UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





x
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
      SECURITIES EXCHANGE ACT OF 1934


For the
quarterly period ended June 30, 2009





OR


 ̈
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934


For
transition period from ________ to ________





Commission
File Number 0-33203





LANDMARK BANCORP,
INC.


(Exact
name of Registrant as specified in its charter)





Delaware
                
                43-1930755(State
      or other jurisdiction of incorporation or organization)
                
                (I.R.S. Employer IdentificationNumber)





701 Poyntz Avenue,
Manhattan,
Kansas       66502


(Address
of principal executive
offices)                              (Zip
Code)





(785)
565-2000


(Registrant's
telephone number, including area code)





Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.  Yes x  No  ̈





Indicate by check mark whether the
registrant has submitted electronically and posted on its Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files).  Yes  ̈  No  ̈





Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company.  See the definitions of “large
accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule
12b-2 of the Exchange Act(check
one):


Large
      accelerated filer  ̈
              Accelerated
      filer  ̈
              Non-accelerated
      filer  ̈
              Smaller
      reporting company  x


(Do not
check if a smaller reporting company)





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yes  o No x





Indicate the number of shares
outstanding of each of the Registrant's classes of common stock as of the latest
practicable date: as of July 31, 2009, the Registrant had outstanding 2,371,450
shares of its common stock, $.01 par value per share.





LANDMARK
BANCORP, INC.


Form
10-Q Quarterly Report





Table
of Contents





Page NumberPART
      IItem
      1.
                                    Financial
      Statements and Related Notes
                                    2 -
      19Item
      2.
                                    Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                    20
      - 29Item
      3.
                                    Quantitative
      and Qualitative Disclosures about Market Risk
                                    29
      - 30Item
      4.
                                    Controls
      and Procedures
                                    30PART
      IIItem
      1.
                                    Legal
      Proceedings
                                    31Item
      1A.
                                    Risk
      Factors
                                    31Item
      2.
                                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                                    31Item
      3.
                                    Defaults
      Upon Senior Securities
                                    31Item
      4.
                                    Submission
      of Matters to a Vote of Security Holders
                                    32Item
      5.
                                    Other
      Information
                                    32Item
      6.
                                    Exhibits
                                    32Form
      10-Q Signature Page
                                    33


1


ITEM
1.  FINANCIAL STATEMENTS AND RELATED NOTES





LANDMARK
BANCORP, INC. AND SUBSIDIARY


CONSOLIDATED
BALANCE SHEETS


(Unaudited)





(Dollars in
      thousands)
                
                June 30,
                
                
                December
31,2009
                
                
                2008AssetsCash and cash
      equivalents
                
                $
                18,853
                
                
                $
                13,788Investment
      securities:Available for sale, at fair
      value
                
                
                170,062
                
                
                
                162,245Other
      securities
                
                
                7,909
                
                
                
                9,052Loans, net
                
                
                355,306
                
                
                
                365,772Loans held for
      sale
                
                
                7,544
                
                
                
                1,487Premises and equipment,
      net
                
                
                16,614
                
                
                
                13,956Goodwill
                
                
                12,894
                
                
                
                12,894Other intangible assets,
      net
                
                
                2,609
                
                
                
                2,407Bank owned life
      insurance
                
                
                12,242
                
                
                
                11,996Accrued interest and other
      assets
                
                
                9,107
                
                
                
                8,617Total
assets
                
                $
                613,140
                
                
                $
                602,214Liabilities and Stockholders’
      EquityLiabilities:Deposits:Non-interest bearing
      demand
                
                $
                57,290
                
                
                $
                49,823Money
      market and NOW
                
                
                154,635
                
                
                
                150,116Savings
                
                
                28,926
                
                
                
                26,203Time,
      $100,000 and greater
                
                
                61,461
                
                
                
                49,965Time,
      other
                
                
                159,266
                
                
                
                163,439Total
      deposits
                
                
                461,578
                
                
                
                439,546Federal Home Loan Bank
      borrowings
                
                
                61,117
                
                
                
                77,319Other
      borrowings
                
                
                28,855
                
                
                
                27,047Accrued expenses, taxes and other
      liabilities
                
                
                9,041
                
                
                
                6,896Total
      liabilities
                
                
                560,591
                
                
                
                550,808Stockholders'
      equity:Preferred stock, $0.01 par,
      200,000 shares authorized, none issued
                
                
                -
                
                
                
                -Common stock, $0.01 par, 7,500,000
      shares authorized, 2,411,412 shares issued, at June 30, 2009 and December
      31, 2008
                
                
                24
                
                
                
                24Additional paid-in
      capital
                
                
                23,951
                
                
                
                23,873Retained
      earnings
                
                
                28,939
                
                
                
                27,819Treasury stock, at cost; 39,962
      and 39,162 shares at June 30, 2009 and December 31, 2008,
      respectively
                
                
                (947
                )
                
                
                (935
                )Accumulated other comprehensive
      income
                
                
                582
                
                
                
                625Total stockholders'
      equity
                
                
                52,549
                
                
                
                51,406Total liabilities and
      stockholders' equity
                
                $
                613,140
                
                
                $
                602,214





See
accompanying notes to condensed consolidated financial
statements.


2


LANDMARK
BANCORP, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF EARNINGS


(Unaudited)





(Dollars in thousands, except per
      share data)
                                  
                                  Three months ended June
      30,
                                  
                                  
                                  Six months ended June
      30,2009
                                  
                                  
                                  2008
                                  
                                  
                                  2009
                                  
                                  
                                  2008Interest
      income:Loans:Taxable
                                  
                                  $
                                  5,170
                                  
                                  
                                  $
                                  6,113
                                  
                                  
                                  $
                                  10,303
                                  
                                  
                                  $
                                  12,727Tax-exempt
                                  
                                  
                                  64
                                  
                                  
                                  
                                  56
                                  
                                  
                                  
                                  113
                                  
                                  
                                  
                                  99Investment
      securities:Taxable
                                  
                                  
                                  1,069
                                  
                                  
                                  
                                  1,198
                                  
                                  
                                  
                                  2,185
                                  
                                  
                                  
                                  2,421Tax-exempt
                                  
                                  
                                  621
                                  
                                  
                                  
                                  599
                                  
                                  
                                  
                                  1,230
                                  
                                  
                                  
                                  1,195Other
                                  
                                  
                                  4
                                  
                                  
                                  
                                  19
                                  
                                  
                                  
                                  7
                                  
                                  
                                  
                                  37Total interest
      income
                                  
                                  
                                  6,928
                                  
                                  
                                  
                                  7,985
                                  
                                  
                                  
                                  13,838
                                  
                                  
                                  
                                  16,479Interest
      expense:Deposits
                                  
                                  
                                  1,558
                                  
                                  
                                  
                                  2,615
                                  
                                  
                                  
                                  3,197
                                  
                                  
                                  
                                  5,737Borrowed
    funds
                                  
                                  
                                  811
                                  
                                  
                                  
                                  897
                                  
                                  
                                  
                                  1,690
                                  
                                  
                                  
                                  1,808Total interest
      expense
                                  
                                  
                                  2,369
                                  
                                  
                                  
                                  3,512
                                  
                                  
                                  
                                  4,887
                                  
                                  
                                  
                                  7,545Net interest
      income
                                  
                                  
                                  4,559
                                  
                                  
                                  
                                  4,473
                                  
                                  
                                  
                                  8,951
                                  
                                  
                                  
                                  8,934Provision for loan
      losses
                                  
                                  
                                  800
                                  
                                  
                                  
                                  300
                                  
                                  
                                  
                                  1,100
                                  
                                  
                                  
                                  900Net interest income after
      provision for loan losses
                                  
                                  
                                  3,759
                                  
                                  
                                  
                                  4,173
                                  
                                  
                                  
                                  7,851
                                  
                                  
                                  
                                  8,034Non-interest
      income:Fees and service
      charges
                                  
                                  
                                  1,142
                                  
                                  
                                  
                                  1,115
                                  
                                  
                                  
                                  2,098
                                  
                                  
                                  
                                  2,081Gains on sale of
      loans
                                  
                                  
                                  1,199
                                  
                                  
                                  
                                  394
                                  
                                  
                                  
                                  1,907
                                  
                                  
                                  
                                  739Gain on prepayment of FHLB
      borrowings
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  246Bank owned life
      insurance
                                  
                                  
                                  124
                                  
                                  
                                  
                                  118
                                  
                                  
                                  
                                  247
                                  
                                  
                                  
                                  234Other
                                  
                                  
                                  174
                                  
                                  
                                  
                                  136
                                  
                                  
                                  
                                  287
                                  
                                  
                                  
                                  278Total non-interest
      income
                                  
                                  
                                  2,639
                                  
                                  
                                  
                                  1,763
                                  
                                  
                                  
                                  4,539
                                  
                                  
                                  
                                  3,578Investment securities gains
      (losses), net:Impairment losses on investment
      securities
                                  
                                  
                                  (60
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (910
                                  )
                                  
                                  
                                  -Less noncredit-related
      losses
                                  
                                  
                                  (189
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  334
                                  
                                  
                                  
                                  -Net impairment
      losses
                                  
                                  
                                  (249
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (576
                                  )
                                  
                                  
                                  -Gains on sales of investment
      securities
                                  
                                  
                                  -
                                  
                                  
                                  
                                  497
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  497Investment securities gains
      (losses), net
                                  
                                  
                                  (249
                                  )
                                  
                                  
                                  497
                                  
                                  
                                  
                                  (576
                                  )
                                  
                                  
                                  497Non-interest
      expense:Compensation and
      benefits
                                  
                                  
                                  2,203
                                  
                                  
                                  
                                  2,097
                                  
                                  
                                  
                                  4,379
                                  
                                  
                                  
                                  4,225Occupancy and
      equipment
                                  
                                  
                                  663
                                  
                                  
                                  
                                  673
                                  
                                  
                                  
                                  1,314
                                  
                                  
                                  
                                  1,434Federal deposit insurance
      premiums
                                  
                                  
                                  447
                                  
                                  
                                  
                                  13
                                  
                                  
                                  
                                  480
                                  
                                  
                                  
                                  26Data
    processing
                                  
                                  
                                  204
                                  
                                  
                                  
                                  206
                                  
                                  
                                  
                                  394
                                  
                                  
                                  
                                  403Amortization of
      intangibles
                                  
                                  
                                  191
                                  
                                  
                                  
                                  205
                                  
                                  
                                  
                                  378
                                  
                                  
                                  
                                  409Professional
      fees
                                  
                                  
                                  192
                                  
                                  
                                  
                                  121
                                  
                                  
                                  
                                  364
                                  
                                  
                                  
                                  233Advertising
                                  
                                  
                                  119
                                  
                                  
                                  
                                  89
                                  
                                  
                                  
                                  240
                                  
                                  
                                  
                                  177Other
                                  
                                  
                                  926
                                  
                                  
                                  
                                  859
                                  
                                  
                                  
                                  1,851
                                  
                                  
                                  
                                  1,645Total non-interest
      expense
                                  
                                  
                                  4,945
                                  
                                  
                                  
                                  4,263
                                  
                                  
                                  
                                  9,400
                                  
                                  
                                  
                                  8,552Earnings before income
      taxes
                                  
                                  
                                  1,204
                                  
                                  
                                  
                                  2,170
                                  
                                  
                                  
                                  2,414
                                  
                                  
                                  
                                  3,557Income tax
      expense
                                  
                                  
                                  192
                                  
                                  
                                  
                                  594
                                  
                                  
                                  
                                  393
                                  
                                  
                                  
                                  914Net
earnings
                                  
                                  $
                                  1,012
                                  
                                  
                                  $
                                  1,576
                                  
                                  
                                  $
                                  2,021
                                  
                                  
                                  $
                                  2,643Earnings per
      share:Basic
                                  
                                  $
                                  0.43
                                  
                                  
                                  $
                                  0.66
                                  
                                  
                                  $
                                  0.85
                                  
                                  
                                  $
                                  1.09Diluted
                                  
                                  $
                                  0.43
                                  
                                  
                                  $
                                  0.66
                                  
                                  
                                  $
                                  0.85
                                  
                                  
                                  $
                                  1.08Dividends per
      share
                                  
                                  $
                                  0.19
                                  
                                  
                                  $
                                  0.18
                                  
                                  
                                  $
                                  0.38
                                  
                                  
                                  $
                                  0.36





See
accompanying notes to condensed consolidated financial
statements.


3


LANDMARK
BANCORP, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





(Dollars in
      thousands)
                  
                  Six months ended June
      30,2009
                  
                  
                  2008Net cash used in operating
      activities
                  
                  $
                  (712
                  )
                  
                  $
                  (1,220
                  )Cash flows from investing
      activities:Net decrease (increase) in
      loans
                  
                  
                  12,247
                  
                  
                  
                  (2,241
                  )Maturities and prepayments of
      investment securities
                  
                  
                  29,101
                  
                  
                  
                  7,097Purchase of investment
      securities
                  
                  
                  (37,707
                  )
                  
                  
                  (25,901
                  )Proceeds from sales of investment
      securities
                  
                  
                  1,210
                  
                  
                  
                  10,407Proceeds from sales of premises
      and equipment and foreclosed assets
                  
                  
                  1,095
                  
                  
                  
                  668Purchases of premises and
      equipment, net
                  
                  
                  (552
                  )
                  
                  
                  (472
                  )Net cash paid in branch
      acquisition
                  
                  
                  (130
                  )
                  
                  
                  -Net cash provided by (used in)
      investing activities
                  
                  
                  5,264
                  
                  
                  
                  (10,442
                  )Cash flows from financing
      activities:Net increase (decrease) in
      deposits
                  
                  
                  15,636
                  
                  
                  
                  (4,855
                  )Federal Home Loan Bank advance
      borrowings
                  
                  
                  -
                  
                  
                  
                  35,000Federal Home Loan Bank advance
      repayments
                  
                  
                  (10,018
                  )
                  
                  
                  (13,518
                  )Federal Home Loan Bank line of
      credit, net
                  
                  
                  (6,000
                  )
                  
                  
                  (6,400
                  )Other borrowings,
      net
                  
                  
                  1,808
                  
                  
                  
                  3,903Purchase of treasury
      stock
                  
                  
                  (12
                  )
                  
                  
                  (3,296
                  )Proceeds from issuance of stock
      under stock option plans
                  
                  
                  -
                  
                  
                  
                  30Excess tax benefit related to
      stock option plans
                  
                  
                  -
                  
                  
                  
                  5Payment of
      dividends
                  
                  
                  (901
                  )
                  
                  
                  (887
                  )Net cash provided by financing
      activities
                  
                  
                  513
                  
                  
                  
                  9,982Net increase (decrease) in cash
      and cash equivalents
                  
                  
                  5,065
                  
                  
                  
                  (1,680
                  )Cash and cash equivalents at
      beginning of period
                  
                  
                  13,788
                  
                  
                  
                  14,739Cash and cash equivalents at end
      of period
                  
                  $
                  18,853
                  
                  
                  $
                  13,059Supplemental disclosure of cash
      flow information:Cash paid during period for
      interest
                  
                  $
                  4,832
                  
                  
                  $
                  7,776Cash paid during period for taxes,
      net
                  
                  
                  312
                  
                  
                  
                  213Supplemental schedule of non-cash
      investing and financing activities:Transfer of loans to real estate
      owned
                  
                  $
                  1,140
                  
                  
                  $
                  1,346Branch
      acquisition:Fair value of liabilities
      assumed
                  
                  
                  6,650
                  
                  
                  
                  -Fair value of assets
      acquired
                  
                  
                  6,520
                  
                  
                  
                  -





See
accompanying notes to condensed consolidated financial
statements.


4


LANDMARK
BANCORP, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME


(Unaudited)





(Dollars in thousands, except per
      share data)
                    
                    Common
                      stock
                    
                    
                    Additional
                      paid-in
                      capital
                    
                    
                    Retained
                      earnings
                    
                    
                    Treasury
                      stock
                    
                    
                    Accumulated
                      other
                      comprehensive
                      income
                    
                    
                    TotalBalance
      at December 31, 2007
                    
                    $
                    24
                    
                    
                    $
                    24,304
                    
                    
                    $
                    27,493
                    
                    
                    $
                    (206
                    )
                    
                    $
                    680
                    
                    
                    $
                    52,295Comprehensive
      income:
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    -Net
      earnings
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,643
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,643Change
      in fair value of investment securities available-for-sale, net of
      tax
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (931
                    )
                    
                    
                    (931
                    )Total
      comprehensive income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,643
                    
                    
                    
                    -
                    
                    
                    
                    (931
                    )
                    
                    
                    1,712Dividends
      paid ($0.36 per share)
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (887
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (887
                    )Stock-based
      compensation
                    
                    
                    -
                    
                    
                    
                    57
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    57Exercise
      of stock options, 1,882 shares, including tax benefit of
      $5,010
                    
                    
                    -
                    
                    
                    
                    35
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    35Purchase
      of 134,385 treasury shares
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (3,296
                    )
                    
                    
                    -
                    
                    
                    
                    (3,296
                    )Adoption
      of EITF 06-4
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (335
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (335
                    )Balance
      June 30, 2008
                    
                    $
                    24
                    
                    
                    $
                    24,396
                    
                    
                    $
                    28,914
                    
                    
                    $
                    (3,502
                    )
                    
                    $
                    (251
                    )
                    
                    $
                    49,581Balance
      at December 31, 2008
                    
                    $
                    24
                    
                    
                    $
                    23,873
                    
                    
                    $
                    27,819
                    
                    
                    $
                    (935
                    )
                    
                    $
                    625
                    
                    
                    $
                    51,406Comprehensive
      income:Net
      earnings
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,021
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,021Change
      in fair value of investment securities available-for-sale for which a
      portion of an other than temporary impairment has been recorded in net
      earnings, net of tax
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    246
                    
                    
                    
                    246Change
      in fair value of all other investment securities available-for-sale, net
      of tax
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (289
                    )
                    
                    
                    (289
                    )Total
      comprehensive income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,021
                    
                    
                    
                    -
                    
                    
                    
                    (43
                    )
                    
                    
                    1,978Dividends
      paid ($0.38 per share)
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (901
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (901
                    )Stock-based
      compensation
                    
                    
                    -
                    
                    
                    
                    78
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    78Purchase
      of 800 shares treasury shares
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (12
                    )
                    
                    
                    -
                    
                    
                    
                    (12
                    )Balance
      at June 30, 2009
                    
                    $
                    24
                    
                    
                    $
                    23,951
                    
                    
                    $
                    28,939
                    
                    
                    $
                    (947
                    )
                    
                    $
                    582
                    
                    
                    $
                    52,549





See
accompanying notes to condensed consolidated financial
statements.


5


LANDMARK
BANCORP, INC. AND SUBSIDIARY


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





1.
            Interim
      Financial Statements





The
condensed consolidated financial statements of Landmark Bancorp, Inc. (the
“Company”) and subsidiary have been prepared in accordance with the instructions
to Form 10-Q.  To the extent that information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements are contained in or consistent with the consolidated audited
financial statements incorporated by reference in the Company’s Form 10-K for
the year ended December 31, 2008, such information and footnotes have not been
duplicated herein.  In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation of financial statements have been reflected herein.  The
December 31, 2008, condensed consolidated balance sheet has been derived from
the audited consolidated balance sheet as of that date.  The results
of the interim period ended June 30, 2009 are not necessarily indicative of the
results expected for the year ending December 31, 2009.  Subsequent
events have been evaluated for potential recognition or disclosure through the
time of the filing on August 13, 2009, which represents the date the
consolidated financial statements were issued.





2.
            Goodwill
      and Other Intangible Assets





The
Company tests goodwill for impairment annually or more frequently if
circumstances warrant.  During 2009, the decline in the Company’s
stock price coupled with current market conditions in the financial services
industry, constituted a triggering event which required an impairment test to be
performed.  The Company performed an impairment test as of March 31,
2009 by comparing the fair value of the Company’s single reporting unit to its
carrying value.  Fair value was determined using observable market
data including the Company’s market capitalization and valuation multiples
compared to recent financial industry acquisition multiples to estimate the fair
value of the Company’s single reporting unit.  Based on the results of
the March 31, 2009 impairment testing which indicated no impairment, along with
the Company’s conclusion that no triggering events occurred during the second
quarter of 2009, the Company concluded its goodwill was not impaired as of June
30, 2009.





On May 8,
2009, the Company’s subsidiary, Landmark National Bank, assumed approximately
$6.4 million in deposits in connection with a branch acquisition.  As
part of the transaction, Landmark National Bank agreed to pay a deposit premium
of 1.75 percent on the core deposit balance as of 270 days after the close of
the transaction.  As of May 8, 2009 the core deposit premium, based on
the acquired core deposit balances, was $86,000.  The following is an
analysis of changes in the core deposit intangible assets:





Three months ended June 30,(Dollars
      in thousands)
                    
                    2009
                    
                    
                    2008Fair value at
                      acquisition
                    
                    
                    Accumulated
                      Amortization
                    
                    
                    Fair value at
                      acquisition
                    
                    
                    Accumulated
                      AmortizationBalance
      at beginning of period
                    
                    $
                    5,396
                    
                    
                    $
                    (3,314
                    )
                    
                    $
                    5,396
                    
                    
                    $
                    (2,641
                    )Additions
                    
                    
                    86
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Amortization
                    
                    
                    -
                    
                    
                    
                    (153
                    )
                    
                    
                    -
                    
                    
                    
                    (177
                    )Balance
      at end of period
                    
                    $
                    5,482
                    
                    
                    $
                    (3,467
                    )
                    
                    $
                    5,396
                    
                    
                    $
                    (2,818
                    )




Six months ended June 30,(Dollars
      in thousands)
                    
                    2009
                    
                    
                    2008Fair value at
                      acquisition
                    
                    
                    Accumulated
                      Amortization
                    
                    
                    Fair value at
                      acquisition
                    
                    
                    Accumulated
                      AmortizationBalance
      at beginning of period
                    
                    $
                    5,396
                    
                    
                    $
                    (3,159
                    )
                    
                    $
                    5,396
                    
                    
                    $
                    (2,462
                    )Additions
                    
                    
                    86
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Amortization
                    
                    
                    -
                    
                    
                    
                    (308
                    )
                    
                    
                    -
                    
                    
                    
                    (356
                    )Balance
      at end of period
                    
                    $
                    5,482
                    
                    
                    $
                    (3,467
                    )
                    
                    $
                    5,396
                    
                    
                    $
                    (2,818
                    )


6


The
following is an analysis of changes in the mortgage servicing
rights:





Three months ended June 30,(Dollars
      in thousands)
                    
                    2009
                    
                    
                    2008Cost
                    
                    
                    Accumulated
                      Amortization
                    
                    
                    Cost
                    
                    
                    Accumulated
                      AmortizationBalance
      at beginning of period
                    
                    $
                    893
                    
                    
                    $
                    (600
                    )
                    
                    $
                    771
                    
                    
                    $
                    (572
                    )Additions
                    
                    
                    339
                    
                    
                    
                    -
                    
                    
                    
                    19
                    
                    
                    
                    -Prepayments/maturities
                    
                    
                    (21
                    )
                    
                    
                    21
                    
                    
                    
                    (19
                    )
                    
                    
                    19Amortization
                    
                    
                    -
                    
                    
                    
                    (38
                    )
                    
                    
                    -
                    
                    
                    
                    (28
                    )Balance
      at end of period
                    
                    $
                    1,211
                    
                    
                    $
                    (617
                    )
                    
                    $
                    771
                    
                    
                    $
                    (581
                    )




Six months ended June 30,(Dollars
      in thousands)
                    
                    2009
                    
                    
                    2008Cost
                    
                    
                    Accumulated
                      Amortization
                    
                    
                    Cost
                    
                    
                    Accumulated
                      AmortizationBalance
      at beginning of period
                    
                    $
                    772
                    
                    
                    $
                    (602
                    )
                    
                    $
                    770
                    
                    
                    $
                    (560
                    )Additions
                    
                    
                    494
                    
                    
                    
                    -
                    
                    
                    
                    33
                    
                    
                    
                    -Prepayments/maturities
                    
                    
                    (55
                    )
                    
                    
                    55
                    
                    
                    
                    (32
                    )
                    
                    
                    32Amortization
                    
                    
                    -
                    
                    
                    
                    (70
                    )
                    
                    
                    -
                    
                    
                    
                    (53
                    )Balance
      at end of period
                    
                    $
                    1,211
                    
                    
                    $
                    (617
                    )
                    
                    $
                    771
                    
                    
                    $
                    (581
                    )
  The
mortgage servicing rights correspond to loans serviced by the Company for
unrelated third parties with outstanding principal balances of $120.5 million
and $82.0 million at June 30, 2009 and December 31, 2008,
respectively.  Gross service fee income related to such loans was
$63,000 and $56,000 for the quarters ended June 30, 2009 and 2008, respectively,
which is included in fees and service charges in the condensed consolidated
statements of earnings.  Gross service fee income for the six months
ended June 30, 2009 and 2008 was $114,000 and $113,000,
respectively.





Aggregate
amortization expense for the quarters ended June 30, 2009 and 2008, was $191,000
and $205,000, respectively and $378,000 and $409,000 for the six months ended
June 30, 2009 and 2008, respectively.  The following depicts estimated
amortization expense for all intangible assets for the remainder of 2009 and in
successive years ending December 31:





Year
                  
                  Amount (in thousands)Remainder
      of 2009
                  
                  $
                  3762010
                  
                  
                  6672011
                  
                  
                  5672012
                  
                  
                  4712013
                  
                  
                  297Thereafter
                  
                  
                  231


7


3.
            Investments





A summary
of investment securities available-for-sale is as follows:





As of June 30,
      2009Gross
                  
                  
                  GrossAmortized
                  
                  
                  unrealized
                  
                  
                  unrealized
                  
                  
                  Estimated(Dollars in
      thousands)
                  
                  cost
                  
                  
                  gains
                  
                  
                  losses
                  
                  
                  fair valueU. S. federal agency
      obligations
                  
                  $
                  26,652
                  
                  
                  $
                  626
                  
                  
                  $
                  (1
                  )
                  
                  $
                  27,277Municipal
      obligations
                  
                  
                  67,096
                  
                  
                  
                  1,028
                  
                  
                  
                  (631
                  )
                  
                  
                  67,493Mortgage-backed
      securities
                  
                  
                  62,514
                  
                  
                  
                  1,400
                  
                  
                  
                  (3
                  )
                  
                  
                  63,911Pooled trust preferred
      securities
                  
                  
                  1,914
                  
                  
                  
                  -
                  
                  
                  
                  (1,595
                  )
                  
                  
                  319Common
    stocks
                  
                  
                  693
                  
                  
                  
                  112
                  
                  
                  
                  (17
                  )
                  
                  
                  788Certificates of
      deposit
                  
                  
                  10,274
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  10,274Total
                  
                  $
                  169,143
                  
                  
                  $
                  3,166
                  
                  
                  $
                  (2,247
                  )
                  
                  $
                  170,062





As of December 31,
      2008Gross
                  
                  
                  GrossAmortized
                  
                  
                  unrealized
                  
                  
                  unrealized
                  
                  
                  Estimated(Dollars in
      thousands)
                  
                  cost
                  
                  
                  gains
                  
                  
                  losses
                  
                  
                  fair valueU. S. federal agency
      obligations
                  
                  $
                  28,566
                  
                  
                  $
                  950
                  
                  
                  $
                  (2
                  )
                  
                  $
                  29,514Municipal
      obligations
                  
                  
                  63,711
                  
                  
                  
                  1,532
                  
                  
                  
                  (934
                  )
                  
                  
                  64,309Mortgage-backed
      securities
                  
                  
                  55,752
                  
                  
                  
                  934
                  
                  
                  
                  (104
                  )
                  
                  
                  56,582Pooled trust preferred
      securities
                  
                  
                  2,488
                  
                  
                  
                  —
                  
                  
                  
                  (1,748
                  )
                  
                  
                  740Common
    stocks
                  
                  
                  693
                  
                  
                  
                  389
                  
                  
                  
                  (8
                  )
                  
                  
                  1,074Certificates of
      deposit
                  
                  
                  10,026
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  10,026Total
                  
                  $
                  161,236
                  
                  
                  $
                  3,805
                  
                  
                  $
                  (2,796
                  )
                  
                  $
                  162,245





Included
in the June 30, 2009 gross unrealized losses above, are noncredit-related losses
of $334,000, recorded in accumulated other comprehensive income, related to a
$1.0 million par investment in a pool of trust preferred securities, which was
determined to be other than temporarily impaired.  The amortized cost
of the other than temporarily impaired investment, after recognition of $576,000
of impairment losses, was $424,000 at June 30, 2009.  The fair value
of this security was $90,000 at June 30, 2009 compared to $275,000 at December
31, 2008, while the unrealized losses included in accumulated other
comprehensive were $334,000 at June 30, 2009 and $725,000 at December 31,
2008.


8


The
summary of available-for-sale investment securities shows that some of the
securities in the available-for-sale investment portfolio had unrealized losses,
or were temporarily impaired, as of June 30, 2009 and December 31,
2008.  This temporary impairment represents the estimated amount of
loss that would be realized if the securities were sold on the valuation
date.  Securities which were temporarily impaired are shown below,
along with the length of the impairment period.





(Dollars
      in thousands)
                      
                      
                      
                      
                      As
      of June 30, 2009Number
                      
                      
                      Less
      than 12 months
                      
                      
                      12
      months or longer
                      
                      
                      Totalof
                      
                      
                      Fair
                      
                      
                      Unrealized
                      
                      
                      Fair
                      
                      
                      Unrealized
                      
                      
                      Fair
                      
                      
                      Unrealizedsecurities
                      
                      
                      value
                      
                      
                      losses
                      
                      
                      value
                      
                      
                      losses
                      
                      
                      value
                      
                      
                      lossesU.
      S. federal agency obligations
                      
                      3
                      
                      
                      $
                      160
                      
                      
                      $
                      (1
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      160
                      
                      
                      $
                      (1
                      )Municipal
      obligations
                      
                      51
                      
                      
                      
                      16,184
                      
                      
                      
                      (417
                      )
                      
                      
                      3,073
                      
                      
                      
                      (214
                      )
                      
                      
                      19,257
                      
                      
                      
                      (631
                      )Mortgage-backed
      securities
                      
                      6
                      
                      
                      
                      3,840
                      
                      
                      
                      (3
                      )
                      
                      
                      69
                      
                      
                      
                      -
                      
                      
                      
                      3,909
                      
                      
                      
                      (3
                      )Pooled
      trust preferred securities
                      
                      3
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      319
                      
                      
                      
                      (1,595
                      )
                      
                      
                      319
                      
                      
                      
                      (1,595
                      )Common
      stocks
                      
                      5
                      
                      
                      
                      75
                      
                      
                      
                      (17
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      75
                      
                      
                      
                      (17
                      )Total
                      
                      68
                      
                      
                      $
                      20,259
                      
                      
                      $
                      (438
                      )
                      
                      $
                      3,461
                      
                      
                      $
                      (1,809
                      )
                      
                      $
                      23,720
                      
                      
                      $
                      (2,247
                      )








(Dollars
      in thousands)
                      
                      
                      
                      
                      As
      of December 31, 2008Number
                      
                      
                      Less
      than 12 months
                      
                      
                      12
      months or longer
                      
                      
                      Totalof
                      
                      
                      Fair
                      
                      
                      Unrealized
                      
                      
                      Fair
                      
                      
                      Unrealized
                      
                      
                      Fair
                      
                      
                      Unrealizedsecurities
                      
                      
                      value
                      
                      
                      losses
                      
                      
                      value
                      
                      
                      losses
                      
                      
                      value
                      
                      
                      lossesU.
      S. federal agency obligations
                      
                      3
                      
                      
                      $
                      64
                      
                      
                      $
                      -
                      
                      
                      $
                      133
                      
                      
                      $
                      (2
                      )
                      
                      $
                      197
                      
                      
                      $
                      (2
                      )Municipal
      obligations
                      
                      56
                      
                      
                      
                      13,282
                      
                      
                      
                      (466
                      )
                      
                      
                      8,542
                      
                      
                      
                      (468
                      )
                      
                      
                      21,824
                      
                      
                      
                      (934
                      )Mortgage-backed
      securities
                      
                      80
                      
                      
                      
                      12,219
                      
                      
                      
                      (78
                      )
                      
                      
                      3,400
                      
                      
                      
                      (26
                      )
                      
                      
                      15,619
                      
                      
                      
                      (104
                      )Pooled
      trust preferred securities
                      
                      3
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      740
                      
                      
                      
                      (1,748
                      )
                      
                      
                      740
                      
                      
                      
                      (1,748
                      )Common
      stocks
                      
                      3
                      
                      
                      
                      13
                      
                      
                      
                      (2
                      )
                      
                      
                      18
                      
                      
                      
                      (6
                      )
                      
                      
                      31
                      
                      
                      
                      (8
                      )Total
                      
                      145
                      
                      
                      $
                      25,578
                      
                      
                      $
                      (546
                      )
                      
                      $
                      12,834
                      
                      
                      $
                      (2,250
                      )
                      
                      $
                      38,412
                      
                      
                      $
                      (2,796
                      )





The
Company’s assessment of other than temporary impairment is based on its
reasonable judgment of the specific facts and circumstances impacting each
individual security at the time such assessments are made.  The
Company reviews and considers factual information, including expected cash
flows, the structure of the security, the credit quality of the underlying
assets and the current and anticipated market conditions.  As of
January 1, 2009, the Company early adopted Financial Accounting Standards Board
(“FASB”) Staff Position (“FSP”) No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other Than Temporary Impairments,”which changed the accounting for other
than temporary impairments of debt securities and separates the impairment into
credit-related and other factors.





The
receipt of principal, at par, and interest on mortgage-backed securities is
guaranteed by the respective government-sponsored agency guarantor, such that
the Company believes that its mortgage-backed securities do not expose the
Company to credit related losses.  Based on these factors, along with
the Company’s intent to not sell the security and that it is more likely than
not that the Company will not be required to sell the security before recovery
of its cost basis, the Company believes that the mortgage-backed securities
identified in the tables above were temporarily depressed as of June 30, 2009
and December 31, 2008.  The Company’s mortgage-backed securities
portfolio consisted of securities predominantly underwritten to the standards of
and guaranteed by the government-sponsored agencies of FHLMC, FNMA and
GNMA.





The
Company believes that the decline in the value of certain municipal obligations
was primarily related to an overall widening of market spreads for many types of
fixed income products during 2008 and 2009, reflecting, among other things,
reduced liquidity and the downgrades on the underlying credit default insurance
providers.  At June 30, 2009, the Company does not intend to sell and
it is more likely than not that the Company will not be required to sell until
the recovery of its cost, its municipal obligations in an unrealized loss
position.  Due to the issuers’ continued satisfaction of the
securities’ obligations in accordance with their contractual terms and the
expectation that they will continue to do so as well as the evaluation of the
fundamentals of the issuers’ financial condition and other objective evidence,
management’s intention not to sell and belief that it is more likely than not
that the Company will not have to sell such securities prior to recovery of the
Company’s amortized cost, and therefore the Company believes that the municipal
obligations identified in the tables above were temporarily depressed as of June
30, 2009 and December 31, 2008.




9





At June
30, 2009, the Company owned three pooled trust preferred securities with an
original cost basis of $2.5 million, which represent investments in pools of
debt obligations issued by financial institutions and insurance
companies.  The market for these securities is considered to be
inactive according to the guidance issued in FSPNo. FAS 157-4,“Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly,”which the
Company early adopted as of January 1, 2009.  The Company used
a discounted cash flow model to determine the estimated fair value of its pooled
trust preferred securities and to assess if the present value of the cash flows
expected to be collected was less than the amortized cost, which would result in
an other than temporary impairment.  The assumptions used in preparing
the discounted cash flow model include the following: estimated discount rates
(using yields of comparable traded instruments adjusted for illiquidity and
other risk factors), estimated deferral and default rates on collateral, and
estimated cash flows.  The discounted cash flow analysis included a
review of all issuers within the collateral pool and incorporated higher
deferral and default rates, as compared to historical rates, in the cash flow
projections through maturity.  The Company also reviewed a stress test
of these securities to determine the additional estimated deferrals or defaults
in the collateral pool in excess of what the Company believes is likely, before
the payments on the individual securities are negatively impacted.





At June
30, 2009, the analysis of two of the Company’s three investments in pooled trust
preferred securities indicated that the unrealized loss was temporary and that
it is more likely than not that the Company would be able to recover the cost
basis of these securities.  However, the Company determined that a
portion of the unrealized loss on the third investment in a $1.0 million pooled
trust preferred security was other than temporary.  The amount of
actual and projected deferrals and/or defaults by the financial institutions
underlying this pooled trust preferred security, increased significantly since
the beginning of 2009, primarily when a large number of deferrals occurred in
this pool during April and July of 2009.  The percentage of the pool
that was not performing according to the contractual terms of the agreements
increased from 9% at December 31, 2008, to 28% at March 31, 2009 and 41% at June
30, 2009.  The increase in nonperforming collateral resulted in an
other than temporary impairment of this security.  The Company follows
the provisions of FSP No. FAS 115-2 and FAS 124-2 in determining the amount of
the other than temporary impairment recorded to earnings.  The Company
performed a discounted cash flow analysis, using the factors noted above to
determine the amount of the other than temporary impairment that was applicable
to either credit losses or other factors.  The amount associated with
credit losses, $576,000, was then realized through a charge to earnings for the
six months ended June 30, 2009 as an impairment loss, while the $334,000 change
in the unrealized loss associated with other factors was recorded in other
comprehensive income.





The
following table reconciles the changes in the Company’s credit losses recognized
in earnings.





Three months
                    ending
                  
                  
                  Six months
                    ending(Dollars in
      thousands)
                  
                  June 30,
    2009
                  
                  
                  June 30,
    2009Beginning
      balance
                  
                  $
                  327
                  
                  
                  $
                  -Additional credit
      losses:Securities with no previous other
      than temporary impairment
                  
                  
                  -
                  
                  
                  
                  576Securities with previous other
      than temporary impairments
                  
                  
                  249
                  
                  
                  
                  -Ending
    balance
                  
                  $
                  576
                  
                  
                  $
                  576





It is
reasonably possible that the fair values of the Company’s investment securities
could decline in the future if the overall economy and the financial condition
of some of the issuers continue to deteriorate and the liquidity of these
securities remains low.  As a result, there is a risk that additional
other than temporary impairments may occur in the future and any such amounts
could be material to the Company’s consolidated statements of
earnings.





Maturities
of investment securities at June 30, 2009 are as follows:





(Dollars in
      thousands)
                  
                  Amortized
                    cost
                  
                  
                  Estimated
                    fair valueDue in less than one
      year
                  
                  $
                  27,749
                  
                  
                  $
                  26,262Due after one year but within five
      years
                  
                  
                  25,349
                  
                  
                  
                  25,984Due after five
      years
                  
                  
                  52,837
                  
                  
                  
                  53,115Mortgage-backed securities and
      common stock
                  
                  
                  63,208
                  
                  
                  
                  64,700Total
                  
                  $
                  169,143
                  
                  
                  $
                  170,062





10




For
mortgage-backed securities, actual maturities will differ from contractual
maturities because borrowers have the right to prepay obligations with or
without prepayment penalties.





Other investment securities include
investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”)
stock.  The carrying value of the FHLB stock at June 30, 2009 and
December 31, 2008 was $6.2 million and $7.3 million, respectively, and the
carrying value of the FRB stock at June 30, 2009 and December 31, 2008 was $1.7
million.  These securities are not readily marketable and are required
for regulatory purposes and borrowing availability.  Since there are
no available observable market values, these securities are carried at
cost.  Redemption of these investments is at the option of the FHLB or
FRB.  We have assessed the ultimate recoverability of these stocks and
believe that no impairment has occurred.





4.
            Loans





Loans consisted of the
following:





(Dollars in thousands)
                  
                  June 30,
                    2009
                  
                  
                  Percent of
                    total
                  
                  
                  December 31,
                    2008
                  
                  
                  Percent of
                    totalReal estate
      loans:One-to-four family
      residential
                  
                  $
                  104,342
                  
                  
                  
                  29.0
                  %
                  
                  $
                  112,815
                  
                  
                  
                  30.5
                  %Commercial
                  
                  
                  127,824
                  
                  
                  
                  35.6
                  %
                  
                  
                  126,977
                  
                  
                  
                  34.4
                  %Construction
                  
                  
                  12,709
                  
                  
                  
                  3.5
                  %
                  
                  
                  19,618
                  
                  
                  
                  5.3
                  %Commercial
      loans
                  
                  
                  107,140
                  
                  
                  
                  29.8
                  %
                  
                  
                  101,976
                  
                  
                  
                  27.6
                  %Consumer
    loans
                  
                  
                  7,545
                  
                  
                  
                  2.1
                  %
                  
                  
                  7,937
                  
                  
                  
                  2.2
                  %Total
                  
                  
                  359,560
                  
                  
                  
                  100.0
                  %
                  
                  
                  369,323
                  
                  
                  
                  100.0
                  %Less:  Deferred loan
      fees/costs and loans in process
                  
                  
                  (571
                  )
                  
                  
                  
                  
                  
                  
                  (320
                  )Less:  Allowance for
      loan losses
                  
                  
                  4,827
                  
                  
                  
                  
                  
                  
                  
                  3,871Loans, net
                  
                  $
                  355,306
                  
                  
                  
                  
                  
                  
                  $
                  365,772





A summary
of the activity in the allowance for loan losses is as follows:





Three months ended June 30,
                  
                  
                  Six months ended June 30,(Dollars in
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Beginning
      balance
                  
                  $
                  4,307
                  
                  
                  $
                  3,288
                  
                  
                  $
                  3,871
                  
                  
                  $
                  4,172Provision
      for loan losses
                  
                  
                  800
                  
                  
                  
                  300
                  
                  
                  
                  1,100
                  
                  
                  
                  900Charge-offs
                  
                  
                  (298
                  )
                  
                  
                  (277
                  )
                  
                  
                  (380
                  )
                  
                  
                  (1,780
                  )Recoveries
                  
                  
                  18
                  
                  
                  
                  15
                  
                  
                  
                  236
                  
                  
                  
                  34Ending
      balance
                  
                  $
                  4,827
                  
                  
                  $
                  3,326
                  
                  
                  $
                  4,827
                  
                  
                  $
                  3,326





During
the six months ended June 30, 2009 we had a net loan charge-off of $144,000
compared to $1.7 million of net loan charge-offs for the comparable period of
2008.


11


A summary
of the non-accrual loans is as follows:





(Dollars in
      thousands)
                        
                        June 30,
                          2009
                        
                        
                        December 31,
                          2008Real
      estate loans:One-to-four
      family residential
                        
                        $
                        742
                        
                        
                        $
                        1,358Commercial
                        
                        
                        1,867
                        
                        
                        
                        2,041Construction
                        
                        
                        5,254
                        
                        
                        
                        759Commercial
      loans
                        
                        
                        5,679
                        
                        
                        
                        1,537Consumer
      loans
                        
                        
                        26
                        
                        
                        
                        53Total
      non-accrual loans
                        
                        $
                        13,568
                        
                        
                        $
                        5,748





A summary
of the nonperforming assets is as follows:





(Dollars in
      thousands)
                        
                        June 30,
                          2009
                        
                        
                        December 31,
                          2008Total
      non-accrual loans
                        
                        $
                        13,568
                        
                        
                        $
                        5,748Accruing
      loans over 90 days past due
                        
                        
                        -
                        
                        
                        
                        -Other
      real estate owned
                        
                        
                        1,916
                        
                        
                        
                        1,934Total
      nonperforming assets
                        
                        $
                        15,484
                        
                        
                        $
                        7,682Total
      nonperforming loans to total loans, net
                        
                        
                        3.8%
                        
                        
                        
                        1.6%Total
      nonperforming assets to total assets
                        
                        
                        2.5%
                        
                        
                        
                        1.3%Allowance
      for loan losses to gross loans outstanding
                        
                        
                        1.3%
                        
                        
                        
                        1.0%Allowance
      for loan losses to total nonperforming loans
                        
                        
                        35.6%
                        
                        
                        
                        67.3%





Loans
past due more than a month totaled $15.6 million at June 30, 2009, compared to
$9.4 million at December 31, 2008.  At June 30, 2009, $13.6 million in
loans were on non-accrual status, or 3.8% of net loans, compared to a balance of
$5.7 million in loans on non-accrual status, or 1.6% of net loans, at December
31, 2008.  Non-accrual loans consist primarily of loans greater than
ninety days past due and which are also included in the past due loan
balances.  There were no loans 90
days delinquent and still accruing interest at June 30, 2009 or December 31,
2008.  The increase in non-accrual and past due loans was
primarily driven by a $4.2 million construction loan relationship and a $3.7
million commercial agriculture loan that were classified as non-accrual and past
due during the first six months of 2009.





A summary of the impaired loans is as
follows:




(Dollars in
      thousands)
                        
                        June 30,
                          2009
                        
                        
                        December 31,
                          2008Impaired loans for which an
      allowance has been provided
                        
                        $
                        10,999
                        
                        
                        $
                        1,867Impaired loans for which no
      allowance has been provided
                        
                        
                        2,709
                        
                        
                        
                        5,192Total impaired
      loans
                        
                        
                        13,708
                        
                        
                        
                        7,059Allowance related to impaired
      loans
                        
                        $
                        2,215
                        
                        
                        $
                        705





Our
impaired loans increased primarily because of the same two loans impacting the
non-accrual and past due loan balances.  Our analysis of the two
nonperforming loans mentioned above concluded that the potential exists that the
updated collateral values or sources of repayment may not be sufficient to fully
cover the outstanding loan balances at June 30, 2009.


12


5.
            Fair
      Value Measurements





On January 1, 2008, the Company
adopted the provisions of SFAS No. 157, which defines fair value, establishes a
framework for measuring fair value and expands the disclosures about fair value
measurements.  SFAS No. 157
requires the use of a hierarchy of fair value techniques based upon whether the
inputs to those fair values reflect assumptions other market participants would
use based upon market data obtained from independent sources or reflect the
Company’s own assumptions of market participant valuation.  Effective
January 1, 2009, the Company adopted SFAS No. 157 on certain nonfinancial assets
and liabilities, which include foreclosed real estate, long-lived assets,
goodwill, and core deposit premium, which are recorded at fair value only upon
impairment.  In accordance with SFAS No. 157, the fair value hierarchy
is as follows:





•
      Level 1:
                Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or
  liabilities.


• Level 2:
              Quoted
      prices for similar assets in active markets, quoted prices in markets that
      are not active or quoted prices that contain observable inputs such as
      yield curves, volatilities, prepayment speeds and other inputs derived
      from market data.


• Level 3:
              Quoted
      prices or valuation techniques that require inputs that are both
      significant to the fair value measurement and
  unobservable.





Valuation
methods for instruments measured at fair value on a recurring basis





The Company’s investment
securities classified as available-for-sale include agency securities, municipal
obligations, mortgage-backed securities, pooled trust preferred securities,
certificates of deposits and common stocks.  Quoted exchange prices
are available for the common stock investments, which are classified as Level
1.  Agency securities and mortgage-backed obligations are priced
utilizing industry-standard models that consider various assumptions, including
time value, yield curves, volatility factors, prepayment speeds, default rates,
loss severity, current market and contractual prices for the underlying
financial instruments, as well as other relevant economic
measures.  Substantially all of these assumptions are observable in
the marketplace, can be derived from observable data, or are supported by
observable levels at which transactions are executed in the marketplace and are
classified as Level 2.  Municipal securities are valued using a type
of matrix, or grid, pricing in which securities are benchmarked against the
treasury rate based on credit rating.  These model and matrix
measurements are classified as Level 2 in the fair value
hierarchy.  The Company’s investments in fixed rate certificates of
deposits are valued using a net present value model that discounts the future
cash flows at the current market rates and are classified as Level
2.





The
Company classifies its pooled trust preferred securities as Level
3.  The portfolio consists of three investments in pooled trust
preferred securities issued by financial companies.  The Company has
determined that the observable market data associated with these assets do not
represent orderly transactions in accordance with FSP No. FAS 157-4 and
reflect forced liquidations or distressed sales.  Based on the lack of
observable market data, the Company estimated fair value based on the observable
data available and reasonable unobservable market data.  The Company
estimated fair value based on a discounted cash flow model which used
appropriately adjusted discount rates reflecting credit and liquidity
risks.





The following table represents
the Company’s investment securities that are measured at fair value on a
recurring basis at June 30, 2009 and December 31, 2008 allocated to the
appropriate fair value hierarchy:





As of June 30, 2009Fair value hierarchy(Dollars in
      thousands)
                  
                  Total
                  
                  
                  Level 1
                  
                  
                  Level 2
                  
                  
                  Level 3Assets:Available-for-sale
      securities
                  
                  $
                  170,062
                  
                  
                  $
                  728
                  
                  
                  $
                  169,015
                  
                  
                  $
                  319Liabilities:Derivative
      financial instruments
                  
                  
                  34
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  34





As of December 31, 2008Fair value hierarchy(Dollars in
      thousands)
                  
                  Total
                  
                  
                  Level 1
                  
                  
                  Level 2
                  
                  
                  Level 3Assets:Available-for-sale
      securities
                  
                  $
                  162,245
                  
                  
                  $
                  1,014
                  
                  
                  $
                  160,490
                  
                  
                  $
                  740Derivative
      financial instruments
                  
                  
                  18
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  18




13




The
following table reconciles the changes in the Company’s Level 3 instruments
during the first six months of 2009.





DerivativeAvailable-for
                    
                    
                    financial(Dollars in thousands)
                    
                    sale-securities
                    
                    
                    instrumentsLevel
      3 fair value at December 31, 2008
                    
                    $
                    740
                    
                    
                    $
                    18Transfers
      into Level 3
                    
                    
                    -Total
      gains (losses)Included
      in earnings
                    
                    
                    (576
                    )
                    
                    
                    (52
                    )Included
      in other comprehensive income
                    
                    
                    (155
                    )
                    
                    
                    -Level
      3 asset (liability) fair value at June 30, 2009
                    
                    $
                    319
                    
                    
                    $
                    (34
                    )





Changes
in the fair value of available-for-sale securities are included in other
comprehensive income to the extent the changes are not considered other than
temporary impairments.  Other than temporary impairment tests are
performed on a quarterly basis and any decline in the fair value of an
individual security below its cost that is deemed to be other than temporary
results in a write-down of that security’s cost basis.  During the
first six months of 2009 the Company recorded a $576,000 impairment loss on one
of its pooled trust preferred securities.





The
Company’s derivative financial instruments consist solely of interest rate lock
commitments and corresponding forward sales contracts on mortgage loans held for
sale and are not designated as hedging instruments.  The fair values
of these derivatives are based on quoted prices for similar loans in the
secondary market.  The market prices are adjusted by a factor, based
on the Company’s historical data and its judgment about future economic trends,
which considers the likelihood that a commitment will ultimately result in a
closed loan.  These instruments are classified as Level 3 based on the
unobservable nature of these assumptions.  The amounts are included in
other assets or other liabilities on the consolidated balance sheets and gains
on sale of loans in the consolidated statements of earnings.





Valuation
methods for instruments measured at fair value on a nonrecurring
basis





The
Company’s other investment securities include investments in Federal Home Loan
Bank of Topeka (“FHLB”) and Federal Reserve Bank (“FRB”) stock, which are held
for regulatory purposes.  These investments generally have
restrictions on the sale and/or liquidation of stock and the carrying value is
approximately equal to fair value.  Fair value measurements for these
securities are classified as Level 3 based on the undeliverable nature and
related credit risk.





The
Company does not value its loan portfolio at fair value, however adjustments are
recorded on certain loans to reflect the impaired value on the underlying
collateral.  Collateral values are generally reviewed on a
loan-by-loan basis through independent appraisals.  Appraised values
may be discounted based on management’s historical knowledge, changes in market
conditions and/or management’s expertise and knowledge of the client and the
client’s business.  Because many of these inputs are unobservable the
valuations are classified as Level 3.  The carrying value of the
Company’s impaired loans was $13.7 million, before an allocated allowance of
$2.2 million at June 30, 2009, compared to a carrying value of $7.1 million and
allocated allowance of $705,000 at December 31, 2008.





Mortgage
loans originated and intended for sale in the secondary market are carried at
the lower of cost or estimated fair value, determined on an aggregate
basis.  The mortgage loan valuations are based on quoted secondary
market prices for similar loans and are classified as Level 2.





The Company’s measure of
its goodwill is based on market based valuation techniques, includingreviewing the Company’s stock price and valuation multiples as compared
to recent financial industry acquisition multiples to estimate the fair value of
the Company’s single reporting unit.  The fair value measurements are
classified as Level 3.





Core
deposit intangibles are recognized at the time core deposits are acquired, using
valuation techniques which calculate the present value of the estimated net cost
savings relative to the Company’s alternative costs of funds over the expected
remaining economic life of the deposits.  Subsequent evaluations are
made when facts or circumstances indicate potential impairment may have
occurred.  The models incorporate market discount rates, estimated
average core deposit lives and alternative funding rates.  The fair
value measurements are classified as Level 3.




14





The
Company measures its mortgage servicing rights at the lower of cost or fair
value, and amortizes them over the period equal to estimated net servicing
income.  Periodic impairment assessments are performed based on fair
value estimates at the reporting date.  The fair value of mortgage
servicing rights are estimated based on a valuation model which calculates the
present value of estimated future cash flows associated with servicing the
underlying loans.  The model incorporates assumptions that market
participants use in estimating future net servicing income, including estimated
prepayment speeds, market discount rates, cost to service, and other servicing
income, including late fees.  The fair value measurements are
classified as Level 3.





Other
real estate owned include assets acquired through, or in lieu of, foreclosure
are initially recorded at the date of foreclosure at fair value of collateral
less estimates selling costs.  Subsequent to foreclosure, valuations
are updated periodically and are based upon appraisals, third party price
opinions or internal pricing models and are classified as Level
3.   During the first six months of 2009 the Company recorded an
impairment charge of $100,000 on a single property with a fair value of
$170,000.





The
following table represents the Company’s assets that are measured at fair value
on a nonrecurring basis at June 30, 2009 allocated to the appropriate fair value
hierarchy:





(Dollars
      in thousands)
                        
                        
                        
                        
                        Fair value hierarchy
                        
                        
                        Total
      gainsAssets:
                        
                        Total
                        
                        
                        Level 1
                        
                        
                        Level 2
                        
                        
                        Level 3
                        
                        
                        (losses)Other
      investment securities
                        
                        $
                        7,909
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        7,909
                        
                        
                        $
                        -Impaired
      loans
                        
                        
                        11,492
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        11,492
                        
                        
                        
                        (1,510
                        )Loans
      held for sale
                        
                        
                        7,603
                        
                        
                        
                        -
                        
                        
                        
                        7,603
                        
                        
                        
                        -
                        
                        
                        
                        -Other
      real estate owned
                        
                        
                        1,916
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,916
                        
                        
                        
                        (100
                        )





6.
              Fair
      Value of Financial
Instruments





Fair
value estimates of the Company’s financial instruments as of June 30, 2009 and
December 31, 2008, including methods and assumptions utilized, are set forth
below:





As of June 30, 2009
                    
                    
                    As of December 31, 2008(Dollars
      in thousands)Carrying
                    
                    
                    Estimated
                    
                    
                    Carrying
                    
                    
                    Estimatedamount
                    
                    
                    fair value
                    
                    
                    amount
                    
                    
                    fair valueCash and cash
      equivalents
                    
                    $
                    18,853
                    
                    
                    $
                    18,853
                    
                    
                    $
                    13,788
                    
                    
                    $
                    13,788Investment
      securities
                    
                    
                    177,971
                    
                    
                    
                    177,971
                    
                    
                    
                    171,297
                    
                    
                    
                    171,297Loans, net of unearned fees and
      allowance for loan losses
                    
                    
                    355,306
                    
                    
                    
                    357,163
                    
                    
                    
                    365,772
                    
                    
                    
                    368,558Loans held for
      sale
                    
                    
                    7,544
                    
                    
                    
                    7,603
                    
                    
                    
                    1,487
                    
                    
                    
                    1,749Mortgage servicing
      rights
                    
                    
                    594
                    
                    
                    
                    1,432
                    
                    
                    
                    170
                    
                    
                    
                    1,008Non-interest bearing demand
      deposits
                    
                    
                    57,290
                    
                    
                    
                    57,290
                    
                    
                    
                    49,823
                    
                    
                    
                    49,823Money market and NOW
      deposits
                    
                    
                    154,635
                    
                    
                    
                    154,635
                    
                    
                    
                    150,116
                    
                    
                    
                    150,116Savings
      deposits
                    
                    
                    28,926
                    
                    
                    
                    28,926
                    
                    
                    
                    26,203
                    
                    
                    
                    26,203Time
    deposits
                    
                    
                    220,727
                    
                    
                    
                    222,394
                    
                    
                    
                    213,404
                    
                    
                    
                    214,859Total
    deposits
                    
                    
                    461,578
                    
                    
                    
                    463,245
                    
                    
                    
                    439,546
                    
                    
                    
                    441,001FHLB
    borrowings
                    
                    
                    61,117
                    
                    
                    
                    63,745
                    
                    
                    
                    77,319
                    
                    
                    
                    81,986Other
      borrowings
                    
                    $
                    28,855
                    
                    
                    $
                    21,285
                    
                    
                    $
                    27,047
                    
                    
                    $
                    23,298





Methods
and Assumptions Utilized





The
carrying amount of cash and cash equivalents, repurchase agreements, federal
funds sold, and accrued interest receivable and payable are considered to
approximate fair value.





A
detailed description of the estimated fair value of investment securities,
mortgage serving rights and loans held-for-sale is available in Note
5.




15





The
estimated fair value of the Company’s loan portfolio is based on the segregation
of loans by collateral type, interest terms, and maturities.  In
estimating the fair value of each category of loans, the carrying amount of the
loan is reduced by an allocation of the allowance for loan
losses.  Such allocation is based on management’s loan classification
system, which is designed to measure the credit risk inherent in each
classification category.  The estimated fair value of performing
variable rate loans is the carrying value of such loans, reduced by an
allocation of the allowance for loan losses.  The estimated fair value
of performing fixed rate loans is calculated by discounting scheduled cash flows
through the estimated maturity using estimated market discount rates that
reflect the interest rate risk inherent in the loan, reduced by an allocation of
the allowance for loan losses.  The estimate of maturity is based on
the Company’s historical experience with repayments for each loan
classification, modified, as required, by an estimate of the effect of current
economic and lending conditions.  The fair value for nonperforming
loans is the estimated fair value of the underlying collateral based on recent
external appraisals or other available information, which generally approximates
carrying value, reduced by an allocation of the allowance for loan
losses.





The
estimated fair value of deposits with no stated maturity, such as non-interest
bearing demand deposits, savings, money market accounts, and NOW accounts, is
equal to the amount payable on demand.  The fair value of interest
bearing time deposits is based on the discounted value of contractual cash flows
of such deposits.  The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.





The fair
value of advances from the FHLB is estimated using current rates offered for
similar borrowings.  The fair values of other borrowings are estimated
using current rates offered for similar borrowings.





Off-Balance
Sheet Financial Instruments





The fair
value of letters of credit and commitments to extend credit is based on the fees
currently charged to enter into similar agreements.  The aggregate of
these fees is not material.





Limitations





Fair
value estimates are made at a specific point in time based on relevant market
information and information about the financial instruments.  These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company’s entire holdings of a particular financial
instrument.  Because no market exists for a significant portion of the
Company’s financial instruments, fair value estimates are based on judgments
regarding future loss experience, current economic conditions, risk
characteristics of various financial instruments, and other
factors.  These estimates are subjective in nature and involve
uncertainties and matters of significant judgment, and, therefore, cannot be
determined with precision.  Changes in assumptions could significantly
affect the estimates.  Fair value estimates are based on existing
balance sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are not
considered financial instruments.





7.
            Earnings
      per Share





Basic
earnings per share have been computed based upon the weighted average number of
common shares outstanding during each period.  Diluted earnings per
share includes the effect of all potential common shares outstanding during each
period.  Earnings and dividends per share for prior periods have been
adjusted to give effect to the 5% stock dividend paid by the Company in December
2008.





The
shares used in the calculation of basic and diluted earnings per share are shown
below:





(Dollars
      in thousands, except per share data)
                
                Three months ended June 30,
                
                
                Six months ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      earnings available to common stockholders
                
                $
                1,012
                
                
                $
                1,576
                
                
                $
                2,021
                
                
                $
                2,643Weighted
      average common shares outstanding – basic
                
                
                2,371,450
                
                
                
                2,382,302
                
                
                
                2,371,706
                
                
                
                2,426,580Dilutive
      stock options
                
                
                4,790
                
                
                
                8,926
                
                
                
                4,942
                
                
                
                10,113Weighted
      average common shares – diluted
                
                
                2,376,240
                
                
                
                2,391,228
                
                
                
                2,376,648
                
                
                
                2,436,693Net
      earnings per share:Basic
                
                $
                0.43
                
                
                $
                0.66
                
                
                $
                0.85
                
                
                $
                1.09Diluted
                
                $
                0.43
                
                
                $
                0.66
                
                
                $
                0.85
                
                
                $
                1.08




16


8.
            Comprehensive
      Income





The Company’s other comprehensive
income (loss) consists of the unrealized holding gains and losses on available
for sale securities as shown below.




(Dollars
      in thousands)
                
                Three months ended June 30,
                
                
                Six months ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      earnings
                
                $
                1,012
                
                
                $
                1,576
                
                
                $
                2,021
                
                
                $
                2,643Unrealized
      holding losses on available for sale securities for which a portion of an
      other than temporary impairment has been recorded in
    earnings
                
                
                (60
                )
                
                
                -
                
                
                
                (185
                )
                
                
                -Unrealized
      holding losses on all other available for sale securities
                
                
                33
                
                
                
                (3,359
                )
                
                
                (480
                )
                
                
                (1,005
                )Reclassification
      adjustment for losses (gains) included in earnings
                
                
                249
                
                
                
                (497
                )
                
                
                576
                
                
                
                (497
                )Net
      unrealized gains (losses)
                
                
                222
                
                
                
                (3,856
                )
                
                
                (89
                )
                
                
                (1,502
                )Income
      tax expense (benefit)
                
                
                85
                
                
                
                (1,465
                )
                
                
                (46
                )
                
                
                (571
                )Total
      comprehensive income (loss)
                
                $
                1,149
                
                
                $
                (815
                )
                
                $
                1,978
                
                
                $
                1,712





9.
            Acquisition





The
Company completed the acquisition, by its wholly-owned subsidiary, Landmark
National Bank, of a branch located at 4621 W. 6th Street, in Lawrence, Kansas
from CornerBank, N.A. effective May 8, 2009.  Pursuant to the
agreement, Landmark National Bank purchased approximately $4.0 million in loans,
assumed approximately $6.4 million in deposits and acquired approximately $2.6
million in related branch premises and equipment.  The transaction
expands Landmark National Bank’s banking presence in Lawrence, Kansas and gives
the bank a second location in the community.


17


10.
            Impact
      of Recent Accounting Pronouncements





In
December 2007, the FASB issued SFAS No. 141 (revised), “Business
Combinations.”  The statement retains the fundamental
requirements in Statement No. 141 that the acquisition method of accounting be
used for business combinations, but broadens the scope of Statement No. 141 and
contains improvements to the application of this method.  The
Statement requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date.  Costs incurred
to effect the acquisition are to be recognized separately from the
acquisition.  Assets and liabilities arising from contingent
considerations must be measured at fair value as of the acquisition
date.  The statement also changes the accounting for negative goodwill
arising from a bargain purchase, requiring recognition in earnings instead of
allocation to assets acquired.  The Company adopted this statement on
January 1, 2009.





Also in
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No.
51.”  This statement amends ARB No. 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary.  It also amends certain of ARB
No. 51’s consolidation procedures for consistency with the requirements of SFAS
No. 141 (revised 2007), “Business
Combinations.”  The Company adopted this statement on January
1, 2009.  The adoption of this statement did not have a material
effect on our consolidated financial statements.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No.
133.”  This statement requires enhanced disclosures about how
and why an entity uses derivative instruments, how derivative instruments and
related hedged items are accounted for, and how these activities affect its
financial position, financial performance, and cash flows. The Company adopted
this statement on January 1, 2009.  The adoption of this statement did
not have a material effect on our consolidated financial statements.





In April
2009, the FASB issued FSP No. SFAS 115-2 and SFAS 124-2, “Recognition and Presentation of
Other Than Temporary Impairments.”  This position amends
guidance for recognizing and reporting other than temporary impairments of debt
securities and improves the presentation of other than temporary impairments in
financial statements for both debt and equity securities.  The
position requires entities to separate an other than temporary impairment of a
debt security into credit related losses and other factors when management
asserts that it does not have the intent to sell the security and it is more
likely than not that it will not be required to sell the security before
recovery of its cost basis.  The amount of other than temporary
impairment related credit losses is recognized in earnings while the amount
related to other factors is recorded in other comprehensive
income.  The Company adopted this position effective January 1, 2009
and applied the guidance to its other than temporary impairment analysis during
the first and second quarter of 2009, including the pooled trust preferred
investment security which resulted in the recognition of a credit related
impairment of $576,000 in earnings while the noncredit-related loss of $334,000
is recognized in accumulated other comprehensive income.





In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not
Orderly.”  The position provides additional guidance for
estimating fair value in accordance with SFAS No. 157 “Fair Value Measurements”
when the volume and level of activity for an asset or liability, in relation to
normal market activity, has significantly decreased.  The guidance
emphasizes that the objective of fair value measurement remains the same,
determining the price that would be received or paid in an orderly transaction
between market participants at the measurement date under current market
conditions.  The Company adopted this position as of January 1, 2009
and applied the guidance to its pooled trust preferred
securities.





In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair
Value of Financial Instruments.”  The position expands
disclosures on the fair value of financial instruments to include interim
reporting periods, in addition to annual disclosures.  The Company
adopted this position on April 1, 2009 and has included the required disclosures
in the attached footnotes.





In May
2009, the FASB issued SFAS No. 165, “Subsequent
Events.”  This statement establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued.  In particular this
statement sets forth the period after the balance sheet date during which
management should evaluate events or transactions for potential recognition or
disclosure in the financial statements, the circumstances under which an entity
should recognize subsequent events or transactions and the disclosures
required.  The Company adopted this statement for the quarter ended
June 30, 2009 and has concluded there were no material subsequent events through
August 13, 2009, the date that financial statements were issued.




18





In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
Financial Assets – an amendment of FASB Statement No.
140.”  This statement clarifies and improves the reporting
requirements of FASB No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities.”  The statement also eliminates the concept of
qualifying special purpose entities for accounting purposes.  For
calendar year companies, this statement is effective for annual periods ending
on December 31, 2009 and for all interim and annual periods
thereafter.  The Company does not expect that the adoption of this
statement will have a material effect on consolidated financial statements.





In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R).”  This statement improves the financial reporting of
variable interest entities and provides clarification as a result of the
elimination of qualifying special purpose entities in FASB No.
166.  For calendar year companies, this statement is effective for
annual periods ending on December 31, 2009 and for all interim and annual
periods thereafter.  The Company does not expect that the adoption of
this statement will have a material effect on consolidated financial
statements.





In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB No. 162.”  This statement establishes the
FASB Accounting Standards Codification (Codification) as the source of
authoritative U.S. generally accepted accounting rules (GAAP).  Rules
and interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants.  On the effective date of this Statement, the
Codification will supersede all then-existing non-SEC accounting and reporting
standards.  Following this Statement, the Board will not issue new
standards in the form of Statements, FASB Staff Positions, or Emerging Issues
Task Force Abstracts.  Instead, it will issue Accounting Standards
Updates.  The Board will not consider Accounting Standards Updates as
authoritative in their own right. Accounting Standards Updates will serve only
to update the Codification, provide background information about the guidance,
and provide the bases for conclusions on the change(s) in the
Codification.  This Statement is effective for financial statements
issued for interim and annual periods ending after September 15,
2009.


19


ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





Overview.  Landmark Bancorp,
Inc. is a bank holding company incorporated under the laws of the State of
Delaware and is engaged in the banking business through its wholly-owned
subsidiary, Landmark National Bank.  Landmark Bancorp is listed on the
NASDAQ Global Market under the symbol “LARK”.  Landmark National Bank
is dedicated to providing quality financial and banking services to its local
communities.  Landmark National Bank originates commercial, commercial
real estate, one-to-four family residential mortgage loans, consumer loans,
multi-family residential mortgage loans and home equity loans.





Our results of operations depend
generally on net interest income, which is the difference between interest
income from interest-earning assets and interest expense on interest-bearing
liabilities.  While net interest income was stable for the second
quarter of 2009, results were affected by certain non-interest related
items.  Net interest income is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows.  In addition, we are subject to interest rate risk to the
degree that our interest-earning assets mature or reprice at different times, or
at different speeds, than our interest-bearing liabilities.  Our
results of operations are also affected by non-interest income, such as service
charges, loan fees and gains from the sale of newly originated loans and gains
or losses on investments.  Our principal operating expenses, aside
from interest expense, consist of compensation and employee benefits, occupancy
costs, data processing expenses and provision for loan losses.





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





Critical
Accounting Policies.  Critical
accounting policies are those which are both most important to the portrayal of
our financial condition and results of operations, and require our management’s
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently
uncertain.  Our critical accounting policies relate to the allowance
for loan losses, the valuation of investment securities, income taxes and
business acquisitions, all of which involve significant judgment by our
management.





Information about our
critical accounting policies is included under Item 7, Management’s Discussion
and Analysis of Financial Condition and Results of Operations in our Annual
Report on Form 10-K for the year ended December 31, 2008.  The only
change in our critical accounting policies since December 31, 2008 is a result
of the adoption ofFSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other Than Temporary Impairments.”  Based on the guidance in
the FSP, now if we deem a decline in the fair value of a debt security to be
other than temporary, we lower the cost basis, through a charge to earnings, by
the amount of credit losses inherent in the investment versus writing the
security down to market value.





Summary of
Results.  During the second
quarter of 2009, our net earnings declined by $564,000 to $1.0 million as
compared to net earnings of $1.6 million in the same period of
2008.  During 2009 we identified a $1.0 million par investment in a
pooled trust preferred security as other than temporarily
impaired.  The net credit-related impairment charge related to this
security was approximately $249,000 for the second quarter of
2009.  Also contributing to the decrease in earnings was an increase
in our provision for loan losses of $500,000 for the second quarter of 2009 as
compared to 2008 based on our analysis of our loan portfolio, which included the
increased level of non-accrual loans as well as the effects of the current
economic environment on our loan portfolio.  Also during the second
quarter of 2009 our FDIC insurance premiums increased by $435,000 as the result
of a $277,000 special assessment, higher assessment rates and the depletion of
our FDIC credits.  Partially offsetting the increased expenses was an
increase in non-interest income, which was primarily attributable to an $805,000
increase in gains on sale of loans, driven by higher origination volumes of
residential real estate loans that were sold in the secondary
market.  Results for the second quarter of 2008 included $497,000 of
gains on sales of investment securities.





During
the first six months of 2009, our net earnings declined by $622,000 to $2.0
million as compared to net earnings of $2.6 million in the same period of
2008.  During the first six months of 2009 we identified a $1.0
million par investment in a pooled trust preferred security as other than
temporarily impaired.  The net credit-related impairment related
charge to this security was approximately $576,000 for the six months ended June
30, 2009.  Our provision for loan losses increased by $200,000 for the
first six months of 2009 as compared to 2008 based on our analysis of our loan
portfolio, which included the increased level of non-accrual loans as well as
the effects of the current economic environment on our loan
portfolio.  Also during the first six months of 2009 our FDIC
insurance premiums increased by $454,000 as the result of a $277,000 special
assessment, higher assessment rates and the depletion of our FDIC
credits.  Partially offsetting the increased expenses was an increase
in non-interest income, which was primarily attributable to a $1.2 million
increase in gains on sale of loans driven by higher origination volumes of
residential real estate loans that were sold in the secondary
market.  Results for the first six months of 2008 included a $246,000
gain from the prepayment of a FHLB advance, which represented the remaining
unamortized fair value adjustment recorded in purchase accounting and $497,000
of gains on sales of investment securities.




20





Our net
interest margin increased from 3.47% for the second quarter of 2008 to 3.58% for
the second quarter of 2009.  For the six months ended June 30, 2008
and 2009, our net interest margin increased from 3.48% to 3.52%,
respectively.  For each period, we were able to reduce our cost of
deposits enough to offset the lower yields earned on loans and investment
securities in markets that experienced a dramatic decline in benchmark interest
rates that began in late 2007 and continued throughout 2008 and
2009.  The lower cost of funding allowed us to maintain our net
interest margin in markets that had considerable competitive pricing
pressures.  While the competitive pricing pressures have eased
recently, they could return during 2009 which may make maintaining or increasing
our net interest margin difficult.





The following table summarizes earnings
and key performance measures for the periods presented.





(Dollars
      in thousands)
                      
                      Three months ended June 30,
                      
                      
                      Six months ended June 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Net
      earnings:Net
      earnings
                      
                      $
                      1,012
                      
                      
                      $
                      1,576
                      
                      
                      $
                      2,021
                      
                      
                      $
                      2,643Basic
      earnings per share
                      
                      $
                      0.43
                      
                      
                      $
                      0.66
                      
                      
                      $
                      0.85
                      
                      
                      $
                      1.09Diluted
      earnings per share
                      
                      $
                      0.43
                      
                      
                      $
                      0.66
                      
                      
                      $
                      0.85
                      
                      
                      $
                      1.08Earnings
      ratios:Return
      on average assets (1)
                      
                      
                      0.67
                      %
                      
                      
                      1.03
                      %
                      
                      
                      0.67
                      %
                      
                      
                      0.87
                      %Return
      on average equity (1)
                      
                      
                      7.81
                      %
                      
                      
                      12.51
                      %
                      
                      
                      7.81
                      %
                      
                      
                      10.38
                      %Dividend
      payout ratio
                      
                      
                      44.19
                      %
                      
                      
                      27.54
                      %
                      
                      
                      44.71
                      %
                      
                      
                      33.33
                      %Net
      interest margin (1) (2)
                      
                      
                      3.58
                      %
                      
                      
                      3.47
                      %
                      
                      
                      3.52
                      %
                      
                      
                      3.48
                      %





(1)
            The
      ratio has been annualized and is not necessarily indicative of the results
      for the entire year.


(2)
            Net
      interest margin is presented on a fully taxable equivalent basis, using a
      34% federal tax rate.





Interest
Income.  Interest income for the quarter ended June 30, 2009,
decreased $1.1 million, or 13.2%, to $6.9 million from $8.0 million in the same
period of 2008.  Interest income on loans decreased $934,000, or
15.1%, to $5.2 million for the quarter ended June 30, 2009 due primarily to
decreases in the yields earned on our loans as rates declined during 2008 and as
a result of decreased outstanding loan balances.  Our tax equivalent
yields earned on loans declined from 6.57% to 5.83% during the second quarter of
2008 to 2009.  Average loans outstanding for the quarter ended June
30, 2009 decreased to $362.4 million from $379.2 million for
2008.  Interest income on investment securities decreased $123,000, or
6.7%, to $1.7 million for the second quarter of 2009, as compared to
2008.  Average investment securities outstanding increased from $173.6
million for the quarter ended June 30, 2008, to $185.1 million for
2009.  Offsetting the increase in average investments outstanding for
the comparable period were lower yields earned on the investments, which
declined from 4.83% during the second quarter of 2008 to 4.31% during the second
quarter of 2009.  The increased levels of investments were the result
of the increased liquidity primarily from lower outstanding loan
balances.





Interest
income for the six months ended June 30, 2009, decreased $2.6 million, or 16.0%,
to $13.8 million from $16.5 million in the same period of
2008.  Interest income on loans decreased $2.4 million, or 18.8%, to
$10.4 million for the six months ended June 30, 2009 due primarily to decreases
in the yields earned on our loans as rates declined during 2008 and as a result
of decreased outstanding loan balances.  Our tax equivalent yields
earned on loans declined from 6.81% to 5.78% during the first six months of 2008
to 2009.  Average loans outstanding for the six months ended June 30,
2009 decreased to $365.4 million from $380.3 million for
2008.  Interest income on investment securities decreased $231,000, or
6.3%, to $3.4 million for the first six months of 2009, as compared to
2008.  Average investment securities outstanding increased from $170.2
million for the six months ended June 30, 2008, to $183.6 million for
2009.  Offsetting the increase in average investments outstanding for
the comparable period were lower yields earned on the investments, which
declined from 4.95% during the first six months of 2008 to 4.39% during the
first six months of 2009.  The higher levels of investments was the
result of the increased liquidity from lower outstanding loan
balances.




21





Interest
Expense.  Interest expense
during the quarter ended June 30, 2009 decreased $1.1 million, or 32.5%, as
compared to the same period of 2008.  For the second quarter of 2009
interest expense on interest-bearing deposits decreased $1.1 million, or 40.4%
as a result of lower rates on deposit balances, primarily lower rates for our
maturing certificates of deposit and lower rates on money market and NOW
accounts due to the decline in interest rates experienced during 2008 and the
first six months of 2009.  Our total cost of deposits declined from
2.64% during the first quarter of 2008 to 1.56% during the same period of
2009.  For the second quarter of 2009 interest expense on borrowings
decreased $86,000, or 9.6%, due primarily to outstanding balances on our
borrowings.  Our cost of borrowing increased from 3.51% in the second
quarter of 2008 to 3.53% in the same period of 2009.





Interest
expense during the six months ended June 30, 2009 decreased $2.7 million, or
35.2%, as compared to the same period of 2008.  For the first six
months of 2009 interest expense on interest-bearing deposits decreased $2.5
million, or 44.3%, as a result of lower rates on deposit balances, primarily
lower rates for our maturing certificates of deposit and lower rates on money
market and NOW accounts due to the decline in interest rates experienced during
2008.  Our total cost of deposits declined from 2.89% during the first
six months of 2008 to 1.61% during the same period of 2009.  For the
first six months of 2009 interest expense on borrowings decreased $118,000, or
6.5%, due primarily to lower outstanding borrowings and lower rates on our
borrowings.  Our cost of borrowing declined from 3.61% in the first
six months of 2008 to 3.55% in the same period of 2009.





Net Interest
Income.  Net interest
income for the quarter ended June 30, 2009 totaled $4.6 million, increasing
$87,000, or 1.9%, as compared to the quarter ended June 30, 2008.  Our
net interest margin, on a tax equivalent basis, increased from 3.47% during the
second quarter of 2008 to 3.58% during the second quarter of 2009.





Net
interest income for the six months ended June 30, 2009 totaled $9.0 million,
increasing $17,000, or 0.2%, as compared to the six months ended June 30,
2008.  Our net interest margin, on a tax equivalent basis, increased
from 3.48% for the six months ending June 30, 2008 to 3.52% for the same period
in 2009.





See the
Rate\Volume Table at the end of Item 2 Management’s Discussion and Analysis of
Financial Condition for additional details on asset yields, liability rates and
net interest margin.





Provision for
Loan Losses.  We maintain, and
our Board of Directors monitors, an allowance for losses on
loans.  The allowance is established based upon management's periodic
evaluation of known and inherent risks in the loan portfolio, review of
significant individual loans and collateral, review of delinquent loans, past
loss experience, adverse situations that may affect the borrowers’ ability to
repay, current and expected market conditions, and other factors management
deems important.  Determining the appropriate level of reserves
involves a high degree of management judgment and is based upon historical and
projected losses in the loan portfolio and the collateral value of specifically
identified problem loans.  Additionally, allowance strategies and
policies are subject to periodic review and revision in response to a number of
factors, including current market conditions, actual loss experience and
management's expectations.





The
provision for loan losses for the quarter ended June 30, 2009 was $800,000,
compared to a provision of $300,000 during the same period of
2008.  For the six months ended June 30, 2009 our provision for loan
losses was $1.1 million as compared to $900,000 for the same period of
2008.  The provision remains elevated compared to historical levels
prior to 2008, due to the difficult conditions that continue to exist in the
economy as well as increased levels of nonperforming loans in our
portfolio.  The higher provision for loan losses is based upon our
analysis of our loan portfolio as well as the effects of the distressed market
conditions on the loan portfolio.  The increased levels of loan loss
provision will likely continue in the current economic environment, particularly
given the continued uncertainty regarding the length and severity of the
recession we are experiencing.  For further discussion of the
allowance for loan losses, refer to the “Asset Quality and Distribution”
section.





Non-interest
Income.  Non-interest
income increased $875,000, or 49.7%, for the quarter ended June 30, 2009, to
$4.5 million, as compared to the six months ended June 30, 2008.  The
increase was primarily attributable to an increase of $805,000 in gains on sale
of loans.  The increased gains on sales of loans were driven by higher
origination volumes of residential real estate loans that were sold in the
secondary market.





Non-interest
income increased $961,000, or 26.9%, for the six months ended June 30, 2009, to
$4.5 million, as compared to the six months ended June 30, 2008.  The
increase was primarily attributable to an increase of $1.2 million in gains on
sale of loans.  The increased gains on sales of loans were driven by
higher origination volumes of residential real estate loans that were sold in
the secondary market.  Partially offsetting the increased gains on
sales of loans, was a $246,000 gain that was recognized in the first quarter of
2008 from the prepayment of a FHLB advance, which represented the remaining
unamortized fair value adjustment required by purchase accounting.




22





Investment
Securities Gains (Losses).  During the second
quarter of 2009 we identified a $1.0 million par investment in a pooled trust
preferred security as other than temporarily impaired.  The same
investment was also identified as other than temporarily impaired during the
first quarter of 2009, but experienced increased levels of deferrals and
defaults during the second quarter of 2009 which exceeded our expectations
resulting in an additional net credit-related impairment loss on this security
of $249,000 in the second quarter of 2009.  During the first six
months of 2009 the net credit-related impairment loss totaled $576,000 on the
$1.0 million par investment in the pooled trust preferred security identified as
other than temporarily impaired.  In the second quarter of 2008 we
recorded $497,000 of gains on sales of investment securities.





Non-interest
Expense.  Non-interest
expense increased $682,000, or 16.0%, to $4.9 million for the quarter ended June
30, 2009, as compared to the same period of 2008.  The increase was
primarily driven by increases of $435,000 in FDIC insurance premiums, $106,000
in compensation and benefits, and $71,000 in professional fees.  The
increase in FDIC insurance premiums was the result of a $277,000 special
assessment, which affected all FDIC insured institutions, as well as higher
assessment rates and the depletion of our FDIC assessment
credits.  The increase in compensation and benefits was driven by
higher salary costs and the addition of employees resulting from the acquisition
of a branch in Lawrence, Kansas.  The increases in professional fees
are due primarily to the legal costs associated with our branch
acquisition.





Non-interest
expense increased $848,000, or 9.9%, to $9.4 million for the six months ended
June 30, 2009, as compared to the same period of 2008.  The increase
was primarily driven by increases of $454,000 in FDIC insurance premiums,
$154,000 in compensation and benefits, $131,000 in professional fees and
$129,000 in foreclosure and other real estate expenses.  The increase
in FDIC insurance premiums was the result of a $277,000 special assessment,
which affected all FDIC insured institutions, as well as higher assessment rates
and the depletion of our FDIC assessment credits.  The increase in
compensation and benefits was driven by higher salary costs and the addition of
employees resulting from the acquisition of a branch in Lawrence,
Kansas.  The increases in professional fees are primarily associated
with our branch acquisition.  The increase in foreclosure and other
real estate expenses, which is included in other non-interest expenses, was the
result of increased foreclosure activity and other real estate
balances.





Income Tax
Expense.  Income tax
expense decreased $402,000, or 67.8%, from $594,000 for the quarter ended June
30, 2008, to $192,000 for the quarter ended June 30, 2009.  The
effective tax rate for the second quarter of 2009 was 15.9% compared to 27.4%
during the second quarter of 2008.  The decline in the effective tax
rate was primarily driven by lower taxable income as a percentage of earnings
before income taxes, while tax exempt income remained relatively constant
between the periods.





Income
tax expense decreased $522,000, or 57.1%, from $914,000 for the six months ended
June 30, 2008, to $393,000 for the six months ended June 30,
2009.  The effective tax rate for the first six months of 2009 was
16.3% compared to 25.7% during the first six months of 2008.  The
decline in the effective tax rate was primarily driven by lower taxable income
as a percentage of earnings before income taxes, while tax exempt income
remained relatively constant between the periods.


23


Asset Quality and
Distribution.  Our primary
investing activities are the origination of commercial, commercial real estate,
mortgage and consumer loans and the purchase of investment
securities.  Total assets increased to $613.1 million at June 30,
2009, compared to $602.2 million at December 31, 2008.  Net loans,
excluding loans held for sale, decreased to $355.3 million at June 30, 2009 from
$365.8 million at December 31, 2008.  The reduction in our total loans
is primarily the result of reducing our exposure to construction loans in
response to the current issues affecting real estate markets in addition to our
normal one-to-four family residential loan runoff.





The allowance for losses on loans is
established through a provision for losses on loans based on our evaluation of
the risk inherent in the loan portfolio and changes in the nature and volume of
its loan activity.  Such evaluation, which includes a review of all
loans with respect to which full collectibility may not be reasonably assured,
considers the fair value of the underlying collateral, economic conditions,
historical loan loss experience, level of classified loans and other factors
that warrant recognition in providing for an adequate allowance for losses on
loans.  During 2009, in response to our assessment that the economic
climate continues to show signs of weakness and the increase in our
non-performing assets, we have increased our provision for loan
losses.  As a result our allowance for loan losses has increased to
$4.8 million at June 30, 2009.  We feel that higher levels of
provisions for loan losses are justified based upon our analysis of our loan
portfolio as well as the effects of the depressed market conditions on our loan
portfolio.  We feel the external risks within the environment which we
operate remain present today and will need to be continuously
monitored.  We have identified the stresses in our loan portfolio and
are working to reduce the risks of certain loan exposures, including
significantly reducing our exposure to construction and land development
loans.  Although we believe that we use the best information available
to determine the allowance for loan losses, unforeseen market conditions could
result in adjustment to the allowance for loan losses.  In addition,
net earnings could be significantly affected if circumstances differ
substantially from the assumptions used in establishing the allowance for loan
losses.





Loans past due more than a month
totaled $15.6 million at June 30, 2009, compared to $9.4 million at December 31,
2008.    At June 30, 2009, $13.6 million in loans were on
non-accrual status, or 3.8% of net loans, compared to a balance of $5.7 million
in loans on non-accrual status, or 1.6% of net loans, at December 31,
2008.  Non-accrual loans consist primarily of loans greater than
ninety days past due and which are also included in the past due loan
balances.  There were no loans 90
days delinquent and still accruing interest at June 30, 2009 or December 31,
2008.  The increase in non-accrual and past due loans was
primarily driven by a $4.2 million construction loan relationship and a $3.7
million commercial agriculture loan that were classified as non-accrual and past
due during the first six months of 2009.  Our impaired loans increased
primarily because of the same two loans that impacted non-accrual and past due
loan balances.  Our analysis of the two nonperforming loans mentioned
above concluded that the potential exists that the updated collateral values or
sources of repayment may not be sufficient to fully cover the outstanding loan
balances.  As part of the Company’s credit risk management, we
continue to aggressively manage the loan portfolio to identify problem loans and
have placed additional emphasis on its commercial real estate and construction
relationships.  During the six months ended June 30, 2009 we had a net
loan charge-off of $144,000 compared to $1.7 million of net loan charge-offs for
the comparable period of 2008.  The net loan charge-off improved as
the result of a $200,000 deficiency settlement on previously charged-off
construction loans which were foreclosed on during 2009 and lower total
charge-offs during the first six months of 2009 as compared to
2008.





Liability
Distribution.  Our primary
ongoing sources of funds are deposits, proceeds from principal and interest
payments on loans and investment securities and proceeds from the sale of
mortgage loans.  While maturities and scheduled amortization of loans
are a predictable source of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions, competition
and the restructuring of the financial services industry.  Total
deposits increased $22.1 million to $461.6 million at June 30, 2009, from $439.5
million at December 31, 2008.  The increase was related to seasonal
fluctuations, increased retail deposits, and the $6.4 million of deposits
assumed with our branch purchase.  Total borrowings decreased $14.4
million to $90.0 million at June 30, 2009, from $104.4 million at December 31,
2008.  The decline was primarily from repaying a $10.0 million FHLB
advance and the outstanding borrowings on our FHLB line of credit.





Certificates of deposit at June 30,
2009, which were scheduled to mature in one year or less, totaled $160.4
million.  Historically, maturing deposits have generally remained with
our bank and we believe that a significant portion of the deposits maturing in
one year or less will remain with us upon maturity.


24


Liquidity.Our most liquid assets are
cash and cash equivalents and investment securities available for
sale.  The levels of these assets are dependent on the operating,
financing, lending and investing activities during any given
period.  These liquid assets totaled $196.8 million at June 30, 2009
and $185.1 million at December 31, 2008.  During periods in which we
are not able to originate a sufficient amount of loans and/or periods of high
principal prepayments, we increase our liquid assets by investing in short-term
U. S. federal agency obligations, high-grade municipal securities or FDIC
insured certificates of deposits with other financial institutions.





Liquidity management is both a daily
and long-term function of our strategy.  Excess funds are generally
invested in short-term investments.  In the event we require funds
beyond our ability to generate them internally, additional funds are generally
available through the use of FHLB advances, a line of credit with the FHLB,
other borrowings or through sales of securities.  At June 30, 2009, we
had outstanding FHLB advances of $61.1 million and no borrowings against our
line of credit with the FHLB.  At June 30, 2009, our total borrowing
capacity with the FHLB was $114.8 million.  At June 30, 2009, we had
no borrowings through the Federal Reserve discount window, while our borrowing
capacity was $15.9 million.  We also have various other fed funds
agreements, both secured and unsecured, with correspondent banks totaling
approximately $67.7 million at June 30, 2009, which had no borrowings against at
that time.  We had other borrowings of $28.8 million at June 30, 2009,
which included $16.5 million of subordinated debentures and $6.9 million in
repurchase agreements.  Additionally, we have a $9.0 million line of
credit from an unrelated financial institution maturing on November 19, 2009
with an interest rate that adjusts daily based on the prime rate less
0.25%.  This line of credit has covenants specific to capital and
other ratios, which the Company was in compliance with at June 30,
2009.  The outstanding balance on the line of credit at June 30, 2009
was $5.4 million, which was also included in other borrowings.





As a provider of financial services, we
routinely issue financial guarantees in the form of financial and performance
standby letters of credit. Standby letters of credit are contingent commitments
issued by us generally to guarantee the payment or performance obligation of a
customer to a third party. While these standby letters of credit represent a
potential outlay by us, a significant amount of the commitments may expire
without being drawn upon. We have recourse against the customer for any amount
the bank is required to pay to a third party under a standby letter of credit.
The letters of credit are subject to the same credit policies, underwriting
standards and approval process as loans originated by us. Most of the standby
letters of credit are secured, and in the event of nonperformance by the
customer, we have the right to the underlying collateral, which could include
commercial real estate, physical plant and property, inventory, receivables,
cash and marketable securities. The contract amount of these standby letters of
credit, which represents the maximum potential future payments guaranteed by us,
was $1.9 million at June 30, 2009.





At June 30, 2009, we had outstanding
loan commitments, excluding standby letters of credit, of $47.4
million.  We anticipate that sufficient funds will be available to
meet current loan commitments.  These commitments consist of unfunded
lines of credit and commitments to finance real estate
loans.


25


Capital.  The Federal
Reserve Board has established capital requirements for bank holding companies
which generally parallel the capital requirements for national banks under the
Office of the Comptroller of the Currency regulations.  The
regulations provide that such standards will generally be applied on a
consolidated (rather than a bank-only) basis in the case of a bank holding
company with more than $150 million in total consolidated
assets.  Banks and bank holding companies are generally expected to
operate at or above the minimum capital requirements.  Our ratios are
well in excess of regulatory minimums and should allow us to operate without
capital adequacy concerns.





At June
30, 2009, we continued to remain well capitalized, with a leverage ratio of
9.05% and a total risk based capital ratio of 14.39%.  As shown by the
following table, our capital exceeded the minimum capital requirements at June
30, 2009:





(dollars
      in thousands)
                  
                  Actual
                  
                  
                  For
      capital
                    adequacy purposes
                  
                  
                  To
      be well-
                    capitalizedCompany
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioLeverage
                  
                  $
                  53,746
                  
                  
                  
                  9.05
                  %
                  
                  $
                  23,768
                  
                  
                  
                  4.0
                  %
                  
                  $
                  29,710
                  
                  
                  
                  5.0
                  %Tier
      1 Capital
                  
                  $
                  53,746
                  
                  
                  
                  13.20
                  %
                  
                  $
                  16,290
                  
                  
                  
                  4.0
                  %
                  
                  $
                  24,435
                  
                  
                  
                  6.0
                  %Total
      Risk Based Capital
                  
                  $
                  58,614
                  
                  
                  
                  14.39
                  %
                  
                  $
                  32,580
                  
                  
                  
                  8.0
                  %
                  
                  $
                  40,725
                  
                  
                  
                  10.0
                  %





At June 30, 2009, Landmark National
Bank continued to remain well capitalized, with a leverage ratio of 9.75% and a
total risk based capital ratio of 15.43%.  As shown by the following
table, the bank’s capital exceeded the minimum capital requirements at June 30,
2009:





(dollars
      in thousands)
                  
                  Actual
                  
                  
                  For
      capital
                    adequacy purposes
                  
                  
                  To
      be well-
                    capitalizedLandmark National Bank
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioLeverage
                  
                  $
                  57,762
                  
                  
                  
                  9.75
                  %
                  
                  $
                  23,704
                  
                  
                  
                  4.0
                  %
                  
                  $
                  29,629
                  
                  
                  
                  5.0
                  %Tier
      1 Capital
                  
                  $
                  57,762
                  
                  
                  
                  14.24
                  %
                  
                  $
                  16,227
                  
                  
                  
                  4.0
                  %
                  
                  $
                  24,341
                  
                  
                  
                  6.0
                  %Total
      Risk Based Capital
                  
                  $
                  62,588
                  
                  
                  
                  15.43
                  %
                  
                  $
                  32,455
                  
                  
                  
                  8.0
                  %
                  
                  $
                  40,569
                  
                  
                  
                  10.0
                  %


26


Average
Assets/Liabilities.  The following
tables set forth information relating to average balances of interest-earning
assets and liabilities for the three months ended June 30, 2009 and
2008.  The following tables reflect the average tax equivalent yields
on assets and average costs of liabilities for the periods indicated (derived by
dividing income or expense by the monthly average balance of assets or
liabilities, respectively) as well as “net interest margin” (which reflects the
effect of the net earnings balance) for the periods shown:





Three
      months ended
                
                
                Three
      months endedJune 30, 2009
                
                
                June 30, 2008(Dollars
      in thousands)
                
                Average
                  balance
                
                
                Interest
                
                
                Average
                  annual
                  yield/rate
                
                
                Average
                  balance
                
                
                Interest
                
                
                Average
                  annual
                  yield/rateASSETS:Interest-earning
      assets:Investment
      securities (1)
                
                $
                185,131
                
                
                $
                1,987
                
                
                
                4.31
                %
                
                $
                173,575
                
                
                $
                2,086
                
                
                
                4.83
                %Loans
      (2)
                
                
                362,436
                
                
                
                5,265
                
                
                
                5.83
                %
                
                
                379,177
                
                
                
                6,196
                
                
                
                6.57
                %Total
      interest-earning assets
                
                
                547,567
                
                
                
                7,252
                
                
                
                5.31
                %
                
                
                552,752
                
                
                
                8,283
                
                
                
                6.03
                %Non-interest-earning
      assets
                
                
                60,853
                
                
                
                
                
                
                
                
                
                
                
                60,074Total
                
                $
                608,420
                
                
                
                
                
                
                
                
                
                
                $
                612,826LIABILITIES
      AND STOCKHOLDERS' EQUITY:Interest-bearing
      liabilities:Certificates
      of deposit
                
                $
                218,519
                
                
                $
                1,379
                
                
                
                2.53
                %
                
                $
                224,242
                
                
                $
                2,144
                
                
                
                3.85
                %Money
      market and NOW accounts
                
                
                153,511
                
                
                
                159
                
                
                
                0.42
                %
                
                
                147,269
                
                
                
                451
                
                
                
                1.23
                %Savings
      accounts
                
                
                29,252
                
                
                
                20
                
                
                
                0.27
                %
                
                
                27,344
                
                
                
                20
                
                
                
                0.29
                %FHLB
      advances and other borrowings
                
                
                92,277
                
                
                
                811
                
                
                
                3.53
                %
                
                
                102,762
                
                
                
                897
                
                
                
                3.51
                %Total
      interest-bearing liabilities
                
                
                493,559
                
                
                
                2,369
                
                
                
                1.93
                %
                
                
                501,617
                
                
                
                3,512
                
                
                
                2.82
                %Non-interest-bearing
      liabilities
                
                
                62,336
                
                
                
                
                
                
                
                
                
                
                
                60,557Stockholders'
      equity
                
                
                52,525
                
                
                
                
                
                
                
                
                
                
                
                50,652Total
                
                $
                608,420
                
                
                
                
                
                
                
                
                
                
                $
                612,826Interest
      rate spread (3)
                
                
                
                
                
                
                
                
                
                
                3.38
                %
                
                
                
                
                
                
                
                
                
                
                3.21
                %Net
      interest margin (4)
                
                
                
                
                
                
                4,883
                
                
                
                3.58
                %
                
                
                
                
                
                
                4,770
                
                
                
                3.47
                %Tax
      equivalent interest – imputed
                
                
                
                
                
                
                324
                
                
                
                0.24
                %
                
                
                
                
                
                
                297
                
                
                
                0.22
                %Net
      interest income
                
                
                
                
                
                $
                4,559
                
                
                
                3.34
                %
                
                
                
                
                
                $
                4,473
                
                
                
                3.25
                %Ratio
      of average interest-earning assets to average interest-bearing
      liabilities
                
                
                
                
                
                
                110.9
                %
                
                
                
                
                
                
                
                
                
                
                110.2
                %





(1)
            Income
      on investment securities includes all securities, including interest
      bearing deposits in other financial institutions.  Income on tax
      exempt securities is presented on a fully taxable equivalent basis, using
      a 34% federal tax rate.


(2)
            Includes
      loans classified as non-accrual.  Income on tax exempt loans is
      presented on a fully taxable equivalent basis, using a 34% federal tax
      rate.


(3)
            Interest
      rate spread represents the difference between the average yield on
      interest-earning assets and the average cost of interest-bearing
      liabilities.


(4)
            Net
      interest margin represents annualized net interest income divided by
      average interest-earning
assets.


27





Six
      months ended
                
                
                Six
      months endedJune 30, 2009
                
                
                June 30, 2008(Dollars
      in thousands)
                
                Average
                  balance
                
                
                Interest
                
                
                Average
                  annual
                  yield/rate
                
                
                Average
                  balance
                
                
                Interest
                
                
                Average
                  annual
                  yield/rateASSETS:Interest-earning
      assets:Investment
      securities (1)
                
                $
                183,585
                
                
                $
                4,001
                
                
                
                4.39
                %
                
                $
                170,184
                
                
                $
                4,187
                
                
                
                4.95
                %Loans
      (2)
                
                
                365,410
                
                
                
                10,471
                
                
                
                5.78
                %
                
                
                380,312
                
                
                
                12,873
                
                
                
                6.81
                %Total
      interest-earning assets
                
                
                548,995
                
                
                
                14,472
                
                
                
                5.32
                %
                
                
                550,496
                
                
                
                17,060
                
                
                
                6.23
                %Non-interest-earning
      assets
                
                
                60,417
                
                
                
                
                
                
                
                
                
                
                
                59,999Total
                
                $
                609,412
                
                
                
                
                
                
                
                
                
                
                $
                610,495LIABILITIES
      AND STOCKHOLDERS' EQUITY:Interest-bearing
      liabilities:Certificates
      of deposit
                
                $
                217,617
                
                
                $
                2,815
                
                
                
                2.61
                %
                
                $
                227,188
                
                
                $
                4,620
                
                
                
                4.09
                %Money
      market and NOW accounts
                
                
                154,937
                
                
                
                342
                
                
                
                0.45
                %
                
                
                145,291
                
                
                
                1,077
                
                
                
                1.49
                %Savings
      accounts
                
                
                28,381
                
                
                
                40
                
                
                
                0.28
                %
                
                
                26,732
                
                
                
                40
                
                
                
                0.30
                %FHLB
      advances and other borrowings
                
                
                95,908
                
                
                
                1,690
                
                
                
                3.55
                %
                
                
                100,768
                
                
                
                1,808
                
                
                
                3.61
                %Total
      interest-bearing liabilities
                
                
                496,843
                
                
                
                4,887
                
                
                
                1.98
                %
                
                
                499,979
                
                
                
                7,545
                
                
                
                3.03
                %Non-interest-bearing
      liabilities
                
                
                60,391
                
                
                
                
                
                
                
                
                
                
                
                59,301Stockholders'
      equity
                
                
                52,178
                
                
                
                
                
                
                
                
                
                
                
                51,215Total
                
                $
                609,412
                
                
                
                
                
                
                
                
                
                
                $
                610,495Interest
      rate spread (3)
                
                
                
                
                
                
                
                
                
                
                3.34
                %
                
                
                
                
                
                
                
                
                
                
                3.20
                %Net
      interest margin (4)
                
                
                
                
                
                
                9,585
                
                
                
                3.52
                %
                
                
                
                
                
                
                9,515
                
                
                
                3.48
                %Tax
      equivalent interest – imputed
                
                
                
                
                
                
                634
                
                
                
                0.23
                %
                
                
                
                
                
                
                581
                
                
                
                0.21
                %Net
      interest income
                
                
                
                
                
                $
                8,951
                
                
                
                3.29
                %
                
                
                
                
                
                $
                8,934
                
                
                
                3.26
                %Ratio
      of average interest-earning assets to average interest-bearing
      liabilities
                
                
                
                
                
                
                110.5
                %
                
                
                
                
                
                
                
                
                
                
                110.1
                %





(1)
            Income
      on investment securities includes all securities, including interest
      bearing deposits in other financial institutions.  Income on tax
      exempt securities is presented on a fully taxable equivalent basis, using
      a 34% federal tax rate.


(2)
            Includes
      loans classified as non-accrual.  Income on tax exempt loans is
      presented on a fully taxable equivalent basis, using a 34% federal tax
      rate.


(3)
            Interest
      rate spread represents the difference between the average yield on
      interest-earning assets and the average cost of interest-bearing
      liabilities.


(4)
            Net
      interest margin represents annualized net interest income divided by
      average interest-earning
assets.


28


Rate/Volume
Table.  The following
table describes the extent to which changes in interest income and interest
expense for major components of interest-earning assets and interest-bearing
liabilities affected the Company’s interest income and expense for the quarter
and six months ended June 30, 2009 as compared the quarter and six months ended
June 30, 2008.  The table distinguishes between (i) changes
attributable to rate (changes in rate multiplied by prior volume), (ii) changes
attributable to volume (changes in volume multiplied by prior rate), and (iii)
net change (the sum of the previous columns).  The net changes
attributable to the combined effect of volume and rate, which cannot be
segregated, have been allocated proportionately to the change due to volume and
the change due to rate.




Three months ended June 30,
      2009
                      compared with the same period of
      2008
                    
                    
                    Six months ended June 30, 2009
                      compared with the same period in
      2008Increase/(Decrease) Attributable
      to
                    
                    
                    Increase/(Decrease) Attributable
      to(Dollars
      in thousands)
                    
                    Volume
                    
                    
                    Rate
                    
                    
                    Net
                    
                    
                    Volume
                    
                    
                    Rate
                    
                    
                    NetInterest
      income:Investment
      securities
                    
                    $
                    107
                    
                    
                    $
                    (207
                    )
                    
                    $
                    (100
                    )
                    
                    $
                    249
                    
                    
                    $
                    (435
                    )
                    
                    $
                    (186
                    )Loans
                    
                    
                    (248
                    )
                    
                    
                    (682
                    )
                    
                    
                    (930
                    )
                    
                    
                    (447
                    )
                    
                    
                    (1,955
                    )
                    
                    
                    (2,402
                    )Total
                    
                    
                    (141
                    )
                    
                    
                    (889
                    )
                    
                    
                    (1,030
                    )
                    
                    
                    (199
                    )
                    
                    
                    (2,389
                    )
                    
                    
                    (2,588
                    )Interest
      expense:Deposits
                    
                    
                    9
                    
                    
                    
                    (1,066
                    )
                    
                    
                    (1,057
                    )
                    
                    
                    14
                    
                    
                    
                    (2,554
                    )
                    
                    
                    (2,540
                    )Borrowings
                    
                    
                    (91
                    )
                    
                    
                    5
                    
                    
                    
                    (86
                    )
                    
                    
                    (88
                    )
                    
                    
                    (30
                    )
                    
                    
                    (118
                    )Total
                    
                    
                    (81
                    )
                    
                    
                    (1,062
                    )
                    
                    
                    (1,143
                    )
                    
                    
                    (75
                    )
                    
                    
                    (2,583
                    )
                    
                    
                    (2,658
                    )Net
      interest income
                    
                    $
                    (60
                    )
                    
                    $
                    173
                    
                    
                    $
                    113
                    
                    
                    $
                    (124
                    )
                    
                    $
                    194
                    
                    
                    $
                    70





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK





Our
assets and liabilities are principally financial in nature and the resulting net
interest income thereon is subject to changes in market interest rates and the
mix of various assets and liabilities.  Interest rates in the
financial markets affect our decision on pricing our assets and liabilities,
which impacts net interest income, a significant cash flow source for
us.  As a result, a substantial portion of our risk management
activities relates to managing interest rate risk.





Our
Asset/Liability Management Committee monitors the interest rate sensitivity of
our balance sheet using earnings simulation models and interest sensitivity gap
analysis.  We have set policy limits of interest rate risk to be
assumed in the normal course of business and monitor such limits through our
simulation process.





We have
been successful in meeting the interest rate sensitivity objectives set forth in
our policy.  Simulation models are prepared to determine the impact on
net interest income for the coming twelve months, including one using rates at
June 30, 2009, and forecasting volumes for the twelve-month
projection.  This position is then subjected to a shift in interest
rates of 100 and 200 basis points rising and 100 basis points falling with an
impact to our net interest income on a one yearhorizon as
follows:





Dollar change in net
                    
                    
                    Percent change inScenario
                    
                    interest income ($000’s)
                    
                    
                    net interest income200
      basis point rising
                    
                    $
                    1,332
                    
                    
                    
                    6.7
                    %100
      basis point rising
                    
                    $
                    702
                    
                    
                    
                    3.5
                    %100
      basis point falling
                    
                    $
                    (144
                    )
                    
                    
                    (0.7
                    )%


29


SAFE
HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995





Forward-Looking
Statements





This
document (including information incorporated by reference) contains, and future
oral and written statements by us and our management may contain,
forward-looking statements, within the meaning of such term in the Private
Securities Litigation Reform Act of 1995, with respect to our financial
condition, results of operations, plans, objectives, future performance and
business.  Forward-looking statements, which may be based upon
beliefs, expectations and assumptions of our management and on information
currently available to management, are generally identifiable by the use of
words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,”
“may,” “will,” “would,” “could,” “should” or other similar
expressions.  Additionally, all statements in this document, including
forward-looking statements, speak only as of the date they are made, and we
undertake no obligation to update any statement in light of new information or
future events.





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




·
            The
      strength of the United States economy in general and the strength of the
      local economies in which we conduct our operations which may be less
      favorable than expected and may result in, among other things, a
      deterioration in the credit quality and value of our
    assets.


·
            The
      effects of, and changes in, federal, state and local laws, regulations and
      policies affecting banking, securities, insurance and monetary and
      financial matters.


·
            The
      effects of changes in interest rates (including the effects of changes in
      the rate of prepayments of our assets) and the policies of the Board of
      Governors of the Federal Reserve
System.


·
            Our
      ability to compete with other financial institutions as effectively as we
      currently intend due to increases in competitive pressures in the
      financial services sector.


·
            Our
      inability to obtain new customers and to retain existing
      customers.


·
            The
      timely development and acceptance of products and services, including
      products and services offered through alternative delivery channels such
      as the Internet.


·
            Technological
      changes implemented by us and by other parties, including third party
      vendors, which may be more difficult or more expensive than anticipated or
      which may have unforeseen consequences to us and our
      customers.


·
            Our
      ability to develop and maintain secure and reliable electronic
      systems.


·
            Our
      ability to retain key executives and employees and the difficulty that we
      may experience in replacing key executives and employees in an effective
      manner.


·
            Consumer
      spending and saving habits which may change in a manner that affects our
      business adversely.


·
            Our
      ability to successfully integrate acquired
  businesses.


·
            The
      costs, effects and outcomes of existing or future
    litigation.


·
            Changes
      in accounting policies and practices, as may be adopted by state and
      federal regulatory agencies and the Financial Accounting Standards
      Board.


·
            The
      economic impact of past and any future terrorist attacks, acts of war or
      threats thereof, and the response of the United States to any such threats
      and attacks.





These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such
statements.  Additional information concerning us and our business,
including other factors that could materially affect our financial results, is
included in our filings with the Securities and Exchange Commission, including
the “Risk Factors” section in our Form 10-K.




ITEM
4.  CONTROLS AND PROCEDURES





An
evaluation was performed under the supervision and with the participation of the
Company’s management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) promulgated under the Securities and
Exchange Act of 1934, as amended) as of June 30, 2009.  Based on that
evaluation, the Company’s management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company’s disclosure controls and
procedures were effective as of June 30, 2009.





There
were no changes in the Company’s internal control over financial reporting
during the quarter ended June 30, 2009 that materially affected or were likely
to materially affect the Company’s internal control over financial
reporting.


30


LANDMARK
BANCORP, INC. AND SUBSIDIARY


PART
II – OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





There is no material pending legal
proceedings to which the Company or its subsidiaries is a party other than
ordinary routine litigation incidental to their respective
businesses.





ITEM
1A.          RISK
FACTORS





There
have been no material changes in the risk factors applicable to the Company from
those disclosed in Part I, Item 1A. “Risk Factors,” in the Company's
2008 Annual Report on Form 10-K.





ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





The
following table provides information about purchases by the Company and its
affiliated purchases during the quarter ended June 30, 2009, of equity
securities that are registered by the Company pursuant to Section 12 of the
Exchange Act.





Period
                          
                          Total
                            number of
                            shares
                            purchased
                          
                          
                          Average
                            price paid
                            per share
                          
                          
                          Total number of
                            shares purchased as
                            part of a publicly
                            announced plan (1)
                          
                          
                          Maximum number
                            of shares that may
                            yet be purchased
                            under the plan (1)April
      1-30, 2009
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          
                          108,806May
      1-31, 2009
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          108,806June 1-30, 2009
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          108,806Total
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          
                          108,806





(1)
              In
      May 2008, our Board of Directors announced the approval of a stock
      repurchase program permitting us to repurchase up to 113,400 shares, or 5%
      of our outstanding common stock.  Unless terminated earlier by
      resolution of the Board of Directors, the repurchase program will expire
      when we have repurchased all shares authorized for repurchase
      thereunder.





ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





None


31


ITEM
4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS





On May 20, 2009, the annual meeting of
Landmark Bancorp, Inc. stockholders was held.  There were 2,371,450
shares of common stock eligible to vote at the annual meeting.  The
voting on each item at the annual meeting was as follows:





1.  Election
of three Class I directors with terms expiring in 2012:




For
            
            
            Withheld
            
            
            Abstain
            
            
            Broker
              Non-VotesRichard
      A. Ball
            
            
            2,069,918
            
            
            
            16,436
            
            
            
            -
            
            
            
            -Susan
      E. Roepke
            
            
            2,065,727
            
            
            
            20,627
            
            
            
            -
            
            
            
            -C.
      Duane Ross
            
            
            2,065,538
            
            
            
            20,816
            
            
            
            -
            
            
            
            -




2.  Ratification
of the appointment of KPMG LLP as the Company’s independent registered public
accounting firm for the year ending December 31, 2009:





For
                    
                    
                    Against
                    
                    
                    Abstain
                    
                    
                    Broker
                      Non-VotesKPMG
      LLP
                    
                    
                    2,055,106
                    
                    
                    
                    20,157
                    
                    
                    
                    11,091
                    
                    
                    
                    -





ITEM
5.  OTHER INFORMATION





None





ITEM
6.  EXHIBITS





Exhibit
      31.1
                
                Certificate
      of Chief Executive Officer Pursuant to Rule
      13a-14(a)/15d-14(a)Exhibit
      31.2
                
                Certificate
      of Chief Financial Officer Pursuant to  Rule
      13a-14(a)/15d-14(a)Exhibit
      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
  2002Exhibit
      32.2
                
                Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002


32


SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.





LANDMARK
      BANCORP, INC.Date:
      August 13, 2009
              /s/ Patrick L. AlexanderPatrick
      L. AlexanderPresident
      and Chief Executive OfficerDate:
      August 13, 2009
              /s/ Mark A. HerpichMark
      A. HerpichVice
      President, Secretary, Treasurerand
      Chief Financial Officer


33