**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 
| **ý** | **QUARTERLY REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                      |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                        |
| ** ** | **For the quarterly period ended March 31,  2005**                                                                                                                                     |
|       |                                                                                                                                                                                        |
| ** ** | **OR**                                                                                                                                                                                      |
|       |                                                                                                                                                                                        |
| **o**      | **TRANSITION REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                     |
|       |                                                                                                                                                                                        |
| ** ** | **For transition period from               to               ** |

 

**Commission File Number 0-33203**

 

**LANDMARK BANCORP, INC.**

(Exact name of Registrant as specified in its charter)

 
| **Delaware**                                                                              | ** ** | **43-1930755**                          |
|-------------------------------------------------------------------------------------------|------------|-----------------------------------------|
| (State or other jurisdiction  of incorporation or organization)                           |       | (I.R.S. Employer Identification Number) |
|                                                                                      |       |                                    |
| **800 Poyntz Avenue, Manhattan,  Kansas        66502** |
| (Address of principal executive offices)**  **(Zip Code)                        |
|                                                                                      |
| **(785) 565-2000**                                                                        |
| (Registrant’s telephone number, including area code)                                 |

 

Indicateby check mark whether the Registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes ý  No o

 

Indicateby check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2of the Exchange Act).  Yes o  No ý

 

Indicatethe number of shares outstanding of each of the Registrant’s classes of commonstock as of the latest practicable date: As of May 9, 2005, the Registrant had outstanding 2,110,588 sharesof its common stock, $.01 par value per share.

 

 

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**LANDMARK BANCORP, INC.**

**Form 10-Q Quarterly Report**

 

**Table of Contents**

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

 

1

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**LANDMARK BANCORP, INC. AND SUBSIDIARY**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                  | ** ** | **March 31,  2005** | ** **  | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|--------------------------|-------------|-----------------------------|------------|
| ** **                                                                                                  | ** ** | **(Unaudited)**          | ** **  | ** **                  | ** ** |
| **ASSETS**                                                                                                  |       |                     |        |                        |       |
| Cash and cash equivalents                                                                                   |       | $                        | 13,761,529  |                        | $          | 7,845,438 |   |
| Investment securities  available for sale                                                                   |       | 131,520,943              |        | 133,604,335                 |       |
| Loans, net                                                                                                  |       | 274,435,929              |        | 277,413,963                 |       |
| Loans held for sale                                                                                         |       | 1,741,270                |        | 846,003                     |       |
| Premises and equipment, net                                                                                 |       | 5,758,115                |        | 5,864,258                   |       |
| Goodwill                                                                                                    |       | 7,651,892                |        | 7,651,892                   |       |
| Other intangible assets, net                                                                                |       | 1,263,968                |        | 1,339,832                   |       |
| Accrued interest and other  assets                                                                          |       | 7,886,823                |        | 7,525,173                   |       |
|                                                                                                        |       |                     |        |                        |       |
| Total assets                                                                                                |       | $                        | 444,020,469 |                        | $          | 442,090,894 |   |
|                                                                                                        |       |                     |        |                        |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                              |       |                     |        |                        |       |
| Liabilities:                                                                                                |       |                     |        |                        |       |
| Deposits                                                                                                    |       | $                        | 307,203,307 |                        | $          | 302,867,721 |   |
| Federal Home Loan Bank  borrowings                                                                          |       | 75,762,791               |        | 81,053,321                  |       |
| Other borrowings                                                                                            |       | 15,133,000               |        | 13,518,000                  |       |
| Accrued expenses, taxes and  other liabilities                                                              |       | 3,744,707                |        | 2,482,875                   |       |
| Total liabilities                                                                                           |       | 401,843,805              |        | 399,921,917                 |       |
|                                                                                                        |       |                     |        |                        |       |
| Stockholders’ equity:                                                                                  |       |                     |        |                        |       |
| Common stock, $0.01 par,  3,000,000 shares authorized, Issued 2,230,435 and 2,230,435 shares,  respectively |       | 22,322                   |        | 22,322                      |       |
| Additional paid-in capital                                                                                  |       | 20,005,540               |        | 19,969,551                  |       |
| Retained earnings                                                                                           |       | 25,673,403               |        | 25,228,826                  |       |
| Accumulated other  comprehensive (loss)/income                                                              |       | (318,778                 | )           | 154,101                     |       |
| Treasury stock, at cost;  139,128 shares                                                                    |       | (3,205,823               | )           | (3,205,823                  | )          |
| Total stockholders’ equity                                                                             |       | 42,176,664               |        | 42,168,977                  |       |
|                                                                                                        |       |                     |        |                        |       |
| Total liabilities and  stockholders’ equity                                                            |       | $                        | 444,020,469 |                        | $          | 442,090,894 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

2

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**LANDMARK BANCORP, INC. ANDSUBSIDIARY**

**CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS**

**(Unaudited)**

 
| ** **                                           | ** ** | **Three  Months Ended March 31,** | ** ** |
|------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                           | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| Interest income:                                     |       |                                   |       |   |   |
| Loans                                                |       | $                                      | 4,101,714  |   | $ | 3,227,509 |   |
| Investment securities                                |       | 1,036,801                              |       | 811,325 |   |
| Other                                                |       | 13,070                                 |       | 8,332 |   |
| Total interest income                                |       | 5,151,585                              |       | 4,047,166 |   |
|                                                 |       |                                   |       |   |   |
| Interest expense:                                    |       |                                   |       |   |   |
| Deposits                                             |       | 1,160,065                              |       | 932,801 |   |
| Borrowed funds                                       |       | 880,726                                |       | 349,444 |   |
| Total interest expense                               |       | 2,040,791                              |       | 1,282,245 |   |
|                                                 |       |                                   |       |   |   |
| Net interest income                                  |       | 3,110,794                              |       | 2,764,921 |   |
|                                                 |       |                                   |       |   |   |
| Provision for loan losses                            |       | 120,000                                |       | 60,000 |   |
|                                                 |       |                                   |       |   |   |
| Net interest income after provision  for loan losses |       | 2,990,794                              |       | 2,704,921 |   |
|                                                 |       |                                   |       |   |   |
| Non-interest income:                                 |       |                                   |       |   |   |
| Fees and service charges                             |       | 797,659                                |       | 532,735 |   |
| Gains on sale of loans                               |       | 165,576                                |       | 234,885 |   |
| Gains on sale of investments                         |       | —                                 |       | 97,687 |   |
| Other                                                |       | 97,180                                 |       | 81,501 |   |
| Total non-interest income                            |       | 1,060,415                              |       | 946,808 |   |
|                                                 |       |                                   |       |   |   |
| Non-interest expense:                                |       |                                   |       |   |   |
| Compensation and benefits                            |       | 1,457,718                              |       | 1,217,804 |   |
| Occupancy and equipment                              |       | 490,234                                |       | 370,159 |   |
| Data processing                                      |       | 128,996                                |       | 78,865 |   |
| Amortization of intangibles                          |       | 96,030                                 |       | 75,147 |   |
| Professional fees                                    |       | 86,143                                 |       | 78,694 |   |
| Advertising                                          |       | 84,840                                 |       | 42,488 |   |
| Other                                                |       | 554,281                                |       | 394,164 |   |
| Total non-interest expense                           |       | 2,898,242                              |       | 2,257,321 |   |
|                                                 |       |                                   |       |   |   |
| Earnings before income taxes                         |       | 1,152,967                              |       | 1,394,408 |   |
|                                                 |       |                                   |       |   |   |
| Income tax expense                                   |       | 349,591                                |       | 445,647 |   |
|                                                 |       |                                   |       |   |   |
| Net earnings                                         |       | $                                      | 803,376    |   | $ | 948,761 |   |
|                                                 |       |                                   |       |   |   |
| Earnings per share:                                  |       |                                   |       |   |   |
| Basic                                                |       | $                                      | 0.38       |   | $ | 0.43 |   |
| Diluted                                              |       | $                                      | 0.38       |   | $ | 0.43 |   |
|                                                 |       |                                   |       |   |   |
| Dividends per share                                  |       | $                                      | 0.17       |   | $ | 0.1619 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

3

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**LANDMARK BANCORP, INC. AND SUBSIDIARY**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                | ** ** | **Three  Months Ended March 31,** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                | ** ** | **2005**                               | ** ** | **2004** | ** ** |
|                                                                      |       |                                   |       |   |   |
| Net cash provided by/(used in)  operating activities                      |       | $                                      | 1,669,181  |   | $ | (534,156 | ) |
|                                                                      |       |                                   |       |   |   |
| Cash flows from investing  activities:                                    |       |                                   |       |   |   |
| Net decrease in loans                                                     |       | 2,629,990                              |       | 3,028,649 |   |
| Maturities and prepayments of  investments                                |       | 9,443,110                              |       | 5,597,814 |   |
| Purchase of investment securities                                         |       | (8,405,034                             | )          | (6,264,643 | ) |
| Proceeds from sale of  investment securities                              |       | —                                 |       | 173,916 |   |
| Proceeds from sales of  premises and equipment and foreclosed assets      |       | 66,966                                 |       | 64,215 |   |
| Purchases of premises and  equipment, net                                 |       | (70,717                                | )          | (161,336 | ) |
| Net cash provided by investing  activities                                |       | 3,664,315                              |       | 2,438,615 |   |
|                                                                      |       |                                   |       |   |   |
| Cash flows from financing  activities:                                    |       |                                   |       |   |   |
| Net increase/(decrease) in  deposits                                      |       | 4,335,586                              |       | (1,740,018 | ) |
| Federal Home Loan Bank  borrowings                                        |       | 40,200,000                             |       | 4,100,000 |   |
| Federal Home Loan Bank  repayments                                        |       | (45,209,192                            | )          | (6,309,192 | ) |
| Proceeds from other borrowings                                            |       | 2,505,000                              |       | — |   |
| Repayments on other borrowings                                            |       | (890,000                               | )          | — |   |
| Purchase of 0 and 19,471  shares of treasury stock                        |       | —                                 |       | (585,225 | ) |
| Issuance of 0 and 22,628  shares of common stock under stock option plans |       | —                                 |       | 322,459 |   |
| Payment of dividends                                                      |       | (358,799                               | )          | (356,402 | ) |
| Net cash provided by/(used in)  financing activities                      |       | 582,595                                |       | (4,568,378 | ) |
| Net increase/(decrease) in  cash and cash equivalents                     |       | 5,916,091                              |       | (2,663,919 | ) |
| Cash and cash equivalents at  beginning of period                         |       | 7,845,438                              |       | 7,708,115 |   |
| Cash and cash equivalents at  end of period                               |       | $                                      | 13,761,529 |   | $ | 5,044,196 |   |
|                                                                      |       |                                   |       |   |   |
| Supplemental disclosure of  cash flow information:                        |       |                                   |       |   |   |
| Cash paid during period for  interest                                     |       | $                                      | 1,861,000  |   | $ | 1,231,000 |   |
| Cash paid during period for  taxes                                        |       | $                                      | —     |   | $ | 400,000 |   |
|                                                                      |       |                                   |       |   |   |
| Supplemental schedule of  non-cash investing activities:             |       |                                   |       |   |   |
| Transfer of loans to real  estate owned                                   |       | $                                      | 158,000    |   | $ | 59,000 |   |

 

*Seeaccompanying notes to condensed consolidated financial statements.*

 

4

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**LANDMARK BANCORP, INC. ANDSUBSIDIARY**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

 

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

 

The condensed consolidated financial statements ofLandmark Bancorp, Inc. (the “Company”) and subsidiary have been preparedin accordance with the instructions to Form 10-Q.  To the extent that information and footnotesrequired by accounting principles generally accepted in the United States ofAmerica for complete financial statements are contained in or consistent withthe consolidated audited financial statements incorporated by reference in theCompany’s Form 10-K for the year ended December 31, 2004, suchinformation and footnotes have not been duplicated herein.  In the opinion of management, alladjustments, consisting of normal recurring accruals, considered necessary fora fair presentation of financial statements have been reflected herein.  The December 31, 2004, condensedconsolidated balance sheet has been derived from the audited consolidatedbalance sheet as of that date.  Theresults of the interim period ended March 31, 2005, are not necessarilyindicative of the results expected for the year ending December 31, 2005.

 

**2.****                                     ****Earnings PerShare**

 

Basic earnings per share have been computed basedupon the 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 all periods presented have been adjusted to give effect to the 5% stockdividend paid by the Company in December 2004.

 

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

 
| ** **                                           | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                           | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Weighted average common shares outstanding (basic)   |       | 2,110,588                             |       | 2,195,210 |   |
| Dilutive stock options                               |       | 12,521                                |       | 19,053 |   |
| Weighted average common shares outstanding (diluted) |       | 2,123,109                             |       | 2,214,263 |   |

 

**3.****                                     ****StockBased Compensation**

 

The Company utilizes the fair value recognition provisions of SFASStatement No. 123, “Accountingfor Stock-Based Compensation.” SFAS No. 123 establishes a fair-value method of accounting foremployee stock options or similar equity instruments. The fair value ofstock-based awards to employees is calculated through the use of option pricingmodels, even though such models were developed to estimate the fair value offreely tradable, fully transferable options without vesting restrictions, whichsignificantly differ from the Company’s stock option awards. These models alsorequire subjective assumptions, including future stock price volatility andexpected time to exercise, which greatly affect the calculated values. TheCompany uses the Black-Scholes option pricing model to estimate the grant datefair value of its stock options. The fair value is recognized as compensationexpense over the option vesting period of five years.

 

In December 2004,The Financial Accounting Standards Board issued SFAS No. 123 (revised), *Shared-Based Payment*. The revision disallows the expense recognition alternatives permitted inthe original statement and requires entities to recognize stock-basedcompensation cost in their statements of earnings.

 

5

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The revisioncontains additional guidance in several areas including award modifications andforfeitures, measuring fair value, classifying an award as equity or as aliability, and attributing compensation cost to reporting periods.  It also contains additional disclosurerequirements.  The Company does notexpect that adoption of the revised Statement on January 1, 2006, willhave a material effect on its consolidated financial statements.

 

**4.****                                     ****Comprehensive Income**

 

The Company’s other comprehensive income (loss)consists of the unrealized holding gains and losses on available-for-salesecurities and an unrealized gain on an interest rate swap as shown below:

 
| ** **                                                           | ** ** | **Three Months Ended March 31,** | ** ** |
|----------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                           | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Net earnings                                                         |       | $                                     | 803,376    |   | $ | 948,761 |   |
|                                                                 |       |                                  |       |   |   |
| Unrealized holding gains (losses)                                    |       | (820,708                              | )          | 461,729 |   |
| Less reclassification adjustment for gains included  in net earnings |       | —                                |       | 97,687 |   |
| Net unrealized gains (losses) on securities                          |       | (820,708                              | )          | 364,042 |   |
| Unrealized gain on interest rate swap                                |       | 58,000                                |       | — |   |
| Income tax expense (benefit)                                         |       | (289,829                              | )          | 138,335 |   |
| Total comprehensive income                                           |       | $                                     | (472,879   | ) | $ | 1,174,468 |   |

 

**5.****                                     ****IntangibleAssets**

 

The following table presents information about theCompany’s intangible assets, which are being amortized in accordance with SFAS No. 142:

 
| ** **                   | ** ** | **March 31, 2005**     | ** ** | **December 31, 2004**    | ** ** |
|------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                   | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** |
| Amortized intangible assets: | ** ** | ** **                  | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Core deposit premium         |       | $                           | 1,385,000  |                          | $          | (543,819 | ) | $ | 1,385,000 |   | $ | (491,501 | ) |
| Mortgage servicing rights    |       | 758,676                     |       | (335,889                      | )          | 766,892 |   | (320,559 | ) |
| Total                        |       | $                           | 2,143,676  |                          | $          | (879,708 | ) | $ | 2,151,892 |   | $ | (812,060 | ) |

 

Aggregate amortization expense for the three monthsended March 31, 2005, and March 31, 2004, was $96,000 and $75,000,respectively.  The following tablerepresents the estimated amortization expense for the years ending December 31,:

 
| **Year** | ** ** | **Amount** | ** ** |
|----------|------------|------------|------------|
| 2005     |       | $          | 337,000    |   |
| 2006     |       | 352,000    |       |
| 2007     |       | 233,000    |       |
| 2008     |       | 122,000    |       |
| 2009     |       | 97,000     |       |
|          |            |            |            |  |

 

6

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**6.****                                     ****OtherEvents**

 

On May 13, 2005, the Company announced theexecution of a definitive purchase agreement to acquire two branch locations inGreat Bend, Kansas from UMB Financial Corporation.  Pursuant to the agreement, the Company willpurchase approximately $38.0 million in deposits along with the branchfacilities.  The transaction is subjectto the approvals of appropriate regulatory agencies.  The purchase is expected to be completedduring the third quarter of 2005.

 

In addition, the Company has entered into anagreement to construct a new branch location in Topeka, Kansas which isanticipated to be completed in early 2006.

 

7

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

 

*Overview.* Landmark Bancorp, Inc. is a one-bank holding company incorporatedunder the laws of the State of Delaware and is engaged in the banking businessthrough its wholly-owned subsidiary, Landmark National Bank.  Landmark Bancorp is listed on the NasdaqStock 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 real estate and non-realestate loans, one-to-four family residential mortgage loans, consumer loans,multi-family residential mortgage loans, and home equity loans.

 

Critical accounting policies are those which areboth most important to the portrayal of our financial condition and results ofoperations, and require our management’s most difficult, subjective or complexjudgments, often as a result of the need to make estimates about the effect ofmatters that are inherently uncertain. Our critical accounting policies relate to the allowance for loanlosses, the valuation of investment securities, and accounting for incometaxes, all of which involve significant judgment by our management.

 

We perform periodic and systematic detailed reviewsof our lending portfolio to assess overall collectability.  The level of the allowance for loan lossesreflects our estimate of the collectability of the loan portfolio.  While these estimates are based onsubstantive methods for determining allowance requirements, nevertheless,actual outcomes may differ significantly from estimated results.  Additional explanation of the methodologiesused in establishing this reserve is provided in the “Asset Quality andDistribution” section.

 

We report our investment securities at estimatedfair values based on readily ascertainable values which are obtained fromindependent sources.  Our managementperforms periodic reviews of the investment securities to determine if anyinvestment securities have declined in value which might be considered otherthan temporary.  Although we believe thatour estimates of the fair values of investment securities to be reasonable,economic and market factors may affect the amounts that will ultimately be realizedfrom these investments.

 

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

 

The objectives of accounting for income taxes are torecognize the amount of taxes payable or refundable for the current year anddeferred tax liabilities and assets for the future tax consequences of eventsthat have been recognized in an entity’s financial statements or taxreturns.  Judgment is required inassessing the future tax consequences of events that have been recognized inour financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences,including the effects of IRS examinations and examinations by other stateagencies, could materially impact our financial position and results ofoperations.

 

8

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We are significantly impacted by prevailing economicconditions including federal monetary and fiscal policies and federalregulations of financial institutions. Deposit balances are influenced by numerous factors such as competingpersonal investments, the level of personal income and the personal rate ofsavings within our market areas.  Factorsinfluencing lending activities include the demand for housing and the interestrate pricing competition from other lending institutions.

 

*Summary of Results*.  Net earnings for the threemonths ended March 31, 2005, decreased $145,000, or 15.3%, to $803,000 ascompared to the three months ended March 31, 2004.  This decline in net earnings was generallyattributable to an increase in non-interest expense which was offset by animprovement of net interest income.  Alsocontributing to the decline in net earnings was an increase of our loan lossprovision in the first quarter.  Theincreases in non-interest expense and the improvement of net interest incomeprimarily resulted from our acquisition of First Kansas on April 1, 2004,as we incurred additional expenses associated with operating these new branchesand as our average earning assets increased. The increase in our loan loss provision during the quarter primarilyrelated to our commercial loan growth.

 

The three months ended March 31, 2005, resultedin diluted earnings per share of $0.38 compared to $0.43 for the same period in2004.  Return on average assets for thethree months ended March 31, 2005, was 0.74% compared to 1.15% for thesame period in 2004.  Return on averagestockholders’ equity was 7.70% for the three months ended March 31, 2004,compared to 8.88% for the same period in 2004.

 

The following table summarizes net earnings and keyperformance measures for the two periods presented.

 
| ** **                   | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------|------------|---------------------------------------|------------|
| ** **                   | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Net earnings                 |       | $                                     | 803,376    |   | $ | 948,761 |   |
| Basic earnings per share     |       | $                                     | 0.38       |   | $ | 0.43 |   |
| Diluted earnings per share   |       | $                                     | 0.38       |   | $ | 0.43 |   |
| Earnings ratios:             |       |                                  |       |   |   |
| Return on average assets (1) |       | 0.74                                  | %          | 1.15 | % |
| Return on average equity (1) |       | 7.70                                  | %          | 8.88 | % |
| Dividend payout ratio        |       | 44.74                                 | %          | 37.77 | % |
| Net interest margin (1)      |       | 3.08                                  | %          | 3.53 | % |

 

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(1) Theratio has been annualized and is not necessarily indicative of the results forthe entire year.

 

*Interest Income.* Interest income for the three months ended March 31, 2005, increased$1.1 million, or 21.1%, to $5.1 million from $4.0 million for the three monthsended March 31, 2004.  This increasewas primarily the result of the increase in interest earning assets from theFirst Kansas acquisition in April of 2004. This increase was offset by the excess liquidity resulting from themortgage refinancings and paydowns being invested into lower yieldinginvestment securities.  Average loans forthe quarter ended March 31, 2005, increased to $279.6 million from $212.4 millionfor the quarter ended March 31, 2004. The increase in average loans was primarily the result of the acquisitionof First Kansas.  Interest income onloans increased $874,000, or 27.1%, to $4.1 million for the quarter ended March 31,2005.  Average investment securities alsoincreased as a result of the First Kansas acquisition, from $99.3 million forthe quarter ended March 31, 2004, to $131.0 million for the same period of2005.  Interest income on investmentsecurities increased $225,000, or 27.8%, to $1.0 million for the quarter ended March 31,2005.

 

9

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*Interest Expense*.  Interest expense during thethree months ended March 31, 2005, increased $759,000, or 40.1%, to $2.0million from $1.3 million as compared to the same period of 2004.  Interest expense on deposits increased $227,000,or 24.4%, to $1.2 million for the three months ended March 31, 2005.  The increase in interest expense on depositsresulted from an increase in average deposits from $253.3 million for thequarter ended March 31, 2004, to $300.3 million for the quarter ended March 31,2005, and as a result of the rise in interest rates in the second half of 2004and the first quarter of 2005.  Interestexpense on borrowings increased $531,000, or 152.0%, to $881,000, for the threemonth period.  The increase in interestexpense on borrowings resulted primarily from the additional FHLB advances of$56.4 million which we assumed through the acquisition of First Kansas and the$15.2 million of other borrowings originated  to consummate the First Kansasacquisition.

 

*Net Interest Income.*** Netinterest income increased to $3.1 million, or by 12.5%, for the three monthsended March 31, 2005, compared to $2.8 million for the three months ended March 31,2004, primarily as a result of the First Kansas acquisition in April 2004.  The increase in our average earning assetsduring the first three months of 2005 to $410.0 million from $315.2 million forthe same period of 2004 was also primarily attributable to the acquisition ofFirst Kansas.  The net interest margin forthe three months ended March 31, 2005, was 3.08%, down from 3.53% for thethree months ended March 31, 2004.  Thedecline in our net interest margin was primarily the result of the increasedFHLB advances acquired with the First Kansas acquisition which are pricedrelatively higher than deposit rates. Additionally, the residential mortgage loans acquired with from FirstKansas are also at rates that are relatively lower than the average of our loanportfolio prior to the acquisition.  Alsocontributing to the decline in the net interest margin is a continued reductionin loans arising from payoffs and refinancings in the one-to-four familyresidential loan portfolio exceeding our ability to generate new commercial andconsumer loans.  We believe the increasein Federal Funds rates in the second half of 2004 and during the first quarterof 2005 by the Federal Open Market Committee will have a positive impact on ournet interest margin in the latter part of 2005 as our interest rates on earningassets reprice to higher rates.

 

*Provision for Loan Losses.*  Theprovision for loan losses increased to $120,000 for the three months ended March 31,2005, compared to $60,000 the three months ended March 31, 2004.  Our continuous review of the loan portfolioprompted an increase in our provision, relating primarily to our commercialloan growth.  First Kansas had anallowance for loan losses of approximately $352,000, or 0.47% of outstandingloans, at March 31, 2004, which increased our allowance following theacquisition.  One measure of the adequacyof the allowance for estimated losses on loans is the ratio of the allowance tothe total loan portfolio.  At March 31,2005, the allowance for loan losses was $3.0 million, or 1.1% of gross loansoutstanding, compared to $2.9 million, or 1.0% of gross loans outstanding, at December 31,2004.  During the three months ended March 31,2005, our net charge-offs were $1,500 compared to $18,000 during the sameperiod of 2004.

 

*Non-interest Income.*  Non-interestincome increased $113,000, or 12.0%, for the three months ended March 31,2005, to $1.1 million from $947,000 for the three months ended March 31,2004.  The increase in non-interestincome reflected increased fees and service charges from $533,000 for the threemonths ended March 31, 2004, to $798,000 for the three months ended March 31,2005.  This significant increase in feesand service charges was the result of the acquisition of First Kansas in April 2004and from substantially increasing the number of our retail checking accountsopened through new marketing initiatives that were introduced in early2004.  Also contributing to the increasein non-interest income was a $16,000 increase in other fee income for the threemonths ended March 31, 2005, as compared to the same period of 2004, whichwas primarily attributable to the sale of other assets.

 

Partially offsetting these increases in non-interestincome was a decline in gains on sale of loans of 29.5%, from $235,000 for thethree months ended March 31, 2004, to $166,000 for the three months ended March 31,2005, as residential mortgage financing activity dropped.  Mortgage refinancings and prepayments

 

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were lower during the first quarter of 2005 as compared to the same periodof 2004.  Another offset to the increasesin non-interest income was a decrease in gains on sale of investments of $98,000for the three months ended March 31, 2005 as compared to the same periodof 2004 as we did not sell any investments during the first quarter of 2005.  We periodically sell equity securities fromour holding company’s investment portfolio based on performance and otherindicators and we could sell additional equity securities in future periods.

 
| ** **                    | ** ** | **Three Months Ended March 31,** | ** ** |
|-------------------------------|------------|---------------------------------------|------------|
| ** **                    | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Non-interest income:          |       |                                  |       |   |   |
| Fees and service charges      |       | $                                     | 797,659    |   | $ | 532,735 |   |
| Gains on sales of loans       |       | 165,576                               |       | 234,885 |   |
| Gains on sales of investments |       | —                                |       | 97,687 |   |
| Other                         |       | 97,180                                |       | 81,501 |   |
| Total non-interest income     |       | $                                     | 1,060,415  |   | $ | 946,808 |   |

 

*Non-interest Expense.*  Non-interestexpense increased $641,000, or 20.6%, to $2.9 million for the three months endedMarch 31, 2005, compared to $2.3 million for the same period in 2004.  The increase was primarily related to a $240,000increase in compensation and benefits, a $120,000 increase in occupancy andequipment expense, and a $50,000 increase in data processing expenses, all ofwhich was associated primarily with the operations of the branches acquiredfrom First Kansas.  The acquisition of FirstKansas added four branch locations and approximately 30 employees to our Company.  Also contributing to the increase innon-interest expense for the three months ended March 31, 2005, was anincrease of $42,000 in advertising expenses related to our new marketinginitiative that was introduced in early 2004. In addition, amortization expense increased $21,000 for the three monthsended March 31, 2005, as compared to the same period of 2004 associatedwith the additional core deposit premium that resulted from the First Kansasacquisition.  Other non-interest expense alsoincreased as a result of the operations of the new branches associated with theFirst Kansas acquisition.

 
| ** **                 | ** ** | **Three  Months Ended March 31,** | ** ** |
|----------------------------|------------|----------------------------------------|------------|
| ** **                 | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| Non-interest expense:      |       |                                   |       |   |   |
| Compensation and benefits  |       | $                                      | 1,457,718  |   | $ | 1,217,804 |   |
| Occupancy and equipment    |       | 490,234                                |       | 370,159 |   |
| Data processing            |       | 128,996                                |       | 78,865 |   |
| Amortization               |       | 96,030                                 |       | 75,147 |   |
| Professional fees          |       | 86,143                                 |       | 78,694 |   |
| Advertising                |       | 84,840                                 |       | 42,488 |   |
| Other                      |       | 554,281                                |       | 394,164 |   |
| Total non-interest expense |       | $                                      | 2,898,242  |   | $ | 2,257,321 |   |

 

*Income Tax Expense*.  Income tax expense decreased $96,000,or 21.6%, from $446,000 for the three months ended March 31, 2004, to $350,000for the three months ended March 31, 2005. This decrease in income tax expense resulted primarily from a decreasein taxable income.  In addition, theeffective tax rate for the first quarter of 2005 decreased to 30.3% compared to32.0% for the first quarter of 2004 as a result of the utilization of investmenttax credits.

 

*Asset Quality and Distribution.*  Totalassets increased to $444.0 million at March 31, 2005, compared to $442.1million at December 31, 2004.  Ourprimary ongoing sources of funds are deposits, proceeds from principal andinterest payments on loans and investment securities and proceeds from the saleof mortgage loans and investment securities. While maturities and scheduled amortization of loans are a predictablesource

 

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of funds, deposit flows and mortgage prepayments are greatly influencedby general interest rates, economic conditions, competition, and therestructuring of the financial services industry.

 

Net loans, excluding loans held for sale, decreased$3.0 million to $274.4 million as of March 31, 2005, from $277.4 millionas of December 31, 2004.  Thisdecline was primarily the result of refinancings and paydowns in ourresidential mortgage portfolio.  Our loanportfolio composition continues to diversify as a result of paydowns and ourplanned expansion of commercial lending activities.  This is evidenced by our one-to-four familyresidential real estate loans comprising 46.8% of total loans as of December 31,2004, and 45.7% of total loans as of March 31, 2005.

 

Our primary investing activities are the originationof mortgage, consumer, and commercial loans and the purchase of investment andmortgage-backed securities.  Generally,we originate fixed-rate, residential mortgage loans with maturities in excessof ten years for sale in the secondary market. We do not originate and warehouse these fixed-rate residential loans forresale in order to speculate on interest rates.

 

The allowance for losses on loans is establishedthrough a provision for losses on loans based on our evaluation of the riskinherent in the loan portfolio and changes in the nature and volume of our loanactivity.  Such evaluation, whichincludes a review of all loans with respect to which full collectability maynot be reasonably assured, considers the fair value of the underlyingcollateral, economic conditions, historical loan loss experience, level ofclassified loans and other factors that warrant recognition in providing for anadequate allowance for losses on loans.

 

We believe that the quality of the loan portfoliocontinues to be strong as evidenced by our low levels of past due andnon-accrual loans which increased slightly, however, remain relatively lowoverall.  Loans pastdue more than one month and less than 90 days as of March 31, 2005, totaled$3.2 million, as compared to $1.7 million at December 31, 2004.  As of March 31, 2005, loans with abalance of $2.4 million were on non-accrual status, or 0.86% of total loans,compared to a balance of $1.1 million loans on non-accrual status, or 0.41% oftotal loans, as of December 31, 2004. In addition, the ratio of non-performing assets as a percentage of totalassets increased from 0.36% as of December 31, 2004, to 0.68% as of March 31,2005.  The increase in non-accrual loansis related to a single borrowing relationship comprised of a pool ofresidential home loans totaling $1.4 million. While the non-accrual loans and non-performing asset ratios haveincreased, this increase occurred in the one-to-four family residential loanportfolio.  Residential home loanscomprised 80.3% of the $2.4 million non-accrual balance at March 31, 2005.  These loans have been underwritten accordingto our residential lending policies and are well secured by real estatecollateral, and in many instances, private mortgage insurance or governmentguarantees.  We have historicallyincurred minimal losses on mortgage loans based upon collateral values andunderlying insurance or guarantees.  Weare aggressively pursuing collection activity of these loans which should enablethe collection of principal.

 

Management believes that there are numerousindications of emerging strength in the economy, including the Federal OpenMarket Committee raising the target for the Federal Funds rate by 200 basispoints since the June 30, 2004, meeting. Even though there are numerous indications of emerging strength, it isnot certain that this strength is sustainable. We believe that the allowance for losses on loans at March 31,2005, was adequate.  While we believe that we use the best informationavailable to determine the allowance for losses on loans, unforeseen marketconditions could result in adjustment to the allowance for losses onloans.  In addition, net earnings could be significantly affected ifcircumstances differ substantially from the assumptions used in establishingthe allowance for losses on loans.

 

*Liability Distribution.*  Totaldeposits increased $4.3 million to $307.2 million at March 31, 2005, from $302.9million at December 31, 2004.  Borrowingsdecreased $3.7 million to $90.9 million at March 31, 2005, from $94.6million at December 31, 2004.

 

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Non-interest bearing demand accounts at March 31,2005, were $27.8 million, or 9.1% of deposits, compared to $28.5 million, or 9.4%of deposits, at December 31, 2004.  Moneymarket and NOW demand accounts decreased to $92.4 million at March 31, 2005,from $96.6 million at December 31, 2004, and were 30.1% of total depositswhile savings accounts increased to $23.5 million from $23.2 million during thesame period.  Certificates of deposit increasedto $163.4 million at March 31, 2005, from $154.5 million at December 31,2004.

 

Certificates of deposit at March 31, 2005,which were scheduled to mature in one year or less, totaled $122.3 million.  Historically, maturing deposits havegenerally remained with our bank and we believe that a significant portion ofthe deposits maturing in one year or less will remain with us upon maturity.

 

*Contractual Obligations andCommercial Commitments.*  The following table presents our contractualobligations, defined as operating lease obligations and principal payments dueon non-deposit obligations with maturities in excess of one year as of March 31,2005, for the periods indicated.

 
| **Contractual Cash  Obligations** | ** ** | **Total**  | ** ** | **One Year  and Less** | ** ** | **One to  Three Years** | ** ** | **Four to  Five Years** | ** ** | **More than  Five Years** | ** ** |
|-----------------------------------|------------|------------|------------|------------------------|------------|-------------------------|------------|-------------------------|------------|---------------------------|------------|
|                              |       |       |       |                   |       |                    |       |                    |       |                      |       |
| Operating leases                  |       | $          | 275,430    |                   | $          | 67,644                  |       | $                       | 103,632    |                      | $          | 100,282 |   | $ | — |   |
| Service contracts                 |       | 2,080,000  |       | 780,000                |       | 1,300,000               |       | —                  |       | —                    |       |
| FHLB advances                     |       | 75,759,727 |       | 5,500,000              |       | 500,000                 |       | 42,150,988              |       | 27,608,739                |       |
| Other borrowings                  |       | 13,383,000 |       | —                 |       | —                  |       | 5,135,000               |       | 8,248,000                 |       |
|                              |       |       |       |                   |       |                    |       |                    |       |                      |       |
| Total contractual obligations     |       | $          | 91,498,157 |                   | $          | 6,347,644               |       | $                       | 1,903,632  |                      | $          | 47,386,270 |   | $ | 35,856,739 |   |

 

*Liquidity.*  Ourmost liquid assets are cash and cash equivalents and investment securitiesavailable for sale.  The level of theseassets is dependent on the operating, financing, lending and investingactivities during any given period.  Theseliquid assets totaled $145.3 million at March 31, 2005, and $141.4 millionat December 31, 2004.  Duringperiods in which we are not able to originate a sufficient amount of loansand/or periods of high principal prepayments, we increase our liquid assets byinvesting in short-term U. S. Government,  agency securities, and governmentsponsored entities or high-grade municipal securities.

 

Liquidity management is both a daily and long-termfunction of our strategy.  Excess fundsare generally invested in short-term investments.  In the event we require funds beyond ourability to generate them internally, additional funds are available through theuse of FHLB advances, a line of credit with the FHLB or through sales ofsecurities.  At March 31, 2005, wehad outstanding FHLB advances of $75.7 million and had no borrowings on ourline of credit with the FHLB.  At March 31,2005, our total borrowing capacity with the FHLB was $101.9 million.  We also had other borrowings of $15.1 millionat March 31, 2005, which included $8.2 million of subordinated debentures,$5.1 million of long-term debt and $1.8 million in repurchase agreements.

 

At March 31, 2005, we had outstanding loancommitments, excluding standby letters of credit, of $41.3 million.  We anticipate that sufficient funds will beavailable to meet current loan commitments. These commitments consist of commercial letters of credit, unfundedlines of credit and commitments to finance real estate loans.

 

*Capital.*  The Federal Reserve Board has establishedcapital requirements for bank holding companies which generally parallel thecapital requirements for national banks under the Office of the Comptroller ofthe Currency regulations.  Theregulations provide that such standards will generally be applied on aconsolidated

 

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(rather than a bank-only) basis in the case of a bank holdingcompany with more than $150 million in total consolidated assets.

 

At March 31, 2005, we continued to maintain asound leverage ratio of 9.8% and a total risk based capital ratio of 16.5%.  As shown by the following table, our capitalexceeded the minimum capital requirements at March 31, 2005 (dollars inthousands):

 
| ** **               | ** ** | **Actual  Amount** | ** ** | **Actual  Percent** | ** ** | **Required  Percent** | ** ** | **Required  Amount** | ** ** |
|--------------------------|------------|--------------------|------------|---------------------|------------|-----------------------|------------|----------------------|------------|
| Leverage                 |       | $                  | 42,209     |                | 9.8        | %                     | 4.0        | %                    | $          | 17,246 |   |
| Tier 1 Capital           |       | $                  | 42,209     |                | 15.4       | %                     | 4.0        | %                    | $          | 10,988 |   |
| Total Risk Based Capital |       | $                  | 45,224     |                | 16.5       | %                     | 8.0        | %                    | $          | 21,977 |   |

 

At March 31, 2005, our subsidiary bankcontinued to maintain a sound leverage ratio of 10.8% and a total risk basedcapital ratio of 18.0%.  As shown by thefollowing table, our bank’s capital exceeded the minimum capital requirementsat March 31, 2005 (dollars in thousands):

 
| ** **               | ** ** | **Actual  Amount** | ** ** | **Actual  Percent** | ** ** | **Required  Percent** | ** ** | **Required  Amount** | ** ** |
|--------------------------|------------|--------------------|------------|---------------------|------------|-----------------------|------------|----------------------|------------|
| Leverage                 |       | $                  | 46,285     |                | 10.8       | %                     | 4.0        | %                    | $          | 17,213 |   |
| Tier 1 Capital           |       | $                  | 46,285     |                | 16.9       | %                     | 4.0        | %                    | $          | 10,960 |   |
| Total Risk Based Capital |       | $                  | 49,300     |                | 18.0       | %                     | 8.0        | %                    | $          | 21,920 |   |

 

Banks and bank holding companies are generallyexpected to operate at or above the minimum capital requirements.  The above ratios are well in excess ofregulatory minimums and should allow us to operate without capital adequacyconcerns.  The Federal Deposit InsuranceCorporation Improvement Act of 1991 establishes a bank rating system based onthe capital levels of banks.  As of March 31,2005, we were rated “well capitalized”, which is the highest rating availableunder this capital-based rating system.

 

Effective April 11, 2005, the Board ofGovernors of the Federal Reserve System amended the risk-based capitalstandards for bank holding companies to allow the continued inclusion ofoutstanding and prospective issuances of trust preferred securities in the tier1 capital of bank holding companies, subject to stricter standards.  The new regulations limit the amount of trustpreferred securities (combined with all other restricted core capital elements)that a bank holding company may include as tier 1 capital to 25% of the sum ofall core capital elements, net of goodwill less any associated deferred taxliability.  Amounts in excess of thelimits described above generally may be included in tier 2 capital.  The regulations also provide a transitionperiod for bank holding companies to conform their capital structures to therevised quantitative limits.  Theselimits will first become applicable to bank holding companies beginning on March 31,2009.  We do not anticipate the amendedrisk-based capital standards will have a material impact on our capitalstructures.

 

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**ITEM 3.****  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUTMARKET RISK**

 

*Quantitative and Qualitative Disclosures AboutMarket Risk*.  Our assetsand liabilities are principally financial in nature and the resulting netinterest income thereon is subject to changes in market interest rates and themix of various assets and liabilities. Interest rates in the financial markets affect our decision on pricingour assets and liabilities which impacts net interest income, a significantcash flow source for us.  As a result, asubstantial portion of our risk management activities relates to managinginterest rate risk.

 

Our Asset/Liability Management Committee monitorsthe interest rate sensitivity of our balance sheet using earnings simulation modelsand interest sensitivity GAP analysis. We have set policy limits of interest rate risk to be assumed in thenormal course of business and monitor such limits through our simulationprocess.

 

We have been successful in meeting the interest ratesensitivity objectives set forth in our policy. Simulation models are prepared to determine the impact on net interestincome for the coming twelve months, including one using rates at March 31,2005, and forecasting volumes for the twelve-month projection.  This position is then subjected to a shift ininterest rates of 100 and 200 basis points rising and 100 basis points fallingwith an impact to our net interest income on a one year horizon as follows:

 
| **Scenario**            | ** ** | **$ change in net interest income** | ** ** | **% of net interest income** | ** ** |
|-------------------------|------------|------------------------------------------|------------|------------------------------|------------|
| 100 basis point rising  |       | $                                        | 741,000    |                         | 6.1        | % |
| 200 basis point rising  |       | $                                        | 1,458,000  |                         | 12.0       | % |
| 100 basis point falling |       | $                                        | (887,000   | )                            | (7.3       | )% |

 

Webelieve that no significant changes in our interest rate sensitivity positionhave occurred since March 31, 2005. We also believe we are appropriately positioned for future interest ratemovements, although we may experience some fluctuations in net interest incomedue to short-term timing differences between the repricing of interest-bearing assetsand liabilities.

 

*Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 -Forward-Looking Statements.*** **This document(including information incorporated by reference) contains, and future oral andwritten statements of the Company and its management may contain,forward-looking statements, within the meaning of such term in the PrivateSecurities Litigation Reform Act of 1995, with respect to the financialcondition, results of operations, plans, objectives, future performance and businessof the Company.  Forward-lookingstatements, which may be based upon beliefs, expectations and assumptions ofthe Company’s management and on information currently available to management,are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,”“plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” orother similar expressions.  Additionally,all statements in this document, including forward-looking statements, speakonly as of the date they are made, and the Company undertakes no obligation toupdate any statement 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 our operations and future prospects  include, but are not limited to, thefollowing:

 

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

 

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•                                         The economicimpact of past and future terrorist attacks, acts of war or threats thereof,   and the response of the United States to anysuch threats and attacks.

 

•                                         The effects of,and changes in, federal, state and local laws, regulations and policiesaffecting banking, securities, insurance and monetary and financial matters.

 

•                                         The effects ofchanges in interest rates (including the effects of changes in the rate ofprepayments our assets) and the policies of the Board of Governors of theFederal Reserve System.

 

•                                         Our ability tocompete with other financial institutions as effectively as we currently intenddue to increases in competitive pressures in the financial services sector.

 

•                                         Our inabilityto obtain new customers and to retain existing customers.

 

•                                         The timelydevelopment and acceptance of products and services, including products andservices offered through alternative delivery channels such as the Internet.

 

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

 

•                                         Our ability todevelop and maintain secure and reliable electronic systems.

 

•                                         Our ability toretain key executives and employees and the difficulty that we may experiencein replacing key executives and employees in an effective manner.

 

•                                         Consumerspending and saving habits which may change in a manner that affects our  businessadversely.

 

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

 

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

 

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

 

•                                         Our ability tomanage the risks associated with the foregoing as well as anticipated.

 

These risks and uncertainties should beconsidered in evaluating forward-looking statements and undue reliance shouldnot be placed on such statements. Additional information concerning us and our business, including otherfactors that could materially affect our financial results, is included in ourfilings with the Securities and Exchange Commission.

 

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**ITEM 4.****  CONTROLS AND PROCEDURES**

 

An evaluation was performed under the supervisionand with the participation of the Company’s management, including the ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of thedesign and operations of the Company’s disclosure controls and procedures (asdefined in Rule 13a-15(e) promulgatedunder the Securities and Exchange Act of 1934, as amended) as of March 31,2005.  Based on that evaluation, theCompany’s management, including the Chief Executive Officer and Chief FinancialOfficer, concluded that the Company’s disclosure controls and procedures wereeffective.  There have been nosignificant changes in the Company’s internal controls or in other factors thatcould significantly affect internal controls.

 

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**LANDMARK BANCORP, INC. ANDSUBSIDIARY**

**PART II – OTHER INFORMATION**

 

**ITEM 1.****  LEGALPROCEEDINGS.**

 

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

 

**ITEM 2.**** UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS.**

 

None

 

**ITEM 3.**** DEFAULTS UPON SENIOR SECURITIES.**

 

None

 

**ITEM 4.**** SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.**

 

None

 

**ITEM 5.****  OTHERINFORMATION.**

 

None

 

**ITEM 6.****  EXHIBITS**

 
| **Exhibits**      | ** ** | ** **                                                                                                                                                   |
|-------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |       |                                                                                                                                                         |
| Exhibit 31.1 |       | Certificate of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)                                                                             |
| Exhibit 31.2 |       | Certificate of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)                                                                             |
| Exhibit 32.1 |       | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,  as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| Exhibit 32.2 |       | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,  as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

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**SIGNATURES**

 

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

 
|                    | LANDMARK BANCORP, INC.                |
|-------------------------|---------------------------------------|
|                    |                                  |
|                    |                                  |
| Date: May 13, 2005 | /s/ Patrick L. Alexander              |   |
|                    | Patrick L. Alexander                  |
|                    | President and Chief Executive Officer |
|                    |                                  |
|                    |                                  |
| Date: May 13, 2005 | /s/ Mark A. Herpich                   |   |
|                    | Mark A. Herpich                       |
|                    | Vice President, Secretary, Treasurer  |
|                    | and Chief Financial  Officer          |

 

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