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LANDMARK BANCORP INC - Quarter Report: 2003 September (Form 10-Q)

 

UNITED STATES
SECURITIES 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 September 30, 2003

 

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)

 

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

 

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

 

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of the latest practicable date:  As of November 2, 2003, the Registrant had outstanding 2,017,283 shares of its common stock, $.01 par value per share.

 

 



 

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.

Changes in 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 and Reports on Form 8-K

 

 

Form 10-Q Signature Page

 

1



 

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,
2003

 

December 31,
2002

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

5,386,450

 

$

11,448,684

 

Investment securities available for sale

 

103,970,661

 

89,296,337

 

Loans, net

 

208,491,766

 

224,061,263

 

Loans held for sale

 

4,784,528

 

5,050,603

 

Premises and equipment, net

 

3,687,274

 

3,755,048

 

Goodwill

 

1,971,178

 

1,971,178

 

Other intangible assets, net

 

921,942

 

1,131,584

 

Other assets

 

4,347,696

 

4,599,483

 

 

 

 

 

 

 

Total assets

 

$

333,561,495

 

$

341,314,180

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits

 

$

257,178,651

 

$

264,280,870

 

Other borrowings

 

28,284,681

 

26,203,121

 

Accrued expenses, taxes and other liabilities

 

5,239,097

 

9,756,414

 

Total liabilities

 

290,702,429

 

300,240,405

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.01 par, 3,000,000 shares authorized, 2,194,155 and 2,157,865 shares issued at 2003 and 2002, respectively

 

21,942

 

21,578

 

Additional paid in capital

 

18,784,491

 

18,269,582

 

Retained earnings

 

27,085,066

 

24,295,211

 

Accumulated other comprehensive income

 

1,210,169

 

1,898,970

 

Treasury stock, at cost; 182,872 and 148,031 shares, respectively

 

(4,097,395

)

(3,266,359

)

Unearned employee benefits

 

(145,207

)

(145,207

)

Total stockholders’ equity

 

42,859,066

 

41,073,775

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

333,561,495

 

$

341,314,180

 

 

See accompanying notes to condensed consolidated financial statements.

 

2



 

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

 

2003

 

2002

 

Interest income:

 

 

 

 

 

Loans

 

$

3,474,288

 

$

4,155,734

 

Investment securities

 

637,611

 

734,912

 

Other

 

21,054

 

22,436

 

Total interest income

 

4,132,953

 

4,913,082

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

Deposits

 

1,054,886

 

1,336,776

 

Borrowed funds

 

295,876

 

331,523

 

Total interest expense

 

1,350,762

 

1,668,299

 

 

 

 

 

 

 

Net interest income

 

2,782,191

 

3,244,783

 

 

 

 

 

 

 

Provision for loan losses

 

60,000

 

50,000

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

2,722,191

 

3,194,783

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

Fees and service charges

 

655,669

 

592,232

 

Gains on sale of loans

 

284,833

 

263,242

 

Gains on sale of investments

 

290,417

 

1,500

 

Other

 

66,714

 

60,129

 

Total non-interest income

 

1,297,633

 

917,103

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

Compensation and benefits

 

1,142,368

 

1,213,977

 

Occupancy and equipment

 

306,637

 

298,954

 

Amortization of intangible assets

 

122,570

 

91,182

 

Professional fees

 

56,565

 

58,145

 

Data processing

 

73,909

 

100,719

 

Other

 

488,965

 

523,581

 

Total non-interest expense

 

2,191,014

 

2,286,558

 

 

 

 

 

 

 

Earnings before income taxes

 

1,828,810

 

1,825,328

 

 

 

 

 

 

 

Income tax expense

 

597,168

 

620,828

 

 

 

 

 

 

 

Net earnings

 

$

1,231,642

 

$

1,204,500

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic

 

$

0.62

 

$

0.59

 

Diluted

 

$

0.61

 

$

0.57

 

 

 

 

 

 

 

Dividends per share

 

$

0.17

 

$

0.14

 

 

See accompanying notes to condensed consolidated financial statements.

 

3



 

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2003

 

2002

 

Interest income:

 

 

 

 

 

Loans

 

$

10,949,353

 

$

12,677,742

 

Investment securities

 

2,086,074

 

2,145,295

 

Other

 

44,289

 

88,442

 

Total interest income

 

13,079,716

 

14,911,479

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

Deposits

 

3,462,811

 

4,510,228

 

Borrowed funds

 

891,419

 

1,017,410

 

Total interest expense

 

4,354,230

 

5,527,638

 

 

 

 

 

 

 

Net interest income

 

8,725,486

 

9,383,841

 

 

 

 

 

 

 

Provision for loan losses

 

180,000

 

116,500

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

8,545,486

 

9,267,341

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

Fees and service charges

 

1,938,321

 

1,474,447

 

Gains on sale of loans

 

1,411,630

 

748,725

 

Gains on sale of investments

 

316,099

 

94,918

 

Other

 

217,867

 

191,162

 

Total non-interest income

 

3,883,917

 

2,509,252

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

Compensation and benefits

 

3,565,309

 

3,633,481

 

Occupancy and equipment

 

931,561

 

867,452

 

Amortization of intangible assets

 

345,680

 

264,442

 

Professional fees

 

244,848

 

188,483

 

Data processing

 

237,157

 

256,155

 

Other

 

1,509,649

 

1,500,167

 

Total non-interest expense

 

6,834,204

 

6,710,180

 

 

 

 

 

 

 

Earnings before income taxes

 

5,595,199

 

5,066,413

 

 

 

 

 

 

 

Income tax expense

 

1,824,618

 

1,724,071

 

 

 

 

 

 

 

Net earnings

 

$

3,770,581

 

$

3,342,342

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic

 

$

1.90

 

$

1.60

 

Diluted

 

$

1.88

 

$

1.55

 

 

 

 

 

 

 

Dividends per share

 

$

0.49

 

$

0.43

 

 

See accompanying notes to condensed consolidated financial statements.

 

4



 

 LANDMARK BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

1,338,258

 

$

4,205,353

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

Net decrease in loans

 

15,231,955

 

8,627,902

 

Maturities and prepayments of investment securities available for sale

 

47,100,790

 

17,450,137

 

Purchase of investment securities available for sale

 

(64,182,433

)

(27,323,554

)

Proceeds from sale of investment securities available for sale

 

747,100

 

276,685

 

Payments received and proceeds from sale of foreclosed assets

 

354,551

 

454,709

 

Improvements of real estate owned

 

 

(992

)

Purchases of premises and equipment, net

 

(269,286

)

(693,881

)

Net cash used in investing activities

 

(1,017,323

)

(1,208,994

)

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

Net decrease in deposits

 

(7,102,219

)

(12,772,126

)

Federal Home Loan Bank and other borrowings

 

34,350,000

 

29,055,000

 

Federal Home Loan Bank repayments

 

(32,170,440

)

(30,305,002

)

Purchase of 34,841 and 161,933 shares of treasury stock

 

(831,036

)

(4,098,150

)

Issuance of 36,290 and 60,350 shares of common stock under stock option plan

 

351,252

 

951,238

 

Payment of dividends

 

(980,726

)

(920,226

)

Net cash used in financing activities

 

(6,383,169

)

(18,089,266

)

Net decrease in cash

 

(6,062,234

)

(15,092,907

)

Cash at beginning of period

 

11,448,684

 

22,163,258

 

Cash at end of period

 

$

5,386,450

 

$

7,070,351

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid during period for interest

 

$

4,378,000

 

$

5,572,000

 

Cash paid during period for taxes

 

$

1,735,000

 

$

1,117,000

 

 

 

 

 

 

 

Supplemental schedule of noncash investing activities:

 

 

 

 

 

Transfer of loans to real estate owned

 

$

224,000

 

$

319,000

 

 

See accompanying notes to condensed consolidated financial statements.

 

5



 

LANDMARK BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1.                                      Interim Financial Statements

 

The condensed consolidated financial statements of Landmark Bancorp, Inc. (the “Company”) and subsidiary have been prepared in accordance with the instructions to Form 10-Q.  To the extent that information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements are contained in or consistent with the consolidated audited financial statements incorporated by reference in the Company’s Form 10-K for the year ended December 31, 2002, such information and footnotes have not been duplicated herein.  In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected herein.  The December 31, 2002, condensed consolidated balance sheet has been derived from the audited consolidated balance sheet as of that date.  The results of the interim periods ended September 30, 2003, are not necessarily indicative of the results expected for the year ending December 31, 2003.

 

2.                                      Earnings per Share

 

Basic earnings per share have been computed based upon the weighted average number of common shares outstanding during each period.  Diluted earnings per share include the effect of all potential common shares outstanding during each period.  Earnings and dividends per share for all periods presented have been adjusted to give effect to the 5% stock dividend paid by the Company in December 2002.

 

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

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2003

 

2002

 

2003

 

2002

 

Weighted average common shares outstanding (basic)

 

1,983,319

 

2,040,387

 

1,982,788

 

2,095,552

 

Dilutive stock options

 

28,330

 

54,592

 

31,966

 

53,875

 

Weighted average common shares (diluted)

 

2,011,649

 

2,094,979

 

2,014,754

 

2,149,427

 

 

6



 

3.                                      Comprehensive Income

 

The Company’s only component of other comprehensive income is the unrealized holding gains on available for sale securities.

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2003

 

2002

 

2003

 

2002

 

Net income

 

$

1,231,642

 

$

1,204,500

 

$

3,770,581

 

$

3,342,342

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses)/gains

 

(252,139

)

616,256

 

(794,870

)

2,206,685

 

Less – reclassification adjustment for gains included in net income

 

290,417

 

1,500

 

316,099

 

94,918

 

Net unrealized (losses)/gains on securities

 

(542,556

)

614,756

 

(1,110,969

)

2,111,767

 

 

 

 

 

 

 

 

 

 

 

Income tax (benefit)/expense

 

(206,171

)

233,607

 

(422,168

)

802,471

 

Total comprehensive income

 

$

895,257

 

$

1,585,649

 

$

3,081,780

 

$

4,651,638

 

 

4.                                      Stock Based Compensation

 

The Company utilizes the fair value recognition provisions of SFAS Statement No. 123, “Accounting for Stock-Based Compensation.”  SFAS No. 123 establishes a fair-value method of accounting for employee stock options or similar equity instruments. The fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company uses the Black-Scholes option pricing model to estimate the grant date fair value of its stock options. The fair value is recognized as additional compensation expense over the option vesting period, which is typically five years.

 

5.                                      Intangible Assets

 

Effective October 1, 2001, the Company adopted certain provisions of Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations,” and certain provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” as required for goodwill and intangible assets resulting from business combinations consummated after June 30, 2001.  Effective January 1, 2002, the Company adopted the remaining provisions of SFAS No. 142.  The Company’s goodwill and core deposit intangible resulted from its acquisition of MNB Bancshares on October 9, 2001.  Pursuant to certain provisions in SFAS No. 142, goodwill resulting from the merger with MNB Bancshares is not amortized; however, it is tested for impairment on a periodic basis.

 

7



 

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

 

 

 

September 30, 2003

 

December 31, 2002

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

Core deposit premium

 

$

780,000

 

$

(269,454

)

$

780,000

 

$

(173,727

)

Mortgage servicing rights

 

638,913

 

(227,517

)

773,254

 

(247,943

)

Total

 

$

1,418,913

 

$

(496,971

)

$

1,553,254

 

$

(421,670

)

 

At September 30, 2003, we serviced loans for other investors totaling $106.6 million. Aggregate amortization expense for the three months ended September 30, 2003, and September 30, 2002, was $122,569 and $91,182, respectively.  Aggregate amortization expense for the nine months ended September 30, 2003, and September 30, 2002, was $345,680 and $264,442, respectively.  The following is estimated amortization expense for the years ending:

 

Year

 

Amount

 

2003

 

$

446,000

 

2004

 

431,000

 

2005

 

99,000

 

2006

 

85,000

 

2007

 

71,000

 

 

6.                                      Recent Accounting Pronouncements

 

In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others.”  This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued.  It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The disclosure requirements in this Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002.  The Company does not believe that the adoption of Interpretation No. 45 did have a significant impact on its consolidated financial statements.

 

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.”  This Interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” elaborates on the financial statement disclosures to be made by enterprises involved with variable interest entities, including requiring consolidation of entities in which an enterprise has a controlling financial interest that is not controlled through voting interests.  The requirements in this Interpretation are effective for variable interest entities created after January 31, 2003, and the first fiscal or interim period beginning after December 15, 2003, for variable interest entities acquired before that date.  The Company does not believe that the adoption of Interpretation No. 46 will have a significant impact on its consolidated financial statements.

 

SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  The

 

8



 

amendments (i) reflect decisions of the Derivatives Implementation Group; (ii) reflect decisions made by the FASB in conjunction with other projects dealing with financial instruments; and (iii) address implementation issues related to the application of the definition of a derivative.  SFAS No. 149 also modifies various other existing pronouncements to conform with the changes made to SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003, with all provisions applied prospectively. Adoption of SFAS No. 149 on July 1, 2003, did not have a significant impact on the Company’s financial statements.

 

SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.”  SFAS No. 150 establishes standards for how an issuer classifies, measures and discloses in its financial statements certain financial instruments with characteristics of both liabilities and equity.  SFAS No. 150 requires that an issuer classify financial instruments that are within its scope as a liability, in most circumstances.  Such financial instruments include (i) financial instruments that are issued in the form of shares that are mandatorily redeemable; (ii) financial instruments that embody an obligation to repurchase the issuer’s equity shares, or are indexed to such an obligation, and that require the issuer to settle the obligation by transferring assets; (iii) financial instruments that embody an obligation that the issuer may settle by issuing a variable number of its equity shares if, at inception, the monetary value of the obligation is predominately based on a fixed amount, variations in something other than the fair value of the issuer’s equity shares or variations inversely related to changes in the fair value of the issuer’s equity shares; and (iv) certain freestanding financial instruments.  SFAS No. 150 is effective for contracts entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003.  Adoption of SFAS No. 150 on July 1, 2003, did not have a significant impact on the Company’s financial statements.

 

9



 

LANDMARK BANCORP, INC. AND SUBSIDIARY
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

General.  Landmark Bancorp, Inc. is a one-bank holding company incorporated under the laws of the State of Delaware and is engaged in the banking business through its wholly-owned subsidiary, Landmark National Bank.  Landmark Bancorp’s common stock is quoted on the Nasdaq Stock Market National Market System (symbol “LARK”).  Landmark National Bank is dedicated to providing quality financial and banking services to its local communities and continues to originate commercial real estate and non-real estate loans, small business loans, residential mortgage loans, consumer loans, and home equity loans.

 

Our results of operations depend primarily on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities.  Our operations are also affected by non-interest income, such as service charges, loan fees and gains and losses from the sale of newly originated loans and investments.  Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, federal deposit insurance costs, data processing expenses and provision for loan losses.

 

Our accounting principles and the methods of applying these principles conform with accounting principles generally accepted in the United States and with general practices within the banking industry.  Critical accounting policies relate to loans and related earnings, investment securities and income taxes.  A description of these policies, which significantly affect the determination of financial position, results of operations and cash flows, are summarized in Note 2, Summary of Significant Accounting Policies in the Notes included in our Annual Report on Form 10-K for the year ended December 31, 2002.

 

Summary of Results.  Net earnings for the three months ended September 30, 2003, increased $27,000, or 2.3%, to $1.2 million as compared to the three months ended September 30, 2002.  This improvement in net earnings was primarily attributable to increased gains on sale of investments and increased fees and service charges, which was offset by a reduction of net interest income.

 

Net earnings for the nine months ended September 30, 2003, increased $428,000, or 12.8%, to $3.8 million as compared to the nine months ended September 30, 2002.  This improvement in net earnings was generally attributable to increased fees and service charges, increased gains on sale of loans and increased gains on sale of investments which was offset by a reduction of net interest income.

 

The three months ended September 30, 2003, resulted in diluted earnings per share of $0.61 compared to $0.57 for the same period in 2002.  Return on average assets was 1.48% for the period compared to 1.42% for the same period in 2002.  Return on average stockholders’ equity was 11.53% for the period compared to 11.77% for the same period in 2002.

 

The nine months ended September 30, 2003, resulted in diluted earnings per share of $1.88 compared to $1.55 for the same period in 2002.  Return on average assets was 1.53% for the period compared to 1.32% for the same period in 2002.  Return on average stockholders’ equity was 12.08% for the period compared to 11.10 % for the same period in 2002.

 

We continued our stock repurchase program during the first nine months of 2003, resulting in the repurchase of an additional 34,841 shares.  As of September 30, 2003, we held 182,872 shares as treasury stock at an average cost per share of $22.41.

 

10



 

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

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2003

 

2002

 

2003

 

2002

 

Net earnings:

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.62

 

$

0.59

 

$

1.90

 

$

1.60

 

Diluted earnings per share

 

$

0.61

 

$

0.57

 

$

1.88

 

$

1.55

 

Earnings ratios:

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

1.48

%

1.42

%

1.53

%

1.32

%

Return on average equity (1)

 

11.53

%

11.77

%

12.08

%

11.10

%

Dividend payout ratio

 

27.87

%

25.00

%

26.06

%

27.61

%

Net interest margin (1)

 

3.54

%

3.96

%

3.74

%

3.91

%

 


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

 

Interest Income.  Interest income for the three months ended September 30, 2003, decreased $780,000, or 15.9 %, to $4.1 million from $4.9 million in the same period of 2002.  This decrease was partially related to the decrease in interest rates experienced as interest earning assets repriced during 2002 and throughout the third quarter of 2003.  Also contributing to the decrease was a decline in average loans for the quarter ended September 30, 2003, which were $212.7 million, compared to $232.1 million for the quarter ended September 30, 2002.  The decline was primarily the result of refinancings and paydowns in our residential mortgage portfolio.  Offsetting the portion attributable to lower loans outstanding, was an increase in average investment securities from $83.4 million for the third quarter of 2002, to $93.8 million for the third quarter of 2003.

 

Interest income for the nine months ended September 30, 2003, decreased $1.8 million, or 12.3%, to $13.1 million from $14.9 million in the same period of 2002.  This decrease was partially related to the decrease in interest rates experienced as interest earning assets repriced during 2002 and the first nine months of 2003.  Also contributing to the decrease was a continued decline in average loans for the first nine months of 2003, which were $218.3 million, compared to $232.28 million for the first nine months of 2002.  The decline was primarily the result of refinancings and paydowns in our residential mortgage portfolio.  Offsetting the portion attributable to lower loans outstanding, was an increase in average investment securities from $82.5 million for the nine months ended September 30, 2002, to $90.2 million for the nine months ended September 30, 2003.

 

Interest Expense.  Interest expense during the three months ended September 30, 2003, decreased $318,000, or 19.0%, as compared to the same period of 2002.  For the three months ended September 30, 2003, interest expense on deposits decreased $282,000, or 21.1%, and interest expense on borrowings, consisting of advances from the Federal Home Loan Bank of Topeka, decreased $36,000, or 10.8%.  This decrease in interest expense resulted primarily from the decline in interest rates and to a decline in average balances of deposits and other borrowings.

 

Interest expense during the nine months ended September 30, 2003, decreased $1.2 million, or 21.2%, as compared to the same period of 2002.  For the nine months ended September 30, 2003, interest expense on deposits decreased $1.0 million, or 23.2%, and interest expense on borrowings,

 

11



 

consisting of advances from the Federal Home Loan Bank of Topeka, decreased $126,000, or 12.4%.  This decrease in interest expense resulted primarily from the decline in interest rates and a decline in average balances of deposits and other borrowings.

 

Net Interest Income.  Net interest income for the three months ended September 30, 2003, totaled $2.8 million, a 14.3% decrease, as compared to $3.2 million for the three months ended September 30, 2002.  Average earning assets during the third quarter of 2003 totaled $311.4 million, compared to $322.2 million during the third quarter of 2002.  The net interest margin on earning assets was 3.54% for the third quarter of 2003, down from 3.96% for the third quarter of 2002.  The refinancings and paydowns in the residential mortgage portfolio exceeded the commercial loan growth during 2002 and throughout the third quarter of 2003, resulting in the excess liquidity being invested into lower yielding investment securities.  In addition, the prolonged low-rate environment caused the net interest margin to compress as assets continue to reprice with little room left for liability repricing.

 

Net interest income for the nine months ended September 30, 2003, totaled $8.7 million, a 7.0% decrease, as compared to $9.4 million for the nine months ended September 30, 2002.  Average earning assets during the first nine months of 2003 totaled $312.1 million, versus $323.2 million during the same period of 2002.  The net interest margin on earning assets was 3.74% for the first nine months of 2003, down from 3.91% during the first nine months of 2002.  The refinancings and paydowns in the residential mortgage portfolio exceeded the commercial loan growth during 2002 and the first nine months of 2003, resulting in the excess liquidity being invested into lower yielding investment securities.  In addition, the prolonged low-rate environment caused the net interest margin to compress as assets continue to reprice with little room left for liability repricing.

 

Provision for Loan Losses.  The provision for loan losses for the three months ended September 30, 2003, was $60,000 compared to a provision of $50,000 during the three months ended September 30, 2002.  The provision for loan losses for the nine months ended September 30, 2003, was $180,000 compared to a provision of $117,000 for the same period in 2002.  Our continuous review of the loan portfolio prompted an increase in our provision, primarily as a result of the loan portfolio’s increased percentage of commercial loans and some limited deterioration in the asset quality of the commercial and consumer loan portfolios as a result of weak economic conditions.  At September 30, 2003, the allowance for loan losses was $2.5 million, or 1.2%, of gross loans outstanding compared to $2.6 million, or 1.1% of gross loans outstanding at December 31, 2002.

 

Non-interest Income.  Non-interest income increased $381,000, or 41.5%, for the three months ended September 30, 2003, to $1.3 million compared to the three months ended September 30, 2002.  The increase in non-interest income was primarily attributable to a $289,000 increase in gains on sale of investments for the third quarter of 2003 compared to the third quarter of 2002.  This increase in gains on sale of investments resulted from equity security sales from our holding company’s investment portfolio.  We periodically sell equity securities based on performance and other indicators, and we could sell additional equity securities in future periods.  Our equity securities portfolio was $1.0 million, including unrealized gains of $518,000, at September 30, 2003.  We estimate that gains on sale of investments during the fourth quarter 2003 will continue, however, it is likely that they will be at a level less than the amount realized during the third quarter.  The increase in non-interest income also reflected increased fees and service charges from $592,000 for the three months ended September 30, 2002, to $656,000 for the three months ended September 30, 2003, relating primarily to the enhancement of our fee-based services and product offerings during the second half of 2002.  Also contributing to the increase in non-interest income was an improvement of 8.2% in gains on sale of loans from $263,000 for the three months ended September 30, 2002, to

 

12



 

$285,000, for the three months ended September 30, 2003, as residential mortgage financing activity increased due to continued low home mortgage rates.  Mortgage refinancing activity is expected to diminish during the remainder of 2003 as many mortgage holders have already taken advantage of the low interest rates favorable for mortgage originations.

 

Non-interest income increased $1.4 million, or 54.8%, for the nine months ended September 30, 2003, to $3.9 million compared to the nine months ended September 30, 2002.  The increase in non-interest income reflected an improvement of 88.5% in gains on sale of loans from $749,000 for the nine months ended September 30, 2002, to $1.4 million for the nine months ended September 30, 2003, as residential mortgage financing activity increased due to low home mortgage rates.  Mortgage refinancing activity is expected to diminish during the remainder of 2003 as many mortgage holders have already taken advantage of the low interest rates favorable for mortgage originations.  Also contributing to the increase in non-interest income was increased fees and service charges from $1.5 million for the nine months ended September 30, 2002, to $1.9 million for the nine months ended September 30, 2003, relating primarily to the enhancement of our fee-based services and product offerings during the second half of 2002.  The increase in non-interest income also reflected a $221,000 increase in gains on sale of investments for the nine months ended September 30, 2003 as compared to the same period of 2002.  This increase in gains on sale of investments resulted from equity security sales from our holding company’s investment portfolio.  We periodically sell equity securities based on performance and other indicators.

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2003

 

2002

 

2003

 

2002

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

$

655,669

 

$

592,232

 

$

1,938,321

 

$

1,474,447

 

Gains on sales of loans

 

284,833

 

263,242

 

1,411,630

 

748,725

 

Gains on sales of investments

 

290,417

 

1,500

 

316,099

 

94,918

 

Other

 

66,714

 

60,129

 

217,867

 

191,162

 

Total non-interest income

 

$

1,297,633

 

$

917,103

 

$

3,883,917

 

$

2,509,252

 

 

Non-interest Expense.  Non-interest expense decreased $96,000, or 4.2%, to $2.2 million for the three months ended September 30, 2003, compared to the same period in 2002.  The decrease in non-interest expense was primarily related to a decrease of $72,000 in compensation and benefits expense and a $27,000 decrease in data processing expense for the three months ended September 30, 2003, compared to the three months ended September 30, 2002.  These decreases were partially offset by a $31,000 increase in amortization expense for the third quarter of 2003 compared to the third quarter of 2002.  The decrease in compensation and benefits expense was primarily related to reduced costs associated with our employee stock ownership plan.  Data processing expense was higher during the third quarter of 2002 due to costs related to the conversion to a new data processing system.  The increase in amortization expense resulted from accelerated prepayments in our mortgage servicing portfolio.

 

Non-interest expense increased $124,000, or 1.9%, to $6.8 million for the nine months ended September 30, 2003, as compared to the same period in 2002.  The increase in non-interest expense was primarily related to an increase of $64,000 in occupancy and equipment expense, a $56,000 increase in professional fees and an increase of $81,000 in amortization expense for the nine months

 

13



 

ended September 30, 2003, compared to the nine months ended September 30, 2002.  The increase in occupancy and equipment expense was primarily related to the depreciation of our enhanced computer system while amortization expense increased as prepayments in our mortgage servicing portfolio have accelerated.  The increase in professional fees included legal fees of approximately $25,000 incurred related to securing our “Landmark” trade name.

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2003

 

2002

 

2003

 

2002

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

1,142,368

 

$

1,213,977

 

$

3,565,309

 

$

3,633,481

 

Occupancy and equipment

 

306,637

 

298,954

 

931,561

 

867,452

 

Amortization of intangible assets

 

122,570

 

91,182

 

345,680

 

264,442

 

Professional fees

 

56,565

 

58,145

 

244,848

 

188,483

 

Data processing

 

73,909

 

100,719

 

237,157

 

256,155

 

Other

 

488,965

 

523,581

 

1,509,649

 

1,500,167

 

Total non-interest expense

 

$

2,191,014

 

$

2,286,558

 

$

6,834,204

 

$

6,710,180

 

 

Income Tax Expense.  Income tax expense for the three months ended September 30, 2003, decreased $24,000, or 3.8%, from $621,000 for the three months ended September 30, 2002.  The effective tax rate for the third quarter of 2003 was 32.7% compared to 34.0% for the third quarter of 2002.  The reduction in the effective tax rate for the third quarter of 2003 as compared to the third quarter of 2002 resulted primarily from the revised projections related to investment tax credits.

 

Income tax expense for the nine months ended September 30, 2003, increased $101,000, or 5.8%, from $1.7 million for the nine months ended September 30, 2002.  The increase in income tax expense for the nine months ended September 30, 2003, resulted primarily from an increase in taxable income.  The effective tax rate for the nine months ended September 30, 2003, was 32.6% compared to 34.0% for the same period of 2002.  The reduction in the effective tax rate for the first nine months of 2003 as compared to the first nine months of 2002 resulted from an increased level of non-taxable municipal investments and from revised projections related to investment tax credits.

 

Asset Quality and Distribution.  Total assets declined to $333.6 million at September 30, 2003, compared to $341.3 million at December 31, 2002.  Our primary ongoing sources of funds are deposits, proceeds from principal and interest payments on loans and investment securities and proceeds from the sale of mortgage loans and investment securities.  While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions, competition, and the restructuring of the financial services industry.

 

Net loans, excluding loans held for sale, decreased $15.6 million during the nine months ended September 30, 2003.  The decline was primarily the result of refinancings and paydowns in our residential mortgage portfolio.  Our loan portfolio composition continues to diversify as a result of pay downs and our planned expansion of commercial lending activities.  This is evidenced by our one-to-four family residential real estate loans comprising 44.7% of total loans as of December 31, 2002, and 35.6% of total loans as of September 30, 2003.

 

14



 

Our primary investing activities are the origination of mortgage, consumer, and commercial loans and the purchase of investment and mortgage-backed securities.  Generally, we originate long- term, fixed-rate, residential mortgage loans for immediate sale in the secondary market and do not originate and warehouse those loans for resale in order to speculate on interest rates.

 

The allowance for losses on loans is established through a provision for losses on loans based on our evaluation of the risk inherent in the loan portfolio and changes in the nature and volume of its loan activity.  Such evaluation, which includes a review of all loans with respect to which full collectibility may not be reasonably assured, considers the fair value of the underlying collateral, economic conditions, historical loan loss experience, level of classified loans and other factors that warrant recognition in providing for an adequate allowance for losses on loans.

 

We believe that the quality of the loan portfolio continues to be strong as evidenced by the small number and amount of loans past due one month or more.  As of September 30, 2003, loans with a balance of $1.1 million were on non-accrual status, or 0.50 % of total loans, compared to a balance of $925,000 loans on non-accrual status, or 0.40% of total loans, as of December 31, 2002.  In addition, the ratio of non-performing assets as a percentage of total assets remained relatively flat at 0.40% as of September 30, 2003, compared to 0.41% as of December 31, 2002.

 

Residential home loans comprised 45.0% of the $1.1 million non-accrual balance at September 30, 2003.  We have historically incurred minimal losses on mortgage loans based upon collateral values.  We experienced some isolated asset quality deterioration relating to the commercial and consumer loan portfolios during the second quarter of 2003 as a result of the weak economy.  We feel that these instances have been appropriately addressed as either charges against the allowance for loan losses or through the increased provisions to the reserve during the past nine months.

 

A slowdown in economic activity beginning in 2001 severely impacted several major industries as well as the economy as a whole.  While we are pleased that there appears to be numerous indications of emerging strength in the economy, we still have a concern for the outlook of the economy during the remainder of 2003.  The strengthening may not be sustainable and consumer confidence may be slow to respond to the positive effects, if any, on the economy.  These events could adversely affect cash flows for both commercial and individual borrowers, as a result of which, we could experience increases in problem assets, delinquencies and losses on loans.  Many financial institutions have experienced an increase in non-performing assets during the recent difficult economic period, as even well-established business borrowers developed cash flow, profitability and other business-related problems.  We believe that the allowance for losses on loans at September 30, 2003, was adequate.  While we believe that we use the best information available to determine the allowance for losses on loans, unforeseen market conditions could result in adjustment to the allowance for losses on loans.  In addition, net earnings could be significantly affected if circumstances differ substantially from the assumptions used in establishing the allowance for losses on loans.

 

Liability Distribution.  Total deposits decreased $7.1 million to $257.2 million at September 30, 2003, from $264.3 million at December 31, 2002.  Borrowings increased $2.1 million to $28.3 million at September 30, 2003, from $26.2 million at December 31, 2002.

 

15



 

Non-interest bearing demand accounts at September 30, 2003, were $20.8 million, or 8.1% of deposits, compared to $23.4 million, or 8.9% of deposits, at December 31, 2002.  Certificates of deposit decreased to $140.4 million at September 30, 2003, from $147.4 million at December 31, 2002.  Money market and NOW demand accounts increased to $81.2 million at September 30, 2003, from $78.4 million at December 31, 2002, and were 31.6% of total deposits.  Savings accounts remained flat at $14.8 million at September 30, 2003, compared to $15.0 million at December 31, 2002.  The reduction of certificates of deposit was reflective of our excess liquidity position in that we have not bid aggressively on public deposits during the past nine months.

 

Certificates of deposit at September 30, 2003, which were scheduled to mature in one year or less, totaled $81.6 million.  Historically, maturing deposits have generally remained with our bank and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity.

 

Contractual Obligations and Commercial Commitments.  The following table presents our contractual obligations, defined as operating lease obligations and principal payments due on non-deposit obligations with maturities in excess of one year as of September 30, 2003, for the periods indicated.

 

Contractual Cash
Obligations

 

Total

 

One Year
or Less

 

One to
Three Years

 

Four to
Five Years

 

More than
Five Years

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

$

146,069

 

$

107,857

 

$

38,212

 

$

 

$

 

FHLB advances

 

25,134,681

 

2,068,385

 

12,000,000

 

 

11,066,296

 

Repurchase agreements

 

250,000

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total contractual obligations

 

$

25,530,750

 

$

2,426,242

 

$

12,038,212

 

$

 

$

11,066,296

 

 

Liquidity.  Our most liquid assets are cash and cash equivalents and investment securities available for sale.  The levels of these assets are dependent on the operating, financing, lending and investing activities during any given period.  These liquid assets totaled $109.4 million at September 30, 2003, and $100.7 million at December 31, 2002.  During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we increase our liquid assets by investing in short-term U. S. Government and agency securities or high-grade municipal securities.

 

Liquidity management is both a daily and long-term function of the management strategy.  Excess funds are generally invested in short-term investments.  In the event funds are required beyond the ability to generate them internally, additional funds are generally available through the use of Federal Home Loan Bank advances, a line of credit with the Federal Home Loan Bank or through sales of securities.  At September 30, 2003, we had outstanding Federal Home Loan Bank advances of $25.1 million and had outstanding borrowings of $2.9 million on our line of credit with the Federal Home Loan Bank.  At September 30, 2003, our total borrowings capacity with the Federal Home Loan Bank was $59.3 million.

 

16



 

As a provider of financial services, we routinely issue financial guarantees in the form of financial and performance standby letters of credit.  Standby letters of credit are contingent commitments issued by us generally to guarantee the payment or performance obligation of a customer to a third party.  While these standby letters of credit represent a potential outlay by us, a significant amount of the commitments may expire without being drawn upon.  We have recourse against the customer for any amount the customer is required to pay to a third party under a standby letter of credit.  The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by us.  Most of the standby letters of credit are secured, and in the event of nonperformance by the customers, we have the right to the underlying collateral, which could include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities.  The contract amount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $2.0 million at September 30, 2003.

 

At September 30, 2003, we had outstanding loan commitments, excluding standby letters of credit, of $27.7 million.  We anticipate that sufficient funds will be available to meet current loan commitments.  These commitments consist of letters of credit, unfunded lines of credit and commitments to fund loans.

 

Capital.  The Federal Reserve Board has established capital requirements for bank holding companies which generally parallel the capital requirements for national banks under the Office of the Comptroller of the Currency regulations.  The regulations provide that such standards will generally be applied on a consolidated (rather than a bank-only) basis in the case of a bank holding company with more than $150 million in total consolidated assets.

 

At September 30, 2003, we continued to maintain a sound leverage ratio of 11.9% and a total risk based capital ratio of 20.1%.  As shown by the following table, our capital exceeded the minimum capital requirements at September 30, 2003 (dollars in thousands):

 

 

 

Actual
Amount

 

Actual
Percent

 

Required
Percent

 

Required
Amount

 

Leverage

 

$

39,126

 

11.9

%

4.0

%

$

13,110

 

Tier 1 Capital

 

$

39,126

 

18.8

%

4.0

%

$

8,307

 

Total Risk Based Capital

 

$

41,646

 

20.1

%

8.0

%

$

16,614

 

 

At September 30, 2003, our subsidiary bank continued to maintain a sound leverage ratio of 11.0% and a total risk based capital ratio of 18.5%.  As shown by the following table, our bank’s capital exceeded the minimum capital requirements at September 30, 2003 (dollars in thousands):

 

 

 

Actual
Amount

 

Actual
Percent

 

Required
Percent

 

Required
Amount

 

Leverage

 

$

35,761

 

11.0

%

4.0

%

$

13,010

 

Tier 1 Capital

 

$

35,761

 

17.2

%

4.0

%

$

8,296

 

Total Risk Based Capital

 

$

38,281

 

18.5

%

8.0

%

$

16,592

 

 

17



 

Banks and bank holding companies are generally expected to operate at or above the minimum capital requirements.  The above ratios are well in excess of regulatory minimums and should allow us to operate without capital adequacy concerns.  The Federal Deposit Insurance Corporation Improvement Act of 1991 establishes a bank rating system based on the capital levels of banks.  As of September 30, 2003, we were rated “well capitalized”, which is the highest rating available under this capital-based rating system.

 

18



 

LANDMARK BANCORP, INC. AND SUSIDIARY

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

 

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

 

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

 

We have been successful in meeting the interest rate sensitivity objectives set forth in our policy.  Simulation models are prepared to determine the impact on net interest income for the coming twelve months, including one using rates at August 31, 2003, and forecasting volumes for the twelve-month projection.  This position is then subjected to a shift in interest rates of 100 and 200 basis points rising and 100 basis points falling with an impact to our net interest income on a one year horizon as follows:

 

Scenario

 

$ Change in Net Interest Income

 

% of Net Interest Income

 

100 basis point rising

 

$

877,000

 

7.5

%

200 basis point rising

 

1,675,000

 

14.4

%

100 basis point falling

 

(974,000

)

(8.4

)%

 

We believe that no significant changes in our interest rate sensitivity position have occurred since August 31, 2003.  We also believe we are appropriately positioned for future interest rate movements, although we may experience some fluctuations in net interest income due to short-term timing differences between the repricing of assets and liabilities.

 

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 - Forward-Looking Statements.  This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the 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” or other similar expressions.  Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

 

19



 

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

 

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

 

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

 

                                         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 our assets) and the policies of the Board of Governors of the Federal Reserve System.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

                                         Business combinations and the integration of acquired businesses which may be more difficult or expensive than expected.

 

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

 

20



 

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

 

                                         Our ability to manage the risks associated with the foregoing as well as anticipated.

 

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

 

21



 

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONTROLS AND PROCEDURES

 

Controls and Procedures. An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2003.  Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.  There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls.

 

22



 

LANDMARK BANCORP, INC. AND SUBSIDIARY

PART II

 

ITEM 1.                        LEGAL PROCEEDINGS.

 

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

 

ITEM 2.                        CHANGES IN SECURITIES.

 

None

 

ITEM 3.                        DEFAULTS UPON SENIOR SECURITIES.

 

None

 

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

 

None

 

ITEM 5.                        OTHER INFORMATION.

 

None

 

ITEM 6.                        EXHIBITS AND REPORTS ON FORM 8-K.

 

A.                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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B.                                     Reports on Form 8-K

 

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

 

A report on Form 8-K was filed on July 31, 2003, to report pursuant to Item 12 that the Company had issued a press release announcing earnings for the quarter and six months ended June 30, 2003, and the declaration of a cash dividend to stockholders.

 

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SIGNATURES

 

 

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

 

 

 

 

LANDMARK BANCORP, INC.

 

 

 

 

 

 

 

 

Date:  November 12, 2003

 

 

/s/   Patrick L. Alexander

 

 

 

 

Patrick L. Alexander

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

Date:  November 12, 2003

 

 

/s/   Mark A. Herpich

 

 

 

 

Mark A. Herpich

 

 

 

Vice President, Secretary, Treasurer

 

 

 

 and Chief Financial Officer

 

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