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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2025
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission File Number 0-33203
LANDMARK BANCORP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 43-1930755 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
701 Poyntz Avenue, Manhattan, Kansas 66502
(Address of principal executive offices) (Zip code)
(785) 565-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol(s) | Name of exchange on which registered: | ||
| Common Stock, par value $0.01 per share | LARK | Nasdaq Global Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: as November 12, 2025, the issuer had outstanding 5,790,579 shares of its common stock, $0.01 par value per share.
LANDMARK BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
| Page Number | ||
| PART I | ||
| Item 1. | Financial Statements | 2 - 26 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 - 35 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 36 |
| Item 4. | Controls and Procedures | 37 |
| PART II | ||
| Item 1. | Legal Proceedings | 38 |
| Item 1A. | Risk Factors | 38 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38 |
| Item 3. | Defaults Upon Senior Securities | 38 |
| Item 4. | Mine Safety Disclosures | 38 |
| Item 5. | Other Information | 38 |
| Item 6. | Exhibits | 39 |
| Signature Page | 40 | |
|
|
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LANDMARK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (Dollars in thousands, except per share amounts) | September 30, | December 31, | ||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 23,947 | $ | 20,275 | ||||
| Interest-bearing deposits at other banks | 3,218 | 4,110 | ||||||
| Investment securities available-for-sale, at fair value | 350,028 | 372,512 | ||||||
| Investment securities, held-to-maturity, net of allowance for credit losses of $91 and $91, fair value of $3,468 and $3,290 | 3,760 | 3,672 | ||||||
| Bank stocks, at cost | 8,021 | 6,618 | ||||||
| Loans, net of allowance for credit losses of $12,299 and $12,825 | 1,104,991 | 1,039,221 | ||||||
| Loans held for sale, at fair value | 3,578 | 3,420 | ||||||
| Bank owned life insurance | 39,890 | 39,056 | ||||||
| Premises and equipment, net | 19,449 | 20,220 | ||||||
| Goodwill | 32,377 | 32,377 | ||||||
| Other intangible assets, net | 2,123 | 2,578 | ||||||
| Mortgage servicing rights | 3,120 | 3,061 | ||||||
| Real estate owned, net | - | 167 | ||||||
| Accrued interest and other assets | 22,573 | 26,855 | ||||||
| Total assets | $ | 1,617,075 | $ | 1,574,142 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Deposits: | ||||||||
| Non-interest-bearing demand | $ | 365,959 | $ | 351,595 | ||||
| Money market and checking | 579,413 | 636,963 | ||||||
| Savings | 146,291 | 145,514 | ||||||
| Certificates of deposit | 233,837 | 194,694 | ||||||
| Total deposits | 1,325,500 | 1,328,766 | ||||||
| Federal Home Loan Bank and other borrowings | 90,483 | 53,046 | ||||||
| Subordinated debentures | 21,651 | 21,651 | ||||||
| Repurchase agreements | 1,420 | 13,808 | ||||||
| Accrued interest and other liabilities | 22,294 | 20,656 | ||||||
| Total liabilities | 1,461,348 | 1,437,927 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.01 par value per share, 7,500,000 shares authorized; 5,790,579 and 5,775,198 shares issued at September 30, 2025 and December 31, 2024, respectively | 58 | 58 | ||||||
| Additional paid-in capital | 95,330 | 95,051 | ||||||
| Retained earnings | 67,327 | 56,934 | ||||||
| Accumulated other comprehensive loss | (6,988 | ) | (15,828 | ) | ||||
| Total stockholders’ equity | 155,727 | 136,215 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,617,075 | $ | 1,574,142 | ||||
See accompanying notes to consolidated financial statements.
|
|
LANDMARK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
| Three months ended | Nine months ended | |||||||||||||||
| (Dollars in thousands, except per share amounts) | September 30, | September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Interest income: | ||||||||||||||||
| Loans | $ | 17,783 | $ | 15,933 | $ | 51,364 | $ | 45,445 | ||||||||
| Investment securities: | ||||||||||||||||
| Taxable | 2,198 | 2,301 | 6,541 | 7,088 | ||||||||||||
| Tax-exempt | 700 | 747 | 2,120 | 2,270 | ||||||||||||
| Interest-bearing deposits at banks | 58 | 41 | 154 | 144 | ||||||||||||
| Total interest income | 20,739 | 19,022 | 60,179 | 54,947 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Deposits | 5,410 | 5,830 | 15,790 | 16,960 | ||||||||||||
| Federal Home Loan Bank and other borrowings | 857 | 1,100 | 2,283 | 3,149 | ||||||||||||
| Subordinated debentures | 361 | 416 | 1,076 | 1,246 | ||||||||||||
| Repurchase agreements | 17 | 72 | 134 | 267 | ||||||||||||
| Total interest expense | 6,645 | 7,418 | 19,283 | 21,622 | ||||||||||||
| Net interest income | 14,094 | 11,604 | 40,896 | 33,325 | ||||||||||||
| Provision for credit losses | 850 | 500 | 1,850 | 800 | ||||||||||||
| Net interest income after provision for credit losses | 13,244 | 11,104 | 39,046 | 32,525 | ||||||||||||
| Non-interest income: | ||||||||||||||||
| Fees and service charges | 2,660 | 2,880 | 7,524 | 8,032 | ||||||||||||
| Gains on sales of loans, net | 948 | 704 | 2,250 | 1,864 | ||||||||||||
| Increase in cash surrender value of bank owned life insurance | 283 | 254 | 833 | 747 | ||||||||||||
| Losses on sales of investment securities, net | - | - | (2 | ) | - | |||||||||||
| Other | 177 | 415 | 447 | 730 | ||||||||||||
| Total non-interest income | 4,068 | 4,253 | 11,052 | 11,373 | ||||||||||||
| Non-interest expense: | ||||||||||||||||
| Compensation and benefits | 6,304 | 5,803 | 18,692 | 16,839 | ||||||||||||
| Occupancy and equipment | 1,364 | 1,429 | 3,860 | 4,113 | ||||||||||||
| Data processing | 476 | 464 | 1,501 | 1,437 | ||||||||||||
| Amortization of mortgage servicing rights and other intangibles | 247 | 256 | 724 | 924 | ||||||||||||
| Professional fees | 746 | 573 | 2,031 | 1,869 | ||||||||||||
| Other | 2,114 | 2,034 | 6,165 | 7,023 | ||||||||||||
| Total non-interest expense | 11,251 | 10,559 | 32,973 | 32,205 | ||||||||||||
| Earnings before income taxes | 6,061 | 4,798 | 17,125 | 11,693 | ||||||||||||
| Income tax expense | 1,131 | 867 | 3,090 | 1,972 | ||||||||||||
| Net earnings | $ | 4,930 | $ | 3,931 | $ | 14,035 | $ | 9,721 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic (1) | $ | 0.85 | $ | 0.68 | $ | 2.43 | $ | 1.69 | ||||||||
| Diluted (1) | $ | 0.85 | $ | 0.68 | $ | 2.41 | $ | 1.69 | ||||||||
| Dividends per share (1) | $ | 0.21 | $ | 0.20 | $ | 0.63 | $ | 0.60 | ||||||||
| (1) | Per share amounts for the periods ended September 30, 2024 have been adjusted to give effect to the 5% stock dividend issued in December 2024. |
See accompanying notes to consolidated financial statements.
|
|
LANDMARK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three months ended | Nine months ended | |||||||||||||||
| (Dollars in thousands) | September 30, | September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net earnings | $ | 4,930 | $ | 3,931 | $ | 14,035 | $ | 9,721 | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Net unrealized holding gains on available-for-sale securities | 4,713 | 11,477 | 11,662 | 8,618 | ||||||||||||
| Reclassification adjustment for net losses included in earnings | - | - | 2 | - | ||||||||||||
| Net unrealized gains | 4,713 | 11,477 | 11,664 | 8,618 | ||||||||||||
| Income tax effect on net unrealized holding gains | (1,141 | ) | (2,812 | ) | (2,824 | ) | (2,111 | ) | ||||||||
| Other comprehensive income | 3,572 | 8,665 | 8,840 | 6,507 | ||||||||||||
| Total comprehensive income | $ | 8,502 | $ | 12,596 | $ | 22,875 | $ | 16,228 | ||||||||
See accompanying notes to consolidated financial statements.
|
|
LANDMARK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| (Dollars in thousands, except per share amounts) | Common stock | Additional paid-in capital | Retained earnings | Treasury stock | Accumulated other comprehensive (loss) income | Total | ||||||||||||||||||
| Balance at July 1, 2024 | $ | 55 | $ | 89,469 | $ | 57,774 | $ | (330 | ) | $ | (18,714 | ) | $ | 128,254 | ||||||||||
| Net earnings | - | - | 3,931 | - | - | 3,931 | ||||||||||||||||||
| Other comprehensive income | - | - | - | - | 8,665 | 8,665 | ||||||||||||||||||
| Dividends paid ($0.20 per share) (1) | - | - | (1,156 | ) | - | - | (1,156 | ) | ||||||||||||||||
| Issue of restricted common stock, 36,175 shares | - | - | - | - | - | - | ||||||||||||||||||
| Stock-based compensation | - | 63 | - | - | - | 63 | ||||||||||||||||||
| Purchase of 3,338 shares treasury stock | - | - | - | (66 | ) | - | (66 | ) | ||||||||||||||||
| Balance at September 30, 2024 | $ | 55 | $ | 89,532 | $ | 60,549 | $ | (396 | ) | $ | (10,049 | ) | $ | 139,691 | ||||||||||
| Balance at July 1, 2025 | $ | 58 | $ | 95,266 | $ | 63,612 | $ | - | $ | (10,560 | ) | $ | 148,376 | |||||||||||
| Net earnings | - | - | 4,930 | - | - | 4,930 | ||||||||||||||||||
| Other comprehensive income | - | - | - | - | 3,572 | 3,572 | ||||||||||||||||||
| Dividends paid ($0.21 per share) | - | - | (1,215 | ) | - | - | (1,215 | ) | ||||||||||||||||
| Stock-based compensation | - | 64 | - | - | - | 64 | ||||||||||||||||||
| Balance at September 30, 2025 | $ | 58 | $ | 95,330 | $ | 67,327 | $ | - | $ | (6,988 | ) | $ | 155,727 | |||||||||||
| (1) | Dividends per share have been adjusted to give effect to the 5% stock dividend issued in December of 2024. |
See accompanying notes to consolidated financial statements.
| (Dollars in thousands, except per share amounts) | Common stock | Additional paid-in capital | Retained earnings | Treasury stock | Accumulated other comprehensive (loss) income | Total | ||||||||||||||||||
| Balance at January 1, 2024 | $ | 55 | $ | 89,208 | $ | 54,282 | $ | (75 | ) | $ | (16,556 | ) | $ | 126,914 | ||||||||||
| Net earnings | - | - | 9,721 | - | - | 9,721 | ||||||||||||||||||
| Other comprehensive income | - | - | - | - | 6,507 | 6,507 | ||||||||||||||||||
| Dividends paid ($0.60 per share) (1) | - | - | (3,454 | ) | - | - | (3,454 | ) | ||||||||||||||||
| Issue of restricted common stock, 41,175 shares | - | - | - | - | - | - | ||||||||||||||||||
| Stock-based compensation | - | 324 | - | - | - | 324 | ||||||||||||||||||
| Purchase of 16,367 shares treasury stock | - | - | - | (321 | ) | - | (321 | ) | ||||||||||||||||
| Balance at September 30, 2024 | $ | 55 | $ | 89,532 | $ | 60,549 | $ | (396 | ) | $ | (10,049 | ) | $ | 139,691 | ||||||||||
| Balance at January 1, 2025 | $ | 58 | $ | 95,051 | $ | 56,934 | $ | - | $ | (15,828 | ) | $ | 136,215 | |||||||||||
| Net earnings | - | - | 14,035 | - | - | 14,035 | ||||||||||||||||||
| Other comprehensive income | - | - | - | - | 8,840 | 8,840 | ||||||||||||||||||
| Dividends paid ($0.63 per share) | - | - | (3,642 | ) | - | - | (3,642 | ) | ||||||||||||||||
| Stock-based compensation | - | 279 | - | - | - | 279 | ||||||||||||||||||
| Balance at September 30, 2025 | $ | 58 | $ | 95,330 | $ | 67,327 | $ | - | $ | (6,988 | ) | $ | 155,727 | |||||||||||
| (1) | Dividends per share have been adjusted to give effect to the 5% stock dividend issued in December of 2024. |
See accompanying notes to consolidated financial statements.
|
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LANDMARK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine months ended | ||||||||
| (Dollars in thousands) | September 30, | |||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net earnings | $ | 14,035 | $ | 9,721 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
| Provision for credit losses | 1,850 | 800 | ||||||
| Valuation allowance on real estate held for sale | - | 1,108 | ||||||
| Amortization of investment security (discount) premiums, net | (122 | ) | (18 | ) | ||||
| Accretion of purchase accounting adjustments | (636 | ) | (850 | ) | ||||
| Amortization of mortgage servicing rights and other intangibles | 724 | 924 | ||||||
| Depreciation | 955 | 987 | ||||||
| Increase in cash surrender value of bank owned life insurance | (833 | ) | (747 | ) | ||||
| Stock-based compensation | 279 | 324 | ||||||
| Deferred income taxes | (973 | ) | (177 | ) | ||||
| Net losses on sales of investment securities | 2 | - | ||||||
| Net (gain) loss on sales of premises and equipment and foreclosed assets | (64 | ) | 282 | |||||
| Net gains on sales of loans | (2,250 | ) | (1,864 | ) | ||||
| Proceeds from sales of loans | 75,413 | 64,500 | ||||||
| Origination of loans held for sale | (73,649 | ) | (65,328 | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Accrued interest and other assets | 2,399 | (183 | ) | |||||
| Accrued expenses, taxes, and other liabilities | 1,638 | 5,849 | ||||||
| Net cash provided by operating activities | 18,768 | 15,328 | ||||||
| Cash flows from investing activities: | ||||||||
| Net increase in loans | (68,072 | ) | (52,761 | ) | ||||
| Net change in interest-bearing deposits at banks | 892 | 555 | ||||||
| Maturities and prepayments of investment securities | 51,736 | 54,193 | ||||||
| Purchases of investment securities | (20,862 | ) | (3,800 | ) | ||||
| Proceeds from sales of available-for-sale investment securities | 3,394 | - | ||||||
| Redemption of bank stocks | 11,983 | 11,956 | ||||||
| Purchase of bank stocks | (13,386 | ) | (11,727 | ) | ||||
| Premiums paid on bank owned life insurance | - | (96 | ) | |||||
| Proceeds from bank owned life insurance | 1,093 | - | ||||||
| Proceeds from sales of premises and equipment and foreclosed assets | 370 | 2,998 | ||||||
| Purchases of premises and equipment, net | (385 | ) | (2,214 | ) | ||||
| Net cash used in investing activities | (33,237 | ) | (896 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net decrease in deposits | (3,266 | ) | (40,749 | ) | ||||
| Federal Home Loan Bank advance borrowings | 696,895 | 595,463 | ||||||
| Federal Home Loan Bank advance repayments | (658,459 | ) | (567,077 | ) | ||||
| Proceeds from other borrowings | - | 360 | ||||||
| Repayments on other borrowings | (999 | ) | (1,358 | ) | ||||
| Change in repurchase agreements | (12,388 | ) | (3,186 | ) | ||||
| Payment of dividends | (3,642 | ) | (3,454 | ) | ||||
| Purchase of treasury stock | - | (321 | ) | |||||
| Net cash provided by (used in) financing activities | 18,141 | (20,322 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 3,672 | (5,890 | ) | |||||
| Cash and cash equivalents at beginning of period | 20,275 | 27,101 | ||||||
| Cash and cash equivalents at end of period | $ | 23,947 | $ | 21,211 | ||||
(Continued)
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LANDMARK BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
| Nine months ended | ||||||||
| (Dollars in thousands) | September 30, | |||||||
| 2025 | 2024 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash payments for income taxes | $ | 2,960 | $ | 628 | ||||
| Cash paid for interest | 19,373 | 21,371 | ||||||
| Cash paid for operating leases | 157 | 128 | ||||||
| Supplemental schedule of noncash investing and financing activities: | ||||||||
| Transfer of loans to repossessed assets | $ | 1,000 | - | |||||
See accompanying notes to consolidated financial statements.
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LANDMARK BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Interim Financial Statements |
The unaudited consolidated financial statements of Landmark Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, Landmark National Bank (the “Bank”) and Landmark Risk Management Inc., have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 25, 2025, containing the latest audited consolidated financial statements and notes thereto. The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected herein. The results of the nine month interim period ended September 30, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025 or any other future time period. The Company has evaluated subsequent events for recognition and disclosure up to the date the financial statements were issued.
| 2. | Investments |
A summary of the Company’s investment securities classified as available-for-sale and held-to-maturity as of September 30, 2025 and December 31, 2024 is as follows:
Schedule of Available-for-sale and Held to Maturity Securities
| (Dollars in thousands) | As of September 30, 2025 | |||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | unrealized | unrealized | Estimated | |||||||||||||
| cost | gains | losses | fair value | |||||||||||||
| Available-for-sale: | ||||||||||||||||
| U. S. treasury securities | $ | 50,661 | $ | 518 | $ | (346 | ) | $ | 50,833 | |||||||
| Municipal obligations, tax exempt | 98,971 | 106 | (1,694 | ) | 97,383 | |||||||||||
| Municipal obligations, taxable | 83,940 | 510 | (2,214 | ) | 82,236 | |||||||||||
| Agency mortgage-backed securities | 125,676 | 305 | (6,405 | ) | 119,576 | |||||||||||
| Total available-for-sale | $ | 359,248 | $ | 1,439 | $ | (10,659 | ) | $ | 350,028 | |||||||
| Held-to-maturity: | ||||||||||||||||
| Other | $ | 3,760 | $ | - | $ | (292 | ) | $ | 3,468 | |||||||
| Total held-to-maturity | $ | 3,760 | $ | - | $ | (292 | ) | $ | 3,468 | |||||||
| As of December 31, 2024 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | unrealized | unrealized | Estimated | |||||||||||||
| cost | gains | losses | fair value | |||||||||||||
| Available-for-sale: | ||||||||||||||||
| U. S. treasury securities | $ | 65,349 | $ | 53 | $ | (944 | ) | $ | 64,458 | |||||||
| Municipal obligations, tax exempt | 111,196 | 47 | (4,115 | ) | 107,128 | |||||||||||
| Municipal obligations, taxable | 76,200 | 70 | (4,555 | ) | 71,715 | |||||||||||
| Agency mortgage-backed securities | 140,651 | 40 | (11,480 | ) | 129,211 | |||||||||||
| Total available-for-sale | $ | 393,396 | $ | 210 | $ | (21,094 | ) | $ | 372,512 | |||||||
| Held-to-maturity: | ||||||||||||||||
| Other | $ | 3,672 | $ | - | $ | (382 | ) | $ | 3,290 | |||||||
| Total held-to-maturity | $ | 3,672 | $ | - | $ | (382 | ) | $ | 3,290 | |||||||
The amortized cost of the above held-to-maturity investment securities has been further reduced by the allowance for credit losses of $91,000 at both September 30, 2025 and December 31, 2024.
|
|
The tables above show that some of the securities in the Company’s available-for-sale and held-to-maturity investment portfolios had unrealized losses, or were temporarily impaired, as of both September 30, 2025 and December 31, 2024. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date.
The following table summarizes available-for-sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded at September 30, 2025 and December 31, 2024 along with the length of time each category of securities has been in a continuous loss position:
Schedule of Available for Sale Securities Continuous Unrealized Loss Position Fair Value
| As of September 30, 2025 | ||||||||||||||||||||||||||||
| (Dollars in thousands) | Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||
| No. of | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||||||
| securities | value | losses | value | losses | value | losses | ||||||||||||||||||||||
| Available-for-sale: | ||||||||||||||||||||||||||||
| U.S. treasury securities | 13 | $ | - | $ | - | $ | 32,032 | $ | (346 | ) | $ | 32,032 | $ | (346 | ) | |||||||||||||
| Municipal obligations, tax exempt | 157 | 1,629 | (41 | ) | 65,421 | (1,653 | ) | 67,050 | (1,694 | ) | ||||||||||||||||||
| Municipal obligations, taxable | 82 | 4,715 | (86 | ) | 47,549 | (2,128 | ) | 52,264 | (2,214 | ) | ||||||||||||||||||
| Agency mortgage-backed securities | 97 | - | - | 98,465 | (6,405 | ) | 98,465 | (6,405 | ) | |||||||||||||||||||
| Total for available-for-sale | 349 | $ | 6,344 | $ | (127 | ) | $ | 243,467 | $ | (10,532 | ) | $ | 249,811 | $ | (10,659 | ) | ||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||
| No. of | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||||||
| securities | value | losses | value | losses | value | losses | ||||||||||||||||||||||
| Available-for-sale: | ||||||||||||||||||||||||||||
| U.S. treasury securities | 22 | $ | 1,558 | $ | - | $ | 43,327 | $ | (944 | ) | $ | 44,885 | $ | (944 | ) | |||||||||||||
| Municipal obligations, tax exempt | 254 | 16,754 | (311 | ) | 86,409 | (3,804 | ) | 103,163 | (4,115 | ) | ||||||||||||||||||
| Municipal obligations, taxable | 107 | 22,201 | (726 | ) | 45,285 | (3,829 | ) | 67,486 | (4,555 | ) | ||||||||||||||||||
| Agency mortgage-backed securities | 102 | 18,875 | (223 | ) | 105,615 | (11,257 | ) | 124,490 | (11,480 | ) | ||||||||||||||||||
| Total for available-for-sale | 485 | 59,388 | (1,260 | ) | 280,636 | (19,834 | ) | 340,024 | (21,094 | ) | ||||||||||||||||||
The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury (“U.S. treasury”). The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of its cost basis, the Company believed that the available-for-sale U.S. treasury securities identified in the table above were temporarily impaired as of September 30, 2025 and December 31, 2024.
The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. As of September 30, 2025, the Company did not intend to sell and it was more likely than not that the Company would not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost basis. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired as of September 30, 2025 and December 31, 2024.
The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and the Government National Mortgage Association. The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the table above were temporarily impaired as of September 30, 2025 and December 31, 2024.
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Management determined that no allowance for credit losses for available-for-sale securities was needed at September 30, 2025 and December 31, 2024. Accrued interest receivable on available-for-sale securities totaled $2.0 million at September 30, 2025 and $2.2 million at December 31, 2024, and is excluded from the estimate of credit losses and is included in accrued income and other assets in the consolidated statements of financial condition.
The Company’s other investment securities portfolio consists of seven subordinated debentures issued by financial institutions. These investment securities were acquired in the Freedom Bank acquisition in 2022 and classified as held-to-maturity. The securities were issued in 2021 and 2022 with a 10 year maturity and a fixed rate for five years. The securities are callable after the end of the fixed rate term, beginning September 3, 2026. The following table provides information regarding the Company’s allowance for credit losses related to held-to-maturity investment securities for the period presented:
Schedule of Allowance for Credit Losses Related to Held-to-maturity Investment Securities
| Nine months ended | ||||||||
| September 30, | ||||||||
| (Dollars in thousands) | 2025 | 2024 | ||||||
| Balance at January 1, | $ | 91 | $ | 91 | ||||
| Provision for credit losses | - | - | ||||||
| Balance at September 30, | $ | 91 | $ | 91 | ||||
The table below sets forth the amortized cost and fair value of investment securities at September 30, 2025. The table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.
Schedule of Investments Classified by Contractual Maturity Date
| Amortized | Estimated | |||||||
| (Dollars in thousands) | cost | fair value | ||||||
| Available-for-sale: | ||||||||
| Due in less than one year | $ | 32,811 | $ | 32,579 | ||||
| Due after one year but within five years | 203,627 | 196,665 | ||||||
| Due after five years but within ten years | 88,990 | 87,705 | ||||||
| Due after ten years | 33,820 | 33,079 | ||||||
| Total available-for-sale | $ | 359,248 | $ | 350,028 | ||||
| Held-to-maturity: | ||||||||
| Due after one year but within five years | 3,760 | 3,468 | ||||||
| Total held-to-maturity | $ | 3,760 | $ | 3,468 | ||||
Sale proceeds and gross realized gains and losses on sales of available-for-sale securities were as follows for the three and nine months ended September 30, 2025 and 2024:
Schedule of Realized Gain (loss)
| Three months ended | Nine months ended | |||||||||||||||
| (Dollars in thousands) | September 30, | September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Sales proceeds | $ | - | $ | - | $ | 3,394 | $ | - | ||||||||
| Realized gains | $ | - | $ | - | $ | 22 | $ | - | ||||||||
| Realized losses | - | - | (24 | ) | - | |||||||||||
| Net realized losses | $ | - | $ | - | $ | (2 | ) | $ | - | |||||||
Securities with carrying values of $277.4 million and $305.3 million were pledged to secure public funds on deposits, repurchase agreements and as collateral for borrowings at September 30, 2025 and December 31, 2024, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10.0% of consolidated stockholders’ equity.
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| 3. | Loans and Allowance for Credit Losses |
Loans consisted of the following as of the dates indicated below:
Schedule of Loans
| September 30, | December 31, | |||||||
| (Dollars in thousands) | 2025 | 2024 | ||||||
| One-to-four family residential real estate loans | $ | 381,641 | $ | 352,209 | ||||
| Construction and land loans | 19,741 | 25,328 | ||||||
| Commercial real estate loans | 389,574 | 345,159 | ||||||
| Commercial loans | 186,656 | 192,325 | ||||||
| Agriculture loans | 99,897 | 100,562 | ||||||
| Municipal loans | 6,884 | 7,091 | ||||||
| Consumer loans | 33,660 | 29,679 | ||||||
| Total gross loans | 1,118,053 | 1,052,353 | ||||||
| Net deferred loan fees and loans in process | (763 | ) | (307 | ) | ||||
| Allowance for credit losses | (12,299 | ) | (12,825 | ) | ||||
| Loans, net | $ | 1,104,991 | $ | 1,039,221 | ||||
The following tables provide information on the Company’s allowance for credit losses by loan class and allowance methodology for the three and nine months ended September 30, 2025 and 2024:
Schedule of Allowance for Credit Losses on Financing Receivables
| Three months and nine months ended September 30, 2025 | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | One-to-four family residential real estate loans | Construction and land loans | Commercial real estate loans | Commercial loans | Agriculture loans | Municipal loans | Consumer loans | Total | ||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||
| Balance at July 1, 2025 | $ | 1,788 | $ | 131 | $ | 5,076 | $ | 5,283 | $ | 1,267 | $ | 45 | $ | 172 | $ | 13,762 | ||||||||||||||||
| Charge-offs | - | - | - | (2,268 | ) | - | - | (112 | ) | (2,380 | ) | |||||||||||||||||||||
| Recoveries | - | - | - | 2 | - | - | 65 | 67 | ||||||||||||||||||||||||
| Provision for credit losses | 265 | (32 | ) | 273 | 284 | (10 | ) | - | 70 | 850 | ||||||||||||||||||||||
| Balance at September 30, 2025 | $ | 2,053 | $ | 99 | $ | 5,349 | $ | 3,301 | $ | 1,257 | $ | 45 | $ | 195 | $ | 12,299 | ||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | 1,765 | $ | 143 | $ | 4,506 | $ | 4,964 | $ | 1,227 | $ | 51 | $ | 169 | $ | 12,825 | ||||||||||||||||
| Charge-offs | - | - | - | (2,287 | ) | - | - | (304 | ) | (2,591 | ) | |||||||||||||||||||||
| Recoveries | - | 5 | - | 16 | - | 6 | 188 | 215 | ||||||||||||||||||||||||
| Provision for credit losses | 288 | (49 | ) | 843 | 608 | 30 | (12 | ) | 142 | 1,850 | ||||||||||||||||||||||
| Balance at September 30, 2025 | $ | 2,053 | $ | 99 | $ | 5,349 | $ | 3,301 | $ | 1,257 | $ | 45 | $ | 195 | $ | 12,299 | ||||||||||||||||
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| Three months and nine months ended September 30, 2024 | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | One-to-four family residential real estate loans | Construction and land loans | Commercial real estate loans | Commercial loans | Agriculture loans | Municipal loans | Consumer loans | Total | ||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||
| Balance at July 1, 2024 | $ | 2,020 | $ | 220 | $ | 4,515 | $ | 2,778 | $ | 1,118 | $ | 55 | $ | 197 | $ | 10,903 | ||||||||||||||||
| Charge-offs | - | - | - | (22 | ) | - | - | (131 | ) | (153 | ) | |||||||||||||||||||||
| Recoveries | - | 45 | - | 8 | 54 | - | 37 | 144 | ||||||||||||||||||||||||
| Provision for credit losses | (30 | ) | (109 | ) | 38 | 611 | 50 | 2 | 88 | 650 | ||||||||||||||||||||||
| Balance at September 30, 2024 | $ | 1,990 | $ | 156 | $ | 4,553 | $ | 3,375 | $ | 1,222 | $ | 57 | $ | 191 | $ | 11,544 | ||||||||||||||||
| (Dollars in thousands) | One-to-four family residential real estate loans | Construction and land loans | Commercial real estate loans | Commercial loans | Agriculture loans | Municipal loans | Consumer loans | Total | ||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | 2,035 | $ | 150 | $ | 4,518 | $ | 2,486 | $ | 1,190 | $ | 15 | $ | 214 | $ | 10,608 | ||||||||||||||||
| Charge-offs | - | - | - | (105 | ) | - | - | (308 | ) | (413 | ) | |||||||||||||||||||||
| Recoveries | - | 245 | - | 28 | 54 | 12 | 110 | 449 | ||||||||||||||||||||||||
| Provision for credit losses | (45 | ) | (239 | ) | 35 | 966 | (22 | ) | 30 | 175 | 900 | |||||||||||||||||||||
| Balance at September 30, 2024 | $ | 1,990 | $ | 156 | $ | 4,553 | $ | 3,375 | $ | 1,222 | $ | 57 | $ | 191 | $ | 11,544 | ||||||||||||||||
The Company recorded net loan charge-offs of $2.3 million during the third quarter of 2025, compared to net loan charge-offs of $9,000 during the third quarter of 2024. The Company recorded net loan charge-offs of $2.4 million during the nine months ended September 30, 2025, compared to net loan recoveries of $36,000 during the nine months ended September 30, 2024.
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The following table presents information regarding non-accrual and loans past due over 89 days and still accruing as of the dates indicated:
Schedule of Non-accrual and Loans Past Due Over 89 Days Still Accruing
| (Dollars in thousands) | As of September 30, 2025 | |||||||||||
| Non-accrual with no allowance for credit loss | Non-accrual with allowance for credit losses | Loans past due over 89 days still accruing | ||||||||||
| One-to-four family residential real estate loans | $ | 497 | $ | 158 | $ | - | ||||||
| Commercial real estate loans | 4,655 | - | - | |||||||||
| Commercial loans | 1,804 | 2,855 | - | |||||||||
| Agriculture loans | - | 30 | - | |||||||||
| Total loans | $ | 6,956 | $ | 3,043 | $ | - | ||||||
| (Dollars in thousands) | As of December 31, 2024 | |||||||||||
| Non-accrual with no allowance for credit loss | Non-accrual with allowance for credit losses | Loans past due over 89 days still accruing | ||||||||||
| One-to-four family residential real estate loans | $ | 34 | $ | - | $ | - | ||||||
| Commercial real estate loans | 782 | - | - | |||||||||
| Commercial loans | 314 | 10,939 | - | |||||||||
| Agriculture loans | 1,046 | - | - | |||||||||
| Total loans | $ | 2,176 | $ | 10,939 | $ | - | ||||||
The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following table presents information regarding the amortized cost basis and collateral type of collateral-dependent loans as of the dates indicated:
Schedule of Amortized Cost Basis and Collateral Type of Collateral Dependent Loans
| (Dollars in thousands) | As of September 30, 2025 | |||||
| Loan balance | Collateral Type | |||||
| One-to-four family residential real estate loans | $ | 655 | First mortgage on residential real estate | |||
| Commercial real estate loans | 4,270 | First mortgage on commercial real estate | ||||
| Commercial loans | 4,758 | Various business asset including real estate | ||||
| Agriculture loans | 30 | Crops, livestock, machinery and real estate | ||||
| Total loans | $ | 9,713 | ||||
| (Dollars in thousands) | As of December 31, 2024 | |||||
| Loan balance | Collateral Type | |||||
| One-to-four family residential real estate loans | $ | 34 | First mortgage on residential real estate | |||
| Commercial real estate loans | 782 | First mortgage on commercial real estate | ||||
| Commercial loans | 3,150 | Various business asset including real estate | ||||
| Agriculture loans | 1,456 | Crops, livestock, machinery and real estate | ||||
| Total loans | $ | 5,422 | ||||
The Company’s key credit quality indicator is a loan’s performance status, defined as accruing or non-accruing. Performing loans are considered to have a lower risk of loss. Non-accrual loans are those which the Company believes have a higher risk of loss. The accrual of interest on non-performing loans is discontinued at the time the loan is 90 days delinquent, unless the credit is well secured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date if collection of principal or interest is considered doubtful. There were no loans 90 days or more delinquent and accruing interest at either September 30, 2025 or December 31, 2024.
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The following tables present information regarding the Company’s past due and non-accrual loans by loan class, as of the dates indicated:
Schedule of Past Due and Non-accrual Loans by Loan Class
| (Dollars in thousands) | As of September 30, 2025 | |||||||||||||||||||||||||||
| 30-59 days delinquent and accruing | 60-89 days delinquent and accruing | 90 days or more delinquent and accruing | Total past due loans accruing | Non-accrual loans | Total past due and non-accrual loans | Total loans not past due | ||||||||||||||||||||||
| One-to-four family residential real estate loans | $ | 1,242 | $ | 214 | $ | - | $ | 1,456 | $ | 655 | $ | 2,111 | $ | 379,530 | ||||||||||||||
| Construction and land loans | 279 | - | - | 279 | - | 279 | 19,462 | |||||||||||||||||||||
| Commercial real estate loans | 892 | - | - | 892 | 4,655 | 5,547 | 384,027 | |||||||||||||||||||||
| Commercial loans | 1,941 | 57 | - | 1,998 | 4,659 | 6,657 | 179,999 | |||||||||||||||||||||
| Agriculture loans | - | 25 | - | 25 | 30 | 55 | 99,842 | |||||||||||||||||||||
| Municipal loans | - | - | - | - | - | - | 6,884 | |||||||||||||||||||||
| Consumer loans | 90 | 113 | - | 203 | - | 203 | 33,457 | |||||||||||||||||||||
| Total | $ | 4,444 | $ | 409 | $ | - | $ | 4,853 | $ | 9,999 | $ | 14,852 | $ | 1,103,201 | ||||||||||||||
| Percent of gross loans | 0.40 | % | 0.04 | % | 0.00 | % | 0.44 | % | 0.89 | % | 1.33 | % | 98.67 | % | ||||||||||||||
| (Dollars in thousands) | As of December 31, 2024 | |||||||||||||||||||||||||||
| 30-59 days delinquent and accruing | 60-89 days delinquent and accruing | 90 days or more delinquent and accruing | Total past due loans accruing | Non-accrual loans | Total past due and non-accrual loans | Total loans not past due | ||||||||||||||||||||||
| One-to-four family residential real estate loans | $ | 115 | $ | 323 | $ | - | $ | 438 | $ | 34 | $ | 472 | $ | 351,737 | ||||||||||||||
| Construction and land loans | - | 118 | - | 118 | - | $ | 118 | 25,210 | ||||||||||||||||||||
| Commercial real estate loans | 1,083 | 3,081 | - | 4,164 | 782 | $ | 4,946 | 340,213 | ||||||||||||||||||||
| Commercial loans | 500 | 59 | - | 559 | 11,253 | $ | 11,812 | 180,513 | ||||||||||||||||||||
| Agriculture loans | 864 | - | - | 864 | 1,046 | $ | 1,910 | 98,652 | ||||||||||||||||||||
| Municipal loans | - | - | - | - | - | $ | - | 7,091 | ||||||||||||||||||||
| Consumer loans | 33 | 25 | - | 58 | - | $ | 58 | 29,621 | ||||||||||||||||||||
| Total | $ | 2,595 | $ | 3,606 | $ | - | $ | 6,201 | $ | 13,115 | $ | 19,316 | $ | 1,033,037 | ||||||||||||||
| Percent of gross loans | 0.25 | % | 0.34 | % | 0.00 | % | 0.59 | % | 1.25 | % | 1.84 | % | 98.16 | % | ||||||||||||||
Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the nine months ended September 30, 2025 and 2024 would have increased interest income by $389,000 and $244,000, respectively. No interest income related to non-accrual loans was included in interest income for the three or nine months ended September 30, 2025 and 2024.
The Company also categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Nonclassified loans generally include those loans that are expected to be repaid in accordance with contractual loan terms. Classified loans are those that are assigned a special mention, substandard or doubtful risk rating using the following definitions:
Special Mention: Loans are currently protected by the current net worth and paying capacity of the obligor or of the collateral pledged but such protection is potentially weak. These loans constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard. The credit risk may be relatively minor, yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset.
Substandard: Loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful: Loans classified doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
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The following table presents information regarding the Company’s risk category of loans by type and year of origination, as of the dates indicated:
Schedule of Loans by Risk Category by Type and Year of Origination
| (Dollars in thousands) | As of September 30, 2025 | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving loans amortized cost | Revolving loans converted to term | Total | ||||||||||||||||||||||||||||
| One-to-four family residential real estate loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 64,804 | $ | 78,991 | $ | 79,555 | $ | 67,894 | $ | 32,930 | $ | 49,678 | $ | 7,048 | $ | 86 | $ | 380,986 | ||||||||||||||||||
| Classified | $ | - | $ | 158 | $ | 417 | $ | - | $ | - | $ | 80 | $ | - | $ | - | 655 | |||||||||||||||||||
| Total | $ | 64,804 | $ | 79,149 | $ | 79,972 | $ | 67,894 | $ | 32,930 | $ | 49,758 | $ | 7,048 | $ | 86 | $ | 381,641 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Construction and land loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 6,325 | $ | 3,627 | $ | 2,557 | $ | 1,775 | $ | 1,617 | $ | 3,740 | $ | 100 | $ | - | $ | 19,741 | ||||||||||||||||||
| Classified | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Total | $ | 6,325 | $ | 3,627 | $ | 2,557 | $ | 1,775 | $ | 1,617 | $ | 3,740 | $ | 100 | $ | - | $ | 19,741 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Commercial real estate loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 61,573 | $ | 55,997 | $ | 58,404 | $ | 57,322 | $ | 51,848 | $ | 93,009 | $ | 2,937 | $ | 29 | 381,119 | |||||||||||||||||||
| Classified | 135 | 1,184 | - | 282 | 445 | 6,409 | - | - | 8,455 | |||||||||||||||||||||||||||
| Total | $ | 61,708 | $ | 57,181 | $ | 58,404 | $ | 57,604 | $ | 52,293 | $ | 99,418 | $ | 2,937 | $ | 29 | $ | 389,574 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 26,520 | $ | 34,063 | $ | 17,607 | $ | 17,711 | $ | 8,037 | $ | 6,476 | $ | 61,469 | $ | 114 | $ | 171,997 | ||||||||||||||||||
| Classified | 2,576 | 2,103 | 1,400 | 1,936 | 30 | 3,608 | 2,449 | 557 | 14,659 | |||||||||||||||||||||||||||
| Total | $ | 29,096 | $ | 36,166 | $ | 19,007 | $ | 19,647 | $ | 8,067 | $ | 10,084 | $ | 63,918 | $ | 671 | $ | 186,656 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | 2,276 | $ | - | $ | - | $ | 11 | $ | - | $ | - | $ | - | $ | 2,287 | ||||||||||||||||||
| Agriculture loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 8,965 | $ | 12,503 | $ | 2,543 | $ | 6,000 | $ | 3,183 | $ | 12,527 | $ | 49,740 | $ | 224 | $ | 95,685 | ||||||||||||||||||
| Classified | 47 | 1,630 | - | 1,291 | 91 | 26 | 1,127 | - | 4,212 | |||||||||||||||||||||||||||
| Total | $ | 9,012 | $ | 14,133 | $ | 2,543 | $ | 7,291 | $ | 3,274 | $ | 12,553 | $ | 50,867 | $ | 224 | $ | 99,897 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Municipal loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | - | $ | - | $ | 5,552 | $ | 58 | $ | - | $ | 1,274 | $ | - | $ | - | $ | 6,884 | ||||||||||||||||||
| Classified | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Total | $ | - | $ | - | $ | 5,552 | $ | 58 | $ | - | $ | 1,274 | $ | - | $ | - | $ | 6,884 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 5,469 | $ | 1,743 | $ | 2,731 | $ | 466 | $ | 816 | $ | 2,661 | $ | 19,624 | $ | 150 | $ | 33,660 | ||||||||||||||||||
| Classified | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Total | $ | 5,469 | $ | 1,743 | $ | 2,731 | $ | 466 | $ | 816 | $ | 2,661 | $ | 19,624 | $ | 150 | $ | 33,660 | ||||||||||||||||||
| Gross charge-offs | $ | 304 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 304 | ||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 173,656 | $ | 186,924 | $ | 168,949 | $ | 151,226 | $ | 98,431 | $ | 169,365 | $ | 140,918 | $ | 603 | $ | 1,090,072 | ||||||||||||||||||
| Classified | 2,758 | 5,075 | 1,817 | 3,509 | 566 | 10,123 | 3,576 | 557 | 27,981 | |||||||||||||||||||||||||||
| Total | $ | 176,414 | $ | 191,999 | $ | 170,766 | $ | 154,735 | $ | 98,997 | $ | 179,488 | $ | 144,494 | $ | 1,160 | $ | 1,118,053 | ||||||||||||||||||
| Gross charge-offs for the nine months | ||||||||||||||||||||||||||||||||||||
| ended September 30, 2025 | $ | 304 | $ | 2,276 | $ | - | $ | - | $ | 11 | $ | - | $ | - | $ | - | $ | 2,591 | ||||||||||||||||||
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| (Dollars in thousands) | As of December 31, 2024 | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving loans amortized cost | Revolving loans converted to term | Total | ||||||||||||||||||||||||||||
| One-to-four family residential real estate loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 86,701 | $ | 84,467 | $ | 75,517 | $ | 37,411 | $ | 27,293 | $ | 35,112 | $ | 5,552 | $ | 122 | $ | 352,175 | ||||||||||||||||||
| Classified | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 34 | $ | - | $ | - | $ | 34 | ||||||||||||||||||
| Total | $ | 86,701 | $ | 84,467 | $ | 75,517 | $ | 37,411 | $ | 27,293 | $ | 35,146 | $ | 5,552 | $ | 122 | $ | 352,209 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Construction and land loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 6,481 | $ | 11,202 | $ | 1,937 | $ | 1,697 | $ | 2,569 | $ | 1,340 | $ | 102 | $ | - | $ | 25,328 | ||||||||||||||||||
| Classified | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Total | $ | 6,481 | $ | 11,202 | $ | 1,937 | $ | 1,697 | $ | 2,569 | $ | 1,340 | $ | 102 | $ | - | $ | 25,328 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Commercial real estate loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 59,717 | $ | 47,624 | $ | 68,854 | $ | 53,868 | $ | 41,862 | $ | 67,351 | $ | 3,217 | $ | 85 | $ | 342,578 | ||||||||||||||||||
| Classified | $ | 360 | $ | - | $ | - | $ | 476 | $ | 151 | $ | 1,594 | $ | - | $ | - | $ | 2,581 | ||||||||||||||||||
| Total | $ | 60,077 | $ | 47,624 | $ | 68,854 | $ | 54,344 | $ | 42,013 | $ | 68,945 | $ | 3,217 | $ | 85 | $ | 345,159 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 31,083 | $ | 27,158 | $ | 23,574 | $ | 9,813 | $ | 7,930 | $ | 2,203 | $ | 68,282 | $ | 135 | $ | 170,178 | ||||||||||||||||||
| Classified | $ | 11,364 | $ | 1,851 | $ | 1,897 | $ | 39 | $ | 3,637 | $ | 13 | $ | 1,969 | $ | 1,377 | $ | 22,147 | ||||||||||||||||||
| Total | $ | 42,447 | $ | 29,009 | $ | 25,471 | $ | 9,852 | $ | 11,567 | $ | 2,216 | $ | 70,251 | $ | 1,512 | $ | 192,325 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | 16 | $ | 114 | $ | 56 | $ | - | $ | - | $ | - | $ | 186 | ||||||||||||||||||
| Agriculture loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 21,379 | $ | 3,659 | $ | 8,404 | $ | 3,616 | $ | 3,297 | $ | 14,215 | $ | 44,458 | $ | 217 | $ | 99,245 | ||||||||||||||||||
| Classified | $ | 29 | $ | 178 | $ | 257 | $ | 419 | $ | 9 | $ | 73 | $ | 352 | $ | - | $ | 1,317 | ||||||||||||||||||
| Total | $ | 21,408 | $ | 3,837 | $ | 8,661 | $ | 4,035 | $ | 3,306 | $ | 14,288 | $ | 44,810 | $ | 217 | $ | 100,562 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 64 | $ | - | $ | - | $ | 64 | ||||||||||||||||||
| Municipal loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 5,565 | $ | - | $ | 90 | $ | - | $ | - | $ | 1,436 | $ | - | $ | - | $ | 7,091 | ||||||||||||||||||
| Classified | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Total | $ | 5,565 | $ | - | $ | 90 | $ | - | $ | - | $ | 1,436 | $ | - | $ | - | $ | 7,091 | ||||||||||||||||||
| Gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 2,850 | $ | 3,229 | $ | 645 | $ | 1,072 | $ | 682 | $ | 3,167 | $ | 17,896 | $ | 138 | $ | 29,679 | ||||||||||||||||||
| Classified | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Total | $ | 2,850 | $ | 3,229 | $ | 645 | $ | 1,072 | $ | 682 | $ | 3,167 | $ | 17,896 | $ | 138 | $ | 29,679 | ||||||||||||||||||
| Gross charge-offs | $ | 376 | $ | 7 | $ | 1 | $ | - | $ | - | $ | 24 | $ | - | $ | 1 | $ | 409 | ||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||||||
| Nonclassified | $ | 213,776 | $ | 177,339 | $ | 179,021 | $ | 107,477 | $ | 83,633 | $ | 124,824 | $ | 139,507 | $ | 697 | $ | 1,026,274 | ||||||||||||||||||
| Classified | $ | 11,753 | $ | 2,029 | $ | 2,154 | $ | 934 | $ | 3,797 | $ | 1,714 | $ | 2,321 | $ | 1,377 | $ | 26,079 | ||||||||||||||||||
| Total | $ | 225,529 | $ | 179,368 | $ | 181,175 | $ | 108,411 | $ | 87,430 | $ | 126,538 | $ | 141,828 | $ | 2,074 | $ | 1,052,353 | ||||||||||||||||||
| Gross charge-offs for the year ended December 31, 2024 | $ | 376 | $ | 7 | $ | 17 | $ | 114 | $ | 56 | $ | 88 | $ | - | $ | 1 | $ | 659 | ||||||||||||||||||
|
|
The following table provides information regarding the Company’s allowance for credit losses related to unfunded loan commitments for the periods indicated:
Schedule of Allowance for Credit Losses Related to Unfunded Loan Commitments
| Three months ended | Nine months ended | |||||||||||||||
| (dollars in thousands) | September 30, | September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Balance at beginning of period | $ | 150 | 300 | $ | 150 | 250 | ||||||||||
| Provision for credit losses | - | (150 | ) | - | (100 | ) | ||||||||||
| Balance at end of period | $ | 150 | $ | 150 | $ | 150 | $ | 150 | ||||||||
The Company did not make any loan modifications to borrowers experiencing financial difficulty during the three months ended September 30, 2025. The Company made two loan modifications to a single borrower experiencing financial difficulty during the nine months ended September 30, 2025. The Company did not make any loan modifications to borrowers experiencing financial difficulty during the three or nine months ended September 30, 2024. The following table presents the amortized cost basis of loans at September 30, 2025 that were both experiencing financial difficulty and modified during the nine months ended September 30, 2025 by class, type of modification and includes the financial effect of the modification.
Schedule of Modifications to Borrowers Experiencing Financial Difficulty
| As of June 30, 2025 | ||||||||||
| Amortized cost basis | % of loan class total | Financial effect | ||||||||
| Term extension: | ||||||||||
| Commercial | $ | 277 | 0.1 | % | Renewal of existing loan | |||||
As of September 30, 2025, all loans both experiencing financial difficulty and modified during the nine months ended September 30, 2025 were current under the terms of the agreements.
| 4. | Goodwill and Other Intangible Assets |
The Company tests goodwill for impairment annually, or more frequently if circumstances warrant. The Company’s annual impairment test as of December 31, 2024 concluded that its goodwill was not impaired. Based on that test and current conditions, as of September 30, 2025, the Company concluded it was more likely than not that its goodwill was not impaired.
Core deposit intangible assets are amortized over the estimated useful life of ten years on an accelerated basis. A summary of the other intangible assets that continue to be subject to amortization as of the dates indicated is presented in the following tables:
Schedule of Other Intangible Assets and Goodwill
| (Dollars in thousands) | As of September 30, 2025 | |||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying amount | ||||||||||
| Core deposit intangible assets | $ | 4,170 | $ | (2,047 | ) | $ | 2,123 | |||||
| (Dollars in thousands) | As of December 31, 2024 | |||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying amount | ||||||||||
| Core deposit intangible assets | $ | 4,170 | $ | (1,592 | ) | $ | 2,578 | |||||
|
|
The following table sets forth estimated amortization expense for core deposit intangible assets for the remainder of 2025 and in successive years ending December 31:
Schedule of Finite-lived Intangible Assets, Future Amortization Expense
| (Dollars in thousands) | Amortization | |||
| expense | ||||
| Remainder of 2025 | $ | 133 | ||
| 2026 | 512 | |||
| 2027 | 436 | |||
| 2028 | 360 | |||
| 2029 | 284 | |||
| 2030 | 208 | |||
| Thereafter | 190 | |||
| Total | $ | 2,123 | ||
| 5. | Mortgage Loan Servicing |
Mortgage loans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgage loans serviced for others, as of the dates indicated:
Schedule of Participating Mortgage Loans
| (Dollars in thousands) | September 30, | December 31, | ||||||
| 2025 | 2024 | |||||||
| FHLMC | $ | 600,206 | $ | 626,379 | ||||
| FHLB | 28,808 | 27,418 | ||||||
| Total | $ | 629,014 | $ | 653,797 | ||||
Custodial escrow balances maintained in connection with mortgage loans serviced for others were $10.7 million and $5.6 million at September 30, 2025 and December 31, 2024, respectively. Custodial escrow balances are included in the deposit balances on the balance sheet. Gross service fee income related to such loans was $403,000 and $425,000 for the three months ended September 30, 2025 and 2024, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $1.2 million and $1.3 million for the nine months ended September 30, 2025 and 2024, respectively, and is included in fees and service charges in the consolidated statements of earnings.
Mortgage servicing rights activity for the periods indicated was as follows for the periods indicated:
Schedule of Servicing Asset at Amortized Cost
| Three months ended | Nine months ended | |||||||||||||||
| (Dollars in thousands) | September 30, | September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Mortgage servicing rights: | ||||||||||||||||
| Balance at beginning of period | $ | 3,082 | $ | 2,997 | $ | 3,061 | $ | 3,158 | ||||||||
| Additions | 133 | 129 | 328 | 295 | ||||||||||||
| Amortization | (95 | ) | (85 | ) | (269 | ) | (412 | ) | ||||||||
| Balance at end of period | $ | 3,120 | $ | 3,041 | $ | 3,120 | $ | 3,041 | ||||||||
The fair value of mortgage servicing rights was $8.7 million and $9.6 million at September 30, 2025 and December 31, 2024, respectively. Fair value at September 30, 2025 was determined using discount rate ranging from 8.77% to 9.00%; prepayment speeds ranging from 5.50% to 27.52%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.66%. Fair value at December 31, 2024 was determined using discount rates at 10.00%; prepayment speeds ranging from 6.00% to 25.44%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.87%.
The Company had a mortgage repurchase reserve of $115,000 at September 30, 2025 and $131,000 at December 31, 2024, which represented the Company’s best estimate at those dates of probable losses that the Company will incur related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. The Company did not incur any losses charged against the reserve or make any provisions to the reserve during the three months ended September 30, 2025. During the nine months ended September 30, 2025, the Company charged $81,000 of losses against the reserve and recorded a $65,000 provision. The Company charged $17,000 of losses against the reserve during the three months ended September 30, 2024 and $19,000 of losses against the reserve during the nine months ended September 30, 2024. As of September 30, 2025, the Company had no outstanding mortgage repurchase requests.
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| 6. | Earnings per Share |
Basic earnings per share have been computed based upon the weighted average number of common shares outstanding during each period. Diluted earnings per share included the effect of all potential common shares outstanding during each period. The diluted earnings per share computation for both the three and nine months ended September 30, 2025, included all unexercised stock options, as no stock options were determined to be anti-dilutive during such periods. The diluted earnings per share computation for both the three and nine months ended September 30, 2024, excluded 207,751 of unexercised stock options because their inclusion would have been anti-dilutive during such periods. The Company’s Board of Directors declared a cash dividend of $0.21 per share to be paid November 26, 2025, to common stockholders of record as of the close of business on November 12, 2025. The Company’s Board of Directors also declared a 5% stock dividend issuable December 15, 2025 to common stockholders of record as of the close of business on December 1, 2025. The shares used in the calculation of basic and diluted earnings per share for the periods indicated are shown below:
| Three months ended | Nine months ended | |||||||||||||||
| (Dollars in thousands, except per share amounts) | September 30, | September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net earnings | $ | 4,930 | $ | 3,931 | $ | 14,035 | $ | 9,721 | ||||||||
| Weighted average common shares outstanding - basic (1) | 5,783,729 | 5,765,348 | 5,780,462 | 5,751,326 | ||||||||||||
| Assumed exercise of stock options (1) | 45,912 | 5,166 | 44,115 | 4,203 | ||||||||||||
| Weighted average common shares outstanding - diluted (1) | 5,829,641 | 5,770,514 | 5,824,577 | 5,755,529 | ||||||||||||
| Earnings per share (1): | ||||||||||||||||
| Basic (1) | $ | 0.85 | $ | 0.68 | $ | 2.43 | $ | 1.69 | ||||||||
| Diluted (1) | $ | 0.85 | $ | 0.68 | $ | 2.41 | $ | 1.69 | ||||||||
| (1) | Share and per share values for the periods ended September 30, 2024 have been adjusted to give effect to the 5% stock dividend paid during December 2024. |
| 7. | Federal Home Loan Bank Borrowings and Other Borrowings |
The Bank has a line of credit with the Federal Home Loan Bank (“FHLB”) under which there were $87.3 million of borrowings at September 30, 2025 and $48.8 million of borrowings at December 31, 2024. Interest on any outstanding balance on the line of credit accrues at the federal funds rate plus 0.15% (4.33% at September 30, 2025). The Company had $25.0 million in letters of credit issued through the FHLB at September 30, 2025 compared to $60.0 million in letters of credit December 31, 2024, to secure municipal deposits. The Company did not have any term advances from FHLB at September 30, 2025 or December 31, 2024.
Although no loans are specifically pledged, the FHLB requires the Bank to maintain eligible collateral (qualifying loans and investment securities) that has a lending value at least equal to its required collateral. At September 30, 2025 and December 31, 2024, there were blanket pledges of loans and securities to the FHLB totaling $467.9 million and $403.9 million, respectively. At September 30, 2025 and December 31, 2024, the Bank’s total borrowing capacity with the FHLB was approximately $323.5 million and $281.2 million, respectively. At September 30, 2025 and December 31, 2024, the Bank’s available borrowing capacity was $209.7 million and $171.0 million, respectively. The difference between the Bank’s total borrowing capacity and available borrowing capacity is related to the amount of borrowings outstanding and letters of credit. The available borrowing capacity with the FHLB is collateral based, and the Bank’s ability to borrow is subject to maintaining collateral that meets the eligibility requirements. The borrowing capacity is not committed and is subject to FHLB credit requirements and policies. In addition, the Bank must maintain a restricted investment in FHLB stock to maintain access to borrowings.
At September 30, 2025, the Bank had no borrowings through the Federal Reserve discount window, while its borrowing capacity with the Federal Reserve was $44.9 million.
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The Company has a $5.0 million line of credit from an unrelated financial institution maturing on November 1, 2026, with an interest rate that adjusts daily based on the prime rate less 0.50%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at September 30, 2025. As of September 30, 2025 and December 31, 2024, the Company did not have an outstanding balance on the line of credit.
On September 29, 2022, the Company borrowed $10.0 million from the same unrelated financial institution at a fixed rate of 6.15%. This borrowing has covenants specific to capital and other financial ratios, which the Company was in compliance with at September 30, 2025 and December 31, 2024. This borrowing matures on September 1, 2027 and requires quarterly principal and interest payments. Early principal payments are allowed and the balance was $3.2 million and $4.2 million at September 30, 2025 and December 31, 2024, respectively.
| 8. | Repurchase Agreements |
The Company has overnight repurchase agreements with certain deposit customers whereby the Company uses investment securities as collateral for non-insured funds. These balances are accounted for as collateralized financing and included in other borrowings on the balance sheet.
Repurchase agreements are comprised of non-insured customer funds, totaling $1.4 million at September 30, 2025 and $13.8 million at December 31, 2024, which were secured by $2.0 million and $15.2 million of the Company’s investment portfolio at the same dates, respectively.
The following is a summary of the balances and collateral of the Company’s repurchase agreements as of the dates indicated:
Schedule of Repurchase Agreements
| As of September 30, 2025 | ||||||||||||||||||||
| (dollars in thousands) | Overnight and | Up to | Greater | |||||||||||||||||
| Continuous | 30 days | 30-90 days | than 90 days | Total | ||||||||||||||||
| Repurchase agreements: | ||||||||||||||||||||
| U.S. treasury securities | $ | 1,420 | $ | - | $ | - | $ | - | $ | 1,420 | ||||||||||
| Total | $ | 1,420 | $ | - | $ | - | $ | - | $ | 1,420 | ||||||||||
| As of December 31, 2024 | ||||||||||||||||||||
| (dollars in thousands) | Overnight and | Up to | Greater | |||||||||||||||||
| Continuous | 30 days | 30-90 days | than 90 days | Total | ||||||||||||||||
| Repurchase agreements: | ||||||||||||||||||||
| U.S. treasury securities | $ | 11,729 | $ | - | $ | - | $ | - | $ | 11,729 | ||||||||||
| Agency mortgage-backed securities | 2,079 | - | - | - | 2,079 | |||||||||||||||
| Total | $ | 13,808 | $ | - | $ | - | $ | - | $ | 13,808 | ||||||||||
The investment securities are held by a third party financial institution in the customer’s custodial account. The Company is required to maintain adequate collateral for each repurchase agreement. Changes in the fair value of the investment securities impact the amount of collateral required. If the Company were to default, the investment securities would be used to settle the repurchase agreement with the deposit customer.
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| 9. | Revenue from Contracts with Customers |
All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. Items outside the scope of ASC 606 are noted as such.
A description of the Company’s revenue streams under ASC 606 follows for the periods indicated:
Schedule of Revenue from Contracts with Customers within Non-interest Income
| Three months ended | Nine months ended | |||||||||||||||
| (Dollars in thousands) | September 30, | September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Non-interest income: | ||||||||||||||||
| Service charges on deposit accounts | ||||||||||||||||
| Overdraft fees | $ | 976 | $ | 1,066 | $ | 2,740 | $ | 3,019 | ||||||||
| Other | 555 | 526 | 1,445 | 1,233 | ||||||||||||
| Interchange income | 648 | 765 | 1,911 | 2,226 | ||||||||||||
| Loan servicing fees (1) | 403 | 425 | 1,222 | 1,293 | ||||||||||||
| Office lease income (1) | 17 | 20 | 53 | 108 | ||||||||||||
| Gains on sales of loans (1) | 948 | 704 | 2,250 | 1,864 | ||||||||||||
| Bank owned life insurance income (1) | 283 | 254 | 833 | 747 | ||||||||||||
| Losses on sales of investment securities (1) | - | - | (2 | ) | - | |||||||||||
| Gains on sales of real estate owned | 12 | 273 | 12 | 264 | ||||||||||||
| Other | 226 | 220 | 588 | 619 | ||||||||||||
| Total non-interest income | $ | 4,068 | $ | 4,253 | $ | 11,052 | $ | 11,373 | ||||||||
| (1) | Not within the scope of ASC 606. |
Service Charges on Deposit Accounts
The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM usage fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period during which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.
Interchange Income
The Company earns interchange fees from debit cardholder transactions conducted through the interchange payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
Gains (Losses) on Sales of Real Estate Owned
The Company records a gain or loss from the sale of real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of real estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the real estate owned asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. There were no sales of real estate owned that were financed by the Company during the first nine months of 2025 or 2024.
| 10. | Fair Value of Financial Instruments and Fair Value Measurements |
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
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Fair value estimates of the Company’s financial instruments as of September 30, 2025 and December 31, 2024, including methods and assumptions utilized, are set forth below:
Schedule of Fair Value Estimates of Financial Instruments
| As of September 30, 2025 | ||||||||||||||||||||
| Carrying | ||||||||||||||||||||
| amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 23,947 | $ | 23,947 | $ | - | $ | - | $ | 23,947 | ||||||||||
| Interest-bearing deposits at other banks | 3,218 | - | 3,218 | - | 3,218 | |||||||||||||||
| Investment securities available-for-sale | 350,028 | 50,833 | 299,195 | - | 350,028 | |||||||||||||||
| Investment securities held-to-maturity | 3,760 | - | 3,468 | - | 3,468 | |||||||||||||||
| Bank stocks, at cost | 8,021 | n/a | n/a | n/a | n/a | |||||||||||||||
| Loans, net | 1,104,991 | - | - | 1,106,896 | 1,106,896 | |||||||||||||||
| Loans held for sale | 3,578 | - | 3,578 | - | 3,578 | |||||||||||||||
| Mortgage servicing rights | 3,120 | - | 8,718 | - | 8,718 | |||||||||||||||
| Accrued interest receivable | 7,192 | 225 | 1,799 | 5,168 | 7,192 | |||||||||||||||
| Derivative financial instruments | 229 | - | 229 | - | 229 | |||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Non-maturity deposits | $ | (1,091,663 | ) | $ | (1,091,663 | ) | $ | - | $ | - | $ | (1,091,663 | ) | |||||||
| Certificates of deposit | (233,837 | ) | - | (233,262 | ) | - | (233,262 | ) | ||||||||||||
| FHLB and other borrowings | (90,483 | ) | - | (90,453 | ) | - | (90,453 | ) | ||||||||||||
| Subordinated debentures | (21,651 | ) | - | (18,760 | ) | - | (18,760 | ) | ||||||||||||
| Repurchase agreements | (1,420 | ) | - | (1,420 | ) | - | (1,420 | ) | ||||||||||||
| Accrued interest payable | (1,742 | ) | - | (1,742 | ) | - | (1,742 | ) | ||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||
| Carrying | ||||||||||||||||||||
| amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 20,275 | $ | 20,275 | $ | - | $ | - | $ | 20,275 | ||||||||||
| Interest-bearing deposits at other banks | 4,110 | - | 4,110 | - | 4,110 | |||||||||||||||
| Investment securities available-for-sale | 372,512 | 64,458 | 308,054 | - | 372,512 | |||||||||||||||
| Investment securities held-to-maturity | 3,672 | - | 3,290 | - | 3,290 | |||||||||||||||
| Bank stocks, at cost | 6,618 | n/a | n/a | n/a | n/a | |||||||||||||||
| Loans, net | 1,039,221 | - | - | 1,027,865 | 1,027,865 | |||||||||||||||
| Loans held for sale | 3,420 | - | 3,420 | - | 3,420 | |||||||||||||||
| Mortgage servicing rights | 3,061 | - | 9,615 | - | 9,615 | |||||||||||||||
| Accrued interest receivable | 7,132 | 219 | 2,001 | 4,912 | 7,132 | |||||||||||||||
| Derivative financial instruments | 200 | - | 200 | - | 200 | |||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Non-maturity deposits | $ | (1,134,072 | ) | $ | (1,134,072 | ) | $ | - | $ | - | $ | (1,134,072 | ) | |||||||
| Certificates of deposit | (194,694 | ) | - | (193,901 | ) | - | (193,901 | ) | ||||||||||||
| FHLB and other borrowings | (53,046 | ) | - | (48,846 | ) | - | (48,846 | ) | ||||||||||||
| Subordinated debentures | (21,651 | ) | - | (18,556 | ) | - | (18,556 | ) | ||||||||||||
| Repurchase agreements | (13,808 | ) | - | (13,808 | ) | - | (13,808 | ) | ||||||||||||
| Accrued interest payable | (1,833 | ) | - | (1,833 | ) | - | (1,833 | ) | ||||||||||||
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|
Transfers
The Company did not transfer any assets or liabilities among levels during the nine months ended September 30, 2025 or during the year ended December 31, 2024.
Valuation Methods for Instruments Measured at Fair Value on a Recurring Basis
The following tables represent the Company’s financial instruments that are measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, allocated to the appropriate fair value hierarchy:
Schedule of Fair Value Instruments Measured on Recurring Basis
| (Dollars in thousands) | As of September 30, 2025 | |||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Available-for-sale investment securities: | ||||||||||||||||
| U. S. treasury securities | $ | 50,833 | $ | 50,833 | $ | - | $ | - | ||||||||
| Municipal obligations, tax exempt | 97,383 | - | 97,383 | - | ||||||||||||
| Municipal obligations, taxable | 82,236 | - | 82,236 | - | ||||||||||||
| Agency mortgage-backed securities | 119,576 | - | 119,576 | - | ||||||||||||
| Loans held for sale | 3,578 | - | 3,578 | - | ||||||||||||
| Derivative financial instruments | 229 | - | 229 | - | ||||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Available-for-sale investment securities: | ||||||||||||||||
| U. S. treasury securities | $ | 64,458 | $ | 64,458 | $ | - | $ | - | ||||||||
| Municipal obligations, tax exempt | 107,128 | - | 107,128 | - | ||||||||||||
| Municipal obligations, taxable | 71,715 | - | 71,715 | - | ||||||||||||
| Agency mortgage-backed securities | 129,211 | - | 129,211 | - | ||||||||||||
| Loans held for sale | 3,420 | - | 3,420 | - | ||||||||||||
| Derivative financial instruments | 200 | - | 200 | - | ||||||||||||
The Company’s investment securities classified as available-for-sale include U.S. treasury securities, municipal obligations, and agency mortgage-backed securities. Quoted exchange prices are available for the Company’s U.S. treasury securities, which are classified as Level 1. U.S. federal agency mortgage-backed securities are priced utilizing industry-standard models that consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. These measurements are classified as Level 2. Municipal obligations are valued using a type of matrix, or grid, pricing in which securities are benchmarked against U.S. treasury rates based on credit rating. These model and matrix measurements are classified as Level 2 in the fair value hierarchy.
Changes in the fair value of available-for-sale securities are included in other comprehensive income to the extent the changes are not considered to be credit related which would instead result in a credit loss reserve. The Company evaluates any potential credit losses on available-for-sale securities on a quarterly basis and credit losses identified on individual securities result in a write-down of the relevant security’s cost basis.
Mortgage loans originated and intended for sale in the secondary market are carried at fair value. The mortgage loan valuations are based on quoted secondary market prices for similar loans and are classified as Level 2. Changes in the fair value of mortgage loans originated and intended for sale in the secondary market and derivative financial instruments are included in gains on sales of loans.
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The aggregate fair value, contractual balance (including accrued interest), and gains on loans held for sale as of September 30, 2025 and December 31, 2024 were as follows:
Schedule of Fair Value Contractual Balance and Gain Loss on Loans Held for Sale
| As of | As of | |||||||
| September 30, | December 31, | |||||||
| (Dollars in thousands) | 2025 | 2024 | ||||||
| Aggregate fair value | $ | 3,578 | $ | 3,420 | ||||
| Contractual balance | 3,529 | 3,376 | ||||||
| Gain | $ | 49 | $ | 44 | ||||
The Company’s derivative financial instruments consist of interest rate lock commitments and corresponding forward sales contracts on mortgage loans held for sale. The fair values of these derivatives are based on quoted prices for similar loans in the secondary market. The market prices are adjusted by a factor, based on the Company’s historical data and its judgment about future economic trends, which considers the likelihood that a commitment will ultimately result in a closed loan. These instruments are classified as Level 2. The amounts are included in accrued interest and other assets or accrued interest and other liabilities on the consolidated balance sheets and gains on sales of loans, net in the consolidated statements of earnings. The total amount of gains from changes in fair value of derivative financial instruments included in earnings for the periods indicated were as follows:
Schedule of Gains from Changes in Fair Value of Derivative Financial Instruments
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Total change in fair value | $ | 10 | $ | (42 | ) | $ | 29 | $ | 173 | |||||||
Valuation Methods for Instruments Measured at Fair Value on a Nonrecurring Basis
The Company does not record its loan portfolio at fair value. Collateral-dependent loans are generally carried at the lower of cost or fair value of the collateral, less estimated selling costs. Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by the Company and then further adjusted if warranted based on relevant facts and circumstances. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Individually evaluated loans are reviewed at least quarterly for additional allowance and adjusted accordingly, based on the same factors identified above. The carrying value of the Company’s individually evaluated loans was $11.5 million at September 30, 2025 and $15.0 million at December 31, 2024. The Company’s individually evaluated loans with an allowance for credit losses were $3.1 million and $2.5 million, with an allocated allowance of $838,000 and $777,000, at September 30, 2025 and December 31, 2024, respectively.
Real estate held-for-sale includes premises and equipment that were previously used as a bank branch facility and is included in other assets on the balance sheet. Real estate held-for-sale is initially recorded at the fair value of the collateral less estimated selling costs. Subsequent valuations are updated periodically and are based upon independent appraisals, third party price opinions or internal pricing models. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Real estate held-for-sale is reviewed and evaluated at least annually for additional allowance and adjusted accordingly, based on the same factors identified above.
Real estate owned includes assets acquired through, or in lieu of, foreclosure and land previously acquired for expansion. Real estate owned is initially recorded at the fair value of the collateral less estimated selling costs. Subsequent valuations are updated periodically and are based upon independent appraisals, third party price opinions or internal pricing models. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Real estate owned is reviewed and evaluated at least annually for additional allowance and adjusted accordingly, based on the same factors identified above.
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The following table presents quantitative information about Level 3 fair value measurements measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024:
Schedule of Fair Value Measurements on Nonrecurring, Valuation Techniques
| (Dollars in thousands) | ||||||||||||
| Fair value | Valuation technique | Unobservable inputs | Range | |||||||||
| As of September 30, 2025 | ||||||||||||
| Individual evaluated loans: | ||||||||||||
| One-to-four family residential real estate | $ | 116 | Sales comparison | Adjustment to appraised value | 20 | % | ||||||
| Commercial | 2,142 | Sales comparison | Adjustment to comparable value | 0%-35 | % | |||||||
| As of December 31, 2024 | ||||||||||||
| Individual evaluated loans: | ||||||||||||
| Commercial | $ | 1,768 | Sales comparison | Adjustment to comparable value | 0%-50 | % | ||||||
| 11. | Regulatory Capital Requirements |
Banks and bank holding companies, such as the Company, are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believed that as of September 30, 2025 and December 31, 2024, the Company and the Bank met all capital adequacy requirements to which they were subject at that time.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.
Banking organizations are required to maintain minimum capital levels as follows: a ratio of common equity Tier 1 capital equal to 4.5% of risk-weighted assets , a ratio of Tier 1 capital equal to 6.0% of risk-weighted assets, a ratio of total capital equal to 8.0% of risk-weighted assets, and a leverage ratio of Tier 1 capital to total quarterly average assets equal to 4.0% in all circumstances.
As of September 30, 2025 and December 31, 2024, the most recent regulatory notifications categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action then in effect. There are no conditions or events since that notification that management believes have changed the institution’s category.
Regulations include a capital conservation buffer of 2.5% that is added to these minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including the amount of dividends that it may pay without prior regulatory approval, stock repurchases and certain discretionary bonus payments to executive officers. At September 30, 2025 and December 31, 2024, the ratios for the Company and the Bank were sufficient to meet the conservation buffer.
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The following is a comparison of the Company’s regulatory capital ratios to minimum capital ratio requirements as of September 30, 2025 and December 31, 2024:
Schedule of Compliance with Regulatory Capital Requirements for Mortgage Companies
| (Dollars in thousands) | ||||||||||||||||
| For capital | ||||||||||||||||
| Actual | adequacy purposes | |||||||||||||||
| Amount | Ratio | Amount | Ratio (1) | |||||||||||||
| As of September 30, 2025 | ||||||||||||||||
| Leverage | $ | 150,556 | 9.44 | % | $ | 63,762 | 4.0 | % | ||||||||
| Common Equity Tier 1 Capital | 129,556 | 11.13 | % | 81,466 | 7.0 | % | ||||||||||
| Tier 1 Capital | 150,556 | 12.94 | % | 98,923 | 8.5 | % | ||||||||||
| Total Risk Based Capital | 162,795 | 13.99 | % | 122,199 | 10.5 | % | ||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Leverage | $ | 139,657 | 9.02 | % | $ | 61,964 | 4.0 | % | ||||||||
| Common Equity Tier 1 Capital | 118,657 | 10.49 | % | 79,164 | 7.0 | % | ||||||||||
| Tier 1 Capital | 139,657 | 12.35 | % | 96,128 | 8.5 | % | ||||||||||
| Total Risk Based Capital | 152,121 | 13.45 | % | 118,746 | 10.5 | % | ||||||||||
| (1) | The required ratios for capital adequacy purposes include a capital conservation buffer of 2.5%. |
The following is a comparison of the Bank’s regulatory capital to minimum capital requirements as of September 30, 2025 and December 31, 2024:
Schedule of Compliance with Regulatory Capital Requirements Under Banking Regulations
| To be well-capitalized | ||||||||||||||||||||||||
| under prompt | ||||||||||||||||||||||||
| (Dollars in thousands) | For capital | corrective | ||||||||||||||||||||||
| Actual | adequacy purposes | action provisions | ||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio (1) | Amount | Ratio | |||||||||||||||||||
| As of September 30, 2025 | ||||||||||||||||||||||||
| Leverage | $ | 149,409 | 9.40 | % | $ | 63,566 | 4.0 | % | $ | 79,457 | 5.0 | % | ||||||||||||
| Common Equity Tier 1 Capital | 149,409 | 12.84 | % | 81,466 | 7.0 | % | 75,647 | 6.5 | % | |||||||||||||||
| Tier 1 Capital | 149,409 | 12.84 | % | 98,923 | 8.5 | % | 93,104 | 8.0 | % | |||||||||||||||
| Total Risk Based Capital | 161,648 | 13.89 | % | 122,199 | 10.5 | % | 116,380 | 10.0 | % | |||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||
| Leverage | $ | 140,523 | 9.10 | % | $ | 61,770 | 4.0 | % | $ | 77,213 | 5.0 | % | ||||||||||||
| Common Equity Tier 1 Capital | 140,523 | 12.43 | % | 79,146 | 7.0 | % | 73,493 | 6.5 | % | |||||||||||||||
| Tier 1 Capital | 140,523 | 12.43 | % | 96,106 | 8.5 | % | 99,453 | 8.0 | % | |||||||||||||||
| Total Risk Based Capital | 152,987 | 13.53 | % | 118,719 | 10.5 | % | 113,066 | 10.0 | % | |||||||||||||||
| (1) | The required ratios for capital adequacy purposes include a capital conservation buffer of 2.5%. |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview. Landmark Bancorp, Inc. is a financial holding company incorporated under the laws of the State of Delaware and is engaged in the banking business through its wholly owned subsidiary, Landmark National Bank, and in the insurance business through its wholly owned subsidiary, Landmark Risk Management, Inc. References to the “Company,” “we,” “us,” and “our” refer collectively to Landmark Bancorp, Inc., Landmark National Bank and Landmark Risk Management, Inc. The Company is listed on the Nasdaq Global Market under the symbol “LARK.” The Bank is dedicated to providing quality financial and banking services to its local communities. Our strategy includes continuing a tradition of holding and acquiring quality assets while growing our commercial, commercial real estate (“CRE”) and agriculture loan portfolios. We are committed to developing relationships with our borrowers and providing a total banking service.
The Bank is principally engaged in the business of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to originate one-to-four family residential real estate, construction and land, CRE, commercial, agriculture, municipal and consumer loans. Although not our primary business function, we invest in certain investment and mortgage-related securities using deposits and other borrowings as funding sources.
Landmark Risk Management, Inc., which was formed and began operations in 2017, is a Nevada-based captive insurance company which provides property and casualty insurance coverage to the Company and the Bank for which insurance may not be currently available or economically feasible in the current insurance marketplace. Landmark Risk Management, Inc. is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.
Our results of operations depend generally on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to the degree that our interest-earning assets mature or reprice at different times, or at different speeds, than our interest-bearing liabilities. Our results of operations are also affected by non-interest income, such as service charges, loan fees, gains from the sale of newly originated loans, gains or losses on investments and certain other non-interest related items. Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, professional fees, data processing expenses and provision for credit losses.
We are significantly impacted by prevailing economic conditions, including federal monetary and fiscal policies, and federal regulations of financial institutions. Deposit balances are influenced by numerous factors such as competing investments, the level of income and the personal rate of savings within our market areas. Factors influencing lending activities include the demand for housing and the interest rate pricing competition from other lending institutions.
Currently, our business consists of ownership of the Bank, with its main office in Manhattan, Kansas and 28 additional branch offices in central, eastern, southeast and southwest Kansas, one loan production office in Kansas City, Missouri and our ownership of Landmark Risk Management, Inc. On October 1, 2022, the Company completed its acquisition of Freedom Bancshares, Inc., the holding company of Freedom Bank. Freedom Bank was founded in 2006 and operated out of a single location in Overland Park, Kansas.
In October 2025, we declared our 97th consecutive quarterly dividend, and we currently have no plans to change our dividend strategy given our current capital and liquidity position. However, while we have achieved a strong capital base and expect to continue operating profitably, our future dividend practice is dependent upon the performance of the economy and the Company’s overall performance. In addition, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, we will not be permitted to make capital distributions (including for dividends and repurchases of stock) or pay discretionary bonuses to executive officers without restriction if we do not maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer, a standard we exceeded at September 30, 2025. In October 2025, we also declared a 5% stock dividend issuable on December 15, 2025. This is the 25th consecutive year that the Company has issued a 5% stock dividend.
Critical Accounting Policies. Critical accounting policies are those which are both most important to the portrayal of our financial condition and results of operations and require our management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to the allowance for credit losses and the accounting for business combinations, each of which involve significant judgment by our management. There have been no material changes to the critical accounting policies included under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on March 25, 2025.
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Summary of Results. During the third quarter of 2025, we recorded net earnings of $4.9 million, which was an increase of $1.0 million, or 25.4%, from net earnings of $3.9 million in the third quarter of 2024. During the first nine months of 2025, we recorded net earnings of $14.0 million, which was an increase of $4.3 million, or 44.4%, from $9.7 million in the first nine months of 2024. The increase in net earnings during both periods in 2025 was primarily related to an increase in net interest income which was driven by growth in interest income on loans due to increased average loan balances and lower interest expense due to lower short-term interest rates.
The following table summarizes earnings and key performance measures as of, or for the periods presented:
| As of or for the | As of or for the | |||||||||||||||
| (Dollars in thousands, except per share amounts) | three months ended September 30, | nine months ended September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net earnings: | ||||||||||||||||
| Net earnings | $ | 4,930 | $ | 3,931 | $ | 14,035 | $ | 9,721 | ||||||||
| Basic earnings per share (1) | $ | 0.85 | $ | 0.68 | $ | 2.43 | $ | 1.69 | ||||||||
| Diluted earnings per share (1) | $ | 0.85 | $ | 0.68 | $ | 2.41 | $ | 1.69 | ||||||||
| Earnings ratios: | ||||||||||||||||
| Return on average assets (2) | 1.21 | % | 1.00 | % | 1.18 | % | 0.84 | % | ||||||||
| Return on average equity (2) | 13.00 | % | 11.82 | % | 12.98 | % | 10.18 | % | ||||||||
| Equity to total assets | 9.63 | % | 8.93 | % | 9.63 | % | 8.93 | % | ||||||||
| Net interest margin (2) (3) | 3.83 | % | 3.30 | % | 3.81 | % | 3.21 | % | ||||||||
| Dividend payout ratio | 24.71 | % | 29.41 | % | 26.14 | % | 35.50 | % | ||||||||
| (1) | Per share values for the periods ended September 30, 2024 have been adjusted to give effect to the 5% dividend paid during 2024. | |
| (2) | Ratios have been annualized and are not necessarily indicative of the results for the entire year. | |
| (3) | Net interest margin is presented on a fully tax equivalent basis, using a 21% federal tax rate. |
Interest Income. Interest income of $20.7 million for the quarter ended September 30, 2025 represented an increase of $1.7 million, or 9.0%, compared to the same period of 2024. Interest income on loans increased $1.9 million, or 11.6%, to $17.8 million for the quarter ended September 30, 2025, compared to the same period of 2024, due to higher average balances, partially offset by lower yields. Average loan balances increased from $985.7 million in the third quarter of 2024 to $1.1 billion in the third quarter of 2025. The yield on loans decreased from 6.43% in the third quarter of 2024 to 6.37% in the third quarter of 2025. Interest income on investment securities decreased $150,000, or 4.9%, to $2.9 million for the third quarter of 2025, as compared to $3.0 million in the same period of 2024. The decrease in interest income on investment securities was primarily the result of a decrease in the average balances of investment securities, which decreased from $428.3 million in the third quarter of 2024 to $362.7 million in the third quarter of 2025. Partially offsetting the lower average balances was an increase in yields, which increased from 2.99% in the third quarter of 2024 to 3.35% in the third quarter of 2025.
Interest income of $60.2 million for the nine months ended September 30, 2025 represented an increase of $5.2 million, or 9.5%, compared to the same period of 2024. Interest income on loans increased $5.9 million, or 13.0%, to $51.4 million for the nine months ended September 30, 2025, compared to the same period of 2024 due to an increase in our average loan balances, which increased from $962.3 million during the first nine months of 2024 to $1.1 billion during the first nine months of 2025. Also contributing to higher interest income were higher yields on loans, which increased from 6.31% in the nine months ended September 30, 2024 to 6.36% during the nine months ended September 30, 2025. Interest income on investment securities decreased $698,000, or 7.5%, to $8.7 million for the first nine months of 2025, as compared to $9.4 million in the same period of 2024. The decrease in interest income on investment securities was primarily the result of a decrease in the average balances of investment securities which decreased from $440.7 million in the first nine months of 2024 to $368.1 million in the first nine months of 2025. Partially offsetting the lower average balances was an increase in yields, which increased from 2.99% in the first nine months of 2024 to 3.33% in the first nine months of 2025.
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Interest Expense. Interest expense during the quarter ended September 30, 2025 decreased $773,000 to $6.6 million, as compared to the same period of 2024. Interest expense on interest-bearing deposits decreased $420,000 to $5.4 million for the quarter ended September 30, 2025, as compared to the same period of 2024. Our total cost of interest-bearing deposits decreased from 2.48% in the third quarter of 2024 to 2.18% in the third quarter of 2025, as a result of lower rates on our deposits. Partially offsetting the lower rates was an increase in average interest-bearing deposit balances, which increased from $936.2 million in the third quarter of 2024 to $984.3 million in the third quarter of 2025. For the third quarter of 2025, interest expense on borrowings decreased $353,000 to $1.2 million, as compared to the same period of 2024, due to a decrease in our average borrowings and repurchase agreements which decreased $14.0 million from the third quarter of 2024 to the third quarter of 2025. Also contributing to lower interest expense was a decrease in rates, which decreased from 5.72% in the third quarter of 2024 to 5.09% in the same period of 2025.
Interest expense during the nine months ended September 30, 2025 decreased $2.3 million to $19.3 million, as compared to the same period of 2024. Interest expense on interest-bearing deposits decreased $1.2 million to $15.8 million for the nine months ended September 30, 2025 compared to the same period of 2024. Our total cost of interest-bearing deposits decreased from 2.42% in the first nine months of 2024 to 2.16% in the first nine months of 2025 as a result of lower rates on our deposits. Partially offsetting the lower rates was an increase in average interest-bearing deposit balances, which increased from $936.0 million in the first nine months of 2024 to $976.5 million in the first nine months of 2025. For the first nine months of 2025, interest expense on borrowings decreased $1.2 million to $3.5 million, as compared to the same period of 2024 due to a decrease in our average borrowings and repurchase agreements which decreased $15.8 million from the first nine months of 2024 to the first nine months of 2025. Also contributing to lower interest expense was a decrease in rates, which decreased from 5.75% in the first nine months of 2024 to 5.05% in the same period of 2025.
Net Interest Income. Net interest income increased $2.5 million, or 21.5%, to $14.1 million for the third quarter of 2025, as compared to the third quarter of 2024. The increase in net interest income was primarily a result of an increase in interest income on loans and lower interest expense. The accretion of purchase accounting adjustments increased net interest income by $367,000 in the third quarter of 2024 compared to an increase of $256,000 in the third quarter of 2025, and was primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction. Compared to the same period last year, growth in average loans increased interest income while lower rates decreased interest expense. Net interest margin, on a tax-equivalent basis, was 3.30% in the third quarter of 2024, compared to 3.83% in the third quarter of 2025.
Net interest income increased $7.6 million, or 22.7%, to $40.9 million for the nine months ended September 30, 2025, as compared to the same period of 2024. The increase in net interest income was primarily a result of an increase in interest income on loans and lower interest expense. The accretion of purchase accounting adjustments increased net interest income by $850,000 in the first nine months of 2024 compared to an increase of $636,000 in the first nine months of 2025, and was primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction. Compared to the same period last year, growth in average loans increased interest income while lower rates decreased interest expense. Net interest margin, on a tax-equivalent basis, was 3.21% in the first nine months of 2024, compared to 3.81% in the first nine months of 2025.
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Average Assets/Liabilities. The following table reflects the tax-equivalent yields earned on average interest-earning assets and costs of average interest-bearing liabilities (derived by dividing income or expense by the monthly average balance of assets or liabilities, respectively) as well as “net interest margin” (which reflects the effect of the net earnings balance) for the periods shown:
| Three months ended | Three months ended | |||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | |||||||||||||||||||||||
| Average balance | Income/ expense | Average yield/cost | Average balance | Income/ expense | Average yield/cost | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Interest-bearing deposits at banks | $ | 6,748 | $ | 58 | 3.41 | % | $ | 5,705 | $ | 41 | 2.86 | % | ||||||||||||
| Investment securities (1) | 362,717 | 3,061 | 3.35 | % | 428,301 | 3,217 | 2.99 | % | ||||||||||||||||
| Loans receivable, net (2) | 1,108,545 | 17,786 | 6.37 | % | 985,659 | 15,937 | 6.43 | % | ||||||||||||||||
| Total interest-earning assets | 1,478,010 | 20,905 | 5.61 | % | 1,419,665 | 19,195 | 5.38 | % | ||||||||||||||||
| Non-interest-earning assets | 139,419 | 142,817 | ||||||||||||||||||||||
| Total | $ | 1,617,429 | $ | 1,562,482 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Money market and checking | $ | 605,834 | $ | 3,173 | 2.08 | % | $ | 580,933 | $ | 3,499 | 2.40 | % | ||||||||||||
| Savings accounts | 147,010 | 45 | 0.12 | % | 148,835 | 51 | 0.14 | % | ||||||||||||||||
| Certificates of deposit | 231,491 | 2,192 | 3.76 | % | 206,450 | 2,280 | 4.39 | % | ||||||||||||||||
| Total interest-bearing deposits | 984,335 | 5,410 | 2.18 | % | 936,218 | 5,830 | 2.48 | % | ||||||||||||||||
| FHLB advances and other borrowings | 72,871 | 857 | 4.67 | % | 77,958 | 1,100 | 5.61 | % | ||||||||||||||||
| Subordinated debentures | 21,651 | 361 | 6.62 | % | 21,651 | 416 | 7.64 | % | ||||||||||||||||
| Repurchase agreements | 1,833 | 17 | 3.68 | % | 10,774 | 72 | 2.66 | % | ||||||||||||||||
| Total borrowings | 96,355 | 1,235 | 5.09 | % | 110,383 | 1,588 | 5.72 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,080,690 | 6,645 | 2.44 | % | 1,046,601 | 7,418 | 2.82 | % | ||||||||||||||||
| Non-interest-bearing liabilities | 386,305 | 383,610 | ||||||||||||||||||||||
| Stockholders’ equity | 150,434 | 132,271 | ||||||||||||||||||||||
| Total | $ | 1,617,429 | $ | 1,562,482 | ||||||||||||||||||||
| Interest rate spread (3) | 3.17 | % | 2.56 | % | ||||||||||||||||||||
| Net interest margin (4) | $ | 14,260 | 3.83 | % | $ | 11,777 | 3.30 | % | ||||||||||||||||
| Tax-equivalent interest - imputed | 166 | 173 | ||||||||||||||||||||||
| Net interest income | $ | 14,094 | $ | 11,604 | ||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities | 136.8 | % | 135.6 | % | ||||||||||||||||||||
| (1) | Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal tax rate. | |
| (2) | Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 21% federal tax rate. | |
| (3) | Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. | |
| (4) | Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets. |
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| Nine months ended | Nine months ended | |||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | |||||||||||||||||||||||
| Average balance | Income/ expense | Average yield/cost | Average balance | Income/ expense | Average yield/cost | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Interest-bearing deposits at banks | $ | 6,141 | $ | 154 | 3.35 | % | $ | 6,304 | $ | 144 | 3.05 | % | ||||||||||||
| Investment securities (1) | 368,106 | 9,157 | 3.33 | % | 440,744 | 9,874 | 2.99 | % | ||||||||||||||||
| Loans receivable, net (2) | 1,079,883 | 51,374 | 6.36 | % | 962,252 | 45,456 | 6.31 | % | ||||||||||||||||
| Total interest-earning assets | 1,454,130 | 60,685 | 5.58 | % | 1,409,300 | 55,474 | 5.26 | % | ||||||||||||||||
| Non-interest-earning assets | 140,914 | 145,382 | ||||||||||||||||||||||
| Total | $ | 1,595,044 | $ | 1,554,682 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Money market and checking | $ | 615,623 | $ | 9,614 | 2.09 | % | $ | 587,203 | $ | 10,429 | 2.37 | % | ||||||||||||
| Savings accounts | 147,455 | 131 | 0.12 | % | 150,950 | 142 | 0.13 | % | ||||||||||||||||
| Certificates of deposit | 213,385 | 6,045 | 3.79 | % | 197,805 | 6,389 | 4.31 | % | ||||||||||||||||
| Total interest-bearing deposits | 976,463 | 15,790 | 2.16 | % | 935,958 | 16,960 | 2.42 | % | ||||||||||||||||
| FHLB advances and other borrowings | 65,192 | 2,283 | 4.68 | % | 74,496 | 3,149 | 5.65 | % | ||||||||||||||||
| Subordinated debentures | 21,651 | 1,076 | 6.64 | % | 21,651 | 1,246 | 7.69 | % | ||||||||||||||||
| Repurchase agreements | 5,691 | 134 | 3.15 | % | 12,218 | 267 | 2.92 | % | ||||||||||||||||
| Total borrowings | 92,534 | 3,493 | 5.05 | % | 108,365 | 4,662 | 5.75 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,068,997 | 19,283 | 2.41 | % | 1,044,323 | 21,622 | 2.77 | % | ||||||||||||||||
| Non-interest-bearing liabilities | 381,456 | 382,762 | ||||||||||||||||||||||
| Stockholders’ equity | 144,591 | 127,597 | ||||||||||||||||||||||
| Total | $ | 1,595,044 | $ | 1,554,682 | ||||||||||||||||||||
| Interest rate spread (3) | 3.17 | % | 2.49 | % | ||||||||||||||||||||
| Net interest margin (4) | $ | 41,402 | 3.81 | % | $ | 33,852 | 3.21 | % | ||||||||||||||||
| Tax-equivalent interest - imputed | 506 | 0.05 | % | 527 | ||||||||||||||||||||
| Net interest income | $ | 40,896 | $ | 33,325 | ||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities | 136.0 | % | 134.9 | % | ||||||||||||||||||||
| (1) | Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal tax rate. | |
| (2) | Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 21% federal tax rate. | |
| (3) | Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. | |
| (4) | Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets. |
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Rate/Volume Table. The following table describes the extent to which changes in tax-equivalent interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities affected the Company’s interest income and expense for the periods indicated. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by prior volume), (ii) changes attributable to volume (changes in volume multiplied by prior rate), and (iii) net change (the sum of (i) and (ii)). The net changes attributable to the combined effect of volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
| Three months ended September 30, |
Nine months ended September 30, |
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| 2025 vs 2024 | 2025 vs 2024 | |||||||||||||||||||||||
| Increase/(decrease) attributable to | Increase/(decrease) attributable to | |||||||||||||||||||||||
| Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||
| Interest-bearing deposits at banks | $ | 8 | $ | 9 | $ | 17 | $ | (4 | ) | $ | 14 | $ | 10 | |||||||||||
| Investment securities | (730 | ) | 574 | (156 | ) | (2,312 | ) | 1,595 | (717 | ) | ||||||||||||||
| Loans | 1,998 | (150 | ) | 1,848 | 5,557 | 360 | 5,917 | |||||||||||||||||
| Total | 1,276 | 433 | 1,709 | 3,241 | 1,969 | 5,210 | ||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||
| Deposits | 310 | (730 | ) | (420 | ) | 789 | (1,959 | ) | (1,170 | ) | ||||||||||||||
| FHLB advances and other borrowings | (68 | ) | (175 | ) | (243 | ) | (365 | ) | (501 | ) | (866 | ) | ||||||||||||
| Subordinated debentures and other borrowings | - | (221 | ) | (221 | ) | - | (170 | ) | (170 | ) | ||||||||||||||
| Repurchase agreements | (102 | ) | 47 | (55 | ) | (156 | ) | 23 | (133 | ) | ||||||||||||||
| Total | 140 | (1,079 | ) | (939 | ) | 268 | (2,607 | ) | (2,339 | ) | ||||||||||||||
| Net interest margin | $ | 1,136 | $ | 1,512 | $ | 2,648 | $ | 2,973 | $ | 4,576 | $ | 7,549 | ||||||||||||
Provision for Credit Losses. During the third quarter of 2025, we recorded an $850,000 provision for credit losses on loans, compared to a $500,000 provision for credit losses recorded in the same period of 2024. The provision for credit losses on loans recorded in the third quarter of 2025 was primarily due to growth in loans. We recorded net loan charge-offs of $2.3 million during the third quarter of 2025, compared to net loan charge-offs of $9,000 during the third quarter of 2024. The increase in net charge-offs was primarily related to the charge-off of a single commercial credit during the third quarter of 2025.
During the first nine months of 2025, we recorded a $1.9 million provision for credit losses on loans compared to a $800,000 provision for credit losses in the first nine months of 2024. The provision for credit losses during the first nine months of 2024 consisted of a $900,000 provision to the allowance for credit losses on loans and a $100,000 credit provision to the allowance for unfunded loan commitments. We recorded net loan charge-offs of $2.4 million during the first nine months of 2025 compared to net loan recoveries of $36,000 during the first nine months of 2024. The increase in net charge-offs was primarily related to the charge-off of a single commercial credit during the third quarter of 2025.
For further discussion of the allowance for credit losses, refer to the “Asset Quality and Distribution” section below.
Non-interest Income. Total non-interest income was $4.1 million in the third quarter of 2025, a decrease of $185,000, or 4.3%, from the same period in 2024. The decrease in non-interest income during the third quarter of 2025 compared to the same period in the prior year was primarily due to a decrease in other income of $238,000 driven by the gain on sale of a former branch facility in Overland Park, Kansas during the third quarter of 2024, coupled with a decrease in fees and service charges of $220,000 primarily due to lower fees related to deposit accounts. Partially offsetting these decreases was an increase of $244,000 in gain on sales of one-to-four family residential real estate loans due to lower interest rates.
Total non-interest income was $11.1 million in the first nine months of 2025, a decrease of $321,000, or 2.8%, from the same period in 2024. The decrease in non-interest income during the first nine months of 2025 compared to the same period in the prior year was primarily due to a decrease in fees and service charges of $508,000 primarily due to lower fees related to deposit accounts, coupled with a decrease of $282,000 in other income driven by the gain on sale of a former branch facility in Overland Park, Kansas during the prior year. Partially offsetting these decreases was an increase of $386,000 in gain on sales of one-to-four family residential real estate loans due to lower interest rates.
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Non-interest Expense. Non-interest expense totaled $11.3 million for the third quarter of 2025, an increase of $692,000, or 6.6%, over the same quarter of 2024. The increase in non-interest expense in the third quarter of 2025 compared to the same period last year was mainly due an increase of $501,000 in compensation and benefits and $173,000 in professional fees. The increase in compensation and benefits was due to additional staffing and higher benefit costs and the increase in professional fees was driven by higher consulting costs.
Non-interest expense totaled $33.0 million for the first nine months of 2025, an increase of $768,000, or 2.4%, over the same period of 2024. The increase in non-interest expense in the first nine months of 2025 compared to the same period in the prior year was mainly due to an increase of $1.9 million in compensation and benefits due to additional staffing and higher benefit costs. Partially offsetting that increase was an $858,000 decrease in other expense related to a valuation allowance recorded against real estate held for sale in the first nine months of 2024.
Income Tax Expense. During the third quarter of 2025, we recorded income tax expense of $1.1 million, compared to income tax expense of $867,000 during the same period of 2024. Our effective tax rate increased from 18.1% in the third quarter of 2024 to 18.7% in the third quarter of 2025. The increase in the effective tax rate was due to higher earnings before taxes while tax exempt income was consistent.
During the first nine months of 2025, we recorded income tax expense of $3.1 million, compared to income tax expense of $2.0 million during the same period of 2024. Our effective tax rate increased from 16.9% in the first nine months of 2024 to 18.0% in the first nine months of 2025. The increase in the effective tax rate was due to higher earnings before taxes while tax exempt income was consistent.
Financial Condition. Economic conditions in the United States remained sluggish during the first nine months of 2025 as elevated inflation levels and high interest rates continued to impact the economy. Although interest rates decreased slightly in the second half of 2024, sustained high interest rates have impacted financial institutions generally, resulting in continued higher costs of funding and lower fair values for investment securities. We maintain strong capital and liquidity, and a stable, conservative deposit portfolio with a significant majority of our deposits being retail-based and insured by the Federal Deposit Insurance Corporation (“FDIC”). We spend significant time each month monitoring our interest rate and concentration risks through our asset/liability management and lending strategies that involve a relationship-based banking model offering stability and consistency. The State of Kansas and the geographic markets in which the Company operates have also been impacted by economic headwinds. Supply chain constraints, labor shortages and geopolitical events have contributed to the rising inflation levels which are impacting all areas of the economy both nationally and locally. The Company’s allowance for credit losses continues to factor in estimates of the economic impact of these conditions and other qualitative factors on our loan portfolio. However, our loan portfolio is diversified across various types of loans and collateral throughout the markets in which we operate. Aside from a few problem loans that management is working to resolve, our asset quality has remained strong over the past few years. While further increases in problem assets may arise, management believes its efforts to run a high-quality financial institution with a sound asset base will continue to create a strong foundation for continued growth and profitability in the future.
Asset Quality and Distribution. Our primary investing activities are the origination of one-to-four family residential real estate, construction and land, CRE, commercial, agriculture, municipal and consumer loans and the purchase of investment securities. Total assets were $1.6 billion at both December 31, 2024 and September 30, 2025.
The allowance for credit losses is established through a provision for credit losses based on our economic projections. At September 30, 2025, our allowance for credit losses on loans totaled $12.3 million, or 1.10% of gross loans outstanding, compared to $12.8 million, or 1.22% of gross loans outstanding, at December 31, 2024. The decrease in our allowance for credit losses on loans as a percentage of gross loans outstanding was primarily due to lower reserves against individually evaluated loans on non-accrual due to a decrease in loans on non-accrual as of September 30, 2025. The balance of our allowance for credit losses reflects current and projected economic conditions and other qualitative factors.
As of September 30, 2025 and December 31, 2024, approximately $28.0 million and $26.1 million, respectively, of loans were considered classified and assigned a risk rating of special mention, substandard or doubtful. These ratings indicate that these loans were identified as potential problem loans having more than normal risk and raised doubts as to the ability of the borrowers to comply with present loan repayment terms. Even though borrowers were experiencing moderate cash flow problems as well as some deterioration in collateral value, management believed the allowance for credit losses was sufficient to cover expected losses related to such loans at September 30, 2025 and December 31, 2024, respectively.
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Loans past due 30-89 days and still accruing interest totaled $4.9 million, or 0.43% of gross loans, at September 30, 2025, compared to $6.2 million, or 0.59% of gross loans, at December 31, 2024. The decrease in such past due loans was primarily related to loans in our CRE and agriculture portfolios. At September 30, 2025, $10.0 million in loans were on non-accrual status, or 0.90% of gross loans, compared to $13.1 million, or 1.25% of gross loans, at December 31, 2024. Non-accrual loans consist of loans 90 or more days past due and certain individually evaluated loans. There were no loans 90 days delinquent and accruing interest at either September 30, 2025 or December 31, 2024.
As part of our credit risk management strategy, we continue to manage the loan portfolio to identify problem loans and have placed additional emphasis on CRE and commercial loan relationships. We are working to resolve the remaining problem credits or move the non-performing credits out of the loan portfolio. At December 31, 2024, we had $167,000 of real estate owned, which consisted of a single parcel of undeveloped land. This land was sold during the third quarter of 2025.
Liability Distribution. Our primary ongoing sources of funds are deposits, FHLB borrowings, proceeds from principal and interest payments on loans and investment securities and proceeds from the sale of mortgage loans and investment securities. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates and economic conditions. Deposit balances as of September 30, 2025 were consistent with balances as of December 31, 2025, at $1.3 billion.
Non-interest-bearing deposits at September 30, 2025 were $366.0 million, or 27.6% of deposits, compared to $351.6 million, or 26.5% of deposits, at December 31, 2024. Money market and checking deposit accounts were 43.7% of our deposit portfolio and totaled $579.4 million at September 30, 2025, compared to 47.9% of our deposit portfolio and totaled $637.0 million at December 31, 2024. The decrease in money market and checking deposit accounts included a decline of $9.4 million in brokered deposits from $39.5 million at December 31, 2024 to a balance of $30.1 million at September 30, 2025. Savings accounts increased to $146.3 million, or 11.0% of deposits, at September 30, 2025, from $145.5 million, or 11.0% of deposits, at December 31, 2024. Certificates of deposit totaled $233.8 million, or 17.6% of deposits, at September 30, 2025, compared to $194.7 million, or 14.7% of deposits, at December 31, 2024. The increase in certificates of deposit was primarily related to higher brokered certificates of deposits, which increased from $41.0 million at December 31, 2024 to $66.7 million at September 30, 2025.
Overdraft deposits consist of non-interest-bearing deposits, money market and checking deposit accounts with negative balances. These overdraft balances totaled $439,000 as of September 30, 2025 and $316,000 as of December 31, 2024 and were presented as loans on the balance sheet.
Total deposits include estimated uninsured deposits of $429.8 million and $444.1 million as of September 30, 2025 and December 31, 2024, respectively. This represented approximately 32.4% of our total deposits at September 30, 2025 and 33.4% of our deposits at December 31, 2024. Approximately 91.9% of the Company’s total deposits were considered core deposits at September 30, 2025. These deposit balances are from retail, commercial and public fund customers located in the markets where the Company has bank branch locations.
Certificates of deposit at September 30, 2025 scheduled to mature in one year or less totaled $224.3 million. Historically, maturing deposits have generally remained with the Bank, and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity in some type of deposit account.
Total borrowings increased $25.0 million to $113.6 million at September 30, 2025, from $88.5 million at December 31, 2024. The increase in total borrowings was primarily due to an increase in FHLB line of credit borrowings.
Cash Flows. During the nine months ended September 30, 2025, our cash and cash equivalents increased by $3.7 million. Our operating activities provided net cash of $18.8 million during the first nine months of 2025 primarily as a result of net earnings. Our investing activities used net cash of $33.2 million during the first nine months of 2025, primarily due to loan growth which was partially offset by maturities of investment securities. Financing activities provided net cash of $18.1 million during the first nine months of 2025, primarily as a result of an increase in borrowings which was partially offset by a decrease in deposit balances.
Liquidity. Our most liquid assets are cash and cash equivalents and investment securities available-for-sale. The levels of these assets are dependent on the operating, financing, lending and investing activities during any given year. These liquid assets totaled $377.2 million at September 30, 2025 and $396.9 million at December 31, 2024. During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we generally increase our liquid assets by investing in short-term, high-grade investments or holding higher balances of cash and cash equivalents.
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Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments. Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally deposit withdrawals and loan advances. In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of FHLB advances, a line of credit with the FHLB, other borrowings or through pledging or sales of investment securities. While the sale of available-for-sale investment securities would result in losses due to the current interest environment, pledging these securities as collateral would not result in a loss. At September 30, 2025, we had $87.3 million borrowed on our line of credit with the FHLB. At September 30, 2025, we had collateral pledged to the FHLB that would allow us to borrow $323.5 million, subject to FHLB credit requirements and policies. At September 30, 2025, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $44.9 million. We also have various other federal funds agreements, both secured and unsecured, with correspondent banks totaling approximately $30.0 million in available credit under which we had no outstanding borrowings at September 30, 2025. At September 30, 2025, we had subordinated debentures totaling $21.7 million and $1.4 million of repurchase agreements. At September 30, 2025, the Company had no borrowings against a $5.0 million line of credit from an unrelated financial institution maturing on November 1, 2026, with an interest rate that adjusts daily based on the prime rate less 0.50%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at September 30, 2025. The Company also has outstanding borrowings of $3.2 million from the same unrelated financial institution at a fixed rate of 6.15%. This borrowing matures on September 1, 2027 and requires quarterly principal and interest payments. The original $10.0 million of borrowings was used to fund part of the acquisition of Freedom Bancshares, Inc.
Off Balance Sheet Arrangements. As a provider of financial services, we routinely issue financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by us generally to guarantee the payment or performance obligation of a customer to a third party. While these standby letters of credit represent a potential outlay by us, a significant amount of the commitments may expire without being drawn upon. We have recourse against the customer for any amount the customer is required to pay to a third party under a standby letter of credit. The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by us. Most of the standby letters of credit are secured, and in the event of nonperformance by the customers, we have the right to the underlying collateral, which could include CRE, physical plant and property, inventory, receivables, cash and marketable securities. The contract amount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $2.2 million at September 30, 2025.
At September 30, 2025, we had outstanding loan commitments, excluding standby letters of credit, of $196.4 million. We anticipate that sufficient funds will be available to meet current loan commitments. These commitments consist of unfunded lines of credit and commitments to finance real estate loans.
Capital. The Company and the Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s business. Banking organizations are required to maintain minimum capital levels as follows: a ratio of common equity Tier 1 capital equal to 4.5% of risk-weighted assets, a ratio of Tier 1 capital equal to 6.0% of risk-weighted assets, a ratio of total capital equal to 8.0% of risk-weighted assets, and a leverage ratio of Tier 1 capital to total quarterly average assets equal to 4.0% in all circumstances. Regulations also include a capital conservation buffer of 2.5% that is added to these minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including the amount of dividends that it may pay without prior regulatory approval, stock repurchases and certain discretionary bonus payments to executive officers. Management believes that the Company and the Bank met all capital adequacy requirements to which they were subject as of September 30, 2025 and December 31, 2024, as discussed in more detail in Note 11 of the Consolidated Financial Statements.
Dividends. During the quarter ended September 30, 2025, we paid a quarterly cash dividend of $0.21 per share to our stockholders.
The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations. As discussed above, banking organizations must maintain a capital conservation buffer of 2.5% that is added to certain regulatory minimum requirements for capital adequacy purposes in order to pay dividends and make other capital distributions. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of September 30, 2025. The National Bank Act also imposes limitations on the amount of dividends that a national bank may pay without prior regulatory approval. Generally, the amount is limited to the bank’s current year net earnings plus the adjusted retained earnings for the three preceding years. As of September 30, 2025, approximately $18.8 million was available to be paid as dividends to the Company by the Bank without prior regulatory approval.
Additionally, our ability to pay dividends is limited by the subordinated debentures that are held by three business trusts that we control. Interest payments on the debentures must be paid before we pay dividends on our capital stock, including our common stock. We have the right to defer interest payments on the debentures for up to 20 consecutive quarters. However, if we elect to defer interest payments, all deferred interest must be paid before we may pay dividends on our capital stock.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a financial institution, our primary component of market risk is interest rate volatility. Interest rate risk is defined as the exposure of net interest income and fair value of financial instruments (interest-earning assets, deposits and borrowings) to movements in interest rates. Our results of operations depend to a large degree on our net interest income and ability to manage interest rate risk. Major sources of interest rate risk include timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, changes in customer behavior and changes in relationships between rate indices (basis risk). Our management measures these risks and their impacts in several ways, including through the use of income simulations and valuation analyses. Multiple interest rate scenarios are used in this analysis which include changes in interest rates, spread narrowing and widening, yield curve twists and changes in assumptions about customer behavior in various interest rate scenarios. A mismatch between maturities, interest rate sensitivities and prepayment characteristics of assets and liabilities results in interest-rate risk. Like most financial institutions, we have material interest-rate risk exposure to changes in both short-term and long-term interest rates, as well as variable interest rate indices. Interest rates in the financial markets affect our decisions relating to pricing our assets and liabilities, which impact net interest income, a significant cash flow source for us. As a result, a substantial portion of our risk management activities relates to managing interest rate risk.
Our Asset/Liability Management Committee (“ALCO”) monitors the interest rate sensitivity of our balance sheet using earnings simulation models and interest sensitivity analyses. We have set policy limits of interest rate risk to be assumed in the normal course of business and monitor such limits through our simulation process. We endeavor to manage our interest rate sensitivity position within our established guidelines, and assess our position quarterly. The ALCO formulates strategies based on perceived levels of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO considers the impact on earnings and capital of the current outlook for interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest earning assets and interest-bearing liabilities and an interest rate shock simulation model.
For additional information regarding the Company’s market risk, see the information set forth under Part II, Item 7A “Quantitative and Qualitative Disclosures About Market and Interest Rate Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Forward-Looking
Statements
This document (including information incorporated by reference) contains, and future oral and written statements by us and our management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to our financial condition, results of operations, plans, objectives, future performance and business. 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, including the negatives of such expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement in light of new information or future events.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on operations and future prospects of us and our subsidiaries include, but are not limited to, the following:
| ● | The strength of the local, state, national and international economies, and financial markets, including the effects of inflationary pressures and future monetary policies of the Federal Reserve in response thereto; |
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| ● | Effects on the U.S. economy resulting from the threat or implementation of new, or changes to, existing policies, regulations, regulatory and other governmental agencies and executive orders, including tariffs, immigration policy, regulatory and other governmental agencies, DEI and ESG initiatives, consumer protection, foreign policy and tax regulations; | |
| ● | Changes in interest rates and prepayment rates of our assets; | |
| ● | 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; | |
| ● | Timely development and acceptance of new products and services; | |
| ● | Rapid and expensive technological changes implemented by us and other parties in the financial services industry, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequence to us and our customers, including the development and implementation of tools incorporating artificial intelligence; | |
| ● | Our risk management framework; | |
| ● | Interruptions in information technology and telecommunications systems and third-party services; | |
| ● | The economic effects of severe weather, natural disasters, widespread disease or pandemics, or other external events; | |
| ● | The loss of key executives or employees; | |
| ● | Changes in consumer spending; | |
| ● | Integration of acquired businesses; | |
| ● | The commencement, cost and outcome of litigation and other legal proceedings and regulatory actions against us or to which we may become subject; | |
| ● | Changes in accounting policies and practices, such as the implementation of the current expected credit losses accounting standard; | |
| ● | The economic impact of past and any future terrorist attacks, acts of war, including ongoing conflicts in the Middle East and the Russian invasion of Ukraine, or threats thereof, and the response of the United States to any such threats and attacks; | |
| ● | The ability to manage credit risk, forecast loan losses and maintain an adequate allowance for loan losses; | |
| ● | Fluctuations in the value of securities held in our securities portfolio; | |
| ● | Concentrations within our loan portfolio and large loans to certain borrowers (including CRE loans; | |
| ● | The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; | |
| ● | The level of non-performing assets on our balance sheets; | |
| ● | The ability to raise additional capital; | |
| ● | The occurrence of fraudulent activity, breaches or failures of our or our third party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud; and | |
| ● | Declines in real estate values: | |
| ● | The effects of fraud on the part of our employees, customers, vendors or counterparties; | |
| ● | Our success at managing and responding to the risks involved in the foregoing items. |
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 us and our business, including other factors that could materially affect our financial results, is included in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2024 filed on March 25, 2025.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2025. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2025 to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2025 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its subsidiaries is a party or which any of their property is subject, other than ordinary routine litigation incidental to their respective businesses.
ITEM 1A. RISK FACTORS
There have been no material changes in the risk factors set forth under Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information about purchases by the Company during the quarter ended September 30, 2025 of the Company’s equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:
| Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans | Maximum number of shares that may yet be purchased under the plans | ||||||||||||
| July 1-31, 2025 | - | $ | - | - | 157,456 | |||||||||||
| August 1-31, 2025 | - | - | - | 157,456 | ||||||||||||
| September 1-30, 2025 | - | - | - | 157,456 | ||||||||||||
| Total | - | $ | - | - | 157,456 | |||||||||||
| (1) | In March 2020, our Board of Directors approved a stock repurchase plan, permitting us to repurchase up to 225,890 shares (“March 2020 Repurchase Program”). As of September 30, 2025, there were 157,456 shares remaining available for repurchase under the March 2020 Repurchase Program. The March 2020 Repurchase Program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will do so or that the Company will repurchase shares at favorable prices. Unless terminated earlier by resolution of the Board of Directors, the March 2020 Repurchase Program will expire when we have repurchased all shares authorized for repurchase thereunder. The March 2020 Repurchase Program may be suspended or terminated at any time and, even if fully implemented, the March 2020 Repurchase Program may not enhance long-term stockholder value. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the quarter ended September 30, 2025, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule10b5-1(c) or any non-Rule 10b5-1 trading arrangement.
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ITEM 6. EXHIBITS
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LANDMARK BANCORP, INC. | |
| Date: November 13, 2025 | /s/ Abigail M. Wendel |
| Abigail M. Wendel | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 13, 2025 | /s/ Mark A. Herpich |
| Mark A. Herpich | |
| Vice President, Secretary, Treasurer and Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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Exhibit 10.1
CHANGE IN TERMS AGREEMENT
| Principal | Loan Date | Maturity | Loan No | Call/Coll | Account | Officer | Initials |
| $5,000,000.00 | 11-01-2025 | 11-01-2026 | xxxxxxx | *** |
| Borrower: | Landmark Bancorp, Inc. | Lender: | First National Bank of Omaha |
| 701 Poyntz Ave | Branch #001 | ||
| Manhattan KS 66502-6055 | 1620 Dodge St | ||
| Omaha, NE 68197 |
| Principal Amount: $5,000,000.00 | Date of Agreement: November 1, 2025 |
DESCRIPTION OF EXISTING INDEBTEDNESS. This Change in Terms Agreement is an amendment and/or modification of the terms and conditions of indebtedness of Borrower as set forth in a Promissory Note dated November 1, 2016, in the amount of $7,500,000.00, and most recently documented in a Change in Terms Agreement dated November 1, 2024, and shall include all renewals, modifications and extensions of such documents.
DESCRIPTION OF CHANGE IN TERMS. As fully set forth herein below, this Change in Terms Agreement generally modifies the terms applicable to the existing indebtedness by extending the maturity date. Any sums due and owing hereunder shall take into account any principal and interest payments made by the Borrower in accordance with regular established billing cycles.
PROMISE TO PAY. Landmark Bancorp, Inc. (“Borrower”) promises to pay to First National Bank of Omaha (“Lender”), or order, in lawful money of the United States of America, the principal amount of Five Million & 00/100 Dollars ($5,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on November 1, 2026. In addition, Borrower will pay regular quarterly payments of all accrued unpaid interest due as of each payment date, beginning December 1, 2025, with all subsequent interest payments to be due on the same day of each quarter after that. Unless otherwise agreed or required by applicable law, payments will be applied to interest, principal, and expenses owing under the Note in an order determined by Lender. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this loan is subject to change from time to time based on changes in an independent index which is the U.S. Prime Rate as published by the Wall Street Journal and currently is determined by the base rate on corporate loans posted by at least seventy percent (70%) of the nations ten (10) largest banks (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each day during the term of the loan. If at any time the Index is less than zero, then it shall be deemed to be zero for the purpose of calculating the interest rate on the Note. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 7.000% per annum. Interest on the unpaid principal balance of this loan will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate of 0.500 percentage points under the Index (the “Margin”), adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 6.500% per annum based on a year of 360 days. If Lender determines, in its sole discretion, that the Index has become unavailable or unreliable, either temporarily, indefinitely, or permanently, during the term of this loan, Lender may amend this loan by designating a substantially similar substitute index. Lender may also amend and adjust the Margin to accompany the substitute index. The change to the Margin may be a positive or negative value, or zero. In making these amendments, Lender may take into consideration any then-prevailing market convention for selecting a substitute index and margin for the specific Index that is unavailable or unreliable. Such an amendment to the terms of this loan will become effective and bind Borrower 10 business days after Lender gives written notice to Borrower without any action or consent of the Borrower. NOTICE: Under no circumstances will the interest rate on this loan be less than 3.000% per annum or more than the maximum rate allowed by applicable law.
INTEREST CALCULATION METHOD. Interest on this loan is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this loan is computed using this method.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: First National Bank of Omaha, Branch #001, 1620 Dodge St, Omaha, NE 68197.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment or $25.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this loan shall be increased by adding an additional 6.000 percentage point margin (“Default Rate Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:
Payment Default. Borrower fails to make any payment when due under the Indebtedness.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or ability to perform Borrower’s obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf, under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Indebtedness. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.
Insecurity. Lender in good faith believes itself insecure.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness evidenced by this Note.
LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Agreement and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
GOVERNING LAW. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Nebraska without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Nebraska.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Douglas County, State of Nebraska.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $30.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Agreement is secured by a Commercial Pledge Agreement dated November 1, 2021, and any and all other security agreements or documents and any and all other collateral agreements or documents associated with this Loan or Note whether now existing or hereafter arising.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender’s office shown above. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Agreement at any time may be evidenced by endorsements on this Agreement or by Lender’s internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Agreement if; (A) Borrower or any guarantor is in default under the terms of this Agreement or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Agreement; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this Agreement or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Agreement for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.
U.S.A. PATRIOT ACT. To help the government fight the funding of terrorism and money laundering activities, the USA PATRIOT Act requires all banks to obtain and verify the identity of each person or business that opens an account. When Borrower opens an account Lender will ask Borrower for information that will allow Lender to properly identify Borrower and Lender will verify that information. If Lender cannot properly verify identity within 30 calendar days, Lender reserves the right to deem all of the balance and accrued interest due and payable immediately.
ELECTRONIC COPIES. Lender may copy, electronically or otherwise, and thereafter destroy, the originals of this Agreement and/or Related Documents in the regular course of Lender’s business. All such copies produced from an electronic form or by any other reliable means (i.e., photographic image or facsimile) shall in all respects be considered equivalent to an original, and Borrower hereby waives any rights or objections to the use of such copies.
CHANGE IN MEMBERSHIP. If Borrower or Guarantor is a limited liability company, any change in ownership of twenty-five percent (25%) or more of the membership interest of Borrower or Guarantor is an Event of Default.
CROSS DEFAULT. An Event of Default, beyond the applicable cure period, if any, or an Event of Default under any other Loan or any Related Document will constitute an Event of Default under this Agreement and a default and an Event of Default under any other agreement by Borrower or any affiliate or subsidiary of Borrower with or in favor of Lender and under any evidence of any Loan or Indebtedness held by Lender, whether or not such is specified therein. Borrower acknowledges that some Loan Documents will be preprinted forms and that it is the intent of Borrower and Lender that all Loans and Guaranties by Borrower or any affiliate or subsidiary of Borrower with or in favor of Lender be cross-defaulted with each other.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower, Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness.
MISCELLANEOUS PROVISIONS. If any part of this Agreement cannot be enforced, this fact will not affect the rest of the Agreement. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party who signs this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Agreement are joint and several.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT.
| BORROWER: | |
| LANDMARK BANCORP, INC | |
| /s/ Mark A Herpich | |
| Mark A Herpich, Chief Fin. Officer/Secretary of | |
| Landmark Bancorp, Inc. | |
| LENDER: | |
| FIRST NATIONAL BANK OF OMAHA | |
| /s/ Tyler Sims | |
| Tyler Sims, Director |
CHANGE IN TERMS AGREEMENT
| Principal | Loan Date | Maturity | Loan No | Call/Coll | Account | Officer | Initials |
| $5,000,000.00 | 11-01-2025 | 11-01-2026 | xxxxxxx | *** |
| Borrower: | Landmark Bancorp, Inc. | Lender: | First National Bank of Omaha |
| 701 Poyntz Ave | Branch #001 | ||
| Manhattan KS 66502-6055 | 1620 Dodge St | ||
| Omaha, NE 68197 |
| Principal Amount: $5,000,000.00 | Date of Agreement: November 1, 2025 |
DESCRIPTION OF EXISTING INDEBTEDNESS. This Change in Terms Agreement is an amendment and/or modification of the terms and conditions of indebtedness of Borrower as set forth in a Promissory Note dated November 1, 2021, and shall include all renewals, modifications and extensions of such documents.
DESCRIPTION OF CHANGE IN TERMS. As fully set forth herein below, this Change in Terms Agreement generally modifies the terms applicable to the Business Loan Agreement as follows:
For Landmark National Bank the following:
Tier 1 Risk Based Capital Ratio. Maintain a Tier 1 Risk-Based Capital Ratio (expressed as a percentage) shall not be less than ten (10) percent and shall be measured on a quarterly basis. “Tier 1 Risk Based Capital Ratio” means Tier 1 Risk Based Capital Ratio as currently defined in the Landmark National Bank’s most recent Call report.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.
U.S.A. PATRIOT ACT. To help the government fight the funding of terrorism and money laundering activities, the USA PATRIOT Act requires all banks to obtain and verify the identity of each person or business that opens an account. When Borrower opens an account Lender will ask Borrower for information that will allow Lender to properly identify Borrower and Lender will verify that information. If Lender cannot properly verify identity within 30 calendar days, Lender reserves the right to deem all of the balance and accrued interest due and payable immediately.
ELECTRONIC COPIES. Lender may copy, electronically or otherwise, and thereafter destroy, the originals of this Agreement and/or Related Documents in the regular course of Lender’s business. All such copies produced from an electronic form or by any other reliable means (i.e., photographic image or facsimile) shall in all respects be considered equivalent to an original, and Borrower hereby waives any rights or objections to the use of such copies.
CHANGE IN MEMBERSHIP. If Borrower or Guarantor is a limited liability company, any change in ownership of twenty-five percent (25%) or more of the membership interest of Borrower or Guarantor is an Event of Default.
CROSS DEFAULT. An Event of Default, beyond the applicable cure period, if any, or an Event of Default under any other Loan or any Related Document will constitute an Event of Default under this Agreement and a default and an Event of Default under any other agreement by Borrower or any affiliate or subsidiary of Borrower with or in favor of Lender and under any evidence of any Loan or Indebtedness held by Lender, whether or not such is specified therein. Borrower acknowledges that some Loan Documents will be preprinted forms and that it is the intent of Borrower and Lender that all Loans and Guaranties by Borrower or any affiliate or subsidiary of Borrower with or in favor of Lender be cross-defaulted with each other.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT, BORROWER AGREES TO THE TERMS OF THE AGREEMENT,
| BORROWER: | |
| LANDMARK BANCORP, INC | |
| /s/ Mark A Herpich | |
| Mark A Herpich, Chief Fin. Officer/Secretary of | |
| Landmark Bancorp, Inc. | |
| LENDER: | |
| FIRST NATIONAL BANK OF OMAHA | |
| /s/ Tyler Sims | |
| Tyler Sims, Director |
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a)
I, Abigail M. Wendel, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 13, 2025 | /s/ Abigail M. Wendel |
| Abigail M. Wendel | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a)
I, Mark A. Herpich, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 13, 2025 | /s/ Mark A. Herpich |
| Mark A. Herpich | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Landmark Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Abigail M. Wendel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Abigail M. Wendel | |
| Abigail M. Wendel | |
| Chief Executive Officer | |
| November 13, 2025 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Landmark Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark A. Herpich, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Mark A. Herpich | |
| Mark A. Herpich | |
| Chief Financial Officer | |
| November 13, 2025 |