QNB CORP. (QNBC) stock intrinsic value fair value estimate & owner earnings analysis

QNB Corp. is the holding company for QNB Bank, a commercial bank founded in 1877 and based in Quakertown, Pennsylvania. It gathers deposits from households and businesses in Bucks, Montgomery and Lehigh counties and lends them out as commercial, commercial real estate, residential mortgage and consumer loans, while also holding a large securities portfolio. At the end of 2025 it had $1.91 billion of assets and $1.64 billion of deposits. In the second quarter of 2026 it completed the all-stock purchase of The Victory Bancorp of Limerick, Pennsylvania. At June 30, 2026 assets were $2.40 billion, deposits $2.07 billion, shareholders' equity $183.5 million, and there were 4.98 million shares outstanding, up from 3.74 million. Because this is a bank, deposits are its raw material and interest is an operating cost, so we value the earnings left for shareholders directly and do not subtract deposits as debt. Our measure of per-share owner earnings is net income per diluted share. Over the last ten years it was $2.63 (2016), $2.41, $3.25, $3.53, $3.42, $4.64 (2021), $4.47, $2.63 (2023), $3.12 and $3.78 (2025). The 2023 drop was specific to how this bank is built. A long-dated securities portfolio bought at low yields was funded by deposits that repriced upward, and the interest margin fell from 2.79% to 2.39%. The margin has since recovered to about 2.72%. Earnings level. The 2025 result of $3.78 included $1.14 million of merger costs; without them it was about $4.02. We do not carry that figure forward. Credit quality has loosened (nonaccrual loans rose from $8.8 million at year-end 2025 to $10.4 million in June 2026, and the loss reserve has been rebuilt from a very low provision of $0.4 million in 2025), and part of the acquired loans' income is accounting accretion that fades. We therefore start all cases from a normalized $3.50 per share for the combined bank. The first full combined quarter (Q2 2026) produced $18.4 million of net interest income against $12.7 million a year earlier and net income of $3.0 million, or $0.60 per share, but it carried deal and integration costs that we could not separate with confidence from the filing data available, so one quarter does not move our level. First-quarter 2026 net income was $2.8 million. Last year's growth in this measure was 21% (from $3.12 to $3.78), a rebound from the margin squeeze. Our base case assumes 3% in the first year, well below that and below the 4.1% to 4.4% yearly rate the bank has compounded over ten years including the 2023 trough. Base case, worth about $71 per share. Earnings of $3.50 grow 3% a year for five years and 2% for the next five, reaching about $4.48 in year ten, then stay flat because the deposit franchise has operated since 1877 but we cannot name anything that would grow it further. Growth credited is the bank's own record of retained earnings funding loan and deposit growth. We left out any promised cost savings from Victory (the filings give no figure we can rely on), further acquisitions, and any margin expansion. Nothing is subtracted as debt; the business is worth about $71 and the shareholders keep that value, because the $54.0 million of subordinated notes ($40 million at 8.875% fixed until September 2029, then floating, due 2034, plus notes acquired with Victory) is already paid for in the interest line that earnings are measured after. Bear case, worth about $39.5 per share. It starts from the bank's own trough rather than from today: the margin squeeze of 2023 and 2024 produced $2.63 to $3.12 a share, so we use $2.75 as the steady level and give no growth. On top of that we place one full credit cycle in the manner of 2008 to 2011, when U.S. bank losses peaked near 2.5% of loans and community banks in Pennsylvania ran lower, at roughly 1%. We apply extra loan-loss provisions of 0.4% of a roughly $1.8 billion loan book (our estimate: $1.26 billion before the deal plus acquired loans) in year 3, 0.9% in years 4 and 5, 0.5% in year 6 and 0.2% in year 7. After tax, that costs about $1.14, $2.57, $2.57, $1.43 and $0.57 a share, leaving earnings near $0.18 in years 4 and 5 and a cumulative loss of about $8.30 per share (roughly $41 million, a fifth of equity). That is survivable without issuing shares because regulatory common equity is about 12.4% of risk-weighted assets. Earnings then return to $2.75 and stay flat. This bear value is above tangible book value of roughly $33 to $34 a share because the 150-year franchise (about $2.07 billion of local deposits) has stayed profitable through every year in our ten-year record, including 2020 and 2023, and is still earning in the worst years of this case. Business value about $39.5, nothing subtracted, difference $39.5. Bull case, worth about $88 per share. Earnings hold at $4.00, which is where 2025 was before merger costs, and grow 4% for five years and 3% for five more (the bank's demonstrated rate), reaching about $5.64 in year ten and then stay flat. It requires clean credit and a stable margin; it still credits no Victory savings. What would make this wrong. The two things we are most likely to be wrong about are the combined earnings level (an unquantified share of Victory's income is accretion, and Q2 earnings were only $0.60) and the timing of credit losses on a larger commercial real estate book. The securities portfolio still carries an after-tax unrealized loss of $43.8 million, which reduces reported equity but not earnings. Prior figures from our earlier assessment were built on a different basis and are not comparable. Margin-of-safety price. We are fairly but not fully sure of $3.50: the 10-year record is volatile (low $2.41, high $4.64), and the combined company has only one full quarter of history. The worst plausible outcome is a repeat of 2023's margin squeeze together with a real estate credit cycle; the structure survives it because deposits are local and granular and capital is adequate, but the cumulative loss would take about a fifth of equity and the dividend of $1.56 a year would likely be cut, and in that case the shares might trade near or below tangible book of about $33. If earnings turn out to be $3.00 rather than $3.50, or growth is nil, shares would still be worth the high $30s to low $50s. The price assumes a five-year holding period, with about $1.56 a year in dividends (more if earnings grow). If earnings reach about $4.05 in five years and the shares are priced then at 11 times earnings, a holder would have about $45 of share value plus roughly $8 of dividends. For that outcome to imply a 20% annualized return, the entry price must be about $21 to $22. A price of $22 is about 0.65 times tangible book, leaving room for a bad outcome in which shares fall to tangible book in a downturn and the dividend still yields about 7% a year over the holding period. The margin-of-safety price is $22.