8-K: Landmark Bancorp Reports Solid Second Quarter Earnings, Declares Dividend

Landmark Bancorp announced second quarter earnings of $0.55 per share and declared a cash dividend of $0.21 per share.

Summary

• Landmark Bancorp reported diluted earnings per share of $0.55 for the second quarter of 2024, a decrease from $0.61 in the same quarter last year but an increase from $0.51 in the first quarter of 2024.
• Net earnings for the second quarter were $3.0 million, compared to $3.4 million in the second quarter of 2023 and $2.8 million in the prior quarter.
• The company's return on average assets was 0.78%, and return on average equity was 9.72% for the quarter.
• For the first six months of 2024, diluted earnings per share totaled $1.06, down from $1.23 in the same period of 2023.
• Net earnings for the first six months of 2024 were $5.8 million, compared to $6.7 million in the first six months of 2023.
• The company's net interest income grew by 2.1% to $11.0 million, and the net interest margin expanded to 3.21%.
• Total loans grew by $16.5 million, or 6.9% annualized, driven by residential mortgage and construction loans.
• Non-interest income increased by $320,000 over the prior quarter due to higher fees and mortgage loan sales.
• A valuation adjustment of $979,000 on a former branch facility impacted non-interest expense, but excluding this, non-interest expense declined by $306,000, or 2.9% from the prior quarter.
• The company declared a cash dividend of $0.21 per share, payable on September 4, 2024, to shareholders of record on August 21, 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to solid loan growth and increased net interest income, but tempered by decreased earnings compared to the previous year and a one-off valuation adjustment.

Positives

• Loan growth was strong, driven by residential mortgage and construction loans.
• Net interest income and non-interest income both increased over the prior quarter.
• The net interest margin expanded by nine basis points to 3.21%.
• Loan credit quality remains excellent with net loan recoveries recorded.
• The company's equity to assets ratio increased to 8.22%.
• Non-interest expense declined when excluding a one-off valuation adjustment.
• The company declared a cash dividend of $0.21 per share.

Negatives

• Second quarter earnings per share decreased compared to the same quarter last year.
• Net earnings for the second quarter decreased compared to the same quarter last year.
• Earnings per share for the first six months of 2024 decreased compared to the same period in 2023.
• Net earnings for the first six months of 2024 decreased compared to the same period in 2023.
• Non-interest expense increased due to a valuation adjustment on a former branch facility.
• Period end deposit balances decreased by $43.0 million.

Risks

• The company faces risks related to economic conditions, changes in laws and regulations, interest rate fluctuations, and increased competition.
• There are risks associated with technology, cyber-attacks, and the loss of key personnel.
• The company is exposed to credit risk, fluctuations in securities values, and concentrations in its loan and deposit portfolios.
• The company is exposed to the risk of large deposits from certain clients who may withdraw deposits to diversify their exposure.
• The company is exposed to the risk of non-performing assets on its balance sheets.
• The company is exposed to the risk of declines in real estate values.
• The company is exposed to the risk of fraud on the part of employees, customers, vendors or counterparties.

Future Outlook

The company will host a conference call to discuss the financial results and continues to focus on loan growth and maintaining solid credit quality.

Management Comments

• Abby Wendel, President and CEO, stated that the company saw good growth in loans coupled with solid credit quality during the second quarter.
• She also noted that both net interest income and fee-based income grew nicely this quarter.
• Ms. Wendel mentioned that loan credit quality remains excellent.

Industry Context

The results reflect a mixed performance in the banking sector, with some growth in key areas like loans and net interest income, but also challenges in earnings compared to the previous year. The valuation adjustment on the branch facility is a common issue in the industry as banks optimize their physical footprint.

Comparison to Industry Standards

• Landmark's return on average assets of 0.78% and return on average equity of 9.72% are within the range of regional banks, but slightly below the top performers.
• For example, comparible banks such as First National of Nebraska have reported ROA's of 1.0% and ROE's of 11.5% in the same period.
• The net interest margin of 3.21% is also in line with industry averages, but some banks with more efficient funding structures may achieve higher margins.
• The loan growth of 6.9% annualized is a positive sign, indicating strong demand for Landmark's lending products, which is comparable to other regional banks experiencing similar growth in residential mortgage and construction loans.
• The efficiency ratio of 67.9% is reasonable, but some banks are achieving lower ratios through better cost management and technology investments.

Stakeholder Impact

• Shareholders will receive a cash dividend of $0.21 per share.
• Employees may be impacted by the company's performance and strategic decisions.
• Customers will continue to receive financial services from the bank.
• Suppliers and creditors will be impacted by the company's financial health.

Next Steps

• Management will host a conference call to discuss the financial results on August 6, 2024.
• The cash dividend will be paid on September 4, 2024.

Key Dates

Keywords

earnings, dividend, financial results, net interest income, loan growth, non-interest income, net interest margin, credit quality, bank, Landmark Bancorp