Landmark Bancorp, Inc. (LARK) Earnings

Management highlights

- Overall Financial Performance * Delivered record Q2 2026 revenue of $19.2 million, with net income of $5.4 million (up from $5.1 million in Q1 2026) * Earnings per share reached $0.88, return on average assets was 1.35%, and return on average equity was 13.23% * Tangible book value per share increased to $21.76, with annualized linked quarter growth of 16.8%, and tangible common equity to assets reached 8.44% * The Board of Directors declared a $0.21 per share cash dividend, marking the 100th consecutive quarterly dividend since 2001 - Growth Strategy & Talent Investment * Maintains a disciplined relationship-based growth strategy focused on commercial and agricultural lending expansion across Kansas markets, including the Kansas City metro * Invested in regional leadership, elevating an internal candidate to lead commercial banking for Central, Western, and Southeastern Kansas, who reports directly to the CEO * Continues investing in talent acquisition, development, and retention to strengthen portfolio management and support long-term growth * New retail banking leadership and programming has driven growth in noninterest-bearing checking accounts - Balance Sheet & Funding Management * Strategically reduced high-cost broker deposits and increased use of lower-cost Federal Home Loan Bank borrowing, bringing the total cost of deposits down to 1.3% * Net interest income reached $15.1 million, a $57,000 sequential increase driven by higher investment portfolio yields and lower funding costs * Net interest margin (tax equivalent) was 4.22%, a 2 basis point sequential decrease, but a 39 basis point improvement year-over-year * Unrealized net losses on the investment portfolio decreased by $1.0 million to $7.6 million due to lower interest rates * All regulatory capital ratios exceed well-capitalized requirements, with a loan-to-deposit ratio of 83.5% that provides sufficient liquidity for future growth - Credit Quality Management * Nonperforming loans increased by $2.7 million to $13.1 million (1.18% of gross loans), driven by two pre-identified borrower credits; early-stage delinquencies (30-89 days) decreased sequentially to 0.57% of gross loans * Net charge-offs remained low at 0.17% of average loans, up modestly from 0.13% in Q1 2026 * Allowance for credit losses held at 1.15% of gross loans ($12.7 million), with a $500,000 provision recorded in the quarter; management confirms the allowance is appropriate for current portfolio conditions

Guidance

- Management maintains cautiously optimistic guidance for continued loan growth build on Q2 2026 results in the second half of 2026, with a focus on steady, prudent, disciplined commercial-focused growth - Management is cautiously optimistic that the net interest margin will hold around the 4.22% (420 basis point) range in the second half of 2026 if the Federal Reserve holds rates steady - Reinvestment of maturing investment portfolio securities (currently rolling off at sub-3% yields) into new investments with yields in the mid-4% range is expected to support net interest income and margin through the second half of the year - Continued growth in low-cost core and noninterest-bearing deposits, if sustained, will further support margin stability

Segment performance

As a regional relationship-based bank, Landmark Bancorp reports loan segment performance for Q2 2026 as follows: Construction and land development loans grew by $4.5 million; commercial loans increased by $2.8 million, accounting for approximately 32% of total gross loan growth for the quarter; agricultural loans grew by $1.5 million, accounting for approximately 17% of total gross loan growth; residential real estate loans decreased by $4.0 million, driven by a strategic choice to allow payoffs to create capacity for commercial lending. On the deposit side, total deposits were $1.3 billion at quarter end, a $17.7 million sequential decrease; noninterest-bearing deposits increased by $12.8 million and represented 29.2% of total deposits; money market and checking accounts grew by $6.7 million; core deposits (excluding broker deposits) increased by $11.0 million, for an annualized linked quarter growth rate of 3.4%; broker deposits decreased by $28.7 million as part of a strategic funding shift.

Risks & headwinds

- Intense market competition for both customer relationships and talent across Landmark's operating footprint, which could pressure growth and increase personnel costs - Credit risk from the two nonaccrual loans (one agricultural, one commercial), though management is proactively working on resolution and does not expect material unexpected exposure - The investment portfolio's projected 12-month cash flow of $78.6 million rolls off at yields below 3%, which is lower than current available market yields, creating near-term pressure on net interest income if reinvestment yields do not meet expectations - Residual cost exposure from previously disclosed fraudulent activity by a non-executive officer, including one-time professional and legal costs, with no adjustment made for potential unclaimed insurance recoveries

Analyst Q&A

• Q: An analyst asks if Landmark can improve on Q2 2026 loan growth in the second half of 2026, and what key factors will drive that outcome. /

  A: Management confirms they are cautiously optimistic about building on Q2 growth, noting solid new commercial customer acquisition and expansion of existing relationships, plus ongoing onboarding of new commercial lenders across the footprint. The residential loan balance decline was a strategic choice to free up balance sheet capacity for higher priority commercial lending opportunities, and management intends to maintain steady, prudent growth aligned with their long-term value proposition for local owner-operated businesses.

• Q: An analyst asks for additional detail on the two borrower relationships that caused the increase in nonperforming loans. /

  A: Credit leadership confirms one relationship is an agricultural borrower and the second is a commercial borrower. Both had been identified and monitored for some time, and management is actively working toward resolution of both credits. No material unexpected additional exposure from these two loans is expected at this time.

• Q: An analyst asks if the net interest margin can hold around the 420 basis point (4.2%) range in the second half if the Federal Reserve holds interest rates steady. /

  A: Management is cautiously optimistic the margin can hold in this range, noting that the Q2 2 basis point sequential decline was driven by one-time impacts from the new nonaccrual loans. Additional support for margin stability will come from continued growth in low-cost noninterest-bearing deposits driven by new retail banking programs, and reinvestment of maturing low-yield investment securities into higher-yield new investments that will boost portfolio income through the second half.