Landmark Bancorp, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. Landmark Bancorp is a Kansas-focused bank holding company operating Landmark National Bank and a captive insurance subsidiary. This unaudited report covers the three months ended March 31, 2024; balance-sheet comparisons are with December 31, 2023. Unless stated otherwise, financial amounts below are in U.S. dollars.
Financial results and position
| Metric | Q1 2024 / March 31, 2024 | Comparable period / prior date |
|---|---|---|
| Interest income | $17.745 million | $14.577 million in Q1 2023 |
| Net interest income | $10.747 million | $10.947 million in Q1 2023 |
| Net interest margin, tax-equivalent | 3.12% | 3.31% in Q1 2023 |
| Provision for credit losses | $300,000 | $49,000 in Q1 2023 |
| Net earnings / diluted EPS | $2.778 million / $0.51 | $3.357 million / $0.61 in Q1 2023 |
| Return on average assets / equity | 0.72% / 8.88% | 0.90% / 12.04% in Q1 2023 |
| Total assets | $1.553 billion | $1.562 billion at December 31, 2023 |
| Gross loans / allowance for loan losses | $964.0 million / $10.9 million | $948.7 million / $10.6 million at December 31, 2023 |
| Total deposits | $1.294 billion | $1.316 billion at December 31, 2023 |
| Total borrowings | Approximately $112.3 million | Approximately $99.0 million at December 31, 2023 |
| Cash and cash equivalents | $16.5 million | $27.1 million at December 31, 2023 |
| Stockholders’ equity | $126.7 million | $126.9 million at December 31, 2023 |
Operating cash flow was $2.9 million; investing activities used $2.7 million and financing activities used $10.8 million. Cash and cash equivalents declined $10.6 million during the quarter. Cash, interest-bearing bank deposits and available-for-sale securities—the company’s stated liquid assets—totaled $458.7 million, versus $484.8 million at year-end. The company reported bank capital ratios above the applicable well-capitalized thresholds; the Bank’s total risk-based capital ratio was 13.75%.
Material changes and management commentary
- Net earnings fell 17.3% year over year. Interest income increased 21.7%, but interest expense rose from $3.6 million to $7.0 million, principally as deposit and borrowing costs increased. The average cost of interest-bearing deposits rose to 2.35% from 1.18%; average loan yield increased to 6.16% from 5.43%.
- Deposits declined $22.7 million, which management attributed primarily to seasonal public-fund balances. Borrowings increased $13.2 million, mainly through FHLB funding to support loan growth and offset lower non-brokered deposits. Estimated uninsured deposits were $406.9 million, or 31.5% of deposits; over 92% of deposits were considered core.
- Credit indicators weakened from year-end: loans past due 30–89 days and still accruing rose to $4.1 million from $1.6 million; non-accrual loans increased to $3.6 million from $2.4 million. Classified loans rose to $14.1 million from $7.5 million. Net loan charge-offs remained low at $7,000. Management said the allowance was sufficient and described overall asset quality as strong, while noting it was working to resolve problem credits.
- Available-for-sale securities had $24.7 million of gross unrealized losses at quarter-end, compared with $22.6 million at year-end. The quarter recorded an after-tax other comprehensive loss of $1.9 million, primarily reflecting securities valuation changes. Management stated it did not intend, and was not likely to be required, to sell the identified temporarily impaired securities before recovery of cost.
- Non-interest income declined 2.7%, mainly because gains on residential loan sales decreased amid higher rates and limited housing inventory. Non-interest expense increased 2.0%, including valuation-related expense on real estate held for sale, operating losses and higher legal fees.
- Real estate owned decreased to $428,000 from $928,000; remaining properties were being marketed. The allowance for loan losses was 1.13% of gross loans, versus 1.12% at year-end.
Outlook, risks and contingencies
The filing provides no specific earnings or financial guidance. Management said it currently has no plans to change its dividend strategy, subject to economic and company performance. It declared a $0.21-per-share dividend payable May 29, 2024, and reported this was its 91st consecutive quarterly dividend. Management identified a sluggish economy, elevated inflation, interest-rate and funding-cost pressures, and competition for deposits as relevant conditions.
Interest-rate sensitivity modeling estimated that a 100-basis-point rate increase would reduce projected 12-month net interest income by 4.5%; a 300-basis-point increase would reduce it by 12.6%. The filing also identifies credit quality, uninsured and concentrated deposits, securities values, real estate markets, cybersecurity, operational and third-party risks, competition, and acquisition integration among potential risks. FHLB available borrowing capacity was $165.3 million, subject to collateral, credit requirements and policies; Federal Reserve borrowing capacity was $56.9 million. Outstanding loan commitments were $195.3 million and standby letters of credit were $1.6 million. Management reported no material pending legal proceedings beyond routine litigation, and no material changes to previously disclosed risk factors. The company reported effective disclosure controls and no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether deposit pricing and borrowing costs continue to outpace asset-yield improvement, and the resulting effect on net interest margin and earnings.
- Trends in classified, past-due and non-accrual loans—particularly commercial real estate, commercial and agricultural credits—and whether the allowance remains adequate.
- Deposit retention and mix, uninsured balances and upcoming certificate maturities; assess reliance on FHLB and other funding.
- Potential liquidity or capital effects if securities must be sold, including the sizable unrealized-loss position and collateral commitments.
- Execution of loan commitments, resolution of problem credits and sale of remaining real estate owned; confirm the declared dividend and regulatory capacity remain supportable.