XML 26 R15.htm IDEA: XBRL DOCUMENT v3.24.0.1
Note 5 - Loans Receivable and the Allowance for Credit Losses on Loans
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Loans Receivable and the Allowance for Credit Losses on Loans

Note 5 - Loans Receivable and the Allowance for Credit Losses on Loans

Major classes of loans are as follows:

 

December 31,

 

2023

 

Commercial:

 

 

 

Commercial and industrial

 

$

137,086

 

Construction and land development

 

 

116,173

 

Real estate secured by multi-family properties

 

 

109,193

 

Real estate secured by owner-occupied properties

 

 

160,695

 

Real estate secured by other commercial properties

 

 

265,101

 

Revolving real estate secured by 1-4 family properties-business

 

 

5,442

 

Real estate secured by 1st lien on 1-4 family properties-business

 

 

103,572

 

Real estate secured by junior lien on 1-4 family properties-business

 

 

3,445

 

State and political subdivisions

 

 

18,708

 

Retail:

 

 

 

1-4 family residential mortgages

 

 

108,906

 

Construction-individual

 

 

—

 

Revolving home equity secured by 1-4 family properties-personal

 

 

34,231

 

Real estate secured by 1st lien on 1-4 family properties-personal

 

 

11,981

 

Real estate secured by junior lien on 1-4 family properties-personal

 

 

15,625

 

Student loans

 

 

1,662

 

Overdrafts

 

 

194

 

Other consumer

 

 

1,757

 

Total loans

 

 

1,093,771

 

Net unearned (fees) costs

 

 

(238

)

Allowance for credit losses on loans

 

 

(8,852

)

Loans receivable, net

 

$

1,084,681

 

 

December 31,

 

2022

 

Commercial:

 

 

 

Commercial and industrial

 

$

160,875

 

Construction

 

 

62,955

 

Secured by commercial real estate

 

 

518,070

 

Secured by residential real estate

 

 

103,419

 

State and political subdivisions

 

 

20,971

 

Retail:

 

 

 

1-4 family residential mortgages

 

 

105,654

 

Home equity loans and lines

 

 

63,580

 

Consumer

 

 

4,113

 

Total loans

 

 

1,039,637

 

Net deferred (fees) costs

 

 

(252

)

Allowance for loan losses

 

 

(10,531

)

Loans receivable, net

 

$

1,028,854

 

 

Loans secured by commercial real estate include all loans collateralized at least in part by commercial real estate. These loans may not be for the express purpose of conducting commercial real estate transactions.

Overdrafts are reclassified as loans and are included in consumer loans above and total loans on the balance sheet and at December 31, 2022 are included in consumer loans. At December 31, 2022, overdrafts were $132,000.

QNB generally lends in Bucks, Lehigh, and Montgomery counties in southeastern Pennsylvania. To a large extent, QNB makes loans collateralized at least in part by real estate. Its lending activities could be affected by changes in the general economy, the regional economy, or real estate values. Other than disclosed in the table above, at December 31, 2023, there was a concentration of loans to lessors of residential buildings and dwellings of 21.5% of total loans and to lessors of nonresidential buildings of 24.7% of total loans, compared with 20.0% and 22.5% of total loans, respectively, at December 31, 2022. These concentrations were primarily within the commercial real estate categories.

QNB engages in a variety of lending activities, including commercial, residential real estate and consumer transactions. QNB focuses its lending activities on individuals, professionals and small to medium sized businesses. Risks associated with lending activities include economic conditions and changes in interest rates, which can adversely impact both the ability of borrowers to repay their loans and the value of the associated collateral.

Commercial and industrial loans, commercial real estate loans, construction loans and residential real estate loans with a business purpose are generally perceived as having more risk of default than residential real estate loans with a personal purpose and consumer loans. These types of loans involve larger loan balances to a single borrower or groups of related borrowers and are more susceptible to a risk of loss during a downturn in the business cycle. These loans may involve greater risk because the availability of funds to repay these loans depends on the successful operation of the borrower’s business. The assets financed are used within the business for its ongoing operation. Repayment of these types of loans generally comes from the cash flow of the business or the ongoing conversions of assets, such as accounts receivable and inventory, to cash. Typical collateral for commercial and industrial loans includes the borrower’s accounts receivable, inventory and machinery and equipment. Commercial real estate and residential real estate loans secured for a business purpose are originated primarily within the southeastern Pennsylvania market area at conservative loan-to-value ratios and often backed by the individual guarantees of the borrowers or owners. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties, as well as the factors affecting residential real estate borrowers.

Loans to state and political subdivisions are tax-exempt or taxable loans to municipalities, school districts and housing and industrial development authorities. These loans can be general obligations of the municipality or school district repaid through their taxing authority, revenue obligations repaid through the income generated by the operations of the authority, such as a water or sewer authority, or loans issued to a housing and industrial development agency, for which a private corporation is responsible for payments on the loans.

QNB originates fixed-rate and adjustable-rate real estate-residential mortgage loans for personal purposes that are secured by first liens on the underlying 1-4 family residential properties. Credit risk exposure in this area of lending is minimized by the evaluation of the credit worthiness of the borrower, including debt-to-income ratios, credit scores and adherence to underwriting policies that emphasize conservative loan-to-value ratios of generally no more than 80%. Residential mortgage loans granted in excess of the 80% loan-to-value ratio criterion are generally insured by private mortgage insurance.

The real estate-home equity portfolio consists of fixed-rate home equity loans and variable-rate home equity lines of credit. Risks associated with loans secured by residential properties are generally lower than commercial loans and include general economic risks, such as the strength of the job market, employment stability and the strength of the housing market. Since most loans are secured by a primary or secondary residence, the borrower’s continued employment is the greatest risk to repayment.

QNB offers a variety of loans to individuals for personal and household purposes. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and is more likely to decrease in value than real estate. Credit risk in this portfolio is controlled by conservative underwriting standards that consider debt-to-income levels and the creditworthiness of the borrower and, if secured, collateral values.

QNB employs a ten-grade risk rating system related to the credit quality of commercial loans and loans to state and political subdivisions of which the first six categories are pass categories (credits not adversely rated). The following is a description of the internal risk ratings and the likelihood of loss related to each risk rating.

1 - Excellent - no apparent risk

2 - Good - minimal risk

3 - Acceptable - lower risk

4 - Acceptable - average risk

5 - Acceptable – higher risk

6 - Pass watch

7 - Special Mention - potential weaknesses

8 - Substandard - well defined weaknesses

9 - Doubtful - full collection unlikely

10 - Loss - considered uncollectible

QNB maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential problem loans. Each loan officer assigns a rating to commercial loans and loans to state and political subdivisions at the time the loan is originated. Loans with risk ratings of one through five are reviewed annually based on the borrower’s fiscal year. Loans with risk ratings of six are reviewed every six to twelve months based on the dollar amount of the relationship with the borrower. Loans with risk ratings of seven through ten are reviewed at least quarterly, and as often as monthly, at management’s discretion. QNB also utilizes an outside loan review firm to review the portfolio on a semi-annual basis to provide the Board of Directors and senior management an independent review of the Bank’s loan portfolio on an ongoing basis. These reviews are designed to recognize deteriorating credits in their earliest stages in an effort to reduce and control risk in the lending function as well as identifying potential shifts in the quality of the loan portfolio. The examinations by the outside loan review firm include the review of lending activities with respect to underwriting and processing new loans, monitoring the risk of existing loans and to provide timely follow-up and corrective action for loans showing signs of deterioration in quality. In addition, the outside firm reviews the methodology for the allowance for loan losses to determine compliance to policy and regulatory guidance.

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the QNB’s internal risk rating system as of December 31, 2023 and 2022:

 

 

 

Term Loans by Origination Year

 

 

 

 

 

 

 

December 31, 2023

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving

 

 

Total

 

Commercial Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

20,473

 

 

$

14,439

 

 

$

8,574

 

 

$

5,913

 

 

$

8,626

 

 

$

7,175

 

 

$

70,716

 

 

$

135,916

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,170

 

 

 

1,170

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial and industrial

 

$

20,473

 

 

$

14,439

 

 

$

8,574

 

 

$

5,913

 

 

$

8,626

 

 

$

7,175

 

 

$

71,886

 

 

$

137,086

 

Construction and land development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

46,171

 

 

$

43,472

 

 

$

14,630

 

 

$

3,434

 

 

$

4,028

 

 

$

4,395

 

 

$

—

 

 

$

116,130

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

43

 

 

 

—

 

 

 

43

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total construction and land development

 

$

46,171

 

 

$

43,472

 

 

$

14,630

 

 

$

3,434

 

 

$

4,028

 

 

$

4,438

 

 

$

—

 

 

$

116,173

 

Real estate secured by multi-family properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

10,826

 

 

$

28,858

 

 

$

23,430

 

 

$

9,808

 

 

$

5,804

 

 

$

27,609

 

 

$

—

 

 

$

106,335

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

704

 

 

 

2,154

 

 

 

—

 

 

 

2,858

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total real estate secured by multi-family properties

 

$

10,826

 

 

$

28,858

 

 

$

23,430

 

 

$

9,808

 

 

$

6,508

 

 

$

29,763

 

 

$

—

 

 

$

109,193

 

Real estate secured by owner-occupied properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

14,430

 

 

$

29,576

 

 

$

26,908

 

 

$

18,693

 

 

$

12,239

 

 

$

53,030

 

 

$

—

 

 

$

154,876

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

 

 

 

—

 

 

 

—

 

 

 

5,819

 

 

 

—

 

 

 

5,819

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

Term Loans by Origination Year

 

 

 

 

 

 

 

December 31, 2023

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving

 

 

Total

 

Total real estate secured by owner-occupied properties

 

$

14,430

 

 

$

29,576

 

 

$

26,908

 

 

$

18,693

 

 

$

12,239

 

 

$

58,849

 

 

$

—

 

 

$

160,695

 

Real estate secured by other commercial properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

32,297

 

 

$

44,526

 

 

$

42,582

 

 

$

17,798

 

 

$

28,947

 

 

$

98,173

 

 

$

—

 

 

$

264,323

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

778

 

 

 

—

 

 

 

778

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total real estate secured by other commercial properties

 

$

32,297

 

 

$

44,526

 

 

$

42,582

 

 

$

17,798

 

 

$

28,947

 

 

$

98,951

 

 

$

—

 

 

$

265,101

 

Revolving real estate secured by 1-4 family properties-business:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

5,442

 

 

$

5,442

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total revolving real estate secured by 1-4 family properties-business

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

5,442

 

 

$

5,442

 

Real estate secured by 1st lien on 1-4 family properties-business:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

14,697

 

 

$

28,596

 

 

$

20,890

 

 

$

9,794

 

 

$

8,441

 

 

$

20,262

 

 

$

—

 

 

$

102,680

 

Special mention

 

 

—

 

 

 

—

 

 

 

137

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

137

 

Substandard

 

 

—

 

 

 

189

 

 

 

—

 

 

 

—

 

 

 

423

 

 

 

143

 

 

 

—

 

 

 

755

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total real estate secured by 1st lien on 1-4 family properties-business

 

$

14,697

 

 

$

28,785

 

 

$

21,027

 

 

$

9,794

 

 

$

8,864

 

 

$

20,405

 

 

$

—

 

 

$

103,572

 

Real estate secured by junior lien on 1-4 family properties-business:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

558

 

 

$

604

 

 

$

542

 

 

$

580

 

 

$

40

 

 

$

934

 

 

$

—

 

 

$

3,258

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

187

 

 

 

—

 

 

 

187

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total real estate secured by junior lien on 1-4 family properties-business

 

$

558

 

 

$

604

 

 

$

542

 

 

$

580

 

 

$

40

 

 

$

1,121

 

 

$

—

 

 

$

3,445

 

State and political subdivisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

707

 

 

$

—

 

 

$

4,247

 

 

$

18

 

 

$

5,444

 

 

$

8,292

 

 

$

—

 

 

$

18,708

 

Special mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

Term Loans by Origination Year

 

 

 

 

 

 

 

December 31, 2023

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving

 

 

Total

 

Total real estate secured by junior lien on 1-4 family properties-business

 

$

707

 

 

$

—

 

 

$

4,247

 

 

$

18

 

 

$

5,444

 

 

$

8,292

 

 

$

—

 

 

$

18,708

 

Total Commercial Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

140,159

 

 

$

190,071

 

 

$

141,803

 

 

$

66,038

 

 

$

73,569

 

 

$

219,870

 

 

$

76,158

 

 

$

907,668

 

Special mention

 

 

—

 

 

 

—

 

 

 

137

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

137

 

Substandard

 

 

—

 

 

 

189

 

 

 

—

 

 

 

—

 

 

 

1,127

 

 

 

9,124

 

 

 

1,170

 

 

 

11,610

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Commercial loans

 

$

140,159

 

 

$

190,260

 

 

$

141,940

 

 

$

66,038

 

 

$

74,696

 

 

$

228,994

 

 

$

77,328

 

 

$

919,415

 

 

December 31, 2022

 

Pass

 

 

Special
mention

 

 

Substandard

 

 

Doubtful

 

 

Total

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

157,914

 

 

$

23

 

 

$

2,938

 

 

$

—

 

 

$

160,875

 

Construction

 

 

62,955

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

62,955

 

Secured by commercial real estate

 

 

505,657

 

 

 

2,597

 

 

 

9,816

 

 

 

—

 

 

 

518,070

 

Secured by residential real estate

 

 

102,295

 

 

 

194

 

 

 

930

 

 

 

—

 

 

 

103,419

 

State and political subdivisions

 

 

20,971

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

20,971

 

Total

 

$

849,792

 

 

$

2,814

 

 

$

13,684

 

 

$

—

 

 

$

866,290

 

 

The following tables present the recorded investment in the retail classes of the loan portfolio based on payment activity as of December 31, 2023 and 2022:

 

 

 

Term Loans by Origination Year

 

 

 

 

 

 

 

December 31, 2023

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving

 

 

Total

 

Retail Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

12,641

 

 

$

14,635

 

 

$

30,495

 

 

$

20,304

 

 

$

4,526

 

 

$

25,500

 

 

$

—

 

 

$

108,101

 

Nonperforming

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

805

 

 

 

—

 

 

 

805

 

Total 1-4 family residential mortgages

 

$

12,641

 

 

$

14,635

 

 

$

30,495

 

 

$

20,304

 

 

$

4,526

 

 

$

26,305

 

 

$

—

 

 

$

108,906

 

Construction-individual:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Nonperforming

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total construction-individual

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Revolving home equity secured by 1-4 family properties-personal:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

33,936

 

 

$

33,936

 

Nonperforming

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

295

 

 

 

295

 

Total revolving home equity secured by 1-4 family properties-personal

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

34,231

 

 

$

34,231

 

Real estate secured by 1st lien on 1-4 family properties-personal:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

2,591

 

 

$

1,613

 

 

$

2,933

 

 

$

1,030

 

 

$

931

 

 

$

2,767

 

 

$

—

 

 

$

11,865

 

Nonperforming

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

116

 

 

 

—

 

 

 

116

 

Total real estate secured by 1st lien Real estate secured by 1st lien on 1-4 family properties-personal

 

$

2,591

 

 

$

1,613

 

 

$

2,933

 

 

$

1,030

 

 

$

931

 

 

$

2,883

 

 

$

—

 

 

$

11,981

 

Real estate secured by junior lien on 1-4 family properties-personal:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loans by Origination Year

 

 

 

 

 

 

 

December 31, 2023

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving

 

 

Total

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

6,438

 

 

$

1,613

 

 

$

2,184

 

 

$

1,180

 

 

$

676

 

 

$

3,515

 

 

$

—

 

 

$

15,606

 

Nonperforming

 

 

—

 

 

 

19

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19

 

Total real estate secured by junior lien on 1-4 family properties-personal

 

$

6,438

 

 

$

1,632

 

 

$

2,184

 

 

$

1,180

 

 

$

676

 

 

$

3,515

 

 

$

—

 

 

$

15,625

 

Student loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,645

 

 

$

—

 

 

$

1,645

 

Nonperforming

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17

 

 

 

—

 

 

 

17

 

Total student loans

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,662

 

 

$

—

 

 

$

1,662

 

Overdrafts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

194

 

 

$

194

 

Nonperforming

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total overdrafts

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

194

 

 

$

194

 

Other consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

793

 

 

$

290

 

 

$

245

 

 

$

89

 

 

$

73

 

 

$

41

 

 

$

189

 

 

$

1,720

 

Nonperforming

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

37

 

 

 

—

 

 

 

37

 

Total other consumer

 

$

793

 

 

$

290

 

 

$

245

 

 

$

89

 

 

$

73

 

 

$

78

 

 

$

189

 

 

$

1,757

 

Total Retail Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

22,463

 

 

$

18,151

 

 

$

35,857

 

 

$

22,603

 

 

$

6,206

 

 

$

33,468

 

 

$

34,319

 

 

$

173,067

 

Nonperforming

 

 

—

 

 

 

19

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

975

 

 

 

295

 

 

 

1,289

 

Total Retail Loans

 

$

22,463

 

 

$

18,170

 

 

$

35,857

 

 

$

22,603

 

 

$

6,206

 

 

$

34,443

 

 

$

34,614

 

 

$

174,356

 

 

December 31, 2022

 

Performing

 

 

Non-performing

 

 

Total

 

Retail:

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

$

105,193

 

 

$

461

 

 

$

105,654

 

Home equity loans and lines

 

 

63,178

 

 

 

402

 

 

 

63,580

 

Consumer

 

 

4,051

 

 

 

62

 

 

 

4,113

 

Total

 

$

172,422

 

 

$

925

 

 

$

173,347

 

 

Retail revolving lines of credit that were termed out during 2023 were $4,534,000; all which are performing.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio (excluding deferred fees and costs) summarized by the past due status, regardless of whether the loan is on non-accrual status, as of December 31, 2023 and 2022:

 

December 31, 2023

 

30-59 days
past due

 

 

60-89 days
past due

 

 

90 days or
more past
due

 

 

Total past
due loans

 

 

Current

 

 

Total loans
receivable

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

77

 

 

$

—

 

 

$

—

 

 

$

77

 

 

$

137,009

 

 

$

137,086

 

Construction and land development

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

116,173

 

 

 

116,173

 

Real estate secured by multi-family properties

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

109,193

 

 

 

109,193

 

Real estate secured by owner-occupied properties

 

 

186

 

 

 

—

 

 

 

—

 

 

 

186

 

 

 

160,509

 

 

 

160,695

 

Real estate secured by other commercial properties

 

 

9,675

 

 

 

—

 

 

 

—

 

 

 

9,675

 

 

 

255,426

 

 

 

265,101

 

Revolving real estate secured by 1-4 family properties-business

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,442

 

 

 

5,442

 

Real estate secured by 1st lien on 1-4 family properties-business

 

 

323

 

 

 

—

 

 

 

—

 

 

 

323

 

 

 

103,249

 

 

 

103,572

 

Real estate secured by junior lien on 1-4 family properties-business

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,445

 

 

 

3,445

 

State and political subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

18,708

 

 

 

18,708

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

433

 

 

 

381

 

 

 

481

 

 

 

1,295

 

 

 

107,611

 

 

 

108,906

 

Construction-individual

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Revolving home equity secured by 1-4 family properties-personal

 

 

56

 

 

 

—

 

 

 

129

 

 

 

185

 

 

 

34,046

 

 

 

34,231

 

Real estate secured by 1st lien on 1-4 family properties-personal

 

 

—

 

 

 

96

 

 

 

—

 

 

 

96

 

 

 

11,885

 

 

 

11,981

 

Real estate secured by junior lien on 1-4 family properties-personal

 

 

—

 

 

 

—

 

 

 

18

 

 

 

18

 

 

 

15,607

 

 

 

15,625

 

Student loans

 

 

—

 

 

 

11

 

 

 

6

 

 

 

17

 

 

 

1,645

 

 

 

1,662

 

Overdrafts

 

 

21

 

 

 

2

 

 

 

—

 

 

 

23

 

 

 

171

 

 

 

194

 

Other consumer

 

 

—

 

 

 

8

 

 

 

—

 

 

 

8

 

 

 

1,749

 

 

 

1,757

 

Total

 

$

10,771

 

 

$

498

 

 

$

634

 

 

$

11,903

 

 

$

1,081,868

 

 

$

1,093,771

 

 

December 31, 2022

 

30-59 days
past due

 

 

60-89 days
past due

 

 

90 days or
more past
due

 

 

Total past
due loans

 

 

Current

 

 

Total loans
receivable

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

—

 

 

$

1,157

 

 

$

—

 

 

$

1,157

 

 

$

159,718

 

 

$

160,875

 

Construction

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

62,955

 

 

 

62,955

 

Secured by commercial real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

518,070

 

 

 

518,070

 

Secured by residential real estate

 

 

—

 

 

 

—

 

 

 

13

 

 

 

13

 

 

 

103,406

 

 

 

103,419

 

State and political subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

20,971

 

 

 

20,971

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

703

 

 

 

168

 

 

 

216

 

 

 

1,087

 

 

 

104,567

 

 

 

105,654

 

Home equity loans and lines

 

 

95

 

 

 

—

 

 

 

—

 

 

 

95

 

 

 

63,485

 

 

 

63,580

 

Consumer

 

 

37

 

 

 

50

 

 

 

—

 

 

 

87

 

 

 

4,026

 

 

 

4,113

 

Total

 

$

835

 

 

$

1,375

 

 

$

229

 

 

$

2,439

 

 

$

1,037,198

 

 

$

1,039,637

 

 

As previously discussed, QNB maintains a loan review system, which includes a continuous review of the loan portfolio by internal and external parties to aid in the early identification of potential impaired loans. A loan is considered impaired when, based on current information and events, it is probable that QNB will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment

status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. When placing a loan on non-accrual status, management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. All non-accrual loans, except student loans, are individually evaluated for an allowance for credit losses ("ACL"). This ACL is measured using either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

 

An allowance for credit loss is established for a non-accrual loan if its carrying value exceeds its estimated fair value. The estimated fair values of the majority of QNB’s non-accrual loans are measured based on the estimated fair value of the loan’s collateral.
 

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable agings or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

The following tables disclose the recorded investment in loans receivable that are either on non-accrual status or past due 90 days or more and still accruing interest as of December 31, 2023 and 2022:

 

December 31, 2023

 

90 Days or More Past Due-Still Accruing

 

 

Nonaccrual With No Specifically-Related ACL

 

 

Nonaccrual With Related ACL

 

 

Total Nonaccrual Loans

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

—

 

 

$

278

 

 

$

33

 

 

$

311

 

Construction and land development

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Real estate secured by multi-family properties

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Real estate secured by owner-occupied properties

 

 

—

 

 

 

175

 

 

 

—

 

 

 

175

 

Real estate secured by other commercial properties

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Revolving real estate secured by 1-4 family properties-business

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Real estate secured by 1st lien on 1-4 family properties-business

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Real estate secured by junior lien on 1-4 family properties-business

 

 

—

 

 

 

—

 

 

 

165

 

 

 

165

 

State and political subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

—

 

 

 

805

 

 

 

—

 

 

 

805

 

Construction-individual

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Revolving home equity secured by 1-4 family properties-personal

 

 

—

 

 

 

21

 

 

 

274

 

 

 

295

 

Real estate secured by 1st lien on 1-4 family properties-personal

 

 

—

 

 

 

116

 

 

 

—

 

 

 

116

 

Real estate secured by junior lien on 1-4 family properties-personal

 

 

—

 

 

 

19

 

 

 

—

 

 

 

19

 

Student loans

 

 

—

 

 

 

17

 

 

 

—

 

 

 

17

 

Other consumer

 

 

—

 

 

 

37

 

 

 

—

 

 

 

37

 

Total

 

$

—

 

 

$

1,468

 

 

$

472

 

 

$

1,940

 

 

QNB recognized interest income of $557,000 on non-accrual loans for the year ended December 31, 2023.

 

The following table presents the collateral-dependent loans by loan category at December 31, 2023:
 

December 31, 2023

 

Real Estate Secured

 

 

Other (1)

 

 

Deficiency in Collateral

 

 

Total Collateral Dependent Nonaccrual Loans

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

—

 

 

$

278

 

 

$

33

 

 

$

311

 

Construction and land development

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Real estate secured by multi-family properties

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Real estate secured by owner-occupied properties

 

 

175

 

 

 

—

 

 

 

—

 

 

 

175

 

Real estate secured by other commercial properties

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Revolving real estate secured by 1-4 family properties-business

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Real estate secured by 1st lien on 1-4 family properties-business

 

 

—

 

 

 

 

 

 

 

 

 

—

 

Real estate secured by junior lien on 1-4 family properties-business

 

 

—

 

 

 

—

 

 

 

165

 

 

 

165

 

State and political subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

805

 

 

 

—

 

 

 

—

 

 

 

805

 

Construction-individual

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Revolving home equity secured by 1-4 family properties-personal

 

 

185

 

 

 

—

 

 

 

110

 

 

 

295

 

Real estate secured by 1st lien on 1-4 family properties-personal

 

 

116

 

 

 

—

 

 

 

—

 

 

 

116

 

Real estate secured by junior lien on 1-4 family properties-personal

 

 

19

 

 

 

—

 

 

 

—

 

 

 

19

 

Other consumer

 

 

—

 

 

 

37

 

 

 

—

 

 

 

37

 

Total

 

$

1,300

 

 

$

315

 

 

$

308

 

 

$

1,923

 

 

(1) Secured by business assets, personal property and equipment or guarantees
 

 

The following tables disclose the recorded investment in loans receivable that are either on non-accrual status or past due 90 days or more and still accruing interest as of December 31, 2022
 

December 31, 2022

 

90 days or more past
due (still accruing)

 

 

Non-accrual

 

Commercial:

 

 

 

 

 

 

Commercial and industrial

 

$

—

 

 

$

1,575

 

Construction

 

 

—

 

 

 

—

 

Secured by commercial real estate

 

 

—

 

 

 

2,031

 

Secured by residential real estate

 

 

—

 

 

 

289

 

State and political subdivisions

 

 

—

 

 

 

—

 

Retail:

 

 

 

 

 

 

1-4 family residential mortgages

 

 

—

 

 

 

461

 

Home equity loans and lines

 

 

—

 

 

 

402

 

Consumer

 

 

—

 

 

 

62

 

Total

 

$

—

 

 

$

4,820

 

 

The following table present the balance in the allowance for loan losses at December 31, 2022 disaggregated on the basis of QNB’s impairment method by class of loans receivable along with the balance of loans receivable by class, excluding unearned fees and costs, disaggregated on the basis of QNB’s impairment methodology:

 

 

 

Allowance for Loan Losses

 

 

Loans Receivable

 

December 31, 2022

 

Balance

 

 

Balance related
to loans
individually
evaluated for
impairment

 

 

Balance related
to loans
collectively
evaluated for
impairment

 

 

Balance

 

 

Balance
individually
evaluated for
impairment

 

 

Balance
collectively
evaluated for
impairment

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

1,316

 

 

$

125

 

 

$

1,191

 

 

$

160,875

 

 

$

1,821

 

 

$

159,054

 

Construction

 

 

755

 

 

 

—

 

 

 

755

 

 

 

62,955

 

 

 

—

 

 

 

62,955

 

Secured by commercial real estate

 

 

5,002

 

 

 

131

 

 

 

4,871

 

 

 

518,070

 

 

 

5,309

 

 

 

512,761

 

Secured by residential real estate

 

 

1,240

 

 

 

321

 

 

 

919

 

 

 

103,419

 

 

 

1,362

 

 

 

102,057

 

State and political subdivisions

 

 

94

 

 

 

—

 

 

 

94

 

 

 

20,971

 

 

 

—

 

 

 

20,971

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

683

 

 

 

—

 

 

 

683

 

 

 

105,654

 

 

 

628

 

 

 

105,026

 

Home equity loans and lines

 

 

437

 

 

 

119

 

 

 

318

 

 

 

63,580

 

 

 

402

 

 

 

63,178

 

Consumer

 

 

502

 

 

 

—

 

 

 

502

 

 

 

4,113

 

 

 

45

 

 

 

4,068

 

Unallocated

 

 

502

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Total

 

$

10,531

 

 

$

696

 

 

$

9,333

 

 

$

1,039,637

 

 

$

9,567

 

 

$

1,030,070

 

 

 

The following table summarizes additional information, in regards to impaired loans by loan portfolio class, as of December 31, 2022:
 

 

 

December 31, 2022

 

 

 

Recorded
investment
(after
charge-offs)

 

 

Unpaid
principal
balance

 

 

Related
allowance

 

With no specific allowance recorded:

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

1,402

 

 

$

1,694

 

 

 

 

Construction

 

 

—

 

 

 

—

 

 

 

 

Secured by commercial real estate

 

 

2,198

 

 

 

2,608

 

 

 

 

Secured by residential real estate

 

 

430

 

 

 

482

 

 

 

 

Retail:

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

628

 

 

 

678

 

 

 

 

Home equity loans and lines

 

 

240

 

 

 

296

 

 

 

 

Consumer

 

 

45

 

 

 

62

 

 

 

 

Total

 

$

4,943

 

 

$

5,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

419

 

 

$

601

 

 

$

125

 

Construction

 

 

—

 

 

 

—

 

 

 

—

 

Secured by commercial real estate

 

 

3,111

 

 

 

3,312

 

 

 

131

 

Secured by residential real estate

 

 

932

 

 

 

1,065

 

 

 

321

 

Retail:

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

—

 

 

 

—

 

 

 

—

 

Home equity loans and lines

 

 

162

 

 

 

191

 

 

 

119

 

Consumer

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

4,624

 

 

$

5,169

 

 

$

696

 

 

 

 

 

 

 

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

1,821

 

 

$

2,295

 

 

$

125

 

Construction

 

 

—

 

 

 

—

 

 

 

—

 

Secured by commercial real estate

 

 

5,309

 

 

 

5,920

 

 

 

131

 

Secured by residential real estate

 

 

1,362

 

 

 

1,547

 

 

 

321

 

Retail:

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

628

 

 

 

678

 

 

 

—

 

Home equity loans and lines

 

 

402

 

 

 

487

 

 

 

119

 

Consumer

 

 

45

 

 

 

62

 

 

 

—

 

Total

 

$

9,567

 

 

$

10,989

 

 

$

696

 

 

Activity in the allowance for loan losses for the years ended December 31, 2023, 2022 and 2021 are as follows:

 

Year ended December 31, 2023

 

Beginning balance prior to adoption of ASC 326

 

 

Impact of adopting ASC 326

 

 

Credit loss expense (reversal)

 

 

Charge-offs

 

 

Recoveries

 

 

Balance, end
of period

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

1,316

 

 

$

(70

)

 

$

(771

)

 

$

(313

)

 

$

661

 

 

$

823

 

Construction and land development

 

 

755

 

 

 

(10

)

 

 

507

 

 

 

—

 

 

 

—

 

 

 

1,252

 

Real estate secured by multi-family properties

 

 

995

 

 

 

684

 

 

 

56

 

 

 

—

 

 

 

—

 

 

 

1,735

 

Real estate secured by owner-occupied properties

 

 

1,549

 

 

 

(374

)

 

 

(174

)

 

 

—

 

 

 

—

 

 

 

1,001

 

Real estate secured by other commercial properties

 

 

2,458

 

 

 

(1,128

)

 

 

(163

)

 

 

—

 

 

 

—

 

 

 

1,167

 

Revolving real estate secured by 1-4 family properties-business

 

 

25

 

 

 

7

 

 

 

(5

)

 

 

—

 

 

 

—

 

 

 

27

 

Real estate secured by 1st lien on 1-4 family properties-business

 

 

1,210

 

 

 

490

 

 

 

(203

)

 

 

—

 

 

 

10

 

 

 

1,507

 

Real estate secured by junior lien on 1-4 family properties-business

 

 

30

 

 

 

(14

)

 

 

(2

)

 

 

—

 

 

 

—

 

 

 

14

 

State and political subdivisions

 

 

94

 

 

 

(20

)

 

 

(19

)

 

 

—

 

 

 

—

 

 

 

55

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

682

 

 

 

(196

)

 

 

(59

)

 

 

—

 

 

 

—

 

 

 

427

 

Construction-individual

 

 

1

 

 

 

-

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

Revolving home equity secured by 1-4 family properties-personal

 

 

299

 

 

 

(7

)

 

 

(154

)

 

 

—

 

 

 

—

 

 

 

138

 

Real estate secured by 1st lien on 1-4 family properties-personal

 

 

57

 

 

 

15

 

 

 

110

 

 

 

—

 

 

 

—

 

 

 

182

 

Real estate secured by junior lien on 1-4 family properties-personal

 

 

55

 

 

 

29

 

 

 

15

 

 

 

—

 

 

 

6

 

 

 

105

 

Student loans

 

 

454

 

 

 

12

 

 

 

(48

)

 

 

(57

)

 

 

8

 

 

 

369

 

Overdrafts

 

 

8

 

 

 

3

 

 

 

70

 

 

 

(91

)

 

 

26

 

 

 

16

 

Other consumer

 

 

41

 

 

 

(8

)

 

 

13

 

 

 

(14

)

 

 

2

 

 

 

34

 

Unallocated

 

 

502

 

 

 

(502

)

 

 

—

 

 

N/A

 

 

N/A

 

 

 

—

 

Total

 

$

10,531

 

 

$

(1,089

)

 

$

(828

)

 

$

(475

)

 

$

713

 

 

$

8,852

 

 

Year ended December 31, 2022

 

Balance,
beginning of
period

 

 

Provision for
(credit to)
loan losses

 

 

Charge-offs

 

 

Recoveries

 

 

Balance, end
of period

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

3,368

 

 

$

(2,320

)

 

$

(38

)

 

$

306

 

 

$

1,316

 

Construction

 

 

363

 

 

 

392

 

 

 

—

 

 

 

—

 

 

 

755

 

Secured by commercial real estate

 

 

4,280

 

 

 

722

 

 

 

—

 

 

 

—

 

 

 

5,002

 

Secured by residential real estate

 

 

1,035

 

 

 

160

 

 

 

—

 

 

 

45

 

 

 

1,240

 

State and political subdivisions

 

 

69

 

 

 

25

 

 

 

—

 

 

 

—

 

 

 

94

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

646

 

 

 

37

 

 

 

—

 

 

 

—

 

 

 

683

 

Home equity loans and lines

 

 

376

 

 

 

55

 

 

 

—

 

 

 

6

 

 

 

437

 

Consumer

 

 

542

 

 

 

82

 

 

 

(158

)

 

 

36

 

 

 

502

 

Unallocated

 

 

505

 

 

 

(3

)

 

N/A

 

 

N/A

 

 

 

502

 

Total

 

$

11,184

 

 

$

(850

)

 

$

(196

)

 

$

393

 

 

$

10,531

 

 

 

Year ended December 31, 2021

 

Balance,
beginning of
period

 

 

Provision for
(credit to)
loan losses

 

 

Charge-offs

 

 

Recoveries

 

 

Balance, end
of period

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

4,050

 

 

$

(774

)

 

$

—

 

 

$

92

 

 

$

3,368

 

Construction

 

 

346

 

 

 

17

 

 

 

—

 

 

 

—

 

 

 

363

 

Secured by commercial real estate

 

 

3,736

 

 

 

544

 

 

 

—

 

 

 

—

 

 

 

4,280

 

Secured by residential real estate

 

 

871

 

 

 

181

 

 

 

(38

)

 

 

21

 

 

 

1,035

 

State and political subdivisions

 

 

89

 

 

 

(20

)

 

 

—

 

 

 

—

 

 

 

69

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential mortgages

 

 

533

 

 

 

113

 

 

 

—

 

 

 

—

 

 

 

646

 

Home equity loans and lines

 

 

386

 

 

 

32

 

 

 

(49

)

 

 

7

 

 

 

376

 

Consumer

 

 

265

 

 

 

410

 

 

 

(176

)

 

 

43

 

 

 

542

 

Unallocated

 

 

550

 

 

 

(45

)

 

N/A

 

 

N/A

 

 

 

505

 

Total

 

$

10,826

 

 

$

458

 

 

$

(263

)

 

$

163

 

 

$

11,184

 

 

 

Since the implementation of ASU 326 on January 1, 2023, the Company measures loan modifications to borrowers in financial distress as a troubled debt modification ("TDM"). A TDM could involve principal forgiveness, term extension, an other-than-insignificant payment delay, interest rate reduction or exchanging or paying off existing debt for new debt with the Company. Any amount forgiven would be charged to the allowance for credit losses. There were no TDMs in 2023.

 

QNB had extended, restructured, or otherwise modified the terms of loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers that had been experiencing financial difficulties. A loan was considered to be a troubled debt restructuring (“TDR”) loan when QNB granted a concession to the borrower because of the borrower’s financial condition that it would not have otherwise considered. Such concessions included a reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates to less than the current market rate for new obligations with similar risk. Loans that had been classified as TDRs are considered non-performing.

 

The concessions made for the TDRs reported in the following disclosures involve lowering the monthly payments on loans through periods of interest only payments, a reduction in interest rate below a market rate or an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these three methods. The restructurings rarely result in the forgiveness of principal or accrued interest. If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. TDR loans that are in compliance with their modified terms and that yield a market rate may be removed from the TDR status after a period of performance. QNB closely monitors the performance of loans that are modified to understand the effectiveness of its modification efforts. There were no payment default (60 days or more past due) during the year ended December 31, 2022 on loans modified within 12 months prior to December 31, 2022.

 

Performing TDRs (not reported as non-accrual or past due 90 days or more and still accruing) totaled $4,301,000 as of December 31, 2022. Non-performing TDRs totaled $371,000 as of December 31, 2022. All TDRs are included in the specific reserve calculation in 2022.

 

The following table illustrates the specific reserve for loan losses allocated to TDMs and TDRs. These specific reserves are included in the allowance for credit losses on loan for loans individually evaluated for impairment.

 

 

December 31,

 

2023

 

 

2022

 

 

 

Unpaid
principal
balance

 

 

Related
allowance

 

 

Unpaid
principal
balance

 

 

Related
allowance

 

TDMs/TDRs with no specific allowance recorded

 

$

—

 

 

$

—

 

 

$

1,272

 

 

$

—

 

TDMs/TDRs with an allowance recorded

 

 

—

 

 

 

—

 

 

 

3,400

 

 

 

392

 

Total

 

$

—

 

 

$

—

 

 

$

4,672

 

 

$

392

 

 

 

There were no charge-offs resulting from TDRs during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, QNB had commitments of $5,000 to lend additional funds to customers with loans whose terms have been modified in troubled debt restructurings.

QNB had no loans secured by residential real estate for which foreclosure proceedings were in process as of December 31, 2023. There was one mortgage loan secured by residential real estate with a recorded investment of $120,000 for which foreclosure proceedings were in process at December 31, 2022.