Earnings Labs

Landmark Bancorp, Inc. (LARK)

Q1 2023 Earnings Call· Sun, May 7, 2023

$28.01

+3.59%

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Transcript

Operator

Operator

Good morning and thank you for standing by. I would like to welcome you all to Landmark Bancorp Q1 Earnings Call. [Operator Instructions] I would now like to turn the conference over to your first speaker today, Michael Scheopner, President and Chief Executive Officer of Landmark Bancorp. Please go ahead when you're ready, Michael.

Michael Scheopner

Analyst

Thank you, and good morning. Thank you for joining our call today to discuss Landmark's earnings and results of operations for the first quarter of 2023. Joining the call with me to discuss various aspects of our first quarter performance is Mark Herpich, Chief Financial Officer of the company; and the company's Chief Credit Officer, Raymond McLanahan. Before we get started, I would like to remind our listeners that some of the information we will be providing today falls under the guidelines for forward-looking statements as defined by the Securities and Exchange Commission. As part of these guidelines, I must point out that any statements made during this presentation that discuss our hopes, beliefs, expectations or predictions of the future are forward-looking statements, and our actual results could differ materially from those expressed. Additional information on these factors is included from time to time in our 10-K and 10-Q filings, which can be obtained by contacting the company or the SEC. Before I get into the details regarding our operating results for the quarter, I want to take a moment to comment on events that have taken place in the banking system during the first few months of this year. Three large regional banks have been closed by the FDIC mainly due to liquidity concerns resulting from interest rate risk issues and large concentrations of uninsured deposits. These liquidity issues were unique to the way these banks operated and are not reflective of the way we manage things at Landmark. Landmark maintains strong capital and liquidity and a stable conservative deposit portfolio, with the majority of our deposits being retail based and FDIC insured. We spend significant time each month monitoring our interest rate and concentration risk through our asset liability management, and our lending strategies involve a relationship-based banking…

Mark Herpich

Analyst

Thanks, Michael, and good morning to everyone. Michael has already highlighted our financial performance in 2023, and now I'd like to talk further about the first quarter 2023 results. Comparisons to the prior year, first quarter results are significantly impacted by the Freedom Bank acquisition effective October 1, 2022. And as a reminder, the acquisition of Freedom Bank brought loans of $118 million and deposits of $150.4 million onto our balance sheet as of October 1. Net income in the first quarter of 2023 totaled $3.4 million compared to $1.2 million in the prior quarter and $3.1 million in the first quarter of 2022. The increase of $2.2 million over the fourth quarter of 2022 was mainly due to Freedom Bank acquisition-related costs of $3.0 million that were recorded in the fourth quarter of 2023 that did not repeat in the current quarter. Net income increased 7.1% over the same period last year mainly due to growth in net interest income, offset by higher expenses. In the first quarter of 2023, net interest income totaled $10.9 million, a decrease of $939,000 compared to the fourth quarter of 2022, due primarily to the increased interest costs, which more than offset the increase in interest income. Total interest income on loans increased $275,000 this quarter and the tax equivalent yield on the loan portfolio increased 14 basis points to 5.43%. Average loans also increased by $18.0 million during the first quarter, adding to loan interest. Interest income on investment securities increased $50,000 to $3.1 million this quarter as a result of higher rates earned, despite a decline in average investment securities balances of $5 million. The yield on investment securities totaled 2.68% in the current quarter compared to 2.56% in the prior quarter and 1.83% in the first quarter of 2022. Interest…

Raymond McLanahan

Analyst

Thank you, Mark, and good morning to everyone. Gross loans outstanding as of March 31, 2023, totaled $869.8 million, an increase of $19.6 million or 9.4% on an annualized basis from the prior quarter. We experienced growth in our 1-4 family residential real estate and commercial real estate portfolios this quarter. The 1-4 family mortgage portfolio increased $9.1 million, while our commercial real estate portfolio increased $12.8 million this quarter. Growth in our residential mortgage portfolio was mainly the result of continued demand for our adjustable-rate mortgage loan product. Additionally, we had good success at funding new commercial real estate loans this quarter. Commercial real estate loans comprised 36% of our overall portfolio, and we monitor concentrations within this portfolio carefully. Our commercial real estate portfolio primarily consists of owner-occupied commercial real estate. We did see an increase in the nonowner-occupied portion of our commercial real estate portfolio during the first quarter. However, the non-owner-occupied growth that we experienced was mainly due to one transaction with very strong credit risk metrics in a prime area of Kansas City. We remain focused on financing owner-occupied opportunities to seasoned borrowers in all of our markets. Credit quality within the portfolio continues to remain strong. Non-performing loans, which primarily consist of non-accrual loans and accruing loans greater than 90 days past due, totaled $3.3 million or 0.38% of gross loans as of March 31, 2023. Total foreclosed real estate was unchanged at $934,000, and we continued to actively pursue the sale of all foreclosed real estate. Another indicator that we monitor as part of our credit risk management efforts is the level of loans past due 30 to 89 days. The level of past due loans between 30 and 89 days still accruing interest remains low and was only 0.17% of gross loans…

Michael Scheopner

Analyst

Thanks, Raymond and Mark. I also want to thank you for your earlier comments. Before we go to questions, I want to summarize by saying we are pleased with our performance for the first quarter of 2023 with our strong loan growth, our solid credit quality and improved net interest margin. I want to express my thanks and appreciation to all of the associates at Landmark National Bank. Their daily focus on executing our strategies, delivering extraordinary service to our clients and communities and carrying out our company vision that everyone starts as a customer and leaves as a friend is the key to our success. With that, I'll open the call up to questions that anyone might have.

Operator

Operator

[Operator Instructions]. We have had no questions registered, so I'd like to hand it back to Michael Scheopner for any remarks.

Unidentified Analyst

Analyst

Michael Scheopner

Analyst

Michael Scheopner

Analyst

Thank you, and I do want to thank everyone for participating in today's earnings call. I appreciate your continued support and confidence in the company, and I look forward to sharing news related to our second quarter 2023 results at our next earnings conference call.

Operator

Operator

Thank you for joining. I can confirm that, that concludes today's call. You may now disconnect your lines and have a lovely rest of your day.