Landmark Bancorp, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with 2021. Landmark is a Kansas-focused bank holding company with 31 branches. It completed its acquisition of Freedom Bancshares on October 1, 2022.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total assets | $1.503 billion | $1.329 billion |
| Net interest income | $38.9 million | $38.3 million |
| Net interest margin, tax-equivalent | 3.21% | 3.39% |
| Non-interest income | $13.7 million | $22.3 million |
| Non-interest expense | $41.3 million | $37.3 million |
| Net earnings | $9.9 million | $18.0 million |
| Diluted earnings per share | $1.88 | $3.42 |
| Return on average assets / equity | 0.73% / 8.25% | 1.44% / 13.80% |
Total gross loans rose to $850.2 million from $662.4 million; net loans were $841.1 million. Total deposits increased to $1.301 billion from $1.148 billion. Total borrowings were $68.3 million, including $21.7 million of subordinated debentures and $29.4 million of repurchase agreements. Stockholders’ equity fell to $111.4 million from $135.6 million, principally reflecting a $28.9 million after-tax other comprehensive loss associated largely with securities valuation changes.
Operating cash flow was $24.8 million; investing activities used $197.2 million and financing activities provided $6.3 million. Cash and cash equivalents declined $166.1 million to $23.2 million. Cash and available-for-sale securities totaled $512.5 million at year-end; including held-to-maturity securities, reported liquid assets were $521.5 million. The Bank’s total risk-based capital ratio was 14.10%, and its leverage ratio was 8.59%; it remained well-capitalized.
Material changes versus 2021
- Net earnings declined 45.2%. Lower residential mortgage loan-sale gains, Freedom acquisition costs, and a loss on securities sales were the principal factors.
- Net interest income increased 1.5%, but the full-year margin narrowed to 3.21% from 3.39%. Quarterly margin rose from 2.99% in Q1 to 3.53% in Q4 as assets repriced faster than funding costs.
- Non-interest income fell 38.5%, including a $7.0 million decline in loan-sale gains and a $1.1 million securities-sale loss, compared with a $1.1 million gain in 2021. Deposit and loan servicing fees partly offset the decline.
- Non-interest expense increased 10.8%, including $3.4 million of Freedom acquisition costs. The acquisition added $14.7 million of goodwill and $4.2 million of core deposit intangibles.
- Loans and deposits grew substantially, primarily reflecting Freedom. Commercial real estate loans rose to $304.1 million from $198.5 million.
- Asset-quality indicators improved: non-accrual loans declined to $3.3 million from $5.2 million, and non-performing assets to $4.3 million from $7.8 million. The allowance remained approximately $8.8 million; net recoveries were $16,000 versus $500,000 of net charge-offs in 2021.
Outlook, commentary, and risks
The filing provides no specific earnings or financial guidance. Management expects higher market rates to support asset yields but cautions that deposit competition, rising funding costs, possible deposit outflows, and loan competition could offset gains. Its year-end interest-rate simulation estimated that a 100-basis-point increase would reduce next-12-month net interest income by 2.5%; a 300-basis-point increase would reduce it by 6.6%. These are modeled estimates, not forecasts.
- Major risks include inflation, interest-rate and securities valuation exposure, economic weakness, credit deterioration, and concentration in Kansas and real estate lending. Real estate loans were approximately 66% of gross loans.
- Uninsured deposits were $192.9 million, less than 15% of deposits; more than 99% of deposits were considered core. Management also disclosed available but conditional borrowing capacity, including $101.8 million at the FHLB and $65.4 million at the Federal Reserve discount window.
- Available-for-sale securities had $33.4 million of gross unrealized losses at year-end. Management considered the losses temporary and stated it did not expect to sell the securities before recovery, but forced or strategic sales could realize losses.
- CECL became effective for the Company January 1, 2023. Management expected the allowance to increase but said the amount was uncertain.
- The company identified LIBOR transition exposure: approximately $27.5 million of loans and $21.7 million of subordinated debentures were tied to LIBOR and were transitioning to SOFR.
- Management reported effective disclosure controls and internal control over financial reporting. The independent auditor issued an unqualified opinion and identified allowance qualitative factors and acquired-loan fair valuation as critical audit matters. No material pending legal proceedings were reported.
Important facts for investors to verify
- How the Freedom acquisition performs after integration, including realized cost savings, acquired-loan credit quality, and goodwill valuation.
- Whether deposit retention and funding costs hold up as certificates mature and competition increases; review uninsured balances and borrowing availability.
- How CECL adoption changes the allowance, earnings, and capital, and whether credit quality or classified loans deteriorate.
- Whether securities unrealized losses remain manageable and whether any liquidity needs require sales at a loss.
- How net interest margin, deposit betas, and modeled interest-rate sensitivity evolve; confirm reported results against the filing’s rate-scenario assumptions.