UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 0-33203

LANDMARK BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	43-1930755
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

701 Poyntz Avenue, Manhattan, Kansas	66502
(Address of principal executive offices)	(Zip code)

(785) 565-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol(s)	Name of exchange on which registered:
Common Stock, par value $0.01 per share	LARK	Nasdaq Global Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: as of August 6, 2020, the issuer had outstanding 4,617,882 shares of its common stock, $0.01 par value per share.

LANDMARK BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

		Page Number
	PART I
Item 1.	Financial Statements	2 – 25
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 – 37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
	PART II
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and  Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
	Signature Page	42

1

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)	June 30,		December 31,
	2020		2019
	(Unaudited)
Assets
Cash and cash equivalents	$	18,187	$	13,694
Investment securities available-for-sale, at fair value		306,825		362,998
Bank stocks, at cost		3,346		3,109
Loans, net of allowance for loans losses of $7,747 at June 30, 2020 and $6,467 at December 31, 2019		689,626		532,180
Loans held for sale, at fair value		20,473		8,497
Premises and equipment, net		20,844		21,133
Bank owned life insurance		25,117		24,809
Goodwill		17,532		17,532
Other intangible assets, net		3,097		2,829
Real estate owned, net		314		290
Accrued interest and other assets		13,576		11,394
Total assets	$	1,118,937	$	998,465
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing demand	$	277,574	$	182,717
Money market and checking		431,805		405,746
Savings		116,348		99,522
Time		118,477		147,063
Total deposits		944,204		835,048
Federal Home Loan Bank borrowings		8,000		3,000
Subordinated debentures		21,651		21,651
Other borrowings		10,192		17,548
Accrued interest, taxes, and other liabilities		17,610		12,611
Total liabilities		1,001,657		889,858
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued		-		-
Common stock, $0.01 par value per share, 7,500,000 shares authorized; 4,600,532 and 4,597,396 shares issued at June 30, 2020 and December 31, 2019, respectively		46		46
Additional paid-in capital		69,224		69,029
Retained earnings		40,938		34,293
Treasury stock, at cost: 106,894 and 0 shares at June 30, 2020 and December 31,2019, respectively		(2,349)		-
Accumulated other comprehensive income		9,421		5,239
Total stockholders’ equity		117,280		108,607
Total liabilities and stockholders’ equity	$	1,118,937	$	998,465

See accompanying notes to consolidated financial statements.

2

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(Dollars in thousands, except per share amounts)	Three months ended					Six months ended
	June 30,					June 30,
	2020		2019			2020		2019
Interest income:
Loans:
Taxable	$	7,742	$	6,853		$	14,845	$	13,288
Tax-exempt		24		26			47		52
Investment securities:
Taxable		1,046		1,493			2,390		2,986
Tax-exempt		829		921			1,677		1,851
Total interest income		9,641		9,293			18,959		18,177
Interest expense:
Deposits		461		1,380			1,444		2,711
Borrowings		165		432			398		789
Total interest expense		626		1,812			1,842		3,500
Net interest income		9,015		7,481			17,117		14,677
Provision for loan losses		400		400			1,600		600
Net interest income after provision for loan losses		8,615		7,081			15,517		14,077
Non-interest income:
Fees and service charges		1,754		1,931			3,716		3,620
Gains on sales of loans, net		4,824		1,742			6,017		2,862
Bank owned life insurance		154		160			308		319
(Losses)/gains on sales of investment securities, net		-		(146	)		1,770		(146	)
Other		240		301			514		589
Total non-interest income		6,972		3,988			12,325		7,244
Non-interest expense:
Compensation and benefits		5,253		4,251			9,835		8,394
Occupancy and equipment		1,063		1,100			2,142		2,162
Professional fees		351		443			714		839
Data processing		439		414			864		828
Amortization of intangibles		424		291			701		555
Advertising		151		169			301		335
Federal deposit insurance premiums		64		69			102		137
Foreclosure and real estate owned expense		17		26			42		67
Other		1,354		1,202			2,522		2,376
Total non-interest expense		9,116		7,965			17,223		15,693
Earnings before income taxes		6,471		3,104			10,619		5,628
Income tax expense		1,371		506			2,156		847
Net earnings	$	5,100	$	2,598		$	8,463	$	4,781
Earnings per share:
Basic (1)	$	1.13	$	0.57		$	1.87	$	1.04
Diluted (1)	$	1.13	$	0.56		$	1.86	$	1.04
Dividends per share (1)	$	0.20	$	0.19		$	0.40	$	0.38

(1) Per share amounts for the periods ended June 30, 2019 have been adjusted to give effect to the 5% stock dividend paid during December 2019.

See accompanying notes to consolidated financial statements.

3

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months ended				Six months ended
(Dollars in thousands)	June 30,				June 30,
	2020		2019		2020		2019
Net earnings	$	5,100	$	2,598	$	8,463	$	4,781
Net unrealized holding gains on available-for-sale securities		2,904		5,481		7,309		10,208
Reclassification adjustment for net losses (gains) included in earnings		-		146		(1,770)		146
Net unrealized gains		2,904		5,627		5,539		10,354
Income tax effect on net (losses) gains included in earnings		-		(36)		434		(36)
Income tax effect on net unrealized holding gains		(711)		(1,343)		(1,791)		(2,501)
Other comprehensive income		2,193		4,248		4,182		7,817
Total comprehensive income	$	7,293	$	6,846	$	12,645	$	12,598

See accompanying notes to consolidated financial statements.

4

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share amounts)	Common stock		Additional paid-in capital		Retained earnings		Treasury stock		Accumulated other comprehensive income (loss)		Total
Balance at April 1, 2019	$	44	$	63,844	$	33,381	$	-	$	(422)	$	96,847
Net earnings		-		-		2,598		-		-		2,598
Other comprehensive income		-		-		-		-		4,248		4,248
Dividends paid ($0.19 per share)		-		-		(874)		-		-		(874)
Stock-based compensation		-		60		-		-		-		60
Balance at June 30, 2019	$	44	$	63,904	$	35,105	$	-	$	3,826	$	102,879
Balance at April 1, 2020	$	46	$	69,147	$	36,736	$	(2,023)	$	7,228	$	111,134
Net earnings		-		-		5,100		-		-		5,100
Other comprehensive income		-		-		-		-		2,193		2,193
Dividends paid ($0.20 per share)		-		-		(898)		-		-		(898)
Stock-based compensation		-		77		-		-		-		77
Purchase of 15,757 treasury shares		-		-		-		(326)		-		(326)
Balance at June 30, 2020	$	46	$	69,224	$	40,938	$	(2,349)	$	9,421	$	117,280

(Dollars in thousands, except per share amounts)	Common stock		Additional paid-in capital		Retained earnings		Treasury stock		Accumulated other comprehensive income (loss)		Total
Balance at January 1, 2019	$	44	$	63,775	$	32,073	$	-	$	(3,991)	$	91,901
Net earnings		-		-		4,781		-		-		4,781
Other comprehensive income		-		-		-		-		7,817		7,817
Dividends paid ($0.38 per share)		-		-		(1,749)		-		-		(1,749)
Stock-based compensation		-		129		-		-		-		129
Balance at June 30, 2019	$	44	$	63,904	$	35,105	$	-	$	3,826	$	102,879
Balance at January 1, 2020	$	46	$	69,029	$	34,293	$	-	$	5,239	$	108,607
Net earnings		-		-		8,463		-		-		8,463
Other comprehensive income		-		-		-		-		4,182		4,182
Dividends paid ($0.40 per share)		-		-		(1,818)		-		-		(1,818)
Stock-based compensation		-		162		-		-		-		162
Exercise of stock options, 3,136 shares		-		33		-		-		-		33
Purchase of 106,894 treasury shares		-		-		-		(2,349)		-		(2,349)
Balance at June 30, 2020	$	46	$	69,224	$	40,938	$	(2,349)	$	9,421	$	117,280

See accompanying notes to consolidated financial statements.

5

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)	Six months ended June 30,
	2020		2019
Cash flows from operating activities:
Net earnings	$	8,463	$	4,781
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		1,600		600
Amortization of investment security premiums, net		628		870
Amortization of purchase accounting adjustment on loans		(28)		(32)
Amortization of intangibles		701		555
Depreciation		497		496
Increase in cash surrender value of bank owned life insurance		(308)		(319)
Stock-based compensation		162		129
Deferred income taxes		1,326		(571)
Net (gains) losses on sales of investment securities		(1,770)		146
Net loss (gain) on sales of premises, equipment and real estate owned		45		(4)
Net gains on sales of loans		(6,017)		(2,862)
Proceeds from sales of loans		151,310		74,813
Origination of loans held for sale		(157,269)		(80,372)
Changes in assets and liabilities:
Accrued interest and other assets		(3,464)		(1,031)
Accrued expenses, taxes, and other liabilities		1,656		(2,459	)
Net cash used in operating activities		(2,468)		(5,260)
Cash flows from investing activities:
Net increase in loans		(159,019)		(21,345)
Maturities and prepayments of investment securities		31,210		30,903
Purchases of investment securities		(12,204)		(24,741)
Proceeds from sales of investment securities		44,508		9,491
Redemption of bank stocks		895		6,584
Purchase of bank stocks		(1,132)		(5,337)
Proceeds from sales of premises and equipment and foreclosed assets		257		15
Purchases of premises and equipment, net		(220)		(697)
Net cash used in investing activities		(95,705)		(5,127)
Cash flows from financing activities:
Net increase in deposits		109,156		5,884
Federal Home Loan Bank advance borrowings		135,843		232,167
Federal Home Loan Bank advance repayments		(130,843)		(229,767)
Proceeds from other borrowings		1,075		-
Repayments on other borrowings		(8,431)		(963)
Proceeds from exercise of stock options		33		-
Payment of dividends		(1,818)		(1,749)
Purchase of treasury stock		(2,349)		-
Net cash provided by financing activities		102,666		5,572
Net increase (decrease) in cash and cash equivalents		4,493		(4,815)
Cash and cash equivalents at beginning of period		13,694		19,114
Cash and cash equivalents at end of period	$	18,187	$	14,299

6

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(Unaudited)

	Six months ended
(Dollars in thousands)	June 30,
	2020		2019
	(Unaudited)
Supplemental disclosure of cash flow information:
Cash payments for income taxes	$	-	$	51
Cash paid for interest		1,973		3,420
Cash paid for operating leases		89		72
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to real estate owned		314		57
Investment securities purchases not yet settled		(659)		(265)
Operating lease asset and related lease liability recorded		-		353

See accompanying notes to consolidated financial statements.

7

LANDMARK BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Interim Financial Statements

The unaudited consolidated financial statements of Landmark Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, Landmark National Bank (the “Bank”) and Landmark Risk Management Inc., have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto. The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but 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 results of the three month and six month interim periods ended June 30, 2020 are not necessarily indicative of the results expected for the year ending December 31, 2020 or any other future time period. The Company has evaluated subsequent events for recognition and disclosure up to the date the financial statements were issued.

8

2. Investments

A summary of investment securities available-for-sale is as follows:

(Dollars in thousands)	As of June 30, 2020
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
U. S. treasury securities	$	2,000	$	55	$	-		$	2,055
U. S. federal agency obligations		2,014		156		-			2,170
Municipal obligations, tax exempt		136,895		5,892		(1)			142,786
Municipal obligations, taxable		46,622		2,243		(26)			48,839
Agency mortgage-backed securities		105,094		4,159		-			109,253
Certificates of deposit		1,722		-		-			1,722
Total	$	294,347	$	12,505	$	(27)		$	306,825
(Dollars in thousands)		As of December 31, 2019
				Gross		Gross
		Amortized		unrealized		unrealized			Estimated
		cost		gains		losses			fair value
U. S. treasury securities	$	2,300	$	16	$	-		$	2,316
U. S. federal agency obligations		4,015		91		-			4,106
Municipal obligations, tax exempt		142,391		3,513		(42	)		145,862
Municipal obligations, taxable		45,541		1,293		(55	)		46,779
Agency mortgage-backed securities		159,908		2,353		(230	)		162,031
Certificates of deposit		1,904		-		-			1,904
Total	$	356,059	$	7,266	$	(327	)	$	362,998

The tables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarily impaired, as of June 30, 2020 and December 31, 2019. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.