Qnb Posts 55% EPS Gain in Fiscal Q2

Key Points

• - Diluted earnings per share (GAAP) rose to $1.04, a 55.2% increase from the prior year.

• - Net interest margin expanded by 0.23 percentage points to 2.69%, boosting profitability.

• - Non-performing loans increased sharply, now representing 0.73% of loans receivable, mainly due to one commercial relationship.

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QNB (OTC:QNBC), a regional bank based in southeastern Pennsylvania, posted its earnings for the second quarter of 2025 on July 22, 2025. The most notable news from the release was a surge in profitability, with diluted earnings per share (GAAP) reaching $1.04 versus $0.67 in Q2 2024. Net income (GAAP) totaled $3.88 million, up from $2.47 million. These results reflect a 55.2% jump in EPS (GAAP) compared to Q2 2024 and a 57.5% rise in net income (GAAP) compared to Q2 2024. Net interest income and margin also improved, while cost management yielded a better efficiency ratio. However, a sharp increase in non-performing loans added caution. The release did not include analyst estimates, so comparisons to expectations are not possible. Overall, the quarter showed improved earnings and margin, with asset quality trends requiring close attention.

The Business and Key Focus Areas

Qnb (OTC:QNBC) is a Pennsylvania-based community bank focused on relationship banking, small-business lending, and personal financial services. It operates in a competitive landscape against regional banks, credit unions, and national institutions. Technology adoption, regulatory compliance, and strong customer service are central to its approach.

In recent periods, the bank has emphasized modest loan and deposit growth, digital banking investments, disciplined cost management, and capital strength. Success in its core business hinges on sustaining deposit and fee growth, managing asset quality, and differentiating through personalized service and technology offerings such as online and mobile banking for both retail and business customers.

Quarterly Review: Financial Results and Developments

The quarter’s standout improvement was in profitability and efficiency. Diluted earnings per share (GAAP) grew 55.2% compared to Q2 2024 as net interest income (GAAP) climbed 19.4% compared to Q2 2024. This increase was powered by net interest margin expansion to 2.69%, reflecting higher yields on both loans and investment securities. The yield on earning assets advanced to 4.90%, while the cost of interest-bearing liabilities dipped slightly. Most of the bank’s earning asset growth came from commercial real estate loans and higher-yielding debt investments during the six months ended Q2 2025, though management noted overall loan and deposit growth was “modest.”

Non-interest income, which covers fees from customer accounts, ATM and debit card transactions, and retail brokerage services, increased 12.8% compared to Q2 2024 (GAAP). However, adjusted for one-off securities gains last year, non-interest income saw a smaller gain of 6.9%. Retail brokerage and advisory income reached $140,000, reflecting incremental progress. The report also highlights that non-recurring security sale gains were absent.

However, the efficiency ratio, which measures expenses as a percent of revenue, improved to 66.39% from 73.26% in Q2 2024.

Asset quality presented a mixed picture. The provision for credit losses (GAAP) reversed by $145,000, contrasting with a charge from Q2 2024, while net loan recoveries remained minimal. The bank’s allowance for credit losses stood at 0.75% of loans receivable. Non-performing loans shot up to $8.947 million—0.73% of loans—compared with $1.975 million at year-end 2024. Management linked this to one commercial relationship that made up approximately 88% of the non-accrual total, but also noted most loans involved were not seriously delinquent. Charge-offs, which represent losses from unrecoverable loans, remained negligible. This sudden jump in troubled loans, however, is a notable risk factor requiring ongoing monitoring.

Shareholders’ equity increased to $113.3 million, and book value per share is now $30.46 as of June 30, 2025, up from $25.57 as of June 30, 2024. Deposits rose to $1.65 billion, a 1.4% gain in the six months to Q2 2025, while the bank’s cash holdings grew by 31.1% from December 2024 to June 2025. The bank continued its uninterrupted dividend trend, declaring $0.38 per share—a small uptick from $0.37 in Q2 2024. Return on average assets (GAAP) improved to 0.83%, and return on average equity climbed to 14.25%.

Looking Ahead: Guidance and Considerations

Management expressed a “cautiously optimistic” view for the second half of the year, citing a strengthening business pipeline but continued customer caution in borrowing and spending. It did not provide specific guidance for future EPS or revenue. The quarterly report indicated that further loan and deposit growth will likely remain measured as economic uncertainty persists in its core markets.

Areas for scrutiny in coming quarters include the trend in non-performing loans—especially given the sharp increase to 0.73% of loans receivable from 0.16% at December 31, 2024—and the sustainability of current profit margins if funding costs begin to rise. Investors should also monitor the pace of technology-related expense growth, as digital and compliance spending continues.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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