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8-K - CURRENT REPORT - LANDMARK BANCORP INCv416322_8k.htm

 

Exhibit 99.1

 

PRESS RELEASE

 

FOR IMMEDIATE RELEASE Contacts:
July 27, 2015 Michael E. Scheopner
  President and Chief Executive Officer
  Mark A. Herpich
  Chief Financial Officer
  (785) 565-2000

 

Landmark Bancorp, Inc. Announces Results for the Second Quarter of 2015

Declares Cash Dividend of $0.19 per Share

 

(Manhattan, KS, July 27, 2015) – Landmark Bancorp, Inc. (Nasdaq: LARK), a bank holding company serving 23 communities across Kansas, reported net earnings of $2.6 million ($0.76 per diluted share) for the quarter ended June 30, 2015, compared to $2.1 million ($0.62 per diluted share) for the second quarter of 2014. For the six months ended June 30, 2015, Landmark reported net earnings of $5.4 million ($1.57 per diluted share), compared to $3.8 million ($1.12 per diluted share) in the first half of 2014. Management will host a conference call to discuss these results at 10:00 a.m. (central time) on Tuesday, July 28, 2015. Investors may participate via telephone by dialing (877) 510-0473. A replay of the call will be available through August 28, 2015, by dialing (877) 344-7529 and using conference number 10069581.

 

Additionally, Landmark’s Board of Directors declared a cash dividend of $0.19 per share, to be paid August 26, 2015, to common stockholders of record on August 12, 2015.

 

Michael E. Scheopner, President and Chief Executive Officer, commented: “We are pleased to report net earnings of $2.6 million for the second quarter of 2015, a 26.0% increase from the second quarter a year earlier. The bank’s organic growth drove a 9.0% increase in second-quarter net interest income, year over year, and our focus on mortgage banking produced a 21.9% increase in gains on sales of loans. Net earnings for the first half of 2015 increased to $5.4 million, up 42.8% from the first half of 2014. During the first six months of 2015, return on average assets was 1.25% compared to 0.92% for the first six months of 2014, and return on average equity was 14.67% compared to 11.66% for the same periods, respectively. We believe that Landmark’s risk management practices and capital strength continue to position us well for long-term growth as the economy expands and the interest rate environment begins to return to past levels. Landmark’s commitment to community banking – meeting the financial needs of families and businesses with service that is both personal and high-tech – continues to build our presence across Kansas.”

 

Second Quarter Financial Highlights

 

Net interest income was $6.6 million for the quarter ended June 30, 2015, an increase of $548,000, or 9.0%, from the second quarter of 2014. Net interest margin, on a tax equivalent basis, increased from 3.47% in the second quarter of 2014 to 3.56% in the second quarter of 2015. The increase in net interest income was primarily the result of a 6.8% increase in our average interest-earning assets from $742.3 million in the second quarter of 2014 to $792.5 million in the second quarter of 2015. Landmark’s provision for loan losses declined from $300,000 in the second quarter of 2014 to $200,000 in the second quarter of 2015.

 

Total non-interest income was $4.7 million in the second quarter of 2015, an increase of $496,000, or 11.9%, compared to the same period of 2014, primarily as a result of a $405,000 increase in gains on sales of loans and a gain of $236,000 on the sale of a closed branch facility, which was included in other non-interest income. Gains on sales of loans increased primarily as a result of increased volumes of one-to-four family residential real estate loans originated during the second quarter of 2015 as compared to the same period of 2014. Partially offsetting those increases was a decline of $109,000 in fees and service charges.

 

Non-interest expense increased $350,000, or 4.9%, to $7.4 million for the second quarter of 2015 compared to the second quarter of 2014. The increase in non-interest expense was primarily the result of increases of $351,000 in compensation and benefits and $100,000 in other non-interest expense. The higher compensation and benefits expense in the second quarter of 2015 primarily reflected expenses associated with the expanded mortgage banking activity while the increase in other non-interest expense reflected a $163,000 impairment of the residual real estate collateral associated with an affordable housing investment. During the second quarter of 2015, we recorded income tax expense of $1.0 million, compared to $792,000 during the same period of 2014. Our effective tax rate increased from 27.6% in the second quarter of 2014 to 28.6% in the second quarter of 2015 as a result of higher earnings before income taxes.

 

First Half Financial Highlights

 

Net interest income was $12.9 million for the first six months of 2015, an increase of $842,000, or 7.0%, from the same period of 2014. Net interest margin, on a tax equivalent basis, increased from 3.48% in the first half of 2014 to 3.51% in the same period of 2015. The increase in net interest income was primarily the result of a 6.3% increase in our average interest-earning assets from $739.6 million in the first half of 2014 to $786.3 million in the first six months of 2015. During the first six months of 2015, we recorded a negative provision for loan losses of $800,000 compared to a provision for loan losses of $450,000 in the same period of 2014, primarily as a result of the recovery of $1.7 million on a previously charged-off construction loan.

 

 
 

 

Total non-interest income was $8.4 million in the first six months of 2015, an increase of $1.0 million, or 13.8%, compared to the same period of 2014. The increase in non-interest income was primarily the result of an increase of $1.2 million in gains on sales of loans. Partially offsetting the increased gains on sales of loans was a $254,000 loss on sales of investment securities during the first six months of 2015 due primarily to the sale of a portion of our agency mortgage-backed investment securities portfolio to reduce exposure to rising interest rates. During the first six months of 2014, we recognized $39,000 in gains on sales of investment securities after selling approximately $1.1 million of municipal bonds that were identified for sale as part of the ongoing credit review of the portfolio.

 

Non-interest expense increased $650,000, or 4.7%, to $14.6 million for the first six months of 2015 compared to the first six months of 2014. The increase in non-interest expense was primarily the result of increases of $588,000 in compensation and benefits and $237,000 in other non-interest expense. The higher compensation and benefits expense in the first half of 2015 primarily reflected expenses associated with the expanded mortgage banking activity, while the increase in other non-interest expense reflected a $163,000 impairment of the residual real estate collateral associated with an affordable housing investment. During the first six months of 2015, we recorded income tax expense of $2.2 million, compared to $1.4 million during the same period of 2014. Our effective tax rate increased from 26.6% in the first half of 2014 to 29.1% in the same period of 2015 as a result of higher earnings before income taxes.

 

Balance Sheet Highlights

 

Total assets increased $26.2 million, or 3.0%, to $889.7 million at June 30, 2015, from $863.5 million at December 31, 2014. Net loans increased $4.9 million, or 1.2%, to $421.1 million at June 30, 2015, compared to $416.2 million at December 31, 2014. Investment securities increased $10.6 million, or 3.0%, to $363.5 million at June 30, 2015, from $352.9 million at December 31, 2014. Stockholders’ equity increased to $75.2 million (book value of $22.53 per share) at June 30, 2015, from $71.6 million (book value of $21.49 per share) at December 31, 2014. The ratio of equity to total assets increased to 8.45% at June 30, 2015, from 8.30% at December 31, 2014, and our ratio of tangible equity to tangible assets increased to 6.14% from 5.91% as of the same dates.

 

At June 30, 2015, the allowance for loan losses was $6.0 million, or 1.41% of gross loans outstanding, compared to $5.3 million, or 1.26% of gross loans outstanding, at December 31, 2014. Non-performing loans increased to $6.4 million, or 1.50% of gross loans, at June 30, 2015, from $6.0 million, or 1.44% of gross loans, at December 31, 2014. We also experienced an $8.7 million increase in our classified loan totals to $26.7 million at June 30, 2015, in comparison to our classified loan totals at December 31, 2014, which contributed to the increase in our allowance for loan losses at June 30, 2015. We recorded net loan recoveries of $1.5 million during the first six months of 2015 compared to net loan charge-offs of $841,000 during the first half of 2014. The net loan recoveries during the first half of 2015 were primarily associated with the recovery of $1.7 million on a $4.3 million construction loan, which had been fully charged-off during 2010 and 2011. As of June 30, 2015, the Company has recovered approximately $2.4 million of the loan and continues to pursue collection of the remaining amount.

 

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, 
   2015   2014 
ASSETS:          
Cash and cash equivalents  $15,135   $12,760 
Investment securities   363,462    352,938 
Loans, net   421,050    416,190 
Loans held for sale   18,127    10,671 
Premises and equipment, net   21,127    20,954 
Bank owned life insurance   17,895    17,650 
Goodwill   17,532    17,532 
Other intangible assets, net   4,399    4,370 
Other assets   10,987    10,405 
TOTAL ASSETS  $889,714   $863,470 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY:          
Deposits  $699,542   $704,555 
Federal Home Loan Bank and other borrowings   102,665    76,547 
Other liabilities   12,311    10,723 
Total liabilities   814,518    791,825 
Stockholders’ equity   75,196    71,645 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $889,714   $863,470 
           
LOANS (unaudited):          
           
One-to-four family residential real estate  $131,149   $127,555 
Construction and land   17,251    21,950 
Commercial real estate   118,645    118,411 
Commercial   64,873    59,971 
Agriculture   67,746    64,316 
Municipal   7,927    8,982 
Consumer   19,347    20,044 
Net deferred loan costs and loans in process   130    281 
Allowance for loan losses   (6,018)   (5,320)
Loans, net  $421,050   $416,190 
           
NON-PERFORMING ASSETS (unaudited):          
           
Non-accrual loans  $6,398   $6,046 
Accruing loans over 90 days past due   -    - 
Non-performing investment securities   -    - 
Real estate owned   46    255 
Total non-performing assets  $6,444   $6,301 
           
RATIOS (unaudited):          
           
Loans 30-89 days delinquent and still accruing to gross loans outstanding   0.40%   0.26%
Total non-performing loans to gross loans outstanding   1.50%   1.44%
Total non-performing assets to total assets   0.72%   0.73%
Allowance for loan losses to gross loans outstanding   1.41%   1.26%
Allowance for loan losses to total non-performing loans   94.06%   87.99%
Equity to total assets   8.45%   8.30%
Tangible equity to tangible assets (1)   6.14%   5.91%
Book value per share (2)  $22.53   $21.49 

 

 

(1)Tangible equity to tangible assets is a non-GAAP financial ratio calculated as stockholders’ equity reduced by goodwill and other intangible assets, net divided by total assets reduced by goodwill and other intangible assets, net.
(2)Per share value at December 31, 2014 has been adjusted to give effect to the 5% stock dividend paid during December 2014.

 

 
 

 

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, 
   2015   2014   2015   2014 
Interest income:                    
Loans  $5,511   $5,248   $10,699   $10,469 
Investment securities and other   1,882    1,625    3,757    3,209 
Total interest income   7,393    6,873    14,456    13,678 
                     
Interest expense:                    
Deposits   272    314    550    640 
Borrowed funds   497    483    988    962 
Total interest expense   769    797    1,538    1,602 
                     
Net interest income   6,624    6,076    12,918    12,076 
Provision for loan losses   200    300    (800)   450 
Net interest income after provision for loan losses   6,424    5,776    13,718    11,626 
                     
Non-interest income:                    
Fees and service charges   1,813    1,922    3,495    3,592 
Gains on sales of loans, net   2,251    1,846    4,194    2,962 
Bank owned life insurance   123    128    245    255 
Gains (Losses) on sales of investment securities, net   -    39    (254)   39 
Other   495    251    765    574 
Total non-interest income   4,682    4,186    8,445    7,422 
                     
Non-interest expense:                    
Compensation and benefits   3,845    3,494    7,566    6,978 
Occupancy and equipment   1,059    1,094    2,130    2,207 
Professional fees   259    329    493    615 
Amortization of intangibles   346    331    681    635 
Data processing   342    344    689    713 
Advertising   125    108    249    220 
Federal deposit insurance premiums   105    133    224    265 
Foreclosure and real estate owned expense   20    18    45    31 
Other   1,342    1,242    2,477    2,240 
Total non-interest expense   7,443    7,093    14,554    13,904 
                     
Earnings before income taxes   3,663    2,869    7,609    5,144 
Income tax expense   1,047    792    2,216    1,368 
Net earnings  $2,616   $2,077   $5,393   $3,776 
                     
Net earnings per share (1)                    
Basic  $0.78   $0.62   $1.62   $1.14 
Diluted   0.76    0.62    1.57    1.12 
                     
Shares outstanding at end of period (1)   3,337,424    3,333,539    3,337,424    3,333,539 
                     
Weighted average common shares outstanding - basic (1)   3,337,424    3,333,503    3,336,662    3,320,098 
Weighted average common shares outstanding - diluted (1)   3,441,355    3,375,954    3,435,470    3,361,272 
                     
OTHER DATA (unaudited):                    
                     
Return on average assets (2)   1.20%   1.01%   1.25%   0.92%
Return on average equity (2)   13.95%   12.46%   14.67%   11.66%
Return on average tangible equity (2) (3)   19.70%   18.61%   20.83%   17.60%
Net interest margin (2) (4)   3.56%   3.47%   3.51%   3.48%

 

 

(1)Share and per share values at or for the period ended June 30, 2014 have been adjusted to give effect to the 5% stock dividend paid during December 2014.
(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.