QNB Corp. Posts Strong Q1 Growth Amidst Victory Bancorp Merger Costs

QUAKERTOWN, PA – April 28, 2026 – QNB Corp. (OTCQX: QNBC) today announced a rise in first-quarter net income, a result underscored by robust operational performance that was partially masked by significant one-time costs related to its strategic acquisition of The Victory Bancorp, Inc. The parent company of QNB Bank reported net income of $2.765 million, or $0.73 per diluted share, for the quarter ending March 31, 2026. This marks an increase from the $2.578 million, or $0.69 per diluted share, recorded in the same period last year.

However, the headline figures include $754,000 in after-tax merger-related expenses. When these non-recurring costs are excluded, the company's adjusted diluted earnings per share climb to $0.93. This non-GAAP figure highlights the underlying health and profitability of the bank's core operations as it embarks on a significant expansion of its regional footprint.

“We reported solid first-quarter earnings growth driven by improved margins, higher net interest income, and continued loan growth,” said Dave Freeman, President and Chief Executive Officer. “While merger-related costs impacted reported earnings, our performance remained strong. The closing of the Victory Bancorp transaction ultimately strengthens our balance sheet, broadens our market presence, and positions QNB for sustainable growth in the periods ahead.”

A Strategic Power Play in Pennsylvania Banking

The first-quarter results provide the first financial glimpse into the impact of QNB's transformative acquisition of Limerick-based Victory Bancorp, a deal that officially closed on April 1, 2026. The all-stock transaction, valued at approximately $40.97 million when announced in September 2025, is a calculated move to solidify QNB's position as a premier community bank in southeastern Pennsylvania.

The merger creates a formidable franchise with nearly $2.4 billion in assets and significantly expands QNB's presence deeper into the lucrative Montgomery County market. The combined entity is projected to hold the top deposit market share in Montgomery County among banks with less than $5 billion in assets, giving it a competitive edge in a crowded field.

To ensure a seamless transition for customers and staff, the integration is being handled in phases. Victory Bank will operate as a division of QNB Bank through mid-June 2026. A full systems conversion is scheduled for the weekend of June 19-21, after which all Victory branches will reopen as fully integrated QNB Bank locations. Upon completion, customers will have access to a network of 14 full-service offices across Bucks, Lehigh, and Montgomery counties.

Underscoring the collaborative nature of the merger, two key figures from Victory's leadership have joined QNB's board. Joseph W. Major, former Chairman and CEO of Victory, now serves as Vice Chairman of the QNB board, and Kevin L. Johnson has also been appointed as a director. This move is expected to facilitate a smooth integration of cultures and operations, retaining valuable local market expertise.

Core Performance Shines Through Merger Noise

Beyond the strategic implications of the merger, a detailed look at QNB's financials reveals a strong and improving core business. The most significant driver of performance was a substantial increase in net interest income, which rose by $1.572 million year-over-year to total $13.109 million for the quarter. This improvement was fueled by a notable expansion of the net interest margin, which climbed 31 basis points to 2.82% from 2.51% in the first quarter of 2025.

The margin improvement was primarily the result of a lower cost of funds. The cost of interest-bearing liabilities decreased by 34 basis points to 2.42%, as the bank successfully replaced matured long-term debt with lower-cost short-term borrowings and saw its average rate paid on interest-bearing deposits decline.

This strong funding position supported healthy loan growth. Total loans receivable grew by $20.7 million during the quarter to reach $1.28 billion. The growth was led by the commercial real estate sector, which now comprises 47.8% of the bank's average earning assets. This focus, combined with favorable rate changes, contributed directly to the increase in net interest income.

To provide investors with a clearer picture of this operational strength, QNB provided a non-GAAP reconciliation that isolates the impact of the merger. The pre-tax merger-related costs amounted to $888,000. Excluding these costs, the bank's return on average assets (ROAA) would have been 0.75% instead of the reported 0.59%, and its return on average equity (ROAE) would have been 10.69% instead of 8.40%. This practice of adjusting for one-time M&A expenses is standard in the banking industry and offers a more comparable view of ongoing profitability.

Asset Quality Remains Stable Despite Minor Uptick

Amidst its strategic expansion, QNB has maintained a close watch on its loan portfolio. Asset quality metrics remained largely stable, though total non-performing loans saw a modest increase. At the end of the quarter, non-performing loans stood at $9.614 million, or 0.75% of total loans, up from $8.793 million, or 0.70%, at the end of 2025. The company noted this increase was primarily attributable to a single retail customer, suggesting it is an isolated issue rather than a sign of systemic portfolio stress.

Further demonstrating confidence in its credit quality, QNB's provision for credit losses was $303,000 for the quarter, significantly lower than the $550,000 provisioned in the same period last year. The bank's allowance for credit losses on loans as a percentage of total loans remained steady at 0.74%. The bank also reported net loan recoveries of $13,000, a positive reversal from the small charge-offs recorded a year ago.

On the expense side, total non-interest expense rose to $11.1 million from $9.4 million in the prior year. The $888,000 in pre-tax merger costs was the primary driver of this increase. Excluding these costs, the underlying non-interest expense growth was a more moderate 9.4%, driven by higher salary and benefits expenses related to annual pay increases and rising medical costs, as well as investments in technology and marketing.

The merger is expected to create significant value for shareholders over the long term. Initial projections at the time of the deal's announcement anticipated the acquisition would be approximately 16% accretive to QNB's estimated earnings per share in 2026 and 19% accretive in 2027, factoring in all expected synergies. With the integration well underway and core performance holding strong, QNB appears poised to capitalize on its expanded scale and market presence in the quarters to come.