mature on September 1, 2034.
Previous wording
Net Interest Income and Net Interest Margin – Six-Month Comparison
Current wording
Net Interest Income and Net Interest Margin – Nine-Month Comparison
Previous wording
For the six-month period ending June 30, 2025 average earning assets increased $148,576,000, or 8.5%, to $1,891,924,000, with average loans increasing 7.9% and average investment securities increasing 8.7%. Average total deposits increased $120,458,000, or 7.9%, to $1,640,634,000 for the six-month period ended June 30, 2025 compared to the same period in 2024. The net interest margin on a tax-equivalent basis was 2.60% for the six-month period ended June 30, 2025, a 17-basis point increase from the same period in 2024.
Current wording
For the nine-month period ending September 30, 2025 average earning assets increased $133,632,000, or7.6%, to $1,898,383,000, with average loans increasing 7.2% and average investment securities increasing 9.4%. Average total deposits increased $105,976,000, or 6.8%, to $1,653,266,000 for the nine-month period ended September 30, 2025 compared to the same period in 2024. The net interest margin on a tax-equivalent basis was 2.64% for the nine-month period ended September 30, 2025, a 19-basis point increase from the same period in 2024.
Previous wording
Total interest income on a tax-equivalent basis increased $5,355,000, or 13.3%, to $45,548,000, when comparing the six-month periods ended June 30, 2025 and June 30, 2024 due to an increase in volume and rate on loans. Interest income on loans increased $2,357,000 as a result of volume and increased $1,795,000 as a result of yields. The analysis of the six-month comparison periods is similar to what was described in the quarterly analysis.
Current wording
Total interest income on a tax-equivalent basis increased $6,900,000, or 11.1%, to $69,175,000, when comparing the nine-month periods ended September 30, 2025 and September 30, 2024 primarily due to an increase in volume and rate on loans. Interest income on loans increased $3,254,000 as a result of volume and increased $2,554,000 as a result of yields. The analysis of the nine-month comparison periods is similar to what was described in the quarterly analysis.
Previous wording
The yield on earning assets increased from 4.64% to 4.85% for the six-month periods with the yield on loans up 29 basis points to 5.89%. QNB continues to experience pressure on yields due to competitive pressures on loan pricing.
Current wording
The yield on earning assets increased from 4.71% to 4.87% for the nine-month periods with the yield on loans up 27 basis points to 5.92%. QNB continues to experience pressure on yields due to competitive pressures on loan pricing.
Previous wording
Total interest expense increased $1,965,000 for the six-month period ended June 30, 2025 compared with the same period in 2024 attributable to an increase in volume. Average interest-bearing liabilities increased $139,090,000 and the average rate paid on interest-bearing deposits increased two basis points to 2.72% for the six-month period ended June 30, 2025 versus the same period in 2024. Average interest-bearing deposits increased $113,916,000 and the related interest expense decreased $100,000 for the six-month period ended June 30, 2025 versus the same period in 2024. The average balance of total short-term borrowings decreased $10,612,000 primarily due to reductions in customer repurchase agreements and FRB borrowings, partly offset by an increase in FHLB borrowings of $40,858,000. During the first quarter of 2023, QNB borrowed $50,000,000 from the FRB under its Bank Term Funding Program and locked in a rate of 4.39%; there were no pre-payment penalties. The FRB borrowings were paid off during the first quarter of 2024; there was an average balance of $20,055,000 for the six-month period ended June 30, 2024 compared to no average balance for the same period in 2025. QNB invested proceeds from the issuance of subordinated debt and deposit growth into loans and investments.
Current wording
Total interest expense increased $1,667,000 for the nine-month period ended September 30, 2025 compared with the same period in 2024 attributable to an increase in volume. Average interest-bearing liabilities increased $121,624,000 and the average rate paid on interest-bearing liabilities decreased seven basis points to 2.70% for the nine-month period ended September 30, 2025 versus the same period in 2024. Average interest-bearing deposits increased $100,721,000 and the related interest expense decreased $976,000, as the rate decreased 27 basis points, for the nine-month period ended September 30, 2025 versus the same period in 2024. The average balance of total long-term borrowings decreased $14,300,000 for the nine months ended September 30, 2025 compared to the same period in 2024 and the average balance of subordinated debt increased $34,537,000. QNB invested proceeds from the issuance of subordinated debt and deposit growth into loans, investments and paying off long-term borrowings.
Previous wording
Based on this analysis, QNB recorded $406,000 in the provision for credit losses on loans for the six months ended June 30, 2025, through the allowance for credit losses on loans, compared to $39,000 through the provision for credit losses for the same period in 2024. QNB recorded a reversal of provision of $2,000 for the allowance for credit losses for unused commitments in the six months ended June 30, 2025 compared to a reversal in provision of $11,000 for the same period in 2024.
Current wording
Based on this analysis, QNB recorded $504,000 in the provision for credit losses on loans for the nine months ended September 30, 2025, through the allowance for credit losses on loans, compared to $193,000 through the provision for credit losses for the same period in 2024. QNB recorded a reversal of provision of $7,000 for the allowance for credit losses for unused commitments in the nine months ended September 30, 2025 compared to a reversal in provision of $6,000 for the same period in 2024.
Previous wording
QNB's allowance for credit losses on loans of $9,169,000 represents 0.75% of loans receivable at June 30, 2025 compared with an allowance for credit losses on loans of $8,744,000, or 0.72% of loans receivable, at December 31, 2024, and $8,858,000, or 0.76%, at June 30, 2024. Management believes the allowance for credit losses on loans at June 30, 2025 is adequate as of that date based on its analysis of historical loss experience, current conditions and reasonable and supportable forecasts in the portfolio.
Current wording
QNB's allowance for credit losses on loans of $9,255,000 represents 0.74% of loans receivable at September 30, 2025 compared with an allowance for credit losses on loans of $8,744,000, or 0.72% of loans receivable, at December 31, 2024, and $8,987,000, or 0.77%, at September 30, 2024. Management believes the allowance for credit losses on loans at September 30, 2025 is adequate as of that date based on its analysis of historical loss experience, current conditions and reasonable and supportable forecasts in the portfolio.
Previous wording
Net recoveries were $16,000 for the three months ended June 30, 2025 compared to net charge-offs of $12,000 for the three months ended June 30, 2024. Charge-offs consisted of overdrafts of $31,000 and other consumer loans of $1,000. Recoveries of approximately $48,000 during the three months ended June 30, 2025 consisted of $44,000 in repayments from borrowers of previously charged-off credits and overdrafts recoveries of $4,000. Annualized net recoveries as a percentage of average loans receivable were 0.01% for the three months ended June 30, 2025, compared to annualized net charge-offs of 0.00% for the three months ended June 30, 2024.
Current wording
Net charge-offs were $12,000 for the three months ended September 30, 2025 compared to net charge-offs of $25,000 for the three months ended September 30, 2024. Charge-offs consisted of overdrafts of $30,000 and other consumer loans of $3,000. Recoveries of approximately $21,000 during the three months ended September 30, 2025 consisted of $16,000 in repayments from borrowers of previously charged-off credits and overdrafts recoveries of $5,000. Annualized net charge-offs as a percentage of average loans receivable were 0.00% for the three months ended September 30, 2025, compared to annualized net charge-offs of 0.01% for the three months ended September 30, 2024.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
QNB reported net income for the third quarter of 2025 of $3,648,000, or $0.98 per share on a diluted basis, compared to net income of $3,338,000, or $0.91 per share on a diluted basis, for the same period in 2024. For the nine-month period ended September 30, 2025, QNB reported net income of $10,109,000, or $2.72 per share on a diluted basis, compared to net income of $8,397,000, or $2.29 per share on a diluted basis, for the same period in 2024.