8-K: Landmark Bancorp Reports Solid First Quarter Earnings, Announces Increased Dividend

Landmark Bancorp, Inc. announced first quarter earnings of $0.51 per diluted share and declared a cash dividend of $0.21 per share, a 5% increase.

Summary

• Landmark Bancorp reported diluted earnings per share of $0.51 for the first quarter of 2024, compared to $0.48 in the previous quarter and $0.61 in the same quarter last year.
• Net earnings for the quarter were $2.8 million, up from $2.6 million in the prior quarter but down from $3.4 million in the first quarter of 2023.
• The company's return on average assets was 0.72%, and return on average equity was 8.88%.
• The efficiency ratio was 73.0% for the quarter.
• Total gross loans increased by $15.4 million, or 6.5% on an annualized basis, compared to the fourth quarter of 2023.
• Average interest-bearing deposits increased by $24.8 million this quarter.
• Net interest income decreased by 1.3% from the prior quarter to $10.7 million due to increased interest costs on deposits.
• The net interest margin increased slightly to 3.12%.
• Non-interest income increased by $1.1 million compared to the previous quarter, which included a $1.2 million loss on the sale of investment securities.
• Non-interest expense decreased slightly this quarter but increased 2.0% over the same period last year.
• A provision for credit losses of $300,000 was recorded in the first quarter of 2024.
• Net loan charge-offs were $7,000 in the first quarter of 2024, compared to $362,000 in the fourth quarter of 2023.
• Non-accrual loans totaled $3.6 million, or 0.38% of gross loans, and loans past due 30 to 89 days totaled $3.9 million, or 0.41% of gross loans.
• The allowance for credit losses totaled $10.9 million, or 1.13% of period end gross loans.
• The loan to deposits ratio was 73.6% at the end of the first quarter.
• A cash dividend of $0.21 per share was declared, a 5% increase, payable on May 29, 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to solid loan growth and a dividend increase, but tempered by a decrease in net earnings compared to the previous year and an increase in non-performing loans.

Positives

• The company experienced solid loan growth, particularly in residential mortgage, construction, and commercial loans.
• Expenses were well-controlled, with a slight decline this quarter.
• Credit quality remains excellent, with low net loan charge-offs.
• The company has ample liquidity for future loan growth, with a loan to deposits ratio of 73.6%.
• The dividend was increased by 5% to $0.21 per share.

Negatives

• Net earnings decreased compared to the first quarter of 2023.
• Net interest income decreased by 1.3% from the prior quarter due to increased interest costs on deposits.
• Non-interest expense increased 2.0% over the same period last year.
• Non-performing loans increased to $3.6 million, or 0.38% of gross loans.
• Loans 30-89 days delinquent increased to $3.9 million, or 0.41% of gross loans.
• Period end deposit balances decreased $22.7 million to $1.3 billion.

Risks

• The company faces risks related to changes in interest rates and prepayment rates of assets.
• Increased competition in the financial services sector could impact the company's ability to attract new customers.
• There are risks associated with changes in technology and the ability to maintain secure electronic systems.
• The company is exposed to risks related to the strength of the local, national, and international economies.
• The company is exposed to risks related to the concentration of large deposits from certain clients.
• The company is exposed to risks related to fluctuations in the value of securities held in the securities portfolio.

Future Outlook

The company will continue to focus on managing expenses and maintaining good credit quality. Management will host a conference call to discuss the company's financial results.

Management Comments

• We are pleased with our first quarter results, which included continued solid loan growth, controlled expenses, and good credit quality.
• The credit quality of our loan portfolio remains excellent.

Industry Context

The results reflect the challenges and opportunities faced by community banks in the current economic environment, including managing interest rate risk and maintaining credit quality. The increase in the dividend is a positive sign for investors.

Comparison to Industry Standards

• Landmark's return on average assets of 0.72% is within the range of other community banks, but could be improved.
• The efficiency ratio of 73.0% is slightly higher than some of the more efficient community banks, indicating room for improvement in operational efficiency.
• The loan to deposit ratio of 73.6% indicates a healthy balance sheet and ample liquidity compared to other similar community banking organizations.
• The allowance for credit losses to gross loans outstanding of 1.13% is in line with industry standards for community banks.
• The net loan charge-offs to average loans of 0.00% is very low and indicates strong credit quality compared to peers.

Stakeholder Impact

• Shareholders will benefit from the increased dividend.
• Customers will continue to receive financial services from the bank.
• Employees will continue to be employed by the company.
• Creditors will be repaid as per their agreements.

Next Steps

• Management will host a conference call on May 2, 2024, to discuss the financial results.
• The cash dividend will be paid on May 29, 2024, to shareholders of record on May 15, 2024.

Key Dates

Keywords

earnings, dividend, loans, deposits, net interest income, credit quality, financial results, bank, Landmark Bancorp