Equibles

10-Q

LANDMARK BANCORP INC (LARK)

10-Q 2022-08-12 For: 2022-06-30
View Original
Added on April 07, 2026

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, 2022

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<br> or other jurisdiction <br><br> of incorporation or organization) (I.R.S.<br> Employer <br><br> Identification Number)

701Poyntz 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<br> Stock, par value $0.01 per share LARK Nasdaq<br> 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<br> accelerated filer ☐ Accelerated<br> filer ☐ Non-accelerated<br> filer ☒ Smaller<br> reporting company ☒
Emerging<br> 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 11, 2022, the issuer had outstanding 4,976,344 shares of its common stock, $0.01 par value per share.

LANDMARK

BANCORP, INC.

Form

10-Q Quarterly Report

Table

of Contents

Page<br><br> <br>Number
PART I
Item<br> 1. Financial Statements 2<br> - 25
Item<br> 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26-35
Item<br> 3. Quantitative and Qualitative Disclosures about Market Risk 35-37
Item<br> 4. Controls and Procedures 37
PART II
Item<br> 1. Legal Proceedings 38
Item<br> 1A. Risk Factors 38
Item<br> 2. Unregistered Sales of Equity Securities and Use of Proceeds 38
Item<br> 3. Defaults Upon Senior Securities 38
Item<br> 4. Mine Safety Disclosures 38
Item<br> 5. Other Information 38
Item<br> 6. Exhibits 39
Signature Page 40 
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PART

I – FINANCIAL INFORMATION

ITEM

  1. FINANCIAL STATEMENTS

LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

BALANCE SHEETS

(Dollars<br> in thousands, except per share amounts) December<br> 31,
2021
(Unaudited)
Assets
Cash<br> and cash equivalents 30,413 $ 189,213
Interest-bearing<br> deposits at other banks 8,360 7,378
Investment<br> securities available-for-sale, at fair value 486,633 380,717
Bank<br> stocks, at cost 2,881 2,905
Loans,<br> net of allowance for loans losses of 8,315 and 8,775 661,830 653,233
Loans<br> held for sale, at fair value 6,264 4,795
Bank<br> owned life insurance 32,483 32,106
Premises<br> and equipment, net 20,679 20,803
Goodwill 17,532 17,532
Other<br> intangible assets, net 52 84
Mortgage<br> servicing rights 4,025 4,193
Real<br> estate owned, net 1,288 2,551
Accrued<br> interest and other assets 19,911 13,458
Total<br> assets 1,292,351 $ 1,328,968
Liabilities<br> and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing<br> demand 343,107 $ 350,005
Money<br> market and checking 520,056 536,868
Savings 170,419 155,501
Certificates<br> of deposit 97,885 106,107
Total<br> deposits 1,131,467 1,148,481
Subordinated<br> debentures 21,651 21,651
Other<br> borrowings 6,223 7,403
Accrued<br> interest and other liabilities 15,708 15,790
Total<br> liabilities 1,175,049 1,193,325
Commitments<br> and contingencies - -
Stockholders’<br> equity:
Preferred<br> stock, 0.01 par value per share, 200,000 shares authorized; none issued - -
Common<br> stock, 0.01 par value per share, 7,500,000 shares authorized; 4,997,459 and 4,997,459 shares issued at June 30, 2022 and December<br> 31, 2021, respectively 50 50
Additional<br> paid-in capital 79,284 79,120
Retained<br> earnings 56,662 52,593
Treasury<br> stock, at cost; 21,115 and 0 shares at June 30, 2022 and December 31, 2021, respectively (538 ) -
Accumulated<br> other comprehensive (loss) income (18,156 ) 3,880
Total<br> stockholders’ equity 117,302 135,643
Total<br> liabilities and stockholders’ equity 1,292,351 $ 1,328,968

All values are in US Dollars.

See accompanying notes to consolidated financial statements.

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF EARNINGS

(Unaudited)

2022 2021 2022 2021
Three<br> months ended Six<br> months ended
(Dollars<br> in thousands, except per share amounts) June<br> 30, June<br> 30,
2022 2021 2022 2021
Interest<br> income:
Loans $ 7,156 $ 8,840 $ 14,347 $ 17,244
Investment<br> securities:
Taxable 1,543 763 2,596 1,574
Tax-exempt 730 759 1,452 1,537
Total<br> interest income 9,429 10,362 18,395 20,355
Interest<br> expense:
Deposits 358 261 553 542
Borrowings 173 121 299 242
Total<br> interest expense 531 382 852 784
Net<br> interest income 8,898 9,980 17,543 19,571
Provision<br> for (reversal of) loan losses - - (500 ) 500
Net<br> interest income after provision for loan losses 8,898 9,980 18,043 19,071
Non-interest<br> income:
Fees<br> and service charges 2,380 2,153 4,568 4,186
Gains<br> on sales of loans, net 1,073 2,864 1,978 6,004
Bank<br> owned life insurance 190 153 377 301
Gains<br> on sales of investment securities, net - 33 - 1,108
Other 153 270 436 599
Total<br> non-interest income 3,796 5,473 7,359 12,198
Non-interest<br> expense:
Compensation<br> and benefits 4,953 5,023 9,728 9,964
Occupancy<br> and equipment 1,177 1,105 2,410 2,167
Data<br> processing 362 492 702 993
Amortization<br> of mortgage servicing rights and other intangibles 335 412 651 849
Professional<br> fees 415 431 866 823
Acquisition<br> costs 221 - 221 -
Other 1,559 1,727 3,282 3,467
Total<br> non-interest expense 9,022 9,190 17,860 18,263
Earnings<br> before income taxes 3,672 6,263 7,542 13,006
Income<br> tax expense 639 1,283 1,376 2,659
Net<br> earnings $ 3,033 $ 4,980 $ 6,166 $ 10,347
Earnings<br> per share:
Basic<br> (1) (1) $ 0.61 $ 1.00 $ 1.24 $ 2.07
Diluted<br> (1) (1) $ 0.61 $ 0.99 $ 1.23 $ 2.07
Dividends<br> per share (1) $ 0.21 $ 0.19 $ 0.42 $ 0.38
(1) Per share amounts for the periods ended June 30, 2021 have<br>been adjusted to give effect to the 5% stock dividend paid during December 2021.
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See accompanying notes to consolidated financial statements.

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

2022 2021 2022 2021
Three<br> months ended Six<br> months ended
(Dollars<br> in thousands) June<br> 30, June<br> 30,
2022 2021 2022 2021
Net<br> earnings $ 3,033 $ 4,980 $ 6,166 $ 10,347
Net<br> unrealized holding losses on available-for-sale securities (10,247 ) (7 ) (29,186 ) (2,790 )
Reclassification<br> adjustment for net gains included in earnings - (33 ) - (1,108 )
Net<br> unrealized losses (10,247 ) (40 ) (29,186 ) (3,898 )
Income<br> tax effect on net gains included in earnings - 8 - 271
Income<br> tax effect on net unrealized holding losses 2,511 2 7,150 684
Other<br> comprehensive loss (7,736 ) (30 ) (22,036 ) (2,943 )
Total<br> comprehensive (loss) income $ (4,703 ) $ 4,950 $ (15,870 ) $ 7,404

See accompanying notes to consolidated financial statements.

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per<br> share amounts) Additional<br><br> <br>paid-in<br><br> <br>capital Retained<br><br> <br>earnings Treasury<br><br> <br>stock Accumulated<br><br> <br>other<br><br> <br>comprehensive<br><br> <br>income (loss) Total
Balance<br> at April 1, 2021 48 $ 72,336 $ 49,363 $ - $ 6,534 $ 128,281
Net<br> earnings - - 4,980 - - 4,980
Other<br> comprehensive loss - - - - (30 ) (30 )
Dividends<br> paid (0.19 per share) - - (952 ) - - (952 )
Stock-based<br> compensation - 77 - - - 77
Balance<br> at June 30, 2021 48 $ 72,413 $ 53,391 $ - $ 6,504 $ 132,356
Balance<br> at April 1, 2022 50 $ 79,206 $ 54,677 $ - $ (10,420 ) $ 123,513
Net<br> earnings - - 3,033 - 3,033
Other<br> comprehensive loss - - - (7,736 ) (7,736 )
Dividends<br> paid (0.21 per share) - - (1,048 ) - (1,048 )
Stock-based<br> compensation - 78 - - - 78
Purchase<br> of 21,115 treasury shares - - - (538 ) - (538 )
Balance<br> at June 30, 2022 50 $ 79,284 $ 56,662 $ (538 ) $ (18,156 ) $ 117,302

All values are in US Dollars.

See accompanying notes to consolidated financial statements.

(Dollars in thousands, except per<br> share amounts) Common<br><br> <br>stock Additional<br><br> <br>paid-in<br><br> <br>capital Retained<br><br> <br>earnings Treasury<br><br> <br>stock Accumulated<br><br> <br>other<br><br> <br>comprehensive<br><br> <br>income (loss) Total
Balance<br> at January 1, 2021 48 $ 72,230 $ 44,947 $ - $ 9,447 $ 126,672
Net<br> earnings - - 10,347 - - 10,347
Other<br> comprehensive loss - - - - (2,943 ) (2,943 )
Dividends<br> paid (0.38 per share) - - (1,903 ) - - (1,903 )
Stock-based<br> compensation - 161 - - - 161
Exercise<br> of stock options, 6,054 shares - 22 - - - 22
Balance<br> at June 30, 2021 48 $ 72,413 $ 53,391 $ - $ 6,504 $ 132,356
Balance<br> at January 1, 2022 50 $ 79,120 $ 52,593 $ - $ 3,880 $ 135,643
Net<br> earnings - - 6,166 - 6,166
Other<br> comprehensive loss - - - (22,036 ) (22,036 )
Dividends<br> paid (0.42 per share) - - (2,097 ) - (2,097 )
Stock-based<br> compensation - 164 - - - 164
Purchase<br> of 21,115 treasury shares - - - (538 ) - (538 )
Balance<br> at June 30, 2022 50 $ 79,284 $ 56,662 $ (538 ) $ (18,156 ) $ 117,302

All values are in US Dollars.

See accompanying notes to consolidated financial statements.

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF CASH FLOWS

(Unaudited)

2022 2021
Six<br> months ended
(Dollars<br> in thousands) June<br> 30,
2022 2021
Cash<br> flows from operating activities:
Net<br> earnings $ 6,166 $ 10,347
Adjustments<br> to reconcile net earnings to net cash provided by operating activities:
Provision<br> for (reversal of) loan losses (500 ) 500
Valuation<br> allowance on real estate owned - 48
Amortization<br> of investment security premiums, net 978 911
Amortization<br> of purchase accounting adjustment on loans (9 ) (23 )
Amortization<br> of mortgage servicing rights and other intangibles 651 849
Depreciation 563 490
Increase<br> in cash surrender value of bank owned life insurance (377 ) (301 )
Stock-based<br> compensation 164 161
Deferred<br> income taxes (70 ) (413 )
Net<br> gains on sales of investment securities - (1,108 )
Net<br> gains on sales of premises and equipment and foreclosed assets (114 ) (5 )
Net<br> gains on sales of loans (1,978 ) (6,004 )
Proceeds<br> from sales of loans 79,920 198,893
Origination<br> of loans held for sale (79,862 ) (189,500 )
Changes<br> in assets and liabilities:
Accrued<br> interest and other assets 767 1,673
Accrued<br> expenses, taxes, and other liabilities (769 ) (2,035 )
Net<br> cash provided by operating activities 5,530 14,483
Cash<br> flows from investing activities:
Net<br> (increase) decrease in loans (8,088 ) 28,609
Net<br> change in interest-bearing deposits at banks (993 ) 245
Maturities<br> and prepayments of investment securities 24,097 21,978
Purchases<br> of investment securities (159,481 ) (87,822 )
Proceeds<br> from sales of investment securities - 15,224
Redemption<br> of bank stocks 185 1,967
Purchase<br> of bank stocks (161 ) (714 )
Purchase<br> bank owned life insurance - (6,000 )
Proceeds<br> from sales of premises and equipment and foreclosed assets 1,379 346
Purchases<br> of premises and equipment, net (439 ) (134 )
Net<br> cash used in investing activities (143,501 ) (26,301 )
Cash<br> flows from financing activities:
Net<br> (decrease) increase in deposits (17,014 ) 61,736
Repayments<br> on other borrowings (1,180 ) (1,837 )
Proceeds<br> from exercise of stock options - 22
Payment<br> of dividends (2,097 ) (1,903 )
Purchase<br> of treasury stock (538 ) -
Net<br> cash (used in) provided by financing activities (20,829 ) 58,018
Net<br> (decrease) increase in cash and cash equivalents (158,800 ) 46,200
Cash<br> and cash equivalents at beginning of period 189,213 84,818
Cash<br> and cash equivalents at end of period $ 30,413 $ 131,018

See accompanying notes to consolidated financial statements.

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF CASH FLOWS, CONTINUED

(Unaudited)

Six<br> months ended
(Dollars<br> in thousands) June<br> 30,
2022 2021
Supplemental<br> disclosure of cash flow information:
Cash<br> payments for income taxes $ 20 $ 3,958
Cash<br> paid for interest 845 804
Cash<br> paid for operating leases 97 76
Supplemental<br> schedule of noncash investing and financing activities:
Investment<br> securities purchases not yet settled 685 -
Operating<br> lease asset and related lease liability recorded - 219

See accompanying notes to consolidated financial statements.

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

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, filed with the Securities and Exchange Commission on March 22, 2022, 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 six-month interim period ended June 30, 2022 are not necessarily indicative of the results expected for the year ending December 31, 2022 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.

2.Acquisition

On

June 28, 2022, the Company announced the execution of a definitive agreement to acquire Freedom Bancshares, Inc., the holding company of Freedom Bank. Freedom Bank was founded in 2006 and operates out of a single location in Overland Park, Kansas. As of June 30, 2022, Freedom Bank reported total assets of $216.2 million, net loans of $121.0 million, and total deposits of $162.4 million. The acquisition is expected to close in the fourth quarter of 2022 subject to regulatory approval, customary closing requirements and approval of the shareholders of Freedom Bancshares, Inc.

3.Investments

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

Schedule of Available-for-sale Securities

As<br> of June 30, 2022
Gross Gross
Amortized unrealized unrealized Estimated
(Dollars<br> in thousands) cost gains losses fair<br> value
U.<br> S. treasury securities $ 141,227 $ - $ (5,768 ) $ 135,459
U.<br> S. federal agency obligations 15,072 - (141 ) 14,931
Municipal<br> obligations, tax exempt 138,153 127 (3,286 ) 134,994
Municipal<br> obligations, taxable 52,569 18 (3,231 ) 49,356
Agency<br> mortgage-backed securities 163,660 31 (11,798 ) 151,893
Total<br> available-for-sale $ 510,681 $ 176 $ (24,224 ) $ 486,633
As<br> of December 31, 2021
--- --- --- --- --- --- --- --- --- ---
Gross Gross
Amortized unrealized unrealized Estimated
(Dollars<br> in thousands) cost gains losses fair<br> value
U.<br> S. treasury securities $ 43,098 $ - $ (423 ) $ 42,675
U.<br> S. federal agency obligations 17,165 67 (37 ) 17,195
Municipal<br> obligations, tax exempt 133,558 4,488 (62 ) 137,984
Municipal<br> obligations, taxable 39,011 1,171 (136 ) 40,046
Agency<br> mortgage-backed securities 142,747 1,339 (1,269 ) 142,817
Total<br> available-for-sale $ 375,579 $ 7,065 $ (1,927 ) $ 380,717 
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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, 2022 and December 31, 2021. 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.

Schedule of Available for Sale Securities Continuous Unrealized Loss Position Fair Value

As<br> of June 30, 2022
(Dollars<br> in thousands) Less<br> than 12 months 12<br> months or longer Total
No.<br> of Fair Unrealized Fair Unrealized Fair Unrealized
securities value losses value losses value losses
U.S.<br> treasury securities 71 $ 131,024 $ (5,564 ) $ 4,435 $ (204 ) $ 135,459 $ (5,768 )
U.S.<br> federal agency obligations 5 5,996 (17 ) 6,930 (124 ) 12,926 (141 )
Municipal<br> obligations, tax exempt 242 95,906 (3,177 ) 2,272 (109 ) 98,178 (3,286 )
Municipal<br> obligations, taxable 83 39,540 (2,867 ) 3,553 (364 ) 43,093 (3,231 )
Agency<br> mortgage-backed securities 93 133,056 (10,395 ) 13,830 (1,403 ) 146,886 (11,798 )
Total 494 $ 405,522 $ (22,020 ) $ 31,020 $ (2,204 ) $ 436,542 $ (24,224 )
As<br> of December 31, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
(Dollars<br> in thousands) Less<br> than 12 months 12<br> months or longer Total
No.<br> of Fair Unrealized Fair Unrealized Fair Unrealized
securities value losses value losses value losses
U.S.<br> treasury securities 28 $ 42,675 $ (423 ) $ - $ - $ 42,675 $ (423 )
U.S.<br> federal agency obligations 6 12,073 (30 ) 3,048 (7 ) 15,121 (37 )
Municipal<br> obligations, tax exempt 37 12,411 (46 ) 1,879 (16 ) 14,290 (62 )
Municipal<br> obligations, taxable 13 8,802 (136 ) - - 8,802 (136 )
Agency<br> mortgage-backed securities 28 95,028 (1,269 ) - - 95,028 (1,269 )
Total 112 170,989 (1,904 ) 4,927 (23 ) 175,916 (1,927 )

The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury. The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of its cost basis, the Company believed that the U.S. treasury securities identified in the table above were temporarily impaired as of June 30, 2022 and December 31, 2021.

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Bank (“FHLB”). The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the U.S. federal agency obligations identified in the tables above were temporarily impaired as of June 30, 2022 and December 31, 2021.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. As of June 30, 2022, the Company did not intend to sell and it was more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired as of June 30, 2022 and December 31, 2021.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association. The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the table above were temporarily impaired as of June 30, 2022 and December 31, 2021.

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The table below sets forth amortized cost and fair value of investment securities at June 30, 2022. The table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

Schedule of Investments Classified by Contractual Maturity Date

(Dollars<br> in thousands) Amortized Estimated
cost fair<br> value
Due<br> in less than one year $ 24,994 $ 24,848
Due<br> after one year but within five years 342,614 326,409
Due<br> after five years but within ten years 99,159 93,743
Due<br> after ten years 43,914 41,633
Total $ 510,681 $ 486,633

Sales proceeds and gross realized gains and losses on sales of available-for-sale securities were as follows for the periods indicated:

Schedule of Realized Gain (loss)

2022 2021 2022 2021
(Dollars<br> in thousands) Three months ended<br><br> <br>June 30, Six months ended<br><br> <br>June 30,
2022 2021 2022 2021
Sales<br> proceeds $ - $ 1,878 $ - $ 15,224
Realized<br> gains $ - $ 33 $ - $ 1,108
Realized<br> losses - - - -
Net<br> realized gains $ - $ 33 $ - $ 1,108

Securities

with carrying values of $355.7 million and $331.7 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at June 30, 2022 and December 31, 2021, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.

4.Loans and Allowance for Loan Losses

Loans consisted of the following as of the dates indicated below:

Schedule of Loans

June<br> 30, December<br> 31,
(Dollars<br> in thousands) 2022 2021
One-to-four<br> family residential real estate loans $ 192,517 $ 166,081
Construction<br> and land loans 23,092 27,644
Commercial<br> real estate loans 209,879 198,472
Commercial<br> loans 137,929 132,154
Paycheck<br> protection program loans 652 17,179
Agriculture<br> loans 78,240 94,267
Municipal<br> loans 2,076 2,050
Consumer<br> loans 25,531 24,541
Total<br> gross loans 669,916 662,388
Net<br> deferred loan costs (fees) and loans in process 229 (380 )
Allowance<br> for loan losses (8,315 ) (8,775 )
Loans,<br> net $ 661,830 $ 653,233 
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The following tables provide information on the Company’s allowance for loan losses by loan class and allowance methodology:

Schedule of Allowance for Credit Losses on Financing Receivables

Three<br> and six months ended June 30, 2022
(Dollars<br> in thousands) One-to-four<br><br> <br>family<br><br> <br>residential<br><br> <br>real estate<br><br> <br>loans Construction<br><br> <br>and land<br><br> <br>loans Commercial<br><br> <br>real estate<br><br> <br>loans Commercial<br><br> <br>loans Paycheck<br><br> <br>protection<br><br> <br>program<br><br> <br>loans Agriculture<br><br> <br>loans Municipal<br><br> <br>loans Consumer<br><br> <br>loans Total
Allowance<br> for loan losses:
Balance<br> at April 1, 2022 $ 624 $ 146 $ 3,061 $ 2,465 $ - $ 1,929 $ 6 $ 126 $ 8,357
Charge-offs - - - - - - - (76 ) (76 )
Recoveries - - - 9 - 2 - 23 34
Provision<br> for loan losses (44 ) (13 ) (79 ) 177 - (111 ) - 70 -
Balance<br> at June 30, 2022 $ 580 $ 133 $ 2,982 $ 2,651 $ - $ 1,820 $ 6 $ 143 $ 8,315
Balance<br> at January 1, 2022 $ 623 $ 138 $ 3,051 $ 2,613 $ - $ 2,221 $ 6 $ 123 $ 8,775
Charge-offs - - - - - - - (129 ) (129 )
Recoveries - 100 - 23 - 3 6 37 169
Provision<br> for loan losses (43 ) (105 ) (69 ) 15 - (404 ) (6 ) 112 (500 )
Balance<br> at June 30, 2022 $ 580 $ 133 $ 2,982 $ 2,651 $ - $ 1,820 $ 6 $ 143 $ 8,315
Three<br> and six months ended June 30, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
(Dollars<br> in thousands) One-to-four<br><br> <br>family<br><br> <br>residential<br><br> <br>real estate<br><br> <br>loans Construction<br><br> <br>and land<br><br> <br>loans Commercial<br><br> <br>real estate<br><br> <br>loans Commercial<br><br> <br>loans Paycheck<br><br> <br>protection<br><br> <br>program<br><br> <br>loans Agriculture<br><br> <br>loans Municipal<br><br> <br>loans Consumer<br><br> <br>loans Total
Allowance<br> for loan losses:
Balance<br> at April 1, 2021 $ 897 $ 186 $ 3,257 $ 2,246 $ - $ 2,503 $ 6 $ 176 $ 9,271
Charge-offs (58 ) - - (72 ) - (50 ) - (48 ) (228 )
Recoveries 1 100 - 1 - - - 18 120
Provision<br> for loan losses (115 ) (155 ) 155 413 - (297 ) (1 ) - -
Balance<br> at June 30, 2021 $ 725 $ 131 $ 3,412 $ 2,588 $ - $ 2,156 $ 5 $ 146 $ 9,163
Allowance<br> for loan losses:
Balance<br> at January 1, 2021 $ 859 $ 181 $ 2,482 $ 2,388 $ - $ 2,690 $ 6 $ 169 $ 8,775
Charge-offs (81 ) - - (72 ) - (50 ) - (89 ) (292 )
Recoveries 2 101 - 2 - - 6 69 180
Reversal<br> of loan losses (55 ) (151 ) 930 270 - (484 ) (7 ) (3 ) 500
Balance<br> at June 30, 2021 $ 725 $ 131 $ 3,412 $ 2,588 $ - $ 2,156 $ 5 $ 146 $ 9,163 
| 11 |

| --- | | | As<br> of June 30, 2022 | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (Dollars<br> in thousands) | One-to-four<br><br> <br>family<br><br> <br>residential<br><br> <br>real<br> estate<br><br> <br>loans | | Construction<br><br> <br>and<br> land loans | | Commercial<br><br> <br>real<br> estate<br><br> <br>loans | | Commercial<br><br> <br>loans | | Paycheck<br><br> <br>protection<br><br> <br>program<br><br> <br>loans | | Agriculture<br><br> <br>loans | | Municipal<br><br> <br>loans | | Consumer<br><br> <br>loans | | Total | | | Allowance<br> for loan losses: | | | | | | | | | | | | | | | | | | | | Individually<br> evaluated for loss | $ | - | $ | - | $ | - | $ | 644 | $ | - | $ | - | $ | - | $ | - | $ | 644 | | Collectively<br> evaluated for loss | | 580 | | 133 | | 2,982 | | 2,007 | | - | | 1,820 | | 6 | | 143 | | 7,671 | | Total | $ | 580 | $ | 133 | $ | 2,982 | $ | 2,651 | $ | - | $ | 1,820 | $ | 6 | $ | 143 | $ | 8,315 | | Loan<br> balances: | | | | | | | | | | | | | | | | | | | | Individually<br> evaluated for loss | $ | 564 | $ | 195 | $ | 2,173 | $ | 1,112 | $ | - | $ | 1,780 | $ | 36 | $ | 10 | $ | 5,870 | | Collectively<br> evaluated for loss | | 191,953 | | 22,897 | | 207,706 | | 136,817 | | 652 | | 76,460 | | 2,040 | | 25,521 | | 664,046 | | Total | $ | 192,517 | $ | 23,092 | $ | 209,879 | $ | 137,929 | $ | 652 | $ | 78,240 | $ | 2,076 | $ | 25,531 | $ | 669,916 | | | | As<br> of December 31, 2021 | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (Dollars<br> in thousands) | | One-to-four<br><br> <br>family<br><br> <br>residential<br><br> <br>real<br> estate<br><br> <br>loan | | Construction<br><br> <br>and<br> land<br><br> <br>loans | | Commercial<br><br> <br>real<br> estate<br><br> <br>loans | | Commercial<br><br> <br>loans | | Paycheck<br><br> <br>protection<br><br> <br>program<br><br> <br>loans | | Agriculture<br><br> <br>loans | | Municipal<br><br> <br>loans | | Consumer<br><br> <br>loans | | Total | | Allowance<br> for loan losses: | | | | | | | | | | | | | | | | | | | | Individually<br> evaluated for loss | $ | - | $ | - | $ | - | $ | 504 | $ | - | $ | - | $ | - | $ | - | $ | 504 | | Collectively<br> evaluated for loss | | 623 | | 138 | | 3,051 | | 2,109 | | - | | 2,221 | | 6 | | 123 | | 8,271 | | Total | $ | 623 | $ | 138 | $ | 3,051 | $ | 2,613 | $ | - | $ | 2,221 | $ | 6 | $ | 123 | $ | 8,775 | | Loan<br> balances: | | | | | | | | | | | | | | | | | | | | Individually<br> evaluated for loss | $ | 578 | $ | 794 | $ | 2,214 | $ | 1,029 | $ | - | $ | 2,067 | $ | 36 | $ | - | $ | 6,718 | | Collectively<br> evaluated for loss | | 165,503 | | 26,850 | | 196,258 | | 131,125 | | 17,179 | | 92,200 | | 2,014 | | 24,541 | | 655,670 | | Total | $ | 166,081 | $ | 27,644 | $ | 198,472 | $ | 132,154 | $ | 17,179 | $ | 94,267 | $ | 2,050 | $ | 24,541 | $ | 662,388 |

The

Company recorded net loan charge-offs of $42,000 during the second quarter of 2022 compared to net loan charge-offs of $108,000 during the second quarter of 2021. The Company recorded net loan recoveries of $40,000 during the six months ended June 30, 2022 compared to net loan charge-offs of $112,000 during the six months ended June 30, 2021.

The

Company’s impaired loans decreased $848,000 from $6.7 million at December 31, 2021 to $5.9 million at June 30, 2022. The difference between the unpaid contractual principal and the impaired loan balance is a result of charge-offs recorded against impaired loans. The difference in the Company’s non-accrual loan balances and impaired loan balances at June 30, 2022 and December 31, 2021, was related to troubled debt restructurings (“TDR”) that are current and accruing interest, but still classified as impaired. Interest income recognized on a cash basis was immaterial during the six months ended June 30, 2022 and 2021.

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The following tables present information on impaired loans:

Schedule of Impaired Financing Receivables

Unpaid<br><br> <br>contractual<br><br> <br>principal Impaired<br><br> <br>loan<br><br> <br>balance Impaired<br><br> <br>loans<br><br> <br>without an<br><br> <br>allowance Impaired<br><br> <br>loans<br><br> <br>with an<br><br> <br>allowance Related<br><br> <br>allowance<br><br> <br>recorded Year-to-date<br><br> <br>average loan<br><br> <br>balance Year-to-date<br><br> <br>interest income<br><br> <br>recognized
(Dollars<br> in thousands) As<br> of June 30, 2022
Unpaid<br><br> <br>contractual<br><br> <br>principal Impaired<br><br> <br>loan<br><br> <br>balance Impaired<br><br> <br>loans<br><br> <br>without an<br><br> <br>allowance Impaired<br><br> <br>loans<br><br> <br>with an<br><br> <br>allowance Related<br><br> <br>allowance<br><br> <br>recorded Year-to-date<br><br> <br>average loan<br><br> <br>balance Year-to-date<br><br> <br>interest income<br><br> <br>recognized
One-to-four<br> family residential real estate $ 564 $ 564 $ 564 $ - $ - $ 573 $ 4
Construction<br> and land 195 195 195 - - 195 4
Commercial<br> real estate 2,173 2,173 2,173 - - 2,190 25
Commercial 1,363 1,112 379 733 644 1,152 8
Agriculture 1,882 1,780 1,780 - - 1,755 29
Municipal 36 36 36 - - 36 -
Consumer 10 10 10 - - 10 -
Total<br> impaired loans $ 6,223 $ 5,870 $ 5,137 $ 733 $ 644 $ 5,911 $ 70
(Dollars<br> in thousands) As<br> of December 31, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Unpaid<br><br> <br>contractual<br><br> <br>principal Impaired<br><br> <br>loan<br><br> <br>balance Impaired<br><br> <br>loans<br><br> <br>without an<br><br> <br>allowance Impaired<br><br> <br>loans<br><br> <br>with an<br><br> <br>allowance Related<br><br> <br>allowance<br><br> <br>recorded Year-to-date<br><br> <br>average loan<br><br> <br>balance Year-to-date<br><br> <br>interest income<br><br> <br>recognized
One-to-four<br> family residential real estate $ 578 $ 578 $ 578 $ - $ - $ 590 $ 8
Construction<br> and land 2,401 794 794 - - 895 16
Commercial<br> real estate 2,214 2,214 2,214 - - 2,388 37
Commercial 1,380 1,029 520 509 504 1,096 38
Agriculture 2,235 2,067 2,067 - - 2,420 67
Municipal 36 36 36 - - 36 1
Total<br> impaired loans $ 8,844 $ 6,718 $ 6,209 $ 509 $ 504 $ 7,425 $ 167

The Company’s key credit quality indicator is a loan’s performance status, defined as accruing or non-accruing. Performing loans are considered to have a lower risk of loss. Non-accrual loans are those which the Company believes have a higher risk of loss. The accrual of interest on non-performing loans is discontinued at the time the loan is 90 days delinquent, unless the credit is well secured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date if collection of principal or interest is considered doubtful. There were no loans 90 days or more delinquent and accruing interest at June 30, 2022 or December 31, 2021.

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The following tables present information on the Company’s past due and non-accrual loans by loan class:

Schedule of Past Due Financing Receivables

(Dollars<br> in thousands) As<br> of June 30, 2022
30-59<br> days delinquent and accruing 60-89<br> days delinquent and accruing 90<br> days or more delinquent and accruing Total<br> past due loans accruing Non-accrual<br> loans Total<br> past due and non-accrual loans Total<br> loans not past due
One-to-four<br> family residential real estate loans $ - $ 120 $ - $ 120 $ 406 $ 526 $ 191,991
Construction<br> and land loans - - - - 195 195 22,897
Commercial<br> real estate loans 67 - - 67 2,173 2,240 207,639
Commercial<br> loans 5 - - 5 815 820 137,109
Paycheck<br> protection program loans - - - - - - 652
Agriculture<br> loans 30 599 - 629 1,288 1,917 76,323
Municipal<br> loans - - - - - - 2,076
Consumer<br> loans 35 21 - 56 10 66 25,465
Total $ 137 $ 740 $ - $ 877 $ 4,887 $ 5,764 $ 664,152
Percent<br> of gross loans 0.02 % 0.11 % 0.00 % 0.13 % 0.73 % 0.86 % 99.14 %
(Dollars<br> in thousands) As<br> of December 31, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
30-59<br> days delinquent and accruing 60-89<br> days delinquent and accruing 90<br> days or more delinquent and accruing Total<br> past due loans accruing Non-accrual<br> loans Total<br> past due and non-accrual loans Total<br> loans not past due
One-to-four<br> family residential real estate loans $ 20 $ 125 $ - $ 145 $ 417 $ 562 $ 165,519
Construction<br> and land loans - - - - 681 681 26,963
Commercial<br> real estate loans - - - - 2,214 2,214 196,258
Commercial<br> loans 289 340 - 629 593 1,222 130,932
Paycheck<br> protection program loans - - - - - - 17,179
Agriculture<br> loans 1,189 - - 1,189 1,325 2,514 91,753
Municipal<br> loans - - - - - - 2,050
Consumer<br> loans 18 9 - 27 - 27 24,514
Total $ 1,516 $ 474 $ - $ 1,990 $ 5,230 $ 7,220 $ 655,168
Percent<br> of gross loans 0.23 % 0.07 % 0.00 % 0.30 % 0.79 % 1.09 % 98.91 %

Under

the original terms of the Company’s non-accrual loans, interest earned on such loans for the six months ended June 30, 2022 and 2021 would have increased interest income by $95,000 and $584,000, respectively. No interest income related to non-accrual loans was included in interest income for the six months ended June 30, 2022 and 2021.

The Company also categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Nonclassified loans generally include those loans that are expected to be repaid in accordance with contractual loan terms. Classified loans are those that are assigned a special mention, substandard or doubtful risk rating using the following definitions:

Special Mention: Loans are currently protected by the current net worth and paying capacity of the obligor or of the collateral pledged but such protection is potentially weak. These loans constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard. The credit risk may be relatively minor, yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset.

Substandard: Loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

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Doubtful: Loans classified doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The following table provides information on the Company’s risk categories by loan class:

Schedule of Troubled Debt Restructurings on Financing Receivables

(Dollars<br> in thousands) Nonclassified Classified Nonclassified Classified
As<br> of June 30, 2022 As<br> of December 31, 2021
(Dollars<br> in thousands) Nonclassified Classified Nonclassified Classified
One-to-four<br> family residential real estate loans $ 191,962 $ 555 $ 165,299 $ 782
Construction<br> and land loans 22,897 195 26,963 681
Commercial<br> real estate loans 205,227 4,652 193,669 4,803
Commercial<br> loans 133,719 4,210 123,609 8,545
Paycheck<br> protection program loans 652 - 17,179 -
Agriculture<br> loans 76,952 1,288 91,036 3,231
Municipal<br> loan 2,076 - 2,050 -
Consumer<br> loans 25,521 10 24,541 -
Total $ 659,006 $ 10,910 $ 644,346 $ 18,042

At

June 30, 2022, the Company had seven loan relationships consisting of 11 outstanding loans that were previously classified as TDRs. No loans were classified as TDRs during the three or six months ending June 30, 2022. During the second quarter of 2022, a $7,000 commercial loan paid off after being classified as a TDR in 2018. During the first quarter of 2022, two construction and land loans totaling $599,000 were paid off. These loans were originally classified as TDRs in 2012. A commercial loan totaling $32,000 was paid off in the first quarter of 2022 after being classified as a TDR in the first quarter of 2021. An agriculture loan totaling $250,000 was also paid off in the first quarter of 2022 after being classified as a TDR in the third quarter of 2021. During the six months ended June 30, 2021, one commercial loan totaling $47,000 was classified as a TDR after extending the maturity of the loan. The restructuring changed the payment terms to match the borrower’s cash flows. The Company had previously charged-off $100,000 of the loan due to a collateral shortfall.

The

Company evaluates each TDR individually and returns the loan to accrual status when a payment history is established after the restructuring and future payments are reasonably assured. There were no loans modified as TDRs for which there was a payment default within 12 months of modification as of June 30, 2022 and 2021. The Company did not record any charge-offs against loans classified as TDRs in the first six months of 2022 or 2021. A credit provision for loan losses of $50,000 and $3,000 was recorded against TDRs in the three months ended June 30, 2022 and 2021, respectively. A credit provision for loan losses of $2,000 and $6,000 was recorded against TDRs in the six months ended June 30, 2022 and 2021, respectively. The Company had no allowance for loan losses recorded against loans classified as TDRs at June 30, 2022 compared to $2,000 at December 31, 2021.

The following table presents information on loans that are classified as TDRs:

Schedule of Troubled Debt Restructurings on Financing Receivables

(Dollars<br> in thousands)
As of June 30, 2022 As<br> of December 31, 2021
Number<br> of loans Non-accrual<br> balance Accruing<br> balance Number<br> of loans Non-accrual<br> balance Accruing<br> balance
One-to-four<br> family residential real estate loans 2 $ - $ 158 2 $ - $ 161
Construction<br> and land loans 1 195 - 3 681 113
Commercial<br> real estate loans 2 1,224 - 2 1,224 -
Commercial<br> loans 2 32 297 4 33 436
Agriculture<br> loans 3 - 492 4 - 742
Municipal<br> loan 1 - 36 1 - 36
Total 11 $ 1,451 $ 983 16 $ 1,938 $ 1,488 
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5.Goodwill and Other Intangible Assets

The Company tests goodwill for impairment annually or more frequently if circumstances warrant. The Company’s annual impairment test as of December 31, 2021 concluded that its goodwill was not impaired. The Company concluded there were no triggering events during the first six months of 2022 that required an interim goodwill impairment test.

Core deposit intangible assets are amortized over the estimated useful life of ten years on an accelerated basis. A summary of the other intangible assets that continue to be subject to amortization was as follows:

Schedule of Other Intangible Assets and Goodwill

(Dollars<br> in thousands) As<br> of June 30, 2022
Gross<br> carrying amount Accumulated<br> amortization Net<br> carrying amount
Core<br> deposit intangible assets $ 1,710 $ (1,658 ) $ 52
(Dollars<br> in thousands) As<br> of December 31, 2021
--- --- --- --- --- --- --- ---
Gross<br> carrying amount Accumulated<br> amortization Net<br> carrying amount
Core<br> deposit intangible assets $ 2,018 $ (1,934 ) $ 84

The following sets forth estimated amortization expense for core deposit and lease intangible assets for the remainder of 2022 and in successive years ending December 31:

Schedule of Finite-lived Intangible Assets, Future Amortization Expense

(Dollars<br> in thousands) Amortization
expense
Remainder<br> of 2022 $ 26
2023 26
Total $ 52

6.Mortgage Loan Servicing

Mortgage loans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgage loans serviced for others:

Schedule of Participating Mortgage Loans

(Dollars<br> in thousands) June<br> 30, December<br> 31,
2022 2021
FHLMC $ 688,557 $ 697,484
FHLB 24,325 18,218
Total $ 712,882 $ 715,702

Custodial

escrow balances maintained in connection with serviced loans were $6.5 million and $5.8 million at June 30, 2022 and December 31, 2021, respectively. Gross service fee income related to such loans was $453,000 and $442,000 for the three months ended June 30, 2022 and 2021, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $907,000 and $873,000 for the six months ended June 30, 2022 and 2021, respectively.

Activity for mortgage servicing rights was as follows:

Schedule of Servicing Asset at Amortized Cost ****

2022 2021 2022 2021
Three<br> months ended Six<br> months ended
(Dollars<br> in thousands) June<br> 30, June<br> 30,
2022 2021 2022 2021
Mortgage<br> servicing rights:
Balance<br> at beginning of period $ 4,128 $ 3,966 $ 4,193 $ 3,726
Additions 217 553 451 1,192
Amortization (320 ) (376 ) (619 ) (775 )
Balance<br> at end of period $ 4,025 $ 4,143 $ 4,025 $ 4,143 
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The

fair value of mortgage servicing rights was $9.7 million and $6.7 million at June 30, 2022 and December 31, 2021, respectively. Fair value at June 30, 2022 was determined using discount rates ranging from 9.00% to 12.00%; prepayment speeds ranging from 6.00% to 19.24%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.40%. Fair value at December 31, 2021 was determined using discount rates ranging from 9.00% to 12.00%; prepayment speeds ranging from 6.02% to 23.70%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.34%.

The

Company had a mortgage repurchase reserve of $226,000 at June 30, 2022 and December 31, 2021, which represents the Company’s best estimate of probable losses that the Company will incur related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. The Company did not incur any losses charged against the reserve or make any provisions to the reserve during the first six months of 2022. The Company charged a $9,000 loss against the reserve during the first six months ended June 30, 2021. As of June 30, 2022, the Company did not have any outstanding mortgage repurchase requests.

7.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. The diluted earnings per share computation for the three and six months ended June 30, 2022 excluded 51,088 of unexercised stock options because their inclusion would have been anti-dilutive during such period. The diluted earnings per share computation for the three and six months ended June 30, 2021 included all unexercised stock options because no stock options were anti-dilutive during such period. The Company’s Board of Directors declared a cash dividend of $0.21 per share to be paid August 24, 2022, to common stockholders of record as of the close of business on August 10, 2022. The shares used in the calculation of basic and diluted earnings per share are shown below:

Schedule of Earnings Per Share, Basic and Diluted

2022 2021 2022 2021
Three<br> months ended Six<br> months ended
(Dollars<br> in thousands, except per share amounts) June<br> 30, June<br> 30,
2022 2021 2022 2021
Net<br> earnings $ 3,033 $ 4,980 $ 6,166 $ 10,347
Weighted average common shares outstanding - basic (1) (1) 4,988,416 4,994,434 4,992,912 4,992,481
Assumed exercise of stock options (1) (1) 14,009 8,610 16,910 7,501
Weighted<br> average common shares outstanding - diluted (1) (1) 5,002,425 5,003,044 5,009,822 4,999,982
Earnings<br> per share (1):
Basic<br> ^(1)^ $ 0.61 $ 1.00 $ 1.24 $ 2.07
Diluted<br> ^(1)^ $ 0.61 $ 0.99 $ 1.23 $ 2.07
(1) Share and per share values for the periods ended June 30, 2021<br>have been adjusted to give effect to the 5% stock dividend paid during December 2021.
--- --- 
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8.Repurchase Agreements

The Company has overnight repurchase agreements with certain deposit customers whereby the Company uses investment securities as collateral for non-insured funds. These balances are accounted for as collateralized financing and included in other borrowings on the balance sheet.

Repurchase

agreements are comprised of non-insured customer funds, totaling $6.2 million at June 30, 2022 and $7.4 million at December 31, 2021, which were secured by $8.2 million and $9.2 million of the Company’s investment portfolio at the same dates, respectively.

The following is a summary of the balances and collateral of the Company’s repurchase agreements:

Schedule of Repurchase Agreements

As<br> of June 30, 2022
(dollars<br> in thousands) Overnight and Up<br> to Greater
Continuous 30<br> days 30-90<br> days than<br> 90 days Total
Repurchase<br> agreements:
U.S.<br> federal treasury obligations $ 508 $ - $ - $ - $ 508
U.S.<br> federal agency obligations 1,880 - - - 1,880
Agency<br> mortgage-backed securities 3,835 - - - 3,835
Total $ 6,223 $ - $ - $ - $ 6,223
As<br> of December 31, 2021
--- --- --- --- --- --- --- --- --- --- ---
(dollars<br> in thousands) Overnight and Up<br> to Greater
Continuous 30<br> days 30-90<br> days than<br> 90 days Total
Repurchase<br> agreements:
U.S.<br> federal treasury obligations $ 325 $ - $ - $ - $ 325
U.S.<br> federal agency obligations 3,008 - - - 3,008
Agency<br> mortgage-backed securities 4,070 - - - 4,070
Total $ 7,403 $ - $ - $ - $ 7,403

The investment securities are held by a third party financial institution in the customer’s custodial account. The Company is required to maintain adequate collateral for each repurchase agreement. Changes in the fair value of the investment securities impact the amount of collateral required. If the Company were to default, the investment securities would be used to settle the repurchase agreement with the deposit customer.

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9.Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. Items outside the scope of ASC 606 are noted as such.

Schedule of Revenue from Contracts with Customers Within Non-interest Income

2022 2021 2022 2021
Three<br> months ended Six<br> months ended
(Dollars<br> in thousands) June<br> 30, June<br> 30,
2022 2021 2022 2021
Non-interest<br> income:
Service<br> charges on deposit accounts
Overdraft<br> fees $ 907 $ 653 $ 1,730 $ 1,325
Other 164 183 324 346
Interchange<br> income 785 845 1,492 1,569
Loan<br> servicing fees (1) 453 442 907 873
Office<br> lease income (1) 33 165 66 331
Gains<br> on sales of loans (1) (1) 1,073 2,864 1,978 6,004
Bank<br> owned life insurance income (1) (1) 190 153 377 301
Gains<br> on sales of investment securities (1) (1) - 33 - 1,108
Gains<br> (losses) on sales of real estate owned - - 114 5
Other 191 135 371 336
Total<br> non-interest income $ 3,796 $ 5,473 $ 7,359 $ 12,198
(1) Not within the<br>scope of ASC 606.
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A description of the Company’s revenue streams under ASC 606 follows:

ServiceCharges on Deposit Accounts

The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM usage fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period during which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

InterchangeIncome

The Company earns interchange fees from debit cardholder transactions conducted through the interchange payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Gains(Losses) on Sales of Real Estate Owned

The Company records a gain or loss from the sale of real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of real estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the real estate owned asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. There were no sales of real estate owned that were financed by the Company during the first six months of 2022 or 2021.

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10.Fair Value of Financial Instruments and Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair value estimates of the Company’s financial instruments as of June 30, 2022 and December 31, 2021, including methods and assumptions utilized, are set forth below:

Schedule of Fair Value, by Balance Sheet Grouping

amount Level<br> 1 Level<br> 2 Level<br> 3 Total
As<br> of June 30, 2022
Carrying
amount Level<br> 1 Level<br> 2 Level<br> 3 Total
Financial<br> assets:
Cash<br> and cash equivalents $ 30,413 $ 30,413 $ - $ - $ 30,413
Interest-bearing<br> deposits at other banks 8,360 - 8,360 - 8,360
Investment<br> securities available-for-sale 486,633 135,459 351,174 - 486,633
Bank<br> stocks, at cost 2,881 n/a n/a n/a n/a
Loans,<br> net 661,830 - - 656,552 656,552
Loans<br> held for sale 6,264 - 6,264 - 6,264
Mortgage<br> servicing rights 4,025 - 9,719 - 9,719
Accrued<br> interest receivable 4,295 335 1,872 2,088 4,295
Derivative<br> financial instruments 466 - 466 - 466
Financial<br> liabilities:
Non-maturity<br> deposits $ (1,033,582 ) $ (1,033,582 ) $ - $ - $ (1,033,582 )
Certificates<br> of deposit (97,885 ) - (96,225 ) - (96,225 )
Subordinated<br> debentures (21,651 ) - (17,175 ) - (17,175 )
Other<br> borrowings (6,223 ) - (6,223 ) - (6,223 )
Accrued<br> interest payable (132 ) - (132 ) - (132 )
amount Level<br> 1 Level<br> 2 Level<br> 3 Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
As<br> of December 31, 2021
Carrying
amount Level<br> 1 Level<br> 2 Level<br> 3 Total
Financial<br> assets:
Cash<br> and cash equivalents $ 189,213 $ 189,213 $ - $ - $ 189,213
Interest-bearing<br> deposits at other banks 7,378 - 7,378 - 7,378
Investment<br> securities available-for-sale 380,717 42,675 338,042 - 380,717
Bank<br> stocks, at cost 2,905 n/a n/a n/a n/a
Loans,<br> net 653,233 - - 663,625 663,625
Loans<br> held for sale 4,795 - 4,795 - 4,795
Mortgage<br> servicing rights 4,193 - 6,722 - 6,722
Accrued<br> interest receivable 4,405 107 1,666 2,632 4,405
Derivative<br> financial instruments 494 - 494 - 494
Financial<br> liabilities:
Non-maturity<br> deposits $ (1,042,374 ) $ (1,042,374 ) $ - $ - $ (1,042,374 )
Certificates<br> of deposit (106,107 ) - (105,935 ) - (105,935 )
Subordinated<br> debentures (21,651 ) - (16,375 ) - (16,375 )
Other<br> borrowings (7,403 ) - (7,403 ) - (7,403 )
Accrued<br> interest payable (125 ) - (125 ) - (125 )

Transfers

The Company did not transfer any assets or liabilities among levels during the six months ended June 30, 2022 or during the year ended December 31, 2021.

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ValuationMethods for Instruments Measured at Fair Value on a Recurring Basis

The following tables represent the Company’s financial instruments that are measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021, allocated to the appropriate fair value hierarchy:

Schedule of Fair Value, Assets Measured On Recurring Basis

Total Level<br> 1 Level<br> 2 Level<br> 3
(Dollars<br> in thousands) As<br> of June 30, 2022
Fair<br> value hierarchy
Total Level<br> 1 Level<br> 2 Level<br> 3
Assets:
Available-for-sale<br> investment securities:
U.<br> S. treasury securities $ 135,459 $ 135,459 $ - $ -
U.<br> S. federal agency obligations 14,931 - 14,931 -
Municipal<br> obligations, tax exempt 134,994 - 134,994 -
Municipal<br> obligations, taxable 49,356 - 49,356 -
Agency<br> mortgage-backed securities 151,893 - 151,893 -
Loans<br> held for sale 6,264 - 6,264 -
Derivative<br> financial instruments 466 - 466 -
Total Level<br> 1 Level<br> 2 Level<br> 3
--- --- --- --- --- --- --- --- ---
As<br> of December 31, 2021
Fair<br> value hierarchy
Total Level<br> 1 Level<br> 2 Level<br> 3
Assets:
Available-for-sale<br> investment securities:
U.<br> S. treasury securities $ 42,675 $ 42,675 $ - $ -
U.<br> S. federal agency obligations 17,195 - 17,195 -
Municipal<br> obligations, tax exempt 137,984 - 137,984 -
Municipal<br> obligations, taxable 40,046 - 40,046 -
Agency<br> mortgage-backed securities 142,817 - 142,817 -
Loans<br> held for sale 4,795 - 4,795 -
Derivative<br> financial instruments 494 - 494 -

The Company’s investment securities classified as available-for-sale include U.S. treasury securities, U.S. federal agency obligations, municipal obligations, agency mortgage-backed securities and certificates of deposit. Quoted exchange prices are available for the Company’s U.S. treasury securities, which are classified as Level 1. U.S. federal agency securities and agency mortgage-backed securities are priced utilizing industry-standard models that consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. These measurements are classified as Level 2. Municipal obligations are valued using a type of matrix, or grid, pricing in which securities are benchmarked against U.S. treasury rates based on credit rating. These model and matrix measurements are classified as Level 2 in the fair value hierarchy.

Changes in the fair value of available-for-sale securities are included in other comprehensive income to the extent the changes are not considered other-than-temporary impairments. Other-than-temporary impairment tests are performed on a quarterly basis and any decline in the fair value of an individual security below its cost that is deemed to be other-than-temporary results in a write-down of that security’s cost basis.

Mortgage loans originated and intended for sale in the secondary market are carried at fair value. The mortgage loan valuations are based on quoted secondary market prices for similar loans and are classified as Level 2. Changes in the fair value of mortgage loans originated and intended for sale in the secondary market and derivative financial instruments are included in gains on sales of loans.

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The aggregate fair value, contractual balance (including accrued interest), and gain on loans held for sale were as follows:

Schedule of Fair Value Contractual Balance and Gain Loss On Loans Held for Sale

As<br> of As<br> of
June<br> 30, December<br> 31,
(Dollars<br> in thousands) 2022 2021
Aggregate<br> fair value $ 6,264 $ 4,795
Contractual<br> balance 6,182 4,651
Gain $ 82 $ 144

The Company’s derivative financial instruments consist of interest rate lock commitments and corresponding forward sales contracts on mortgage loans held for sale. The fair values of these derivatives are based on quoted prices for similar loans in the secondary market. The market prices are adjusted by a factor, based on the Company’s historical data and its judgment about future economic trends, which considers the likelihood that a commitment will ultimately result in a closed loan. These instruments are classified as Level 2. The amounts are included in other assets or other liabilities on the consolidated balance sheets and gains on sales of loans, net in the consolidated statements of earnings. The total amount of gains from changes in fair value of derivative financial instruments included in earnings were as follows:

Schedule of Gains and Losses from Changes in Fair Value of Loans Held for Sale

(Dollars<br> in thousands) 2022 2021 2022 2021
Three<br> months ended Six<br> months ended
June<br> 30, June<br> 30,
(Dollars<br> in thousands) 2022 2021 2022 2021
Total<br> change in fair value $ (15 ) $ (654 ) $ (28 ) $ (227 )

ValuationMethods for Instruments Measured at Fair Value on a Nonrecurring Basis

The

Company does not record its loan portfolio at fair value. Collateral-dependent impaired loans are generally carried at the lower of cost or fair value of the collateral, less estimated selling costs. Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by the Company and then further adjusted if warranted based on relevant facts and circumstances. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Impaired loans are reviewed and evaluated at least quarterly for additional impairment and adjusted accordingly, based on the same factors identified above. The carrying value of the Company’s impaired loans was $5.9 million and $6.7 million at June 30, 2022 and December 31, 2021, respectively. The Company’s impaired loans with an allowance for loan losses was $733,000 and $509,000, with an allocated allowance of $644,000 and $504,000, at June 30, 2022 and December 31, 2021, respectively.

Real estate owned includes assets acquired through, or in lieu of, foreclosure and land previously acquired for expansion. Real estate owned is initially recorded at the fair value of the collateral less estimated selling costs. Subsequent valuations are updated periodically and are based upon independent appraisals, third party price opinions or internal pricing models. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Real estate owned is reviewed and evaluated at least annually for additional impairment and adjusted accordingly, based on the same factors identified above.

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The following table presents quantitative information about Level 3 fair value measurements measured at fair value on a nonrecurring basis as of June 30, 2022 and December 31, 2021.

Schedule of Fair Value Measurements On Nonrecurring, Valuation Techniques

(Dollars<br> in thousands) Fair<br> value Valuation<br> technique Unobservable<br> inputs Range
As of June 30, 2022
Impaired<br> loans:
Commercial $ 89 Sales<br> comparison Adjustment<br> to comparable value 0%-10%
As of December 31,<br> 2021
Impaired<br> loans:
Commercial $ 5 Sales<br> comparison Adjustment<br> to comparable value 0 %

11.Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believed that as of June 30, 2022, the Company and the Bank met all capital adequacy requirements to which they were subject at that time.

Prompt

corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The Company and the Bank are subject to the Basel III Rule, which is applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companies with consolidated assets of less than $3.0 billion).

The

Basel III Rule includes a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, a minimum ratio of Total Capital to risk-weighted assets of 8.0%, and a minimum Tier 1 leverage ratio of 4.0%. A capital conservation buffer, equal to 2.5% of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements for the common equity Tier 1 capital ratio, and Tier 1 capital and total risk based capital ratios.

As of June 30, 2022 and December 31, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action then in effect. There are no conditions or events since that notification that management believes have changed the institution’s category.

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The following is a comparison of the Company’s regulatory capital to minimum capital requirements at June 30, 2022 and December 31, 2021.

Schedule of Compliance with Regulatory Capital Requirements for Mortgage Companies

(Dollars in thousands) For<br> capital
Actual adequacy<br> purposes
Amount Ratio Amount Ratio (1)
As of June 30,<br> 2022
Leverage $ 139,600 10.71 % $ 52,133 4.0 %
Common<br> Equity Tier 1 Capital 118,600 15.00 % 55,347 7.0 %
Tier<br> 1 Capital 139,600 17.66 % 67,208 8.5 %
Total<br> Risk Based Capital 148,055 18.73 % 83,021 10.5 %
As<br> of December 31, 2021
Leverage $ 135,824 10.83 % $ 50,181 4.0 %
Common<br> Equity Tier 1 Capital 114,824 15.00 % 53,592 7.0 %
Tier<br> 1 Capital 135,824 17.74 % 65,077 8.5 %
Total<br> Risk Based Capital 144,739 18.91 % 80,389 10.5 %
(1) The required ratios<br>for capital adequacy purposes include a capital conservation buffer of 2.5%.
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The following is a comparison of the Bank’s regulatory capital to minimum capital requirements at June 30, 2022 and December 31, 2021:

Schedule of Compliance with Regulatory Capital Requirements Under Banking Regulations

To be<br><br> <br>well-capitalized
under<br> prompt
(Dollars<br> in thousands) For<br> capital corrective
Actual adequacy<br> purposes action<br> provisions
Amount Ratio Amount Ratio (1) Amount Ratio
As of June 30,<br> 2022
Leverage $ 136,439 10.49 % $ 52,002 4.0 % $ 65,002 5.0 %
Common<br> Equity Tier 1 Capital 136,439 17.27 % 55,289 7.0 % 51,340 6.5 %
Tier<br> 1 Capital 136,439 17.27 % 67,137 8.5 % 63,188 8.0 %
Total<br> Risk Based Capital 144,894 18.34 % 82,934 10.5 % 79,985 10.0 %
As<br> of December 31, 2021
Leverage $ 132,313 10.58 % $ 50,040 4.0 % $ 62,550 5.0 %
Common<br> Equity Tier 1 Capital 132,313 17.29 % 53,563 7.0 % 49,737 6.5 %
Tier<br> 1 Capital 132,313 17.29 % 65,041 8.5 % 61,215 8.0 %
Total<br> Risk Based Capital 141,228 18.46 % 80,345 10.5 % 76,519 10.0 %
(1) The required ratios for capital adequacy purposes<br>include a capital conservation buffer of 2.5%.
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12.Impact of Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), commonly referred to as “CECL.” The provisions of the update eliminate the probable initial recognition threshold under current GAAP which requires reserves to be based on an incurred loss methodology. Under CECL, reserves required for financial assets measured at amortized cost will reflect an organization’s estimate of all expected credit losses over the expected term of the financial asset and thereby require the use of reasonable and supportable forecasts to estimate future credit losses. Because CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity debt securities. Under the provisions of the update, credit losses recognized on available for sale debt securities will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for only purchased credit impaired loans. Under prior GAAP, a purchased loan’s contractual balance was adjusted to fair value through a credit discount, and no reserve was recorded on the purchased loan upon acquisition. Since under CECL reserves will be established for purchased loans at the time of acquisition, the accounting for purchased loans is made more comparable to the accounting for originated loans. Finally, increased disclosure requirements under CECL oblige organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The FASB expects that the evaluation of underwriting standards and credit quality trends by financial statement users will be enhanced with the additional vintage disclosures. In October 2019, the FASB approved a change in the effective dates for CECL which delayed the effective date to fiscal years beginning after December 15, 2022 for smaller reporting companies. Because the Company is a smaller reporting company, the proposed delay is applicable to the Company, and the Company plans to delay the implementation of CECL until January 1, 2023. Management has initiated an implementation committee that has implemented a process to collect the data and is utilizing a vendor solution for the new standard. Initial calculations estimate the effect will be an increase to the allowance for loan losses upon adoption. However, the size of the overall increase is uncertain at this time. Management is utilizing the delay to continue to refine and back test the CECL calculation. The internal controls over financial reporting specifically related to CECL are in the final design stage.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this update simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments require an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. In October 2019, the FASB approved a change in the effective dates for ASU 2017-04 which delayed the effective date to fiscal years beginning after December 15, 2022 for smaller reporting companies. Because the Company is a smaller reporting company, the proposed delay is applicable to the Company, and the Company plans to delay the implementation of ASU 2017-04 until January 1, 2023. Early adoption of the amendments of this ASU is permitted. The adoption of ASU 2017-04 is not expected to have a material effect on the Company’s operating results or financial condition.

In May 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Reference rate reform relates to the effects undertaken to eliminate certain reference rates such as the London Interbank Offered Rate (“LIBOR”) and introduce new reference rates that may be based on larger or more liquid observations and transactions. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other contracts. Generally, ASU 2020-04 would allow entities to consider contract modifications due to reference rate reform to be a continuation of an existing contract; thus, the Company would not have to determine if the modification is considered insignificant. The Company is in the process of reviewing loan documentation, along with the transition procedures it will need in order to implement reference rate reform. While the Company has yet to adopt ASU 2020-04, the standard was effective upon issuance and terminates December 31, 2022 such that changes made to contracts beginning on or after January 1, 2023 would not apply. The adoption of ASU 2020-04 is not expected to have a material effect on the Company’s operating results or financial condition.

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ITEM

  1. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

**Overview.**Landmark Bancorp, Inc. is a financial 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, and in the insurance business through its wholly owned subsidiary, Landmark Risk Management, Inc. References to the “Company,” “we,” “us,” and “our” refer collectively to Landmark Bancorp, Inc., Landmark National Bank and Landmark Risk Management, Inc. The Company is listed on the Nasdaq Global Market under the symbol “LARK.” The Bank is dedicated to providing quality financial and banking services to its local communities. Our strategy includes continuing a tradition of holding and acquiring quality assets while growing our commercial, commercial real estate and agriculture loan portfolios. We are committed to developing relationships with our borrowers and providing a total banking service.

The Bank is principally engaged in the business of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to originate one-to-four family residential real estate, construction and land, commercial real estate, commercial, agriculture, municipal and consumer loans. Although not our primary business function, we invest in certain investment and mortgage-related securities using deposits and other borrowings as funding sources.

Landmark Risk Management, Inc., which was formed and began operations on in 2017, is a Nevada-based captive insurance company which provides property and casualty insurance coverage to the Company and the Bank for which insurance may not be currently available or economically feasible in the current insurance marketplace. Landmark Risk Management, Inc. is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Our results of operations depend generally on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to the degree that our interest-earning assets mature or reprice at different times, or at different speeds, than our interest-bearing liabilities. Our results of operations are also affected by non-interest income, such as service charges, loan fees, gains from the sale of newly originated loans, gains or losses on investments and certain other non-interest related items. Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, professional fees, data processing expenses and provision for loan losses.

We are significantly impacted by prevailing economic conditions, including federal monetary and fiscal policies, and federal regulations of financial institutions. Deposit balances are influenced by numerous factors such as competing investments, the level of income and the personal rate of savings within our market areas. Factors influencing lending activities include the demand for housing and the interest rate pricing competition from other lending institutions.

Currently, our business consists of ownership of the Bank, with its main office in Manhattan, Kansas and twenty- nine additional branch offices in central, eastern, southeast and southwest Kansas, and our ownership of Landmark Risk Management, Inc.

In July 2022, we declared our 84^th^ consecutive quarterly dividend, and we currently have no plans to change our dividend strategy given our current capital and liquidity position. However, while we have achieved a strong capital base and expect to continue operating profitably, this is dependent upon the performance of the economy. In addition, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, we will not be permitted to make capital distributions (including for dividends and repurchases of stock) or pay discretionary bonuses to executive officers without restriction if we do not maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer, a standard we exceeded at June 30, 2022.

CriticalAccounting Policies*.* Critical accounting policies are those which are both most important to the portrayal of our financial condition and results of operations and require our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to the allowance for loan losses and the accounting for income taxes, each of which involve significant judgment by our management. There have been no material changes to the critical accounting policies included under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 22, 2022.

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Summaryof Results. During the second quarter of 2022, we recorded net earnings of $3.0 million, which was a decrease of $2.0 million, or 39.1%, from the $5.0 million of net earnings in the second quarter of 2021. During the first six months of 2022, we recorded net earnings of $6.2 million, which was a decrease of $4.1 million, or 40.4%, from the $10.3 million of net earnings in the first six months of 2021. The decrease in net earnings during 2022 was primarily due to lower interest income on PPP loans and a decrease in gains on sales of mortgage loans. Interest income on PPP loans declined as our balances decreased as a result of the forgiveness of these loans. Gains on sales of mortgage loans decreased as originations of residential real estate loans declined. Decreased loan originations mainly resulted from low housing inventories coupled with increasing mortgage interest rates during 2022, which reduced refinancing activity.

The following table summarizes earnings and key performance measures for the periods presented:

As<br> of or for the As<br> of or for the
(Dollars<br> in thousands, except per share amounts) three<br>months ended<br><br> <br>June 30, six<br>months ended<br><br> <br>June 30,
2022 2021 2022 2021
Net<br> earnings:
Net<br> earnings $ 3,033 $ 4,980 $ 6,166 $ 10,347
Basic<br> earnings per share (1) $ 0.61 $ 1.00 $ 1.24 $ 2.07
Diluted<br> earnings per share (1) $ 0.61 $ 0.99 $ 1.23 $ 2.07
Earnings<br> ratios:
Return<br> on average assets (2) 0.93 % 1.59 % 0.95 % 1.68 %
Return<br> on average equity (2) 10.04 % 15.40 % 9.81 % 16.22 %
Equity<br> to total assets 9.08 % 10.58 % 9.08 % 10.58 %
Net<br> interest margin (2) (3) 3.05 % 3.54 % 3.02 % 3.53 %
Dividend<br> payout ratio 34.43 % 19.23 % 34.15 % 18.43 %
(1) Per<br> share values for the periods ended June 30, 2021 have been adjusted to give effect to the<br> 5% dividend paid during December 2021.
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(2) Ratios<br> have been annualized and are not necessarily indicative of the results for the entire year.
(3) Net<br> interest margin is presented on a fully tax equivalent basis, using a 21% federal tax rate.

InterestIncome. Interest income of $9.4 million for the quarter ended June 30, 2022 decreased $900,000, or 9.0%, as compared to the same period of 2021. Interest income on loans decreased $1.7 million, or 19.0%, to $7.2 million for the quarter ended June 30, 2022, compared to the same period of 2021 due primarily to lower yields and average loan balances. Our yields decreased from 5.00% in the second quarter of 2021 to 4.40% in the second quarter of 2022. The decrease in yields on loans was driven by a decrease in interest income on PPP loans, which decreased from $2.2 million in the second quarter of 2021 to $178,000 in the second quarter of 2022. Also contributing to lower interest income on loans was a decrease in our average loan balances, which decreased from $709.9 million in the second quarter of 2021 to $653.0 million in the second quarter of 2022, primarily as a result of PPP loan forgiveness. Our average loan balances included average PPP loans of $4.2 million in the second quarter of 2022 and $97.5 million in the second quarter of 2021. Interest income on investment securities increased $751,000, or 49.3%, to $2.3 million for the second quarter of 2022, as compared to $1.5 million in the same period of 2021. The increase in interest income on investment securities was primarily the result of an increase in the average balances of investment securities which increased from $334.9 million in the second quarter of 2021 to $477.0 million in the second quarter of 2022. Partially offsetting average balances was lower yields on investment securities, which decreased from 2.02% in the second quarter of 2021 to 1.97% in the second quarter of 2022.

Interest income of $18.4 million for the six months ended June 30, 2022 decreased $2.0 million, or 9.6%, as compared to the same period of 2021. Interest income on loans decreased $2.9 million, or 16.8%, to $14.3 million for the six months ended June 30, 2022, compared to the same period of 2021 due mainly to a decrease in our average loan balances, which decreased from $720.0 million during the first six months of 2021 to $644.6 million during the first six months of 2022. Also contributing to lower interest income were lower yields on loans, which decreased from 4.83% in the six months ended June 30, 2021 to 4.49% during the six months ended June 30, 2022. Our average loan balances included average PPP loans of $7.8 million in the six months ended June 30, 2022 compared to $104.2 million the same period of 2021. Interest income on PPP loans decreased from $3.3 million in the first six months of 2021 to $658,000 in the first six months of 2022. The yield on PPP loans increased from 6.37% in the first half of 2021 to 8.47% in the first half of 2022. Interest income on investment securities increased $937,000, or 30.1%, to $4.0 million for the first six months of 2022, as compared to $3.1 million in the same period of 2021. The increase in interest income on investment securities was the result of higher average balances, which increased from $318.4 million in the first six months of 2021 compared to $449.7 million in the first six months of 2022. Partially offsetting the higher average balances of investment securities were lower yields, which decreased from 2.19% in the first six months of 2021 to 1.90% in the first six months of 2022.

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InterestExpense. Interest expense during the quarter ended June 30, 2022 increased $149,000, or 39.0%, to $531,000 as compared to the same period of 2021. Interest expense on interest-bearing deposits increased $97,000, or 37.2%, to $358,000 for the quarter ended June 30, 2022 as compared to the same period of 2021. Our total cost of interest-bearing deposits increased from 0.14% in the second quarter of 2021 to 0.18% in the second quarter of 2022 as a result of higher rates paid on money market and checking accounts, as the rates repriced based on market indexes. Also contributing to higher interest expense was an increase in average interest-bearing deposit balances, which increased from $771.7 million in the second quarter of 2021 to $791.3 million in the second quarter of 2022. For the second quarter of 2022, interest expense on borrowings increased $52,000, or 43.0%, to $173,000 as compared to the same period of 2021 due to an increase in our average borrowings, which increased from $26.0 million in the second quarter of 2021 to $28.6 million in the same period of 2022. Also contributing to the increase in interest expense on borrowings were higher rates, which increased from 1.86% in the second quarter of 2021 to 2.42% in the same period of 2022.

Interest expense during the six months ended June 30, 2022 increased $68,000, or 8.7%, to $852,000 as compared to the same period of 2021. Interest expense on interest-bearing deposits increased $11,000, or 2.0%, to $553,000 for the six months ended June 30, 2022 as compared to the same period of 2021. The increase in interest expense on interest-bearing deposits was the result of higher rates paid on money market and checking accounts, as the rates reprice based on market indexes. The increase in interest expense on deposits was due to an increase in average interest-bearing deposit balances, which increased from $767.2 million in the first six months of 2021 to $791.8 million in the same period of 2022. For the first six months of 2022, interest expense on borrowings increased $57,000, or 23.6%, to $299,000 as compared to the same period of 2021, due primarily to an increase in our average outstanding borrowings, which increased from $26.8 million in the first six months of 2021 to $28.6 million in the first six months of 2022. Also contributing to the higher interest expense on borrowings were higher average rates on our borrowings, which increased to 2.11% for the first six months of 2022 compared to 1.82% for the same period of 2021.

NetInterest Income. Net interest income decreased $1.1 million, or 10.8%, to $8.9 million for the second quarter of 2022 compared to the same period of 2021. The decrease in net interest income was primarily a result of a decrease in interest on loans, which declined $1.7 million or 19.0%. Compared to the same period last year, the decrease in loan interest income was primarily due to lower interest and fees earned on PPP loans. Interest and fees on PPP loans in the second quarter of 2022 totaled $178,000 compared to $2.2 million in the same period last year. Net interest margin, on a tax-equivalent basis, decreased from 3.54% in the second quarter of 2021 to 3.05% in the same period of 2022.

Net interest income decreased $2.0 million, or 10.4%, to $17.5 million for the first six months of 2022 compared to the same period of 2021. The decrease was primarily due to lower interest and fees earned on PPP loans, which decreased from $3.3 million in the first six months of 2021 to $658,000 in the same period of 2022. Net interest margin, on a tax-equivalent basis, decreased from 3.53% in the first six months of 2021 to 3.02% in the same period of 2022.

The increase in market interest rate should continue to increase our net interest margin as a result of higher yields on loans and investment securities exceeding the increase in our cost of funds. Our net interest margin increased from 2.99% in the first quarter of 2022 to 3.05% in the second quarter of 2022 as our assets began to reprice faster than our cost of funds. Our net interest margin has been positively impacted by PPP loans over the past couple of years, however, the impact of these loans on net interest margin going forward is expected to be minimal. While the rise in interest rates should result in increased net interest income and net interest margin, these improvements could be offset by increased competition for loans and deposits. Additionally, the deposit balance increases we have seen over the past two years may reverse resulting in the need for higher cost funding.

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AverageAssets/Liabilities. The following table reflects the tax-equivalent yields earned on average interest-earning assets and costs of average interest-bearing liabilities for the periods indicated (derived by dividing income or expense by the monthly average balance of assets or liabilities, respectively) as well as “net interest margin” (which reflects the effect of the net earnings balance) for the periods shown:

Three<br> months ended Three<br> months ended
June<br> 30, 2022 June<br> 30, 2021
Average<br><br> <br>balance Income/<br><br> <br>expense Average<br><br> <br>yield/cost Average<br><br> <br>balance Income/<br><br> <br>expense Average<br><br> <br>yield/cost
(Dollars in thousands)
Assets
Interest-earning<br> assets:
Interest-bearing<br> deposits at banks $ 66,048 $ 126 0.77 % $ 110,288 $ 32 0.12 %
Investment<br> securities (1) 477,035 2,338 1.97 % 334,936 1,689 2.02 %
Loans<br> receivable, net (2) 653,013 7,161 4.40 % 709,872 8,846 5.00 %
Total<br> interest-earning assets 1,196,096 9,625 3.23 % 1,155,096 10,567 3.67 %
Non-interest-earning<br> assets 111,016 98,899
Total $ 1,307,112 $ 1,253,995
Liabilities<br> and Stockholders’ Equity
Interest-bearing<br> liabilities:
Money<br> market and checking $ 521,148 $ 274 0.21 % $ 506,479 $ 126 0.10 %
Savings<br> accounts 169,618 10 0.02 % 145,498 13 0.04 %
Certificates<br> of deposit 100,491 74 0.30 % 119,751 122 0.41 %
Total<br> interest-bearing deposits 791,257 358 0.18 % 771,728 261 0.14 %
Subordinate<br> debentures and other borrowings 21,651 165 3.06 % 21,651 119 2.20 %
Repurchase<br> agreements 6,981 8 0.46 % 4,387 2 0.18 %
Total<br> interest-bearing liabilities 819,889 531 0.26 % 797,766 382 0.19 %
Non-interest-bearing<br> liabilities 366,076 326,485
Stockholders’<br> equity 121,147 129,744
Total $ 1,307,112 $ 1,253,995
Interest<br> rate spread (3) 2.97 % 3.48 %
Net<br> interest margin (4) $ 9,094 3.05 % $ 10,185 3.54 %
Tax-equivalent<br> interest - imputed 196 205
Net<br> interest income $ 8,898 $ 9,980
Ratio<br> of average interest-earning assets to average interest-bearing liabilities 145.9 % 144.8 %
(1) Income<br> on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal<br> tax rate.
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(2) Includes<br> loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent<br> basis, using a 21% federal tax rate.
(3) Interest<br> rate spread represents the difference between the average yield earned on interest-earning<br> assets and the average rate paid on interest-bearing liabilities.
(4) Net<br> interest margin represents annualized, tax-equivalent net interest income divided by average<br> interest-earning assets. 
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| --- | | | Six<br> months ended | | | | | | | Six<br> months ended | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | June<br> 30, 2022 | | | | | | | June<br> 30, 2021 | | | | | | | | | Average<br><br> <br>balance | | Income/<br><br> <br>expense | | Average<br><br> <br>yield/cost | | | Average<br><br> <br>balance | | Income/<br><br> <br>expense | | Average<br><br> <br>yield/cost | | | | (Dollars in thousands) | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | Interest-earning<br> assets: | | | | | | | | | | | | | | | | Interest-bearing<br> deposits at banks | $ | 103,314 | $ | 188 | | 0.37 | % | $ | 104,864 | $ | 64 | | 0.12 | % | | Investment<br> securities (1) | | 449,667 | | 4,241 | | 1.90 | % | | 318,353 | | 3,451 | | 2.19 | % | | Loans<br> receivable, net (2) | | 644,569 | | 14,357 | | 4.49 | % | | 719,985 | | 17,255 | | 4.83 | % | | Total<br> interest-earning assets | | 1,197,550 | | 18,786 | | 3.16 | % | | 1,143,202 | | 20,770 | | 3.66 | % | | Non-interest-earning<br> assets | | 108,896 | | | | | | | 98,953 | | | | | | | Total | $ | 1,306,446 | | | | | | $ | 1,242,155 | | | | | | | Liabilities<br> and Stockholders’ Equity | | | | | | | | | | | | | | | | Interest-bearing<br> liabilities: | | | | | | | | | | | | | | | | Money<br> market and checking | $ | 523,086 | $ | 374 | | 0.14 | % | $ | 503,805 | $ | 251 | | 0.10 | % | | Savings<br> accounts | | 166,039 | | 20 | | 0.02 | % | | 139,186 | | 24 | | 0.03 | % | | Certificates<br> of deposit | | 102,678 | | 159 | | 0.31 | % | | 124,252 | | 267 | | 0.43 | % | | Total<br> interest-bearing deposits | | 791,803 | | 553 | | 0.14 | % | | 767,243 | | 542 | | 0.14 | % | | Subordinate<br> debentures and other borrowings | | 21,651 | | 288 | | 2.68 | % | | 21,654 | | 238 | | 2.22 | % | | Repurchase<br> agreements | | 6,903 | | 11 | | 0.32 | % | | 5,151 | | 4 | | 0.16 | % | | Total<br> interest-bearing liabilities | | 820,357 | | 852 | | 0.21 | % | | 794,048 | | 784 | | 0.20 | % | | Non-interest-bearing<br> liabilities | | 359,332 | | | | | | | 319,439 | | | | | | | Stockholders’<br> equity | | 126,757 | | | | | | | 128,668 | | | | | | | Total | $ | 1,306,446 | | | | | | $ | 1,242,155 | | | | | | | Interest<br> rate spread (3) | | | | | | 2.95 | % | | | | | | 3.46 | % | | Net<br> interest margin (4) | | | $ | 17,934 | | 3.02 | % | | | $ | 19,986 | | 3.53 | % | | Tax-equivalent<br> interest - imputed | | | | 391 | | | | | | | 415 | | | | | Net<br> interest income | | | $ | 17,543 | | | | | | $ | 19,571 | | | | | Ratio<br> of average interest-earning assets to average interest-bearing liabilities | | | | | | 146.0 | % | | | | | | 144.0 | % | | (1) | Income<br> on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal<br> tax rate. | | --- | --- | | (2) | Includes<br> loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent<br> basis, using a 21% federal tax rate. | | (3) | Interest<br> rate spread represents the difference between the average yield earned on interest-earning<br> assets and the average rate paid on interest-bearing liabilities. | | (4) | Net<br> interest margin represents annualized, tax-equivalent net interest income divided by average<br> interest-earning assets. |

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Rate/VolumeTable*.* The following table describes the extent to which changes in tax-equivalent interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities affected the Company’s interest income and expense for the periods indicated. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by prior volume), (ii) changes attributable to volume (changes in volume multiplied by prior rate), and (iii) net change (the sum of (i) and (ii)). The net changes attributable to the combined effect of volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

Three<br> months ended June 30, Six<br> months ended June 30,
2022<br> vs 2021 2022<br> vs 2021
Increase/(decrease)<br> attributable to Increase/(decrease)<br> attributable to
Volume Rate Net Volume Rate Net
(Dollars<br> in thousands) (Dollars<br> in thousands)
Interest<br> income:
Interest-bearing<br> deposits at banks $ (8 ) $ 102 $ 94 $ (1 ) $ 125 $ 124
Investment<br> securities 689 (40 ) 649 1,164 (374 ) 790
Loans (674 ) (1,011 ) (1,685 ) (1,733 ) (1,165 ) (2,898 )
Total 7 (949 ) (942 ) (570 ) (1,414 ) (1,984 )
Interest<br> expense:
Deposits 8 89 97 11 - 11
Subordinated<br> debentures and other borrowings - 46 46 - 50 50
Repurchase<br> agreements 2 4 6 2 5 7
Total 10 139 149 13 55 68
Net<br> interest income $ (3 ) $ (1,088 ) $ (1,091 ) $ (583 ) $ (1,469 ) $ (2,052 )

Provisionfor Loan Losses. We maintain, and our Board of Directors monitors, an allowance for losses on loans. The allowance is established based upon management’s periodic evaluation of known and inherent risks in the loan portfolio, review of significant individual loans and collateral, review of delinquent loans, past loss experience, adverse situations that may affect the borrowers’ ability to repay, current and expected market conditions, and other factors management deems important. Determining the appropriate level of reserves involves a high degree of management judgment and is based upon historical and projected losses in the loan portfolio and the collateral value or discounted cash flows of specifically identified impaired loans. Additionally, allowance policies are subject to periodic review and revision in response to a number of factors, including current market conditions, actual loss experience and management’s expectations.

During the second quarter of 2022 and 2021, we did not record a provision for loan losses. We recorded net loan charge-offs of $42,000 during the second quarter of 2022 compared to net loan charge-offs of $108,000 during the second quarter of 2021.

During the first six months of 2022, we recorded a reverse provision for loan losses of $500,000 compared to a provision for loan losses of $500,000 in the first six months of 2021. We recorded net loan recoveries of $40,000 during the six months ended June 30, 2022 compared to net loan charge-offs of $112,000 during the six months ended June 30, 2021.

For further discussion of the allowance for loan losses, refer to the “Asset Quality and Distribution” section below.

Non-interestIncome. Total non-interest income was $3.8 million in the second quarter of 2022, a decrease of $1.7 million, or 30.6%, from the same period in 2021. The decrease in non-interest income during the second quarter of 2022 compared to the same period last year was primarily due to a decrease of $1.8 million in gains on sales of one-to-four family residential real estate loans as higher interest rates and low housing inventories reduced originations of these loan which are normally sold. Higher mortgage rates however did result in increased originations of adjustable-rate loans this quarter which are kept in our one-to-four family residential loan portfolio. Partially offsetting this decrease was an increase of $227,000 in fees and services charges primarily due to higher overdraft charges and servicing fees.

Total non-interest income was $7.4 million in the first half of 2022, a decrease of $4.8 million, or 39.7%, from the first half of 2021, primarily as a result of a decrease of $4.0 million in gains on sales of loans. Our gains on sales of loans decreased as our originations of secondary market one-to-four family residential real estate loans slowed due to the increase in mortgage interest rates and decreased inventory in the housing market in our market areas. Also contributing to the decrease in non-interest income was a decrease of $1.1 million gains on sales of investment securities. We did not record any gains on sales of investment securities during the first six months of 2022 compared to net gains of $1.1 million in the same period of 2021. Partially offsetting the decrease in gains on sales of investment securities was a $382,000 increase in fees and services charges due primarily to higher overdraft charges and servicing fees.

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Non-interestExpense. Non-interest expense totaled $9.0 million for the second quarter of 2022, a decrease of $168,000, or 1.8%, from $9.2 million for the first quarter of 2021. The decrease in non-interest expense in the second quarter of 2022 compared to the same period last year was mainly due to lower data processing fees, reduced mortgage servicing rights amortization and a decline in compensation and benefits and other non-interest expense. The decline in data processing fees was due to a new contract with our main technology vendor in effect this year, while lower mortgage banking activity this quarter resulted in lower costs for compensation, amortization and other non-interest expense. Partially offsetting the decreases in non-interest expense were costs of $221,000 during the second quarter of 2022 related to the recently announced acquisition of Freedom Bancshares, Inc. and its wholly owned subsidiary Freedom Bank.

Non-interest expense totaled $17.9 million for the first six months of 2022, a decrease of $403,000 or 2.2%, from $18.3 million for the first six months of 2021. The decrease in non-interest expense in the first half of 2022 compared to the same period last year was mainly due to lower data processing fees, reduced mortgage servicing rights amortization and a decline in compensation and benefits and other non-interest expense. The decline in data processing fees was due to a new contract with our main technology vendor in effect this year, while lower mortgage banking activity this quarter resulted in lower costs for compensation, amortization and other non-interest expense. Partially offsetting the decreases in non-interest expense were costs of $221,000 during the first six months of 2022 related to the recently announced acquisition of Freedom Bancshares, Inc. and its wholly owned subsidiary Freedom Bank.

IncomeTax Expense. During the second quarter of 2022, we recorded income tax expense of $639,000, compared to $1.3 million during the same period of 2021. Our effective tax rate decreased from 20.5% in the second quarter of 2021 to 17.4% in the second quarter of 2022. The decrease in the effective tax rate was due to lower earnings before income taxes while tax-exempt income was similar between the periods.

We recorded income tax expense of $1.4 million for the first six months of 2022 compared to $2.7 million in the same period of 2021. Our effective tax rate was 20.4% in the first half of 2021 compared to 18.2% in the first half of 2022. The decrease in the effective tax rate was due to lower earnings before income taxes while tax-exempt income was similar between the periods.

FinancialCondition. Economic conditions in the United States slowed during the first six months of 2022 as elevated inflation levels and higher interest rates impacted the economy. The State of Kansas and the geographic markets in which the Company operates was also impacted by these economic headwinds. The ongoing COVID-19 pandemic, supply chain constraints, labor shortages and geopolitical events have all contributed to the rising inflation levels which are impacting all areas of the economy both nationally and locally. The Company’s allowance for loan losses included estimates of the economic impact of COVID-19 and other qualitative factors on our loan portfolio. However, our loan portfolio is diversified across various types of loans and collateral throughout the markets in which we operate. Aside from a few problem loans that management is working to resolve, our asset quality has remained strong over the past few years. While further increases in problem assets may arise, management believes its efforts to run a high quality financial institution with a sound asset base will continue to create a strong foundation for continued growth and profitability in the future.

AssetQuality and Distribution. Our primary investing activities are the origination of one-to-four family residential real estate, construction and land, commercial real estate, commercial, agriculture, municipal and consumer loans and the purchase of investment securities. Total assets decreased $36.6 million, or 2.8%, from December 31, 2021 to $1.3 billion at June 30, 2022.

The allowance for loan losses is established through a provision for loan losses based on our evaluation of the risk inherent in the loan portfolio and changes in the nature and volume of our loan activity. This evaluation, which includes a review of all loans with respect to which full collectability 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 appropriate allowance for loan losses. At June 30, 2022, our allowance for loan losses totaled $8.3 million, or 1.24% of gross loans outstanding, compared to $8.8 million, or 1.32% of gross loans outstanding, at December 31, 2021. Our allowance for loan losses as a percentage of gross loans outstanding, excluding PPP loans of $652,000 at June 30, 2022 and $17.2 million at December 31, 2021, was 1.24% at June 30, 2022 compared to 1.36% at December 31, 2021. This reflects a more comparable ratio to periods prior to PPP, as no allowance for loan losses has been allocated to PPP loans since they are guaranteed by the Small Business Administration. The decline in our allowance for loan losses as a percentage of gross loans outstanding was primarily due to improving economic conditions and a decrease in our classified loan totals.

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As of June 30, 2022 and December 31, 2021, approximately $10.9 million and $18.0 million, respectively, of loans were considered classified and assigned a risk rating of special mention, substandard or doubtful. These ratings indicate that these loans were identified as potential problem loans having more than normal risk that raised doubts as to the ability of the borrowers to comply with present loan repayment terms. Even though borrowers were experiencing moderate cash flow problems as well as some deterioration in collateral value, management believed the allowance was sufficient to cover the risks and probable incurred losses related to such loans at June 30, 2022 and December 31, 2021, respectively.

Loans past due 30-89 days and still accruing interest totaled $877,000, or 0.13% of gross loans, at June 30, 2022, compared to $2.0 million, or 0.30% of gross loans, at December 31, 2021. At June 30, 2022, $4.9 million in loans were on non-accrual status, or 0.73% of gross loans, compared to $5.2 million, or 0.79% of gross loans, at December 31, 2021. Non-accrual loans consist of loans 90 or more days past due and certain impaired loans. There were no loans 90 days delinquent and accruing interest at June 30, 2022 or December 31, 2021. Our impaired loans totaled $5.9 million at June 30, 2022 compared to $6.7 million at December 31, 2021. The difference in the Company’s non-accrual loan balances and impaired loan balances at June 30, 2022 and December 31, 2021 was related to TDRs that were accruing interest but still classified as impaired.

At June 30, 2022, the Company had seven loan relationships consisting of 11 outstanding loans that were previously classified as TDRs. No loans were classified as TDRs during the three or six months ending June 30, 2022. During the second quarter of 2022, a $7,000 commercial loan paid off after being classified as a TDR in 2018. During the first quarter of 2022, two construction and land loans totaling $599,000 were paid off. These loans were originally classified as TDRs in 2012. A commercial loan totaling $32,000 was paid off in the first quarter of 2022 after being classified as a TDR in the first quarter of 2021. An agriculture loan totaling $250,000 was also paid off in the first quarter of 2022 after being classified as a TDR in the third quarter of 2021. During the six months ended June 30, 2021, one commercial loan totaling $47,000 was classified as a TDR after extending the maturity of the loan. The restructuring changed the payment terms to match the borrower’s cash flows. The Company had previously charged-off $100,000 of the loan due to a collateral shortfall.

As part of our credit risk management, we continue to manage the loan portfolio to identify problem loans and have placed additional emphasis on commercial real estate and construction and land relationships. We are working to resolve the remaining problem credits or move the non-performing credits out of the loan portfolio. During the first half of 2022, two commercial real estate properties were sold resulting in a gain of $114,000. At June 30, 2022, we had $1.3 million of real estate owned compared to $2.6 million at December 31, 2021. As of June 30, 2022, real estate owned primarily consisted of commercial buildings, undeveloped land and residential real estate properties. The Company is currently marketing all of the remaining properties in real estate owned.

LiabilityDistribution. Our primary ongoing sources of funds are deposits, FHLB borrowings, 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 and economic conditions. We experienced a decrease of $17.0 million in total deposits during the first six months of 2022, to $1.1 billion at June 30, 2022. The decrease in deposits was primarily due to a seasonal decline in public funds accounts.

Non-interest-bearing deposits at June 30, 2022, were $343.1 million, or 30.3% of deposits, compared to $350.0 million, or 30.5% of deposits, at December 31, 2021. Money market and checking deposit accounts were 46.0% of our deposit portfolio and totaled $520.1 million at June 30, 2022, compared to $536.9 million, or 46.8% of deposits, at December 31, 2021. Savings accounts increased to $170.4 million, or 15.1% of deposits, at June 30, 2022, from $155.5 million, or 13.5% of deposits, at December 31, 2021. Certificates of deposit totaled $97.9 million, or 8.6% of deposits, at June 30, 2022, compared to $106.1 million, or 9.2% of deposits, at December 31, 2021.

Certificates of deposit at June 30, 2022, scheduled to mature in one year or less totaled $82.1 million. Historically, maturing deposits have generally remained with the Bank, and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity in some type of deposit account.

Total borrowings decreased $1.2 million to $27.9 million at June 30, 2022, from $29.1 million at December 31, 2021. The decrease in total borrowings was due to a decrease in balances of repurchase agreement accounts.

CashFlows. During the six months ended June 30, 2022, our cash and cash equivalents decreased by $158.8 million. Our operating activities provided net cash of $5.5 million during the first six months of 2022 primarily as a result of net earnings. Our investing activities used net cash of $143.5 million during the first six months of 2022, primarily due to the purchase of investment securities. Financing activities used net cash of $20.8 million during the first six months of 2022, primarily as a result of a decrease in deposits.

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**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 year. These liquid assets totaled $525.4 million at June 30, 2022 and $577.3 million at December 31, 2021. During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we generally increase our liquid assets by investing in short-term, high-grade investments or holding higher balances of cash and cash equivalents. The higher balances of cash and cash equivalents are primarily held in our Federal Reserve account.

Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments. Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally deposit withdrawals and loan advances. In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of FHLB advances, a line of credit with the FHLB, other borrowings or through sales of investment securities. At June 30, 2022, we had no borrowings against our line of credit with the FHLB. At June 30, 2022, we had collateral pledged to the FHLB that would allow us to borrow $95.6 million, subject to FHLB credit requirements and policies. At June 30, 2022, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $68.5 million. We also have various other federal funds agreements, both secured and unsecured, with correspondent banks totaling approximately $30.0 million in available credit under which we had no outstanding borrowings at June 30, 2022. At June 30, 2022, we had subordinated debentures totaling $21.7 million and $6.2 million of repurchase agreements. At June 30, 2022, the Company had no borrowings against a $7.5 million line of credit from an unrelated financial institution maturing on November 1, 2022, with an interest rate that adjusts daily based on the prime rate less 0.25%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at June 30, 2022.

OffBalance Sheet Arrangements. 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 $2.1 million at June 30, 2022.

At June 30, 2022, we had outstanding loan commitments, excluding standby letters of credit, of $133.9 million. We anticipate that sufficient funds will be available to meet current loan commitments. These commitments consist of unfunded lines of credit and commitments to finance real estate loans.

**Capital.**Current regulatory capital regulations require financial institutions (including banks and bank holding companies) to meet certain regulatory capital requirements. The Company and the Bank are subject to the Basel III Rules that implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Basel III Rules are applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companies with consolidated assets of less than $3.0 billion).

The Basel III Rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a Tier 1 capital to risk-weighted assets minimum ratio of 6.0%, a Total Capital to risk-weighted assets minimum ratio of 8.0%, and a Tier 1 leverage minimum ratio of 4.0%. A capital conservation buffer, equal to 2.5% common equity Tier 1 capital, is also established above the regulatory minimum capital requirements (other than the Tier 1 leverage ratio). As of June 30, 2022 and December 31, 2021, the Bank met the requirements to be “well capitalized,” which is the highest rating available under the regulatory capital regulations framework for prompt corrective action. Management believed that as of June 30, 2022, the Company and the Bank met all capital adequacy requirements to which we are subject.

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| --- |

Dividends. During the quarter ended June 30, 2022, we paid a quarterly cash dividend of $0.21 per share to our stockholders.

The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations. In addition, under the Basel III Rules, financial institutions have to maintain 2.5% in common equity Tier 1 capital attributable to the capital conservation buffer in order to pay dividends and make other capital distributions. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of June 30, 2022. The National Bank Act imposes limitations on the amount of dividends that a national bank may pay without prior regulatory approval. Generally, the amount is limited to the bank’s current year’s net earnings plus the adjusted retained earnings for the two preceding years. As of June 30, 2022, approximately $30.6 million was available to be paid as dividends to the Company by the Bank without prior regulatory approval.

Additionally, our ability to pay dividends is limited by the subordinated debentures that are held by three business trusts that we control. Interest payments on the debentures must be paid before we pay dividends on our capital stock, including our common stock. We have the right to defer interest payments on the debentures for up to 20 consecutive quarters. However, if we elect to defer interest payments, all deferred interest must be paid before we may pay dividends on our capital stock.

ITEM

  1. 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 decisions relating to pricing our assets and liabilities, which impact 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. 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 interest rates as of the forecast date, and forecasting volumes for the twelve-month projection. This position is then subjected to a shift in interest rates of 100, 200 and 300 basis points with an impact to our net interest income on a one-year horizon as follows:

As<br> of June 30, 2022 As<br> of December 31, 2021
Scenario Dollar<br> change in net interest income (000’s) Percent<br> change in net interest income Dollar<br> change in net interest income (000’s) Percent<br> change in net interest income
300<br> basis point rising ) (1.7 )% 9.9 %
200<br> basis point rising ) (1.1 )% 6.6 %
100<br> basis point rising ) (0.6 )% 3.4 %
100<br> basis point falling ) (4.7 )% ( ) (2.5 )%
200<br> basis point falling ) (10.4 )% NM

All values are in US Dollars.

The 200 basis point falling scenario was considered to be not meaningful (“NM”) as of December 31, 2021.

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SafeHarbor Statement Under the Private Securities Litigation Reform Act of 1995

Forward-Looking Statements

This document (including information incorporated by reference) contains, and future oral and written statements by us and our management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to our financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our 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 we undertake no obligation to update any statement in light of new information or future events.

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 operations and future prospects of us and our subsidiaries include, but are not limited to, the following:

● The<br> effects of changes in interest rates (including the effects of changes in the rate of prepayments<br> of our assets) and the policies of the Federal Reserve including on our net interest income<br> and the value of our security portfolio.
● The<br> effects of the COVID-19 pandemic, including its effects on the economic environment, our<br> customers and our operations, including due to supply chain disruptions, as well as any changes<br> to federal, state or local government laws, regulations or orders in connection with the<br> pandemic.
● The<br> impact of the COVID-19 pandemic on our financial results, including possible lost revenue<br> and increased expenses (including the cost of capital), as well as possible goodwill impairment<br> charges.
● The<br> strength of the United States economy in general and the strength of the local economies<br> in which we conduct our operations, including the effects of the COVID-19 pandemic on such<br> economies, which may be less favorable than expected and may result in, among other things,<br> a deterioration in the credit quality and value of our assets.
● The<br> economic impact of past and any future terrorist attacks, acts of war, including the current<br> conflict in Ukraine, or threats thereof, and the response of the United States to any such<br> threats and attacks.
● The<br> effects of, and changes in, federal, state and local laws, regulations and policies affecting<br> banking, securities, consumer protection, insurance, tax, trade and monetary and financial<br> matters.
● Our<br> ability to compete with other financial institutions due to increases in competitive pressures<br> in the financial services sector.
● Our<br> inability to obtain new customers and to retain existing customers.
● The<br> timely development and acceptance of products and services.
● Technological<br> changes implemented by us and by other parties, including third-party vendors, which may<br> be more difficult to implement or more expensive than anticipated or which may have unforeseen<br> consequences to us and our customers.
● Our<br> ability to develop and maintain secure and reliable electronic systems.
● The<br> effectiveness of our risk management framework.
● The<br> occurrence of fraudulent activity, breaches or failures of our information security controls<br> or cybersecurity-related incidents and our ability to identify and address such incidents.
● Interruptions<br> involving our information technology and telecommunications systems or third-party servicers.
● Changes<br> in and uncertainty related to the availability of benchmark interest rates used to price<br> our loans and deposits, including the expected elimination of LIBOR and the development of<br> a substitute.
● The<br> effects of severe weather, natural disasters, widespread disease or pandemics, and other<br> external events.
● Our<br> ability to retain key executives and employees and the difficulty that we may experience<br> in replacing key executives and employees in an effective manner.
● Consumer<br> spending and saving habits which may change in a manner that affects our business adversely.
● Our<br> ability to successfully integrate acquired businesses and future growth.
● The<br> costs, effects and outcomes of existing or future litigation.
--- --- 
| 36 |

| --- | | ● | Changes<br> in accounting policies and practices, as may be adopted by state and federal regulatory agencies<br> and the FASB, such as the implementation of CECL. | | --- | --- | | ● | Our<br> ability to effectively manage our credit risk. | | ● | Our<br> ability to forecast probable loan losses and maintain an adequate allowance for loan losses. | | ● | The<br> effects of declines in the value of our investment portfolio. | | ● | Our<br> ability to raise additional capital if needed. | | ● | The<br> effects of declines in real estate markets. | | ● | The<br> effects of fraudulent activity on the part of our employees, customers, vendors, or counterparties. |

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, including the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 22, 2022.

ITEM

  1. 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 Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2022. 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 as of June 30, 2022 to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2022 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART

II – OTHER INFORMATION

ITEM

  1. LEGAL PROCEEDINGS

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

ITEM

1A. RISK FACTORS

There have been no material changes in the risk factors set forth under Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM

  1. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases by the Company during the quarter ended June 30, 2022, of the Company’s equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:

Period Total<br> number of<br><br> <br>shares<br> purchased Average<br> price paid per share Total<br> number of shares purchased as part of publicly announced plans (1) Maximum<br> number of shares that may yet be purchased under the plans (1)
April<br> 1-30, 2022 1,537 $ 26.02 1,537 225,465
May<br> 1-31, 2022 12,015 25.30 12,015 213,450
June<br> 1-30, 2022 7,563 25.69 7,563 205,887
Total 21,115 $ 25.49 21,115 205,887

(1) In December 2017, our Board of Directors approved a stock repurchase program, permitting us to repurchase up to 108,006 shares of our common stock, which was the amount of shares remaining under our prior stock repurchase program (“December 2017 Repurchase Program”). Unless terminated earlier by resolution of the Board of Directors, the December 2017 Repurchase Program will expire when we have repurchased all shares authorized for repurchase thereunder. During the second quarter of 2022, the 1,112 shares remaining under the December 2017 Repurchase Program were repurchased and the plan is expired as of June 30, 2022. In March 2020, our Board of Directors approved a new stock repurchase plan, permitting us to repurchase up to 225,890 shares (“March 2020 Repurchase Program”) following repurchase of all shares under the December 2017 Repurchase Program. Unless terminated earlier by resolution of the Board of Directors, the March 2020 Repurchase Program will expire when we have repurchased all shares authorized for repurchase thereunder. As of June 30, 2022, there were 205,887 shares remaining to repurchase under the March 2020 Repurchase Program.

ITEM

  1. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM

  1. MINE SAFETY DISCLOSURES

Not applicable.

ITEM

  1. OTHER INFORMATION

None.

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ITEM

  1. EXHIBITS
Exhibit<br> 2.1 Agreement<br> and Plan of Merger, dated as of June 28, 2022, by and among Landmark Bancorp, Inc., LARK Investment Corporation and Freedom Bancshares,<br> Inc. (incorporated by reference to Exhibit 2.1 to the Company’s report on Form 8-K filed with the SEC on June 28, 2022 (SEC<br> file no. 000-33203))
Exhibit<br> 3.1 Amended<br> and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s transition report on Form<br> 10-K filed with the SEC on March 29, 2002 (SEC file no. 000-33203))
Exhibit<br> 3.2 Certificate<br> of Amendment of the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Company’s<br> report on Form 10-K filed with the SEC on March 29, 2013 (SEC file no. 000-33203))
Exhibit<br> 3.3 Bylaws<br> (incorporated by reference to Exhibit 3.3 to the Company’s Form S-4 filed with the SEC on June 7, 2001 (SEC file no. 333-62466))
Exhibit<br> 31.1 Certificate<br> of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit<br> 31.2 Certificate<br> of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit<br> 32.1 Certification<br> 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<br> 32.2 Certification<br> 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
Exhibit<br> 101 Interactive<br> data files pursuant to Rule 405 of Regulation S-T formatted in Inline XBRL: (i) Consolidated Balance Sheets as of June 30, 2022 and<br> December 31, 2021; (ii) Consolidated Statements of Earnings for the three and six months ended June 30, 2022 and June 30, 2021;<br> (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and June 30, 2021; (iv)<br> Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and June 30, 2021; (v)<br> Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and June 30, 2021; and (vi) Notes to Consolidated<br> Financial Statements
Exhibit<br> 104 Cover<br> Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 
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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<br> BANCORP, INC.
Date: August 12,<br> 2022 /s/ Michael E. Scheopner
Michael E. Scheopner
President and Chief<br> Executive Officer
(Principal Executive<br> Officer)
Date: August 12,<br> 2022 /s/ Mark A. Herpich
Mark A. Herpich
Vice President, Secretary,<br> Treasurer and Chief Financial Officer
(Principal Financial<br> and Accounting Officer) 
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| --- |

Exhibit31.1

CERTIFICATIONPURSUANT TO

RULE13a-14(a)/15d-14(a)

I, Michael E. Scheopner, certify that:

1. I<br> have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.;
2. Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or<br> omit to state a material fact necessary to make the statements made, in light of the circumstances<br> under which such statements were made, not misleading with respect to the period covered<br> by this report;
--- ---
3. Based<br> on my knowledge, the financial statements, and other financial information included in this<br> report, fairly present in all material respects the financial condition, results of operations<br> and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The<br> registrant’s other certifying officer and I are responsible for establishing and maintaining<br> disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))<br> and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)<br> and 15d-15(f)) for the registrant and have:
--- ---
(a) designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures<br> to be designed under our supervision, to ensure that material information relating to the<br> registrant, including its consolidated subsidiaries, is made known to us by others within<br> those entities, particularly during the period in which this report is being prepared;
--- ---
(b) designed<br> such internal control over financial reporting, or caused such internal control over financial<br> reporting to be designed under our supervision, to provide reasonable assurance regarding<br> the reliability of financial reporting and the preparation of financial statements for external<br> purposes in accordance with generally accepted accounting principles;
--- ---
(c) evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented<br> in this report our conclusions about the effectiveness of the disclosure controls and procedures,<br> as of the end of the period covered by this report based on such evaluation; and
--- ---
(d) disclosed<br> in this report any change in the registrant’s internal control over financial reporting<br> that occurred during the registrant’s most recent fiscal quarter (the registrant’s<br> fourth fiscal quarter in the case of an annual report) that has materially affected, or is<br> reasonably likely to materially affect, the registrant’s internal control over financial<br> reporting; and
--- ---
5. The<br> registrant’s other certifying officer and I have disclosed, based on our most recent<br> evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing<br> the equivalent functions):
--- ---
(a) all<br> significant deficiencies and material weaknesses in the design or operation of internal control<br> over financial reporting which are reasonably likely to adversely affect the registrant’s<br> ability to record, process, summarize and report financial information; and
--- ---
(b) any<br> fraud, whether or not material, that involves management or other employees who have a significant<br> role in the registrant’s internal control over financial reporting.
--- ---
Date: August 12, 2022 /s/ Michael E. Scheopner
--- ---
Michael E. Scheopner
Chief Executive Officer

Exhibit31.2

CERTIFICATIONPURSUANT TO

RULE13a-14(a)/15d-14(a)

I, Mark A. Herpich, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.;
2. Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or<br> omit to state a material fact necessary to make the statements made, in light of the circumstances<br> under which such statements were made, not misleading with respect to the period covered<br> by this report;
--- ---
3. Based<br> on my knowledge, the financial statements, and other financial information included in this<br> report, fairly present in all material respects the financial condition, results of operations<br> and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The<br> registrant’s other certifying officer and I are responsible for establishing and maintaining<br> disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))<br> and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)<br> and 15d-15(f)) for the registrant and have:
--- ---
(a) designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures<br> to be designed under our supervision, to ensure that material information relating to the<br> registrant, including its consolidated subsidiaries, is made known to us by others within<br> those entities, particularly during the period in which this report is being prepared;
--- ---
(b) designed<br> such internal control over financial reporting, or caused such internal control over financial<br> reporting to be designed under our supervision, to provide reasonable assurance regarding<br> the reliability of financial reporting and the preparation of financial statements for external<br> purposes in accordance with generally accepted accounting principles;
--- ---
(c) evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented<br> in this report our conclusions about the effectiveness of the disclosure controls and procedures,<br> as of the end of the period covered by this report based on such evaluation; and
--- ---
(d) disclosed<br> in this report any change in the registrant’s internal control over financial reporting<br> that occurred during the registrant’s most recent fiscal quarter (the registrant’s<br> fourth fiscal quarter in the case of an annual report) that has materially affected, or is<br> reasonably likely to materially affect, the registrant’s internal control over financial<br> reporting; and
--- ---
5. The<br> registrant’s other certifying officer and I have disclosed, based on our most recent<br> evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing<br> the equivalent functions):
--- ---
(a) all<br> significant deficiencies and material weaknesses in the design or operation of internal control<br> over financial reporting which are reasonably likely to adversely affect the registrant’s<br> ability to record, process, summarize and report financial information; and
--- ---
(b) any<br> fraud, whether or not material, that involves management or other employees who have a significant<br> role in the registrant’s internal control over financial reporting.
--- ---
Date: August 12, 2022 /s/ Mark A. Herpich
--- ---
Mark A. Herpich
Chief Financial Officer

Exhibit 32.1

CERTIFICATIONPURSUANT TO

18 U.S.C. SECTION1350,

AS ADOPTEDPURSUANT TO

SECTION 906OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Landmark Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael E. Scheopner, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael E. Scheopner
Michael E. Scheopner
Chief Executive Officer
August 12, 2022

Exhibit 32.2

CERTIFICATIONPURSUANT TO

18 U.S.C. SECTION1350,

AS ADOPTEDPURSUANT TO

SECTION 906OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Landmark Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark A. Herpich, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mark A. Herpich
Mark A. Herpich
Chief Financial Officer
August 12, 2022

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