Landmark Bancorp Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Landmark Bancorp Inc. 2024 First Quarter Earnings Call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end. If you'd like to ask a question, please press star followed by one on your telephone keypad. I would now like to hand the conference call over to Abby Wendell, CEO. Please go ahead.

Thank you. Good morning. Thank you for joining our call today to discuss landmarks, earnings, and operating results for the first quarter of 2024. As you just heard from the operator, my name is Abby Wendell, and I am the new CEO of Landmark Bank Corp. Joining the call with me to discuss various aspects of our first quarter performance is Mark Herpich, Chief Financial Officer of the company, and Raymond McClanahan, Chief Credit Officer. As we start, 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 Security 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 review the highlights regarding our operating results for the quarter, I want to take a moment to comment on our leadership change effective March 29th. As you are aware by now, Landmark's former CEO, Michael Scheppner, retired from his position in March, and I assumed the President and Chief Executive Officer roles for Landmark Bancorp at that time. Michael is still at the bank in a non-executive capacity, providing assistance to me during this transition, for which I'm grateful. I'm also very excited for the opportunity to further build upon Landmark's legacy and help write the next chapter for the company. While it's only been a month, I have already come to appreciate the team that is in place and look forward to working with the outstanding leadership team, associates, and board of directors to deliver tailored financial solutions to our customers and value to our shareholders. Now, I will move on to our results. Landmark reported net earnings of $2.8 million during the first quarter of 2024. Earnings per share on a fully diluted basis for the first quarter was $0.51. The return on average assets was 0.72%, and the return on average equity was 8.88%. Our efficiency ratio in the first quarter of 2024 was 73%. Our first quarter results included solid loan growth lower expenses, and continued good credit quality. Total gross loans increased by $15.4 million, or 6.5% on an annualized basis this quarter, while average interest-bearing deposits increased $24.8 million. Compared to the fourth quarter of 2023, our non-interest income increased while our operating expenses declined. This quarter, we continue to see very good demand for residential mortgages and other commercial loans and our net interest margin, which totaled 3.12% this quarter, increased slightly, aided by relatively stable interest rates. Our focus on operational efficiencies kept our non-interest expenses well controlled this quarter. Credit quality has remained strong as net loan charge-offs, non-accrual loans, and delinquencies remain at relatively low levels. The allowance for credit losses remains robust, totaling $10.9 million at March 31, 2024. Landmarks, capital, and liquidity measures are strong, and we have a stable, conservative deposit portfolio, with most of our deposits being retail-based and FDIC-insured. We remain risk averse both in monitoring our interest rate and concentration risk and in maintaining a strong credit discipline. Further, we employ a relationship-based banking model which offers stability and consistency to all our customers. I am pleased to also report that our board of directors has declared a cash dividend of 21 cents per share to be paid May 29th, 2024 to shareholders of record as of May 15th, 2024. This represents the 91st consecutive quarterly cash dividend since the company's formation in 2001. I will now turn the call over to Mark Herbick, our CFO, who will review the financial results with you.

Thanks, Abby, and good morning to everyone. While Abby has just provided a good summary of our overall financial performance in the first quarter of 2024, I'll provide some further details on these results. As Abby mentioned, net income in the first quarter of 2024 totaled $2.8 million compared to $2.6 million in the prior quarter and $3.4 million in the first quarter of 2023. Net income this quarter increased in comparison with the prior quarter, mainly due to securities losses of $1.2 million taken in the fourth quarter last year, but offset by an increase in the provision for credit losses of $250,000 taken this quarter. In the first quarter of 2024, net interest income totaled $10.8 million, a decrease of $139,000 compared to the fourth quarter of 2023, due primarily to increased interest expense on deposits which more than offset our increase in interest income on loans. Total interest income on loans increased $267,000 this quarter, and the tax equivalent yield on the loan portfolio increased 12 basis points to 6.16%. Average loans also increased by $11.4 million during the first quarter, adding to loan interest income. Interest income on investment securities decreased $22,000 to $3.2 million this quarter due to a decline in average investment securities balances of $6.8 million but offset by higher yields earned on our investment securities balances. The yield on investment securities totaled 2.96 percent in the current quarter compared to 2.86 percent in the prior quarter and 2.68 percent in the first quarter of 2023. Interest expense on deposits in the first quarter of 2024 increased 578,000, mainly due to higher rates and balances. The average rate on our interest-bearing deposits increased this quarter to 2.35% compared to 2.13% last quarter, while the average balance of interest-bearing deposits increased 24.8 million. Interest expense on borrowed funds decreased 180,000 this quarter, despite slightly higher rates as average borrowed fund balances declined $11.2 million during the first quarter. Landmark's net interest margin on a tax-equivalent basis increased to 3.12% in the first quarter of 2024 as compared to 3.11% in the fourth quarter of 2023. This quarter, a $50,000 provision for credit losses was made to our Liability for Unfunded Lending Commitment, along with a loan-related provision of $250,000, mainly due to the continued growth in our loan portfolio. Net loan charge-offs decreased this quarter, and our allowance for credit losses of $10.9 million remains strong and represents 1.13% of gross loans. Non-interest income totaled $3.4 million this quarter, decreasing $95,000 compared to the first quarter last year, while increasing $1.1 million compared to the fourth quarter of 2023. The increase from the fourth quarter last year was primarily the result of the $1.2 million in securities losses taken in the fourth quarter that I mentioned earlier. Also, gains on sales of residential mortgages more than doubled to $512,000, but were offset by lower deposit fees. Compared to the first quarter last year, gains on sales of fixed rate residential mortgages declined by $181,000. While fees from sales of fixed rate mortgages have declined somewhat over the last year, we continue to see solid growth in new adjustable rate mortgages, which we normally keep in our loan portfolio instead of selling into the market. Non-interest expense for the first quarter of 2024 totaled $10.6 million. a decrease of $11,000 compared to the prior quarter, but grew only 2% higher than the same period last year. The increase in non-interest expense compared to the first quarter last year was mainly due to increases of $198,000 in other non-interest expense and $156,000 in professional fees, which were offset by lower data processing costs of $108,000 and flat compensation and benefits expense. The increase in professional fees was related to higher legal costs associated with the company's benefit plan, while growth and other non-interest expense resulted from a valuation allowance recorded against real estate held for sale and an increase in operating losses incurred. This quarter, we recorded a tax expense of $518,000, resulting in an effective tax rate of 15.7% as compared to tax expense of $693,000 in the first quarter of last year. for an effective tax rate of 17.1%. Gross loans increased 15.4 million, or 6.5% annualized during the first quarter, and totaled 964 million. We saw good growth in our adjustable rate, residential mortgage, commercial real estate, and commercial construction loan portfolios. Our investment securities portfolio decreased 15.5 million on a period-end basis, as we utilized our maturing investments to fund our loan growth. Our investment portfolio has an average life of 4.2 years with a projected cash flow of $71.5 million coming due in the next 12 months. Period end deposits totaled $1.3 billion at March 31, 2024 and decreased by $22.7 million this quarter. Interest checking and money market deposits and non-interest checking declined by $30.3 million and $2.7 million, respectively, this quarter, while certificates of deposits and savings accounts grew by $10.3 million. The decline in money market and checking accounts was driven by the seasonal decline in public fund account balances occurring soon after year-end. Average interest-bearing deposits, however, increased $24.8 million this quarter. Our loan-to-deposit ratio totaled 73.6% at March 31st, which remains low, giving us ample liquidity to fund new loan growth. Our markets throughout the state of Kansas remain very stable, and they provide us with predictable liquidity through access to retail, commercial, and municipal deposits. Also, we continue to maintain and manage multiple other sources of liquidity, including the Federal Home Loan Bank and the Federal Reserve Bank lines of credit and fed funds agreements. Combined, they provide approximately $252 million of additional borrowing capacity as of March 31st. Our investment portfolio also has unfledged securities available as collateral for additional borrowings. Stockholders' equity decreased to $126.7 million at March 31, 2024, and our book value totaled $23.14 per share at March 31st, compared to $23.17 at December 31st. The decrease in stockholders' equity resulted from an increase in net unrealized losses on our investment securities portfolio, mainly due to slightly higher interest rates this quarter. Our consolidated and bank regulatory capital ratios as of December 31, 2023, are strong and exceed the regulatory levels considered well-capitalized. The bank's leverage ratio was 8.8% at March 31, 2024, while the total risk-based capital ratio was 13.8%. Now let me turn the call over to Raymond to review highlights of our loan portfolio and credit risk outlook.