Landmark Bancorp(US:LARK)2023-11-13 16:48Financial Performance - Net earnings for Q3 2023 were $2.9 million, a 15.1% increase from $2.5 million in Q3 2022[130]. - Interest income for Q3 2023 was $16.8 million, up $6.2 million or 58.6% compared to Q3 2022, driven by higher loan yields and average balances[133]. - Average loan balances increased from $687.7 million in Q3 2022 to $906.3 million in Q3 2023, contributing to a 68.6% rise in interest income on loans[133]. - Total interest income for the first nine months of 2023 was $47.2 million, a 62.8% increase compared to the same period in 2022[134]. - Net interest income increased by $5.4 million, or 20.0%, to $32.4 million for the first nine months of 2023 compared to the same period in 2022[139]. - The company recorded net interest income of $32.4 million for the nine months ended September 30, 2023, compared to $27 million for the same period in 2022[143]. - Total non-interest income for Q3 2023 was $3.7 million, an increase of $123,000 or 3.5% from Q3 2022, primarily due to higher fees related to deposit accounts[151]. Interest and Loan Metrics - Interest expense for Q3 2023 rose to $6.2 million, an increase of $5.0 million from Q3 2022, primarily due to higher rates and increased competition for deposits[136]. - The net interest margin decreased from 3.21% in Q3 2022 to 3.06% in Q3 2023, reflecting the impact of rising interest rates and competitive pressures[138]. - Net interest margin, on a tax-equivalent basis, increased from 3.08% in the first nine months of 2022 to 3.19% in the same period of 2023[139]. - The interest rate spread decreased from 3.06% in the three months ended September 30, 2022, to 2.43% in the same period of 2023[141]. - The average balance of interest-earning assets increased to $1.38 billion for the nine months ended September 30, 2023, compared to $1.2 billion in the same period of 2022[143]. Expenses and Dividends - The Company recorded a dividend payout ratio of 38.08% for Q3 2023, down from 42.00% in Q3 2022[131]. - Non-interest expense for Q3 2023 totaled $10.7 million, an increase of $1.3 million or 13.4% from Q3 2022, mainly due to higher compensation and benefits related to the acquisition of Freedom Bank[153]. - Income tax expense for Q3 2023 was $671,000, with an effective tax rate increase from 17.3% in Q3 2022 to 18.9% in Q3 2023[155]. - The Bank paid a quarterly cash dividend of $0.21 per share during the quarter ended September 30, 2023[175]. - Approximately $12.0 million was available to be paid as dividends to the Company by the Bank without prior regulatory approval as of September 30, 2023[176]. Assets and Liabilities - Total assets increased by $54.7 million or 3.5% from December 31, 2022, to $1.6 billion at September 30, 2023[158]. - Total deposits increased by $7.4 million or 0.6% to $1.3 billion at September 30, 2023, primarily due to an increase in brokered deposit balances[163]. - Non-interest-bearing deposits decreased to $395.0 million or 30.20% of total deposits at September 30, 2023, down from $410.1 million or 31.5% at December 31, 2022[164]. - Total borrowings increased by $48.6 million to $116.8 million at September 30, 2023, primarily due to an increase in FHLB borrowings[167]. - Cash and cash equivalents decreased by $665,000 during the first nine months of 2023, with net cash from operating activities of $11.4 million[168]. Credit and Risk Management - The provision for credit losses recorded during the first nine months of 2023 was $299,000, compared to no provision in the same period of 2022[149]. - Net loan recoveries during the first nine months of 2023 were $406,000, an increase from $83,000 in the same period of 2022[149]. - The allowance for credit losses on loans was $11.0 million or 1.17% of gross loans outstanding as of September 30, 2023, up from $8.8 million or 1.03% at December 31, 2022[159]. - Outstanding loan commitments, excluding standby letters of credit, were $199.8 million as of September 30, 2023[172]. - The Company is subject to various risks including changes in interest rates, economic conditions, and competitive pressures in the financial services sector[182]. - The Company’s risk management framework is crucial for managing interest rate risk and ensuring compliance with capital adequacy requirements[182]. Capital and Regulatory Compliance - The Company has maintained a Common Equity Tier 1 Capital ratio above 2.5%, allowing for continued dividend distributions[128]. - As of September 30, 2023, the Bank met the requirements to be "well capitalized," with a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%[174]. - The Basel III Rules require a capital conservation buffer of 2.5% common equity Tier 1 capital above the regulatory minimum[174]. - The Company has the right to defer interest payments on subordinated debentures for up to 20 consecutive quarters, impacting dividend payments[177]. - The Company’s ability to pay dividends is also limited by the National Bank Act, which restricts dividends to the current year's net earnings plus adjusted retained earnings for the preceding three years[176]. Interest Rate Sensitivity - Interest rate sensitivity simulations indicated a potential decrease in net interest income of $5,434,000 (12.0%) under a 300 basis point rising scenario as of September 30, 2023[180]. - The Company has set policy limits for interest rate risk and has successfully met its interest rate sensitivity objectives[179].