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What changed in LANDMARK BANCORP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of LANDMARK BANCORP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+154 added−153 removedSource: 10-K (2025-03-25) vs 10-K (2024-03-27)

Top changes in LANDMARK BANCORP INC's 2024 10-K

154 paragraphs added · 153 removed · 135 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+6 added−1 removed161 unchanged
Biggest changeAcquiring other banks and businesses will involve risks commonly associated with acquisitions, including: ● 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.
Biggest changeAcquiring other banks and businesses will involve risks commonly associated with acquisitions, including: ● 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. 34 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 cannot assure you that volume of trading in our common shares will increase in the future. The stock market can be volatile, and fluctuations in our operating results and other factors could cause our stock price to decline.
We cannot assure you that volume of trading in our common shares will increase in the future. 39 The stock market can be volatile, and fluctuations in our operating results and other factors could cause our stock price to decline.
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. 37 ITEM 1B. UNRESOLVED STAFF COMMENTS None
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.
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. 27 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.
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. 29 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.
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. 30 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.
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. 32 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.
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. 26 Our loan portfolio has a large concentration of real estate loans, which involve risks specific to real estate value.
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. 28 Our loan portfolio has a large concentration of real estate loans, which involve risks specific to real estate value.
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. 36 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.
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. 38 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.
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. 33 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.
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. 35 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.
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. 34 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.
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. 36 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.
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, and other non-bank financial service providers, many of which have greater financial, marketing and technological resources than us.
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.
Any such events could have a material adverse effect on our business, financial condition, results of operations and growth prospects. 35 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.
Any such events could have a material adverse effect on our business, financial condition, results of operations and growth prospects. 37 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.
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 commercial real estate loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service.
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.
Accordingly, adverse circumstances affecting wheat, corn and soybean crops could have an adverse effect on our agricultural real estate loan portfolio. 28 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.
Accordingly, adverse circumstances affecting wheat, corn and soybean crops could have an adverse effect on our agricultural real estate loan portfolio. 30 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.
Given the interconnectedness of the global financial system, these vulnerabilities could impact the Company’s business operations and financial condition. 29 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.
Given the interconnectedness of the global financial system, these vulnerabilities could impact the Company’s business operations and financial condition. 31 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.
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 2023, commodity prices declined from near record highs experienced in 2022.
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.
Although a significant portion of commercial real estate 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.
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.
In general, these risks have increased as a result of the recent increases 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.
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.
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 of this Annual Report on Form 10-K.
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 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 United States as a whole.
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.
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), commonly referred to as “CECL”.
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).
The Company’s loan portfolio has a large concentration of commercial real estate loans, which involve risks specific to real estate values and the health of the real estate market generally.
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.
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 commercial real estate markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity in the secondary market for certain investment securities.
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.
Before foreclosing on commercial real estate, 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.
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.
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 $49.6 million and $46.3 million, or 5.3% and 5.4%, of our loan portfolio at December 31, 2023 and 2022, respectively.
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.
In addition, we had $1.6 million in accruing loans that were 30-89 days delinquent as of December 31, 2023. Our non-performing assets adversely affect our net income in various ways.
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.
“Quantitative and Qualitative Disclosures About Market Risk.” 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.
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.
In addition, if interest rates continue to rise in response to, or as a result of, elevated levels of inflation, 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.
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.
If the FOMC further increases the targeted federal funds rates, overall interest rates likely will rise, which may negatively impact the entire national economy.
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.
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 $302.5 million and $237.0 million, or 31.9% and 27.9%, of our loan portfolio at December 31, 2023 and 2022, respectively. These loans are secured primarily by properties located in the state of Kansas.
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.
It is currently expected that during 2024, and perhaps beyond, the Federal Open Market Committee of the Federal Reserve, or FOMC, will continue to monitor interest rates, in part to reduce the rate of inflation to its preferred level.
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.
Commercial loans make up a significant portion of our loan portfolio. Commercial loans comprised $180.9 million and $173.4 million, or 19.1% and 20.4%, of our loan portfolio at December 31, 2023 and 2022, 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.
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.
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. Failure to pay interest on our debt may adversely impact our ability to pay 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.
At December 31, 2023 and 2022, agricultural real estate loans totaled $40.1 million and $38.0 million, or 4.2% and 4.5% 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.
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.
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. 31 We are subject to changes in accounting principles, policies or guidelines.
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.
As of December 31, 2023, our non-performing loans (which consist of non-accrual loans and loans past due 90 days or more and still accruing interest) totaled $2.4 million, or 0.25% of our loan portfolio, and our non-performing assets (which include non-performing loans plus real estate owned) totaled $3.3 million, or 0.21% of total assets.
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.
We are also subject to losses related to our depositors, whether due to simple errors or mistakes, circumvention of controls, or unauthorized override of controls by our employees, other financial institutions or other third parties.
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.
At December 31, 2023 and 2022, our allowance for credit losses as a percentage of total loans, was 1.12% and 1.03%, respectively, and as a percentage of total non-performing loans was 443.66% and 264.31%, respectively.
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.
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. 32 We face intense competition in all phases of our business from other banks and financial institutions.
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.
In 2023, the FOMC increased at various dates throughout the year the target range for the federal funds rate from 4.25% to 4.50% to a range of 5.25% to 5.50%. All of these increases were expressly made in response to inflationary pressures.
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.
As of December 31, 2023, Kansas’s unemployment rate was 2.8%. 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.
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.
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, 2023, we had $199.7 million of municipal securities, which represented 44.1% of our total securities portfolio.
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.
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.
An increase in market interest rates may affect the market value of our securities portfolio, potentially reducing accumulated other comprehensive income and/or earnings.
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 these policies require the use of estimates and assumptions that may affect the value of our assets or liabilities and financial results.
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.
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.
Real estate lending (including commercial real estate, construction and land and residential real estate) is a large portion of our loan portfolio. These categories were $644.6 million, or approximately 67.9% of our total loan portfolio, as of December 31, 2023, as compared to $563.8 million, or approximately 66.3% of our total loan portfolio, as of December 31, 2022.
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 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. 25 Continued elevated levels of inflation could adversely impact our business and results of operations.
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. 27 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.
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.
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.
Commercial real estate loans represented 36.1% of the Company’s total loan portfolio and 237% of the Bank’s total capital at December 31, 2023.
CRE loans represented 35.2% of the Company’s total loan portfolio and 272% of the Bank’s total capital at December 31, 2024.
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.
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.
As of December 31, 2023, the Company had $342.1 million of commercial real estate loans, consisting of $100.6 million of non-owner occupied loans, $181.7 million of owner occupied loans, $38.6 million of loans secured by multifamily residential properties and $21.1 million of construction and land development loans.
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.
The banking and financial services business in our market is highly competitive.
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.
A summary of this process, along with the results of our net interest income simulations, is presented in the section entitled Item 7A.
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.
Removed
The United States has recently experienced elevated levels of inflation, with the consumer price index climbing approximately 3.4% in 2023. Continued levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse.
Added
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.
Added
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.
Added
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 legal and regulatory framework affecting financial institutions remain highly uncertain, and may take time to be implemented.
Added
Uncertainty surrounding future changes may adversely affect our operating environment and therefore our business, financial condition, results of operations and growth prospects. 33 We are subject to changes in accounting principles, policies or guidelines. Our financial performance is impacted by accounting principles, policies and guidelines.
Added
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.
Added
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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese security and privacy policies and procedures are in effect across all of the Company’s businesses and geographic locations. 38 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.
Biggest changeThese security and privacy policies and procedures are in effect across all of the Company’s businesses and geographic locations. 40 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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES The Company has 31 offices in 24 communities across Kansas: Manhattan (2), Auburn, Dodge City (2), Fort Scott (2), Garden City, Great Bend (2), Hoisington, Iola, Junction City, Kincaid, LaCrosse, Lawrence (2), Lenexa, Louisburg, Mound City, Osage City, Osawatomie, Overland Park (2), Paola, Pittsburg, Prairie Village, Topeka (2), Wamego and Wellsville, Kansas.
Biggest changeITEM 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 27 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 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans (1) Maximum number of shares that may yet be purchased under the plans (1) October 1-31, 2023 - $ - - 178,496 November 1-30, 2023 - - - 178,496 December 1-31, 2023 3,812 19.58 3,812 174,684 Total 3,812 $ 19.58 3,812 174,684 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”).
Biggest changePeriod 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]
In January 2024, we declared our 90 th consecutive cash quarterly dividend of $0.21 per share. We also distributed a 5% stock dividend for the 23 rd consecutive year in December 2023. As adjusted for the stock dividend, the quarterly cash dividends were $0.20 per share in 2023.
In January 2025, we declared our 94 th consecutive cash quarterly dividend of $0.21 per share. We also distributed a 5% stock dividend for the 24 th consecutive year in December 2024. As adjusted for the stock dividend, the quarterly cash dividends were $0.20 per share in 2024.
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 December 31, 2023, the Company had approximately 277 common shareholders of record and approximately 2,137 beneficial owners of our common stock.
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.
As of December 31, 2023, there were 174,684 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. ITEM 6. [RESERVED]
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.
Removed
We currently have no plans to change our dividend strategy given our current capital and liquidity positions.
Added
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+9 added−16 removed22 unchanged
Biggest changeFactors 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 effects of changes in interest rates (including the effects of changes in the rate of prepayments of our assets) and the policies of the Federal Reserve including on our net interest income and the value of our security portfolio. 40 ● The strength of the United States economy in general and the strength of the local economies in which we conduct our operations, including the effects of inflationary pressures and supply chain constraints on such economies, which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of our assets. ● The effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of those institutions; ● The economic impact of past and any future terrorist attacks, acts of war, including Israeli-Palestinian conflict and the Russian invasion of Ukraine, or threats thereof, and the response of the United States to any such threats and attacks. ● The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, consumer protection, insurance, tax, trade and monetary and financial matters. ● Our ability to compete with other financial institutions due to increases in competitive pressures in the financial services sector. ● Our inability to obtain new customers and to retain existing customers. ● The timely development and acceptance of products and services. ● Technological changes implemented by us and by other parties, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequences to us and our customers. ● Our ability to develop and maintain secure and reliable electronic systems. ● The effectiveness of our risk management framework. ● The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents and our ability to identify and address such incidents. ● Interruptions involving our information technology and telecommunications systems or third-party servicers. ● Changes in and uncertainty related to the availability of benchmark interest rates used to price our loans and deposits, including the expected elimination of LIBOR and the development of a substitute. ● The effects of severe weather, natural disasters, widespread disease or pandemics (including the COVID-19 pandemic), and other external events. ● Our ability to retain key executives and employees and the difficulty that we may experience in replacing key executives and employees in an effective manner. ● Consumer spending and saving habits which may change in a manner that affects our business adversely. ● Our ability to successfully integrate acquired businesses and future growth. ● The costs, effects and outcomes of existing or future litigation. ● Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the FASB. ● Our ability to effectively manage our credit risk. ● Our ability to forecast probable credit losses and maintain an adequate allowance for credit losses. ● The effects of declines in the value of our investment portfolio. ● Our ability to raise additional capital if needed. ● The effects of declines in real estate markets. ● The effects of fraudulent activity on the part of our employees, customers, vendors, or counterparties.
Biggest changeFactors 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; ● 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.
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.
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. 42 Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.
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.
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.
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, 2023.
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.
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, 2023.
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.
Risk Factors.” 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.
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.
We are committed to developing relationships with our borrowers and providing a total banking service. 41 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, commercial real estate, commercial, agriculture, municipal and consumer loans.
We are committed to developing relationships with our borrowers and providing a total banking service. 43 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.
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, 2023.
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.
Our critical accounting policies relate to the allowance for credit losses and business combinations, 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.
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.
As of December 31, 2023, $12.9 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.
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.
On January 1, 2023, we adopted CECL and established an allowance for credit losses (“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.
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 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. 42 COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND DECEMBER 31, 2022 SUMMARY OF PERFORMANCE.
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. 44 COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2024 AND DECEMBER 31, 2023 SUMMARY OF PERFORMANCE.
At December 31, 2023, we had subordinated debentures totaling $21.7 million and $12.7 million of repurchase agreements. At December 31, 2023, the Company had no borrowings against a $5.0 million line of credit from an unrelated financial institution maturing on November 1, 2024, with an interest rate that adjusts daily based on the prime rate less 0.50%.
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%.
DIVIDENDS During the year ended December 31, 2023, 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 23th consecutive year in December 2023. The 2022 quarterly cash dividends were $0.19 per share as adjusted to give effect to 5% stock dividends.
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.
There were no loans 90 days delinquent and accruing interest at December 31, 2023 and 2022. 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 real estate and construction and land relationships.
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.
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 commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities.
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.
We are working to resolve the remaining problem credits or move the non-performing credits out of the loan portfolio. At December 31, 2023, we had $928,000 of real estate owned compared to $934,000 at December 31, 2022.
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.
Our allowance for credit losses included 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.
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.
Our operating activities provided net cash of $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 $50.6 million during 2023, primarily to fund loan growth.
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.
EFFECTS OF INFLATION Our consolidated financial statements and accompanying footnotes have been prepared in accordance with U.S. generally accepted accounting principles (“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.
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.
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, 2023, scheduled to mature in one year or less totaled $163.4 million.
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.
At December 31, 2023, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $60.7 million. We also have various other federal funds agreements, both secured and unsecured, with correspondent banks totaling approximately $30.0 million in available credit under which we had no outstanding borrowings at December 31, 2023.
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.
The historical loss rates are adjusted to reflect reasonable and supportable forecasts to estimate expected credit losses over the life of the financial asset. 43 During 2023, we recorded a $349,000 provision for credit losses compared to no provision for credit losses in 2022.
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.
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.
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.
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 2023, net interest income increased $4.4 million, or 11.3%, to $43.3 million compared to $38.9 million in 2022.
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.
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 2023, our cash and cash equivalents increased by $3.9 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.
The Company is listed on the Nasdaq Global Market under the symbol “LARK.” The Bank is dedicated to providing quality financial and banking services to its local communities. Our strategy includes continuing a tradition of quality assets while growing our commercial, commercial real estate and agriculture loan portfolios.
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.
At December 31, 2023, we had an outstanding balance of $58.0 million against our line of credit with the FHLB. At December 31, 2023, we had collateral pledged to the FHLB that would allow us to borrow $153.1 million, subject to FHLB credit requirements and policies.
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.
The increase in net interest income was primarily a result of an increase in interest income on loans and investments, partially offset by higher interest expense. The accretion of purchase accounting adjustments increased net interest income by $993,000 in 2023 compared to $460,000 in 2022.
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.
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.
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.
The increase in our allowance for credit losses on loans as a percentage of gross loans outstanding was primarily due to the adoption of CECL on January 1, 2023. As of December 31, 2023 and 2022, approximately $7.5 million and $13.0 million, respectively, of loans were considered classified and assigned a risk rating of special mention, substandard or doubtful.
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.
Interest income on loans increased $18.3 million, or 54.6%, to $51.8 million for 2023, as compared to 2022 due to higher yields and average balances. Our yields increased from 4.77% in 2022 to 5.81% in 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.
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 $474,000 or 4.5% in the allowance for credit losses as of December 31,2023.
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.
Continued increases in interest rates may not result in a higher net interest margin as a result of increased competition for loans and deposits and the impact of a negative sloping yield curve. Additionally, deposit balances may decline resulting in the need for higher cost funding. Provision for credit Losses.
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.
The increase in interest income on loans was also driven by an increase in average loan balances, which increased from $702.2 million in 2022 to $891.5 million in 2023. Interest income on investment securities increased $3.3 million, or 34.5%, to $12.7 million during 2023, as compared to 2022.
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.
Our financing activities provided net cash of $42.0 million during 2023, primarily as a result of an increase in borrowings. 45 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.
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.
Our primary investing activities are the origination of one-to-four family residential real estate, construction and land, commercial real estate, commercial, agriculture, municipal and consumer loans and the purchase of investment securities. Total assets increased $58.8 million, or 3.9%, to $1.6 billion at December 31, 2023, compared to $1.5 billion at December 31, 2022.
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.
Non-interest-bearing deposits at December 31, 2023, were $367.1 million, or 27.9% of deposits, compared to $410.1 million, or 31.5% of deposits, at December 31, 2022. Money market and checking accounts were 46.6% of our deposit portfolio and totaled $613.6 million at December 31, 2023, compared to $626.7 million, or 48.2% of deposits, at December 31, 2022.
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 $152.4 million, or 11.6% of deposits, at December 31, 2023, from $170.6 million, or 13.1% of deposits, at December 31, 2022. Certificates of deposit totaled $183.2 million, or 13.9% of deposits, at December 31, 2023, compared to $93.3 million, or 7.2% of deposits, at December 31, 2022.
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.
During 2023, we recognized $517,000 of previously unrecognized tax benefits compared to $465,000 during 2022, which reduced the effective tax rates in both years. FINANCIAL CONDITION. Economic conditions in the United States continue to be stagnant during 2023 as elevated inflation levels and higher interest rates continued to impact the economy.
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.
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.
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.
Net earnings for 2023 increased $2.4 million, or 23.9%, to $12.2 million as compared to $9.9 million for 2022. The increase in net earnings during 2023 was primarily related to an increase in interest income due to an increase in average interest earning assets and higher yields on those assets.
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.
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, 2023 and 2022, the Company and the Bank also exceeded the “well capitalized” thresholds, which is the highest rating available.
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.
At December 31, 2023, our allowance for credit losses on loans totaled $10.6 million, or 1.12% of gross loans outstanding, compared to $8.8 million, or 1.03% of gross loans outstanding, at December 31, 2022.
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.
Also contributing to the increase in interest expense was an increase in average interest-bearing deposit balances, which increased from $804.1 million in 2022 to $892.4 million in 2023, largely resulting from the acquisition of Freedom Bank.
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.
See Note 1 Summary of Significant Accounting Policies 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.
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.
We distributed a 5% stock dividend for the 23rd consecutive year in December 2023. All per share and average share data in this section reflect the 2023 and 2022 stock dividends. Interest Income. Interest income for 2023 increased $21.5 million to $64.7 million, an increase of 49.6% as compared to 2022.
We distributed a 5% stock dividend for the 24 th 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.
At December 31, 2023, $2.4 million of loans were on non-accrual status, or 0.25% of gross loans, compared to $3.3 million, or 0.39% of gross loans, at December 31, 2022. Non-accrual loans consist of loans 90 or more days past due and certain impaired loans.
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.
Our total cost of interest-bearing deposits increased from 0.35% during 2022 to 1.71% during 2023 as a result of higher rates and increased competition for deposits.
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.
The increase was primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction. Compared to the same period last year, the increase in interest rates raised the yields on our interest-earning assets and the cost of our interest-bearing liabilities. Our net interest margin, on a tax-equivalent basis, decreased to 3.17% during 2023 from 3.21% during 2022.
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.
The $349,000 provision for credit losses during 2023 consisted of a $250,000 provision to the allowance for credit losses on loans, $80,000 to unfunded loan commitments and $19,000 to the allowance for credit losses on held-to-maturity investment securities. We recorded net loan recoveries of $44,000 during 2023 compared to net loan recoveries of $16,000 during 2022. Non-interest Income.
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. 45 Non-interest Income.
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.
Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally deposit withdrawals and loan advances.
Even though these borrowers were experiencing moderate cash flow problems 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.
Even though these borrowers were experiencing moderate cash flow problems 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. 46 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.
These liquid assets totaled $484.8 million at December 31, 2023 and $521.5 million at December 31, 2022. 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.
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. 47 Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments.
The contract amount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $1.6 million at December 31, 2023. At December 31, 2023, we had outstanding loan commitments, excluding standby letters of credit, of $211.8 million. We anticipate that sufficient funds will be available to meet current loan commitments.
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.
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. While nationally commercial real estate has been negatively impacted by higher interest rates and vacancies, the Company’s markets have not been impacted as much as other areas of the United States.
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.
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 were also impacted by these economic headwinds.
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 decrease in real estate owned as of December 31, 2023 compared to December 31, 2022 was primarily due to a valuation allowance recorded against a residential real estate property. As of December 31, 2023, real estate owned consisted of a commercial building, undeveloped land and three residential real estate properties.
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.
Factors influencing lending activities include the demand for housing and the interest rate pricing competition from other lending institutions. Currently, our business consists of ownership of the Bank, with its main office in Manhattan, Kansas and thirty one additional offices in central, eastern, southeast and southwest Kansas and Missouri, and our ownership of Landmark Risk Management, Inc.
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.
Net loans, excluding loans held for sale, increased $96.5 million, or 11.5%, to $937.6 million at December 31, 2023, compared to $841.1 million at December 31, 2022.
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.
Offsetting those increases was a $3.4 million decrease in acquisition costs associated with the acquisition of Freedom Bank. INCOME TAXES. We recorded income tax expense of $2.0 million in 2023 compared to $1.4 million in 2022. The effective tax rate increased from 12.7% in 2022 to 13.8% in 2023, primarily due to higher earnings before 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.
The Company is currently marketing all of the remaining properties in real estate owned. 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.
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.
The increase in deposits was primarily due to higher balances of brokered deposits. Total borrowings increased $30.8 million, or 45.1%, to $99.0 million at December 31, 2023, from $68.3 million at December 31, 2022. The increase in borrowings was primarily due to funding loan growth.
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.
The Bank’s markets have been impacted by the COVID-19 pandemic, which has had and continues to have a complex and significant impact on the economy. 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.
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.
As shown by the following table, the Bank’s capital exceeded the minimum capital requirements in effect at December 31, 2023, including the capital conservation buffers. 46 Actual Actual Minimum Minimum (dollars in thousands) amount percent amount percent(1) Leverage $ 134,422 8.68 % $ 61,951 4.00 % Common Equity Tier 1 Capital 134,422 12.74 % 73,833 7.00 % Tier 1 Capital 134,422 12.74 % 89,655 8.50 % Total risk-based Capital 144,468 13.70 % 110,750 10.50 % (1) The minimum required percent includes a capital conservation buffer of 2.5%.
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.
The increase in interest income on investment securities was primarily the result of increased yields on investment securities, which increased from 2.15% in 2022 to 2.76% in 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.
These commitments consist of unfunded lines of credit and commitments to finance real estate loans. CAPITAL. Current regulatory capital regulations require financial institutions (including banks and bank holding companies) to meet certain regulatory capital requirements.
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.
Higher market interest rates have negatively impacted our cost of interest-bearing deposits and borrowings. Net Interest Income. Net interest income represents the difference between income derived from interest-earning assets and the expense incurred on interest-bearing liabilities.
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.
The increase in non-interest expense in 2023 compared to 2022 was mainly due to higher compensation and benefits, occupancy and equipment and data processing due to the acquisition of Freedom Bank. Also contributing to the increases were higher amortization costs associated with the purchase accounting entries related to the acquisition. Professional fees increased due higher consulting costs and audit fees.
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.
This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at December 31, 2023. The Company also borrowed $6.6 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.
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.
Also contributing to the increase in interest income on investment securities was an increase in the average balances of investment securities, which increased from $474.7 million in 2022 to $486.3 million in 2023. Higher market interest rates have positively impacted the yield on our loans and investment securities. Interest Expense.
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.
Removed
Landmark Risk Management, Inc. is a Nevada-based captive insurance company.
Added
These qualitative factors comprise a significant portion of the Company’s allowance for credit losses.
Removed
The increase in assets was due primarily to our acquisition of Freedom Bank on October 1, 2022 and organic growth. Higher interest rates and average balances of interest bearing liabilities also increased our interest expense. The acquisition of Freedom Bank also contributed to an increase in non-interest expense in 2023.
Added
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.
Removed
Interest expense during 2023 increased $17.0 million, or 392.2%, to $21.4 million as compared to 2022. Interest expense on interest-bearing deposits increased $12.5 million to $15.3 million for 2023 as compared to $2.8 million in 2022.
Added
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.
Removed
Interest expense on borrowings increased $4.6 million to $6.1 million during 2023, as compared to 2022, due to an increase in our average borrowings, which increased from $50.0 million in 2022 to $114.2 million in 2023. Also contributing to the increase in interest expense on borrowings were higher rates, which increased from 3.14% in 2022 to 5.37% in 2023.
Added
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.
Removed
Total non-interest income was $13.2 million in 2023, a decrease of $470,000, or 3.4%, compared to 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+3 added−0 removed7 unchanged
Biggest changeThis has been accomplished primarily by managing the assets and liabilities while maintaining our traditional high credit standards. 48 INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES REPRICING SCHEDULE (“GAP” TABLE) As of December 31, 2023 3 months or less 3 to 12 months 1 to 5 years Over 5 years Total (Dollars in thousands) Interest-earning assets: Investment securities $ 4,805 $ 32,340 $ 236,365 $ 182,814 $ 456,324 Loans 228,622 192,229 431,353 96,452 948,656 Total interest-earning assets $ 233,427 $ 224,569 $ 667,718 $ 279,266 $ 1,404,980 Interest-bearing liabilities: Certificates of deposit $ 91,903 $ 71,536 $ 19,713 $ 2 $ 183,154 Money market and checking accounts 613,613 - - - 613,613 Savings accounts 152,381 - - - 152,381 Borrowed money 79,241 14,201 5,585 - 99,027 Total interest-bearing liabilities $ 937,138 $ 85,737 $ 25,298 $ 2 $ 1,048,175 Interest sensitivity gap per period $ (703,711 ) $ 138,832 $ 642,420 $ 279,264 $ 356,805 Cumulative interest sensitivity gap (703,711 ) (564,879 ) 77,541 356,805 Cumulative gap as a percent of total interest-earning assets (50.09 )% (40.21 )% 5.52 % 25.40 % Cumulative interest sensitive assets as a percent of cumulative interest sensitive liabilities 24.91 % 44.78 % 107.40 % 134.04 % 49
Biggest changeThis has been accomplished primarily by managing the assets and liabilities while maintaining our traditional high credit standards. 50 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 % 51
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. 47 In the past, we have been successful in meeting the interest rate sensitivity objectives set forth in our policy.
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. 49 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, 2023 and forecasting volumes for the twelve-month projection.
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: As of December 31, 2023 As of December 31, 2022 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 $ (5,924 ) (13.8 )% $ (3,245 ) (6.6 )% 200 basis point rising $ (4,012 ) (9.3 )% $ (2,218 ) (4.5 )% 100 basis point rising $ (2,122 ) (4.9 )% $ (1,215 ) (2.5 )% 100 basis point falling $ 17 0.0 % $ 747 1.5 % 200 basis point falling $ (909 ) (2.1 )% $ 434 90.0 % 300 basis point falling $ (2,037 ) (4.7 )% $ (67 ) (0.1 )% 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.
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: As of December 31, 2024 As of December 31, 2023 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 )% 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our assets and liabilities are principally financial in nature, and the resulting net interest income thereon is subject to changes in market interest rates and the mix of various assets and liabilities.
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.
Added
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).
Added
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.
Added
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.

Other LARK 10-K year-over-year comparisons