PART I – FINANCIAL INFORMATION This section provides the Company's unaudited financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1. FINANCIAL STATEMENTS This section presents the Company's unaudited consolidated financial statements, including balance sheets, statements of earnings, comprehensive income, stockholders' equity, and cash flows, along with detailed notes providing further context on investments, loans, intangible assets, borrowings, revenue, fair value measurements, and regulatory capital Consolidated Balance Sheets Presents the Company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :----- | | Total Assets | $1,624,865 | $1,574,142 | +$50,723 | | Cash and cash equivalents | $25,038 | $20,275 | +$4,763 | | Loans, net | $1,103,407 | $1,039,221 | +$64,186 | | Total Liabilities | $1,476,489 | $1,437,927 | +$38,562 | | Total Deposits | $1,273,901 | $1,328,766 | -$54,865 | | FHLB and other borrowings | $155,110 | $53,046 | +$102,064 | | Total Stockholders' Equity | $148,376 | $136,215 | +$12,161 | Consolidated Statements of Earnings Details the Company's revenues, expenses, and net earnings over specific reporting periods | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net earnings | $4,404 | $3,012 | $9,105 | $5,790 | | Basic EPS | $0.76 | $0.52 | $1.58 | $1.01 | | Diluted EPS | $0.75 | $0.52 | $1.56 | $1.01 | | Dividends per share | $0.21 | $0.20 | $0.42 | $0.40 | | Total interest income | $20,098 | $18,180 | $39,440 | $35,925 | | Total interest expense | $6,415 | $7,206 | $12,638 | $14,204 | | Net interest income | $13,683 | $10,974 | $26,802 | $21,721 | | Provision for credit losses | $1,000 | $- | $1,000 | $300 | | Total non-interest income | $3,626 | $3,720 | $6,984 | $7,120 | | Total non-interest expense | $10,961 | $11,095 | $21,722 | $21,646 | Consolidated Statements of Comprehensive Income Presents net earnings and other comprehensive income items, reflecting total changes in equity from non-owner sources | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net earnings | $4,404 | $3,012 | $9,105 | $5,790 | | Net unrealized holding gains (losses) on AFS securities | $3,189 | $(402) | $6,949 | $(2,859) | | Other comprehensive income (loss) | $2,417 | $(303) | $5,268 | $(2,158) | | Total comprehensive income | $6,821 | $2,709 | $14,373 | $3,632 | Consolidated Statements of Stockholders' Equity Outlines changes in equity components, including net earnings, dividends, and other comprehensive income | Metric | Balance at January 1, 2025 (in thousands) | Net Earnings (in thousands) | Other Comprehensive Income (in thousands) | Dividends Paid (in thousands) | Stock-based Compensation (in thousands) | Balance at June 30, 2025 (in thousands) | | :-------------------------------- | :---------------------------------------- | :-------------------------- | :---------------------------------------- | :---------------------------- | :-------------------------------------- | :---------------------------------------- | | Common stock | $58 | - | - | - | - | $58 | | Additional paid-in capital | $95,051 | - | - | - | $215 | $95,266 | | Retained earnings | $56,934 | $9,105 | - | $(2,427) | - | $63,612 | | Accumulated other comprehensive loss | $(15,828) | - | $5,268 | - | - | $(10,560) | | Total stockholders' equity | $136,215 | $9,105 | $5,268 | $(2,427) | $215 | $148,376 | Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (Six months ended June 30, in thousands) | 2025 | 2024 | | :-------------------------------------------------------- | :----- | :----- | | Net cash provided by operating activities | $8,457 | $7,226 | | Net cash used in investing activities | $(40,483) | $(4,815) | | Net cash provided by (used in) financing activities | $36,789 | $(5,623) | | Net increase (decrease) in cash and cash equivalents | $4,763 | $(3,212) | | Cash and cash equivalents at end of period | $25,038 | $23,889 | Notes to Consolidated Financial Statements Provides detailed explanations and additional information supporting the consolidated financial statements - The unaudited consolidated financial statements are prepared in accordance with Form 10-Q instructions and should be read in conjunction with the Company's most recent Annual Report on Form 10-K29 - Management believes all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected29 - The results of the six-month interim period ended June 30, 2025, are not necessarily indicative of the results expected for the year ending December 31, 2025, or any other future time period29 Note 1. Interim Financial Statements This note clarifies that the financial statements are unaudited, prepared per Form 10-Q, and should be read in conjunction with the latest 10-K. Management confirms all necessary adjustments for fair presentation have been made, and prior year amounts have been reclassified for consistency - Financial statements are unaudited and prepared in accordance with Form 10-Q, requiring review with the Company's latest Annual Report on Form 10-K29 - Management's opinion is that all necessary adjustments for fair presentation have been reflected29 - Interim results are not necessarily indicative of future periods29 Note 2. Investments The Company's investment portfolio includes available-for-sale (AFS) and held-to-maturity (HTM) securities. AFS securities decreased in fair value from $372.5 million to $352.4 million, with significant unrealized losses, particularly in municipal obligations and agency mortgage-backed securities, though management believes these are temporarily impaired. HTM securities remained stable | Investment Type | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | June 30, 2025 Gross Unrealized Losses (in thousands) | December 31, 2024 Gross Unrealized Losses (in thousands) | | :-------------------------------- | :-------------------------------------- | :---------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Available-for-sale | $352,442 | $372,512 | $(14,828) | $(21,094) | | Held-to-maturity | $3,448 | $3,290 | $(282) | $(382) | - Management determined that no allowance for credit losses for available-for-sale securities was needed at June 30, 2025, and December 31, 2024, believing unrealized losses were temporary35 - Securities with carrying values of $288.7 million (June 30, 2025) and $305.3 million (December 31, 2024) were pledged to secure public funds, repurchase agreements, and borrowings39 Note 3. Loans and Allowance for Credit Losses Gross loans increased to $1.12 billion at June 30, 2025, from $1.05 billion at December 31, 2024, with growth across most categories, especially residential and commercial real estate. The allowance for credit losses increased to $13.8 million (1.23% of gross loans) from $12.8 million (1.22%), driven by loan growth and higher reserves for individually evaluated non-accrual loans. Non-accrual loans increased to $17.0 million | Loan Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Total gross loans | $1,117,784 | $1,052,353 | | Allowance for credit losses | $(13,762) | $(12,825) | | Loans, net | $1,103,407 | $1,039,221 | | Credit Quality Indicator | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Non-accrual loans | $16,984 | $13,115 | | Loans past due 30-89 days and accruing | $4,321 | $6,201 | | Classified loans | $34,989 | $26,079 | - The provision for credit losses was $1.0 million for both the three and six months ended June 30, 2025, compared to $0 and $300,000 respectively in 2024, primarily due to loan growth and higher reserves against individually evaluated non-accrual loans122123 Note 4. Goodwill and Other Intangible Assets The Company's goodwill was not impaired as of December 31, 2024, and management concluded it was not impaired at June 30, 2025. Core deposit intangible assets, amortized over ten years, had a net carrying amount of $2.28 million at June 30, 2025 - Goodwill was not impaired as of December 31, 2024, and management believes it was not impaired at June 30, 202554 | Intangible Asset | June 30, 2025 Net Carrying Amount (in thousands) | December 31, 2024 Net Carrying Amount (in thousands) | | :----------------------------- | :--------------------------------------------- | :----------------------------------------------- | | Core deposit intangible assets | $2,275 | $2,578 | | Year | Estimated Amortization Expense (in thousands) | | :---------------- | :------------------------------------ | | Remainder of 2025 | $285 | | 2026 | $512 | | 2027 | $436 | | 2028 | $360 | | 2029 | $284 | | 2030 | $208 | | Thereafter | $190 | | Total | $2,275 | Note 5. Mortgage Loan Servicing The principal balance of mortgage loans serviced for others decreased to $635.8 million at June 30, 2025, from $653.8 million at December 31, 2024. Mortgage servicing rights (MSRs) had a fair value of $8.8 million at June 30, 2025, down from $9.6 million at December 31, 2024, with specific valuation assumptions detailed | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Principal balance of mortgage loans serviced for others | $635,757 | $653,797 | | Fair value of mortgage servicing rights | $8,800 | $9,600 | - Gross service fee income related to mortgage loans serviced for others was $404,000 for the three months ended June 30, 2025, and $819,000 for the six months ended June 30, 202558 - The Company had a mortgage repurchase reserve of $115,000 at June 30, 2025, and charged $81,000 of losses against the reserve during the six months ended June 30, 202560 Note 6. Earnings per Share Basic EPS for Q2 2025 was $0.76 and diluted EPS was $0.75, based on weighted average common shares outstanding of 5,782,555 and 5,840,923, respectively. For the six months ended June 30, 2025, basic EPS was $1.58 and diluted EPS was $1.56 | Metric | Three months ended June 30, 2025 | Six months ended June 30, 2025 | | :------------------------------------ | :------------------------------- | :----------------------------- | | Net earnings (in thousands) | $4,404 | $9,105 | | Weighted average common shares outstanding - basic | 5,782,555 | 5,780,930 | | Weighted average common shares outstanding - diluted | 5,840,923 | 5,827,844 | | Basic EPS | $0.76 | $1.58 | | Diluted EPS | $0.75 | $1.56 | - The Board of Directors declared a cash dividend of $0.21 per share to be paid August 27, 202561 Note 7. Federal Home Loan Bank Borrowings and Other Borrowings FHLB borrowings significantly increased to $151.6 million at June 30, 2025, from $48.8 million at December 31, 2024. The Bank's total borrowing capacity with the FHLB was $304.5 million, with $111.4 million available. The Company also has a $5.0 million line of credit and a $3.5 million outstanding borrowing from an unrelated financial institution | Borrowing Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | FHLB borrowings | $151,600 | $48,800 | | Total FHLB borrowing capacity | $304,500 | $281,200 | | Available FHLB borrowing capacity | $111,400 | $171,000 | | Outstanding balance on line of credit from unrelated financial institution | $0 | $0 | | Outstanding borrowing from unrelated financial institution | $3,500 | $4,200 | - The FHLB line of credit accrues interest at the federal funds rate plus 0.15% (4.59% at June 30, 2025)62 - The Company had no borrowings through the Federal Reserve discount window at June 30, 2025, while its borrowing capacity was $44.5 million64 Note 8. Repurchase Agreements Repurchase agreements, collateralized by investment securities, decreased to $5.8 million at June 30, 2025, from $13.8 million at December 31, 2024. These are primarily overnight agreements secured by U.S. treasury securities | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Repurchase agreements | $5,825 | $13,808 | | Investment securities as collateral | $10,800 | $15,200 | - Repurchase agreements are comprised of non-insured customer funds and are secured by investment securities held by a third-party financial institution6869 Note 9. Revenue from Contracts with Customers Non-interest income, including service charges on deposit accounts, interchange income, and gains on sales of loans, totaled $3.6 million for Q2 2025 and $7.0 million for YTD 2025. Overdraft fees and interchange income saw decreases compared to the prior year | Non-Interest Income (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Overdraft fees | $880 | $992 | $1,764 | $1,953 | | Interchange income | $676 | $777 | $1,263 | $1,461 | | Gains on sales of loans, net | $740 | $648 | $1,302 | $1,160 | | Total non-interest income | $3,626 | $3,720 | $6,984 | $7,120 | - Service charges on deposit accounts are recognized for transaction-based, account maintenance, and overdraft services72 - Interchange fees from debit cardholder transactions are recognized daily73 Note 10. Fair Value of Financial Instruments and Fair Value Measurements The Company categorizes financial instruments into Level 1, 2, or 3 based on input observability. Available-for-sale securities are primarily Level 1 (U.S. treasury) and Level 2 (municipal, agency MBS). Loans held for sale and derivative financial instruments are Level 2. Loans, net, and accrued interest receivable have significant Level 3 inputs - Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market75 - Level 1 inputs are quoted prices for identical assets/liabilities in active markets; Level 2 are significant other observable inputs; Level 3 are significant unobservable inputs7576 | Financial Instrument (Assets, June 30, 2025, in thousands) | Carrying Amount | Fair Value (Total) | Level 1 | Level 2 | Level 3 | | :------------------------------------------------------- | :---------------- | :----------------- | :------ | :------ | :-------- | | Cash and cash equivalents | $25,038 | $25,038 | $25,038 | $- | $- | | Investment securities available-for-sale | $352,442 | $352,442 | $51,624 | $300,818 | $- | | Loans, net | $1,103,407 | $1,102,118 | $- | $- | $1,102,118 | | Loans held for sale | $4,773 | $4,773 | $- | $4,773 | $- | Note 11. Regulatory Capital Requirements Both the Company and the Bank met all "well capitalized" regulatory capital adequacy requirements at June 30, 2025, and December 31, 2024, including the capital conservation buffer. The Bank's actual capital ratios exceeded minimum requirements - Management believes the Company and the Bank met all capital adequacy requirements to which they were subject as of June 30, 2025, and December 31, 202489 - The Bank was categorized as "well capitalized" under the regulatory framework for prompt corrective action92 | Capital Ratio (Company, June 30, 2025) | Actual Ratio | Minimum for Adequacy (incl. buffer) | | :------------------------------------- | :----------- | :---------------------------------- | | Leverage | 9.32% | 4.0% | | Common Equity Tier 1 Capital | 10.57% | 7.0% | | Tier 1 Capital | 12.34% | 8.5% | | Total Risk Based Capital | 13.49% | 10.5% | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial performance and condition for the periods ended June 30, 2025. It highlights significant increases in net earnings driven by higher net interest income and lower interest expense, alongside changes in asset quality, liability distribution, and liquidity management strategies - Net earnings increased by 46.2% to $4.4 million in Q2 2025 and by 57.3% to $9.1 million in YTD 2025, primarily due to increased net interest income and lower interest expense106 - The Company's strategy focuses on holding and acquiring quality assets while growing commercial, commercial real estate (CRE), and agriculture loan portfolios98 - The Company maintains strong capital and liquidity, with a stable, conservative, retail-based, and FDIC-insured deposit portfolio131 Overview Landmark Bancorp, Inc. operates as a financial holding company through Landmark National Bank and Landmark Risk Management, Inc., providing banking and insurance services. The Bank focuses on attracting deposits and originating various loans, with a strategy to grow quality assets and loan portfolios. The Company declared its 96th consecutive quarterly dividend, maintaining a strong capital and liquidity position - Landmark Bancorp, Inc. is a financial holding company engaged in banking (Landmark National Bank) and insurance (Landmark Risk Management, Inc.)98 - The Bank's strategy involves holding and acquiring quality assets and growing commercial, commercial real estate, and agriculture loan portfolios98 - The Company declared its 96th consecutive quarterly dividend and maintains a strong capital and liquidity position104 Critical Accounting Policies The Company's critical accounting policies, including the allowance for credit losses and accounting for business combinations, involve significant management judgment. No material changes to these policies were reported since the December 31, 2024 Annual Report on Form 10-K - Critical accounting policies relate to the allowance for credit losses and accounting for business combinations, requiring significant management judgment105 - No material changes to critical accounting policies were reported since the Annual Report on Form 10-K for the year ended December 31, 2024105 Summary of Results Net earnings for the second quarter of 2025 increased by 46.2% to $4.4 million, and for the first six months of 2025, they increased by 57.3% to $9.1 million. This growth was primarily driven by higher net interest income due to increased loan balances and lower interest expense from reduced short-term interest rates | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :----------------------- | :------ | :------ | :------- | :------- | | Net earnings (in millions) | $4.4 | $3.0 | $9.1 | $5.8 | | Basic EPS | $0.76 | $0.52 | $1.58 | $1.01 | | Return on average assets | 1.11% | 0.78% | 1.16% | 0.75% | | Return on average equity | 12.25% | 9.72% | 12.96% | 9.30% | | Net interest margin | 3.83% | 3.21% | 3.80% | 3.16% | - The increase in net earnings was primarily related to an increase in net interest income, driven by growth in interest income on loans due to increased average loan balances and lower interest expense due to lower short-term interest rates106 Interest Income Total interest income increased by 10.6% to $20.1 million in Q2 2025 and by 9.8% to $39.4 million in YTD 2025. This growth was primarily due to a 14.4% increase in interest income on loans, driven by higher average loan balances and yields. Interest income on investment securities decreased due to lower average balances, despite higher yields | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Total interest income | $20,098 | $18,180 | $39,440 | $35,925 | | Interest income on loans | $17,186 | $15,022 | $33,581 | $29,512 | | Average loan balances | $1,100,000 | $955,100 | $1,100,000 | $950,400 | | Yields on loans | 6.37% | 6.33% | 6.36% | 6.25% | | Interest income on investment securities | $2,864 | $3,118 | $5,763 | $6,310 | | Average investment securities balances | $363,900 | $437,100 | $370,500 | $447,000 | | Yields on investment securities | 3.34% | 3.04% | 3.32% | 2.99% | Interest Expense Total interest expense decreased by $791,000 to $6.4 million in Q2 2025 and by $1.6 million to $12.6 million in YTD 2025. This reduction was primarily due to lower rates on deposits and borrowings, partially offset by an increase in average interest-bearing deposit balances | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Total interest expense | $6,415 | $7,206 | $12,638 | $14,204 | | Interest expense on deposits | $5,144 | $5,673 | $10,380 | $11,130 | | Cost of interest-bearing deposits | 2.14% | 2.44% | 2.15% | 2.39% | | Average interest-bearing deposit balances | $965,200 | $936,200 | $972,500 | $935,800 | | Interest expense on borrowings | $1,271 | $1,533 | $2,258 | $3,074 | | Rates on borrowings | 4.98% | 5.81% | 5.03% | 5.76% | Net Interest Income Net interest income increased by 24.7% to $13.7 million in Q2 2025 and by 23.4% to $26.8 million in YTD 2025, primarily due to higher interest income on loans and lower interest expense. The net interest margin (tax-equivalent) improved to 3.83% in Q2 2025 and 3.80% in YTD 2025 | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Net interest income | $13,683 | $10,974 | $26,802 | $21,721 | | Net interest margin (tax-equivalent) | 3.83% | 3.21% | 3.80% | 3.16% | - Accretion of purchase accounting adjustments increased net interest income by $196,000 in Q2 2025 and $380,000 in YTD 2025, primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction113114 Average Assets/Liabilities Average interest-earning assets increased to $1.45 billion in Q2 2025 and $1.44 billion in YTD 2025, primarily driven by loan growth. Average interest-bearing liabilities also increased, but the average cost decreased, leading to an improved interest rate spread and net interest margin | Metric (Q2) | 2025 Average Balance (in thousands) | 2025 Average Yield/Cost | 2024 Average Balance (in thousands) | 2024 Average Yield/Cost | | :-------------------------------- | :---------------------------------- | :---------------------- | :---------------------------------- | :---------------------- | | Total interest-earning assets | $1,451,911 | 5.60% | $1,397,940 | 5.29% | | Total interest-bearing liabilities | $1,067,555 | 2.41% | $1,042,287 | 2.78% | | Interest rate spread | | 3.19% | | 2.51% | | Net interest margin | | 3.83% | | 3.21% | | Metric (YTD) | 2025 Average Balance (in thousands) | 2025 Average Yield/Cost | 2024 Average Balance (in thousands) | 2024 Average Yield/Cost | | :-------------------------------- | :---------------------------------- | :---------------------- | :---------------------------------- | :---------------------- | | Total interest-earning assets | $1,441,973 | 5.56% | $1,404,061 | 5.20% | | Total interest-bearing liabilities | $1,063,052 | 2.40% | $1,043,172 | 2.74% | | Interest rate spread | | 3.16% | | 2.46% | | Net interest margin | | 3.80% | | 3.16% | Rate/Volume Table The increase in net interest income for both the three and six months ended June 30, 2025, was primarily driven by a positive rate effect, particularly from lower interest expense on deposits and borrowings, combined with a positive volume effect from loans | Change in Net Interest Margin (in thousands) | Q2 2025 vs 2024 (Volume) | Q2 2025 vs 2024 (Rate) | Q2 2025 vs 2024 (Net) | YTD 2025 vs 2024 (Volume) | YTD 2025 vs 2024 (Rate) | YTD 2025 vs 2024 (Net) | | :----------------------------------------- | :----------------------- | :--------------------- | :-------------------- | :------------------------ | :---------------------- | :--------------------- | | Interest income | $1,391 | $502 | $1,893 | $1,947 | $1,554 | $3,501 | | Interest expense | $156 | $(947) | $(791) | $100 | $(1,666) | $(1,566) | | Net interest margin | $1,235 | $1,449 | $2,684 | $1,847 | $3,220 | $5,067 | Provision for Credit Losses A $1.0 million provision for credit losses on loans was recorded in Q2 2025 and YTD 2025, compared to no provision in Q2 2024 and $300,000 in YTD 2024. This increase was primarily due to loan growth and higher reserves against individually evaluated non-accrual loans. Net loan charge-offs were $40,000 in Q2 2025 and $63,000 in YTD 2025, contrasting with net recoveries in the prior year periods | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Provision for credit losses | $1,000 | $- | $1,000 | $300 | | Net loan charge-offs (recoveries) | $40 | $(52) | $63 | $(45) | - The provision increase was primarily due to loan growth and higher reserves against individually evaluated loans on non-accrual122 Non-interest Income Total non-interest income decreased by 2.5% to $3.6 million in Q2 2025 and by 1.9% to $7.0 million in YTD 2025. This decline was mainly due to lower fees and service charges on deposit accounts, partially offset by increased gains on sales of residential real estate loans and bank-owned life insurance income | Non-Interest Income (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--------------------------------- | :------ | :------ | :------- | :------- | | Total non-interest income | $3,626 | $3,720 | $6,984 | $7,120 | | Fees and service charges | $2,476 | $2,691 | $4,864 | $5,152 | | Gains on sales of loans, net | $740 | $648 | $1,302 | $1,160 | | Increase in cash surrender value of bank owned life insurance | $278 | $248 | $550 | $493 | - The decrease in fees and service charges was primarily due to lower fees related to deposit accounts125126 Non-interest Expense Total non-interest expense decreased by 1.2% to $11.0 million in Q2 2025 but increased by 0.4% to $21.7 million in YTD 2025. The Q2 decrease was mainly due to a valuation allowance on real estate held for sale in the prior year, while the YTD increase was driven by higher compensation and benefits due to additional staffing and benefit costs | Non-Interest Expense (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------------------------- | :------ | :------ | :------- | :------- | | Total non-interest expense | $10,961 | $11,095 | $21,722 | $21,646 | | Compensation and benefits | $6,234 | $5,504 | $12,388 | $11,036 | | Valuation allowance on real estate held for sale | $- | $979 | $- | $1,108 | | Data processing | $629 | $492 | $1,025 | $973 | - The increase in compensation and benefits was due to additional staffing and higher benefit costs127128 Income Tax Expense Income tax expense increased to $944,000 in Q2 2025 and $2.0 million in YTD 2025, with the effective tax rate rising to 17.7% for both periods. This increase was attributed to higher earnings before taxes while tax-exempt income remained consistent | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :----------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Income tax expense | $944 | $587 | $1,959 | $1,105 | | Effective tax rate | 17.7% | 16.3% | 17.7% | 16.0% | - The increase in the effective tax rate was due to higher earnings before taxes while tax-exempt income was consistent129130 Financial Condition The Company's financial condition remains strong despite sluggish economic conditions, elevated inflation, and high interest rates. It maintains robust capital and liquidity, a stable deposit portfolio, and actively manages interest rate and concentration risks. Asset quality remains strong, with management focused on resolving problem loans - Economic conditions remained sluggish with elevated inflation and high interest rates impacting the economy131 - The Company maintains strong capital and liquidity, and a stable, conservative deposit portfolio, with a significant majority being retail-based and FDIC-insured131 - Asset quality has remained strong, with management actively working to resolve problem credits131 Asset Quality and Distribution Total assets were $1.6 billion at June 30, 2025. The allowance for credit losses on loans increased to $13.8 million (1.23% of gross loans) from $12.8 million (1.22%) at December 31, 2024, driven by loan growth and higher reserves for individually evaluated non-accrual loans. Classified loans and non-accrual loans increased, while loans past due 30-89 days decreased - Total assets were $1.6 billion at June 30, 2025132 | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Allowance for credit losses on loans | $13.8 million | $12.8 million | | Allowance for credit losses as % of gross loans | 1.23% | 1.22% | | Classified loans | $35.0 million | $26.1 million | | Loans past due 30-89 days and accruing | $4.3 million | $6.2 million | | Non-accrual loans | $17.0 million | $13.1 million | - The increase in allowance for credit losses was primarily due to loan growth and higher reserves against individually evaluated loans on non-accrual133 Liability Distribution Total deposits decreased by $54.9 million (4.1%) to $1.3 billion at June 30, 2025, primarily due to seasonal declines in public funds and brokered deposits. Non-interest-bearing deposits increased slightly, while money market and checking accounts decreased significantly due to a reduction in brokered deposits. Certificates of deposit increased, driven by brokered CDs. Total borrowings increased by $94.1 million to $182.6 million, mainly due to FHLB line of credit borrowings | Deposit Type (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total deposits | $1,273,901 | $1,328,766 | | Non-interest-bearing demand | $351,993 | $351,595 | | Money market and checking | $562,919 | $636,963 | | Savings | $148,092 | $145,514 | | Certificates of deposit | $210,897 | $194,694 | - Total borrowings increased by $94.1 million to $182.6 million at June 30, 2025, primarily due to an increase in FHLB line of credit borrowings142 - Approximately 94.9% of total deposits were considered core deposits at June 30, 2025140 Cash Flows For the first six months of 2025, cash and cash equivalents increased by $4.8 million. Operating activities generated $8.5 million, investing activities used $40.5 million (primarily due to loan growth), and financing activities provided $36.8 million (driven by increased borrowings offsetting deposit decreases) | Cash Flow Activity (Six months ended June 30, in thousands) | 2025 | 2024 | | :-------------------------------------------------------- | :----- | :----- | | Net cash provided by operating activities | $8,457 | $7,226 | | Net cash used in investing activities | $(40,483) | $(4,815) | | Net cash provided by (used in) financing activities | $36,789 | $(5,623) | | Net increase (decrease) in cash and cash equivalents | $4,763 | $(3,212) | Liquidity The Company maintains strong liquidity with $380.9 million in liquid assets at June 30, 2025. It has access to additional funds through FHLB advances ($111.4 million available), Federal Reserve discount window ($44.5 million capacity), correspondent bank agreements ($30.0 million available), and existing lines of credit - Liquid assets (cash and cash equivalents, investment securities available-for-sale) totaled $380.9 million at June 30, 2025144 - Available FHLB borrowing capacity was $111.4 million at June 30, 2025145 - The Company had $44.5 million in borrowing capacity with the Federal Reserve and $30.0 million in available credit from correspondent banks, with no outstanding borrowings145 Off Balance Sheet Arrangements The Company had $2.2 million in outstanding standby letters of credit at June 30, 2025, which are contingent commitments secured by customer collateral. Additionally, it had $202 million in outstanding loan commitments, excluding standby letters of credit, and anticipates sufficient funds to meet these - Outstanding standby letters of credit totaled $2.2 million at June 30, 2025146 - The Company had outstanding loan commitments, excluding standby letters of credit, of $202 million at June 30, 2025147 - Standby letters of credit are subject to the same credit policies, underwriting standards, and approval process as loans and are mostly secured146 Capital Both the Company and the Bank met all regulatory capital adequacy requirements, including the capital conservation buffer, as of June 30, 2025, and December 31, 2024. Management believes they continue to be "well capitalized" - The Company and the Bank met all capital adequacy requirements, including the capital conservation buffer, at June 30, 2025, and December 31, 2024148 - Banking organizations are required to maintain a capital conservation buffer of 2.5% to pay dividends and make other capital distributions without restriction148 - Management believes the Bank exceeded its minimum capital requirements and was categorized as "well capitalized"148 Dividends The Company paid a quarterly cash dividend of $0.21 per share in Q2 2025. The ability to pay dividends is subject to maintaining adequate regulatory capital and is limited by the requirement to pay interest on subordinated debentures before common stock dividends - A quarterly cash dividend of $0.21 per share was paid during the quarter ended June 30, 2025149 - The payment of dividends is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations150 - Interest payments on subordinated debentures must be paid before dividends on capital stock, with the right to defer interest for up to 20 consecutive quarters151 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate risk, which is managed through its Asset/Liability Management Committee using earnings simulation models and interest sensitivity analyses. Simulations indicate potential negative impacts on net interest income from rising interest rates (e.g., -11.8% for a 300 basis point rise) and smaller negative impacts from falling rates - Interest rate risk is defined as the exposure of net interest income and fair value of financial instruments to movements in interest rates152 - The Asset/Liability Management Committee monitors the interest rate sensitivity of the balance sheet using earnings simulation models and interest sensitivity analyses153 | Scenario (1-year horizon) | June 30, 2025 Dollar Change in Net Interest Income (in thousands) | June 30, 2025 Percent Change in Net Interest Income | | :------------------------ | :-------------------------------------------------------------- | :-------------------------------------------------- | | 300 basis point rising | $(6,204) | (11.8)% | | 200 basis point rising | $(4,190) | (7.9)% | | 100 basis point rising | $(2,174) | (4.1)% | | 100 basis point falling | $38 | 0.1% | | 200 basis point falling | $(1,007) | (1.9)% | | 300 basis point falling | $(1,410) | (2.7)% | ITEM 4. CONTROLS AND PROCEDURES Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were effective as of June 30, 2025158 - No changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025, materially affected or are reasonably likely to materially affect internal control over financial reporting159 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This section provides a safe harbor statement for forward-looking statements, identifying them by specific terminology and noting that actual results may differ materially due to various factors. It advises against undue reliance on such statements and refers to the 10-K for additional risk factors - The document contains forward-looking statements, generally identifiable by words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions155 - The ability to predict results or the actual effect of future plans or strategies is inherently uncertain, and various factors could have a material adverse effect on operations and future prospects156 - Undue reliance should not be placed on forward-looking statements, and additional information concerning business risks is included in the Company's Annual Report on Form 10-K156 PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits ITEM 1. LEGAL PROCEEDINGS There are no material pending legal proceedings against the Company or its subsidiaries, other than routine litigation incidental to their businesses - There are no material pending legal proceedings to which the Company or its subsidiaries is a party or which any of their property is subject, other than ordinary routine litigation incidental to their respective businesses162 ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes in the risk factors set forth under Part I, Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2024163 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The Company did not purchase any of its equity securities during the quarter ended June 30, 2025. As of that date, 157,456 shares remained available for repurchase under the March 2020 Repurchase Program | Period | Total number of shares purchased | Average price paid per share | Maximum number of shares that may yet be purchased under the plans | | :---------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------- | | April 1-30, 2025 | - | $- | 157,456 | | May 1-31, 2025 | - | $- | 157,456 | | June 1-30, 2025 | - | $- | 157,456 | | Total | - | $- | 157,456 | - As of June 30, 2025, there were 157,456 shares remaining available for repurchase under the March 2020 Repurchase Program164 ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities were reported for the period - No defaults upon senior securities165 ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the Company - Not applicable166 ITEM 5. OTHER INFORMATION No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - During the quarter ended June 30, 2025, none of the Company's directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement167 ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including corporate organizational documents, certifications from the CEO and CFO, and interactive data files in Inline XBRL format - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, CEO/CFO certifications (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350), and Interactive Data Files (Inline XBRL)168 SIGNATURES The report was duly signed on August 13, 2025, by Abigail M. Wendel, President and Chief Executive Officer, and Mark A. Herpich, Vice President, Secretary, Treasurer, and Chief Financial Officer - The report was signed by Abigail M. Wendel, President and Chief Executive Officer, and Mark A. Herpich, Vice President, Secretary, Treasurer, and Chief Financial Officer, on August 13, 2025170
Landmark Bancorp(LARK) - 2025 Q2 - Quarterly Report