Landmark Bancorp(LARK) - 2024 Q4 - Annual Report

Interest Income and Loans - Interest income increased by $9,171 thousand in 2024 compared to 2023, driven by a$ 9,645 thousand increase in loans[113] - The average balance of loans receivable increased to $974,294 thousand in 2024, with a yield of 6.30%[116] - As of December 31, 2024, total gross loans increased to$ 1,052,353,000 from $948,656,000 in 2023, representing an increase of approximately 10.95%[122] - One-to-four family residential real estate loans increased to$ 352,209,000 in 2024 from $302,544,000 in 2023, showing growth in this segment[122] - As of December 31, 2024, total loans amounted to$ 12,825 million, a 20.8% increase from $10,608 million in 2023[132] Interest Expense and Net Interest Income - Net interest income for 2024 was$ 45,724 thousand, up from $43,292 thousand in 2023, reflecting a net interest margin of 3.28%[116] - Interest expense rose to$ 28,175 thousand in 2024, compared to $21,391 thousand in 2023, primarily due to higher costs associated with deposits[116] - The company's interest rate spread remained stable at 2.58% for both 2024 and 2023[117] - The average balance of interest-earning assets increased to$ 1,413,525 thousand in 2024, with an overall yield of 5.28%[116] - The total interest-bearing liabilities increased to $1,042,316 thousand in 2024, with a cost of 2.70%[116] Credit Quality and Allowance for Credit Losses - Non-accrual loans rose significantly to$ 13,115,000 in 2024 from $2,391,000 in 2023, indicating a substantial increase in credit risk[125] - The allowance for credit losses increased to$ 12,825,000 in 2024, up from $10,608,000 in 2023, reflecting a proactive approach to managing potential loan losses[129] - The ratio of allowance for credit losses to total gross loans was 1.22% as of December 31, 2024, compared to 1.12% in 2023[125] - The company recorded net loan charge-offs of$ 183,000 in 2024, contrasting with net loan recoveries of $44,000 in 2023, indicating a shift in credit performance[129] - The total non-performing assets increased to$ 13,282,000 in 2024 from $3,319,000 in 2023, highlighting a deterioration in asset quality[125] Deposits and Funding - Average deposit balances increased to$ 1,301,094 thousand in 2024 from $1,285,821 thousand in 2023, with a notable rise in the average rate paid on certificates of deposit to 4.26% from 3.08%[140] - Total deposits included uninsured deposits of$ 181.5 million as of December 31, 2024, representing 13.7% of total deposits[140] - The average balance of money market and checking accounts was $589,360 thousand in 2024, with an average rate of 2.31%[140] Financial Ratios and Performance - Return on average assets improved to 0.83% in 2024 from 0.80% in 2023, while return on average equity decreased to 10.01% from 10.70%[144] - The equity to total assets ratio improved to 8.65% in 2024 from 8.13% in 2023[144] - The ratio of average interest-earning assets to average interest-bearing liabilities was 135.6% in 2024, down from 137.9% in 2023[117] Operational and Strategic Risks - The bank faces intense competition from various financial institutions, which could negatively impact loan and deposit amounts, as well as net interest income[187] - The bank's community banking strategy relies heavily on its management team, and the unexpected loss of key managers could adversely affect operations[193] - The bank is susceptible to cybersecurity risks, with increasing electronic fraudulent activity and data breaches in the financial services industry[197] - The company relies heavily on third-party information technology and telecommunications systems, which if disrupted, could adversely affect operations and financial condition[200] - Operational risks include customer or employee fraud and data processing system failures, which could result in financial losses and regulatory sanctions[204] Future Outlook and Challenges - Future bank failures may lead to increased FDIC insurance premiums, adversely affecting the bank's financial condition and dividend payments[180] - The company anticipates needing to raise additional capital for future growth, particularly for acquisitions, but market conditions may affect this ability[208] - The bank's growth strategy includes potential acquisitions, which may expose it to unknown liabilities and integration challenges[185] - Changes in accounting principles and financial reporting standards could materially impact the bank's financial condition and results of operations[183] - The company may face challenges in replacing core banking and information service vendors, potentially leading to increased costs and customer loss[201] Investment and Market Conditions - The trading market for the company's common shares is limited, affecting liquidity and resale potential for shareholders[212] - Stock price volatility may occur due to fluctuations in operating results and broader market conditions, which could negatively impact market price[213] - Potential partnerships with digital asset companies could require significant investment and pose competitive risks[189] - The company had$ 178.8 million in municipal securities, representing 48.0% of the total securities portfolio as of December 31, 2024[176]