Good day, and welcome to the Landmark Bancorp Fourth Quarter Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions, [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Michael Scheopner, President and Chief Executive Officer. Please go ahead.

Good morning. Thank you for joining our call today to discuss Landmark's earnings and results of operations for the fourth quarter and full year 2017. Joining the call with me today to discuss various aspects of our 2017 performance is Mark Herpich, Chief Financial Officer for the company. Before we get started, I would like to remind our listeners that some of the information we will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission. As part of these guidelines, I must point out that any statements made during this presentation that discuss our hopes, beliefs, expectations or predictions of the future are forward-looking statements and our actual results could differ materially from those expressed. Additional information on these factors is included from time to time in our 10-K and 10-Q filings, which can be obtained by contacting the company or the SEC. We reported net earnings of $2.4 million or $0.59 per share on a fully diluted basis for the fourth quarter of 2017. For the year ending December 31, 2017 Landmark's net earnings totaled $4.4 million or $1.06 per diluted share. The full year 2017 return on average assets calculates to 0.47%. The company's return on average equity for 2017 was 4.98%. As previously disclosed, Landmark's net earnings in 2017 were impacted by a $8.1 million deposit-related loss. This loss reduced net earnings by $5.1 million during the third quarter of 2017. The company continues to pursue collection and intends to protect all of its rights pursuant to this matter and seek all available legal and equitable remedies. Clearly, we are disappointed with the impact of this fraud on our 2017 financial results. While we believe we had appropriate controls in place, as a result of this event management…

Thanks Michael and good morning to everyone. As Michael has already summarized our earnings for the fourth quarter and year ended December 31, 2017, I would like to make a few comments on various elements comprising those results. Starting with the fourth quarter income statement highlights, net interest income was $6.6 million, an increase of $48,000 or 0.7% in comparison to the prior year's fourth quarter. The slight improvement in net interest income was attributable to a $14.7 million or 1.8% increase in our average interest-earning assets to $832.1 million in comparison to the prior year fourth quarter period. Higher rates on interest-bearing deposits offset the increased level of investments and loans, resulting in a slight decline in our net interest margin from 3.40% in the fourth quarter of 2016 to 3.38% in the same period of 2017. Looking at our provision for loan losses, our analysis of the allowance for loan losses resulted in providing $200,000 to the allowance in the fourth quarter of 2017 as compared to no provision during the fourth quarter of 2016. Noninterest income increased $200,000 to $3.5 million for the fourth quarter of 2017 up 6.1% as compared to the same period of 2016. The increase was primarily related to $135,000 of gains on sales of investment securities during the fourth quarter of 2017 as compared to none in the fourth quarter of 2016. Also contributing to the improvement in noninterest income in the fourth quarter of 2017 were increases of $44,000 in bank-owned life insurance income, $31,000 in gains on sales of loans and $11,000 in fees and service charges as compared to a year earlier. Our fourth quarter noninterest expenses decreased by $145,000 to $7.2 million as compared to $7.3 million for the fourth quarter of 2016. The reduction in noninterest expense…

Thank you for your comments Mark. We continue to maintain a diversified mix in loan portfolio both in loan types and in geography across the state. As part of our comprehensive credit risk management process, we review construction land and commercial real estate on a quarterly basis for loan type and geographic concentration issues. As of December 31, 2017, our construction and land and loan portfolio balances totaled $19.4 million or 4.4% of our total loan portfolio. Outstanding loan balances in our commercial real estate portfolio totaled $120.6 million representing 27.5% of our total loan portfolio. Landmark's loan portfolio in the construction land category as of the end of the year totals 21% of risk-based capital, well below the regulatory guideline of 100%, a level where regulators review the total as a concentration requiring heightened risk management practices. Our commercial real estate portfolio was 151% of risk-based capital, which is far below the 300% regulatory guideline in that category. The mortgage one-to-four family loan portfolio represents 31% of the portfolio at $136.2 million as of December 31, 2017. Residential real estate activity across the State of Kansas continues to show stable to brisk sales activity with tight market supply of inventory in most of our markets. The performance of this segment of our portfolio continues to be strong today with low levels of delinquency and limited collection issues. With regard to our agricultural loan portfolio, total balances were $83 million or 18.9% of our total loan portfolio as of December 31, 2017. The agricultural outlook continues to be challenging. We've identified borrowers in this portfolio who are subject to increased risk in this segment through an intentional risk assessment of the portfolio and we will continue to monitor those trends closely. Commercial and industrial loans were $54.6 million as of December 31, 2017 or 12.4% from the current portfolio. We will continue to carefully monitor the many risk factors impacting our credit portfolio going forward and we'll remain diligent and disciplined in applying the same disciplined underwriting and risk management practices that have supported our continued profitability these past several years. Before we go to questions, I want to summarize by saying that while the deposit fraud loss that we experienced in the third quarter negatively impacted our 2017 earnings, excluding this event, Landmark continued to demonstrate a history of delivering strong core earnings performance across all of our community banking lines of business. We continue to believe that the company is well positioned for long-term organic and acquisitive growth. I anticipate our trend of solid core earnings will continue. With that, I'll open the call up to questions that anyone might have.

Thank you. we will now begin the question-and-answer session. [Operator instructions] And our first question comes from Michael Brilley of Sit Investment. Please go ahead.

Okay. I have two questions. First of all, I've heard other banks particularly larger banks, indicate that their compliance costs and the number of people they have to hire continue to be a major cost problem for them, but I've also heard that may be smaller banks like yourself may be getting less regulatory pressure. Could you comment on that? And my second question is regarding the $8.1 million loss, I believe you have indicated that the customer was well known to you and had a history of these large transactions and deposits and withdrawals. My question is I know bad things can happen. My question is are you eliminating client relationships of this type where there is a pattern of high risk transactions or are you letting other customers continue to do this type of activity? Thank you.

Okay. Michael, thank you for the questions. I'll address the compliance costs question first. We have increased our staffing with respect to audit and compliance and that's been a trend over the last several years. As of the end of 2017, we consider ourself to be fully staffed in that area in both the audit and in the compliance related areas and while it is a significant cost, we think our current staffing is appropriate relative to any kind of ease of burden on the compliance or regulatory front, while we have visited with our regulators about specific compliance-related fatigue that we feel given our efforts to continue to meet their expectations and demands, we haven't seen a significant easing or a adjustment in expectations at the regulatory level or from the regulatory -- or from our regulators at this point. Related to eliminating client relationships, part of our enhanced controls that we put in place following the deposits related loss, involved a higher level of scrutiny or higher level of review with respect to client relationships that demonstrated patterns related to negative collected balances, we have identified several relationships that represented a higher risk and have eliminated those relationships based upon the enhanced controls or review of those accounts. And so again from a -- while we believe we had appropriate controls in place, the enhanced controls have that resulted in some additional monitoring that from a risk standpoint we felt it was appropriate to eliminate those relationships.

Thank you.

[Operator instructions] As we have no further questions, I would like to turn the conference back over to Michael Scheopner for any closing remarks.

Thank you. And I want to thank everyone for participating and joining us in today's earnings call. I do appreciate your continued support and the confidence that you've shown in our company and I look forward to sharing news related to our first quarter 2018 results at our next earnings conference call. Thank you,

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.