QNB CORP.

Previous wording

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.

Current wording

QNB reported net income for the first quarter of 2026 of $2,765,000, or $0.73 per share on a diluted basis, compared to net income of $2,578,000, or $0.69 per share on a diluted basis, for the same period in 2025. For the three-month period of 2026, net income included after-tax merger-related cost of $754,000. The merger-related costs are significant one-time costs and are not normal recurring operating expenses. Adjusted diluted earnings per share excluding the impact of the merger-related cost for the three-month

Previous wording

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 wording

The following table shows calculated impact of the merger-related costs on net income and ratios, reconciling GAAP to non-GAAP measurements:

Previous 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.

Current wording

The Bank contributed $3,759,000 to net income for the three months ended March 31, 2026 compared to $3,292,000 for the same period 2025; and the holding company had a negative contribution of $994,000 to net income for the three months ended March 31, 2026 compared to a negative contribution of $714,000 for the same period 2025. The improved results at the Bank were primarily due to improvement in the interest margin causing a $1,849,000 increase in net interest income and a $229,000 increase in non-interest income; this was partly offset by and an increase in non-interest expense of $1,500,000, of which $622,000 was related to merger-related costs. The change in contribution from QNB Corp. is primarily due to a decrease in net interest income of $27,000 and an increase in non-interest expense of $281,000, primarily due to merger-related expenses of $266,000.

Previous 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.

Current wording

Net income expressed as an annualized rate of return on average assets and average shareholders’ equity was 0.59% and 8.40%, respectively, for the quarter ended March 31, 2026, compared with 0.56% and 9.73%, respectively, for the quarter ended March 31, 2025. Return on average assets and return on average shareholders’ equity, excluding the impact of the merger-related cost, for the three-month period of 2026 was 0.75% and 10.69%, respectively.

Previous 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.

Current wording

Total assets as of March 31, 2026 were $1,923,123,000, compared with $1,906,005,000 at December 31, 2025. Loans receivable at March 31, 2026 were $1,282,773,000, a $20,699,000 increase from $1,262,074,000 at December 31, 2025. Total deposits of $1,653,431,000 at March 31, 2026 increased $10,920,000 compared with total deposits of $1,642,511,000 at December 31, 2025.

Previous wording

Results for the three and nine months ended September 30, 2025 include the following significant components:

Current wording

Results for the three months ended March 31, 2026 include the following significant components:

Previous 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.

Current wording

QNB recorded a $303,000 provision for credit losses on loans for the first quarter of 2026, compared with a provision of $551,000 for the same period in 2025.

Previous wording

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 wording

Non-interest expense increased $1,769,000 to $11,138,000 for the first quarter of 2026 compared with the same period in 2025. Non-interest expense, excluding merger-related costs increased $881,000, or 9.4% to $10,250,000 for the first quarter of 2026 compared with the same period in 2025.

Previous 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.

Current wording

Total non-performing loans, comprised of loans on non-accrual status, were $9,614,000, or 0.75% of loans receivable at March 31, 2026, compared to $8,793,000, or 0.70% of loans receivable at December 31, 2025. Net loan recoveries for the three months ended March 31, 2026 were $13,000, compared with net recoveries of $3,000 for the same period in 2025.

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 nine-month periods ended September 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-month periods ended March 31, 2026 and 2025.

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 nine months ended September 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 months ended March 31, 2026 and 2025.

Previous 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.

Current wording

Average earning assets for the first quarter of 2026 were $1,907,593,000, an increase of $22,630,000, or 1.2%, from the first quarter of 2025, with average loans increasing $62,834,000, or 5.2%, and average investment securities decreasing $29,663,000, or 4.7%, over the same period in 2025. Proceeds from payments on and maturities of investment securities along with interest-earning deposits over the past year were invested in higher-yielding loans. Average loans as a percentage of average earning assets was 66.8% for the first quarter of 2026, compared to 64.2% for the first quarter of 2025. On the funding side, average deposits increased $5,644,000, or 0.3%, to $1,638,840,000 for the first quarter of 2026. Average short-term borrowed funds, which consisted primarily of average commercial repurchase agreements and FHLB borrowings, increased $36,044,000 to $83,573,000 for the first quarter of 2026 compared to $47,529,000 for the same period in 2025. Proceeds from the issuance of short-term debt were used to payoff long-term debt which decreased $30,111,000 on average.

Previous 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.

Current wording

The net interest margin for the first quarter of 2026 increased 31 basis points to 2.82% from 2.51% for the same period in 2025. 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 $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.

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 $285,000, or 1.3%, to $22,623,000 for the first quarter of 2026; whereas total interest expense decreased $1,294,000, or 12.1%, to $9,367,000.

Previous 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.

Current wording

The yield on earning assets on a tax-equivalent basis remained flat at 4.81% for the first quarter of 2026 compared to the first quarter of 2025. The cost of interest-bearing liabilities declined 34 basis points to 2.42% for the first quarter of 2026, compared with 2.76% for the same period in 2025.

Previous 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.

Current wording

Interest income on investment securities decreased $867,000 when comparing the first quarters of 2026 and 2025. The average yield on the investment portfolio was 2.41% for the first quarter of 2026 compared with 2.85% for the same period in 2025, a decrease of 44 basis points.

Previous 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%.

Current wording

The yield on U.S. Treasury securities was 3.71% for the first quarter of 2026 compared to 4.38% for the same period in 2025; the decline in rate was partly offset by the average balances increase of $672,000 for a net decrease in interest income of $67,000. 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 $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.

Current wording

Interest income on municipal securities, which are primarily tax-exempt, decreased $151,000 due to a 55 basis-point decrease in rate, and a $732,000 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 $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.

Current wording

Interest income on mortgage-backed securities and CMOs decreased $660,000 and average balances decreased $38,746,000 and the yield decreased 52 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 $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.

Current wording

Interest income on corporate debt and mutual funds decreased $30,000 as average balances increased $9,134,000 and the average yield decreased 106 basis points.

Previous 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.

Current wording

Income on loans increased $1,320,000 to $18,675,000 when comparing the first quarters of 2026 and 2025, with a $62,834,000 increase in average balances contributing to an increase in interest income of $835,000 and a 14-basis point increase in yield contributing to a $485,000 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 $1,760,000 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%.

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 $1,375,000 when comparing the first quarters of 2026 and 2025, primarily due to a 28-basis point increase in rate from 5.71% in 2025 to 5.99% and increased average balances of $53,323,000, or 6.2%.

Previous 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.

Current wording

Income on commercial and industrial loans decreased $269,000 when comparing the first quarters of 2026 and 2025. The average yield on these loans decreased 38 basis points to 7.03% resulting in a decrease in income of $133,000; average balances decreased $7,476,000, to $141,204,000 for the first quarter of 2026 resulting in a $136,000 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 $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.

Current wording

Tax-exempt loan income increased $43,000 for the first quarter of 2026 compared to the same period in 2025. Average balances increased $842,000 to $19,637,000 for the first quarter of 2026. The yield on municipal loans increased 70 basis points, to 4.85% for the first quarter of 2026, compared with the same period in 2025.

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 $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.

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 $154,000 when comparing the first quarter of 2026 to the same period in 2025. Average residential mortgage loan balances increased by $8,098,000, or 7.1%, to $122,369,000 for the first quarter of 2026 compared to the same period in 2025, which contributed a $87,000 increase in interest income. The average yield on the portfolio increased 22 basis points and contributed an increase of $67,000 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 2026 period by $8,561,000 to $76,534,000 and the average yield decreased 58 basis points to 5.83% resulting in a net $25,000 net increase in interest income. The yield on the consumer portfolio increased 23 basis points to 7.91% for the first quarter of 2026 and there was a $514,000 decrease in average balances resulting in a net $8,000 decrease in interest income.

Previous 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.

Current wording

Earning assets are funded by deposits and borrowed funds. Interest expense decreased $1,294,000, when comparing the first quarter of 2026 to the same period in 2025. Interest expense on interest-bearing deposits decreased $1,244,000 to $7,668,000 when comparing the first quarters of 2026 and 2025, with a net $2,045,000 increase in average balances contributing to a net decrease in interest expense of $131,000 and a 35-basis point decrease in yield contributing to a $1,113,000 decrease in interest expense. Average interest-bearing demand accounts increased $18,955,000, or 5.0%, to $399,248,000 for the first quarter of 2026 and the average rate paid on these deposits decreased six basis points; interest expense on interest-bearing demand accounts decreased $13,000 to $931,000 for the same period. Average non-interest-bearing demand accounts increased $3,599,000 to $189,591,000 for the first quarter of 2026. Average money market accounts decreased $1,045,000 to $255,220,000 for the first quarter of 2026 compared with the same period in 2025. Interest expense on money market accounts decreased $215,000 to $1,603,000, and the average interest rate paid on money market accounts decreased 33 basis points to 2.55% for the first quarter of 2026. 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 $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.

Current wording

Interest expense on municipal interest-bearing demand accounts decreased $393,000 to $1,603,000 for the first quarter of 2026. The average interest rate paid on municipal interest-bearing demand accounts decreased 76 basis points to 3.19% for the first quarter of 2026 over the same quarter of 2025, and average balances decreased $14,437,000 to $135,142,000. 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 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.

Current wording

Interest expense on savings accounts increased $10,000 when comparing the first quarter of 2026 to the same quarter of 2025. The average interest rate paid on savings accounts remained about the same at 1.29% for the first quarter of 2026 compared to 1.30% for the same period in 2025. Average savings balances increased $4,599,000 to $284,256,000, or 1.6%, for the first quarter of 2026. QNB’s online e-Savings product is the largest category of savings deposits, with average balances for the first quarter of 2026 of $211,299,000 compared to $206,579,000 in the same period of 2025. The average yield paid on these accounts was 1.70% for the first quarter of 2026 compared to 1.71% for the same period in 2025. 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 $121,000 when comparing the first quarter of 2026 to the same period in 2025.

Previous 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.

Current wording

Interest expense on time deposits totaled $3,168,000 for the first quarter of 2026 compared to $3,801,000 in 2025. Average total time deposits decreased $6,027,000 to $375,383,000 for the first quarter of 2026. 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 $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.

Current wording

Approximately $350,187,000, or 96%, of time deposits at March 31, 2026 will mature over the next 12 months. The average rate paid on these time deposits is approximately 3.34%. 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 $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%.

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 $306,000 for the first quarter of 2026 to $762,000 when compared to the same period in 2025. When comparing these same periods, average balances increased $36,044,000 to $83,573,000 and average rate decreased 19 basis points to 3.70%.

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 $39,191,000 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.

Current wording

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

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.

Current wording

Based on this analysis, QNB recorded $303,000 in the provision for credit losses on loans for the three months ended March 31, 2026, through the allowance for credit losses on loans, compared to $551,000 through the provision for credit losses for the same period in 2025. QNB recorded a reversal in provision of $3,000 for the allowance for credit losses for unused commitments in the three months ended March 31, 2026 compared to a reversal in provision of $1,000 for the same period in 2025.

Previous 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.

Current wording

QNB's allowance for credit losses on loans of $9,531,000 represents 0.74% of loans receivable at March 31, 2026 compared with an allowance for credit losses on loans of $9,215,000, or 0.73% of loans receivable, at December 31, 2025, and $9,298,000, or 0.77%, at March 31, 2025. Management believes the allowance for credit losses on loans at March 31, 2026 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 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.

Current wording

Net recoveries were $13,000 for the three months ended March 31, 2026 compared to net recoveries of $3,000 for the three months ended March 31, 2025. Charge-offs consisted of overdrafts of $16,000 and a real estate loan secured by junior lien on 1-4 family property of $4,000. Recoveries of approximately $33,000 during the three months ended March 31, 2026 consisted of $27,000 in repayments from borrowers of previously charged-off credits and overdrafts recoveries of $7,000. Annualized net recoveries as a percentage of average loans receivable were 0.00% for the three months ended March 31, 2026, compared to annualized net recoveries of 0.00% for the three months ended March 31, 2025.

Previous wording

Non-performing assets were $8,947,000 at September 30, 2025 compared to $1,975,000 as of December 31, 2024 and $1,696,000 at September 30, 2024. Total non-performing loans, which represent loans on non-accrual status, loans past due 90 days or more and still accruing interest, were 0.72% of loans receivable at September 30, 2025, 0.16% at December 31, 2024 and 0.14% of loans receivable at September 30, 2024. The increase in non-accrual loans was primarily due to one commercial relationship placed on nonaccrual status during 2025. In cases where there is a collateral shortfall on non-accrual 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. Commercial loans classified as substandard or doubtful totaled $34,973,000, an increase of $672,000 from the $34,301,000 reported at December 31, 2024 and an increase of $8,140,000 from the $26,833,000 reported at September 30, 2024.

Current wording

Non-performing assets were $9,614,000 at March 31, 2026 compared to $8,793,000 as of December 31, 2025 and $8,651,000 at March 31, 2025. Total non-performing loans, which represent loans on non-accrual status, loans past due 90 days or more and still accruing interest, were 0.75% of loans receivable at March 31, 2026, 0.70% at December 31, 2025 and 0.71% of loans receivable at March 31, 2025. The increase in non-accrual loans was primarily due to one consumer relationship placed on nonaccrual status during 2026. In cases where there is a collateral shortfall on non-accrual 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. Commercial loans classified as substandard or doubtful totaled $38,845,000, a decrease of $374,000 from the $39,219,000 reported at December 31, 2025 and an increase of $4,397,000 from the $34,448,000 reported at March 31, 2025.

Previous wording

QNB had no loans past due 90 days or more and still accruing interest at September 30, 2025, December 31, 2024, or September 30, 2024. Total loans 30 days or more past due, which includes non-accrual loans by actual number of days delinquent, represented 0.61% of loans receivable at September 30, 2025 compared with 0.18% at December 31, 2024, and 0.18% at September 30, 2024.

Current wording

QNB had no loans past due 90 days or more and still accruing interest at March 31, 2026, December 31, 2025, or March 31, 2025. Total loans 30 days or more past due, which includes non-accrual loans by actual number of days delinquent, represented 0.22% of loans receivable at March 31, 2026 compared with 0.14% at December 31, 2025, and 0.69% at March 31, 2025.

Previous wording

There were two loan modifications to one borrower experiencing financial difficulty identified during the nine months ended September 30, 2025. These two loans continue to be reported as nonaccrual as there is a collateral deficiency. The loans were modified to interest only payments for twelve months. QNB had no other real estate owned or repossessed assets at September 30, 2025, December 31, 2024 or September 30, 2024.

Current wording

There was one loan modification to a borrower experiencing financial difficulty identified during the three months ended March 31, 2026. The loan continues to be reported as accruing. The loan was modified to interest only payments for three months and one month deferred payment. QNB had no other real estate owned or repossessed assets at March 31, 2026, December 31, 2025 or March 31, 2025.

Previous wording

An analysis of net loan charge-offs (recoveries) for the three and nine months ended September 30, 2025 compared to the same periods in 2024 is as follows:

Current wording

An analysis of net loan charge-offs (recoveries) for the three months ended March 31, 2026 compared to the same periods in

Previous wording

At September 30, 2025 and December 31, 2024, the recorded investment in collateral dependent loans totaled $8,936,000 and $1,923,000 of which $1,848,000 and $1,607,000, respectively, required no specific allowance for loan loss. The recorded investment in collateral dependent loans requiring an allowance for loan losses was $7,088,000 and $357,000 at September 30, 2025 and December 31, 2024, respectively, and the related allowance for loan losses associated with these loans was $1,412,000 and $308,000, respectively. See Note 8 to the Notes to Consolidated Financial Statements for additional detail of collateral dependent loans.

Current wording

At March 31, 2026 and December 31, 2025, the recorded investment in collateral dependent loans totaled $9,602,000 and $8,793,000 of which $1,541,000 and $1,704,000, respectively, required no specific allowance for loan loss. The recorded investment in collateral dependent loans requiring an allowance for loan losses was $8,061,000 and $7,089,000 at March 31, 2026 and December 31, 2025, respectively, and the related allowance for loan losses associated with these loans was $1,878,000 and $1,649,000, respectively. See Note 8 to the Notes to Consolidated Financial Statements for additional detail of collateral dependent loans.