LANDMARK BANCORP INC Q3 FY2024 earnings call

• Net earnings for the third quarter were $3.9 million, with earnings per share at $0.72. Return on average assets was 1.0% and return on average equity was 11.82%. Efficiency ratio was 66.5%.
• Total gross loans grew by $21.3 million, with significant growth in adjustable rate residential mortgage, agricultural, and commercial real estate portfolios.
• Net interest income increased due to higher interest income on loans, offsetting some increase in interest expense on deposits and borrowings. Noninterest income rose from fee-based, mortgage, and branch sale gains.
• Credit quality remained strong with low net credit losses. Capital and liquidity measures were strong, with a stable deposit portfolio.
• Board declared a cash dividend of $0.21 per share and a 5% stock dividend.

Landmark Bancorp reported net earnings of $3.9 million in the third quarter of 2024. Total gross loans increased by $21.3 million to reach $1 billion for the first time in company history. Net interest income grew by 5.7%, with the net interest margin increasing 9 basis points to 3.30%. Noninterest income increased by $533,000 compared to the prior quarter, driven by fee-based revenue, residential mortgage revenue, and a gain on the sale of a former branch facility. The allowance for credit losses totaled $11.5 million at September 30, 2024, representing 1.15% of gross loans.

• Anticipates margin benefits from future Federal Reserve rate cuts, though uncertainty exists regarding the pace of further cuts.
• Expect continued loan growth, particularly in fixed rate mortgages as interest rates drop, with pipeline activity remaining robust.

• Credit risk: Non-performing loans increased, including a single secured commercial loan placed on non-accrual. Past due loans between 30-89 days also increased.
• Interest rate risk: Uncertainty in future rate path could impact the margin and overall financial performance.

Q: How did the margin and spread fare with the recent rate drop and what's the outlook for further rate cuts?

A: The full impact of the 50 basis point drop in September wasn't fully felt in the third quarter but should be accretive going forward. Further rate cuts are expected, though uncertain, and the company is well-positioned to benefit.

Q: What's the situation on the mortgage side, including mortgage volume and margins on sale?

A: Interest rates dropped, and while variable rate loans are kept, there's increased activity in fixed rate options. Margins on the sale of fixed rate mortgages are stable at present.