Landmark Bancorp Q1 2025 Earnings Call Transcript

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May 1, 2025

There are 3 speakers on the call.

Operator

Hello, everyone.

Operator

And welcome to the Landmark Bancorp Inc q one earnings call. My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question, please press star, followed by one on your telephone keypad. I will now hand over to your host, Abby Wendell, president and chief executive officer, to begin. Abby, please go ahead.

Speaker 1

Thank you. Good morning, and thank you for joining our call today to discuss Landmark's earnings and operating results for the first quarter of twenty twenty five. As you just heard from the operator, my name is Abby Wendel, President and CEO of Landmark Bancorp and Landmark National Bank. On the call with me to discuss various aspects of our first quarter performance is Mark Herpich, Chief Financial Officer of the company and Raymond McClanahan, Chief Credit Officer. As we start, I would like to remind our listeners that some of the information we will be providing today falls under the guidelines for forward looking statements as defined by the Securities and Exchange Commission.

Speaker 1

As part of these guidelines, I must point out that any statements made during this presentation that discuss our hopes, beliefs, expectations or predictions of the future are forward looking statements and our actual results could differ materially from those expressed. Additional information on these factors is included from time to time in our 10 ks and 10 Q filings, which can be obtained by contacting the company or the SEC. By now, I hope you have had a chance to read our press release announcing results for the first quarter of twenty twenty five. If not, you can find us on our website at www.banklandmark.com in the Investors section. Are pleased to report strong growth in net income this quarter, driven by increased net interest income, lower expenses and excellent credit quality.

Speaker 1

Net income in the first quarter totaled $4,700,000 compared to $2,800,000 in the same period last year. Also diluted earnings per share this quarter totaled $0.81 an increase of 69% over the same quarter last year. The return on average assets was 1.21% and the return on average equity was 13.71%. Our efficiency ratio in the first quarter twenty twenty five was 64.1%. I'm especially pleased with these results because we continue to recognize balanced growth across all of our markets.

Speaker 1

Our sweet spot remains in serving business owners across the state of Kansas from family farms in rural markets to small and mid sized business owners in metro markets. Our loan mix reflects this commitment and our continued approach to relationship banking has helped us find success across all of our markets. Compared to the fourth quarter twenty twenty four, total gross loans increased by $22,600,000 or 8.7% on an annualized basis with strong growth in virtually all loan categories and brings our total loan balances to nearly $1,100,000,000 Deposit balances also increased $7,100,000 this quarter and combined with maturities of investment securities, we were able to fund both loan growth and reduce more expensive short term borrowings. As a result, net interest income grew by 5.8% compared to the fourth quarter of twenty twenty four and our net interest margin increased 25 basis points to 3.76%. Overall, credit quality remains solid as we continue to experience low net credit losses and maintain a robust allowance for credit losses, which totaled $12,800,000 at 03/31/2025.

Speaker 1

Landmark's capital and liquidity measures are strong as well and we have a stable conservative deposit portfolio with most of our deposits being retail based and FDIC insured, thanks to our network of community based banking centers. We remain risk averse in both monitoring our interest rate and concentration risk and in maintaining a strong credit discipline. I'm also pleased to report that our Board of Directors has declared a cash dividend of $0.21 per share to be paid 06/04/2025 to shareholders of record as of 05/21/2025. This represents the ninety fifth consecutive quarterly cash dividend since the company's formation in 02/2001. I will now turn the call over to Mark Herpich, our CFO, who will review the financial results in detail with you.

Speaker 2

Thanks, Abby, and good morning to everyone. While Abby has just provided a highlight of our overall financial performance in the first quarter twenty twenty five, I'll provide some further details on those results. As mentioned, net income in the first quarter of twenty twenty five totaled $4,700,000 compared to $3,300,000 in the prior quarter and $2,800,000 in the first quarter of twenty twenty four. Compared to the prior quarter, net income in the first quarter twenty twenty five had strong growth due to continued increases in net interest income, lower non interest expense and no provision for credit losses. In the first quarter of twenty twenty five, net interest income totaled $13,100,000 an increase of $720,000 compared to the fourth quarter of twenty twenty four due to a combination of higher loan, interest income and lower interest expense on deposits and borrowings.

Speaker 2

The reduction in interest expense on deposits and other borrowed funds was impacted by the Federal Reserve cuts to short term rates in the fourth quarter. Total interest income on loans increased $440,000 this quarter and the tax equivalent yield on the loan portfolio increased six basis points to 6.34%. Average loans increased by $38,400,000 during the first quarter, which resulted from loan growth rate in the fourth quarter of twenty twenty four, which continued into the first quarter of twenty twenty five. Interest income on investment securities decreased slightly to $2,900,000 this quarter due to a decline in average investment securities balances of $31,800,000 but was offset by higher yields earned on our investment securities balances. The yield on our investment securities portfolio totaled 3.29% in the current quarter compared to 2.96% in the first quarter of twenty twenty four.

Speaker 2

Interest expense on deposits in the first quarter of twenty twenty five decreased $114,000 due to lower rates as our average interest bearing deposits grew 34,800,000.0 Interest on borrowed funds declined by $216,000 due to lower rates and balances. The average rate on interest bearing deposits decreased eight basis points to 2.17%, while the average rate on other borrowed funds declined 15 basis points to 5.09% in the first quarter. Landmark's net interest margin on a tax equivalent basis increased to 3.76 in the first quarter of twenty twenty five as compared to 3.51% in the fourth quarter of twenty twenty four. This quarter, we did not make a provision to our allowance for credit losses after providing $1,500,000 in the prior quarter. Net charge offs totaled $23,000 in the first quarter of twenty twenty five compared to net loan charge offs of $219,000 in the prior quarter.

Speaker 2

At 03/31/2025, our allowance for credit losses of $12,800,000 remained strong and represents 1.19% of gross loans. Non interest income totaled $3,400,000 this quarter, a decline of $13,000 compared to the prior quarter, while decreasing $42,000 compared to the first quarter of twenty twenty four. The decrease from fourth quarter twenty twenty four was primarily due to a $704,000 decline in bank owned life insurance related to one time benefits recorded in the fourth quarter, coupled with a $322,000 decline in fees and service charges related to lower deposit related fee income in part due to fewer days in the quarter. Partly offsetting those declines was a $1,000,000 loss on the sale of lower yielding investment securities in the fourth quarter of twenty twenty four compared to a loss of only $2,000 in the first quarter of twenty twenty five. Non interest expense for the first quarter of twenty twenty five totaled $10,800,000 a decrease of $1,100,000 compared to the prior quarter.

Speaker 2

This decline related primarily to decreases of $350,000 in other non interest expense, dollars 298,000 in professional fees and $298,000 also in occupancy and equipment. The decreases in other non interest expenses and occupancy and equipment were primarily related to branch closures in 2024 and the related cost savings in 2025. The decrease in professional fees this quarter was primarily due to higher consulting costs in the prior quarter on several initiatives. This quarter, we recorded a tax expense of $1,000,000 compared to a tax benefit of $886,000 in the fourth quarter of last year. The fourth quarter twenty twenty four tax benefit included previously unrecognized tax benefits of $1,000,000 Gross loans increased $22,600,000 or 8.7% annualized during the first quarter and totaled nearly $1,100,000,000 a new record high.

Speaker 2

During the quarter, loan growth was primarily comprised of increases in commercial real estate and construction and land loans of $14,400,000 and $3,300,000 respectively. We also saw good growth of $3,400,000 in our residential mortgage loan portfolio. Investment securities decreased $16,500,000 during the first quarter of twenty twenty five due primarily to maturities. Our investment portfolio has an average life of four point six years with a projected cash flow of $60,400,000 coming due in the next twelve months. Deposits totaled $1,300,000,000 at 03/31/2025 and increased by $7,100,000 this quarter.

Speaker 2

Interest checking and money market deposits declined by $23,500,000 this quarter, while non interest checking increased $16,900,000 and savings and certificates of deposit grew by $13,700,000 The decline in interest checking and money market deposits was driven by seasonal declines in public fund deposit accounts. Average interest bearing deposits, however, increased by $34,800,000 during the first quarter of twenty twenty five, while average borrowings decreased by $12,600,000 during the quarter. Our loan to deposit ratio totaled 79.5% at March 31, which remains low giving us sufficient liquidity to continue funding loan growth. Stockholders' equity increased 6,400,000.0 to $142,700,000 at 03/31/2025 and our book value increased to $24.69 per share at March 31 compared to $23.59 at December 31. The increase in stockholders' equity this quarter mainly resulted from a decline in other comprehensive losses due to lower net and unrealized losses on our investment securities along with net earnings from the quarter.

Speaker 2

Our consolidated and bank regulatory capital ratios as of 03/31/2025 are strong and exceed the regulatory levels considered well capitalized. The bank's leverage ratio was 9.2% at 03/31/2025, while the total risk based capital ratio was 13.6%. Now let me turn the call over to Raymond to review highlights of our loan portfolio and credit risk outlook. Thank you, Mark, and good morning to everyone. As mentioned earlier, we enjoyed continued loan growth throughout the quarter, mainly due to increases in our residential mortgage, agriculture, commercial and commercial real estate portfolios.

Speaker 2

Gross loans outstanding at quarter end totaled $1,075,000,000 an increase of $23,000,000 or 8.7% on an annualized basis from the previous quarter. We experienced solid growth across virtually all of our portfolios. Our commercial real estate portfolio increased $14,000,000 Our residential mortgage loan portfolio increased $3,400,000 this quarter due to continued demand for our adjustable rate loan product that we retain in our portfolio. Turning to credit quality. At 03/31/2025, nonperforming loans consisting mainly of nonaccrual loans were relatively unchanged from the prior quarter and totaled $13,300,000 Total foreclosed real estate ended the quarter at $167,000 The balance of past due loans between thirty and eighty nine days still accruing interest increased $3,800,000 this quarter and totaled $10,000,000 or 0.93% of gross loans.

Speaker 2

This increase was largely due to $12,200,000.0 SBA guaranteed commercial loan that we've mentioned on previous calls. Compared to a year ago, balances increased 5,900,000.0 This increase was primarily observed within our commercial real estate portfolio. We do not view this increase as an indicator of a broader weakness within the portfolio. Since quarter end, $11,000,000 relationship has been brought current, and we remain actively engaged on the other credits. We recorded net loan charge offs of $23,000 during the first quarter of twenty twenty five compared to net loan charge offs of $7,000 during the first quarter of twenty twenty four.

Speaker 2

Our allowance for credit losses totaled $12,800,000 and ended the quarter at 1.19% of gross loans. The current economic landscape in Kansas remains healthy. The preliminary seasonally adjusted unemployment rate for Kansas as of March 31 was 3.8% according to the Bureau of Labor Statistics. The uncertain economic environment, particularly tariffs, are on everyone's mind. Our approach to banking has always been relationship focused.

Speaker 2

So it should be no surprise that our banking teams have already been out in the field talking to our customers. What we're hearing from our customers is a general level of uncertainty and cautiousness, believing, however, that the uncertainty will resolve over time. While it's still too early to tell what impact if any of the administration's policies or actions will create for our customers, we continue to stay close to our customers and navigate these uncertain times together. And with that, I thank you, and

Speaker 1

I'll turn the call back over to Abby. Thank you, Raymond. Before we go to questions, I want to summarize by saying we were pleased with our results in the first quarter. We continue to see solid growth in our loan portfolio along with an expanding margin. We remain focused on maintaining solid credit quality given the uncertainties in the economy and we continually look for efficiencies in our operations.

Speaker 1

With the operating success we've had over the past few years and the high quality banking products and services we offer, our bank is well positioned for future growth. We continue to work on strengthening our existing customer relationships and we are focused on growing our lending and fee businesses across all our markets. Finally, I'd like to thank all the associates at Landmark, Their daily focus on executing our strategies, delivering extraordinary service to our customers and communities is the key to our success. With that, I'll open the call up to questions that anyone might have.

Operator

Thank you. If you would like to ask a question, please press followed by 1 on the telephone keypad. If you would like to remove your question, please press followed by 2. When the parent to ask your question, please ensure your phone is unmuted locally. We'll pause for just a moment.

Operator

That's star followed by one on your telephone keypad. Appears you have no questions at this time. I'll hand the call back over to Abby for any closing comments.

Speaker 1

Thank you. I want to thank everyone for attending today's earnings call. I appreciate your continued support and confidence in the company. I look forward to sharing news related to our second quarter twenty twenty five results at our next earnings call. Hope everyone has a great day.

Operator

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines. Good.

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Earnings Conference Call
Landmark Bancorp Q1 2025
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