PRESS RELEASE
| FOR IMMEDIATE RELEASE | Contacts: |
| July 22, 2014 | Michael E. Scheopner |
| | President and Chief Executive Officer |
| | Mark A. Herpich |
| | Chief Financial Officer |
| | (785) 565-2000 |
Landmark Bancorp, Inc.Announces Record Results for the Second Quarter of 2014
Declares Cash Dividend of $0.19 per Share
(Manhattan, KS, July 22, 2014) – Landmark Bancorp, Inc. (Nasdaq: LARK), a bank holding company serving 23 communities across Kansas, reported record net earnings of $2.1 million ($0.65 per diluted share) for the quarter ended June 30, 2014, compared to $1.4 million ($0.45 per diluted share) for the second quarter of 2013. For the six months ended June 30, 2014, Landmark reported record net earnings of $3.8 million ($1.18 per diluted share), compared to $2.8 million ($0.91 per diluted share) in the first half of 2013. Management will host a conference call to discuss these results at 2:00 p.m. (CT) on Wednesday, July 23, 2014. Investors may participate via telephone by dialing (877) 510-0473. A replay of the call will be available through August 25, 2014, by dialing (877) 344-7529 and using conference number 10049896.
Additionally, Landmark’s Board of Directors declared a cash dividend of $0.19 per share, to be paid August 25 2014, to common stockholders of record on August 13, 2014.
Michael E. Scheopner, President and Chief Executive Officer, commented: “We are pleased to report record net earnings of $2.1 million for the second quarter of 2014, a 47.4% year-over-year increase, driven primarily by our acquisition of Citizens Bank on November 1, 2013. The Citizens Bank acquisition represented a milestone in our disciplined approach to building the scale of Landmark National Bank’s franchise, adding to our earning power through higher interest-earning assets, net interest margin and non-interest income in the first half of 2014. We are very excited about our new customer relationships, expanding Landmark’s already strong presence and opening up additional opportunities in key markets in eastern Kansas. During the second quarter of 2014, return on average assets was 1.01% and return on average equity was 12.46%, representing increases from 0.88% and 8.79%, respectively, during the second quarter of 2013. While we continue to focus on growing Landmark’s loan portfolio with quality credit relationships, the low interest rate environment and slow-growth economy represent ongoing headwinds to improving our net interest margin and expanding lending. Despite these headwinds, we believe that Landmark’s risk management practices and capital strength position us well for long-term growth as the economy expands and the interest rate environment begins to return to a more normal level.”
Second Quarter Financial Highlights
Net interest income was $6.1 million for the quarter ended June 30, 2014, an increase of $1.6 million, or 36.7%, from the second quarter of 2013. Net interest margin, on a tax equivalent basis, increased from 3.34% in the second quarter of 2013 to 3.47% in the second quarter of 2014. The increases in net interest income and net interest margin were primarily the result of the acquisition of Citizens Bank, which increased average interest-earning assets 29.5% from $573.0 million in the second quarter of 2013 to $742.3 million in the second quarter of 2014. A $300,000 provision for loan losses was recorded in the second quarters of both 2014 and 2013.
Total non-interest income was $4.1 million in the second quarter of 2014, an increase of $1.6 million, or 63.1%, compared to the same period of 2013, primarily as a result of a $967,000 increase in gains on sales of loans. The Citizens Bank acquisition contributed to the increase in gains on sales of loans as well as increases of $517,000 in fees and service charges and $129,000 in other non-interest income, which was driven by higher lease revenue associated with the acquisition.
In the second quarter of 2014, Landmark recognized $39,000 in gains on sales of investment securities after selling approximately $1.1 million of municipal bonds which were identified for sale as part of the ongoing credit review of the portfolio. No such gains or losses were realized during the second quarter of 2013.
Non-interest expense increased $2.2 million, or 45.9%, to $7.1 million for the second quarter of 2014 compared to the same period of 2013. The increase in non-interest expense was primarily the result of increases of $1.0 million in compensation and benefits, $361,000 in occupancy and equipment, $332,000 in other non-interest expense, $314,000 in amortization expense and $99,000 in data processing. The higher expenses in the second quarter of 2014 primarily reflected ongoing operating costs relating to the eight additional branches assumed in the Citizens Bank acquisition. The increase in amortization expense in the second quarter of 2014 was primarily the result of a lower level of expense recorded during 2013 as a result of the reversal of a $212,000 valuation allowance against Landmark’s mortgage servicing rights portfolio. During the second quarter of 2014, Landmark recorded income tax expense of $792,000, compared to $417,000 during the same period of 2013. Landmark’s effective tax rate increased from 22.8% in the second quarter of 2013 to 27.6% in the second quarter of 2014 as a result of higher earnings before income taxes, while tax-exempt income remained stable between the periods.
First Half Financial Highlights
Net interest income was $12.1 million for the first six months of 2014, an increase of $3.2 million, or 36.8%, from the same period of 2013. Net interest margin, on a tax equivalent basis, increased from 3.36% in the first half of 2013 to 3.48% in the same period of 2014. The increases in net interest income and net interest margin were primarily the result of the acquisition of Citizens Bank, which increased average interest-earning assets 29.9% from $569.2 million during the first six months of 2013 to $739.6 million in the same period of 2014. Landmark’s provision for loan losses declined to $450,000 during the first six months of 2014 from $600,000 during the same period of 2013.
Total non-interest income was $7.4 million in the first six months of 2014, an increase of $2.2 million, or 42.6%, compared to the same period of 2013, primarily as a result of increases of $1.1 million in gains on sales of loans, $879,000 in fees and service charges and $309,000 in other non-interest income. The increase in non-interest income was primarily a result of the Citizens Bank acquisition.
Non-interest expense increased $4.2 million, or 42.7%, to $13.9 million for the first six months of 2014 compared to the same period of 2013. The increase in non-interest expense was primarily the result of increases of $2.1 million in compensation and benefits, $772,000 in occupancy and equipment, $525,000 in other non-interest expense, $395,000 in amortization and $251,000 in data processing. The higher expenses in 2014 primarily reflected ongoing operating costs relating to the branches assumed in the Citizens Bank acquisition. The increase in amortization expense in the first half of 2014 was primarily the result of a lower level of expense recorded during 2013 as a result of the reversal of a $212,000 valuation allowance against Landmark’s mortgage servicing rights portfolio. During the first six months of 2014, Landmark recorded income tax expense of $1.4 million, compared to $812,000 during the same period of 2013. Landmark’s effective tax rate increased from 22.2% in the first half of 2013 to 26.6% in the same period of 2014 as a result of higher earnings before income taxes, while tax-exempt income remained stable between the periods.
Balance Sheet Highlights
Total assets increased $7.2 million, or 0.9%, to $836.0 million at June 30, 2014, from $828.8 million at December 31, 2013. Net loans decreased $1.3 million, or 0.3%, to $412.7 million at June 30, 2014, compared to $414.0 million at December 31, 2013. Investment securities increased $16.9 million, or 5.5%, to $322.4 million at June 30, 2014, from $305.5 million at December 31, 2013. Stockholders’ equity increased to $68.7 million (book value of $21.64 per share) at June 30, 2014, from $62.7 million (book value of $19.96 per share) at December 31, 2013. In addition to retained earnings, the increase in stockholders’ equity was due in part to unrealized gains on investment securities. The ratio of equity to total assets increased to 8.22% at June 30, 2014, from 7.56% at December 31, 2013, and the ratio of tangible equity to tangible assets increased to 5.74% from 5.00% as of the same dates.
At June 30, 2014, the allowance for loan losses was $5.1 million, or 1.23% of gross loans outstanding, compared to $5.5 million, or 1.32% of gross loans outstanding, at December 31, 2013. Non-performing loans decreased to $6.6 million, or 1.57% of gross loans, at June 30, 2014, from $9.8 million, or 2.35% of gross loans, at December 31, 2013. Landmark recorded net loan charge-offs of $841,000 during the first six months of 2014 compared to net loan charge-offs of $276,000 during the same period of 2013. The increase in net loan charge-offs was principally associated with a previously impaired commercial loan relationship that was liquidated during the second quarter of 2014.
About Landmark
Landmark Bancorp, Inc., the holding company for Landmark National Bank, is listed on the NASDAQ Global Market under the symbol “LARK.” Headquartered in Manhattan, Kansas, Landmark National Bank is a community banking organization dedicated to providing quality financial and banking services. Landmark National Bank has 29 locations in 23 communities across Kansas: Manhattan (2), Auburn, Dodge City (2), Fort Scott (2), Garden City, Great Bend (2), Hoisington, Iola, Junction City, Kincaid, LaCrosse, Lawrence (2), Lenexa, Louisburg, Mound City, Osage City, Osawatomie, Overland Park, Paola, Pittsburg, Topeka (2), Wamego and Wellsville, Kansas. Visit www.banklandmark.com for more information.
Special Note Concerning Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of Landmark Bancorp, Inc (the “Company”). Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. A number of factors, many of which are beyond our ability to control or predict, could cause actual results to differ materially from those in our forward-looking statements. These factors include, among others, the following: (i) the strength of the local and national economy; (ii) changes in state and federal laws, regulations and governmental policies concerning our general business; (iii) changes in interest rates and prepayment rates of our assets; (iv) increased competition in the financial services sector and the inability to attract new customers; (v) timely development and acceptance of new products and services; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) integration of acquired businesses; (x) unexpected outcomes of existing or new litigation; (xi) changes in accounting policies and practices; (xii) the economic impact of armed conflict or terrorist acts involving the United States; (xiii) the ability to manage credit risk, forecast loan losses and maintain an adequate allowance for loan losses; (xiv) declines in the value of our investment portfolio; (xv) the ability to raise additional capital; and (xvi) declines in real estate values. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning Landmark Bancorp, Inc. and its business, including additional factors that could materially affect the Company’s financial results, is included in our filings with the Securities and Exchange Commission.
Financial Highlights
(Dollars in thousands, except per share data)
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited):
| | | June 30, | | | December 31, | |
| | | 2014 | | | 2013 | |
| ASSETS: | | | | | | | | |
| Cash and cash equivalents | | $ | 18,003 | | | $ | 29,735 | |
| Investment securities | | | 322,411 | | | | 305,517 | |
| Loans, net | | | 412,678 | | | | 414,016 | |
| Loans held for sale | | | 11,006 | | | | 7,864 | |
| Premises and equipment, net | | | 20,851 | | | | 20,634 | |
| Bank owned life insurance | | | 17,597 | | | | 17,342 | |
| Goodwill | | | 17,532 | | | | 17,532 | |
| Other intangible assets, net | | | 4,481 | | | | 4,811 | |
| Other assets | | | 11,452 | | | | 11,304 | |
| TOTAL ASSETS | | $ | 836,011 | | | $ | 828,755 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY: | | | | | | | | |
| Deposits | | $ | 684,536 | | | $ | 687,486 | |
| Federal Home Loan Bank and other borrowings | | | 68,557 | | | | 68,744 | |
| Other liabilities | | | 14,208 | | | | 9,833 | |
| Total liabilities | | | 767,301 | | | | 766,063 | |
| Stockholders' equity | | | 68,710 | | | | 62,692 | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 836,011 | | | $ | 828,755 | |
| | | | | | | | | |
| LOANS (unaudited): | | | | | | | | |
| | | | | | | | | |
| One-to-four family residential real estate | | $ | 127,567 | | | $ | 125,087 | |
| Construction and land | | | 22,967 | | | | 23,776 | |
| Commercial real estate | | | 118,158 | | | | 119,390 | |
| Commercial | | | 56,115 | | | | 61,383 | |
| Agriculture | | | 63,370 | | | | 62,287 | |
| Municipal | | | 9,397 | | | | 8,846 | |
| Consumer | | | 20,195 | | | | 18,600 | |
| Net deferred loan costs and loans in process | | | 58 | | | | 187 | |
| Allowance for loan losses | | | (5,149 | ) | | | (5,540 | ) |
| Loans, net | | $ | 412,678 | | | $ | 414,016 | |
| | | | | | | | | |
| NON-PERFORMING ASSETS (unaudited): | | | | | | | | |
| | | | | | | | | |
| Non-accrual loans | | $ | 6,550 | | | $ | 9,836 | |
| Accruing loans over 90 days past due | | | - | | | | - | |
| Non-performing investment securities | | | - | | | | - | |
| Real estate owned | | | 191 | | | | 400 | |
| Total non-performing assets | | $ | 6,741 | | | $ | 10,236 | |
| | | | | | | | | |
| RATIOS (unaudited): | | | | | | | | |
| | | | | | | | | |
| Loans 30-89 days delinquent and still accruing to gross loans outstanding | | | 0.34% | | | | 0.34% | |
| Total non-performing loans to gross loans outstanding | | | 1.57% | | | | 2.35% | |
| Total non-performing assets to total assets | | | 0.81% | | | | 1.24% | |
| Allowance for loan losses to gross loans outstanding | | | 1.23% | | | | 1.32% | |
| Allowance for loan losses to total non-performing loans | | | 78.61% | | | | 56.32% | |
| Equity to total assets | | | 8.22% | | | | 7.56% | |
| Tangible equity to tangible assets (1) | | | 5.74% | | | | 5.00% | |
| Book value per share (2) | | $ | 21.64 | | | $ | 19.96 | |
(1) Tangible equity to tangible assets is a non-GAAP financial ratio calculated as stockholders' equity reduced by goodwill and other intangibleassets, net divided by total assets reduced by goodwill and other intangible assets, net.
(2) Per share value at December 31, 2013 has been adjusted to give effect to the 5% stock dividend paid during December 2013.
Financial Highlights (continued)
(Dollars in thousands, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited):
| | | Three months ended June 30, | | | Six months ended June 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| Interest income: | | | | | | | | | | | | | | | | |
| Loans | | $ | 5,248 | | | $ | 3,992 | | | $ | 10,469 | | | $ | 7,950 | |
| Investment securities and other | | | 1,625 | | | | 1,212 | | | | 3,209 | | | | 2,431 | |
| Total interest income | | | 6,873 | | | | 5,204 | | | | 13,678 | | | | 10,381 | |
| | | | | | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Deposits | | | 314 | | | | 346 | | | | 640 | | | | 732 | |
| Borrowed funds | | | 483 | | | | 412 | | | | 962 | | | | 821 | |
| Total interest expense | | | 797 | | | | 758 | | | | 1,602 | | | | 1,553 | |
| | | | | | | | | | | | | | | | | |
| Net interest income | | | 6,076 | | | | 4,446 | | | | 12,076 | | | | 8,828 | |
| Provision for loan losses | | | 300 | | | | 300 | | | | 450 | | | | 600 | |
| Net interest income after provision for loan losses | | | 5,776 | | | | 4,146 | | | | 11,626 | | | | 8,228 | |
| | | | | | | | | | | | | | | | | |
| Non-interest income: | | | | | | | | | | | | | | | | |
| Fees and service charges | | | 1,922 | | | | 1,405 | | | | 3,592 | | | | 2,713 | |
| Gains on sales of loans, net | | | 1,846 | | | | 879 | | | | 2,962 | | | | 1,909 | |
| Bank owned life insurance | | | 128 | | | | 137 | | | | 255 | | | | 290 | |
| Other | | | 251 | | | | 122 | | | | 574 | | | | 265 | |
| Total non-interest income | | | 4,147 | | | | 2,543 | | | | 7,383 | | | | 5,177 | |
| | | | | | | | | | | | | | | | | |
| Investment securities: | | | | | | | | | | | | | | | | |
| Net impairment losses | | | - | | | | - | | | | - | | | | - | |
| Gains on sales of investment securities, net | | | 39 | | | | - | | | | 39 | | | | - | |
| Investment securities gains, net | | | 39 | | | | - | | | | 39 | | | | - | |
| | | | | | | | | | | | | | | | | |
| Non-interest expense: | | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 3,494 | | | | 2,453 | | | | 6,978 | | | | 4,906 | |
| Occupancy and equipment | | | 1,094 | | | | 733 | | | | 2,207 | | | | 1,435 | |
| Professional fees | | | 329 | | | | 257 | | | | 615 | | | | 482 | |
| Amortization of intangibles | | | 331 | | | | 17 | | | | 635 | | | | 240 | |
| Data processing | | | 344 | | | | 245 | | | | 713 | | | | 462 | |
| Advertising | | | 108 | | | | 107 | | | | 220 | | | | 214 | |
| Federal deposit insurance premiums | | | 133 | | | | 123 | | | | 265 | | | | 231 | |
| Foreclosure and real estate owned expense | | | 18 | | | | 18 | | | | 31 | | | | 59 | |
| Other | | | 1,242 | | | | 910 | | | | 2,240 | | | | 1,715 | |
| Total non-interest expense | | | 7,093 | | | | 4,863 | | | | 13,904 | | | | 9,744 | |
| | | | | | | | | | | | | | | | | |
| Earnings before income taxes | | | 2,869 | | | | 1,826 | | | | 5,144 | | | | 3,661 | |
| Income tax expense | | | 792 | | | | 417 | | | | 1,368 | | | | 812 | |
| Net earnings | | $ | 2,077 | | | $ | 1,409 | | | $ | 3,776 | | | $ | 2,849 | |
| | | | | | | | | | | | | | | | | |
| Net earnings per share (1) | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.65 | | | $ | 0.46 | | | $ | 1.19 | | | $ | 0.93 | |
| Diluted | | | 0.65 | | | | 0.45 | | | | 1.18 | | | | 0.91 | |
| | | | | | | | | | | | | | | | | |
| Shares outstanding at end of period (1) | | | 3,174,799 | | | | 3,082,625 | | | | 3,174,799 | | | | 3,082,625 | |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding - basic (1) | | | 3,174,765 | | | | 3,072,334 | | | | 3,161,998 | | | | 3,070,604 | |
| Weighted average common shares outstanding - diluted (1) | | | 3,215,194 | | | | 3,135,865 | | | | 3,201,211 | | | | 3,126,949 | |
| | | | | | | | | | | | | | | | | |
| OTHER DATA (unaudited): | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Return on average assets (2) | | | 1.01% | | | | 0.88% | | | | 0.92% | | | | 0.90% | |
| Return on average equity (2) | | | 12.46% | | | | 8.79% | | | | 11.66% | | | | 8.98% | |
| Return on average tangible equity (2) (3) | | | 18.61% | | | | 11.60% | | | | 17.60% | | | | 11.87% | |
| Net interest margin (2) (4) | | | 3.47% | | | | 3.34% | | | | 3.48% | | | | 3.36% | |
(1) Share and per share values at or for the periods ended June 30, 2013 have been adjusted to give effect to the 5% stock dividend paid during December 2013.
(2) Information for the three and six months ended June 30 is annualized.
(3) Return on average tangible equity is a non-GAAP financial ratio calculated as net earnings divided by average stockholders' equity reduced by average goodwill and average other intangible assets, net.
(4) Net interest margin is presented on a fully tax equivalent basis, using a 34% federal tax rate.
