Landmark Bancorp, Inc. (NASDAQ:LARK) Q3 2025 Earnings Call Transcript

Landmark Bancorp, Inc. (NASDAQ:LARK) Q3 2025 Earnings Call Transcript October 30, 2025

Operator: Hello, everyone, and thank you for joining us today for the Landmark Bancorp, Inc. Third Quarter Earnings Call. My name is Lucy, and I’ll be coordinating your call today. [Operator Instructions] It is my now my pleasure to hand over to your host, Abby Wendel, President and CEO, to begin. Please go ahead.

Abigail Wendel: Thank you, Lucy. Good morning, and thank you for joining our call today to discuss Landmark’s earnings and operating results for the third quarter of 2025. My name is Abby Wendel, President and CEO of Landmark Bancorp. On the call with me to discuss various aspects of our third quarter performance are Mark Herpich, Chief Financial Officer; and Raymond McLanahan, Chief Credit Officer. As we start, I would like to remind our listeners that some of the information we will provide today falls under the guidelines for forward-looking statements as defined by the Securities and Exchange Commission. 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.

We include more information on these factors from time to time in our 10-K and 10-Q filings, which can be obtained by contacting the company or the SEC. By now, we hope you have had a chance to review our press release, which announced our financial results for the third quarter of 2025 yesterday afternoon. You can find it on our website at www.banklandmark.com in the Investors section. Landmark reported another solid quarter of results, which reflect the hard work and commitment of our associates whose efforts continue to elevate Landmark’s position in the market. Net income for the third quarter totaled $4.9 million or $0.85 per diluted share compared to $3.9 million or $0.68 per diluted share in the same period last year, an increase of 24.1% in diluted earnings per share.

This year-over-year increase in earnings primarily reflects growth in net interest income and prudently managed expenses. Our return on average assets improved to 1.21% for the quarter and return on average equity improved to 13.0%. We maintained a steady net interest margin and improved our efficiency ratio to 60.7% in the third quarter while simultaneously investing in new talent throughout the bank and across our footprint. Total loans were flat this quarter based on period-end balances, while average loans grew nearly 10% on an annualized basis compared to the prior quarter. Brokered deposits were the primary driver of deposit growth in the third quarter. However, we also saw solid growth in noninterest-bearing demand deposits, and we reduced our reliance on FHLB and other borrowing sources.

I’m happy to announce we made significant improvements in our overall credit quality this quarter as nonperforming loans declined by almost $7 million, mostly from the resolution of a large commercial loan on nonaccrual status discussed in previous quarters. Our tangible book value per share increased to $20.96, up 6.6% on a linked-quarter basis and 15.7% from the end of the third quarter of 2024, primarily — due primarily to solid growth in retained earnings and a reduction in our accumulated other comprehensive loss. I am pleased to report as well that our Board of Directors has declared a cash dividend of $0.21 per share to be paid November 26, 2025, to shareholders of record as of November 12, 2025. This represents the 97th consecutive quarterly cash dividend since the company’s formation in 2001.

Q&A Session

The Board also declared a 5% stock dividend to be issued December 15, 2025, to shareholders of record on December 1, 2025. This represents the 25th consecutive year that the Board has declared a 5% stock dividend, a continued demonstration of our long-term commitment to support growth in value and liquidity for our shareholders. Landmark’s capital and liquidity measures are strong, and we have a stable low-cost core deposit base, thanks to the network of community-based banking centers we operate and our relationship banking model. We remain risk-averse in both monitoring the company’s interest rate and concentration risks and in maintaining a strong credit discipline. As we look ahead, we look forward to building on the momentum of the third quarter.

We will continue to invest in talented associates and make infrastructure upgrades to support continued customer growth while making Landmark an exceptional place to work and bank. I will now turn the call over to Mark Herpich, our CFO, who will review the financial results in detail with you.

Mark Herpich: Thanks, Abby, and good morning to everyone. While Abby has just provided a highlight of our overall strong financial performance in the third quarter of 2025, I’ll provide some additional details on these results. Net income in the third quarter of 2025 totaled $4.9 million compared to $4.4 million in the prior quarter and $3.9 million in the third quarter of 2024. Compared to the prior quarter, the solid growth in net income this quarter was mainly due to continued increases in net interest income and higher noninterest income. In the third quarter of 2025, net interest income totaled $14.1 million, an increase of $411,000 compared to the second quarter of 2025 due to higher interest income. Total interest income on loans increased $597,000 this quarter to $17.8 million due to higher average loan balances.

Average loans increased by $26.7 million and while the tax equivalent yield on the loan portfolio remained steady at 6.37%. Interest income on investment securities increased slightly to $2.9 million this quarter due to a small improvement in our yield earned on our investment securities balances, while our average investment securities balance declined slightly by $1.2 million. The yield on investment securities totaled 3.35% in the current quarter compared to 2.99% in the third quarter of 2024. Interest expense on deposits in the third quarter of 2025 increased $266,000 due to a mix — a shift mix in our interest-bearing deposits, which grew by $19.1 million. Interest expense on borrowed funds decreased by $36,000 due to lower average balances.

The average rate on interest-bearing deposits increased 4 basis points to 2.18%, mainly due to growth in certificates of deposits, which have higher rates. The average rate on our other borrowed funds increased 11 basis points to 5.09% in the third quarter as our lower cost repurchase agreement balances dropped. Total cost of funds was 2.44% for the quarter ended September 30, 2025, a decrease of 38 basis points as compared to the third quarter of 2024. Landmark’s net interest margin on a tax equivalent basis held steady at 3.83% in the third quarter of 2025 as compared to the second quarter of 2025. In comparison to the comparable third quarter of 2024, our net interest margin improved by 53 basis points. This quarter, we provided $850,000 to our allowance for credit losses after taking a $1 million provision in the prior quarter.

Net charge-offs totaled $2.3 million in the third quarter of 2025, which mostly pertains to the resolution of a previously disclosed commercial loan. This compares to net charge-offs of $40,000 in the prior quarter. At September 30, 2025, our allowance for credit losses of $12.3 million remains strong and represents 1.10% of gross loans. Noninterest income totaled $4.1 million this quarter, an increase of $442,000 compared to the prior quarter. The increase was primarily due to growth in gains of $208,000 on sales of mortgage loans, coupled with a $184,000 increase in fees and service charges related to higher deposit-related fee income. Noninterest expense for the third quarter of 2025 totaled $11.3 million, an increase of $290,000 compared to the prior quarter.

This increase related primarily to increases of $206,000 in professional fees, $120,000 in occupancy and equipment expense and $70,000 in compensation and benefits expense. The increase in professional fees was driven by higher consulting costs during the quarter. Partially offsetting these increases was a decrease in data processing expense this quarter. The combination of growth in noninterest income, coupled with control over our expenses has resulted in our efficiency ratio improving to 60.7% for the third quarter of 2025 as compared to 66.5% in the third quarter of 2024. This quarter, we recorded a tax expense of $1.1 million, resulting in an effective tax rate of 18.7% as compared to tax expense of $944,000 in the second quarter of this year or an effective tax rate of 17.7%.

Gross loans remained relatively flat in comparison to the second quarter at $1.1 billion. However, our average loans grew by $26.7 million or approximately 10% annualized during the third quarter. During the quarter, actual loan growth was primarily comprised of an increase in our commercial and residential real estate loan portfolios, but offset by lower commercial and construction loan portfolios. Investment securities decreased $2.4 million during the third quarter of 2025, mainly due to maturities exceeding our level of purchases. Pretax unrealized net losses on our investment portfolio declined by $4.7 million to $9.2 million this quarter, and our investment portfolio has an average duration of 3.7 years with a projected 12-month cash flow of $85.8 million.

Deposits totaled $1.3 billion at September 30, 2025, and increased by $51.6 million on a linked-quarter basis. Compared to the prior quarter, certificates of deposits grew by $22.9 million. Interest checking and money market deposits increased by $16.5 million and noninterest checking grew by $14 million. Average interest-bearing deposits, however, increased by $19.1 million in the third quarter of 2025, while average borrowings declined by $6.0 million during the quarter. Our loan-to-deposit ratio totaled 83.4% at September 30 and continues to provide us sufficient liquidity to fund future loan growth. Stockholders’ equity increased $7.4 million during the third quarter to $155.7 million at September 30, 2025, and our book value increased to $26.92 per share at September 30 compared to $25.66 per share at June 30.

The increase in stockholders’ equity this quarter mainly resulted from a decline in our other comprehensive losses driven by lower net unrealized losses on our investment securities, along with net earnings from the quarter. Our consolidated and bank regulatory capital ratios as of September 30, 2025, are strong and exceed the regulatory levels considered well capitalized. Now let me turn the call over to Raymond to review highlights of our loan portfolio and credit risk outlook.

Raymond McLanahan: Thank you, Mark, and good morning to everyone. As noted earlier, loan growth for the third quarter was relatively flat on a period-end basis, although average loans grew $26.7 million or 9.8% on an annualized basis. We saw increases in our commercial real estate, mortgage and consumer portfolios. However, these were offset by reductions in our commercial, construction and land and agricultural loan portfolios. Our commercial real estate portfolio grew by $19 million this quarter, while our mortgage and consumer portfolios increased $4.5 million and $1.4 million, respectively. However, commercial and construction and land loans declined by $17.6 million and $6.6 million, respectively. Turning to credit quality.

Nonaccrual loans declined by $7 million this quarter, while net loan charge-offs totaled $2.3 million, mostly driven by the resolution of a large commercial loan relationship we previously disclosed in Q3 of last year and had been on nonaccrual. Excluding this commercial loan, net loan losses remained low. Additionally, a $1 million commercial real estate loan was placed on nonaccrual last quarter has now been fully collected. The balance of past due loans between 30 and 89 days still accruing interest increased slightly, totaling $4.9 million or 0.43% of gross loans. Net loan charge-offs for Q3 totaled $2.3 million compared to just $9,000 in Q3 of 2024. Year-to-date net loan charge-offs represented 0.29% of average loans. Our allowance for credit losses stood at $12.3 million or 1.10% of gross loans.

Our Kansas economy has remained healthy. As of August 31, the seasonally adjusted unemployment rate was 3.8% according to the Bureau of Labor Statistics. Regarding housing, the Kansas Association of REALTORS recently reported that home sales in the state increased 1.2% year-over-year in September. The median sale price rose 5.5% from a year earlier, and the association also reported that homes sold in September were typically on the market for 15 days and sold for 100% of their list prices. We recognize that investors are closely watching asset quality across the banking sector. We remain vigilant in our underwriting, portfolio monitoring and recovery efforts. Our strategy continues to emphasize a resilient relationship-driven approach. We’re confident in the strength of our portfolio and our ability to navigate evolving market dynamics.

With that, I thank you. I’ll turn the call back over to Abby.

Abigail Wendel: Thanks, Raymond. Before we go to questions, I want to summarize by saying we were pleased with our results in the third quarter. Growth in average loan balances, a steady margin and higher noninterest income all contributed to solid revenue growth this quarter. We are focused on maintaining solid credit quality given the uncertainties in the economy, and we continually look for efficiencies in our operations. 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 to further grow our business and add to our customer base. We continue to work on strengthening our existing customer relationships and are focused on growing lending and fee businesses across all our markets.

Finally, I’d like to thank all the associates at Landmark National Bank. Their daily focus on executing our strategies, delivering extraordinary service to our customers and communities is key to our success. And with that, I’ll open up the questions — I’ll open up the call to questions that anyone might have.

Operator: [Operator Instructions] We currently have no questions submitted. So I’d like to hand back to Abby for closing remarks.

Abigail Wendel: Thank you. I want to thank everyone for participating in today’s earnings call. I appreciate your continued support and confidence in the company, and I look forward to sharing news related to our fourth quarter 2025 results at our next earnings conference call. I hope everyone has a great day.

Operator: This concludes today’s call. Thank you all for joining. You may now disconnect your lines.