2024 ANNUAL REPORT
1
Landmark National Bank
Landmark National Bank
Osage City
Osage City
102 S. Sixth
102 S. Sixth
Contents
Contents
Letter to Stockholders
Letter to Stockholders...........................................................................................................................................................................
...........................................................................................................................................................................2-3
2-3
Financial Highlights
Financial Highlights..............................................................................................................................................................................
..............................................................................................................................................................................4-5
4-5
Executive Officers
Executive Officers......................................................................................................................................................................................
......................................................................................................................................................................................6 6
Board of Directors
Board of Directors.....................................................................................................................................................................................
.....................................................................................................................................................................................6
Corporate Information
Corporate Information............................................................................................................................................................................
............................................................................................................................................................................7 7
Map and Locations
Map and Locations....................................................................................................................................................................................
....................................................................................................................................................................................8
Annual Report on Form 10-K
Annual Report on Form 10-K..............................................................................................................................................................
.............................................................................................................................................................. 9 9
www.banklandmark.com
2
Dear Fellow Shareholders,
We at Landmark Bancorp, Inc. (“Landmark”) have embarked upon an evolution
this year—one designed to embrace our role as a community bank and build
upon our past successes in order to reach new levels of associate engagement,
customer service, and shareholder return. During my first year as President and
CEO of Landmark and Landmark National Bank, it has been my pleasure to
build relationships with all of our constituencies—associates, customers, share-
holders, communities and regulators—and solidify our purpose of being cham-
pions and catalysts in our communities. I am pleased to write to you, presenting
my first annual letter to shareholders sharing our achievements, challenges, and
vision for the future.
2024 marked a significant transition for us as I stepped into the role of President
and CEO on March 29, following the tenure of Michael Scheopner. Under his
leadership, our bank grew steadily, establishing a strong foundation of trust, ser-
vice, and friendship. I want to personally thank Michael for his dedication and
commitment to our bank and communities and wish him all the best in his well-earned retirement. In partnership
with our board of directors and associates, it is a privilege to build upon Michael’s legacy, and we are committed
to the high level of service our customers have come to expect from Landmark National Bank.
Financial Performance and Growth
Landmark’s financial results in 2024 were solid. Net income for the twelve months ending December 31, 2024,
totaled $13.0 million, an increase of 6.3% over 2023, and book value increased 6.9%. The increase in net in-
come was achieved through net interest margin expansion and modest improvement in non-interest income,
while keeping non-interest expense growth below 5.0%. Landmark’s net interest margin was 3.17% for 2023
and 3.28% for 2024, with momentum building as it reached 3.51% for the last quarter of 2024. Non-interest
income for 2024 increased by $1.5 million, or 11.4%, from 2023. We are focused on continuing to increase
non-interest income. For example, we have continued to develop the strong treasury management program we
acquired with the Freedom Bank transaction in late 2022, and we expect to continue to enhance our offerings
and increase this business in the future.
Our bankers have been working diligently to win new customer relationships and strengthen those we have
served over time. With loan balances increasing by 10.9%, Landmark National Bank surpassed $1.0 billion in
loans in 2024. We are very proud of reaching this milestone, particularly because this was achieved without
sacrificing the overall quality of our loan portfolio. Despite a single, large credit placed on nonaccrual in the
third quarter, credit quality remains strong, underscored by our disciplined approach to credit underwriting and
prudent banking practices. Deposit balances reached $1.3 billion, growing by a modest 1.0%, a respectable
number in this environment. Overall, we maintain levels of liquidity that are adequate to support future growth.
Balance sheet management was one of our top priorities in 2024 with an emphasis on net interest margin ex-
pansion and diversification of assets and liabilities, both of which were achieved. We benefited modestly from
the Federal Reserve’s limited short-term rate reductions in 2024; however, we are not dependent on rates to
drive our financial performance. Our goal is to structure our balance sheet such that we can thrive in any type
of interest rate environment.
While we celebrate our successes, we also recognize the unique challenges that come with being a community
bank. Regulatory requirements, coupled with the general regulatory uncertainty with the new administration,
rising competition from larger financial institutions and fintech companies, threats of fraud and cybersecurity
risks, and the economic landscape all pose ongoing hurdles. Despite these challenges, Landmark’s dedication
to personalized service, meaningful customer connections, deep community relationships, and local economic
growth continues to differentiate us in the marketplace. We will navigate these headwinds with the same resil-
ience and adaptability that have defined our bank for years. This allows us to deliver for our customers and, in
turn, our shareholders.
PRESIDENT’S LETTER TO OUR STOCKHOLDERS, CUSTOMERS AND FRIENDS
Abigail M. Wendel
President/ Chief Executive Officer
3
Landmark maintains a strong branch bank network across Kansas, with 29 locations in 23 communities. We also
now have a loan production office in Kansas City, MO, which opened in February 2024, and we continue to find
important ways to add value to this and the surrounding communities. We closed two locations in 2024, the first
due to a planned consolidation within Overland Park as a result of the Freedom Bank acquisition, and the second in
Kincaid, KS. However, we enjoy the balance and benefits of a branch distribution network in both rural and urban
locations. We are proud of our retail banking focus across all of our markets in providing competitive lower-cost,
non-public-fund checking, money market, and savings accounts with strong customer service, and accessible lo-
cations. We continue to invest in a platform of products and services to meet the financial needs of our client base,
focusing on digital services and solutions that are simple, intuitive, integrated, and relevant. We have implemented
video stations at some of our branches, allowing customers to have meaningful interactions with product experts
who may be located in other offices. We also plan to launch a full study of our retail branch network this year to
ensure the relevance and effectiveness of each location, with emphasis on refining our service delivery models.
At the heart of our bank’s mission is a deep-rooted commitment to the communities we serve. In the past year,
we have expanded our lending programs in all markets, including small businesses, provided mortgage solutions
to local families, and invested in community development initiatives. Our team continues to build lasting rela-
tionships with our customers, prioritizing personalized service and innovative banking solutions.
Becoming an Employer of Choice
Landmark is fortunate to employ a very talented group of banking professionals, both on the frontline and in ad-
ministrative functions. The marketplace for such talented individuals is highly competitive, so one area of focus
in 2025 is to enhance the “employee experience,” shorthand for making material improvements on our perfor-
mance management programs while adjusting our compensation, benefits, and leave policies as appropriate to
meet our associates’ needs and expectations. The associates at Landmark often hear me say, “feedback is a gift,”
and with that in mind, we are acting upon numerous points of feedback from associates that tell us we have an
opportunity to adapt our programs to the modern employment landscape and make continued investments ensur-
ing we are able to attract and retain the best talent possible. Banking is a competitive industry, and as we grow,
both organically and strategically, we aim to do so in a way that best meet the needs of our customers and the
communities we serve. To do that well, our fundamental offerings for associates must lead the market. Becom-
ing an “employer of choice” will help us attain our service goals and position Landmark as the “bank of choice”.
Looking Ahead
As we look forward, we face an uncertain environment as the U.S. navigates its own economic and geopoliti-
cal landscape. As I mentioned earlier, at Landmark, we strive to maintain a stable operation irrespective of the
economic environment in which we find ourselves. We remain focused on enhancing the associate and customer
experiences to achieve sustainable growth and, therefore, deliver shareholder value. In the near term, our strate-
gic priorities include expanding our lending capacity, enhancing banking capabilities, and deepening our com-
munity impact. As Jim Collins writes in Good to Great, disciplined people engage in disciplined thought, take
disciplined action, and, combined with a little luck, drive superior results to create a lasting, enduring company.
At Landmark, this is what we are all about—maintaining a disciplined approach to our business and supporting
our dedicated team to drive results for our associates, customers, and shareholders alike.
Gratitude and Appreciation
In closing, I would like to extend my sincere gratitude to our associates, customers, and you—our valued share-
holders—for your trust and support during this period of change. Your belief in our vision enables us to thrive
and fulfill our mission. I am incredibly excited and enthusiastic about the future of Landmark and look forward
to continued success for years to come. Thank you for your partnership and confidence in our bank.
Sincerely,
Abigail M. Wendel
President & CEO
President’s letter continued
4
Financial Highlights
$0.00
$1.00
$2.00
$3.00
2022
2023
2024
$1.71
$2.13
$2.26
Earnings per Share
$0.00
$0.25
$0.50
$0.75
$1.00
2022
2023
2024
$0.73
$0.76
$0.80
Dividends per Share
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
2022
2023
2024
$9.9
$12.2
$13.0
Net Earnings
(Dollars in Millions)
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
2022
2023
2024
$19.39
$22.07
$23.59
Book Value per Share
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
2022
2023
2024
0.73%
0.80%
0.83%
Return on Average Assets
0.00%
5.00%
10.00%
15.00%
2022
2023
2024
8.25%
10.70%
10.01%
Return on Average Equity
5
Financial Highlights
$0.0
$250.0
$500.0
$750.0
$1,000.0
$1,250.0
$1,500.0
$1,750.0
2022
2023
2024
$1,502.9
$1,561.7
$1,574.1
Total Assets
(Dollars in Millions)
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
2022
2023
2024
$841.1
$937.6
$1,039.2
Net Loans
(Dollars in Millions)
$0.0
$25.0
$50.0
$75.0
$100.0
$125.0
$150.0
2022
2023
2024
$111.4
$126.9
$136.2
Stockholders' Equity
(Dollars in Millions)
$0.0
$10.0
$20.0
$30.0
$40.0
2022
2023
2024
$38.9
$43.3
$45.7
Net Interest Income
(Dollars in Millions)
$0.0
$250.0
$500.0
$750.0
$1,000.0
$1,250.0
$1,500.0
2022
2023
2024
$1,300.6
$1,316.3
$1,328.8
Deposits
(Dollars in Millions)
0.0%
1.0%
2.0%
3.0%
4.0%
2022
2023
2024
3.21%
3.17%
3.28%
Net Interest Margin
(Dollars in Millions)
6
Mark A. Herpich
Vice President, Secretary,
Chief Financial Officer and Treasurer
Michael E. Scheopner
President and Chief Executive Officer
DIRECTORS OF LANDMARK BANCORP, INC. AND LANDMARK NATIONAL BANK
EXECUTIVE OFFICERS OF LANDMARK BANCORP, INC.
AND LANDMARK NATIONAL BANK
Patrick L. Alexander, Chairman
Landmark Bancorp, Inc. and
Landmark National Bank
Abigail M. Wendel
President and Chief Executive Officer
Landmark Bancorp, Inc. and
Landmark National Bank
Michael E. Scheopner
Former President and Chief Executive Officer
Landmark Bancorp, Inc. and
Landmark National Bank
Sarah Hill-Nelson
President and Chief Executive Officer
The Bowersock Mills & Power Company
Angela S. Hurt
President and Chief Executive Officer
Veracity Consulting, Inc.
Mark J. Kohlrus
Financial Consultant
Jim. W. Lewis
Lewis Automotive Group
Sandra J. Moll
Partner, President and Chief Executive Officer
Advance Business Solutions, LLC
Thomas A. Page
Former President and Chief Executive Officer
Emprise Bank
Wayne R. Sloan
Chairman
BHS Construction, LLC
David H. Snapp
Attorney
David H. Snapp, LC
Angela K. Stanland
Chief of Staff
The Illig Family Enterprise Co.
Abigail M. Wendel
President and Chief Executive Officer
7
CORPORATE INFORMATION
Corporate Headquarters
701 Poyntz Avenue
Manhattan, Kansas 66502
Annual Meeting
The annual meeting of stockholders will
be held by virtual meeting, on Wednesday,
May 21, 2025 at 2:00 PM.
Registrar And Transfer Agent
Computershare, Inc.
P.O. Box 30170
College Station, Texas 77842
Independent Registered
Public Accounting Firm
Crowe LLP
2200 Ross Avenue, Suite 4200
Dallas, TX 75201
Form 10-K
A copy of the Annual Report on Form 10-K filed with the
Securities and Exchange Commission may be obtained
by stockholders without charge on written request to our
Corporate Secretary at Landmark Bancorp, Inc., 701 Poyntz
Avenue, Manhattan, Kansas 66502, or by accessing our
website at http://www.landmarkbancorpinc.com or the
SEC’s website at www.sec.gov.
Our Purpose
To be champions and catalysts for our communities.
8
MANHATTAN
701 Poyntz
3005 Anderson
AUBURN
1741 N. Washington
DODGE CITY
Central & Spruce
2500 N. 14th
FORT SCOTT
200 S. Main
US 69 HWY & 23rd St.
GARDEN CITY
1007 N. Main
GREAT BEND
1623 Main St.
5200 Broadway
HOISINGTON
623 N. Main
IOLA
1206 East St.
JUNCTION CITY
208 S. Washington
LA CROSSE
808 Main
LAWRENCE
2710 Iowa St.
4621 W. 6th St.
LENEXA
7900 Quivira Rd.
LOUISBURG
100 W. Amity
MOUND CITY
402 S. Main
OSAGE CITY
102 S. Sixth
OSAWATOMIE
600 Main
OVERLAND PARK
6640 W. 143rd St.
PAOLA
1310 Baptiste Dr.
PITTSBURG
2300 N. Broadway
PRAIRIE VILLAGE
3500 W. 75th St.
TOPEKA
6100 SW 21st St.
6010 SW 6th Ave.
WAMEGO
530 Lincoln
WELLSVILLE
112 W. Sixth
www.banklandmark.com
SERVING COMMUNITIES ACROSS KANSAS
Landmark National Bank, a Bauer 5-Star rated bank, has twenty-nine banks in
twenty-three Kansas communities. In 2024, we opened a loan production office in
Kansas City, Missouri. We are dedicated to building meaningful relationships
with our customers providing security, convenience and expertise.
9
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For 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 each exchange on which registered:
Common Stock, par value $0.01 per share
LARK
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
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 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 has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant
to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based
on the last sales price of $18.29 quoted on the Nasdaq Global Market on the last business day of the registrant’s most recently
completed second fiscal quarter, was approximately $74.1 million. On March 25, 2025, the total number of shares of common
stock outstanding was 5,782,259.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders of the registrant to be held on May 21, 2025,
are incorporated by reference in Part III hereof, to the extent indicated herein.
10
LANDMARK BANCORP, INC.
2024 Form 10-K Annual Report
Table of Contents
ITEM 1.
BUSINESS ...........................................................................................................................
11
ITEM 1A.
RISK FACTORS ..................................................................................................................
35
ITEM 1B.
UNRESOLVED STAFF COMMENTS ...............................................................................
48
ITEM 1C.
CYBERSECURITY .............................................................................................................
48
ITEM 2.
PROPERTIES ......................................................................................................................
49
ITEM 3.
LEGAL PROCEEDINGS ....................................................................................................
49
ITEM 4.
MINE SAFETY DISCLOSURES ........................................................................................
49
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ................................
50
ITEM 6.
[RESERVED] …… .............................................................................................................
50
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................................................
51
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK ..................................................................................................................
59
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .....................................
61
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ..........................................................
109
ITEM 9A.
CONTROLS AND PROCEDURES ...................................................................................
109
ITEM 9B.
OTHER INFORMATION ....................................................................................................
109
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS ....................................................................................................................
110
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ..............
110
ITEM 11.
EXECUTIVE COMPENSATION .......................................................................................
110
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS .........................
111
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE ...........................................................................................
111
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES .....................................................
111
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES ...........................................
112
ITEM 16.
FORM 10-K SUMMARY ....................................................................................................
115
SIGNATURES
.............................................................................................................................................
116
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PART I.
ITEM 1. BUSINESS
The Company
Landmark Bancorp, Inc. (the “Company”) is a financial holding company that was incorporated under the
laws of the State of Delaware in 2001. Currently, the Company’s business consists of the ownership of Landmark
National Bank (the “Bank”) and Landmark Risk Management, Inc. (the “Captive”), which are wholly-owned
subsidiaries of the Company. As of December 31, 2024, the Company had approximately $1.6 billion in consolidated
total assets.
The Company is headquartered in Manhattan, Kansas, and has expanded its geographic presence through
both opening of new branches and strategic acquisitions. In February 2024, the Bank opened a loan production office
in Kansas City, Missouri. On October 1, 2022, the Company completed its acquisition of Freedom Bancshares, Inc.
(“Freedom”), the holding company of Freedom Bank. The acquisition was accounted for as a business combination
under ASC 805.
The Bank has continued to focus on increasing its originations of commercial, commercial real estate
(“CRE”) and agricultural loans, which management believes will be more profitable and provide more growth for the
Bank than traditional one-to-four family residential real estate lending. The Bank has grown its one-to-four family
residential loan portfolio over the past two years as higher interest rates increased consumer demand for variable rate
loans, which were retained in the Bank’s portfolio. Additionally, greater emphasis has been placed on diversification
of the deposit mix through the expansion of core deposit accounts such as checking, savings, and money market
accounts. The Bank has also diversified its geographical markets as a result of its branching and acquisition
opportunities. The Company’s main office is in Manhattan, Kansas. The Company has 29 branch offices in 23
communities across the state of Kansas and one loan production office in Kansas City, Missouri.
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. The
Captive is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada
Division of Insurance.
The results of operations of the Bank and the Company are dependent primarily upon net interest income
and, to a lesser extent, upon other income derived from sales of one-to-four family residential mortgage loans, loan
servicing fees and customer deposit services. Additional expenses of the Bank include general and administrative
expenses such as salaries, employee benefits, federal deposit insurance premiums, data processing, occupancy and
related expenses.
Deposits of the Bank are insured by the Deposit Insurance Fund (the “DIF”) of the Federal Deposit Insurance
Corporation (the “FDIC”) up to the maximum amount allowable under applicable federal laws and regulations. The
Bank is regulated by the Office of the Comptroller of the Currency (the “OCC”), as the chartering authority for national
banks, and the FDIC, as the administrator of the DIF. The Company and the Bank are also subject to regulation by the
Board of Governors of the Federal Reserve System (the “Federal Reserve”) with respect to reserves required to be
maintained against deposits and certain other matters, including the regulation of bank holding companies. The Bank
is a member of the Federal Reserve Bank of Kansas City and the Federal Home Loan Bank (the “FHLB”) of Topeka.
The Company’s executive office and the Bank’s main office are located at 701 Poyntz Avenue, Manhattan,
Kansas 66502. The telephone number is (785) 565-2000.
Market Areas
The Bank’s primary deposit gathering and lending markets are geographically diversified throughout central,
eastern, southeast, and southwest Kansas. The primary industries within these respective markets are also diverse and
12
dependent upon a wide array of industry and governmental activity for their economic base. A brief description of the
four geographic areas and the communities which the Bank serves is set forth below.
Central region. The central region of the Bank’s market area consists of the Bank’s locations in Auburn,
Junction City, Manhattan, Osage City, Topeka and Wamego, Kansas and includes the counties of Riley, Geary, Osage,
Pottawatomie and Shawnee. The economies are significantly impacted by employment at Fort Riley Military Base in
Junction City and Kansas State University, the second largest university in Kansas, which is located in Manhattan.
Topeka is the capital of Kansas and strongly influenced by the government of the State of Kansas. Topeka and
Manhattan are regional destinations for retail shopping as well as home to regional hospitals. Manhattan was selected
as the site of a new National Bio and Agro-Defense Facility, which has had a significant impact on the regional
economy. Additionally, manufacturing and service industries play a key role within the central Kansas market.
Eastern region. The Bank’s eastern Kansas branches are located in the communities of Lawrence, Lenexa,
Louisburg, Osawatomie, Overland Park, Paola, Prairie Village and Wellsville, Kansas and Kansas City Missouri. The
Bank’s Lawrence locations are located in Douglas County and are significantly impacted by the University of Kansas,
the largest university in Kansas. The eastern region is strongly influenced by the Kansas City metropolitan market,
which is the highest growth area in the State of Kansas. The region is influenced by public and private industries and
businesses of all sizes. In addition, housing growth and CRE are major drivers of the region’s economy. The
acquisition of Freedom Bank in 2022 expanded the Bank’s presence in Overland Park and contributed to the growth
in loans and deposits. Panasonic Energy is currently constructing a new lithium-ion battery manufacturing facility in
De Soto, Kansas which is expected to begin production in the spring of 2025. This new plant is projected to have a
significant impact on the regional economy in eastern Kansas.
Southeast region. The southeast region of the Bank’s market area consists of the Bank’s locations in Fort
Scott, Iola, Mound City and Pittsburg, Kansas. Agriculture, oil, and gas are the predominant industries in the southeast
Kansas region. Both Fort Scott and Pittsburg are recognized as regional commercial centers within the southeast
region of the state, which attracts small retail businesses to the region. Additionally, Pittsburg State University and
Fort Scott Community College attract a number of individuals from the surrounding area to live within the
communities to participate in educational programs and pursue a degree. Additionally, manufacturing and service
industries play a key role within the southeast Kansas market.
Southwest region. The Bank’s southwest Kansas branches are located in the communities of Dodge City,
Garden City, Great Bend, Hoisington and LaCrosse, Kansas. Agriculture, oil, and gas are the predominant industries
in the southwest Kansas region. Predominant activities involve crop production, feed lot operations, and food
processing. Dodge City is known as the “Cowboy Capital of the World” and maintains a significant tourism industry.
Both Dodge City and Garden City are recognized as regional commercial centers within the state with small
businesses, manufacturing, retail, and service industries having a significant influence upon the local economies.
Additionally, the Dodge City, Garden City and Great Bend communities each have a community college that attracts
individuals from the surrounding areas. Dodge City was selected as the site for a new state-of-the-art cheese and whey
processing plant, which has had a significant impact on the regional economy.
Competition
The Company faces strong competition both in attracting deposits and making real estate, commercial and
other loans. Its most direct competition for deposits and loans comes from large national and regional banks, local
community banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance
companies, finance companies, money market mutual funds, credit unions, financial technology (fintech) companies
and other non-bank financial service providers including digital asset service providers, located in its principal market
areas, including many larger financial institutions which have greater financial and marketing resources available to
them. The ability of the Company to attract and retain deposits generally depends on its ability to provide a rate of
return, service levels, liquidity and risk comparable to or better than those offered by competing investment
opportunities. The Company competes for loans principally through the interest rates and loan fees it charges and the
efficiency and quality of services it provides borrowers.
13
Human Capital Resources
Employees. At December 31, 2024, the Bank had a total of 287 employees (283 full time equivalent
employees). The Company has no employees, although the Company is a party to several employment agreements
with executives of the Bank. Employees are provided with a comprehensive benefits program, including basic and
major medical insurance, life and disability insurance, sick leave, and a 401(k) profit sharing plan. Employees are not
represented by any union or collective bargaining group, and the Bank considers its employee relations to be excellent.
Diversity, Equity and Inclusion. The Company believes that a diverse workforce is critical to achieving its
strategic goals. The Company strives to foster a strong and inclusive culture that is committed to delivering
extraordinary service to our clients and communities by meeting the financial needs of families and businesses across
Kansas.
Talent development and retention. The Company utilizes various processes to recruit employees with values
that align with the Company’s vision. The long-term success of the Company revolves around the ability to continue
to develop and retain these employees.
Lending Activities
General. The Bank strives to provide a full range of financial products and services to small- and medium-
sized businesses and to consumers in each market area it serves. The Bank targets owner-operated businesses and
utilizes Small Business Administration (“SBA”) lending as a part of its product mix. The Bank has a loan committee
for each of its markets, which has authority to approve credits within established guidelines. Concentrations in excess
of those guidelines must be approved by either a corporate loan committee comprised of the Bank’s Chief Executive
Officer, the Chief Credit Officer, and other senior commercial lenders or the Bank’s board of directors. When lending
to an entity, the Bank generally obtains a guaranty from the principals of the entity. The loan mix is subject to the
discretion of the Bank’s board of directors and the demands of the local marketplace.
The following is a brief description of each major category of the Bank’s lending activity.
One-to-Four Family Residential Real Estate Lending. The Bank originates one-to-four family residential
real estate loans with both fixed and variable rates. One-to-four family residential real estate loans, which make up
approximately 33.5% of total loans at December 31, 2024, are typically priced and originated following underwriting
standards that are consistent with guidelines established by the major buyers in the secondary market. Generally,
residential real estate loans retained in the Bank’s loan portfolio have fixed or variable rates with adjustment periods
of seven years or less and amortization periods of typically either 15 or 30 years. A significant portion of these loans
prepay prior to maturity. The Bank has no potential negative amortization loans. While the origination of fixed-rate,
one-to-four family residential loans continues to be a key component of our business, the majority of these loans are
sold in the secondary market. One-to-four family residential real estate loans that exceed 80% of the appraised value
of the real estate generally are required, by policy, to be supported by private mortgage insurance, although on occasion
the Bank will retain non-conforming residential loans to known customers at premium pricing. The balances of one-
to-four family residential real estate loans increased as of December 31, 2024 compared to December 31, 2023,
primarily due to demand for the Bank’s variable rate mortgage loans. These loans are retained in portfolio and were
the primary factor for the 16.4% increase in balances during 2024 and 2023. While the Bank retains some of the new
fixed rate mortgage loan originations, most new fixed rate mortgage loans continue to be sold.
Construction and Land Lending. Loans in this category include loans to facilitate the development of both
residential and CRE, which make up approximately 2.4% of total loans at December 31, 2024. Construction and land
loans generally have terms of less than 18 months, and the Bank will retain a security interest in the borrower’s real
estate. Construction loans are generally limited, by policy, to 80% of the appraised value of the property. Land loans
are generally limited, by policy, to 65% of the appraised value of the property. The origination of construction and
land loans has not been a primary strategy of the Bank over the past few years to reduce risk in the Bank’s loan
portfolio. The balances of construction and land loans increased 20.1% as of December 31, 2024 compared to
December 31, 2023 primarily due to higher demand from the Bank’s loan customers.
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CRE Lending. CRE loans, including multi-family loans, generally have amortization periods of 15 or 20
years. CRE loans comprise approximately 32.8% of total loans at December 31, 2024. CRE and multi-family loans
are generally limited, by policy, to 80% of the appraised value of the property and are subject to strict underwriting
guidelines. CRE loans are also supported by an analysis demonstrating the borrower’s ability to repay. The Bank
continues to focus on generating additional CRE, which are part of an overall banking relationship with the customer,
and does not focus on originating transactional type loans where the borrower does not have other financial
relationships with the Bank. This focus results in more owner-occupied CRE loans that are diversified by borrower
type and geography. The Bank monitors the CRE loan portfolio closely for concentrations in loan types as well as the
financial performance of the borrowers. Currently, the Bank has not identified any negative trends related to the CRE
loan portfolio. The Bank’s loan growth over the past few years has been driven in large part by CRE loans.
Commercial Lending. Commercial loans, which make up approximately 18.3% of total loans at December
31, 2024, include loans to service, retail, wholesale and light manufacturing businesses. Commercial loans are made
based on the financial strength and repayment ability of the borrower, as well as the collateral securing the loans. The
Bank targets owner-operated businesses as its customers and makes lending decisions based upon a cash flow analysis
of the borrower as well as a collateral analysis. Accounts receivable loans and loans for inventory purchases are
generally on a one-year renewable term, and loans for equipment generally have a term of seven years or less. The
Bank generally takes a blanket security interest in all assets of the borrower. Equipment loans are generally limited,
by policy, to 75% of the cost or appraised value of the equipment. Inventory loans are generally limited to 50% of the
value of the inventory, and accounts receivable loans are generally limited to 75% of a predetermined eligible base.
The Bank continues to focus its organic growth on generating additional commercial loan relationships, including
SBA loans.
Agriculture Lending. Agricultural real estate loans, which make up approximately 9.5% of total loans at
December 31, 2024, generally have amortization periods of 20 years or less, during which time the Bank generally
retains a security interest in the borrower’s real estate. The Bank also provides short-term credit for operating loans
and intermediate-term loans for farm product, livestock and machinery purchases and other agricultural
improvements. Farm product loans generally have a one-year term, and machinery, equipment and breeding livestock
loans generally have five to seven year terms. Extension of credit is based upon the borrower’s ability to repay, as
well as the existence of federal guarantees and crop insurance coverage. These loans are generally secured by a blanket
lien on livestock, equipment, feed, hay, grain and growing crops. Equipment and breeding livestock loans are generally
limited, by policy, to 75% of appraised value of the collateral. The Bank continues to focus on generating additional
agriculture loan relationships in each of its market areas.
Municipal Lending. Loans to municipalities, which make up approximately 0.7% of total loans at December
31, 2024, are generally related to equipment leasing or general fund loans. Terms are generally limited to 5 years.
Equipment leases are generally made for the purchase of municipal assets and are secured by the leased asset. The
Bank is generally not active in the origination of municipal loans and leases; however, the Bank may originate loans
or leases for municipalities in its market areas.
Consumer and Other Lending. Loans classified as consumer and other loans, which make up approximately
2.8% of total loans at December 31, 2024, include automobile, boat, home improvement and home equity loans. With
the exception of home improvement loans and home equity loans, the Bank generally takes a purchase money security
interest in collateral for which it provides the original financing. Home improvement loans and home equity loans are
principally secured through second mortgages. The terms of the loans typically range from one to five years, depending
upon the use of the proceeds, and generally range from 75% to 90% of the value of the collateral. The majority of
these loans are installment loans with fixed interest rates. Home improvement and home equity loans are generally
secured by a second mortgage on the borrower’s personal residence and, when combined with the first mortgage,
limited to 80% of the value of the property unless further protected by private mortgage insurance. Home improvement
loans are generally made for terms of five to seven years with fixed interest rates. Home equity loans are generally
made for terms of ten years on a revolving basis with adjustable monthly interest rates tied to the national prime
interest rate. While the Bank primarily provides consumer loans to its existing customers, consumer lending is not a
category the Bank targets for organic growth.
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Loan Origination and Processing
Loan originations are derived from a number of sources. Residential loan originations result from real estate
broker referrals, direct solicitation by the Bank’s loan officers, present depositors and borrowers, referrals from
builders and attorneys, walk-in customers and, in some instances, other lenders. Consumer and CRE loan originations
generally emanate from many of the same sources.
Residential loan applications are underwritten and closed based upon standards which generally meet
secondary market guidelines. The loan underwriting procedures followed by the Bank conform to regulatory
specifications and are designed to assess both the borrower’s ability to make principal and interest payments and the
value of any assets or property serving as collateral for the loan. Generally, as part of the process, a loan officer meets
with each applicant to obtain the appropriate employment and financial information as well as any other required loan
information. The Bank then obtains reports with respect to the borrower’s credit record, and on real estate loans, orders
and reviews an appraisal of any collateral for the loan (prepared for the Bank by an independent appraiser).
Loan applicants are notified promptly of the decision of the Bank. Prior to closing any long-term loan, the
borrower must provide proof of fire and casualty insurance on the property serving as collateral, and such insurance
must be maintained during the full term of the loan. Title insurance is required on loans collateralized by real property.
The Bank is focusing on the generation of commercial, CRE and agriculture loans to grow and diversify the
loan portfolio. Total gross loans increased during 2024 as a result of the origination of variable rate mortgage loans
and loan growth in CRE, commercial and agriculture loans. The Bank was able to generate loan growth across the
geographic markets that it serves, primarily in commercial, CRE and one-to-four residential real estate loans.
Deposits
The Bank has a diversified deposit base. The deposit base consists of retail, commercial and public fund
customers located in the markets in which the Bank operates. The Bank provides a diverse financial suite of products
to its deposit customers and seeks to be the primary financial service provider for these customers. The Bank considers
these deposit relationships to be its core deposit base. If the Bank requires funding that exceeds these customers’
deposit balances, non-core or brokered deposits may be utilized. The balance of these non-core or brokered deposits
at December 31, 2024 was $91.4 million, or 6.9% of total deposits, compared to $83.2 million, or 6.3% of total deposits
at December 31, 2023.
In order for the Bank to attract and retain stable deposit relationships, the Bank offers business cash
management solution services to help local companies better manage their cash flow. The Bank also offers Insured
Cash Sweep (“ICS”) and Certificate of Deposit Account Registry Service to provide customers with FDIC insurance
coverage for deposit balances that exceed the insurance limit of $250,000. The ICS accounts are integrated with the
Bank’s core processor so transfers can be automated for the Bank’s customers. The expertise and experience of the
Bank’s management coupled with the latest technology accessed through third party providers enables the Bank to
maximize the growth of business-related deposits.
As for consumers, deposit growth is driven by a variety of factors including, but not limited to, population
growth, bank and non-bank competition, local bank mergers and consolidations, increases in household income,
interest rates, accessibility of location and the sales efforts of Bank personnel. Time deposits can be attracted and
increased by paying an interest rate higher than that offered by competitors, but are the costliest type of deposit. The
most profitable type of deposits are non-interest bearing demand (checking) accounts, which can be attracted by
offering free checking. However, both high interest rates and free checking accounts generate certain expenses for a
bank and the desire to increase deposits must be balanced with the need to be profitable and the extent of banking
relationships with the customers. The deposit services of the Bank are generally comprised of demand deposits,
savings deposits, money market deposits, time deposits and individual retirement accounts.
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Supervision and Regulation
General
FDIC-insured institutions, like the Bank, their holding companies and their affiliates are extensively
regulated under federal law. As a result, our growth and earnings performance may be affected not only by
management decisions and general economic conditions, but also by the requirements of applicable statutes and by
the regulations and policies of various banking agencies, including our primary federal regulator, the Federal Reserve,
and the Bank’s primary federal regulator, the OCC, as well as the FDIC, as the insurer of the Bank’s deposits, and the
Consumer Financial Protection Bureau (“CFPB”), as the regulator of consumer financial services and their providers.
Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules
developed by the Financial Accounting Standards Board (“FASB”), securities laws administered by the Securities and
Exchange Commission (“SEC”) and state securities authorities, and anti-money laundering and sanctions laws
enforced by the U.S. Department of the Treasury (“Treasury”) have an impact on our business. The effect of these
statutes, regulations, regulatory policies and accounting rules are significant to our operations and results.
Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement
on the operations of FDIC-insured institutions, their holding companies and affiliates that is intended primarily for the
protection of the FDIC-insured deposits and depositors of banks, rather than shareholders. These laws, and the
regulations of the banking agencies issued under them, affect, among other things, the scope of our business, the kinds
and amounts of investments that we may make, required capital levels relative to assets, the nature and amount of
collateral for loans, the establishment of branches, our ability to merge, consolidate and acquire, dealings with the
Company’s and the Bank’s insiders and affiliates and our payment of dividends. In reaction to the global financial
crisis and particularly following passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”), we experienced heightened regulatory requirements and scrutiny. Although the reforms primarily
targeted large banking organizations and systemically important financial institutions, their influence filtered down in
varying degrees to community banking organizations over time and caused our compliance and risk management
processes, and the costs thereof, to increase. The Economic Growth, Regulatory Relief and Consumer Protection Act
of 2018 (“Regulatory Relief Act”) eliminated questions about the applicability of certain Dodd-Frank Act reforms to
community banking systems, including relieving them of any requirement to engage in mandatory stress tests,
maintain a risk committee or comply with the Volcker Rule’s complicated prohibitions on proprietary trading and
ownership of private funds. These reforms have been favorable to our operations. It is anticipated that the Trump
Administration and the current U.S. Congress likely will not increase the regulatory burden on community banking
organizations and may seek to reduce and streamline certain prudential and regulatory requirements applicable to
community banking organizations at a federal level based on statements made by relevant congressional leaders and
the acting leaders of certain federal banking agencies. At this time, however, it is not possible to predict with any
certainty the actual impact that the Trump Administration may have on the banking industry or our operations.
The supervisory framework for U.S. banking organizations subjects banks and bank holding companies to
regular examination by their respective banking agencies, which results in examination reports and ratings that are not
publicly available and that can impact the conduct and growth of their businesses. These examinations consider not
only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management
ability and performance, earnings, liquidity, and various other factors. The banking agencies generally have broad
discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine,
among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise
inconsistent with laws and regulations. The approach to supervision adopted by each banking agency may have
significant impacts on the operations and results of the Company and the Bank, as well as the banking industry in
general. Based on recent statements made by congressional leaders and the acting leaders of certain federal banking
agencies, there may be changes in the supervisory processes and approach made by the Trump Administration banking
agencies, but it is not possible at this time to predict the specific changes (or the timing of any such changes) that may
be made.
The following is a summary of the material elements of the supervisory and regulatory framework applicable
to the Company and the Bank. It does not describe all of the statutes, regulations and regulatory policies that apply,
nor does it restate all of the requirements of those that are described. The descriptions are qualified in their entirety by
reference to the particular statutory and regulatory provision.
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The Role of Capital
Regulatory capital represents the net assets of a banking organization available to absorb losses. Because of
the risks attendant to their business, FDIC-insured institutions, such as banks, as well as their holding companies (i.e.,
banking organizations) are generally required to hold more capital than other businesses, which directly affects our
earnings capabilities. Although capital has historically been one of the key measures of the financial health of both
bank holding companies and banks, its role became fundamentally more important in the wake of the global financial
crisis, as the banking agencies recognized that the amount and quality of capital held by banking organizations prior
to that crisis was insufficient to absorb losses during periods of severe stress.
Capital Levels. Banking organizations have been required to hold minimum levels of capital based on
guidelines established by the federal banking agencies since 1983. The minimum capital levels for banking
organizations have been expressed in terms of ratios of “capital” divided by “total assets.” The capital guidelines for
U.S. banking organizations beginning in 1989 have been based upon international capital accords (known as the
“Basel” accords) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank
supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. federal
banking agencies on an interagency basis. These accords recognized that bank assets for the purpose of the capital
ratio calculations needed to be risk weighted (the theory being that riskier assets should require more capital) and that
off-balance sheet exposures needed to be factored in the calculations. Following the global financial crisis, the Group
of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision,
announced an agreement on a strengthened set of capital requirements for banking organizations around the world,
known as the Basel III accords, to address deficiencies recognized in connection with the global financial crisis.
The Basel III Rule. The U.S. federal banking agencies adopted the U.S. Basel III regulatory capital reforms,
and, at the same time, effected changes required by the Dodd-Frank Act, in regulations that were effective (with certain
phase-ins) in 2015 (the “Basel III Rule”). The Basel III Rule established capital standards for banks and bank holding
companies that are meaningfully more stringent than those in place previously and are still in effect today. The Basel
III Rule increased the required quantity and quality of capital and required a more complex, detailed and calibrated
assessment of risk in the calculation of risk weightings for bank assets. The Basel III Rule is applicable to all banking
organizations that are subject to minimum capital requirements, including national and state banks and savings and
loan associations, as well as to holding companies, other than “small bank holding companies” and certain qualifying
banking organizations that may elect a simplified framework (which we have not done). The Company and the Bank
is currently subject to the Basel III Rule as described below.
Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January
1, 2015, but, in requiring that forms of capital be of higher quality to absorb loss, it introduced the concept of Common
Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of Treasury stock), retained
earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments. The Basel III Rule
also changed the definition of capital by establishing more stringent criteria that instruments must meet to be
considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain
requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to
limitations). The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and
deferred tax assets in capital and required deductions from Common Equity Tier 1 Capital in the event that such assets
exceeded a percentage of a banking organization’s Common Equity Tier 1 Capital.
The Basel III Rule requires banking organizations to maintain minimum capital ratios 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% of risk-weighted assets;
●A ratio of Total Capital (Tier 1 plus Tier 2) equal to 8% of risk-weighted assets; and
●A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
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In addition, banking organizations that wish to make capital distributions (including for dividends and
repurchases of stock) and pay discretionary bonuses to executive officers without restriction must also maintain 2.5%
in Common Equity Tier 1 Capital attributable to a capital conservation buffer. The purpose of the conservation buffer
is to ensure that banking organizations maintain a buffer of capital that can be used to absorb losses during periods of
financial and economic stress. Factoring in the conservation buffer increases the minimum ratios depicted above to
7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital.
In July 2023, the Biden Administration federal banking agencies proposed wide-ranging and significant
changes to the Basel III Rules (the “Basel III Endgame Proposal”), which would have, among other requirements,
imposed structural changes to the calculation of capital requirements and risk-weighted assets in an effort to finish the
implementation of the Basel III accords. The Basel III Endgame Proposal would have primarily impacted the capital
requirements applicable to banking organizations with $100 billion or more in total assets, and, as a general matter,
would not have had a significant impact on us. The Basel III Endgame Proposal has not been, and is not expected to
be, adopted in its proposed form. The Trump Administration banking agencies may change or issue their own version
of this proposal.
Well-Capitalized Requirements. The capital ratios described above are minimum standards in order for
banking organizations to be considered “adequately capitalized.” Banking agencies uniformly encourage banking
organizations to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide
various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory
requirements. For example, a banking organization that is well-capitalized may: (i) qualify for exemptions from prior
notice or application requirements otherwise applicable to certain types of activities; (ii) qualify for expedited
processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits. Higher
capital levels could also be required if warranted by the particular circumstances or risk profiles of individual banking
organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be
required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of
credit, nontraditional activities or securities trading activities. Further, any banking organization experiencing or
anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e.,
Tier 1 Capital less all intangible assets), well above the minimum levels.
Under the capital regulations of the Federal Reserve for the Company and the OCC for the Bank, in order to
be well-capitalized, we must maintain:
●A Common Equity Tier 1 Capital ratio to risk-weighted assets of 6.5% or more;
●A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more;
●A ratio of Total Capital to total risk-weighted assets of 10% or more; and
●A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.
It is possible under the Basel III Rule to be well-capitalized, while remaining out of compliance with the
capital conservation buffer discussed above.
As of December 31, 2024: (i) the Bank was not subject to a directive from the OCC to increase its capital
and (ii) the Bank was well-capitalized, as defined by OCC regulations. As of December 31, 2024, the Company had
regulatory capital in excess of the Federal Reserve’s requirements and met the Basel III Rule requirements to be well-
capitalized. The Company also is in compliance with the capital conservation buffer.
Prompt Corrective Action. The concept of a banking organization being “well-capitalized” is part of a
regulatory regime that provides the federal banking agencies with broad power to take “prompt corrective action” to
resolve the problems of undercapitalized depository institutions based on the capital level of each particular institution.
The extent of the banking agencies’ powers depends on whether the institution in question is “adequately capitalized,”
“undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by
regulation. Depending upon the capital category to which a banking organization is assigned, the agencies’ corrective
powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset
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growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional
voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the
interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii)
requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting
deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the
payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Community Bank Capital Simplification. Community banking organizations have long raised concerns with
the federal banking agencies about the regulatory burden, complexity, and costs associated with certain provisions of
the Basel III Rule. In response, U.S. Congress provided an “off-ramp” for institutions, like the Bank, with total
consolidated assets of less than $10 billion as part of the Regulatory Relief Act. Section 201 of the Regulatory Relief
Act specifically instructed the federal banking agencies to establish a single “Community Bank Leverage Ratio”
(“CBLR”) of between 8 and 10%. Under the final rule, a community banking organization is eligible to elect to comply
with its capital requirements under the CBLR framework if it has: (i) less than $10 billion in total consolidated assets,
(ii) limited amounts of certain assets and off-balance sheet exposures, and (iii) a CBLR greater than 9%. We may elect
the CBLR framework at any time but have not currently determined to do so.
Supervision and Regulation of the Company
General. The Company, as the sole shareholder of the Bank, is a bank holding company. As a bank holding
company, we are registered with, and subject to regulation, supervision and enforcement by, the Federal Reserve under
the Bank Holding Company Act of 1956, as amended (the “BHCA”). We are legally obligated to act as a source of
financial and managerial strength to the Bank and to commit resources to support the Bank in circumstances where
we might not otherwise do so. Under the BHCA, we are subject to periodic examination by the Federal Reserve and
are required to file with the Federal Reserve periodic reports of our operations and such additional information
regarding the Company and the Bank as the Federal Reserve may require.
Acquisitions and Activities. The primary purpose of a bank holding company is to control and manage banks.
The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding
company or any acquisition by a bank holding company of another bank or bank holding company. Subject to certain
conditions (including deposit concentration limits established by the BHCA), the Federal Reserve may allow a bank
holding company to acquire banks located in any state of the United States (“U.S.”). In approving interstate
acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount
of deposits that may be held by the acquiring bank holding company and its FDIC-insured institution affiliates in the
state in which the target bank is located (provided that those limits do not discriminate against out-of-state institutions
or their holding companies) and state laws that require that the target bank have been in existence for a minimum
period of time (not to exceed five years) before being acquired by an out-of-state bank holding company. Furthermore,
in accordance with the Dodd-Frank Act, bank holding companies must be well-capitalized and well-managed in order
to effect interstate mergers or acquisitions. For a discussion of the capital requirements, see “–The Role of Capital”
above.
The BHCA generally prohibits the Company from acquiring direct or indirect ownership or control of 5% or
more of a class of the voting shares of any company that is not a bank and from engaging in any business other than
that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. This general
prohibition is subject to a number of exceptions. The principal exception allows bank holding companies to engage
in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November
11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority would permit the
Company to engage in a variety of banking-related businesses, including the ownership and operation of a savings
association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau
(including software development) and mortgage banking and brokerage services. The BHCA does not place territorial
restrictions on the domestic activities of nonbank subsidiaries of bank holding companies. In addition to approval
from the Federal Reserve that may be required in certain circumstances, prior approval for acquisitions by the
Company may be required from other agencies that regulate the target company of an acquisition.
Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and
elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range
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of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other
activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order
is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be
complementary to any such financial activity, as long as the activity does not pose a substantial risk to the safety or
soundness of FDIC-insured institutions or the financial system generally. We elected to operate as a financial holding
company in May 2017. In order to maintain our status as a financial holding company, both the Company and the
Bank must be well-capitalized, well-managed, and the Bank must have at least a satisfactory CRA rating. If the Federal
Reserve determines that either we or the Bank is not well-capitalized or well-managed, the Federal Reserve will
provide a period of time in which to achieve compliance, but during the period of noncompliance, the Federal Reserve
may place any limitations on us that it deems appropriate. Furthermore, if the Federal Reserve determines that the
Bank has not received a satisfactory CRA rating, we would not be able to commence any new financial activities or
acquire a company that engages in such activities.
Change in Control. Federal law prohibits any person or company from acquiring “control” of an FDIC-
insured depository institution or its holding company without prior notice to the appropriate federal banking agency.
“Control” is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities
of a bank or bank holding company, but may arise under certain circumstances between 10% and 24.99% ownership.
Capital Requirements. Bank holding companies are required to maintain capital in accordance with Federal
Reserve capital adequacy requirements. For a discussion of capital requirements generally, see “–the “Role of Capital”
above.
Dividend Payments. Our ability to pay dividends to shareholders may be affected by both general corporate
law considerations and the policies and capital requirements of the Federal Reserve applicable to bank holding
companies. As a Delaware corporation, we are subject to the limitations of the Delaware General Corporation Law
(the “DGCL”). The DGCL allows us to pay dividends only out of its surplus (as defined and computed in accordance
with the provisions of the DGCL) or if we have no such surplus, out of its net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year.
As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company
should eliminate, defer or significantly reduce dividends to shareholders if: (i) the company’s net income available to
shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully
fund the dividends; (ii) the prospective rate of earnings retention is inconsistent with the company’s capital needs and
overall current and prospective financial condition; or (iii) the company will not meet, or is in danger of not meeting,
its minimum regulatory capital adequacy ratios. The Federal Reserve also possesses enforcement powers over bank
holding companies and their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound
practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the
payment of dividends by banks and bank holding companies. In addition, under the Basel III Rule, banking
organizations that wish to pay dividends have to maintain 2.5% in Common Equity Tier 1 Capital attributable to the
capital conservation buffer. See “–The Role of Capital” above.
Incentive Compensation. There have been a number of developments in recent years focused on incentive
compensation plans sponsored by bank holding companies and their subsidiary banks, reflecting recognition by the
federal banking agencies and U.S. Congress that flawed incentive compensation practices in the financial industry
were one of many factors contributing to the global financial crisis. The result was interagency guidance on sound
incentive compensation practices for banking organizations.
The interagency guidance recognized three core principles. Effective incentive plans should: (i) provide
employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk-
management; and (iii) be supported by strong corporate governance, including active and effective oversight by the
organization’s board of directors. Much of the guidance is directed at large banking organizations and, because of the
size and complexity of their operations, the banking agencies expect those organizations to maintain systematic and
formalized policies, procedures, and systems for ensuring that the incentive compensation arrangements for all
executive and non-executive employees covered by this guidance are identified and reviewed, and appropriately
balance risks and rewards. Under the interagency guidance, smaller banking organizations, like the Company, that
21
use incentive compensation arrangements are expected to implement less extensive, formalized, and detailed policies,
procedures, and systems than those of larger banks.
In May 2024, certain of the federal banking and other financial services agencies, including the OCC, released
a proposed rule regarding certain incentive-based compensation arrangements at certain financial institutions with at
least $1 billion in assets, as required under Section 956 of the Dodd-Frank Act. This proposal was largely based on an
earlier 2016 proposal. The Federal Reserve and the SEC, however, did not join this proposal and it was not published
in the Federal Register, signaling potential interagency misalignment. In March 2025, the FDIC withdrew its support
for this proposed rule, making it unlikely that any rule in a substantially similar form will be finalized.
Monetary Policy. The monetary policy of the Federal Reserve has a significant effect on the operating results
of bank holding companies and their subsidiaries. Among the tools available to the Federal Reserve to affect the
money supply are open market transactions in U.S. government securities and changes in the discount rate on bank
borrowings. These means are used in varying combinations to influence overall growth and distribution of bank loans,
investments and deposits, and their use may affect interest rates charged on loans or paid on deposits, which may
impact the Company’s business and operations.
Federal Securities Regulation. Our common stock will be registered with the SEC under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) as a result of the offering. Consequently, we will be subject
to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the
Exchange Act.
Corporate Governance. The Dodd-Frank Act addressed many investor protection, corporate governance and
executive compensation matters that will affect most U.S. publicly traded companies. It increased stockholder
influence over boards of directors by requiring companies to give stockholders a nonbinding vote on executive
compensation and so-called “golden parachute” payments, and authorizing the SEC to promulgate rules that would
allow stockholders to nominate and solicit voters for their own candidates using a company’s proxy materials. The
Dodd-Frank Act also directed the Federal Reserve, together with the other federal banking and financial services
agencies, to promulgate rules prohibiting excessive compensation paid to executives of bank holding companies,
regardless of whether such companies are publicly traded.
Supervision and Regulation of the Bank
General. The Bank is a national bank, chartered by the OCC under the National Bank Act. The deposit
accounts of the Bank are insured by the DIF to the maximum extent provided under federal law and FDIC regulations,
currently $250,000 per insured depositor category, and the Bank is a member of the Federal Reserve System. As a
national bank, the Bank is subject to the examination, supervision, reporting and enforcement requirements of the
OCC, the chartering authority for national banks. The Bank is subject to that authority and is examined by the OCC.
The FDIC, as administrator of the DIF, also has regulatory authority over the Bank.
Deposit Insurance. As an FDIC-insured institution, the Bank is required to pay deposit insurance premium
assessments to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured institutions
pay insurance premiums at rates based on their risk classification. For institutions like the Bank that are not considered
large and highly complex banking organizations, assessments are now based on examination ratings and financial
ratios. The total base assessment rates, effective as of January 1, 2023, currently range from 2.5 basis points to 32
basis points.
At least semi-annually, the FDIC updates its loss and income projections for the DIF and, if needed, increases
or decreases the assessment rates, following notice and comment on proposed rulemaking. For this purpose, the reserve
ratio is the DIF balance divided by estimated insured deposits. In response to the global financial crisis, the Dodd-
Frank Act increased the minimum reserve ratio from 1.15% to 1.35% of the estimated amount of total insured deposits.
In its October 2024 semiannual update, the FDIC stated that the reserve ratio likely will reach the statutory minimum
by the September 30, 2028 deadline, and no adjustments to the base assessment rates is currently projected.
In addition, because the total cost of the failures of Silicon Valley Bank, Signature Bank and First Republic
Bank was approximately $24.1 billion, the FDIC adopted a special assessment for banking organizations with $5
22
billion or more in total assets. Because the Company is a banking organization with less than $5 billion in total assets,
this special assessment does not apply to us.
Supervisory Assessments. National banks are required to pay supervisory assessments to the OCC to fund
the operations of the OCC. The amount of the assessment is calculated using a formula that considers the bank’s size
and its supervisory condition. During the year ended December 31, 2024, the Bank paid supervisory assessments to
the OCC totaling $205,000.
Capital Requirements. Banks are generally required to maintain capital levels in excess of other businesses.
For a discussion of capital requirements, see “–The Role of Capital” above.
Liquidity Requirements. Liquidity is a measure of the ability and ease with which bank assets may be
converted to meet financial obligations such as deposits or other funding sources. Banks are required to implement
liquidity risk management frameworks that ensure they maintain sufficient liquidity, including a cushion of
unencumbered, high-quality liquid assets, to withstand a range of stress events. The level and speed of deposit outflows
contributing to the failures of Silicon Valley Bank, Signature Bank and First Republic Bank in the first half of 2023
was unprecedented and contributed to acute liquidity and funding strain. These events have further underscored the
importance of liquidity risk management and contingency funding planning by insured depository institutions like the
Bank, as highlighted in a 2023 addendum to existing interagency guidance on funding and liquidity risk management.
The primary roles of liquidity risk management are to: (i) prospectively assess the need for funds to meet
financial obligations; and (ii) ensure the availability of cash or collateral to fulfill those needs at the appropriate time
by coordinating the various sources of funds available to the institution under normal and stressed conditions. The
Basel III Rule includes a liquidity framework that requires the largest insured institutions to measure their liquidity
against specific liquidity tests. One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure
that the banking organization has an adequate stock of unencumbered high-quality liquid assets that can be converted
easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress
scenario. The other test, known as the Net Stable Funding Ratio, or NSFR, is designed to promote more medium- and
long-term funding of the assets and activities of FDIC-insured institutions over a one-year horizon. These tests provide
an incentive for banks and bank holding companies to increase their holdings in Treasury securities and other
sovereign debt as a component of assets, increase the use of long-term debt as a funding source and rely on stable
funding like core deposits (in lieu of brokered deposits).
Although these tests do not apply to the Bank, we continue to review our liquidity risk management policies
in light of regulatory requirements and industry developments. For instance, in July 2024, the FDIC released a request
for information on deposits, soliciting information on whether and to what extent certain types of deposits may behave
differently from each other (particularly during periods of economic or financial stress), the results of which may
impact liquidity monitoring and risk management requirements, including for FDIC-insured institutions, like the Bank,
going forward.
Dividend Payments. The primary source of funds for the Company is dividends from the Bank. Under the
National Bank Act, a national bank may pay dividends out of its undivided profits in such amounts and at such times
as the bank’s board of directors deems prudent. Without prior OCC approval, however, a national bank may not pay
dividends in any calendar year that, in the aggregate, exceed the bank’s year-to-date net income plus the bank’s
retained net income for the two preceding years. The payment of dividends by any FDIC-insured institution is affected
by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations,
and an FDIC-insured institution generally is prohibited from paying any dividends if, following payment thereof, the
institution would be undercapitalized. As described above, the Bank exceeded its capital requirements under
applicable guidelines as of December 31, 2024. Notwithstanding the availability of funds for dividends, however, the
OCC may prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or
unsound practice. In addition, under the Basel III Rule, banking organizations that wish to pay dividends have to
maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “–The Role of
Capital” above.
Investments, Activities and Acquisitions. The Bank is permitted to make investments and engage in activities
directly or through subsidiaries as authorized by, and subject to the limitations set forth in, the National Bank Act as
23
well as OCC regulations and interpretations. The Bank may be required to seek approval from the OCC and other
banking or financial services agencies before engaging in certain acquisitions or mergers under applicable state and
federal law. In 2024, each of the OCC and the FDIC separately released updated policy statements—and in the case
of the OCC, a final rule—regarding how each banking agency reviews applications submitted pursuant to the Bank
Merger Act based on statutory factors. In March 2025, the FDIC issued a notice of proposed rulemaking to repeal its
2024 policy statement and reinstate its prior policy statement on bank mergers, while it considers wider changes to its
bank merger review practices.
Insider Transactions. The Bank is subject to certain restrictions imposed by federal law on “covered
transactions” between the Bank and its “affiliates.” The Company is an affiliate of the Bank for purposes of these
restrictions, and covered transactions subject to the restrictions include extensions of credit to the Company,
investments in the stock or other securities of the Company and the acceptance of the stock or other securities of the
Company as collateral for loans made by the Bank. The Dodd-Frank Act enhanced the requirements for certain
transactions with affiliates, including an expansion of the definition of “covered transactions” and an increase in the
amount of time for which collateral requirements regarding covered transactions must be maintained.
Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its
directors and officers, to directors and officers of the Company and its subsidiaries, to principal shareholders of the
Company and to “related interests” of such directors, officers and principal shareholders. In addition, federal law and
regulations may affect the terms on which any person who is a director or officer of the Company or the Bank, or a
principal shareholder of the Company, may obtain credit from banks with which the Bank maintains a correspondent
relationship.
Safety and Soundness Standards/Risk Management. FDIC-insured institutions are expected to operate in a
safe and sound manner. The federal banking agencies have adopted operational and managerial standards to promote
the safety and soundness of such institutions that address internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset
quality and earnings.
In general, the safety and soundness standards prescribe the goals to be achieved in each area, and each
institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to operate in
a safe and sound manner, the FDIC-insured institution’s primary federal regulator may require the institution to submit
a plan for achieving and maintaining compliance. If an FDIC-insured institution fails to submit an acceptable
compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary
federal regulator, the banking agency is required to issue an order directing the institution to cure the deficiency. Until
the deficiency cited in the agency’s order is cured, the banking agency may restrict the FDIC-insured institution’s rate
of growth, require the FDIC-insured institution to increase its capital, restrict the rates that the institution pays on
deposits or require the institution to take any action that the agency deems appropriate under the circumstances.
Operating in an unsafe or unsound manner will also constitute grounds for other enforcement action by the federal
banking agencies, including cease and desist orders and civil money penalty assessments.
During the past decade, the banking agencies have increasingly emphasized the importance of sound risk
management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions that
they supervise. Properly managing risk has been identified as critical to the conduct of safe and sound banking
activities and has become even more important as new technologies, third-party relationships, product innovation, and
the size and speed of financial transactions have changed the nature of banking markets. The agencies have identified
a spectrum of risks facing a banking organization, including, but not limited to, credit, market, liquidity, operational,
legal and reputational risk. Key risk themes identified are discussed in more detail under “Item 1A. Risk Factors” of
this Annual Report on Form 10-K.
The Bank is expected to have active board and senior management oversight; adequate policies, procedures
and limits; adequate risk measurement, monitoring and management information systems; and comprehensive internal
controls. The federal banking agencies also have released specific risk management guidance on certain topics,
including third-party relationships, in response to the proliferation of relationships between banking organizations and
fintech companies (although the guidance applies more broadly).
24
Privacy and Cybersecurity. The Bank is subject to many U.S. federal and state laws and regulations
governing requirements for maintaining policies and procedures to protect non-public personal and confidential
information of their customers. These laws require the Bank to periodically disclose its privacy policies and practices
relating to sharing such information and permit consumers to opt out of their ability to share information with
unaffiliated third parties under certain circumstances. They also impact the Bank’s ability to share certain information
with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing
offers. In addition, as a part of its operational risk mitigation, the Bank is required to implement a comprehensive
information security program that includes administrative, technical, and physical safeguards to ensure the security
and confidentiality of customer records and information and to require the same of its service providers. These security
and privacy policies and procedures are in effect across all business lines and geographic locations.
Risks and exposures related to cybersecurity require financial institutions to design multiple layers of security
controls to establish lines of defense and to ensure that their risk management processes also address the risk posed
by compromised customer credentials, including security measures to reliably authenticate customers accessing
internet-based services of the financial institution. Bank management is expected to maintain sufficient business
continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations
after a cyber-attack involving destructive malware. The Bank and the Company also are subject to a number of federal
and state laws and regulations requiring notifications and disclosures regarding certain cybersecurity incidents.
Branching Authority. National banks headquartered in Kansas, such as the Bank, have the same branching
rights in Kansas as banks chartered under Kansas law, subject to OCC approval. Kansas law grants Kansas-chartered
banks the authority to establish branches anywhere in the State of Kansas, subject to receipt of all required regulatory
approvals. The Dodd-Frank Act permits well-capitalized and well-managed banks to establish new branches across
state lines without legal impediments. However, while Federal law permits state and national banks to merge with
banks in other states, such mergers are subject to: (i) regulatory approval; (ii) federal and state deposit concentration
limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of
time (not to exceed five years) prior to the merger.
Financial Subsidiaries. Under federal law and OCC regulations, national banks are authorized to engage,
through “financial subsidiaries,” in any activity that is permissible for a financial holding company and any activity
that the Secretary of the Treasury, in consultation with the Federal Reserve, determines is financial in nature or
incidental to any such financial activity, except (i) insurance underwriting, (ii) real estate development or real estate
investment activities (unless otherwise permitted by law), (iii) insurance company portfolio investments and (iv)
merchant banking. The authority of a national bank to invest in a financial subsidiary is subject to a number of
conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized
(after deducting from capital the bank’s outstanding investments in financial subsidiaries).
Federal Home Loan Bank System. The Bank is a member of the FHLB of Topeka, which serves as a central
credit facility for its members. The FHLB is funded primarily from proceeds from the sale of obligations of the FHLB
system, and makes loans to member banks in the form of FHLB advances. All advances from the FHLB are required
to be fully collateralized as determined by the FHLB.
Community Reinvestment Act Requirements. The CRA requires the Bank to have a continuing and
affirmative obligation in a safe and sound manner to help meet the credit needs of its entire community, including
low- and moderate-income neighborhoods. The OCC regularly assesses the Bank’s record of meeting the credit needs
of its communities in dedicated examinations. The Bank’s CRA ratings derived from these examinations can have
significant impacts on the activities in which the Bank and the Company may engage. For example, a low CRA rating
may impact the review of applications for acquisitions by the Bank or the Company’s financial holding company
status.
On October 24, 2023, the federal banking agencies issued a final rule to strengthen and modernize the CRA
regulations (the CRA Rule). Elements of this rule were supposed to become effective on April 1, 2024 (while other
elements had much later effective dates). However, the effective date of the CRA Rule was paused because of an order
issued as part of ongoing litigation claiming that the federal banking agencies exceeded their statutory authority in
promulgating the CRA Rule. Despite the lawsuit, management of the Bank is continuing to assess the impact of the
CRA Rule on its CRA lending and investment activities in its respective markets.
25
The CRA Rule is designed to update how CRA activities qualify for consideration, where CRA activities are
considered, and how CRA activities are evaluated. More specifically, the federal banking agencies described the goals
of the CRA Rule as follows: (i) to expand access to credit, investment, and basic banking services in low- and
moderate-income communities; (ii) to adapt to changes in the banking industry, including mobile and internet banking
by modernizing assessment areas while maintaining a focus on branch-based areas; (iii) to provide greater clarity,
consistency, and transparency in the application of the regulations through the use of standardized metrics as part of
CRA evaluation and clarifying eligible CRA activities focused on low- and moderate-income communities and
underserved rural communities; (iv) to tailor CRA rules and data collection to bank size and business model; and (v)
to maintain a unified approach among the banking agencies.
Anti-Money Laundering/Sanctions. The Bank Secrecy Act (“BSA”) is the common name for a series of
laws and regulations enacted in the U.S. to combat money laundering and the financing of terrorism. They are designed
to deny terrorists and criminals the ability to obtain access to the U.S. financial system and have significant
implications for FDIC-insured institutions and other businesses involved in the transfer of money. The so-called Anti-
Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime under the BSA provides a foundation
to promote financial transparency and deter and detect those who seek to misuse the U.S. financial system to launder
criminal proceeds, finance terrorist acts, or move funds for other illicit purposes.
The laws mandate financial services companies to have policies and procedures with respect to measures
designed to address: (i) customer identification programs; (ii) money laundering; (iii) terrorist financing; (iv)
identifying and reporting suspicious activities and currency transactions; (v) currency crimes; and (vi) cooperation
between FDIC-insured institutions and law enforcement authorities. The Bank must also comply with stringent
economic and trade sanctions regimes administered and enforced by the Office of Foreign Assets Control.
Concentrations in CRE. Concentration risk exists when FDIC-insured institutions deploy too many assets
to any one industry or segment. A concentration in CRE is one example of regulatory concern, which has been subject
to additional scrutiny by federal banking agencies as well as the SEC (the publicly-traded banking organization) in
recent years. The Interagency Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices
guidance (“CRE Guidance”) provides supervisory criteria, including the following numerical indicators, to assist bank
examiners in identifying banks with potentially significant CRE loan concentrations that may warrant greater
supervisory scrutiny: (i) CRE loans exceeding 300% of capital and increasing 50% or more in the preceding three
years; or (ii) construction and land development loans exceeding 100% of capital. The CRE Guidance does not limit
banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and
levels of capital that are commensurate with the level and nature of their CRE concentrations. On December 18, 2015,
and again in recent years, the federal banking agencies have issued statements to reinforce prudent risk-management
practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets,
increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards.
The federal banking agencies have reminded FDIC-insured institutions to maintain underwriting discipline and
exercise prudent risk-management practices to identify, measure, monitor, and manage the risks arising from CRE
lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their
CRE concentration risk.
Based on the Bank’s loan portfolio as of December 31, 2024, we do not exceed the 300% guideline for CRE
loans.
Consumer Financial Services. The historical structure of federal consumer protection regulation applicable
to all providers of consumer financial products and services changed significantly on July 21, 2011, when the CFPB
commenced operations to supervise and enforce consumer protection laws. The CFPB has broad rulemaking authority
for a wide range of consumer protection laws that apply to all providers of consumer products and services, including
the Bank, as well as the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has
examination and enforcement authority over providers with more than $10 billion in assets. FDIC-insured institutions
with $10 billion or less in assets, like the Bank, continue to be examined by their applicable federal banking agencies.
Because abuses in connection with residential mortgages were a significant factor contributing to the
financial crisis, many rules issued by the CFPB, as required by the Dodd-Frank Act, addressed mortgage and
mortgage-related products, their underwriting, origination, servicing and sales. The Dodd-Frank Act significantly
26
expanded underwriting requirements applicable to loans secured by 1-4 family residential real property and augmented
federal law combating predatory lending practices. In addition to numerous disclosure requirements, the Dodd-Frank
Act and CFPB rules imposed new standards for mortgage loan originations on all lenders, including banks and savings
associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing
a presumption of compliance for certain “qualified mortgages.” The Regulatory Relief Act provided relief in
connection with mortgages for banks with assets of less than $10 billion, and, as a result, mortgages the Bank makes
are now considered to be qualified mortgages if they are held in portfolio for the life of the loan.
Over the last several years, the CFPB has taken an aggressive approach to the regulation (and supervision,
where applicable) of providers of consumer financial products and services. Given the increased number and
expansive nature of its regulatory initiatives, the CFPB has been subject to lawsuits brought by the banking industry
and other providers of consumer financial products and services. The CFPB’s approach will likely change under the
Trump Administration, but it remains unclear exactly what changes will occur or how quickly. In addition, certain
rules that the Biden Administration CFPB finalized, such as rules relating to overdraft fees and reporting requirements
for small business lending, may be subject to reversal by either the U.S. Congress or the new CFPB administration.
The CFPB’s rules have not had a significant impact on the Bank’s operations, except for higher compliance costs.
Company Web Site
The Company maintains a corporate website at www.landmarkbancorpinc.com. In addition, the Company
has an investor relations link at the Bank’s corporate website at www.banklandmark.com. Many of the Company’s
policies, including its code of business conduct and ethics, committee charters and other investor information, are
available on its website. The Company makes available free of charge on or through its website its Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, proxy statements, and annual reports as soon as
reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. Copies
of the Company’s filings with the SEC are also available from the SEC’s website (http://www.sec.gov) free of charge.
The Company will also provide copies of its filings free of charge upon written request to our Corporate Secretary at
Landmark Bancorp, Inc., 701 Poyntz Avenue, Manhattan, Kansas 66502.
27
STATISTICAL DATA
The Company has a fiscal year ending on December 31. Unless otherwise noted, the information presented
in this Annual Report on Form 10-K presents information on behalf of the Company as of and for the year ended
December 31, 2024.
Certain of the statistical data required to be disclosed by banks pursuant to the Securities Act of 1933 is set
forth in the following pages. This data should be read in conjunction with the consolidated financial statements,
related notes and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”
of this Annual Report on Form 10-K.
I. Distribution of Assets, Liabilities, and Stockholders’ Equity; Interest Rates and Interest Differential
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 during 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 the previous columns). The net changes attributable to the combined
effect of volume and rate which cannot be segregated have been allocated proportionately to the change due to volume
and the change due to rate.
Volume
Rate
Net
Volume
Rate
Net
Interest income:
Interest-bearing deposits at banks
$ (183)
$ 134 $ (49)
$ (66) $ (13) $ (79)
Investment securities
Taxable
(2,007)
1,710 (297)
423 2,757 3,180
Tax-exempt (1)
(271)
143 (128)
(148)
176 28
Loans (2)
5,055 4,590 9,645
10,103 8,174 18,277
Total
2,594 6,577 9,171
10,312 11,094 21,406
Interest expense:
Deposits
818 6,238 7,056
343 12,135 12,478
FHLB advances and other borrowings
(223)
61 (162)
3,140 324 3,464
Subordinated debentures
- 45 45
- 750 750
Repurchase agreements
(174)
19 (155)
73 280 353
Total
421 6,363 6,784
3,556 13,489 17,045
Net interest income
$ 2,173 $ 214 $ 2,387
$ 6,756 $ (2,395)
$ 4,361
(1) The change in tax-exempt income on investment securities is presented on a fully taxable equivalent basis, using a
(2) The change in tax-exempt loan income is presented on a fully taxable equivalent basis, using a 21% federal tax rate.
21% federal tax rate.
(Dollars in thousands)
Years ended December 31,
2023 vs 2022
Increase/(decrease) attributable to
2024 vs 2023
Increase/(decrease) attributable to
28
The following table sets forth information relating to average balances of interest-earning assets and interest-
bearing liabilities for the years ended December 31, 2024, 2023 and 2022. Average balances are derived from daily
average balances. Non-accrual loans were included in the computation of average balances but have been reflected
in the table as loans carrying a zero yield. The yields set forth in the table below include the effect of deferred fees,
discounts and premiums that are amortized or accreted to interest income or interest expense. This table reflects the
average yields on assets and average costs of liabilities for the periods indicated (derived by dividing income or
expense by the monthly average balance of assets or liabilities, respectively) as well as the "net interest margin" (which
reflects the effect of the net earnings balance) for the periods shown.
Average
balance
Income/
expense
Yield/
cost
Average
balance
Income/
expense
Yield/
cost
Average
balance
Income/
expense
Yield/
cost
(Dollars in thousands)
Interest bearing deposits at banks
6,303
$
193
$
3.06%
10,095
$
242
$
2.40%
60,014
$
321
$
0.53%
Investment securities
Taxable
318,483
9,297
2.92%
363,735
9,594
2.64%
342,131
6,414
1.87%
Tax-exempt (1)
114,445
3,698
3.23%
122,533
3,826
3.12%
132,601
3,798
2.86%
Loans receivable, net (2)
974,294
61,415
6.30%
891,487
51,770
5.81%
702,247
33,493
4.77%
1,413,525
74,603
5.28%
1,387,850
65,432
4.71%
1,236,993
44,026
3.56%
144,710
147,844
120,486
Total
1,558,235
$
1,535,694
$
1,357,479
$
Money market and checking
589,360
$
13,629
$
2.31%
591,000
$
10,818
$
1.83%
535,693
$
2,318
$
0.43%
Savings accounts
149,475
188
0.13%
161,417
126
0.08%
169,478
46
0.03%
Certificates of deposit
199,388
8,493
4.26%
139,956
4,310
3.08%
98,975
412
0.42%
Total deposits
938,223
22,310
2.38%
892,373
15,254
1.71%
804,146
2,776
0.35%
FHLB advances and other borrowings
70,226
3,886
5.53%
74,210
4,048
5.45%
15,061
584
3.88%
Subordinated debentures
21,651
1,635
7.55%
21,651
1,590
7.34%
21,651
840
3.88%
Repurchase agreements
12,216
344
2.82%
18,361
499
2.72%
13,239
146
1.10%
Total borrowings
104,093
5,865
5.63%
114,222
6,137
5.37%
49,951
1,570
3.14%
1,042,316
28,175
2.70%
1,006,595
21,391
0.51%
854,097
4,346
0.51%
385,976
414,760
383,590
129,943
114,339
119,792
Total
1,558,235
$
1,535,694
$
1,357,479
$
2.58%
2.58%
3.05%
46,428
$
3.28%
44,041
$
3.17%
39,680
$
3.21%
704
749
800
45,724
$
43,292
$
38,880
$
135.6%
137.9%
144.8%
Interest-earning assets:
Non-interest-bearing liabilities
Total interest-earning assets
to average interest-bearing liabilities
Stockholders' equity
Liabilities and Stockholders' Equity
Tax equivalent interest - imputed (1) (2)
Net interest income
Year ended December 31, 2022
Year ended December 31, 2024
Assets
Interest-bearing liabilities:
Total interest-bearing liabilities
Ratio of average interest-earning assets
Interest rate spread (3)
Year ended December 31, 2023
Net interest margin (4)
Non-interest-earning assets
(1) Income on tax-exempt investment securities is presented on a fully taxable equivalent basis, using a 21% federal tax rate.
(2) Income on tax-exempt loans is presented on a fully taxable equivalent basis, using a 21% federal tax rate.
(3) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-
bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
29
II. Investment Portfolio
Available-for-sale Investment Securities. The following table sets forth the carrying value of the Company’s
available-for-sale investment securities at the dates indicated. The Company’s federal agency obligations consist of
obligations of U.S. government-sponsored enterprises, primarily the FHLB. The Company’s agency mortgage-backed
securities portfolio consists of securities predominantly underwritten to the standards of and guaranteed by the government-
sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association
(“FNMA”) and Government National Mortgage Association (“GNMA”).
2024
2023
Available-for-sale investment securities:
U.S. treasury securities
$ 64,458
$ 95,667
Municipal obligations, tax-exempt
107,128
120,623
Municipal obligations, taxable
71,715
79,083
Agency mortgage-backed securities
129,211
157,396
Total available-for-sale investment securities, at fair value
$ 372,512 $ 452,769
As of December 31,
(Dollars in thousands)
The following table sets forth certain information regarding the carrying values, weighted average yields, and
maturities of the Company's available-for-sale investment securities portfolio, as of December 31, 2024. Yields on tax-
exempt obligations have been computed on a tax equivalent basis, using a 21% federal tax rate for 2024. Mortgage-backed
investment securities include scheduled principal payments and estimated prepayments based on observable market inputs.
Actual prepayments will differ from contractual maturities because borrowers have the right to prepay obligations with or
without prepayment penalties.
Carrying
Average
Carrying
Average
Carrying
Average
Carrying
Average
Carrying
Average
value
yield
value
yield
value
yield
value
yield
value
yield
Available-for-sale investment securities:
U.S. treasury securities
15,618
$
2.26%
39,047
$
3.09%
9,793
$
4.51%
-
$
0.00%
64,458
$
3.11%
Municipal obligations, tax-exempt
14,698
2.81%
35,242
2.80%
41,998
3.59%
15,190
4.24%
107,128
$
3.32%
Municipal obligations, taxable
3,493
2.49%
23,561
2.72%
26,408
3.70%
18,253
4.51%
71,715
$
3.53%
Agency mortgage-backed securities
1,460
2.23%
112,185
2.56%
15,566
2.08%
-
0.00%
129,211
$
2.50%
Total available-for-sale investment securities
35,269
$
2.51%
210,035
$
2.72%
93,765
$
3.47%
33,443
$
4.39%
372,512
$
3.04%
(Dollars in thousands)
As of December 31, 2024
One year or less
One to five years
Five to ten years
More than ten years
Total
30
III. Loan Portfolio
Loan Portfolio Composition. The following table sets forth the composition of the loan portfolio balances by type
of loan as of the dates indicated.
2024
2023
One-to-four family residential real estate loans
352,209
$
302,544
$
Construction and land loans
25,328
21,090
Commercial real estate loans
345,159
320,962
Commercial loans
192,325
180,942
Agriculture loans
100,562
89,680
Municipal loans
7,091
4,507
Consumer loans
29,679
28,931
Total gross loans
1,052,353
948,656
Net deferred loan costs and loans in process
(307)
(429)
Allowance for credit losses
(12,825)
(10,608)
Loans, net
1,039,221
$
937,619
$
As of December 31,
(Dollars in thousands)
The following table sets forth the contractual maturities of loans as of December 31, 2024. The table does not
include unscheduled prepayments.
1 year or
less
1-5 years
6-15 years
After 15
years
Total
One-to-four family residential real estate loans
$ 51,008
$ 145,832
$ 140,754
$ 14,615
$ 352,209
Construction and land loans
13,373 10,764 1,137 54 25,328
Commercial real estate loans
58,699
174,454
103,555
8,451
345,159
Commercial loans
158,942 33,125 258 - 192,325
Agriculture loans
69,733
23,970
6,748
111
100,562
Municipal loans
233 785 624 5,449 7,091
Consumer loans
13,630
14,408
1,580
61
29,679
Total gross loans
$ 365,618
$ 403,338
$ 254,656
$ 28,741
$ 1,052,353
(Dollars in thousands)
As of December 31, 2024
The following table sets forth, as of December 31, 2024, the dollar amount of all loans that mature after one year
and whether such loans had fixed interest rates or adjustable interest rates:
Fixed
Adjustable
Total
One-to-four family residential real estate loans
$ 49,479 $ 251,722 $ 301,201
Construction and land loans
7,728 4,227 11,955
Commercial real estate loans
61,672 224,788 286,460
Commercial loans
27,591 5,792 33,383
Agriculture loans
7,180 23,649 30,829
Municipal loans
1,301 5,557 6,858
Consumer loans
871 15,178 16,049
Total gross loans
155,822
$
530,913
$
686,735
$
As of December 31, 2024
(Dollars in thousands)
Non-performing Assets. The following table sets forth information with respect to non-performing assets, including
non-accrual loans and real estate acquired through foreclosure or by deed in lieu of foreclosure (“real estate owned”) as of
31
the dates indicated. The accrual of interest on non-performing loans is discontinued at the time the loan is ninety 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. Under the original terms of the Company’s non-
accrual loans as of December 31, 2024, interest earned on such loans for the years ended December 31, 2024, 2023 and 2022
would have increased interest income by $423,000, $96,000 and $137,000, respectively, if included in the Company’s interest
income for those years. No interest income related to non-accrual loans was included in interest income for the years ended
December 31, 2024, 2023 and 2022.
2024
2023
2022
Non-accrual loans
$ 13,115
$ 2,391
$ 3,326
Accruing loans over 90 days past due
- - -
Non-performing investments
- - -
Real estate owned, net
167
928
934
Non-performing assets
$ 13,282 $ 3,319
$ 4,260
Allowance for credit losses to total gross loans
1.22%
1.12%
1.03%
Non-performing loans to total gross loans
1.25%
0.25%
0.39%
Non-performing assets to total assets
0.84%
0.21%
0.28%
Allowance for credit losses to non-performing loans
97.79%
443.66%
264.31%
As of December 31,
(Dollars in thousands)
The increase in non-accrual loans as of December 31, 2024 was primarily related to one commercial loan relationship
totaling $8.3 million that transferred to non-accrual status during 2024. The commercial loan was modified to interest only
payments for six months in late 2024. The loan is current under the terms of the modification agreement but classified as
non-accrual. The decrease in non-accrual loans as of December 31, 2023 was primarily related to one CRE loan relationship
totaling $1.2 million that returned to accrual status during 2023.
At December 31, 2024, the $167,000 of real estate owned consisted of one parcel of agricultural land. The decrease
in real estate owned as of December 31, 2024 compared to December 31, 2023 was due to the sale of sale of one commercial
property and three residential real estate properties during 2024. The decrease in real estate owned as of December 31, 2023
compared to December 31, 2022 was due to a valuation allowance recorded against a residential real estate property.
As part of the Company’s credit risk management, the Company continues to aggressively manage the loan portfolio
to identify problem loans and has placed additional emphasis on its commercial and CRE relationships. As discussed in more
detail in the “Asset Quality and Distribution” section of “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of this Annual Report on Form 10-K, as of December 31, 2024, the Company concluded
its allowance for credit losses (“ACL”) was adequate based on the evaluation of the loan portfolio’s expected credit losses.
32
IV. Summary of Credit Loss Experience
The following table sets forth information with respect to the Company’s allowance for credit losses as of the
dates and for the periods indicated:
The Company recorded net loan charge-offs of $183,000 during 2024, compared to net loan recoveries of $44,000
during 2023. The net loan charge-offs were associated with various loans during 2024. The Company recorded net loan
recoveries of $44,000 during 2023 compared to net loan recoveries of $16,000 during 2022. The net loan recoveries in 2023
were primarily related to a $626,000 recovery related to a construction loan previously charged-off in 2011. In 2022, the
Company recorded net loan recoveries of $16,000 primarily related to a $150,000 recovery on a land loan.
2024
2023
2022
Balances at beginning of year
10,608
$
8,791
$
8,775
$
Adoption of ASC 326
-
1,523
-
Provision for credit losses
2,400
250
-
Charge-offs:
One-to-four family residential real estate loans
-
-
-
Construction and land loans
-
-
-
Commercial real estate loans
-
-
-
Commercial loans
(186)
(479)
-
Agriculture loans
(64)
-
-
Municipal loans
-
-
-
Consumer loans
(409)
(371)
(336)
Total charge-offs
(659)
(850)
(336)
Recoveries:
One-to-four family residential real estate loans
-
-
-
Construction and land loans
245
675
165
Commercial real estate loans
-
-
-
Commercial loans
35
35
38
Agriculture loans
54
74
59
Municipal loans
12
-
6
Consumer loans
130
110
84
Total recoveries
476
894
352
Net (charge-offs) recoveries
(183)
44
16
Balances at end of year
12,825
$
10,608
$
8,791
$
Allowance for credit losses to total gross loans
1.22%
1.12%
1.03%
Net loans charged-off to average net loans
0.02%
0.00%
0.00%
As of and for the years ended
(Dollars in thousands)
33
The distribution of the Company’s allowance for credit losses on loans at the dates indicated and the percent of loans
in each category to total loans is summarized in the following table. This allocation reflects management’s judgment as to
risks inherent in the types of loans indicated, but in general the Company’s total allowance for credit losses included in the
table is not restricted and is available to absorb all loan losses. The amount allocated in the following table to any category
should not be interpreted as an indication of expected actual charge-offs in that category.
As of December 31,
Amount
% Loan
type to
total
loans
Net
charge-
offs to
average
loans
Amount
% Loan
type to
total
loans
Net
charge-
offs to
average
loans
Amount
% Loan
type to
total
loans
Net
charge-
offs to
average
loans
One-to-four family residential real estate loans
$ 1,765
33.5%
0.00% $ 2,035
31.9%
0.00% $ 655
27.9%
0.00%
Construction and land loans
143
2.4% (0.97%)
150
2.2%
3.19%
117
2.7%
(0.72%)
Commercial real estate loans
4,506
32.8%
0.00%
4,518
33.8%
0.00%
3,158
35.8%
0.00%
Commercial loans
4,964
18.3%
0.08% 2,486
19.1%
(0.25%) 2,753
20.4%
(0.03%)
Agriculture loans
1,227
9.5%
0.01% 1,190
9.5%
0.09% 1,966
9.9%
(0.07%)
Municipal loans
51
0.7%
(0.19%) 15
0.5%
0.00% 5
0.2%
(0.29%)
Consumer loans
169
2.8%
0.95% 214
3.0%
(0.91%) 137
3.1%
0.98%
Total
$ 12,825
100.0%
0.02% $ 10,608
100.0%
0.00% $ 8,791
100.0%
0.00%
(Dollars in thousands)
2024
2023
2022
The decrease in the allowance for credit losses on the one-to-four family residential real estate loans as of December
31, 2024 compared to December 31, 2023 was primarily due to lower projected losses over the life of the loans in the portfolio.
The increase in the allowance for credit losses on the one-to-four family residential real estate loans as of December 31, 2023
compared to December 31, 2022 was primarily due to the adoption of ASU 2016-13, Financial Instruments-Credit Losses
(Topic 326), commonly referred to as “CECL” and, to a lesser extent, higher balances of loans in the portfolio.
The decrease in the allowance for credit losses on construction and land loans as of December 31, 2024 compared
to December 31, 2023 was primarily related to lower projected losses over the life of the loans in the portfolio. The increase
in the allowance for credit losses on construction and land loans as of December 31, 2023 compared to December 31, 2022
was primarily related to the adoption of CECL.
The decrease in the allowance for credit losses on CRE loans as of December 31, 2024 compared to December 31,
2023 was primarily related to lower projected losses over the life of the loans in the portfolio. The increase in the allowance
for credit losses on CRE loans as of December 31, 2023 compared to December 31, 2022 was primarily related to the
adoption of CECL and higher balances of loans in this portfolio.
The increase in the allowance for credit losses on commercial loans as of December 31, 2024 compared to December
31, 2023 was primarily related to an increase in the allowance for credit on individually evaluated loans. The decrease in the
allowance for credit losses on commercial loans as of December 31, 2023 compared to December 31, 2022 was primarily
related to the payoff of a loan that was previously individually evaluated for loss and had an allowance for credit losses
allocated against the principal balance.
The increase in the allowance for credit losses on agriculture loans as of December 31, 2024 compared to December
31, 2023 was primarily related to an increase in loan balances and higher forecast losses. The decrease in the allowance for
credit losses on agriculture loans as of December 31, 2023 compared to December 31, 2022 was primarily related to the
adoption of CECL.
The increase in the allowance for credit losses on municipal loans as of December 31, 2024 compared to December
31, 2023 was primarily related to an increase in loans. The increase in the allowance for credit losses on municipal loans as
of December 31, 2023 compared to December 31, 2022 was primarily related to the adoption of CECL.
The allowance for credit losses is discussed in more detail in the “Asset Quality and Distribution” section of “Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form
34
10-K. As of December 31, 2024, we believed the Company’s allowance for credit losses continued to be adequate based on
the Company’s evaluation of the loan portfolio’s expected incurred losses.
V. Deposits
The following table presents the average deposit balances and the average rate paid on those balances for the years
indicated.
(Dollars in thousands)
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Non-interest bearing demand
$ 362,871
-
$ 393,448
-
Money market and checking
589,360
2.31%
591,000
1.83%
Savings accounts
149,475
0.13%
161,417
0.08%
Certificates of deposit
199,388
4.26%
139,956
3.08%
Total
$ 1,301,094
$ 1,285,821
Years ended December 31,
2023
2024
Total deposits include uninsured deposits, excluding collateralized public fund deposits, of $181.5 million and
$197.2 million as of December 31, 2024 and 2023, respectively. This represents 13.7% of our total deposits at December 31,
2024 and compares favorably with other similar community banking organizations. Approximately 93.1% of the Company’s
total deposits were considered core deposits at December 31, 2024. These deposit balances are from retail, commercial and
public fund customers located in the markets where the Company has bank branch locations.
The following table presents the maturities of certificates of deposit $250,000 or greater.
2024
2023
Three months or less
$ 21,441 $ 23,919
Over three months through six months
18,989 11,069
Over six months through 12 months
6,773 8,697
Over 12 months
5,023 6,545
Total
$ 52,226 $ 50,230
(Dollars in thousands)
As of December 31,
VI. Return on Equity and Assets
The following table presents information on return on average equity, return on average assets, equity to total assets
and our dividend payout ratio.
2024
2023
2022
Return on average assets
0.83%
0.80%
0.73%
Return on average equity
10.01%
10.70%
8.25%
Equity to total assets
8.65%
8.13%
7.41%
Dividend payout ratio
35.40%
35.87%
42.55%
As of or for the years ended December 31,
35
ITEM 1A. RISK FACTORS
An investment in our securities is subject to certain risks inherent in our business. Before making an investment
decision, you should carefully consider the risks and uncertainties described below together with all of the other information
included in this report. In addition to the risks and uncertainties described below, other risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial
condition and results of operations. The value or market price of our securities could decline due to any of these identified or
other risks, and you could lose all or part of your investment.
Credit Risks
We must effectively manage our credit risk.
There are risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risks of
nonpayment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in economic
and industry conditions. In general, these risks have increased as a result of recent changes in prevailing interest rates and
uncertainties associated with inflation, which have potentially increased the risk of a near-term decline in growth or an
economic downturn. We attempt to minimize our credit risk through prudent loan application approval procedures, careful
monitoring of the concentration of our loans within specific industries and periodic independent reviews of outstanding loans
by our credit review department. However, we cannot assure you that such approval and monitoring procedures will reduce
these credit risks.
Most of our loans are commercial, real estate, or agriculture loans, each of which is subject to distinct types of risk.
To reduce the lending risks we face, we generally take a security interest in borrowers’ property for all three types of loans.
In addition, we sell certain residential real estate loans to third parties. Nevertheless, the risk of non-payment is inherent in
all types of loans, and if we are unable to collect amounts owed, it may materially affect our operations and financial
performance. For a more complete discussion of our lending activities see “Item 1. Business” of this Annual Report on Form
10-K.
Our business is subject to domestic and, to a lesser extent, international economic conditions and other factors, many
of which are beyond our control and could materially and adversely affect us.
Our financial performance generally, and in particular the ability of customers to pay interest on and repay principal
of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and
services we offer, is highly dependent upon the business environment not only in the markets where we operate, but also in
the state of Kansas generally and in the U.S. as a whole. A favorable business environment is generally characterized by,
among other factors: economic growth; efficient capital markets; low inflation; low unemployment; high business and
investor confidence; and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused
by: declines in economic growth, business activity or investor or business confidence; limitations on the availability or
increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; uncertainty in U.S. trade
policies, legislation, treaties and tariffs; natural disasters; acts of war or terrorism, including the current conflict in Ukraine;
widespread disease or pandemics; or a combination of these or other factors.
Economic conditions in the state of Kansas are generally impacted by commodity prices, which may adversely
impact the Kansas economy, specifically the agriculture sector. Declines in commodity prices could materially and adversely
affect our results of operations. During 2024, commodity prices declined from near record highs experienced in 2023. The
outlook is for commodity prices to continue to decline modestly over the next few years before stabilizing, but are subject to
global economic and market conditions.
The agricultural economy in the Midwest, including Kansas, has been stable over the previous several years. A
prolonged period of weakness in the agricultural economy could result in a decrease in demand for loans or other products
and services offered by us, an increase in agricultural loan delinquencies and defaults, an increase in impaired assets and
foreclosures, a decline in the value of our loans secured by real estate, and an inability to sell foreclosed assets. The effects
of a prolonged period of a weakened agricultural economy could have a material adverse effect on our business, financial
condition and results of operations.
36
Continued elevated levels of inflation could adversely impact our business and results of operations.
The U.S. has recently experienced elevated levels of inflation, with the consumer price index climbing
approximately 2.9% in 2024. Continued levels of inflation could have complex effects on our business and results of
operations, some of which could be materially adverse. For example, elevated inflation harms consumer purchasing power,
which could negatively affect our retail customers and the economic environment and, ultimately, many of our business
customers, and could also negatively affect our levels of non-interest expense. In addition, if interest rates continue to remain
elevated, the value of our securities portfolio would be negatively impacted. Continued elevated levels of inflation could also
cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our
clients’ ability to repay indebtedness. It is also possible that governmental responses to the current inflation environment
could adversely affect our business, such as changes to monetary and fiscal policy that are too strict, or the imposition or
threatened imposition of price controls. The duration and severity of the current inflationary period cannot be estimated with
precision.
Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.
We maintain our allowance for credit losses at a level considered appropriate by management to absorb all expected
future losses expected in the loan portfolio at the balance sheet date. Additionally, our Board of Directors regularly monitors
the appropriateness of our allowance for credit losses. The allowance is also subject to regulatory examinations and a
determination by the regulatory agencies as to the appropriate level of the allowance. The amount of future credit losses is
susceptible to changes in economic, operating and other conditions, including changes in interest rates and the value of the
underlying collateral, which may be beyond our control, and such losses may exceed current estimates. At December 31,
2024 and 2023, our allowance for credit losses as a percentage of total loans, was 1.22% and 1.12%, respectively, and as a
percentage of total non-performing loans was 97.79% and 443.66%, respectively. Although management believes that the
allowance for credit losses is appropriate to absorb future losses on any existing loans that may become uncollectible, we
cannot predict credit losses with certainty nor can we assure you that our allowance for credit losses will prove sufficient to
cover actual credit losses in the future. Credit losses in excess of our reserves will adversely affect our business, financial
condition and results of operations.
Also, as of January 1, 2023, the Company was required to adopt accounting standard update (“ASU”) 2016-13, Financial
Instruments – Credit Losses (Topic 326). CECL changed how the Company calculates its allowance for credit losses by
requiring the Company to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected
credit losses as allowances for credit losses. This is a change from the previous method of providing allowances for credit
losses that are incurred.
Our concentration of one-to-four family residential mortgage loans may result in lower yields and profitability.
One-to-four family residential mortgage loans comprised $352.2 million and $302.5 million, or 33.5% and 31.9%,
of our loan portfolio at December 31, 2024 and 2023, respectively. These loans are secured primarily by properties located
in the state of Kansas. Our concentration of these loans results in lower yields relative to other loan categories within our
loan portfolio. While these loans generally possess higher yields than investment securities, their repayment characteristics
are not as well defined, and they generally possess a higher degree of interest rate risk versus other loans and investment
securities within our portfolio. This increased interest rate risk is due to the repayment and prepayment options inherent in
residential mortgage loans which are exercised by borrowers based upon the overall level of interest rates. These residential
mortgage loans are generally made on the basis of the borrower’s ability to make repayments from his or her employment
and the value of the property securing the loan. Thus, as a result, repayment of these loans is also subject to general economic
and employment conditions within the communities and surrounding areas where the property is located.
A decline in residential real estate market prices or home sales has the potential to adversely affect our one-to-four
family residential mortgage portfolio in several ways, such as a decrease in collateral values and an increase in non-
performing loans, each of which could adversely affect our operating results and/or financial condition.
37
Our loan portfolio has a large concentration of real estate loans, which involve risks specific to real estate value.
Real estate lending (including CRE, construction and land and residential real estate) comprises the largest portion
of our loan portfolio. These categories were $722.7 million, or approximately 68.7% of our total loan portfolio, as of
December 31, 2024, as compared to $644.6 million, or approximately 67.9% of our total loan portfolio, as of December 31,
2023. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in
the geographic area in which the real estate is located. Although a significant portion of CRE and construction and land loans
are secured by a secondary form of collateral, adverse developments affecting real estate values in one or more of our markets
could increase the credit risk associated with our loan portfolio. Additionally, real estate lending typically involves higher
loan principal amounts, and the repayment of the loans generally is dependent, in large part, on sufficient income from the
properties securing the loans to cover operating expenses and debt service. Economic events or governmental regulations
outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected
properties, including (i) declines in the rents or decreases in occupancy and, therefore, in the cash flows generated by those
real properties on which the borrowers depend to fund their loan payments to us, (ii) decreases in the values of those real
properties, which make it more difficult for the borrowers to sell those real properties for amounts sufficient to repay their
loans in full, and (iii) job losses of residential home buyers, which makes it more difficult for these borrowers to fund their
loan payments. Adverse changes affecting real estate values, including decreases in office occupancy due to the shift to
remote working environments following the COVID-19 pandemic, and the liquidity of real estate in one or more of the
Company’s markets could increase the credit risk associated with the Company’s loan portfolio, significantly impair the value
of property pledged as collateral on loans and affect the Company’s ability to sell the collateral upon foreclosure without a
loss or additional losses or the Company’s ability to sell those loans on the secondary market.
If the loans that are collateralized by real estate become troubled during a time when market conditions are declining
or have declined, then we may not be able to realize the amount of security that we anticipated at the time of originating the
loan, which could cause us to increase our provision for credit losses and adversely affect our operating results and financial
condition. In light of the uncertainty that exists in the economy and credit markets nationally, there can be no guarantee that
we will not experience additional deterioration in credit performance by our real estate loan customers.
The Company’s loan portfolio has a large concentration of CRE loans, which involve risks specific to real estate
values and the health of the real estate market generally.
As of December 31, 2024, the Company had $370.5 million of CRE loans, consisting of $110.7 million of non-
owner occupied loans, $197.2 million of owner occupied loans, $37.3 million of loans secured by multifamily residential
properties and $25.3 million of construction and land development loans. CRE loans represented 35.2% of the Company’s
total loan portfolio and 272% of the Bank’s total capital at December 31, 2024. The market value of real estate can fluctuate
significantly in a short period of time as a result of interest rates and market conditions in the area in which the real estate is
located and some of these values have been negatively affected by the recent rise in prevailing interest rates. Adverse
developments affecting real estate values in the Company’s market areas could increase the credit risk associated with the
Company’s loan portfolio. Additionally, the repayment of CRE loans generally is dependent, in large part, on sufficient
income from the properties securing the loans to cover operating expenses and debt service. Economic events, including
decreases in office occupancy due to the shift to remote working environments following the COVID-19 pandemic, or
governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and
market values of the affected properties. If the loans that are collateralized by real estate become troubled during a time when
market conditions are declining or have declined, then the Company may not be able to realize the full value of the collateral
that the Company anticipated at the time of originating the loan, which could force the Company to take charge-offs or require
the Company to increase the Company’s provision for credit losses, which could have a material adverse effect on the
Company’s business, financial condition, results of operations and growth prospects.
Commercial loans make up a significant portion of our loan portfolio.
Commercial loans comprised $192.3 million and $180.9 million, or 18.3% and 19.1%, of our loan portfolio at
December 31, 2024 and 2023, respectively. Our commercial loans are made based primarily on the identified cash flow of
the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral is accounts
receivable, inventory, or machinery. Credit support provided by the borrower for most of these loans, and the probability of
repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any exists. As a
result, in the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be
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substantially dependent on the ability of the borrower to collect amounts due from its customers. The collateral securing
other loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the
business. Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as
well as collateral that is generally less readily marketable, losses incurred on a small number of commercial loans could have
a material adverse impact on our financial condition and results of operations.
The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our
status as a Preferred Lender under the SBA loan programs and our ability to comply with applicable SBA lending
requirements.
As an SBA Preferred Lender, we enable our clients to obtain SBA loans without being subject to the potentially
lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the
lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk
management. When weaknesses are identified, the SBA may request corrective actions or impose other restrictions, including
revocation of the lender’s Preferred Lender status. If we lose our status as a Preferred Lender, we may lose our ability to
compete effectively with other SBA Preferred Lenders, and as a result we could experience a material adverse effect to our
financial results. Any changes to the SBA program, including changes to the level of guaranty provided by the federal
government on SBA loans or changes to the level of funds appropriated by the federal government to the various SBA
programs, may also have an adverse effect on our business, results of operations and financial condition.
In order for a borrower to be eligible to receive an SBA loan, the lender must establish that the borrower would not
be able to secure a bank loan without the credit enhancements provided by a guaranty under the SBA program. Accordingly,
the SBA loans in our portfolio generally have weaker credit characteristics than the rest of our portfolio, and may be at greater
risk of default in the event of deterioration in economic conditions or the borrower’s financial condition. In the event of a
loss resulting from default and a determination by the SBA that there is a deficiency in the manner in which the loan was
originated, funded or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty,
or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from us. Management
has estimated losses inherent in the outstanding guaranteed portion of SBA loans and recorded a recourse reserve at a level
determined to be appropriate. Significant increases to the recourse reserve may materially decrease our net income, which
may adversely affect our business, results of operations and financial condition.
Our agriculture loans involve a greater degree of risk than other loans, and the ability of the borrower to repay may
be affected by many factors outside of the borrower’s control.
Agriculture operating loans comprised $51.9 million and $49.6 million, or 4.9% and 5.3%, of our loan portfolio at
December 31, 2024 and 2023, respectively. The repayment of agriculture operating loans is dependent on the successful
operation or management of the farm property. Likewise, agricultural operating loans involve a greater degree of risk than
lending on residential properties, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets
such as farm equipment, livestock or crops. We generally secure agricultural operating loans with a blanket lien on livestock,
equipment, food, hay, grain and crops. Nevertheless, any repossessed collateral for a defaulted loan may not provide an
adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or
depreciation.
We also originate agriculture real estate loans. At December 31, 2024 and 2023, agricultural real estate loans totaled
$48.7 million and $40.1 million, or 4.6% and 4.2% of our total loan portfolio, respectively. Agricultural real estate lending
involves a greater degree of risk and typically involves larger loans to single borrowers than lending on single-family
residences. As with agriculture operating loans, payments on agricultural real estate loans are dependent on the profitable
operation or management of the farm property securing the loan. The success of the farm may be affected by many factors
outside the control of the farm borrower, including adverse weather conditions that prevent the planting of a crop or limit
crop yields (such as hail, drought and floods), loss of livestock due to disease or other factors, declines in market prices for
agricultural products (both domestically and internationally) and the impact of government regulations (including changes in
price supports, tariffs, trade agreements, subsidies and environmental regulations). In addition, many farms are dependent
on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm.
If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired. The
primary crops in our market areas are wheat, corn and soybean. Accordingly, adverse circumstances affecting wheat, corn
and soybean crops could have an adverse effect on our agricultural real estate loan portfolio.
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Our business is concentrated in and dependent upon the continued growth and welfare of the markets in which we
operate, including eastern, central, southeast and southwest Kansas.
We operate primarily in eastern, central, southeast and southwest Kansas, and as a result, our financial condition,
results of operations and cash flows are subject to changes in the economic conditions in those areas. Although each market
we operate in is geographically and economically diverse, our success depends upon the business activity, population, income
levels, deposits and real estate activity in each of these markets. Although our customers’ business and financial interests
may extend well beyond our market area, adverse economic conditions that affect our specific market area could reduce our
growth rate, affect the ability of our customers to repay their loans to us and generally affect our financial condition and
results of operations. Because of our geographic concentration, we are less able than other regional or national financial
institutions to diversify our credit risks across multiple markets.
Non-performing assets take significant time to resolve and adversely affect our results of operations and financial
condition, and could result in further losses in the future.
As of December 31, 2024, our non-performing loans (which consist of non-accrual loans and loans past due 90 days
or more and still accruing interest) totaled $13.1 million, or 1.25% of our loan portfolio, and our non-performing assets (which
include non-performing loans plus real estate owned) totaled $13.3 million, or 0.84% of total assets. In addition, we had $6.2
million in accruing loans that were 30-89 days delinquent as of December 31, 2024.
Our non-performing assets adversely affect our net income in various ways. We do not record interest income on
non-accrual loans or other real estate owned, thereby adversely affecting our net income and returns on assets and equity,
increasing our loan administration costs and adversely affecting our efficiency ratio. When we take collateral in foreclosure
and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. These
non-performing loans and other real estate owned also increase our risk profile and the capital our regulators believe is
appropriate in light of such risks. The resolution of non-performing assets requires significant time commitments from
management and can be detrimental to the performance of their other responsibilities. If we experience increases in non-
performing loans and non-performing assets, our net interest income may be negatively impacted and our loan administration
costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets
and equity.
Interest Rate Risks
Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and
results of operations.
In addition to being affected by general economic conditions, our earnings and growth are affected by the policies
of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit
conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market operations
in U.S. government securities, adjustments of the discount rate and changes in reserve requirements against bank
deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of
credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.
The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results
of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our
business, financial condition and results of operations cannot be predicted.
The Federal Reserve has indicated that it is working to avoid abrupt or unpredictable changes in economic or
financial conditions so as not to disrupt the financial systems, also known as “shocks;” despite this, the impact of these
changes cannot be certain. Vulnerabilities in the financial system can amplify the impact of an initial shock following rate
increases, potentially leading to unintended volatility, as well as to disruptions in the provision of financial services, such as
clearing payments, the provision of liquidity, and the availability of credit. Furthermore, asset liquidation pressures can be
amplified by liquidity mismatches and the leverage of certain nonbank financial intermediaries such as hedge funds. The
financial crisis in March 2020 also demonstrated that pressures on dealer intermediation can limit the availability of liquidity
during times of market stress. Given the interconnectedness of the global financial system, these vulnerabilities could impact
the Company’s business operations and financial condition.
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Interest rates and other conditions impact our results of operations.
Our profitability is in part a function of the spread between the interest rates earned on investments and loans and
the interest rates paid on deposits and other interest-bearing liabilities. Like most banking institutions, our net interest spread
and margin will be affected by general economic conditions and other factors, including fiscal and monetary policies of the
federal government that influence market interest rates and our ability to respond to changes in such rates. At any given time,
our assets and liabilities will be such that they are affected differently by a given change in interest rates. It is currently
expected that during 2025, and perhaps beyond, the Federal Open Market Committee of the Federal Reserve, (“ FOMC”)
will continue to monitor interest rates, in part to reduce the rate of inflation to its preferred level. In 2024, the FOMC decreased
at various dates throughout the year the target range for the federal funds rate from 5.25% to 5.50% to a range of 4.25% to
4.50%. These decreases were made in response to declining inflationary pressures. If the FOMC further increases or decreases
the targeted federal funds rates, overall interest rates likely will also rise or fall, which may negatively impact the entire
national economy. As a result, an increase or decrease in rates, the length of loan terms or the mix of adjustable and fixed
rate loans in our portfolio could have a positive or negative effect on our net income, capital and liquidity. We measure
interest rate risk under various rate scenarios and using specific criteria and assumptions. A summary of this process, along
with the results of our net interest income simulations, is presented in “Item 7A. Quantitative and Qualitative Disclosures
About Market Risk” of this Annual Report on Form 10-K. Although we believe our current level of interest rate sensitivity
is reasonable and effectively managed, significant fluctuations in interest rates may have an adverse effect on our business,
financial condition and results of operations.
Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates
that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in non-
performing assets and a reduction of income recognized, which could have a material adverse effect on our results of
operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest
receivable, which decreases interest income. Subsequently, we continue to have a cost to fund the loan, which is reflected as
interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of
non-performing assets would have an adverse impact on net interest income.
Continued high interest rates may result in a further decline in value of our fixed-rate debt securities. The unrealized
losses resulting from holding these securities would be recognized in other comprehensive income and reduce total
stockholders' equity. Unrealized losses do not negatively impact our regulatory capital ratios; however, tangible common
equity and the associated ratios would be reduced. If debt securities in an unrealized loss position are sold, such losses become
realized and will reduce our regulatory capital ratios.
Declines in value may adversely impact the carrying amount of our investment portfolio and result in other-than-
temporary impairment charges.
We may be required to record impairment charges on our investment securities if they suffer declines in value that
are considered other-than-temporary. If the credit quality of the securities in our investment portfolio deteriorates, we may
also experience a loss in interest income from the suspension of either interest or dividend payments. Numerous factors,
including lack of liquidity for resales of certain investment securities, absence of reliable pricing information for investment
securities, adverse changes in business climate or adverse actions by regulators could have a negative effect on our investment
portfolio in future periods.
The value of the financial instruments we own may decline in the future.
An increase in market interest rates may affect the market value of our securities portfolio, potentially reducing
accumulated other comprehensive income and/or earnings. Additionally, an increase in market interest rates may reduce the
value of our loan portfolio, although, in accordance with U.S. generally accepted accounting principles (“GAAP”), such a
decline in value may not be reflected in the carrying balance of our loans in the same manner as our debt securities available-
for-sale. The market value of these investments may be affected by factors other than the underlying performance of the
servicer of the securities or the mortgages underlying the securities, such as changes in the interest rate environment, negative
trends in the residential and CRE markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity
in the secondary market for certain investment securities. In addition, we may determine to sell securities in our available-
for-sale investment securities portfolio, and any such sale could cause us to realize currently unrealized losses that resulted
from the recent increases in the prevailing interest rates.
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Downgrades in the credit rating of one or more insurers that provide credit enhancement for our state and municipal
securities portfolio may have an adverse impact on the market for and valuation of these types of securities.
We invest in tax-exempt and taxable state and local municipal investment securities, some of which are insured by
monoline insurers. As of December 31, 2024, we had $178.8 million of municipal securities, which represented 48.0% of
our total securities portfolio. Even though management generally purchases municipal securities on the overall credit strength
of the issuer, the reduction in the credit rating of an insurer may negatively impact the market for and valuation of our
investment securities. Such downgrade could adversely affect our liquidity, financial condition and results of operations.
Legal, Accounting and Compliance Risks
Legislative and regulatory reforms applicable to the financial services industry may have a significant impact on our
business, financial condition and results of operations.
The laws, regulations, rules, policies and regulatory interpretations governing us are constantly evolving and may
change significantly over time as Congress and various regulatory agencies react to adverse economic conditions or other
matters. The implementation of any current, proposed or future regulatory or legislative changes to laws applicable to the
financial industry may impact the profitability of our business activities and may change certain of our business practices,
including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest
spreads, and could expose us to additional costs, including increased compliance costs. These regulations and legislation may
be impacted by the political ideologies of the executive and legislative branches of the U.S. government as well as the heads
of regulatory and administrative agencies, which may change as a result of elections.
The Company and the Bank are subject to stringent capital and liquidity requirements.
The Basel III Rule imposes stringent capital requirements on bank holding companies and banks. In addition to the
minimum capital requirements, banks and bank holding companies are also required to maintain a capital conservation buffer
of 2.5% of Common Equity Tier 1 Capital on top of minimum risk-weighted asset ratios to make capital distributions
(including for dividends and repurchases of stock) and pay discretionary bonuses to executive officers without restriction.
Banking institutions that do not maintain capital in excess of the Basel III Rule standards including the capital conservation
buffer face constraints on the payment of dividends, equity repurchases and compensation based on the amount of the
shortfall. Accordingly, if the Bank fails to maintain the applicable minimum capital ratios and the capital conservation buffer,
distributions to the Company may be prohibited or limited.
Future increases in minimum capital requirements could adversely affect our net income. Furthermore, our failure
to comply with the minimum capital requirements could result in our regulators taking formal or informal actions against us,
which could restrict our future growth or operations.
We may be required to pay higher FDIC insurance premiums in the future.
Future bank failures may prompt the FDIC to increase its premiums above the current levels or to issue special
assessments. The Bank generally is unable to control the amount of premiums or special assessments that it or its subsidiary
is required to pay for FDIC insurance. Any future changes in the calculation or assessment of FDIC insurance premiums may
have a material adverse effect on the Bank’s results of operations, financial condition, and the ability to continue to pay
dividends on common stock at the current rate or at all.
There is uncertainty surrounding potential legal, regulatory and policy changes by new presidential administrations
in the United States that may directly affect financial institutions and the global economy.
Changes in federal policy and at regulatory agencies occur over time through policy and personnel changes following
elections and changes in federal administration, including the change in administration which occurred in January 2025,
which lead to changes involving the level of oversight and focus on the financial services industry. During his campaign,
newly elected President Trump proposed numerous regulatory and policy changes including new tariffs, mass deportations,
tax changes and general deregulation, The nature, timing and economic and political effects of potential changes to the current
42
legal and regulatory framework affecting financial institutions remain highly uncertain, and may take time to be implemented.
Uncertainty surrounding future changes may adversely affect our operating environment and therefore our business, financial
condition, results of operations and growth prospects.
We are subject to changes in accounting principles, policies or guidelines.
Our financial performance is impacted by accounting principles, policies and guidelines. Some of these policies
require the use of estimates and assumptions that may affect the value of our assets or liabilities and financial results. Some
of our accounting policies are critical because they require management to make difficult, subjective and complex judgments
about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under
different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are
incorrect, we may experience material losses.
From time to time, the FASB and the SEC change the financial accounting and reporting standards or the
interpretation of those standards that govern the preparation of our financial statements. In addition, trends in financial and
business reporting, including environmental social and governance (ESG) related disclosures, could require us to incur
additional reporting expense. These changes are beyond our control, can be difficult to predict and could materially impact
how we report our financial condition and results of operations. Changes in these standards are continuously occurring, and
more drastic changes may occur in the future. The implementation of such changes could have a material adverse effect on
our financial condition and results of operations.
Our business is affected from time to time by federal and state laws and regulations relating to hazardous
substances.
Under the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), owners
and operators of properties containing hazardous substances may be liable for the costs of cleaning up the substances.
CERCLA and similar state laws can affect us both as an owner of branches and other properties used in our business and as
a lender holding a security interest in property which is found to contain hazardous substances. In particular, our branch office
located in Iola is located on property that has been designated as a “Superfund” site under CERCLA, and we may hold
mortgages on properties located in Iola that are also designated as “Superfund” sites. While CERCLA contains an exemption
for holders of security interests, the exemption is not available if the holder participates in the management of a property, and
some courts have broadly defined what constitutes participation in management of property. Moreover, CERCLA and similar
state statutes can affect our decision whether or not to foreclose on a property. Before foreclosing on CRE, our general policy
is to obtain an environmental report, thereby increasing the costs of foreclosure. In addition, the existence of hazardous
substances on a property securing a troubled loan may cause us to elect not to foreclose on the property, thereby reducing our
flexibility in handling the loan.
Operational, Strategic and Reputational Risks
We may experience difficulties in managing our growth, and our growth strategy involves risks that may negatively
impact our net income.
As part of our general strategy, we may acquire banks, branches and related businesses that we believe provide a
strategic fit with our business. In the past, we have acquired a number of local banks and branches, and, to the extent that we
grow through future acquisitions, we cannot assure you that we will be able to adequately and profitably manage this growth.
Acquiring other banks and businesses will involve risks commonly associated with acquisitions, including:
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potential exposure to unknown or contingent liabilities of banks and businesses we acquire;
•
exposure to potential asset quality issues of the acquired bank or related business;
•
difficulty and expense of integrating the operations and personnel of banks and businesses we acquire;
•
potential disruption to our business;
•
potential diversion of our management’s time and attention; and
•
the possible loss of key employees and customers of the banks and businesses we acquire.
43
In addition to acquisitions, we may expand into additional communities or attempt to strengthen our position in our
current markets by undertaking additional branch openings. We believe that it generally takes several years for new banking
facilities to first achieve operational profitability, due to the impact of organization and overhead expenses and the start-up
phase of generating loans and deposits. To the extent that we undertake additional branch openings, we are likely to
experience the effects of higher operating expenses relative to operating income from the new operations, which may have
an adverse effect on our levels of reported net income, return on average equity and return on average assets.
We face intense competition in all phases of our business from other banks and financial institutions.
The banking and financial services business in our market is highly competitive. Our competitors include large
national and regional banks, local community banks, savings and loan associations, securities and brokerage companies,
mortgage companies, insurance companies, finance companies, money market mutual funds, credit unions, fintech
companies, digital asset service providers, and other non-bank financial service providers, many of which have greater
financial, marketing and technological resources than us. Many of these competitors are not subject to the same regulatory
restrictions that we are and may be able to compete more effectively as a result. Increased competition in our market may
result in a decrease in the amounts of our loans and deposits, reduced spreads between loan rates and deposit rates or loan
terms that are more favorable to the borrower. Any of these results could have a material adverse effect on our ability to grow
and remain profitable. If increased competition causes us to significantly discount the interest rates we offer on loans or
increase the amount we pay on deposits, our net interest income could be adversely impacted. If increased competition causes
us to relax our underwriting standards, we could be exposed to higher losses from lending activities. Additionally, many of
our competitors are much larger in total assets and capitalization, have greater access to capital markets and offer a broader
range of financial services than we can offer.
Technology and other changes are allowing consumers and businesses to complete financial transactions that
historically have involved banks through alternative methods. For example, the wide acceptance of internet-based commerce
has resulted in a number of alternative payment processing systems and lending platforms in which banks play only minor
roles. Customers can also maintain funds in prepaid debit cards or digital currencies, and pay bills and transfer funds directly
without the direct assistance of banks. The diminishing role of banks as financial intermediaries has resulted and could
continue to result in the loss of fee income, as well as the loss of customer deposits and the related income generated from
those deposits. The loss of these revenue streams and the potential loss of lower cost deposits as a source of funds could have
a material adverse effect on our business, financial condition and results of operations.
While we do not offer products relating to digital assets, including cryptocurrencies, stablecoins and other similar
assets, there has been a significant increase in digital asset adoption globally over the past several years. Certain characteristics
of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without
the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the
anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such
transactions. Accordingly, digital asset service providers—which, at present are not subject to the same degree of scrutiny
and oversight as banking organizations and other financial institutions—are becoming active competitors to more traditional
financial institutions. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the
loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of
these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial
condition and results of operations. Potential partnerships with digital asset companies, moreover, could also entail
significant investment.
The financial services industry continues to undergo rapid technological changes with frequent introductions of new
technology-driven products and services, including internet services, cryptocurrencies and payment systems. In addition to
better serving customers, the effective use of technology increases efficiency as well as enables financial institutions to reduce
costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology to
provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies
in our operations as we continue to grow and expand our market area. Many of our larger competitors have substantially
greater resources to invest in technological improvements. As a result, they may be able to offer additional or superior
products to those that we will be able to offer, which would put us at a competitive disadvantage. Accordingly, we cannot
provide you with assurance that we will be able to effectively implement new technology-driven products and services or be
successful in marketing such products and services to our customers.
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Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could
otherwise adversely affect the Company’s business.
Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into the Company’s
products or those developed by its third party partners. As with many developing technologies, artificial intelligence presents
risks and challenges that could affect its further development, adoption, and use, and therefore our business. Artificial
intelligence algorithms may be flawed, for example datasets may contain biased information or otherwise be insufficient, and
inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in
burdensome new regulations. If the analyses that products incorporating artificial intelligence assist in producing for the
Company or its third party partners are deficient, biased or inaccurate, the Company could be subject to competitive harm,
potential legal liability and brand or reputational harm. The use of artificial intelligence may also present ethical issues. If the
Company or its third party partners offer artificial intelligence enabled products that are controversial because of their
purported or real impact on human rights, privacy, or other issues, the Company may experience competitive harm, potential
legal liability and brand or reputational harm. In addition, the Company expects that governments will continue to assess and
implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or
efficiency of products and services and those developed by the Company’s third party partners.
Attractive acquisition opportunities may not be available to us in the future.
We expect that other banking and financial service companies, many of which have significantly greater resources
than us, will compete with us in acquiring other financial institutions if we pursue such acquisitions. This competition could
increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory
approvals. If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that
we believe is in our best interests. Among other things, our regulators consider our capital, liquidity, profitability, regulatory
compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals. Any acquisition
could be dilutive to our earnings and stockholders' equity per share of our common stock.
Our community banking strategy relies heavily on our management team, and the unexpected loss of key managers
may adversely affect our operations.
Much of our success to date has been influenced strongly by our ability to attract and to retain senior management
experienced in banking and financial services and familiar with the communities in our market area. Our ability to retain
executive officers, the current management teams, branch managers and loan officers will continue to be important to the
successful implementation of our strategy. It is also critical, as we grow, to be able to attract and retain qualified additional
management and loan officers with the appropriate level of experience and knowledge about our market area to implement
our community-based operating strategy. The unexpected loss of services of any key management personnel, or the inability
to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and
results of operations.
Labor shortages and failure to attract and retain qualified employees could negatively impact our business, results of
operations and financial condition.
A number of factors may adversely affect the labor force available to us or increase labor costs, including high
employment levels, and decreased labor force size and participation. Although we have not experienced any
material labor shortage to date, we have recently observed an overall tightening and increasingly competitive local labor
market. As of December 31, 2024, the unemployment rate in Kansas was 3.6%. A sustained labor shortage or increased
turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and
retain employees.
In addition, if we are unable to hire and retain employees capable of performing at a high-level, or if mitigation
measures we may take to respond to a decrease in labor availability have unintended negative effects, our business could be
adversely affected. An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, could have a material
adverse impact on our operations, results of operations, liquidity or cash flows.
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The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-
related incidents could have a material adverse effect on our business, financial condition, results of operations and
growth prospects.
As a bank, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related
incidents that may be committed against us or our clients, which may result in financial losses or increased costs to us or our
clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against
our clients, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud,
electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Information security breaches and
cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us or our clients, denial or
degradation of service attacks and malware or other cyber-attacks.
In recent periods, there continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks
within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting
commercial bank accounts. Moreover, several large corporations, including financial institutions and retail companies, have
suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also
sensitive financial and other personal information of their customers and employees and subjecting them to potential
fraudulent activity. Some of our clients may have been affected by these breaches, which could increase their risks of identity
theft and other fraudulent activity that could involve their accounts with us.
Information pertaining to us and our clients is maintained, and transactions are executed, on networks and systems
maintained by us and certain third party partners, such as our online banking, mobile banking or accounting systems. The
secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are
essential to protect us and our clients against fraud and security breaches and to maintain the confidence of our clients.
Breaches of information security also may occur through intentional or unintentional acts by those having access to our
systems or the confidential information of our clients, including employees. In addition, increases in criminal activity levels
and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third party technologies (including
browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes
and controls that we use to prevent fraudulent transactions and to protect data about us, our clients and underlying transactions,
as well as the technology used by our clients to access our systems. Our third party partners’ inability to anticipate, or failure
to adequately mitigate, breaches of security could result in a number of negative events, including losses to us or our clients,
loss of business or clients, damage to our reputation, the incurrence of additional expenses, disruption to our business,
additional regulatory scrutiny or penalties or our exposure to civil litigation and possible financial liability, any of which
could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We depend on information technology and telecommunications systems of third parties, and any systems failures,
interruptions or data breaches involving these systems could adversely affect our operations and financial condition.
Our business is highly dependent on the successful and uninterrupted functioning of our information technology and
telecommunications systems, third party servicers, accounting systems, mobile and online banking platforms and financial
intermediaries. We outsource to third parties many of our major systems, such as data processing and mobile and online
banking. The failure of these systems, or the termination of a third party software license or service agreement on which any
of these systems is based, could interrupt our operations. Because our information technology and telecommunications
systems interface with and depend on third party systems, we could experience service denials if demand for such services
exceeds capacity or such third party systems fail or experience interruptions. A system failure or service denial could result
in a deterioration of our ability to process loans or gather deposits and provide customer service, compromise our ability to
operate effectively, result in potential noncompliance with applicable laws or regulations, damage our reputation, result in a
loss of customer business or subject us to additional regulatory scrutiny and possible financial liability, any of which could
have a material adverse effect on business, financial condition, results of operations and growth prospects. In addition, failures
of third parties to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of
these third parties, could disrupt our operations or adversely affect our reputation.
It may be difficult for us to replace some of our third party vendors, particularly vendors providing our core banking
and information services, in a timely manner if they are unwilling or unable to provide us with these services in the future for
any reason and even if we are able to replace them, it may be at higher cost or result in the loss of customers. Any such events
could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
46
Our operations rely heavily on the secure processing, storage and transmission of information and the monitoring of
a large number of transactions on a minute-by-minute basis, and even a short interruption in service could have significant
consequences. We also interact with and rely on retailers, for whom we process transactions, as well as financial
counterparties and regulators. Each of these third parties may be targets of the same types of fraudulent activity, computer
break-ins and other cyber security breaches described above, and the cyber security measures that they maintain to mitigate
the risk of such activity may be different than our own and may be inadequate.
As a result of financial entities and technology systems becoming more interdependent and complex, a cyber-
incident, information breach or loss, or technology failure that compromises the systems or data of one or more financial
entities could have a material impact on counterparties or other market participants, including ourselves. As a result of the
foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties
with whom we interact.
We are subject to certain operational risks, including, but not limited to, customer or employee fraud, losses related
to our depositors and data processing system failures and errors.
Employee errors and misconduct could subject us to financial losses or regulatory sanctions and seriously harm our
reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized
activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee
errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.
Employee errors could also subject us to financial claims for negligence. We are also subject to losses related to our customers,
whether due to simple errors or mistakes, circumvention of controls, incomplete or fraudulent information provided by
customers, or unauthorized override of controls by our employees, other financial institutions or other third parties.
We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including
data processing system failures and errors and customer or employee fraud. Should our internal controls fail to prevent or
detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material
adverse effect on our business, financial condition and results of operations.
Our framework for managing risks may not be effective in mitigating risk and loss to us.
Our risk management framework seeks to mitigate risk and loss to us. We have established processes and procedures
intended to identify, measure, monitor, report and analyze the types of risk to which we are subject, including liquidity risk,
credit risk, market risk, interest rate risk, operational risk, compensation risk, legal and compliance risk, cyber risk, and
reputational risk, among others. However, as with any risk management framework, there are inherent limitations to our risk
management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated or
identified. Our ability to successfully identify and manage risks facing us is an important factor that can significantly impact
our results. If our risk management framework proves ineffective, we could suffer unexpected losses and could be materially
adversely affected.
Financial services companies depend on the accuracy and completeness of information about customers and
counterparties.
In deciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on
behalf of customers and counterparties, including financial statements, credit reports and other financial information. We
may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to
the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports
or other financial information could have a material adverse impact on our business, financial condition and results of
operations.
47
Liquidity and Capital Risks
Our growth or future losses may require us to raise additional capital in the future, but that capital may not be
available when it is needed.
We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our
operations. We anticipate that our existing capital resources will satisfy our capital requirements for the foreseeable future.
However, we may at some point need to raise additional capital to support continuing growth. Our ability to raise additional
capital is particularly important to our strategy of growth through acquisitions. Our ability to raise additional capital depends
on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions
regarding the banking industry, market conditions and governmental activities, and on our financial condition and
performance. In particular, if we were required to raise additional capital in the current interest rate environment, we believe
the pricing and other terms investors may require in such an offering may not be attractive to us. Accordingly, we cannot
assure you of our ability to raise additional capital if needed on terms acceptable to us. If we cannot raise additional capital
when needed, our ability to further expand our operations through internal growth and acquisitions could be materially
impaired.
Risks Related to our Common Stock
There can be no assurances concerning continuing dividend payments.
Our common stockholders are only entitled to receive the dividends declared by our Board of Directors. Although
we have historically paid quarterly dividends on our common stock and an annual 5% stock dividend, there can be no
assurances that we will be able to continue to pay regular quarterly dividends or an annual stock dividend or that any dividends
we do declare will be in any particular amount. The primary source of money to pay our cash dividends comes from dividends
paid to the Company by the Bank. The Bank’s ability to pay dividends to the Company is subject to, among other things, its
earnings, financial condition and applicable regulations, which in some instances limit the amount that may be paid as
dividends. In addition, the Company and the Bank are required to maintain a capital conservation buffer of 2.5% of Common
Equity Tier 1 Capital on top of minimum risk-weighted asset ratios to pay dividends without additional restrictions.
Debt covenants and other lender requirements may adversely impact our ability to borrow funds.
Our ability to borrow funds may be impacted by our ability to comply with covenants concerning minimum capital
and other financial ratios required by potential lending partners. If we are not able to borrow funds on terms that are acceptable
to us, our liquidity may be impacted which could, in turn, affect the Company’s ability to pay dividends, its results of
operations, and its ability to take advantage of strategic opportunities.
Failure to pay interest on our debt may adversely impact our ability to pay dividends.
Our $21.7 million of subordinated debentures 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. Deferral of interest payments could also
cause a decline in the market price of our common stock.
There is a limited trading market for our common shares, and you may not be able to resell your shares at or above
the price you paid for them.
Although our common shares are listed for trading on the Nasdaq Global Market under the symbol “LARK,” the
trading in our common shares has substantially less liquidity than many other publicly traded companies. A public trading
market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the market of willing
buyers and sellers of our common shares at any given time. This presence depends on the individual decisions of investors
and general economic and market conditions over which we have no control. We cannot assure you that volume of trading in
our common shares will increase in the future.
48
The stock market can be volatile, and fluctuations in our operating results and other factors could cause our stock
price to decline.
The stock market has experienced, and may continue to experience, fluctuations that significantly impact the market
prices of securities issued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations
have often been unrelated or disproportionate to the operating performance of particular companies. These broad market
fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, loss of investor
confidence, interest rate changes, tariffs, government shutdowns, Brexit, or international currency fluctuations, may
negatively affect the market price of our common stock. Moreover, our operating results may fluctuate and vary from period
to period due to the risk factors set forth herein. As a result, period-to-period comparisons should not be relied upon as an
indication of future performance. Our stock price could fluctuate significantly in response to our quarterly or annual results,
annual projections and the impact of these risk factors on our operating results or financial position.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy. The Company relies extensively on various information systems and other
electronic resources to operate its business. In addition, nearly all of the Company’s customers, service providers and other
business partners on whom the Company depends, including the providers of the Company’s online banking, mobile banking
and accounting systems, use these systems and their own electronic information systems. Any of these systems can be
compromised, including by employees, customers and other individuals who are authorized to use them, and bad actors using
sophisticated and constantly evolving set of software, tools and strategies to do so.
Accordingly, the Company has devoted significant resources to assessing, identifying and managing risks associated
with cybersecurity threats, as noted below:
•
Identifying and assessing cybersecurity threats: The Company regularly evaluates its systems and data for
potential vulnerabilities and analyzes the evolving cyber threat landscape, to ensure it proactively addresses risks
before they materialize. The Company employs monitoring tools that can detect and help respond to
cybersecurity threats in real-time.
•
Integration with Overall Risk Management: Cybersecurity risks are seamlessly integrated into the Company’s
broader risk management framework, ensuring a holistic view and prioritized mitigation strategies.
•
Management of Third-Party Risk: The Company’s comprehensive third-party management process includes
rigorous due diligence, oversight and identification of cybersecurity risks associated with vendors and service
providers.
•
Team: The Company has an internal committee that is responsible for conducting regular assessments of its
information systems, existing controls, vulnerabilities and potential improvements.
•
Engagement of Expert Assistance: The Company leverages the expertise of independent consultants, legal
advisors, and audit firms to evaluate the effectiveness of our risk management systems and address potential
cybersecurity incidents efficiently.
•
Training: The Company conducts periodic cybersecurity training for its workforce.
This information security program is a key part of the Company’s overall risk management system. The program
includes administrative, technical and physical safeguards to help protect the security and confidentiality of customer records
and information. These security and privacy policies and procedures are in effect across all of the Company’s businesses and
geographic locations.
49
From time-to-time, the Company has identified cybersecurity threats and cybersecurity incidents that require the
Company to make changes to its processes and to implement additional safeguards. While none of these identified threats or
incidents have materially affected the Company, it is possible that threats and incidents the Company identifies in the future
could have a material adverse effect on its business strategy, results of operations and financial condition.
Governance. The Company’s management team is responsible for the day-to-day management of cybersecurity risks
it faces, including the Company’s Chief Executive Officer and Chief Financial Officer.
In addition, the Company’s and the Bank's Boards of Directors, both as a whole and through the Bank’s Enterprise
Risk Management Committee (“ERM”) is responsible for the oversight of risk management, including cybersecurity risks.
In that role, the boards of directors and the ERM, with support from the Bank’s cybersecurity advisors, are responsible for
ensuring that the risk management processes designed and implemented by management are adequate and functioning as
designed.
ITEM 2. PROPERTIES
The Company has 29 offices in 23 communities across Kansas: Manhattan (2), Auburn, Dodge City (2), Fort Scott
(2), Garden City, Great Bend (2), Hoisington, Iola, Junction City, LaCrosse, Lawrence (2), Lenexa, Louisburg, Mound City,
Osage City, Osawatomie, Overland Park, Paola, Pittsburg, Prairie Village, Topeka (2), Wamego and Wellsville, Kansas. The
Company has opened a loan production office in Missouri. The Company owns its main office in Manhattan, Kansas and 25
branch offices and leases three branch offices. The Company leases the branch offices in Topeka, Wamego and Prairie
Village, Kansas and one loan production office in Kansas City, Missouri. The Company also leases a parking lot for one of
the Dodge City branch offices it owns.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or the Bank is a party or of which any of
their property is subject, other than ordinary routine litigation incidental to the Bank’s business. While the ultimate outcome
of current legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of these
legal actions should not have a material effect on the Company’s consolidated financial position or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock has traded on the Nasdaq Global Market under the symbol "LARK" since 2001. At March 20,
2025, the Company had approximately 267 common shareholders of record and approximately 2,120 beneficial owners of
our common stock.
In January 2025, we declared our 94th consecutive cash quarterly dividend of $0.21 per share. We also distributed a
5% stock dividend for the 24th consecutive year in December 2024. As adjusted for the stock dividend, the quarterly cash
dividends were $0.20 per share in 2024. We currently have no plans to change our dividend strategy given our current capital
and liquidity positions.
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 December 31, 2024, there were 157,456 shares remaining to repurchase
under the March 2020 Repurchase Program. 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 following table sets forth information about the Company’s purchases of its common stock during the fourth
quarter of 2024.
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
October 1-31, 2024
861 $ 20.02 861
157,456
November 1-30, 2024
- - -
157,456
December 1-31, 2024
- - -
157,456
Total
861 $ 20.02 861
157,456
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 by us and our subsidiaries include, but are not limited to,
the following:
•
The strength of the local, national and international economies, including the effects of changing inflationary
pressures and supply chain constraints on such economies;
•
Changes to U.S. or state tax laws, regulations and governmental policies concerning the Company’s general
business, including changes in interpretation or prioritization and changes in response to prior bank failures;
•
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;
•
Our risk management framework;
•
Interruptions in information technology and telecommunications systems and third-party services;
•
Changes and uncertainty in benchmark interest rates, including the timing of additional rate changes, if any, by the
Federal Reserve;
•
The economic effects of severe weather, natural disasters, widespread disease or pandemics, or other external events;
•
The composition of our executive management team and our ability to attract and retain key personnel;
•
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 conflict in 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, large loans to certain borrowers, and large deposits from certain clients;
•
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;
•
Fluctuations in the values of the securities held in our securities portfolio, including as a result of changes in interest
rates;
•
The extensive regulatory framework that applies to the Company;
•
The impact of recent and future legislative and regulatory changes, including in response to prior bank failures;
52
•
Governmental monetary, trade and fiscal policies;
•
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.
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 “Item 1A. Risk Factors” of this Annual Report on Form 10-K.
CORPORATE PROFILE AND 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. 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 growing our commercial, CRE and agriculture loan portfolios, while continuing to
emphasize and maintaining high quality assets. 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 do invest
in certain investment and mortgage-related securities using deposits and other borrowings as funding sources.
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 and gains or losses on investments, and certain other non-interest
related items. Our principal operating expenses, aside from interest expense, consist of, among others, compensation and
employee benefits, occupancy costs, professional fees, amortization of intangibles expense, federal deposit insurance costs,
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, the interest rate pricing competition from other lending institutions, and rates of
inflation.
Currently, our business consists of its ownership of the Bank, with its main office in Manhattan, Kansas and thirty
additional offices in central, eastern, southeast and southwest Kansas and Missouri, and our ownership of the Captive, a
Nevada-based captive insurance company.
53
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those that 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 goodwill, both of which involve significant judgment by our management.
On January 1, 2023, we adopted CECL, which changed our allowance for credit losses from an incurred loss
methodology to an expected loss methodology. The CECL model is subject to changes in our economic forecast, which can
impact the calculation of our allowance for credit losses substantially. Our most significant critical accounting estimates relate
to the allowance for credit losses on loans, which involve significant judgment by our management. The analysis is updated
on a quarterly basis based on historical loss information adjusted for current conditions and reasonable and supportable
forecasts. Additionally, the Company considers changes in economic and business conditions, changes in policies, procedures
and underwriting, changes in management or staff and their related experience, changes in nature and volume of the portfolio,
changes in loan review, changes in collateral values, changes in past due and nonaccrual loans, changes in competition, legal
and regulatory issues, changes in concentrations and other qualitative factors, which impacts the estimate of future credit
losses. These qualitative factors comprise a significant portion of the Company’s allowance for credit losses. Based on a
sensitivity analysis of all collectively evaluated loan pools, a five basis point change in the qualitative risk factors across all
loan categories would result in an increase or decrease of $520,000, or 4.1%, in the allowance for credit losses as of December
31, 2024. See Note 1 (Summary of Significant Accounting Policies) to the Company’s consolidated financial statements in
“Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for a more detailed description
methodology and impact of adoption.
We have completed several business and asset acquisitions since 2002, which have generated significant amounts
of goodwill. The initial value assigned to goodwill is the residual of the purchase price over the fair value of all identifiable
tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized; however, it is tested for impairment
at each calendar year end or more frequently when events or circumstances dictate. The Company performed a qualitative
assessment of factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying
amount as of December 31, 2024. This assessment included a review of macroeconomic conditions, industry and market
specific considerations and other relevant factors including the Company’s market capitalization, with control premiums and
valuation multiples, compared to recent financial industry acquisition multiples for similar institutions to estimate the fair
value of the Company’s single reporting unit. The Company’s qualitative impairment test indicated that its goodwill was not
impaired. The Company can make no assurances that future impairment tests will not result in goodwill impairments.
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COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2024 AND DECEMBER
31, 2023
SUMMARY OF PERFORMANCE. Net earnings for 2024 increased $767,000, or 6.3%, to $13.0 million as
compared to $12.2 million for 2023. The increase in net earnings during 2024 was primarily related to an increase in net
interest income due primarily to an increase in loans and higher yields on interest-earning assets.
We distributed a 5% stock dividend for the 24th consecutive year in December 2024. All per share and average share
data in this section reflect the 2024 and 2023 stock dividends.
INTEREST INCOME. Interest income for 2024 increased $9.2 million, or 14.2%, to $73.9 million, as compared
to 2023. Interest income on loans increased $9.6 million, or 18.6%, to $61.4 million for 2024, as compared to 2023 due to
higher yields and average balances. Our yields increased from 5.81% in 2023 to 6.3% in 2024. The increase in interest income
on loans was also driven by an increase in average loan balances, which increased from $891.5 million in 2023 to $974.3
million in 2024. Interest income on investment securities decreased $382,000, or 3.1%, to $12.3 million during 2024, as
compared to 2023. The decrease in interest income on investment securities was primarily the result of a decrease in the
average balances of investment securities in 2024, which decreased from $486.3 million in 2023 to $432.9 million in 2024.
INTEREST EXPENSE. Interest expense during 2024 increased $6.8 million, or 31.5%, to $28.2 million as
compared to 2023. Interest expense on interest-bearing deposits increased $7.1 million to $22.3 million for 2024 as compared
to $15.3 million in 2023. Our total cost of interest-bearing deposits increased from 1.71% during 2023 to 2.38% during 2024
as a result of higher rates and increased competition for deposits. Also contributing to the increase in interest expense was an
increase in average interest-bearing deposit balances, which increased from $892.4 million in 2023 to $938.2 million in 2024.
Interest expense on borrowings decreased $272,000 to $5.9 million during 2024, as compared to 2023, due to a decrease in
our average borrowings, which decreased from $114.2 million in 2023 to $104.1 million in 2024.
NET INTEREST INCOME. Net interest income represents the difference between income derived from interest-
earning assets and the expense incurred on interest-bearing liabilities. Net interest income is affected by both the difference
between the rates of interest earned on interest-earnings assets and the rates paid on interest-bearing liabilities (“interest rate
spread”) as well as the relative amounts of interest-earning assets and interest-bearing liabilities.
During 2024, net interest income increased $2.4 million, or 5.6%, to $45.7 million compared to $43.3 million in
2023. The increase in net interest income was primarily a result of an increase in interest income on loans, partially offset by
higher interest expense. The accretion of purchase accounting adjustments increased net interest income by $1.0 million in
2024 compared to $993,000 in 2023. Compared to the same period last year, higher interest rates increased the yields on our
interest-earning assets and the cost of our interest-bearing liabilities. Our net interest margin, on a tax-equivalent basis,
increased to 3.28% during 2024 from 3.17% during 2023. Lower interest rates may not result in a higher net interest margin
as a result of increased competition for loans and deposits and the slope of the yield curve also impacts our net interest margin.
Additionally, deposit balances may decline resulting in the need for higher cost funding.
PROVISION FOR CREDIT LOSSES. On January 1, 2023, we adopted CECL and established an ACL based on
this framework. The ACL is based on the historical loss rates and the weighted average remaining maturity for financial
assets measured at amortized costs including loans, investment securities and unfunded loan commitments. The historical
loss rates are adjusted to reflect reasonable and supportable forecasts to estimate expected credit losses over the life of the
financial asset.
During 2024, we recorded a $2.3 million provision for credit losses compared to a $349,000 provision for credit
losses in 2023. The $2.3 million provision for credit losses during 2024 consisted of a $2.4 million provision to the allowance
for credit losses on loans and a credit provision of $100,000 to unfunded loan commitments. We recorded net loan charge-
offs of $183,000 during 2024 compared to net loan recoveries of $44,000 during 2023.
55
NON-INTEREST INCOME. Total non-interest income was $14.7 million in 2024, an increase of $1.5 million, or
11.4%, compared to 2023. The increase in non-interest income was primarily the result of an increase of $810,000 in bank
owned life insurance due to the accrual of death benefits in 2024. Also contributing to the increase in non-interest income
was an increase of $522,000 in fees and service charges primarily due to higher fees to deposit accounts. A loss of $1.0
million was recorded on the sale of investment securities during 2024, a decrease from the $1.2 million loss recorded on the
sale of investment securities in 2023.
NON-INTEREST EXPENSE. Non-interest expense increased $2.1 million, or 5.0%, to $44.1 million in 2024
compared to $42.0 million in 2023. The increase in non-interest expense in 2024 was mainly associated with a $1.1 million
valuation allowance recorded against real estate held for sale. Also contributing to the increase in non-interest expense was a
$460,000 increase in professional fees associated with increased legal and consulting costs and a $422,000 increase in
compensation. Partially offsetting the increase in non-interest expense was a $680,000 decrease in amortization of mortgage
serving rights and other intangibles.
INCOME TAXES. We recorded income tax expense of $1.1 million in 2024 compared to $2.0 million in 2023.
The effective tax rate decreased from 13.8% in 2023 to 7.7% in 2024, primarily due to higher tax-exempt income and the
recognition of previously unrecognized tax benefits. During 2024, we recognized $1.0 million of previously unrecognized
tax benefits compared to $517,000 during 2023, which reduced the effective tax rates in both years.
FINANCIAL CONDITION. Economic conditions in the U.S. remained sluggish during 2024 as elevated inflation
levels and higher interest rates continued to impact the economy. Elevated interest rates and a flat or negative sloping yield
curve have impacted financial institutions generally, resulting in continued higher costs of funding and lower fair values for
investment securities. The Federal Reserve lowered interest rates by 1.00% in the second half of 2024 due to improvements
in the inflation outlook, however, additional rate cuts are dependent upon further reductions in the inflation rate and other
economic factors. 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 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 December 31, 2023. Net
loans, excluding loans held for sale, increased $101.6 million, 10.8%, to $1.0 billion at December 31, 2024, compared to
$937.6 million at December 31, 2023. Investment securities available-for-sale decreased $80.3 million, or 17.7%, from
$452.8 million at December 31, 2023 to $372.5 million at December 31, 2024.
The allowance for credit losses is established through a provision for credit losses based on our economic
projections. At December 31, 2024, our allowance for credit losses on loans totaled $12.8 million, or 1.22% of gross loans
outstanding, compared to $10.6 million, or 1.12% of gross loans outstanding, at December 31, 2023. The increase in our
allowance for credit losses on loans as a percentage of gross loans outstanding was primarily due to an increase in the reserves
on individually evaluated loans.
As of December 31, 2024 and 2023, approximately $26.1 million and $7.5 million, respectively, of loans were
considered classified and assigned a risk rating of special mention, substandard or doubtful. The increase in classified loans
was primarily due to commercial loan relationships that moved to classified status during 2024. These ratings indicate that
the loans identified as potential problem loans have more than normal risk which raised doubts as to the ability of the borrower
to comply with present loan repayment terms. Even though these borrowers were experiencing moderate cash flow problems
56
as well as some deterioration in collateral value, management believed the general allowance was sufficient to cover all
expected future losses expected in the loan portfolio at the balance sheet date.
Loans past due 30-89 days and still accruing interest totaled $6.2 million, or 0.59% of gross loans, at December 31,
2024, compared to $1.6 million, or 0.17% of gross loans, at December 31, 2023. At December 31, 2024, $13.1 million of
loans were on non-accrual status, or 1.25% of gross loans, compared to $2.4 million, or 0.25% of gross loans, at December
31, 2023. Past due loans are determined in accordance with the contractual repayment terms. 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 December 31, 2024 and 2023.
As part of our credit risk management, we continue to manage the loan portfolio to identify problem loans and have
placed additional emphasis on commercial, CRE and construction and land 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 compared to $928,000 at December 31, 2023. The decrease in real estate owned as of December
31, 2024 compared to December 31, 2023 was primarily due to the sale of properties. As of December 31, 2024, real estate
owned consisted of a single parcel of undeveloped land. The Company is currently marketing the property.
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. We had a balance of
$1.3 billion in deposits at December 31, 2024 and December 31, 2023.
Total borrowings decreased $10.5 million, or 10.6%, to $88.5 million at December 31, 2024, from $99.0 million at
December 31, 2023. The decrease in borrowings was primarily due to deposit growth and the sale of investment securities.
Non-interest-bearing deposits at December 31, 2024 were $351.6 million, or 26.5% of deposits, compared to $367.1
million, or 27.9% of deposits, at December 31, 2023. Money market and checking accounts were 47.9% of our deposit
portfolio and totaled $637.0 million at December 31, 2024, compared to 46.6% of our deposit portfolio totaling $613.6
million, at December 31, 2023. Savings accounts decreased to $145.5 million, or 10.9% of deposits, at December 31, 2024,
from $152.4 million, or 11.6% of deposits, at December 31, 2023. Certificates of deposit totaled $194.7 million, or 14.7% of
deposits, at December 31, 2024, compared to $183.2 million, or 13.9% of deposits, at December 31, 2023. Competition for
deposits may affect our ability to continue to increase deposit balances and could result in a decrease in our deposit balances
in future periods.
Certificates of deposit at December 31, 2024, scheduled to mature in one year or less totaled $181.0 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.
CASH FLOWS. During 2024, our cash and cash equivalents decreased by $6.8 million as compared to 2023. Our
operating activities provided net cash of $14.2 million in 2024, compared to $12.6 million in 2023, which is primarily the
result of net earnings and sales of one-to-four family residential mortgage loans. Our investing activities used net cash of
$18.1 million during 2024, compared to $50.6 million in 2023, primarily to fund loan growth. Our financing activities used
net cash of $2.9 million during 2024, compared to providing $42.0 million in 2023, primarily as a result of funding dividend
payments.
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 $396.9 million at December 31, 2024 and $484.8 million at December 31, 2023. 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.
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 brokered deposits, FHLB advances, a line of credit with
57
the FHLB, other borrowings or through sales of investment securities. At December 31, 2024, we had an outstanding balance
of $48.8 million against our line of credit with the FHLB. At December 31, 2024, we had collateral pledged to the FHLB that
would allow us to borrow $171.0 million, subject to FHLB credit requirements and policies. At December 31, 2024, we had
no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was
$50.5 million. We also have various other federal funds agreements, both secured and unsecured, with correspondent banks
totaling approximately $35.0 million in available credit under which we had no outstanding borrowings at December 31,
2024. At December 31, 2024, we had subordinated debentures totaling $21.7 million and $13.8 million of repurchase
agreements. At December 31, 2024, the Company had no borrowings against a $5.0 million line of credit from an unrelated
financial institution maturing on November 1, 2025, 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. At December 31, 2024, the Company’s tier 1
capital ratio of 12.43% was below the minimum required under such covenants of 12.50%. The Company requested from the
lender a waiver of the default, which was granted by the lender. On March 14, 2025, the Company and the lender entered
into a Change in Terms Agreement, reducing the minimum risk-based capital ratio required under such covenants to 12.00%
going forward. The Company also borrowed $4.2 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
balance of this borrowing was $10.0 million and was used to fund part of the acquisition of Freedom.
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 $1.9 million at December 31, 2024 as compared to $1.6 million
at December 31, 2023.
At December 31, 2024, we had outstanding loan commitments, excluding standby letters of credit, of $201.2 million,
as compared to $211.8 million at December 31, 2023. 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. As discussed in more detail in the “Supervision and Regulation” section of “Item 1. Business” of this
Annual Report on Form 10-K, current regulatory capital regulations require financial institutions (including banks and bank
holding companies) to meet certain regulatory capital requirements. The Company and the Bank are subject to the Basel III
Rule that implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain
changes required by the Dodd-Frank Act. The Basel III Rule is applicable to all U.S. banks that are subject to minimum
capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies”
(generally, non-public bank holding companies with consolidated assets of less than $3.0 billion).
At December 31, 2024, the Bank maintained a leverage ratio of 9.10% and a total risk-based capital ratio of 13.5%.
As shown by the following table, the Bank’s capital exceeded the minimum capital requirements in effect at December 31,
2024, including the capital conservation buffers.
Actual
Actual
Minimum
Minimum
(dollars in thousands)
amount
percent
amount
percent(1)
Leverage
140,523
$
9.10%
61,770
$
4.00%
Common Equity Tier 1 Capital
140,523
12.43%
79,146
7.00%
Tier 1 Capital
140,523
12.43%
96,106
8.50%
Total Risk-Based Capital
152,987
13.53%
118,719
10.50%
(1) The minimum required percent includes a capital conservation buffer of 2.5%.
58
Banks and bank holding companies are generally expected to operate at or above the minimum capital requirements.
The Company’s and the Bank’s ratios above are well in excess of regulatory minimums. As of December 31, 2024 and 2023,
the Company and the Bank also exceeded the "well capitalized" thresholds, which is the highest rating available. There are
no conditions or events that management believes have changed the Company’s and the Bank’s category as of the date of this
report. We have $21.7 million in trust preferred securities which, in accordance with current capital guidelines, have been
included in total risk-based capital as of December 31, 2024. Cash distributions on the securities are payable quarterly, are
deductible for income tax purposes and are included in interest expense in the consolidated financial statements.
DIVIDENDS
During the year ended December 31, 2024, we paid quarterly cash dividends of $0.20 per share to our stockholders,
as adjusted to give effect to 5% stock dividends, which we distributed for the 24th consecutive year in December 2024. The
2023 quarterly cash dividends were $0.19 per share as adjusted to give effect to 5% stock dividends.
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 described above, the Bank
exceeded its minimum capital requirements under applicable guidelines as of December 31, 2024. The National Bank Act
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's net earnings plus the adjusted retained earnings for the three preceding years.
As of December 31, 2024, $4.9 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 associated with the trust preferred
securities 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.
EFFECTS OF INFLATION
Our consolidated financial statements and accompanying footnotes have been prepared in accordance with GAAP,
which generally require the measurement of financial position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation can
be found in the increased cost of our operations because our assets and liabilities are primarily monetary, and interest rates
have a greater impact on our performance than do the effects of inflation.
59
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 on pricing our assets and liabilities
which impacts our 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 monitors the interest rate sensitivity of our balance sheet using earnings
simulation models and interest sensitivity “gap” analysis. 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.
In the past, we have been successful in meeting the interest rate sensitivity objectives set forth in our policy.
Simulation models are prepared to determine the impact on net interest income for the coming twelve months, including using
rates at December 31, 2024 and forecasting volumes for the twelve-month projection. This position is then subjected to a
shift in interest rates of 100, 200 and 300 basis points rising and 100 basis points falling with an impact to our net interest
income on a one-year horizon as follows:
Scenario
Dollar change in
net interest
income ($000’s)
Percent change
in net interest
income
Dollar change in
net interest
income ($000’s)
Percent change
in net interest
income
300 basis point rising
($6,831)
(13.8%)
($5,924)
(13.8%)
200 basis point rising
($4,629)
(9.4%)
($4,012)
(9.3%)
100 basis point rising
($2,434)
(4.9%)
($2,122)
(4.9%)
100 basis point falling
$282
0.6%
$17
0.0%
200 basis point falling
($588)
(1.2%)
($909)
(2.1%)
300 basis point falling
($1,774)
(3.6%)
($2,037)
(4.7%)
As of December 31, 2024
As of December 31, 2023
60
ASSET/LIABILITY MANAGEMENT
Interest rate "gap" analysis is a common, though imperfect, measure of interest rate risk which measures the relative
dollar amounts of interest-earning assets and interest-bearing liabilities which reprice within a specific time period, either
through maturity or rate adjustment. The "gap" is the difference between the amounts of such assets and liabilities that are
subject to such repricing. A "positive" gap for a given period means that the amount of interest-earning assets maturing or
otherwise repricing within that period exceeds the amount of interest-bearing liabilities maturing or otherwise repricing
during that same period. In a rising interest rate environment, an institution with a positive gap would generally be expected,
absent the effects of other factors, to experience a greater increase in the yield of its assets relative to the cost of its liabilities.
Conversely, the cost of funds for an institution with a positive gap would generally be expected to decline less quickly than
the yield on its assets in a falling interest rate environment. Changes in interest rates generally have the opposite effect on an
institution with a "negative" gap.
The following is our "static gap" schedule. Loans include prepayment assumptions based on historical prepayment
speeds. Mortgage-backed securities include published prepayment assumptions, while all other investments assume no
prepayments.
Certificates of deposit reflect contractual maturities only. Money market, checking and savings accounts reprice
immediately in the first period. Borrowing reflects contractual repricing and maturities.
We have been successful in meeting the interest sensitivity objectives set forth in our policy. This has been
accomplished primarily by managing the assets and liabilities while maintaining our traditional high credit standards.
INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES REPRICING SCHEDULE
("GAP" TABLE)
As of December 31, 2024
3 months or less
3 to 12
months
1 to 5 years
Over 5 years
Total
(Dollars in thousands)
Interest-earning assets:
Investment securities
19,745
$
32,959
$
162,081
$
161,399
$
376,184
$
Loans
248,884
205,678
492,478
108,733
1,055,773
Total interest-earning assets
268,629
$
238,637
$
654,559
$
270,132
$
1,431,957
$
Interest-bearing liabilities:
Certificates of deposit
101,825
$
79,128
$
13,739
$
2
$
194,694
$
Money market and checking accounts
636,963
-
-
-
636,963
Savings accounts
145,514
-
-
-
145,514
Borrowed money
71,102
14,003
3,400
-
88,505
Total interest-bearing liabilities
955,404
$
93,131
$
17,139
$
2
$
1,065,676
$
Interest sensitivity gap per period
(686,775)
$
145,506
$
637,420
$
270,130
$
366,281
$
Cumulative interest sensitivity gap
(686,775)
(541,269)
96,151
366,281
Cumulative gap as a percent of
total interest-earning assets
(47.96%)
(37.80%)
6.71%
25.58%
Cumulative interest sensitive assets
as a percent of cumulative interest
sensitive liabilities
28.12%
48.38%
109.02%
134.37%
61
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and the Board of Directors
Landmark Bancorp, Inc. and Subsidiaries
Manhattan, Kansas
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Landmark Bancorp, Inc. and Subsidiaries (the "Company")
as of December 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income (loss),
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles
generally accepted in the United States of America.
Explanatory Paragraph - Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses in
2023 due to the adoption of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses (ASC Topic
326). The Company adopted the new credit loss standard using the modified retrospective method such that prior period
amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting
principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (U.S.) ("PCAOB") and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Allowance for Credit Losses on Loans – Qualitative Factors
As described in Note 1 of the consolidated financial statements and the explanatory paragraph above, the Company adopted
ASC Topic 326 as of January 1, 2023 using the modified retrospective method. The allowance for credit losses on loans is a
62
valuation account that is deducted from the amortized costs basis of loans to present the net amount expected to be collected
on loans. The Company utilized a weighted average remaining maturity model to estimate the quantitative component of the
allowance for credit losses for loans. The quantitative model was adjusted with qualitative factors, including but not limited
to: changes in economic and business conditions, changes in policies, procedures and underwriting, changes in management
or staff and their related experience, changes in nature and volume of the portfolio, changes in loan review, changes in
collateral values, changes in past due and nonaccrual loans, changes in competition, legal and regulatory issues, changes in
concentrations and other qualitative factors that could affect credit losses.
We identified auditing the qualitative factors as a critical audit matter as it involved significant management judgment, which
in turn led to a high degree of auditor judgment and subjectivity to evaluate management’s determination and application of
the qualitative factors.
The primary substantive audit procedures we performed to address this critical audit matter included:
•
Testing the completeness and accuracy of internal data and the reliability and relevance of external data used as the
basis for the qualitative factors;
•
Evaluating the reasonableness of management’s judgments related to the determination of the qualitative factors and
the accuracy of the resulting allocation of the allowance;
•
Analytically evaluating the qualitative factors including the magnitude of the adjustments; and
•
Tracing the allowance allocation from the qualitative factor analysis to the overall allowance calculation.
/s/ Crowe LLP
Crowe LLP
We have served as the Company's auditor since 2014.
Dallas, Texas
March 25, 2025
63
LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
December 31,
December 31,
2024
2023
Assets
Cash and cash equivalents
20,275
$
27,101
$
Interest-bearing deposits at other banks
4,110
4,918
Investment securities available-for-sale, at fair value
372,512
452,769
Investment securities, held-to-maturity, net of allowance for credit losses of $91 and $91,
fair value of $3,290 and $3,049
3,672
3,555
Bank stocks, at cost
6,618
8,123
Loans, net of allowance for credit losses of $12,825 and $10,608
1,039,221
937,619
Loans held for sale, at fair value
3,420
853
Bank owned life insurance
39,056
38,333
Premises and equipment, net
20,220
19,709
Goodwill
32,377
32,377
Other intangible assets, net
2,578
3,241
Mortgage servicing rights
3,061
3,158
Real estate owned, net
167
928
Accrued interest and other assets
26,855
28,988
Total assets
1,574,142
$
1,561,672
$
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing demand
351,595
$
367,103
$
Money market and checking
636,963
613,613
Savings
145,514
152,381
Certificates of deposit
194,694
183,154
Total deposits
1,328,766
1,316,251
Federal Home Loan Bank and other borrowings
53,046
64,662
Subordinated debentures
21,651
21,651
Repurchase agreements
13,808
12,714
Accrued interest and other liabilities
20,656
19,480
Total liabilities
1,437,927
1,434,758
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued
-
-
Common stock, $0.01 par value per share, 7,500,000 shares authorized; 5,775,198 and
5,755,477 shares issued at December 31, 2024 and 2023, respectively
58
55
Additional paid-in capital
95,051
89,208
Retained earnings
56,934
54,282
Treasury stock, at cost; zero and 4,002 shares at December 31, 2024 and 2023, respectively
-
(75)
Accumulated other comprehensive loss
(15,828)
(16,556)
Total stockholders’ equity
136,215
126,914
Total liabilities and stockholders’ equity
1,574,142
$
1,561,672
$
See accompanying notes to consolidated financial statements.
64
LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Dollars in thousands, except per share amounts)
2024
2023
2022
Loans
61,400
$
51,753
$
33,473
$
Investment securities:
Taxable
9,298
9,594
6,414
Tax-exempt
3,008
3,094
3,018
Interest-bearing deposits at banks
193
242
321
Total interest income
73,899
64,683
43,226
Interest expense:
Deposits
22,310
15,254
2,776
FHLB and other borrowings
3,886
4,048
584
Subordinated debentures
1,635
1,590
840
Repurchase agreements
344
499
146
Total interest expense
28,175
21,391
4,346
Net interest income
45,724
43,292
38,880
Provision for credit losses
2,300
349
-
Net interest income after provision for credit losses
43,424
42,943
38,880
Non-interest income:
Fees and service charges
10,742
10,220
9,651
Gains on sales of loans, net
2,386
2,269
3,444
Increase in cash surrender value of bank owned life insurance
1,723
913
780
Losses on sales of investment securities, net
(1,031)
(1,246)
(1,103)
Other
924
1,074
928
Total non-interest income
14,744
13,230
13,700
Non-interest expense:
Compensation and benefits
23,103
22,681
20,405
Occupancy and equipment
5,663
5,565
5,118
Data processing
1,889
1,940
1,580
Amortization of mortgage servicing rights and other intangibles
1,164
1,844
1,446
Professional fees
2,912
2,452
1,892
Acquisition costs
-
-
3,398
Valuation allowance on real estate held for sale
1,108
-
-
Other
8,240
7,501
7,431
Total non-interest expense
44,079
41,983
41,270
Earnings before income taxes
14,089
14,190
11,310
Income tax expense
1,086
1,954
1,432
Net earnings
13,003
$
12,236
$
9,878
$
2.26
$
2.13
$
1.71
$
2.26
$
2.13
$
1.71
$
(1) All per share amounts have been adjusted to give effect to the 5% stock dividends paid during December 2024, 2023 and 2022.
Years ended December 31,
Interest income:
Basic
Diluted
Earnings per share (1):
65
LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(Dollars in thousands)
2024
2023
2022
Net earnings
13,003
$
12,236
$
9,878
$
Net unrealized holding gains (losses) on available-for-sale securities
13
10,025
(39,440)
Less reclassification adjustment on losses included in earnings
1,031
1,246
1,103
Net unrealized gains (losses)
1,044
11,271
(38,337)
Income tax effect on net losses included in earnings
(253)
(305)
(271)
Income tax effect on net unrealized holding (gains) losses
(63)
(2,456)
9,662
Other comprehensive income (loss)
728
8,510
(28,946)
Total comprehensive income (loss)
13,731
$
20,746
$
(19,068)
$
See accompanying notes to consolidated financial statements.
Years ended December 31,
66
LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(Dollars in thousands, except per share amounts)
Common
stock
Additional
paid-in
capital
Retained
earnings
Treasury stock
Accumulated other
comprehensive
income (loss)
Total
Balance at January 1, 2022
50
$
79,120
$
52,593
$
-
$
3,880
$
135,643
$
Net earnings
-
-
9,878
-
-
9,878
Other comprehensive loss
-
-
-
-
(28,946)
(28,946)
Dividends paid ($0.73 per share) (1)
-
-
(4,198)
-
-
(4,198)
Issuance of restricted common stock, 17,551 shares
-
-
-
-
-
-
Stock-based compensation
-
295
-
-
-
295
Purchase of 49,721 treasury shares
-
-
-
(1,239)
-
(1,239)
Exercise of stock options, 112 shares (2)
-
-
-
-
-
-
5% stock dividend, 247,831 shares
2
4,858
(6,099)
1,239
-
-
Balance at December 31, 2022
52
$
84,273
$
52,174
$
-
$
(25,066)
$
111,433
$
Cumulative effect of change in accounting
principle from implementation of ASU 2016-13
-
-
(1,204)
-
-
(1,204)
Balance at January 1, 2023
52
$
84,273
$
50,970
$
-
$
(25,066)
$
110,229
$
Net earnings
-
-
12,236
-
-
12,236
Other comprehensive income
-
-
-
-
8,510
8,510
Dividends paid ($0.76 per share) (1)
-
-
(4,390)
-
-
(4,390)
Issuance of restricted common stock, 5,192 shares
-
-
-
-
-
-
Stock-based compensation
-
352
-
-
-
352
Purchase of 3,812 treasury shares
-
-
-
(75)
(75)
Exercise of stock options, 2,693 shares (2)
-
52
-
-
-
52
5% stock dividend, 260,640 shares
3
4,531
(4,534)
-
-
-
Balance at December 31, 2023
55
$
89,208
$
54,282
$
(75)
$
(16,556)
$
126,914
$
Net earnings
-
-
13,003
-
-
13,003
Other comprehensive income
-
-
-
-
728
728
Dividends paid ($0.80 per share) (1)
-
-
(4,612)
-
-
(4,612)
Issuance of restricted common stock, 41,175 shares
-
-
-
-
-
-
Stock-based compensation
-
520
-
-
-
520
Purchase of 17,288 treasury shares
-
-
-
(338)
(338)
5% stock dividend, 274,838 shares
3
5,323
(5,739)
413
-
-
Balance at December 31, 2024
58
$
95,051
$
56,934
$
-
$
(15,828)
$
136,215
$
(1) Dividends per share have been adjusted to give effect to the 5% stock dividends paid during December 2024, 2023 and 2022.
(2) Shares from the exercise of stock options are shown net of forfeitures related to cashless exercises.
See accompanying notes to consolidated financial statements.
67
LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
2024
2023
2022
Cash flows from operating activities:
Net earnings
13,003
$
12,236
$
9,878
$
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for credit losses
2,300
349
-
Valuation allowance on real estate owned
1,108
6
354
Amortization of investment security (discounts) premiums, net
(111)
240
1,481
Accretion of purchase accounting adjustments
(1,035)
(993)
(460)
Amortization of mortgage servicing rights and intangibles
1,164
1,844
1,446
Depreciation
1,335
1,270
1,134
Increase in cash surrender value of bank owned life insurance
(1,723)
(913)
(780)
Stock-based compensation
520
352
295
Deferred income taxes
(212)
404
(1,190)
Net loss on investment securities
1,031
1,246
1,103
Net gains on sales of premises and equipment and foreclosed assets
(326)
(1)
(114)
Net gains on sales of loans
(2,386)
(2,269)
(3,444)
Proceeds from sale of loans
85,799
80,475
145,923
Origination of loans held for sale
(86,384)
(76,995)
(140,990)
Changes in assets and liabilities:
Accrued interest and other assets
(1,123)
(1,276)
5,146
Accrued interest, expenses and other liabilities
1,276
(3,371)
4,998
Net cash provided by operating activities
14,236
12,604
24,780
Cash flows from investing activities:
Net increase in loans
(103,084)
(97,361)
(73,571)
Net change in interest-bearing deposits at banks
808
4,150
(1,728)
Maturities and prepayments of investment securities
71,080
54,537
53,877
Purchases of investment securities
(23,322)
(29,112)
(226,336)
Proceeds from sale of available-for-sale securities
32,623
20,913
52,597
Redemption of bank stocks
16,487
11,192
4,208
Purchase of bank stocks
(14,982)
(13,845)
(6,074)
Net cash paid in bank acquisition
-
-
(572)
Proceeds from sales of premises and equipment and foreclosed assets
4,700
7
1,379
Premiums paid on bank owned life insurance
(95)
(97)
(63)
Purchases of premises and equipment, net
(2,320)
(995)
(876)
Net cash used in investing activities
(18,105)
(50,611)
(197,159)
Cash flows from financing activities:
Net increase in deposits
12,515
15,591
1,758
Federal Home Loan Bank advance borrowings
778,725
727,629
327,360
Federal Home Loan Bank advance repayments
(787,893)
(677,815)
(326,160)
Proceeds from other borrowings
360
-
10,065
Repayments on other borrowings
(2,808)
(2,352)
(1,065)
Change in repurchase agreements
1,094
(16,688)
(199)
Proceeds from exercise of stock options
-
52
-
Payment of dividends
(4,612)
(4,390)
(4,198)
Purchase of treasury stock
(338)
(75)
(1,239)
Net cash (used in) provided by financing activities
(2,957)
41,952
6,322
Net (decrease) increase in cash and cash equivalents
(6,826)
3,945
(166,057)
Cash and cash equivalents at beginning of year
27,101
23,156
189,213
Cash and cash equivalents at end of year
20,275
$
27,101
$
23,156
$
(continued)
Years ended December 31,
68
LANDMARK BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Dollars in thousands)
Years ended December 31,
2024
2023
2022
Supplemental disclosure of cash flow information:
Cash payments paid during the year for income taxes
834
$
55
$
1,104
$
Cash paid during the year for interest
28,321
19,851
4,032
Cash paid during the year for operating leases
177
156
175
Supplemental schedule of noncash investing and financing activities:
Transfer of premises and equipment to real estate held for sale
-
4,343
-
Operating lease asset and related liability recorded
-
61
-
Bank acquisition:
Fair value of liabilities assumed
-
$
-
$
181,350
$
Fair value of assets acquired
-
-
200,033
See accompanying notes to consolidated financial statements.
69
LANDMARK BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Principles of Consolidation. The accompanying consolidated financial statements include the accounts of Landmark
Bancorp, Inc. and its wholly owned subsidiaries, the Bank and the Captive. All intercompany balances and transactions have
been eliminated in consolidation. The Bank, considered a single operating segment, 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. The Captive provides property and casualty insurance coverage to the Company and the Bank for which insurance may
not be currently available or economically feasible in today's insurance marketplace.
Use of Estimates. The preparation of the consolidated financial statements in conformity with U.S. generally
accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Business Combinations. At the date of acquisition, the Company records the net assets acquired and liabilities
assumed on the consolidated balance sheets at their estimated fair values, and goodwill is recognized for the excess purchase
price over the estimated fair value of acquired net assets. The results of operations for acquired companies are included in the
Company’s consolidated statements of earnings beginning at the acquisition date. Expenses arising from the acquisition
activities are recorded in the consolidated statements of earnings during the period incurred.
Reserve Requirements. Regulations of the Federal Reserve require reserves to be maintained by all banking
institutions according to the types and amounts of certain deposit liabilities. These requirements restrict a portion of the
amounts shown as consolidated cash and due from banks from everyday usage in the operation of banks. As of December
31, 2024 and 2023, the Bank did not have a minimum reserve requirement.
Cash Flows. Cash and cash equivalents include cash on hand and amounts due from banks with original maturities
of fewer than 90 days, and are carried at cost. Net cash flows are reported for customer loan and deposit transactions.
Interest-Bearing Deposits in Banks. Interest-bearing deposits in other banks include investments in certificates of
deposits with original maturities greater than 90 days, and are carried at cost.
Implementation of CECL. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326). The provisions of the update eliminated the probable initial recognition threshold under previous GAAP which
requires reserves to be based on an incurred loss methodology. Under CECL, reserves required for financial assets measured
at amortized cost reflect an organization’s estimate of all expected credit losses over the expected term of the financial asset
and thereby require the use of reasonable and supportable forecasts to estimate future credit losses. Because CECL
encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an
organization’s reasonable and supportable estimate of expected credit losses extends to held-to-maturity debt securities.
Under the provisions of the update, credit losses recognized on available-for-sale debt securities are presented as an allowance
as opposed to a write-down. In addition, CECL modified the accounting for purchased loans. Under prior GAAP, a purchased
loan’s contractual balance was adjusted to fair value through a credit discount, and no reserve was recorded on the purchased
loan upon acquisition. Under CECL loans determined to be purchased credit deteriorated have an allowance for credit losses
established through purchase accounting. Finally, increased disclosure requirements under CECL oblige organizations to
present credit quality disclosures disaggregated by the year of origination or vintage. FASB expects that the evaluation of
underwriting standards and credit quality trends by financial statement users will be enhanced with the additional vintage
disclosures. In October 2019, the FASB approved a change in the effective dates for CECL which delayed the effective date
to fiscal years beginning after December 15, 2022 for smaller reporting companies.
70
On January 1, 2023, the Company adopted CECL. The measurement of expected credit losses under the CECL
methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity
investment securities. It also applies to off-balance credit exposures not accounted for as insurance (loan commitments and
standby letters of credit). In addition, ASC 326 made changes to the accounting for available-for-sale investment securities
management does not intend to sell or believes that it is more likely than not they will be required to sell.
The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at
amortized cost and off-balance sheet credit exposures. Results for the reporting periods beginning after January 1, 2023 are
presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP
requirements. The adoption of CECL resulted in an increase in the allowance for credit losses on loans of $1.5 million, an
initial allowance for credit losses on held-to-maturity investment securities of $72,000, an increase in deferred tax assets of
$391,000 and a decrease in retained earnings of $1.2 million. The increases in allowance for credit losses is primarily due to
moving to a weighted average remaining maturity allowance methodology and the transition of purchase accounting discounts
on loans from an adjustment to amortized cost in the allowance calculation.
The following table illustrates the impact of ASC 326:
(Dollars in thousands)
As reported
under ASC
326
Pre-ASC 326
adoption
Impact of
ASC 326
adoption
Allowance for credit losses:
Held-to-maturity investment securities
72
$
-
$
72
$
One-to-four family residential real estate loans
1,677
$
655
$
1,022
$
Construction and land loans
166
117
49
Commercial real estate loans
4,221
3,158
1,063
Commercial loans
2,898
2,753
145
Paycheck protection program loans
-
-
-
Agriculture loans
1,142
1,966
(824)
Municipal loans
16
5
11
Consumer loans
194
137
57
Total allowance for credit losses for loans
10,314
$
8,791
$
1,523
$
Unfunded loan commitments
170
$
170
$
-
$
January 1, 2023
Investment Securities. Investment securities are classified as held-to-maturity when management has the positive
intent and ability to hold them to maturity. Securities are classified as available-for-sale when they might be sold before
maturity. Held-to-maturity securities are carried at amortized cost while available-for-sale securities are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive income, net of tax.
Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are
amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where
prepayments are anticipated. Realized gains and losses on sales of available-for-sale securities are recorded on a trade date
basis and are calculated using the specific identification method.
Allowance for Credit Losses – Held-to-Maturity Investment Securities. Management measures expected credit
losses on held-to-maturity investment securities on a collective basis by major security type. Accrued interest is excluded
from the estimate of credit losses. The estimate of expected credit losses considers historical loss information adjusted for
current conditions and reasonable and supportable forecasts.
71
Allowance for Credit Losses – Available-for-Sale Investment Securities. For available-for-sale investment
securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not will
be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or
requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that
do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit
losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized
cost, the current interest rate environment, changes to rating of the security or security issuer, and adverse conditions
specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value
of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present
value of cash flows expected to be collected was less than the amortized cost basis, a credit loss exists and an allowance for
credit losses would be recorded for the credit loss, which is limited by the amount that the fair value is less than the amortized
cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other
comprehensive income. Changes in the allowance for credit losses are recorded as provision for or reversal of credit loss
expense. Losses are charged against the allowance for credit losses when the Company determines the available-for-sale
security is uncollectible or when either of the criteria regarding intent or requirement to sell is met. The Company does not
estimate credit losses on available-for-sale security accrued interest receivable.
Bank Stocks. Bank stocks are investments acquired for regulatory purposes and borrowing availability and are
accounted for at cost. The cost of such investments represents their redemption value as such investments do not have a
readily determinable fair value. The Company evaluates bank stocks for other-than-temporary impairment by analyzing the
ultimate recoverability based on a credit analysis of the issuer.
Acquired Loans. Acquired loans are recorded at estimated fair value at the time of acquisition. The Company’s
acquired loans were not acquired with deteriorated credit quality. Estimated fair values of acquired loans are based on a
discounted cash flow methodology that considers various factors including the type of loan and related collateral, the expected
timing of cash flows, classification status, fixed or variable interest rate, term of loan and whether or not the loan is amortizing,
and a discount rate reflecting the Company’s assessment of risk inherent in the cash flow estimates. Discounts or premiums
created when acquired loans are recorded at their estimated fair values are accreted or amortized over the remaining term of
the loan as an adjustment to the related loan’s yield. Similar to originated loans described below, the accrual of interest income
on acquired loans is discontinued when the collection of principal or interest, in whole or in part, is doubtful.
Loans. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff
are reported at amortized cost. The amortized cost is the principal balance outstanding net of previous charge-offs, and for
purchased loans, net of unamortized purchase premiums and discounts. Interest income is accrued on the unpaid principal
balance. Origination fees received on loans held in portfolio and the estimated direct costs of origination are deferred and
amortized to interest income using the level yield method without anticipating prepayments.
The accrual of interest on non-performing loans is discontinued at the time the loan is ninety 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 the principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on
non-accrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash basis
or cost recovery method, until qualifying for return to accrual. Loans are evaluated individually and are returned to accrual
status when all principal and interest amounts contractually due are brought current and future payments are reasonably
assured.
Allowance for Credit Losses - Loans. The allowance for credit losses is a valuation account that is deducted from
the loans’ amortized cost basis to present the net amount expected to be collected on loans. The analysis is updated on a
quarterly basis based on historical loss information adjusted for current conditions and reasonable and supportable forecasts.
Additionally, the Company considers asset quality trends, composition and trends in the loan portfolio, underlying collateral
values, industry trends and other pertinent factors, including regulatory recommendations. The level of the allowance for
credit losses maintained by management is believed adequate to absorb all expected future losses expected in the loan
portfolio at the balance sheet date. The allowance is adjusted through provision for credit losses and charge-offs, net of
recoveries of amounts previously charged off.
72
The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics.
The Company has identified the following pools of financial assets with similar risk characteristics for measuring expected
credit losses.
One-to-Four Family Residential Real Estate. One-to-four family residential real estate loans consists primarily of
loans secured by 1-4 family residential properties. Repayment is primarily dependent on the personal cash flow of the
borrower.
Construction and Land. Construction and land loans consist primarily of loans to facilitate the development of
both residential and CRE. Repayment is primarily dependent on the completion of the development and refinancing to longer
term financing.
Commercial Real Estate. CRE loans consist primarily of loans secured by office buildings, industrial buildings,
warehouses, retail buildings and multi-family housing and are primarily owner-occupied. For such loans, repayment is largely
dependent upon the operation of the borrower's business.
Commercial. Commercial loans include loans to business enterprises issued for commercial, industrial and/or other
professional purposes. These loans are generally secured by equipment, inventory and accounts receivable of the borrower
and repayment is primarily dependent on business cash flows.
Agriculture. Agriculture loans include operating and real estate loans to agriculture enterprises. Generally, the
borrower’s ability to repay is based on the cash flows from farming operations.
Municipal. Municipal loans are generally related to equipment leasing or general fund loans. Repayment is
primarily dependent on the tax revenue of the municipal entity.
Consumer. Consumer loans include automobile, boat, home improvement and home equity loans. Repayment is
primarily dependent on the personal cash flow of the borrower.
The Company utilizes a weighted average remaining maturity allowance methodology to calculate the quantitative
component of the allowance for credit losses. Historical loss rates are adjusted for current conditions and reasonable and
supportable forecasts. Following the economic forecast period loss rates revert back to historical loss rates over a reasonable
period of time. Additional adjustments for qualitative factors are included to quantify the risks within each of the loan
categories that are not included in the historical loss rates or economic projections. These adjustments include but are not
limited to: changes in economic and business conditions, changes in policies, procedures and underwriting, changes in
management or staff and their related experience, changes in nature and volume of the portfolio, changes in loan review,
changes in collateral values, changes in past due and nonaccrual loans, changes in competition, legal and regulatory issues,
changes in concentrations and other qualitative factors that could affect credit losses. The data for the allowance calculation
may be obtained from internal or external sources.
Loans that do not share similar risk characteristics with the collectively evaluated pools are evaluated on an
individual basis and are excluded from the collectively evaluated loan pools. Such loans are evaluated for credit losses based
on either discounted cash flows or the fair value of collateral.
The Company estimates expected credit losses over the contractual term of obligations to extend credit, unless the
obligation is unconditionally cancellable. The allowance for off-balance-sheet exposures is adjusted through the provision
for credit losses. The estimates are determined based on the likelihood of funding during the contractual term and an estimate
of credit losses subsequent to funding. Estimated credit losses on subsequently funded balances are based on the same
assumptions used to estimated credit losses on loans.
Loan Modifications. Loan modifications, including modifications to borrowers experiencing financial difficulty,
are treated as a new loan if two conditions are met. The terms of the new loan are at least as favorable to the Company as the
terms for comparable loans to other customers with similar collection risks and modifications to the terms of the original loan
are more than minor.
73
Loans Held for Sale. Mortgage loans originated and intended for sale in the secondary market are carried at fair
value. The fair value includes the servicing value of the loans as well as any accrued interest.
Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of mortgage loans
sold is reduced by the amount allocated to the servicing right. Gains and losses on sales of mortgage loans are based on the
difference between the selling price and the carrying value of the related loan sold.
Mortgage Servicing Rights. When mortgage loans are sold with servicing retained, servicing rights are initially
recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market
prices for comparable mortgage servicing contracts, when available or alternatively, is based on a valuation model that
calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently
measured using the amortization method which requires servicing rights to be recorded in amortization of intangibles in
proportion to, and over the period of, the estimated future net servicing income of the underlying loans.
Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount.
Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate,
loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent
that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no
longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in
valuation allowances are included in amortization expense on the income statement. The fair values of servicing rights are
subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds, default rates and losses.
Transfers of Financial Assets. Transfers of financial assets are accounted for as sales when control over the assets
has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from
the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge
or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through
an agreement to repurchase them before their maturity.
Mortgage Loan Repurchase Reserve. The Company routinely sells one-to-four family residential mortgage loans
to secondary mortgage market investors. Under standard representations and warranties clauses in the Company’s mortgage
sale agreements, the Company may be required to repurchase mortgage loans sold or reimburse the investors for credit losses
incurred on those loans if a breach of the contractual representations and warranties occurred. The Company establishes a
mortgage repurchase liability in an amount equal to management’s estimate of losses on loans for which the Company could
have a repurchase obligation or loss reimbursement. The estimated liability incorporates the volume of loans sold in previous
periods, default expectations, historical investor repurchase demand and actual loss severity. Provisions to the mortgage
repurchase reserve reduce gains on sales of loans.
Premises and Equipment. Land is carried at cost. Premises and equipment are stated at cost less accumulated
depreciation. Major replacements and betterments are capitalized while maintenance and repairs are charged to expense when
incurred. Gains or losses on dispositions are reflected in earnings as incurred.
Bank Owned Life Insurance. The Company has purchased life insurance policies on certain key officers. Bank
owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date,
which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Goodwill and Intangible Assets. Goodwill is not amortized; however, it is tested for impairment at each calendar
year end or more frequently when events or circumstances dictate. The Company performed a qualitative assessment of
factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount as of
December 31, 2024. This assessment included a review of macroeconomic conditions, industry and market specific
considerations and other relevant factors including the Company’s market capitalization, with control premiums and valuation
multiples, compared to recent financial industry acquisition multiples for similar institutions to estimate the fair value of the
Company’s single reporting unit. A goodwill impairment would be recorded for the amount that the carrying value exceeds
the implied fair value.
74
Intangible assets include core deposit intangibles. Core deposit intangible assets are amortized over their estimated
useful life of ten years on an accelerated basis. When facts and circumstances indicate potential impairment, the Company
will evaluate the recoverability of the intangible asset’s carrying value, using estimates of undiscounted future cash flows
over the remaining asset life. Any impairment loss is measured by the excess of carrying value over fair value.
Income Taxes. The objective of accounting for income taxes is to recognize the amount of taxes payable or
refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been
recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of
events that have been recognized in financial statements or tax returns. Uncertain income tax positions will be recognized
only if it is more likely than not that they will be sustained upon examination by taxing authorities, based upon their technical
merits. Once that standard is met, the amount recorded will be the largest amount of benefit that has a greater than 50 percent
likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized
tax benefits as a component of income tax expense in the consolidated statements of earnings. The Company assesses deferred
tax assets to determine if the items are more likely than not to be realized, and a valuation allowance is established for any
amounts that are not more likely than not to be realized.
Loan Commitments and Related Financial Instruments. Financial instruments include off-balance sheet credit
instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.
The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.
Such financial instruments are recorded when they are funded.
Loss Contingencies. Loss contingencies, including claims and legal actions arising in the ordinary course of
business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have a material effect on the financial
statements.
Comprehensive Income. Comprehensive income consists of net income and other comprehensive income. Other
comprehensive income includes unrealized gains and losses on securities available for sale, net of tax which are also
recognized as separate components of equity.
Real Estate Owned. Assets acquired through, or in lieu of, foreclosure are initially recorded at fair value less costs
to sell when acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a
consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys
all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal
agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value
declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are
expensed.
Stock-Based Compensation. The Company uses the Black-Scholes option pricing model to estimate the grant date
fair value of its stock options, which is recognized as compensation expense over the option vesting period, on a straight-line
basis, which is typically four years. The fair value of restricted common stock is equal to the Company’s stock price on the
grant date, which is recognized as compensation expense on a straight-line basis over the vesting period. The Company
accounts for forfeitures as they occur.
Earnings per Share. Basic earnings per share represent net earnings divided by the weighted average number of
common shares outstanding during the year. Diluted earnings per share reflect additional common shares that would have
been outstanding if dilutive potential common shares had been issued. The diluted earnings per share computation for 2024,
2023 and 2022 excluded 207,745, 174,889 and 54,304, respectively, of unexercised stock options because their inclusion
would have been anti-dilutive.
75
The shares used in the calculation of basic and diluted earnings per share, which have been adjusted to give effect
to the 5% common stock dividends paid by the Company in December 2024, 2023 and 2022, are shown below:
(Dollars in thousands, except per share amounts)
2024
2023
2022
Net earnings available to common shareholders
13,003
$
12,236
$
9,878
$
Weighted average common shares outstanding - basic
5,758,056
5,751,585
5,766,900
Assumed exercise of stock options
6,226
3,255
16,556
Weighted average common shares outstanding - diluted
5,764,282
5,754,840
5,783,456
Earnings per share:
Basic
2.26
$
2.13
$
1.71
$
Diluted
2.26
$
2.13
$
1.71
$
Years ended December 31,
Derivative Financial Instruments. Commitments to fund mortgage loans (interest rate locks) to be sold into the
secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing
derivatives. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is
executed and is adjusted for the expected exercise of the commitment before the loan is funded. In order to hedge the change
in interest rates resulting from its commitments to fund the loans, the Company enters into forward commitments for the
future delivery of mortgage loans when interest rate locks are entered into. Fair values of these mortgage derivatives are
estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. Changes in the fair
values of these derivatives are included in net gains on sales of loans.
Dividend Restriction. Banking regulations require maintaining certain capital levels and may limit the dividends paid
by the bank to the holding company or by the holding company to shareholders.
Fair Value of Financial Instruments. Fair values of financial instruments are estimated using relevant market
information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence
of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these
estimates.
Reclassifications. Some items in the prior year financial statements were reclassified to the current presentation.
Reclassifications had no effect on prior year net income or stockholders’ equity.
76
(2) Impact of Recent Accounting Pronouncements
The FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures, in November 2023. The amendments require disclosure of significant segment expenses and other segment items
on an annual and interim basis. Public entities are required to disclose significant expense categories and amounts for each
reportable segment, as well as the amount and a description of the composition of other segment items. Significant expense
categories are derived from expenses that are regularly provided to an entity’s chief operating decision-maker (“CODM”),
and included in a segment’s reported measures of profit or loss. Public entities are also required to disclose the title and
position of the CODM and explain how the CODM uses the reported measures of profit or loss in assessing segment
performance and deciding how to allocate resources. This ASU requires interim disclosures of certain segment-related
disclosures that previously were only required annually. ASU 2023-07 requires annual disclosures for fiscal years beginning
January 1, 2024 and interim disclosures for fiscal years beginning January 1, 2025. The Company adopted ASU 2023-07 in
2024, and other than the inclusion of additional disclosures, the adoption did not have a significant impact on the Company's
consolidated financial statements. The standard will be effective for the Company's consolidated financial statements for
interim periods beginning January 1, 2025.
The FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, in December
2023. The amendments require additional disclosures regarding the rate reconciliation and income taxes paid. ASU 2023-09
also removed certain existing disclosure requirements and is effective for annual periods beginning January 1, 2025. Early
adoption is permitted. The amendments in ASU 2023-09 should be applied on a prospective basis, though retrospective
application is permitted. Other than the inclusion of additional disclosures, the adoption is not expected to have a significant
effect on the Company's consolidated financial statements.
The FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses in November 2024. The amendments require
new disclosures providing further detail of a company's income statement expense items. ASU 2024-03 is effective for annual
periods beginning January 1, 2027, and interim periods beginning January 1, 2028. Early adoption is permitted. The
amendments should be applied on a prospective basis. Other than the inclusion of additional disclosures, the adoption is not
expected to have a significant effect on the Company's consolidated financial statements.
(3) Acquisition
On October 1, 2022, the Company acquired 100% of the outstanding common shares of Freedom Bancshares, Inc.,
in exchange for $33.4 million of cash. Freedom was the holding company of Freedom Bank. Freedom Bank was founded in
2006 and operated out of a single location in Overland Park, Kansas. The acquisition was effected through the merger of
Freedom with and into the Bank. The purchase price was financed with $10.0 million of debt issued by Company and through
cash received from a dividend from the Bank.
The transaction was accounted for using the acquisition method of accounting, and as such, assets acquired and
liabilities assumed were recorded at their estimated fair value on the acquisition date. Acquired loans were recorded at fair
value at the acquisition date and no separate valuation allowance was established. No purchased credit impaired loans were
acquired. Market value adjustments are accreted or amortized on a level yield basis over the expected term of the asset or
liability. Additionally, the Company recorded a core deposit intangible of $4.2 million. The core deposit intangible is
amortized on an accelerated basis over the estimated useful life of the deposits. Goodwill of $14.7 million from the acquisition
consisted largely of synergies and the cost savings resulting from the combining of the operations of the banks. The goodwill
is not deductible for income tax purposes. During 2023, goodwill was increased by $178,000 due to adjustments related to
filing final tax returns for Freedom and Freedom Bank, which are reflected in the table below. The Company incurred $3.4
million of acquisition related costs relating to the acquisition during 2022, of which $3.1 million was deductible for income
tax purposes.
Results of the operations of the acquired business are included in the income statement from the effective date of
the acquisition.
77
The following table summarizes the consideration paid for Freedom and the amounts of the assets acquired and
liabilities assumed at the acquisition date:
As of
(Dollars in thousands)
October 1, 2022
Cash paid in acquisition
33,350
$
Assets acquired:
Cash and cash equivalents
32,778
Investment securities
33,126
Bank stocks
699
Loans
113,910
Bank owned life insurance
4,374
Premises and equipment
3,782
Core deposit intangibles
4,170
Other
7,016
Total assets acquired
199,855
Liabilities assumed:
Deposits
150,410
FHLB advances
7,000
Other borrowings
22,198
Other liabilities
1,742
Total liabilities assumed
181,350
Net assets acquired
18,505
Goodwill
14,845
$
The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered
impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows.
However, the Company believes that all contractual cash flows related to these financial instruments will be collected. As
such, these receivables, which have shown evidence of credit deterioration since origination were not considered impaired at
the acquisition date and were not subject to the guidance relating to purchased credit impaired loans. Receivables acquired
that were not subject to these requirements include non-impaired loans with a fair value and gross contractual amounts
receivable of $113.9 million and $118.1 million on the date of acquisition.
Unaudited pro forma consolidated operating results for the years ended December 31, 2022 and December 31,
2021, as if the acquisition was consummated on January 1 of that year are as follows:
(Dollars in thousands, except per share amounts)
2022
2021
Net interest income
44,750
$
45,942
$
Net earnings
9,098
19,922
1.58
3.45
1.57
3.44
(1) All per share amounts have been adjusted to give effect to the 5% stock dividends paid during December 2024, 2023
2022 and 2021.
Years ended December 31,
Basic
Diluted
Earnings per share (1):
78
(4) Investment Securities
A summary of investment securities available-for-sale and securities held-to-maturity is as follows:
(Dollars in thousands)
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
$
(Dollars in thousands)
Gross
Gross
Amortized
unrealized
unrealized
Estimated
cost
gains
losses
fair value
Available-for-sale:
U. S. treasury securities
99,340
$
-
$
(3,673)
$
95,667
$
Municipal obligations, tax exempt
122,775
186
(2,338)
120,623
Municipal obligations, taxable
82,926
225
(4,068)
79,083
Agency mortgage-backed securities
169,656
247
(12,507)
157,396
Total available-for-sale
474,697
$
658
$
(22,586)
$
452,769
$
Held-to-maturity:
Other
3,555
$
-
$
(506)
$
3,049
$
Total held-to-maturity
3,555
$
-
$
(506)
$
3,049
$
As of December 31, 2024
As of December 31, 2023
The tables above show that some of the securities in the available-for-sale and held-to-maturity investment portfolio
had unrealized losses, or were temporarily impaired, as of December 31, 2024 and 2023. This temporary impairment
represents the estimated amount of loss that would be realized if the securities were sold on the valuation date.
79
The following tables summarize securities available-for-sale in an unrealized loss positions for which an
allowance for credit losses has not been recorded at December 31, 2024 and 2023 along with length of time in a continuous
unrealized loss position.
(Dollars in thousands)
No. of
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Available-for-sale
securities
value
losses
value
losses
value
losses
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 available-for-sale
485
59,388
$
(1,260)
$
280,636
$
(19,834)
$
340,024
$
(21,094)
$
(Dollars in thousands)
No. of
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Available-for-sale
securities
value
losses
value
losses
value
losses
U. S. treasury securities
47
1,129
$
(7)
$
93,833
$
(3,666)
$
94,962
$
(3,673)
$
Municipal obligations, tax exempt
229
31,468
(337)
64,962
(2,001)
96,430
(2,338)
Municipal obligations, taxable
110
17,278
(151)
52,212
(3,917)
69,490
(4,068)
Agency mortgage-backed securities
100
6,480
(68)
128,512
(12,439)
134,992
(12,507)
Total available-for-sale
486
56,355
$
(563)
$
339,519
$
(22,023)
$
395,874
$
(22,586)
$
As of December 31, 2023
Less than 12 months
12 months or longer
Total
As of December 31, 2024
Less than 12 months
12 months or longer
Total
The Company’s U.S. treasury portfolio consists of securities issued by the U.S. Department of the 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 security and its belief that it was more
likely than not that the Company will not be required to sell the security before recovery of its cost basis, the Company
believed that the U.S. treasury securities identified in the tables above were temporarily impaired.
The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations
securities issued by various municipalities. As of December 31, 2024, the Company did not intend to sell and it is more likely
than not that the Company will 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.
The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of
and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the GNMA. 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 tables above were temporarily impaired.
The Company’s held-to-maturity investment securities portfolio consists of seven subordinated debentures issued
by financial institutions. These investment securities were acquired in the Freedom Bank acquisition 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.
80
The following table provides information on the Company’s allowance for credit losses related to held-to-maturity
investment securities.
2024
2023
(Dollars in thousands)
Beginning balance
91
$
-
$
Impact of adopting ASC 326
-
72
Provision for credit losses
-
19
Ending balance
91
$
91
$
Years ended December 31,
The table below 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. The amortized cost and fair value of investment
securities at December 31, 2024 are as follows:
Amortized
Estimated
(Dollars in thousands)
cost
fair value
Available-for-sale:
Due in less than one year
35,536
$
35,269
$
Due after one year but within five years
222,328
210,035
Due after five years but within ten years
99,918
93,765
Due after ten years
35,614
33,443
Total available-for-sale
393,396
$
372,512
$
Held-to-maturity:
Due after five years but within ten years
3,672
$
3,290
$
Total held-to-maturity
3,672
$
3,290
$
The Company has not sold any investment securities subsequent to December 31, 2024 and the date of this filing.
Sales proceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:
(Dollars in thousands)
2024
2023
2022
Sales proceeds
32,623
$
20,913
$
52,597
$
Realized gains
-
$
-
$
-
$
Realized losses
(1,031)
(1,246)
(1,103)
Net realized (losses) gains
(1,031)
$
(1,246)
$
(1,103)
$
Years ended December 31,
Securities with carrying values of $305.3 million and $380.4 million were pledged to secure public funds on deposit,
repurchase agreements and as collateral for borrowings at December 31, 2024 and 2023, respectively. As of December 31,
2024, all of the Company’s investment securities were performing and there were no securities on non-accrual status. Except
for U.S. treasuries and federal agency obligations, no investment in a single issuer exceeded 10% of consolidated
stockholders’ equity.
81
(5) Bank Stocks
Bank stocks primarily consist of restricted investments in FHLB and Federal Reserve Bank (“FRB”) stock. The
carrying value of the FHLB stock at December 31, 2024 was $3.5 million compared to $5.0 million at December 31, 2023.
The carrying value of the FRB stock at both December 31, 2024 and 2023 was $3.0 million. These securities are not readily
marketable and are required for regulatory purposes and borrowing availability. Since there are no available market values,
these securities are carried at cost. Redemption of these investments at par value is at the option of the FHLB or FRB, as
applicable. Also included in Bank stocks are other miscellaneous investments in the common stock of various correspondent
banks which are held for borrowing purposes and totaled $111,000 at December 31, 2024 and 2023.
(6) Loans and Allowance for Credit Losses
Loans consisted of the following:
(Dollars in thousands)
2024
2023
One-to-four family residential real estate loans
352,209
$
302,544
$
Construction and land loans
25,328
21,090
Commercial real estate loans
345,159
320,962
Commercial loans
192,325
180,942
Agriculture loans
100,562
89,680
Municipal loans
7,091
4,507
Consumer loans
29,679
28,931
Total gross loans
1,052,353
948,656
Net deferred loan (fees) costs and loans in process
(307)
(429)
Allowance for credit losses
(12,825)
(10,608)
Loans, net
1,039,221
$
937,619
$
As of December 31,
82
The following tables provide information on the Company’s allowance for credit losses by loan class and allowance
methodology:
(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
-
-
-
(186)
(64)
-
(409)
(659)
Recoveries
-
245
-
35
54
12
130
476
Provision for credit losses
(270)
(252)
(12)
2,629
47
24
234
2,400
Balance at December 31, 2024
1,765
$
143
$
4,506
$
4,964
$
1,227
$
51
$
169
$
12,825
$
(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, 2023
655
$
117
$
3,158
$
2,753
$
1,966
$
5
$
137
$
8,791
$
Impact of adopting ASC 326
1,022
49
1,063
145
(824)
11
57
1,523
Charge-offs
-
-
-
(479)
-
-
(371)
(850)
Recoveries
-
675
-
35
74
-
110
894
Provision for credit losses
358
(691)
297
32
(26)
(1)
281
250
Balance at December 31, 2023
2,035
$
150
$
4,518
$
2,486
$
1,190
$
15
$
214
$
10,608
$
Year ended December 31, 2023
Year ended December 31, 2024
(Dollars in thousands)
One-to-four
family
residential
real estate
loans
Construction
and land loans
Commercial
real estate
loans
Commercial
loans
Paycheck
protection
loans
Agriculture
loans
Municipal
loans
Consumer
loans
Total
Allowance for credit losses:
Balance at January 1, 2022
623
$
138
$
3,051
$
2,613
$
-
$
2,221
$
6
$
123
$
8,775
$
Charge-offs
-
-
-
-
-
-
-
(336)
(336)
Recoveries
-
165
-
38
-
59
6
84
352
Provision for credit losses
32
(186)
107
102
-
(314)
(7)
266
-
Balance at December 31, 2022
655
$
117
$
3,158
$
2,753
$
-
$
1,966
$
5
$
137
$
8,791
$
Allowance for credit losses:
Individually evaluated for loss
-
$
-
$
-
$
636
$
-
$
18
$
-
$
-
$
654
$
Collectively evaluated for loss
655
117
3,158
2,117
-
1,948
5
137
8,137
Total
655
$
117
$
3,158
$
2,753
$
-
$
1,966
$
5
$
137
$
8,791
$
Loan balances:
Individually evaluated for loss
326
$
412
$
1,224
$
812
$
-
$
1,319
$
36
$
-
$
4,129
$
Collectively evaluated for loss
236,656
22,313
302,850
172,603
21
82,964
1,990
26,664
846,061
Total
236,982
$
22,725
$
304,074
$
173,415
$
21
$
84,283
$
2,026
$
26,664
$
850,190
$
Year ended December 31, 2022
The Company recorded net loan charge offs of $183,000 during 2024 compared to net loan recoveries of $44,000
during 2023.
83
The following tables present information on non-accrual status and loans past due over 89 days and still accruing:
(Dollars in thousands)
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
$
-
$
(Dollars in thousands)
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
161
$
31
$
-
$
Commercial loans
363
1,517
-
Agriculture loans
295
-
-
Consumer loans
24
-
-
Total loans
843
$
1,548
$
-
$
As of December 31, 2024
As of December 31, 2023
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
tables present information on the amortized cost basis and collateral type of collateral-dependent loans:
(Dollars in thousands)
Loan balance
Collateral Type
One-to-four family residential real estate loans
34
$
First mortgage on residential real estate
Construction and land loans
-
First mortgage on residential or commercial real estate
Commercial real estate loans
782
First mortgage on commercial real estate
Commercial loans
3,150
Accounts receivable, equipment and real estate
Agriculture loans
1,456
Crops, livestock, machinery and real estate
Total loans
5,422
$
(Dollars in thousands)
Loan balance
Collateral Type
One-to-four family residential real estate loans
192
$
First mortgage on residential real estate
Construction and land loans
192
First mortgage on residential or commercial real estate
Commercial real estate loans
1,205
First mortgage on commercial real estate
Commercial loans
2,054
Accounts receivable, equipment and real estate
Agriculture loans
682
Crops, livestock, machinery and real estate
Consumer loans
24
Personal property or second mortgages on real estate
Total loans
4,349
$
As of December 31, 2023
As of December 31, 2024
84
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. Past due loans are determined in accordance with the contractual
repayment terms. 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 ninety 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 ninety days delinquent and accruing interest at December 31, 2024 or
December 31, 2023.
The following tables present information on the Company’s past due and non-accrual loans by loan class:
(Dollars in thousands)
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%
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
85
$
247
$
-
$
332
$
192
$
524
$
302,020
$
Construction and land loans
-
-
-
-
-
-
21,090
Commercial real estate loans
153
-
-
153
-
153
320,809
Commercial loans
399
332
-
731
1,880
2,611
178,331
Agriculture loans
256
-
-
256
295
551
89,129
Municipal loans
-
-
-
-
-
-
4,507
Consumer loans
110
-
-
110
24
134
28,797
Total
1,003
$
579
$
-
$
1,582
$
2,391
$
3,973
$
944,683
$
Percent of gross loans
0.11%
0.06%
0.00%
0.17%
0.25%
0.42%
99.58%
As of December 31, 2023
As of December 31, 2024
Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the years 2024, 2023
and 2022, would have increased interest income by $423,000, $96,000, and $137,000, respectively. No interest income
related to non-accrual loans was included in interest income for the years ended December 31, 2024, 2023, and 2022.
85
The Company also categorizes loans into risk categories based on relevant information about the ability of the
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. Non-classified 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 classified as special mention have a potential weakness that deserves management’s close
attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for
the loan or of the institution’s credit position at some future date.
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.
86
The following table provides information on the Company’s risk category of loans by type and year of origination:
(Dollars in thousands)
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
$
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
$
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
$
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
$
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
$
Charge-offs
-
$
-
$
-
$
-
$
-
$
64
$
-
$
-
$
64
$
Municipal loans
Nonclassified
5,565
$
-
$
90
$
-
$
-
$
1,436
$
-
$
-
$
7,091
$
Classified
-
-
-
-
-
-
-
-
-
Total
5,565
$
-
$
90
$
-
$
-
$
1,436
$
-
$
-
$
7,091
$
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
$
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
$
Charge-offs
376
$
7
$
17
$
114
$
56
$
88
$
-
$
1
$
659
$
As of December 31, 2024
87
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
loans
amortized
cost
Revolving
loans
converted
to term
Total
One-to-four family residential real estate loans
Nonclassified
95,290
$
84,718
$
42,533
$
32,081
$
12,776
$
29,694
$
5,097
$
163
$
302,352
$
Classified
-
-
-
-
-
192
-
-
192
Total
95,290
$
84,718
$
42,533
$
32,081
$
12,776
$
29,886
$
5,097
$
163
$
302,544
$
Charge-offs
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
Construction and land loans
Nonclassified
6,283
$
5,267
$
5,367
$
2,665
$
916
$
492
$
100
$
-
$
21,090
$
Classified
-
-
-
-
-
-
-
-
-
Total
6,283
$
5,267
$
5,367
$
2,665
$
916
$
492
$
100
$
-
$
21,090
$
Charge-offs
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
Commercial real estate loans
Nonclassified
41,644
$
77,427
$
58,327
$
50,744
$
30,551
$
57,502
$
3,017
$
92
$
319,304
$
Classified
-
-
481
22
180
975
-
-
1,658
Total
41,644
$
77,427
$
58,808
$
50,766
$
30,731
$
58,477
$
3,017
$
92
$
320,962
$
Charge-offs
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
Commercial loans
Nonclassified
38,818
$
32,764
$
16,747
$
15,511
$
2,514
$
4,386
$
61,046
$
4,121
$
175,907
$
Classified
226
2,000
158
460
57
-
1,952
182
5,035
Total
39,044
$
34,764
$
16,905
$
15,971
$
2,571
$
4,386
$
62,998
$
4,303
$
180,942
$
Charge-offs
-
$
(28)
$
(407)
$
(44)
$
-
$
-
$
-
$
-
$
(479)
$
Agriculture loans
Nonclassified
7,862
$
11,718
$
4,864
$
4,092
$
3,902
$
12,114
$
44,352
$
214
$
89,118
$
Classified
-
16
171
-
131
113
131
-
562
Total
7,862
$
11,734
$
5,035
$
4,092
$
4,033
$
12,227
$
44,483
$
214
$
89,680
$
Charge-offs
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
Municipal loans
Nonclassified
2,774
$
128
$
-
$
-
$
-
$
1,605
$
-
$
-
$
4,507
$
Classified
-
-
-
-
-
-
-
-
-
Total
2,774
$
128
$
-
$
-
$
-
$
1,605
$
-
$
-
$
4,507
$
Charge-offs
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
Consumer loans
Nonclassified
4,705
$
1,332
$
1,340
$
1,380
$
1
$
4,906
$
15,221
$
21
$
28,906
$
Classified
-
-
-
-
-
-
25
-
25
Total
4,705
$
1,332
$
1,340
$
1,380
$
1
$
4,906
$
15,246
$
21
$
28,931
$
Charge-offs
-
$
-
$
(3)
$
-
$
-
$
-
$
(368)
$
-
$
(371)
$
Total loans
Nonclassified
197,376
$
213,354
$
129,178
$
106,473
$
50,660
$
110,699
$
128,833
$
4,611
$
941,184
$
Classified
226
2,016
810
482
368
1,280
2,108
182
7,472
Total
197,602
$
215,370
$
129,988
$
106,955
$
51,028
$
111,979
$
130,941
$
4,793
$
948,656
$
Charge-offs
-
$
(28)
$
(410)
$
(44)
$
-
$
-
$
(368)
$
-
$
(850)
$
As of December 31, 2023
The following table provides information on the Company’s allowance for credit losses related to unfunded loan
commitments.
(dollars in thousands)
2024
2023
Balance at beginning of period
250
$
170
$
Impact of adopting ASC 326
-
-
Provision (benefit) for credit losses
(100)
80
Balance at end of period
150
$
250
$
Years ended December 31,
88
The following tables present the amortized cost basis of loans at December 31, 2024 and 2023 that were both
experiencing financial difficulty and modified by class, type of modification and includes the financial effect of the
modification.
(Dollars in thousands)
Amortized cost
% of loan class
Financial effect
Interest Only:
Commercial
8,230
$
4.5%
6 month interest only payments
Term extension:
Commercial
954
$
0.5%
5 month principal payment deferral
(Dollars in thousands)
Amortized cost
% of loan class
Financial effect
Term extension:
Commercial
141
$
0.1%
90 day payment deferral
As of December 31, 2023
As of December 31, 2024
As of December 31, 2024, all loans experiencing both financial difficulty and modified during the twelve months
ended December 31, 2024 were current under the terms of the agreements. There were no commitments to lend additional
funds to the borrowers and there were no charge-offs recorded against the loans. The Company had a $1.8 million allowance
for credit losses recorded against these loans as of December 31, 2024. The Company did not have any loan modifications
that had a payment default during the twelve months ended December 31, 2024.
The Company had loans and unfunded commitments to directors and officers, and to affiliated parties, at December
31, 2024 and 2023. A summary of such loans is as follows:
(Dollars in thousands)
Balance at December 31, 2023
13,056
$
New loans
3,500
Repayments
(2,364)
Balance at December 31, 2024
14,192
$
(7) Loan Commitments
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet
customers’ financing needs. These financial instruments consist principally of commitments to extend credit. The Company
uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
The Company’s exposure to credit loss in the event of nonperformance by the other party is represented by the contractual
amount of those instruments. In the normal course of business, there are various commitments and contingent liabilities, such
as commitments to extend credit, letters of credit, and lines of credit, the balance of which are not recorded in the
accompanying consolidated financial statements. The Company generally requires collateral or other security on unfunded
loan commitments and irrevocable letters of credit. Unfunded commitments to extend credit, excluding standby letters of
credit, aggregated to $201.2 million and $211.8 million at December 31, 2024 and 2023, respectively, and are generally at
variable interest rates. Standby letters of credit totaled $1.9 million at December 31, 2024 and $1.6 million at December 31,
2023.
89
(8) Goodwill and Intangible Assets
The changes in goodwill is as follows:
(Dollars in thousands)
2024
2023
2022
Balance at January 1
32,377
$
32,199
$
17,532
$
Acquired goodwill
-
-
14,667
Acquisition period adjustments
-
178
-
Balance at December 31
32,377
$
32,377
$
32,199
$
Years ended December 31,
The Company performed its annual impairment test as of December 31, 2024. Based on the results of the qualitative
analysis, the Company concluded it was more likely than not that its goodwill was not impaired.
A summary of the other intangible assets that continue to be subject to amortization is as follows:
(Dollars in thousands)
2024
2023
Gross carrying amount
$ 4,170
$ 4,170
Accumulated amortization
(1,592) (929)
Net carrying amount
$ 2,578
$ 3,241
As of December 31,
Amortization expense for the years ended December 31, 2024 and 2023 was $663,000 and $765,000. The following
sets forth estimated amortization expense for core deposit intangible assets for the years ending December 31:
(Dollars in thousands)
Amortization
expense
2025
588
2026
512
2027
436
2028
360
2029
284
Thereafter
398
Total
2,578
$
(9) 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:
Custodial escrow balances maintained in connection with serviced loans were $5.6 million at December 31, 2024
and $5.0 million at December 31, 2023. Gross service fee income related to such loans was $1.7 million for the year ended
December 31, 2024 and $1.8 million for the years ended 2023 and 2022, and is included in fees and service charges in the
consolidated statements of earnings.
(Dollars in thousands)
2024
2023
FHLMC
$ 626,379 $ 659,488
FHLB
27,418 28,621
Total
653,797
$
688,109
$
As of December 31,
90
Activity for mortgage servicing rights and the related valuation allowance follows:
(Dollars in thousands)
2024
2023
Mortgage servicing rights:
Balance at beginning of year
$ 3,158
$ 3,813
Additions
404
424
Amortization
Balance at end of year
$ 3,061
$ 3,158
As of December 31,
(501) (1,079)
At December 31, 2024 and 2023, there was no valuation allowance related to mortgage servicing rights.
The fair value of mortgage servicing rights was $9.6 million and $9.5 million at December 31, 2024 and 2023,
respectively. Fair value at December 31, 2024 was determined using a discount rate at 10.0%, 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%. Fair value at December 31, 2023 was determined using a discount rate at 10.0%, prepayment speeds
ranging from 6.00% to 26.87%, depending on the stratification of the specific mortgage servicing right, and a weighted
average default rate of 1.65%.
The Company had a mortgage repurchase reserve of $131,000 at December 31, 2024 and $159,000 at December 31,
2023, which represented the Company’s best estimate as of such 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
made no provision to the reserve during 2024 compared to a $50,000 provision to the reserve provision during 2023 and no
reserve during 2022. The Company charged losses of $28,000, $116,000, and $1,000 against the reserve during 2024, 2023,
and 2022, respectively. As of December 31, 2024, the Company had no outstanding mortgage repurchase requests.
(10) Premises and Equipment
Premises and equipment consisted of the following:
(Dollars in thousands)
Estimated
useful lives
2024
2023
Land
Indefinite
5,202
$
5,444
$
Office buildings and improvements
10 - 50 years
21,648
20,868
Furniture and equipment
3 - 15 years
8,558
9,729
Automobiles
2 - 5 years
646
555
Total premises and equipment
36,054
36,596
Accumulated depreciation
(15,834)
(16,887)
Total premises and equipment, net
20,220
$
19,709
$
As of December 31,
Depreciation expense totaled $1.3 million for the years ended December 31, 2024 and 2023, and $1.1 million during
the year ended 2022 and was included in occupancy and equipment expense on the consolidated statements of earnings.
91
(11) Deposits
The following table presents the maturities of certificates of deposit at December 31, 2024:
(Dollars in thousands)
Year
Amount
2025
180,953
2026
8,416
2027
2,522
2028
2,311
2029
490
Thereafter
2
Total
$ 194,694
The aggregate amount of certificate of deposit in denominations of $250,000 or more at December 31, 2024 and 2023
was $52.2 million and $50.2 million, respectively. As of December 31, 2024, the Company had $91.4 million in brokered
deposits compared to $83.2 million at December 31, 2023.
The components of interest expense associated with deposits are as follows:
(Dollars in thousands)
2024
2023
2022
Certificates of deposit
$ 8,494 $ 4,310 $ 412
Money market and checking
13,628 10,818 2,318
Savings
188 126 46
Total
$ 22,310 $ 15,254 $ 2,776
Years ended December 31,
(12) Federal Home Loan Bank Borrowings
The Bank has a line of credit, renewable annually each September, with the FHLB under which there were $48.8
million of borrowings at December 31, 2024 compared to $58.0 million of borrowings at December 31, 2023. Interest on any
outstanding balance on the line of credit accrues at the federal funds rate plus 0.15% (4.57% at December 31, 2024). The
Company had $60.0 million letters of credit issued through the FHLB at December 31, 2024 compared to $20.0 million at
December 31, 2023 to secure municipal deposits. The Company did not have any term advances from FHLB at December
31, 2024 and 2023.
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 December 31, 2024 and
2023, there was a blanket pledge of loans totaling $403.9 million and $328.7 million, respectively. At December 31, 2024
and 2023, the Bank’s total borrowing capacity with the FHLB was approximately $281.2 million and $232.3 million,
respectively. At December 31, 2024 and 2023, the Bank’s available borrowing capacity was $171.0 million and $153.1
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 issued to collateralized public fund deposits. 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.
92
(13) Subordinated Debentures
In 2003, the Company issued $8.2 million of subordinated debentures. These debentures, which are due in 2034
and are currently redeemable, were issued to a wholly owned grantor trust (the “Trust”) formed to issue preferred securities
representing undivided beneficial interests in the assets of the Trust. The Trust then invested the gross proceeds of such
preferred securities in the debentures. The Trust’s preferred securities and the subordinated debentures require quarterly
interest payments and have variable rates, adjustable quarterly. Interest accrues at three month CME term SOFR plus a spread
adjustment of 0.26% and a margin of 2.85%. The interest rate at December 31, 2024 and 2023 was 7.74% and 8.50%,
respectively.
In 2005, the Company issued an additional $8.2 million of subordinated debentures. These debentures, which are
due in 2036 and are currently redeemable, were issued to a wholly owned grantor trust (“Trust II”) formed to issue preferred
securities representing undivided beneficial interests in the assets of Trust II. Trust II then invested the gross proceeds of such
preferred securities in the debentures. Trust II’s preferred securities and the subordinated debentures require quarterly interest
payments and have variable rates, adjustable quarterly. Interest accrues at three month CME term SOFR plus a spread
adjustment of 0.26% and a margin of 1.34%. The interest rate at December 31, 2024 and 2023 was 5.96% and 6.99%,
respectively.
In 2013, the Company assumed an additional $5.2 million of subordinated debentures as part of the Bank’s
acquisition of Citizens Bank. These debentures, which are due in 2036 and are currently redeemable, were issued by Citizens
Bank’s former holding company to a wholly owned grantor trust, First Capital (KS) Statutory Trust (“Trust III”) formed to
issue preferred securities representing undivided beneficial interests in the assets of Trust III. Trust III’s preferred securities
and the subordinated debentures require quarterly interest payments and have variable rates, adjustable quarterly. Interest
accrues at three month CME term SOFR plus a spread adjustment of 0.26% and a margin of 1.62%. The interest rate at
December 31, 2024 and 2023 was 5.94% and 7.24% respectively.
While these trusts are accounted for as unconsolidated equity investments, a portion of the trust preferred securities
issued by the trusts qualifies as Tier 1 Capital for regulatory purposes.
(14) Other Borrowings
The Company has a $5.0 million line of credit from an unrelated financial institution maturing on November 1,
2025, 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. At December 31, 2024, the Company’s risk-based capital ratio of 12.43% was below the
minimum required under such covenants of 12.50%. The Company requested from the lender a waiver of the default which
was granted ty the lender. On March 14, 2025, the Company and the lender entered into a Change in Terms Agreement,
reducing the minimum tier 1 capital ratio required under such covenants to 12.00% going forward. As of December 31, 2024
and 2023, the Company did not have an outstanding balance on the line of credit.
The Company borrowed $10.0 million from an unrelated financial institution at a fixed rate of 6.15% maturing on
September 1, 2027, which requires quarterly principal and interest payments. The principal balance was $4.2 million and
$6.6 million at December 31, 2024 and 2023, respectively.
At December 31, 2024 and 2023, the Bank had no borrowings through the Federal Reserve discount window, while
the borrowing capacity was $50.5 million and $60.7 million, respectively. The Bank also has various other federal funds
agreements, both secured and unsecured, with correspondent banks totaling approximately $35.0 million at December 31,
2024 and $30.0 million at December 31, 2023. As of December 31, 2024 and 2023, there were no borrowings through these
correspondent bank federal funds agreements.
93
(15) 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 $13.8 million at December 31, 2024,
and $12.7 million at December 31, 2023, which were secured by $15.2 million and $23.7 million of the Bank’s investment
portfolio at the same dates, respectively.
The following is a summary of the balances and collateral of the Company’s repurchase agreements:
(Dollars in thousands)
2024
2023
Average daily balance during the year
$ 12,216 $ 18,361
Average interest rate during the year
2.82%
2.72%
Maximum month-end balance during the year $ 16,660 $ 20,083
Weighted average interest rate at year-end
2.68%
2.84%
Years ended December 31,
Overnight and
Greater
Continuous
Up to 30 days
30-90 days
than 90 days
Total
Repurchase agreements:
U.S. federal treasury obligations
11,729
$
-
$
-
$
-
$
11,729
$
Agency mortgage-backed securities
2,079
-
-
-
2,079
Total
13,808
$
-
$
-
$
-
$
13,808
$
Overnight and
Greater
Continuous
Up to 30 days
30-90 days
than 90 days
Total
Repurchase agreements:
U.S. federal treasury obligations
12,714
$
-
$
-
$
-
$
12,714
$
Total
12,714
$
-
$
-
$
-
$
12,714
$
As of December 31, 2023
As of December 31, 2024
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.
94
(16) 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.
(Dollars in thousands)
2024
2023
2022
Non-interest income:
Service charges on deposits
Overdraft fees
3,968
$
3,845
$
3,747
$
Other
1,707
1,080
787
Interchange income
2,921
3,206
3,098
Loan servicing fees (1)
1,714
1,788
1,819
Office lease income (1)
126
509
123
Gains on sales of loans (1)
2,386
2,269
3,444
Bank owned life insurance income (1)
1,723
913
780
(Losses) gains on sales of investment securities (1)
(1,031)
(1,246)
(1,103)
Gains (losses) on sales of premises and equipment and foreclosed assets
326
1
114
Other
904
865
891
Total non-interest income
14,744
$
13,230
$
13,700
$
(1) Not within the scope of ASC 606.
Years ended December 31,
A description of the Company’s revenue streams within the scope of ASC 606 follows:
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 years 2024, 2023, or 2022.
95
(17) Income Taxes
Income tax expense (benefit) attributable to income from operations consisted of the following:
(Dollars in thousands)
2024
2023
2022
Current:
Federal
2,012
$
1,711
$
559
$
State
(714)
(161)
(317)
Total current
1,298
1,550
242
Deferred:
Federal
(120)
295
994
State
(71)
56
238
Total deferred
(191)
351
1,232
Deferred tax valuation allowance
(21)
53
(42)
Income tax expense
1,086
$
1,954
$
1,432
$
Years ended December 31,
The reasons for the difference between actual income tax expense (benefit) and expected income tax expense
attributable to income from operations at the statutory federal income tax rate were as follows:
(Dollars in thousands)
2024
2023
2022
Computed “expected” tax expense
2,958
$
2,980
$
2,375
$
(Reduction) increase in income taxes resulting from:
Tax-exempt interest income, net
(556)
(592)
(633)
Excess tax expense (benefit) from stock awards
2
2
(4)
Bank owned life insurance
(378)
(208)
(180)
Reversal of unrecognized tax benefits, net
(1,037)
(517)
(465)
State income taxes, net of federal benefit
401
476
369
Investment tax credits
(116)
(47)
(23)
Other, net
(188)
(140)
(7)
1,086
$
1,954
$
1,432
$
Years ended December 31,
96
The tax effects of temporary differences that give rise to the significant portions of the deferred tax assets and
liabilities at the following dates were as follows:
(Dollars in thousands)
2024
2023
Deferred tax assets:
Unrealized loss on investment securities available-for-sale
5,056
$
5,371
$
Loans, including allowance for credit losses
3,280
2,949
State taxes
494
536
Other, net
297
244
Net operating loss carry forwards
213
332
Net deferred loan fees
140
144
Acquisition costs
79
99
Valuation allowance on other real estate
-
75
Deferred compensation arrangements
63
62
Total deferred tax assets
9,622 9,812
Less valuation allowance
(213)
(234)
Total deferred tax assets, net of valuation allowance
9,409
9,578
Deferred tax liabilities:
Intangible assets
1,252
1,277
Prepaid expenses
669
586
Mortgage servicing rights
643
681
Premises and equipment, net of depreciation
601
618
Investments
99
158
FHLB stock dividends
49
59
Total deferred tax liabilities
3,313
3,379
Net deferred tax asset
6,096
$
6,199
$
As of December 31,
The Company had Kansas corporate and privilege tax net operating loss carry forwards totaling $4.5 million and
$4.6 million as of December 31, 2024 and 2023, respectively, which expire between 2025 and 2032. The Company had
recorded a valuation allowance against the Kansas net operating loss carry forwards. The Company had federal net operating
loss carry forwards totaling $465,000 as of December 31, 2023, which was utilized during 2024. A valuation allowance
related to the remaining deferred tax assets has not been provided because management believes it is more likely than not
that the results of future operations will generate sufficient taxable income to realize the deferred tax assets at December 31,
2024.
Retained earnings at December 31, 2024 and 2023 include approximately $6.3 million for which no provision for
federal income tax had been made. This amount represents allocations of income to bad debt deductions in years prior to
1988 for tax purposes only. Reduction of amounts allocated for purposes other than tax bad debt losses will create income
for tax purposes only, which will be subject to the then current corporate income tax rate.
97
The Company has unrecognized tax benefits representing tax positions for which a liability has been established. A
reconciliation of the beginning and ending amount of the liability relating to unrecognized tax benefits is as follows:
(Dollars in thousands)
2024
2023
Unrecognized tax benefits at beginning of year
$ 2,040 $ 2,157
Gross increases to current year tax positions
495 472
Gross decreases to prior year’s tax positions
(73) (61)
Lapse of statute of limitations
(975) (528)
Unrecognized tax benefits at end of year
$ 1,487 $ 2,040
Years ended December 31,
Tax years that remain open and subject to audit include the years 2020 through 2024 for both federal and state tax
purposes. The Company recognized $975,000 and $528,000 of previously unrecognized tax benefits during 2024 and 2023,
respectively. The gross unrecognized tax benefits of $1.5 million and $2.0 million at December 31, 2024 and December 31,
2023, respectively, would favorably impact the effective tax rate by $1.2 million and $1.6 million, respectively, if recognized.
During 2024, 2023 and 2022, the Company recorded an income tax benefit of $209,000, $51,000 and $52,000, respectively,
associated with interest and penalties. As of December 31, 2024 and 2023, the Company had accrued interest and penalties
related to the unrecognized tax benefits of $311,000 and $520,000, respectively, which are not included in the table above.
The Company believes that it is reasonably possible that a reduction in gross unrecognized tax benefits of up to $264,000 is
possible during the next 12 months as a result of the lapse of the statute of limitations.
(18) Employee Benefit Plans
Employee Retirement Plan. Substantially all employees are covered under a 401(k) defined contribution savings
plan. Eligible employees receive dollar-for-dollar matching contributions from the Company of up to 6% of their
compensation. Matching contributions by the Company were $787,000, $857,000, and $768,000 for the years ended
December 31, 2024, 2023, and 2022, respectively.
Split-Dollar Life Insurance Agreement. The Company has recognized a liability for future benefits payable under
an agreement that splits the benefits of a bank owned life insurance policy between the Company and a former employee.
The liability totaled $44,000 at December 31, 2024 and 2023.
Deferred Compensation Agreements. The Company has entered into a deferred compensation agreement with a
key employee that provides for cash payments to be made after retirement. The obligations under this arrangement have been
recorded at the present value of the accrued benefits. The Company has also entered into agreements with a current and
former director to defer portions of their compensation. The balance of accrued benefits under all deferred compensation
agreements was $924,000 and $798,000 at December 31, 2024 and 2023, respectively, and was included as a component of
other liabilities in the accompanying consolidated balance sheets. The Company recorded income associated with the deferred
compensation agreements of $1,000 for the year ended December 31, 2024, expense associated with the deferred
compensation agreements of $2,000 for the year ended December 31, 2023, and income associated with the deferred
compensation agreements of $1,000 for the year ended December 31, 2022. The liability balance is also impacted by changes
in the value of the underlying assets supporting the agreements for directors who have not retired.
98
(19) Stock-Based Compensation
Overview. The Company has a stock-based employee compensation plan, which allows for the issuance of stock
options, stock appreciation rights, and stock awards (including, among others, restricted common stock, and restricted stock
unit awards.), the purpose of which is to provide additional incentive to certain employees, directors, and service providers
by facilitating their purchase of a stock interest in the Company. Compensation expense related to prior awards under the
Company’s current and former stock-based employee compensation plans is recognized on a straight line basis over the
vesting period, which is typically four years. The stock-based compensation cost related to these awards was $520,000,
$352,000, and $295,000 for the years ended December 31, 2024, 2023, and 2022, respectively. The Company recognized tax
benefits of $126,000, $84,000, and $77,000 for the years ended December 31, 2024, 2023, and 2022, respectively.
For stock options, the exercise price may not be less than 100% of the fair market value of the shares on the date of
the grant, and no option shall be exercisable after ten years from the grant date. In determining compensation cost, the Black-
Scholes option-pricing model is used to estimate the fair value of options on date of grant. The Black-Scholes model is a
closed-end model that considers expected volatility, the expected term of the options the risk-free rate for the expected option
term, and dividend yield using the assumptions outlined below. Expected volatility is based on historical volatility of the
Company’s stock. The Company uses historical exercise behavior and other qualitative factors to estimate the expected term
of the options, which represents the period of time that the options granted are expected to be outstanding. The risk-free rate
for the expected term is based on U.S. Treasury rates in effect at the time of grant.
2015 Stock Incentive Plan. On May 20, 2015, our stockholders approved the Landmark Bancorp, Inc., 2015 Stock
Incentive Plan (the “2015 Stock Incentive Plan”), which authorized the issuance of equity awards covering 407,224 shares
of common stock, as adjusted for subsequent stock dividends. On August 1, 2022, the Compensation Committee awarded
20,318 shares of restricted common stock pursuant to the 2015 Stock Incentive Plan, as adjusted for subsequent stock
dividends. The restricted stock awards vest ratably over one or four years and the value was based on a stock price of $22.02
per share on the date such shares were granted, as adjusted for subsequent stock dividends. On August 1, 2023, the
Compensation Committee awarded 5,725 shares of restricted common stock pursuant to the 2015 Stock Incentive Plan, as
adjusted for subsequent stock dividends and options to acquire 89,425 shares of common stock, as adjusted for subsequent
stock dividends. The restricted stock awards vest ratably over one year and the value was based on a stock price of $19.20
per share on the date such shares were granted, as adjusted for subsequent stock dividends. The options vest ratably over four
years.
On February 29, 2024, the Compensation Committee awarded, effective March 29, 2024, 5,250 shares of restricted
common stock pursuant to the 2015 Stock Incentive Plan, as adjusted for subsequent stock dividends and options to acquire
42,000 shares of common stock, as adjusted for subsequent stock dividends. The restricted stock awards vest ratably over
four years and the value was based on a stock price of $18.36 per share on the date such shares were granted, as adjusted for
subsequent stock dividends. The options vest ratably over four years.
2024 Stock Incentive Plan. On May 22, 2024, our stockholders approved the Landmark Bancorp, Inc., 2024 Stock
Incentive Plan which authorized the issuance of equity awards covering 525,000 shares of common stock as adjusted for
subsequent stock dividends. Upon shareholder approval of the 2024 Stock Incentive Plan, the 2015 Stock Incentive Plan was
frozen with respect to future grants.
On August 1, 2024, the Compensation Committee awarded 37,984 shares of restricted common stock, as adjusted
for subsequent stock dividends. The restricted stock awards vest ratably over one or four years and the value was based on a
stock price of $19.10 per share on the date such shares were granted, as adjusted for subsequent stock dividends. As of
December 31, 2024, there were 487,016 shares of common stock remaining available for issuance under the 2024 Stock
Incentive Plan.
99
The fair value of the options granted were determined using the following weighted-average assumptions as of the
grant date:
2024
2023
Risk-free interest rate
4.20%
4.15%
Expected term
7 years
7 years
Expected stock price volatility
27.18%
26.31%
Dividend yield
4.36%
3.97%
Years ended December 31,
A summary of option activity during 2024 is presented below:
(Dollars in thousands, except per share amounts)
Weighted
Weighted
average
average
exercise
remaining
Aggregate
price
contractual
intrinsic
Shares
per share
term
value
Outstanding at January 1, 2024
228,408 $ 20.58
7.2 years $ 88
Granted
40,000 $ 18.50
Effect of 5% stock dividend
12,792
Forfeited/expired
(12,474) $ 20.95
Exercised
- $ -
Outstanding at December 31, 2024
268,726 $ 19.44
6.7 years $ 1,235
Exercisable at December 31, 2024
156,919 $ 19.26
5.4 years $ 720
Fully vested options at December 31, 2024
156,919 $ 19.26
5.4 years $ 720
Additional information about stock options exercised is presented below:
(Dollars in thousands)
2024
2023
2022
Intrinsic value of options exercised (on exercise date)
$ -
$ 4
$ 3
Cash received from options exercised
- 52 -
Excess tax benefit realized from options exercised
$ -
$ 1 $ -
Years ended December 31,
As of December 31, 2024, there was $329,000 of total unrecognized compensation cost related to the 111,807
outstanding unvested options that will be recognized over the following periods:
(Dollars in thousands)
Year
Amount
2025
132
2026
108
2027
79
2028
10
Total
$ 329
100
The fair value of restricted stock on the vesting date was $293,000, $187,000, and $223,000 during the years ended
December 31, 2024, 2023, and 2022 respectively. A summary of nonvested restricted common stock activity during 2024 is
presented below:
Shares
Weighted
average grant
date price per
share
Nonvested restricted common stock at January 1, 2024
23,001
22.40
$
Granted
41,175
19.96
$
Vested
(14,868)
20.06
$
Forfeited
(1,183)
22.16
$
Effect of 5% stock dividend
2,384
Nonvested restricted common stock at December 31, 2024
50,509
19.77
$
As of December 31, 2024, there was $791,000 of total unrecognized compensation cost related to the outstanding
nonvested restricted shares that will be recognized over the following periods:
(Dollars in thousands)
Year
Amount
2025
300
2026
217
2027
178
2028
96
Total
$ 791
(20) 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.
101
Fair value estimates of the Company’s financial instruments as of December 31, 2024 and 2023, including methods
and assumptions utilized, are set forth below:
(Dollars in thousands)
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)
(Dollars in thousands)
Carrying
amount
Level 1
Level 2
Level 3
Total
Financial assets:
Cash and cash equivalents
27,101
$
27,101
$
-
$
-
$
27,101
$
Interest-bearing deposits at other banks
4,918
-
4,918
-
4,918
Investment securities available-for-sale
452,769
95,667
357,102
-
452,769
Investment securities held-to-maturity
3,555
-
3,049
-
3,049
Bank stocks, at cost
8,123
n/a
n/a
n/a
n/a
Loans, net
937,619
-
-
920,984
920,984
Loans held for sale
853
-
853
-
853
Mortgage servicing rights
3,158
-
9,498
-
9,498
Accrued interest receivable
7,341
327
2,280
4,734
7,341
Derivative financial instruments
114
-
114
-
114
Financial liabilities:
Non-maturity deposits
(1,133,097)
$
(1,133,097)
$
-
$
-
$
(1,133,097)
$
Certificates of deposit
(183,154)
-
(181,655)
-
(181,655)
FHLB and other borrowings
(64,662)
-
(65,478)
-
(65,478)
Subordinated debentures
(21,651)
-
(18,906)
-
(18,906)
Repurchase agreements
(12,714)
-
(12,714)
-
(12,714)
Accrued interest payable
(1,979)
-
(1,979)
-
(1,979)
Derivative financial instruments
(14)
-
(14)
-
(14)
As of December 31, 2024
As of December 31, 2023
Transfers
The Company did not transfer any assets or liabilities among levels during the year ended December 31, 2024 or
2023.
102
Valuation Methods for Instruments Measured at Fair Value on a Recurring Basis
The following table represents the Company’s financial instruments that are measured at fair value on a recurring
basis at December 31, 2024 and 2023, allocated to the appropriate fair value hierarchy:
(Dollars in thousands)
Total
Level 1
Level 2
Level 3
Assets:
Available-for-sale 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
-
(Dollars in thousands)
Total
Level 1
Level 2
Level 3
Assets:
U. S. treasury securities
95,667
$
95,667
$
-
$
-
$
Municipal obligations, tax exempt
120,623
-
120,623
-
Municipal obligations, taxable
79,083
-
79,083
-
Agency mortgage-backed securities
157,396
-
157,396
-
Loans held for sale
853
-
853
-
Derivative financial instruments
114
-
114
-
Liabilities:
Derivative financial instruments
(14)
-
(14)
-
As of December 31, 2023
Fair value hierarchy
As of December 31, 2024
Fair value hierarchy
The Company’s investment securities classified as available-for-sale include U.S. treasury securities, U.S. federal
agency 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 securities and agency mortgage-
backed obligations 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 securities 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 credit-related.
Mortgage loans originated and intended for sale in the secondary market are carried at estimated 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.
103
The aggregate fair value, contractual balance (including accrued interest), and gain or loss on loans held for sale
were as follows:
(Dollars in thousands)
2024
2023
Aggregate fair value
$ 3,420
$ 853
Contractual balance
3,376
848
Gain
$ 44
$ 5
As of December 31,
The Company’s derivative financial instruments consist of interest rate lock commitments and forward commitments
for the future delivery of these mortgage loans. 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 other assets or other liabilities on the
consolidated balance sheets and gains on sale of loans, net in the consolidated statements of earnings. The total amount of
gains and losses from changes in fair value of derivative financial instruments included in earnings were as follows:
(Dollars in thousands)
2024
2023
2022
Total change in fair value
$ 100
$ (26)
$ (368)
As of December 31,
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 impairment and adjusted accordingly, based on the same factors identified above. The carrying value of the
Company’s individually evaluated loans was $15.0 million at December 31, 2024 and $4.3 million at December 31, 2023,
respectively. The Company’s collateral dependent loans with an allowance for credit losses was $2.5 million and $1.7 million,
with an allocated allowance of $777,000 and $311,000, at December 31, 2024 and December 31, 2023, respectively.
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 impairment and adjusted accordingly, based on the same factors identified above.
104
The following table presents quantitative information about Level 3 fair value measurements for individually
evaluated loans measure at fair value on a non-recurring basis as of December 31, 2024 and 2023.
(Dollars in thousands)
Fair value
Valuation technique
Unobservable inputs
Range
As of December 31, 2024
Individual evaluated loans:
Commercial loans
1,768
$
Sales comparison
Adjustment to comparable sales
0%-50%
As of December 31, 2023
Individual evaluated loans:
One-to-four family residential real estate
31
$
Sales comparison
Adjustment to appraised value
7%
Commercial loans
1,386
Sales comparison
Adjustment to comparable sales
0%-50%
Real estate owned:
One-to-four family residential real estate
266
Sales comparison
Adjustment to appraised value
10%
(21) Regulatory Capital Requirements
Banks and bank holding companies 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 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.
The Company and the Bank are subject to the Basel III Rule, which is applicable to all U.S. banks that are subject to minimum
capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies”
(generally, non-public bank holding companies with consolidated assets of less than $3.0 billion).
The Basel III Rule includes a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a
minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, a minimum ratio of Total Capital to risk-weighted assets of
8.0%, and a minimum Tier 1 leverage ratio of 4.0%. A capital conservation buffer, equal to 2.5% of common equity Tier 1
capital, is also established above the regulatory minimum capital requirements. The capital conservation buffer increases the
common equity Tier 1 capital ratio, and Tier 1 capital and total risk-based capital ratios.
As of December 31, 2024 and December 31, 2023, 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.
105
The following is a comparison of the Company’s regulatory capital to minimum capital requirements in effect at
December 31, 2024 and 2023:
(Dollars in thousands)
Amount
Ratio
Amount
Ratio (1)
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%
As of December 31, 2023
Leverage
$130,625
8.41%
$ 62,116
4.0%
Common Equity Tier 1 Capital
109,625
10.39%
73,854
7.0%
Tier 1 Capital
130,625
12.38%
89,680
8.5%
Total Risk-Based Capital
140,671
13.33%
110,781
10.5%
(1) The required percent for capital adequacy purposes includes a capital conservation
buffer of 2.5%.
Actual
For capital
adequacy purposes
The following is a comparison of the Bank’s regulatory capital to minimum capital requirements in effect at
December 31, 2024 and 2023:
(Dollars in thousands)
Amount
Ratio
Amount
Ratio (1)
Amount
Ratio
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%
90,453
8.0%
Total Risk-Based Capital
152,987
13.53%
118,719
10.5%
113,066
10.0%
As of December 31, 2023
Leverage
$ 134,422
8.68%
$ 61,951
4.0%
$ 77,439
5.0%
Common Equity Tier 1 Capital
134,422
12.74%
73,833
7.0%
68,560
6.5%
Tier 1 Capital
134,422
12.74%
89,655
8.5%
84,381
8.0%
Total Risk-Based Capital
144,468
13.70%
110,750
10.5%
105,476
10.0%
(1) The required percent for capital adequacy purposes includes a capital conservation
buffer of 2.5%.
To be well-capitalized
under regulatory
guidelines
Actual
For capital
adequacy purposes
106
(22) Parent Company Condensed Financial Statements
The following is condensed financial information of the parent company as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022:
Condensed Balance Sheets
(Dollars in thousands)
2024
2023
Assets:
Cash and cash equivalents
395
$
286
$
Interest-bearing deposits at other banks
151
215
Investment in subsidiaries
160,634
153,813
Other
960
990
Total assets
162,140
$
155,304
$
Liabilities and stockholders' equity:
Subordinated debentures
21,651
$
21,651
$
Other borrowings
4,200
6,649
Other
74
90
Stockholders' equity
136,215
126,914
Total liabilities and stockholders' equity
162,140
$
155,304
$
As of December 31,
Condensed Statements of Earnings
(Dollars in thousands)
2024
2023
2022
Dividends from Bank
8,500
$
8,000
$
29,350
$
Dividends from nonbank subsidiary
975
1,000
490
Interest income
55
51
26
Other non-interest income
8
8
8
Interest expense
(2,013)
(2,113)
(998)
Other expense, net
(637)
(620)
(412)
Earnings before equity in undistributed earnings
6,888
6,326
28,464
Increase (decrease) in undistributed equity of Bank
5,122
5,252
(19,030)
Increase (decrease) in undistributed equity of nonbank subsidiary
450
102
155
Earnings before income taxes
12,460
11,680
9,589
Income tax benefit
(543)
(556)
(289)
Net earnings
13,003
12,236
9,878
Other comprehensive income (loss)
728
8,510
(28,946)
Total comprehensive income
13,731
$
20,746
$
(19,068)
$
Years ended December 31,
107
Condensed Statements of Cash Flows
(Dollars in thousands)
2024
2023
2022
Cash flows from operating activities:
Net earnings
13,003
$
12,236
$
9,878
$
(Increase) decrease in undistributed equity of subsidiaries
(5,572)
(5,354)
18,875
Other
12
1
79
Net cash provided by operating activities
7,443
6,883
28,832
Cash flows from investing activities:
Net change in interest-bearing deposits at banks
64
1
-
Acquisition of Freedom Bancshares, Inc.
-
-
(33,350)
Net cash (used in) provided by investing activities
64
1
(33,350)
Cash flows from financing activities:
Proceeds from exercise of stock options
-
52
-
Payment of dividends
(4,612)
(4,390)
(4,198)
Purchase of treasury stock
(338)
(75)
(1,239)
Issuances of outstanding debt
360
-
10,065
Payment on outstanding debt
(2,808)
(2,351)
(1,065)
Net cash (used in) provided by financing activities
(7,398)
(6,764)
3,563
Net increase (decrease) in cash
109
120
(955)
Cash at beginning of year
286
166
1,121
Cash at end of year
395
$
286
$
166
$
Years ended December 31,
Dividends paid by the Company are provided through dividends from the Bank and dividends from nonbank
subsidiaries. At December 31, 2024, the Bank could distribute dividends of up to $4.9 million without regulatory approvals.
The primary source of funds for the Company is dividends from the Bank. Under the National Bank Act, a national bank may
pay dividends out of its undivided profits in such amounts and at such times as the bank’s board of directors deems prudent.
Without prior OCC approval, however, a national bank may not pay dividends in any calendar year that, in the aggregate,
exceed the bank’s year-to-date net income plus the bank’s retained net income for the two preceding years. The payment of
dividends by any financial institution is affected by the requirement to maintain adequate capital pursuant to applicable capital
adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if,
following payment thereof, the institution would be undercapitalized.
108
(23) Segment Information
The Company operates as a single segment entity for financial reporting purposes. The Company’s reportable
segment is determined by the Chief Executive Officer, who is the designated CODM, based upon information provided about
the company’s products and services offered, primarily banking operations. The CODM allocates resources and assesses
performance of the Company based on the consolidated performance of the Company and its wholly owned subsidiaries and
does not significantly utilize disaggregated segment financial information for decision making and resource allocation. Based
on this assessment the Company’s financial statement disclosures fully comply with ASC 2023-07, and no additional
qualitative segment disclosures are necessary. The CODM uses revenue streams to evaluate product pricing and significant
expenses to assess performance and evaluate return on assets. The CODM uses consolidated net income to benchmark the
Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in
assessments of Company performance and in establishing compensation. Loans, investments, and deposits provide the
revenues for the Company. Interest expenses, provisions for credit losses, and compensation and benefits expense comprise
the significant expenses. All operations are domestic.
(24) Commitments, Contingencies and Guarantees
Commitments to extend credit are legally binding agreements to lend to a borrower provided there are no violations
of any conditions established in the contract. The Company, as a provider of financial services, routinely issues financial
guarantees in the form of financial and performance commercial and standby letters of credit. As many of the commitments
are expected to expire without being drawn upon, the total commitment does not necessarily represent future cash
requirements. See Note 7 (Loan Commitments) for additional detail.
There are no pending legal proceedings to which the Company or the Bank is a party other than ordinary routine
litigation incidental to the Bank’s business. While the ultimate outcome of current legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal actions should not have a material effect on the
Company’s consolidated financial position or results of operations.
109
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of
December 31, 2024. 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 the end of the fiscal
year covered by this Annual Report on Form 10-K.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined by Rule 13a-15(f) promulgated under the Exchange Act). The Company’s internal control over financial reporting is
a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements
for external purposes in accordance with GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management has made a comprehensive review, evaluation, and assessment of the Company’s internal control over
financial reporting as of December 31, 2024. In making its assessment of the effectiveness of the Company’s internal control
over financial reporting, management used the framework established in Internal-Control Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission - 2013. Based on that assessment, management
concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective as of the end
of the fiscal year covered by this Annual Report on Form 10-K.
Our auditors are not required to formally opine on the effectiveness of our internal control over financial reporting,
in accordance with the Sarbanes-Oxley Act of 2022 because the Company is not an accelerated filer or a large accelerated
filer. As a result, this Annual Report on Form 10-K does not include an attestation report of the Company’s independent
registered public accounting firm.
There were no changes in the Company’s internal control over financial reporting during the quarter ended
December 31, 2024 that materially affected or were reasonably likely to materially affect the Company’s internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the fiscal quarter ended December 31, 2024, 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 Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
110
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
The information required by this Item 10 will be included in the Company’s Definitive Proxy Statement for the 2025
annual meeting of shareholders to be held May 21, 2025 (the “2025 Proxy Statement”), under the headings “Proposal 1 –
Election of Directors,” “Delinquent Section 16(a) Reports,” and “Corporate Governance and the Board of Directors” and is
incorporated herein by reference. The 2025 Proxy Statement will be filed with the SEC pursuant to Regulation 14A within
120 days of the end of the Company’s 2024 fiscal year.
Insider Trading Policy. The Company has adopted an insider trading policy governing the purchase, sale and other
dispositions of its securities by directors, officers and employees of the Company that is designed to promote compliance
with insider trading laws, rules and regulations and any applicable Nasdaq listing standards. A copy of our insider trading
policy is filed as Exhibit 19.1 to this Form 10-K. In addition, with regard to the Company’s trading in it own securities, it is
the Company’s policy to comply with the federal securities laws and the applicable exchange listing requirements.
The executive officers of the Company, each of whom is also currently an executive officer of the Bank and serves
at the discretion of the Board of Directors of the Company and the Bank, as appropriate, as of the date of this Annual Report
on Form 10-K are identified below:
Name
Age
Positions with the Company and the Bank
Held position
since
Abigail M. Wendel
51
President and Chief Executive Officer
March 2024
Mark A. Herpich
57
Executive Vice President, Secretary,
Chief Financial Officer and Treasurer
October 2001
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item 11 will be included in the 2025 Proxy Statement, under the headings
“Corporate Governance and the Board of Directors” and “Executive Compensation,” and is incorporated herein by reference.
The 2025 Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s
2024 fiscal year.
111
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table sets forth information relating to the number of shares authorized for issuance under our
equity compensation plans as of December 31, 2024.
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance
(excluding securities
reflected in column (a))
(a)
(b)
(c)
Equity compensation plans approved by
security holders
268,726
(1)
$ 19.44
(2)
487,016
(3)
Equity compensation plans not approved
by security holders
-
-
-
Total
268,726
$ 19.44
487,016
(1) Reflects the number of underlying shares of our common stock associated with outstanding stock options granted under the 2015 Stock
Incentive Plan, as adjusted for stock dividends.
(2) Reflects the weighted-average exercise price with respect to the exercise of outstanding stock options included in column (a).
(3) Reflects the number of shares of our common stock available for future issuance under the 2024 Stock Incentive Plan, as adjusted
for stock dividends.
EQUITY COMPENSATION PLAN INFORMATION
Plan category
The other information required by this Item 12 will be included in the 2025 Proxy Statement, under the heading
“Security Ownership of Certain Beneficial Owners” and is incorporated herein by reference. The 2025 Proxy Statement will
be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s 2024 fiscal year.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item 13 will be included in the 2025 Proxy Statement, under the headings “Proposal
1 – Election of Directors,” “Corporate Governance and the Board of Directors” and “Certain Relationships and Related
Transactions,” and is incorporated herein by reference. The 2025 Proxy Statement will be filed with the SEC pursuant to
Regulation 14A within 120 days of the end of the Company’s 2024 fiscal year.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 will be included in the 2025 Proxy Statement, under the heading “Proposal
4 – Ratification of Crowe LLP as our Independent Registered Public Accounting Firm” and is incorporated herein by
reference. The 2025 Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of
the Company’s 2024 fiscal year
112
PART IV.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 15 (a)1 and 2. Financial Statements and Schedules
LANDMARK BANCORP, INC. AND SUBSIDIARY
LIST OF FINANCIAL STATEMENTS
The following audited Consolidated Financial Statements of the Company and its subsidiaries and related notes and
auditors’ report are included in Part II, Item 8 of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm (PCAOB ID 173)
Consolidated Balance Sheets – December 31, 2024 and 2023
Consolidated Statements of Earnings – Years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Comprehensive Income (Loss) – Years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Cash Flows – Years ended December 31, 2024, 2023 and 2022
Notes to Consolidated Financial Statements
All schedules are omitted because they are not required or are not applicable or the required information is shown
in the financial statements incorporated by reference or notes thereto.
Item 15(a)3 and (b). Exhibits
Exhibit
Number
Description
Incorporated by reference to
Attached
hereto
2.1
Agreement and Plan of Merger, dated June 28, 2022, by
and among Landmark Bancorp, Inc., LARK Investment
Corporation and Freedom Bancshares, Inc.
Exhibit 2.1 to the registrant’s
report on Form 8-K filed with the
SEC on June 28, 2022 (SEC file
no. 000-33203)
3.1
Amended and Restated Certificate of Incorporation
Exhibit 3.1 to the registrant’s
transition report on Form 10-K
filed with the SEC on March 29,
2002 (SEC file no. 000-33203)
3.2
Certificate of Amendment of the Amended and Restated
Certificate of Incorporation
Exhibit 3.2 to the registrant’s
report on Form 10-K filed with the
SEC on March 29, 2013 (SEC file
no. 000-33203)
3.3
Bylaws
Exhibit 3.3 to the registrant’s Form
S-4 filed with the SEC on June 7,
2001 (SEC file no. 333-62466)
4.1
Certain instruments defining the rights of holders of
long-term debt of the Company, none of which authorize
a total amount of indebtedness in excess of 10% of the
total assets of the Company and its subsidiaries on a
consolidated basis, have not been filed as exhibits. The
113
Company hereby agrees to furnish a copy of any of these
agreements to the Commission upon request.
4.2
Description of the Company’s securities registered
pursuant to Section 12 of the Securities Exchange Act of
1934
Exhibit 4.1 to the registrant’s
report on Form 10-K filed with the
SEC on March 12, 2020 (SEC file
no. 000-33203)
10.1*
Employment Agreement effective January 1, 2014
between Michael E. Scheopner, the Company and the
Bank
Exhibit 10.2 to the registrant’s
report on Form 8-K filed with the
SEC on December 20, 2013 (SEC
file no. 000-33203)
10.2*
Employment Agreement effective November 1, 2013
between Mark A. Herpich, the Company and the Bank
Exhibit 10.3 to the registrant’s
report on Form 8-K filed with the
SEC on December 20, 2013 (SEC
file no. 000-33203)
10.3*
Form of Landmark Bancorp, Inc. Deferred Compensation
Agreement
Exhibit 10.11 to the registrant’s
report on Form 10-K filed with the
SEC on March 30, 2005 (SEC file
no. 000-33203)
10.4*
Landmark Bancorp, Inc. 2024 Stock Incentive Plan
Exhibit 4.4 to the registrant’s Form
S-8 filed with the SEC on July 25,
2024 (SEC file no. 333-281020)
10.5*
Form of Landmark Bancorp, Inc. 2024 Stock Incentive
Plan Nonqualified Stock Option Award Agreement
Exhibit 4.5 to the registrant’s Form
S-8 filed with the SEC on July 25,
2024 (SEC file no. 333-281020)
10.6*
Form of Landmark Bancorp, Inc. 2024 Stock Incentive
Plan Incentive Stock Option Award Agreement
Exhibit 4.6 to the registrant’s Form
S-8 filed with the SEC on July 25,
2024 (SEC file no. 333-281020)
10.7*
Form of Landmark Bancorp, Inc. 2024 Stock Incentive
Plan Restricted Stock Award Agreement
Exhibit 4.7 to the registrant’s Form
S-8 filed with the SEC on July 25,
2024 (SEC file no. 333-281020)
10.8*
Form of Landmark Bancorp, Inc. 2024 Stock Incentive
Plan Restricted Stock Unit Award Agreement
Exhibit 4.8 to the registrant’s Form
S-8 filed with the SEC on July 25,
2024 (SEC file no. 333-281020)
10.9
Business Loan Agreement, Promissory Note and
Commercial Pledge Agreement, dated November 1,
2021, between Landmark Bancorp, Inc. and First
National Bank of Omaha
Exhibit 10.1 to the registrant’s
report on Form 10-Q filed with the
SEC on November 12, 2021 (SEC
file no. 000-33203)
10.10
Change in Terms Agreement and Promissory Note, dated
November 01, 2024, between Landmark Bancorp, Inc.
and First National Bank of Omaha
Exhibit 10.1 to the registrant’s
report on Form 10-Q filed with the
SEC on November 13, 2024 (SEC
file no. 000-33203)
10.11*
Employment Agreement between the Company, the
Bank and Abigail M. Wendel, dated as of March 1, 2024
Exhibit 10.1 to the registrant’s
report on Form 8-K filed with the
SEC on March 4, 2024 (SEC file
no. 000-33203)
10.12*
Addendum to Employment Agreement by and between
the Company, the Bank and Michael E. Scheopner, dated
as of March 1, 2024
Exhibit 10.2 to the registrant’s
report on Form 8-K filed with the
SEC on March 4, 2024 (SEC file
no. 000-33203)
114
10.13
Change in Terms Agreement, dated November 1, 2024,
between Landmark Bancorp, Inc. and First National
Bank of Omaha
Exhibit 10.6 to the registrant’s
report on Form 10-Q filed with the
SEC on November 13, 2024 (SEC
file no. 000-33203)
10.14
Change in Terms Agreement, dated March 14, 2025
between Landmark Bancorp, Inc. and First National
Bank of Omaha
X
10.15
Landmark Bancorp, Inc. 2015 Stock Incentive Plan
Exhibit 10.20 to the registrant’s
report on Form 10-K filed with the
SEC on March 16, 2016 (SEC file
no. 000-33203)
10.16
Form of Landmark Bancorp, Inc. 2015 Stock Incentive
Plan Restricted Stock Award Agreement
Exhibit 4.5 to the registrant’s Form
S-8 filed with the SEC on May 16,
2016 (SEC file no. 333-211399)
10.17
Landmark Bancorp, Inc. 2015 Stock Incentive Plan
Nonqualified Stock Option Award Agreement
Exhibit 4.6 to the registrant’s Form
S-8 filed with the SEC on May 16,
2016 (SEC file no. 333-211399)
13.1
Letter to Stockholders and Corporate Information
included in 2024 Annual Report to Stockholders
X
19.1
Landmark Bancorp, Inc. Insider Trading Policy
X
21.1
Subsidiaries of the Company
X
23.1
Consent of Crowe LLP
X
31.1
Certification of Principal Executive Officer Pursuant to
Rule 13a-14(a)/15d-14(a)
X
31.2
Certification of Principal Financial Officer Pursuant to
Rule 13a-14(a)/15d-14(a)
X
32.1
Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350, as adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of Principal Financial Officer Pursuant to
18 U.S.C. Section 1350, as adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
X
97.1
Landmark Bancorp, Inc. Claw Back Policy
Exhibit 99 to the registrant’s report
on Form 10-Q filed with the SEC
on May 14, 2024 (SEC file no.
000-33203)
101
Interactive data files pursuant to Rule 405 of Regulation
S-T, formatted in inline XBRL: (i) Consolidated Balance
Sheets as of December 31, 2024 and 2023; (ii)
Consolidated Statements of Earnings for the twelve
months ended December 31, 2024, 2023 and 2022; (iii)
Consolidated Statements of Comprehensive Income for
the twelve months ended December 31, 2024, 2023 and
2022; (iv) Consolidated Statements of Stockholders’
Equity for the twelve months ended December 31, 2024,
2023 and 2022; (v) Consolidated Statements of Cash
Flows for the twelve months ended December 31, 2024,
X
115
2023 and 2022; and (vi) Notes to Consolidated Financial
Statements
104
Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101)
X
*Indicates management contract or compensatory plan or arrangement.
Upon written request to the President of the Company, P.O. Box 308, Manhattan, Kansas 66505-0308, copies of the
exhibits listed above are available to stockholders of the Company by specifically identifying each exhibit desired in the
request. The Company’s filings with the SEC are also available free of charge via the Internet at www.sec.gov, the
Company’s website at www.landmarkbancorpinc.com or through the investor relations link at the Bank’s website at
www.banklandmark.com.
ITEM 16.
FORM 10-K SUMMARY
None
116
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
By: /s/ Abigail M. Wendel
By: /s/ Mark A. Herpich
March 25, 2025
Abigail M. Wendel
Mark A. Herpich
date
President and Chief Executive Officer
Vice President, Secretary, Treasurer and Chief Financial Officer
(Principal Executive Officer)
(Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
/s/ Abigail M. Wendel
March 25, 2025
President, Chief Executive Officer and
Director (Principal Executive Officer)
Abigail M. Wendel
Date
/s/ Patrick L. Alexander
March 25, 2025
Chairman of the Board, Director
Patrick L. Alexander
Date
/s/ Mark A. Herpich
March 25, 2025
Vice President, Secretary, Treasurer and
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Mark A. Herpich
Date
/s/ Michael E. Scheopner
March 25, 2025
Director
Michael E. Scheopner
Date
/s/ Sarah Hill-Nelson
March 25, 2025
Director
Sarah Hill-Nelson
Date
/s/ Angela S. Hurt
March 25, 2025
Director
Angela S. Hurt
/s/ Mark J. Kohlrus
March 25, 2025
Director
Mark J. Kohlrus
Date
/s/ Jim W. Lewis
March 25, 2025
Director
Jim W. Lewis
Date
/s/ Sandra J. Moll
March 25, 2025
Director
Sandra J. Moll
Date
/s/ Wayne R. Sloan
March 25, 2025
Director
Wayne R. Sloan
Date
/s/ David H. Snapp
March 25, 2025
Director
David H. Snapp
Date
/s/ Angelia K. Stanland
March 25, 2025
Director
Angelia K. Stanland
Date
117
EXHIBIT 10.14
CHANGE IN TERMS AGREEMENT
Principal
Loan Date
Maturity
Loan No
Call/Coll
Account
Officer
Initials
$5,000,000.00
03-14-2025
11-01-2025
xxxxxxx
***
Borrower:
Landmark Bancorp, Inc.
Lender:
First National Bank of Omaha
701 Poyntz Ave
Branch #001
Manhattan KS 66502
1620 Dodge St
Omaha, NE 68197
========================================================================================
Principal Amount: $5,000,000.00 Date of Agreement: March 14, 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 twelve (12) 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.
118
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
119
EXHIBIT 13.1
See pages 2-3 of this document for the letter to shareholders and pages 6-7 for the corporate information contained in
exhibit 13.1 filed on form 10-K with the SEC.
EXHIBIT 19.1
Landmark Bancorp, Inc.
Insider Trading Policy
This Insider Trading Policy (this “Policy”) sets forth certain mandatory restrictions and provides certain additional
guidelines to employees, officers, and directors of, and contractors and consultants to, Landmark Bancorp, Inc. and its
subsidiaries, including Landmark National Bank (collectively, the “Company”) with respect to transactions in the Company’s
securities, and, in certain circumstances, securities of other companies.
I.
Background
Federal and state securities laws provide severe penalties for both individuals and companies for trading in
securities based upon Material Nonpublic Information (as defined in Section VI).
(a)
Liability for Insider Trading. Section 32(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), provides that Insiders (as defined in Section II(a)) may be subject to penalties of up to $5 million and up
to 20 years in jail for engaging in transactions in the Company’s securities or the securities of another company at a time
when they have knowledge of Material Nonpublic Information regarding the Company or such other company. Although
responsibility for compliance with this Policy and liability for noncompliance are primarily personal to the individuals
involved, violations may also result in civil and criminal liability for the Company. Criminal penalties for corporations may
be assessed up to as much as $25 million.
(b)
Liability for Tipping. Insiders also may be liable for improper transactions by any person (commonly
referred to as a “tippee”) to whom they have disclosed Material Nonpublic Information regarding the Company or to whom
they have made recommendations or expressed opinions on the basis of such Material Nonpublic Information as to trading
in the Company’s securities or the securities of another company. The Securities and Exchange Commission (the “SEC”)
has imposed large penalties even when the disclosing person did not profit from the trading. The SEC, the national stock
exchanges and the Financial Industry Regulatory Authority use sophisticated electronic surveillance techniques to uncover
insider trading.
(c)
Company Interests. In addition to the need to comply with applicable law, the Company has also
determined that it is in the best interest of the Company for its directors, officers, employees, consultants and contractors to
conduct their trading of Company securities, as well as the securities of the Company’s business partners (both existing and
those companies with which the Company is considering entering into a material business transaction), in a manner that
avoids the appearance of impropriety even if in technical compliance with applicable law.
(d)
Section 16. The Company must comply with the reporting obligations and limitations on “short swing”
transactions set forth in Section 16 of the Exchange Act. The practical effect of these provisions is that directors and certain
officers of the Company who purchase and sell the Company’s securities within a six-month period must disgorge all profits
to the Company whether or not they had knowledge of any Material Nonpublic Information. Moreover, no officer or director
may ever make a short sale of the Company’s stock. The Company has provided, or will provide, separate memoranda and
other appropriate materials to its directors and officers regarding Section 16.
II.
Applicability of Policy
(a)
Persons Covered by this Policy. This Policy applies to all officers of the Company, all members of the
Company’s board of directors, and all employees of, and consultants and contractors to, the Company who receive or have
120
access to Material Nonpublic Information regarding the Company. This group of people, members of their immediate
families and members of their households are sometimes referred to in this Policy as “Insiders.” Any person who possesses
Material Nonpublic Information regarding the Company is an Insider for so long as the information is not publicly known.
Any employee can be an Insider from time to time, and would at those times be subject to this Policy. This Policy also applies
to any person who receives Material Nonpublic Information from any Insider.
(b)
Transactions Covered by this Policy. This Policy applies to all transactions in the Company’s securities,
including common stock, preferred stock, warrants, options, subordinated debentures and any other securities the Company
may issue from time to time. The transactions covered by this Policy specifically include any transactions designed to hedge
or offset any decrease in the market value of any of the Company’s securities described in the preceding sentence.
(c)
Applicability to Business Partners. This Policy and the restrictions and guidelines described herein also
apply to Material Nonpublic Information relating to other companies, including the Company’s customers, vendors or
suppliers, when that information is obtained in the course of employment with, or other services performed on behalf of, the
Company.
III.
General Policy
(a)
Statement of Policy. It is the policy of the Company to oppose the unauthorized disclosure of any nonpublic
information acquired in the workplace and the misuse of Material Nonpublic Information in securities trading.
(b)
Possible Disciplinary Actions. Insiders who violate this Policy shall be subject to disciplinary action by
the Company, which may include ineligibility for future participation in the Company’s equity incentive plans, reduction or
elimination of annual or other bonuses and/or termination of employment.
(c)
Individual Responsibility. Every officer, director and employee of, and contractor or consultant to, the
Company has the individual responsibility to comply with this Policy against insider trading, even if such Insider only trades
outside the Black-out Period (as defined in Section IV(d)). An Insider may, from time to time, have to forego a proposed
transaction in the Company’s securities and/or the securities of another company even if he or she planned to make the
transaction before learning of the Material Nonpublic Information and even though the Insider believes he or she may suffer
an economic loss or forego anticipated profit by waiting.
IV.
Mandatory Restrictions
(a)
Trading on Material Nonpublic Information. No Insider shall engage in any transaction involving a
purchase or sale of the Company’s securities or, if applicable, the securities of another company, including any offer to
purchase or offer to sell, during any period commencing with the date that he or she possesses Material Nonpublic Information
concerning the Company or such other company, and ending at the close of business on the second Trading Day following
the date of public disclosure of that information, or at such time as such Material Nonpublic Information is no longer material,
unless such transfer is made pursuant to an approved 10b5-1 Trading Plan (described in Section VII(b)). As used herein, the
term “Trading Day” shall mean a day on which national stock exchanges are open for trading.
(b)
Tipping. No Insider shall disclose (“tip”) any Material Nonpublic Information with respect to the
Company’s securities or, if applicable, the securities of another company, to any other person (including family members),
nor shall such Insider or related person make recommendations or express opinions on the basis of Material Nonpublic
Information as to trading in the Company’s securities or, if applicable, the securities of another company.
(c)
Confidentiality of Nonpublic Information. Nonpublic information relating to the Company is the property
of the Company and the unauthorized disclosure of such information is forbidden.
(d)
Mandatory Black-out Period for Officers, Directors and Certain Employees. The period beginning at the
close of business on the 15th of the last month of each fiscal quarter and ending at the close of business on the second Trading
Day following the date of public disclosure of the financial results for each fiscal quarter is a particularly sensitive period of
time for transactions in the Company’s securities from the perspective of compliance with applicable securities laws. This
121
sensitivity is due to the fact that officers, directors and certain other employees will, during that period, often possess Material
Nonpublic Information about the expected financial results for the quarter.
Accordingly, to ensure compliance with this Policy and applicable federal and state securities laws, all directors and
officers and other employees who have access to the Company’s internal financial statements or other Material Nonpublic
Information shall refrain from conducting transactions involving the purchase or sale of the Company’s securities during the
period beginning at the close of business on the 15th of the last month of each fiscal quarter and ending at the close of business
on the second Trading Day following the date of public disclosure of the financial results for each fiscal quarter (the “Black-
out Period”). The purpose behind the Black-out Period is to establish a diligent effort to avoid any improper transaction or
any transaction that has the appearance of impropriety.
From time to time, the Company also may recommend that directors, officers, selected employees and others suspend
trading because of developments known to the Company and not yet disclosed to the public. In such event, such persons are
advised not to engage in any transaction involving the purchase or sale of the Company’s securities during such period and
should not disclose to others the fact of such suspension of trading.
It should be noted, however, that even outside the Black-out Period, any person possessing Material Nonpublic
Information concerning the Company should not engage in any transactions in the Company’s securities until such
information has been known publicly for at least two Trading Days, whether or not the Company has recommended a
suspension of trading to that person. Assuming the absence of Material Nonpublic Information, trading in the Company’s
securities outside of the Black-out Period should not be considered a “safe harbor,” and all directors, officers and other
persons should use good judgment at all times.
(e)
Pre-Clearance of Trades. The Company has determined that all of the Company’s Section 16 reporting
insiders (as designated pursuant to Section V) should refrain from trading in the Company’s securities without first complying
with the Company’s “pre-clearance” process. Each officer and director should contact the Company’s Chief Financial Officer
Mark Herpich no less than two business days prior to commencing any trade in the Company’s securities. The Company
may find it necessary, from time to time, to require compliance with the pre-clearance process from certain officers,
employees, consultants and contractors other than and in addition to Section 16 reporting insiders. Any employee with any
questions regarding trading in the Company’s securities is encouraged to contact the Company’s Chief Financial Officer
Mark Herpich.
(f)
Prohibition Against Short Sales. No director or officer of the Company shall enter into any “short” position
with respect to any equity security of the Company or otherwise violate Section 16(c) of the Exchange Act.
(g)
Prohibition Against Hedging. No director, officer or employee is permitted to enter into any hedging
transaction with respect to the Company’s securities, including, but not limited to, the purchase or use of, directly or indirectly
through any other persons or entities, any stock option, prepaid variable forward contracts, equity swaps, collars, exchange
funds or any other instruments designed to offset any decrease in the market value of the Company’s securities.
V.
Section 16 Reporting Persons
Each year the board of directors of the Company will identify the Section 16 reporting insiders and notify them of
their status as such. These individuals will be required to comply with Section 16 of the Exchange Act, and the Company
will inform them of these obligations.
VI.
Definition of Material Nonpublic Information
It is not possible to define all categories of “material” information. Information should be regarded as material,
however, if there is a reasonable likelihood that it would be considered important to a reasonable investor in making an
investment decision regarding the purchase or sale of the Company’s securities or, if applicable, the securities of another
company.
122
While it may be difficult under this standard to determine whether particular information is material, there are
various categories of information that are particularly sensitive and, as a general rule, should always be considered material.
Examples of such information may include, but is not limited to:
•
financial results;
•
projections of future earnings or losses;
•
dividend declarations;
•
news of a pending or proposed merger or joint venture;
•
news of the disposition of a subsidiary;
•
gain or loss of a substantial customer;
•
stock splits or consolidations;
•
new equity or debt offerings;
•
acquisitions;
•
significant litigation exposure due to actual or threatened litigation; and
•
major changes in senior management.
Either positive or negative information may be material. Nonpublic information is information that has not been
previously disclosed to the general public and is otherwise not available to the general public.
VII.
Certain Exemptions from the Policy
(a)
Exercise of Stock Options. For the purposes of this Policy, the Company considers that the exercise of
stock options for cash under the Company’s stock options plans (but not the sale of any shares acquired upon exercise) is
exempt from this Policy, since the other party to the transaction is the Company itself and the price does not vary with the
market, but is fixed by the terms of the option agreement or the plan.
(b)
Pre-Existing/10b5-1 Trading Plans. An Insider may have trades in the Company’s securities made on his or
her behalf during a restricted period or when the Insider is in possession of Material Nonpublic Information if the Insider enters
into a plan, contract or instruction at a time that is not during a restricted period and while the Insider is not in possession of
Material Nonpublic Information. In accordance with the foregoing restrictions, trades may be made pursuant to the trading plan
despite the fact that the Insider may be in possession of Material Nonpublic Information, or the Company is in a restricted period,
at the actual time of the trade. Generally, a trading plan must specify the amount of securities to buy or sell, the price at which to
buy or sell, as well as specific time periods for the trades. A sample plan is attached as Appendix A. However, please note that
some brokers require use of their own form trading plan. You must notify the Company’s Chief Financial Officer Mark
Herpich no later than two business days prior to entering into a trading plan with respect to the Company’s securities.
The Company considers the adherence to the securities laws to be of utmost importance, and an Insider’s reliance on a
trading plan will not necessarily relieve the Insider of liability.
(c)
Bona Fide Gifts of Company Stock. Bona fide gifts of the Company’s securities made by Insiders to family
members and charities also are generally exempt from this Policy. Whether a gift is bona fide, however, will depend on the
circumstances surrounding the gift. For example, gifts to dependent children followed by a sale of the “gift” shares by the
donee in close proximity to the time of the gift may imply some economic benefit to the donor and, therefore, make the gift
non-bona fide. Insiders should also be aware that there may be some exposure to tax liability based on the timing and value
of the gift.
(d)
401(k) Plan. This Policy does not apply to periodic contributions to the Company’s 401(k) Plan which are
used to purchase Company stock pursuant to an individual’s advance instructions. The Policy does apply, however, to certain
elections Insiders may make under the 401(k) Plan, including: (i) an election to increase or decrease the amount or percentage
of the periodic contributions that will be allocated to the Company stock fund; (ii) an election to make an intra-plan transfer
of an existing account balance into or out of the Company stock fund; (iii) an election to borrow money against the 401(k)
Plan account, if the loan will result in a liquidation of some or all of the Insider’s Company stock fund balance; and (iv) an
election to prepay a plan loan if the prepayment will result in a change in the Insider’s Company stock fund balance.
123
EXHIBIT 21.1
Subsidiaries of Landmark Bancorp, Inc.
The most significant subsidiary of Landmark Bancorp, Inc. (the “Company”) is Landmark National Bank, a national banking
association with its main office located in Manhattan, Kansas, and with branch offices located in Auburn, Dodge City (2),
Fort Scott (2), Garden City, Great Bend (2), Hoisington, Iola, Junction City, LaCrosse, Lawrence (2), Lenexa, Louisburg,
Manhattan, Mound City, Osage City, Osawatomie, Overland Park, Paola, Pittsburg, Prairie Village, Topeka (2), Wamego
and Wellsville, Kansas and Kansas City, Missouri. The Company also owns Landmark Risk Management, Inc., which is a
Nevada incorporated captive insurance company that provides property and casualty insurance coverage to the Company and
Landmark National Bank for which insurance may not be currently available or economically feasible in today’s insurance
marketplace. Landmark Risk Management, Inc. pools resources with other captive insurance companies to spread a limited
amount of risk among themselves. The Company also owns all of the common securities of Landmark Capital Trust I,
Landmark Capital Trust II and First Capital (KS) Statutory Trust, each a Delaware statutory trust, formed to issue trust
preferred securities in a private placement.
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statements No. 333-211399 and 333-281020 on Form S-8 of
Landmark Bancorp, Inc. of our report dated March 25, 2025 relating to the consolidated financial statements, appearing in
this Annual Report on Form 10-K.
/s/ Crowe LLP
Dallas, Texas
March 25, 2025
124
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Abigail M. Wendel, certify that:
1.
I have reviewed this annual report on Form 10-K of Landmark Bancorp, Inc.;
2.
Based on my knowledge, this annual 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:
March 25, 2025
/s/ Abigail M. Wendel
Abigail M. Wendel
Chief Executive Officer
125
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark A. Herpich, certify that:
1.
I have reviewed this annual report on Form 10-K of Landmark Bancorp, Inc.;
2.
Based on my knowledge, this annual 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:
March 25, 2025
/s/ Mark A. Herpich
Mark A. Herpich
Chief Financial Officer
126
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 annual report of Landmark Bancorp, Inc. (the “Company”) on Form 10-K for the period ending December
31, 2024 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
March 25, 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 annual report of Landmark Bancorp, Inc. (the “Company”) on Form 10-K for the period ending December
31, 2024 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
March 25, 2025
Nasdaq: LARK