Landmark Bancorp, Inc. (NASDAQ:LARK) Q2 2024 Earnings Name August 6, 2024 11:00 AM ET
Firm Individuals
Abi Wendel – President and Chief Govt Officer
Mark Herpich – Chief Monetary Officer
Raymond McLanahan – Chief Credit score Officer
Convention Name Individuals
Ross Haberman – RLH Investments
Operator
Good day, everybody and welcome to the Landmark Bancorp Q2 Earnings Convention Name. My title is Carla and I will probably be coordinating your name at the moment. [Operator Instructions] I might now like at hand you over to Abi Wendel, President and Chief Govt at Landmark, to start. Abi, please go forward.
Abi Wendel
Thanks. Good morning. Thanks for becoming a member of our name at the moment to debate Landmark’s earnings and working outcomes for the second quarter of 2024. As you simply heard from the operator, my title is Abi Wendel, President and CEO of Landmark Bancorp. Becoming a member of the decision with me to debate numerous features of our second quarter efficiency is Mark Herpich, Chief Monetary Officer of the corporate and Raymond McLanahan, Chief Credit score Officer.
As we begin, I wish to remind listeners that a number of the data we will probably be offering at the moment falls below the rules for forward-looking statements as outlined by the Securities and Trade Fee. As a part of these tips, I have to level out that any statements made throughout this presentation that debate our hopes, beliefs, expectations or predictions of the long run are forward-looking statements, and our precise outcomes may differ materially from these expressed. Extra data on these elements is included once in a while in our 10-Ok and 10-Q filings, which will be obtained by contacting the corporate or the SEC.
Landmark reported web earnings of $Three million in the course of the second quarter of 2024. Earnings per share on a completely diluted foundation for the primary quarter have been $0.55, the return on common property was 0.78%, and the return on common fairness was 9.72%. Our effectivity ratio within the second quarter was 67.9%. Our second quarter outcomes mirrored continued stable earnings pushed by continued stable progress in loans, together with increased web curiosity revenue and non-interest revenue. As talked about in our press launch, this quarter, we recorded a pretax valuation adjustment of $979,000 on a former department, which is below sale contract this adjustment resulted in a discount of earnings per share of $0.13. Excluding this merchandise, non-interest bills declined from the prior quarter on decrease compensation, occupancy and mortgage amortization expense.
Complete gross loans elevated this quarter by $16.5 million and common interest-bearing deposits additionally elevated by $820,000. In comparison with the primary quarter of 2024, web curiosity revenue grew 2.1%, and our web curiosity margin expanded to three.21%. Non-interest revenue additionally elevated as each charges and positive aspects on mortgage mortgage gross sales have been increased than within the prior quarter. Core non-interest expense was properly managed this quarter as we proceed to give attention to operational effectivity. Credit score high quality has remained sturdy as web mortgage charge-offs, non-accrual loans and delinquencies stay at comparatively low ranges this quarter. The allowance for credit score losses stays strong, totaling virtually $11 million at June 30, 2024.
Landmark capital and liquidity measures are sturdy, and we now have a secure, conservative deposit portfolio with most of our deposits being retail primarily based and FDIC insured. We stay risk-averse, each in monitoring our rate of interest and focus danger and in sustaining a powerful credit score self-discipline. Additional, we make use of our relationship-based mannequin, which gives stability and consistency to all our prospects.
I’m happy to report that our Board of Administrators had declared a money dividend of $0.21 per quarter to be paid September 4, 2024, to shareholders of file as of August 21, 2024. This represents the 92nd consecutive quarterly money dividend because the firm’s formation in 2001.
I’ll now flip the decision over to Mark Herpich, our CFO, who will evaluate the monetary ends in element with you.
Mark Herpich
Thanks, Abi, and good morning to everybody. Whereas Abi has simply supplied a spotlight of our total monetary efficiency within the second quarter of 2024, I’ll present some additional particulars on these outcomes.
As Abi talked about, web revenue within the second quarter of 2024 totaled $3.Zero million in comparison with $2.Eight million within the prior quarter and $3.Four million within the first quarter of 2023. Web revenue this quarter elevated as compared with the prior quarter, primarily resulting from enhancements in web curiosity revenue and non-interest revenue.
Additionally, we didn’t make a provision for credit score losses this quarter. Core non-interest expense additionally declined properly unique of the department valuation adjustment that Abi talked about earlier. In truth, excluding these changes, our non-interest bills would have declined by $306,000 or 2.9%.
Within the second quarter of 2024, web curiosity revenue totaled $11.Zero million, a rise of $227,000 in comparison with the primary quarter of 2024, due primarily to elevated curiosity revenue on loans, which greater than offset our enhance in curiosity expense on deposits. Complete curiosity revenue on loans elevated $532,000 this quarter and the tax equal yield on the mortgage portfolio elevated 17 foundation factors to six.33%.
Common loans additionally elevated by $9.Four million in the course of the second quarter, including to our mortgage curiosity revenue. Curiosity revenue on funding securities decreased $74,000 to $3.1 million this quarter resulting from a decline in common funding securities balances of $19.Eight million, however offset by increased yields earned on our funding securities balances.
The yield on funding securities totaled 3.04% within the present quarter in comparison with 2.96% within the prior quarter and a pair of.7% within the second quarter of 2023. Curiosity expense on deposits within the second quarter of 2024 elevated $216,000, primarily resulting from increased charges. The common fee on our interest-bearing deposits elevated this quarter to 2.44% in comparison with 2.35% final quarter, whereas the typical steadiness of interest-bearing deposits elevated $820,000.
Curiosity expense on borrowed funds decreased barely this quarter regardless of barely increased charges as common borrowed fund balances declined $2.6 million in the course of the second quarter. Landmark’s web curiosity margin on a tax equal foundation elevated to three.21% within the second quarter of 2024 as in comparison with 3.12% within the first quarter of 2024. This quarter, no provision for credit score losses was made after our credit score fashions thought-about the financial setting and acknowledged a big a part of our mortgage progress this quarter was within the one-to-four-family residential mortgage class, the place we proceed to expertise sturdy credit score outcomes.
At June 30, 2024, our allowance for credit score losses totaled $10.9 million, which stays sturdy and represents 1.11% of gross loans. Non-interest revenue totaled $3.7 million this quarter, rising $320,000 as in comparison with the primary quarter, whereas lowering $109,000 in comparison with the second quarter of 2023. The rise from the primary quarter was primarily the results of a rise in charges and repair costs of $230,000, together with progress in positive aspects on – of $136,000 on gross sales of residential mortgages. In comparison with the second quarter final 12 months positive aspects on gross sales of fastened fee residential mortgages declined by $182,000. Whereas charges from gross sales of fastened fee mortgages have declined considerably during the last 12 months, progress in adjustable fee mortgages, that are saved on our steadiness sheet has been sturdy.
Non-interest expense for the second quarter of 2024 totaled $11.1 million a rise of $544,000 in comparison with the prior quarter, however as mentioned earlier, this enhance was fully pushed by the $979,000 valuation adjustment on a former department constructing that’s below contract on the market. Absent the valuation changes within the first and second quarters, non-interest expense would have been $306,000 decrease than the prior quarter.
Compensation and advantages, occupancy and tools and mortgage servicing amortization have been all decrease this quarter. This quarter, we recorded tax expense of $587,000, leading to an efficient tax fee of 16.3% as in comparison with tax expense of $518,000 within the first quarter of this 12 months for an efficient tax fee of 15.7%. Gross loans elevated $16.5 million or 6.9% annualized in the course of the second quarter and totaled $980.6 million. We noticed good progress in our adjustable fee residential mortgage and business development mortgage portfolios, our funding securities portfolio decreased $16.Eight million on a period-end foundation as we make the most of maturing investments to fund our mortgage progress. Our funding portfolio has a mean lifetime of 4.Three years with a projected money circulation of $69.7 million coming due within the subsequent 12 months.
Interval-end deposits totaled $1.Three billion at June 30, 2024, and decreased by $43 million this quarter. Curiosity checking and cash market deposits, and non-interest checking accounts declined by $36.9 million and $3.Eight million, respectively, this quarter. The decline in cash market and checking accounts was primarily pushed by a decline in dealer deposits on the final day of the second quarter, resulting in a corresponding enhance in in a single day borrowings from the Federal Dwelling Mortgage Financial institution at quarter finish.
Common interest-earning deposits really elevated barely within the second quarter of 2024, whereas our common borrowings declined by $2.6 million in the course of the quarter. Our loan-to-deposit ratio totaled 77.5% at June 30, which stays low, giving us enough liquidity to fund mortgage progress. Stockholders’ fairness elevated to $128.Three million at June 30, 2024, and our guide worth totaled $23.45 per share at June 30 in comparison with $23.14 at March 31. Our consolidated and financial institution regulatory capital ratios as of June 30, 2024, are sturdy and exceed the regulatory ranges thought-about properly capitalized. The financial institution’s leverage ratio was 8.9% at June 30, 2024, whereas the full risk-based capital ratio was 13.7%.
Now let me flip the decision over to Raymond to evaluate highlights of our mortgage portfolio and credit score danger outlook.
Raymond McLanahan
Thanks, Mark, and good morning, everybody. As talked about earlier, we loved continued mortgage progress all through the quarter, primarily resulting from will increase in our residential mortgage and development and land mortgage portfolios. Gross loans excellent at quarter – excuse me, gross loans excellent on the finish of the quarter totaled $980.6 million, a rise of $16.5 million or 6.9% on an annualized foundation from the earlier quarter. Our residential mortgage mortgage portfolio elevated $19.Three million this quarter, primarily resulting from continued demand for our adjustable fee mortgage mortgage merchandise. Moreover, our development and land mortgage portfolio elevated $5.7 million this quarter.
Turning to credit score high quality. At June 30, 2024, non-performing loans consisting primarily of non-accrual loans totaled $5 million, a rise of $1.Four million from the prior quarter. This enhance is essentially resulting from weak point recognized with a $1.2 million SBA assured business mortgage relationship. Complete foreclosed actual property was unchanged from the prior quarter and ended at $428,000. The steadiness of late loans between 30 and 89 days nonetheless accruing curiosity decreased $2.2 million this quarter and totaled $1.9 million or 0.19% of gross loans.
We recorded web mortgage recoveries of $52,000 in the course of the second quarter of 2024, in comparison with web mortgage charge-offs of $68,000 in the course of the second quarter of 2023. Our allowance for credit score losses totaled $10.9 million and ended the quarter at 1.11% of gross loans. Asset high quality at Landmark has remained glorious over the previous few years, and we stay centered on sustaining sturdy metrics.
Concerning our business actual property portfolio, our lending philosophy has at all times been centered on relationship banking with prospects in our respective markets. Because of this, our business actual property portfolio is primarily comprised of owner-occupied business actual property which traditionally has been a well-performing asset class. We stay vigilant in monitoring the well being and efficiency of this mortgage portfolio in addition to the traits within the broader business actual property financial setting. The present financial panorama in Kansas is wholesome. The preliminary seasonally adjusted unemployment fee for Kansas as of June 30th, was 3.1% based on the Bureau of Labor Statistics.
By way of housing, the Kansas Affiliation of Realtors’ President lately shared two attention-grabbing statistics. They mentioned, “Through the first half of the 12 months, typical sale costs throughout the state are up 6.3% in comparison with the primary half of 2023. As well as, half of all properties offered did so in 10 days or much less.” Dwelling costs in June elevated 5.3% in Kansas in comparison with the identical time final 12 months, whereas costs within the Midwest elevated 5.5% in comparison with final 12 months. Dwelling gross sales in Kansas fell by 17.8% in June in comparison with the identical interval final 12 months. Given the statistics shared by the Kansas Affiliation of Realtors, it will seem that stock ranges of accessible properties stay very tight.
And with that, I thanks, and I’ll flip the decision again over to Abi.
Abi Wendel
Thanks Raymond. Earlier than we go to questions, I need to summarize by saying, we have been happy with our core efficiency for the second quarter of 2024, with continued sturdy mortgage progress, stable credit score high quality and well-controlled bills. Additional, our web curiosity margin expanded properly. With the working successes we now have had over the previous few years, we stay up for increasing our presence with high-quality banking services and products. We’re focusing extra lately on bringing each loans and payment enterprise, which is taking part in properly throughout all of our markets and particularly in Kansas Metropolis, the place we’re comparatively new.
Lastly, I wish to thank all the associates at Landmark Nationwide Financial institution, their day by day give attention to executing our methods, delivering extraordinary service to our purchasers and communities is the important thing to our success.
And with that, I’ll open up the decision to questions that anybody might need.
Query-and-Reply Session
Operator
[Operator Instructions] Our first query comes from Ross Haberman from RLH Investments.
Ross Haberman
Good morning. Good quarter, having simply a few fast questions. May you discuss concerning the mortgage enterprise? What are you seeing at the moment? And has there been any latest pickup within the final couple of weeks with the latest drop in charges? And do you anticipate given the latest up in charges, say, an affordable pickup within the subsequent couple of months. Thanks.
Abi Wendel
Hello Ross, that is Abi. Thanks for becoming a member of us this morning. So, as we now have reported for the previous a number of quarters, our mortgage division actually has hung in there due to our pivot in the direction of the variable fee, the adjustable fee mortgage that we promote and retain on steadiness sheet. Within the final couple of – I imply final week, actually, we simply noticed the 30-year fastened transfer down under the place we’re providing the variable fee mortgage, and I do assume over the previous month, we now have began to see an uptick and an curiosity within the merchandise that we’re in a position to promote within the secondary. I imply as you recognize, the mortgage business is mostly a rate-driven curiosity business. And so we actually foresee extra curiosity in these fastened merchandise as charges proceed to maneuver down.
Ross Haberman
And only one follow-up query, if we do see – I don’t know, simply say for argument sake like 1 / 4 minimize in September and one other quarter in December, how do you see that situation affecting the margin or the unfold?
Abi Wendel
Sure. I’m going to let Mark reply that in additional element. However I assume I might simply kick it off by saying regardless of what the Fed decides to do in September or November, I feel we’re very properly positioned, and let me flip it over to Mark only for a little bit bit extra data on that.
Mark Herpich
Sure. I might be joyful to, Abi, and thanks, Ross, for the query. However I feel we’re fairly legal responsibility delicate at this juncture of our enterprise. And a minimize on the Fed funds fee of 25 or 50 or in the event that they need to go additional, that’s even higher from our standpoint. We’ve got lots of borrowings on our – what we think about lots of borrowings on our Federal Dwelling Mortgage Financial institution and a few dealer deposits that may re-price each day, and that will probably be very advantageous to us to see the short-term charges go down. What’s been troublesome over the previous few years or years, I assume at this level has been the inverted yield curve, which has gotten much more exacerbated Thursday and Friday of final week. So, if the Fed funds fee, that are tied to lots of our short-term variable liabilities, we are going to benefit from that.
Ross Haberman
And one remaining query. Any massive expenditures anticipated within the subsequent quarter or two quarters?
Mark Herpich
No uncommon or non-core expenditures are on the docket at this time limit. We talked concerning the – or one factor within the second quarter the place we’re promoting a former department constructing, however we now have that hopefully behind us to shut right here in a few weeks, fingers crossed. However that was the one uncommon merchandise that we had within the second quarter to report. And as we mentioned within the core bills, we have been happy with and assume that we must always proceed to see bills alongside these traces. We’ll proceed to search for areas that we will put money into human capital or different merchandise, however we don’t envision something vital.
Ross Haberman
Thanks very a lot.
Operator
[Operator Instructions] And we at present haven’t any additional questions on the queue. I’ll hand again over to Abi Wendel for any remaining remarks.
Abi Wendel
Thanks. I need to thank everybody for taking part in at the moment’s earnings name. I recognize your curiosity and your continued help and confidence within the firm. I stay up for sharing information associated to our third quarter 2024 outcomes at our subsequent earnings convention name.
Operator
That does conclude at the moment’s convention name. Have a pleasant day. You could now disconnect from the decision.