Landmark Bancorp's Strategic Maneuvers Drive Strong Fourth Quarter Results

Landmark Bancorp, Inc. (LARK) has announced its fourth quarter 2024 earnings, showcasing a robust performance driven by strategic maneuvers in the face of interest rate fluctuations. The company's earnings call, scheduled for Wednesday, February 5, 2025, at 10:00 am CT, will provide further insights into its financial performance and strategic direction.

Landmark Bancorp's strategic approach to interest rate fluctuations has been instrumental in driving its financial performance in the fourth quarter of 2024. The company has effectively managed its interest income and expenses, leading to an increase in net interest income and a higher net interest margin. Here's how this has contributed to its financial performance and what insights investors can draw from this:

1. Growth in interest income on loans: Landmark Bancorp has seen a significant increase in interest income on loans, which grew by $692,000 (5.1%) compared to the previous quarter. This is primarily due to both higher rates and balances, with the average tax-equivalent yield on the loan portfolio increasing by 11 basis points to 6.04%. This growth in interest income on loans has contributed to the overall increase in net interest income.
2. Increased net interest margin: The net interest margin increased by 5 basis points to 3.11% during the fourth quarter. This improvement in net interest margin indicates that the company has been successful in managing its interest income and expenses, allowing it to generate more revenue from its lending activities.
3. Reducing reliance on borrowed funds: Landmark Bancorp has reduced its reliance on borrowed funds by selling some lower-rate investment securities at a pre-tax loss of $1.2 million and reducing higher-cost funding sources. This has helped the company lower its interest expenses and improve its overall financial performance.
4. Stabilizing interest rates: The Federal Reserve's decision to stabilize short-term rates and the decline in long-term interest rates have enabled Landmark Bancorp to grow deposits and reduce investment securities. This has allowed the company to fund continued loan growth and maintain ample liquidity for future loan growth, as reflected in its loan-to-deposit ratio of 71.3% in the fourth quarter.

For investors, these insights suggest that Landmark Bancorp has effectively navigated the interest rate environment, demonstrating its ability to adapt and capitalize on changes in the market. The company's focus on growing interest income on loans, improving the net interest margin, and reducing reliance on borrowed funds has contributed to its strong financial performance in the fourth quarter of 2024. This strategic approach indicates that the company is well-positioned to continue delivering solid results in the future, even in the face of interest rate fluctuations.



Key factors driving Landmark Bancorp's loan and deposit growth in the fourth quarter of 2024 include:

1. Stabilization of interest rates: In the fourth quarter, the Federal Reserve started to stabilize short-term rates, and long-term interest rates declined. This enabled Landmark to grow deposits and reduce investment securities, funding continued loan growth.
2. Increased loan demand: Total gross loans increased by $11.2 million, or 4.8% on an annualized basis, mainly due to growth in residential mortgage and agriculture loans. This growth aligns with the company's long-term strategy of expanding its loan portfolio to generate more interest income.
3. Deposit growth: Deposits increased by $6.8 million during the fourth quarter of 2024. This growth is likely due to the company's efforts to attract and retain customers, as well as the stabilization of interest rates, which may have encouraged customers to deposit more funds.
4. Reduced reliance on borrowed funds: Landmark sold some lower-rate investment securities at a pre-tax loss of $1.2 million and reduced higher-cost funding sources. This reduction in reliance on borrowed funds helped the company maintain its liquidity and support loan growth.

These trends align with Landmark Bancorp's long-term growth strategy, as the company aims to increase its loan portfolio, attract deposits, and maintain a strong balance sheet. By doing so, Landmark can generate more interest income, improve its net interest margin, and ultimately drive shareholder value.

Landmark Bancorp's management has effectively managed credit risk and maintained a strong balance sheet, as evidenced by the low net loan charge-offs and non-accrual loans in the fourth quarter of 2024. The company recorded net loan charge-offs of $362,000 in the fourth quarter of 2024, compared to net loan charge-offs of $67,000 in the fourth quarter of 2022. This represents a significant improvement in the company's credit quality. Additionally, the ratio of net loan charge-offs to loans totaled 0.15% in the fourth quarter of 2024, which remains low.

The company also maintained a low level of non-accrual loans, which totaled $2.4 million, or 0.25%, of gross loans at December 31, 2024. This is a decline of $2.0 million from the prior quarter. The balance of loans past due 30 to 89 days remained low at $1.6 million, or 0.17%, of gross loans at December 31, 2024.

Landmark Bancorp's management has also maintained a strong allowance for credit losses, which totaled $10.6 million at December 31, 2024, or 1.12% of period end gross loans. This ensures that the company has adequate provisions to cover potential loan losses.

The company's equity to assets ratio also remained strong at 8.13% at December 31, 2024, indicating a solid capital base.

In summary, Landmark Bancorp's management has effectively managed credit risk by maintaining low net loan charge-offs and non-accrual loans, while also maintaining a strong allowance for credit losses and equity to assets ratio. This has helped the company maintain a strong balance sheet and credit quality.

As Landmark Bancorp prepares to discuss its fourth quarter 2024 earnings, investors can expect to gain valuable insights into the company's strategic approach to interest rate fluctuations, loan and deposit growth, and credit risk management. By understanding these key factors, investors can make informed decisions about their investments in Landmark Bancorp and other financial institutions.