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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number 0-33203

LANDMARK BANCORP, INC.
(Exact name of registrant as specified in its charter)

        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 the number of shares outstanding of each of the Registrant's classes of common stock as of the latest practicable date: As of November 8, 2002, the Registrant had outstanding 1,961,864 shares of its common stock, $.01 par value per share.

LANDMARK BANCORP, INC.
Form 10-Q Quarterly Report

Table of Contents

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LANDMARK BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

2

LANDMARK BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

3

LANDMARK BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

4

LANDMARK BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

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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, 2001, 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, 2001, 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, 2002, are not necessarily indicative of the results expected for the year ending December 31, 2002. The former Landmark Bancshares utilized a September 30 fiscal year. Landmark Bancorp has a December 31 fiscal year end and presented the results for the quarter ended December 31, 2001, on Form 10-K as a transition period. The results for the three months and nine months ended September 30, 2001, do not include MNB Bancshares' results.

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 2001.

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

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3.    Comprehensive Income

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

4.    Recent Accounting Developments

        Effective October 1, 2001, we adopted certain provisions of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Tangible Assets", as required for goodwill and intangible assets resulting from business combinations consummated after June 30, 2001. Effective January 1, 2002, we adopted the remaining provisions of SFAS 142. SFAS 142 addresses the accounting and reporting for acquired goodwill and other intangible assets. It requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. For acquisitions consummated after June 30, 2001, goodwill is not being amortized. It is tested for impairment at a reporting unit level, under certain circumstances. Intangible assets with definite useful lives are amortized over their respective estimated useful lives to the estimated residual values, and reviewed for impairment. In connection with the transitional goodwill impairment evaluation, SFAS 142 requires us to assess whether there is an indication that goodwill is impaired as of the date of adoption. This assessment is a two-step process. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the second step of the test must be performed. The second step is to compare the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess. Upon evaluating our goodwill for impairment, the fair value of the reporting unit exceeded the carrying value of the unit. Therefore, no indication of goodwill impairment exists and accordingly the performance of the second step of the transitional goodwill impairment evaluation described above was not necessary.

        The following table presents information about our intangible assets, which are being amortized in accordance with SFAS 142:

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        Aggregate amortization expense for the three months ended September 30, 2002, and September 30, 2001, was $91,182 and $47,629, respectively. Aggregate amortization expense for the nine months ended September 30, 2002, and September 30, 2001, was $264,442 and $151,516, respectively. The following is estimated amortization expense for the years ending:

        Prior to our merger with MNB Bancshares on October 9, 2001, there was no goodwill on our balance sheet to be amortized. Pursuant to the guidance of SFAS 142, goodwill resulting from the merger with MNB Bancshares has not been amortized since the merger date but is evaluated for impairment on an annual basis.

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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 is listed on the Nasdaq Stock Market National Market System (symbol "LARK"). Landmark National Bank is dedicated to providing quality financial or 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. Effective October 9, 2001, Landmark Bancshares, Inc. and MNB Bancshares, Inc. completed their merger into Landmark Merger Company, which immediately changed its name to Landmark Bancorp, Inc. In addition, Landmark Federal Savings Bank merged with Security National Bank and the resulting bank changed its name to Landmark National Bank, which is the wholly-owned subsidiary of Landmark Bancorp, Inc. Landmark Bancorp, Inc. is the accounting successor to the former Landmark Bancshares, and therefore, all financial information presented for periods prior to October 9, 2001, reflects only the operations of Landmark Bancshares. The former Landmark Bancshares utilized a September 30 fiscal year end. Landmark Bancorp has a December 31 fiscal year end and presented the results for the quarter ended December 31, 2001, on Form 10-K as a transition period. The results for the three months and nine months ended September 30, 2001, do not include MNB Bancshares' results.

        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. 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 quarter ended December 31, 2001.

        Summary of Results.    Net earnings for the three months ended September 30, 2002, increased $564,000, or 88.1%, to $1.2 million as compared to the three months ended September 30, 2001. Net interest income increased $1.7 million, or 108.1%, from $1.5 million to $3.2 million. This improvement in net earnings and net interest income was generally attributable to the merger and our interest bearing liabilities, which repriced downward at a more rapid pace than our interest earning assets. Non-interest income increased $64,000, or 7.5%, from $853,000 to $917,000, as fee and service charges resulted in a $504,000 increase and gains on sale of loans increased $76,000 compared to the prior year. These increases were offset by a reduction of $499,000 in gains on sales of investments. Non-interest expense increased $1.1 million, relating primarily to the combined operating expenses occurring as a result of the merger.

        Net earnings for the nine months ended September 30, 2002, increased $1.3 million, or 65.1%, to $3.3 million as compared to the nine months ended September 30, 2001. Net interest income increased $4.5 million, or 90.6%, from $4.9 million to $9.4 million. This improvement in net earnings and net interest income was generally attributable to the merger and our interest bearing liabilities, which repriced downward at a more rapid pace than our interest earning assets. Non-interest income increased $700,000, or 38.7%, from $1.8 million to $2.5 million, as fee and service charges resulted in a

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$1.2 million increase and gains on sale of loans increased $304,000 compared to the prior year. These increases were offset by a reduction of $836,000 in gains on sales of investments. Non-interest expense increased $3.4 million, relating primarily to combined operating expenses occurring as a result of the merger.

        The three months ended September 30, 2002, resulted in diluted earnings per share of $0.60 compared to $0.51 for the same period in 2001. Return on average assets was 1.42% for the period compared to 1.25% for the same period in 2001. Return on average stockholders' equity was 11.77% for the period compared to 9.87% for the same period in 2001.

        The nine months ended September 30, 2002, resulted in diluted earnings per share of $1.63 compared to $1.68 for the same period in 2001. Return on average assets was 1.32% for the period compared to 1.26% for the same period in 2001. Return on average stockholders' equity was 11.10% for the period compared to 10.84% for the same period in 2001.

        Our successful completion of a 5% stock repurchase program, initiated in December 2001, resulted in us repurchasing 97,039 shares. During April 2002, our board of directors approved a new stock repurchase program enabling us to repurchase up to an additional 100,800 shares, or 5%, of our outstanding stock. As of September 30, 2002, we have repurchased 191,001 shares at an average cost per share of $21.69.

        The decrease in earnings per share for the nine months ended September 30, 2002, as compared to the nine months ended September 30, 2001, was primarily the result of the issuance of 817,806 shares to former MNB Bancshares shareholders as a result of the October 9, 2001, merger. The following table summarizes net income and key performance measures for the two periods presented.

(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, 2002, increased $1.3 million, or 36.7%, to $4.9 million from $3.6 million in the same period of 2001. Interest income on loans increased $1.2 million, or 39.6%, during this time period. This increase was primarily related to an increase in average loans resulting from the merger, which overcame the decrease in rates experienced as interest earning assets repriced during 2001. Average loans for the third quarter of 2002 were significantly higher at $234.5 million, compared to $147.9 million for the third quarter of 2001.

        Interest income for the nine months ended September 30, 2002, increased $3.0 million, or 24.7%, to $14.9 million from $11.9 million in the same period of 2001. Interest income on loans increased $2.8 million, or 28.8%, during this time period. This increase was primarily related to an increase in average loans resulting from the merger, which overcame the decrease in rates experienced as interest earning assets repriced during 2001. Average loans for the first nine months of 2002 were significantly higher at $234.8 million, compared to $162.1 million for the first nine months of 2001.

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        During 2001, the national prime rate decreased from 9.5% to 8.0% in the first quarter, decreased from 8.0% to 6.75% in the second quarter and decreased again from 6.75% to 6.0% in the third quarter. During the first, second and third quarters of 2002, the national prime rate remained unchanged at 4.75%. On November 6, 2002, the Federal Reserve policy makers lowered their benchmark interest rate 50 basis points. This resulted in the lowest target interest rate on overnight loans between banks since 1961. Correspondingly, the national prime rate also decreased 50 basis points to 4.25%. This most recent rate reduction may have a negative impact on our net interest margin. At these historical low interest rate levels, we may have pressure from our commercial loan customers to refinance and obtain lower rates. In addition, the rates paid on deposit products have been driven to significantly low levels during the past year. There is little room for us to lower the rates on our deposit products another 50 basis points.

        Interest Expense.    Interest expense during the three months ended September 30, 2002, decreased $365,000, or 18.0%, as compared to the same period of 2001. Interest expense on deposits decreased $395,000, or 22.8%, while interest expense on borrowings, consisting of advances from the Federal Home Loan Bank of Topeka, increased $30,000, or 9.9%, during this time period. This decrease in interest expense resulted despite an increase in deposits resulting from the merger, as a result of the decline in rates. An increase in borrowings from the Federal Home Loan Bank, as a result of the merger, precipitated the increased i