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Landmark Bancorp(LARK) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net earnings of $2.2 million or $0.50 per share for Q1 2019, a 4% increase from the previous year [4] - Return on average assets was 0.91% and return on average equity was 9.52% for the quarter [4] - Net interest income increased by $602,000 or 9.1% to $7.2 million compared to Q1 2018 [11] - Non-interest income decreased by $145,000 or 4.3% to $3.3 million for Q1 2019 [13] - Non-interest expenses increased by $288,000 to $7.7 million, primarily due to increased compensation and benefits [15] - Effective tax rate increased from 10.9% in Q1 2018 to 13.5% in Q1 2019 [16] Business Line Data and Key Metrics Changes - The loan portfolio increased by $1.3 million to $490.7 million as of March 31, 2019 [17] - Non-accrual loans totaled $6.7 million or 1.35% of gross loans, an increase from 1.06% at year-end 2018 [20] - The construction and land loan portfolio was $18.4 million or 3.7% of total loans [26] - Commercial real estate loans totaled $141 million, representing 28.4% of the total loan portfolio [27] - Agricultural loans were $94.9 million or 19.1% of the total loan portfolio [28] Market Data and Key Metrics Changes - The company has a strong presence across the State of Kansas and is focused on growing customer relationships [8][31] - The loan growth is spread across all geographic markets, supported by the addition of commercial bankers in key areas [24] Company Strategy and Development Direction - The management team is focused on conservative and disciplined management, underwriting loans prudently, and monitoring interest rate risks [7][30] - The company aims to maintain a diversified mix in the loan portfolio across types and geography [26] - The company is actively pursuing M&A opportunities but has not found the right fit yet [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall loan portfolio despite challenges in the agricultural sector [40] - The company anticipates continued solid earnings and loan growth throughout 2019 [32] - Management is preparing for the implementation of CECL and believes they are well-positioned [64][65] Other Important Information - The Board of Directors declared a cash dividend of $0.20 per share, marking the 71st consecutive quarterly cash dividend [5] - Total assets decreased by $4.8 million to $981 million as of March 31, 2019 [17] - Stockholders' equity increased to $96.8 million, resulting in a book value of $22.15 per share [18] Q&A Session Summary Question: Increase in non-performers and Ag loan details - Management noted that a specific Agri business relationship increased non-accruals but is well secured and expected to resolve [39] Question: Overall portfolio health - Management feels confident about the overall loan portfolio despite industry stress [40] Question: Loan growth expectations - Management aims to replicate last year's growth, targeting low double-digit growth [41][42] Question: Net interest margin outlook - Management expects to maintain or slightly increase net interest margins due to loan growth [43] Question: M&A environment - The company is actively pursuing M&A opportunities but has not found the right one yet [45] Question: SBA lending strategy - The SBA portfolio is around $10 million to $12 million, and the company will continue to pursue SBA loans within credit risk disciplines [53][54] Question: Loan loss provision adequacy - Management believes the current loan loss provision is adequate based on historical losses [56] Question: Tax rate expectations - Management expects a more appropriate tax rate of around 13% going forward [62] Question: Branch rationalization and digital strategy - The company is reviewing branch rationalization but currently has no plans for adjustments; they are focusing on enhancing digital banking services [70][71] Question: Mortgage origination efforts - The company generates around $200 million in one-to-four family originations annually and has a strong mortgage origination platform [74]