10-Q: Landmark Bancorp Reports Strong Q3 Earnings Growth

Landmark Bancorp, Inc. announced a significant increase in net earnings and net interest income for the third quarter and first nine months of 2025, driven by loan growth and lower interest expenses.

Summary

• Net earnings for the third quarter of 2025 increased by 25.4% to $4.9 million, up from $3.9 million in the same period of 2024.
• For the first nine months of 2025, net earnings rose by 44.4% to $14.0 million, compared to $9.7 million in the prior year period.
• Net interest income grew by 21.5% to $14.1 million in Q3 2025 and by 22.7% to $40.9 million for the first nine months of 2025.
• The net interest margin, on a tax-equivalent basis, improved to 3.83% for Q3 2025 and 3.81% for the first nine months of 2025.
• Total assets increased to $1.617 billion at September 30, 2025, from $1.574 billion at December 31, 2024.
• Loans, net of allowance for credit losses, increased to $1.105 billion at September 30, 2025, from $1.039 billion at December 31, 2024.
• The allowance for credit losses on loans decreased to $12.3 million, or 1.10% of gross loans, at September 30, 2025, from $12.8 million, or 1.22% of gross loans, at December 31, 2024.
• Net loan charge-offs were $2.3 million in Q3 2025 and $2.4 million for the first nine months of 2025, primarily due to a single commercial credit.
• Non-accrual loans decreased to $10.0 million (0.90% of gross loans) at September 30, 2025, from $13.1 million (1.25% of gross loans) at December 31, 2024.
• The Company declared its 97th consecutive quarterly cash dividend of $0.21 per share and its 25th consecutive 5% stock dividend.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance with significant increases in net earnings and net interest income, coupled with improved asset quality metrics and robust capital. While there was a notable increase in loan charge-offs due to a single commercial credit and a decrease in non-interest income, the overall trend is positive, indicating effective management in a challenging economic environment.

Positives

• Net earnings increased significantly by 25.4% for the third quarter and 44.4% for the first nine months of 2025.
• Basic and diluted earnings per share saw substantial increases for both the quarter and year-to-date periods.
• Net interest income grew by 21.5% in Q3 and 22.7% YTD, driven by increased average loan balances and lower interest expense.
• Net interest margin improved to 3.83% in Q3 2025 and 3.81% YTD 2025.
• Return on average assets (ROAA) and return on average equity (ROAE) both increased, indicating improved profitability and efficiency.
• Asset quality improved with non-accrual loans decreasing by 23.7% and loans past due 30-89 days decreasing by 21%.
• The Company and its Bank subsidiary maintain strong capital ratios, exceeding all 'well capitalized' regulatory thresholds, including the capital conservation buffer.
• Accumulated other comprehensive loss improved from $(15.828) million at December 31, 2024, to $(6.988) million at September 30, 2025.
• The Company declared its 97th consecutive quarterly cash dividend and its 25th consecutive 5% stock dividend, demonstrating consistent shareholder returns.

Negatives

• Provision for credit losses increased significantly by 70% in Q3 2025 to $850,000 and by 131.25% YTD 2025 to $1.850 million.
• Net loan charge-offs increased substantially to $2.3 million in Q3 2025 and $2.4 million YTD 2025, primarily due to a single commercial credit.
• Non-interest income decreased by 4.3% in Q3 2025 and 2.8% YTD 2025, mainly due to lower fees and service charges and the absence of a prior year gain on sale of a branch facility.
• Non-interest expense increased by 6.6% in Q3 2025 and 2.4% YTD 2025, driven by higher compensation and benefits and professional fees.
• Total deposits saw a slight decrease from $1.329 billion at December 31, 2024, to $1.326 billion at September 30, 2025.

Risks

• The strength of local, state, national, and international economies, including inflationary pressures and future monetary policies of the Federal Reserve.
• Effects on the U.S. economy from new or changed policies, regulations, and executive orders, including tariffs, immigration, DEI, ESG, consumer protection, foreign policy, and tax regulations.
• Changes in interest rates and prepayment rates of assets.
• Increased competition in the financial services sector, including from non-bank competitors like credit unions and fintech companies.
• Rapid and expensive technological changes, including the development and implementation of artificial intelligence tools, which may be difficult to implement or have unforeseen consequences.
• Effectiveness of the risk management framework.
• Interruptions in information technology and telecommunications systems and third-party services.
• Economic effects of severe weather, natural disasters, widespread disease or pandemics, or other external events.
• The loss of key executives or employees.
• Changes in consumer spending.
• Challenges in the integration of acquired businesses.
• The commencement, cost, and outcome of litigation and other legal proceedings and regulatory actions.
• Changes in accounting policies and practices, such as the implementation of the current expected credit losses (CECL) accounting standard.
• The economic impact of past and any future terrorist attacks, acts of war (including ongoing conflicts in the Middle East and the Russian invasion of Ukraine), or threats thereof.
• The ability to manage credit risk, forecast loan losses, and maintain an adequate allowance for loan losses.
• Fluctuations in the value of securities held in the securities portfolio.
• Concentrations within the loan portfolio and large loans to certain borrowers, including commercial real estate (CRE) loans.
• The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits.
• The level of non-performing assets on the balance sheets.
• The ability to raise additional capital.
• The occurrence of fraudulent activity, breaches or failures of information security controls or cybersecurity-related incidents, including sophisticated attacks using artificial intelligence and insider fraud.
• Declines in real estate values.
• The effects of fraud on the part of employees, customers, vendors, or counterparties.

Future Outlook

Management expects to continue operating profitably and believes its efforts to run a high-quality financial institution with a sound asset base will create a strong foundation for future growth and profitability. The future dividend practice is dependent upon the performance of the economy and the Company's overall performance.

Management Comments

• "In October 2025, we declared our 97th consecutive quarterly dividend, and we currently have no plans to change our dividend strategy given our current capital and liquidity position."
• "However, while we have achieved a strong capital base and expect to continue operating profitably, our future dividend practice is dependent upon the performance of the economy and the Companys overall performance."
• "In October 2025, we also declared a 5% stock dividend issuable on December 15, 2025. This is the 25th consecutive year that the Company has issued a 5% stock dividend."
• "Management believes its efforts to run a high-quality financial institution with a sound asset base will continue to create a strong foundation for continued growth and profitability in the future."

Industry Context

Economic conditions in the United States remained sluggish during the first nine months of 2025, with elevated inflation and high interest rates impacting the economy. Sustained high interest rates have generally affected financial institutions, leading to higher funding costs and lower fair values for investment securities. Despite these headwinds, Landmark Bancorp has maintained strong capital and liquidity, along with a stable, conservative, and predominantly retail-based deposit portfolio, positioning it favorably compared to broader industry challenges.

Comparison to Industry Standards

• The Bank was categorized as 'well capitalized' under the regulatory framework for prompt corrective action, exceeding all minimum capital requirements, including the capital conservation buffer.
• The Company's Common Equity Tier 1 Capital Ratio of 11.13% significantly surpasses the regulatory minimum of 7.0% (including buffer).
• The Company's Tier 1 Capital Ratio of 12.94% exceeds the regulatory minimum of 8.5% (including buffer).
• The Company's Total Risk Based Capital Ratio of 13.99% is well above the regulatory minimum of 10.5% (including buffer).
• The Company's Leverage Ratio of 9.44% is substantially higher than the regulatory minimum of 4.0%.

Corporate Governance

Legal Proceedings

• There are no material pending legal proceedings to which the Company or its subsidiaries is a party or which any of their property is subject, other than ordinary routine litigation incidental to their respective businesses.

Related Party Transactions

• Subordinated debentures totaling $21.651 million are held by three business trusts controlled by the Company. Interest payments on these debentures must be paid before dividends on capital stock.

Stakeholder Impact

• Shareholders benefit from increased net earnings, higher EPS, consistent cash dividends, and a 5% stock dividend, indicating strong returns and management confidence.
• Employees are positively impacted by increased compensation and benefits, suggesting a stable and growing workforce.
• Customers continue to receive quality financial and banking services through a relationship-based banking model.
• Creditors are reassured by the Company's strong capital position and liquidity, enhancing confidence in its ability to meet financial obligations.

Next Steps

• Payment of a $0.21 per share cash dividend to common stockholders on November 26, 2025.
• Issuance of a 5% stock dividend to common stockholders on December 15, 2025.
• Continued monitoring and management of interest rate and concentration risks through asset/liability management and lending strategies.
• Ongoing efforts to identify and resolve problem credits or move non-performing credits out of the loan portfolio.
• Subordinated debentures from the Freedom Bank acquisition become callable after September 3, 2026.
• The $5.0 million line of credit from an unrelated financial institution matures on November 1, 2026.
• The $10.0 million borrowing from an unrelated financial institution matures on September 1, 2027.

Key Dates

Recommendation

The filing demonstrates robust financial performance with significant year-over-year growth in net earnings and net interest income, driven by effective loan portfolio management and favorable interest expense trends. The improvement in key profitability metrics (ROAA, ROAE, NIM) and asset quality indicators (decreased non-accrual and past due loans) is commendable, especially within a challenging economic environment. While the increase in net charge-offs due to a single commercial credit is a point of concern, it appears to be an isolated event rather than a systemic issue, and overall asset quality metrics improved. The company's strong capital position, exceeding all 'well capitalized' regulatory thresholds, provides a solid foundation for future growth and resilience. The consistent dividend payments and declaration of a 25th consecutive stock dividend further underscore management's confidence and commitment to shareholder returns. These factors collectively suggest a healthy and well-managed institution with positive momentum, making it an attractive investment.

Keywords

Banking, Financial Services, Regional Bank, Community Bank, Net Interest Income, Earnings Growth, Loan Portfolio, Credit Quality, Capital Ratios, Dividends, SEC Filing, 10-Q, Kansas, Nasdaq, Commercial Real Estate, Mortgage Servicing Rights