QNB Corp. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported a net loss of $14,774,000 ($2.67 per share diluted) for the third quarter of 2026, compared to net income of $3,648,000 ($0.98 per share) in the same period of 2025.
• For the nine months ended September 30, 2026, reported a net loss of $8,994,000 ($1.89 per share diluted), compared to net income of $10,109,000 ($2.72 per share) in 2025.
• Adjusted net income for the third quarter of 2026 was $7,207,000 ($1.30 per share diluted), an increase from $4,058,000 ($1.09 per share) in 2025.
• Adjusted net income for the nine months ended September 30, 2026, was $16,236,000 ($3.39 per share diluted), an increase from $10,519,000 ($2.83 per share) in 2025.
• Net interest income for the third quarter was $19,161,000, an increase of $6,163,000 from 2025; for the nine months, it was $50,621,000, an increase of $13,434,000 from 2025.
• Tax-equivalent net interest margin was 3.25% for the third quarter of 2026, up from 2.72% in 2025; for the nine months, it was 3.09%, up from 2.64%.
• Total assets were $2,361,620,000 as of September 30, 2026, compared to $1,906,005,000 at December 31, 2025.
• Loans receivable increased to $1,772,174,000, and total deposits increased to $2,056,299,000 as of September 30, 2026.
• Return on average assets (ROAA) was -2.44% for the quarter and -0.54% for the nine months; adjusted ROAA was 1.19% for the quarter and 0.97% for the nine months.
• Return on average equity (ROAE) was -29.70% for the quarter and -7.03% for the nine months; adjusted ROAE was 14.49% for the quarter and 12.68% for the nine months.
• Provision for credit losses on loans was $379,000 for the quarter and $900,000 for the nine months.
• Net loan charge-offs were $102,000 for the quarter and $88,000 for the nine months.
• Allowance for credit losses on loans was $13,047,000 (0.74% of loans) as of September 30, 2026.
• Non-performing loans were $11,688,000 (0.66% of loans) as of September 30, 2026.
• Total non-interest expense was $12,734,000 for the quarter and $40,308,000 for the nine months.
• Income tax benefit was $4,126,000 for the quarter and $2,602,000 for the nine months; the effective tax rate was 21.8% for the quarter and 22.4% for the nine months.

Guidance and Future Outlook:

• Management stated that the balance sheet restructuring positions the company to benefit from further earnings improvement in future periods.
• The company expects to continue realizing meaningful synergies from the Victory Bancorp acquisition, particularly through robust loan growth.
• Forward-looking statements indicate that actual results could differ due to economic conditions, competition, and technological developments.

Business Segments and Product Lines:

• The acquisition of Victory Bancorp closed on April 1, 2026, adding $408,379,000 in loans, $409,165,000 in deposits, and $47,101,000 in equity.
• Commercial real estate loans comprised 56.0% of average earning assets in the third quarter of 2026, up from 46.3% in 2025.
• Fees for services to customers increased $169,000 in the quarter and $408,000 for the nine months, driven by higher overdraft and deposit-related fees.
• ATM and debit card income increased $111,000 in the quarter and $283,000 for the nine months.
• Retail brokerage and advisory income decreased $61,000 in the quarter but increased $9,000 for the nine months.
• The Bank completed the exchange offer to convert Visa B-2 shares to B-3 and C shares in the second quarter, and subsequently converted remaining C shares to A shares, recording an $880,000 unrealized gain for the nine months.

Market and Competitive Landscape:

• QNB Corp. operates fourteen branches in Bucks, Lehigh, and Montgomery Counties, along with two loan production offices in Montgomery and Berks Counties.
• The company provides securities and advisory services under QNB Financial Services and title insurance through Laurel Abstract Company LLC.
• Loan growth was primarily driven by commercial real estate, contributing to a 24 basis-point increase in the yield on loans.

Risks and Challenges:

• Reported earnings were significantly impacted by a $27,713,000 net loss from balance sheet restructuring and $251,000 in merger-related costs for the quarter.
• Non-performing loans increased to $11,688,000, primarily due to four commercial and one retail customer.
• Commercial loans classified as substandard or doubtful increased by $5,402,000 to $44,621,000, primarily due to acquired commercial real estate and commercial/industrial loans.
• The company faces risks related to increased demand or prices not occurring, changing economic conditions, and technological developments.

Management Commentary and Tone:

• Dave Freeman, President and CEO, stated that third-quarter results reflect significant strategic progress and a strengthened capital position.
• Management noted that underlying performance remained strong, supported by higher net interest income, margin expansion, and strong loan growth.
• Freeman highlighted that the balance sheet restructuring and Victory Bancorp integration have enhanced market presence and positioned QNB for continued growth and profitability.

Other Key Points:

• On August 19, 2026, QNB completed a public offering of 1,232,142 common shares, adding $48,284,000 in net proceeds to shareholders' equity.
• On September 8, 2026, QNB executed a strategic repositioning of its securities available-for-sale portfolio, selling $250,712,000 in securities at a loss of $29,049,000 and unwinding a related swap for a gain of $1,336,000.
• Merger-related costs for the quarter were $251,000, compared to $519,000 in the same period of 2025; costs for the nine months were $4,223,000.
• Cash dividends were $0.39 per share for the third quarter of 2026, compared to $0.38 in 2025.
• Book value per share was $36.37 as of September 30, 2026.
• The company reported a negative efficiency ratio of -224.39% for the quarter due to the restructuring loss, with an adjusted efficiency ratio of 56.64%.