Landmark’s Board of Directors declared a cash dividend of $0.21 per share, to be paid November 29, 2023, to common stockholders of record as of the close of business on November 15, 2023. The Board of Directors also declared a 5% stock dividend payable on December 15, 2023, to common stockholders of record on December 1, 2023. This is the 23rd consecutive year that the Board has declared a 5% stock dividend.

Management will host a conference call to discuss the Company’s financial results at 10:00 a.m. (Central time) on Wednesday, November 1, 2023. Investors may participate via telephone by dialing (833) 470-1428 and using access code 410831. A replay of the call will be available through November 29, 2023, by dialing (866) 813-9403 and using access code 501805.

SUMMARY OF THIRD QUARTER RESULTS

Net Interest Income

Net interest income in the third quarter of 2023 amounted to $10.6 million representing a decrease of $207,000, or 1.9%, compared to the previous quarter. This decrease in net interest income was due mainly to higher interest expense on deposits and borrowed funds but partly offset by growth in interest income on loans. The net interest margin totaled 3.06% during the third quarter compared to 3.21% in the prior quarter. Compared to the previous quarter, interest income on loans increased $908,000, or 7.2%, to $13.5 million due to both higher rates and balances while the average tax-equivalent yield on the loan portfolio increased 13 basis points to 5.93%. Interest income on investment securities increased slightly due to increases in rates but partly offset by lower balances. The average tax-equivalent yield on investment securities totaled 2.77% in the third quarter compared to 2.70% in the prior quarter.

Interest expense on deposits increased $932,000 in the third quarter 2023, compared to the prior quarter, mainly due to higher rates and average balances on interest-bearing deposits. The average rate on interest-bearing deposits increased in the third quarter to 1.93% compared to 1.57% in the prior quarter. Interest expense on total borrowed funds grew $243,000, compared to the prior quarter, as the average rate paid increased 55 basis points to 5.60% and average balances grew $10.7 million.

Non-Interest Income

Non-interest income totaled $3.7 million for the third quarter of 2023, an increase of $123,000, or 3.5%, compared to the same period last year and a decrease of $177,000, or 4.6%, from the previous quarter. The increase in non-interest income during the third quarter of 2023 compared to the same period last year was primarily due to recording a $353,000 loss on the sale of lower yielding investment securities in the third quarter of 2022 as well as increases of $180,000 in other non-interest income, $107,000 in fees and services charges and $41,000 in bank owned life insurance (“BOLI”) income. The increase in other non-interest income was primarily related to an increase in rental income associated with a branch which was vacant in the prior year period. The increases in fees and services charges and BOLI income were primarily associated with the acquisition of Freedom Bank in the fourth quarter of 2022, as the acquisition increased Landmark’s deposit base and BOLI assets. Gains on sales of one-to-four family residential real estate loans declined $558,000 from the same period last year due to lower fixed rate mortgage loan originations. Compared to the prior quarter, the decrease in non-interest income was primarily due to a decline in gains on sales of one-to-four family residential real estate loans.

Non-Interest Expense

During the third quarter of 2023, non-interest expense totaled $10.7 million, an increase of $1.3 million, or 13.4%, over the same period in 2022 and an increase of $380,000, or 3.7%, compared to the prior quarter. Compared to the same period last year, higher costs this year for compensation and benefits, occupancy and equipment, data processing and other non-interest expenses were primarily due to higher operating costs associated with the Freedom Bank acquisition, while amortization expense increased $160,000 in the third quarter primarily due to the core deposit intangible recorded for this acquisition. The increase in non-interest expense compared to the prior quarter was primarily due to higher compensation and benefit costs mainly associated with increased adjustable-rate mortgage loan production. Also the increase in other non-interest expense was related to higher FDIC insurance premiums and other insurance costs.

Income Tax Expense

Landmark recorded income tax expense of $671,000 in the third quarter of 2023 compared to income tax expense of $522,000 in the third quarter of 2022 and $701,000 in the second quarter of 2023. The effective tax rate was 18.9% in the third quarter of 2023 compared to 17.3% in the third quarter of 2022 and 17.3% in the second quarter of 2023. The increase in our effective tax rate in the third quarter of 2023 was primarily related to losses recorded at our captive insurance subsidiary which are not deductible for income taxes.

Liquidity Highlights

In addition to local retail, commercial and public fund deposits, the Company has access to multiple sources of brokered deposits that can be utilized for liquidity. Landmark also has diverse sources of liquidity available through both secured and unsecured borrowing lines of credit. At September 30, 2023, Landmark had collateral pledged to the Federal Home Loan Bank (“FHLB”) that would allow for an additional $128.4 million of FHLB borrowings. Additionally, investment securities were pledged to the Federal Reserve discount window that provides borrowing capacity with the Federal Reserve of $57.2 million. Landmark also had various other federal funds agreements, both secured and unsecured with correspondent banks totaling approximately $30.0 million in available credit at September 30, 2023.

As of September 30, 2023, Landmark had unpledged available-for-sale investment securities with a fair value of $62.6 million as well as approximately $108.7 million of pledged investment securities in excess of required levels. The average life of the Company’s investment portfolio is approximately 4.7 years and is projected to generate cash flow through maturities of $67.6 million over the next 12 months.

Balance Sheet Highlights

As of September 30, 2023, gross loans totaled $937.4 million, an increase of $44.2 million, or 19.6% annualized since June 30, 2023. During the quarter, loan growth was primarily comprised of one-to-four family residential real estate (growth of $29.9 million), commercial real estate (growth of $8.5 million) and commercial (growth of $4.4 million). The increase in one-to-four family residential real estate loans is primarily related to continued demand in adjustable-rate mortgage loans which are retained in our portfolio. Investment securities decreased $27.5 million, during the third quarter of 2023, while gross unrealized net losses on these investment securities increased from $30.0 million at June 30, 2023 to $42.8 million at September 30, 2023.

Deposit balances increased $27.1 million, or 8.4% on an annualized basis, to $1.3 billion at September 30, 2023. The increase in deposits was mainly driven by increases in non-interest demand (increase of $12.6 million) and certificate of deposit accounts (increase of $37.6 million) in the third quarter which was partially offset by lower money market, interest checking and savings accounts, which decreased in total by $23.1 million. Total borrowings, including FHLB advances and repurchase agreements decreased $3.3 million this quarter. At September 30, 2023, the loan to deposits ratio was 70.8% compared to 68.9% in the prior quarter and 62.9% in the same period last year.

Total deposits include estimated uninsured deposits of $202.8 million and $193.1 million as of September 30, 2023 and June 30, 2023, respectively. This represents approximately 16% of total deposits at September 30, 2023 and compares favorably with other similar community banking organizations. Over 94% of Landmark’s total deposits were considered core deposits at September 30, 2023. These deposit balances are from retail, commercial and public fund customers located in the markets where the Company has bank branch locations. Brokered deposits are considered non-core and totaled $72.4 million at September 30, 2023 compared to $41.2 million at June 30, 2023 and are utilized as an additional source of liquidity.

Stockholders’ equity decreased to $109.6 million (book value of $20.98 per share) as of September 30, 2023, from $117.4 million (book value of $22.50 per share) as of June 30, 2023, due to an increase in other comprehensive losses during the third quarter of 2023 related to higher market interest rates which increased the unrealized losses on the Company’s investment securities portfolio. The ratio of equity to total assets decreased to 7.03% on September 30, 2023, from 7.62% on June 30, 2023.

The allowance for credit losses totaled $11.0 million, or 1.17% of total gross loans on September 30, 2023, compared to $10.4 million, or 1.17% of total gross loans on June 30, 2023. Net loan recoveries totaled $521,000 in the third quarter of 2023, compared to $43,000 during the same quarter last year and net loan charge-offs of $68,000 during the second quarter of 2023. The ratio of annualized net loan recoveries to total average loans was 0.23% in the third quarter of 2023 and 0.02% in the third quarter of 2022, while the ratio of annualized net loan charge-offs to total average loans was 0.03% in the second quarter of 2023. The net loan recoveries in the third quarter of 2023 included $626,000 related to a construction loan previously charged-off in 2011. No provision for credit losses was recorded in the third quarter of 2023 as the net loan recoveries offset the growth in the loan portfolio. A provision for credit losses of $250,000 was made in the second quarter of 2023 and a provision for credit losses of $500,000 was made in the third quarter of 2022, as credit models factored in growth in our overall loan portfolio during these quarters.

Non-performing loans totaled $4.4 million, or 0.47% of gross loans, while loans 30-89 days delinquent totaled $6.2 million, or 0.66% of gross loans, as of September 30, 2023. The increase in non-accrual loans during the third quarter of 2023 was principally associated with one commercial lending relationship which was classified as non-accrual as of September 30, 2023. The increase in delinquent loans was primarily due to two loan relationships which have returned to performing status subsequent to September 30, 2023. Real estate owned totaled $0.9 million at September 30, 2023.

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 31 locations in 24 communities across Kansas: Manhattan (2), Auburn, Dodge City (2), Fort Scott (2), Garden City, Great Bend (2), Hoisington, Iola, Junction City, Kincaid, La Crosse, Lawrence (2), Lenexa, Louisburg, Mound City, Osage City, Osawatomie, Overland Park (2), Paola, Pittsburg, Prairie Village, 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. 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 Landmark 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, national and international economies, including the effects of inflationary pressures and supply chain constraints on such economies; (ii) changes in state and federal laws, regulations and governmental policies concerning banking, securities, consumer protection, insurance, monetary, trade and tax matters, including any changes in response to the recent failures of other banks; (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, including from non-bank competitors such as credit unions and “fintech” companies; (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) our risk management framework; (viii) interruptions in information technology and telecommunications systems and third-party services; (ix) changes and uncertainty in benchmark interest rates, including the elimination of LIBOR and the development of a substitute and the recent and potential additional rate increases by the Federal Reserve; (x) the effects of severe weather, natural disasters, widespread disease or pandemics (including the COVID-19 pandemic), or other external events; (xi) the loss of key executives or employees; (xii) changes in consumer spending; (xiii) integration of acquired businesses; (xiv) unexpected outcomes of existing or new litigation; (xv) changes in accounting policies and practices, such as the implementation of the current expected credit losses accounting standard; (xvi) the economic impact of past and any future terrorist attacks, acts of war, including the current Israeli-Palestinian conflict and the conflict in Ukraine, or threats thereof, and the response of the United States to any such threats and attacks; (xvii) the ability to manage credit risk, forecast loan losses and maintain an adequate allowance for loan losses; (xviii) fluctuations in the value of securities held in our securities portfolio; (xix) concentrations within our loan portfolio, large loans to certain borrowers, and large deposits from certain clients; (xx) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; (xxi) the level of non-performing assets on our balance sheets; (xxii) the ability to raise additional capital; (xxiii) cyber-attacks; (xxiv) declines in real estate values; (xxv) the effects of fraud on the part of our employees, customers, vendors or counterparties; and (xxvi) any other risks described in the “Risk Factors” sections of reports filed by Landmark with the Securities and Exchange Commission. 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 and its business, including additional risk factors that could materially affect Landmark’s financial results, is included in our filings with the Securities and Exchange Commission.

LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)

LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings (unaudited)

(1) Share and per share values at or for the periods ended September 30, 2022 have been adjusted to give effect to the 5% stock dividend paid during December 2022.

LANDMARK BANCORP, INC. AND SUBSIDIARIES
Select Ratios and Other Data (unaudited)

(1) Information is annualized.
(2) Net interest margin is presented on a fully tax equivalent basis, using a 21% federal tax rate.
(3) Non-GAAP financial measures. See the “Non-GAAP Financial Measures” section of this press release for a reconciliation to the most comparable GAAP equivalent.

LANDMARK BANCORP, INC. AND SUBSIDIARIES
Non-GAAP Finacials Measures (unaudited)