Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview. Landmark Bancorp, Inc. is a financial holding company incorporated under the laws of the State of Delaware and is engaged in the banking business through its wholly owned subsidiary, Landmark National Bank, and in the insurance business through its wholly owned subsidiary, Landmark Risk Management, Inc. References to the "Company," "we," "us," and "our" refer collectively to Landmark Bancorp, Inc., Landmark National Bank and Landmark Risk Management, Inc. The Company is listed on the Nasdaq Global Market under the symbol "LARK." The Bank is dedicated to providing quality financial and banking services to its local communities. Our strategy includes growing our commercial, commercial real estate ("CRE") and agriculture loan portfolios, while continuing to emphasize and maintain high quality assets. We are committed to developing relationships with our borrowers and providing a total banking service.

The Bank is principally engaged in the business of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to originate one-to-four family residential real estate, construction and land, CRE, commercial, agriculture, municipal and consumer loans. Although not our primary business function, we invest in certain investment and mortgage-related securities using deposits and other borrowings as funding sources.

Landmark Risk Management, Inc., which was formed and began operations in 2017, is a Nevada-based captive insurance company which provides property and casualty insurance coverage to the Company and the Bank for which insurance may not be currently available or economically feasible in the current insurance marketplace. Landmark Risk Management, Inc. is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Our results of operations depend generally on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to the degree that our interest-earning assets mature or reprice at different times, or at different speeds, than our interest-bearing liabilities. Our results of operations are also affected by non-interest income, such as service charges, loan fees, gains from the sale of newly originated loans, gains or losses on investments and certain other non-interest related items. Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, professional fees, data processing expenses and provision for credit losses.

We are significantly impacted by prevailing economic conditions, including federal monetary and fiscal policies, and federal regulations of financial institutions. Deposit balances are influenced by numerous factors such as competing investments, the level of income and the personal rate of savings within our market areas. Factors influencing lending activities include the demand for housing, the interest rate pricing competition from other lending institutions, and rates of inflation.

Currently, our business consists of ownership of the Bank, with its main office in Manhattan, Kansas and 28 additional branch offices in central, eastern, southeast and southwest Kansas, one loan production office in Kansas City, Missouri and our ownership of Landmark Risk Management, Inc.

In April 2026, we declared our 99^th consecutive quarterly dividend, and we currently have no plans to change our dividend strategy given our current capital and liquidity position. However, while we have achieved a strong capital base and expect to continue operating profitably, our future dividend practice is dependent upon the performance of the economy and the Company's overall performance. In addition, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, we will not be permitted to make capital distributions (including for dividends and repurchases of stock) or pay discretionary bonuses to executive officers without restriction if we do not maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer, a standard we exceeded at March 31, 2026.

Critical Accounting Policies. Critical accounting policies are those which are both most important to the portrayal of our financial condition and results of operations and require our management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to the allowance for credit losses and the accounting for business combinations, each of which involve significant judgment by our management. There have been no material changes to the critical accounting policies included under Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on April 14, 2026.

Summary of Results. During the first quarter of 2026, we recorded net earnings of $5.1 million, an increase of $365,000, or 7.8%, from net earnings of $4.7 million in the first quarter of 2025.The increase in net earnings during the first quarter of 2026 was primarily related to an increase in net interest income and non-interest income.

The following table summarizes earnings and key performance measures as of or for the periods presented:

		As of or for the
(Dollars in thousands, except per share amounts)		three months ended March 31,
		2026				2025
Net earnings:
Net earnings		$	5,066			$	4,701
Basic earnings per share (1)		$	0.83			$	0.77
Diluted earnings per share (1)		$	0.83			$	0.77
Earnings ratios:
Return on average assets (2)			1.29	%			1.21	%
Return on average equity (2)			12.65	%			13.71	%
Equity to total assets			10.06	%			9.04	%
Net interest margin (2) (3)			4.24	%			3.76	%
Dividend payout ratio			25.30	%			25.97	%

(1) Per share values for the period ending March 31, 2025 have been adjusted to give effect to the 5% dividend paid during 2025.

(2) Ratios have been annualized and are not necessarily indicative of the results for the entire year.

(3) Net interest margin is presented on a fully tax equivalent basis, using a 21% federal tax rate.

Interest Income. Interest income of $20.2 million for the quarter ended March 31, 2026 represented an increase of $906,000, or 4.7%, compared to the same period of 2025. Interest income on loans increased $865,000, or 5.3%, to $17.3 million for the quarter ended March 31, 2026, compared to the same period of 2025 due to higher yields and average balances. Yield on loans increased from 6.34% in the first quarter of 2025 to 6.40% in the first quarter of 2026. The increase in interest income on loans was also driven by an increase of $45.0 million in average loan balances, which increased from $1.0 billion in the first quarter of 2025 to $1.1 billion in the first quarter of 2026. Interest income on investment securities increased $30,000, or 1.0%, to $2.9 million for the first quarter of 2026. The increase in interest income on investment securities was primarily the result of higher yields, partially offset by a decrease in average balances of investment securities. The yield on investment securities increased 26 basis points to 3.55% in the first quarter of 2026. The average balance of investment securities decreased $27.0 million, or 7.2%, to $350.8 million in the first quarter of 2026.

Interest Expense. Interest expense during the quarter ended March 31, 2026 decreased $998,000 to $5.2 million, as compared to the same period of 2025. Interest expense on interest-bearing deposits decreased $625,000 to $4.6 million for the quarter ended March 31, 2026, as compared to the same period of 2025. The total cost of interest-bearing deposits decreased from 2.17% in the first quarter of 2025 to 1.90% in the first quarter of 2026 as a result of lower rates on our deposits. Partially offsetting the lower rates was an increase in average interest-bearing deposit balances, which increased from $979.8 million in the first quarter of 2025 to $983.1 million in the first quarter of 2026. For the first quarter of 2026, interest expense on borrowings decreased $373,000 to $614,000, as compared to the same period of 2025 due to a decrease in our average borrowings and repurchase agreements which decreased $20.6 million from the first quarter of 2025 to the first quarter of 2026. Also contributing to lower interest expense was a decrease in rates, which decreased from 5.09% in the first quarter of 2025 to 4.85% in the same period of 2026.

Net Interest Income. Net interest income increased $1.9 million, or 14.5%, to $15.0 million for the first quarter of 2026, as compared to the first quarter of 2025. The increase in net interest income was primarily a result of an increase in interest income on loans and investment securities, and lower interest expense. The accretion of purchase accounting adjustments increased net interest income by $184,000 in the first quarter of 2025 compared to an increase of $149,000 in the first quarter of 2026, and was primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction. Compared to the same period last year, higher yields on earning assets and growth in average loans increased interest income while lower deposit costs decreased interest expense. Net interest margin, on a tax-equivalent basis, was 3.76% in the first quarter of 2025, compared to 4.24% in the first quarter of 2026.

Average Assets/Liabilities. The following table reflects the tax-equivalent yields earned on average interest-earning assets and costs of average interest-bearing liabilities (derived by dividing income or expense by the monthly average balance of assets or liabilities, respectively) as well as "net interest margin" (which reflects the effect of the net earnings balance) for the periods shown:

		Three months ended												Three months ended
		March 31, 2026												March 31, 2025
		Average balance				Income/ expense				Average yield/cost				Average balance				Income/ expense				Average yield/cost
(Dollars in thousands)
Assets
Interest-earning assets:
Interest-bearing deposits at banks		$	7,994			$	59				2.99	%		$	5,494			$	48				3.54	%
Investment securities (1)			350,802				3,073				3.55	%			377,845				3,068				3.29	%
Loans receivable, net (2)			1,093,593				17,263				6.40	%			1,048,585				16,398				6.34	%
Total interest-earning assets			1,452,389				20,395				5.69	%			1,431,924				19,514				5.53	%
Non-interest-earning assets			142,223												142,371
Total		$	1,594,612											$	1,574,295
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Money market and checking		$	609,444			$	2,664				1.77	%		$	630,194			$	3,250				2.09	%
Savings accounts			151,567				42				0.11	%			147,135				43				0.12	%
Certificates of deposit			222,137				1,905				3.48	%			202,458				1,943				3.89	%
Total interest-bearing deposits			983,148				4,611				1.90	%			979,787				5,236				2.17	%
FHLB advances and other borrowings			27,851				277				4.03	%			48,428				565				4.73	%
Subordinated debentures			21,651				322				6.03	%			21,651				357				6.69	%
Repurchase agreements			1,871				15				3.25	%			8,634				65				3.05	%
Total borrowings			51,373				614				4.85	%			78,713				987				5.09	%
Total interest-bearing liabilities			1,034,521				5,225				2.05	%			1,058,500				6,223				2.38	%
Non-interest-bearing liabilities			397,628												376,727
Stockholders' equity			162,463												139,068
Total		$	1,594,612											$	1,574,295
Interest rate spread (3)											3.64	%											2.92	%
Net interest margin (4)						$	15,170				4.24	%						$	13,291				3.76	%
Tax-equivalent interest - imputed							147												172
Net interest income						$	15,023											$	13,119
Ratio of average interest-earning assets to average interest-bearing liabilities											140.4	%											135.3	%

	(1)	Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal tax rate.
	(2)	Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 21% federal tax rate.
	(3)	Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
	(4)	Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets.

Rate/Volume Table. The following table describes the extent to which changes in tax-equivalent interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities affected the Company's interest income and expense for the periods indicated. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by prior volume), (ii) changes attributable to volume (changes in volume multiplied by prior rate), and (iii) net change (the sum of (i) and (ii)). The net changes attributable to the combined effect of volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

		Three months ended March 31,
		2026 vs 2025
		Increase/(decrease) attributable to
		Volume				Rate				Net
		(Dollars in thousands)
Interest income:
Interest-bearing deposits at banks		$	17			$	(6	)		$	11
Investment securities			(48	)			53				5
Loans			709				156				865
Total			678				203				881
Interest expense:
Deposits			18				(643	)			(625	)
FHLB advances and other borrowings			(214	)			(74	)			(288	)
Subordinated debentures and other borrowings			-				(35	)			(35	)
Repurchase agreements			(55	)			5				(50	)
Total			(251	)			(747	)			(998	)
Net interest margin		$	929			$	950			$	1,879

Provision for Credit Losses. During the first quarter of 2026, a $500,000 provision for credit losses for loans was recorded, compared to no provision during the first quarter of 2025. During the first quarter of 2026, a $70,000 provision for credit losses for unfunded loan commitments was recorded. We recorded net loan charge-offs of $349,000 during the first quarter of 2026, compared to net loan charge-offs of $23,000 during the first quarter of 2025.

For further discussion of the allowance for credit losses, refer to the "Asset Quality and Distribution" section below.

Non-interest Income. Total non-interest income was $3.8 million in the first quarter of 2026, an increase of $406,000, or 12.1%, from the same period in 2025. The increase in non-interest income during the first quarter of 2026 compared to the same period in the prior year was primarily due to an increase of $323,000 in gains on sales of one-to-four family residential real estate loans due to an increase in volume. There was also an increase of $101,000 in bank-owned life insurance income due to the accrual of death benefits during the first quarter of 2026.

Non-interest Expense. Non-interest expense totaled $11.9 million for the first quarter of 2026, an increase of $1.1 million, or 10.6%, over the same quarter of 2025. The increase in non-interest expense in the first quarter of 2026 compared to the same period in the prior year was mainly due to increases of $604,000 in other expense, $198,000 in occupancy and equipment, $169,000 in compensation and benefits expense, and $158,000 in data processing expense. The increase in other expense was driven by $433,000 of fraud losses recognized during the first quarter, related to the previously disclosed fraudulent activity by a non-executive officer of the Bank. The increase in fraud losses was coupled with increased insurance loss reserves of our captive insurance subsidiary. The increases in both occupancy and equipment expense and data processing expense were related to expenses incurred to upgrade our core branch operation systems during the current quarter as compared to the first quarter of 2025. The increase in compensation and benefits was attributable to an increase in the number of employees in the current year, coupled with higher benefits expense as compared to the prior year.

Income Tax Expense. During the first quarter of 2026, we recorded income tax expense of $1.3 million, compared to income tax expense of $1.0 million during the same period of 2025. Our effective tax rate increased from 17.8% in the first quarter of 2025 to 19.8% in the first quarter of 2026. The increase in the effective tax rate was due to higher earnings before taxes, coupled with a decrease in tax exempt income.

Financial Condition. Economic conditions in the U.S. remained resilient during the first quarter of 2026 despite elevated inflation levels and economic uncertainty related to ongoing conflicts in the Middle East and tariffs continuing to impact the economy. Rate cuts by the Federal Reserve Bank have positively benefitted financial institutions' earnings and net interest margin. The Federal Reserve lowered interest rates by 75 basis points during the fourth quarter of 2025 due to improvements in the inflation outlook, however, additional rate cuts are dependent upon further reductions in the inflation rate and other economic factors. We maintain strong capital and liquidity, and a stable, conservative deposit portfolio with a significant majority of our deposits being retail-based and insured by the Federal Deposit Insurance Corporation ("FDIC"). We spend significant time each month monitoring our interest rate and concentration risks through our asset/liability management and lending strategies that involve a relationship-based banking model offering stability and consistency. The State of Kansas and the geographic markets in which the Company operates have also been impacted by economic headwinds. Supply chain constraints, labor shortages and geopolitical events have contributed to the rising inflation levels which are impacting all areas of the economy both nationally and locally. The Company's allowance for credit losses continues to factor in estimates of the economic impact of these conditions and other qualitative factors on our loan portfolio. However, our loan portfolio is diversified across various types of loans and collateral throughout the markets in which we operate. Aside from a few problem loans that management is working to resolve, our asset quality has remained strong over the past few years. While further increases in problem assets may arise, management believes its efforts to run a high-quality financial institution with a sound asset base will continue to create a strong foundation for continued growth and profitability in the future.

Asset Quality and Distribution. Our primary investing activities are the origination of one-to-four family residential real estate, construction and land, CRE, commercial, agriculture, municipal and consumer loans and the purchase of investment securities. Total assets were $1.6 billion at both December 31, 2025 and March 31, 2026.

The allowance for credit losses is established through a provision for credit losses based on our economic projections. At March 31, 2026, our allowance for credit losses on loans totaled $12.6 million, or 1.15% of gross loans outstanding, compared to $12.5 million, or 1.12% of gross loans outstanding, at December 31, 2025. The increase in our allowance for credit losses on loans as a percentage of gross loans outstanding was primarily due to loan growth and current and projected economic conditions and other qualitative factors.

As of March 31, 2026 and December 31, 2025, approximately $25.9 million and $27.2 million, respectively, of loans were considered classified and assigned a risk rating of special mention, substandard or doubtful. These ratings indicate that these loans were identified as potential problem loans having more than normal risk and raised doubts as to the ability of the borrowers to comply with present loan repayment terms. Even though borrowers were experiencing moderate cash flow problems as well as some deterioration in collateral value, management believed the allowance for credit losses was sufficient to cover expected losses related to such loans at March 31, 2026 and December 31, 2025, respectively.

Loans past due 30-89 days and still accruing interest totaled $7.4 million, or 0.68% of gross loans, at March 31, 2026, compared to $4.3 million, or 0.38% of gross loans, at December 31, 2025. The increase in past due loans was primarily related to loans in our agriculture portfolio. We are currently working with a small number of delinquent borrowers, and do not believe the increase in delinquent loans is an indicator of broader weakness in the agriculture portfolio. At March 31, 2026, $10.4 million in loans were on non-accrual status, or 0.94% of gross loans, compared to $10.0 million, or 0.90% of gross loans, at December 31, 2025. Non-accrual loans consist of loans 90 or more days past due and certain individually evaluated loans. There were no loans 90 days delinquent and accruing interest at either March 31, 2026 or December 31, 2025.

As part of our credit risk management strategy, we continue to manage the loan portfolio to identify problem loans and have placed additional emphasis on agricultural, commercial, and CRE relationships. We are working to resolve the remaining problem credits or move the non-performing credits out of the loan portfolio. At both March 31, 2026 and December 31, 2025, we had no 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. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates and economic conditions. We experienced a decrease of $66.2 million, or 19.3% in total deposits during the first three months of 2026, to $1.3 billion at March 31, 2026. The decrease in deposits was primarily due to a decrease in brokered deposits, coupled with a seasonal decrease in our public fund deposit accounts.

Non-interest-bearing deposits at March 31, 2026 were $367.7 million, or 27.8% of deposits, compared to $364.7 million, or 26.3% of deposits, at December 31, 2025. Money market and checking deposit accounts were 44.6% of our deposit portfolio and totaled $589.4 million at March 31, 2026, compared to $651.0 million, or 46.9% of deposits, at December 31, 2025. Savings accounts increased to $154.6 million, or 11.7% of deposits, at March 31, 2026, from $151.4 million, or 10.9% of deposits, at December 31, 2025. Certificates of deposit totaled $210.9 million, or 15.9% of deposits, at March 31, 2026, compared to $221.8 million, or 16.0% of deposits, at December 31, 2025. The decrease in certificates of deposit was primarily related to lower brokered certificates of deposits, which decreased from $57.9 million at December 31, 2025 to $41.5 million at March 31, 2026.

Overdraft deposits consist of non-interest-bearing deposits, money market and checking deposit accounts with negative balances. These overdraft balances totaled $345,000 as of March 31, 2026 and $297,000 as of December 31, 2025 and were presented as loans on the balance sheet.

Total deposits include estimated uninsured deposits of $450.7 million and $490.9 million as of March 31, 2026 and December 31, 2025, respectively. This represented approximately 37.1% of our total deposits at March 31, 2026 and 35.3% of our deposits at December 31, 2025. Over 96.1% of the Company's total deposits were considered core deposits at March 31, 2026. These deposit balances are from retail, commercial and public fund customers located in the markets where the Company has bank branch locations.

Certificates of deposit at March 31, 2026 scheduled to mature in one year or less totaled $201.5 million. Historically, maturing deposits have generally remained with the Bank, and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity in some type of deposit account.

Total borrowings increased $57.3 million to $91.0 million at March 31, 2026, from $33.7 million at December 31, 2025. The increase in total borrowings was primarily due to an increase in FHLB line of credit borrowings driven by the reduction in higher-cost brokered deposits.

Cash Flows. During the three months ended March 31, 2026, our cash and cash equivalents increased by $10.9 million. Our operating activities provided net cash of $7.2 million during the first three months of 2026 primarily as a result of net earnings. Our investing activities provided net cash of $13.9 million during the first three months of 2026, primarily due to a decline in loans, coupled with maturities of investment securities. Financing activities used net cash of $10.2 million during the first three months of 2026, primarily as a result of a decrease in deposits, partial offset by an increase in borrowings.

Liquidity. Our most liquid assets are cash and cash equivalents and investment securities available-for-sale. The levels of these assets are dependent on the operating, financing, lending and investing activities during any given year. These liquid assets totaled $376.9 million at March 31, 2026 and $372.4 million at December 31, 2025. During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we generally increase our liquid assets by investing in short-term, high-grade investments or holding higher balances of cash and cash equivalents.

Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments. Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally deposit withdrawals and loan advances. In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of FHLB advances, a line of credit with the FHLB, other borrowings or through pledging or sales of investment securities. While the sale of available-for-sale investment securities would result in losses due to the current interest environment, pledging these securities as collateral would not result in a loss. At March 31, 2026, we had $65.7 million of outstanding borrowings under our line of credit with the FHLB. At March 31, 2026, we had collateral pledged to the FHLB that would allow us to borrow $227.0 million, subject to FHLB credit requirements and policies. At March 31, 2026, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $38.4 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 March 31, 2026. At March 31, 2026, we had subordinated debentures totaling $21.7 million and $2.3 million of repurchase agreements. At March 31, 2026, the Company had no borrowings against a $5.0 million line of credit from an unrelated financial institution maturing on November 1, 2026, with an interest rate that adjusts daily based on the prime rate less 0.50%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at March 31, 2026. The Company also has outstanding borrowings of $1.3 million from the same unrelated financial institution at a fixed rate of 6.15%. This borrowing matures on September 1, 2027 and requires quarterly principal and interest payments. The original $10.0 million of borrowings was used to fund part of the acquisition of Freedom Bancshares, Inc.

Off Balance Sheet Arrangements. As a provider of financial services, we routinely issue financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by us generally to guarantee the payment or performance obligation of a customer to a third party. While these standby letters of credit represent a potential outlay by us, a significant amount of the commitments may expire without being drawn upon. We have recourse against the customer for any amount the customer is required to pay to a third party under a standby letter of credit. The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by us. Most of the standby letters of credit are secured, and in the event of nonperformance by the customers, we have the right to the underlying collateral, which could include CRE, physical plant and property, inventory, receivables, cash and marketable securities. The contract amount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $2.2 million at March 31, 2026.

At March 31, 2026, we had outstanding loan commitments, excluding standby letters of credit, of $206.1 million. We anticipate that sufficient funds will be available to meet current loan commitments. These commitments consist of unfunded lines of credit and commitments to finance real estate loans.

Capital. The Company and the Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on the Company's and Bank's business. Banking organizations are required to maintain minimum capital levels as follows: a ratio of common equity Tier 1 capital equal to 4.5% of risk-weighted assets, a ratio of Tier 1 capital equal to 6.0% of risk-weighted assets, a ratio of total capital equal to 8.0% of risk-weighted assets, and a leverage ratio of Tier 1 capital to total quarterly average assets equal to 4.0% in all circumstances. Regulations also include a capital conservation buffer of 2.5% that is added to these minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including the amount of dividends that it may pay without prior regulatory approval, stock repurchases and certain discretionary bonus payments to executive officers. Management believes that the Company and the Bank met all capital adequacy requirements to which they were subject as of March 31, 2026 and December 31, 2025, as discussed in more detail in Note 11 of the Consolidated Financial Statements.

Dividends. During the quarter ended March 31, 2026, we paid a quarterly cash dividend of $0.21 per share to our stockholders.

The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations. As discussed above, banking organizations must maintain a capital conservation buffer of 2.5% that is added to certain regulatory minimum requirements for capital adequacy purposes in order to pay dividends and make other capital distributions. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of March 31, 2026. The National Bank Act also imposes limitations on the amount of dividends that a national bank may pay without prior regulatory approval. Generally, the amount is limited to the bank's current year net earnings plus the adjusted retained earnings for the three preceding years. As of March 31, 2026, approximately $20.0 million was available to be paid as dividends to the Company by the Bank without prior regulatory approval.

Additionally, our ability to pay dividends is limited by the subordinated debentures that are held by three business trusts that we control. Interest payments on the debentures must be paid before we pay dividends on our capital stock, including our common stock. We have the right to defer interest payments on the debentures for up to 20 consecutive quarters. However, if we elect to defer interest payments, all deferred interest must be paid before we may pay dividends on our capital stock.