Landmark Bancorp Q4 2025 Earnings Call - NIM and deposit-cost discipline fuel 43% y/y EPS surge

William, Moderator, Landmark Bancorp: Hello, everyone. Thank you for attending today’s Landmark Bancorp, Inc. Q4 earnings call. My name is William, and I will be your moderator today. All lines will be muted during the presentation portion of the call. At this time, I would now like to pass the conference over to our host, Shelley Reed, Investor Relations with Landmark Bancorp. Shelley?

Shelley Reed, Investor Relations, Landmark Bancorp: Thank you. Good morning, and welcome to Landmark Bancorp’s fourth quarter and full year 2025 earnings conference call. My name is Shelley Reed, new to Landmark as of August 2025. Joining me today are several members of our executive leadership team, including our President and CEO, Abby Wendel; Chief Financial Officer, Mark Herpich; and Chief Credit Officer, Raymond McLanahan. During today’s call, we may make statements that constitute projections, plans, objectives, future performance, beliefs, expectations, or similar forward-looking statements. These statements involve risks and uncertainties, which should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. We caution that such statements are predictions only and that actual results may differ materially.

We include more information on these factors in our earnings release, furnished with our Form 8-K yesterday, as well as our Form 10-K and Form 10-Q filings and subsequent filings with the SEC. Additionally, all statements, including forward-looking statements, speak only as of the date they are made, and Landmark undertakes no obligations to update any statement in light of new information or future events. Also, our remarks may reference certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP measures, including the reconciliation of those non-GAAP metrics to GAAP, are contained in our earnings release, which we filed yesterday with the SEC, and is also available on the investor section of our website at banklandmark.com.

We caution that these non-GAAP financial metrics should not be viewed as a substitute for operating results determined in accordance with GAAP as contained in our earnings release and other filings with the SEC. A replay of this call will be available through February fifth. Access information can be found in our earnings release. I will now turn the conference call over to our President and Chief Executive Officer, Abby Wendel.

Abby Wendel, President and CEO, Landmark Bancorp: Thank you, Shelley, and welcome to the team. Good morning, everyone, and thank you for joining our call today to discuss Landmark’s earnings and operating results for the fourth quarter and full year of 2025. Landmark’s strong fourth quarter results capped off a year of outstanding revenue growth, increased profitability, pricing discipline, and per share increases in earnings and tangible book value. These results are a testament to the hard work and dedication of our talented associates. We are pleased to report net income of $4.7 million or diluted earnings per share of $0.77 for the fourth quarter. Tangible book value increased to $20.79 per share, an increase of $0.83 versus the prior quarter, and an increase of $4.09 or 24% over year-end 2024.

For full year 2025, we reported net income of $18.8 million or $3.07 per share. That’s a 43% increase over our 2024 earnings per share. We achieved positive operating leverage in 2025, driven by 17% revenue growth, which outpaced our overhead expense growth. Revenue growth was largely driven by continued expansion in net interest income, which increased each quarter throughout 2025. Our net interest margin increased 58 basis points to 3.86% for the full year of 2025, driven by our attractive cost of deposits, which improved to 1.56%. For the fourth quarter of 2025, our total cost of deposits was 1.50%, driven by our pricing discipline and the nature of our core deposit base.

Our efficiency ratio improved to 62.7% in 2025 from 69.1% in 2024, as we controlled expense growth while enhancing our capabilities to better serve our customers and invest in our talent throughout the organization and across our footprint. Throughout the year, we delivered 11.5 average total loan growth, with loans ending the year at $1.1 billion. Commercial loan production was strong, led by growth in commercial real estate loans, and our mortgage team delivered robust results, increasing originations 11% year-over-year. We also worked diligently throughout the year to address a few problem credits to better position our loan portfolio and strengthen our overall balance sheet. We remain diligent in our efforts to monitor and constructively address our non-performing loans.

Our capital ratios remain above well-capitalized, and our tangible common equity to assets now exceeds 8%. I am pleased to report our board of directors has declared a cash dividend of $0.21 per share to be paid February 26 to shareholders of record as of February 12, 2026. This represents the 98th consecutive quarterly cash dividend since the parent company’s formation in 2021, or excuse me, in 2001. I will now turn the call over to Mark Herpich, our CFO, who will review the financial results in detail with you.

William, Moderator, Landmark Bancorp: Thanks, Abby, and good morning to everyone. While Abby has just provided a highlight of our overall strong financial performance this year, I’ll provide some further details on our fourth quarter results. Net income in the fourth quarter of 2025 totaled $4.7 million, compared to $3.3 million in the fourth quarter of 2024.... mainly due to continued growth in net interest income. In the fourth quarter of 2025, net interest income totaled $14.8 million, an increase of $695,000 compared to the third quarter of 2025, driven by increased asset yields and lower funding costs. Net interest income also grew $2.4 million compared to the same period last year.

Interest income on loans increased $75,000 this quarter to $17.9 million due to higher yields on loans. Average loan balances decreased by $2.1 million, while the tax equivalent yield on the loan portfolio improved 3 basis points to 6.40%. Interest expense on deposits in the fourth quarter of 2025 decreased $272,000 compared to the prior quarter as a result of lower costs of deposits, despite an increase in average deposit balances during the fourth quarter. Interest expense on borrowed funds also decreased by $325,000 due to lower average balances and borrowing rates. The average rate on interest-bearing deposits decreased 12 basis points to 2.06%, mainly due to lower rates on deposits.

The average rate on other borrowed funds decreased 16 basis points to 4.93% in the fourth quarter, resulting from lower short-term Fed funds rates. Landmark’s net interest margin on a tax equivalent basis improved 20 basis points to 4.03% in the fourth quarter of 2025 as compared to the third quarter of 2025, and improved 52 basis points compared to the fourth quarter of 2024. This quarter, we provided $500,000 to our allowance for credit losses after taking an $850,000 provision in the prior quarter. Net charge-offs totaled $341,000 in the fourth quarter of 2025, compared to net charge-offs of $2.3 million in the prior quarter.

As discussed previously, the third quarter charge-offs were elevated as we reached resolution with a single commercial credit. At December 31, 2025, our allowance for credit losses of $12.5 million remains strong and represents 1.12% of gross loans. Non-interest income totaled $3.9 million this quarter, a decrease of $169,000 compared to the prior quarter. The decrease was primarily due to a $101,000 loss on the sale of lower-yielding investment securities during the fourth quarter as part of our strategy to reposition our investment securities portfolio to improve future income. Non-interest expense for the fourth quarter of 2025 totaled $12.3 million, an increase of $1.0 million compared to the prior quarter.

This increase related primarily to increases of $511,000 in compensation and benefits expense, $173,000 in professional fees, and an impairment loss taken on repossessed assets held for sale of $356,000. The increase in compensation and benefits resulted from an increase in the number of employees, coupled with higher incentive compensation tied to improved company performance. The increase in professional fees was driven by higher audit and consulting costs during the quarter. This quarter, we recorded tax expense of $1.2 million, resulting in an effective tax rate of 20%, as compared to tax expense of $1.1 million in the third quarter of this year, or an effective tax rate of 18.7%.

Gross loans decreased $6.3 million in the current quarter compared to the previous quarter and totaled $1.1 billion at year-end. Average loans, however, declined only $2.1 million in the fourth quarter. We experienced decreases in our commercial and residential real estate portfolios, which were offset by increases in our commercial real estate, agriculture, and construction loan portfolios. Our investment securities decreased $1.9 million during the fourth quarter of 2025, mainly due to maturities exceeding our level of purchases. Our investment portfolio has an average duration of 4.0 years, with a projected twelve-month cash flow of $86.4 million. Pre-tax unrealized net losses on our investment portfolio declined by $1.7 million to $7.5 million this quarter.

Our deposits totaled $1.4 billion at December 31, 2025, and increased by $63.4 million in the fourth quarter compared to the prior quarter. This quarter, interest checking and money market deposits increased by $71.6 million, while certificates of deposit declined by $12.1 million. Seasonal growth in public funds deposit accounts, as well as growth in core deposit, deposits, drove the quarterly increase in deposits. Year-over-year deposits are also up $60.1 million, and non-interest-bearing deposits ended the year at 26.3% of total deposits. Our total borrowings declined by $79.8 million during the quarter, as deposit growth allowed us to reduce more expensive short-term borrowings. Our loan-to-deposit ratio totaled 79.1% at December 31 and continues to provide us sufficient liquidity to fund future loan growth.

Stockholders’ equity increased $4.9 million during the fourth quarter to $160.6 million at December 31, 2025, and our book value increased to $26.44 per share at December 31, compared to $25.64 at September 30.

Abby Wendel, President and CEO, Landmark Bancorp: ...The increase in stockholders’ equity this quarter mainly resulted from net earnings from the quarter, coupled with a decline in other comprehensive loss. Our consolidated and bank capital ratios as of December 31, 2025, are strong and exceed the regulatory capital levels considered to be well capitalized. Now, let me turn the call over to Raymond to highlight some of our loan portfolio and a look at our credit risk going forward.

Raymond McLanahan, Chief Credit Officer, Landmark Bancorp: Thanks, Mark, and good morning to everyone. As noted earlier, loan balances for the fourth quarter were down slightly despite overall growth for the year. We saw increases in our commercial real estate and agricultural portfolios. However, these were offset by reductions in our commercial and 1-4, 1-4 family portfolios. Our commercial real estate portfolio grew by $4.7 million this quarter due to loan production net of payoffs, and our agricultural portfolio grew by $2.9 million as a result of increased line utilization. As part of our ongoing efforts to maintain a strong and resilient balance sheet, we continue to proactively monitor the overall credit quality of our loan portfolio to identify emerging risks and minimize future losses. Throughout the year, we have worked to reduce the overall risk in our loan portfolio and reduce our non-performing loans.

As of December 31, 2025, non-performing loans, primarily non-accrual loans, decreased slightly from the prior quarter, totaled just under $10 million or 0.90% of gross loans. Compared to year-end 2024, we reduced non-performing loans by $3.1 million, an improvement of 24%. Of our remaining non-performing loans, $1.9 million are covered by government guarantees, which we are in the process of working to collect. The balance of past due loans between 30 and 89 days, still accruing interest, decreased slightly, totaling $4.3 million, or 0.38% of gross loans. Net loan charge-offs for Q4 totaled $341,000, compared to just $219,000 during Q4 of 2024. Year-to-date, net loan charge-offs represent 0.25% of average loans.

Our allowance for credit losses stood at $12.5 million, or 1.12% of gross loans. The Kansas economy remains healthy. As of November thirtieth, the seasonally adjusted unemployment rate was 3.8%, according to the Bureau of Labor Statistics. Regarding housing, the Kansas Association of Realtors recently reported home sales of 2,560 units, down 9.6% year-over-year, while the median sale price rose to $277,000 from $265,000 a year earlier. Homes that sold in November were typically on the market 19 days and sold for 100% of their list prices. Inventory conditions continue to normalize, with active listings up to 7,833 units and a month’s supply of 2.6 months.

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

Abby Wendel, President and CEO, Landmark Bancorp: Thank you, Raymond. As we move into 2026, we look forward to building on the foundation set in 2025. We will continue to invest in our talented associates, make strategic investments to better serve our customers, and capitalize on growth opportunities in our markets. I am deeply grateful to our associates for their continued dedication to putting people first and building the meaningful connections that empower our customers and strengthen the communities we proudly serve. If there are any follow-up questions to today’s call, please see our earnings release for our CFO and investor relations contact information. We appreciate everyone being on today’s call, and we look forward to talking with you again in April.

William, Moderator, Landmark Bancorp: Thank you. That concludes today’s conference call. Thank you for your participation. You may now disconnect your lines.