Safe and Sound

QNB Bank

Quakertown, PA
4
Star Rating
Founded in 1877, QNB Bank is an FDIC-insured bank headquartered in Quakertown, PA. As of December 31, 2017, the bank had equity of $89.3 million on $1.14 billion in assets.

U.S. bank customers have $993.9 million on deposit at 14 offices in PA run by 184 full-time employees. With that footprint, the bank holds loans and leases worth $725.4 million, including $541.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, QNB Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It works as a bulwark against losses and as protection for accountholders during times of economic trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

QNB Bank received a score of 6 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. QNB Bank's Tier 1 capital ratio was 10.75 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, QNB Bank held equity amounting to 7.81 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due mortgages.

Having a large number of these types of assets means a bank could eventually have to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

QNB Bank scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.08 percent of QNB Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on QNB Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

QNB Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for QNB Bank was 8.45 percent, above the national average of 8.10 percent.

The bank reported net income of $7.5 million on total equity of $89.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.68 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.