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LANDMARK BANCORP INC (LARK)·Q4 2024 Earnings Summary
Executive Summary
- Q4 2024 delivered solid profitability with diluted EPS of $0.57 and net income of $3.3M; net interest margin expanded 21 bps to 3.51% on lower funding costs, while efficiency ratio rose to 70.0% due to higher professional fees and compensation .
- Loan growth accelerated sharply (+$50.5M; 20.1% annualized), broad-based across CRE (+$21.1M), commercial (+$10.7M), agriculture (+$8.6M), and 1–4 family (+$7.8M); deposits increased $53.3M with seasonal strength in public funds, and borrowings declined $34.7M .
- Non-interest income was pressured by a $1.0M realized loss to reposition the securities portfolio, partly offset by ~$0.7M higher BOLI income; management also recognized $1.0M of previously unrecognized tax benefits, producing a tax benefit of $0.9M and a -37.0% effective tax rate in Q4 .
- Board declared a $0.21 cash dividend (up from $0.20 paid in Q4) and emphasized margin expansion potential even in a stable rate environment; catalysts include improving NIM, funding mix shift, and strong loan production, balanced by elevated (but stable) NPLs and higher opex .
What Went Well and What Went Wrong
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What Went Well
- Broad-based loan growth with new record gross loans near $1.1B; loan-to-deposit ratio remained conservative at 78.2%, preserving liquidity .
- Funding costs declined: average rate on interest-bearing deposits fell 23 bps to 2.25%, and other borrowings fell 51 bps to 5.10%; NIM expanded 21 bps Q/Q to 3.51% .
- Management tone constructive on margin trajectory: “see greater margin expansion over the course of ’25 even in a stable rate environment” (Abby Wendel) .
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What Went Wrong
- Non-interest income fell Q/Q on a $1.0M securities loss and weaker mortgage sale gains; other non-interest income was lower due to non-recurring asset sale gains in Q3 .
- Non-interest expense rose $1.3M Q/Q (professional fees +$470k; compensation +$461k) as Landmark invested in people and initiatives; efficiency ratio worsened to 70.0% .
- NPLs remain elevated (driven by one commercial relationship in Q3); NPLs were $13.1M (1.25% of loans), though flat-to-down sequentially and 30–89 day delinquencies improved to $6.2M .
Financial Results
Guidance Changes
Management indicated aim for margin expansion even if rates remain stable, but no quantitative ranges were provided .
Earnings Call Themes & Trends
Management Commentary
- Abby Wendel, CEO: “We saw strong growth in virtually all loan categories… Total deposits also increased… helped fund loan growth and reduce expensive short-term borrowings… our net interest margin improved to 3.51%… Strategic investments resulted in higher non-interest expenses… Credit quality remained solid overall.”
- CFO Mark Herpich: “Net interest income totaled $12.4M… due primarily to lower interest expense on deposits and borrowings… average rate on interest-bearing deposits decreased 23 bps to 2.25%, while other borrowed funds declined 51 bps to 5.10%.”
- CEO on 2025 priorities: focus on infrastructure, associate and customer experience, information tools; seek efficiency improvements (70% efficiency ratio is “a bit high”); open to M&A to build Kansas density .
Q&A Highlights
- Margin trajectory in stable-rate scenario: Management expects margin expansion in 2025 even if rates hold steady, via deposit/pricing levers and investment portfolio restructuring .
- Loan growth repeatability: Pipeline remains strong; December bookings support higher average balances and NII into Q1; 20% annualized growth not required every quarter but momentum is solid .
- Hiring/coverage: Recently added a lender in Southwest Kansas; ongoing recruiting and developmental programs in Topeka/Manhattan to deepen capacity .
- Mortgage profitability: Segment results not disclosed; team runs lean and adjusts to rate backdrop; mortgage production supports cross-sell opportunities; outlook tied to rate dynamics .
- BOLI benefit: ~+$700k increase due to a benefit realization in late December, lifting non-interest income .
Estimates Context
Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of query; we were unable to retrieve estimates for LARK due to an SPGI request limit error. As a result, we cannot quantify beats/misses versus Street for this quarter [functions.GetEstimates error].
Key Takeaways for Investors
- Net interest margin expansion is the core near-term driver; funding cost declines (deposits -23 bps; other borrowings -51 bps) and securities repositioning underpin improved spread in Q4 and into 2025 .
- Loan growth momentum is strong and diversified, with CRE/commercial/agriculture/1–4 family all contributing; average balances set up Q1 NII tailwinds .
- Watch non-interest expense: investments in people and consulting lifted opex; efficiency ratio at 70.0% remains a focus area for improvement and could be an M&A gating metric .
- Credit quality stable but elevated NPLs persist after a Q3 spike; ACL increased to 1.22% of loans and delinquencies improved—monitor resolution of the identified commercial relationship .
- One-time items: $1.0M securities loss depressed non-interest income; ~$0.7M BOLI benefit and $1.0M UTB recognition boosted tax benefit—normalize these in modeling .
- Capital and liquidity remain strong (loan-to-deposit 78.2%, borrowings down $34.7M); TBVPS dipped on higher AOCI as long-end rates rose at year-end .
- Dividend raised to $0.21 and long-standing 5% stock dividend maintained—signals confidence; total shareholder return supported by improving margin trajectory .