Landmark's Record Revenue Comes With a Rate-Hike Bill Attached
A 4.35% margin and a 101st straight dividend — financed by a $10.9M AOCI hit, a shrinking loan book, and a credit culture still under reconstruction
LARK · Earnings Call · 2026-10-29
The Margin Quarter
Landmark Bancorp's third quarter was, by the numbers, the best operating quarter in its history as a public company. Revenue of $19.2 million was a record. Net interest margin on a tax-equivalent basis rose 13 basis points sequentially and 52 basis points year over year to 4.35%. Return on assets climbed to 1.36% from 1.21%. Diluted EPS was $0.89, and year-to-date EPS of $2.59 compares with $2.29 through September 2025. The engine was deposit pricing, full stop. “Our disciplined approach to deposit pricing enabled us to further reduce our cost of deposits to 1.29%” — Abigail Wendel, President and CEO · 2026-10-29, Abby Wendel told listeners, with the interest-bearing rate at 1.81% and noninterest-bearing balances still roughly 29% of total deposits. That is the whole trick: cost of deposits falling while loan yields rose to 6.46%. Net interest income of $15.6 million was up $562,000 linked-quarter and $1.5 million year over year, and the efficiency ratio sits near 50% — a far cry from the 84% it printed in 2017. This is not a Landmark invention. A Fed rate hike sits atop the market-wide keyword board this quarter, and core deposits ranks among the top five themes across all reporting companies — including bank peers like AVBH and BANC who spent their calls on rate increases and broker funding. Landmark is simply a very small, very well-margined participant in a large sector trade. Mark Herpich confirmed the positioning: “We're slightly asset sensitive at this point over the next year, John. I think we -- it's not a strong asset position, but we feel like we're well situated to take advantage” — Mark Herpich, Chief Financial Officer · 2026-10-29.The Bill for Those Rates
The same rate rise that lifted the margin put a dent in the balance sheet. Unrealized net losses on the investment portfolio widened by $10.9 million in the quarter to $18.5 million after tax, dragging stockholders' equity down $6.6 million to $160.3 million. Book value fell to $26.24 from $27.35; tangible book value ended at $20.68, down sequentially though still up 3.6% year over year. Here is the oddity. The stock is up 6.9% over the last 90 days and sits just 3.2% below its September 15 peak of $33.33 — yet it trades at 0.9x book and 7.9x earnings. Price-to-earnings is down 29% year over year even as EPS rose. Investors are being paid to wait, but they are being asked to accept that paper losses on a 4.8-year-duration portfolio — with a roll-off yield under 3% against higher reinvestment rates and $60.4 million of projected 12-month cash flow — will eventually resolve in their favor.Shrinking Loans, Hardening Credit Language
Beneath the record revenue, the loan book contracted $22.2 million to $1.1 billion: commercial real estate down $12.5 million, residential down $10.6 million, commercial down $6.4 million, partly offset by $9.3 million of construction and land growth. The culprit was payoff activity — a fresh high-momentum term this quarter, replacing last quarter's loans increased narrative. Wendel was candid about the lumpiness: “in the third quarter, specifically, we had some payoffs that -- there's kind of lumpy. There's not anything that indicates a trend” — Abigail Wendel, President and CEO · 2026-10-29, including one participation purchased by a larger bank where Landmark hopes to re-enter as a participant. Herpich made clear the margin was not flattered by exit fees: “We didn't have any early termination penalties or anything going through the margin. It was core regular routine earnings net of costs.” — Mark Herpich, Chief Financial Officer · 2026-10-29 Credit is where the language has quietly hardened. Nonperforming loans fell to $12.5 million, or 1.16% of gross loans, and net charge-offs were essentially nil at 0.01%. But 30-to-89-day delinquencies jumped to $8.3 million, or 0.77% of loans, from 0.57% — driven by a single commercial real estate borrower. And the CEO volunteered a concession that reads as a self-assessment:That is not a new theme so much as a persistent one. On the July 2025 call, Grant LacKamp asked directly whether the bank was adequately reserved, and Wendel pointed to “a large loan that's on nonaccrual” — Abigail M. Wendel, President and Chief Executive Officer · 2025-07-25 that had been discussed in prior quarters. Five quarters later, the same nonperforming loan conversation continues, now paired with credit culture language and the recent addition of experienced credit and risk executives to the leadership team. When a bank hires for a problem and names the problem out loud, that is a signal.But we still have work to do on our loan portfolio and overall credit approach as we elevate expectations and strengthen our credit culture.