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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17706
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QNB CORP.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2318082
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 North Third Street, Quakertown, PA 18951-9005
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 538-5600
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Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class Name of each exchange on which registered
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 par value
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(Title of class)
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(Title of class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
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[Cover page 1 of 2 pages]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
As of March 20, 2000, 1,439,273 shares of Common Stock of the registrant
were outstanding and the aggregate market value of the Common Stock of the
registrant, held by nonaffiliates was approximately $30,703,852.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for 1999 - Part I, Item 3
Part II, Items 6, 7 and 8
Proxy Statement dated April 14, 2000 - Part III, Items 10, 11, 12 and 13
FORM 10-K INDEX
PAGE
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PART I
Item 1 Business........................................................................... 4
Item 2 Properties.........................................................................11
Item 3 Legal Proceedings..................................................................12
Item 4 Submission of Matters to a Vote of Security Holders................................12
PART II
Item 5 Market for Registrant's Common Stock and Related Stockholder Matters...............12
Item 6 Selected Financial Data............................................................13
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operation.....................................................13
Item 7A Quantitative and Qualitative Disclosures about Market Risk.........................13
Item 8 Financial Statements and Supplementary Data........................................13
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.....................................................13
PART III
Item 10 Directors and Executive Officers of the Registrant.................................13
Item 11 Executive Compensation.............................................................14
Item 12 Security Ownership of Certain Beneficial Owners and Management.....................14
Item 13 Certain Relationships and Related Transactions.....................................14
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K....................14
PART I
ITEM 1. BUSINESS
QNB CORP.
QNB Corp. was incorporated under the laws of the Commonwealth of
Pennsylvania on June 4, 1984. QNB Corp. is registered with the Federal Reserve
Board as a bank holding company under Bank Holding Company Act of 1956 and
conducts its business through its wholly-owned subsidiary, The Quakertown
National Bank. The principal business of QNB Corp., through The Quakertown
National Bank, is commercial banking and consists of, among other things,
attracting deposits from the general public and using these funds in making
commercial loans, residential mortgage loans, consumer loans, and purchasing
investment securities.
QNB Corp. was organized for the purpose of becoming the holding company of
The Quakertown National Bank. Pursuant to a Plan of Reorganization approved by
The Quakertown National Bank's stockholders, QNB Corp.'s application to the
Federal Reserve Board of Governors requesting approval to become a bank holding
company was approved on September 11, 1984. In accordance with the terms of the
Plan of Reorganization, each share of The Quakertown National Bank's common
stock previously outstanding was automatically converted into one share of QNB's
common stock and The Quakertown National Bank became a wholly owned subsidiary
of QNB Corp. QNB Corp's primary asset is its investment in The Quakertown
National Bank. QNB Corp's primary assets also include an investment portfolio
consisting of stock in various financial institutions. The investment portfolio
accounts for less than 1.00% of QNB Corp.'s total consolidated assets.
THE QUAKERTOWN NATIONAL BANK
The Quakertown National Bank is a national banking association organized in
1877. The Quakertown National Bank is chartered under the National Banking Act
to engage in the various activities of a commercial bank and is subject to
federal and state laws applicable to commercial banks.
The Quakertown National Bank is a full-service commercial bank that
provides most major financial services. The Quakertown National Bank's principal
office is located in Bucks County, Pennsylvania. The Quakertown National Bank
also operates five other full-service branches, an operations facility and an
administrative office. For more information relating to The Quakertown National
Bank's properties, see Item 2. Properties. The Quakertown National Bank had 121
full-time employees and 33 part-time employees, at March 16, 2000. There are
employees of The Quakertown National Bank who are also employees of QNB Corp.
As of December 31, 1999 QNB Corp., on a consolidated basis, had total
assets of $350,489,000, total deposits of $286,166,000, and total shareholders'
equity of $27,462,000.
We have made forward-looking statements in this document, and in documents
that we incorporate by reference, that are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of QNB Corp. The Quakertown National Bank
or the combined company. When we use words such as "believes," or "expects,"
"anticipates" or similar expressions, we are making forward-looking statements.
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Readers should note that many factors, some of which are discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect the future financial results of QNB Corp., The
Quakertown National Bank or the combined company and could cause those results
to differ materially from those expressed in our forward-looking statements
contained or incorporated by reference in this document. These factors include
the following:
o operating, legal and regulatory risks;
o economic, political, and competitive forces affecting our banking,
securities, asset management and credit services businesses; and
o rapidly changing technology; and
o the risk that our analysis of these risks and forces could be
incorrect and/or that the strategies developed to address them
could be unsuccessful.
See also, page 8 of QNB Corp.'s 1999 annual report to shareholders,
"Management's Discussion and Analysis-Consolidated Financial Review"
incorporated here by reference, which page is included as Exhibit 13.1
MARKET AREA
The Quakertown National Bank's primary market area is Quakertown,
Pennsylvania and its surrounding communities and includes parts of Upper Bucks
County, Southern Lehigh County, and Northern Montgomery County. The Quakertown
National Bank is not dependent upon a single customer, or a few customers, the
loss of which would have a material adverse effect on The Quakertown National
Bank.
LENDING ACTIVITIES
General. The Quakertown National Bank offers a variety of loan products to
its customers; including residential real estate mortgages, commercial,
construction, home equity, business, consumer, and student loans. The Quakertown
National Bank's loan portfolio totaled $173,764,000 and $176,443,000 at December
31, 1999 and 1998, respectively. The portfolio represented approximately 49.6%
and 54.3% of The Quakertown National Bank's total assets at December 31, 1999
and 1998, respectively.
Residential Mortgage Loans. The Quakertown National Bank offers primarily 1
and 3 year adjustable rate mortgages, 7 year balloon mortgages, and 15, 20 and
30 year fixed rate loans. The Quakertown National Bank has generally sold,
without recourse, its mortgage loans in the secondary mortgage market. During
1999 and 1998 substantially all originations of loans to individuals for
residential mortgages with maturities of 20 years or greater were sold in the
secondary market.
The Quakertown National Bank originates mortgage loans up to a 95% maximum
loan-to-value ratio provided the amount above 80% is covered by private mortgage
insurance. The borrower pays for private mortgage insurance.
All mortgages sold in the secondary market conform to the loan-to-value
ratios and underwriting standards dictated by the secondary market. The
Quakertown National Bank sells a majority of the mortgages to the Federal Home
Loan Mortgage Corporation. The Quakertown National Bank retains servicing
rights.
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The Quakertown National Bank also offers home equity loans and lines of
credit which are included in real estate residential loans. Real estate
residential loans in the aggregate amount of $68,945,000 and $71,052,000
represented 39.6% and 40.2% of gross loans at December 31, 1999 and 1998.
Commercial Loans. The Quakertown National Bank offers commercial loans,
including lines of credit or commitment, term loans, commercial mortgages,
letters of credit, and tax-free loans.
The Quakertown National Bank's commercial and industrial loan portfolio
totaled $32,003,000 and $35,003,000 at December 31, 1999 and 1998, respectively.
Commercial and industrial loans represented approximately 18.4% and 19.8% of The
Quakertown National Bank's total gross loans at December 31, 1999 and 1998
respectively. Although a certain amount of these loans are considered unsecured,
the majority are secured by non-real estate collateral, such as equipment,
vehicles, accounts receivable and inventory.
Commercial real estate loans in the aggregate amount of $64,853,000 and
$60,708,000 represented 37.3% and 34.3% of The Quakertown National Bank's gross
loan portfolio at December 31, 1999 and 1998, respectively, while construction
loans, including commercial and residential, totaled $258,000 and $782,000 for
the same periods. Commercial real estate loans include all loans collateralized
at least in part by commercial real estate, but may not be for the expressed
purpose of conducting commercial real estate transactions.
Construction, commercial and industrial, and commercial real estate lending
generally entails significant additional risk as compared with residential
mortgage lending. These loans typically involve larger loan balances to single
borrowers or groups of related borrowers.
Consumer Loans. The Quakertown National Bank's consumer loan portfolio
totaled $6,005,000 and $5,864,000 at December 31, 1999 and 1998, respectively.
Consumer loans represented 3.5% and 3.3% of The Quakertown National Bank's total
gross loans at December 31, 1999 and 1998, respectively. Consumer loans include
automobile loans, student loans and other consumer type credit not secured by
real estate.
INVESTMENT ACTIVITIES
At December 31, 1999 and 1998, QNB Corp.'s investment portfolio, on a
consolidated basis, aggregated $145,911,000 and $120,153,000. The portfolios
consisted primarily of United States government and federal agency obligations,
mortgage-backed securities, and state and municipal securities. Subject to
applicable limits The Quakertown National Bank is also permitted to invest in
corporate bonds and QNB Corp. is permitted to invest in equity securities. The
Quakertown National Bank accounts for its investments based on Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Quakertown National Bank records investment
securities available-for-sale at market value with the unrealized holding gain
or loss, net of taxes, included in shareholders' equity. The Quakertown National
Bank records investment securities held-to-maturity at amortized cost. At
December 31, 1999 and 1998, the balance of the available-for-sale portfolio was
$97,609,000 and $70,088,000 and the balance of the held-to-maturity portfolio
was $48,302,000 and $50,065,000, respectively.
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The Quakertown National Bank views its investment portfolio as a secondary
source of liquidity and stable earnings. The Chief Operating Officer, the Chief
Financial Officer, or either of then, together with one other member of the
asset/liability committee, make decisions concerning the selection of
investments for The Quakertown National Bank's portfolio. The Quakertown
National Bank's investment policy, as approved by the Board of Directors,
dictates the maturity and types of investments for The Quakertown National Bank.
The Quakertown National Bank's strategy has been to invest in:
o Short and medium term United States government and federal agency
obligations and callable bonds;
o Longer term mortgage-backed securities; and
o State and municipal securities.
The available-for-sale and held-to-maturity investment portfolios had
weighted average maturities of 7 years 4 months, and 6 years, respectively, at
December 31, 1999.
SOURCES OF FUNDS
Deposits. The Quakertown National Bank offers a variety of deposit
products, including:
o Checking accounts;
o Passbook and statement savings;
o Money market accounts;
o Interest-bearing demand accounts;
o Certificates of deposit; and
o Jumbo certificates of deposit.
The Federal Deposit Insurance Corporation insures deposits of The Quakertown
National Bank up to $100,000.
Borrowings. The Quakertown National Bank is a member of the Federal Home
Loan Bank of Pittsburgh. As a member, The Quakertown National Bank may obtain
advances from the Federal Home Loan Bank secured by otherwise unencumbered
qualifying assets including 1-4 family residential mortgage loans and United
States government agency notes, bonds and mortgage-backed securities. The
Quakertown National Bank pledges its Federal Home Loan Bank stock to secure
these advances. Advances are made under several different credit programs, each
of which has its own interest rate and range of maturities. Federal Home Loan
Bank advances are generally available to meet seasonal and other withdrawals of
deposit accounts and to expand lending and investment activities. At December
31, 1999, The Quakertown National Bank had $25,000,000 in outstanding advances.
In addition, The Quakertown National Bank has a $5,000,000 unsecured federal
funds line granted by its correspondent bank.
COMPETITION
The Quakertown National Bank competes actively with other commercial banks
in its market area. Competition exists for:
o New deposits;
o Type and scope of services offered;
o Interest rates on interest-bearing deposits and loans; and
o Other aspects of banking, such as convenience and fee schedules.
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In addition, The Quakertown National Bank, like other commercial banks,
encounters competition from other non-bank financial institutions including:
o Savings banks;
o Savings and loans;
o Insurance companies;
o Credit unions;
o Finance companies;
o Mutual funds; and
o Government agencies.
In addition, large regional and national banks located in Philadelphia and
Allentown are active in servicing companies based in The Quakertown National
Bank's market area.
For additional information with respect to QNB Corp.'s business activities,
see Part II, Item 7 of this Form 10-K.
SUPERVISION AND REGULATION
QNB Corp. and its subsidiary, The Quakertown National Bank, operate in a
heavily regulated environment. The general cost of compliance with numerous
federal and state laws and regulations currently has, and in the future may
have, a negative impact on the results of operations of QNB Corp. and The
Quakertown National Bank.
From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of QNB Corp. and The Quakertown National Bank. It cannot be predicted
whether such legislation will be adopted or, if adopted, how such legislation
would affect the business of QNB Corp. and The Quakertown National Bank. As a
consequence of the extensive regulation of commercial banking activities in the
United States, QNB Corp.'s and The Quakertown National Bank's business is
particularly susceptible to being affected by federal legislation and
regulations that may increase the cost of doing business. Except as specifically
described above, Management believes that the effect of the provisions of the
aforementioned legislation on the liquidity, capital resources, and results of
operations of QNB Corp. will be immaterial. Management is not aware of any other
current specific recommendations by regulatory authorities or proposed
legislation, which if they were implemented, would have a material adverse
effect upon the liquidity, capital resources, or results of operations, although
the general cost of compliance with numerous and multiple federal and state laws
and regulations does have, and in the future may have, a negative impact on QNB
Corp.'s results of operations.
Further, the business of QNB Corp. is also affected by the state of the
financial services industry in general. As a result of legal and industry
changes, Management predicts that the industry will continue to experience an
increase in consolidations and mergers as the financial services industry
strives for greater cost efficiencies and market share. Management believes that
such consolidations and mergers may enhance its competitive positions as a
community bank.
Gramm-Leach-Bliley. On November 12, 1999, President Clinton signed into law
the Gramm-Leach-Bliley Act of 1999, which is also known as the Financial
Services Modernization Act. The act repeals some Depression-era banking laws and
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will permit banks, insurance companies and securities firms to engage in each
others' business after complying with certain conditions and regulations which
are yet to be finalized. The act grants to community banks the power to enter
new financial markets as a matter of right that larger institutions have managed
to do on an ad hoc basis. At this time, our company has no plans to pursue these
additional possibilities.
Our company does not believe that the Financial Services Modernization Act
will have an immediate positive or negative material effect on our operations.
However, the act may have the result of increasing the amount of competition
that our company faces from larger financial service companies, many of whom
have substantially more financial resources than our company, which may now
offer banking services in addition to insurance and brokerage services.
Pending Legislation. Management cannot anticipate what changes Congress may
enact, or, if enacted, their impact on QNB Corp.'s financial position and
reported results of operation. As a consequence of the extensive regulation of
commercial banking activities in the United States, QNB Corp.'s and The
Quakertown National Bank's business is particularly susceptible to being
affected by federal and state legislation and regulations that may increase the
costs of doing business. See also, page 27 of QNB Corp.'s 1999 annual report,
incorporated here by reference which page is included at Exhibit 13.1.
Effects of Inflation. Inflation has some impact on QNB Corp.'s and The
Quakertown National Bank's operating costs. Unlike many industrial companies,
however, substantially all of QNB Corp.'s assets and liabilities are monetary in
nature. As a result, interest rates have a more significant impact on QNB
Corp.'s and The Quakertown National Bank's performance than the general level of
inflation. Over short periods of time, interest rates may not necessarily move
in the same direction or in the same magnitude as prices of goods and services.
Risk Based Capital. The Federal Reserve Board, the FDIC and the Comptroller
of the Currency have issued certain risk-based capital guidelines, which
supplement existing capital requirements. See pages 24 and 25 of QNB Corp.'s
1999 annual report for information concerning QNB Corp.'s capital ratios,
incorporated here by reference, which pages are included at Exhibit 13.1.
Holding Company Regulation
As a registered holding company under the Bank Holding Company Act, QNB
Corp. is regulated by the Federal Reserve Board. QNB Corp. is also subject to
the provisions of section 115 of the Pennsylvania Banking Code of 1965.
As a bank holding company, QNB Corp. is required to file with the Federal
Reserve Board an annual report and such additional information regarding the
holding company and its subsidiary bank as required under the Bank Holding
Company Act.
The Bank Holding Company Act prohibits QNB Corp. from acquiring:
o direct or indirect control of more than 5% of the voting stock of any
bank; or
o substantially all of the assets of any bank; or
o merging with another bank holding company;
Without the prior approval of the Federal Reserve. The Pennsylvania Department
of Banking also must approve any similar consolidation. Pennsylvania law permits
Pennsylvania bank holding companies to control an unlimited number of banks.
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The Bank Holding Company Act restricts QNB Corp. from engaging in
activities to those that the Federal Reserve has found:
o to be closely related to banking; and
o which are expected to produce benefits for the public that will
outweigh any potential adverse effects.
To this end, the Bank Holding Company Act prohibits QNB Corp. from:
o engaging in most non-banking businesses; or
o acquiring ownership or control of more than 5% of the outstanding
voting stock of any company engaged in a non-banking business; unless
o the Federal Reserve has determined that the non-banking business is
closely related to banking.
Under the Bank Holding Company Act, the Federal Reserve may require a bank
holding company to end a non-banking business if it constitutes a serious risk
to the financial soundness and stability of any bank subsidiary of the bank
holding company.
Bank Regulation
The Quakertown National Bank operates as a national bank subject to
regulation and examination by the Office of the Comptroller of the Currency.
The Office of the Comptroller of the Currency regulates all areas of a
national bank's commercial banking operations including loans, mergers,
establishment of branches and other aspects of operations. The Office of the
Comptroller of the Currency also regulates the level of dividends which can be
declared. For more information see QNB Corp.'s 1999 annual report which is
incorporated here by reference.
The Quakertown National Bank is also regulated by the Federal Reserve
System and the Federal Deposit Insurance Corporation. The major function of the
Federal Deposit Insurance Corporation with respect to insured member banks is to
pay depositors to the extent provided by law in the event an insured bank is
closed without adequately providing for payment of the claims of depositors.
Federal Deposit Insurance Corporation insured banks are subject to certain
Federal Deposit Insurance Corporation requirements designed to maintain the
safety and soundness of individual banks and the banking system. In addition,
the Federal Deposit Insurance Corporation along with the Comptroller of the
Currency and the Federal Reserve Board has adopted regulations which define and
set the minimum requirements for capital adequacy based on risk. See pages 24
and 25 of QNB Corp's 1999 annual report, "Management's Discussion and
Analysis-Capital Adequacy," incorporated by reference herein, which pages are
included at Exhibit 13.1. The Federal Reserve Board, the Federal Deposit
Insurance Corporation and Federal and State law extensively regulate other
various aspects of the banking business, including, but not limited to,
permissible types and amounts of loans, investments and other activities,
branching, interest rates on loans and the safety and soundness of banking
practices.
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Environmental Laws. Neither QNB Corp. nor The Quakertown National Bank
anticipates that compliance with environmental laws and regulations will have
any material effect on capital, expenditures, earnings, or on its competitive
position. However, environmentally related hazards have become a source of high
risk and potentially unlimited liability for financial institutions.
Environmentally contaminated properties owned by an institution's borrowers may
result in a drastic reduction in the value of the collateral securing the
institution's loans to such borrowers, high environmental clean up costs to the
borrower affecting its ability to repay the loans, the subordination of any lien
in favor of the institution to a state or federal lien securing clean up costs,
and liability to the institution for clean up costs if it forecloses on the
contaminated property or becomes involved in the management of the borrower. To
minimize this risk, The Quakertown National Bank may require an environmental
examination of and report with respect to the property of any borrower or
prospective borrower if circumstances affecting the property indicate a
potential for contamination, taking into consideration a potential loss to the
institution in relation to the borrower. Such examination must be performed by
an engineering firm experienced in environmental risk studies and acceptable to
the institution, and the cost of such examinations and reports are the
responsibility of the borrower. These costs may be substantial and may deter
prospective borrowers from entering into a loan transaction with The Quakertown
National Bank. QNB Corp. is not aware of any borrower who is currently subject
to any environmental investigation or clean up proceeding that is likely to have
a material adverse effect on the financial condition or results of operations of
The Quakertown National Bank.
In 1995, the Pennsylvania General Assembly enacted the Economic Development
Agency, Fiduciary and Lender Environmental Liability Protection Act which, among
other things, provides protection to lenders from environmental liability and
remediation costs under the environmental laws for releases and contamination
caused by others. A lender who engages in activities involved in the routine
practices of commercial lending, including, but not limited to, the providing of
financial services, holding of security interests, workout practices,
foreclosure or the recovery of funds from the sale of property shall not be
liable under the environmental acts or common law equivalents to the
Pennsylvania Department of Environmental Resources or to any other person by
virtue of the fact that the lender engages in such commercial lending practice.
A lender, however, will be liable if it, its employees or agents, directly cause
an immediate release or directly exacerbate a release of regulated substance on
or from the property, or knowingly and willfully compelled the borrower to
commit an action which caused such release or violate an environmental act. The
Economic Development Agency, Fiduciary and Lender Environmental Liability
Protection Act, however, does not limit federal liability which still exists
under certain circumstances.
Federal Reserve Board Requirements
Regulation D of the Federal Reserve Board imposes reserve requirements on
all depository institutions, including The Quakertown National Bank, that
maintain transaction accounts or non-personal time and savings accounts. These
reserves may be in the form of cash or non-interest bearing deposits with the
Philadelphia Federal Reserve Bank. Under current Regulation D, The Quakertown
National Bank must establish reserves equal to 3.0% of the first $39.3 million
of net transaction accounts and 10.0% of the remainder. The reserve requirement
on non-personal savings and time deposits is 0.0%. Demand balances due from
depository institutions in the United States are used as a deduction against the
reserve. At December 31, 1999, The Quakertown National Bank met applicable
Federal Reserve Board reserve requirements.
ITEM 2. PROPERTIES
The Quakertown National Bank and Corporation's main office is located at 10
North Third Street, Quakertown, Pennsylvania. The Quakertown National Bank
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conducts business from its main office and five other retail offices located in
Upper Bucks, Southern Lehigh, and Northern Montgomery Counties. The Quakertown
National Bank owns its main office, two retail locations, its operations
facility, and the computer facility. The Quakertown National Bank leases its
remaining retail properties. The leases on the properties generally contain
renewal options. Management considers that its facilities are adequate for its
business.
The following table details The Quakertown National Bank's properties:
Location
Quakertown, Pa. - Downtown Office Owned
10 North Third Street
Quakertown, Pa. - Towne Bank Center Owned
320 West Broad Street
Quakertown, Pa. - Computer Center Owned
- 121 West Broad Street
Quakertown, Pa. - Country Square Office Leased
240 South West End Boulevard
Dublin, Pa. - Dublin Branch Leased
161 North Main Street
Pennsburg, Pa. - Pennsburg Square Branch Leased
410-420 Pottstown Ave
Coopersburg, Pa. - Coopersburg Branch Owned
51 South Third Street
Perkasie, Pa. - Perkasie Branch Owned
607 Chestnut Street
In management's opinion, the above properties are in good condition and
are adequate for QNB Corp.'s purposes.
ITEM 3. LEGAL PROCEEDINGS
Management, after consulting with QNB Corp.'s legal counsel, is not aware
of any litigation that would have a material adverse effect on the consolidated
financial position of QNB Corp. There are no proceedings pending other than
ordinary routine litigation incident to the business of QNB Corp. and its
subsidiary, The Quakertown National Bank. In addition, no material proceedings
are known to be contemplated by governmental authorities against QNB Corp. or
The Quakertown National Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
QNB Corp. had 694 shareholders of record as of March 20, 2000; however, QNB
Corp. believes, based on the number of annual reports and proxy statements
12
requested by nominee holders of QNB Corp.'s Common Stock, that the number of
beneficial holders exceeds 950. See Page 44 of the 1999 annual report,
"Corporate Information-Stock Information" and page 43 of the 1999 annual report,
"Notes to Consolidated Financial Statements-Note 20-Regulatory Restrictions,"
incorporated here by reference which pages are included in Exhibit 13.1.
ITEM 6. SELECTED FINANCIAL AND OTHER DATA
The information required by Item 6 is incorporated by reference to the
information appearing under the caption "Selected Financial and Other Data" on
page 28 of QNB Corp.'s annual report, incorporated here by reference which page
is attached as Exhibit 13.1.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by Item 7 is incorporated by reference to the
information appearing under the caption "Management's Discussion and Analysis"
on pages 7 to 28 of QNB Corp.'s annual report incorporated here by reference
which page is attached as Exhibit 13.1.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 7A is incorporated by reference to the
information appearing under the caption "Interest Rate Sensitivity" on pages 25
through 27 of QNB Corp.'s annual report which pages are attached as Exhibit
13.1.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 and the auditor's report are
incorporated by reference to pages 29 to 44 of QNB Corp.'s Annual Report which
is attached as Exhibit 13.1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item, relating to directors, executive
officers, control persons is set forth in the sections captioned "Election of
Directors" and "Executive Officers of Registrant" of the QNB Corp's definitive
proxy statement to be used in connection with the 2000 annual meeting of
shareholders, on pages 8 and 17 which pages are incorporated here by reference.
Section 16(a) Beneficial Ownership Compliance. Section 16(a) of the
Securities Exchange Act of 1934 requires QNB Corp's officers and directors, and
persons who own more than 10 percent of a registered class of QNB Corp's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10
percent shareholders are required by Commission regulation to furnish QNB Corp.
with copies of all Section 16(a) forms they file.
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Based solely on its review of the copies of such forms received by it or
written representations from certain reporting persons that no Form 5s were
required for those persons. QNB Corp. believes that during the period January 1,
1999 through December 31, 1999, its officers and directors were in compliance
with all filing requirements applicable to them.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the
information appearing under the caption "Executive Compensation" in the proxy
statement to be used in connection with the 2000 annual meeting of shareholders,
on pages 11-15 which pages are incorporated here by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference to the
information appearing under the caption "Securities Ownership of Management" in
the proxy statement to be used in connection with the 2000 annual meeting of
shareholders, on pages 5 through 7, which pages are incorporated here by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference to the
information appearing under the caption "Related Transactions" in the proxy
statement to be used in connection with the 2000 Annual Meeting of Shareholders,
on page 17, which page is incorporated here by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements are included by reference in part II,
Item 8 hereof.
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The financial statement schedules required by this Item are omitted
because the information is either inapplicable, not required or is in
the consolidated financial statements as a part of this Report.
3. The following exhibits are incorporated by reference herein or
annexed to this Form 10-K:
14
3.1- Articles of Incorporation of Registrant, as amended.
(Incorporated by reference to Exhibit 3.1 of Registrants Form
10-Q filed with the Commission on April 13, 1998.)
3.2- Bylaws of Registrant, as amended. (Incorporated by reference
to Exhibit 3.1 of Registrants Form 10-Q filed with the
Commission on April 13, 1998.)
10.1- Employment Agreement between the Registrant and Thomas J.
Bisko. (Incorporated by reference to Exhibit 10.1 of
Registrants Form 10-K filed with the Commission on
March 31, 1999).
10.2- Salary Continuation Agreement between the Registrant and
Thomas J. Bisko. (Incorporated by reference to Exhibit 10.2
of Registrants Form 10-K filed with the Commission on
March 31, 1999).
10.3- QNB Corp. 1998 Stock Incentive Plan. (Incorporated by
reference to Exhibit 4.3 to Registration Statement
No. 333-91201 on Form S-8, filed with the Commission on
November 18, 1999.)
10.4- QNB Corp. 1988 Stock Incentive Plan. (Incorporated by
reference to Exhibit 4A to Registration Statement
No. 333-16627 on Form S-8, filed with the Commission on
November 22, 1996.)
10.5- QNB Corp. Employee Stock Purchase Plan. (Incorporated by
reference to Exhibit 4B to Registration Statement
No. 333-16627 on Form S-8, filed with the Commission on
November 22, 1996.)
10.6- The Quakertown National Bank Profit Sharing and Section 401(k)
Salary Deferral Plan. (Incorporated by reference to Exhibit
4C to Registration Statement No. 333-16627 on Form S-8,
filed with the Commission on November 22, 1996.)
11.1- Statement re: Computation of Earnings per Share. (Incorporated
by Reference to page 35 of QNB Corp.'s 1999 Annual Report,
"Notes to Consolidated Financial Statements-Note 2-Earnings
Per Share," which is included herein at Exhibit 13.1.)
12.1- Statement re: Computation of Ratios. (Incorporated by
Reference to page 1 of QNB Corp.'s 1999 Annual Report, which
is included herein as Exhibit 13.1.)
13.1- Excerpts from the 1999 Annual Report to Shareholders.
21.1- Subsidiaries of the Registrant.
23.1- Consent of KPMG LLP, filed herewith.
(b) Reports on Form 8-K
None
(c) The exhibits required to be filed by this Item are listed under
Item 14(a)3 above.
(d) Not applicable
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
QNB Corp.
March 30, 2000
BY: /s/ Thomas J. Bisko
------------------------------------
Thomas J. Bisko
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
/s/ Thomas J. Bisko President, Chief Executive March 30, 2000
- ------------------------------------- Officer and Director
Thomas J. Bisko
/s/ Robert C. Werner Vice President March 30, 2000
- -------------------------------------
Robert C. Werner
/s/ Bret H. Krevolin Chief Accounting Officer March 30, 2000
- -------------------------------------
Bret H. Krevolin
/s/ Norman L. Baringer Director March 30, 2000
- -------------------------------------
Norman L. Baringer
/s/ Kenneth F. Brown Jr. Director March 30, 2000
- -------------------------------------
Kenneth F. Brown Jr.
/s/ Dennis Helf Director March 30, 2000
- -------------------------------------
Dennis Helf
16
SIGNATURES (Continued)
/s/ Gary S. Parzych Director March 30, 2000
- -------------------------------------
Gary S. Parzych
/s/ Donald T. Knauss Director March 30, 2000
- -------------------------------------
Donald T. Knauss
/s/ Charles M. Meredith, III Director March 30, 2000
- -------------------------------------
Charles M. Meredith, III
/s/ Henry L. Rosenberger Director March 30, 2000
- -------------------------------------
Henry L. Rosenberger
/s/ Edgar L. Stauffer Director March 30, 2000
- -------------------------------------
Edgar L. Stauffer
QNB CORP.
FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1999
EXHIBIT INDEX
Exhibit
3.1- Articles of Incorporation of Registrant, as amended
3.3- Bylaws of Registrant, as amended
10.1- Employment Agreement between the Registrant and Thomas
J. Bisko
10.2- Salary Continuation Agreement between the Registrant and
Thomas J. Bisko
10.3- QNB Corp. 1998 Stock Incentive Plan
10.4- QNB Corp. 1988 Stock Incentive Plan
10.5- QNB Corp. Employee Stock Purchase Plan
10.6- The Quakertown National Bank Profit Sharing and Section 401(k)
Salary Deferral Plan
11.1- Statement re: Computation of Earnings per Share
12.1- Statement re: Computation of Ratios
13.1- Excerpts from the 1999 Annual Report to Shareholders.
21.1- Subsidiaries of the Registrant.
23.1- Consent of KPMG LLP, filed herewith.