**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 21549**

** **

**FORM 10-K**

** **

| **ý** |   | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES AND EXCHANGE ACT OF 1934**                                                            |
|------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   | **For fiscal year ended December 31, 2003**                                                                                                               |
|       |   |                                                                                                                                                      |
|       |   | **OR**                                                                                                                                                    |
| **o**      |   | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES AND EXCHANGE ACT OF 1934**                                                        |
|       |   | **For transition period  from          to          ** |

** **

**CommissionFile Number 0-33203**

** **

**LANDMARKBANCORP, INC.**

(Exact name ofRegistrant as specified in its charter)

 

| **Delaware**                                                                                                  |   | **43-1930755**                          |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|
| (State or other jurisdiction  of incorporation or organization)                                               |   | (I.R.S. Employer Identification Number) |
|                                                                                                          |   |                                    |
| **800 Poyntz Avenue, Manhattan, Kansas    66505**                                         |
| (Address of principal executive offices)**         **(Zip  Code) |
|                                                                                                          |
| **(785) 565-2000**                                                                                            |
| (Registrant’s telephone number, including  area code)                                                    |
|                                                                                                          |
| Securities registered pursuant to Section  12(b) of the Act:                                                  |

 

| **Title of Each Class** |   | **Name of Each Exchange  on which Registered** |
|-------------------------|--------|------------------------------------------------|
| None                    |   | None                                           |

 

Securities registered pursuant to Section12(g) of the Act:

 

# **CommonStock, par value $0.01 per sharePreferred Share Purchase Rights**

(Title of Class)

 

Indicate bycheck mark whether the Registrant (1) has filed all reports to be filed bySection 13 or 15(d) of the Securities and Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes   ý   No   o

 

Indicate bycheck mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof Registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this 10-K or any amendment to thisform 10-K.  ý

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Act).  Yes   o   No   ý

 

The aggregatemarket value of the voting and non-voting common equity held by non-affiliatesof the registrant, based on the last sales price quoted on the Nasdaq NationalMarket System on June 30, 2003, the last business day of the registrant’s mostrecently completed second fiscal quarter, was approximately $44.8million*.  At March 22, 2004, the totalnumber of shares of common stock outstanding was 2,091,307.

 

Documents incorporated by Reference:

 

Portions ofthe 2003 Annual Report to Stockholders for the fiscal year ended December 31,2003, are incorporated by reference into Parts I and II hereof, to the extentindicated herein.  Portions of the ProxyStatement for the Annual Meeting of Stockholders to be held May 19, 2004, areincorporated by reference in Part III hereof, to the extent indicated herein.

 

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*                                         Basedon the last reported price of actual transactions in Registrant’s common stockon June 30, 2003, and reports of beneficial ownership prepared by alldirectors, executive officers and beneficial owners of more than 5% of theoutstanding shares of common stock of Registrant; however, such determinationof shares owned by affiliates does not constitute an admission of affiliatestatus or beneficial interest in shares of common stock of Registrant.

 

 

 

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**LANDMARKBANCORP, INC.**

 

2003 Form 10-K Annual Report

 

Table of Contents

 
| **PART I** |
|------------|
|       |   |   |
| ITEM 1.    | BUSINESS |   |
|       |   |   |
| ITEM 2.    | PROPERTIES |   |
|       |   |   |
| ITEM 3.    | LEGAL  PROCEEDINGS |   |
|       |   |   |
| ITEM 4.    | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS |   |
|       |   |   |
| ITEM 5.    | MARKET  FOR THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS |   |
|       |   |   |
| ITEM 6.    | SELECTED  FINANCIAL DATA |   |
|       |   |   |
| ITEM 7.    | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |   |
|       |   |   |
| ITEM  7A.  | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |   |
|       |   |   |
| ITEM 8.    | FINANCIAL  STATEMENTS AND SUPPLEMENTAL DATA |   |
|       |   |   |
| ITEM 9.    | CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |   |
|       |   |   |
| ITEM  9A.  | CONTROLS  AND PROCEDURES |   |
|       |   |   |
| ITEM  10.  | DIRECTORS  AND EXECUTIVE OFFICERS OF THE REGISTRANT |   |
|       |   |   |
| ITEM  11.  | EXECUTIVE  COMPENSATION |   |
|       |   |   |
| ITEM  12.  | SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |   |
|       |   |   |
| ITEM  13.  | CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS |   |
|       |   |   |
| ITEM  14.  | PRINCIPAL  ACCOUNTANT FEES AND SERVICES |   |
|       |   |   |
| ITEM  15.  | EXHIBITS,  FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K |   |
|       |   |
| SIGNATURES |   |

 

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**PART I.**

 

**ITEM 1.****                                           BUSINESS**

 

**Forward LookingStatements**

 

This document(including information incorporated by reference) contains, and future oral andwritten statements by us and our management may contain, forward-lookingstatements, within the meaning of such term in the Private SecuritiesLitigation Reform Act of 1995, with respect to our financial condition, resultsof operations, plans, objectives, future performance and business.  Forward-looking statements, which may bebased upon beliefs, expectations and assumptions of our management and oninformation currently available to management, are generally identifiable bythe use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,”“estimate,” “may,” “will,” “would,” “could,” “should” or other similarexpressions.  Additionally, allstatements in this document, including forward-looking statements, speak onlyas of the date they are made, and we undertake no obligation to update anystatement in light of new information or future events.

 

Our ability to predict results or the actual effect of future plans orstrategies is inherently uncertain. Factors which could have a material adverse effect on our operations andfuture prospects include, but are not limited to, the following:

 

•                                         Thestrength of the United States economy in general and the strength of the localeconomies in which we conduct our operations which may be less favorable thanexpected and may result in, among other things, a deterioration in the creditquality and value of our assets.

 

•                                         Theeconomic impact of past and future terrorist attacks, acts of war or threatsthereof, and the response of the United States to any such threats and attacks.

 

•                                         Theeffects of, and changes in, federal, state and local laws, regulations andpolicies affecting banking, securities, insurance and monetary and financialmatters.

 

•                                         Theeffects of changes in interest rates (including the effects of changes in therate of prepayments of our assets) and the policies of the Board of Governorsof the Federal Reserve System.

 

•                                         Ourability to compete with other financial institutions as effectively as wecurrently intend due to increases in competitive pressures in the financialservices sector.

 

•                                         Ourinability to obtain new customers and to retain existing customers.

 

•                                         Thetimely development and acceptance of products and services, including productsand services offered through alternative delivery channels such as theInternet.

 

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•                                         Technologicalchanges implemented by us and by other parties, including third party vendors,which may be more difficult or more expensive than anticipated or which mayhave unforeseen consequences to us and our customers.

 

•                                         Ourability to develop and maintain secure and reliable electronic systems.

 

•                                         Ourability to retain key executives and employees and the difficulty that we mayexperience in replacing key executives and employees in an effective manner.

 

•                                         Consumerspending and saving habits which may change in a manner that affects ourbusiness adversely.

 

•                                         Businesscombinations and the integration of acquired businesses which may be moredifficult or expensive than expected.

 

•                                         Thecosts, effects and outcomes of existing or future litigation.

 

•                                         Changesin accounting policies and practices, as may be adopted by state and federalregulatory agencies and the Financial Accounting Standards Board.

 

•                                         Ourability to manage the risks associated with the foregoing as well asanticipated.

 

These risksand uncertainties should be considered in evaluating forward-looking statementsand undue reliance should not be placed on such statements.  Additional information concerning us and ourbusiness, including other factors that could materially affect our financialresults, is included in our filings with the Securities and ExchangeCommission.

 

**The Company**

 

EffectiveOctober 9, 2001, Landmark Bancshares, Inc., the holding company for LandmarkFederal Savings Bank, and MNB Bancshares, Inc., the holding company forSecurity National Bank, completed their merger into Landmark Merger Company,which immediately changed its name to Landmark Bancorp, Inc. (the“Merger”).  In addition, LandmarkFederal Savings Bank merged with Security National Bank and the resulting bankchanged its name to Landmark National Bank (the “Bank”), which is thewholly-owned subsidiary of Landmark Bancorp, Inc. (the “Company” or the“Registrant”).

 

The Company isthe accounting successor to the prior Landmark Bancshares, Inc. and therefore,all financial information presented for periods prior to October 9, 2001reflects only the operations of Landmark Bancshares, Inc.  Landmark Bancshares, Inc. filed an AnnualReport on Form 10-K for its fiscal year ended September 30, 2001.  The Company has a fiscal year ending onDecember 31.  Therefore, the Companyelected to file a Form 10-K for the transition period from October 1, 2001 toDecember 31, 2001, which included audited consolidated financialinformation.  The results for the threemonth transition period ended December 31, 2001 included MNB Bancshares, Inc.’sresults commencing October 9, 2001.  Theinformation presented in this Form 10-K presents information on behalf of theCompany as of and for the year ended December 31, 2003.

 

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The Company isa bank holding company incorporated under the laws of the State ofDelaware.  Currently, the Company’sbusiness consists solely of the ownership of the Bank, which is a wholly-ownedsubsidiary of the Company.

 

As a bankholding company, the Company is subject to regulation by the Board of Governorsof the Federal Reserve System (the “Federal Reserve”).  The Company is also subject to variousreporting requirements of the Securities and Exchange Commission (the “SEC”).

 

Pursuant tothe Merger, the Bank succeeded to all of the assets and liabilities of LandmarkFederal Savings Bank and Security National Bank.  The Bank is principally engaged in the business of attractingdeposits from the general public and using such deposits, together withborrowings and other funds, to originate consumer, commercial, multi-family,and one-to-four family residential mortgage loans in the Bank’s principallending areas, consisting primarily of Manhattan, Auburn, Dodge City, GardenCity, Great Bend, Hoisington, LaCrosse, Topeka, Osage City and Wamego, Kansasand the surrounding communities in Riley, Barton, Finney, Ford, Pottawatomie,Rush, Shawnee and Osage Counties in Kansas. Since the Merger, the Bank has focused on originating greater numbersand amounts of consumer, commercial, and agricultural loans.  Additionally, greater emphasis has beenplaced on diversification of the deposit mix through expansion of core depositaccounts such as checking, savings, and money market accounts.  The Bank has also diversified itsgeographical markets as a result of the Merger, with its main office inManhattan, Kansas and branch offices in central and southwestern Kansas.  On November 13, 2003, the Company announcedthe acquisition of First Kansas Financial Corporation (First Kansas), a singlethrift holding company based in Osawatomie, Kansas.  The acquisition of First Kansas by the Company is expected toclose in April 2004.  This acquisitionwill further diversify our geographical markets as First Kansas currentlyoperates six offices in eastern and north central Kansas.  The Company continues to exploreopportunities to expand its banking markets through mergers and acquisitions,as well as branching opportunities.

 

The results ofoperations of the Bank are dependent primarily upon net interest income and, toa lesser extent, upon other income derived from loan servicing fees andcustomer deposit services.  Additionalexpenses of the Bank include general and administrative expenses such assalaries, employee benefits, federal deposit insurance premiums, dataprocessing, occupancy and related expenses.

 

Deposits ofthe Bank are insured by either the Savings Association Insurance Fund (the“SAIF”) or the Bank Insurance Fund (the “BIF”) of the Federal Deposit InsuranceCorporation (the “FDIC”) up to the maximum amount allowable under applicablefederal law and regulation.  The Bank isregulated by the Office of the Comptroller of the Currency (the “OCC”), as thechartering authority for national banks, and the FDIC, as the administrator ofthe SAIF and the BIF.  The Bank is alsosubject to regulation by the Board of Governors of the Federal Reserve Systemwith respect to reserves required to be maintained against deposits and certainother matters.  The Bank is a member ofthe Federal Reserve Bank of Kansas City and the Federal Home Loan Bank (the“FHLB”) of Topeka.

 

The Company’sexecutive office and the Bank’s main office are located at 800 Poyntz Avenue,Manhattan, Kansas 66502.  The telephonenumber is (785) 565-2000.

 

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**Market Area**

 

The Bank’sprimary deposit gathering and lending market consists of the Kansas counties ofRiley, Barton, Finney, Ford, Osage, Pottawatomie, Rush and Shawnee Counties,Kansas.  Riley County’s economy issignificantly influenced by employment at Fort Riley Military Base and KansasState University, the second largest university in Kansas, which is located inManhattan.  The counties of Ford,Finney, Barton and Rush were founded on agriculture, which continues to play amajor role in the economy.  Predominantactivities involve crop production, feed lot operations, and foodprocessing.  Dodge City is known as the“Cowboy Capital of the World” and maintains a significant tourismindustry.  In the central part ofKansas, the oil industry is also prevalent. The southwestern market area is dependent upon the agricultural, beefpacking, and oil and gas industries. Shawnee County’s economy is strongly influenced by the State of Kansas,City of Topeka and several major private firms and public institutions.  Osage County is primarily agricultural withsmall private industries and business firms.

 

**Competition**

 

The Companyfaces strong competition both in attracting deposits and making real estate andother loans.  Its most directcompetition for deposits comes from commercial banks and other savingsinstitutions located in its principal market areas, including many largefinancial institutions which have greater financial and marketing resourcesavailable to them.  The ability of theCompany to attract and retain deposits generally depends on its ability toprovide a rate of return, liquidity and risk comparable to that offered bycompeting investment opportunities.  TheCompany competes for loans principally through the interest rates and loan feesit charges and the efficiency and quality of services it providesborrowers.  Additionally, competitionmay increase as a result of the continuing reduction on restrictions on theinterstate operations of financial institutions. Under the Gramm-Leach-BlileyAct, which became effective in 2000, securities firms and insurance companiesthat elect to become financial holding companies may acquire banks and otherfinancial institutions.  TheGramm-Leach-Bliley Act may significantly change the competitive environment inwhich the Company conducts business. The financial services industry is also likely to become morecompetitive as further technological advances enable more companies to providefinancial services.  These technologicaladvances may diminish the importance of depository institutions and otherfinancial intermediaries in the transfer of funds between parties.

 

**Employees**

 

At December31, 2003, the Bank had a total of 120 employees (112 full time equivalentemployees).  The Company has no directemployees.  Employees are provided witha comprehensive benefits program, including basic and major medical insurance,life and disability insurance, sick leave, an employee stock ownership plan anda 401(k) profit sharing plan.  Employeesare not represented by any union or collective bargaining group and the Bankconsiders its employee relations to be good.

 

# **Lending Activities**

 

***General*.**  The Company strives to provide each marketarea it serves a full range of financial products and services to small andmedium sized businesses and to consumers. The

 

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Company targets owner-operatedbusinesses and utilizes Small Business Administration and Farm ServicesAdministration lending as a part of its product mix.  Each market has an established loan committee which has authorityto approve credits, within established guidelines.  Concentrations in excess of those guidelines must be approved byeither a corporate loan committee comprised of the Company’s Chief ExecutiveOfficer, the Credit Risk Manager, two other senior commercial lenders or thebank’s board of directors.  When lendingto an entity, the Company generally obtains a guaranty from the principals ofthe entity.  The loan mix is subject tothe discretion of the Bank’s board of directors and the demands of the localmarketplace.

 

Residentialloans are priced and originated following underwriting standards that areconsistent with guidelines established by the major buyers in the secondarymarket.  Commercial and consumer loansgenerally are issued at or above the national prime rate.  The Company has no potential negativeamortization loans.  The following is abrief description of each major category of the Company’s lending activity.

 

***RealEstate Lending***. Commercial, residential, construction and multi-family real estate loansrepresent the largest class of loans of the Company.  Generally, residential loans retained in portfolio are variablerate with adjustment periods of five years or less and amortization periods ofover either 15 or 30 years.  Commercialreal estate loans, including agricultural real estate, generally haveamortization periods over 15 or 20 years. The Company has a security interest in the real estate.  The Company also generates long term fixedrate residential real estate loans which are sold in the secondary market.  Commercial real estate, construction andmulti-family loans are generally limited, by policy, to 80% of the appraisedvalue of the property.  Commercial realestate, including agricultural real estate loans, also are supported by ananalysis demonstrating the borrower’s ability to repay.  Residential loans that exceed 80% of theappraised value of the real estate generally are required, by policy, to besupported by private mortgage insurance, although on occasion the Company willretain non-conforming residential loans to known customers at premium pricing.

 

***CommercialLending***. Loans in this category include loans to service, retail, wholesale andlight manufacturing businesses, including agricultural operations.  Commercial loans are made based on thefinancial strength and repayment ability of the borrower, as well as thecollateral securing the loans.  TheCompany targets owner-operated businesses as its customers and makes lendingdecisions based upon a cash flow analysis of the borrower as well as acollateral analysis.  Accountsreceivable loans and loans for inventory purchases are generally on a one-yearrenewable term and loans for equipment generally have a term of seven years orless.  The Company generally takes ablanket security interest in all assets of the borrower.  Equipment loans are generally limited to 75%of the cost or appraised value of the equipment.  Inventory loans are generally limited to 50% of the value of theinventory, and accounts receivable loans are generally limited to 75% of apredetermined eligible base.  TheCompany provides short-term credit for operating loans and intermediate termloans for farm product, livestock and machinery purchases and otheragricultural improvements.  Farm productloans have generally a one-year term and machinery and equipment and breedinglivestock loans generally have five to seven year terms.  Extension of credit is based upon theborrower’s ability to repay, as well as the existence of federal guarantees andcrop insurance coverage.  These loansare generally secured by a blanket lien on livestock, equipment, feed, hay,grain and growing crops.  Equipment andbreeding livestock loans are generally limited to 75% of appraised value.

 

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***Consumerand Other Lending***.  Loans classified as consumer and other loans include automobile,boat, student loans, home improvement and home equity loans, the latter twosecured principally through second mortgages. The Company generally takes a purchase money security interest incollateral for which it provides the original financing.  The terms of the loans typically range fromone to five years, depending upon the use of the proceeds, and generally rangefrom 75% to 90% of the value of the collateral.  The majority of these loans are installment loans with fixedinterest rates.

 

**Loan Origination and Processing**

 

Loanoriginations are derived from a number of sources.  Residential loan originations result from real estate brokerreferrals, direct solicitation by the Bank’s loan officers, present savers andborrowers, referrals from builders and attorneys, walk in customers and, insome instances, other lenders.  Residentialloan applications are underwritten and closed based upon standards whichgenerally meet secondary market guidelines. Consumer and commercial real estate loan originations emanate from manyof the same sources.  The average loanis less than $500,000.

 

The loanunderwriting procedures followed by the Bank conform to regulatoryspecifications and are designed to assess both the borrower’s ability to makeprincipal and interest payments and the value of any assets or property servingas collateral for the loan.  Generally,as part of the process, a loan officer meets with each applicant to obtain theappropriate employment and financial information as well as any other requiredloan information.  The bank then obtainsreports with respect to the borrower’s credit record, and orders, on real estateloans, and reviews an appraisal of any collateral for the loan (prepared forthe Bank through an independent appraiser).

 

Loan applicants are notified promptly of the decision of the bank.  Prior to closing any long-term loan, theborrower must provide proof of fire and casualty insurance on the propertyserving as collateral, and such insurance must be maintained during the fullterm of the loan.  Title insurance isrequired on loans collateralized by real property.

 

**SUPERVISION AND REGULATION**

 

# **General**

 

Financialinstitutions, their holding companies and their affiliates are extensivelyregulated under federal and state law. As a result, the growth and earnings performance of the Company may beaffected not only by management decisions and general economic conditions, butalso by the requirements of federal and state statutes and by the regulationsand policies of various bank regulatory authorities, including the OCC,Federal Reserve and the FDIC. Furthermore, taxation laws administered by the Internal Revenue Serviceand state taxing authorities and securities laws administered by the SEC andstate securities authorities have an impact on the business of the Company. Theeffect of these statutes, regulations and regulatory policies may be significant,and cannot be predicted with a high degree of certainty.

 

Federal andstate laws and regulations generally applicable to financial institutionsregulate, among other things, the scope of business, the kinds and amounts ofinvestments,

 

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reserve requirements, capitallevels relative to operations, the nature and amount of collateral for loans,the establishment of branches, mergers and consolidations and the payment ofdividends. This system of supervision and regulation establishes acomprehensive framework for the respective operations of the Company and itssubsidiaries and is intended primarily for the protection of the FDIC-insureddeposits and depositors of the Bank, rather than shareholders.

 

The following is a summary of the material elements of the regulatoryframework that applies to the Company and its subsidiaries.  It does not describe all of the statutes,regulations and regulatory policies that apply, nor does it restate all of therequirements of those statutes, regulations and regulatory policies that aredescribed. As such, the following is qualified in its entirety by reference toapplicable law.  Any change inapplicable statutes, regulations or regulatory policies may have a material effecton the business of the Company and its subsidiaries.

 

**Recent Regulatory Developments**

 

***National BankPreemption.*** On January 7, 2004, the OCC issued two final rules that clarify thefederal character of the national banking system.  The first rule provides that, except where made applicable byfederal law, state laws that obstruct, impair or condition national banks’ability to fully exercise their deposit-taking, lending and operational powersare not applicable to national banks. That rule further provides that the following types of state laws applyto national banks to the extent that they only incidentally affect the exerciseof national banks’ deposit-taking, lending and operational powers: contract,criminal, taxation, tort, zoning and laws relating to certain homestead rights,rights to collect debts, acquisitions and transfers of property and other lawsas determined to apply to national banks by the OCC.  The second rule affirms that, under federal law, with someexceptions, the OCC has exclusive visitorial authority (the power to inspect,examine, supervise and regulate) with respect to the content and conduct ofactivities authorized for national banks. These controversial rules give national banks, especially those thatoperate in multiple states, a significant competitive advantage overstate-chartered banks and are therefore likely to be challenged by individualsand organizations that represent the interests of individual states andstate-chartered banks.  Both the U.S.House Committee on Financial Services and the New York Attorney General havealready initiated such challenges.

 

***FACT Act. ***On December 4,2003, President Bush signed into law the Fair and Accurate Credit TransactionsAct of 2003 (the “FACT Act”), which contains numerous amendments to theFair Credit Reporting Act relating to matters including identity theft andprivacy.  Among its other provisions,the FACT Act requires financial institutions: (i) to establish an identitytheft prevention program; (ii) to enhance the accuracy and integrity ofinformation furnished to consumer reporting agencies; and (iii) to allowcustomers to prevent financial institution affiliates from using, for marketingsolicitation purposes, transaction and experience information about thecustomers received from the financial institution.  The FACT Act also requires the federal banking regulators,and certain other agencies, to promulgate regulations to implement itsprovisions.  The various provisions ofthe FACT Act contain different effective dates including March 31, 2004, forthose provisions of the FACT Act that do not require significant changes tobusiness procedures and December 1, 2004, for certain other provisions thatwill require significant business procedure changes.

 

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**The Company**

 

***General.**** *The Company, as the soleshareholder of the Bank, is a bank holding company.  As a bank holding company, the Company is registered with, and issubject to regulation by, the Federal Reserve under the Bank Holding CompanyAct of 1956, as amended (the “BHCA”). In accordance with Federal Reserve policy, the Company is expected toact as a source of financial strength to the Bank and to commit resources tosupport the Bank in circumstances where the Company might not otherwise doso.  Under the BHCA, the Company issubject to periodic examination by the Federal Reserve.  The Company is also required to file withthe Federal Reserve periodic reports of the Company’s operations and suchadditional information regarding the Company and its subsidiaries as theFederal Reserve may require.

 

***Acquisitions,Activities and Change in Control.***Theprimary purpose of a bank holding company is to control and manage banks.****TheBHCA generally requires the prior approval of the Federal Reserve for anymerger involving a bank holding company or any acquisition by a bank holdingcompany of another bank or bank holding company.  Subject to certain conditions (including deposit concentrationlimits established by the BHCA), the Federal Reserve may allow a bank holdingcompany to acquire banks located in any state of the United States. Inapproving interstate acquisitions, the Federal Reserve is required to giveeffect to applicable state law limitations on the aggregate amount of depositsthat may be held by the acquiring bank holding company and its insureddepository institution affiliates in the state in which the target bank islocated (provided that those limits do not discriminate against out-of-statedepository institutions or their holding companies) and state laws that requirethat the target bank have been in existence for a minimum period of time (notto exceed five years) before being acquired by an out-of-state bank holdingcompany.

 

The BHCA generally prohibits the Company fromacquiring direct or indirect ownership or control of more than 5% of the votingshares of any company that is not a bank and from engaging in any businessother than that of banking, managing and controlling banks or furnishingservices to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. Theprincipal exception allows bank holding companies to engage in, and to ownshares of companies engaged in, certain businesses found by the Federal Reserveto be “so closely related to banking ... as to be a proper incidentthereto.”  This authority would permitthe Company to engage in a variety of banking-related businesses, including theoperation of a thrift, consumer finance, equipment leasing, the operation of acomputer service bureau (including software development), and mortgage bankingand brokerage. The BHCA generally does not place territorial restrictions onthe domestic activities of non-bank subsidiaries of bank holding companies.

 

Additionally, bank holding companies thatmeet certain eligibility requirements prescribed by the BHCA and elect tooperate as financial holding companies may engage in, or own shares incompanies engaged in, a wider range of nonbanking activities, includingsecurities and insurance underwriting and sales, merchant banking and any otheractivity that the Federal Reserve, in consultation with the Secretary of theTreasury, determines by regulation or order is financial in nature, incidentalto any such financial activity or complementary to any such financial activityand does not pose a substantial risk to the safety or soundness of depositoryinstitutions or the financial system generally.  As of the date of this filing, the Company has neitherapplied for nor received approval to operate as a financial holding company.

 

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Federal lawalso prohibits any person or company from acquiring “control” of anFDIC-insured depository institution or its holding company without prior noticeto the appropriate federal bank regulator. “Control” is conclusively presumed to exist upon the acquisition of 25%or more of the outstanding voting securities of a bank or bank holding company,but may arise under certain circumstances at 10% ownership.

 

***CapitalRequirements.*** Bank holding companies are required to maintain minimum levels ofcapital in accordance with Federal Reserve capital adequacy guidelines.  If capital levels fall below the minimumrequired levels, a bank holding company, among other things, may be deniedapproval to acquire or establish additional banks or non-bank businesses.

 

The Federal Reserve’s capital guidelinesestablish the following minimum regulatory capital requirements for bankholding companies:  (i) a risk-basedrequirement expressed as a percentage of total assets weighted according torisk; and (ii) a leverage requirement expressed as a percentage of totalassets.  The risk-based requirementconsists of a minimum ratio of total capital to total risk-weighted assets of 8%and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%.  The leverage requirement consists of aminimum ratio of Tier 1 capital to total assets of 3% for the most highly ratedcompanies, with a minimum requirement of 4% for all others.  For purposes of these capital standards,Tier 1 capital consists primarily of permanent stockholders’ equity lessintangible assets (other than certain loan servicing rights and purchasedcredit card relationships). Total capital consists primarily of Tier 1 capitalplus certain other debt and equity instruments that do not qualify as Tier 1capital and a portion of the company’s allowance for loan and lease losses.

 

The risk-basedand leverage standards described above are minimum requirements. Higher capitallevels will be required if warranted by the particular circumstances or riskprofiles of individual banking organizations. For example, the FederalReserve’s capital guidelines contemplate that additional capital may berequired to take adequate account of, among other things, interest rate risk,or the risks posed by concentrations of credit, nontraditional activities orsecurities trading activities.  Further,any banking organization experiencing or anticipating significant growth wouldbe expected to maintain capital ratios, including tangible capital positions (*i.e.*,Tier 1 capital less all intangible assets), well above the minimum levels.  As of December 31, 2003, the Company hadregulatory capital in excess of the Federal Reserve’s minimum requirements.

 

***Dividend Payments.**** *The Company’s ability to paydividends to its shareholders may be affected by both general corporate lawconsiderations and policies of the Federal Reserve applicable to bank holdingcompanies*.*As a Delaware corporation, the Company is subject to the limitations of theDelaware General Corporation Law (the ”DGCL”). The DGCL allows the Companyto pay dividends only out of its surplus (as defined and computed in accordancewith the provisions of the DGCL) or if the Company has no such surplus, out ofits net profits for the fiscal year in which the dividend is declared and/orthe preceding fiscal year. Additionally, policies of the Federal Reservecaution that a bank holding company should not pay cash dividends that exceedits net income or that can only be funded in ways that weaken the bank holdingcompany’s financial health, such as by borrowing.  The Federal Reserve also possesses enforcement powers over bankholding companies and their non-bank subsidiaries to prevent or remedy actionsthat represent unsafe or unsound practices or violations of applicable statutesand regulations.  Among these powers isthe ability to proscribe the payment of dividends by banks and bank holdingcompanies.

 

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***Federal SecuritiesRegulation.*** The Company’s common stock is registered with the SEC under theSecurities Act of 1933, as amended, and the Securities Exchange Act of 1934, asamended (the ”Exchange Act”). Consequently, the Company is subject to the information, proxysolicitation, insider trading and other restrictions and requirements of theSEC under the Exchange Act.

 

**The Bank**

 

***General.*** The Bank is a national bank, chartered by the OCCunder the National Bank Act. The deposit accounts of the Bank are insured by the FDIC’s BIF, buta portion of its deposits are deemed to be insured by the FDIC’s SAIF.  The Bank is a member of the Federal ReserveSystem and the Federal Home Loan Bank System. As a national bank, the Bank is subject to the examination, supervision,reporting and enforcement requirements of the OCC, the chartering authority fornational banks. The FDIC, as administrator of the BIF and the SAIF, also hasregulatory authority over the Bank.

 

***DepositInsurance.* **Asan FDIC-insured institution, the Bank is required to pay deposit insurancepremium assessments to the FDIC.  TheFDIC has adopted a risk-based assessment system under which all insureddepository institutions are placed into one of nine categories and assessedinsurance premiums based upon their respective levels of capital and results ofsupervisory evaluations.  Institutionsclassified as well-capitalized (as defined by the FDIC) and considered healthypay the lowest premium while institutions that are less than adequatelycapitalized (as defined by the FDIC) and considered of substantial supervisoryconcern pay the highest premium.  Riskclassification of all insured institutions is made by the FDIC for eachsemi-annual assessment period.

 

During the year ended December 31, 2003, bothBIF and SAIF assessments ranged from 0% of deposits to 0.27% of deposits.  For the semi-annual assessment periodbeginning January 1, 2004, both BIF and SAIF assessment rates willcontinue to range from 0% of deposits to 0.27% of deposits.

 

***FICO Assessments.***  Since1987, a portion of the deposit insurance assessments paid by SAIF members hasbeen used to cover interest payments due on the outstanding obligations of theFinancing Corporation (“FICO”). FICO was created in 1987 to finance therecapitalization of the Federal Savings and Loan Insurance Corporation, theSAIF’s predecessor insurance fund. As a result of federal legislation enactedin 1996, beginning as of January 1, 1997, both SAIF members and BIFmembers became subject to assessments to cover the interest payments onoutstanding FICO obligations until the final maturity of such obligations in2019.  These FICO assessments are inaddition to amounts assessed by the FDIC for deposit insurance. During the yearended December 31, 2003, the FICO assessment rate for BIF and SAIF memberswas approximately 0.02% of deposits.

 

***SupervisoryAssessments.***  National banks are required to paysupervisory assessments to the OCC to fund the operations of the OCC.  The amount of the assessment is calculatedusing a formula that takes into account the bank’s size and its supervisorycondition (as determined by the composite rating assigned to the bank as aresult of its most recent OCC examination).** **Duringthe

 

10

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year endedDecember 31, 2003, the Bank paid supervisory assessments to the OCC totaling$90,000.

 

***CapitalRequirements.* **Banksare generally required to maintain capital levels in excess of otherbusinesses. The OCC has established the following minimum capital standards fornational banks, such as the Bank: (i) a leverage requirement consisting of aminimum ratio of Tier 1 capital to total assets of 3% for the most highly-ratedbanks with a minimum requirement of at least 4% for all others; and (ii) arisk-based capital requirement consisting of a minimum ratio of total capitalto total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital tototal risk-weighted assets of 4%.  Forpurposes of these capital standards, the components of Tier 1 capital and totalcapital are the same as those for bank holding companies discussed above.

 

The capital requirements described above areminimum requirements.  Higher capitallevels will be required if warranted by the particular circumstances or riskprofiles of individual institutions. For example, regulations of the OCC provide that additional capital maybe required to take adequate account of, among other things, interest rate riskor the risks posed by concentrations of credit, nontraditional activities orsecurities trading activities.

 

Further, federal law and regulations provide various incentives forfinancial institutions to maintain regulatory capital at levels in excess ofminimum regulatory requirements. For example, a financial institution that is“well-capitalized” may qualify for exemptions from prior notice or applicationrequirements otherwise applicable to certain types of activities and mayqualify for expedited processing of other required notices or applications.Additionally, one of the criteria that determines a bank holding company’seligibility to operate as a financial holding company is a requirement that allof its financial institution subsidiaries be “well-capitalized.”  Under the regulations of the OCC, in order tobe “well-capitalized” a financial institution must maintain a ratio of totalcapital to total risk-weighted assets of 10% or greater, a ratio of Tier 1capital to total risk-weighted assets of 6% or greater and a ratio of Tier 1capital to total assets of 5% or greater.

 

Federal lawalso provides the federal banking regulators with broad power to take promptcorrective action to resolve the problems of undercapitalizedinstitutions.  The extent of theregulators’ powers depends on whether the institution in question is“adequately capitalized,” “undercapitalized,” “significantly undercapitalized”or “critically undercapitalized,” in each case as defined by regulation.  Depending upon the capital category to whichan institution is assigned, the regulators’ corrective powers include:  (i) requiring the institution to submit acapital restoration plan; (ii) limiting the institution’s asset growth andrestricting its activities; (iii) requiring the institution to issue additionalcapital stock (including additional voting stock) or to be acquired; (iv)restricting transactions between the institution and its affiliates; (v)restricting the interest rate the institution may pay on deposits; (vi)ordering a new election of directors of the institution; (vii) requiring thatsenior executive officers or directors be dismissed; (viii) prohibiting theinstitution from accepting deposits from correspondent banks; (ix) requiringthe institution to divest certain subsidiaries; (x) prohibiting the payment ofprincipal or interest on subordinated debt; and (xi) ultimately, appointing areceiver for the institution.

 

As of December 31, 2003: (i) the Bank was not subject to a directivefrom the OCC to increase its capital to anamount in excess of the minimum regulatory capital requirements; (ii)

 

11

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the Bank exceeded its minimumregulatory capital requirements under OCC capital adequacy guidelines; and(iii) the Bank was “well-capitalized,” as defined by OCC regulations.

 

***Dividends.*** The primary source of funds for the Company isdividends from the Bank. Under the National Bank Act, a national bank may paydividends out of its undivided profits in such amounts and at such times as thebank’s board of directors deems prudent. Without prior OCC approval, however, a national bank may not paydividends in any calendar year that, in the aggregate, exceed the bank’syear-to-date net income plus the bank’s retained net income for the twopreceding years.

 

The payment of dividends by any financialinstitution is affected by the requirement to maintain adequate capitalpursuant to applicable capital adequacy guidelines and regulations, and afinancial institution generally is prohibited from paying any dividends if,following payment thereof, the institution would be undercapitalized.  As described above, the Bank exceeded itsminimum capital requirements under applicable guidelines as of December 31,2003.  Further, the Bank may not paydividends in an amount which would reduce its capital below the amount requiredfor the liquidation account established by the Bank in connection with itsconversion from the mutual to the stock form of ownership in 1993. As ofDecember 31, 2003, approximately $1.2 million was available to be paid as dividendsby the Bank.  Notwithstanding theavailability of funds for dividends, however, the OCC may prohibit the paymentof any dividends by the Bank if the OCC determines such payment wouldconstitute an unsafe or unsound practice.

 

***InsiderTransactions.* **TheBank is subject to certain restrictions imposed by federal law on extensions ofcredit to the Company, on investments in the stock or other securities of theCompany and the acceptance of the stock or other securities of the Company ascollateral for loans made by the Bank. Certain limitations and reportingrequirements are also placed on extensions of credit by the Bank to itsdirectors and officers, to the directors and officers of the Company, toprincipal stockholders of the Company, and to “related interests” of suchdirectors, officers and principal stockholders.  In addition, federal law and regulations may affect the termsupon which any person who is a director or officer of the Company or the Bankor a principal stockholder of the Company may obtain credit from banks withwhich the Bank maintains correspondent relationships.

 

***Safetyand Soundness Standards.***  The federal banking agencieshave adopted guidelines that establish operational and managerial standards topromote the safety and soundness of federally insured depositoryinstitutions.  The guidelines set forthstandards for internal controls, information systems, internal audit systems,loan documentation, credit underwriting, interest rate exposure, asset growth,compensation, fees and benefits, asset quality and earnings.

 

In general, the safety and soundnessguidelines prescribe the goals to be achieved in each area, and eachinstitution is responsible for establishing its own procedures to achieve thosegoals.  If an institution fails to complywith any of the standards set forth in the guidelines, the institution’sprimary federal regulator may require the institution to submit a plan forachieving and maintaining compliance. If an institution fails to submit anacceptable compliance plan, or fails in any material respect to implement acompliance plan that has been accepted by its primary federal regulator, theregulator is required to issue an order directing the institution to cure thedeficiency. Until the deficiency cited in the regulator’s order is cured, theregulator may restrict the institution’s rate of growth, require theinstitution to increase its capital, restrict the rates the institution pays ondeposits or require the institution to take any action the regulator deems appropriateunder the

 

12

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circumstances.Noncompliance with the standards established by the safety and soundnessguidelines may also constitute grounds for other enforcement action by thefederal banking regulators, including cease and desist orders and civil moneypenalty assessments.

 

***BranchingAuthority.***National banks headquartered in Kansas, such as the Bank, have the samebranching rights in Kansas as banks chartered under Kansas law, subject to OCCapproval.  Kansas law grantsKansas-chartered banks the authority to establish branches anywhere in theState of Kansas, subject to receipt of all required regulatory approvals.

 

Federal law permits state and national banks to merge with banks inother states subject to: (i) regulatory approval; (ii) federal and statedeposit concentration limits; and (iii) state law limitations requiring themerging bank to have been in existence for a minimum period of time (not toexceed five years) prior to the merger. The establishment of new interstate branches or the acquisition ofindividual branches of a bank in another state (rather than the acquisition ofan out-of-state bank in its entirety) is permitted only in those few statesthat authorize such expansion.

 

***FinancialSubsidiaries. ***UnderFederal law and OCC regulations, national banks are authorized to engage,through “financial subsidiaries,” in any activity that is permissible for afinancial holding company and any activity that the Secretary of the Treasury,in consultation with the Federal Reserve, determines is financial in nature orincidental to any such financial activity, except (i) insurance underwriting,(ii) real estate development or real estate investment activities (unlessotherwise permitted by law), (iii) insurance company portfolio investments and(iv) merchant banking.  The authority ofa national bank to invest in a financial subsidiary is subject to a number ofconditions, including, among other things, requirements that the bank must bewell-managed and well-capitalized (after deducting from capital the bank’soutstanding investments in financial subsidiaries).  The Bank has neither applied for nor received approval toestablish any financial subsidiaries.

 

***FederalReserve System.***  Federal Reserve regulations, aspresently in effect, require depository institutions to maintain non-interestearning reserves against their transaction accounts (primarily NOW and regularchecking accounts), as follows:  fortransaction accounts aggregating $45.4 million or less, the reserve requirementis 3% of total transaction accounts; and for transaction accounts aggregatingin excess of $45.4 million, the reserve requirement is $1.164 million plus 10%of the aggregate amount of total transaction accounts in excess of$45.4 million.  The first $6.6million of otherwise reservable balances are exempted from the reserverequirements.  These reserverequirements are subject to annual adjustment by the Federal Reserve.  The Bankis in compliance with the foregoing requirements.

 

**STATISTICAL DATA**

 

The statistical data required by Guide 3 of the Guides for Preparationand Filing of Reports and Registration Statements under the Securities ExchangeAct of 1934 is set forth in the following pages.  This data should be read in conjunction with the consolidatedfinancial statements, related notes and “Management’s Discussion and Analysisof Financial Condition and Results of Operations” as set forth in the Company’s2003 Annual Report to Stockholders (attached hereto as Exhibit 13.1).  All dollars in the tables are expressed inthousands.

 

13

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**I.****                                         Distributionof Assets, Liabilities, and Stockholders’ Equity; Interest Rates and InterestDifferentials**

 

The averagebalance sheets are incorporated by reference from the Company’s 2003 AnnualReport to Stockholders (attached as Exhibit 13.1).  The following table describes the extent to which changes ininterest income and interest expense for major components of interest-earningassets and interest-bearing liabilities affected the Company’s interest incomeand expense during 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 ofthe previous columns).  The net changesattributable to the combined effect of volume and rate, which cannot besegregated, have been allocated proportionately to the change due to volume andthe change due to rate.

 
|                   |   | **Years Ended  December 2003 vs December 2002  Increase/(Decrease) Attributable to** |   | **Years Ended  December 2002 vs September 2001  Increase/(Decrease) Attributable to** |   |
|------------------------|--------|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|
|                   |   |                                                                                 |   |
|                   |   |                                                                                 |   |
|                   |   | **Volume**                                                                           |   | **Rate**                                                                              |   | **Net** |   | **Volume** |   | **Rate** |   | **Net** |   |
|                   |   | **(Dollars in thousands)**                                                           |   | **(Dollars in thousands)**                                                            |   |
| Interest  income:      |   |                                                                                 |   |                                                                                  |   |   |   |   |   |   |   |   |   |
| Investment  securities |   | $                                                                                    | 189    |                                                                                  | $      | (127 | ) | $ | 62 |   | $ | 132 |   | $ | (68 | ) | $ | 64 |   |
| Loans                  |   | (1,094                                                                               | )      | (1,253                                                                                | )      | (2,347 | ) | 4,544 |   | (1,485 | ) | 3,059 |   |
| Total                  |   | (905                                                                                 | )      | (1,380                                                                                | )      | (2,285 | ) | 4,676 |   | (1,553 | ) | 3,123 |   |
| Interest  expense:     |   |                                                                                 |   |                                                                                  |   |   |   |   |   |   |   |   |   |
| Deposits               |   | $                                                                                    | 278    |                                                                                  | $      | (1,605 | ) | $ | (1,327 | ) | $ | (24,840 | ) | $ | 22,832 |   | $ | (2,008 | ) |
| Other  borrowings      |   | (13                                                                                  | )      | (116                                                                                  | )      | (129 | ) | (408 | ) | (382 | ) | (790 | ) |
| Total                  |   | 265                                                                                  |   | (1,721                                                                                | )      | (1,456 | ) | (25,248 | ) | 22,450 |   | (2,798 | ) |
| Net interest  income   |   | $                                                                                    | (1,170 | )                                                                                     | $      | 341 |   | $ | (829 | ) | $ | 29,924 |   | $ | (24,003 | ) | $ | 5,921 |   |

 

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|                   |   | **Three Months Ended  December 2001 vs December 2000  Increase/(Decrease) Attributable to** |   |
|------------------------|--------|---------------------------------------------------------------------------------------------|--------|
|                   |   |                                                                                        |
|                   |   |                                                                                        |
|                   |   | **Volume**                                                                                  |   | **Rate** |   | **Net** |   |
|                   |   | **(Dollars in thousands)**                                                                  |   |
| Interest  income:      |   |                                                                                        |   |   |   |   |   |
| Investment  securities |   | $                                                                                           | (316   | ) | $ | 175 |   | $ | (141 | ) |
| Loans                  |   | 1,209                                                                                       |   | (329 | ) | 880 |   |
| Total                  |   | 893                                                                                         |   | (154 | ) | 739 |   |
| Interest  expense:     |   |                                                                                        |   |   |   |   |   |
| Deposits               |   | $                                                                                           | 33     |   | $ | (19 | ) | $ | 14 |   |
| Other  borrowings      |   | (169                                                                                        | )      | (248 | ) | (417 | ) |
| Total                  |   | (136                                                                                        | )      | (267 | ) | (403 | ) |
| Net interest  income   |   | $                                                                                           | (1,029 | ) | $ | 113 |   | $ | (1,142 | ) |

 

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**II.  Investment Portfolio**

 

***InvestmentSecurities****.* The following table sets forth the carrying value of the Company’sinvestment securities at the dates indicated. None of the investment securities held as of December 31, 2003 wasissued by an individual issuer in excess of 10% of the Company’s stockholders’equity, excluding the securities of U.S. government and federal agencyobligations.

 
|                                      |   | **At  December 31,**        |   | **At  September 30,** |   |
|-------------------------------------------|--------|-----------------------------|--------|-----------------------|--------|
|                                      |   | **2003**                    |   | **2002**              |   | **2001** |   | **2001** |   |
|                                      |   | **(Dollars  in thousands)** |   |
|                                      |   |                        |   |                  |   |   |   |   |   |
| Investment Securities Available-for-Sale: |   |                        |   |                  |   |   |   |   |   |
| U.S. Agency Securities                    |   | $                           | 32,616 |                  | $      | 12,656 |   | $ | 12,768 |   | $ | 8,508 |   |
| Municipal Obligations                     |   | 14,020                      |   | 13,179                |   | 11,948 |   | 1,019 |   |
| Mortgage-backed securities                |   | 46,563                      |   | 58,107                |   | 44,773 |   | 15,892 |   |
| FHLB Stock                                |   | 2,544                       |   | 2,521                 |   | 3,425 |   | 3,598 |   |
| Common Stock                              |   | 662                         |   | 1,475                 |   | 1,455 |   | 1,444 |   |
| FRB Stock                                 |   | 805                         |   | 805                   |   | 288 |   | — |   |
| Corporate Notes and Bonds                 |   | 52                          |   | 101                   |   | 204 |   | 198 |   |
| Other investments                         |   | 2,483                       |   | 452                   |   | 450 |   | 230 |   |
| Total Investments Available -for-Sale     |   | $                           | 99,746 |                  | $      | 89,296 |   | $ | 75,311 |   | $ | 30,889 |   |

 

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The following table sets forth certaininformation regarding the carrying values, weighted average yields, andmaturities of the Company’s investment securities portfolio as of December 31,2003.  Yields on tax-exempt obligationshave not been computed on a tax equivalent basis.  The table includes scheduled principal payments and estimatedprepayments.

 
|                                   |   | **As of December 31, 2003** |   |
|----------------------------------------|--------|-----------------------------|--------|
|                                   |   | **One Year  or Less**       |   | **One to  Five Years** |   | **Five to  Ten Years** |   | **More than  Ten Years** |   | **Total  Investment  Securities** |   |
|                                   |   | **Carrying  Value**         |   | **Average  Yield** |   | **Carrying  Value** |   | **Average  Yield** |   | **Carrying  Value** |   | **Average  Yield** |   | **Carrying  Value** |   | **Average  Yield** |   | **Carrying  Value** |   | **Average  Yield** |   |
|                                   |   | **(Dollars  in thousands)** |   |
|                                   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment Securities:                 |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government and agency obligations |   | $                           | 13,225 |   | 2.78 | % | $ | 19,391 |   | 2.45 | % | $ | — |   | — | % | $ | — |   | — | % | $ | 32,616 |   | 2.58 | % |
| Municipal obligations                  |   | 3,509                       |   | 3.48 |   | 9,210 |   | 3.92 |   | 1,301 |   | 3.87 |   | — |   | — |   | 14,020 |   | 3.88 |   |
| Mortgage-backed securities             |   | 8,760                       |   | 3.41 |   | 34,382 |   | 3.58 |   | 2,800 |   | 4.70 |   | 621 |   | 4.53 |   | 46,563 |   | 3.63 |   |
| Corporate bonds                        |   | 52                          |   | 11.00 |   | — |   | — |   | — |   | — |   | — |   | — |   | 52 |   | 11.00 |   |
| Total                                  |   | $                           | 25,546 |   | 3.11 | % | $ | 62,983 |   | 3.30 | % | $ | 4,101 |   | 4.42 | % | $ | 621 |   | 4.53 | % | $ | 93,251 |   | 3.30 | % |

 

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**III.****                                 LoanPortfolio**

***Loan PortfolioComposition****.* The following table sets forth the composition of the loan portfolio bytype of loan at the dates indicated.

 
|                                 |   | **December  31,**           |    | **September  30,**    |   |
|--------------------------------------|--------|-----------------------------|---------|-----------------------|--------|
|                                 |   | **2003**                    |    | **2002**              |   | **2001** |   | **2001** |   | **2000** |   | **1999** |   |
|                                 |   | **Amount**                  |    | **Percent  of Total** |   | **Amount** |   | **Percent  of Total** |   | **Amount** |   | **Percent  of Total** |   | **Amount** |   | **Percent  of Total** |   | **Amount** |   | **Percent  of Total** |   | **Amount** |   | **Percent  of Total** |   |
|                                 |   | **(Dollars  in thousands)** |    |
| Real estate loans:                   |   |                        |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential one-to-four family       |   | $                           | 82,828  |                  | 38.5   | % | $ | 106,341 |   | 46.4 | % | $ | 135,179 |   | 56.1 | % | $ | 118,087 |   | 81.7 | % | $ | 166,772 |   | 87.1 | % | $ | 148,329 |   | 83.4 | % |
| Commercial                           |   | 65,729                      |    | 30.6                  |   | 62,207 |   | 27.2 |   | 48,818 |   | 20.3 |   | 10,084 |   | 7.0 |   | 9,331 |   | 4.9 |   | 9,050 |   | 5.1 |   |
| Construction                         |   | 9,171                       |    | 4.3                   |   | 8,969 |   | 3.9 |   | 10,799 |   | 4.5 |   | 3,248 |   | 2.2 |   | 858 |   | 0.4 |   | 1,848 |   | 1.0 |   |
| Commercial loans                     |   | 50,054                      |    | 23.3                  |   | 41,809 |   | 18.2 |   | 33,077 |   | 13.7 |   | 7,604 |   | 5.3 |   | 7,034 |   | 3.7 |   | 6,531 |   | 3.7 |   |
| Consumer loans                       |   | 9,567                       |    | 4.4                   |   | 12,810 |   | 5.6 |   | 15,979 |   | 6.6 |   | 6,926 |   | 4.8 |   | 9,050 |   | 4.7 |   | 13,579 |   | 7.6 |   |
| Gross loans                          |   | 217,349                     |    | 101.1                 |   | 232,136 |   | 101.3 |   | 243,852 |   | 101.2 |   | 145,949 |   | 101.0 |   | 193,045 |   | 100.8 |   | 179,337 |   | 100.8 |   |
|                                 |   |                        |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                |   |                        |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred fees & loans in process |   | 3                           |    | 0.0                   |   | 459 |   | 0.2 |   | 233 |   | 0.1 |   | 52 |   | 0.0 |   | 154 |   | 0.1 |   | 179 |   | 0.1 |   |
| Allowance for loan losses            |   | 2,316                       |    | 1.1                   |   | 2,565 |   | 1.1 |   | 2,640 |   | 1.1 |   | 1,424 |   | 1.0 |   | 1,377 |   | 0.7 |   | 1,318 |   | 0.7 |   |
| Total loans                          |   | $                           | 215,030 |                  | 100.0  | % | $ | 229,112 |   | 100.0 | % | $ | 240,979 |   | 100.0 | % | $ | 144,473 |   | 100.0 | % | $ | 191,514 |   | 100.0 |   | $ | 177,840 |   | 100.0 | % |

 

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(1)                                  Includes loans heldfor sale.

 

18

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The followingtable sets forth the contractual maturities of loans at December 31, 2003.  The table does not include unscheduledprepayments.

 
|                                     |   | **Less than  1 year**      |   | **2-5 years** |   | **Over  5 years** |   | **Total** |    |
|------------------------------------------|--------|----------------------------|--------|---------------|--------|-------------------|--------|-----------|---------|
|                                     |   | **(Dollars in thousands)** |   |
| Real estate  loans:                      |   |                       |   |          |   |              |   |      |    |
| Residential  one-to-four family          |   | $                          | 12,138 |          | $      | 37,941            |   | $         | 32,749  |   | $ | 82,828 |   |
| Commercial                               |   | 11,810                     |   | 20,776        |   | 33,143            |   | 65,729    |    |
| Construction                             |   | 8,507                      |   | 189           |   | 475               |   | 9,171     |    |
| Commercial                               |   | 31,548                     |   | 17,214        |   | 1,292             |   | 50,054    |    |
| Consumer                                 |   | 4,661                      |   | 4,641         |   | 265               |   | 9,567     |    |
| Gross loans                              |   | $                          | 68,664 |          | $      | 80,761            |   | $         | 67,924  |   | $ | 217,349 |   |
| Deferred loan  fees and loans in process |   |                       |   |          |   |              |   | 3         |    |
| Allowance for  loan losses               |   |                       |   |          |   |              |   | 2,316     |    |
| Loans, net                               |   |                       |   |          |   |              |   | $         | 215,030 |   |

 

The following table sets forth, at December 31, 2003, the dollar amountof all loans due after December 31, 2004 and whether such loans had fixedinterest rates or adjustable interest rates:

 
|                            |   | **Fixed**                  |   | **Adjustable** |   | **Total** |   |
|---------------------------------|--------|----------------------------|--------|----------------|--------|-----------|--------|
|                            |   | **(Dollars in thousands)** |   |
| Real estate  loans:             |   |                       |   |           |   |      |   |
| Residential  one-to-four family |   | $                          | 28,561 |           | $      | 42,129    |   | $ | 70,690 |   |
| Commercial                      |   | 8,378                      |   | 45,541         |   | 53,919    |   |
| Construction                    |   | 50                         |   | 614            |   | 664       |   |
| Commercial                      |   | 8,049                      |   | 10,457         |   | 18,506    |   |
| Consumer                        |   | 4,365                      |   | 541            |   | 4,906     |   |
| Gross loans                     |   | $                          | 49,403 |           | $      | 99,282    |   | $ | 148,685 |   |

 

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***Nonperforming Assets****.*The following table sets forth information with respect to nonperforming assets,including non-accrual loans and real estate acquired through foreclosure or bydeed in lieu of foreclosure (“real estate owned”).  Under the original terms of the Company’s non-accrual loans atDecember 31, 2003, interest earned on such loans for the year period endedDecember 31, 2003 would not have been significantly different than reported.

 
|                                               |   | **At December 31,**        |   | **At September 30,** |   |
|----------------------------------------------------|--------|----------------------------|--------|----------------------|--------|
|                                               |   | **2003**                   |   | **2002**             |   | **2001** |   | **2001** |   | **2000** |   | **1999** |   |
|                                               |   | **(Dollars in thousands)** |   |
| Total non-accrual loans                            |   | $                          | 1,205  |                 | $      | 925 |   | $ | 1,033 |   | $ | 641 |   | $ | 505 |   | $ | 313 |   |
| Accruing loans over 90 days  past due              |   | —                     |   | —               |   | 148 |   | 145 |   | 634 |   | 180 |   |
| Real estate owned (“REO”)                |   | 281                        |   | 402                  |   | 257 |   | 233 |   | 171 |   | 147 |   |
| Total nonperforming assets                         |   | $                          | 1,486  |                 | $      | 1,327 |   | $ | 1,438 |   | $ | 1,019 |   | $ | 1,310 |   | $ | 640 |   |
| Total nonperforming loans to  total loans, net     |   | 0.6                        | %      | 0.4                  | %      | 0.4 | % | 0.5 | % | 0.6 | % | 0.3 | % |
| Total nonperforming assets  to total assets        |   | 0.4                        | %      | 0.4                  | %      | 0.4 | % | 0.5 | % | 0.5 | % | 0.3 | % |
| Allowance for loanlosses to non-  performing loans |   | 192.2                      | %      | 277.3                | %      | 223.5 | % | 181.2 | % | 120.9 | % | 267.3 | % |

 

20

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**IV.****                    Summaryof Loan Loss Experience**

 

The following table sets forth informationwith respect to the Company’s allowance for loan losses at the dates indicated:

 
|                                                                 |   | **At  December 31,**        |    | **At  September 30,** |   |
|----------------------------------------------------------------------|--------|-----------------------------|---------|-----------------------|--------|
|                                                                 |   | **2003**                    |    | **2002**              |   | **2001** |   | **2001** |   | **2000** |   | **1999** |   |
|                                                                 |   | **(Dollars  in thousands)** |    |
|                                                                 |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Total loans outstanding                                              |   | $                           | 215,030 |                  | $      | 229,112 |   | $ | 240,979 |   | $ | 144,473 |   | $ | 191,514 |   | $ | 177,840 |   |
|                                                                 |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Average loans outstanding                                            |   | $                           | 217,327 |                  | $      | 233,311 |   | $ | 245,669 |   | $ | 164,165 |   | $ | 184,269 |   | $ | 176,318 |   |
|                                                                 |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Allowance balances  (at beginning of period)                         |   | 2,565                       |    | 2,640                 |   | 1,424 |   | 1,377 |   | 1,318 |   | 1,137 |   |
| Provision (credit):                                                  |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Real estate                                                          |   | —                      |    | —                |   | — |   | — |   | — |   | — |   |
| Commercial and consumer                                              |   | 240                         |    | 182                   |   | 33 |   | 120 |   | 267 |   | 785 |   |
|                                                                 |   | 240                         |    | 182                   |   | 33 |   | 120 |   | 267 |   | 785 |   |
| Allowance of merged bank:                                            |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Real estate                                                          |   | —                      |    | —                |   | 483 |   | — |   | — |   | — |   |
| Commercial and consumer...                                        |   | —                      |    | —                |   | 755 |   | — |   | — |   | — |   |
|                                                                 |   | —                      |    | —                |   | 1,238 |   | — |   | — |   | — |   |
| Charge-offs:                                                         |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Real estate                                                          |   | (30                         | )       | (17                   | )      | (15 | ) | (11 | ) | (21 | ) | — |   |
| Commercial and consumer                                              |   | (524                        | )       | (302                  | )      | (49 | ) | (149 | ) | (331 | ) | (658 | ) |
|                                                                 |   | (554                        | )       | (319                  | )      | (64 | ) | (160 | ) | (352 | ) | (658 | ) |
| Recoveries:                                                          |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Real estate                                                          |   | —                      |    | 30                    |   | — |   | 9 |   | — |   | — |   |
| Commercial and consumer                                              |   | 65                          |    | 32                    |   | 9 |   | 78 |   | 144 |   | 54 |   |
|                                                                 |   | 65                          |    | 62                    |   | 9 |   | 87 |   | 144 |   | 54 |   |
| Net (charge-offs) recoveries                                         |   | (489                        | )       | (257                  | )      | (55 | ) | (73 | ) | (208 | ) | (604 | ) |
|                                                                 |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Allowance balance  (at end of period)                                |   | $                           | 2,316   |                  | $      | 2,565 |   | $ | 2,640 |   | $ | 1,424 |   | $ | 1,377 |   | $ | 1,318 |   |
|                                                                 |   |                        |    |                  |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses as a percent of  total loans outstanding   |   | 1.08                        | %       | 1.12                  | %      | 1.10 | % | 0.99 | % | 0.72 | % | 0.74 | % |
| Net loans charged off as a percent of  average loans outstanding (1) |   | 0.23                        | %       | 0.11                  | %      | 0.09 | % | 0.04 | % | 0.11 | % | 0.34 | % |

 

----

(1)                Information forthe three months ended December 31, 2001 is annualized.

 

21

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The distribution of the Company’s allowance for losses on loans at thedates indicated and the percent of loans in each category to total loans issummarized in the following table.  Thisallocation reflects management’s judgment as to risks inherent in the types ofloans indicated, but the general allowance included in the table are not restrictedand are available to absorb all loan losses. The amount allocated in the following table to any category should notbe interpreted as an indication of expected actual charge-offs in thatcategory.

 
|                    |   | **At  December 31,**        |   | **At  September 30,** |   |
|-------------------------|--------|-----------------------------|--------|-----------------------|--------|
|                    |   | **2003**                    |   | **2002**              |   | **2001** |   | **2001** |   | **2000** |   | **1999** |   |
|                    |   | **(Dollars in  thousands)** |   |
|                    |   | **Amount**                  |   | **%**                 |   | **Amount** |   | **%** |   | **Amount** |   | **%** |   | **Amount** |   | **%** |   | **Amount** |   | **%** |   | **Amount** |   | **%** |   |
| Real estate             |   | $                           | 910    |                  | 72.6   | % | $ | 1,026 |   | 76.5 | % | $ | 1,188 |   | 79.9 | % | $ | 789 |   | 90.1 | % | $ | 771 |   | 91.7 | % | $ | 759 |   | 88.8 | % |
| Commercial and consumer |   | 1,406                       |   | 27.4                  |   | 1,539 |   | 23.5 |   | 1,452 |   | 20.1 |   | 635 |   | 9.9 |   | 606 |   | 8.3 |   | 559 |   | 11.2 |   |
| Total                   |   | $                           | 2,316  |                  | 100.0  | % | $ | 2,565 |   | 100.0 | % | $ | 2,640 |   | 100.0 | % | $ | 1,424 |   | 100.0 | % | $ | 1,377 |   | 100.0 | % | $ | 1,318 |   | 100.0 | % |

 

22

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**V.****                                    Deposits**

 

As of December 31, 2003, the aggregate amount outstanding of jumbocertificates of deposit (amounts of $100,000 or more) was $28.3 million.  The following table presents the maturitiesof these time certificates of deposit at December 31, 2003:

 

(Dollarsin thousands)

 

| 3 months or  less                |   | $     | 11,861 |   |
|----------------------------------|--------|-------|--------|--------|
| Over 3 months  through 6 months  |   | 8,406 |   |
| Over 6 months  through 12 months |   | 4,343 |   |
| Over 12 months                   |   | 3,684 |   |
| Total                            |   | $     | 28,294 |   |

 

**VI.****                                Returnon Equity and Assets**

 
|                          |   | **At or for the****years ended  December 31,** |   | **At or for the****three months ended****December 31,** |   | **At or for  the  years ended  September 30,** |   |
|-------------------------------|--------|------------------------------------------------|--------|---------------------------------------------------------|--------|------------------------------------------------|--------|
|                          |   | **2003**                                       |   | **2002**                                                |   | **2001**                                       |   | **2001** |   | **2000** |   | **1999** |   |
|                          |   |                                           |   |                                                    |   |                                           |   |   |   |   |   |   |   |
| Return on  average assets (1) |   | 1.46                                           | %      | 1.35                                                    | %      | (0.72                                          | )%     | 1.13 | % | .97 | % | 1.01 | % |
| Return on  average equity (1) |   | 11.53                                          |   | 11.31                                                   |   | (6.29                                          | )      | 10.17 |   | 10.23 |   | 10.09 |   |
| Equity to  total assets       |   | 12.74                                          |   | 12.03                                                   |   | 11.50                                          |   | 13.03 |   | 9.44 |   | 9.18 |   |
| Dividend  payout ratio        |   | 27.63                                          |   | 27.57                                                   |   | NM                                             |   | 25.38 |   | 27.31 |   | 34.18 |   |

 

----

NM – not meaningful

(1) Information for the three months ended December 31, 2001 isannualized.

 

23

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**ITEM 2.****                                           PROPERTIES**

 

The Company owns its main office in Manhattan and seven branch officesand leases 4 branch offices.  TheCompany also leases a parking lot for one of the branch offices owned.

 

**ITEM 3.****                                           LEGALPROCEEDINGS**

 

There are no pending legal proceedings to which the Company or the Bankis a party, other than ordinary routine litigation incidental to the Bank’sbusiness.  While the ultimate outcome ofcurrent legal proceedings cannot be predicted with certainty, it is the opinionof management that the resolution of these legal actions should not have amaterial effect on the Company’s consolidated financial position or results ofoperations.

 

**ITEM 4.****                                           SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

No matter was submitted to a vote of security holders during thequarter ended December 31, 2003.

 

**PARTII.**

 

**ITEM 5.****                                           MARKETFOR THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS**

 

The Company incorporates by reference the information called for by Item5 of this Form 10-K from the section captioned “Stock Price Information” of theCompany’s 2003 Annual Report to Stockholders for the year ended December 31,2003 (attached as Exhibit 13.1).

 

**ITEM 6.****                                           SELECTEDFINANCIAL DATA**

 

The Company incorporates by reference the information called for byItem 6 of this Form 10-K from the sections entitled “Selected Financial andOther Data” and “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” of the Company’s 2003 Annual Report to Stockholdersfor the year ended December 31, 2003 (attached as Exhibit 13.1).

 

**ITEM 7.****                                           MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The Company incorporates by reference the information called for byItem 7 of this Form 10-K from the section entitled “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” of the Company’s2003 Annual Report to Stockholders for the year ended December 31, 2003(attached as Exhibit 13.1).

 

**ITEM 7A.****                                  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The Company incorporates by reference the information called for byItem 7A of this Form 10-K from the section entitled “Quantitative DisclosuresAbout Market Risk” of the Company’s 2003 Annual Report to stockholders for theyear ended December 31, 2003 (attached as Exhibit 13.1).

 

24

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**ITEM 8.****                                           FINANCIALSTATEMENTS AND SUPPLEMENTAL DATA**

 

The Company incorporates by reference the information called for byItem 8 of this Form 10-K from the Financial Statements set forth in theCompany’s 2003 Annual Report to Stockholders for the year ended December 31,2003 (attached as Exhibit 13.1).

 

**ITEM 9.****                                           CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

None.

 

**ITME 9A.****                                  CONTROLSAND PROCEDURES**

 

An evaluation was performed under the supervision and with theparticipation of the Company’s management, including the Chief ExecutiveOfficer and Chief Financial Officer, of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined inRule 13a-15(e) promulgated under the Securities and Exchange Act of 1934,as amended) as of December 31, 2003. Based on that evaluation, the Company’smanagement, including the Chief Executive Officer and Chief Financial Officer,concluded that the Company’s disclosure controls and procedures were effective.There have been no significant changes in the Company’s internal controls or inother factors that could significantly affect internal controls.

 

**PARTIII.**

 

**ITEM 10.****                                    DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT**

 

**Directors**

 

The Company incorporates by reference theinformation called for by Item 10 of this Form 10-K regarding directors of theCompany from the sections entitled “Election of Directors” and “CorporateGovernance and the Board of Directors” of the Company’s Proxy Statement for theannual meeting of stockholders to be held May 19, 2004 (the “2004 ProxyStatement”).

 

Section 16(a) of the Exchange Act requires that the Company’s executiveofficers, directors and persons who own more than 10% of their Company’s CommonStock file reports of ownership and changes in ownership with the Securitiesand Exchange Commission and with the exchange on which the Company’s shares ofCommon Stock are traded.  Such personsare also required to furnish the Company with copies of all Section 16(a) formsthey file.  Based solely on theCompany’s review of the copies of such forms, the Company is not aware that anyof its directors and executive officers or 10% stockholders failed to complywith the filing requirements of Section 16(a) during 2001.

 

25

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**Executive Officers**

 

The executive officers of the Company, each of whom is also currentlyan executive officer of the Bank and both of whom serve at the discretion ofthe Board of Directors, are identified below:

 
| **Name**             |   | **Age** |   | **Positions with the Company**                                   |
|----------------------|--------|---------|--------|------------------------------------------------------------------|
|                 |   |    |   |                                                             |
| Patrick L. Alexander |   | 51      |   | President and Chief Executive Officer                            |
|                 |   |    |   |                                                             |
| Mark A. Herpich      |   | 36      |   | Vice President, Secretary, Chief Financial Officer and Treasurer |

 

The executive officers of the Bank are identified below:

 
| **Name**             |   | **Age** |   | **Positions with the Bank**                          |
|----------------------|--------|---------|--------|------------------------------------------------------|
|                 |   |    |   |                                                 |
| Patrick L. Alexander |   | 51      |   | President and Chief Executive Officer                |
|                 |   |    |   |                                                 |
| Mark A. Herpich      |   | 36      |   | Executive Vice President and Chief Financial Officer |
|                 |   |    |   |                                                 |
| Michael E. Scheopner |   | 42      |   | Executive Vice President, Credit Risk Manager        |
|                 |   |    |   |                                                 |
| Mark J. Oliphant     |   | 51      |   | Market President – Dodge City                   |
|                 |   |    |   |                                                 |
| Dean R. Thibault     |   | 52      |   | Market President - Manhattan                         |

** **

**ITEM 11.****                                    EXECUTIVECOMPENSATION**

 

The Company incorporates by reference the information called for byItem 11 of this Form 10-K from the sections entitled “Corporate Governance andthe Board of Directors” and “Executive Compensation” of the 2004 ProxyStatement.

 

**ITEM 12.****                                    SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

The Company incorporates by reference the information called for byItem 12 of this Form 10-K from the section entitled “Security Ownership ofCertain Beneficial Owners” of the 2004 Proxy Statement.

 

26

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**Equity CompensationPlan Information**

 

Thetable below sets forth the following information as of December 31, 2003 for(i) all compensation plans previously approved by the Company’s shareholdersand (ii) all compensation plans not previously approved by the Company’sshareholders:

 

(a)          the number of securities to be issued uponthe exercise of outstanding options, warrants and rights; 

 

(b)         the weighted-average exercise price of suchoutstanding options, warrants and rights; 

 

(c)          other than securities to be issued upon theexercise of such outstanding options, warrants and rights, the number ofsecurities remaining available for future issuance under the plans. 

 

**EQUITYCOMPENSATION PLAN INFORMATION**

 
| **Plan category**                                           |   | **Number of securities to be  issued upon exercise of  outstanding options (1)** |   | **Weighted-average  exercise  price of outstanding  options** |   | **Number of securities  remaining available for  future issuance (1)** |    |
|-------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|
| Equity  compensation plans approved by security holders     |   | 2,894                                                                            |   | $                                                             | 15.98  |                                                                   | 170,750 |   |
| Equity  compensation plans not approved by security holders |   | - 0 -                                                                            |   | - 0 -                                                         |   | - 0 -                                                                  |    |
| **Total**                                                   |   | 2,894                                                                            |   | $                                                             | 15.98  |                                                                   | 170,750 |   |

 

----

(1) Does not include options assumed by the Company in 2001 inconnection with the merger of Landmark Bancshares, Inc. and MNB Bancshares,Inc. with and into the Company.  At thetime of the merger, there were options issued under the previous companies’ plans,each of which was approved by stockholders of the respective company at thetime of their adoption.  All of theoptions granted under these plans fully vested at the time of the merger and noadditional options were available for grant after the merger.  As of December 31, 2003, there wereoptions outstanding for an aggregate of 58,472 shares of the Company’s commonstock under the prior plans with a weighted average exercise price of $13.03.

 

27

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**ITEM 13.****                                    CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

 

The Company incorporates by reference the information called for byItem 13 of this Form 10-K from the section entitled “Transactions withDirectors, Officers and Associates” of the 2004 Proxy Statement.

 

**ITEM 14.**                                    **PRINCIPALACCOUNTANT FEES AND SERVICES**

 

The Company incorporates by reference the information called for byItem 14 of this Form 10-K from the section entitled “Independent PublicAccountants” of the 2004 Proxy Statement.

 

**PARTIV**

 

**ITEM 15.****                                    EXHIBITS,FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K**

 

ITEM 15(a)1 and 2.  FinancialStatements and Schedules

 

LANDMARK BANCORP, INC. AND SUBSIDIARIESLIST OF FINANCIAL STATEMENTS

 

The following audited Consolidated Financial Statements of the Companyand its subsidiaries and related notes and auditors’ report are incorporated byreference from the Company’s 2003 Annual Report to Stockholders (attached asExhibit 13.1).

 
| Independent Auditors’ Report                                                                                                                                                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                            |
| Consolidated Balance Sheets - December 31, 2003 and 2002                                                                                                                                                        |
|                                                                                                                                                                                                            |
| Consolidated Statements of Earnings – Years ended December 31, 2003  and 2002, Three-month period ended December 31, 2001, and the Year Ended  September 30, 2001                                          |
|                                                                                                                                                                                                            |
| Consolidated Statements of Stockholders’ Equity and Comprehensive  Income – Years ended December 31, 2003 and 2002, Three-month period ended  December 31, 2001 and the Year Ended September 30, 2001 |
|                                                                                                                                                                                                            |
| Consolidated Statements of Cash Flows – Years ended December 31, 2003  and 2002, Three-month period ended December 31, 2001 and Year Ended September  30, 2001                                             |
|                                                                                                                                                                                                            |
| Notes to Consolidated Financial Statements                                                                                                                                                                      |

 

All schedules are omitted because they are not required or are notapplicable or the required information is shown in the financial statementsincorporated by reference or notes thereto.

 

28

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Item 15(a)3.                                   Exhibits andReports on Form 8-K

 

The exhibits required by Item 601 of Regulation S-K are included withthis Form 10-K and are listed on the “Index to Exhibits” immediately followingthe signature page.

 

A report on Form 8-K was filed on February 6, 2004 to report theissuance of a press release announcing the Company’s results for the quarterand year ended December 31, 2003 and the declaration of a cash dividend tostockholders.

 

A report on Form 8-K was filed on November 21, 2003, to report theissuance of a press release announcing the Company’s declaration of a 5% stockdividend to stockholders.

 

A report on Form 8-K was filed on November 13, 2003, to announcepursuant to Item 5 that the Company entered into an Agreement and Plan ofMerger with First Kansas Financial Corporation, a Kansas corporation.

 

A report on Form 8-K was filed on October 31, 2003, to report pursuantto Item 12 that the Company had issued a press release announcing earnings forthe quarter and nine months ended September 30, 2003, and the declaration of acash dividend to stockholders.

***

Upon written request to the President of the Company, P.O. Box 308,Manhattan, Kansas 66505-0308, copies of the exhibits listed above are availableto stockholders of the Company by specifically identifying each exhibit desiredin the request.  The Company’s filingswith the Securities and Exchange Commission are also available via the Internetat www.sec.gov, www.banklandmark.com or www.landmarkbancorpinc.com .

 

29

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 
|   | **LANDMARK BANCORP, INC.** |                                  |
|--------|----------------------------|---------------------------------------|
|   | (Registrant)               |                                  |
|   |                       |
|   |                       |
|   | By:                        | /s/ Patrick L. Alexander              |   | By: | /s/ Mark A. Herpich |
|   |                       | Patrick L. Alexander                  |   |   | Mark A. Herpich |
|   |                       | President and Chief Executive Officer |   |   | Principal Financial and Accounting Officer |
|        |                            |                                       |  |  |  |  |  |

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated.

 
| **SIGNATURE**            |   |           |   | **TITLE**                                        |
|--------------------------|--------|----------------|--------|--------------------------------------------------|
|                     |   |           |   |                                             |
| /s/ Patrick L. Alexander |   | March 30, 2004 |   | President, Chief Executive  Officer and Director |
| Patrick L. Alexander     |   | Date           |   |
|                     |   |           |   |                                             |
| /s/ Larry L. Schugart    |   | March 30, 2004 |   | Chairman of the Board                            |
| Larry L. Schugart        |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ Richard A. Ball      |   | March 30, 2004 |   | Director                                         |
| Richard A. Ball          |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ Brent A. Bowman      |   | March 30, 2004 |   | Director                                         |
| Brent A. Bowman          |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ Joseph L. Downey     |   | March 30, 2004 |   | Director                                         |
| Joseph L. Downey         |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ Jim W. Lewis         |   | March 30, 2004 |   | Director                                         |
| Jim W. Lewis             |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ Jerry R. Pettle      |   | March 30, 2004 |   | Director                                         |
| Jerry R. Pettle          |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ Susan E. Roepke      |   | March 30, 2004 |   | Director                                         |
| Susan E. Roepke          |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ C. Duane Ross        |   | March 30, 2004 |   | Director                                         |
| C. Duane Ross            |   | Date           |   |                                             |
|                     |   |           |   |                                             |
| /s/ David H. Snapp       |   | March 30, 2004 |   | Director                                         |
| David H. Snapp           |   | Date           |   |                                             |

 

30

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INDEX TO EXHIBITS

 
| **Exhibit  Number** |   | **Description**                                                                                                                                     |   | **Incorporated by reference to**                                                                                                                                                 |   | **Attached  hereto** |
|---------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|
| 3.1                 |   | Amended  and Restated Certificate of Incorporation                                                                                                  |   | the  registrant’s transition report on Form 10-K for the transition period ending  December 31, 2001, filed with the Commission on March 24, 2002 (SEC file no.  000-33203) |   |                 |
| 3.2                 |   | Bylaws                                                                                                                                              |   | the  registrant’s Form S-4, as amended, filed with the Commission on June 7, 2001  (SEC file no. 333-62466)                                                                 |   |                 |
| 4.1                 |   | Form  of stock certificate                                                                                                                          |   | the  registrant’s Form S-4, as amended, filed with the Commission on June 7, 2001  (SEC file no. 333-62466)                                                                 |   |                 |
| 10.1                |   | Form  of employment agreement between Larry Schugart and the Company                                                                                |   | the  registrant’s Form S-4, as amended, filed with the Commission on June 7, 2001  (SEC file no. 333-62466)                                                                 |   |                 |
| 10.2                |   | Form  of employment agreement between Patrick L. Alexander and the Company                                                                          |   | the  registrant’s Form S-4, as amended, filed with the Commission on June 7, 2001  (SEC file no. 333-62466)                                                                 |   |                 |
| 10.3                |   | Form  of employment agreement between Mark A. Herpich and the Company                                                                               |   | the  registrant’s Form S-4, as amended, filed with the Commission on June 7, 2001  (SEC file no. 333-62466)                                                                 |   |                 |
| 10.4                |   | Form  of employment agreement between Michael E. Scheopner and the Company                                                                          |   | the  registrant’s Form S-4, as amended, filed with the Commission on June 7, 2001  (SEC file no. 333-62466)                                                                 |   |                 |
| 10.5                |   | Form  of employment agreement between Dean R. Thibault and the Company                                                                              |   | the  registrant’s Form S-4, as amended, filed with the Commission on June 7, 2001  (SEC file no. 333-62466)                                                                 |   |                 |
| 10.6                |   | Rights  Agreement between the Company and Landmark National Bank                                                                                    |   | the  registrant’s Form 8-K filed with the Commission on January 22, 2002 (SEC file  no. 000-33203)                                                                          |   |                 |
| 10.7                |   | Indenture  dated as of December 19, 2003 between the Company and Wilmington Trust  Company                                                          |   |                                                                                                                                                                             |   | X                    |
| 13.1                |   | 2003  Annual Report to Stockholders                                                                                                                 |   |                                                                                                                                                                             |   | X                    |
| 21.1                |   | Subsidiaries  of the Company                                                                                                                        |   |                                                                                                                                                                             |   | X                    |
| 23.1                |   | Consent  of KPMG LLP                                                                                                                                |   |                                                                                                                                                                             |   | X                    |
| 31.1                |   | Certification  of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)                                                                      |   |                                                                                                                                                                             |   | X                    |
| 31.2                |   | Certification  of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)                                                                      |   |                                                                                                                                                                             |   | X                    |
| 32.1                |   | Certification  of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   |                                                                                                                                                                             |   | X                    |
| 32.2                |   | Certification  of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted  Pursuant to Section 906 of theSarbanes-Oxley Act of 2002  |   |                                                                                                                                                                             |   | X                    |

 

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