**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 
| **x**      | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF**                              |
|------------|-------------------------------------------------------------------------------------------------|
| ** ** | **THE  SECURITIES EXCHANGE ACT OF 1934**                                                        |
| ** ** | **For the  quarterly period ended March 31, 2008**                                         |
| ** ** | ** **                                                                                      |
| ** ** | **OR**                                                                                          |
| ** ** | ** **                                                                                      |
| **o**      | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**                         |
| ** ** | **SECURITIES  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  Identification Number) |

 

| **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) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the Registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x  No o

 

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

 

| Large accelerated filer  o                     |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer o                        |   | Smaller reporting  company x |
| (Do not check if a  smaller reporting company) |   |                              |

 

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

 

Indicate thenumber of shares outstanding of each of the Registrant’s classes of commonstock as of the latest practicable date: as of April 30, 2008, the Registrant had outstanding 2,268,959shares of its common stock, $.01 par value per share.

 

 

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**LANDMARKBANCORP, INC.**

**Form 10-QQuarterly Report**

 

**Table ofContents**

 
|                          |                                                                                        |                 |
|-------------------------------|---------------------------------------------------------------------------------------------|----------------------|
|                          |                                                                                        |                 |
| ** **                    | ** **                                                                                  | **Page Number** |
|                          |                                                                                        |                 |
|                          | PART I                                                                                 |                 |
|                          |                                                                                        |                 |
| Item  1.                      | Financial Statements and  Related Notes                                                     | 2 - 10               |
| Item 2.                       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 11 - 17              |
| Item 3.                       | Quantitative  and Qualitative Disclosures about Market Risk                                 | 18 - 19              |
| Item 4.                       | Controls and  Procedures                                                                    | 19                   |
|                          |                                                                                        |                 |
|                          | PART II                                                                                |                 |
|                          |                                                                                        |                 |
| Item 1.                       | Legal Proceedings                                                                           | 20                   |
| Item  1A.                     | Risk Factors                                                                                | 20                   |
| Item 2.                       | Unregistered  Sales of Equity Securities and  Use of  Proceeds                         | 20                   |
| Item 3.                       | Defaults Upon  Senior Securities                                                            | 20                   |
| Item 4.                       | Submission of  Matters to a Vote of  Security Holders                                  | 20                   |
| Item 5.                       | Other Information                                                                           | 20                   |
| Item  6.                      | Exhibits                                                                                    | 21                   |
|                          |                                                                                        |                 |
| Form 10-Q Signature Page | 22                                                                                          |

 

1

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**ITEM1.  FINANCIAL STATEMENTS AND RELATEDNOTES**

 

**LANDMARKBANCORP, INC. AND SUBSIDIARY**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

** **
| ** **                                                                                                 | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                                                                                 | ** ** | **2008**           | ** **  | **2007**              | ** ** |
| ** **                                                                                                 | ** ** | **(Unaudited)**    | ** **  | ** **            | ** ** |
| **ASSETS**                                                                                                 | ** ** | ** **         | ** **  | ** **            | ** ** |
| Cash and cash equivalents                                                                                  |       | $                  | 12,568,070  |                  | $          | 14,739,148 |   |
| Investment securities:                                                                                     |       |               |        |                  |       |
| Available for sale, at fair value                                                                          |       | 155,442,412        |        | 155,879,231           |       |
| Other securities                                                                                           |       | 8,913,650          |        | 8,844,950             |       |
| Loans, net                                                                                                 |       | 378,753,777        |        | 376,156,608           |       |
| Loans held for sale                                                                                        |       | 2,761,368          |        | 1,723,687             |       |
| Premises and equipment, net                                                                                |       | 14,349,803         |        | 14,259,172            |       |
| Goodwill                                                                                                   |       | 12,894,167         |        | 12,894,167            |       |
| Other intangible assets, net                                                                               |       | 2,952,959          |        | 3,144,001             |       |
| Bank owned life insurance                                                                                  |       | 11,750,267         |        | 11,634,535            |       |
| Accrued interest and other assets                                                                          |       | 8,007,989          |        | 7,179,224             |       |
|                                                                                                       |       |               |        |                  |       |
| Total assets                                                                                               |       | $                  | 608,394,462 |                  | $          | 606,454,723 |   |
|                                                                                                       |       |               |        |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                              |       |               |        |                  |       |
| Liabilities:                                                                                               |       |               |        |                  |       |
| Deposits                                                                                                   |       | $                  | 447,276,346 |                  | $          | 452,652,306 |   |
| Federal Home Loan Bank borrowings                                                                          |       | 71,532,018         |        | 69,026,525            |       |
| Other borrowings                                                                                           |       | 28,623,059         |        | 24,061,554            |       |
| Accrued expenses, taxes and other liabilities                                                              |       | 10,169,714         |        | 8,418,200             |       |
| Total liabilities                                                                                          |       | 557,601,137        |        | 554,158,585           |       |
|                                                                                                       |       |               |        |                  |       |
| Stockholders’ equity:                                                                                 |       |               |        |                  |       |
| Preferred stock, $0.01 par, 200,000 shares authorized, none issued                                         |       | —             |        | —                |       |
| Common stock, $0.01 par, 5,000,000 shares authorized, 2,411,007 and  2,409,125 shares issued, respectively |       | 24,110             |        | 24,091                |       |
| Additional paid-in capital                                                                                 |       | 24,362,077         |        | 24,304,144            |       |
| Retained earnings                                                                                          |       | 27,769,034         |        | 27,493,281            |       |
| Treasury stock, at cost; 142,148 and 7,763 shares, respectively                                            |       | (3,501,696         | )           | (205,894              | )          |
| Accumulated other comprehensive income                                                                     |       | 2,139,800          |        | 680,516               |       |
| Total stockholders’ equity                                                                            |       | 50,793,325         |        | 52,296,138            |       |
|                                                                                                       |       |               |        |                  |       |
| Total liabilities and stockholders’ equity                                                            |       | $                  | 608,394,462 |                  | $          | 606,454,723 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

2

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**LANDMARKBANCORP, INC. AND SUBSIDIARY**

# **CONDENSEDCONSOLIDATED STATEMENTS OF EARNINGS**

**(Unaudited)**

** **
| ** **                                           | ** ** | **Three months ended March 31,** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                           | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| Interest income:                                     |       |                                                 |       |   |   |
| Loans:                                               |       |                                                 |       |   |   |
| Taxable                                              |       | $                                                    | 6,614,074  |   | $ | 7,108,888 |   |
| Tax-exempt                                           |       | 43,191                                               |       | 27,394 |   |
| Investment securities:                               |       |                                                 |       |   |   |
| Taxable                                              |       | 1,223,042                                            |       | 1,136,783 |   |
| Tax-exempt                                           |       | 595,956                                              |       | 542,496 |   |
| Other                                                |       | 17,743                                               |       | 15,171 |   |
| Total interest income                                |       | 8,494,006                                            |       | 8,830,732 |   |
|                                                 |       |                                                 |       |   |   |
| Interest expense:                                    |       |                                                 |       |   |   |
| Deposits                                             |       | 3,121,309                                            |       | 3,250,165 |   |
| Borrowed funds                                       |       | 911,263                                              |       | 1,081,367 |   |
| Total interest expense                               |       | 4,032,572                                            |       | 4,331,532 |   |
|                                                 |       |                                                 |       |   |   |
| Net interest income                                  |       | 4,461,434                                            |       | 4,499,200 |   |
|                                                 |       |                                                 |       |   |   |
| Provision for loan losses                            |       | 600,000                                              |       | 65,000 |   |
| Net interest income after provision for  loan losses |       | 3,861,434                                            |       | 4,434,200 |   |
|                                                 |       |                                                 |       |   |   |
| Non-interest income:                                 |       |                                                 |       |   |   |
| Fees and service charges                             |       | 966,977                                              |       | 901,131 |   |
| Gains on sale of loans                               |       | 344,407                                              |       | 183,292 |   |
| Gain on prepayment of FHLB borrowings                |       | 246,033                                              |       | — |   |
| Bank owned life insurance                            |       | 116,090                                              |       | 115,824 |   |
| Other                                                |       | 141,770                                              |       | 128,622 |   |
| Total non-interest income                            |       | 1,815,277                                            |       | 1,328,869 |   |
|                                                 |       |                                                 |       |   |   |
| Non-interest expense:                                |       |                                                 |       |   |   |
| Compensation and benefits                            |       | 2,128,040                                            |       | 2,043,235 |   |
| Occupancy and equipment                              |       | 761,001                                              |       | 698,969 |   |
| Amortization of intangibles                          |       | 204,736                                              |       | 233,909 |   |
| Data processing                                      |       | 197,190                                              |       | 203,320 |   |
| Professional fees                                    |       | 111,265                                              |       | 117,907 |   |
| Advertising                                          |       | 88,027                                               |       | 108,888 |   |
| Other                                                |       | 799,193                                              |       | 751,165 |   |
| Total non-interest expense                           |       | 4,289,452                                            |       | 4,157,393 |   |
|                                                 |       |                                                 |       |   |   |
| Earnings before income taxes                         |       | 1,387,259                                            |       | 1,605,676 |   |
|                                                 |       |                                                 |       |   |   |
| Income tax expense                                   |       | 320,745                                              |       | 361,056 |   |
|                                                 |       |                                                 |       |   |   |
| Net earnings                                         |       | $                                                    | 1,066,514  |   | $ | 1,244,620 |   |
|                                                 |       |                                                 |       |   |   |
| Earnings per share:                                  |       |                                                 |       |   |   |
| Basic                                                |       | $                                                    | 0.45       |   | $ | 0.51 |   |
| Diluted                                              |       | $                                                    | 0.45       |   | $ | 0.50 |   |
| Dividends per share                                  |       | $                                                    | 0.19       |   | $ | 0.18 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

3

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** LANDMARK BANCORP, INC. AND SUBSIDIARY**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                           | ** ** | **Three months ended March 31,** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                           | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
|                                                                 |       |                                                 |       |   |   |
| Net cash provided by operating activities                            |       | $                                                    | 890,591    |   | $ | 1,582,229 |   |
|                                                                 |       |                                                 |       |   |   |
| Cash flows from investing activities:                                |       |                                                 |       |   |   |
| Net increase in loans                                                |       | (4,092,034                                           | )          | (3,979,501 | ) |
| Maturities and prepayments of investments                            |       | 3,320,830                                            |       | 3,154,898 |   |
| Purchase of investment securities                                    |       | (581,888                                             | )          | (13,357,833 | ) |
| Proceeds from sales of premises and equipment and  foreclosed assets |       | 205,348                                              |       | 40,216 |   |
| Purchases of premises and equipment, net                             |       | (373,872                                             | )          | (237,316 | ) |
| Net cash used in investing activities                                |       | (1,521,616                                           | )          | (14,379,536 | ) |
|                                                                 |       |                                                 |       |   |   |
| Cash flows from financing activities:                                |       |                                                 |       |   |   |
| Net increase (decrease) in deposits                                  |       | (5,375,960                                           | )          | 13,072,656 |   |
| Federal Home Loan Bank advance borrowings                            |       | 25,000,000                                           |       | — |   |
| Federal Home Loan Bank advance repayments                            |       | (13,509,192                                          | )          | (9,192 | ) |
| Federal Home Loan Bank line of credit, net                           |       | (8,500,000                                           | )          | — |   |
| Other borrowings, net                                                |       | 4,561,505                                            |       | 16,362 |   |
| Purchase of treasury stock                                           |       | (3,295,802                                           | )          | (126,560 | ) |
| Proceeds from issuance of common stock under  stock option plans     |       | 30,432                                               |       | 20,491 |   |
| Excess tax benefit related to stock option plans                     |       | 5,010                                                |       | 3,774 |   |
| Payment of dividends                                                 |       | (456,046                                             | )          | (444,205 | ) |
| Net cash (used in) provided by financing activities                  |       | (1,540,053                                           | )          | 12,533,326 |   |
| Net decrease in cash and cash equivalents                            |       | (2,171,078                                           | )          | (263,981 | ) |
| Cash and cash equivalents at beginning of period                     |       | 14,739,148                                           |       | 14,751,914 |   |
| Cash and cash equivalents at end of period                           |       | $                                                    | 12,568,070 |   | $ | 14,487,933 |   |
|                                                                 |       |                                                 |       |   |   |
| Supplemental disclosure of cash flow information:                    |       |                                                 |       |   |   |
| Cash paid during period for interest                                 |       | $                                                    | 4,082,000  |   | $ | 4,166,000 |   |
| Cash paid during period for taxes                                    |       | $                                                    | 223,000    |   | $ | — |   |
| Supplemental schedule of non-cash investing activities:              |       |                                                 |       |   |   |
| Transfer of loans to real estate owned                               |       | $                                                    | 898,000    |   | $ | 119,000 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

4

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**LANDMARKBANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATEDSTATEMENTS OF EQUITY AND COMPREHENSIVE INCOME**

**(Unaudited)**

** **
| ** **                                                                    | ** ** | **Common  stock** | ** ** | **Additional  paid-in  capital** | ** ** | **Retained  earnings** | ** ** | **Treasury  stock** | ** ** | **Accumulated  other  comprehensive  income (loss)** | ** ** | **Total**  | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------|------------|----------------------------------|------------|------------------------|------------|---------------------|------------|-----------------------------------------------------------|------------|------------|------------|
|                                                                          |       |              |       |                             |       |                   |       |                |       |                                                      |       |       |       |
| Balance  December 31, 2006                                               |       | $                 | 23,417     |                             | 22,607,510 |                   | 26,758,056 |                | (138,506   | )                                                         | (14,462    | )          | 49,236,015 |   |
|                                                                          |       |              |       |                             |       |                   |       |                |       |                                                      |       |       |       |
| Net earnings                                                                  |       | —            |       | —                           |       | 1,244,620              |       | —              |       | —                                                    |       | 1,244,620  |       |
| Change in fair  value of investment securities available-for-sale, net of tax |       | —            |       | —                           |       | —                 |       | —              |       | 172,071                                                   |       | 172,071    |       |
| Dividends paid  ($0.18 per share)                                             |       | —            |       | —                           |       | (444,205               | )          | —              |       | —                                                    |       | (444,205   | )          |
| Stock-based  compensation                                                     |       | —            |       | 34,031                           |       | —                 |       | —              |       | —                                                    |       | 34,031     |       |
| Exercise of  stock options, 1,181 shares, including tax benefit of $3,774     |       | 12                |       | 24,253                           |       | —                 |       | —              |       | —                                                    |       | 24,265     |       |
| Purchase of  4,520 treasury shares                                            |       | —            |       | —                           |       | —                 |       | (126,560            | )          | —                                                    |       | (126,560   | )          |
| Balance  March 31, 2007                                                  |       | $                 | 23,429     |                             | 22,665,794 |                   | 27,558,471 |                | (265,066   | )                                                         | 157,609    |       | 50,140,237 |   |
|                                                                          |       |              |       |                             |       |                   |       |                |       |                                                      |       |       |       |
| Balance  December 31, 2007                                               |       | $                 | 24,091     |                             | 24,304,144 |                   | 27,493,281 |                | (205,894   | )                                                         | 680,516    |       | 52,296,138 |   |
|                                                                          |       |              |       |                             |       |                   |       |                |       |                                                      |       |       |       |
| Net earnings                                                                  |       | —            |       | —                           |       | 1,066,514              |       | —              |       | —                                                    |       | 1,066,514  |       |
| Change in fair  value of investment securities available-for-sale, net of tax |       | —            |       | —                           |       | —                 |       | —              |       | 1,459,284                                                 |       | 1,459,284  |       |
| Dividends paid  ($0.19 per share)                                             |       | —            |       | —                           |       | (456,046               | )          | —              |       | —                                                    |       | (456,046   | )          |
| Stock-based  compensation                                                     |       | —            |       | 22,510                           |       | —                 |       | —              |       | —                                                    |       | 22,510     |       |
| Exercise of  stock options, 1,882 shares, including tax benefit of $5,010     |       | 19                |       | 35,423                           |       | —                 |       | —              |       | —                                                    |       | 35,442     |       |
| Purchase of  134,385 treasury shares                                          |       | —            |       | —                           |       | —                 |       | (3,295,802          | )          | —                                                    |       | (3,295,802 | )          |
| Adoption of EITF  06-4                                                        |       | —            |       | —                           |       | (334,715               | )          | —              |       | —                                                    |       | (334,715   | )          |
| Balance  March 31, 2008                                                  |       | $                 | 24,110     |                             | 24,362,077 |                   | 27,769,034 |                | (3,501,696 | )                                                         | 2,139,800  |       | 50,793,325 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

5

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**LANDMARKBANCORP, INC. AND SUBSIDIARY**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****             InterimFinancial Statements**

 

The condensed consolidated financial statements ofLandmark Bancorp, Inc. (the “Company”) and subsidiary have been preparedin accordance with the instructions to Form 10-Q.  To the extent that information and footnotesrequired by U.S. generally accepted accounting principles for completefinancial statements are contained in or consistent with the consolidatedaudited financial statements incorporated by reference in the Company’s Form 10-Kfor the year ended December 31, 2007, such information and footnotes havenot been duplicated herein.  In theopinion of management, all adjustments, consisting of normal recurringaccruals, considered necessary for a fair presentation of financial statementshave been reflected herein.  The December 31,2007, condensed consolidated balance sheet has been derived from the auditedconsolidated balance sheet as of that date. The results of the interim period ended March 31, 2008 are notnecessarily indicative of the results expected for the year ending December 31,2008.

 

**2.****             FairValue**

 

On January 1, 2008, the Company adopted theprovisions of FASB Statement of Financial Accounting Standards (“SFAS”) No. 157,“Fair Value Measurements,” which defines fair value, establishes a frameworkfor measuring fair value and expands the disclosures about fair valuemeasurements.  SFAS No. 157 requiresthe use of a hierarchy of fair value techniques based upon whether the inputsto those fair values reflect assumptions other market participants would usebased upon market data obtained from independent sources or reflect the company’sown assumptions of market participant valuation.  In accordance with SFAS No. 157, thefair value hierarchy is as follows:

 

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

 

·                  Level2:  Quoted prices for similar assets inactive markets, quoted prices in markets that are not active or quoted pricesthat contain observable inputs such as yield curves, volatilities, prepaymentspeeds and other inputs derived from market data.

 

·                  Level3:  Quoted prices or valuation techniquesthat require inputs that are both significant to the fair value measurement andunobservable.

 

TheCompany’s fair value disclosures exclude certain nonfinancial assets andliabilities which are deferred under the provisions of FASB Staff Position157-2. These include foreclosed real estate, long-lived assets, goodwill, andcore deposit premium, which are recorded at fair value only upon impairment.The FASB’s deferral is intended to allow additional time to consider the effectof various implementation issues relating to these non-financial instruments,and defers disclosures under SFAS No. 157 until January 1, 2009.

 

**Valuation methods for instrumentsmeasured at fair value on a recurring basis**

 

The Company’s investment securities classified asavailable-for-sale includes agency securities, municipal obligations, mortgage-backedsecurities, corporate bonds, certificates of deposits and common stock.  Quoted exchange prices are available for thecommon stock investments, which are classified as level 1.  Agency securities and mortgage-backedobligations are priced utilizing industry-standard models that consider variousassumptions, including time value, yield curves, volatility factors, prepaymentspeeds, default rates, loss severity, current market and contractual prices forthe underlying financial instruments, as well as other relevant economicmeasures.  Substantially all of theseassumptions are observable in the marketplace, can be derived from observabledata, or are supported by observable levels at which transactions are executedin the marketplace and are classified as level 2.  Municipal and corporate securities are valuedusing a type of matrix, or grid, pricing in which securities are benchmarkedagainst the treasury rate based on credit rating.  These model and matrix measurements areclassified as Level 2 in the fair value hierarchy.  The Company’s investments in fixed ratecertificates of deposits are valued using a net present value model thatdiscounts the future cash flows at the current market rates and are classifiedas level 2.

 

6

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The Company’s derivativeinstruments consist solely of interest rate lock commitments and correspondingforward sales contracts on certain mortgage loans.  The fair values of these derivatives arebased 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 economictrends, which considers the likelihood that a commitment will ultimately resultin a closed loan.  These instruments,which were not significant at March 31, 2008, are classified as Level 3based on the unobservable nature of these assumptions.

 

The following tablerepresents the company’s assets that are measured at fair value on a recurringbasis at March 31, 2008 allocated to the appropriate fair value hierarchy:

 
| ** **                           | ** ** | ** ** | ** ** | **Fair value hierarchy** | ** ** |
|--------------------------------------|------------|------------|------------|------------------------------------|------------|
| **Assets (in thousands):** | ** ** | **Total**  | ** ** | **Level 1**                   | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| Available-for-sale  securities       |       | $          | 155,442    |                               | $          | 1,137 |   | $ | 154,305 |   | — |   |
|                                      |            |            |            |                                    |            |  |  |  |  |  |  |  |

 

Changes in the fair valueof available-for-sale securities are included in other comprehensive income.

 

**Valuation methods for instrumentsmeasured at fair value on a nonrecurring basis**

 

The Company’s otherinvestment securities include investments in Federal Home Loan Bank (“FHLB”)and Federal Reserve Bank stock, which are held for regulatory purposes.  These investments generally have restrictionson the sale and/or liquidation of stock and the carrying value is approximatelyequal to fair value.  Fair valuemeasurements for these securities are classified as Level 3 based on theundeliverable nature and related credit risk.

 

The Company does notvalue its loan portfolio at fair value, however adjustments are recorded oncertain loans to reflect the impaired value on the underlying collateral.   Collateral values are reviewed on aloan-by-loan basis through independent appraisals.  Appraised values may be discounted based onmanagement’s historical knowledge, changes in market conditions and/ormanagement’s expertise and knowledge of the client and the client’sbusiness.  Because many of these inputsare unobservable the valuations are classified as level 3.  The carrying value of the Company’s impairedloans was $5.9 million, with an allocated allowance of $98,000, at March 31,2008.

 

Mortgage loans originatedand intended for sale in the secondary market are carried at the lower of costor estimated fair value, determined on an aggregate basis.  The mortgage loan valuations are based onquoted secondary market prices for similar loans and are classified as level 2.

 

The Company initiallymeasures its mortgage servicing rights at fair value, and amortizes them overthe period equal to estimated net servicing income.  Periodic impairment assessments are performedbased on fair value estimates at the reporting date.  The fair value of mortgage servicing rightsare estimated based on a valuation model which calculates the present value ofestimated future cash flows associated with servicing the underlyingloans.  The model incorporates assumptionsthat 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 asLevel 3.

 

**3.  Split-Dollar Life Insurance**

 

The Company adopted theEmerging Issues Task Force (“EITF”) Issue 06-4, “*Accountingfor Deferred Compensation and Postretirement Benefit Aspects of EndorsementSplit-Dollar Life Insurance Arrangements*”, on January 1,2008.  The EITF Issue 06-4 addressesaccounting for separate agreements that split life insurance policy benefitsbetween an employer and employee, and requires the employer to recognize aliability for future benefits payable to an employee under theseagreements.  The effects of adoption mustbe recognized through either a change in accounting principle through anadjustment to equity or through the retrospective application to all priorperiods.  Upon adoption, the Companyrecognized a liability of $335,000, with an offsetting reduction to retainedearnings, for a split-dollar life insurance arrangement with a former employee.

 

7

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**4.****             Stock BasedCompensation**

 

A summary of option activity during the first threemonths of 2008 is presented below:

 
| ** **                                          | ** ** | **Shares** | ** ** | **Weighted  average  exercise  price** | ** ** | **Weighted  average  remaining  contractual  term** | ** ** | **Aggregate  intrinsic  value** | ** ** |
|-----------------------------------------------------|------------|------------|------------|----------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| Outstanding at  December 31, 2007              |       | 249,188    |       | $                                      | 23.05      |                                                | 6.80 years |                            | n/a        |   |
| Granted                                             |       | 2,000      |       | 24.50                                  |       | —                                              |       | n/a                             |       |
| Forfeited/expired                                   |       | —     |       | —                                 |       | —                                              |       | n/a                             |       |
| Exercised                                           |       | 1,882      |       | 16.17                                  |       | —                                              |       | n/a                             |       |
| Outstanding at  March 31, 2008                 |       | 249,306    |       | $                                      | 23.11      |                                                | 6.62 years |                            | $          | 159,000 |   |
| Exercisable at  March 31, 2008                 |       | 158,268    |       | $                                      | 22.24      |                                                | 5.77 years |                            | $          | 239,000 |   |
| Vested and  expected to vest at March 31, 2008 |       | 239,039    |       | $                                      | 23.06      |                                                | 6.59 years |                            | $          | 292,000 |   |

 

The fair value of each option grant is estimated onthe date of grant. The fair value of options granted in the first quarter of2008 were estimated utilizing the following assumptions: dividend rate of 5.2%,volatility of 18.2%, risk-free interest rate of 2.6%, and expected lives offive years, resulting in a fair value of $2.11 per option at grant date.

 

Additional information about stock options exercisedis presented below:

 
| ** **                                          | ** ** | **Three months**         | ** ** |
|-----------------------------------------------------|------------|-------------------------------|------------|
| ** **                                          | ** ** | **ended March 31,** | ** ** |
| ** **                                          | ** ** | **2008**                      | ** ** | **2007** | ** ** |
| Intrinsic value  of options exercised               |       | $                             | 14,736     |   | $ | 11,101 |   |
| Cash received  from options exercised               |       | $                             | 30,432     |   | $ | 20,490 |   |
| Excess tax  benefit realized from options exercised |       | $                             | 5,010      |   | $ | 3,774 |   |

 

As of March 31, 2008, there was $199,000 of totalunrecognized compensation cost related to outstanding options.  That cost is expected to be recognized over aweighted-average period of 4 years.  Thetotal fair value (at vest date) of shares vested during the three month periodsended March 31, 2008 and 2007 was $64,000 and $142,000 respectively.

 

**5.****             Earnings per Share**

 

Basic earnings per sharehave been computed based upon the weighted average number of common sharesoutstanding during each period.  Diluted earningsper share include the effect of all potential common shares outstanding duringeach period.  Earnings and dividends pershare for prior periods have been adjusted to give effect to the 5% stockdividend paid by the Company in December 2007.

 

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

 
| ** **                                                             | ** ** | **Three months ended  March 31,** | ** **      |
|------------------------------------------------------------------------|------------|--------------------------------------------------|-----------------|
| ** **                                                             | ** ** | **2008**                                         | ** **      | **2007** | ** ** |
| Net earnings available to common stockholders |       | $                                                |  1,066,514 |   | $ |  1,244,620 |   |
|                                                                   |       |                                             |            |   |   |
| Weighted average  common shares outstanding (basic)                    |       | 2,353,198                                        |            | 2,452,528 |   |
| Dilutive stock  options                                                |       | 12,872                                           |            | 19,094 |   |
| Weighted average  common shares (diluted)                              |       | 2,366,070                                        |            | 2,471,622 |   |
|                                                                   |       |                                             |            |   |   |
| Net earnings per  share:                                               |       |                                             |            |   |   |
| Basic                                                                  |       | $                                                | 0.45            |   | $ | 0.51 |   |
| Diluted                                                                |       | $                                                | 0.45            |   | $ | 0.50 |   |

 

8

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**6.****             OtherComprehensive Income**

 

The Company’s other comprehensive income consists ofthe unrealized holding gains and losses on available-for-sale securities asshown below.

 
| ** **                                                                  | ** ** | **Three months ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| Unrealized  holding gains on securities                                     |       | $                                                | 2,353,684  |   | $ | 277,534 |   |
| Less  reclassification adjustment for net gains (losses) included in income |       | —                                           |       | — |   |
| Net unrealized  gains                                                       |       | 2,353,684                                        |       | 277,534 |   |
| Income tax  expense                                                         |       | 894,400                                          |       | 105,463 |   |
| Other comprehensive  income                                                 |       | $                                                | 1,459,284  |   | $ | 172,071 |   |

 

**7.****             OtherIntangible Assets**

 

The following is an analysis of changes in the coredeposit intangible assets:

 
| ** **                      | ** ** | **Three months ended March 31,** | ** ** |
|---------------------------------|------------|------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                      | ** ** | **Fair value at  acquisition**             | ** ** | **Accumulated  Amortization** | ** ** | **Fair value at  acquisition** | ** ** | **Accumulated  Amortization** | ** ** |
| Balance at  beginning of period |       | $                                                    | 5,396,065  |   | $ | (2,462,256 | ) | $ | 5,396,065 |   | $ | (1,667,478 | ) |
| Additions                       |       | —                                               |       | — |   | — |   | — |   |
| Amortization                    |       | —                                               |       | (179,290 | ) | — |   | (203,815 | ) |
| Balance at end  of period       |       | $                                                    | 5,396,065  |   | $ | (2,641,546 | ) | $ | 5,396,065 |   | $ | (1,871,293 | ) |

 

The following is ananalysis of changes in the mortgage servicing rights:

 
| ** **                      | ** ** | **Three months ended March 31,** | ** ** |
|---------------------------------|------------|------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                      | ** ** | **Cost**                                             | ** ** | **Accumulated  Amortization** | ** ** | **Cost** | ** ** | **Accumulated  Amortization** | ** ** |
| Balance at  beginning of period |       | $                                                    | 770,172    |   | $ | (559,980 | ) | $ | 791,840 |   | $ | (489,718 | ) |
| Additions                       |       | 13,694                                               |       | — |   | 8,812 |   | — |   |
| Prepayments/maturities          |       | (12,996                                              | )          | 12,996 |   | (9,028 | ) | 9,028 |   |
| Amortization                    |       | —                                               |       | (25,446 | ) | — |   | (30,094 | ) |
| Balance at end  of period       |       | $                                                    | 770,870    |   | $ | (572,430 | ) | $ | 791,624 |   | $ | (510,784 | ) |

 

The mortgage servicing rights correspond to loansserviced by the Company for unrelated third parties with outstanding principalbalances of $89.2 million and $91.0 million at March 31, 2008 and December 31,2007, respectively.  Gross service feeincome related to such loans was $57,000 and $64,000 for the quarters ended March 31,2008 and March 31, 2007, respectively, which is included in fees andservice charges in the condensed consolidated statements of earnings.

 

Aggregate amortizationexpense for the quarters ended March 31, 2008 and 2007, was $205,000 and$234,000.  The following depictsestimated amortization expense for the remainder of 2008 and in successiveyears ending December 31:

 

| **Year**   | ** ** | **Amount** | ** **    |
|------------|------------|------------|---------------|
| 2008       |       | $          |  618,000 |   |
| 2009       |       | 697,000    |          |
| 2010       |       | 500,000    |          |
| 2011       |       | 402,000    |          |
| 2012       |       | 308,000    |          |
| Thereafter |       | 428,000    |          |
|            |            |            |               |  |

 

9

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**8.****                                      Impactof Recent Accounting Pronouncements**

 

In February 2007,the FASB issued SFAS No. 159, “*The Fair Value Option forFinancial Assets and Financial Liabilities*.”  SFAS No. 159 allows companies to electfair-value measurement of specified financial instruments and warranty andinsurance contracts when an eligible asset or liability is initially recognizedor when an event, such as a business combination triggers a new basis ofaccounting for that asset or liability. The election, called the “fair-value option,” will enable companies toreduce the volatility in reported earnings caused by measuring related assetsand liabilities differently.  Theelection is available for eligible assets or liabilities on acontract-by-contract basis without electing it for identical assets orliabilities under certain restrictions. For calendar year companies, SFAS No. 159 is effective beginning January 1,2008.  We did not elect to apply SFAS No. 159to any financial instruments.

 

In November 2007,the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 109, “*Written Loan Commitment Recorded at Fair Value Through Earnings*.”  This SAB supersedes SAB 105 and expresses thecurrent view that, consistent with the guidance in Statement of FinancialAccounting Standards No. 156, Accounting for Servicing of FinancialAssets, and Statement of Financial Accounting Standards No. 159, “*The Fair Value Option for Financial Assets and Financial Liabilities*”,the expected net future cash flows related to the associated servicing of theloan should be included in the measurement of all written loan commitments thatare accounted for at fair value through earnings.  For calendar year companies, this SAB iseffective January 1, 2008.  Theadoption of SAB 109 did not have a material effect on our financial statements.

 

In December 2007,the FASB issued SFAS No. 141 (revised), “*BusinessCombinations*.”  The Statementretains the fundamental requirements in Statement 141 that the acquisitionmethod of accounting be used for business combinations, but broadens the scopeof Statement 141 and contains improvements to the application of this method.  The Statement requires an acquirer torecognize the assets acquired, the liabilities assumed, and any noncontrollinginterest in the acquiree at the acquisition date, measured at their fair valuesas of that date.  Costs incurred toeffect the acquisition are to be recognized separately from theacquisition.  Assets and liabilitiesarising from contractual contingencies and contingent considerations must bemeasured at fair value as of the acquisition date.  The Statement also changes the accounting fornegative goodwill arising from a bargain purchase, requiring recognition inearnings instead of allocation to assets acquired.  For calendar year companies, this Statementis applicable to business combinations occurring after January 1, 2009.

 

Also in December 2007,the FASB issued SFAS No. 160, “*Noncontrolling Interestsin Consolidated Financial Statements – an amendment of ARB No. 51*”.  This statement amends ARB 51 to establishaccounting and reporting standards for the noncontrolling interest in asubsidiary and for the deconsolidation of a subsidiary.  It also amends certain of ARB 51’sconsolidation procedures for consistency with the requirements of FASBStatement No. 141 (revised 2007), Business Combinations.  For calendar year companies, this Statementis effective January 1, 2009.  We donot expect that adoption of the Statement will have a material effect on ourconsolidated financial statements.

 

In March 2008, theFASB issued Statement of Financial Accounting Standards No. 161, “*Disclosures about Derivative Instruments and Hedging Activities - anamendment of FASB Statement No. 133*”.  This Statement requires enhanced disclosuresabout how and why an entity uses derivative instruments, how derivativeinstruments and related hedged items are accounted for, and how theseactivities affect its financial position, financial performance, and cashflows. The Statement is effective for financial statements issued in 2009. TheCompany does not expect adoption of the Statement to have a significant effecton its consolidated financial statements.

 

10

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**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

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

 

Our results of operations depend primarily on netinterest income, which is the difference between interest income frominterest-earning assets and interest expense on interest-bearingliabilities.  Net interest income isaffected by regulatory, economic and competitive factors that influenceinterest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to the degree that ourinterest-earning assets mature or reprice at different times, or at differentspeeds, than our interest-bearing liabilities. Our results of operations are also affected by non-interest income, suchas service charges, loan fees and gains and losses from the sale of newlyoriginated loans and investments.  Ourprincipal operating expenses, aside from interest expense, consist ofcompensation and employee benefits, occupancy costs, data processing expensesand provision for loan losses.

 

We are significantly impacted by prevailing nationaland local economic conditions, including federal monetary and fiscal policiesand federal regulations of financial institutions.  Deposit balances are influenced by numerousfactors such as competing personal investments, the level of personal incomeand the personal rate of savings within our market areas.  Factors influencing lending activitiesinclude the demand for housing and commercial loans as well as the interestrate pricing competition from other lending institutions.

 

*CriticalAccounting Policies.* Critical accounting policies are thosewhich are both most important to the portrayal of our financial condition andresults of operations, and require our management’s most difficult, subjectiveor complex judgments, often as a result of the need to make estimates about theeffect of matters that are inherently uncertain.  Our critical accounting policies relate tothe allowance for loan losses, the valuation of investment securities andaccounting for income taxes, all of which involve significant judgment by ourmanagement.

 

We perform periodic and systematicdetailed reviews of our lending portfolio to assess overallcollectability.  The level of theallowance for loan losses reflects our estimate of the collectability of theloan portfolio as of each reporting date. While these estimates are based on substantive methods for determiningallowance requirements, nevertheless, actual outcomes may differ significantlyfrom estimated results.  Additionalexplanation of the methodologies used in establishing this reserve is providedin the “Asset Quality and Distribution” section.

 

We report our investmentsecurities at estimated fair values based primarily on observable marketinputs, which are obtained from independent sources.  We perform periodic reviews of the fair valueof investment securities to determine if any declines in value might beconsidered other than temporary.  Ourmost recent review showed that the securities that had experienced decreases infair value, resulting in unrealized loss positions, were related to changes ininterest rates and not to a credit deterioration.  We have the ability and intent to hold thesesecurities until market values recover, including up to the maturity date.  Although we believe that our estimates of thefair values of investment securities to be reasonable, economic and marketfactors may affect the amounts that will ultimately be realized from theseinvestments.

 

The objectives ofaccounting for income taxes are to recognize the amount of taxes payable orrefundable for the current year and deferred tax liabilities and assets for thefuture tax consequences of events that have been recognized in an entity’sfinancial statements or tax returns. Judgment is required in assessing the future tax consequences of eventsthat have been recognized in our financial statements or tax returns.  Under FIN 48, an income tax position will berecognized if it is more likely than not that it will be sustained upon IRSexamination, based upon its technical merits. Once that status is met, the amount recorded will be the largest amountof benefit that is greater than 50 percent likely of being realized uponultimate settlement.  Changes inestimates regarding the actual outcome of these future tax consequences,including the effects of IRS examinations and examinations by other stateagencies, could materially impact our financial position and results ofoperations.

 

11

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*Summaryof Results*.  During thefirst quarter of 2008 we experienced a $178,000 decline in earnings as comparedto the first quarter of 2007.  Thisdecline was primarily attributable to a $535,000 increase in our provision forloan losses, as well as a decline in our net interest margin.  Partially offsetting the decline in earningswas a $246,000 gain recognized on the prepayment of a $10 million FHLB advanceas well as a $161,000 increase in gains on sale of loans experienced in thefirst quarter of 2008 as compared to the first quarter of 2007.  Our net interest margin also declined from3.59% during the first three months of 2007 to 3.47% during the same period of2008.  This decline in net interestmargin was the result of competitive deposit pricing pressures not allowing usto decrease our costs of deposits in line with our decrease in variable loanrates this past quarter as the Federal Reserve Bank continued to decrease thefederal funds target rate.

 

Our variable ratesor commercial and commercial real estate loans are generally tied to the primerate, which moves with the federal funds target rate.  Our certificate of deposits and money marketrates are typically priced off of our alternative funding sources as well ascompetitors’ rates, which typically do not decline as fast or as far as thefederal funds target rate.  Thosecharacteristics generally lead to a decline in our net interest margin in adeclining rate environment, which we are currently experiencing.

 

Net earnings forthe three months ended March 31, 2008 decreased $178,000, or 14.3%, to$1.1 million as compared to the three months ended March 31, 2007.  The three months ended March 31, 2008and 2007 resulted in diluted earnings per share of $0.45 and $0.50,respectively.  Return on average assets,on an annualized basis, was 0.70% for the period ended March 31, 2008compared to 0.85% for the same period in 2007. Return on average stockholders’ equity, on an annualized basis, was8.26% for the first three months of 2008 compared to 10.33% for the same periodin 2007.

 

The followingtable summarizes net earnings per share and key performance measures for theperiods presented.

 
| ** **                        | ** ** | **Three months ended March  31,** | ** ** |
|-----------------------------------|------------|--------------------------------------------------|------------|
| ** **                        | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| Net earnings:                     |       |                                             |       |   |   |
| Basic earnings  per share         |       | $                                                | 0.45       |   | $ | 0.51 |   |
| Diluted earnings  per share       |       | $                                                | 0.45       |   | $ | 0.50 |   |
| Earnings ratios:                  |       |                                             |       |   |   |
| Return on  average assets (1)     |       | 0.70                                             | %          | 0.85 | % |
| Return on  average equity (1)     |       | 8.26                                             | %          | 10.33 | % |
| Dividend payout  ratio            |       | 42.22                                            | %          | 35.85 | % |
| Net interest  margin (1) (2) |       | 3.47                                             | %          | 3.59 | % |

 

----

(1)          The ratio has beenannualized and is not necessarily indicative of the results for the entireyear.

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

 

*InterestIncome.*  Interestincome for the three months ended March 31, 2008, decreased $337,000, or3.8%, to $8.5 million from $8.8 million in the same period of 2007, resultingfrom decreased interest income on loans. Interest income on loans decreased $479,000, or 6.7%, to $6.7 millionfor the quarter ended March 31, 2008 due to decreases in loan volumes andyields.  Average loans for the quarterended March 31, 2008 decreased to $381.4 million from $383.5 million forthe quarter ended March 31, 2007. Interest income on investment securities increased $142,000, or 8.4%, to$1.8 million for the first quarter of 2008, as compared to the same period of2007.  Average investment securitiesincreased from $153.0 million for the quarter ended March 31, 2007, to$166.8 million for the quarter ended March 31, 2008.  Offsetting the increase in averageinvestments for the comparable period was a lower yield on those investments.

 

*InterestExpense*.  Interestexpense during the three months ended March 31, 2008 decreased $299,000,or 6.9%, as compared to the same period of 2007.  For the three months ended March 31,2008, interest expense on interest-bearing deposits decreased $129,000, or4.0%.  Average interest-bearing depositsincreased from $397.0 million during the quarter ended March 31, 2007 to$399.6 million for the quarter ended March 31, 2008.  The decrease in interest expense oninterest-bearing deposits resulted from lower rates on deposit balances,primarily in our money market and NOW accounts as they repriced down, alongwith the federal funds target rates and other interest rates, throughout thefirst quarter of 2008.  Averageborrowings for the quarter ended March 31, 2008 increased to $98.8 millionfrom $93.7 million for the quarter ended March 31, 2007, however interestexpense on borrowings decreased $170,000, or 15.7%, to $911,000 for the threemonths ended March 31, 2008 as compared to the same period in 2007.  The declining rates on our variable rateborrowings more than offset the higher average balances during the quarter.

 

12

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*NetInterest Income*.  Netinterest income for the three months ended March 31, 2008, totaled $4.5million, decreasing $38,000, or 0.8%, as compared to the three months ended March 31,2007.  This decline in net interestincome was due primarily to the decreases in yields on interest earning assetsoutpacing the decreases in our cost of funding on deposits.  Average interest-earning assets increasedduring the first quarter of 2008 to $548.2 million from $536.5 million for thefirst quarter of 2007.  Our net interestmargin, on a tax equivalent basis, declined to 3.47% for the three months endedMarch 31, 2008 from 3.59% for the same period in 2007.

 

*Provision for Loan Losses*.  We maintain, and our Board of Directorsmonitors, an allowance for losses on loans. The allowance is established basedupon management’s periodic evaluation of known and inherent risks in the loanportfolio, review of significant individual loans and collateral, review ofdelinquent loans, past loss experience, adverse situations that may affect theborrowers’ ability to repay, current market conditions, and other factorsmanagement deems important. Determining the appropriate level of reservesinvolves a high degree of management judgment and is based upon historical andprojected losses in the loan portfolio and the collateral value of specificallyidentified impaired loans. Allowance policies are subject to periodic reviewand revision in response to a number of factors, including current marketconditions, actual loss experience and management’s expectations.

 

The provision for loanlosses for the three months ended March 31, 2008 was $600,000, compared toa provision of $65,000 during the three months ended March 31, 2007.  We increased in the provision for loan lossesby $535,000 during the first quarter of 2008 due to the deterioratingconditions in the credit markets and increased historical losses as a result ofthe increased charge-offs, despite the fact that our levels of non-accrual andpast due loans declined over the same period. While we experienced a general economic slowdown in 2007, it acceleratedrapidly during the first quarter of 2008, as evidenced by deteriorating U.S.economic indicators coupled with further declines in residential real estateprices, higher energy and food costs and ebbing consumer confidence.  These risk factors were further exemplifiedby the Federal Open Market Committee reducing the fed funds target rate by 200basis points during the first quarter of 2008 and through the use of itsemergency monetary powers in an effort to calm the credit markets.

 

One measure of theadequacy of the allowance for estimated losses on loans is the ratio of theallowance to the total loan portfolio. At March 31, 2008, the allowance for loan losses was $3.3 million,or 0.9% of gross loans outstanding, compared to $4.2 million, or 1.1% of grossloans outstanding at December 31, 2007. Our allowance for loan losses to gross loans ratio declined during thefirst quarter of 2008, despite the increase in our provision, because of the$1.5 million in charge-offs related to previously identified impairedloans.  The charge-offs decreased grossloans and the allowance for loan losses, lowering the corresponding ratio.  For further discussion of the allowance forloan losses, refer to the “Asset Quality and Distribution” section.

 

*Non-interest Income*.  Non-interest income increased $486,000, or36.6%, for the three months ended March 31, 2008, to $1.8 million, ascompared to the three months ended March 31, 2007.  The increase was primarily attributable to a$246,000 gain on the prepayment of a FHLB advance and an increase of $161,000in gains on sale of loans, as compared to the first quarter of 2007.  During the first quarter of 2008, we began astrategy of issuing longer-term, fixed rate FHLB advances and repayingshorter-term FHLB advances to lengthen our FHLB advance maturities while ratesare lower.  As a result of the prepaymentof a $10 million advance, we were able to recognize a gain of $246,000.  The increased gains on sale of loans weredriven by higher origination volumes of residential real estate loans that weresold in the secondary market.  Ourability to originate secondary market conforming loans allowed us to increaseour loan volumes.

 

*Non-interestExpense*.  Non-interestexpense increased $132,000, or 3.2%, to $4.3 million for the three months endedMarch 31, 2008, as compared to the three months ended March 31,2007.  These general increases innon-interest expense consisted of $85,000 in compensation and benefits and$62,000 in occupancy and equipment expense. Offsetting some of the increases was a $29,000 decrease in amortizationexpense and a $21,000 decline in advertising costs.

 

*Income Tax Expense*.  Income tax expense decreased $40,000, or11.2%, from $361,000 for the three months ended March 31, 2007, to$321,000 for the three months ended March 31, 2008.  The decrease in income tax expense was theresult of a $218,000 decrease in earnings before income taxes for the firstquarter of 2008 as compared to the first quarter of 2007.  The effective tax rate for the first quarterof 2008 was 23.1% compared to 22.5% during the first quarter of 2007.

 

*AssetQuality and Distribution*. Our primary investing activities are the origination of commercial,commercial real estate, mortgage, consumer loans and the purchase of investmentsecurities.  We have concentrated ongenerating commercial and commercial real estate loans over the past few yearsand are pleased with the growth in this segment of our loan portfolio.  We also originate fixed-rate, residentialmortgage loans with maturities in excess of ten years, primarily for sale inthe secondary market.  Total assetsincreased to $608.4 million at March 31, 2008, compared to $606.5 millionat 

 

13

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December 31,2007.  While net loans, excluding loansheld for sale increased $2.6 million to $378.8 million during the three monthsended March 31, 2008 as compared to December 31, 2007, thecomposition of loans changed more substantially as our commercial andcommercial real estate loans increased by $7.4 million and our one-to-fourfamily residential loans decreased by $5.8 million.

 

Loans consisted of thefollowing:

 
| ** **                                    | ** ** | **March 31, 2008** | ** **  | **December 31, 2007** | ** ** |
|-----------------------------------------------|------------|------------------------------|-------------|---------------------------------|------------|
| Real estate loans:                            |       |                         |        |                            |       |
| One-to-four family residential                |       | $                            | 120,637,239 |                            | $          | 126,459,081 |   |
| Commercial                                    |       | 117,295,445                  |        | 113,209,220                     |       |
| Construction                                  |       | 23,185,994                   |        | 27,936,176                      |       |
| Commercial loans                              |       | 111,136,175                  |        | 103,098,695                     |       |
| Consumer loans                                |       | 8,834,959                    |        | 9,164,122                       |       |
| Total                                         |       | 381,089,812                  |        | 379,867,294                     |       |
|                                          |       |                         |        |                            |       |
| Less: Deferred loan fees and loans in process |       | (951,869                     | )           | (460,981                        | )          |
| Less: Allowance for loan losses               |       | 3,287,904                    |        | 4,171,667                       |       |
| Loans, net                                    |       | $                            | 378,753,777 |                            | $          | 376,156,608 |   |

 

The allowance for loan losses is established through aprovision for losses on loans based on our evaluation of the risk inherent inthe loan portfolio and changes in the nature and volume of its loanactivity.  Such evaluation, whichincludes a review of all loans with respect to which full collectability maynot be reasonably assured, considers the fair value of the underlyingcollateral, economic conditions, historical loan loss experience, level ofclassified loans and other factors that warrant recognition in providing for anadequate allowance for loan losses.  As apart of its examination process, the OCC periodically reviews our allowance forloan losses and has the authority to require us to make additions to theallowance based on its evaluation. Although we believe that we use the best information available todetermine the allowance for loan losses, unforeseen market conditions couldresult in adjustment to the allowance for loan losses.  In addition, net earnings could besignificantly affected if circumstances differ substantially from the assumptionsused in establishing the allowance for loan losses.

 

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

 
| ** **                 | ** ** | **Three months ended** | ** ** |
|----------------------------|------------|----------------------------------|------------|
| ** **                 | ** ** | **March 31, 2008**     | ** ** | **March 31, 2007** | ** ** |
| Beginning  balance         |       | $                                | 4,171,667  |   | $ | 4,029,710 |   |
| Provision for  loan losses |       | 600,000                          |       | 65,000 |   |
| Charge-offs                |       | (1,503,355                       | )          | (42,371 | ) |
| Recoveries                 |       | 19,592                           |       | 22,764 |   |
| Ending balance             |       | $                                | 3,287,904  |   | $ | 4,075,103 |   |

 

Loans past due more than a month totaled $7.6 millionat March 31, 2008, compared to $11.9 million at December 31,2007.  Loans past due more than a monthand still accruing interest at March 31, 2008, totaled $2.8 million.  At March 31, 2008, $5.2 million in loanswere on non-accrual status, or 1.4% of net loans, compared to a balance of$10.0 million in loans on non-accrual status, or 2.7% of net loans, at December 31,2007.  The decrease in non-accrual loanswas primarily the result of the collection of the outstanding balances on twoloan relationships totaling $3.0 million and certain loan charge-offs on loanspreviously classified as non-accrual during the first quarter of 2008.  Although non-accrual loans decreased duringthe first quarter of 2008, we increased our provision for loan losses duringthe quarter due to deteriorating conditions in the credit markets, slowingnational and local economies and an increase in historical losses resultingfrom the first quarter of 2008 charge-offs. We felt this step was appropriate given the impact these factors couldhave on our asset quality in the future. Net loan charge-offs for the quarter ended March 31, 2008 were $1.5million compared to $42,000 for the comparable period of 2007.  While the charge-offs increased during thefirst quarter of 2008, substantially all had a specific loss reserve allocationat December 31, 2007.  The increasedcharge-offs were primarily related to three loan relationships withinsufficient collateral, on which we believe it is not likely that ourcollection attempts will result in any recoveries.

 

14

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A summary of thenon-performing assets:

 
| ** **                                     | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Total  non-accrual loans                       |       | $                            | 5,156,479  |                            | $          | 10,037,022 |   |
| Accruing loans  over 90 days past due          |       | —                       |       | —                          |       |
| Real estate  owned                             |       | 1,201,490                    |       | 491,722                         |       |
| Total nonperforming  assets                    |       | $                            | 6,357,969  |                            | $          | 10,528,744 |   |
|                                           |       |                         |       |                            |       |
| Total  nonperforming loans to total loans, net |       | 1.4                          | %          | 2.7                             | %          |
| Total  nonperforming assets to total assets    |       | 1.0                          | %          | 1.7                             | %          |

 

*Liability Distribution*.  Our primary ongoing sources of funds aredeposits, proceeds from principal and interest payments on loans and investmentsecurities and proceeds from the sale of mortgage loans and investmentsecurities.  While maturities andscheduled amortization of loans are a predictable source of funds, depositflows and mortgage prepayments are greatly influenced by general interestrates, economic conditions, competition and the restructuring of the financialservices industry.  Total depositsdecreased $5.4 million to $447.3 million at March 31, 2008, from $452.7million at December 31, 2007. Borrowings increased $7.1 million to $100.2 million at March 31,2008, from $93.1 million at December 31, 2007.

 

Deposits consisted of the following:

 
| ** **                   | ** ** | **March 31, 2008** | ** **  | **December 31, 2007** | ** ** |
|------------------------------|------------|------------------------------|-------------|---------------------------------|------------|
| Non-interest  bearing demand |       | $                            | 47,504,271  |                            | $          | 51,007,859 |   |
| Money market and  NOW        |       | 143,860,792                  |        | 139,557,359                     |       |
| Savings                      |       | 27,257,801                   |        | 25,882,935                      |       |
| Time, $100,000  and greater  |       | 53,067,332                   |        | 58,980,552                      |       |
| Time, other                  |       | 175,586,150                  |        | 177,223,601                     |       |
| Total deposits               |       | $                            | 447,276,346 |                            | $          | 452,652,306 |   |

 

Certificates of deposit at March 31, 2008, whichwere scheduled to mature in one year or less, totaled $198.3 million.  Historically, maturing deposits havegenerally remained with our bank and we believe that a significant portion ofthe deposits maturing in one year or less will remain with us upon maturity.

 

*Liquidity*.  Our most liquid assets are cash and cashequivalents and investment securities available for sale.  The levels of these assets are dependent onthe operating, financing, lending and investing activities during any givenperiod.  These liquid assets totaled$168.0 million at March 31, 2008, and $170.6 million at December 31,2007.  During periods in which we are notable to originate a sufficient amount of loans and/or periods of high principalprepayments, we increase our liquid assets by investing in short-term U. S.Government and agency securities or high-grade municipal securities.

 

Liquidity management is both a daily and long-termfunction of our strategy.  Excess fundsare generally invested in short-term investments.  In the event we require funds beyond ourability to generate them internally, additional funds are generally availablethrough the use of FHLB advances, a line of credit with the FHLB, or otherborrowings or through sales of securities. At March 31, 2008, we had outstanding FHLB advances of $67.9million and $2.6 million of borrowings against our line of credit with theFHLB.  At March 31, 2008, our totalborrowing capacity with the FHLB was $109.5 million.  We also had other borrowings of $28.6 millionat March 31, 2008, which included $16.5 million of subordinateddebentures, $6.7 million of long-term debt and $5.4 million in repurchaseagreements.

 

During the first quarter of 2008 we began a strategyof issuing longer-term, fixed rate FHLB advances and repaying shorter-term,variable rate FHLB advances to lengthen our maturities while interest rateswere low.  Over the first three months of2008, we issued $25 million of advances with maturities ranging from eight toten years.  These advances have aone-time option to convert to adjustable rates, beginning between two and fiveyears from the issue date.  We retired$13.5 million of advances that had previously converted to adjustable rates.

 

As a provider of financial services, we routinelyissue financial guarantees in the form of financial and performance standbyletters of credit. Standby letters of credit are contingent commitments issuedby us generally to guarantee the payment or performance obligation of acustomer to a third party. While these standby letters of credit represent apotential outlay by us, a significant amount of the commitments may expirewithout being drawn upon. We have recourse against the customer for any amountthe bank is required to pay to a third party under a standby letter of credit.The letters of credit are 

 

15

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subject to the samecredit policies, underwriting standards and approval process as loansoriginated by us. Most of the standby letters of credit are secured, and in theevent of nonperformance by the customer, we have the right to the underlyingcollateral, which could include commercial real estate, physical plant andproperty, inventory, receivables, cash and marketable securities. The contractamount of these standby letters of credit, which represents the maximumpotential future payments guaranteed by us, was $2.1 million at March 31,2008.

 

At March 31, 2008, we had outstanding loancommitments, excluding standby letters of credit, of $68.3 million.  We anticipate that sufficient funds will beavailable to meet current loan commitments. These commitments consist of unfunded lines of credit and commitments tofinance real estate loans.

 

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

 

At March 31, 2008,we continued to maintain a sound leverage ratio of 8.27% and a total risk basedcapital ratio of 12.55%.  As shown by thefollowing table, our capital exceeded the minimum capital requirements at March 31,2008 (dollars in thousands):

 
| ** **                | ** ** | **Actual** | ** ** | **For capital  adequacy purposes** | ** ** | **To be well-  capitalized** | ** ** |
|---------------------------|------------|------------|------------|----------------------------------------------|------------|----------------------------------------|------------|
| **Company**               | ** ** | **Amount** | ** ** | **Ratio**                                    | ** ** | **Amount**                             | ** ** | **Ratio** | ** ** | **Amount** | ** ** | **Ratio** | ** ** |
| Leverage                  |       | $          | 48,984     |                                         | 8.27       | %                                      | $          | 23,700 |   | 4.0 | % | $ | 29,625 |   | 5.0 | % |
| Tier 1 Capital            |       | $          | 48,984     |                                         | 11.76      | %                                      | $          | 16,664 |   | 4.0 | % | $ | 24,997 |   | 6.0 | % |
| Total Risk Based  Capital |       | $          | 52,272     |                                         | 12.55      | %                                      | $          | 33,329 |   | 8.0 | % | $ | 41,661 |   | 10.0 | % |

 

At March 31, 2008,Landmark National Bank continued to maintain a sound leverage ratio of 9.13%and a total risk based capital ratio of 13.76%. As shown by the following table, the bank’s capital exceeded the minimumcapital requirements at March 31, 2008 (dollars in thousands):

 
| ** **                           | ** ** | **Actual** | ** ** | **For capital  adequacy purposes** | ** ** | **To be well-  capitalized** | ** ** |
|--------------------------------------|------------|------------|------------|----------------------------------------------|------------|----------------------------------------|------------|
| **Landmark National Bank** | ** ** | **Amount** | ** ** | **Ratio**                                    | ** ** | **Amount**                             | ** ** | **Ratio** | ** ** | **Amount** | ** ** | **Ratio** | ** ** |
| Leverage                             |       | $          | 53,900     |                                         | 9.13       | %                                      | $          | 23,612 |   | 4.0 | % | $ | 23,612 |   | 5.0 | % |
| Tier 1 Capital                       |       | $          | 53,900     |                                         | 12.97      | %                                      | $          | 16,623 |   | 4.0 | % | $ | 24,935 |   | 6.0 | % |
| Total Risk Based  Capital            |       | $          | 57,188     |                                         | 13.76      | %                                      | $          | 33,247 |   | 8.0 | % | $ | 41,559 |   | 10.0 | % |

 

16

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*AverageAssets/Liabilities*.  The following table sets forth informationrelating to average balances of interest-earning assets and liabilities for thethree months ended March 31, 2008 and the same period for 2007.  The following table reflects the average taxequivalent yields on assets and average costs of liabilities for the periodsindicated (derived by dividing income or expense by the monthly average balanceof assets or liabilities, respectively) as well as “net interest margin” (whichreflects the effect of the net earnings balance) for the periods shown:

 
| ** **                                                                        | ** ** | **Three months ended** | ** ** | **Three months ended** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                                        | ** ** | **March 31, 2008**     | ** ** | **March 31, 2007**     | ** ** |
| **(Dollars in thousands)**                                              | ** ** | **Average  balance**             | ** ** | **Interest**                     | ** ** | **Average  annual  yield/rate** | ** ** | **Average  balance** | ** ** | **Interest** | ** ** | **Average  annual  yield/rate** | ** ** |
| ASSETS:                                                                           |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Interest-earning  assets:                                                         |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Investment  securities (1)                                                        |       | $                                | 166,792    |                             | $          | 2,101 |   | 5.05 | % | $ | 152,987 |   | $ | 1,931 |   | 5.12 | % |
| Loans (2)                                                                         |       | 381,446                          |       | 6,678                            |       | 7.02 | % | 383,540 |   | 7,149 |   | 7.56 | % |
|                                                                              |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Total  interest-earning assets                                                    |       | 548,238                          |       | 8,779                            |       | 6.42 | % | 536,527 |   | 9,080 |   | 6.86 | % |
| Non-interest-earning  assets                                                      |       | 59,926                           |       |                             |       |   |   | 60,425 |   |   |   |   |   |
|                                                                              |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Total                                                                             |       | $                                | 608,164    |                             |       |   |   |   | $ | 596,952 |   |   |   |   |   |
|                                                                              |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY:                                       |       |                             |       |                             |       |   |   |   |   |   |   |
| Interest-bearing  liabilities:                                                    |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Certificates of  deposit                                                          |       | $                                | 230,133    |                             | $          | 2,475 |   | 4.31 | % | $ | 232,397 |   | $ | 2,497 |   | 4.36 | % |
| Money market and  NOW accounts                                                    |       | 143,314                          |       | 628                              |       | 1.76 | % | 136,812 |   | 733 |   | 2.17 | % |
| Savings accounts                                                                  |       | 26,119                           |       | 19                               |       | 0.29 | % | 27,783 |   | 21 |   | 0.31 | % |
| FHLB advances  and other borrowings                                               |       | 98,774                           |       | 911                              |       | 3.70 | % | 93,726 |   | 1,081 |   | 4.68 | % |
|                                                                              |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Total  interest-bearing liabilities                                               |       | 498,340                          |       | 4,033                            |       | 3.25 | % | 490,718 |   | 4,332 |   | 3.58 | % |
| Non-interest-bearing  liabilities                                                 |       | 58,046                           |       |                             |       |   |   | 56,715 |   |   |   |   |   |
| Stockholders’  equity                                                        |       | 51,778                           |       |                             |       |   |   | 49,519 |   |   |   |   |   |
| Total                                                                             |       | $                                | 608,164    |                             |       |   |   |   | $ | 596,952 |   |   |   |   |   |
|                                                                              |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Interest rate  spread (3)                                                         |       |                             |       |                             |       | 3.17 | % |   |   |   |   | 3.28 | % |
| Net interest  margin (4)                                                          |       |                             |       | 4,746                            |       | 3.47 | % |   |   | 4,748 |   | 3.59 | % |
| Tax equivalent  interest - imputed                                                |       |                             |       | 285                              |       |   |   |   |   | 249 |   |   |   |
| Net interest  income                                                              |       |                             |       | $                                | 4,461      |   |   |   |   |   | $ | 4,499 |   |   |   |
|                                                                              |       |                             |       |                             |       |   |   |   |   |   |   |   |   |
| Ratio of average  interest-earning assets to average interest-bearing liabilities |       |                             |       | 110.0                            | %          |   |   |   |   | 109.3 | % |   |   |

 

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

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

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

 

17

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**ITEM3.  QUANTITATIVE AND QUALITATIVEDISCLOSURE ABOUT MARKET RISK**

 

Our assets andliabilities are principally financial in nature and the resulting net interestincome thereon is subject to changes in market interest rates and the mix ofvarious assets and liabilities.  Interestrates in the financial markets affect our decision on pricing our assets andliabilities, which impacts net interest income, a significant cash flow sourcefor us.  As a result, a substantialportion of our risk management activities relates to managing interest raterisk.

 

Our Asset/LiabilityManagement Committee monitors the interest rate sensitivity of our balancesheet using earnings simulation models and interest sensitivity gapanalysis.  We have set policy limits ofinterest rate risk to be assumed in the normal course of business and monitorsuch limits through our simulation process.

 

We have been successfulin meeting the interest rate sensitivity objectives set forth in ourpolicy.  Simulation models are preparedto determine the impact on net interest income for the coming twelve months,including one using rates at March 31, 2008, and forecasting volumes forthe twelve-month projection.  Thisposition is then subjected to a shift in interest rates of 100 and 200 basis pointsrising and falling with an impact to our net interest income on a one year****horizon as follows:

 
| **Scenario**             | ** ** | **$ Change in Net Interest Income** | ** ** | **% of Net Interest Income** | ** ** |
|--------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------|------------|
| 200 basis point  rising  |       | $                                                            | 842,000    |                                             | 4.7        | % |
| 100 basis point  rising  |       | $                                                            | 473,000    |                                             | 2.6        | % |
| 100 basis point  falling |       | $                                                            | (595,000   | )                                                | (3.3       | )% |
| 200 basis point  falling |       | $                                                            | (1,156,000 | )                                                | (6.4       | )% |

 

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**SAFEHARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF1995**

 

**Forward-LookingStatements**

 

Thisdocument (including information incorporated by reference) contains, and futureoral and written statements by us and our management may contain,forward-looking statements, within the meaning of such term in the PrivateSecurities Litigation Reform Act of 1995, with respect to our financialcondition, results of operations, plans, objectives, future performance andbusiness.  Forward-looking statements,which may be based upon beliefs, expectations and assumptions of our managementand on information currently available to management, are generallyidentifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,”“intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or othersimilar expressions.  Additionally, allstatements in this document, including forward-looking statements, speak onlyas of the date they are made, and we undertake no obligation to update anystatement in light of new information or future events.

 

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

 

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

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

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

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

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

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

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

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

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

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

·                  Ourability to successfully integrate acquired businesses.

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

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

·                  Theeconomic impact of past and any future terrorist attacks, acts of war orthreats thereof, and the response of the United States to any such threats andattacks.

 

These risks anduncertainties should be considered in evaluating forward-looking statements andundue reliance should not be placed on such statements.  Additional information concerning us and ourbusiness, including other factors that could materially affect our financialresults, is included in our filings with the Securities and ExchangeCommission, including the “Risk Factors” section in our Form 10-K.

 

**ITEM4.  CONTROLS AND PROCEDURES**

 

An evaluation wasperformed under the supervision and with the participation of the Company’smanagement, including the Chief Executive Officer and Chief Financial Officer,of the effectiveness of the Company’s disclosure controls and procedures (asdefined in Rule 13a-15(e) promulgated under the Securities andExchange Act of 1934, as amended) as of March 31, 2008.  Based on that evaluation, the Company’smanagement, including the Chief Executive Officer and Chief Financial Officer,concluded that the Company’s disclosure controls and procedures were effectiveas of March 31, 2008.

 

There were no changes inthe Company’s internal control over financial reporting during the quarterended March 31, 2008 that materially affected or were likely to materiallyaffect the Company’s internal control over financial reporting.

 

19

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**LANDMARK BANCORP, INC. ANDSUBSIDIARY**

**PART II – OTHER INFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS**

 

There is no materialpending legal proceedings to which the Company or its subsidiaries is a partyother than ordinary routine litigation incidental to their respectivebusinesses.

 

**ITEM 1A.**               **RISK FACTORS**

 

There have been nomaterial changes in the risk factors applicable to the Company from thosedisclosed in Part I, Item 1A. “Risk Factors,” in the Company’s 2007Annual Report on Form 10-K.

 

**ITEM2.  UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

The following table provides information aboutpurchases by the Company and its affiliated purchases during the quarter ended March 31,2008, of equity securities that are registered by the Company pursuant to Section 12of 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 Plans (1)** | ** ** |
|---------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------|------------|
| January 1-31,  2008  |       | 3,000                                        |       | 26.61                                        |       | 3,000                                                                                                                         |       | 16,796                                                                                                                     |       |
| February 1-29,  2008 |       | 124,730                                      |       | $                                            | 24.43      |                                                                                                                          | 124,730    |                                                                                                                       | 11,966     |   |
| March 1-31,  2008    |       | 6,655                                        |       | $                                            | 25.29      |                                                                                                                          | 6,655      |                                                                                                                       | 5,311      |   |
| Total                     |       | 134,385                                      |       | $                                            | 24.53      |                                                                                                                          | 134,385    |                                                                                                                       | 47,769     |   |

 

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(1)   In January 2008,our Board of Directors announced the approval of a stock repurchase programpermitting us to repurchase up to 119,900 shares, or 5% of our outstandingcommon stock (“January 2008 Repurchase Program”), following completion ofthe 2004 Repurchase Program.  The companycompleted the repurchase plan approved in November 2004 during February 2008.  In May 2008, our Board of Directorsannounced another a new stock repurchase program, permitting us to repurchaseup to 113,400 shares, or 5% of our outstanding common stock (“May 2008Repurchase Program”), following completion of the January 2008 RepurchaseProgram.  Unless terminated earlier byresolution of the Board of Directors, the January 2008 Repurchase Programand the May 2008 Repurchase Program will expire when we have repurchasedall shares authorized for repurchase thereunder.

 

**ITEM3.  DEFAULTS UPON SENIOR SECURITIES**

 

None

 

**ITEM4.  SUBMISSION OF MATTERS TO VOTE OFSECURITY HOLDERS**

 

None

 

**ITEM5.  OTHER INFORMATION**

 

None

 

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**ITEM6.  EXHIBITS**

 
| ** ** | **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 2002 |
|       | Exhibit 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 |

 

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**SIGNATURES**

 

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|                    |   | LANDMARK BANCORP, INC.                 |
|-------------------------|--------|----------------------------------------|
|                    |   |                                   |
|                    |   |                                   |
| Date: May 14, 2008 |   | /s/ Patrick L.  Alexander              |
|                    |   | Patrick L. Alexander                   |
|                    |   | President and Chief  Executive Officer |
|                    |   |                                   |
|                    |   |                                   |
| Date: May 14, 2008 |   | /s/ Mark A. Herpich                    |
|                    |   | Mark A. Herpich                        |
|                    |   | Vice President,  Secretary, Treasurer  |
|                    |   |  and Chief Financial Officer      |

 

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