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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
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, 1997
[ ] 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
-- --
[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 23, 1998, 1,431,240 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 $39,599,288.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for 1997 - Part I, Item 3
Part II, Items 6, 7 and 8
Proxy Statement dated April 3, 1998 - Part III, Items 10, 11, 12 and 13
FORM 10-K INDEX
PART I PAGE
Item 1 Business........................................................... 4
Item 2 Properties......................................................... 9
Item 3 Legal Proceedings.................................................. 10
Item 4 Submission of Matters to a Vote of Security Holders................ 10
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters................................................ 10
Item 6 Selected Financial Data............................................ 10
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operation........................................... 11
Item 7A Quantitative and Qualitative Disclosures about Market Risk......... 11
Item 8 Financial Statements and Supplementary Data........................ 11
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................... 11
PART III
Item 10 Directors and Executive Officers of the Registrant................. 11
Item 11 Executive Compensation............................................. 12
Item 12 Security Ownership of Certain Beneficial Owners and Management..... 12
Item 13 Certain Relationships and Related Transactions..................... 12
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 12
PART I
ITEM 1. BUSINESS
QNB CORP.
QNB Corp. (the "Corporation") was incorporated under the laws of the
Commonwealth of Pennsylvania on June 4, 1984. The Corporation is registered with
the Federal Reserve Board as a bank holding company under the Bank Holding
Company Act of 1956, as amended, and conducts its business through its
wholly-owned subsidiary, The Quakertown National Bank (the "Bank"). The
principal business of the Corporation, through the 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.
The Corporation was organized for the purpose of becoming the holding
company of the Bank. Pursuant to a Plan of Reorganization approved by the Bank's
stockholders, the Corporation'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 Bank's common stock previously outstanding was automatically
converted into one share of the Corporation's common stock and the Bank became a
wholly owned subsidiary of the Corporation. The Corporation's primary asset is
its investment in the Bank. The Corporation's assets also include an investment
portfolio consisting of stock in various financial institutions. The investment
portfolio accounts for less than .65% of the Corporation's total consolidated
assets.
THE QUAKERTOWN NATIONAL BANK
The Bank is a national banking association organized in 1877. The 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 Bank is a full-service commercial bank that provides most major
financial services. The Bank's principal office is located in Bucks County,
Pennsylvania. The Bank also operates five other full-service branches, an
operations facility and an administrative office. For more information relating
to the Bank's properties, see Item 2. Properties. The Bank had 113 full-time
employees and 40 part-time employees, at December 31, 1997. There are employees
of the Corporation who are also employees of the Bank.
As of December 31, 1997 the Corporation, on a consolidated basis, had
total assets of $305,772,000, total deposits of $267,166,000, and total
shareholders' equity of $25,832,000.
MARKET AREA
The 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 Bank is not dependent upon a
single customer, or a few customers, the loss of which would have a material
adverse effect on the Bank.
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LENDING ACTIVITIES
GENERAL. The 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 Bank's loan portfolio totaled
$167,720,000 and $159,278,000 at December 31, 1997 and 1996, respectively. The
portfolio represented approximately 54.9% and 56.8% of the Bank's total assets
at December 31, 1997 and 1996, respectively.
RESIDENTIAL MORTGAGE LOANS. The Bank offers primarily 1 and 3 year
adjustable rate mortgages, 7 year balloon mortgages, and 15, 20 and 30 year
fixed rate loans. Since 1984 the Bank has generally sold, without recourse, its
mortgage loans in the secondary mortgage market. During 1996 the Bank sold only
30 year fixed rate mortgage loans in the secondary market. In 1997, the Bank
sold a small group of 15 and 20 year fixed rate mortgages in addition to 30 year
mortgages.
The Bank originates mortgage loans up to a 95% maximum loan-to-value
ratio provided the amount above 80% is covered by private mortgage insurance.
Premiums for private mortgage insurance are paid by the borrower.
All mortgages sold in the secondary market conform to the loan-to-value
ratios and underwriting standards dictated by the secondary market. A majority
of the mortgages are sold to the Federal Home Loan Mortgage Corporation (Freddie
Mac), with servicing retained by the Bank.
The 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 $67,621,000 and $66,203,000 represented 40.2% and 41.4% of
gross loans at December 31, 1997 and 1996, respectively.
COMMERCIAL LOANS. The Bank offers commercial loans, including lines of
credit or commitment, term loans, commercial mortgages, letters of credit, and
tax-free loans.
The Bank's commercial and industrial loan portfolio totaled $32,794,000
and $22,973,000 at December 31, 1997 and 1996, respectively. Commercial and
industrial loans represented approximately 19.5% and 14.4% of the Bank's total
gross loans at December 31, 1997 and 1996 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 $58,783,000 and
$57,589,000 represented 34.9% and 36.1% of the Bank's gross loan portfolio at
December 31, 1997 and 1996, respectively, while construction loans, including
commercial and residential, totaled $813,000 and $3,640,000 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 Bank's consumer loan portfolio totaled $5,312,000
and $6,477,000 at December 31, 1997 and 1996, respectively. Consumer loans
represented 3.2% and 4.0% of the Bank's
5
total gross loans at December 31, 1997 and 1996, respectively. Consumer loans
include automobile loans, student loans and other consumer type credit not
secured by real estate. The decline in consumer loans is primarily the result of
the increased use of home equity loans which are classified as real estate
residential loans. Additionally, consumer loans outstanding continue to decline
as a result of the decision made in 1995 to discontinue indirect vehicle lending
through automobile dealers.
INVESTMENT ACTIVITIES
At December 31, 1997 and 1996, the Corporation's investment portfolio,
on a consolidated basis, in the aggregate amount of $116,320,000 and $95,478,000
consisted primarily of U.S. Government and Federal agency obligations,
mortgage-backed securities, and state and municipal securities. Subject to
applicable limits the Bank is also permitted to invest in corporate bonds and
the Corporation is permitted to invest in equity securities. The Bank accounts
for its investments based on Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Investment securities available-for-sale are recorded at market value with the
unrealized holding gain or loss, net of taxes, included in shareholders' equity,
while investment securities held-to-maturity are recorded at amortized cost. At
December 31, 1997 and 1996, the balance of the available-for-sale portfolio was
$75,920,000 and $52,779,000 and the balance of the held-to-maturity portfolio
was $40,400,000 and $42,699,000, respectively.
The Bank views its investment portfolio as a secondary source of
liquidity and stable earnings. Decisions regarding the selection of investments
for the Bank's portfolio are made by the Chief Operating Officer and the Chief
Financial Officer, or either of them, together with one other member of the
asset/liability committee. Decisions on maturity and type of investment are
dictated by the Bank's investment policy as approved by the Board of Directors.
To enhance the liquidity and interest rate sensitivity of the portfolio, the
Bank's strategy has been to invest in short and medium term U.S. Government and
Federal Agency obligations and callable bonds and in longer term mortgage-backed
securities and state and municipal securities. The available-for-sale and
held-to-maturity investment portfolios had weighted average maturities of 5
years and 2 years and 10 months respectively, at December 31, 1997. The expected
weighted average life of the available-for-sale portfolio was 1 year and 10
months at December 31, 1997. The callable nature of the securities within this
portfolio in conjunction with the decline in interest rates at the end of 1997,
which makes these call features more likely to be exercised, account for the
shorter average life.
SOURCES OF FUNDS
DEPOSITS. The Bank offers a variety of deposit products including
checking accounts, passbook and statement savings, money market accounts, Super
NOW accounts, certificates of deposit, and jumbo certificates of deposit.
Deposits of the Bank are insured up to $100,000 by the Federal Deposit Insurance
Corporation (the "FDIC").
COMPETITION
The Bank competes actively with other commercial banks in its market
area. Competition exists for new deposits, in the scope and type of services
offered, in interest rates on interest-bearing deposits and loans, and in other
aspects of banking. In addition, the Bank, like other commercial banks,
encounters competition from other non-bank financial institutions including
savings banks, savings and loans, insurance companies, credit unions, finance
companies, mutual funds and certain governmental agencies. Furthermore, large
regional and national banks located in Philadelphia and Allentown are active in
servicing companies based in the Bank's market area.
6
SUPERVISION AND REGULATION
Recently, Pennsylvania enacted a law to permit State chartered
financial institutions to sell insurance. This follows a United States Supreme
Court decision in favor of nationwide insurance sales by banks and which also
bars states from blocking insurance sales by national banks in towns with
populations of no more than 5,000. Consequently, banks are allowed to sell
insurance in Pennsylvania. The Office of the Comptroller of the Currency has
issued guidelines for national banks to sell insurance. The Bank is evaluating
its options regarding the sale of insurance.
Congress is currently considering legislative reform centered on the
repeal of the Glass-Steagall Act which prohibits commercial banks from engaging
in the securities industry. The holding company structure, under such a
proposal, would be regulated by the Federal Reserve Board, and its subsidiaries
would be supervised by the applicable regulator based on their respective
functions.
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 the Corporation and the Bank. It cannot be predicted whether
such legislation will be adopted or, if adopted, how such legislation would
affect the business of the Corporation and the Bank. As a consequence of the
extensive regulation of commercial banking activities in the United States, the
Corporation's and the 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 the Corporation 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 the Corporation's
results of operations.
Further, the business of the Corporation 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 and
increase in consolidations an 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.
As the Year 2000 approaches, regulation of the Corporation and the Bank
with respect to completing Year 2000 modifications is likely to increase. A
brief discussion of the most recent federal banking agency pronouncements that
affect the Corporation and/or the Bank follows.
In December 1997, the Federal Financial Institutions Examination
Council ("FFIEC") issued an interagency statement. The statement indicates that
senior management and the board of directors should be actively involved in
managing the Corporation's and the Bank's Year 2000 compliance efforts. The
statement also recommended that institutions obtain Year 2000 compliance
certification from vendors followed by comprehensive internal testing. In
addition, contingency plans should be developed for all vendors that service
"mission critical" applications which are applications vital to the successful
continuance of a core business activity.
The Office of the Comptroller of the Currency ("OCC") recently issued
an advisory indicating that Year 2000 preparedness will be factored into its
review of de novo charters, conversions, business
7
combinations and establishment of federal branches and agencies as well as
hardware and software systems integration issues related to business
combinations. See the Corporation's 1997 Annual Report to Shareholders ("Annual
Report"), "Management Discussion and Analysis," incorporated by reference herein
for a discussion of the Corporation's Year 2000 plan.
HOLDING COMPANY REGULATION
As a registered holding company under the Bank Holding Company Act,
(the "BHCA"), the Corporation is regulated by the Federal Reserve Board (the
"FRB"). The Corporation is also subject to the provisions of section 115 of the
Pennsylvania Banking Code of 1965.
As a bank holding company, the Corporation is required to file with the
FRB an annual report and such additional information regarding the holding
company and its subsidiary bank as required pursuant to the BHCA. The FRB may
also make examinations of the holding company and its subsidiary. The FRB
possesses cease-and-desist powers over bank holding companies and their non-bank
subsidiaries where their actions would constitute an unsafe or unsound practice
or violation of law.
In addition to the restrictions imposed by the BHCA relating to a bank
holding company's ability to acquire control of additional banks, the BHCA
generally prohibits a bank holding company from (i) acquiring a direct or
indirect interest in, or control of 5% or more of the outstanding voting shares
of any company, and (ii) engaging directly or indirectly in activities other
than that of banking, managing or controlling banks or furnishing services to
subsidiaries. However, a bank holding company may engage in, and may own shares
of companies engaged in, certain activities deemed by the FRB to be closely
related to banking or managing or controlling banks.
BANK REGULATION
The Bank operates as a national bank subject to regulation and
examination by the Office of the Comptroller of the Currency (the "OCC").
The OCC regulates all areas of a national bank's commercial banking
operations including loans, mergers, establishment of branches and other aspects
of operations. The OCC also regulates the level of dividends which can be
declared by the Corporation. See the Corporation's 1997 Annual Report.
The Bank is also regulated by the Federal Reserve System and the FDIC.
The major function of the FDIC 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.
FDIC insured banks are subject to certain FDIC requirements designed to
maintain the safety and soundness of individual banks and the banking system. In
addition, the FDIC along with the Comptroller of the Currency and the FRB have
adopted regulations which define and set the minimum requirements for capital
adequacy based on risk. See the Corporation's Annual Report, "Capital Adequacy,"
incorporated by reference herein. The FRB, the FDIC 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.
8
ENVIRONMENTAL LAWS. Neither the Corporation nor the Bank anticipate
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 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 Bank. The Corporation 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 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 FRB imposes reserve requirements on all depository
institutions, including the 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 Bank must establish reserves equal to 3.0%
of the first $43.1 million of net transaction accounts and 10.0% of the
remainder. The reserve requirement on non-personal savings and time deposits
with an original maturity of less than 18 months is 3.0%. Cash and due from
banks are used as a deduction against the reserve. At December 31, 1997, the
Bank met applicable FRB reserve requirements.
ITEM 2. PROPERTIES
The Bank and Corporation's main office is located at 10 North Third
Street, Quakertown, Pennsylvania. The Bank conducts business from its main
office and five other retail offices located in Upper Bucks, Southern Lehigh,
and Northern Montgomery Counties. The Bank owns its main office,
9
two retail locations, its operations facility, and the computer facility. The
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 Bank's properties:
Location
1) Quakertown, Pa. - Main Office - owned
2) Quakertown, Pa. - Towne Bank Center - owned
3) Quakertown, Pa. - Computer Center - owned
4) Quakertown, Pa. - Country Square Branch - net lease requiring rental
payments of $25,000 per year.
5) Dublin, Pa. - Dublin Branch - net lease requiring rental payments of $22,600 per year.
6) Pennsburg, Pa. - Pennsburg Square Branch - net lease requiring
rental payments of $45,000 per year.
7) Coopersburg, Pa. - Coopersburg Branch - owned
8) Perkasie, Pa. - Perkasie Branch - owned
ITEM 3. LEGAL PROCEEDINGS
The information required by Item 3 is incorporated by reference to Note
15 - Commitments and Contingencies, to the Consolidated Financial Statements,
appearing on page 38 of the Annual Report to Shareholders which is attached as
Exhibit 13.1.
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
The Corporation had 677 shareholders of record as of March 23, 1998;
however, the Corporation believes, based on the number of annual reports and
proxy statements requested by nominee holders of the Corporation's Common Stock,
that the number of beneficial holders exceeds 831. The other information
required by Item 5 is incorporated by reference to the information appearing
under the caption "Stock Information" on page 42 of the Annual Report to
Shareholders which is attached as 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 27 of the Annual Report to Shareholders which is attached as Exhibit 13.1.
10
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 26 of the Annual Report to Shareholders which 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 24
and 25 of the Annual Report to Shareholders which is 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 the Corporation's consolidated financial
statements, on pages 28 to 42 of the Annual Report to Shareholders which is
attached as Exhibit 13.1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The information required by this Item 9 is set forth in the
Corporation's Current Report on Form 8-K, filed with the Commission on June 21,
1996, which Current Report is incorporated herein by reference.
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 "Executive
Officers of the Registrant" of the Registrant's definitive Proxy Statement to be
used in connection with the 1998 Annual Meeting of Shareholders, which pages are
incorporated herein by reference.
Section 16(a) Beneficial Ownership Compliance. Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Registrant's officers
and directors, and persons who own more than 10 percent of a registered class of
the Registrant's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than 10 percent shareholders are required by SEC
regulation to furnish the Registrant with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Registrant believes that during the period
January 1, 1997 through December 31, 1997, 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 1998 Annual Meeting of Shareholders.
11
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 1998 Annual Meeting of
Shareholders.
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 1998 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The consolidated financial statements to be included in Part II, Item 8
are incorporated by reference to the 1997 Annual Report to
Shareholders, at pages 28 through 42, which is attached as Exhibit
13.1.
2. Financial Statement Schedules
All schedules applicable to the Registrant are shown in the respective
financial statements or in the notes thereto included in the 1997
Annual Report to Shareholders which is attached as Exhibit 13.1.
3. The following exhibits are incorporated by reference herein or
annexed to this 10-K:
3.1- Registrants Articles of Incorporation, as amended, are
incorporated by reference to Exhibit 3 of Registrant's Current
Report on Form 8-K filed with the Commission on April 30, 1989
"Form 8-K".
3.2- Registrants By-Laws, as amended, are incorporated by reference
to Exhibit 3 of Form 8-K.
4.1- Registrant's specimen certificate of Common Stock is
incorporated by reference to Exhibit 4 of Form 8-K.
10.1- Employment Agreement between the Registrant and Thomas J.
Bisko is incorporated by reference to Exhibit 10(a) of Form
8-K.
10.2- Salary Continuation Agreement between the Registrant and
Thomas J. Bisko is incorporated by reference to Exhibit 10(b)
of Form 8-K.
12
10.3- Deferred Compensation Agreement between the Registrant and
Philip D. Miller is incorporated by reference to Exhibit 10(c)
of Form 8-K.
10.4- QNB Corp. 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.)
13.1- Excerpts from the 1997 Annual Report to Shareholders.
21.1- Subsidiaries of the Registrant.
23.1- Consent of KPMG Peat Marwick LLP, filed herewith.
23.2- Independent Auditor's Report and Consent of Coopers & Lybrand
LLP, filed herewith.
(b) Reports on Form 8-K
None
All other schedules and exhibits are omitted because they are not
applicable or because the required information is set out in the financial
statements or the notes thereto.
13
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 24, 1998
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 March 24,1998
- ---------------------------- Executive Officer
Thomas J. Bisko and Director
/s/ Robert C. Werner Vice President March 24, 1998
---------------------------
Robert C. Werner
/s/ Bret H. Krevolin Chief March 24, 1998
- ---------------------------- Accounting Officer
Bret H. Krevolin
/s/ Norman L. Baringer Director March 24, 1998
- ----------------------------
Norman L. Baringer
/s/ Kenneth F. Brown Jr. Director March 24, 1998
- ----------------------------
Kenneth F. Brown Jr.
/s/ Dennis Helf Director March 24, 1998
- ----------------------------
Dennis Helf
14
SIGNATURES (Continued)
/s/ Gary S. Parzych
--------------------------- Director March 24, 1998
Gary S. Parzych
/s/ Donald T. Knauss Director March 24, 1998
- ----------------------------
Donald T. Knauss
/s/ Charles M. Meredith, III Director March 24, 1998
- ----------------------------
Charles M. Meredith, III
/s/ Henry L. Rosenberger Director March 24, 1998
- ----------------------------
Henry L. Rosenberger
/s/ Edgar L. Stauffer Director March 24, 1998
- ----------------------------
Edgar L. Stauffer
15
QNB CORP.
FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1997
EXHIBIT INDEX
Exhibit
13.1 Excerpts from the 1997 Annual Report to Shareholders
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
23.2 Independent Auditor's Report and Consent of Coopers & Lybrand LLP