Table of Contents

 

 

 

**UNITED STATESSECURITIES 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 thequarterly period ended March 31, 2009**

** **

**OR**

 
| **o** | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|------------|----------------------------------------------------------------------------------------------------------|

 

**Fortransition period from                to                **

 

**CommissionFile Number 0-33203**

 

**LANDMARK BANCORP, INC.**

(Exact name ofRegistrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **43-1930755**                            |
|-----------------------------------------------------------------|------------|-------------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (I.R.S. Employer  Identification  Number) |
|                                                            |       |                                      |
| **701  Poyntz Avenue, Manhattan, Kansas**                       | ** ** | **66502**                                 |
| (Address of  principal executive offices)                       |       | (Zip Code)                                |

 

**(785)565-2000**

(Registrant’stelephone number, including area code)

 

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

 

Indicate by check markwhether the registrant has submitted electronically and posted on its Web site,if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files).  Yes o 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 the definitions of “large acceleratedfiler,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

| 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 the number ofshares outstanding of each of the Registrant’s classes of common stock as ofthe latest practicable date: as of April 30, 2009, the Registrant hadoutstanding 2,371,450 shares of its common stock, $.01 par value per share.

 

 

 

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**LANDMARKBANCORP, INC.**

**Form 10-QQuarterly Report**

** **

**Table of Contents**

 
|                                | ** **                                                                                  | **Page Number** |
|--------------------------------|---------------------------------------------------------------------------------------------|-----------------|
|                           |                                                                                        |            |
| PART I                    |
|                           |                                                                                        |            |
| Item 1.                        | Financial Statements and Related Notes                                                      | 2 - 14          |
| Item 2.                        | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 15 - 22         |
| Item 3.                        | Quantitative  and Qualitative Disclosures about Market Risk                                 | 22 - 23         |
| Item 4.                        | Controls and Procedures                                                                     | 23              |
|                           |                                                                                        |            |
| PART II                   |
|                           |                                                                                        |            |
| Item 1.                        | Legal Proceedings                                                                           | 24              |
| Item 1A.                       | Risk Factors                                                                                | 24              |
| Item 2.                        | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 24              |
| Item 3.                        | Defaults Upon  Senior Securities                                                            | 24              |
| Item 4.                        | Submission of  Matters to a Vote of Security Holders                                        | 24              |
| Item 5.                        | Other Information                                                                           | 24              |
| Item 6.                        | Exhibits                                                                                    | 24              |
| Form 10-Q  Signature Page | 25                                                                                          |

 

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** **

**ITEM1.  FINANCIALSTATEMENTS AND RELATED NOTES**

 

**LANDMARKBANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATEDBALANCE SHEETS**

**(Unaudited)**

** **
| ** **                                                                                                                        | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| **(Dollars in thousands)**                                                                                                        | ** ** | **2009**           | ** ** | **2008**              | ** ** |
| **Assets**                                                                                                                        |       |               |       |                  |       |
| Cash and due from banks                                                                                                           |       | $                  | 10,264     |                  | $          | 13,788 |   |
| Federal funds sold                                                                                                                |       | 4,090              |       | —                |       |
| Total cash and cash equivalents                                                                                                   |       | 14,354             |       | 13,788                |       |
| Investment securities:                                                                                                            |       |               |       |                  |       |
| Available for sale, at fair value                                                                                                 |       | 174,413            |       | 162,245               |       |
| Other securities                                                                                                                  |       | 9,078              |       | 9,052                 |       |
| Loans, net                                                                                                                        |       | 355,180            |       | 365,772               |       |
| Loans held for sale                                                                                                               |       | 13,138             |       | 1,487                 |       |
| Premises and equipment, net                                                                                                       |       | 13,816             |       | 13,956                |       |
| Goodwill                                                                                                                          |       | 12,894             |       | 12,894                |       |
| Other intangible assets, net                                                                                                      |       | 2,375              |       | 2,407                 |       |
| Bank owned life insurance                                                                                                         |       | 12,118             |       | 11,996                |       |
| Accrued interest and other assets                                                                                                 |       | 9,915              |       | 8,617                 |       |
| Total assets                                                                                                                      |       | $                  | 617,281    |                  | $          | 602,214 |   |
|                                                                                                                              |       |               |       |                  |       |
| **Liabilities and Stockholders’ Equity**                                                                                     |       |               |       |                  |       |
| Liabilities:                                                                                                                      |       |               |       |                  |       |
| Deposits:                                                                                                                         |       |               |       |                  |       |
| Non-interest bearing demand                                                                                                       |       | $                  | 52,501     |                  | $          | 49,823 |   |
| Money market and  NOW                                                                                                             |       | 158,479            |       | 150,116               |       |
| Savings                                                                                                                           |       | 28,686             |       | 26,203                |       |
| Time, $100,000  and greater                                                                                                       |       | 53,547             |       | 49,965                |       |
| Time, other                                                                                                                       |       | 164,000            |       | 163,439               |       |
| Total deposits                                                                                                                    |       | 457,213            |       | 439,546               |       |
|                                                                                                                              |       |               |       |                  |       |
| Federal Home Loan Bank borrowings                                                                                                 |       | 71,196             |       | 77,319                |       |
| Other borrowings                                                                                                                  |       | 27,679             |       | 27,047                |       |
| Accrued expenses, taxes and other liabilities                                                                                     |       | 9,382              |       | 6,896                 |       |
| Total liabilities                                                                                                                 |       | 565,470            |       | 550,808               |       |
|                                                                                                                              |       |               |       |                  |       |
| Stockholders’ equity:                                                                                                        |       |               |       |                  |       |
| Preferred stock, $0.01 par, 200,000 shares authorized, none issued                                                                |       | —             |       | —                |       |
| Common stock, $0.01 par, 7,500,000 shares authorized, 2,411,412 shares  issued, at March 31, 2009 and December 31, 2008 |       | 24                 |       | 24                    |       |
| Additional paid-in capital                                                                                                        |       | 23,912             |       | 23,873                |       |
| Retained earnings                                                                                                                 |       | 28,377             |       | 27,819                |       |
| Treasury stock, at cost; 39,962 and 39,162 shares at March 31,  2009 and  December 31, 2008, respectively               |       | (947               | )          | (935                  | )          |
| Accumulated other comprehensive income                                                                                            |       | 445                |       | 625                   |       |
| Total stockholders’ equity                                                                                                   |       | 51,811             |       | 51,406                |       |
|                                                                                                                              |       |               |       |                  |       |
| Total liabilities and stockholders’ equity                                                                                   |       | $                  | 617,281    |                  | $          | 602,214 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

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**LANDMARKBANCORP, INC. AND SUBSIDIARY**

# **CONSOLIDATEDSTATEMENTS OF EARNINGS**

**(Unaudited)**

** **
| ** **                                          | ** ** | **Three months ended  March 31,** | ** ** |
|-----------------------------------------------------|------------|----------------------------------------|------------|
| **(Dollars in thousands, except  per share data)**  | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| Interest income:                                    |       |                                   |       |   |   |
| Loans:                                              |       |                                   |       |   |   |
| Taxable                                             |       | $                                      | 5,133      |   | $ | 6,614 |   |
| Tax-exempt                                          |       | 49                                     |       | 43 |   |
| Investment securities:                              |       |                                   |       |   |   |
| Taxable                                             |       | 1,116                                  |       | 1,223 |   |
| Tax-exempt                                          |       | 609                                    |       | 596 |   |
| Other                                               |       | 3                                      |       | 18 |   |
| Total interest income                               |       | 6,910                                  |       | 8,494 |   |
|                                                |       |                                   |       |   |   |
| Interest expense:                                   |       |                                   |       |   |   |
| Deposits                                            |       | 1,639                                  |       | 3,121 |   |
| Borrowed funds                                      |       | 879                                    |       | 911 |   |
| Total interest expense                              |       | 2,518                                  |       | 4,032 |   |
| Net interest income                                 |       | 4,392                                  |       | 4,462 |   |
| Provision for loan losses                           |       | 300                                    |       | 600 |   |
| Net interest income after provision for loan losses |       | 4,092                                  |       | 3,862 |   |
|                                                |       |                                   |       |   |   |
| Non-interest income:                                |       |                                   |       |   |   |
| Fees and service charges                            |       | 956                                    |       | 967 |   |
| Gains on sale of loans                              |       | 864                                    |       | 344 |   |
| Gain on prepayment of FHLB borrowings               |       | —                                 |       | 246 |   |
| Bank owned life insurance                           |       | 123                                    |       | 116 |   |
| Other                                               |       | 113                                    |       | 142 |   |
| Total non-interest income                           |       | 2,056                                  |       | 1,815 |   |
|                                                |       |                                   |       |   |   |
| Investment securities gains (losses), net:          |       |                                   |       |   |   |
| Impairment losses on investment securities          |       | (850                                   | )          | — |   |
| Less noncredit-related losses                       |       | 523                                    |       | — |   |
| Net impairment losses                               |       | (327                                   | )          | — |   |
|                                                |       |                                   |       |   |   |
| Non-interest expense:                               |       |                                   |       |   |   |
| Compensation and benefits                           |       | 2,333                                  |       | 2,128 |   |
| Occupancy and equipment                             |       | 651                                    |       | 761 |   |
| Data processing                                     |       | 190                                    |       | 197 |   |
| Amortization of intangibles                         |       | 187                                    |       | 205 |   |
| Professional fees                                   |       | 172                                    |       | 111 |   |
| Advertising                                         |       | 121                                    |       | 88 |   |
| Other                                               |       | 957                                    |       | 799 |   |
| Total non-interest expense                          |       | 4,611                                  |       | 4,288 |   |
| Earnings before income taxes                        |       | 1,210                                  |       | 1,387 |   |
| Income tax expense                                  |       | 201                                    |       | 321 |   |
| Net earnings                                        |       | $                                      | 1,009      |   | $ | 1,067 |   |
|                                                |       |                                   |       |   |   |
| Earnings per share:                                 |       |                                   |       |   |   |
| Basic                                               |       | $                                      | 0.43       |   | $ | 0.43 |   |
| Diluted                                             |       | $                                      | 0.42       |   | $ | 0.43 |   |
| Dividends per share                                 |       | $                                      | 0.19       |   | $ | 0.18 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

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**LANDMARKBANCORP, INC. AND SUBSIDIARY**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

* *
| ** **                                                          | ** ** | **Three months ended  March 31,** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------------|------------|
| **(Dollars in thousands)**                                          | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| Net cash provided by (used in) operating activities                 |       | $                                      | (8,163     | ) | $ | 891 |   |
|                                                                |       |                                   |       |   |   |
| Cash flows from investing activities:                               |       |                                   |       |   |   |
| Net decrease (increase) in loans                                    |       | 9,811                                  |       | (4,092 | ) |
| Maturities and prepayments of investment securities                 |       | 13,087                                 |       | 3,321 |   |
| Purchase of investment securities                                   |       | (25,919                                | )          | (582 | ) |
| Proceeds from sales of premises and equipment and foreclosed assets |       | 2                                      |       | 205 |   |
| Purchases of premises and equipment, net                            |       | (78                                    | )          | (374 | ) |
| Net cash used in investing activities                               |       | (3,097                                 | )          | (1,522 | ) |
|                                                                |       |                                   |       |   |   |
| Cash flows from financing activities:                               |       |                                   |       |   |   |
| Net increase (decrease) in deposits                                 |       | 17,667                                 |       | (5,376 | ) |
| Federal Home Loan Bank advance borrowings                           |       | —                                 |       | 25,000 |   |
| Federal Home Loan Bank advance repayments                           |       | (9                                     | )          | (13,509 | ) |
| Federal Home Loan Bank line of credit, net                          |       | (6,000                                 | )          | (8,500 | ) |
| Other borrowings, net                                               |       | 632                                    |       | 4,562 |   |
| Purchase of treasury stock                                          |       | (12                                    | )          | (3,296 | ) |
| Proceeds from issuance of stock under stock option plans            |       | —                                 |       | 30 |   |
| Excess tax benefit related to stock option plans                    |       | —                                 |       | 5 |   |
| Payment of dividends                                                |       | (451                                   | )          | (456 | ) |
| Net cash provided (used in) by financing activities                 |       | 11,827                                 |       | (1,540 | ) |
|                                                                |       |                                   |       |   |   |
| Net increase (decrease) in cash and cash equivalents                |       | 566                                    |       | (2,171 | ) |
| Cash and cash equivalents at beginning of period                    |       | 13,788                                 |       | 14,739 |   |
| Cash and cash equivalents at end of period                          |       | $                                      | 14,354     |   | $ | 12,568 |   |
|                                                                |       |                                   |       |   |   |
| Supplemental disclosure of cash flow information:                   |       |                                   |       |   |   |
| Cash paid during period for interest                                |       | $                                      | 2,498      |   | $ | 4,082 |   |
| Cash paid (refunds received) during period for taxes, net           |       | $                                      | (13        | ) | $ | 223 |   |
|                                                                |       |                                   |       |   |   |
| Supplemental schedule of non-cash investing activities:             |       |                                   |       |   |   |
| Transfer of loans to real estate owned                              |       | $                                      | 486        |   | $ | 898 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

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**LANDMARKBANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATEDSTATEMENTS OF EQUITY AND COMPREHENSIVE INCOME**

**(Unaudited)**

** **
| **(Dollars in thousands, except per share data)**                                                                                                                          | ** ** | **Common  stock** | ** ** | **Additional  paid-in  capital** | ** ** | **Retained  earnings** | ** ** | **Treasury  stock** | ** ** | **Accumulated  other  comprehensive  income** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|----------------------------------|------------|------------------------|------------|---------------------|------------|-----------------------------------------------|------------|-----------|------------|
|                                                                                                                                                                       |       |              |       |                             |       |                   |       |                |       |                                          |       |      |       |
| Balance at  December 31, 2007                                                                                                                                         |       | $                 | 24         |                             | $          | 24,304                 |       | $                   | 27,493     |                                          | $          | (206      | )          | $ | 681 |   | $ | 52,296 |   |
| Comprehensive  income:                                                                                                                                                     |       |              |       |                             |       |                   |       |                |       |                                          |       |      |       |
| Net earnings                                                                                                                                                               |       | —            |       | —                           |       | 1,067                  |       | —              |       | —                                        |       | 1,067     |       |
| Change in fair  value of investment securities available-for-sale, net of tax                                                                                              |       | —            |       | —                           |       | —                 |       | —              |       | 1,459                                         |       | 1,459     |       |
| Total  comprehensive income                                                                                                                                                |       | —            |       | —                           |       | 1,067                  |       | —              |       | 1,459                                         |       | 2,526     |       |
| Dividends paid  ($0.18 per share)                                                                                                                                          |       | —            |       | —                           |       | (456                   | )          | —              |       | —                                        |       | (456      | )          |
| Stock-based  compensation                                                                                                                                                  |       | —            |       | 23                               |       | —                 |       | —              |       | —                                        |       | 23        |       |
| Exercise of  stock options, 1,882 shares, including tax benefit of $5                                                                                                      |       | —            |       | 35                               |       | —                 |       | —              |       | —                                        |       | 35        |       |
| Purchase of  134,385 treasury shares                                                                                                                                       |       | —            |       | —                           |       | —                 |       | (3,296              | )          | —                                        |       | (3,296    | )          |
| Adoption of EITF  06-4                                                                                                                                                     |       | —            |       | —                           |       | (335                   | )          | —              |       | —                                        |       | (335      | )          |
| Balance  March 31, 2008                                                                                                                                               |       | $                 | 24         |                             | $          | 24,362                 |       | $                   | 27,769     |                                          | $          | (3,502    | )          | $ | 2,140 |   | $ | 50,793 |   |
|                                                                                                                                                                       |       |              |       |                             |       |                   |       |                |       |                                          |       |      |       |
| Balance at  December 31, 2008                                                                                                                                         |       | $                 | 24         |                             | $          | 23,873                 |       | $                   | 27,819     |                                          | $          | (935      | )          | $ | 625 |   | $ | 51,406 |   |
| Comprehensive income:                                                                                                                                                      |       |              |       |                             |       |                   |       |                |       |                                          |       |      |       |
| Net earnings                                                                                                                                                               |       | —            |       | —                           |       | 1,009                  |       | —              |       | —                                        |       | 1,009     |       |
| Change in fair  value of investment securities available-for-sale for which a portion of an  other than temporary impairment has been recorded in net earnings, net of tax |       | —            |       | —                           |       | —                 |       | —              |       | 127                                           |       | 127       |       |
| Change in fair  value of all other investment securities available-for-sale, net of tax                                                                                    |       | —            |       | —                           |       | —                 |       | —              |       | (307                                          | )          | (307      | )          |
| Total  comprehensive income                                                                                                                                                |       | —            |       | —                           |       | 1,009                  |       | —              |       | (180                                          | )          | 829       |       |
| Dividends paid  ($0.19 per share)                                                                                                                                          |       | —            |       | —                           |       | (451                   | )          | —              |       | —                                        |       | (451      | )          |
| Stock-based  compensation                                                                                                                                                  |       | —            |       | 39                               |       | —                 |       | —              |       | —                                        |       | 39        |       |
| Purchase of 800  treasury shares                                                                                                                                           |       | —            |       | —                           |       | —                 |       | (12                 | )          | —                                        |       | (12       | )          |
| Balance at  March 31, 2009                                                                                                                                            |       | $                 | 24         |                             | $          | 23,912                 |       | $                   | 28,377     |                                          | $          | (947      | )          | $ | 445 |   | $ | 51,811 |   |

 

* See accompanying notes to condensedconsolidated financial statements.*

 

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**LANDMARKBANCORP, INC. AND SUBSIDIARY**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****                                     ****Interim Financial Statements**

 

The condensedconsolidated financial statements of Landmark Bancorp, Inc. (the “Company”)and subsidiary have been prepared in accordance with the instructions to Form 10-Q.  To the extent that information and footnotesrequired by U.S. generally accepted accounting principles for complete financialstatements are contained in or consistent with the consolidated auditedfinancial statements incorporated by reference in the Company’s Form 10-Kfor the year ended December 31, 2008, 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 31,2008, 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, 2009 are notnecessarily indicative of the results expected for the year ending December 31,2009.

 

**2.****                                     ****Goodwill and Other Intangible Assets**

 

The Company testsgoodwill for impairment annually or more frequently if circumstanceswarrant.  During the first quarter of2009, the decline in the Company’s stock price coupled with current marketconditions in the financial services industry, constituted a triggering eventwhich required an interim goodwill impairment test to be performed.  The Company performed an impairment test asof March 31, 2009 by comparing the fair value of the Company’s singlereporting unit to the carrying value. Fair value was determined using observable market data including theCompany’s market capitalization and valuation multiples compared to recentfinancial industry acquisition multiples to estimate the fair value of theCompany’s single reporting unit.  Basedon the results of testing the Company concluded its goodwill was not impaired.

 

The following is ananalysis of changes in the core deposit intangible assets:

 
| ** **                      | ** ** | **Three months ended March 31,** | ** ** |
|---------------------------------|------------|---------------------------------------|------------|
| *** ***                    | ** ** | **2009**                              | ** ** | **2008** | ** ** |
| **(Dollars in thousands)**      | ** ** | **Fair value at  acquisition**        | ** ** | **Accumulated  Amortization** | ** ** | **Fair value at  acquisition** | ** ** | **Accumulated  Amortization** | ** ** |
| Balance at  beginning of period |       | $                                     | 5,396      |   | $ | (3,159 | ) | $ | 5,396 |   | $ | (2,462 | ) |
| Additions                       |       | —                                |       | — |   | — |   | — |   |
| Amortization                    |       | —                                |       | (155 | ) | — |   | (179 | ) |
| Balance at end  of period       |       | $                                     | 5,396      |   | $ | (3,314 | ) | $ | 5,396 |   | $ | (2,641 | ) |

 

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

 
| ** **                      | ** ** | **Three months ended March 31,** | ** ** |
|---------------------------------|------------|---------------------------------------|------------|
| ** **                      | ** ** | **2009**                              | ** ** | **2008** | ** ** |
| **(Dollars in thousands)**      | ** ** | **Cost**                              | ** ** | **Accumulated  Amortization** | ** ** | **Cost** | ** ** | **Accumulated  Amortization** | ** ** |
| Balance at  beginning of period |       | $                                     | 772        |   | $ | (602 | ) | $ | 770 |   | $ | (560 | ) |
| Additions                       |       | 155                                   |       | — |   | 14 |   | — |   |
| Prepayments/maturities          |       | (34                                   | )          | 34 |   | (13 | ) | 13 |   |
| Amortization                    |       | —                                |       | (32 | ) | — |   | (25 | ) |
| Balance at end  of period       |       | $                                     | 893        |   | $ | (600 | ) | $ | 771 |   | $ | (572 | ) |

 

The mortgage servicingrights correspond to loans serviced by the Company for unrelated third partieswith outstanding principal balances of $90.5 million and $82.0 million at March 31,2009 and December 31, 2008, respectively. Gross service fee income related to such loans was $52,000 and $57,000for the quarters ended March 31, 2009 and 2008, respectively, which isincluded in fees and service charges in the condensed consolidated statementsof earnings.

 

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Aggregate amortizationexpense for the quarters ended March 31, 2009 and 2008, was $187,000 and$205,000, respectively.  The followingdepicts estimated amortization expense for all intangible assets for theremainder of 2009 and in successive years ending December 31:

 

| **Year**           | ** ** | **Amount (in thousands)** | ** ** |
|--------------------|------------|---------------------------|------------|
| Remainder of  2009 |       | $                         | 573        |   |
| 2010               |       | 629                       |       |
| 2011               |       | 437                       |       |
| 2012               |       | 308                       |       |
| 2013               |       | 224                       |       |
| Thereafter         |       | 204                       |       |
|                    |            |                           |            |  |

 

**3.****                                     ****Investments**

 

A summary of investmentsecurities available-for-sale is as follows:

 
| ** **                         | ** ** | **As of March 31, 2009** | ** ** |
|------------------------------------|------------|-------------------------------|------------|
| ** **                         | ** ** | ** **                    | ** ** | **Gross** | ** ** | **Gross** | ** ** | ** ** | ** ** |
| ** **                         | ** ** | **Amortized**                 | ** ** | **unrealized** | ** ** | **unrealized** | ** ** | **Estimated** | ** ** |
| **(Dollars in thousands)**         | ** ** | **cost**                      | ** ** | **gains** | ** ** | **losses** | ** ** | **fair value** | ** ** |
|                               |       |                          |       |   |   |   |   |   |   |
| U. S. federal  agency obligations  |       | $                             | 29,697     |   | $ | 735 |   | $ | (4 | ) | $ | 30,428 |   |
| Municipal  obligations             |       | 64,193                        |       | 1,167 |   | (823 | ) | 64,537 |   |
| Mortgage-backed  securities        |       | 59,446                        |       | 1,278 |   | (35 | ) | 60,689 |   |
| Pooled trust  preferred securities |       | 2,159                         |       | — |   | (1,823 | ) | 336 |   |
| Common stocks                      |       | 693                           |       | 226 |   | (24 | ) | 895 |   |
| Certificates of  deposit           |       | 17,528                        |       | — |   | — |   | 17,528 |   |
| Total                              |       | $                             | 173,716    |   | $ | 3,406 |   | $ | (2,709 | ) | $ | 174,413 |   |

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

 

Included in the March 31, 2009 gross unrealizedlosses above, are noncredit-related losses of $523,000 related to a $1.0million par investment in a pool of trust preferred securities, which wasdetermined to be other than temporarily impaired.

 

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

 
| ** **                         | ** ** | ** **     | ** ** | **As of  March 31, 2009** | ** ** |
|------------------------------------|------------|----------------|------------|--------------------------------|------------|
| ** **                         | ** ** | **Number**     | ** ** | **Less  than 12 months**       | ** ** | **12  months or longer** | ** ** | **Total** | ** ** |
| ** **                         | ** ** | **of**         | ** ** | **Fair**                       | ** ** | **Unrealized** | ** ** | **Fair** | ** ** | **Unrealized** | ** ** | **Fair** | ** ** | **Unrealized** | ** ** |
| **(Dollars  in thousands)**        | ** ** | **securities** | ** ** | **value**                      | ** ** | **losses** | ** ** | **value** | ** ** | **losses** | ** ** | **value** | ** ** | **losses** | ** ** |
| U. S. federal  agency obligations  |       | 4              |       | $                              | 878        |   | $ | (4 | ) | — |   | — |   | $ | 878 |   | $ | (4 | ) |
| Municipal  obligations             |       | 55             |       | 16,362                         |       | (664 | ) | 2,471 |   | (159 | ) | 18,833 |   | (823 | ) |
| Mortgage-backed  securities        |       | 18             |       | 9,981                          |       | (34 | ) | 72 |   | (1 | ) | 10,053 |   | (35 | ) |
| Pooled trust  preferred securities |       | 3              |       | —                         |       | — |   | 336 |   | (1,823 | ) | 336 |   | (1,823 | ) |
| Common stocks                      |       | 5              |       | 83                             |       | (24 | ) | — |   | — |   | 83 |   | (24 | ) |
| Total                              |       | 85             |       | $                              | 27,304     |   | $ | (726 | ) | $ | 2,879 |   | $ | (1,983 | ) | $ | 30,183 |   | $ | (2,709 | ) |
|                                    |            |                |            |                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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

 

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

 

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

 

The Company believes that the decline in the value ofcertain municipal obligations was primarily related to an overall widening ofmarket spreads for many types of fixed income products during 2008, reflecting,among other things, reduced liquidity and the downgrades on the underlyingcredit default insurance providers.  At March 31,2009, the Company does not intend to sell and it is more likely than not thatthe Company will not be required to sell until the recovery of its cost, itsmunicipal obligations in an unrealized loss position.  Due to the issuers’ continued satisfaction ofthe securities’ obligations in accordance with their contractual terms and theexpectation that they will continue to do so, management’s intent and abilityto hold these securities for a period of time sufficient to allow for anyanticipated recovery in fair value, as well as the evaluation of thefundamentals of the issuers’ financial condition and other objective evidence,the Company believes that the municipal obligations identified in the tablesabove were temporarily depressed as of March 31, 2009 and December 31,2008.

 

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At March 31, 2009, the Company owned three pooledtrust preferred securities with an original cost basis of $2.5 million, whichrepresent investments in pools of debt obligations issued by financialinstitutions and insurance companies. The market for these securities is considered to be inactive accordingto the guidance issued in FSP No. FAS 157-4, *“DeterminingFair Value When the Volume and Level of Activity for the Asset or LiabilityHave Significantly Decreased and Identifying Transactions That Are Not Orderly,”*which the Company early adopted as of January 1, 2009.  The Company used a discounted cash flow modelto determine the estimated fair value of its pooled trust preferred securitiesand to assess other than temporary impairment. The assumptions used in preparing the discounted cash flow model includethe following: estimated discount rates (using yields of comparable tradedinstruments adjusted for illiquidity and other risk factors), estimateddeferral and default rates on collateral, and estimated cash flows.  The discounted cash flow analysis wasperformed in accordance with EITF 99-20-1. The discounted cash flow analysis included a review of all issuerswithin the collateral pool and incorporated higher estimated deferral anddefault rates, as compared to historical rates, in the cash flow projectionsthrough maturity.  The Company continuesto receive its full interest payments. The Company also reviewed a stress test of these securities to determinethe additional deferrals or defaults in the collateral pool in excess of whatthe Company believes is likely, before the payments on the individualsecurities are negatively impacted.

 

At March 31, 2009, the analysis of two of theCompany’s three investments in pooled trust preferred securities indicated thatthe unrealized loss was temporary and the Company would be able to collect allof the principal and interest in accordance with the original terms of theagreements, however the Company determined that a portion of the unrealizedloss on the third investment was other than temporary on a $1.0 millioninvestment in a pooled trust preferred security.  The amount of actual and projected deferralsand/or defaults by the financial institutions underlying this investment pool,  increased significantly since the beginningof 2009, primarily when a large number of deferrals occurred in this poolduring April.  The increase innonperforming collateral triggered an other than temporary impairment of thissecurity resulting in a charge to earnings during the first quarter of2009.  The Company adopted the provisionsof FSP No. FAS 115-2 and FAS 124-2 in determining the amount of the otherthan temporary impairment recorded to earnings. The Company performed a discounted cash flow analysis, using the factorsnoted above to determine the amount of the other than temporary impairment thatwas applicable to either credit losses or other factors.  The amount associated with credit losses of$327,000 was then realized through a charge to earnings as an impairment loss,while the change in the unrealized loss associated with other factors wasrecorded in other comprehensive income.

 

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

 

Maturities of investment securities at March 31,2009 are as follows:

 
| ** **                                   | ** ** | **Amortized  cost** | ** ** | **Estimated  fair value** | ** ** |
|----------------------------------------------|------------|---------------------|------------|---------------------------|------------|
| Due in less than  one year                   |       | $                   | 35,526     |                      | $          | 35,065 |   |
| Due after one  year but within five years    |       | 23,127              |       | 23,794                    |       |
| Due after five  years                        |       | 53,924              |       | 53,970                    |       |
| Mortgage-backed  securities and common stock |       | 60,139              |       | 61,584                    |       |
| Total                                        |       | $                   | 173,716    |                      | $          | 174,413 |   |

 

For mortgage-backed securities, actual maturities willdiffer from contractual maturities because borrowers have the right to prepayobligations with or without prepayment penalties.

 

Other investment securities include investments inFederal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock.  The carrying value of the FHLB stock at March 31,2009 and December 31, 2008 was $7.3 million and the carrying value of theFRB stock at March 31, 2009 and December 31, 2008 was $1.7million.  These securities are notreadily marketable and are required for regulatory purposes and borrowingavailability.  Since there is noavailable market values these securities are carried at cost.  Redemption of these investments is at theoption of the FHLB or FRB.  We haveassessed the ultimate recoverability of these stocks and believe that noimpairment has occurred.

 

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**4.****                                     ****Fair Value Measurements**

 

On January 1, 2008, the Company adopted the provisionsof SFAS No. 157, which defines fair value, establishes a framework formeasuring 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.  Effective January 1, 2009, the Companyadopted SFAS No. 157 on certain nonfinancial assets and liabilities, whichinclude foreclosed real estate, long-lived assets, goodwill, and core depositpremium, which are recorded at fair value only upon impairment.  In accordance with SFAS No. 157, the fairvalue hierarchy is as follows:

 
| · Level 1: | Unadjusted quoted  prices in active markets that are accessible at the measurement date for  identical, unrestricted assets or liabilities.                                                                                                          |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · Level 2: | Quoted prices for  similar assets in active markets, quoted prices in markets that are not  active or quoted prices that contain observable inputs such as yield curves,  volatilities, prepayment speeds and other inputs derived from market data. |
| · Level 3: | Quoted prices or  valuation techniques that require inputs that are both significant to the  fair value measurement and unobservable.                                                                                                                |

 

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

 

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

 

The Company classifiesits pooled trust preferred securities as Level 3.  The portfolio consists of three investmentsin pooled trust preferred securities issued by financial companies.  The Company has determined that theobservable market data associated with these assets do not represent orderlytransactions in accordance with FSP No. FAS 157-4 and reflect forcedliquidations or distressed sales.  Basedon the lack of observable market data, the Company estimated fair value basedon the observable data available and reasonable unobservable market data.  The Company estimated fair value based on adiscounted cash flow model which used appropriately adjusted discount ratesreflecting credit and liquidity risks.

 

The following table represents the Company’s investmentsecurities that are measured at fair value on a recurring basis at March 31,2009 and December 31, 2008 allocated to the appropriate fair valuehierarchy:

** **
| ** **                        | ** ** | ** ** | ** ** | **As of March 31, 2009**    | ** ** |
|-----------------------------------|------------|------------|------------|----------------------------------|------------|
| ** **                        | ** ** | ** ** | ** ** | **Fair value hierarchy**         | ** ** |
| **(Dollars in thousands)**        | ** ** | **Total**  | ** ** | **Level 1**                      | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| Assets:                           |       |       |       |                             |       |   |   |   |   |   |   |   |   |
| Available-for-sale  securities    |       | $          | 174,413    |                             | $          | 835 |   | $ | 173,242 |   | $ | 336 |   |
| Derivative  financial instruments |       | 102        |       | —                           |       | — |   | 102 |   |
| ** **                        | ** ** | ** ** | ** ** | ** **                       | ** ** |
| ** **                        | ** ** | ** ** | ** ** | **As of December 31, 2008** | ** ** |
| ** **                        | ** ** | ** ** | ** ** | **Fair value hierarchy**         | ** ** |
| **(Dollars in thousands)**        | ** ** | **Total**  | ** ** | **Level 1**                      | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| Assets:                           |       |       |       |                             |       |   |   |   |   |
| Available-for-sale  securities    |       | $          | 162,245    |                             | $          | 1,014 |   | $ | 160,490 |   | $ | 740 |   |
| Derivative  financial instruments |       | 18         |       | —                           |       | — |   | 18 |   |
|                                   |            |            |            |                                  |            |  |  |  |  |  |  |  |  |  |

 

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The following tablereconciles the changes in the Company’s Level 3 instruments during the firstquarter of 2009.

 
| ** **                                    | ** ** | **Available-for**   | ** ** | **Derivative**            | ** ** |
|-----------------------------------------------|------------|---------------------|------------|---------------------------|------------|
| **(Dollars in thousands)**                    | ** ** | **sale-securities** | ** ** | **financial instruments** | ** ** |
| Level 3 fair  value at December 31, 2008 |       | $                   | 740        |                      | $          | 18 |   |
| Transfers into  Level 3                       |       | —              |       | —                    |       |
| Total gains  (losses)                         |       |                |       |                      |       |
| Included in  earnings                         |       | (327                | )          | 84                        |       |
| Included in  other comprehensive income       |       | (77                 | )          | —                    |       |
| Level 3 fair  value at March 31, 2009    |       | $                   | 336        |                      | $          | 102 |   |

 

Changes in the fair value of available-for-salesecurities are included in other comprehensive income to the extent the changesare not considered other than temporary impairments.  Other than temporary impairment tests areperformed on a quarterly basis and any decline in the fair value of anindividual security below its cost that is deemed to be other than temporaryresults in a write-down.  During thefirst quarter of 2009 the Company recorded a $327,000 impairment loss on one ofthe pooled trust preferred securities.

 

The Company’s derivative financial instruments consistsolely of interest rate lock commitments and corresponding forward salescontracts on certain mortgage loans and are not designated as hedginginstruments.  The fair values of thesederivatives are based on quoted prices for similar loans in the secondarymarket.  The market prices are adjustedby a factor, based on the Company’s historical data and its judgment aboutfuture economic trends, which considers the likelihood that a commitment willultimately result in a closed loan. These instruments are classified as Level 3 based on the unobservablenature of these assumptions.  The amountsare included in other assets or other liabilities on the consolidated balancesheets and gains on sale of loans in the consolidated statement of earnings.

 

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

 

The Company’s other investment securities includeinvestments in Federal Home Loan Bank of Topeka (“FHLB”) and Federal ReserveBank (“FRB”) 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 not value its loan portfolio at fairvalue, however adjustments are recorded on certain loans to reflect theimpaired value on the underlying collateral. Collateral values are generally reviewed on a loan-by-loan basis throughindependent appraisals.  Appraised valuesmay be discounted based on management’s historical knowledge, changes in marketconditions and/or management’s expertise and knowledge of the client and theclient’s business.  Because many of theseinputs are unobservable the valuations are classified as Level 3.  The carrying value of the Company’s impairedloans was $11.4 million, before an allocated allowance of $1.7 million at March 31,2009.

 

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

 

The Company’s measure of its goodwill is based onmarket based valuation techniques, including reviewing the Company’s stockprice and valuation multiples as compared to recent financial industry acquisitionmultiples to estimate the fair value of the Company’s single reportingunit.  The fair value measurements areclassified as Level 3.

 

Core deposit intangibles are recognized at the timecore deposits are acquired, using valuation techniques which calculate thepresent value of the estimated net cost savings relative to the Company’salternative costs of funds over the expected remaining economic life of thedeposits.  Subsequent evaluations aremade when facts or circumstances indicate potential impairment may haveoccurred.  The models incorporate marketdiscount rates, estimated average core deposit lives and alternative fundingrates.  The fair value measurements areclassified as Level 3.

 

The Company measures its mortgage servicing rights atthe lower of cost or fair value, and amortizes them over the period equal toestimated net servicing income.  Periodicimpairment assessments are performed based on fair value estimates at thereporting date.  The fair value ofmortgage servicing rights are estimated based on a valuation model whichcalculates the present value of estimated future cash flows associated withservicing the underlying loans.  Themodel incorporates assumptions that market participants use in estimatingfuture net servicing income, including estimated

 

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prepayment speeds, marketdiscount rates, cost to service, and other servicing income, including latefees.  The fair value measurements areclassified as Level 3.

 

Foreclosed assets are acquired through, or in lieu of,foreclosure are initially recorded at the date of foreclosure at fair value ofcollateral less estimates selling costs. Subsequent to foreclosure, valuations are updated periodically and arebased upon appraisals, third party price opinions or internal pricing modelsand are classified as Level 3.   Duringthe first quarter of 2009 the Company recorded an impairment charge of $30,000on a single property with a fair value of $240,000.

 

The following table represents the Company’s assetsthat are measured at fair value on a nonrecurring basis at March 31, 2009allocated to the appropriate fair value hierarchy:

 
| ** **                   | ** ** | ** ** | ** ** | **Fair value hierarchy** | ** ** | **Total gains** | ** ** |
|------------------------------|------------|------------|------------|--------------------------|------------|-----------------|------------|
| **(Dollars in thousands)**   | ** ** | **Total**  | ** ** | **Level 1**              | ** ** | **Level 2**     | ** ** | **Level 3** | ** ** | **(losses)** | ** ** |
| Assets:                      |       |       |       |                     |       |            |       |   |   |   |   |   |   |   |   |   |
| Other investment  securities |       | $          | 9,078      |                     | $          | —          |       | $ | — |   | $ | 9,078 |   | $ | — |   |
| Impaired loans               |       | 9,700      |       | —                   |       | —          |       | 9,700 |   | — |   |
| Loans held for  sale         |       | 13,225     |       | —                   |       | 13,225          |       | — |   | — |   |
| Foreclosed  assets           |       | 2,390      |       | —                   |       | —          |       | 2,390 |   | 30 |   |

 

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

 

Basic earnings per share have been computed based uponthe weighted average number of common shares outstanding during eachperiod.  Diluted earnings per shareinclude the effect of all potential common shares outstanding during eachperiod.  Earnings and dividends per sharefor prior periods have been adjusted to give effect to the 5% stock dividendpaid by the Company in December 2008.

 

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

 
| ** **                                               | ** ** | **Three months ended March 31,** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------|------------|
| **(Dollars in thousands, except per share data)**        | ** ** | **2009**                              | ** ** | **2008** | ** ** |
| Net earnings  available to common stockholders           |       | $                                     | 1,009      |   | $ | 1,067 |   |
|                                                     |       |                                  |       |   |   |
| Weighted average  common shares outstanding — basic |       | 2,371,966                             |       | 2,470,858 |   |
| Dilutive stock  options                                  |       | 5,097                                 |       | 13,516 |   |
| Weighted average  common shares — diluted           |       | 2,377,063                             |       | 2,484,374 |   |
|                                                     |       |                                  |       |   |   |
| Net earnings per  share:                                 |       |                                  |       |   |   |
| Basic                                                    |       | $                                     | 0.43       |   | $ | 0.43 |   |
| Diluted                                                  |       | $                                     | 0.42       |   | $ | 0.43 |   |

 

**6.****                                     ****Comprehensive 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,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| **(Dollars in thousands)**                                                                                                                                   | ** ** | **2009**                              | ** ** | **2008** | ** ** |
| Net earnings                                                                                                                                                 |       | $                                     | 1,009      |   | $ | 1,067 |   |
| Unrealized holding  gains (losses) on available for sale securities for which a portion of an  other than temporary impairment has been recorded in earnings |       | (125                                  | )          | — |   |
| Unrealized  holding gains (losses) on all other available for sale securities                                                                                |       | (513                                  | )          | 2,354 |   |
| Reclassification  adjustment for losses included in income                                                                                                   |       | 327                                   |       | — |   |
| Net unrealized  gains (losses)                                                                                                                               |       | (311                                  | )          | 2,354 |   |
| Income tax  expense (benefit)                                                                                                                                |       | (131                                  | )          | 895 |   |
| Total  comprehensive income                                                                                                                                  |       | $                                     | 829        |   | $ | 2,526 |   |

 

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**7.****                                     ****Stock Based Compensation**

 

A summary of option activity during the first threemonths of 2009 is presented below:

 
| ** **                                          | ** ** | **Shares** | ** ** | **Weighted  average  exercise  price** | ** ** | **Weighted  average  remaining  contractual  term** | ** ** | **Aggregate  intrinsic  value** | ** ** |
|-----------------------------------------------------|------------|------------|------------|----------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                          | ** ** | ** ** | ** ** | ** **                             | ** ** | ** **                                          | ** ** | **(in thousands)**              | ** ** |
| Outstanding at  January 1, 2009                |       | 394,193    |       | $                                      | 21.97      |                                                | 7.0 years  |                            | $          | 235 |   |
| Granted                                             |       | —     |       | —                                 |       | —                                              |       | n/a                             |       |
| Forfeited/expired                                   |       | —     |       | —                                 |       | —                                              |       | n/a                             |       |
| Exercised                                           |       | —     |       | —                                 |       | —                                              |       | n/a                             |       |
| Outstanding at March 31,  2009                 |       | 394,193    |       | $                                      | 21.97      |                                                | 6.8 years  |                            | $          | 81 |   |
| Exercisable at  March 31, 2009                 |       | 197,546    |       | $                                      | 21.56      |                                                | 5.2 years  |                            | $          | 81 |   |
| Vested and  expected to vest at March 31, 2009 |       | 376,876    |       | $                                      | 21.93      |                                                | 6.8 years  |                            | $          | 81 |   |

 

Additional information about stock options exercised ispresented below:

 
| **Three months ended March 31,**               | ** ** | **2009** | ** ** | **2008** | ** ** |
|-----------------------------------------------------|------------|----------|------------|----------|------------|
| Intrinsic value  of options exercised               |       | $        | —     |     | $          | 14,736 |   |
| Cash received  from options exercised               |       | $        | —     |     | $          | 30,432 |   |
| Excess tax  benefit realized from options exercised |       | $        | —     |     | $          | 5,010 |   |

 

As of March 31, 2009, there was $313,000 of totalunrecognized compensation cost related to outstanding options.   That cost is expected to be recognized overa period of 4 years.  No shares vestedduring the quarter ended March 31, 2009 while the total fair value (atvest date) of shares vested during the quarter ended March 31, 2008 was$64,000.

 

**8.****                                     ****Subsequent Event**

 

Landmark Bancorp, Inc. also announced thecompletion of the acquisition, by its wholly-owned subsidiary, LandmarkNational Bank, of a branch located at 4621 W. 6th Street, in Lawrence, Kansasfrom CornerBank, N.A. effective May 8, 2009.  Pursuant to the agreement, Landmark NationalBank purchased approximately $4.0 million in loans, assumed approximately $6.4million in deposits and acquired approximately $2.6 million in related branchpremises and equipment.  The transactionexpands Landmark National Bank’s banking presence in Lawrence, Kansas and givesthe bank a second location in the community.

 

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**9.****            ****Impact of Recent AccountingPronouncements**

 

In December 2007,the FASB issued SFAS No. 141 (revised), “*BusinessCombinations*.”  The statementretains the fundamental requirements in Statement No. 141 that theacquisition method of accounting be used for business combinations, butbroadens the scope of Statement No. 141 and contains improvements to theapplication of this method.  TheStatement requires an acquirer to recognize the assets acquired, theliabilities assumed, and any noncontrolling interest in the acquiree at theacquisition date, measured at their fair values as of that date.  Costs incurred to effect the acquisition areto be recognized separately from the acquisition.  Assets and liabilities arising fromcontractual contingencies and contingent considerations must be measured atfair value as of the acquisition date. The statement also changes the accounting for negative goodwill arisingfrom a bargain purchase, requiring recognition in earnings instead ofallocation to assets acquired.  TheCompany adopted this statement on 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 No. 51 toestablish accounting and reporting standards for the noncontrolling interest ina subsidiary and for the deconsolidation of a subsidiary.  It also amends certain of ARB No. 51’s consolidationprocedures for consistency with the requirements of SFAS No. 141 (revised2007), *“Business Combinations.”*  The Company adopted this statement on January 1,2009.  The adoption of this statement didnot have a material effect on our consolidated financial statements.

 

In March 2008, theFASB issued SFAS No. 161, “*Disclosures aboutDerivative Instruments and Hedging Activities - an amendment 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 Company adopted this statement on January 1, 2009.  The adoption of this statement did not have amaterial effect on our consolidated financial statements.

 

In January 2009, theFASB issued Staff Position (FSP) No. EITF 99-20-1, “*Amendmentsto the Impairment Guidance of EITF Issue No. 99-20.*”  The amendment’s purpose is to achieve a moreconsistent determination of whether an other than temporary impairment hasoccurred on beneficial interests. Specifically, the new pronouncement no longer requires the usage ofmarket participant assumptions about future cash flows in determining otherthan temporary impairment under the EITF 99-20 model, and aligns that model’simpairment guidance with SFAS No. 115. This statement was adopted on December 31, 2008 and is applicableto our investments in pooled trust preferred investment securities.

 

In April 2009, theFASB issued FSP No. FAS 115-2 and FAS 124-2, *“Recognitionand Presentation of Other Than Temporary Impairments.”*  This position amends guidance for recognizingand reporting other than temporary impairments of debt securities and improvesthe presentation of other than temporary impairments in financial statementsfor both debt and equity securities.  Theposition requires entities to separate an other than temporary impairment of adebt security into credit related losses and other factors when managementasserts that it does not have the intent to sell the security and it is morelikely than not that it will not be required to sell the security beforerecovery of its cost basis.  The amountof other than temporary impairment related credit losses is recognized inearnings while the amount related to other factors is recorded in othercomprehensive income.  The Companyadopted this position effective January 1, 2009 and applied the guidance to itsother than temporary impairment analysis during the first quarter of 2009,including the pooled trust preferred investment security which resulted in therecognition of a credit related loss of $327,000 in earnings while thenoncredit-related loss of $523,000 is recognized in accumulated othercomprehensive income.

 

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

 

In April 2009, theFASB issued FSP No. FAS 107-1 and APB 28-1, *“InterimDisclosures about Fair Value of Financial Instruments.”*  The position expands disclosures on the fairvalue of financial instruments to include interim reporting periods, inaddition to annual disclosures.  TheCompany adopted this position on April 1, 2009.  The Company does not expect the adoption ofthis position to have a material effect our financial statements.

 

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

 

***Overview*****.**  LandmarkBancorp, Inc. is a bank holding company incorporated under the laws of theState of Delaware and is engaged in the banking business through itswholly-owned subsidiary, Landmark National Bank.  Landmark Bancorp is listed on the NASDAQGlobal 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 from the sale of newly originated loansand gains or losses on 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 interest ratepricing competition from other lending institutions.

 

***CriticalAccounting Policies****.*  Critical accounting policies are those whichare both most important to the portrayal of our financial condition and resultsof operations, and require our management’s most difficult, subjective orcomplex 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, incometaxes and business acquisitions, all of which involve significant judgment byour management.

 

Information about ourcritical accounting policies is included under Item 7, Management’s Discussionand Analysis of Financial Condition and Results of Operations in our AnnualReport on Form 10-K for the year ended December 31, 2008.  The only change in our critical accountingpolicies since December 31, 2008 is a result of the adoption of FSP No. FAS115-2 and FAS 124-2, *“Recognition and Presentationof Other Than Temporary Impairments.”*  Based on the guidance in the FSP, now if wedeem a decline in the fair value of a debt security to be other than temporary,we lower the cost basis, through a charge to earnings, by the amount of creditlosses inherent in the investment versus writing the security down to marketvalue.

 

***Summaryof Results*****.**  During the first quarter of 2009, our netearnings declined by $57,000 to $1.0 million as compared to net earnings of$1.1 million in the same period of 2008. During the first quarter of 2009 we identified a $1.0 million investmentin a pooled trust preferred security as other than temporarily impaired.  The net credit-related impairment  related to this security was approximately$327,000.  Offsetting the loss was areduction in our provision for loan losses by $300,000 for the first quarter of2009 as compared to 2008 based on our analysis of our loan portfolio.  Our increase in non-interest income wasprimarily attributable to a $519,000 increase in gains on sale of loans, whichwas driven by higher origination volumes of residential real estate loans thatwere sold in the secondary market. Results for the first quarter of 2008 included a $246,000 gain from the prepaymentof a FHLB advance, which represented the remaining unamortized fair valueadjustment recorded in purchase accounting. During the first quarter of 2009 we also experienced elevated levels ofthe non-interest expenses primarily related to compensation and benefits, costsassociated with our Lawrence branch acquisition and increased foreclosure andother real estate expenses.

 

Our net interest marginwas 3.47% during the first quarters of both 2009 and 2008.  For each period, we were able to reduce ourcost of deposits and borrowings to offset the lower yields earned on loans andinvestment securities in markets that experienced a dramatic decline inbenchmark interest rates that began in late 2007 and continued throughout2008.  The lower cost of funding allowedus to maintain our net interest margin in markets that had considerablecompetitive pricing pressures.  We expectthese pricing pressures to continue during 2009, which may make maintaining orincreasing our net interest margin difficult.

 

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The followingtable summarizes earnings and key performance measures for the periodspresented.

 
| ** **                        | ** ** | **Three months ended March 31,** | ** ** |
|-----------------------------------|------------|---------------------------------------|------------|
| **(Dollars in thousands)**        | ** ** | **2009**                              | ** ** | **2008** | ** ** |
|                              |       |                                  |       |   |   |
| Net earnings:                     |       |                                  |       |   |   |
| Net earnings                      |       | $                                     | 1,009      |   | $ | 1,067 |   |
| Basic earnings  per share         |       | $                                     | 0.43       |   | $ | 0.43 |   |
| Diluted earnings  per share       |       | $                                     | 0.42       |   | $ | 0.43 |   |
| Earnings ratios:                  |       |                                  |       |   |   |
| Return on  average assets (1)     |       | 0.67                                  | %          | 0.70 | % |
| Return on  average equity (1)     |       | 7.90                                  | %          | 8.27 | % |
| Dividend payout  ratio            |       | 45.24                                 | %          | 42.22 | % |
| Net interest  margin (1) (2) |       | 3.47                                  | %          | 3.47 | % |

 

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(1)   The ratio has been annualized and is notnecessarily indicative of the results for the entire year.

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

 

***InterestIncome.***  Interest income for the quarter ended March 31,2009, decreased $1.6 million, or 18.7%, to $6.9 million from $8.5 million inthe same period of 2008.  Interest incomeon loans decreased $1.5 million, or 22.2%, to $5.2 million for the quarterended March 31, 2009 due primarily to decreases in the yields earned onour loans as rates declined during 2008. Our tax equivalent yields earned on loans declined from 7.02% to 5.75%during the first quarters of 2008 to 2009. Average loans outstanding for the quarter ended March 31, 2009decreased to $368.4 million from $381.4 million for 2008.  Interest income on investment securitiesdecreased $109,000, or 5.9%, to $1.7 million for the first quarter of 2009, ascompared to 2008.  Average investmentsecurities outstanding increased from $166.8 million for the quarter ended March 31,2008, to $182.0 million for 2009. Offsetting the increase in average investments outstanding for thecomparable period were lower yields earned on the investments, which declinedfrom 5.05% during the first quarter of 2008 to 4.50% during the first quarterof 2009.  The higher levels ofinvestments was the result of the increased liquidity from lower outstanding loanbalances.

 

***InterestExpense*****.**  Interest expense during the quarter ended March 31,2009 decreased $1.5 million, or 37.6%, as compared to the same period of2008.  For the first quarter of 2009interest expense on interest-bearing deposits decreased $1.5 million, or 47.5%as a result of lower rates on deposit balances, primarily lower rates for ourmaturing certificates of deposit and lower rates on money market and NOWaccounts due to the decline in interest rates experienced during 2008.  Our total cost of deposits declined from3.13% during the first quarter of 2008 to 1.66% during the same period of2009.  For the first quarter of 2009interest expense on borrowings decreased $32,000, or 3.6%, due primarily to lowerrates on our outstanding borrowings.  Ourcost of borrowing declined from 3.70% in the first quarter of 2008 to 3.59% inthe same period of 2009.

 

***NetInterest Income*****.**  Net interest income for the quarter ended March 31,2009 totaled $4.4 million, decreasing $70,000, or 1.6%, as compared to thethree months ended March 31, 2008. Our net interest margin, on a tax equivalent basis, remained at 3.47%during the first quarters of both 2009 and 2008.

 

See the Rate\Volume Tableat the end of Item 2 Management’s Discussion and Analysis of FinancialCondition for additional details on asset yields, liability rates and netinterest margin.

 

***Provisionfor Loan Losses*****.**  We maintain, and our Board of Directorsmonitors, an allowance for losses on loans. The allowance is established based upon management’s periodic evaluationof known and inherent risks in the loan portfolio, review of significantindividual loans and collateral, review of delinquent loans, past lossexperience, adverse situations that may affect the borrowers’ ability to repay,current and expected market conditions, and other factors management deemsimportant.  Determining the appropriatelevel of reserves involves a high degree of management judgment and is basedupon historical and projected losses in the loan portfolio and the collateralvalue of specifically identified problem loans. Additionally, allowance strategies and policies are subject to periodicreview and revision in response to a number of factors, including currentmarket conditions, actual loss experience and management’s expectations.

 

The provision for loanlosses for the quarter ended March 31, 2009 was $300,000, compared to aprovision of $600,000 during the same period of 2008.  While our provision for loan losses declined$300,000 during the first quarter of 2009 as compared to 2008, the provisionremains elevated compared to historical levels due to the difficult conditionsthat continue to exist in the economy as well as increased levels ofnonperforming loans in our portfolio. The higher provision for loan losses is based upon our analysis of ourloan portfolio as well as distressed market conditions.  The increased levels 

 

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of loan loss provisionwill likely continue in the current economic environment and the continueduncertainty regarding the length and severity of the recession we are currentlyexperiencing.  For further discussion ofthe allowance for loan losses, refer to the “Asset Quality and Distribution”section.

 

***Non-interestIncome*****.**  Non-interest income increased $241,000, or13.3%, for the quarter ended March 31, 2009, to $2.1 million, as comparedto the quarter ended March 31, 2008. The increase was primarily attributable to an increase of $519,000 ingains on sale of loans.  The increasedgains on sales of loans were driven by higher origination volumes ofresidential real estate loans that were sold in the secondary market.  Offsetting the increased gains on sales ofloans, was a $246,000 gain that was recognized in the first quarter of 2008from the prepayment of a FHLB advance, which represented the remainingunamortized fair value adjustment required by purchase accounting.

 

***InvestmentSecurities Gains (Losses)*****.**  During the first quarter of 2009 weidentified a $1.0 million investment in a pooled trust preferred security asother than temporarily impaired.  The netcredit-related impairment loss on this security amounted to $327,000.  See Note 3 on Investments in the accompanyingconsolidated financial statements for additional details.

 

***Non-interestExpense*****.**  Non-interest expense increased $321,000, or7.5%, to $4.6 million for the quarter ended March 31, 2009, as compared tothe same period of 2008.  These increaseswere primarily driven by increases of $205,000 in compensation and benefits,$103,000 in foreclosure and other real estate expenses and $61,000 inprofessional fees.  The increase incompensation and benefits was driven by general salary increases as well asincreased costs associated with commissions paid due to the higher residentialreal estate loan volumes.  The increasesin foreclosure and other real estate are the result of increased fees and expensesassociated with foreclosure activity, higher other real estate balances and a$30,000 impairment of one other real estate property.  The increases in professional fees areprimarily associated with our Lawrence branch acquisition.  There were also various increased costsassociated with the higher levels of 1-4 family mortgage loanoriginations.  Offsetting those increaseswas a $110,000 reduction in our occupancy and equipment costs.

 

***IncomeTax Expense*****.**  Income tax expense decreased $119,000, or37.3%, from $321,000 for the quarter ended March 31, 2008, to $201,000 forthe quarter ended March 31, 2009. The effective tax rate for the first quarter of 2009 was 16.6% comparedto 23.1% during the first quarter of 2008. The decline in the effective tax rate was primarily driven by lowertaxable income as a percentage of earnings before income taxes, while taxexempt income remained relatively constant between the periods.

 

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***AssetQuality and Distribution*****.**  Our primary investing activities are theorigination of commercial, commercial real estate, mortgage and consumer loansand the purchase of investment securities. Total assets increased to $617.3 million at March 31, 2009,compared to $602.2 million at December 31, 2008.  Net loans, excluding loans held for sale,decreased to $355.2 million at March 31, 2009 from $365.8 million at December 31,2008.  The reduction in our total loansis primarily the result of reducing our exposure to construction and commercialreal estate loans in response to the current issues in real estate.

 

Loans consisted of thefollowing:

 
| **(Dollars in thousands)**                    | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Real estate loans:                            | ** ** | ** **               | ** ** | ** **                  | ** ** |
| One-to-four family residential                |       | $                        | 110,023    |                        | $          | 112,815 |   |
| Commercial                                    |       | 121,506                  |       | 126,977                     |       |
| Construction                                  |       | 16,730                   |       | 19,618                      |       |
| Commercial loans                              |       | 103,504                  |       | 101,976                     |       |
| Consumer loans                                |       | 7,674                    |       | 7,937                       |       |
| Total                                         |       | 359,437                  |       | 369,323                     |       |
|                                          |       |                     |       |                        |       |
| Less: Deferred loan fees and loans in process |       | (50                      | )          | (320                        | )          |
| Less: Allowance for loan losses               |       | 4,307                    |       | 3,871                       |       |
| Loans, net                                    |       | $                        | 355,180    |                        | $          | 365,772 |   |
|                                          |       |                     |       |                        |       |
| Percent of total                              |       |                     |       |                        |       |
| Real estate  loans:                           |       |                     |       |                        |       |
| One-to-four  family residential               |       | 30.6                     | %          | 30.5                        | %          |
| Commercial                                    |       | 33.8                     | %          | 34.4                        | %          |
| Construction                                  |       | 4.7                      | %          | 5.3                         | %          |
| Commercial loans                              |       | 28.8                     | %          | 27.6                        | %          |
| Consumer loans                                |       | 2.1                      | %          | 2.2                         | %          |
| Total gross  loans                            |       | 100.0                    | %          | 100.0                       | %          |

 

The allowance for losseson loans is established through a provision for losses on loans based on ourevaluation of the risk inherent in the loan portfolio and changes in the natureand volume of its loan activity.  Suchevaluation, which includes a review of all loans with respect to which fullcollectibility may not be reasonably assured, considers the fair value of theunderlying collateral, economic conditions, historical loan loss experience,level of classified loans and other factors that warrant recognition inproviding for an adequate allowance for losses on loans.  We feel that higher levels of provisions forloan losses are required based upon our analysis of our loan portfolio as wellas depressed market conditions.  We feelthe external risks within the environment which we operate remain present todayand will need to be continuously monitored. We have identified the stresses in our loan portfolio and are working toreduce the risks of certain loan exposures, including significantly reducingour exposure to construction and land development loans.  Although we believe that we use the bestinformation available to determine the allowance for loan losses, unforeseenmarket conditions could result in adjustment to the allowance for loanlosses.  In addition, net earnings couldbe significantly affected if circumstances differ substantially from theassumptions used in establishing the allowance for loan losses.

 

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

 
| **(Dollars in thousands)** | ** ** | **Three months ended March 31,** | ** ** |
|----------------------------|------------|---------------------------------------|------------|
| ** **                 | ** ** | **2009**                              | ** ** | **2008** | ** ** |
| Beginning  balance         |       | $                                     | 3,871      |   | $ | 4,172 |   |
| Provision for  loan losses |       | 300                                   |       | 600 |   |
| Charge-offs                |       | (82                                   | )          | (1,503 | ) |
| Recoveries                 |       | 218                                   |       | 19 |   |
| Ending balance             |       | $                                     | 4,307      |   | $ | 3,288 |   |

 

Loans past due more thana month totaled $13.2 million at March 31, 2009, compared to $9.4 millionat December 31, 2008.    At March 31,2009, $11.0 million in loans were on non-accrual status, or 3.1% of net loans,compared to a balance of $5.7 million in loans on non-accrual status, or 1.6%of net loans, at December 31, 2008. There were no loans 90 

 

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days delinquent and stillaccruing interest at March 31, 2009 and December 31, 2008.  The increase in non-accrual and impairedloans was primarily related to three construction and land loan relationships whichwere placed on non-accrual during the first quarter of 2009.  As part of the Company’s credit riskmanagement, we continue to aggressively manage the loan portfolio to identifyproblem loans and have placed additional emphasis on its commercial real estateand construction relationships.  Duringthe quarter ended March 31, 2009 we had a net loan recovery of $137,000compared to the $1.5 million of net loan charge-offs for the comparable periodof 2008.  The net loan recovery wasprimarily the result of a $200,000 deficiency settlement on previouslycharged-off construction loans which were foreclosed on during 2009 and arecurrently included in other real estate owned.

 

A summary of thenon-performing assets is as follows:

 
| **(Dollars in thousands)**                    | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Total  non-accrual loans                                | ** ** | $                        | 10,984     |                        | $          | 5,748 | ** ** |
| Accruing loans  over 90 days past due                   |       | —                   |       | —                      |       |
| Other real  estate owned                                |       | 2,390                    |       | 1,934                       |       |
| Total  nonperforming assets                             |       | $                        | 13,374     |                        | $          | 7,682 |   |
|                                                    |       |                     |       |                        |       |
| Total  nonperforming loans to total loans, net          |       | 3.1                      | %          | 1.6                         | %          |
| Total  nonperforming assets to total assets             |       | 2.2                      | %          | 1.3                         | %          |
| Allowance for  loan losses to gross loans outstanding   |       | 1.2                      | %          | 1.0                         | %          |
| Allowance for  loan losses to total nonperforming loans |       | 39.2                     | %          | 67.3                        | %          |

 

A summary of the impairedloans is as follows:

 
| **(Dollars in thousands)**                     | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|----------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Impaired loans  for which an allowance has been provided |       | $                        | 7,081      |                        | $          | 1,867 |   |
| Impaired loans  for which no allowance has been provided |       | 4,298                    |       | 5,192                       |       |
| Total impaired  loans                                    |       | 11,379                   |       | 7,059                       |       |
| Allowance  related to impaired loans                     |       | $                        | 1,679      |                        | $          | 705 |   |

 

***LiabilityDistribution*****.**  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.  While maturities and scheduled amortizationof loans are a predictable source of funds, deposit flows and mortgageprepayments are greatly influenced by general interest rates, economicconditions, competition and the restructuring of the financial servicesindustry.  Total deposits increased $17.7million to $457.2 million at March 31, 2009, from $439.5 million at December 31,2008.  The increase was related toseasonal fluctuations and increased retail deposits.  Total borrowings decreased $5.5 million to$98.9 million at March 31, 2009, from $104.4 million at December 31,2008.  The decline was primarily fromrepaying outstanding borrowings on our FHLB line of credit.

 

Certificates of depositat March 31, 2009, which were scheduled to mature in one year or less,totaled $170.0 million.  Historically,maturing deposits have generally remained with our bank and we believe that asignificant portion of the deposits maturing in one year or less will remainwith us upon maturity.

 

***Liquidity*****.** Our most liquidassets are cash and cash equivalents and investment securities available forsale.  The levels of these assets aredependent on the operating, financing, lending and investing activities duringany given period.  These liquid assetstotaled $197.8 million at March 31, 2009 and $185.1 million at December 31,2008.  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.federal agency obligations, high-grade municipal securities or FDIC insuredcertificates of deposits with other financial institutions.

 

Liquidity management isboth a daily and long-term function of our strategy.  Excess funds are generally invested inshort-term investments.  In the event werequire funds beyond our ability to generate them internally, additional fundsare generally available through the use of FHLB advances, a line of credit withthe FHLB, or other borrowings or through sales of securities.  At March 31, 2009, we had outstandingFHLB advances of $71.2 million and no borrowings against our line of creditwith the FHLB.  At March 31, 2009,our total borrowing capacity with the FHLB was $121.9 million.  At March 

 

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31, 2009, we had noborrowings through the Federal Reserve discount window, while our borrowingcapacity was $15.9 million.  We also havevarious other fed funds agreements, both secured and unsecured, withcorrespondent banks totaling approximately $67.0 million at March 31,2009, which had no borrowings against at that time.  We also had other borrowings of $27.7 millionat March 31, 2009, which included $16.5 million of subordinateddebentures, $5.6 million of long-term debt and $5.6 million in repurchaseagreements.

 

As a provider offinancial services, we routinely issue financial guarantees in the form offinancial and performance standby letters of credit. Standby letters of creditare contingent commitments issued by us generally to guarantee the payment orperformance obligation of a customer to a third party. While these standbyletters of credit represent a potential outlay by us, a significant amount ofthe commitments may expire without being drawn upon. We have recourse againstthe customer for any amount the bank is required to pay to a third party undera standby letter of credit. The letters of credit are subject to the same creditpolicies, underwriting standards and approval process as loans originated byus. Most of the standby letters of credit are secured, and in the event ofnonperformance by the customer, we have the right to the underlying collateral,which could include commercial real estate, physical plant and property,inventory, receivables, cash and marketable securities. The contract amount ofthese standby letters of credit, which represents the maximum potential futurepayments guaranteed by us, was $2.1 million at March 31, 2009.

 

At March 31, 2009,we had outstanding loan commitments, excluding standby letters of credit, of$67.3 million.  We anticipate thatsufficient funds will be available to meet current loan commitments.  These commitments consist of unfunded linesof credit and commitments to finance real estate loans.

 

***Capital*****.**  The FederalReserve Board has established capital requirements for bank holding companieswhich generally parallel the capital requirements for national banks under theOffice of the Comptroller of the Currency regulations.  The regulations provide that such standardswill generally be applied on a consolidated (rather than a bank-only) basis inthe case of a bank holding company with more than $150 million in totalconsolidated assets.  Banks and bankholding companies are generally expected to operate at or above the minimumcapital requirements.  Our ratios arewell in excess of regulatory minimums and should allow us to operate withoutcapital adequacy concerns.

 

At March 31, 2009,we continued to remain well capitalized, with a leverage ratio of 8.90% and atotal risk based capital ratio of 14.08%. As shown by the following table, our capital exceeded the minimumcapital requirements at March 31, 2009 (dollars in thousands):

 
| ** **                | ** ** | ** ** | ** ** | **For capital**       | ** ** | **To be well-** | ** ** |
|---------------------------|------------|------------|------------|-----------------------|------------|-----------------|------------|
| ** **                | ** ** | **Actual** | ** ** | **adequacy purposes** | ** ** | **capitalized** | ** ** |
| **Company**               | ** ** | **Amount** | ** ** | **Ratio**             | ** ** | **Amount**      | ** ** | **Ratio** | ** ** | **Amount** | ** ** | **Ratio** | ** ** |
| Leverage                  |       | $          | 53,142     |                  | 8.90       | %               | $          | 23,890 |   | 4.0 | % | $ | 29,862 |   | 5.0 | % |
| Tier 1 Capital            |       | $          | 53,142     |                  | 13.03      | %               | $          | 16,316 |   | 4.0 | % | $ | 24,474 |   | 6.0 | % |
| Total Risk Based  Capital |       | $          | 57,449     |                  | 14.08      | %               | $          | 32,632 |   | 8.0 | % | $ | 40,791 |   | 10.0 | % |

 

At March 31,2009, Landmark National Bank continued to remain well capitalized, with aleverage ratio of 9.62% and a total risk based capital ratio of 15.13%.  As shown by the following table, the bank’scapital exceeded the minimum capital requirements at March 31, 2009(dollars in thousands):

 
| ** **                 | ** ** | ** ** | ** ** | **For capital**       | ** ** | **To be well-** | ** ** |
|----------------------------|------------|------------|------------|-----------------------|------------|-----------------|------------|
| ** **                 | ** ** | **Actual** | ** ** | **adequacy purposes** | ** ** | **capitalized** | ** ** |
| **Landmark National Bank** | ** ** | **Amount** | ** ** | **Ratio**             | ** ** | **Amount**      | ** ** | **Ratio** | ** ** | **Amount** | ** ** | **Ratio** | ** ** |
| Leverage                   |       | $          | 57,196     |                  | 9.62       | %               | $          | 23,793 |   | 4.0 | % | $ | 29,741 |   | 5.0 | % |
| Tier 1 Capital             |       | $          | 57,196     |                  | 14.07      | %               | $          | 16,256 |   | 4.0 | % | $ | 24,384 |   | 6.0 | % |
| Total Risk Based  Capital  |       | $          | 61,503     |                  | 15.13      | %               | $          | 32,512 |   | 8.0 | % | $ | 40,640 |   | 10.0 | % |

 

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***AverageAssets/Liabilities*****.**  The following tables set forth informationrelating to average balances of interest-earning assets and liabilities for thethree months ended March 31, 2009 and 2008.  The following tables reflect 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, 2009** | ** ** | **March 31, 2008** | ** ** |
| **(Dollars in thousands)**                                                        | ** ** | **Average  balance**    | ** ** | **Interest**            | ** ** | **Average  annual  yield/rate** | ** ** | **Average  balance** | ** ** | **Interest** | ** ** | **Average  annual  yield/rate** | ** ** |
| ASSETS:                                                                           |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Interest-earning  assets:                                                         |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Investment  securities (1)                                                        |       | $                       | 182,023    |                    | $          | 2,014 |   | 4.50 | % | $ | 166,792 |   | $ | 2,101 |   | 5.05 | % |
| Loans (2)                                                                         |       | 368,417                 |       | 5,206                   |       | 5.75 | % | 381,446 |   | 6,678 |   | 7.02 | % |
|                                                                              |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Total  interest-earning assets                                                    |       | 550,440                 |       | 7,220                   |       | 5.33 | % | 548,238 |   | 8,779 |   | 6.42 | % |
| Non-interest-earning  assets                                                      |       | 59,975                  |       |                    |       |   |   | 59,926 |   |   |   |   |   |
|                                                                              |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Total                                                                             |       | $                       | 610,415    |                    |       |   |   |   | $ | 608,164 |   |   |   |   |   |
|                                                                              |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY:                                       |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                                                    |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Certificates of  deposit                                                          |       | $                       | 216,704    |                    | $          | 1,436 |   | 2.69 | % | $ | 230,133 |   | $ | 2,475 |   | 4.31 | % |
| Money market and  NOW accounts                                                    |       | 156,380                 |       | 183                     |       | 0.48 | % | 143,314 |   | 627 |   | 1.76 | % |
| Savings accounts                                                                  |       | 27,500                  |       | 20                      |       | 0.30 | % | 26,119 |   | 19 |   | 0.29 | % |
| FHLB advances  and other borrowings                                               |       | 99,578                  |       | 879                     |       | 3.59 | % | 98,774 |   | 911 |   | 3.70 | % |
|                                                                              |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Total  interest-bearing liabilities                                               |       | 500,162                 |       | 2,518                   |       | 2.05 | % | 498,340 |   | 4,032 |   | 3.25 | % |
| Non-interest-bearing  liabilities                                                 |       | 58,426                  |       |                    |       |   |   | 58,046 |   |   |   |   |   |
| Stockholders’  equity                                                        |       | 51,827                  |       |                    |       |   |   | 51,778 |   |   |   |   |   |
| Total                                                                             |       | $                       | 610,415    |                    |       |   |   |   | $ | 608,164 |   |   |   |   |   |
|                                                                              |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Interest rate  spread (3)                                                         |       |                    |       |                    |       | 3.28 | % |   |   |   |   | 3.17 | % |
| Net interest  margin (4)                                                          |       |                    |       | 4,702                   |       | 3.47 | % |   |   | 4,747 |   | 3.47 | % |
| Tax equivalent  interest – imputed                                           |       |                    |       | 310                     |       |   |   |   |   | 285 |   |   |   |
| Net interest  income                                                              |       |                    |       | $                       | 4,392      |   |   |   |   |   | $ | 4,462 |   |   |   |
|                                                                              |       |                    |       |                    |       |   |   |   |   |   |   |   |   |
| Ratio of average  interest-earning assets to average interest-bearing liabilities |       |                    |       | 110.1                   | %          |   |   |   |   | 110.0 | % |   |   |

 

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(1)   Income on investmentsecurities includes all securities, including interest bearing deposits inother financial institutions.  Income ontax exempt securities is presented on a fully taxable equivalent basis, using a34% federal tax rate.

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

(3)   Interest rate spreadrepresents the difference between the average yield on interest-earning assetsand the average cost of interest-bearing liabilities.

(4)   Net interest marginrepresents annualized net interest income divided by average interest-earningassets.

 

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***Rate/VolumeTable****.* The following table describes the extent to which changes in interestincome and interest expense for major components of interest-earning assets andinterest-bearing liabilities affected the Company’s interest income and expensefor the three months ended March 31, 2009 as compared the three monthsended March 31, 2008.  The tabledistinguishes between (i) changes attributable to rate (changes in ratemultiplied by prior volume), (ii) changes attributable to volume (changesin volume multiplied by prior rate), and (iii) net change (the sum of theprevious columns).  The net changesattributable to the combined effect of volume and rate, which cannot besegregated, have been allocated proportionately to the change due to volume andthe change due to rate.

 
| ** **                 | ** ** | **Three months ended March 31, 2009  compared with the same period in 2008** | ** ** |
|----------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                 | ** ** | **Increase/(Decrease) Attributable to**                                           | ** ** |
| **(Dollars in thousands)** | ** ** | **Volume**                                                                        | ** ** | **Rate** | ** ** | **Net** | ** ** |
|                       |       |                                                                              |       |   |   |   |   |
| Investment  securities     |       | 189                                                                               |       | (276 | ) | (87 | ) |
| Loans                      |       | (203                                                                              | )          | (1,269 | ) | (1,472 | ) |
| Total                      |       | (14                                                                               | )          | (1,545 | ) | (1,559 | ) |
| Interest  expense:         |       |                                                                              |       |   |   |   |   |
| Deposits                   |       | 4                                                                                 |       | (1,486 | ) | (1,482 | ) |
| Borrowings                 |       | 12                                                                                |       | (43 | ) | (32 | ) |
| Total                      |       | 16                                                                                |       | (1,530 | ) | (1,514 | ) |
| Net interest  income       |       | (30                                                                               | )          | (15 | ) | (45 | ) |

 

**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 source forus.  As a result, a substantial portionof our risk management activities relates to managing interest rate risk.

 

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, 2009, and forecasting volumes forthe twelve-month projection.  Thisposition is then subjected to a shift in interest rates of 100 and 200 basispoints rising and 100 basis points falling with an impact to our net interestincome on a one year****horizon asfollows:

 
| ** **              | ** ** | **Dollar change in net**          | ** ** | **Percent change in**   | ** ** |
|-------------------------|------------|-----------------------------------|------------|-------------------------|------------|
| **Scenario**            | ** ** | **interest income ($000’s)** | ** ** | **net interest income** | ** ** |
| 200 basis point rising  |       | $                                 | 1,054      |                    | 5.7        | % |
| 100 basis point rising  |       | 555                               |       | 3.0                     | %          |
| 100 basis point falling |       | 47                                |       | 0.3                     | %          |
|                         |            |                                   |            |                         |            |  |

 

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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:

 

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

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

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

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

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

·                  The timely development and acceptance ofproducts and services, including products and services offered throughalternative delivery channels such as the Internet.

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

·                  Our ability to develop and maintainsecure and reliable electronic systems.

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

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

·                  Our ability to successfully integrateacquired businesses.

·                  The costs, effects and outcomes ofexisting or future litigation.

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

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

 

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, 2009.  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, 2009.

 

There were no changes inthe Company’s internal control over financial reporting during the quarterended March 31, 2009 that materially affected or were likely to materiallyaffect the Company’s internal control over financial reporting.

 

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**LANDMARK BANCORP, INC. ANDSUBSIDIARY**

**PART II – OTHER INFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS**

 

There is nomaterial pending legal proceedings to which the Company or its subsidiaries isa party other than ordinary routine litigation incidental to their respectivebusinesses.

 

**ITEM 1A.        RISKFACTORS**

 

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 2008Annual Report on Form 10-K.

 

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

 

The following tableprovides information about purchases by the Company and its affiliatedpurchases during the quarter ended March 31, 2009, of equity securitiesthat are registered by the Company pursuant to Section 12 of the ExchangeAct.

 
| **Period**                | ** ** | **Total  number of  shares  purchased** | ** ** | **Average  price paid  per share** | ** ** | **Total number of  shares purchased as  part of a publicly  announced plan (1)** | ** ** | **Maximum number  of shares that may  yet be purchased  under the plan (1)** | ** ** |
|---------------------------|------------|-----------------------------------------|------------|------------------------------------|------------|----------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| January 1-31,  2009  |       | 800                                     |       | $                                  | 14.75      |                                                                             | 800        |                                                                         | 108,806    |   |
| February 1-28,  2009 |       | —                                  |       | —                             |       | —                                                                           |       | 108,806                                                                      |       |
| March 1-31,  2009    |       | —                                  |       | —                             |       | —                                                                           |       | 108,806                                                                      |       |
| Total                     |       | 800                                     |       | $                                  | 14.75      |                                                                             | 800        |                                                                         | 108,806    |   |

 

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

 

**ITEM3.  DEFAULTS UPON SENIOR SECURITIES**

 

                None

 

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

 

                None

 

**ITEM5.  OTHER INFORMATION**

 

                None

 

**ITEM6.  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 therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                    |   | LANDMARK BANCORP, INC.                 |
|-------------------------|--------|----------------------------------------|
|                    |   |                                   |
|                    |   |                                   |
| Date: May 15, 2009 |   | /s/ Patrick L.  Alexander              |
|                    |   | Patrick L. Alexander                   |
|                    |   | President and Chief  Executive Officer |
|                    |   |                                   |
|                    |   |                                   |
| Date: May 15, 2009 |   | /s/ Mark A. Herpich                    |
|                    |   | Mark A. Herpich                        |
|                    |   | Vice President,  Secretary, Treasurer  |
|                    |   | and Chief Financial  Officer           |

 

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