UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

For transition period from          to         

Commission File Number 0-33203

LANDMARK BANCORP, INC.

(Exact name of Registrant as specified in its charter)

                Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

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

Large accelerated filer o                         Accelerated filer  o                        Non-accelerated filer  x

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

                Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of the latest practicable date:  as of November 5, 2007, the Registrant had outstanding 2,304,641 shares of its common stock, $.01 par value per share.

LANDMARK BANCORP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.          Interim Financial Statements

             The condensed consolidated financial statements of Landmark Bancorp, Inc. (the “Company”) and subsidiary have been prepared in accordance with the instructions to Form 10-Q.  To the extent that information and footnotes required by U.S. generally accepted accounting principles for complete financial statements are contained in or consistent with the consolidated audited financial statements incorporated by reference in the Company’s Form 10-K for the year ended December 31, 2006, such information and footnotes have not been duplicated herein.  In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected herein.  The December 31, 2006, condensed consolidated balance sheet has been derived from the audited consolidated balance sheet as of that date.  The results of the interim period ended September 30, 2007 are not necessarily indicative of the results expected for the year ending December 31, 2007.

2.                              Income Tax

             The Company adopted the provisions of the Financial Accounting Standards Board (“FASB”) Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007.  FIN 48 provides a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.  Unrecognized tax benefits represent tax positions for which reserves have been established.  The Company’s adoption of FIN 48 did not have any effect on its consolidated financial statements.  As of the date of adoption, our gross unrecognized tax benefits totaled approximately $1.2 million.  The anticipated amount of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate was $827,000.  Included in this unrecognized tax benefit, are interest and penalties of $245,000.  We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense in our consolidated statements of earnings.

             Tax years that remain open and subject to audit include the years 2003 through 2006 for both federal and state.  During the three months ended September 30, 2007 we recognized $50,000 of previously unrecognized tax benefits.  We anticipate recognizing an additional $290,000 of previously unrecognized tax benefits during the fourth quarter, of which $175,000 will favorably impact the effective tax rate.  We believe that it is reasonably possible that a reduction in unrecognized tax benefits of up to $115,000 is possible during the next 12 months.

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5.             Other Comprehensive Income

                The Company’s other comprehensive income consists of the unrealized holding gains and losses on available-for-sale securities and an unrealized gain on an interest rate swap, which was terminated in December 2006, as shown below.

                Accumulated other comprehensive income related entirely to investment securities, classified as available for sale, at September 30, 2007.  The components at September 30, 2006 were unrealized gains of $73,000 in cash flow hedging activities and $205,000 in available for sale investment securities, net of taxes.

6.             Other Intangible Assets

The following is an analysis of changes in the core deposit intangible assets:

The following is an analysis of changes in the mortgage servicing rights:

The Company adopted the provisions of FASB Statement of Financial Accounting Standards (“SFAS”) No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140” on January 1, 2007 and elected to maintain the amortized cost method and carry the mortgage servicing rights at the lower of cost or market value.  The balance of the mortgage servicing rights can

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

                Overview.  Landmark Bancorp, Inc. is a bank holding company incorporated under the laws of the State of Delaware and is engaged in the banking business through its wholly-owned subsidiary, Landmark National Bank.  Landmark Bancorp is listed on the NASDAQ Global Market under the symbol “LARK”.  Landmark National Bank is dedicated to providing quality financial and banking services to its local communities.  Landmark National Bank originates commercial, commercial real estate, one-to-four family residential mortgage loans, consumer loans, multi-family residential mortgage loans and home equity loans.

                Our results of operations depend primarily on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities.  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 and losses from the sale of newly originated loans and investments.  Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, federal deposit insurance costs, data processing expenses and provision for loan losses.

                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 personal investments, the level of personal income and the personal rate of savings within our market areas.  Factors influencing lending activities include the demand for housing and commercial loans as well as the interest rate pricing competition from other lending institutions.

                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 related to business acquisitions, all of which involve significant judgment by our management.

                We perform periodic and systematic detailed reviews of our lending portfolio to assess overall collectability.  The level of the allowance for loan losses reflects our estimate of the collectability of the loan portfolio as of each reporting date.  While these estimates are based on substantive methods for determining allowance requirements, nevertheless, actual outcomes may differ significantly from estimated results.  Additional explanation of the methodologies used in establishing this reserve is provided in the “Asset Quality and Distribution” section.

                We report our investment securities at estimated fair values based on published market ascertainable values, which are obtained from independent sources.  We perform periodic reviews of the fair value of investment securities to determine if any declines in value might be considered other than temporary.  Our most recent review showed that the securities that had experienced decreases in fair value, resulting in unrealized loss positions, were related to changes in interest rates and not to a

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credit deterioration.  The Company has the ability and intent to hold these securities until market values recover, including up to the maturity date.  Although we believe that our estimates of the fair values of investment securities to be reasonable, economic and market factors may affect the amounts that will ultimately be realized from these investments.

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.  Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns.  Under FIN 48, an income tax position will be recognized if it is more likely than not that it will be sustained upon IRS examination, based upon its technical merits.  Once that status is met, the amount recorded will be the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.  Changes in estimates regarding the actual outcome of these future tax consequences, including the effects of IRS examinations and examinations by other state agencies, could materially impact our financial position and results of operations.

                We have completed several business and asset acquisitions which have generated significant amounts of goodwill and intangible assets and related amortization. The values assigned to goodwill and intangibles, as well as their related useful lives, are subject to judgment and estimation by the Company.  Goodwill and intangibles related to acquisitions are determined and based on purchase price allocations.  Valuation of intangible assets is generally based on the estimated cash flows related to those assets, while the initial value assigned to goodwill is the residual of the purchase price over the fair value of all identifiable assets acquired and liabilities assumed. Performing such a discounted cash flow analysis involves the use of estimates and assumptions.  Useful lives are determined based on the expected future period of the benefit of the asset, the assessment of which considers various characteristics of the asset, including the historical cash flows.  Due to the number of estimates involved related to the allocation of purchase price and determining the appropriate useful lives of intangible assets, we have identified purchase accounting as a critical accounting policy.  If the carrying value of the goodwill and other intangible assets exceeds the implied fair value of the goodwill, an impairment loss is recorded.

Summary of Results.  During 2007 we experienced a decline in earnings as compared to 2006.  This decline is primarily attributable to certain items recognized during 2006 that did not occur in 2007, as well as a decline in net interest margin.  During 2006 we recognized $717,000 in gains on the sale of certain assets, primarily the sale of our previous headquarters at 800 Poyntz.  These gains were partially offset by $444,000 in losses on sale of investments as we restructured our investment portfolio by selling lower yielding, shorter-term investments and purchasing higher yielding, longer-term investments during the second quarter of 2006.  Our net interest margin also declined from 3.58% during the first nine months of 2006 to 3.52% during the same period of 2007.  This decline in net interest margin was primarily driven by increases in our cost of funding.  Our cost of funding increased because of higher short-term interest rates and fed funds rate, as well as increased competition for our deposits.  Also contributing to the lower net interest margin was the increased percentage of investment securities as a portion of our interest bearing assets, which typically have a lower yield than loans.

Net earnings for the three months ended September 30, 2007, decreased $26,000, or 1.8%, to $1.4 million as compared to the three months ended September 30, 2006.  The three months ended September 30, 2007 and 2006, both resulted in diluted earnings per share of $0.62.  Return on average assets, on an annualized basis, was 0.95% for the period ended September 30, 2007 compared to 0.98%

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for the same period in 2006.  Return on average stockholders’ equity, on an annualized basis, was 11.53% for the period compared to 12.60% for the same period in 2006.

                Net earnings for the nine months ended September 30, 2007, decreased $445,000, or 9.9%, to $4.0 million as compared to the nine months ended September 30, 2006.  The nine months ended September 30, 2007 resulted in diluted earnings per share of $1.72 compared to $1.90 for the same period in 2006.  Return on average assets, on an annualized basis, was 0.90% for the period ended September 30, 2007 compared to 1.00% for the same period in 2006.  Return on average stockholders’ equity, on an annualized basis, was 10.85% for the period compared to 13.22% for the same period in 2006.

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

(1)                                     The ratio has been annualized and is not necessarily indicative of the results for the entire year.

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

Interest Income.  Interest income for the three months ended September 30, 2007, increased $248,000, or 2.9%, to $9.1 million from $8.8 million in the same period of 2006, resulting from increased interest income on investment securities.  Average loans for the quarter ended September 30, 2007 decreased to $386.5 million from $396.8 million for the quarter ended September 30, 2006.  Offsetting the decline in average loans was the rise in the yield we earned on those loans.  As a result, interest income on loans only decreased $7,000, or 0.1%, to $7.3 million for the quarter ended September 30, 2007.  Average investment securities increased from $136.5 million for the quarter ended September 30, 2006, to $156.3 million for the quarter ended September 30, 2007.  Along with the increase in average investments for the comparable periods, and despite the increased holdings of tax exempt investments, interest income on investment securities increased $270,000, or 17.8%, to $1.8 million for the third quarter of 2007, as compared to the same period of 2006.

Interest income for the nine months ended September 30, 2007, increased $1.6 million, or 6.3%, to $26.9 million from $25.3 million in the same period of 2006, resulting from increased interest income on both investment securities and loans.  Average loans for the nine months ended September 30, 2007 decreased to $384.7 million from $393.8 million for the nine months ended September 30, 2006.  Offsetting the decline in average loans was the rise in interest rates experienced during the first half of 2006, which contributed to the increased interest income.  As a result, interest income on loans increased $830,000, or 4.0%, to $21.6 million for the nine months ended September 30, 2007.  Average investment securities increased from $144.8 million for the nine months ended September 30, 2006, to $156.6 million for the nine months ended September 30, 2007.  Along with the increase in average investments for the comparable periods, and despite the increased holdings of tax exempt

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investments, interest income on investment securities increased $860,000, or 19.6%, to $5.2 million for the first nine months of 2007, as compared to the same period of 2006.  The increase in interest rates, which resulted in yields on our investments purchased being higher than the yields on the investments which either matured or were sold during the past year, was responsible for the increase in interest income on investments.

                Interest Expense.  Interest expense during the three months ended September 30, 2007, increased $510,000, or 12.4%, as compared to the same period of 2006.  For the three months ended September 30, 2007, interest expense on deposits increased $657,000, or 23.1%.  Average deposits increased from $383.4 million during the quarter ended September 30, 2006 to $399.7 million for the quarter ended September 30, 2007.  The increase in interest expense on deposits resulted from higher rates on deposit balances as well as higher deposit balances.  Average borrowings for the quarter ended September 30, 2007 decreased to $94.5 million from $107.8 million for the quarter ended September 30, 2006.  Interest expense on borrowings decreased $147,000, or 11.6%, to $1.1 million for the three months ended September 30, 2007 as compared to the same period in 2006.

Interest expense during the nine months ended September 30, 2007, increased $2.1 million, or 18.3%, as compared to the same period of 2006.  For the nine months ended September 30, 2007, interest expense on deposits increased $2.2 million, or 28.2%.  Average deposits increased from $389.5 million during the nine months ended September 30, 2006 to $398.3 million for the nine months ended September 30, 2007.  The increase in interest expense on deposits resulted from higher deposit balances as well as higher rates on those balances.  Average borrowings for the nine months ended September 30, 2007 decreased to $95.8 million from $105.0 million for the nine months ended September 30, 2006.  Interest expense on borrowings decreased $140,000, or 4.0%, to $3.4 million.

Net Interest Income.  Net interest income for the three months ended September 30, 2007, totaled $4.5 million, decreasing $261,000, or 5.5%, as compared to the three months ended September 30, 2006.  This decline in net interest income was due primarily to the increases in our cost of funding outpacing the increases in our yields on interest earning assets.  Average interest-earning assets increased during the third quarter of 2007 to $542.8 million from $533.3 million for the third quarter of 2006.  Our net interest margin, on a tax equivalent basis, declined to 3.47% for the three months ending September 30, 2007 from 3.66%.

Net interest income for the nine months ended September 30, 2007, totaled $13.4 million, decreasing $488,000, or 3.5%, as compared to the nine months ended September 30, 2006.  This decline in net interest income was due primarily to the increases in our cost of funding outpacing the increases in our yields on interest earning assets.  Average interest-earning assets increased during the first nine months of 2007 to $541.2 million from $538.6 million for the first nine months of 2006.  Our net interest margin, on a tax equivalent basis, declined to 3.52% from 3.58% over the same time period.

                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 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 of specifically identified problem loans. Allowance policies are subject to periodic review and revision in response to

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a number of factors, including current market conditions, actual loss experience and management’s expectations.

The provision for loan losses for the three months ended September 30, 2007, was $70,000, compared to a provision of $80,000 during the three months ended September 30, 2006.  The provision for loan losses for the nine months ended September 20, 2007, was $195,000, compared to a provision of $155,000 during the nine months ended September 30, 2006.  One measure of the adequacy of the allowance for estimated losses on loans is the ratio of the allowance to the total loan portfolio.  At September 30, 2007, and December 31, 2006, the allowance for loan losses was $4.1 million and $4.0 million, or 1.1% of gross loans outstanding.  For further discussion of the allowance for loan losses, refer to the “Asset Quality and Distribution” section.

                Non-interest Income.  Non-interest income decreased $108,000, or 6.4%, for the three months ended September 30, 2007, to $1.6 million, as compared to the three months ended September 30, 2006.  Contributing to this decline was a decrease in gain on sale of loans of $46,000, which was the result of lower volumes of loans originated for sale in 2007 as compared to 2006.

Non-interest income decreased $897,000, or 16.9%, for the nine months ended September 30, 2007, to $4.4 million compared to the nine months ended September 30, 2006.  This decrease in 2007 was attributable primarily due to certain items recognized during the first nine months of 2006.  During the first nine months of 2006, we recognized $717,000 in gains on the sale of certain assets, primarily the 800 Poyntz facility.  These gains were partially offset by $444,000 in losses on sale of investments as we restructured our investment portfolio by selling lower yielding, shorter-term investments and purchasing higher yielding, longer-term investments during the second quarter of 2006.  Furthering the decline in 2007 was a decrease in gains on sale of loans of $193,000, or 13.4%, as well as a decline of $66,000 in deposit related income.  Offsetting these declines was a $144,000 gain on sale of investments during the first quarter of 2007 as well as a $75,000 increase in the cash surrender value of bank owned life insurance, which resulted from the purchase of additional policies totaling $7.5 million in March 2006.

Non-interest Expense.  Non-interest expense decreased $152,000, or 3.5%, to $4.2 million for the three months ended September 30, 2007, as compared to the three months ended September 30, 2006.  Contributing to the reduction in non-interest expense was a $51,000 decrease in professional fees, a $34,000 decrease in occupancy and equipment, and a $30,000 decrease in amortization of intangibles.

Non-interest expense decreased $291,000, or 2.3%, to $12.5 million for the nine months ended September 30, 2007, as compared to the nine months ended September 30, 2006.  Contributing to the reduction in non-interest expense was a $192,000 decrease in compensation and benefits and a $85,000

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decrease in amortization expense and a $55,000 decrease in occupancy and equipment.  Offsetting those reductions was an increase of $57,000 in data processing.

Income Tax Expense.  Income tax expense decreased $181,000, or 33.0%, from $548,000 for the three months ended September 30, 2006, to $367,000 for the three months ended September 30, 2007.  The decrease in income tax expense was the result of a $207,000 decrease in earnings before income taxes for the third quarter of 2007 as compared to the third quarter of 2006, increased purchases of tax exempt municipal bonds, and the recognition of $50,000 of previously unrecognized tax benefits.  The effective tax rate for the third quarter of 2007, decreased to 20.4% from 27.3% in the second quarter of 2006, primarily as a result of the tax exempt income on municipal bonds.

Income tax expense decreased $690,000, or 37.7%, from $1.8 million for the nine months ended September 30, 2006, to $1.1 million for the nine months ended September 30, 2007.  The decrease in income tax expense was the result of a $1.1 million decrease in earnings before income taxes for the first nine months of 2007 as compared to the nine months of 2006, increased purchases of tax exempt municipal bonds and bank owned life insurance, and the recognition of $50,000 of previously unrecognized tax benefits.  The effective tax rate for the nine months of 2007 decreased to 22.0% from 29.0% in the first nine months of 2006.

Asset Quality and Distribution.  Our primary investing activities are the origination of commercial, mortgage, consumer loans and the purchase of investment and mortgage-backed securities.  We have concentrated on generating commercial loans over the past few years and are pleased with the growth in this segment of our loan portfolio.  We also originate fixed-rate, residential mortgage loans with maturities in excess of ten years for sale in the secondary market.  While the January 1, 2006 First Manhattan Bancorporation, Inc. acquisition increased our one-to-four family residential loan totals, as the majority of the acquired loans were residential, we plan to continue our strategy to expand our commercial lending activities.  Total assets increased to $602.3 million at September 30, 2007, compared to $590.6 million at December 31, 2006.  While net loans, excluding loans held for sale, increased $838,000 to $380.2 million during the nine months ended September 30, 2007 as compared to December 31, 2006, the composition of loans changed more substantially as our commercial and commercial real estate loans increased by $22.9 million and our one-to-four family residential loans decreased by $22.0 million.

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underlying insurance or guarantees.  We are aggressively pursuing collection activity of these loans which should enable the collection of outstanding principal.

                Liability Distribution.  Our primary ongoing sources of funds are deposits, 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, economic conditions, competition and the restructuring of the financial services industry.  Total deposits increased $5.7 million to $450.2 million at September 30, 2007, from $444.5 million at December 31, 2006.  Borrowings increased $2.2 million to $92.6 million at September 30, 2007, from $90.4 million at December 31, 2006.

                Non-interest bearing demand accounts at September 30, 2007, were $54.7 million, or 12.2% of deposits, compared to $48.4 million, or 10.9% of deposits, at December 31, 2006.  Certificates of deposit increased to $245.9 million, or 54.6% of deposits, at September 30, 2007, from $231.1 million, or 52.0% of deposits at December 31, 2006.  Money market and NOW demand accounts decreased to $123.9 million at September 30, 2007, or 27.5% of deposits, from $137.3 million, or 30.9% of deposits, at December 31, 2006. Savings accounts decreased to $25.7 million at September 30, 2007, or 5.7% of deposits, from $27.7 million, or 6.2% of deposits, at December 31, 2006.

                Certificates of deposit at September 30, 2007, which were scheduled to mature in one year or less, totaled $211.6 million.  Historically, maturing deposits have generally remained with our bank and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity.

                Contractual Obligations and Commercial Commitments.  The following table presents our contractual obligations, defined as operating lease obligations and principal payments due on non-deposit obligations with maturities in excess of one year as of September 30, 2007, for the periods indicated.  Unrealized tax benefits related to tax uncertainties which are not classified as more likely than not, are excluded in the following table as the timing and resolution of these unrealized benefits can not be reasonably estimated.

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Liquidity.  Our most liquid assets are cash and cash equivalents and investment securities available for sale.  The levels of these assets are dependent on the operating, financing, lending and investing activities during any given period.  These liquid assets totaled $169.1 million at September 30, 2007, and $160.6 million at December 31, 2006.  During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we increase our liquid assets by investing in short-term U. S. Government and agency securities or high-grade municipal securities.

                Liquidity management is both a daily and long-term function of our strategy.  Excess funds are generally invested in short-term investments.  In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of Federal Home Loan Bank (“FHLB”) advances, a line of credit with the FHLB, or other borrowings or through sales of securities.  At September 30, 2007, we had outstanding FHLB advances of $61.2 million and $4.0 million of borrowings against our line of credit with the FHLB.  At September 30, 2007, our total borrowing capacity with the FHLB was $123.0 million.  We also had other borrowings of $27.5 million at September 30, 2007, which included $16.5 million of subordinated debentures, $4.0 million of long-term debt and $7.0 million in repurchase agreements.

                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 bank 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 originated by us. Most of the standby letters of credit are secured, and in the event of nonperformance by the customer, we have the right to the underlying collateral, which could include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. The contract amount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $2.3 million at September 30, 2007.

                At September 30, 2007, we had outstanding loan commitments, excluding standby letters of credit, of $74.8 million.  We anticipate that sufficient funds will be available to meet current loan commitments.  These commitments consist of unfunded lines of credit and commitments to finance real estate loans.

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Capital.  The Federal Reserve Board has established capital requirements for bank holding companies which generally parallel the capital requirements for national banks under the Office of the Comptroller of the Currency regulations.  The regulations provide that such standards will generally be applied on a consolidated (rather than a bank-only) basis in the case of a bank holding company with more than $150 million in total consolidated assets.  Banks and bank holding companies are generally expected to operate at or above the minimum capital requirements.  Our ratios are well in excess of regulatory minimums and should allow us to operate without capital adequacy concerns.

At September 30, 2007, we continued to maintain a sound leverage ratio of 8.68% and a total risk based capital ratio of 13.10%.  As shown by the following table, our capital exceeded the minimum capital requirements at September 30, 2007 (dollars in thousands):

                At September 30, 2007, Landmark National Bank continued to maintain a sound leverage ratio of 9.09% and a total risk based capital ratio of 13.65%.  As shown by the following table, the bank’s capital exceeded the minimum capital requirements at September 30, 2007 (dollars in thousands):

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Average Assets/Liabilities.  The following table sets forth information relating to average balances of interest-earning assets and liabilities for the three and nine months ended September 30, 2007 and the same period for 2006.  The following table reflects the average tax equivalent yields on assets and average costs of 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:

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