LANDMARK BANCORP INC (Form: 10-Q, Received: 11/10/2016 16:57:40)

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, 2016

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

For the transition period from ________ to ________

Commission File Number 0-33203

LANDMARK BANCORP, INC.

(Exact name of registrant as specified in its charter)

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

701 Poyntz Avenue, Manhattan, Kansas 66502

(Address of principal executive offices) (Zip code)

(785) 565-2000

(Registrant's telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

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

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company x
	(Do not check if a smaller reporting company)

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

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 9, 2016, the issuer had outstanding 3,674,261 shares of its common stock, $.01 par value per share.

LANDMARK BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

		Page Number
	PART I

Item 1.	Financial Statements	2 - 25
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26 – 35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36 – 37
Item 4.	Controls and Procedures	38

	PART II

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39

	Signature Page	40

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)	September 30,		December 31,
	2016		2015
	(Unaudited)
Assets
Cash and cash equivalents	$	17,650	$	13,569
Investment securities available-for-sale, at fair value		374,426		353,438
Bank stocks, at cost		4,869		4,497
Loans, net of allowance for loans losses of $5,507 and $5,922		430,054		419,923
Loans held for sale, net		9,098		14,465
Premises and equipment, net		20,607		20,958
Bank owned life insurance		18,196		18,164
Goodwill		17,532		17,532
Other intangible assets, net		4,042		4,304
Real estate owned, net		1,178		1,000
Accrued interest and other assets		10,032		10,526
Total assets	$	907,684	$	878,376

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing demand	$	159,398	$	143,616
Money market and checking		322,344		346,106
Savings		87,686		81,062
Time		146,283		143,943
Total deposits		715,711		714,727

Federal Home Loan Bank borrowings		52,700		37,600
Subordinated debentures		21,234		21,084
Other borrowings		12,525		11,974
Accrued interest, taxes, and other liabilities		15,728		12,421
Total liabilities		817,898		797,806

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; 3,661,355 and 3,531,036 shares issued and outstanding at September 30, 2016 and December 31, 2015 respectively		36		35
Additional paid-in capital		47,295		45,372
Retained earnings		37,437		32,988
Accumulated other comprehensive income		5,018		2,175
Total stockholders’ equity		89,786		80,570

Total liabilities and stockholders’ equity	$	907,684	$	878,376

See accompanying notes to consolidated financial statements.

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three months ended				Nine months ended
(Dollars in thousands, except per share amounts)	September 30,				September 30,
	2016		2015		2016		2015
Interest income:
Loans:
Taxable	$	5,330	$	5,189	$	15,750	$	15,745
Tax-exempt		62		68		189		211
Investment securities:
Taxable		1,089		1,115		3,424		3,458
Tax-exempt		869		828		2,533		2,242
Total interest income		7,350		7,200		21,896		21,656
Interest expense:
Deposits		285		265		849		815
Borrowings		513		508		1,529		1,496
Total interest expense		798		773		2,378		2,311
Net interest income		6,552		6,427		19,518		19,345
Provision for loan losses		150		100		500		(700	)
Net interest income after provision for loan losses		6,402		6,327		19,018		20,045
Non-interest income:
Fees and service charges		1,873		1,922		5,449		5,417
Gains on sales of loans, net		1,219		2,013		4,418		6,207
Bank owned life insurance		125		131		390		376
Gains (losses) on sales of investment securities, net		261		135		558		(119	)
Other		264		275		769		1,040
Total non-interest income		3,742		4,476		11,584		12,921

Non-interest expense:
Compensation and benefits		3,903		3,885		11,481		11,451
Occupancy and equipment		1,131		1,073		3,242		3,203
Amortization of intangibles		373		340		1,041		1,021
Data processing		369		352		1,026		1,041
Professional fees		258		233		759		726
Advertising		166		184		498		433
Federal deposit insurance premiums		75		97		295		321
Foreclosure and real estate owned expense		60		10		176		55
Other		1,059		1,134		3,249		3,611
Total non-interest expense		7,394		7,308		21,767		21,862
Earnings before income taxes		2,750		3,495		8,835		11,104
Income tax expense		656		966		2,219		3,182
Net earnings	$	2,094	$	2,529	$	6,616	$	7,922
Earnings per share:
Basic (1)	$	0.57	$	0.72	$	1.83	$	2.26
Diluted (1)	$	0.56	$	0.70	$	1.80	$	2.19
Dividends per share (1)	$	0.20	$	0.18	$	0.60	$	0.54

(1) Per share amounts for the periods ended September 30, 2015 have been adjusted to give effect to the 5% stock dividend paid during December 2015.

See accompanying notes to consolidated financial statements.

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended						Nine months ended
(Dollars in thousands)	September 30,						September 30,
	2016			2015			2016			2015

Net earnings	$	2,094		$	2,529		$	6,616		$	7,922

Net unrealized holding (losses) gains on available-for-sale securities		(2,073	)		3,216			5,088			1,894
Reclassification adjustment for net (gains) losses included in earnings		(261	)		(135	)		(558	)		119
Net unrealized (losses) gains		(2,334	)		3,081			4,530			2,013
Income tax effect on net gains (losses) included in earnings		97			50			206			(44	)
Income tax effect on net unrealized holding losses (gains)		760			(1,190	)		(1,893	)		(697	)
Other comprehensive (loss) income		(1,477	)		1,941			2,843			1,272

Total comprehensive income	$	617		$	4,470		$	9,459		$	9,194

See accompanying notes to consolidated financial statements.

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share amounts)	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income		Total

Balance at January 1, 2015	$	33	$	40,473	$	29,321		$	1,818	$	71,645
Net earnings		-		-		7,922			-		7,922
Other comprehensive income		-		-		-			1,272		1,272
Dividends paid ($0.54 per share)		-		-		(1,903	)		-		(1,903	)
Stock-based compensation		-		16		-			-		16
Exercise of stock options, 7,941 shares, including excess tax benefit of $5		-		129		-			-		129
Balance at September 30, 2015	$	33	$	40,618	$	35,340		$	3,090	$	79,081

Balance at January 1, 2016	$	35	$	45,372	$	32,988		$	2,175	$	80,570
Net earnings		-		-		6,616			-		6,616
Other comprehensive income		-		-		-			2,843		2,843
Dividends paid ($0.60 per share)		-		-		(2,167	)		-		(2,167	)
Stock-based compensation		-		23		-			-		23
Exercise of stock options, 117,919 shares, including excess tax benefit of $266		1		1,900		-			-		1,901
Balance at September 30, 2016	$	36	$	47,295	$	37,437		$	5,018	$	89,786

See accompanying notes to consolidated financial statements.

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended
(Dollars in thousands)	September 30,
	2016			2015
Cash flows from operating activities:
Net earnings	$	6,616		$	7,922
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		500			(700	)
Amortization of investment security premiums, net		1,238			1,154
Amortization of purchase accounting adjustment on loans		(75	)		(459	)
Amortization of purchase accounting adjustment on subordinated debentures		150			150
Amortization of intangibles		1,041			1,021
Depreciation		866			869
Increase in cash surrender value of bank owned life insurance		(390	)		(376	)
Stock-based compensation		23			16
Deferred income taxes		594			215
Net (gains) losses on sales of investment securities		(558	)		119
Impairment of affordable housing investment		-			163
Net loss (gain) on sales of premises, equipment and real estate owned		89			(240	)
Net gains on sales of loans		(4,418	)		(6,207	)
Proceeds from sales of loans		173,967			229,162
Origination of loans held for sale		(164,182	)		(221,309	)
Changes in assets and liabilities:
Accrued interest and other assets		(2,305	)		(2,448	)
Accrued expenses, taxes, and other liabilities		1,764			1,232
Net cash provided by operating activities		14,920			10,284
Cash flows from investing activities:
Net (increase) decrease in loans		(11,650	)		523
Maturities and prepayments of investment securities		32,061			45,957
Purchases of investment securities		(62,230	)		(75,238	)
Proceeds from sales of investment securities		14,326			30,610
Redemption of bank stocks		4,686			8,774
Purchase of bank stocks		(5,058	)		(9,243	)
Proceeds from sales of premises and equipment and foreclosed assets		813			537
Proceeds from bank owned life insurance		358			-
Purchases of premises and equipment, net		(518	)		(1,049	)
Net cash (used in) provided by investing activities		(27,212	)		871
Cash flows from financing activities:
Net increase (decrease) in deposits		988			(17,012	)
Federal Home Loan Bank advance borrowings		276,833			220,326
Federal Home Loan Bank advance repayments		(261,733	)		(215,279	)
Proceeds from other borrowings		551			3,158
Repayments on other borrowings		-			(660	)
Proceeds from exercise of stock options, including excess tax benefit		1,901			129
Payment of dividends		(2,167	)		(1,903	)
Net cash provided by (used in) financing activities		16,373			(11,241	)
Net increase (decrease) in cash and cash equivalents		4,081			(86	)
Cash and cash equivalents at beginning of period		13,569			12,760
Cash and cash equivalents at end of period	$	17,650		$	12,674

(Continued)

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(Unaudited)

	Nine months ended
(Dollars in thousands)	September 30,
	2016			2015
Supplemental disclosure of cash flow information:
Cash payments for income taxes	$	510		$	2,190
Cash paid for interest		2,254			2,173

Supplemental schedule of noncash investing and financing activities:
Transfer of loans to real estate owned		1,077			94
Investment securities purchases not yet settled		(1,295	)		(4,094	)

See accompanying notes to consolidated financial statements.

LANDMARK BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interim Financial Statements

The unaudited consolidated financial statements of Landmark Bancorp, Inc. (the “Company”) and its subsidiary, Landmark National Bank (the “Bank”), have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles ("GAAP") for complete financial statements and should be read in conjunction with the Company’s most recent annual report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto. The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected herein. The results of the nine months ended September 30, 2016 are not necessarily indicative of the results expected for the year ending December 31, 2016 or for any other period. The Company has evaluated subsequent events for recognition and disclosure up to the date the financial statements were issued.

Investments

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

	As of September 30, 2016
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
(Dollars in thousands)	cost		gains		losses			fair value

U. S. treasury securities	$	6,008	$	22	$	-		$	6,030
U. S. federal agency obligations		27,188		167		(6	)		27,349
Municipal obligations, tax-exempt		160,122		3,907		(181	)		163,848
Municipal obligations, taxable		71,680		1,949		(1	)		73,628
Agency mortgage-backed securities		91,331		1,580		(42	)		92,869
Common stocks		458		544		-			1,002
Certificates of deposit		9,700		-		-			9,700
Total	$	366,487	$	8,169	$	(230	)	$	374,426

	As of December 31, 2015
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
(Dollars in thousands)	cost		gains		losses			fair value

U. S. treasury securities	$	6,517	$	1	$	(1	)	$	6,517
U. S. federal agency obligations		30,064		43		(187	)		29,920
Municipal obligations, tax-exempt		135,341		2,671		(71	)		137,941
Municipal obligations, taxable		81,999		472		(581	)		81,890
Agency mortgage-backed securities		85,829		391		(235	)		85,985
Common stocks		580		906		-			1,486
Certificates of deposit		9,699		-		-			9,699
Total	$	350,029	$	4,484	$	(1,075	)	$	353,438

The tables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarily impaired, as of September 30, 2016 and December 31, 2015. 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.

			As of September 30, 2016
(Dollars in thousands)			Less than 12 months					12 months or longer				Total
	No. of		Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	securities		value		losses			value		losses		value		losses
U.S. federal agency obligations		3	$	6,198	$	(6	)	$	-	$	-	$	6,198	$	(6	)
Municipal obligations, tax-exempt		78		27,441		(181	)		-		-		27,441		(181	)
Municipal obligations, taxable		2		567		(1	)		-		-		567		(1	)
Agency mortgage-backed securities		19		10,936		(42	)		-		-		10,936		(42	)
Total		102	$	45,142	$	(230	)	$	-	$	-	$	45,142	$	(230	)

			As of December 31, 2015
(Dollars in thousands)			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
U.S. treasury securities		2	$	3,542	$	(1	)	$	-	$	-		$	3,542	$	(1	)
U. S. federal agency obligations		18		23,015		(163	)		1,976		(24	)		24,991		(187	)
Municipal obligations, tax-exempt		47		11,328		(53	)		2,132		(18	)		13,460		(71	)
Municipal obligations, taxable		105		38,605		(494	)		5,068		(87	)		43,673		(581	)
Agency mortgage-backed securities		40		29,814		(166	)		2,925		(69	)		32,739		(235	)
Total		212	$	106,304	$	(877	)	$	12,101	$	(198	)	$	118,405	$	(1,075	)

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

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, 2016, 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 their costs. 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 the date of the respective table.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association (“GNMA”). 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 tables above were temporarily impaired as of the date of the respective table.

The table below of the amortized cost and estimated fair value of investment securities 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. The amortized cost and fair value of investment securities at September 30, 2016 are as follows:

(Dollars in thousands)	Amortized		Estimated
	cost		fair value
Due in less than one year	$	25,963	$	26,067
Due after one year but within five years		182,604		184,791
Due after five years but within ten years		89,280		92,434
Due after ten years		68,182		70,132
Common stocks		458		1,002
Total	$	366,487	$	374,426

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

(Dollars in thousands)	Three months ended September 30,					Nine months ended September 30,
	2016		2015			2016			2015

Sales proceeds	$	708	$	11,541		$	14,326		$	30,610

Realized gains	$	261	$	206		$	573		$	230
Realized losses		-		(71	)		(15	)		(349	)
Net realized gains (losses)	$	261	$	135		$	558		$	(119	)

Securities with carrying values of $204.5 million and $171.6 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at September 30, 2016 and December 31, 2015, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.

Loans and Allowance for Loan Losses

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

	September 30,			December 31,
(Dollars in thousands)	2016			2015

One-to-four family residential real estate	$	133,714		$	131,930
Construction and land		16,084			15,043
Commercial real estate		116,395			118,983
Commercial loans		61,580			61,300
Agriculture loans		80,632			71,030
Municipal loans		7,132			7,635
Consumer loans		20,038			19,895
Total gross loans		435,575			425,816
Net deferred loan (fees) costs and loans in process		(14	)		29
Allowance for loan losses		(5,507	)		(5,922	)
Loans, net	$	430,054		$	419,923

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class:

	Three and nine months ended September 30, 2016
(Dollars in thousands)	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial loans			Agriculture loans			Municipal loans			Consumer loans			Total

Allowance for loan losses:
Balance at July 1, 2016	$	584		$	89		$	1,776		$	1,393		$	1,600		$	23		$	187		$	5,652
Charge-offs		(14	)		-			-			-			(215	)		-			(89	)		(318	)
Recoveries		3			-			-			9			-			-			11			23
Provision for loan losses		36			(7	)		(40	)		(28	)		88			-			101			150
Balance at September 30, 2016		609			82			1,736			1,374			1,473			23			210			5,507

Balance at January 1, 2016	$	925		$	77		$	1,740		$	1,530		$	1,428		$	23		$	199		$	5,922
Charge-offs		(14	)		-			-			(306	)		(298	)		-			(374	)		(992	)
Recoveries		8			-			-			29			-			6			34			77
Provision for loan losses		(310	)		5			(4	)		121			343			(6	)		351			500
Balance at September 30, 2016		609			82			1,736			1,374			1,473			23			210			5,507

	Three and nine months ended September 30, 2015
(Dollars in thousands)	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial loans			Agriculture loans		Municipal loans			Consumer loans			Total

Allowance for loan losses:
Balance at July 1, 2015	$	1,325		$	99		$	1,539		$	1,756		$	1,102	$	21		$	176		$	6,018
Charge-offs		(48	)		-			-			(68	)		-		-			(88	)		(204	)
Recoveries		3			2			-			10			-		-			7			22
Provision for loan losses		(172	)		(3	)		129			(113	)		144		1			114			100
Balance at September 30, 2015		1,108			98			1,668			1,585			1,246		22			209			5,936

Balance at January 1, 2015	$	755		$	762		$	1,832		$	836		$	915	$	51		$	169		$	5,320
Charge-offs		(57	)		-			-			(78	)		-		(88	)		(230	)		(453	)
Recoveries		8			1,721			2			13			-		-			25			1,769
Provision for loan losses		402			(2,385	)		(166	)		814			331		59			245			(700	)
Balance at September 30, 2015		1,108			98			1,668			1,585			1,246		22			209			5,936

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

	As of September 30, 2016
(Dollars in thousands)	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial loans		Agriculture loans		Municipal loans		Consumer loans		Total

Allowance for loan losses:
Individually evaluated for loss		-		-		-		13		2		-		22		37
Collectively evaluated for loss		609		82		1,736		1,361		1,471		23		188		5,470
Total		609		82		1,736		1,374		1,473		23		210		5,507

Loan balances:
Individually evaluated for loss		309		2,006		2,517		114		675		345		110		6,076
Collectively evaluated for loss		133,405		14,078		113,878		61,466		79,957		6,787		19,928		429,499
Total	$	133,714	$	16,084	$	116,395	$	61,580	$	80,632	$	7,132	$	20,038	$	435,575

	As of December 31, 2015
(Dollars in thousands)	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial loans		Agriculture loans		Municipal loans		Consumer loans		Total

Allowance for loan losses:
Individually evaluated for loss		78		-		-		-		-		-		10		88
Collectively evaluated for loss		847		77		1,740		1,530		1,428		23		189		5,834
Total		925		77		1,740		1,530		1,428		23		199		5,922

Loan balances:
Individually evaluated for loss		752		2,220		2,429		620		189		591		36		6,837
Collectively evaluated for loss		131,178		12,823		116,554		60,680		70,841		7,044		19,859		418,979
Total	$	131,930	$	15,043	$	118,983	$	61,300	$	71,030	$	7,635	$	19,895	$	425,816

The Company recorded net loan charge-offs of $915,000 during the first nine months of 2016 compared to net loan recoveries of $1.3 million during the first nine months of 2015. The net loan charge-offs during the first nine months of 2016 were primarily related to an agriculture loan relationship which was subject to a trouble debt restructuring (“TDR”) and the liquidation of the assets securing a previously identified and impaired commercial loan. The charge-off associated with this commercial loan exceeded the related allowance recorded at March 31, 2016, which contributed to the provision for loan losses during the second quarter of 2016. The net loan recoveries during the first nine months of 2015 were primarily associated with the recovery of $1.7 million on a $4.3 million construction loan which was fully charged-off during 2010 and 2011. As of September 30, 2016, the Company has recovered approximately $2.4 million of the loan and continues to pursue collection of the remaining amount.

The Company’s impaired loans decreased from $6.8 million at December 31, 2015 to $6.1 million at September 30, 2016. The difference between the unpaid contractual principal and the impaired loan balance is a result of charge-offs recorded against impaired loans. The difference in the Company’s non-accrual loan balances and impaired loan balances at September 30, 2016 and December 31, 2015, was related to TDRs that are current and accruing interest, but still classified as impaired. Interest income recognized on a cash basis was immaterial during the nine months ended September 30, 2016 and 2015.

The following tables present information on impaired loans:

(Dollars in thousands)	As of September 30, 2016
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to- date average loan balance		Year-to- date interest income recognized

One-to-four family residential real estate	$	309	$	309	$	309	$	-	$	-	$	323	$	6
Construction and land		3,741		2,006		2,006		-		-		2,101		56
Commercial real estate		2,517		2,517		2,517		-		-		2,618		383
Commercial loans		114		114		62		52		13		138		2
Agriculture loans		891		676		224		452		2		686		4
Municipal loans		345		345		345		-		-		456		10
Consumer loans		110		110		62		48		22		116		-
Total impaired loans	$	8,027	$	6,077	$	5,525	$	552	$	37	$	6,438	$	461

(Dollars in thousands)	As of December 31, 2015
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to- date average loan balance		Year-to- date interest income recognized

One-to-four family residential real estate	$	752	$	752	$	408	$	344	$	78	$	1,041	$	-
Construction and land		3,955		2,220		2,220		-		-		2,389		88
Commercial real estate		2,429		2,429		2,429		-		-		2,484		175
Commercial loans		637		620		620		-		-		634		3
Agriculture loans		189		189		189		-		-		188		3
Municipal loans		591		591		591		-		-		631		19
Consumer loans		36		36		10		26		10		41		-
Total impaired loans	$	8,589	$	6,837	$	6,467	$	370	$	88	$	7,408	$	288

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 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 principal or interest is considered doubtful. There were no loans ninety days delinquent and accruing interest at September 30, 2016 or December 31, 2015.

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

(Dollars in thousands)	As of September 30, 2016
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non- accrual loans			Total loans not past due

One-to-four family residential real estate	$	263		$	120		$	-		$	383		$	122		$	505		$	133,209
Construction and land		4			-			-			4			602			606			15,478
Commercial real estate		332			90			-			422			237			659			115,736
Commercial loans		256			-			-			256			90			346			61,234
Agriculture loans		83			-			-			83			631			714			79,918
Municipal loans		-			-			-			-			-			-			7,132
Consumer loans		88			10			-			98			110			208			19,830
Total	$	1,026		$	220		$	-		$	1,246		$	1,792		$	3,038		$	432,537

Percent of gross loans		0.24	%		0.05	%		0.00	%		0.29	%		0.41	%		0.70	%		99.30	%

(Dollars in thousands)	As of December 31, 2015
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non- accrual loans			Total loans not past due

One-to-four family residential real estate	$	70		$	712		$	-		$	782		$	749		$	1,531		$	130,399
Construction and land		4			-			-			4			614			618			14,425
Commercial real estate		240			-			-			240			47			287			118,696
Commercial loans		90			40			-			130			583			713			60,587
Agriculture loans		174			5			-			179			139			318			70,712
Municipal loans		-			-			-			-			-			-			7,635
Consumer loans		65			2			-			67			36			103			19,792
Total	$	643		$	759		$	-		$	1,402		$	2,168		$	3,570		$	422,246

Percent of gross loans		0.15	%		0.18	%		0.00	%		0.33	%		0.51	%		0.84	%		99.16	%

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the nine months ended September 30, 2016 and 2015 would have increased interest income by $43,000 and $121,000, respectively. No interest income related to non-accrual loans was included in interest income for the nine months ended September 30, 2016 and 2015.

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. Non-classified 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.

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

	As of September 30, 2016				As of December 31, 2015
(Dollars in thousands)	Nonclassified		Classified		Nonclassified		Classified

One-to-four family residential real estate	$	133,069	$	645	$	130,575	$	1,355
Construction and land		15,267		817		14,429		614
Commercial real estate		107,317		9,078		111,016		7,967
Commercial loans		58,379		3,201		58,862		2,438
Agriculture loans		74,039		6,593		68,186		2,844
Municipal loans		7,132		-		7,635		-
Consumer loans		19,913		125		19,839		56
Total		415,116		20,459		410,542		15,274

At September 30, 2016, the Company had eleven loan relationships consisting of seventeen outstanding loans that were classified as TDRs. During the third quarter of 2016, the Company classified a $302,000 agriculture loan relationship consisting of three loans as a TDR after extending the maturities of the loans. The collateral securing the loans was deemed to be insufficient, resulting in a charge-off of $215,000. During the second quarter of 2016, the Company classified an $8,000 commercial loan as a TDR after modifying the payments to interest only. Also during the second quarter of 2016, the Company classified an $188,000 one-to-four family residential real estate loan as a TDR after agreeing to a loan modification which adjusted the payment schedule. No loan modifications were classified as TDRs during the first quarter of 2016. The Company recorded charge-offs of $215,000 and a provision for loan loss of $2,000 against TDRs during the three and nine months ended September 30, 2016. No loan modifications were classified as TDRs during the third quarter of 2015. During the second quarter of 2015, the Company classified a commercial loan relationship consisting of $2.7 million in real estate and land loans as a TDR after agreeing to a bankruptcy plan with the borrower. The bankruptcy plan restarted the amortization period of the loans which extended the maturities of the loans. During the first quarter of 2015, the Company classified a $44,000 agriculture loan relationship consisting of two loans as a TDR after extending the maturity of the loans. During the first nine months of 2016, a $56,000 one-to-four family residential real estate loan and a $25,000 agriculture loan, which were both classified as TDRs during 2015, were paid off. During the first nine months of 2015, a land loan relationship consisting of three loans totaling $1.6 million, which was previously classified as a TDR during 2012, was paid off with proceeds from the sale of assets and a new loan on the remaining assets was originated at market terms. The Company did not record any charge-offs or provision for loan losses during the three and nine months ended September 30, 2015.

The Company evaluates each TDR individually and returns the loan to accrual status when a payment history is established after the restructuring and future payments are reasonably assured. There were no loans modified as TDRs for which there was a payment default within 12 months of modification as of September 30, 2016 and 2015. At September 30, 2016, there was a commitment of $84,000 to lend additional funds on one construction and land loan classified as a TDR. The Company had no allowance recorded against loans classified as TDRs at September 30, 2016 or December 31, 2015. There were no loans modified as TDRs in the process of foreclosure at September 30, 2016 or December 31, 2015.

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

	As of September 30, 2016						As of December 31, 2015
	Number of loans		Non-accrual balance		Accruing balance		Number of loans		Non-accrual balance		Accruing balance

One-to-four family residential real estate		2	$	-	$	187		2	$	55	$	3
Construction and land		4		590		1,404		4		600		1,606
Commercial real estate		3		-		2,280		3		-		2,382
Commercial loans		2		-		24		1		-		37
Agriculture		4		302		45		2		-		50
Municipal loans		2		-		345		2		-		591
Total troubled debt restructurings		17	$	892	$	4,285		14	$	655	$	4,669

Goodwill and Other Intangible Assets

The Company tests goodwill for impairment annually or more frequently if circumstances warrant. The Company’s annual step one impairment test as of December 31, 2015 concluded that its goodwill was not impaired. The Company concluded there were no triggering events during the first nine months of 2016 that required an interim goodwill impairment test.

Lease intangible assets are amortized over the life of the lease. 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 is as follows:

(Dollars in thousands)	As of September 30, 2016
	Gross carrying amount		Accumulated amortization			Valuation allowance		Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,071	)	$	-	$	996
Lease intangible asset		350		(132	)		-		218
Mortgage servicing rights		5,655		(2,827	)		-		2,828
Total other intangible assets	$	8,072	$	(4,030	)	$	-	$	4,042

(Dollars in thousands)	As of December 31, 2015
	Gross carrying amount		Accumulated amortization			Valuation allowance		Net carrying amount
Core deposit intangible assets	$	2,067	$	(855	)	$	-	$	1,212
Lease intangible asset		350		(98	)		-		252
Mortgage servicing rights		5,322		(2,482	)		-		2,840
Total other intangible assets	$	7,739	$	(3,435	)	$	-	$	4,304

The following sets forth estimated amortization expense for core deposit and lease intangible assets for the remainder of 2016 and in successive years ending December 31:

(Dollars in thousands)	Amortization
	expense
Remainder of 2016	$	77
2017		289
2018		252
2019		214
2020		177
Thereafter		205
Total	$	1,214

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:

(Dollars in thousands)	September 30,		December 31,
	2016		2015
FHLMC	$	473,896	$	444,714
FHLB		12,055		14,039

Custodial escrow balances maintained in connection with serviced loans were $7.2 million and $3.5 million at September 30, 2016 and December 31, 2015, respectively. Gross service fee income related to such loans was $308,000 and $285,000 for the three months ended September 30, 2016 and 2015, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $912,000 and $808,000 for the nine months ended September 30, 2016 and 2015, respectively.

Activity for mortgage servicing rights and the related valuation allowance follows:

(Dollars in thousands)	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Mortgage servicing rights:
Balance at beginning of period	$	2,851		$	2,729		$	2,840		$	2,477
Additions		268			328			780			1,038
Amortization		(291	)		(233	)		(792	)		(691	)
Balance at end of period	$	2,828		$	2,824		$	2,828		$	2,824

The fair value of mortgage servicing rights was $4.1 million and $4.6 million at September 30, 2016 and December 31, 2015, respectively. Fair value at September 30, 2016 was determined using discount rates ranging from 9.50% to 9.51%; prepayment speeds ranging from 5.50% to 15.09%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 2.20%. Fair value at December 31, 2015 was determined using discount rates ranging from 9.50% to 10.00%; prepayment speeds ranging from 5.15% to 33.78%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 2.25%.

The Company had a mortgage repurchase reserve of $361,000 and $351,000 at September 30, 2016 and December 31, 2015, respectively, which represents the Company’s best estimate of probable losses that the Company will incur related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. The Company did not incur any losses charged against the reserve or make any provisions to the reserve during the first nine months of 2016 and 2015. The Company had no losses or recoveries during the three months ended September 30, 2016 and recovered $10,000 of losses against the mortgage repurchase reserve during the nine months ended September 30, 2016. As of September 30, 2016, the Company did not have any outstanding mortgage repurchase requests.

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

(Dollars in thousands, except per share amounts)	September 30				September 30
	2016		2015		2016		2015
Net earnings	$	2,094	$	2,529	$	6,616	$	7,922

Weighted average common shares outstanding - basic (1)		3,645,618		3,506,440		3,605,509		3,504,487
Assumed exercise of stock options (1)		69,165		115,397		67,129		101,674
Weighted average common shares outstanding - diluted (1)		3,714,783		3,621,837		3,672,638		3,611,251
Net earnings per share (1):
Basic	$	0.57	$	0.72	$	1.83	$	2.26
Diluted	$	0.56	$	0.70	$	1.80	$	2.19

(1) Share and per share values for the periods ended September 30, 2015 have been adjusted to give effect to the 5% stock dividend paid during December 2015.

The diluted earnings per share computations for the three and nine months ended September 30, 2016 and 2015 include all unexercised stock options because no stock options were anti-dilutive during such periods.

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

	As of September 30, 2016
	Overnight and						Greater
	Continuous		Up to 30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal agency obligations	$	5,046	$	-	$	-	$	-	$	5,046
Agency mortgage-backed securities		7,479		-		-		-		7,479
Total	$	12,525	$	-	$	-	$	-	$	12,525

	As of December 31, 2015
	Overnight and		Up to				Greater
	Continuous		30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal agency obligations	$	5,810	$	-	$	-	$	-	$	5,810
Agency mortgage-backed securities		6,164		-		-		-		6,164
Total	$	11,974	$	-	$	-	$	-	$	11,974

Repurchase agreements are comprised of non-insured customer funds, totaling $12.5 million at September 30, 2016, and $12.0 million at December 31, 2015, which were secured by $16.7 million and $15.7 million of the Company’s investment portfolio at the same dates, respectively.

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.

Fair Value of Financial Instruments and Fair Value Measurements

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

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

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

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

Fair value estimates of the Company’s financial instruments as of September 30, 2016 and December 31, 2015, including methods and assumptions utilized, are set forth below:

(Dollars in thousands)	As of September 30, 2016
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	17,650		$	17,650		$	-		$	-	$	17,650
Investment securities available-for-sale		374,426			7,032			367,394			-		374,426
Bank stocks, at cost		4,869			n/a			n/a			n/a		n/a
Loans, net		430,054			-			-			431,408		431,408
Loans held for sale, net		9,098			-			9,098			-		9,098
Derivative financial instruments		553			-			553			-		553
Accrued interest receivable		4,160			11			1,901			2,248		4,160

Financial liabilities:
Non-maturity deposits	$	(569,428	)	$	(569,428	)	$	-		$	-		(569,428	)
Time deposits		(146,283	)		-			(145,631	)		-		(145,631	)
FHLB borrowings		(52,700	)		-			(53,708	)		-		(53,708	)
Subordinated debentures		(21,234	)		-			(18,906	)		-		(18,906	)
Other borrowings		(12,525	)		-			(12,525	)		-		(12,525	)
Accrued interest payable		(265	)		-			(265	)		-		(265	)

	As of December 31, 2015
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	13,569		$	13,569		$	-		$	-	$	13,569
Investment securities available-for-sale		353,438			8,003			345,435			-		353,438
Bank stocks, at cost		4,497			n/a			n/a			n/a		n/a
Loans, net		419,923			-			-			420,061		420,061
Derivative financial instruments		797			-			797			-		797
Accrued interest receivable		4,002			22			2,117			1,863		4,002

Financial liabilities:
Non-maturity deposits	$	(570,784	)	$	(570,784	)	$	-		$	-	$	(570,784	)
Time deposits		(143,943	)		-			(142,924	)		-		(142,924	)
FHLB borrowings		(37,600	)		-			(38,215	)		-		(38,215	)
Subordinated debentures		(21,084	)		-			(19,051	)		-		(19,051	)
Other borrowings		(11,974	)		-			(11,974	)		-		(11,974	)
Accrued interest payable		(287	)		-			(287	)		-		(287	)

Methods and Assumptions Utilized

The carrying amount of cash and cash equivalents is considered to approximate fair value.

The Company’s investment securities classified as available-for-sale include U.S. treasury securities, U.S. federal agency securities, municipal obligations, agency mortgage-backed securities, certificates of deposits and common stocks. Quoted exchange prices are available for the Company’s U.S treasury securities and common stock investments, which are classified as Level 1. U.S. federal agency securities and agency mortgage-backed obligations 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 securities 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.

It is not practical to determine the fair value of bank stocks due to restrictions placed on the transferability of FHLB and FRB stock.

The estimated fair value of the Company’s loan portfolio is based on the segregation of loans by collateral type, interest terms, and maturities. The fair value is estimated based on discounting scheduled and estimated cash flows through maturity using an appropriate risk-adjusted yield curve to approximate current interest rates for each category. No adjustment was made to the interest rates for changes in credit risk of performing loans where there are no known credit concerns. Management segregates loans in appropriate risk categories. Management believes that the risk factor embedded in the interest rates along with the allowance for loan losses applicable to the performing loan portfolio results in a fair valuation of such loans. The fair values of impaired loans are generally based on market prices for similar assets determined through independent appraisals or discounted values of independent appraisals and brokers’ opinions of value. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC Topic 820 and is classified as Level 3.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value, determined on an aggregate basis. The mortgage loan valuations are based on quoted secondary market prices for similar loans and are classified as Level 2.

The carrying amounts of accrued interest receivable and payable are considered to approximate fair value.

The estimated fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, money market accounts, and checking accounts, is equal to the amount payable on demand. The fair value of interest-bearing time deposits is based on the discounted value of contractual cash flows of such deposits. The discount rate is tied to the FHLB yield curve plus an appropriate servicing spread. Fair value measurements based on discounted cash flows are classified as Level 2. These fair values do not incorporate the value of core deposit intangibles which may be associated with the deposit base.

The fair value of advances from the FHLB, subordinated debentures, and other borrowings is estimated using current yield curves for similar borrowings adjusted for the Company’s current credit spread and classified as Level 2.

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 management’s 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 sale of loans, net in the consolidated statements of earnings.

Off-Balance-Sheet Financial Instruments

The fair value of letters of credit and commitments to extend credit is based on the fees currently charged to enter into similar agreements. The aggregate of these fees is not material.

Transfers

The Company did not transfer any assets or liabilities among levels during the nine months ended September 30, 2016 or during the year ended December 31, 2015.

Valuation Methods for Instruments Measured at Fair Value on a Recurring Basis

The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis at September 30, 2016 and December 31, 2015, allocated to the appropriate fair value hierarchy:

(Dollars in thousands)			As of September 30, 2016
			Fair value hierarchy
	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale investment securities
U. S. treasury securities	$	6,030	$	6,030	$	-	$	-
U. S. federal agency obligations		27,349		-		27,349		-
Municipal obligations, tax exempt		163,848		-		163,848		-
Municipal obligations, taxable		73,628		-		73,628		-
Agency mortgage-backed securities		92,869		-		92,869		-
Common stocks		1,002		1,002		-		-
Certificates of deposit		9,700		-		9,700		-
Derivative financial instruments	$	553	$	-	$	553	$	-

(Dollars in thousands)			As of December 31, 2015
			Fair value hierarchy
	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale investment securities
U. S. treasury securities	$	6,517	$	6,517	$	-	$	-
U. S. federal agency obligations		29,920		-		29,920		-
Municipal obligations, tax exempt		137,941		-		137,941		-
Municipal obligations, taxable		81,890		-		81,890		-
Agency mortgage-backed securities		85,985		-		85,985		-
Common stocks		1,486		1,486		-		-
Certificates of deposit		9,699		-		9,699		-
Derivative financial instruments		797		-		797		-

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.

Valuation Methods for Instruments Measured at Fair Value on a Non-recurring Basis

The Company does not value its loan portfolio at fair value. Collateral-dependent impaired loans are generally carried at the lower of cost or fair value of the collateral, less estimated selling costs. Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by the Company and then further adjusted if warranted based on relevant facts and circumstances. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Impaired loans are reviewed and evaluated at least quarterly for additional impairment and adjusted accordingly, based on the same factors identified above. The carrying value of the Company’s impaired loans was $6.1 million and $6.8 million, with an allocated allowance of $37,000 and $88,000, at September 30, 2016 and December 31, 2015, respectively.

The following table represents the Company’s financial instruments that are measured at fair value on a non-recurring basis as of September 30, 2016 and December 31, 2015 allocated to the appropriate fair value hierarchy:

(Dollars in thousands)

			As of September 30, 2016						Total
			Fair value hierarchy						gains/
	Total		Level 1		Level 2		Level 3		(losses)
Assets:
Impaired loans:
Commercial loans	$	39	$	-	$	-	$	39	$	(13	)
Agriculture loans		449		-		-		449		(2	)
Consumer loans		26		-		-		26		(12	)
Real estate owned:
One-to-four family residential real estate		540		-		-		540		-

			As of December 31, 2015						Total
			Fair value hierarchy						(losses)/
	Total		Level 1		Level 2		Level 3		gains
Assets:
Impaired loans:
One-to-four family residential real estate	$	266	$	-	$	-	$	266	$	(137	)
Consumer loans		16		-		-		16		6
Loans held for sale		14,465		-		14,465		-		(10	)

The following table presents quantitative information about Level 3 fair value measurements for impaired loans measured at fair value on a non-recurring basis as of September 30, 2016 and December 31, 2015.

(Dollars in thousands)

	Fair value		Valuation technique	Unobservable inputs	Range
As of September 30, 2016
Impaired loans:
Commercial loans	$	39	Sales comparison	Adjustment to appraised value		7	%
Agriculture loans		449	Sales comparison	Adjustment to appraised value		15%-50	%
Consumer loans		26	Sales comparison	Adjustment to appraised value		6%-20	%
Real estate owned:
One-to-four family residential real estate		540	Sales comparison	Adjustment to appraised value		10	%

As of December 31, 2015
Impaired loans:
One-to-four family residential real estate	$	266	Sales comparison	Adjustment to appraised value		0%-40	%
Consumer loans		16	Sales comparison	Adjustment to comparable sales		0	%

Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believed that as of September 30, 2016, 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. On January 1, 2015, the Company and the Bank became subject to new capital rules (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 $1.0 billion).

The Basel III Rules have maintained the general structure of the prompt corrective action framework, while incorporating increased requirements. The Basel III Rules include a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, require a minimum ratio of Total Capital to risk-weighted assets of 8.0%, and require a minimum Tier 1 leverage ratio of 4.0%. A capital conservation buffer, comprised of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements. This capital conservation buffer began on January 1, 2016 at 0.625% of risk-weighted assets, and will increase each subsequent year by an additional 0.625% until reaching its final level of 2.5% on January 1, 2019. The capital conservation buffer increases the common equity Tier 1 capital ratio, Tier 1 capital and total risk based capital ratios as of March 31 of each year until the final level of 2.5% is reached. The Bank made the one-time accumulated other comprehensive income (“AOCI”) opt-out election on its first Call Report filed after January 1, 2015, which allowed banks under $250 billion a one-time opt-out election to remove the impact of certain unrealized capital gains and losses from the calculation of capital.

As of September 30, 2016 and December 31, 2015, 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.

The following is a comparison of the Company’s regulatory capital to minimum capital requirements at September 30, 2016 and December 31, 2015:

(Dollars in thousands)						For capital
	Actual					adequacy purposes*
	Amount		Ratio			Amount		Ratio
As of September 30, 2016
Leverage	$	87,248		9.95	%	$	35,087		4.0	%
Common Equity Tier 1 Capital		66,705		12.40	%		27,577		5.1	%
Tier 1 Capital		87,248		16.21	%		35,648		6.6	%
Total Risk Based Capital		93,150		17.31	%		46,410		8.6	%

As of December 31, 2015
Leverage	$	80,401		9.43	%	$	34,092		4.0	%
Common Equity Tier 1 Capital		60,375		11.05	%		24,584		4.5	%
Tier 1 Capital		80,401		14.72	%		32,779		6.0	%
Total Risk Based Capital		87,214		15.96	%		43,706		8.0	%

*The ratios for September 30, 2016 include a capital conservation buffer of 0.625%.

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements at September 30, 2016 and December 31, 2015:

											To be well-capitalized
											under prompt
(Dollars in thousands)						For capital					corrective
	Actual					adequacy purposes*					action provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2016
Leverage	$	85,833		9.81	%	$	34,983		4.0	%	$	43,729		5.0	%
Common Equity Tier 1 Capital		85,833		16.01	%		27,475		5.1	%		34,847		6.5	%
Tier 1 Capital		85,833		16.01	%		35,517		6.6	%		42,888		8.0	%
Total Risk Based Capital		91,490		17.07	%		46,239		8.6	%		53,610		10.0	%

As of December 31, 2015
Leverage	$	79,857		9.40	%	$	33,993		4.0	%	$	42,491		5.0	%
Common Equity Tier 1 Capital		79,857		14.66	%		24,519		4.5	%		35,416		6.5	%
Tier 1 Capital		79,857		14.66	%		32,692		6.0	%		43,589		8.0	%
Total Risk Based Capital		85,929		15.77	%		43,589		8.0	%		54,486		10.0	%

*The ratios for September 30, 2016 include a capital conservation buffer of 0.625%.

Impact of Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The main provisions of the update require the identification of performance obligations within a contract and require the recognition of revenue based on a stand-alone allocation of contract revenue to each performance obligation. Performance obligations may be satisfied and revenue recognized over a period of time if: 1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs, or 2) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or 3) the entity’s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date. For public entities the amendments of the update are effective for annual reporting periods beginning after December 15, 2017 including interim periods within that reporting period. Management is currently evaluating the impact of adopting ASU 2014-09 on the consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities. The main provisions of the update are to eliminate the available for sale classification of accounting for equity securities and to adjust the fair value disclosures for financial instruments carried at amortized costs such that the disclosed fair values represent an exit price as opposed to an entry price. The provisions of this update will require that equity securities be carried at fair market value on the balance sheet and any periodic changes in value will be adjustments to the income statement. A practical expedient is provided for equity securities without a readily determinable fair value, such that these securities can be carried at cost less any impairment. The provisions of this update become effective for interim and annual periods beginning after December 15, 2017. Upon the effective date of the update, changes in the value of the Company's common stock investments will be adjustments to the income statement. Management does not expect the remaining requirements of this update to have a material impact on the Company’s financial position, results of operations or cash flows.

In February 2016, the FASB issued an update ASU No. 2016-02, Leases creating FASB Topic 842, Leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact on the consolidated financial statements and related disclosures.

In March 2016, the FASB issued an update ASU No. 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The guidance in this update affects any entity that issues share-based payment awards including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flow. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact on the consolidated financial statements and related disclosures.

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 eliminate the probable initial recognition threshold under current GAAP which requires reserves to be based on an incurred loss methodology. Under CECL reserves required for financial assets measured at amortized cost will reflect an organization’s estimate of all expected credit losses over the expected term of the financial asset and thereby require the use of reasonable and supportable forecasts to estimate future credit losses. Because CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity debt securities. Under the provisions of the update, credit losses recognized on available for sale debt securities will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans, with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Under current GAAP a purchased loan’s contractual balance is adjusted to fair value through a credit discount and no reserve is recorded on the purchased loan upon acquisition. Since under CECL reserves will be established for purchased loans at the time of acquisition the accounting for purchased loans is made more comparable to the accounting for originated loans. Finally, increased disclosure requirements under CECL oblige organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. FASB expects that the evaluation of underwriting standards and credit quality trends by financial statement users will be enhanced with the additional vintage disclosures. For public entities the amendments of the update are effective beginning January 1, 2020. Management is in the process of evaluating the impact of CECL on the Company’s financial position, results of operations and cash flows as well as its required disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Payments (a consensus of Emerging Issues Task Force). This ASU attempts to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The purpose of this update is to reduce existing diversity in practice in eight areas addressed by the update. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. Management has concluded that the adoption of ASU 2016-15 will not have a material impact on the Company’s consolidated financial statements and related disclosures.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview . Landmark Bancorp, Inc. is a one-bank holding company incorporated under the laws of the State of Delaware and is engaged in the banking business through its wholly-owned subsidiary, Landmark National Bank. Except as otherwise required by the context, references to the “Company,” “we,” “us,” and “our” refer collectively to Landmark Bancorp, Inc. and Landmark National Bank 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 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 do invest in certain investment and mortgage-related securities using deposits and other borrowings as funding sources.

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 and 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, federal deposit insurance costs, data processing expenses, provision for loan losses and certain other non-interest related expenses.

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

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

Critical Accounting Policies . Critical accounting policies are those which are both most important to the portrayal of our financial condition and results of operations and require our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to the allowance for loan losses, the valuation of investment securities, accounting for income taxes and the accounting for goodwill and other intangible assets, all of which involve significant judgment by our management. Information about our critical accounting policies is 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, 2015.

Summary of Results . During the third quarter of 2016, we recorded net earnings of $2.1 million, which was a decrease of $435,000 from the $2.5 million of net earnings in the third quarter of 2015. The decrease in net earnings during the third quarter was primarily the result of an $794,000 decline in gains on sales of loans. Our gains on sales of loans declined during the third quarter of 2016 as a result of the loss of several mortgage lenders during the second quarter of 2016.

During the first nine months of 2016, we recorded net earnings of $6.6 million, which was a decrease of $1.3 million from the $7.9 million of net earnings in the first nine months of 2015. The decrease in net earnings was partially the result of a $1.7 million recovery on a previously charged-off construction loan, which contributed to a $700,000 credit to the provision for loan losses during the first nine months of 2015 compared to a $500,000 provision for loan losses during the same period of 2016. In addition, gains on sales of loans declined $1.8 million during the first nine months of 2016 as compared to the same period of 2015 due to the loss of several mortgage lenders.

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

(Dollars in thousands, except per share amounts)	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Net earnings:
Net earnings	$	2,094		$	2,529		$	6,616		$	7,922
Basic earnings per share (1)	$	0.57		$	0.72		$	1.83		$	2.26
Diluted earnings per share (1)	$	0.56		$	0.70		$	1.80		$	2.19
Earnings ratios:
Return on average assets (2)		0.93	%		1.15	%		0.99	%		1.22	%
Return on average equity (2)		9.29	%		13.12	%		10.24	%		14.14	%
Equity to total assets		9.89	%		9.12	%		9.89	%		9.12	%
Net interest margin (2) (3)		3.45	%		3.48	%		3.46	%		3.50	%
Dividend payout ratio		35.71	%		26.03	%		33.33	%		24.78	%

(1)

Per share values for the periods ended September 30, 2015 have been adjusted to give effect to the 5% stock dividend paid during December 2015.

(2)

Ratios have been annualized and are not necessarily indicative of the results for the entire year.

(3)

Net interest margin is presented on a fully tax equivalent basis, using a 34% federal tax rate.

Interest Income. Interest income of $7.4 million for the quarter ended September 30, 2016 increased $150,000, or 2.1%, as compared to the same period of 2015. Interest income on loans increased $135,000, or 2.6%, to $5.4 million for the quarter ended September 30, 2016 compared to the quarter ended September 30, 2015, due to an increase in our average loan balances from $427.0 million during the third quarter of 2015 to $437.1 million during the third quarter of 2016 and to higher tax equivalent yields earned on loans, which increased from 4.92% to 4.94% between the same periods. Interest income on investment securities increased $15,000, or 0.80%, to $2.0 million for the third quarter of 2016, as compared to $1.9 million in the same period of 2015. The increase in interest income on investment securities was primarily the result of an increase in our average balance of investment securities from $357.2 million during the third quarter of 2015 to $370.7 million during the third quarter of 2016. Partially offsetting the higher average balances of investment securities was a decrease in our tax equivalent yield, which decreased from 2.62% in the third quarter of 2015 to 2.56% during the third quarter of 2016.

Interest income of $21.9 million for the nine months ended September 30, 2016 increased $240,000, or 1.1%, as compared to the same period of 2015. Interest income on loans decreased $17,000, or 0.1%, to $15.9 million for the nine months ended September 30, 2016 compared to same period of 2015, due to lower tax equivalent yields earned on loans, which decreased to 4.94% from 5.01% over the same periods. Partially offsetting the lower yields was an increase in our average loan balances from $428.6 million during the first nine months of 2015 to $433.8 million during the first nine months of 2016. Interest income on investment securities increased $257,000, or 4.5%, to $6.0 million for the first nine months of 2016, as compared to $5.7 million in the same period of 2015. The increase in interest income on investment securities was primarily the result of an increase in our average balance of investment securities from $353.5 million during the nine months of 2015 to $368.6 million during the first nine months of 2016. Also contributing to the higher interest income on investment securities was an increase in our tax equivalent yield, which increased from 2.58% in the nine months ended September 30, 2015, to 2.61% during the same period of 2016.

Interest Expense . Interest expense during the quarter ended September 30, 2016 increased $25,000, or 3.2%, to $798,000 as compared to the same period of 2015. Interest expense on interest-bearing deposits increased $20,000, or 7.5%, to $285,000 for the quarter ended September 30, 2016 as compared to the quarter ended September 30, 2015. Our total cost of interest-bearing deposits increased from 0.19% during the third quarter of 2015 to 0.20% during the third quarter of 2016 as a result of higher rates on our money market and checking accounts as short-term interest rates were higher during the third quarter of 2016 as compared to the same period of 2015. Our average interest-bearing deposit balances increased from $550.9 million to $560.0 million from the third quarter of 2015 to the third quarter of 2016. For the third quarter of 2016, interest expense on borrowings increased $5,000, or 1.0%, to $513,000 as compared to the same period of 2015, due to higher average rates on our borrowings, which increased from 2.49% to 2.72% between the same periods as our variable rate borrowings repriced higher due to an increase in short-term interest rates. Partially offsetting the higher rates on borrowings was a decrease in our average outstanding borrowings, which decreased from $80.8 million in the third quarter of 2015 to $75.3 million during the same period of 2016.

Interest expense during the nine months ended September 30, 2016 increased $67,000, or 2.9%, to $2.4 million as compared to the same period of 2015. Interest expense on interest-bearing deposits increased $34,000, or 4.2%, to $849,000 for the nine months ended September 30, 2016 as compared to the same period of 2015. Our total cost of interest-bearing deposits increased from 0.19% during the first nine months of 2015 to 0.20% during the same period of 2016 as a result of higher rates on our money market and checking accounts. Partially offsetting the higher costs was a decrease in average interest-bearing deposit balances, which decreased slightly from $561.4 million during the first nine months of 2015 to $561.3 million during the first nine months of 2016. For the first nine months of 2016, interest expense on borrowings increased $33,000, or 2.2%, to $1.5 million as compared to the same period of 2015, due to an increase in our average outstanding borrowings. Our average outstanding borrowings increased from $76.6 million in the first nine months of 2015 to $78.8 million during the same period of 2016. Partially offsetting the increase in average outstanding borrowings was a lower average rate on our borrowings, which decreased from 2.61% in the first nine month of 2015 to 2.60% in same period of 2016 as we maintained higher average balances on our lower cost lines of credit.

Net Interest Income . Net interest income was $6.6 million for the quarter ended September 30, 2016, an increase of $125,000, or 1.9%, from the third quarter of 2015. Net interest margin, on a tax equivalent basis, decreased from 3.48% in the third quarter of 2015 to 3.45% in the same period of 2016. The increase in net interest income resulted from a 3.1% increase in average interest-earning assets, from $784.6 million in the third quarter of 2015 to $809.9 million in the third quarter of 2016. The lower net interest margin was a result of a combination of lower yields on interest-earning assets and higher rates on interest-bearing deposits and borrowings.

Net interest income was $19.5 million for the first nine months of 2016, an increase of $173,000, or 0.9%, from the same period of 2015. Net interest margin, on a tax equivalent basis, decreased from 3.50% in the first nine months of 2015 to 3.46% in the first nine months of 2016. The increase in net interest income was primarily the result of a 2.5% increase in average interest-earning assets from $785.7 million in the first nine months of 2015 to $805.7 million in the first nine months of 2016, while the lower net interest margin was a result of lower yields on interest-earning assets and higher rates on interest-bearing deposits.

Average Assets/Liabilities . The following tables reflect 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 months ended							Three months ended
	September 30, 2016							September 30, 2015
	Average balance		Interest		Average yield/rate			Average balance		Interest		Average yield/rate
	(Dollars in thousands)
Assets
Interest-earning assets:
Interest-bearing deposits at banks	$	2,064	$	5		0.96	%	$	425	$	-		0.00	%
Investment securities (1)		370,745		2,386		2.56	%		357,202		2,357		2.62	%
Loans receivable, net (2)		437,052		5,423		4.94	%		426,976		5,292		4.92	%
Total interest-earning assets		809,861		7,814		3.84	%		784,603		7,649		3.87	%
Non-interest-earning assets		85,411							84,800
Total	$	895,272						$	869,403

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Money market and checking	$	324,320	$	115		0.14	%	$	315,956	$	78		0.10	%
Savings accounts		87,601		6		0.03	%		78,723		6		0.03	%
Time deposit		148,038		164		0.44	%		156,261		181		0.46	%
Total deposits		559,959		285		0.20	%		550,940		265		0.19	%
FHLB advances and other borrowings		75,293		513		2.72	%		80,834		508		2.49	%
Total interest-bearing liabilities		635,252		798		0.50	%		631,774		773		0.49	%
Non-interest-bearing liabilities		170,325							161,146
Stockholders' equity		89,695							76,483
Total	$	895,272						$	869,403

Interest rate spread (3)						3.34	%						3.38	%
Net interest margin (4)			$	7,016		3.45	%			$	6,876		3.48	%
Tax-equivalent interest - imputed				464							449
Net interest income			$	6,552						$	6,427

Ratio of average interest-earning assets to average interest-bearing liabilities						127.5	%						124.2	%

(1)

Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 34% federal tax rate.

(2)

Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 34% federal tax rate.

(3)

Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

(4)

Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets.

	Nine months ended							Nine months ended
	September 30, 2016							September 30, 2015
	Average balance		Interest		Average yield/rate			Average balance		Interest		Average yield/rate
	(Dollars in thousands)
Assets
Interest-earning assets:
Interest-bearing deposits at banks	$	3,267	$	15		0.61	%	$	3,623	$	7		0.26	%
Investment securities (1)		368,613		7,205		2.61	%		353,495		6,814		2.58	%
Loans receivable, net (2)		433,788		16,034		4.94	%		428,596		16,062		5.01	%
Total interest-earning assets		805,668		23,254		3.86	%		785,714		22,883		3.89	%
Non-interest-earning assets		85,249							84,833
Total	$	890,917						$	870,547

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Money market and checking	$	330,400	$	336		0.14	%	$	321,951	$	232		0.10	%
Savings accounts		85,968		19		0.03	%		78,419		18		0.03	%
Time deposit		144,893		494		0.46	%		161,064		565		0.47	%
Total deposits		561,261		849		0.20	%		561,434		815		0.19	%
FHLB advances and other borrowings		78,751		1,529		2.60	%		76,582		1,496		2.61	%
Total interest-bearing liabilities		640,012		2,378		0.50	%		638,016		2,311		0.48	%
Non-interest-bearing liabilities		164,623							157,602
Stockholders' equity		86,282							74,929
Total	$	890,917						$	870,547

Interest rate spread (3)						3.36	%						3.41	%
Net interest margin (4)			$	20,876		3.46	%			$	20,572		3.50	%
Tax-equivalent interest - imputed				1,358							1,227
Net interest income			$	19,518						$	19,345

Ratio of average interest-earning assets to average interest-bearing liabilities						125.9	%						123.1	%

(1)

Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 34% federal tax rate.

(2)

Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 34% federal tax rate.

(3)

Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

(4)

Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets.

Rate/Volume Table . The following table describes the extent to which changes in volumes and rates of 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 the previous columns). 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 months ended September 30,								Nine months ended September 30,
	2016 vs 2015								2016 vs 2015
	Increase/(decrease) attributable to								Increase/(decrease) attributable to
	Volume			Rate			Net		Volume			Rate			Net
	(Dollars in thousands)								(Dollars in thousands)
Interest income:
Interest-bearing deposits at banks	$	-		$	5			5	$	(1	)	$	9		$	8
Investment securities		73			(44	)		29		307			84			391
Loans		112			19			131		183			(211	)		(28	)
Total		185			(20	)		165		489			(118	)		371
Interest expense:
Deposits		5			15			20		-			34			34
Other borrowings		(18	)		23			5		45			(12	)		33
Total		(13	)		38			25		45			22			67
Net interest income	$	198		$	(58	)	$	140	$	444		$	(140	)	$	304

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

During the third quarter of 2016, we recorded a provision for loan losses of $150,000 compared to $100,000 in the third quarter of 2015. We recorded net loan charge-offs of $295,000 during the third quarter of 2016 compared to net loan charge-offs of $182,000 during the third quarter of 2015. The net loan charge-offs during the third quarter of 2016 were primarily related to the restructuring of a previously identified and impaired agriculture loan relationship.

During the first nine months of 2016, we recorded a provision for loan losses of $500,000 compared to a credit provision for loan losses of $700,000 during the same period of 2015. We recorded net loan charge-offs of $915,000 during the nine months ended September 30, 2016 compared to net loan recoveries of $1.3 million during the same period of 2015. The net loan charge-offs during the first nine months of 2016 were primarily related to restructuring an agriculture loan relationship and the liquidation of the assets securing a previously identified and impaired commercial loan. The net loan recoveries during the first nine months of 2015 were primarily associated with the recovery of $1.7 million on a $4.3 million construction loan which was fully charged-off during 2010 and 2011. As of September 30, 2016, the Company has recovered approximately $2.4 million of the loan and continues to pursue collection of the remaining amount. The net loan recoveries in the first nine months of 2015 were the primary reason for the negative provision for loan losses during the period.

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

Non-interest Income . Total non-interest income was $3.7 million in the third quarter of 2016, a decrease of $734,000, or 16.4%, compared to $4.5 million in the same period of 2015. This change was primarily the result of a $794,000 decline in gains on sales of loans, as the departure of several mortgage lenders affected originations in the third quarter of 2016. Partially offsetting the lower gains on sales of loans were $261,000 of gains on sales of investment securities, relating primarily to the sale of common stock investments securities. A net gain of $135,000 was recorded on sales of investment securities during the third quarter of 2015 as we sold a portion of our agency mortgage-backed investment securities portfolio to reduce exposure to rising interest rates.

Total non-interest income was $11.6 million in the first nine months of 2016, a decrease of $1.3 million, or 10.4%, compared to $12.9 million during the same period of 2015. The decrease in non-interest income was primarily due to a $1.8 million decline in gains on sales of loans, which resulted from fewer mortgage lenders on staff, and a $271,000 decline in other non-interest income. Included in other non-interest income during the first nine months of 2015 was a gain of $236,000 on the sale of a closed branch facility. Partially offsetting those reductions were $558,000 of gains on sales of $14.3 million of municipal bonds and common stock investment securities that were identified for sale as part of the ongoing review of the portfolio, during the first nine months of 2016. During the first nine months of 2015, a loss of $119,000 on sales of investment securities was incurred due primarily to the sale of a portion of our agency mortgage-backed investment securities portfolio to reduce exposure to rising interest rates.

Non-interest Expense . Non-interest expense increased $86,000, or 1.2%, to $7.4 million for the third quarter of 2016 compared to $7.3 million for the third quarter of 2015, primarily as a result of increases of $58,000 in occupancy and equipment and $50,000 in foreclosure and real estate owned expense. The increase in occupancy and equipment reflects higher levels of building repairs while new real estate owned properties increased foreclosure and real estate owned expenses. Partially offsetting those increases were declines of $74,000 in other non-interest expense and $22,000 in federal deposit insurance premiums. The decrease in non-interest expense reflected the reduced mortgage banking activity while the decline in federal deposit insurance premiums was the result of new assessment rates that took effect in the third quarter 2016.

Non-interest expense decreased $95,000, or 0.4%, to $21.8 million for the first nine months of 2016 compared to $21.9 million for the first nine months of 2015. The decrease was primarily the result of a $361,000 decrease in other non-interest expense, reflecting a $163,000 impairment of the residual real estate collateral associated with an affordable housing investment that was recorded in 2015, as well as reduced mortgage banking activity during in the first nine months of 2016. Those decreases were partially offset by increases of $121,000 in foreclosure and other real estate expense and $65,000 in advertising expenses. The increase in foreclosure and real estate owned expense was primarily related to real estate owned properties added during the first nine months of 2016 while the increase in advertising expenses reflected costs associated with growth in our deposit rewards program.

Income Tax Expense . During the third quarter of 2016, we recorded income tax expense of $656,000, compared to $966,000 during the same period of 2015. The effective tax rate decreased from 27.6% in the third quarter of 2015 to 23.9% in the third quarter of 2016 as a result of a decline in earnings before income taxes and higher tax exempt income.

During the first nine months of 2016, we recorded income tax expense of $2.2 million, compared to $3.2 million during the same period of 2015. The effective tax rate decreased from 28.7% in the first nine months of 2015 to 25.1% in the same period of 2016 as a result of a decline in earnings before income taxes and higher tax exempt income.

Financial Condition . Despite measured improvement in certain metrics, general uncertainty with respect to economic conditions in the United States continues to affect our asset quality and performance. These economic conditions, as well as a downturn in the agriculture sector, have impacted the geographic markets in which the Company operates. Our loan portfolio is diversified across various types of loans and collateral throughout the markets in which we operate. Despite a few problem loans that management continues to work to resolve, our asset quality has generally improved over the past few years. Outside of identified problem assets, management believes that the Company continues to have a high quality asset base and solid core earnings, and anticipates that 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.

Asset Quality 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 to $907.7 million at September 30, 2016, compared to $878.4 million at December 31, 2015. The increase in our total assets was primarily the result of increases in our investment securities and loans. Investment securities increased from $353.4 million at December 31, 2015 to $374.4 million at September 30, 2016 as a result of the purchase of additional investment securities during the first nine months of 2016. Loans increased from $419.9 million at December 31, 2015 to $430.0 million at September 30, 2016 primarily as a result of increases in our agriculture loans.

The allowance for loan losses is established through a provision for loan losses based on our evaluation of the risk inherent in the loan portfolio and changes in the nature and volume of our loan activity. This evaluation, which includes a review of all loans with respect to which full collectability may not be reasonably assured, considers the fair value of the underlying collateral, economic conditions, historical loan loss experience, level of classified loans and other factors that warrant recognition in providing for an appropriate allowance for loan losses. At September 30, 2016, our allowance for loan losses totaled $5.5 million, or 1.26% of gross loans outstanding, as compared to $5.9 million, or 1.39% of gross loans outstanding, at December 31, 2015.

The decline in our allowance for loan losses during the first nine months of 2016 was primarily related to the allowance for loan losses required on our one-to-four family residential real estate loans. The decline in our allowance for one-to-four family residential real estate loans resulted from lower historical loss rates and a decrease in the adjustments for qualitative and environmental factors.

As of September 30, 2016 and December 31, 2015, approximately $20.5 million and $15.3 million, respectively, of loans were assigned a risk rating of special mention, substandard or doubtful. The increase in these loans was primarily the result of downgrades of a few agriculture, commercial and commercial real estate loan relationships. These ratings indicate that the loans identified as potential problem loans have more than normal risk which raised doubts as to the ability of the borrower to comply with present loan repayment terms. Even though the borrowers of such loans were experiencing moderate cash flow problems as well as some deterioration in collateral value, management believed the general allowance was sufficient to cover the risks and probable incurred losses related to such loans at September 30, 2016 and December 31, 2015, respectively.

Loans past due 30-89 days and still accruing interest totaled $1.2 million, or 0.29% of gross loans, at September 30, 2016 compared to $1.4 million, or 0.33% of gross loans, at December 31, 2015. At September 30, 2016, $1.8 million in loans were on non-accrual status, or 0.41% of gross loans, compared to $2.2 million, or 0.51% of gross loans, at December 31, 2015. Non-accrual loans consist of loans 90 or more days past due and certain impaired loans. No loans were 90 or more days delinquent and accruing interest at September 30, 2016 or at December 31, 2015. Our impaired loans totaled $6.1 million at September 30, 2016 compared to $6.8 million at December 31, 2015. The difference in the Company’s non-accrual loan balances and impaired loan balances at September 30, 2016 was related to TDRs that were accruing interest but still classified as impaired.

At September 30, 2016, the Company had eleven loan relationships consisting of seventeen outstanding loans that were classified as TDRs. During the third quarter of 2016, the Company classified a $302,000 agriculture loan relationship consisting of three loans as a TDR after extending the maturities of the loans. The collateral securing the loans was deemed to be insufficient, resulting in a charge-off of $215,000. During the second quarter of 2016, the Company classified an $8,000 commercial loan as a TDR after modifying the payments to interest only. Also during the second quarter of 2016, the Company classified an $188,000 one-to-four family residential real estate loan as a TDR after agreeing to a loan modification which adjusted the payment schedule. No loan modifications were classified as TDRs during the first quarter of2016. The Company recorded charge-offs of $215,000 and a provision for loan loss of $2,000 against TDRs during the three and nine months ended September 30, 2016. No loan modifications were classified as TDRs during the third quarter of 2015. During the second quarter of 2015, the Company classified a commercial loan relationship consisting of $2.7 million in real estate and land loans as a TDR after agreeing to a bankruptcy plan with the borrower. The bankruptcy plan restarted the amortization period of the loans which extended the maturities of the loans. During the first quarter of 2015, the Company classified a $44,000 agriculture loan relationship consisting of two loans as a TDR after extending the maturity of the loans. During the first nine months of 2016, a $56,000 one-to-four family residential real estate loan and a $25,000 agriculture loan, which were both classified as TDRs during 2015, were paid off. During the first nine months of 2015, a land loan relationship consisting of three loans totaling $1.6 million, which was previously classified as a TDR during 2012, was paid off with proceeds from the sale of assets and a new loan on the remaining assets originated at market terms. The Company did not record any charge-offs or provision for loan losses during the three and nine months ended September 30, 2015.

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.

Liability Distribution . 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 $984,000 in total deposits during the first nine months of 2016, to $715.7 million at September 30, 2016, from $714.7 million at December 31, 2015. The increase in deposits was primarily due to higher balances in non-interest bearing demand deposits, savings accounts and certificates of deposits. Money market and checking account balances decreased by $23.8 million between December 31, 2015 and September 30, 2016, due primarily to a seasonal decline in public fund balances. Total borrowings increased $15.8 million to $86.5 million at September 30, 2016, from $70.7 million at December 31, 2015. The increase in borrowings was used to fund the purchase of investment securities and to fund loan growth.

Non-interest-bearing demand deposits at September 30, 2016, were $159.4 million, or 22.3% of total deposits, compared to $143.6 million, or 20.1% of total deposits, at December 31, 2015. Money market and checking deposit accounts were 45.0% of our deposit portfolio and totaled $322.3 million at September 30, 2016, compared to $346.1 million, or 48.4% of total deposits, at December 31, 2015. Savings accounts increased to $87.7 million, or 12.3% of total deposits, at September 30, 2016, from $81.1 million, or 11.3% of total deposits, at December 31, 2015. Certificates of deposit totaled $146.3 million, or 20.4% of total deposits, at September 30, 2016, compared to $143.9 million, or 20.1% of total deposits, at December 31, 2015.

Certificates of deposit at September 30, 2016, scheduled to mature in one year or less, totaled $106.1 million. Historically, maturing deposits have generally remained with the Bank, and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity in some type of deposit account.

Cash Flows. During the nine months ended September 30, 2016, our cash and cash equivalents increased by $4.1 million. Our operating activities provided cash of $14.9 million during the first nine months of 2016, primarily due to a decrease in loans held for sale as more one-to-four family residential mortgage loans were sold than originated for sale during the first nine months of 2016. Our investing activities used net cash of $27.2 million during the first nine months of 2016, primarily as a result of funding loans and purchasing more investment securities than were sold or matured over the same time period. Financing activities provided net cash of $16.4 million during the first nine months of 2016, primarily as a result of increased borrowings which were used to fund the investment purchases and loan growth.

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 $392.1 million at September 30, 2016 and $367.0 million at December 31, 2015. During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we generally invest in short-term, high-grade investments.

Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments. Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally deposit withdrawals and loan advances. In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of FHLB advances, a line of credit with the FHLB, other borrowings or through sales of investment securities. At September 30, 2016, we had outstanding FHLB advances of $35.0 million and $17.7 million borrowed against our line of credit with the FHLB. At September 30, 2016, we had collateral pledged to the FHLB that would allow us to borrow an additional $36.6 million, subject to FHLB credit requirements and policies. At September 30, 2016, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $17.0 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, 2016. At September 30, 2016 , we had subordinated debentures totaling $21.2 million and other borrowings of $12.5 million, which consisted of repurchase agreements. At September 30, 2016, the Company had no borrowings against a $7.5 million line of credit from an unrelated financial institution maturing on November 1, 2017, with an interest rate that adjusts daily based on the prime rate less 0.25% This line of credit has covenants specific to capital and other financial ratios, with which the Company was in compliance at September 30, 2016.

Off Balance 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 $1.9 million at September 30, 2016.

At September 30, 2016, we had outstanding loan commitments, excluding standby letters of credit, of $72.7 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. On January 1, 2015, the Company and the Bank became 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 Ac t. 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 $1.0 billion).

The Basel III Rules have maintained the general structure of the prompt corrective action framework, while incorporating increased requirements. The Basel III Rules include a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, require a minimum ratio of Total Capital to risk-weighted assets of 8.0%, and require a minimum Tier 1 leverage ratio of 4.0%. A capital conservation buffer, comprised of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements. This capital conservation buffer began on January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until reaching its final level of 2.5% on January 1, 2019. The Bank made the one-time AOCI opt-out election on its first Call Report filed after January 1, 2015, which allowed banks under $250 billion a one-time opt-out election to remove the impact of certain unrealized capital gains and losses from the calculation of capital. As of September 30, 2016 and December 31, 2015, the Bank was rated “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, 2016, the Company and the Bank met all capital adequacy requirements to which we are subject.

Dividends . During the quarter ended September 30, 2016, we paid a quarterly cash dividend of $0.20 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, by January 1, 2019, financial institutions will 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. This buffer is being phased in by 0.625% per year over three years beginning in 2016 before reaching its final level of 2.5% on January 1, 2019. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of September 30, 2016. The National Bank Act imposes limitations on the amount of dividends that a national bank may pay without prior regulatory approval. Generally, the amount is limited to the bank's current year's net earnings plus the adjusted retained earnings for the two preceding years. As of September 30, 2016, approximately $21.2 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 rates at September 30, 2016, and forecasting volumes for the twelve-month projection. This position is then subjected to a shift in interest rates of 100 and 200 basis points with an impact to our net interest income on a one-year horizon as follows:

	Dollar change in net			Percent change in
Scenario	interest income ($000’s)			net interest income
200 basis point rising	$	(618	)		(2.4	)%
100 basis point rising	$	(337	)		(1.3	)%
100 basis point falling	$	(236	)		(0.9	)%
200 basis point falling		NM			NM

The 200 basis point falling scenario is considered to be not meaningful (“NM”) in the current low interest rate environment.

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

The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, insurance and monetary and financial matters (including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, as well as rules adopted by the federal bank regulatory agencies to implement Basel III) and the effects of increases in Federal Deposit Insurance Corporation premiums.

The effects of changes in interest rates (including the effects of changes in the rate of prepayments of our assets) and the policies of the Board of Governors of the Federal Reserve System.

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

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

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

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

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

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

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

Our ability to successfully integrate acquired businesses and future growth.

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

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

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

Our ability to effectively manage our credit risk.

Our ability to forecast probable loan losses and maintain an adequate allowance for loan losses.

The effects of declines in the value of our investment portfolio.

Our ability to raise additional capital if needed.

The effects of cyber-attacks.

The effects of declines in real estate markets.

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, 2015.

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) as of September 30, 2016. 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, 2016.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2016 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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 applicable to the Company from those disclosed in Part I, Item 1A. “Risk Factors,” in the Company's 2015 Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit 10.1	Business Loan Agreement, Promissory Note and Commercial Pledge Agreement, dated November 1, 2016, between Landmark Bancorp, Inc. and First National Bank of Omaha
Exhibit 31.1	Certificate of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit 31.2	Certificate of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit 32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015; (ii) Consolidated Statements of Earnings for the three and nine months ended September 30, 2016 and September 30, 2015; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and September 30, 2015; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and September 30, 2015; (v) Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2016 and September 30, 2015; and (vi) Notes to Consolidated Financial Statements

SIGNATURES

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

	LANDMARK BANCORP, INC.

Date: November 10, 2016	/s/ Michael E. Scheopner
	Michael E. Scheopner
	President and Chief Executive Officer

Date: November 10, 2016	/s/ Mark A. Herpich
	Mark A. Herpich
	Vice President, Secretary, Treasurer
	and Chief Financial Officer

Exhibit 10.1

Business Loan Agreement, Promissory Note and Commercial Pledge Agreement, dated November 1, 2016, between Landmark Bancorp, Inc. and First National Bank of Omaha

BUSINESS LOAN AGREEMENT

THIS BUSINESS LOAN AGREEMENT dated November 1, 2016, is made and executed between Landmark Bancorp, Inc. ("Borrower") and First National Bank of Omaha ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement. This Agreement shall apply to any and all present and future loans, loan advances, extension of credit, financial accommodations and other agreements and undertakings of every nature and kind that may be entered into by and between Borrower and Lender now and in the future.

TERM . This Agreement shall be effective as of November 1, 2016, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

CONDITIONS PRECEDENT TO EACH ADVANCE . Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

Loan Documents . Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender's counsel.

Borrower's Authorization . Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

Payment of Fees and Expenses . Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

Representations and Warranties . The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

Organization . Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 701 Poyntz Ave, Manhattan, KS 66502-6055. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower's state of organization or any change in Borrower's name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower's business activities.

Assumed Business Names . Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None .

Authorization . Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower, do not require the consent or approval of any other person, regulatory authority, or governmental body, and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower's articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties. Borrower has the power and authority to enter into the Note and the Related Documents and to grant collateral as security for the Loan. Borrower has the further power and authority to own and to hold all of Borrower's assets and properties, and to carry on Borrower's business as presently conducted.

Financial Informatio n. Each of Borrower's financial statements supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

Properties . Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower's ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.

Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

Lien Priority . Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral.

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

Commercial Purposes. Borrower intends to use the Loan proceeds solely for business or commercially related purposes.

Employee Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (1) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan, (2) Borrower has not withdrawn from any such plan or initiated steps to do so, (3) no steps have been taken to terminate any such plan or to appoint a trustee to administer such a plan, and (4) there are no unfunded liabilities other than those previously disclosed to Lender in writing.

Investment Company Act. Borrower is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended.

Public Utility Holding Company Act. Borrower is not a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended.

Regulations T and U. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System).

Information . All information previously furnished or which is now being furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated by this Agreement is, and all information furnished by or on behalf of Borrower to Lender in the future will be, true and accurate in every material respect on the date as of which such information is dated or certified; and no such information is or will be incomplete by omitting to state any material fact the omission of which would cause the information to be misleading.

Claims and Defenses. There are no defenses or counterclaims, offsets or other adverse claims, demands or actions of any kind, personal or otherwise, that Borrower, any Grantor, or any Guarantor could assert with respect to the Note, Loan, this Agreement, or the Related Documents.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

Repayment . Repay the Loan in accordance with its terms and the terms of this Agreement.

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. In addition, Borrower shall provide Lender with written notice of the occurrence of any Event of Default, the occurrence of any Reportable Event under, or the institution of steps by Borrower to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which Borrower may have any liability.

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times.

Financial Statements. Furnish Lender with the following:

Additional Requirements.

Compliance Certification. As soon as available, but in no event later than 30 days after the end of each fiscal quarter, a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, and in a format acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.

Financial Statements Interim 10Q. Promptly upon the filing thereof with the Securities and Exchange Commission (but in no event more than forty-five (45) days after the end of each fiscal quarter), a copy of each signed Quarterly Report on Form 10-Q of the Borrower. Such report shall include the Borrower's quarterly financial statements, including but not limited to consolidated balance sheets of the Borrower for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year and all prepared in accordance with GAAP consistently applied and certified by the President of the Borrower to fairly present the financial condition of the Borrower (subject to year-end adjustments)

FRY-9LP. Immediately upon the filing thereof with the applicable Bank Regulatory Authority (but in no event more than forty-five (45) days after the end of each fiscal quarter), a copy of the FRY-9LP for Landmark Bancorp, Inc.

For Landmark National Bank the following:

Bank Call Reports. Immediately upon the filing thereof with the applicable Bank Regulatory Authority (but in no event more than forty-five (45) days after the end of each fiscal quarter), a copy of the Call Report for Landmark National Bank for such calendar quarter.

Non-Performing Assets to Tier 1 Capital and Loan Loss Reserves Ratio. Maintain a Non-Performing Assets to Tier 1 Capital and Loan Loss Reserves Ratio (expressed as a percentage) shall not in any event exceed twenty percent (20.00%) and shall be measured on a quarterly basis. "Non-Performing Assets" means with the sum of (a) Non-Performing Loans, (b) leases and other Assets for which payments or other obligations are past due or in default by ninety (90) days or more, (c) the total of all non-accrual leases and other Assets, and (d) all other Assets acquired through foreclosure or other realization upon collateral or rearrangement or satisfaction Debt. "Tier 1 Capital" means, at any time, or any date, the amount of Tier 1 Capital as reflected in the most recent call report. "Loan loss reserve" or the allowance for loan and lease losses" in Landmark National Bank.

Non-Performing Loans to Total Loans. The ratio (expressed as a percentage) of Non-Performing loans to the total of all loans made by such Person of less than five percent (5%) measured on a quarterly basis. “Non-performing loans” means, as of any date of determination, the sum of; (a) loans classified as non-accrual (regardless of whether such classification is internal or as reported to or directed by a Bank Regulatory); plus (b) loans past due by ninety (90) or more days that are still accruing interest.

Tier 1 Leverage Capital Ratio . Maintain a Tier 1 Leverage Capital Ratio (expressed as a percentage) shall not be less than eight percent (8.00%) and shall be measured on a quarterly basis. "Tier 1 Leverage Capital Ratio" means Tier 1 Leverage Capital Ratio as currently defined in the Landmark National Bank's most recent Call Report.

Tier 1 Risk Based Capital Ratio. Maintain a Tier 1 Risk-Based Capital Ratio (expressed as a percentage) shall not be less than twelve and one-half percent (12.5%) and shall be measured on a quarterly basis. "Tier 1 Risk Based Capital Ratio" means Tier 1 Risk Based Capital Ratio as currently defined in the Landmark National Bank's most recent Call Report.

For the above Additional Requirements, “Call Report” means, with respect to the Borrower, its FRY-9LP quarterly reports to the Federal Reserve System, and, its "Consolidated Reports of Condition and Income" (or similar reports) filed with its applicable Bank Regulatory Authority, or such other forms of call reports as may be required by the Bank Regulatory Authority from time to time; provided, however, if at any time such reports are not required by the applicable Bank Regulatory Authorities, then "Call Reports" shall mean reports containing information similar to the reports set forth above or such other reports as the parties hereto agree upon.

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

Additional Information . Furnish such additional information and statements, as Lender may request from time to time.

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require.

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

Loan Proceeds . Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing.

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower's books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender, and in all other loan agreements now or in the future existing between Borrower and any other party. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest.

Inspection . Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense.

Change of Location . Immediately notify Lender in writing of any additions to or changes in the location of Borrower's businesses.

Title to Assets and Property . Maintain good and marketable title to all of Borrower's assets and properties.

Notice of Default, Litigation and ERISA Matters. Forthwith upon learning of the occurrence of any of the following, Borrower shall provide Lender with written notice thereof, describing the same and the steps being taken by Borrower with respect thereto: (1) the occurrence of any Event of Default, or (2) the institution of, or any adverse determination in, any litigation, arbitration proceeding or governmental proceeding, or (3) the occurrence of a Reportable Event under, or the institution of steps by Borrower to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which Borrower may have any liability.

Other Information. From time to time Borrower will provide Lender with such other information as Lender may reasonably request.

Employee Benefit Plans. So long as this Agreement remains in effect, Borrower will maintain each employee benefit plan as to which Borrower may have any liability, in compliance with all applicable requirements of law and regulations.

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower's part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

Additional Assurances . Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:

Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower's accounts, except to Lender.

Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of Borrower's stock, or purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure.

Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business.

Agreements. Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower's obligations under this Agreement or in connection herewith.

CESSATION OF ADVANCES . If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

RIGHT OF 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.

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

Payment Default. Borrower fails to make any payment when due under the Loan.

Other Defaults. 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.

Default in Favor of Third Parties. Borrower or any Grantor 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 or any Grantor's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf, or made by Guarantor, under this Agreement or the Related Documents in connection with the obtaining of the Loan evidenced by the Note or any security document directly or indirectly securing repayment of the Note 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.

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.

Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

Creditor or 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 Loan. 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.

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.

Change in 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.

Default Under 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.

Events Affecting Guarantor . Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

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

Adverse Change . A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.

Insecurity . Lender in good faith believes itself insecure.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies.

ADDITIONAL DOCUMENTS. Borrower shall provide Lender with the following additional documents:

Corporate Resolution . Borrower has provided or will provide Lender with a certified copy of resolutions properly adopted by Borrower's Board of Directors, and certified by Borrower's corporate secretary, assistant secretary, or other authorized officer, under which Borrower's Board of Directors authorized one or more designated officers or employees to execute this Agreement, the Note and any and all Security Agreements directly or indirectly securing repayment of the same, and to consummate the borrowings and other transactions as contemplated under this Agreement, and to consent to the remedies following any default by Borrower as provided in this Agreement and in any Security Agreements.

Opinion of Counsel. When required by Lender, Borrower has provided or will provide Lender with an opinion of Borrower's counsel certifying to and that: (1) Borrower's Note, any Security Agreements and this Agreement constitute valid and binding obligations on Borrower's part that are enforceable in accordance with their respective terms; (2) Borrower is validly existing and in good standing; (3) Borrower has authority to enter into this Agreement and to consummate the transactions contemplated under this Agreement; and (4) such other matters as may have been requested by Lender or by Lender's counsel.

GUARANTOR PROVISION. Borrower agrees to deliver to Lender any required Guarantor financial items per the Agreement.

ELECTRONIC COPIES. 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.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

Borrower Information . Borrower consents to the release of information on or about Borrower by Lender in accordance with any court order, law or regulation and in response to credit inquiries concerning Borrower.

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

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

Choice of 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.

Non-Liability of Lender. The relationship between Borrower and Lender created by this Agreement is strictly a debtor and creditor relationship and not fiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender and Borrower. Borrower is exercising Borrower's own judgment with respect to Borrower's business. All information supplied to Lender is for Lender's protection only and no other party is entitled to rely on such information. There is no duty for Lender to review, inspect, supervise or inform Borrower of any matter with respect to Borrower's business. Lender and Borrower intend that Lender may reasonably rely on all information supplied by Borrower to Lender, together with all representations and warranties given by Borrower to Lender, without investigation or confirmation by Lender and that any investigation or failure to investigate will not diminish Lender's right to so rely.

Notice of Lender's Breach. Borrower must notify Lender in writing of any breach of this Agreement or the Related Documents by Lender and any other claim, cause of action or offset against Lender within thirty (30) days after the occurrence of such breach or after the accrual of such claim, cause of action or offset. Borrower waives any claim, cause of action or offset for which notice is not given in accordance with this paragraph. Lender is entitled to rely on any failure to give such notice.

Indemnification of Lender. Borrower agrees to indemnify, to defend and to save and hold Lender harmless from any and all claims, suits, obligations, damages, losses, costs and expenses (including, without limitation, Lender's attorneys' fees), demands, liabilities, penalties, fines and forfeitures of any nature whatsoever that may be asserted against or incurred by Lender, its officers, directors, employees, and agents arising out of, relating to, or in any manner occasioned by this Agreement and the exercise of the rights and remedies granted Lender under this, as well as by: (1) the ownership, use, operation, construction, renovation, demolition, preservation, management, repair, condition, or maintenance of any part of the Collateral; (2) the exercise of any of Borrower's rights collaterally assigned and pledged to Lender hereunder; (3) any failure of Borrower to perform any of its obligations hereunder; and/or (4) any failure of Borrower to comply with the environmental and ERISA obligations, representations and warranties set forth herein. The foregoing indemnity provisions shall survive the cancellation of this Agreement as to all matters arising or accruing prior to such cancellation and the foregoing indemnity shall survive in the event that Lender elects to exercise any of the remedies as provided under this Agreement following default hereunder. Borrower's indemnity obligations under this section shall not in any way be affected by the presence or absence of covering insurance, or by the amount of such insurance or by the failure or refusal of any insurance carrier to perform any obligation on its part under any insurance policy or policies affecting the Collateral and/or Borrower's business activities. Should any claim, action or proceeding be made or brought against Lender by reason of any event as to which Borrower's indemnification obligations apply, then, upon Lender's demand, Borrower, at its sole cost and expense, shall defend such claim, action or proceeding in Borrower's name, if necessary, by the attorneys for Borrower's insurance carrier (if such claim, action or proceeding is covered by insurance), or otherwise by such attorneys as Lender shall approve. Lender may also engage its own attorneys at its reasonable discretion to defend Borrower and to assist in its defense and Borrower agrees to pay the fees and disbursements of such attorneys.

Counterparts. This Agreement may be executed in multiple counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts, taken together, shall constitute one and the same Agreement.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

Sole Discretion of Lender. Whenever Lender's consent or approval is required under this Agreement, the decision as to whether or not to consent or approve shall be in the sole and exclusive discretion of Lender and Lender's decision shall be final and conclusive.

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates.

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower's rights under this Agreement or any interest therein, without the prior written consent of Lender.

Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

Time is of the Essence. Time is of the essence in the performance of this Agreement.

Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

DEFINITIONS . The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

Advance. The word "Advance" means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.

Agreement. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

Borrower. The word "Borrower" means Landmark Bancorp, Inc. and includes all co-signers and co-makers signing the Note and all their successors and assigns.

Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

ERISA. The word "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and including all regulations and published interpretations of the act.

Event of Default. The words "Event of Default" mean individually, collectively, and interchangeably any of the events of default set forth in this Agreement in the default section of this Agreement.

GAAP . The word "GAAP" means generally accepted accounting principles.

Grantor. The word "Grantor" means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan, and, in each case, Borrower's successors, assigns, heirs, personal representatives, executors and administrators of any guarantor, surety, or accommodation party.

Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

Lender . The word "Lender" means First National Bank of Omaha, its successors and assigns.

Loan . The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time, and further including any and all subsequent amendments, additions, substitutions, renewals and refinancings of any of Borrower's Loans.

Note . The word "Note" means any and all of Borrower's liabilities, obligations and debts to Lender, now existing or hereinafter incurred or created, including, without limitation, all loans, advances, interest, costs debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower together with all modifications, increases, renewals, and extensions of the aforementioned. Additionally, hereby incorporated as if fully set forth herein are the terms and conditions of any promissory note, agreement or other document executed by Borrower and/or Lender indicating this security instrument or the property described herein shall be considered "Collateral" securing such promissory note, agreement, or other instrument, or any similar reference.

Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets.

Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

Security Interest. The words "Security Interest" mean, individually, collectively, and interchangeably, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED NOVEMBER 1, 2016.

BORROWER:

LANDMARK BANCORP, INC.

By: /s/ Mark A. Herpich

Mark A. Herpich, Chief Fin. Officer/Secretary of Landmark Bancorp, Inc.

LENDER:

FIRST NATIONAL BANK OF OMAHA

By: /s/ Chris Reiner

Chris Reiner, Vice President

PROMISSORY NOTE

PROMISE TO 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 Seven Million Five Hundred Thousand & 00/100 Dollars ($7,500,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on November 1, 2017. In addition, Borrower will pay regular quarterly payments of all accrued unpaid interest due as of each payment date, beginning February 1, 2017, with all subsequent interest payments to be due on the same day of each quarter after that. Unless otherwise agreed or required by applicable law, payments will be applied to interest, principal, and expenses owing under the Note in an order determined by Lender. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note 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. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. 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. At Lender's option, the Index and/or the interest rate may be rounded upwards to the next higher one one-hundredth of one percent (0.01%). Borrower understands that Lender may make loans based on other rates as well. The Index currently is 3.500% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of 0.250 percentage points under the Index, resulting in an initial rate of 3.250% per annum based on a year of 360 days. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Unless waived by Lender, any increase in the interest rate will increase the amounts of Borrower's interest payments.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year 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 Note is computed using this method.

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 Note, and Borrower will remain obligated to pay any further amount owed to Lender . All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: First National Bank of Omaha, Downtown- Corporate Banking Group, 1620 Dodge St SC 1031, Omaha, NE 68197.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 3.000% of the regularly scheduled payment or $25.00, whichever is greater.

INTEREST AFTER DEFAULT . Upon default, including failure to pay upon final maturity, the interest rate on this Note 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.

DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note 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.

Default in Favor of Third Parties . Borrower or any Grantor 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 Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents.

False Statements. 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 Note or the related documents in connection with the obtaining of the loan evidenced by this Note or any security document directly or indirectly securing repayment of this Note 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.

Creditor or 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 loan. 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.

Change in 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.

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

Events Affecting 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.

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

Adverse Change . A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Insecurity. Lender in good faith believes itself insecure.

LENDER'S RIGHTS . Upon default, Lender may declare the entire unpaid principal balance under this Note 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 Note 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.

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

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

CHOICE OF 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.

DISHONORED ITEM 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.

RIGHT OF 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 Note is secured by a Pledge Agreement dated November 1, 2016, 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.

LINE OF CREDIT. This Note evidences a revolving line of credit. 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 Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs.

FINANCIAL STATEMENTS. Borrower agrees to provide Lender with such financial statements and other related information at such frequencies and in such detail as Lender may reasonably request.

ERRORS AND OMISSIONS. Borrower agrees, if requested by Lender, to fully cooperate in the correction, if necessary, in the reasonable discretion of Lender of any and all loan closing documents so that all documents accurately describe the loan between Lender and Borrower. Borrower agrees to assume all costs including by way of illustration and not limitation, actual expenses, legal fees and marketing losses for failing to reasonably comply with Lender requests within thirty (30) days.

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.

CROSS DEFAULT . 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 be 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.

CONSENT TO PARTICIPATION. Borrower agrees and consents to Lender's sale or transfer, whether now or later, or one or more participation interest in this loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interest, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interest will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interest irrespective of any personal claims or defenses that Borrower may have against Lender.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, 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 modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.

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

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

LANDMARK BANCORP, INC.

By: /s/ Mark A. Herpich

Mark A. Herpich, Chief Fin. Officer/Secretary of Landmark Bancorp, Inc.

LENDER:

FIRST NATIONAL BANK OF OMAHA

By: /s/ Chris Reiner

Chris Reiner, Vice President

COMMERCIAL PLEDGE AGREEMENT

THIS COMMERCIAL PLEDGE AGREEMENT dated November 1, 2016, is made and executed between Landmark Bancorp, Inc. ("Grantor") and First National Bank of Omaha ("Lender").

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means all of Grantor's property (however owned if more than one), in the possession of, or subject to the control of, Lender (or in the possession of, or subject to the control of, a third party subject to the control of Lender), whether existing now or later and whether tangible or intangible in character, including without limitation each and all of the following:

Stock Certificate # R3 - 2,000,000 Million Shares of Landmark National Bank

In addition, the word "Collateral" includes all of Grantor's property (however owned), in the possession of, or subject to the control of, Lender (or in the possession of, or subject to the control of, a third party subject to the control of Lender), whether now or hereafter existing and whether tangible or intangible in character, including without limitation each of the following:

(A)

All property to which Lender acquires title or documents of title.

(B)

All property assigned to Lender.

(C)

All promissory notes, bills of exchange, stock certificates, bonds, investment property, savings passbooks, time certificates of deposit, insurance policies, and all other instruments and evidences of an obligation.

(D)

All records relating to any of the property described in this Collateral section, whether in the form of a writing, microfilm, microfiche, or electronic media.

(E)

All Income and Proceeds from the Collateral as defined herein.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Grantor's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor 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. Grantor 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.

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor represents and warrants to Lender that:

Ownership. Grantor is the lawful owner of the Collateral free and clear of all security interests, liens, encumbrances and claims of others except as disclosed to and accepted by Lender in writing prior to execution of this Agreement.

Right to Pledge. Grantor has the full right, power and authority to enter into this Agreement and to pledge the Collateral.

Authority; Binding Effect. Grantor has the full right, power and authority to enter into this Agreement and to grant a security interest in the Collateral to Lender. This Agreement is binding upon Grantor as well as Grantor's successors and assigns, and is legally enforceable in accordance with its terms. The foregoing representations and warranties, and all other representations and warranties contained in this Agreement are and shall be continuing in nature and shall remain in full force and effect until such time as this Agreement is terminated or cancelled as provided herein.

No Further Assignment. Grantor has not, and shall not, sell, assign, transfer, encumber or otherwise dispose of any of Grantor's rights in the Collateral except as provided in this Agreement.

No Defaults. There are no defaults existing under the Collateral, and there are no offsets or counterclaims to the same. Grantor will strictly and promptly perform each of the terms, conditions, covenants and agreements, if any, contained in the Collateral which are to be performed by Grantor.

No Violation. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement.

Financing Statements. Grantor authorizes Lender to file a UCC financing statement, or alternatively, a copy of this Agreement to perfect Lender's security interest. At Lender's request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue Lender's security interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to execute documents necessary to transfer title if there is a default. Lender may file a copy of this Agreement as a financing statement.

LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. Lender may hold the Collateral until all Indebtedness has been paid and satisfied. Thereafter Lender may deliver the Collateral to Grantor or to any other owner of the Collateral. Lender shall have the following rights in addition to all other rights Lender may have by law:

Maintenance and Protection of Collateral. Lender may, but shall not be obligated to, take such steps as it deems necessary or desirable to protect, maintain, insure, store, or care for the Collateral, including paying of any liens or claims against the Collateral. This may include such things as hiring other people, such as attorneys, appraisers or other experts. Lender may charge Grantor for any cost incurred in so doing. When applicable law provides more than one method of perfection of Lender's security interest, Lender may choose the method(s) to be used. If the Collateral consists of stock, bonds or other investment property for which no certificate has been issued, Grantor agrees, at Lender's request, either to request issuance of an appropriate certificate or to give instructions on Lender's forms to the issuer, transfer agent, mutual fund company, or broker, as the case may be, to record on its books or records Lender's security interest in the Collateral. Grantor also agrees to execute any additional documents, including but not limited to, a control agreement, necessary to perfect Lender's security interest as Lender may desire.

Income and Proceeds from the Collateral . Lender may receive all Income and Proceeds and add it to the Collateral. Grantor agrees to deliver to Lender immediately upon receipt, in the exact form received and without commingling with other property, all Income and Proceeds from the Collateral which may be received by, paid, or delivered to Grantor or for Grantor's account, whether as an addition to, in discharge of, in substitution of, or in exchange for any of the Collateral.

Application of Cash. At Lender's option, Lender may apply any cash, whether included in the Collateral or received as Income and Proceeds or through liquidation, sale, or retirement, of the Collateral, to the satisfaction of the Indebtedness or such portion thereof as Lender shall choose, whether or not matured.

Transactions with Others. Lender may (1) extend time for payment or other performance, (2) grant a renewal or change in terms or conditions, or (3) compromise, compound or release any obligation, with any one or more Obligors, endorsers, or Guarantors of the Indebtedness as Lender deems advisable, without obtaining the prior written consent of Grantor, and no such act or failure to act shall affect Lender's rights against Grantor or the Collateral.

All Collateral Secures Indebtedness. All Collateral shall be security for the Indebtedness, whether the Collateral is located at one or more offices or branches of Lender. This will be the case whether or not the office or branch where Grantor obtained Grantor's loan knows about the Collateral or relies upon the Collateral as security.

Collection of Collateral . Lender at Lender's option may, but need not, collect the Income and Proceeds directly from the Obligors. Grantor authorizes and directs the Obligors, if Lender decides to collect the Income and Proceeds, to pay and deliver to Lender all Income and Proceeds from the Collateral and to accept Lender's receipt for the payments.

Power of Attorney. Grantor irrevocably appoints Lender as Grantor's attorney-in-fact, with full power of substitution, (a) to demand, collect, receive, receipt for, sue and recover all Income and Proceeds and other sums of money and other property which may now or hereafter become due, owing or payable from the Obligors in accordance with the terms of the Collateral; (b) to execute, sign and endorse any and all instruments, receipts, checks, drafts and warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, and in the place and stead of Grantor, execute and deliver Grantor's release and acquittance for Grantor; (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in Lender's own name or in the name of Grantor, or otherwise, which in the discretion of Lender may seem to be necessary or advisable; and (e) to execute in Grantor's name and to deliver to the Obligors on Grantor's behalf, at the time and in the manner specified by the Collateral, any necessary instruments or documents.

Perfection of Security Interest. Upon Lender's request, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral. When applicable law provides more than one method of perfection of Lender's security interest, Lender may choose the method(s) to be used. Upon Lender's request, Grantor will sign and deliver any writings necessary to perfect Lender's security interest. If any of the Collateral consists of securities for which no certificate has been issued, Grantor agrees, at Lender's option, either to request issuance of an appropriate certificate or to execute appropriate instructions on Lender's forms instructing the issuer, transfer agent, mutual fund company, or broker, as the case may be, to record on its books or records, by book-entry or otherwise, Lender's security interest in the Collateral. Grantor hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect, amend, or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties. This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness is paid in full and even though for a period of time Grantor may not be indebted to Lender.

LENDER'S EXPENDITURES . If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Grantor fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. The Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default.

LIMITATIONS ON OBLIGATIONS OF LENDER . Lender shall use ordinary reasonable care in the physical preservation and custody of the Collateral in Lender's possession, but shall have no other obligation to protect the Collateral or its value. In particular, but without limitation, Lender shall have no responsibility for (A) any depreciation in value of the Collateral or for the collection or protection of any Income and Proceeds from the Collateral, (B) preservation of rights against parties to the Collateral or against third persons, (C) ascertaining any maturities, calls, conversions, exchanges, offers, tenders, or similar matters relating to any of the Collateral, or (D) informing Grantor about any of the above, whether or not Lender has or is deemed to have knowledge of such matters. Except as provided above, Lender shall have no liability for depreciation or deterioration of the Collateral.

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

Payment Default. Grantor fails to make any payment when due under the Indebtedness.

Other Defaults. Grantor 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 Grantor.

Default in Favor of Third Parties. Grantor 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 Grantor's property or ability to perform Grantor's obligations under this Agreement or any of the Related Documents.

False Statements . Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor's behalf under this Agreement or the Related Documents 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.

Insolvency . The dissolution or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor'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 Grantor.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor 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.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness or 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.

Adverse Change. A material adverse change occurs in Grantor'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.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender may exercise any one or more of the following rights and remedies:

Accelerate Indebtedness. Declare all Indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and payable, without notice of any kind to Grantor.

Collect the Collateral. Collect any of the Collateral and, at Lender's option and to the extent permitted by applicable law, retain possession of the Collateral while suing on the Indebtedness.

Sell the Collateral. Sell the Collateral, at Lender's discretion, as a unit or in parcels, at one or more public or private sales. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shall give or mail to Grantor, and other persons as required by law, notice at least ten (10) days in advance of the time and place of any public sale, or of the time after which any private sale may be made. However, no notice need be provided to any person who, after an Event of Default occurs, enters into and authenticates an agreement waiving that person's right to notification of sale. Grantor agrees that any requirement of reasonable notice as to Grantor is satisfied if Lender mails notice by ordinary mail addressed to Grantor at the last address Grantor has given Lender in writing. If a public sale is held, there shall be sufficient compliance with all requirements of notice to the public by a single publication in any newspaper of general circulation in the county where the Collateral is located, setting forth the time and place of sale and a brief description of the property to be sold. Lender may be a purchaser at any public sale.

Sell Securities. Sell any securities included in the Collateral in a manner consistent with applicable federal and state securities laws. If, because of restrictions under such laws, Lender is unable, or believes Lender is unable, to sell the securities in an open market transaction, Grantor agrees that Lender will have no obligation to delay sale until the securities can be registered. Then Lender may make a private sale to one or more persons or to a restricted group of persons, even though such sale may result in a price that is less favorable than might be obtained in an open market transaction. Such a sale will be considered commercially reasonable. If any securities held as Collateral are "restricted securities" as defined in the Rules of the Securities and Exchange Commission (such as Regulation D or Rule 144) or the rules of state securities departments under state "Blue Sky" laws, or if Grantor or any other owner of the Collateral is an affiliate of the issuer of the securities, Grantor agrees that neither Grantor, nor any member of Grantor's family, nor any other person signing this Agreement will sell or dispose of any securities of such issuer without obtaining Lender's prior written consent.

Rights and Remedies with Respect to Investment Property, Financial Assets and Related Collateral. In addition to other rights and remedies granted under this Agreement and under applicable law, Lender may exercise any or all of the following rights and remedies: (1) register with any issuer or broker or other securities intermediary any of the Collateral consisting of investment property or financial assets (collectively herein, "investment property") in Lender's sole name or in the name of Lender's broker, agent or nominee; (2) cause any issuer, broker or other securities intermediary to deliver to Lender any of the Collateral consisting of securities, or investment property capable of being delivered; (3) enter into a control agreement or power of attorney with any issuer or securities intermediary with respect to any Collateral consisting of investment property, on such terms as Lender may deem appropriate, in its sole discretion, including without limitation, an agreement granting to Lender any of the rights provided hereunder without further notice to or consent by Grantor; (4) execute any such control agreement on Grantor's behalf and in Grantor's name, and hereby irrevocably appoints Lender as agent and attorney-in-fact, coupled with an interest, for the purpose of executing such control agreement on Grantor's behalf; (5) exercise any and all rights of Lender under any such control agreement or power of attorney; (6) exercise any voting, conversion, registration, purchase, option, or other rights with respect to any Collateral; (7) collect, with or without legal action, and issue receipts concerning any notes, checks, drafts, remittances or distributions that are paid or payable with respect to any Collateral consisting of investment property. Any control agreement entered with respect to any investment property shall contain the following provisions, at Lender's discretion. Lender shall be authorized to instruct the issuer, broker or other securities intermediary to take or to refrain from taking such actions with respect to the investment property as Lender may instruct, without further notice to or consent by Grantor. Such actions may include without limitation the issuance of entitlement orders, account instructions, general trading or buy or sell orders, transfer and redemption orders, and stop loss orders. Lender shall be further entitled to instruct the issuer, broker or securities intermediary to sell or to liquidate any investment property, or to pay the cash surrender or account termination value with respect to any and all investment property, and to deliver all such payments and liquidation proceeds to Lender. Any such control agreement shall contain such authorizations as are necessary to place Lender in "control" of such investment collateral, as contemplated under the provisions of the Uniform Commercial Code, and shall fully authorize Lender to issue "entitlement orders" concerning the transfer, redemption, liquidation or disposition of investment collateral, in conformance with the provisions of the Uniform Commercial Code.

Foreclosure. Maintain a judicial suit for foreclosure and sale of the Collateral.

Transfer Title. Effect transfer of title upon sale of all or part of the Collateral. For this purpose, Grantor irrevocably appoints Lender as Grantor's attorney-in-fact to execute endorsements, assignments and instruments in the name of Grantor and each of them (if more than one) as shall be necessary or reasonable.

Other Rights and Remedies . Have and exercise any or all of the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, at law, in equity, or otherwise.

Application of Proceeds . Apply any cash which is part of the Collateral, or which is received from the collection or sale of the Collateral, to reimbursement of any expenses, including any costs for registration of securities, commissions incurred in connection with a sale, attorneys' fees and court costs, whether or not there is a lawsuit and including any fees on appeal, incurred by Lender in connection with the collection and sale of such Collateral and to the payment of the Indebtedness of Grantor to Lender, with any excess funds to be paid to Grantor as the interests of Grantor may appear. Grantor agrees, to the extent permitted by law, to pay any deficiency after application of the proceeds of the Collateral to the Indebtedness.

Election of Remedies. Except as may be prohibited by applicable law, all of Lender's rights and remedies, whether evidenced by this Agreement, the Related Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

Attorneys' Fees; Expenses . Grantor agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may be directed by the court.

Caption Headings . Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of Douglas County, State of Nebraska.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors.

Successors and Assigns . Subject to any limitations stated in this Agreement on transfer of Grantor'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 Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Grantor from the obligations of this Agreement or liability under the Indebtedness.

Time is of the Essence. Time is of the essence in the performance of this Agreement.

Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code:

Agreement. The word "Agreement" means this Commercial Pledge Agreement, as this Commercial Pledge Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Commercial Pledge Agreement from time to time.

Borrower. The word "Borrower" means Landmark Bancorp, Inc. and includes all co-signers and co-makers signing the Note and all their successors and assigns.

Collateral. The word "Collateral" means all of Grantor's right, title and interest in and to all the Collateral as described in the Collateral Description section of this Agreement.

Default. The word "Default" means the Default set forth in this Agreement in the section titled "Default".

Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement.

Grantor. The word "Grantor" means Landmark Bancorp, Inc.

Guaranty. The word "Guaranty" means the guaranty from guarantor, endorser, surety, or accommodation party to Lender, including without limitation a guaranty of all or part of the Note.

Income and Proceeds. The words "Income and Proceeds" mean all present and future income, proceeds, earnings, increases, and substitutions from or for the Collateral of every kind and nature, including without limitation all payments, interest, profits, distributions, benefits, rights, options, warrants, dividends, stock dividends, stock splits, stock rights, regulatory dividends, subscriptions, monies, claims for money due and to become due, proceeds of any insurance on the Collateral, shares of stock of different par value or no par value issued in substitution or exchange for shares included in the Collateral, and all other property Grantor is entitled to receive on account of such Collateral, including accounts, documents, instruments, chattel paper, investment property, and general intangibles.

Indebtedness . The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents.

Lender . The word "Lender" means First National Bank of Omaha, its successors and assigns.

Obligor. The word "Obligor" means without limitation any and all persons obligated to pay money or to perform some other act under the Collateral.

Property. The word "Property" means all of Grantor's right, title and interest in and to all the Property as described in the "Collateral Description" section of this Agreement.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED NOVEMBER 1, 2016.

GRANTOR:

LANDMARK BANCORP, INC.

By: /s/ Mark A. Herpich

Mark A. Herpich, Chief Fin. Officer/Secretary of Landmark Bancorp, Inc.

LENDER:

FIRST NATIONAL BANK OF OMAHA

By: /s/ Chris Reiner

Chris Reiner, Vice President

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a)

I, Michael E. Scheopner, certify that:

I have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2016	/s/ Michael E. Scheopner
	Michael E. Scheopner
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a)

I, Mark A. Herpich, certify that:

I have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2016	/s/ Mark A. Herpich
	Mark A. Herpich
	Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 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, 2016 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:

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

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

/s/ Michael E. Scheopner
Michael E. Scheopner
Chief Executive Officer
November 10, 2016

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 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, 2016 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:

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

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

/s/ Mark A. Herpich
Mark A. Herpich
Chief Financial Officer
November 10, 2016