Additionally, interest income on securities increased $135,000 to $1.7 million, primarily due to higher average balances and yields. Interest expense on deposits decreased by $315,000 to $2.8 million, reflecting lower costs on deposits. Overall, our net interest margin improved to 3.90% in the fourth quarter, up from 3.72% in the third quarter and 3.38% in the fourth quarter of 2024.
Non-interest income for the fourth quarter of 2025 was $2.5 million, an increase of $100,000 compared to the third quarter of 2025 and an increase of $400,000 compared to the fourth quarter of 2024. This increase was primarily driven by higher service charges and fees, as well as gains on the sale of securities.
Non-interest expenses for the fourth quarter of 2025 were $11.1 million, an increase of $200,000 compared to the third quarter of 2025 and an increase of $800,000 compared to the fourth quarter of 2024. This increase was primarily due to higher salaries and employee benefits, as well as increased marketing and occupancy expenses.
Overall, our efficiency ratio for the fourth quarter improved to 61.2%, down from 63.8% in the third quarter and 67.5% in the fourth quarter of 2024. This improvement reflects our continued focus on expense management and operational efficiency.
In terms of asset quality, our nonperforming loans decreased to $5.3 million at the end of the fourth quarter, down from $6.2 million at the end of the third quarter. Our allowance for loan losses remained stable at $8.1 million, providing coverage of 1.33% of total loans.
Looking ahead, we remain focused on driving sustainable growth, managing risk effectively, and delivering value to our shareholders. We are confident in our ability to navigate the evolving economic environment and continue to serve our customers effectively.
Thank you for your continued support, and we look forward to updating you on our progress in the coming quarters. This concludes our prepared remarks, and we will now open the call for questions. Thank you. In the fourth quarter of 2025, Landmark Bank saw a decrease in average loan balances by $2.1 million, while the tax equivalent yield on the loan portfolio improved by 3 basis points to 6.40%. Interest expense on deposits also decreased by $272,000 compared to the prior quarter due to lower deposit costs despite an increase in average deposit balances. Additionally, interest expense on borrowed funds decreased by $325,000 as a result of lower average balances and borrowing rates.
The average rate on interest-bearing deposits decreased by 12 basis points to 2.06% mainly due to lower rates on deposits. The average rate on other borrowed funds also decreased by 16 basis points to 4.93% in the fourth quarter, resulting from lower short-term Fed funds rates. Landmark’s net interest margin on a tax equivalent basis improved by 20 basis points to 4.03% in the fourth quarter of 2025 compared to the third quarter of 2025 and improved by 52 basis points compared to the fourth quarter of 2024.
During the fourth quarter, Landmark provided $500,000 to its allowance for credit losses after taking a $850,000 provision in the prior quarter. Net charge-offs totaled $341,000 in the fourth quarter of 2025 compared to net charge-offs of $2.3 million in the prior quarter. The allowance for credit losses at the end of December 31, 2025, stood at $12.5 million, representing 1.12% of gross loans.
Noninterest income totaled $3.9 million in the fourth quarter, a decrease of $169,000 compared to the prior quarter. The decrease was primarily due to a $101,000 loss on the sale of lower-yielding investment securities as part of Landmark’s strategy to reposition its investment portfolio to improve future income. Noninterest expense for the fourth quarter of 2025 totaled $12.3 million, an increase of $1.0 million compared to the prior quarter. This increase was primarily driven by increases in compensation and benefits expense, professional fees, and an impairment loss on repossessed assets held for sale.
In terms of the loan portfolio, gross loans decreased by $6.3 million in the current quarter compared to the previous quarter, totaling $1.1 billion at year-end. Despite the overall decrease in loan balances, Landmark saw increases in its commercial real estate and agricultural portfolios, offset by reductions in other portfolios. The investment securities portfolio also decreased by $1.9 million mainly due to maturities exceeding purchases.
Deposits at Landmark totaled $1.4 billion at December 31, 2025, an increase of $63.4 million in the fourth quarter compared to the prior quarter. Interest checking and money market deposits increased, while certificates of deposits declined. The loan-to-deposit ratio stood at 79.1% at year-end, providing sufficient liquidity to fund future loan growth.
Stockholders’ equity increased by $4.9 million in the fourth quarter, reaching $160.6 million at December 31, 2025. The book value per share also increased to $26.44 compared to $25.64 at September 30. Landmark’s consolidated and bank capital ratios as of December 31, 2025, exceeded regulatory capital levels considered to be well capitalized.
In conclusion, Landmark Bank has shown resilience and stability in its financial performance despite fluctuations in loan balances, interest rates, and expenses. The bank remains focused on managing credit risk, improving its loan portfolio quality, and enhancing its overall financial position to drive future growth and profitability. Landmark Bancorp recently released its Q4 2025 earnings report, showcasing a slight decrease in the balance of past due loans between 30 and 89 days that are still accruing interest. The total amount stands at $4.3 million, representing 0.38% of gross loans. Additionally, net loan charge-offs for the quarter totaled $341,000, a slight increase from the previous quarter’s $219,000. Year-to-date, net loan charge-offs make up 0.25% of average loans. The allowance for credit losses is reported at $12.5 million or 1.12% of gross loans.
Despite these figures, the Kansas economy remains robust, with a seasonally adjusted unemployment rate of 3.8% as of November 30, according to the Bureau of Labor Statistics. The housing market in Kansas is also showing signs of strength, with the median sale price of homes rising to $277,000 from $265,000 a year earlier. However, home sales have seen a slight decline of 9.6% year-over-year, with homes typically spending 19 days on the market before selling at 100% of their list prices.
Inventory conditions in the housing market are normalizing, with active listings increasing to 7,833 units and a month’s supply of 2.6 months. The company’s CEO, Abigail Wendel, expressed optimism for the year ahead, promising to build on the successes of 2025 by investing in associates, enhancing customer service, and seizing growth opportunities in their markets.
In conclusion, Landmark Bancorp’s Q4 2025 earnings report reflects a mixed financial performance, with some areas showing improvement while others face challenges. The company remains optimistic about the future and is committed to delivering value to its customers and shareholders. The world of technology is constantly evolving, with new innovations and advancements being made every day. One of the most exciting developments in recent years has been the rise of artificial intelligence (AI) technology. AI is revolutionizing industries across the board, from healthcare to finance to transportation. But what exactly is AI, and how is it changing the way we live and work?
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