10-Q

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

September 30, 2023

OR

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

For

the transition period from ________ to ________

Commission

File Number 0-33203

LANDMARK

BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	43-1930755
(State or other jurisdiction of<br><br> <br>incorporation or organization)	(I.R.S. Employer<br><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 accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

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

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

Indicate

the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: as of November 10, 2023, the issuer had outstanding 5,220,767 shares of its common stock, $0.01 par value per share.

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LANDMARK

BANCORP, INC.

Form

10-Q Quarterly Report

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Table

of Contents

		Page<br> Number
	PART I
Item<br> 1.	Financial Statements	2<br> - 30
Item<br> 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31<br> – 39
Item<br> 3.	Quantitative and Qualitative Disclosures about Market Risk	40<br> – 41
Item<br> 4.	Controls and Procedures	42
	PART II
Item<br> 1.	Legal Proceedings	42
Item<br> 1A.	Risk Factors	42
Item<br> 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	42
Item<br> 3.	Defaults Upon Senior Securities	42
Item<br> 4.	Mine Safety Disclosures	42
Item<br> 5.	Other Information	42
Item<br> 6.	Exhibits	43
	Signature Page	44

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PART

I – FINANCIAL INFORMATION

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ITEM

1. FINANCIAL STATEMENTS

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

BALANCE SHEETS

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(Dollars in thousands, except per share amounts)			December 31,
			2022
Assets
Cash and cash equivalents	23,821		$	23,156
Interest-bearing deposits at other banks	5,904			9,084
Investment securities available-for-sale, at fair value	456,857			489,306
Investment securities, held-to-maturity, net of allowance for credit losses of 91 and 0, fair value of 3,225 and 3,452	3,525			3,524
Bank stocks, at cost	8,009			5,470
Loans, net of allowance for credit losses of 10,970 and 8,791	926,060			841,149
Loans held for sale, at fair value	1,857			2,488
Bank owned life insurance	38,090			37,323
Premises and equipment, net	23,911			24,327
Goodwill	32,377			32,199
Other intangible assets, net	3,414			4,006
Mortgage servicing rights	3,368			3,813
Real estate owned, net	934			934
Accrued interest and other assets	29,459			26,088
Total assets	1,557,586		$	1,502,867
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing demand	395,046		$	410,142
Money market and checking	586,651			626,659
Savings	157,112			170,570
Certificates of deposit	169,225			93,278
Total deposits	1,308,034			1,300,649
Federal Home Loan Bank and other borrowings	82,569			17,200
Subordinated debentures	21,651			21,651
Repurchase agreements	12,590			29,402
Accrued interest and other liabilities	23,185			22,532
Total liabilities	1,448,029			1,391,434
Commitments and contingencies
Stockholders’ equity:
Preferred stock, 0.01 par value per share, 200,000 shares authorized; none issued	-			-
Common stock, 0.01 par value per share, 7,500,000 shares authorized; 5,221,117 and 5,213,232 shares issued at September 30, 2023 and December 31, 2022, respectively	52			52
Additional paid-in capital	84,568			84,273
Retained earnings	57,280			52,174
Accumulated other comprehensive loss	(32,343	)		(25,066	)
Total stockholders’ equity	109,557			111,433
Total liabilities and stockholders’ equity	1,557,586		$	1,502,867

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)

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	2023		2022			2023		2022
	Three<br> months ended					Nine<br> months ended
(Dollars<br> in thousands, except per share amounts)	September<br> 30,					September<br> 30,
	2023		2022			2023		2022
Interest<br> income:
Loans	$	13,531	$	8,025		$	37,530	$	22,372
Investment<br> securities:
Taxable		2,445		1,739			7,141		4,147
Tax-exempt		772		780			2,333		2,232
Interest-bearing<br> deposits at banks		46		44			193		232
Total<br> interest income		16,794		10,588			47,197		28,983
Interest<br> expense:
Deposits		4,384		771			10,375		1,324
Federal<br> Home Loan Bank and other borrowings		1,251		106			2,845		106
Subordinated<br> debentures		417		234			1,168		522
Repurchase<br> agreements		116		26			403		37
Total<br> interest expense		6,168		1,137			14,791		1,989
Net<br> interest income		10,626		9,451			32,406		26,994
Provision<br> for credit losses		-		500			299		-
Net<br> interest income after provision for credit losses		10,626		8,951			32,107		26,994
Non-interest<br> income:
Fees<br> and service charges		2,618		2,511			7,457		7,079
Gains<br> on sales of loans, net		491		1,049			2,014		3,027
Increase<br> in cash surrender value of bank owned life insurance		230		189			671		566
Losses<br> on sales of investment securities, net		-		(353	)		-		(353	)
Other		313		133			834		569
Total<br> non-interest income		3,652		3,529			10,976		10,888
Non-interest<br> expense:
Compensation<br> and benefits		5,811		5,051			16,925		14,779
Occupancy<br> and equipment		1,373		1,335			4,136		3,745
Data<br> processing		458		383			1,478		1,085
Amortization<br> of mortgage servicing rights and other intangibles		474		314			1,407		965
Professional<br> fees		624		472			1,722		1,338
Acquisition<br> costs		-		134			-		355
Other		1,989		1,769			5,753		5,051
Total<br> non-interest expense		10,729		9,458			31,421		27,318
Earnings<br> before income taxes		3,549		3,022			11,662		10,564
Income<br> tax expense		671		522			2,065		1,898
Net<br> earnings	$	2,878	$	2,500		$	9,597	$	8,666
Earnings<br> per share:
Basic<br> (1)	$	0.55	$	0.48		$	1.84	$	1.65
Diluted<br> (1)	$	0.55	$	0.48		$	1.84	$	1.65
Dividends<br> per share (1)	$	0.21	$	0.20		$	0.63	$	0.60
(1)	Per share amounts<br>for the periods ended September 30, 2022 have been adjusted to give effect to the 5% stock dividend paid during December 2022.
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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)

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	Three<br> months ended						Nine<br> months ended
(Dollars<br> in thousands)	September<br> 30,						September<br> 30,
	2023			2022			2023			2022
Net<br> earnings	$	2,878		$	2,500		$	9,597		$	8,666
Net<br> unrealized holding losses on available-for-sale securities		(12,810	)		(17,324	)		(9,639	)		(46,510	)
Reclassification<br> adjustment for net losses included in earnings		-			353			-			353
Net<br> unrealized losses		(12,810	)		(16,971	)		(9,639	)		(46,157	)
Income<br> tax effect on net losses included in earnings		-			(86	)		-			(87	)
Income<br> tax effect on net unrealized holding losses		3,139			4,244			2,362			11,395
Other<br> comprehensive loss		(9,671	)		(12,813	)		(7,277	)		(34,849	)
Total<br> comprehensive (loss) income	$	(6,793	)	$	(10,313	)	$	2,320		$	(26,183	)

See accompanying notes to consolidated financial statements.

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

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(Dollars<br> in thousands, except per share amounts)		Additional<br> paid-in capital		Retained<br> earnings			Treasury<br> stock			Accumulated<br> other comprehensive income (loss)			Total
Balance<br> at July 1, 2022	50	$	79,284	$	56,662		$	(538	)	$	(18,156	)	$	117,302
Net<br> earnings	-		-		2,500			-			-			2,500
Other<br> comprehensive loss	-		-		-			-			(12,813	)		(12,813	)
Dividends<br> paid (0.20 per share)	-		-		(1,048	)		-			-			(1,048	)
Issue<br> of restricted common stock, 17,551 shares	-		-		-			-			-			-
Stock-based<br> compensation	-		45		-			-			-			45
Purchase<br> of 19,691 treasury shares	-		-		-			(502	)		-			(502	)
Balance<br> at September 30, 2022	50	$	79,329	$	58,114		$	(1,040	)	$	(30,969	)	$	105,484
Balance<br> at July 1, 2023	52	$	84,475	$	55,498		$	-		$	(22,672	)	$	117,353
Net<br> earnings	-		-		2,878			-			-			2,878
Other<br> comprehensive loss	-		-		-			-			(9,671	)		(9,671	)
Dividends<br> paid (0.21 per share)	-		-		(1,096	)		-			-			(1,096	)
Issuance<br> of restricted common stock, 5,192 shares	-		-		-			-			-			-
Stock-based<br> compensation	-		93		-			-			-			93
Balance<br> at September 30, 2023	52	$	84,568	$	57,280		$	-		$	(32,343	)	$	109,557

All values are in US Dollars.

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(Dollars<br> in thousands, except per share amounts)		Additional<br> paid-in capital		Retained<br> earnings			Treasury<br> stock			Accumulated<br> other comprehensive income (loss)			Total
Balance<br> at January 1, 2022	50	$	79,120	$	52,593		$	-		$	3,880		$	135,643
Net<br> earnings	-		-		8,666						-			8,666
Other<br> comprehensive loss	-		-		-			-			(34,849	)		(34,849	)
Dividends<br> paid (0.60 per share)	-		-		(3,145	)		-			-			(3,145	)
Issuance<br> of restricted common stock, 17,551 shares	-		-		-			-			-			-
Stock-based<br> compensation	-		209		-			-			-			209
Purchase<br> of 40,806 treasury shares	-		-		-			(1,040	)		-			(1,040	)
Balance<br> at September 30, 2022	50	$	79,329	$	58,114		$	(1,040	)	$	(30,969	)	$	105,484
Balance<br> at January 1, 2023	52	$	84,273	$	52,174		$	-		$	(25,066	)	$	111,433
Balance	52	$	84,273	$	52,174		$	-		$	(25,066	)	$	111,433
Net<br> earnings	-		-		9,597						-			9,597
Other<br> comprehensive loss	-		-		-			-			(7,277	)		(7,277	)
Dividends<br> paid (0.63 per share)	-		-		(3,287	)		-			-			(3,287	)
Dividends<br>paid	-		-		(3,287	)		-			-			(3,287	)
Cumulative effect of change in accounting  principle from implementation of ASU 2016-13	-		-		(1,204	)		-			-			(1,204	)
Forfeiture<br> of restricted common stock, 350 shares	-		-		-			-			-			-
Issuance<br> of restricted common stock, 5,192 shares	-		-		-			-			-			-
Stock-based<br> compensation	-		243		-			-			-			243
Exercise<br> of stock options, 2,693 shares	-		52		-			-			-			52
Balance<br> at September 30, 2023	52	$	84,568	$	57,280		$	-		$	(32,343	)	$	109,557
Balance	52	$	84,568	$	57,280		$	-		$	(32,343	)	$	109,557

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)

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Cash<br> flows from operating activities:	2023			2022
	Nine<br> months ended
(Dollars<br> in thousands)	September<br> 30
Cash<br> flows from operating activities:	2023			2022
Net<br> earnings	$	9,597		$	8,666
Adjustments<br> to reconcile net earnings to net cash provided by operating activities:
Provision<br> for credit losses		299			-
Amortization<br> of investment security premiums, net		221			1,272
Accretion<br> of purchase accounting adjustments		(750	)		(22	)
Amortization<br> of mortgage servicing rights and other intangibles		1,407			965
Depreciation		936			836
Increase<br> in cash surrender value of bank owned life insurance		(671	)		(566	)
Stock-based<br> compensation		243			209
Deferred<br> income taxes		7			139
Net<br> losses on sales of investment securities		-			353
Net<br> gains on sales of premises and equipment and foreclosed assets		-			(114	)
Net<br> gains on sales of loans		(2,014	)		(3,027	)
Proceeds<br> from sales of loans		69,747			124,886
Origination<br> of loans held for sale		(67,472	)		(120,509	)
Changes<br> in assets and liabilities:
Accrued<br> interest and other assets		(625	)		(828	)
Accrued<br> expenses, taxes, and other liabilities		445			2,243
Net<br> cash provided by operating activities		11,370			14,503
Cash<br> flows from investing activities:
Net<br> increase in loans		(86,015	)		(48,883	)
Net<br> change in interest-bearing deposits at banks		3,166			(1,482	)
Maturities<br> and prepayments of investment securities		41,250			40,885
Purchases<br> of investment securities		(18,647	)		(201,511	)
Proceeds<br> from sales of available-for-sale securities		-			11,210
Redemption<br> of bank stocks		8,564			185
Purchase<br> of bank stocks		(11,103	)		(3,921	)
Premiums<br> paid on bank owned life insurance		(96	)		-
Proceeds<br> from sales of premises and equipment and foreclosed assets		-			1,379
Purchases<br> of premises and equipment, net		(520	)		(661	)
Net<br> cash used in investing activities		(63,401	)		(202,799	)
Cash<br> flows from financing activities:
Net<br> increase (decrease) in deposits		7,374			(31,344	)
Federal<br> Home Loan Bank advance borrowings		560,546			178,139
Federal<br> Home Loan Bank advance repayments		(494,179	)		(103,239	)
Proceeds<br> from other borrowings		-			10,000
Repayments<br> on other borrowings		(998	)		-
Change<br> in repurchase agreements		(16,812	)		(1,054	)
Proceeds<br> from exercise of stock options		52			-
Payment<br> of dividends		(3,287	)		(3,145	)
Purchase<br> of treasury stock		-			(1,040	)
Net<br> cash provided by financing activities		52,696			48,317
Net<br> decrease in cash and cash equivalents		665			(139,979	)
Cash<br> and cash equivalents at beginning of period		23,156			189,213
Cash<br> and cash equivalents at end of period	$	23,821		$	49,234

(Continued)

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LANDMARK

BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF CASH FLOWS, CONTINUED

(Unaudited)

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	Nine<br> months ended
(Dollars<br> in thousands)	September<br> 30,
	2023		2022
Supplemental<br> disclosure of cash flow information:
Cash<br> payments for income taxes	$	-	$	320
Cash<br> paid for interest		13,641		1,866
Cash<br> paid for operating leases		118		128
Supplemental<br> schedule of noncash investing and financing activities:
Investment<br> securities purchases not yet settled		-		1,740

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 30, 2023, containing the latest audited consolidated financial statements and notes thereto. The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected herein. The results of the three and nine-month interim period ended September 30, 2023 are not necessarily indicative of the results expected for the year ending December 31, 2023 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.Summary of Significant Accounting Policies

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), commonly referred to as “CECL.” The provisions of the update eliminated the probable initial recognition threshold under previous 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 purchased 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. Under CECL loans determined to be purchased credit deteriorated will have an allowance for credit losses established through purchase accounting. Finally, increased disclosure requirements under CECL oblige organizations to present credit quality disclosures disaggregated by the year of origination or vintage. 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.

On January 1, 2023, the Company adopted CECL. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity investment securities. It also applies to off-balance credit exposures not accounted for as insurance (loan commitments and standby letters of credit). In addition, ASC 326 made changes to the accounting for available-for-sale investment securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The

Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP requirements. The adoption of CECL resulted in an increase in the allowance for credit losses on loans of $1.5 million, an initial allowance for credit losses on held-to-maturity investment securities of $72,000, an increase in deferred tax assets of $391,000 and a decrease in retained earnings of $1.2 million. The increases in allowance for credit losses is primarily due to moving to a weighted average remaining maturity allowance methodology and the transition of purchase accounting discounts on loans from an adjustment to amortized cost in the allowance calculation.

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The following table illustrates the impact of ASC 326:

Schedule of Purchase Accounting Discounts on Loans from an Adjustment to Amortized Cost

	January<br> 1, 2023
(Dollars<br> in thousands)	As<br> reported under ASC 326		Pre-ASC<br> 326 adoption		Impact<br> of ASC 326 adoption
Allowance<br> for credit losses:
Held-to-maturity<br> investment securities	$	72	$	-	$	72
One-to-four<br> family residential real estate loans	$	1,677	$	655	$	1,022
Construction<br> and land loans		166		117		49
Commercial<br> real estate loans		4,221		3,158		1,063
Commercial<br> loans		2,898		2,753		145
Paycheck<br> protection program loans		-		-		-
Agriculture<br> loans		1,142		1,966		(824	)
Municipal<br> loans		16		5		11
Consumer<br> loans		194		137		57
Total<br> allowance for credit losses for loans	$	10,314	$	8,791	$	1,523
Unfunded<br> loan commitments	$	170	$	170	$	-

InvestmentSecurities. Investment securities are classified as held-to-maturity when management has the positive intent and ability to hold them to maturity. Securities are classified as available-for-sale when they might be sold before maturity. Held-to-maturity securities are carried at amortized cost while available-for-sale securities are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Realized gains and losses on sales of available-for-sale securities are recorded on a trade date basis and are calculated using the specific identification method.

Allowancefor Credit Losses – Held-to-Maturity Investment Securities. Management measures expected credit losses on held-to-maturity investment securities on a collective basis by major security type. Accrued interest is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical loss information adjusted for current conditions and reasonable and supportable forecasts.

Allowancefor Credit Losses – Available-for-Sale Investment Securities. For available-for-sale investment securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, the current interest rate environment, changes to rating of the security or security issuer, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected was less than the amortized cost basis, a credit loss existed and an allowance for credit losses would be recorded for the credit loss, which is limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for or reversal of credit loss expense. Losses are charged against the allowance for credit losses when the Company determines the available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met. The Company does not estimate credit losses on available-for-sale security accrued interest receivable.

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**Loans.**Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. The amortized cost is the principal balance outstanding net of previous charge-offs, and for purchased loans, net of unamortized purchase premiums and discounts. Interest income is accrued on the unpaid principal balance. Origination fees received on loans held in portfolio and the estimated direct costs of origination are deferred and amortized to interest income using the level yield method without anticipating prepayments.

The accrual of interest on non-performing loans is discontinued at the time the loan is ninety 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 the principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on non-accrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method, until qualifying for return to accrual. Loans are evaluated individually and are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowancefor Credit Losses - Loans. The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on loans. The analysis is updated on a quarterly basis based on historical loss information adjusted for current conditions and reasonable and supportable forecasts. Additionally, the Company considers asset quality trends, composition and trends in the loan portfolio, underlying collateral values, industry trends and other pertinent factors, including regulatory recommendations. The level of the allowance for credit losses maintained by management is believed adequate to absorb all expected future losses expected in the loan portfolio at the balance sheet date. The allowance is adjusted through provision for credit losses and charge-offs, net of recoveries of amounts previously charged off.

The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. The Company has identified the following pools of financial assets with similar risk characteristics for measuring expected credit losses.

One-to-FourFamily Residential Real Estate. One-to-four family residential real estate loans consists primarily of loans secured by 1-4 family residential properties. Repayment is primarily dependent on the personal cash flow of the borrower.

---

Constructionand Land. Construction and land loans consist primarily of loans to facilitate the development of both residential and commercial real estate. Repayment is primarily dependent on the completion of the development and refinancing to longer term financing.

---

CommercialReal Estate. Commercial real estate loans consist primarily of loans secured by office buildings, industrial buildings, warehouses, retail buildings and multi-family housing and are primarily owner-occupied. For such loans, repayment is largely dependent upon the operation of the borrower’s business.

**Commercial.**Commercial loans include loans to business enterprises issued for commercial, industrial and/or other professional purposes. These loans are generally secured by equipment, inventory and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

**Agriculture.**Agriculture loans include operating and real estate loans to agriculture enterprises. Generally, the borrower’s ability to repay is based on the cash flows from farming operations.

**Municipal.**Municipal loans are generally related to equipment leasing or general fund loans. Repayment is primarily dependent on the tax revenue of the municipal entity.

**Consumer.**Consumer loans include automobile, boat, home improvement and home equity loans. Repayment is primarily dependent on the personal cash flow of the borrower.

The Company utilized a weighted average remaining maturity allowance methodology to calculate the allowance for credit losses. Historical loss rates are adjusted for current conditions and reasonable and supportable forecasts. Following the economic forecast period loss rates revert back to historical loss rates over a reasonable period of time. Additional adjustments for qualitative factors are included to quantify the risks within each of the loan categories that are not included in the historical loss rates or economic projections. The data for the allowance calculation may be obtained from internal or external sources.

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Loans that do not share similar risk characteristics with the collectively evaluated pools are evaluated on an individual basis and are excluded from the collectively evaluated loan pools. Such loans are evaluated for credit losses based on either discounted cash flows or the fair value of collateral.

The Company estimates expected credit losses over the contractual term of obligations to extend credit, unless the obligation is unconditionally cancellable. The allowance for off-balance-sheet exposures is adjusted through the provision for credit losses. The estimates are determined based on the likelihood of funding during the contractual term and an estimate of credit losses subsequent to funding. Estimated credit losses on subsequently funded balances are based on the same assumptions used to estimated credit losses on loans.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures which eliminated the recognition and measurement guidance for troubled debt restructurings (“TDRs”) by creditors in ASC 310-40. The update also enhanced disclosure required for loan restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity will apply the loan refinancing and restructuring guidance to determine whether a modification or other form of restructuring results in a new loan or a continuation of an existing loan. Additionally, the amendments to this ASU require a public business entity to disclose current period gross charge-offs by year of origination for loans in the vintage disclosures.

On January 1, 2023, the Company adopted ASU 2022-02, electing the prospective approach. The adoption did not have a material effect on the Company’s operating results or financial condition. The disclosures in this document have been updated to reflect the new guidance.

LoansModifications. Loan modifications, including modifications to borrowers experiencing financial difficulty, are treated as a new loan if two conditions are met. The terms of the new loan are at least as favorable to the Company as the terms for comparable loans to other customers with similar collection risks and modifications to the terms of the original loan are more than minor.

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3.Investments

A summary of investment securities available-for-sale and held-to-maturity is as follows:

Schedule of Available-for-sale and Held to Maturity Securities

(Dollars<br> in thousands)	As<br> of September 30, 2023
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair<br> value
Available-for-sale:
U.<br> S. treasury securities	$	125,667	$	-	$	(7,326	)	$	118,341
Municipal<br> obligations, tax exempt		124,352		-		(8,646	)		115,706
Municipal<br> obligations, taxable		81,834		-		(7,841	)		73,993
Agency<br> mortgage-backed securities		167,842		-		(19,025	)		148,817
Total<br> available-for-sale	$	499,695	$	-	$	(42,838	)	$	456,857
	As<br> of September 30, 2023
---	---	---	---	---	---	---	---	---	---
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair<br> value
Held-to-maturity:
Other	$	3,525	$	-	$	(300	)	$	3,225
Total<br> held-to-maturity	$	3,525	$	-	$	(300	)	$	3,225
	As<br> of December 31, 2022
---	---	---	---	---	---	---	---	---	---
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair<br> value
Available-for-sale:
U.<br> S. treasury securities	$	130,684	$	-	$	(7,573	)	$	123,111
U.<br> S. federal agency obligations		2,002		-		(14	)		1,988
Municipal<br> obligations, tax exempt		130,848		59		(3,645	)		127,262
Municipal<br> obligations, taxable		73,520		14		(6,290	)		67,244
Agency<br> mortgage-backed securities		185,451		172		(15,922	)		169,701
Total<br> available-for-sale	$	522,505	$	245	$	(33,444	)	$	489,306
	As<br> of December 31, 2022
---	---	---	---	---	---	---	---	---	---
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair<br> value
Held-to-maturity:
Other	$	3,524	$	5	$	(77	)	$	3,452
Total<br> held-to-maturity	$	3,524	$	5	$	(77	)	$	3,452

The

amortized cost of the above held-to-maturity investment securities has been further reduced by the allowance for credit losses of $91,000 at September 30, 2023.

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The tables above show that some of the securities in the available-for-sale and held-to-maturity investment portfolios had unrealized losses, or were temporarily impaired, as of September 30, 2023 and December 31, 2022. 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 September 30, 2023
(Dollars<br> in thousands)			Less<br> than 12 months					12<br> months or longer					Total
	No.<br> of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Available-for-sale:	securities		value		losses			value		losses			value		losses
U.S.<br> treasury securities		66	$	909	$	(10	)	$	117,432	$	(7,316	)	$	118,341	$	(7,326	)
Municipal<br> obligations, tax exempt		290		50,036		(3,126	)		65,225		(5,520	)		115,261		(8,646	)
Municipal<br> obligations, taxable		126		23,773		(1,519	)		50,220		(6,322	)		73,993		(7,841	)
Agency<br> mortgage-backed securities		103		20,263		(629	)		128,554		(18,396	)		148,817		(19,025	)
Total<br> for available-for-sale		585	$	94,981	$	(5,284	)	$	361,431	$	(37,554	)	$	456,412	$	(42,838	)
Held-to-maturity:
Other		7	$	3,225	$	300		$	-	$	-		$	3,225	$	300
Total<br> held-to-maturity		7		3,225		300			-		-			3,225		300
			As<br> of December 31, 2022
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
			Less<br> than 12 months					12<br> months or longer					Total
	No.<br> of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Available-for-sale:	securities		value		losses			value		losses			value		losses
U.S.<br> treasury securities		67	$	85,988	$	(4,591	)	$	37,123	$	(2,982	)	$	123,111	$	(7,573	)
U.S.<br> federal agency obligations		1		1,988		(14	)		-		-			1,988		(14	)
Municipal<br> obligations, tax exempt		274		107,262		(3,020	)		8,495		(625	)		115,757		(3,645	)
Municipal<br> obligations, taxable		108		54,746		(5,006	)		7,571		(1,284	)		62,317		(6,290	)
Agency<br> mortgage-backed securities		100		78,971		(4,550	)		79,882		(11,372	)		158,853		(15,922	)
Total<br> for available-for-sale		550		328,955		(17,181	)		133,071		(16,263	)		462,026		(33,444	)
Held-to-maturity:
Other		6	$	3,009	$	(77	)	$	-	$	-		$	3,009	$	(77	)
Total<br> held-to-maturity		6		3,009		(77	)		-		-			3,009		(77	)

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 September 30, 2023 and December 31, 2022.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. As of September 30, 2023, 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 September 30, 2023 and December 31, 2022.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“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 September 30, 2023 and December 31, 2022.

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The Company’s other investment securities portfolio consists of seven subordinated debentures issued by financial institutions. These investment securities were acquired in the Freedom Bank acquisition and classified as held-to-maturity. The securities were issued in 2021 and 2022 with a 10 year maturity and a fixed rate for five years. The securities are callable after the end of the fixed rate term. 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 other securities identified in the tables above were temporarily impaired as of September 30, 2023 and December 31, 2022.

The following table provides information on the Company’s allowance for credit losses related to held-to-maturity investment securities.

Schedule of Allowance for Credit Losses Related to Held-to-maturity Investment Securities

(Dollars<br> in thousands)
Balance<br> at January 1, 2023	$	-
Impact<br> of adopting ASC 326		72
Provision<br> for credit losses		19
Balance<br> at September 30, 2023	$	91

The table below sets forth amortized cost and fair value of investment securities at September 30, 2023. 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
Available-for-sale:	cost		fair<br> value
Due<br> in less than one year	$	37,975	$	37,272
Due<br> after one year but within five years		265,924		244,855
Due<br> after five years but within ten years		142,733		127,386
Due<br> after ten years		53,063		47,344
Total<br> available-for-sale	$	499,695	$	456,857
Held-to-maturity:
Due<br> after five years but within ten years		3,525		3,225
Total<br> held-to-maturity	$	3,525	$	3,225

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)

	2023		2022			2023		2022
(Dollars<br> in thousands)	Three<br> months ended September 30,					Nine<br> months ended September 30,
	2023		2022			2023		2022
Sales<br> proceeds	$	-	$	11,210		$	-	$	11,210
Realized<br> gains	$	-	$	-		$	-	$	-
Realized<br> losses		-		(353	)		-		(353	)
Net<br> realized losses	$	-	$	(353	)	$	-	$	(353	)

Securities

with carrying values of $398.2 million and $420.8 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at September 30, 2023 and December 31, 2022, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.

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4.Loans and Allowance for Credit Losses

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

Schedule of Loans

	September<br> 30,			December<br> 31,
(Dollars<br> in thousands)	2023			2022
One-to-four<br> family residential real estate loans	$	289,571		$	236,982
Construction<br> and land loans		21,657			22,725
Commercial<br> real estate loans		323,427			304,074
Commercial<br> loans		185,831			173,415
Paycheck<br> protection program loans		-			21
Agriculture<br> loans		84,560			84,283
Municipal<br> loans		3,200			2,026
Consumer<br> loans		29,180			26,664
Total<br> gross loans		937,426			850,190
Net<br> deferred loan fees and loans in process		(396	)		(250	)
Allowance<br> for credit losses		(10,970	)		(8,791	)
Loans,<br> net	$	926,060		$	841,149

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The following tables provide information on the Company’s allowance for credit losses by loan class and allowance methodology:

Schedule of Allowance for Credit Losses on Financing Receivables

	Three<br> and nine months ended September 30, 2023
(Dollars<br> in thousands)	One-to-four<br> family residential real estate loans		Construction<br> and land loans			Commercial<br> real estate loans		Commercial<br> loans			Paycheck<br> protection program loans		Agriculture<br> loans			Municipal<br> loans			Consumer<br> loans			Total
Allowance<br> for credit losses:
Balance<br> at July 1, 2023	$	1,852	$	161		$	4,373	$	2,710		$	-	$	1,134		$	16		$	203		$	10,449
Charge-offs		-		-			-		(44	)		-		-			-			(98	)		(142	)
Recoveries		-		626			-		9			-		1			-			27			663
Provision<br> for credit losses		38		(641	)		81		469			-		(45	)		(1	)		99			-
Impact of adopting ASC 326		-		-			-		-			-		-			-			-			-
Balance<br> at September 30, 2023	$	1,890	$	146		$	4,454	$	3,144		$	-	$	1,090		$	15		$	231		$	10,970
Allowance<br> for credit losses:
Balance<br> at January 1, 2023	$	655	$	117		$	3,158	$	2,753		$	-	$	1,966		$	5		$	137		$	8,791
Impact<br> of adopting ASC 326		1,022		49			1,063		145			-		(824	)		11			57			1,523
Charge-offs		-		-			-		(151	)		-		-			-			(257	)		(408	)
Recoveries		-		626			-		28			-		74			-			86			814
Provision<br> for credit losses		213		(646	)		233		369			-		(126	)		(1	)		208			250
Balance<br> at September 30, 2023	$	1,890	$	146		$	4,454	$	3,144		$	-	$	1,090		$	15		$	231		$	10,970
	Three<br> and nine months ended September 30, 2022
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Dollars<br> in thousands)	One-to-four<br> family residential real estate loans			Construction<br> and land loans			Commercial<br> real estate loans		Commercial<br> loans		Paycheck<br> protection program loans		Agriculture<br> loans			Municipal<br> loans			Consumer<br> loans			Total
Allowance<br> for credit losses:
Balance<br> at July 1, 2022	$	580		$	133		$	2,982	$	2,651	$	-	$	1,820		$	6		$	143		$	8,315
Charge-offs		-			-			-		-		-		-			-			(106	)		(106	)
Recoveries		-			65			-		5		-		56			-			23			149
Provision<br> for credit losses		25			(92	)		216		146		-		130			(1	)		76			500
Balance<br> at September 30, 2022	$	605		$	106		$	3,198	$	2,802	$	-	$	2,006		$	5		$	136		$	8,858
Allowance<br> for credit losses:
Balance<br> at January 1, 2022	$	623		$	138		$	3,051	$	2,613	$	-	$	2,221		$	6		$	123		$	8,775
Balance	$	623		$	138		$	3,051	$	2,613	$	-	$	2,221		$	6		$	123		$	8,775
Charge-offs		-			-			-		-		-		-			-			(235	)		(235	)
Recoveries		-			165			-		28		-		59			6			60			318
Provision<br> for credit losses		(18	)		(197	)		147		161		-		(274	)		(7	)		188			-
Balance<br> at September 30, 2022	$	605		$	106		$	3,198	$	2,802	$	-	$	2,006		$	5		$	136		$	8,858
Balance	$	605		$	106		$	3,198	$	2,802	$	-	$	2,006		$	5		$	136		$	8,858
	As<br> of December 31, 2022
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Dollars<br> in thousands)	One-to-four<br> family residential real estate loan		Construction<br> and land loans		Commercial<br> real estate loans		Commercial<br> loans		Paycheck<br> protection program loans		Agriculture<br> loans		Municipal<br> loans		Consumer<br> loans		Total
Allowance<br> for credit losses:
Individually<br> evaluated for loss	$	-	$	-	$	-	$	636	$	-	$	18	$	-	$	-	$	654
Collectively<br> evaluated for loss		655		117		3,158		2,117		-		1,948		5		137		8,137
Total	$	655	$	117	$	3,158	$	2,753	$	-	$	1,966	$	5	$	137	$	8,791
Loan<br> balances:
Individually<br> evaluated for loss	$	326	$	412	$	1,224	$	812	$	-	$	1,319	$	36	$	-	$	4,129
Collectively<br> evaluated for loss		236,656		22,313		302,850		172,603		21		82,964		1,990		26,664		846,061
Total	$	236,982	$	22,725	$	304,074	$	173,415	$	21	$	84,283	$	2,026	$	26,664	$	850,190

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The

Company recorded net loan recoveries of $521,000 during the third quarter of 2023 compared to net loan recoveries of $43,000 during the third quarter of 2022. The Company recorded net loan recoveries of $406,000 during the nine months ended September 30, 2023 compared to net loan recoveries of $83,000 during the nine months ended September 30, 2022.

The following table presents information on non-accrual and loans past due over 89 days and still accruing:

Schedule of Non-accrual and Loans Past Due Over 89 Days Still Accruing

(Dollars<br> in thousands)	As<br> of September 30, 2023
	Non-accrual with no allowance for credit loss		Non-accrual with allowance for credit losses		Loans past due over 89 days still accruing
One-to-four<br> family residential real estate loans	$	31	$	-	$	-
Construction<br> and land loans		193		-		-
Commercial<br> real estate loans		1,211		-		-
Commercial<br> loans		208		2,551		-
Paycheck<br> protection program loans		-		-		-
Agriculture<br> loans		214		4		-
Municipal<br> loans		-		-		-
Consumer<br> loans		28		-		-
Total<br> loans	$	1,885	$	2,555	$	-

The following table presents information on impaired loans:

Schedule of Impaired Financing Receivables

(Dollars<br> in thousands)	As<br> of December 31, 2022
	Unpaid<br> contractual principal		Impaired<br> loan balance		Impaired<br> loans without an allowance		Impaired<br> loans with an allowance		Related<br> allowance recorded		Year-to-date<br> average loan balance		Year-to-date<br> interest income recognized
One-to-four<br> family residential real estate	$	326	$	326	$	326	$	-	$	-	$	357	$	9
Construction<br> and land		843		412		412		-		-		243		10
Commercial<br> real estate		1,224		1,224		1,224		-		-		1,224		47
Commercial		1,063		812		75		737		636		865		5
Agriculture		1,402		1,319		1,301		18		18		1,433		64
Municipal		36		36		36		-		-		36		1
Consumer		-		-		-		-		-		-		-
Total<br> impaired loans	$	4,894	$	4,129	$	3,374	$	755	$	654	$	4,158	$	136

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 September 30, 2023 or December 31, 2022.

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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 September 30, 2023
	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	$	-		$	141		$	-		$	141		$	31		$	172		$	289,399
Construction<br> and land loans		-			-			-			-			193			193			21,464
Commercial<br> real estate loans		1,280			-			-			1,280			1,211			2,491			320,936
Commercial<br> loans		4,389			10			-			4,399			2,759			7,158			178,673
Paycheck<br> protection program loans		-			-			-			-			-			-			-
Agriculture<br> loans		22			236			-			258			218			476			84,084
Municipal<br> loans		-			-			-			-			-			-			3,200
Consumer<br> loans		95			-			-			95			28			123			29,057
Total	$	5,786		$	387		$	-		$	6,173		$	4,440		$	10,613		$	926,813
Percent<br> of gross loans		0.62	%		0.04	%		0.00	%		0.66	%		0.47	%		1.13	%		98.87	%
(Dollars<br> in thousands)	As<br> of December 31, 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	$	8		$	72		$	-		$	80		$	170		$	250		$	236,732
Construction<br> and land loans		-			-			-			-			195			195			22,530
Commercial<br> real estate loans		-			-			-			-			1,224			1,224			302,850
Commercial<br> loans		-			411			-			411			812			1,223			172,192
Paycheck<br> protection program loans		-			-			-			-			-			-			21
Agriculture<br> loans		-			180			-			180			925			1,105			83,178
Municipal<br> loans		-			-			-			-			-			-			2,026
Consumer<br> loans		67			-			-			67			-			67			26,597
Total	$	75		$	663		$	-		$	738		$	3,326		$	4,064		$	846,126
Percent<br> of gross loans		0.01	%		0.08	%		0.00	%		0.09	%		0.39	%		0.48	%		99.52	%

Under

the original terms of the Company’s non-accrual loans, interest earned on such loans for the nine months ended September 30, 2023 and 2022 would have increased interest income by $75,000 and $155,000, respectively. No interest income related to non-accrual loans was included in interest income for the three and nine months ended September 30, 2023 and 2022.

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.

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.

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The following table presents information on the Company’s risk category of loans by type and year of origination:

Schedule of Troubled

Debt Restructurings on Financings Receivables and Year of Origination

(Dollars<br> in thousands)	As<br> of September 30, 2023
	2023		2022			2021			2020			2019		Prior		Revolving<br> loans amortized cost			Revolving<br> loans converted to term		Total
One-to-four<br> family residential real estate loans
Nonclassified	$	76,711	$	86,384		$	43,601		$	34,007		$	13,013	$	31,361	$	4,052		$	411	$	289,540
Classified		-		-			-			-			-		31		-			-		31
Total	$	76,711	$	86,384		$	43,601		$	34,007		$	13,013	$	31,392	$	4,052		$	411	$	289,571
Charge-offs	$	-	$	-		$	-		$	-		$	-	$	-	$	-		$	-	$	-
Construction<br> and land loans
Nonclassified	$	5,531	$	5,731		$	5,390		$	2,688		$	924	$	341	$	530		$	329	$	21,464
Classified		-		-			-			-			-		193		-			-		193
Total	$	5,531	$	5,731		$	5,390		$	2,688		$	924	$	534	$	530		$	329	$	21,657
Charge-offs	$	-	$	-		$	-		$	-		$	-	$	-	$	-		$	-	$	-
Commercial<br> real estate loans
Nonclassified	$	32,881	$	77,872		$	59,680		$	54,139		$	31,836	$	60,917	$	2,751		$	389	$	320,465
Classified		-		-			484			25			181		2,272		-			-		2,962
Total	$	32,881	$	77,872		$	60,164		$	54,164		$	32,017	$	63,189	$	2,751		$	389	$	323,427
Charge-offs	$	-	$	-		$	-		$	-		$	-	$	-	$	-		$	-	$	-
Commercial<br> loans
Nonclassified	$	33,938	$	35,464		$	18,840		$	17,282		$	2,990	$	4,991	$	61,285		$	4,579	$	179,369
Classified		220		2,037			641			488			535		37		2,305			199		6,462
Total	$	34,158	$	37,501		$	19,481		$	17,770		$	3,525	$	5,028	$	63,590		$	4,778	$	185,831
Charge-offs	$	-	$	(17	)	$	(90	)	$	(44	)	$	-	$	-	$	-		$	-	$	(151	)
Agriculture<br> loans
Nonclassified	$	4,597	$	12,195		$	5,361		$	4,250		$	4,225	$	12,643	$	40,920		$	151	$	84,342
Classified		-		-			-			-			50		114		54			-		218
Total	$	4,597	$	12,195		$	5,361		$	4,250		$	4,275	$	12,757	$	40,974		$	151	$	84,560
Charge-offs	$	-	$	-		$	-		$	-		$	-	$	-	$	-		$	-	$	-
Municipal<br> loans
Nonclassified	$	1,452	$	135		$	-		$	-		$	-	$	1,613	$	-		$	-	$	3,200
Classified		-		-			-			-			-		-		-			-		-
Total	$	1,452	$	135		$	-		$	-		$	-	$	1,613	$	-		$	-	$	3,200
Charge-offs	$	-	$	-		$	-		$	-		$	-	$	-	$	-		$	-	$	-
Consumer<br> loans
Nonclassified	$	4,282	$	1,493		$	1,477		$	1,398		$	2	$	5,177	$	15,302		$	21	$	29,152
Classified		-		-			1			-			-		-		25			2		28
Total	$	4,282	$	1,493		$	1,478		$	1,398		$	2	$	5,177	$	15,327		$	23	$	29,180
Charge-offs	$	-	$	-		$	-		$	-		$	-	$	-	$	(257	)	$	-	$	(257	)
Total<br> loans
Nonclassified	$	159,392	$	219,274		$	134,349		$	113,764		$	52,990	$	117,043	$	124,840		$	5,880	$	927,532
Classified		220		2,037			1,126			513			766		2,647		2,384			201		9,894
Total	$	159,612	$	221,311		$	135,475		$	114,277		$	53,756	$	119,690	$	127,224		$	6,081	$	937,426
Charge-offs	$	-	$	(17	)	$	(90	)	$	(44	)	$	-	$	-	$	(257	)	$	-	$	(408	)

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

Schedule of Troubled Debt Restructurings on Financing Receivables

	As<br> of December 31, 2022
(Dollars<br> in thousands)	Nonclassified		Classified
One-to-four<br> family residential real estate loans	$	236,663	$	319
Construction<br> and land loans		22,530		195
Commercial<br> real estate loans		300,216		3,858
Commercial<br> loans		165,709		7,706
Paycheck<br> protection program loans		21		-
Agriculture<br> loans		83,358		925
Municipal<br> loan		2,026		-
Consumer<br> loans		26,664		-
Total	$	837,187	$	13,003

The following table provides information on the Company’s allowance for credit losses related to unfunded loan commitments.

Schedule of Allowance for Credit Losses Related to Unfunded Loan Commitments

(dollars<br> in thousands)
Balance<br> at January 1, 2023	$	170
Impact<br> of adopting ASC 326		-
Provision<br> for credit losses		30
Balance<br> at September 30, 2023	$	200

The following table presents the amortized cost basis of loans at September 30, 2023 that were both experiencing financial difficulty and modified during the nine months ended September 30, 2023 by class, type of modification and includes the financial effect of the modification.

Schedule of Amortization cost

(Dollars<br> in thousands)	As<br> of September 30, 2023
	Amortized<br> cost basis		%<br> of loan class total			Financial<br> effect
Term<br> extension:
Commercial	$	145		0.1	%	90<br> day payment deferral

As of September 30, 2023, all loans experiencing both financial difficulty and modified during the three and nine months ended September 30, 2023 were current under the terms of the agreements. There were no commitments to lend additional funds to the borrowers and there were no charge-offs recorded against the loans. The Company had no allowance for credit losses recorded against these loans as of September 30, 2023. The Company did not have any loan modifications that had a payment default during the three and nine months ended September 30, 2023.

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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, 2022 concluded that its goodwill was not impaired. As of September 30. 2023, the Company concluded it was more likely than not that its goodwill was not impaired.

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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 of September 30, 2023
	Gross<br> carrying amount		Accumulated<br> amortization			Net<br> carrying amount
Core<br> deposit intangible assets	$	5,880	$	(2,466	)	$	3,414
(Dollars<br> in thousands)	As of December 31, 2022
---	---	---	---	---	---	---	---
	Gross<br> carrying amount		Accumulated<br> amortization			Net<br> carrying amount
Core<br> deposit intangible assets	$	5,880	$	(1,874	)	$	4,006

The following sets forth estimated amortization expense for core deposit and intangible assets for the remainder of 2023 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 2023	$	173
2024		663
2025		588
2026		512
2027		436
2028		360
Thereafter		682
Total	$	3,414

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)	September<br> 30,		December<br> 31,
	2023		2022
FHLMC	$	672,397	$	685,859
FHLB		27,788		27,285
Total	$	700,185	$	713,144

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Custodial

escrow balances maintained in connection with serviced loans were $10.1 million and $5.3 million at September 30, 2023 and December 31, 2022, respectively. Custodial escrow balances are included in the deposit balances on the balance sheet. Gross service fee income related to such loans was $450,000 and $456,000 for the three months ended September 30, 2023 and 2022, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $1.3 and $1.4 million for the nine months ended September 30, 2023 and 2022, respectively.

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Activity for mortgage servicing rights was as follows:

Schedule of Servicing Asset at Amortized Cost

	2023			2022			2023			2022
	Three<br> months ended						Nine<br> months ended
(Dollars<br> in thousands)	September<br> 30,						September<br> 30,
	2023			2022			2023			2022
Mortgage<br> servicing rights:
Balance<br> at beginning of period	$	3,514		$	4,025		$	3,813		$	4,193
Additions		130			253			370			704
Amortization		(276	)		(298	)		(815	)		(917	)
Balance<br> at end of period	$	3,368		$	3,980		$	3,368		$	3,980

---

The

fair value of mortgage servicing rights was $10.8 million and $10.3 million at September 30, 2023 and December 31, 2022, respectively. Fair value at September 30, 2023 was determined using discount rate of 9.50%; prepayment speeds ranging from 6.00% to 17.05%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.61%. Fair value at December 31, 2022 was determined using discount rates at 9.50%; prepayment speeds ranging from 6.00% to 21.34%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.47%.

The

Company had a mortgage repurchase reserve of $170,000 at September 30, 2023 and $225,000 at December 31, 2022, 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 charged a $84,000 loss against the reserve during the three months ended September 30, 2023 and losses of $105,000 against the reserve during the nine months ended September 30, 2023. The Company charged a $1,000 loss against the reserve during the first three and nine months ended September 30, 2022. The Company recorded a $50,000 provision to the mortgage repurchase reserve during the three and nine months ended September 30, 2023. As of September 30, 2023, the Company had no outstanding mortgage repurchase requests.

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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 nine months ended September 30, 2023 excluded

130,409

of unexercised stock options because their inclusion would have been anti-dilutive during such periods. The diluted earnings per share computation for the three and nine months ended September 30, 2022 excluded

34,986

of unexercised stock options because their inclusion would have been anti-dilutive during such periods. The Company’s Board of Directors declared a cash dividend of $0.21 per share to be paid November 29, 2023, to common stockholders of record as of the close of business on November 15, 2023. The Board of Directors also declared a 5% stock dividend issuable December 15, 2023 to common stockholders of record on December 1, 2023. The shares used in the calculation of basic and diluted earnings per share are shown below:

Schedule of Earnings Per Share, Basic and Diluted

		2023		2022		2023		2022
(Dollars<br> in thousands, except per share amounts)		Three<br> months ended<br><br> <br>September<br> 30,				Nine<br> months ended<br><br> <br>September<br> 30,
		2023		2022		2023		2022
Net<br> earnings		$	2,878	$	2,500	$	9,597	$	8,666
Weighted<br> average common shares outstanding - basic (1)			5,218,961		5,228,270		5,215,908		5,237,743
Assumed<br> exercise of stock options (1)			2,594		13,802		4,349		15,573
Weighted<br> average common shares outstanding - diluted (1)			5,221,555		5,242,072		5,220,257		5,253,316
Earnings<br> per share (1):
Basic	(1)	$	0.55	$	0.48	$	1.84	$	1.65
Diluted	(1)	$	0.55	$	0.48	$	1.84	$	1.65
(1)	Share and per share<br>values for the periods ended September 30, 2022 have been adjusted to give effect to the 5% stock dividend paid during December 2022.
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8.Federal Home Loan Bank Borrowings and Other Borrowings

---

The

Bank has a line of credit, renewable annually each September, with the Federal Home Loan Bank (“FHLB’) under which there were $74.6 million of borrowings at September 30, 2023 and $8.2 million at December 31, 2022. Interest on any outstanding balance on the line of credit accrues at the federal funds rate plus 0.15% (5.49% at September 30, 2023). The Company had no letters of credit issued through the FHLB at September 30, 2023 or December 31, 2022 to secure municipal deposits. The Company did not have any term advances from FHLB at September 30, 2023 or December 31, 2022.

Although

no loans are specifically pledged, the FHLB requires the Bank to maintain eligible collateral (qualifying loans and investment securities) that has a lending value at least equal to its required collateral. At September 30, 2023 and December 31, 2022, there was a blanket pledge of loans and securities totaling $285.1 million and $139.0 million, respectively. At September 30, 2023 and December 31, 2022, the Bank’s total borrowing capacity with the FHLB was approximately $204.1 million and $111.0 million, respectively. At September 30, 2023 and December 31, 2022, the Bank’s available borrowing capacity was $128.4 million and $101.8 million, respectively. The difference between the Bank’s total borrowing capacity and available borrowing capacity is related to the amount of borrowings outstanding. The available borrowing capacity with the FHLB is collateral based, and the Bank’s ability to borrow is subject to maintaining collateral that meets the eligibility requirements. The borrowing capacity is not committed and is subject to FHLB credit requirements and policies. In addition, the Bank must maintain a restricted investment in FHLB stock to maintain access to borrowings.

At September 30, 2023, the Bank had no borrowings through the Federal Reserve discount window, while the borrowing

capacity with the Federal Reserve was $57.2 million.

The Company has a $5.0 million line of credit from an unrelated financial institution maturing on November 1, 2024, with an interest rate that adjusts daily based on the prime rate less 0.50%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at September 30, 2023 and December 31, 2022. As of September 30, 2023 and December 31, 2022, the Company did not have an outstanding balance on the line of credit.

On September 29, 2022, the Company borrowed $10.0 million from an unrelated financial institution at a fixed rate of 6.15%. This borrowing matures on September 1, 2027 and requires quarterly principal and interest payments. Early principal payments are allowed and the balance was $8.0 million and $9.0 million at September 30, 2023 and December 31, 2022, respectively.

9.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 $12.6 million at September 30, 2023 and $29.4 million at December 31, 2022, which were secured by $30.0 million and $38.4 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 September 30, 2023
(dollars<br> in thousands)	Overnight<br> and<br><br> Continuous		Up<br> to 30 days		30-90<br> days		Greater<br><br> than 90 days		Total
Repurchase<br> agreements:
U.S.<br> federal treasury obligations	$	12,339	$	-	$	-	$	-	$	12,339
Agency<br> mortgage-backed securities		251		-		-		-		251
Total	$	12,590	$	-	$	-	$	-	$	12,590
	As<br> of December 31, 2022
---	---	---	---	---	---	---	---	---	---	---
(dollars<br>in thousands)	Overnight<br> and<br><br> Continuous		Up<br> to<br><br> 30 days		30-90<br> days		Greater<br><br> than 90 days		Total
Repurchase<br> agreements:
U.S.<br> federal treasury obligations	$	25,973	$	-	$	-	$	-	$	25,973
U.S.<br> federal agency obligations		1,236		-		-		-		1,236
Agency<br> mortgage-backed securities		2,193		-		-		-		2,193
Total	$	29,402	$	-	$	-	$	-	$	29,402

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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10.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

	2023		2022			2023		2022
	Three<br> months ended					Nine<br> months ended
(Dollars<br> in thousands)	September<br> 30,					September<br> 30,
	2023		2022			2023		2022
Non-interest<br> income:
Service<br> charges on deposit accounts
Overdraft<br> fees	$	1,021	$	1,058		$	2,850	$	2,788
Other		318		242			792		566
Interchange<br> income		756		704			2,298		2,196
Loan<br> servicing fees (1)		450		456			1,344		1,363
Office<br> lease income (1)		147		30			365		96
Gains<br> on sales of loans (1)		491		1,049			2,014		3,027
Bank<br> owned life insurance income (1)		230		189			671		566
Losses<br> on sales of investment securities (1)		-		(353	)		-		(353	)
Gains<br> on sales of real estate owned		-		-			-		114
Other		239		154			642		525
Total<br> non-interest income	$	3,652	$	3,529		$	10,976	$	10,888
(1)	Not within the scope of<br> 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

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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 nine months of 2023 or 2022.

11.Fair Value of Financial Instruments and Fair Value Measurements

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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.

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Fair value estimates of the Company’s financial instruments as of September 30, 2023 and December 31, 2022, including methods and assumptions utilized, are set forth below:

Schedule of Fair Value, by Balance Sheet Grouping ****

	As<br> of September 30, 2023
	Carrying
	amount			Level<br> 1			Level<br> 2			Level<br> 3		Total
Financial<br> assets:
Cash<br> and cash equivalents	$	23,821		$	23,821		$	-		$	-	$	23,821
Interest-bearing<br> deposits at other banks		5,904			-			5,904			-		5,904
Investment<br> securities available-for-sale		456,857			118,341			338,516			-		456,857
Investment<br> securities held-to-maturity		3,525			-			3,225			-		3,225
Bank<br> stocks, at cost		8,009			n/a			n/a			n/a		n/a
Loans,<br> net		926,060			-			-			904,001		904,001
Loans<br> held for sale		1,857			-			1,857			-		1,857
Mortgage<br> servicing rights		3,368			-			10,763			-		10,763
Accrued<br> interest receivable		7,178			403			2,098			4,677		7,178
Derivative<br> financial instruments		139			-			139			-		139
Financial<br> liabilities:
Non-maturity<br> deposits	$	(1,138,809	)	$	(1,138,809	)	$	-		$	-	$	(1,138,809	)
Certificates<br> of deposit		(169,225	)		-			(167,274	)		-		(167,274	)
FHLB<br> and other borrowings		(82,569	)		-			(82,255	)		-		(82,255	)
Subordinated<br> debentures		(21,651	)		-			(16,999	)		-		(16,999	)
Repurchase<br> agreements		(12,590	)		-			(12,590	)		-		(12,590	)
Accrued<br> interest payable		(1,589	)		-			(1,589	)		-		(1,589	)
	As<br> of December 31, 2022
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Carrying
	amount			Level<br> 1			Level<br> 2			Level<br> 3		Total
Financial<br> assets:
Cash<br> and cash equivalents	$	23,156		$	23,156		$	-		$	-	$	23,156
Interest-bearing<br> deposits at other banks		9,084			-			9,084			-		9,084
Investment<br> securities available-for-sale		489,306			123,111			366,195			-		489,306
Investment<br> securities held-to-maturity		3,524			-			3,452			-		3,452
Bank<br> stocks, at cost		5,470			n/a			n/a			n/a		n/a
Loans,<br> net		841,149			-			-			828,726		828,726
Loans<br> held for sale		2,488			-			2,488			-		2,488
Mortgage<br> servicing rights		3,813			-			10,282			-		10,282
Accrued<br> interest receivable		5,879			426			2,150			3,303		5,879
Derivative<br> financial instruments		126			-			126			-		126
Financial<br> liabilities:
Non-maturity<br> deposits	$	(1,207,371	)	$	(1,207,371	)	$	-		$	-	$	(1,207,371	)
Certificates<br> of deposit		(93,278	)		-			(90,760	)		-		(90,760	)
FHLB<br> and other borrowings		(17,200	)		-			(14,981	)		-		(14,981	)
Subordinated<br> debentures		(21,651	)		-			(18,189	)		-		(18,189	)
Repurchase<br> agreements		(29,402	)		-			(29,402	)		-		(29,402	)
Accrued<br> interest payable		(439	)		-			(439	)		-		(439	)

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Transfers

The Company did not transfer any assets or liabilities among levels during the nine months ended September 30, 2023 or during the year ended December 31, 2022.

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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 September 30, 2023 and December 31, 2022, allocated to the appropriate fair value hierarchy:

Schedule of Fair Value, Assets Measured On Recurring Basis

(Dollars<br> in thousands)			As<br> of September 30, 2023
			Fair value hierarchy
	Total		Level<br> 1		Level<br> 2		Level<br> 3
Assets:
Available-for-sale<br> investment securities:
U.<br> S. treasury securities	$	118,341	$	118,341	$	-	$	-
Municipal<br> obligations, tax exempt		115,706		-		115,706		-
Municipal<br> obligations, taxable		73,993		-		73,993		-
Agency<br> mortgage-backed securities		148,817		-		148,817		-
Loans<br> held for sale		1,857		-		1,857		-
Derivative<br> financial instruments		139		-		139		-
			As of December 31, 2022
---	---	---	---	---	---	---	---	---
			Fair value hierarchy
	Total		Level<br> 1		Level<br> 2		Level<br> 3
Assets:
Available-for-sale<br> investment securities:
U.<br> S. treasury securities	$	123,111	$	123,111	$	-	$	-
U.<br> S. federal agency obligations		1,988		-		1,988		-
Municipal<br> obligations, tax exempt		127,262		-		127,262		-
Municipal<br> obligations, taxable		67,244		-		67,244		-
Agency<br> mortgage-backed securities		169,701		-		169,701		-
Loans<br> held for sale		2,488		-		2,488		-
Derivative<br> financial instruments		126		-		126		-

The Company’s investment securities classified as available-for-sale include U.S. treasury securities, municipal obligations, and agency mortgage-backed securities. Quoted exchange prices are available for the Company’s U.S. treasury securities, which are classified as Level 1. U.S. federal 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 gains 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
	September<br> 30,		December<br> 31,
(Dollars<br> in thousands)	2023		2022
Aggregate<br> fair value	$	1,857	$	2,488
Contractual<br> balance		1,846		2,468
Gain	$	11	$	20

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

	Three<br> months ended						Nine<br> months ended
	September<br> 30,						September<br> 30,
(Dollars<br> in thousands)	2023			2022			2023		2022
Total<br> change in fair value	$	(143	)	$	(100	)	$	13	$	(128	)

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ValuationMethods for Instruments Measured at Fair Value on a Nonrecurring Basis

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The

Company does not record its loan portfolio at fair value. Collateral-dependent 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. Individually evaluated loans are reviewed at least quarterly for additional impairment and adjusted accordingly, based on the same factors identified above. The carrying value of the Company’s individually evaluated loans was $5.0 million at September 30, 2023 and $4.1 million at December 31, 2022, respectively. The Company’s individually evaluated loans with an allowance for credit losses was $2.6 million and $755,000, with an allocated allowance of $1.0 million and $654,000, at September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022.

Schedule of Fair Value Measurements On Nonrecurring, Valuation Techniques

(Dollars<br> in thousands)
	Fair<br> value		Valuation<br> technique	Unobservable<br> inputs	Range
As<br> of September 30, 2023
Impaired<br> loans:
Commercial	$	1,567	Sales<br> comparison	Adjustment<br> to comparable value		0%-30	%
As<br> of December 31, 2022
Impaired<br> loans:
Commercial	$	101	Sales<br> comparison	Adjustment<br> to comparable value		0%-25	%
Real<br> estate owned:
One-to-four<br> family residential real estate		272	Sales<br> comparison	Adjustment<br> to appraised value		15	%
Commercial<br> real estate		234	Sales<br> comparison	Adjustment<br> to appraised value		15	%

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12.Regulatory Capital Requirements

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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 September 30, 2023, 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 September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022.

Schedule of Compliance with Regulatory Capital Requirements for Mortgage Companies

(Dollars<br> in thousands)
						For<br> capital
	Actual					adequacy<br> purposes
	Amount		Ratio			Amount		Ratio<br> (1)
As<br> of September 30, 2023
Leverage	$	128,858		8.36	%	$	61,631		4.0	%
Common<br> Equity Tier 1 Capital		107,858		10.26	%		73,596		7.0	%
Tier<br> 1 Capital		128,858		12.26	%		89,366		8.5	%
Total<br> Risk Based Capital		139,216		13.24	%		110,394		10.5	%
As<br> of December 31, 2022
Leverage	$	122,275		8.14	%	$	60,100		4.0	%
Common<br> Equity Tier 1 Capital		101,275		10.37	%		68,352		7.0	%
Tier<br> 1 Capital		122,275		12.52	%		82,999		8.5	%
Total<br> Risk Based Capital		131,236		13.44	%		102,528		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 September 30, 2023 and December 31, 2022:

Schedule of Compliance with Regulatory Capital Requirements Under Banking Regulations

											To<br> be well-capitalized
											under<br> prompt
(Dollars<br> in thousands)						For<br> capital					corrective
	Actual					adequacy<br> purposes					action<br> provisions
	Amount		Ratio			Amount		Ratio<br> (1)			Amount		Ratio
As<br> of September 30, 2023
Leverage	$	133,192		8.67	%	$	61,456		4.0	%	$	76,820		5.0	%
Common<br> Equity Tier 1 Capital		133,192		12.68	%		73,524		7.0	%		68,272		6.5	%
Tier<br> 1 Capital		133,192		12.68	%		89,279		8.5	%		84,028		8.0	%
Total<br> Risk Based Capital		143,550		13.67	%		110,286		10.5	%		105,035		10.0	%
As<br> of December 31, 2022
Leverage	$	128,643		8.59	%	$	59,933		4.0	%	$	74,917		5.0	%
Common<br> Equity Tier 1 Capital		128,643		13.18	%		68,309		7.0	%		63,430		6.5	%
Tier<br> 1 Capital		128,643		13.18	%		82,947		8.5	%		78,068		8.0	%
Total<br> Risk Based Capital		137,604		14.10	%		102,464		10.5	%		97,585		10.0	%
(1)	The required ratios<br>for capital adequacy purposes include a capital conservation buffer of 2.5%.
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13.Impact of Recent Accounting Pronouncements

On January 1, 2023, the Company adopted ASU 2016-13 and ASU 2022-02 which is described in note 3.

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. The Company adopted ASU 2017-04 effective January 1, 2023. The adoption of ASU 2017-04 did not 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 standard was effective upon issuance and the amendments may be applied prospectively through December 31, 2022 such that changes made to contracts beginning on or after January 1, 2023 would not apply. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date, which extended the sunset date from December 31, 2022 to December 31, 2024. LIBOR continued to be published until September 30, 2023.

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ITEM

2. 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 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. On April 10, 2023, the IRS issued IR-2023-74 proposing regulations that classify 831(b) captives with less than a 65% claims loss ratio as a “listed transaction”. We are currently reviewing the proposed regulations and consulting with tax advisors to understand the impact on Landmark Risk Management if the final regulations are substantially similar to the proposed regulations. The ultimate impact of the proposal and the impact on the Company is uncertain.

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 credit 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 thirty additional branch offices in central, eastern, southeast and southwest Kansas, and our ownership of Landmark Risk Management, Inc. On October 1, 2022, the Company completed its acquisition of 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.

In October 2023, we declared our 89^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, our future dividend practice is dependent upon the performance of the economy and the Company’s overall performance. In addition, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, 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 September 30, 2023.

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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 credit losses and the accounting for business combinations, each of which involve significant judgment by our management. On January 1, 2023, we adopted CECL which changed our allowance for credit losses from an incurred loss methodology to an expected loss methodology. The CECL model is subject to changes in our economic forecast, which can impact the calculation of our allowance for credit losses substantially. The impact of the adoption and more information on our allowance for credit losses is included in Notes 2 and 4 of the consolidated financial statements. Our most significant critical accounting estimates relate to the allowance for credit losses on loans, which involve significant judgment by our management. The analysis is updated on a quarterly basis based on historical loss information adjusted for current conditions and reasonable and supportable forecasts. Additionally, the Company considers asset quality trends, composition and trends in the loan portfolio, underlying collateral values, industry trends and other pertinent factors, including regulatory recommendations, which impacts the estimate of future credit losses. Other than CECL, 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, 2022, filed with the Securities and Exchange Commission on March 30, 2023.

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Summaryof Results. During the third quarter of 2023, we recorded net earnings of $2.9 million, which was an increase of $378,000, or 15.1%, from the $2.5 million of net earnings in the third quarter of 2022. During the first nine months of 2023, we recorded net earnings of $9.6 million, which was an increase of $931,000, or 10.7%, from the $8.7 million of net earnings in the first nine months of 2022. The increase in net earnings during 2023 was primarily related to an increase in interest income due to an increase in average interest earning assets and higher yields on those assets. The increase in assets was due to our acquisition of Freedom Bank and organic growth. Higher interest rates and average balances of interest bearing liabilities also increased our interest expense. The acquisition of Freedom Bank also contributed to an increase in non-interest expense in 2023.

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>September 30,						nine<br> months ended <br><br>September 30,
	2023			2022			2023			2022
Net<br> earnings:
Net<br> earnings	$	2,878		$	2,500		$	9,597		$	8,666
Basic<br> earnings per share (1)	$	0.55		$	0.48		$	1.84		$	1.65
Diluted<br> earnings per share (1)	$	0.55		$	0.48		$	1.84		$	1.65
Earnings<br> ratios:
Return<br> on average assets (2)		0.74	%		0.76	%		0.84	%		0.89	%
Return<br> on average equity (2)		9.87	%		8.33	%		11.13	%		9.33	%
Equity<br> to total assets		7.03	%		7.78	%		7.03	%		7.78	%
Net<br> interest margin (2) (3)		3.06	%		3.21	%		3.19	%		3.08	%
Dividend<br> payout ratio		38.08	%		42.00	%		34.24	%		36.42	%
(1)<br> Per share values for the periods ended September 30, 2022 have been adjusted to give effect to the 5% dividend paid during December<br> 2022.
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(2)<br> Ratios have been annualized and are not necessarily indicative of the results for the entire year.
(3)<br> Net interest margin is presented on a fully tax equivalent basis, using a 21% federal tax rate.

InterestIncome. Interest income of $16.8 million for the quarter ended September 30, 2023 increased $6.2 million, or 58.6%, as compared to the same period of 2022. Interest income on loans increased $5.5 million, or 68.6%, to $13.5 million for the quarter ended September 30, 2023, compared to the same period of 2022 due to higher yields and average balances. Our yields increased from 4.63% in the third quarter of 2022 to 5.93% in the third quarter of 2023. The increase in interest income on loans was also driven by an increase in average loan balances which increased from $687.7 million in the third quarter of 2022 to $906.3 million in the third quarter of 2023. Interest income on investment securities increased $698,000, or 27.7%, to $3.2 million for the third quarter of 2023, as compared to $2.5 million in the same period of 2022. The increase in interest income on investment securities was primarily the result of increased yields on investment securities, which increased from 2.18% in the third quarter of 2022 to 2.77% in the third quarter of 2023. Offsetting the higher investment securities income was a decrease in the average balances of investment securities which decreased from $494.3 million in the third quarter of 2022 to $486.7 million in the third quarter of 2023.

Interest income of $47.2 million for the nine months ended September 30, 2023 increased $18.2 million, or 62.8%, as compared to the same period of 2022. Interest income on loans increased $15.2 million, or 67.8%, to $37.5 million for the nine months ended September 30, 2023, compared to the same period of 2022 due to an increase in our average loan balances, which increased from $659.1 million during the first nine months of 2022 to $877.0 million during the first nine months of 2023. Also contributing to higher interest income was higher yields on loans, which increased from 4.54% in the nine months ended September 30, 2022 to 5.72% during the nine months ended September 30, 2023. Interest income on investment securities increased $3.1 million, or 48.5%, to $9.5 million for the first nine months of 2023, as compared to $6.4 million in the same period of 2022. The increase in interest income on investment securities was primarily the result of increased yields, which increased from 2.00% in the first nine months of 2022 to 2.72% in the first nine months of 2023. Also contributing to the higher yields on investment securities were higher average balances on investment securities, which increased from $464.7 million in the first nine months of 2022 compared to $493.9 million in the first nine months of 2023.

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InterestExpense. Interest expense during the quarter ended September 30, 2023 increased $5.0 million, to $6.2 million, as compared to the same period of 2022. Interest expense on interest-bearing deposits increased $3.6 million, to $4.4 million for the quarter ended September 30, 2023 as compared to the same period of 2022. Our total cost of interest-bearing deposits increased from 0.39% in the third quarter of 2022 to 1.93% in the third quarter of 2023 as a result of higher rates and increased competition for deposits. Also contributing to higher interest expense was an increase in average interest-bearing deposit balances, which increased from $782.5 million in the third quarter of 2022 to $902.7 million in the third quarter of 2023. For the third quarter of 2023, interest expense on borrowings increased $1.4 million, to $1.8 million as compared to the same period of 2022 due to an increase in our average borrowings which increased from $44.9 million in the third quarter of 2022 to $126.5 million in the same period of 2023. Also contributing to the increase in interest expense on borrowings were higher rates, which increased from 2.18% in the third quarter of 2022 to 5.60% in the same period of 2023.

Interest expense during the nine months ended September 30, 2023 increased $12.8 million, to $14.8 million, as compared to the same period of 2022. Interest expense on interest-bearing deposits increased $9.1 million, to $10.4 million for the nine months ended September 30, 2023 as compared to the same period of 2022. The increase in interest expense on interest-bearing deposits was the result of higher rates as our cost of interest-bearing deposits increased from 0.22% in the first nine months of 2022 to 1.57% in the first nine months of 2023. The increase in interest expense on deposits was due to an increase in average interest-bearing deposit balances, which increased from $788.7 million in the first nine months of 2022 to $886.2 million in the same period of 2023. For the first nine months of 2023, interest expense on borrowings increased $3.8 million, to $4.4 million as compared to the same period of 2022, due primarily to an increase in our average outstanding borrowings which increased from $34.1 million in the first nine months of 2022 to $112.3 million in the first nine months of 2023. Also contributing to the higher interest expense on borrowings were higher average rates on our borrowings, which increased to 5.26% for the first nine months of 2023 compared to 1.60% for the same period of 2022.

NetInterest Income. Net interest income increased $1.2 million, or 12.4%, to $10.6 million for the third quarter of 2023 compared to the same period of 2022. The increase in net interest income was primarily a result of an increase in interest income on loans and investments, partially offset by higher interest expense. The accretion of purchase accounting adjustments increased net interest income by $282,000 in the third quarter of 2023 compared to an increase of $13,000 in the third quarter of 2022 and was primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction. Compared to the same period last year, the increase in interest rates raised the yields on our interest-earning assets and the cost of our interest-bearing liabilities. Net interest margin, on a tax-equivalent basis, decreased from 3.21% in the third quarter of 2022 to 3.06% in the same period of 2023. Continued increases in interest rates may not result in a higher net interest margin as a result of increased competition for loans and deposits. Additionally, the deposit balance increases we have seen over the past few years may reverse resulting in the need for higher cost funding.

Net interest income increased $5.4 million, or 20.0%, to $32.4 million for the first nine months of 2023 compared to the same period of 2022. The increase in net interest income was primarily a result of an increase in interest income on loans and investments, partially offset by higher interest expense. The accretion of purchase accounting adjustments increased net interest income by $750,000 in the first nine months of 2023 compared to an increase of $22,000 in the first nine months of 2022 and was primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction. Compared to the same period last year, the increase in interest rates raised the yields on our interest-earning assets and the cost of our interest-bearing liabilities. Net interest margin, on a tax-equivalent basis, increased from 3.08% in the first nine months of 2022 to 3.19% in the same period of 2023.

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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
	September<br> 30, 2023							September<br> 30, 2022
	Average<br> balance		Income/<br> expense		Average<br> yield/cost			Average<br> balance		Income/<br> expense		Average<br> yield/cost
(Dollars<br> in thousands)
Assets
Interest-earning<br> assets:
Interest-bearing<br> deposits at banks	$	8,733	$	46		2.09	%	$	12,266	$	44		1.42	%
Investment<br> securities (1)		486,706		3,396		2.77	%		494,283		2,720		2.18	%
Loans<br> receivable, net (2)		906,289		13,535		5.93	%		687,716		8,030		4.63	%
Total<br> interest-earning assets		1,401,728		16,977		4.81	%		1,194,265		10,794		3.59	%
Non-interest-earning<br> assets		147,996							113,601
Total	$	1,549,724						$	1,307,866
Liabilities<br> and Stockholders’ Equity
Interest-bearing<br> liabilities:
Money<br> market and checking	$	596,405	$	3,065		2.04	%	$	516,141	$	684		0.53	%
Savings<br> accounts		157,157		31		0.08	%		171,645		11		0.03	%
Certificates<br> of deposit		149,165		1,288		3.43	%		94,747		76		0.32	%
Total<br> interest-bearing deposits		902,727		4,384		1.93	%		782,533		771		0.39	%
FHLB<br> advances and other borrowings		89,441		1,251		5.55	%		15,881		105		1.11	%
Subordinated<br> debentures		21,651		417		7.64	%		21,651		234		4.29	%
Repurchase<br> agreements		15,387		116		2.99	%		7,411		27		1.45	%
Total<br> borrowings		126,479		1,784		5.60	%		44,943		366		2.18	%
Total<br> interest-bearing liabilities		1,029,206		6,168		2.38	%		827,476		1,137		0.53	%
Non-interest-bearing<br> liabilities		404,874							361,290
Stockholders’<br> equity		115,644							119,100
Total	$	1,549,724						$	1,307,866
Interest<br> rate spread (3)						2.43	%						3.06	%
Net<br> interest margin (4)			$	10,809		3.06	%			$	9,657		3.21	%
Tax-equivalent<br> interest - imputed				183							206
Net<br> interest income			$	10,626						$	9,451
Ratio<br> of average interest-earning assets to average interest-bearing liabilities						136.2	%						140.6	%
(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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	Nine<br> months ended							Nine<br> months ended
	September<br> 30, 2023							September<br> 30, 2022
	Average<br> balance		Income/<br> expense		Average<br> yield/cost			Average<br> balance		Income/<br> expense		Average<br> yield/cost
(Dollars<br> in thousands)
Assets
Interest-earning<br> assets:
Interest-bearing<br> deposits at banks	$	10,973	$	193		2.35	%	$	72,631	$	232		0.43	%
Investment<br> securities (1)		493,853		10,029		2.72	%		464,702		6,961		2.00	%
Loans<br> receivable, net (2)		877,048		37,543		5.72	%		659,109		22,387		4.54	%
Total<br> interest-earning assets		1,381,874		47,765		4.62	%		1,196,442		29,580		3.31	%
Non-interest-earning<br> assets		147,064							110,496
Total	$	1,528,938						$	1,306,938
Liabilities<br> and Stockholders’ Equity
Interest-bearing<br> liabilities:
Money<br> market and checking	$	595,990	$	7,759		1.74	%	$	520,746	$	1,058		0.27	%
Savings<br> accounts		163,498		92		0.08	%		167,927		31		0.02	%
Certificates<br> of deposit		126,739		2,524		2.66	%		100,005		235		0.31	%
Total<br> interest-bearing deposits		886,227		10,375		1.57	%		788,678		1,324		0.22	%
FHLB<br> advances and other borrowings		70,774		2,845		5.37	%		5,352		105		0.52	%
Subordinated<br> debentures		21,651		1,168		7.21	%		21,651		522		3.22	%
Repurchase<br> agreements		19,903		403		2.71	%		7,074		38		0.72	%
Total<br> borrowings		112,328		4,416		5.26	%		34,077		665		1.60	%
Total<br> interest-bearing liabilities		998,555		14,791		1.98	%		822,755		1,989		0.31	%
Non-interest-bearing<br> liabilities		415,108							360,006
Stockholders’<br> equity		115,275							124,177
Total	$	1,528,938						$	1,306,938
Interest<br> rate spread (3)						2.64	%						3.00	%
Net<br> interest margin (4)			$	32,974		3.19	%			$	27,591		3.08	%
Tax-equivalent<br> interest - imputed				568							597
Net<br> interest income			$	32,406						$	26,994
Ratio<br> of average interest-earning assets to average interest-bearing liabilities						138.4	%						141.7	%
(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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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<br><br> <br>September<br> 30,								Nine<br> months ended<br><br> <br>September<br> 30,
	2023<br> vs 2022								2023<br> vs 2022
	Increase/(decrease)<br><br> <br>attributable<br> to								Increase/(decrease)<br><br> <br>attributable<br> to
	Volume			Rate			Net		Volume		Rate			Net
	(Dollars<br> in thousands)								(Dollars<br> in thousands)
Interest<br> income:
Interest-bearing<br> deposits at banks	$	(3	)	$	5		$	2	$	9	$	(48	)	$	(39	)
Investment<br> securities		(41	)		717			676		455		2,613			3,068
Loans		2,923			2,582			5,505		8,486		6,670			15,156
Total		2,879			3,304			6,183		8,950		9,235			18,185
Interest<br> expense:
Deposits		135			3,478			3,613		179		8,872			9,051
FHLB<br> advances and other borrowings		294			852			1,146		406		2,334			2,740
Subordinated<br> debentures and other borrowings		47			136			183		96		550			646
Repurchase<br> agreements		45			44			89		145		220			365
Total		521			4,510			5,031		826		11,976			12,802
Net<br> interest income	$	2,358		$	(1,206	)	$	1,152	$	8,124	$	(2,741	)	$	5,383

Provisionfor Credit Losses. On January 1, 2023, the Company adopted CECL and has established an allowance for credit losses (“ACL”) based on this framework. The ACL is based on the historical loss rates and the weighted average remaining maturity for financial assets measured at amortized costs including loans, investment securities and unfunded loan commitments. The historical loss rates are adjusted to reflect reasonable and supportable forecasts to estimate expected credit losses over the life of the financial asset. Upon adoption, the ACL on loans increased by $1.5 million and the ACL on held-to-maturity investment securities of $72,000 was recorded.

During the third quarter of 2023, we recorded no provision for credit losses as compared to a $500,000 provision for credit losses recorded in the same period of 2022. We recorded net loan recoveries of $521,000 during the third quarter of 2023 compared to net loan recoveries of $43,000 during the third quarter of 2022.

During the first nine months of 2023, we recorded a $299,000 provision for credit losses compared to no provision for credit losses in the first nine months of 2022. The $299,000 provision for credit losses during the first nine months of 2023 consisted of a $250,000 provision to the allowance for credit losses on loans, $30,000 to unfunded loan commitments and $19,000 to the allowance for credit losses on held-to-maturity investment securities. We recorded net loan recoveries of $406,000 during the nine months ended September 30, 2023 compared to net loan recoveries of $83,000 during the nine months ended September 30, 2022.

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

Non-interestIncome. Total non-interest income was $3.7 million in the third quarter of 2023, an increase of $123,000, or 3.5%, from the same period in 2022. The increase in non-interest income during the third quarter of 2023 compared to the same period last year was primarily due to recording a $353,000 loss on the sale of lower yielding investment securities in the third quarter of 2022 as well as an increase of $107,000 in fees and service charges primarily due to higher fees related to deposit accounts. Other non-interest income also increased by $180,000 which was primarily due to an increase in lease income associated with part of a branch facility that was vacant in the prior year. Partially offsetting this increase was a decrease of $558,000 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 loans, which are typically sold in the secondary market. However, higher mortgage rates did result in increased originations of adjustable-rate loans this quarter which are maintained in our one-to-four family residential loan portfolio.

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Total non-interest income was $11.0 million in the first nine months of 2023, a increase of $88,000, or 0.8%, from the first nine months of 2022, primarily as a result of recording of a $353,000 loss on the sale of lower yielding investment securities in the third quarter of 2022 as well as an increase of $378,000 in fees and services charges due primarily to higher overdraft charges and servicing fees. Offsetting the increase in non-interest income was a decrease of $1.0 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.

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Non-interestExpense. Non-interest expense totaled $10.7 million for the third quarter of 2023, an increase of $1.3 million, or 13.4%, over the same quarter of 2022. The increase in non-interest expense in the third quarter of 2023 compared to the same period last year was mainly due to higher compensation and benefits, occupancy and equipment, data processing and other non-interest expense due to the acquisition of Freedom Bank. Also contributing to the increases were higher amortization costs associated with the purchase accounting entries related to the acquisition. Offsetting the increase was a decrease in acquisition costs from the third quarter of 2022 associated with the acquisition of Freedom Bank.

Non-interest expense totaled $31.4 million for the first nine months of 2023, an increase of $4.1 million or 15.0%, from $27.3 million for the first nine months of 2022. The increase in non-interest expense in the nine months of 2023 compared to the same period last year was mainly due to higher compensation and benefits, occupancy and equipment, data processing, and other non-interest expense due to the acquisition of Freedom Bank. Partially offsetting the increases in non-interest expense were acquisition costs of $355,000 during the first nine months of 2022 related to the acquisition of Freedom Bank.

IncomeTax Expense. During the third quarter of 2023, we recorded income tax expense of $671,000, compared to $522,000 during the same period of 2022. Our effective tax rate increased from 17.3% in the third quarter of 2022 to 18.9% in the third quarter of 2023. The increase in the effective tax rate was primarily related to losses of our captive insurance subsidiary which are not deductible for income taxes.

We recorded income tax expense of $2.1 million for the first nine months of 2023 compared to $1.9 million in the same period of 2022. Our effective tax rate was 18.0% in the first nine months of 2022 compared to 17.7% in the first nine months of 2023.

FinancialCondition. Economic conditions in the United States slowed during the first nine months of 2023 as elevated inflation levels and higher interest rates impacted the economy. The increase in interest rates has impacted financial institutions resulting in higher costs of funding and lower fair values for investment securities. Three large regional banks have been closed by the Federal Deposit Insurance Corporation (FDIC) mainly due to liquidity concerns, resulting from interest rate risk issues and large concentrations of uninsured corporate deposits. The liquidity issues faced by these banks related to their operations and business strategies and the Company does not have these same concerns. We maintain strong capital and liquidity, and a stable, conservative deposit portfolio with a majority of our deposits being retail-based and FDIC insured. We spend significant time each month monitoring our interest rate and concentration risks through our asset/liability management and lending strategies that involve a relationship-based banking model offering stability and consistency. The State of Kansas and the geographic markets in which the Company operates were also impacted by these economic headwinds. Supply chain constraints, labor shortages and geopolitical events have contributed to the rising inflation levels which are impacting all areas of the economy both nationally and locally. The Company’s allowance for credit losses included estimates of the economic impact of these conditions 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 increased $54.7 million, or 3.5%, from December 31, 2022 to $1.6 billion at September 30, 2023.

The allowance for credit losses is established through a provision for credit losses based on our economic projections. At September 30, 2023, our allowance for credit losses on loans totaled $11.0 million, or 1.17% of gross loans outstanding, compared to $8.8 million, or 1.03% of gross loans outstanding, at December 31, 2022. The increase in our allowance for credit losses on loans as a percentage of gross loans outstanding was primarily due to the adoption of CECL on January 1, 2023.

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As of September 30, 2023 and December 31, 2022, approximately $9.9 million and $13.0 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 and 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 ACL was sufficient to cover expected losses related to such loans at September 30, 2023 and December 31, 2022, respectively.

Loans past due 30-89 days and still accruing interest totaled $6.2 million, or 0.66% of gross loans, at September 30, 2023, compared to $738,000, or 0.09% of gross loans, at December 31, 2022. The increase in delinquent loans was primarily due to two relationships which have returned to performing status subsequent to September 30, 2023. At September 30, 2023, $4.4 million in loans were on non-accrual status, or 0.47% of gross loans, compared to $3.3 million, or 0.39% of gross loans, at December 31, 2022. Non-accrual loans consist of loans 90 or more days past due and certain impaired loans. The increase in non-accrual loans during the third quarter of 2023 was principally associated with one commercial lending relationship which was classified as non-accrual as of September 30, 2023. There were no loans 90 days delinquent and accruing interest at September 30, 2023 or December 31, 2022.

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. At September 30, 2023 and December 31, 2022, we had $934,000 of real estate owned. As of September 30, 2023, 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 an increase of $7.4 million, or 0.6% in total deposits during the first nine months of 2023, to $1.3 billion at September 30, 2023. The increase in deposits was primarily due to an increase in our brokered deposit balances, which increased from $10.3 million at December 31, 2022 to $72.4 million at September 30, 2023.

Non-interest-bearing deposits at September 30, 2023, were $395.0 million, or 30.20% of deposits, compared to $410.1 million, or 31.5% of deposits, at December 31, 2022. Money market and checking deposit accounts were 44.8% of our deposit portfolio and totaled $586.7 million at September 30, 2023, compared to $626.7 million, or 48.2% of deposits, at December 31, 2022. Savings accounts decreased to $157.1 million, or 12.0% of deposits, at September 30, 2023, from $170.6 million, or 13.1% of deposits, at December 31, 2022. Certificates of deposit totaled $169.2 million, or 12.9% of deposits, at September 30, 2023, compared to $93.3 million, or 7.2% of deposits, at December 31, 2022. The increase in certificates of deposit was primarily related to higher public fund balances, customers seeking higher interest rates and brokered certificates of deposits, which increased from $1.0 million at December 31, 2022 to $32.2 million at September 30, 2023.

Total deposits include estimated uninsured deposits of $202.8 million and $192.9 million as of September 30, 2023 and December 31, 2022, respectively. This represents approximately 15.5% of our total deposits at September 30, 2023 and compares favorably with other similar community banking organizations. Over 95.3% of the Company’s total deposits were considered core deposits at September 30, 2023. These deposit balances are from retail, commercial and public fund customers located in the markets where the Company has bank branch locations.

Certificates of deposit at September 30, 2023, scheduled to mature in one year or less totaled $104.8 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 increased $48.6 million to $116.8 million at September 30, 2023, from $68.3 million at December 31, 2022. The increase in total borrowings was due to an increase in FHLB borrowings. The increase in FHLB borrowings was to fund loan growth and to offset the decline in non-brokered deposits.

CashFlows. During the nine months ended September 30, 2023, our cash and cash equivalents decreased by $665,000. Our operating activities provided net cash of $11.4 million during the first nine months of 2023 primarily as a result of net earnings. Our investing activities used net cash of $63.4 million during the first nine months of 2023, primarily due to loan growth. Financing activities provided net cash of $52.7 million during the first nine months of 2023, primarily as a result of an increase in FHLB borrowings.

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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 $486.6 million at September 30, 2023 and $521.5 million at December 31, 2022. 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.

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 pledging or sales of investment securities. While the sale of available-for-sale investment securities would result in losses due to the current interest environment, pledging these securities as collateral would not result in a loss. At September 30, 2023, we had $74.6 million borrowed on our line of credit with the FHLB. At September 30, 2023, we had collateral pledged to the FHLB that would allow us to borrow $204.1 million, subject to FHLB credit requirements and policies. At September 30, 2023, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $57.2 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 September 30, 2023. At September 30, 2023, we had subordinated debentures totaling $21.7 million and $12.6 million of repurchase agreements. At September 30, 2023, the Company had no borrowings against a $5.0 million line of credit from an unrelated financial institution maturing on November 1, 2024, with an interest rate that adjusts daily based on the prime rate less 0.50%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at September 30, 2023. The Company also borrowed $8.0 million from the same unrelated financial institution at a fixed rate of 6.15%. This borrowing matures on September 1, 2027 and requires quarterly principal and interest payments. The original $10.0 million of borrowings was used to fund part of the acquisition of Freedom Bancshares, Inc.

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 $2.4 million at September 30, 2023.

At September 30, 2023, we had outstanding loan commitments, excluding standby letters of credit, of $199.8 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 September 30, 2023 and December 31, 2022, 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 September 30, 2023, the Company and the Bank met all capital adequacy requirements to which we are subject.

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Dividends. During the quarter ended September 30, 2023, 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 September 30, 2023. 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 three preceding years. As of September 30, 2023, approximately $12.0 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

3. 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 September 30, 2023					As<br> of December 31, 2022
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		)		(12.0	)%		)		(6.6	)%
200<br> basis point rising		)		(8.2	)%		)		(4.5	)%
100<br> basis point rising		)		(4.3	)%		)		(2.5	)%
100<br> basis point falling				0.7	%				1.5	%
200<br> basis point falling		)		(0.8	)%				0.9	%
300<br> basis point falling		)		(3.1	)%		)		(0.1	)%

All values are in US Dollars.

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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 of our assets) and the policies<br> of the Federal Reserve (including and the recent and potential additional rate increases by the Federal Reserve) including on our<br> net interest income and the value of our security portfolio.
●	The<br> strength of the United States economy in general and the strength of the local economies in which we conduct our operations, including<br> the effects of inflationary pressures and supply chain constraints on such economies, which may be less favorable than expected and<br> may result in, among other things, 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 Israeli-Palestinian conflict and the<br> conflict in Ukraine, or threats thereof, and the response of the United States to any such threats and attacks.
●	The<br> effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, consumer protection,<br> insurance, tax, trade and monetary and financial matters, including any changes in response to the recent failures of other banks.
●	Our<br> ability to compete with other financial institutions due to increases in competitive pressures in the financial services sector,<br> including from non-bank competitors such as credit unions and “fintech” companies.
●	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 be more difficult to implement or more expensive<br> than anticipated or which may have unforeseen 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 or cybersecurity-related incidents and<br> our ability to identify and address such incidents.
●	Interruptions<br> involving our information technology and telecommunications systems or third-party servicers.
●	The<br> effects of severe weather, natural disasters, widespread disease or pandemics (including the COVID-19 pandemic), and other external<br> events.
●	Our<br> ability to retain key executives and employees and the difficulty that we may experience in replacing key executives and employees<br> 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.
●	Changes<br> in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the FASB, such as the implementation<br> of CECL.
●	Our<br> ability to effectively manage our credit risk.
●	Our<br> ability to forecast probable credit losses and maintain an adequate allowance for credit losses.
●	Fluctuations<br> in the value of securities held in our securities portfolio.
●	Concentrations<br> within our loan portfolio, large loans to certain borrowers, and large deposits from certain clients.
●	The<br> concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits<br> to diversify their exposure.
●	The<br> level of non-performing assets on our balance sheets.
●	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.

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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, 2022 filed on March 30, 2023.

ITEM

4. 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 September 30, 2023. 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 September 30, 2023 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 September 30, 2023 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, 2022.

ITEM

2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

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None.

ITEM

3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM

4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM

5. OTHER INFORMATION

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None.

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ITEM

6. EXHIBITS

Exhibit<br> 3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s transition report on Form 10-K filed with the SEC on March 29, 2002 (SEC file no. 000-33203))
Exhibit<br> 3.2	Certificate of Amendment of the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Company’s report on Form 10-K filed with the SEC on March 29, 2013 (SEC file no. 000-33203))
Exhibit<br> 3.3	Bylaws (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> 10.1	Change in Terms Agreement, dated November 3, 2023, between Landmark Bancorp, Inc. and First National Bank of Omaha
Exhibit<br> 31.1	Certificate of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit<br> 31.2	Certificate of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit<br> 32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit<br> 32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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 September 30, 2023<br> and December 31, 2022; (ii) Consolidated Statements of Earnings for three and nine months ended September 30, 2023 and September<br> 30, 2022; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and September<br> 30, 2022; (iv) Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and September<br> 30, 2022; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and September 30 2022; and (vi)<br> Notes to Consolidated 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:<br> November 13, 2023	/s/ Michael E. Scheopner
	Michael<br> E. Scheopner
	President<br> and Chief Executive Officer
	(Principal<br> Executive Officer)
Date:<br> November 13, 2023	/s/ Mark A. Herpich
	Mark<br> A. Herpich
	Vice<br> President, Secretary, Treasurer
	and<br> Chief Financial Officer
	(Principal<br> Financial and Accounting Officer)

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Exhibit10.1

CHANGEIN TERMS AGREEMENT

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Principal	Loan<br> Date	Maturity	Loan<br> No	Call/Coll	Account	Officer	Initials
$5,000,000.00	11-01-2023	11-01-2024	xxxxxxx			***

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Borrower:	Landmark<br> Bancorp, Inc.	Lender:	First<br> National Bank of Omaha
	701<br> Poyntz Ave		Downtown-Corporate Banking Group
	Manhattan<br> KS 66502-6055		1620 Dodge St SC 3206
			Omaha, NE 68197
Principal<br> Amount: $5,000,000.00	Date<br> of Agreement: November 3, 2023
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DESCRIPTIONOF EXISTING INDEBTEDNESS. This Change in Terms Agreement is an amendment and/or modification of the terms and conditions of indebtednessof Borrower as set forth in a Promissory Note dated November 1, 2016, in the amount of $7,500,000.00, and most recently documented ina Change in Terms Agreement dated September 29, 2022, and shall include all renewals, modifications and extensions of such documents.

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DESCRIPTIONOF CHANGE IN TERMS. As fully set forth herein below, this Change in Terms Agreement generally modifies the terms applicable to the existingindebtedness by extending the maturity date. Any sums due and owing hereunder shall take into account any principal and interest paymentsmade by the Borrower in accordance with regular established billing cycles.

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PROMISETO PAY. Landmark Bancorp, Inc. (“Borrower”) promises to pay to First National Bank of Omaha (“Lender”), or order,in lawful money of the United States of America, the principal amount of Five Million & 00/100 Dollars ($5,000,000.00) or so muchas may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculatedfrom the date of each advance until repayment of each advance.

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PAYMENT.Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on November 1, 2024. In addition,Borrower will pay regular quarterly payments of all accrued unpaid interest due as of each payment date, beginning December 1, 2023,with all subsequent interest payments to be due on the same day of each quarter after that. Unless otherwise agreed or required by applicablelaw, payments will be applied to interest, principal, and expenses owing under the Note in an order determined by Lender. Borrower willpay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.

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VARIABLEINTEREST RATE. The interest rate on this loan is subject to change from time to time based on changes in an independent index which is the U.S. Prime Rate as published by the Wall Street Journal and currently is determined by the base rate on corporate loans posted by at least seventy percent (70%) of the nations ten (10) largest banks (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each day during the term of the loan. If at any time the Index is less than zero, then it shall be deemed to be zero for the purpose of calculating the interest rate on the Note. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 8.500% per annum. Interest on the unpaid principal balance of this loan will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate of 0.50 percentage points under the Index (the “Margin”), adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 8.250% per annum based on a year of 360 days. If Lender determines, in its sole discretion, that the Index has become unavailable or unreliable, either temporarily, indefinitely, or permanently, during the term of this loan, Lender may amend this loan by designating a substantially similar substitute index. Lender may also amend and adjust the Margin to accompany the substitute index. The change to the Margin may be a positive or negative value, or zero. In making these amendments, Lender may take into consideration any then-prevailing market convention for selecting a substitute index and margin for the specific Index that is unavailable or unreliable. Such an amendment to the terms of this loan will become effective and bind Borrower 10 business days after Lender gives written notice to Borrower without any action or consent of the Borrower. NOTICE: Under no circumstances will the interest rate on this loan be less than 3.000% per annum or more than the maximum rate allowed by applicable law.

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INTERESTCALCULATION METHOD. Interest on this loan is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over ayear of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.All interest payable under this loan is computed using this method.

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**PREPAYMENT.**Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. All written communicationsconcerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “paymentin full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amountmust be mailed or delivered to: First National Bank of Omaha, Downtown- Corporate Banking Group, 1620 Dodge St SC 3206, Omaha, NE 68197.

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LATECHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment or $25.00, whicheveris greater.

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INTERESTAFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this loan shall be increased by adding an additional 6.000 percentage point margin (“Default Rate Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

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**DEFAULT.**Each of the following shall constitute an Event of Default under this Agreement:

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PaymentDefault. Borrower fails to make any payment when due under the Indebtedness.

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OtherDefaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Defaultin Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or ability to perform Borrower’s obligations under this Agreement or any of the Related Documents.

FalseStatements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf, or made by Guarantor, or any other guarantor, endorser, surety, or accommodation party, under this Agreement or the Related Documents in connection with the obtaining of the Indebtedness evidenced by this Agreement or any security document directly or indirectly securing repayment of this Agreement is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

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**Insolvency.**The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

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Creditoror Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Indebtedness. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

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Execution;Attachment. Any execution or attachment is levied against the Collateral, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.

Changein Zoning or Public Restriction. Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted or implemented, that limits or defines the uses which may be made of the Collateral such that the present or intended use of the Collateral, as specified in the Related Documents, would be in violation of such zoning ordinance or regulation or public restriction, as changed.

DefaultUnder Other Lien Documents. A default occurs under any other mortgage, deed of trust or security agreement covering all or any portion of the Collateral.

**Judgment.**Unless adequately covered by insurance in the opinion of Lender, the entry of a final judgment for the payment of money involving more than ten thousand dollars ($10,000.00) against Borrower and the failure by Borrower to discharge the same, or cause it to be discharged, or bonded off to Lender’s satisfaction, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered.

EventsAffecting Guarantor. Any of the preceding events occurs with respect to any Guarantor, or any other guarantor, endorser, surety, or accommodation party of any of the Indebtedness or any Guarantor, or any other guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness evidenced by this Note.

ChangeIn Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.

AdverseChange. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.

**Insecurity.**Lender in good faith believes itself insecure.

LENDER’SRIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Agreement and all accrued unpaid interest immediately due, and then Borrower will pay that amount.

ATTORNEYS’FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.

JURYWAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lenderor Borrower against the other.

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GOVERNINGLAW. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws ofthe State of Nebraska without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Nebraska.

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CHOICEOF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Douglas County, State of Nebraska.

DISHONOREDITEM FEE. Borrower will pay a fee to Lender of $30.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored.

RIGHTOF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

**COLLATERAL.**Borrower acknowledges this Agreement is secured by a Commercial Pledge Agreement dated November 1, 2021, and any and all other security agreements or documents and any and all other collateral agreements or documents associated with this Loan or Note whether now existing or hereafter arising.

LINEOF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender’s office shown above. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Agreement at any time may be evidenced by endorsements on this Agreement or by Lender’s internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Agreement if; (A) Borrower or any guarantor is in default under the terms of this Agreement or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Agreement; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this Agreement or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Agreement for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure.

CONTINUINGVALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.

U.S.A.PATRIOT ACT. To help the government fight the funding of terrorism and money laundering activities, the USA PATRIOT Act requires all banks to obtain and verify the identity of each person or business that opens an account. When Borrower opens an account Lender will ask Borrower for information that will allow Lender to properly identify Borrower and Lender will verify that information. If Lender cannot properly verify identity within 30 calendar days, Lender reserves the right to deem all of the balance and accrued interest due and payable immediately.

ELECTRONICCOPIES. Lender may copy, electronically or otherwise, and thereafter destroy, the originals of this Agreement and/or Related Documents in the regular course of Lender’s business. All such copies produced from an electronic form or by any other reliable means (i.e., photographic image or facsimile) shall in all respects be considered equivalent to an original, and Borrower hereby waives any rights or objections to the use of such copies.

CHANGEIN MEMBERSHIP. If Borrower or Guarantor is a limited liability company, any change in ownership of twenty-five percent (25%) or more of the membership interest of Borrower or Guarantor is an Event of Default.

CROSSDEFAULT. An Event of Default, beyond the applicable cure period, if any, or an Event of Default under any other Loan or any Related Document will constitute an Event of Default under this Agreement and a default and an Event of Default under any other agreement by Borrower or any affiliate or subsidiary of Borrower with or in favor of Lender and under any evidence of any Loan or Indebtedness held by Lender, whether or not such is specified therein. Borrower acknowledges that some Loan Documents will e preprinted forms and that it is the intent of Borrower and Lender that all Loans and Guaranties by Borrower or any affiliate or subsidiary of Borrower with or in favor of Lender be cross-defaulted with each other.

SUCCESSORSAND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower, Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness.

MISCELLANEOUSPROVISIONS. If any part of this Agreement cannot be enforced, this fact will not affect the rest of the Agreement. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party who signs this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may mod’1fy this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Agreement are joint and several.

PRIORTO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

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BORROWER:

LANDMARKBANCORP, INC

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/s/ Mark A Herpich
Mark<br> A Herpich, Chief Fin. Officer/Secretary of
Landmark<br> Bancorp, Inc.

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Exhibit31.1

CERTIFICATIONPURSUANT TO

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

I, Michael E. Scheopner, certify that:

1.	I have<br> 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:<br> November 13, 2023	/s/ Michael E. Scheopner
---	---
	Michael<br> E. Scheopner
	Chief<br> Executive Officer

Exhibit31.2

CERTIFICATIONPURSUANT TO

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

I, Mark A. Herpich, certify that:

1.	I have<br> 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:<br> November 13, 2023	/s/ Mark A. Herpich
---	---
	Mark<br> A. Herpich
	Chief<br> Financial Officer

Exhibit32.1

CERTIFICATIONPURSUANT TO

18U.S.C. SECTION 1350,

ASADOPTED PURSUANT TO

SECTION906 OF 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 September 30, 2023 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<br> E. Scheopner
Chief<br> Executive Officer
November 13, 2023

Exhibit32.2

CERTIFICATIONPURSUANT TO

18U.S.C. SECTION 1350,

ASADOPTED PURSUANT TO

SECTION906 OF 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 September 30, 2023 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<br> A. Herpich
Chief<br> Financial Officer
November 13, 2023