CORPORATE PROFILE AND 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. 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. Our strategy includes continuing a tradition of quality assets while growing our commercial and commercial real estate loan portfolios. We are committed to developing relationships with our borrowers and providing a total banking service.

Landmark National Bank is principally engaged in the business of attracting deposits from the general public and using such deposits, together with Federal Home Loan Bank borrowings and funds from operations, to originate commercial real estate and non-real estate loans, as well as one-to-four family residential mortgage loans. Landmark National Bank also originates small business, multi-family residential mortgage, home equity 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 are primarily dependent 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 operating expenses, aside from interest expense, principally consist of compensation and employee benefits, occupancy costs, federal deposit insurance costs, data processing expenses and provisions for potential loan losses.

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

Currently, our business consists of ownership of Landmark National Bank, with its main office in Manhattan, Kansas and nineteen branch offices in eastern, central and southwestern Kansas. In January 2009, we entered into an agreement to purchase a second branch in Lawrence. The location is near our planned building site and allows us to expedite the planned expansion more quickly and economically. The branch acquisition will come with approximately $7 million in deposits and $4 million in loans.

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. 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 available-for-sale investment securities at fair value, and in accordance with the requirements of SFAS No. 157 "Fair Value Measurements," the Company employs valuation techniques which utilize observable inputs when those inputs are available. These observable inputs reflect assumptions market participants would use in pricing the security, developed based on market data obtained from sources independent of the Company. When such information is not available, the Company employs valuation techniques which utilize unobservable inputs, or those which reflect the Company's own assumptions about market participants, based on the best information available in the circumstances. These valuation methods typically involve cash flow and other financial modeling techniques. Changes in underlying factors, assumptions, estimates, or other inputs to the valuation techniques could have a material impact on the Company's future financial condition and results of operations. SFAS 157, which requires fair value measurements to be classified as Level 1 (quoted prices), Level 2 (based on observable inputs) or Level 3 (based on unobservable inputs) is discussed in more detail in Note 12 to the consolidated financial statements. Our management performs periodic reviews of the investment securities to determine if any investment securities have declined in value which might be considered other than temporary. If such decline is deemed other than temporary, we would adjust the cost basis of the security by writing down the security to the estimated fair market value through a charge to current period operations. The market values of securities are affected by changes in interest rates as well credit spreads associated with the issuers. The Company's review includes an analysis of the facts and circumstances surrounding each security including the length and severity of the loss, the credit of the borrower and our ability and intent to hold the security until maturity. The Company obtains estimates of the fair value for investments in pooled trust preferred securities from pricing services and by discounting projected cash flows using a risk-adjusted discount rate in accordance with FSP FAS No. 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active." The fair value of the pooled trust preferred securities for disclosure purposes is estimated by considering the reasonableness of the range of fair value estimates provided by a pricing service and the discounted cash values. The Company's review of investments in pooled trust preferred securities is also assessed for the recoverability of cash flows under EITF 99-20-1 "Recognition of Interest Income and Impairment on Purchased Beneficial Interest." 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. We have also established a valuation allowance on a portion of our deferred tax assets because we believe it is more likely than not that these items will not be realized. 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 our management. Goodwill and intangibles related to acquisitions are determined and based on purchase price allocations. 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. If the carrying value of our goodwill exceeded the implied fair value of the goodwill, an impairment loss would be recorded in an amount equal to that excess. Our analysis includes a review of stock price and valuation multiples compared to recent acquisition multiples in determining our implied fair value of our goodwill. Valuation of intangible assets is generally based on the estimated cash flows related to those assets. 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, and the subsequent impairment testing of goodwill and intangible assets, as a critical accounting policy.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND
DECEMBER 31, 2007

SUMMARY OF PERFORMANCE. Net earnings for 2008 decreased $849,000, or 15.7%, to $4.6 million as compared to 2007. The decrease in earnings was primarily due to a $2.1 million increase in our provision for loan losses. During 2008 our loan loss analysis indicated it was necessary to increase our provision for loan losses based upon our analysis of our loan portfolio as well as deteriorating market conditions. Even though our levels of non accrual and past due loans declined during 2008, increased levels of loan loss provision were warranted given the economic environment, the uncertainty regarding the length and severity of the recession and the loan losses and resulting charge-offs experienced during 2008. We feel the external risks within the environment which we operate remain present today and will need to be continuously monitored. We believe that our capital levels, loan portfolio management and our provision for loan losses position us to deal with the economic uncertainties in this challenging environment. We will continue to monitor economic events closely, along with the performance of our loan portfolio, and take the necessary steps required to address any issues that may arise.

Partially offsetting the higher provision for loan losses were gains of $497,000 on sales of investment securities and $270,000 of gains on the prepayment of two FHLB advances, as well as an increase of $502,000 in gains on sales of loans. Market conditions during the second quarter of 2008 allowed us to sell longer term, higher yielding U.S. agency obligations while purchasing shorter term, lower yielding mortgage-backed obligations at gains that were higher than the reductions in interest income as a result of the transactions. During 2008, we began a strategy of issuing longer-term, fixed rate FHLB advances and repaying shorter-term FHLB advances to lengthen our FHLB advance maturities while rates were believed to be at a relatively low point in the rate cycle. As a result of the prepayment of two $10 million advances, we recognized gains of $270,000, which represented the unamortized fair value adjustment required by purchase accounting for a prior acquisition. The increase in gains on sales of loans was driven by higher origination volumes of residential real estate loans that were sold in the secondary market.

The year ended December 31, 2008 resulted in diluted earnings per share of $1.89 compared to $2.10 for 2007. Return on average assets was 0.75% for 2008, compared to 0.90% for 2007. Return on average stockholders' equity was 8.98% for 2008, compared to 10.78% for 2007.

We distributed a 5% stock dividend for the eighth consecutive year in December 2008. All per share and average share data in this section reflects the 2008 and 2007 stock dividends.

INTEREST INCOME. Interest income for 2008 decreased $3.9 million, or 11.0%, to $31.7 million from $35.6 million for 2007, primarily as a result of lower yields on interest-earning assets as a result of the dramatic declines in benchmark interest rates during 2008. Average loans for 2008 decreased to $375.2 million from $383.1 million in 2007. Interest income on loans decreased $4.0 million, or 14.2%, to $24.4 million for 2008, due to a decrease in the average yield on loans from 7.45% during 2007 to 6.49% during 2008 combined with lower average balances. Average investment securities increased from $157.4 million for 2007, to $170.0 million for 2008. The average yield on our investment securities decreased to 4.88% during 2008 from 5.15% during 2007. Interest income on investment securities increased $124,000, or 1.7%, to $7.2 million for 2008.

INTEREST EXPENSE. Interest expense for 2008 decreased 23.8%, or $4.3 million, to $13.6 million from $17.9 million for 2007. Interest expense on deposits decreased to $9.9 million, or 26.7%, from $13.5 million in 2007. Contributing to the decline in interest expense was a decline in average interest-bearing deposits from $397.7 million for 2007, to $391.5 million during 2008, as well as a decline in the average rate from 3.40% in 2007 to 2.53% in 2008. Interest expense on borrowings decreased $644,000 during 2008 to $3.7 million from $4.4 million in 2007. This decline was the result of lower rates on our average borrowings, which declined to 3.52% during 2008 from 4.63% in 2007. Offsetting the lower average rates were higher average balances which increased from $94.2 million in 2007 to $105.5 million in 2008.

NET INTEREST INCOME. Net interest income represents the difference between income derived from interest-earning assets and the expense incurred on interest-bearing liabilities. Net interest income is affected by both the difference between the rates of interest earned on interest-earnings assets and the rates paid on interest-bearing

liabilities ("interest rate spread") as well as the relative amounts of interest-earning assets and interest-bearing liabilities.

Net interest income for the year ended December 31, 2008 increased $349,000 to $18.0 million compared to the year ended December 31, 2007, an increase of 2.0%. This increase in net interest income was due primarily to the decline in our cost of funding outpacing the decline in our yield on interest earning assets, which resulted in our net interest margin, on a tax equivalent basis, increasing to 3.51% from 3.47% for 2008 and 2007, respectively. During 2008 we were able to reduce our cost of deposits and borrowings enough to offset the lower yield on loans in a market that experienced a dramatic decline in benchmark interest rates that began in late 2007 and continued throughout 2008. The lower cost of funding allowed us to maintain our net interest margin in markets that had considerable competitive pricing pressures. We expect these pricing pressures to continue during 2009, which will continue to make maintaining or increasing our net interest margin difficult.

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 of specifically identified problem loans. Additionally, allowance strategies and 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.

The provision for loan losses increased to $2.4 million for 2008, compared to $255,000 for 2007. We increased our provision for loan losses based on our analysis of the loan portfolio as well as deteriorating market conditions. Even though our levels of non-accrual and past due loans declined from December 31, 2007 to December 31, 2008, increased levels of loan loss provision were warranted given the economic environment and the uncertainty regarding the length and severity of the recession we are currently experiencing. The Company's non-accrual loans declined to $5.7 million at December 31, 2008 from $10.0 million as of December 31, 2007. The decline was primarily the result of the collection of the outstanding balances of two loan relationships totaling $3.0 million during 2008 and increased charge-offs of balances in non-accrual at December 31, 2007. Net loan charge-offs for the year ended December 31, 2008 were $2.7 million compared to $113,000 for the year ended December 31, 2007. At December 31, 2008, the allowance for loan losses was $3.9 million, or 1.05% of gross loans outstanding, compared to $4.2 million, or 1.10% of gross loans outstanding, at December 31, 2007. For further discussion of the provision for loan losses, refer to the "Asset Quality and Distribution" section.

NON-INTEREST INCOME. Total non-interest income increased $1.6 million to $7.5 million for 2008, which was primarily attributable to $497,000 in gains on sales of investment securities, a $270,000 gain on the prepayment of FHLB advances and increases of $502,000 in gains on sales of loans and $228,000 in fees and service charges, as compared to 2007. The increase in gains on sales of loans were driven by higher origination volumes of residential real estate loans that were sold in the secondary market while the increase in fees and service charges were primarily deposit related.

NON-INTEREST EXPENSE. Total non-interest expense increased $872,000, an increase of 5.2% during 2008 as compared to 2007. The increase was primarily attributable to increases of $568,000 in compensation and benefits and $352,000 in other non-interest expense. The increase in compensation and benefits was driven primarily by increased staffing levels and general pay increases. The increased staffing levels were primarily related to increased one-to-four family residential mortgage loan staff. The increase in other non-interest expenses was primarily the result of $118,000 increase in foreclosure and other real estate asset expenses, as well as $66,000 of other than temporary impairment charges on certain investment securities. During 2008 our FDIC deposit insurance costs were primarily offset by assessment credits that were previously received. However, during 2009 these credits will be fully utilized which will cause a substantial increase in our non-interest expense. We expect our FDIC deposit insurance expense to increase approximately $300,000 during 2009 as compared to 2008 due to the expiration of the credits and the increased assessment levels. This amount does not include the proposed emergency special assessment, which would be approximately $900,000. These additional amounts will increase non-interest expense.

INCOME TAXES. Income tax expense decreased $193,000, or 14.8%, to $1.1 million for 2008, from $1.3 million for 2007. The decrease in income tax expense for 2008 resulted primarily from a decrease in taxable income during 2008 as compared to 2007. The effective tax rate was 19.6% for 2008 as compared to 19.4% for 2007.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2007 AND
DECEMBER 31, 2006

SUMMARY OF PERFORMANCE. Net earnings for 2007 decreased $608,000, or 10.6%, to $5.4 million as compared to 2006. Our decline in earnings for 2007 declined from 2006 primarily due to decreases in both net interest income and non-interest income.

The year ended December 31, 2007 resulted in diluted earnings per share of $2.10 compared to $2.32 for 2006. Return on average assets was 0.90% for 2007, compared to 1.01% for 2006. Return on average stockholders' equity was 10.78% for 2007, compared to 13.01% for 2006.

INTEREST INCOME. Interest income for 2007 increased $1.2 million, or 3.4%, to $35.6 million from $34.4 million for 2006, primarily as a result of an increase in interest income on investment securities. Average loans for 2007 decreased to $383.1 million from $393.7 million in 2006. Despite the decrease in average loans, interest income on loans increased $171,000, or 0.6%, to $28.5 million for 2007, due primarily to an increase in the average yield on loans from 7.20% during 2006 to 7.45% during 2007. Average investment securities increased from $144.1 million for 2006, to $157.4 million for 2007. The average yield on our investment securities increased to 5.15% during 2007 from 4.70% during 2006. As a result of higher balances and yields, interest income on investment securities increased $1.0 million, or 16.2%, to $7.1 million for 2007.

INTEREST EXPENSE. Interest expense for 2007 increased 14.3%, or $2.2 million, to $17.9 million from $15.6 million for 2006. Interest expense on deposits increased to $13.5 million, or 23.4%, from $10.9 million in 2006 as average deposits increased from $439.7 million for 2006, to $448.8 million during 2007. The average rate on our certificates of deposit increased from 3.78% in 2006 to 4.48% in 2007. This increase was due in part to increased competition for deposits and the repricing of lower rate certificates of deposits. The higher average deposits allowed us to decrease our average borrowings for 2007 to $94.2 million from $103.8 million for 2006. Corresponding with the decrease in average borrowings for the comparable periods, interest expense on borrowings decreased $329,000, or 7.0%. Additionally, offsetting the lower average borrowings were increased interest rates, as the average rate on our borrowings increased from 4.52% in 2006 to 4.63% in 2007.

NET INTEREST INCOME. Net interest income for the year ended December 31, 2007 decreased $1.1 million to $17.7 million compared to the year ended December 31, 2006, a decrease of 5.7%. This decline in net interest income was due primarily to the increase in our cost of funding outpacing the increase in our yield on interest earning assets, which resulted in our net interest margin, on a tax equivalent basis, declining to 3.47% from 3.62% for 2007 and 2006, respectively. In the latter part of 2007, as the Federal Reserve lowered interest rates, our loan yields decreased at a faster pace than our deposit costs. The faster decline in loan yields was largely attributed to increasing competitive pressures resulting from a slowing economy, deteriorating loan pricing, and relatively fewer lending opportunities. At the same time increasing competition for deposits has limited our ability to lower the costs of deposits as quickly as the loans.

PROVISION FOR LOAN LOSSES. The provision for loan losses increased to $255,000 for 2007, compared to $235,000 for 2006. Our regular review of the loan portfolio prompted the increase in our provision, primarily as a result of decreases in credit quality, slowing economic conditions, increased commercial lending and higher nonperforming asset balances. At December 31, 2007, the allowance for loan losses was $4.2 million, or 1.10% of gross loans outstanding, compared to $4.0 million, also 1.05% of gross loans outstanding, at December 31, 2006. For further discussion of the provision for loan losses, refer to the "Asset Quality and Distribution" section.

NON-INTEREST INCOME. Non-interest income decreased $998,000 or 14.4%, during 2007, to $5.9 million compared to 2006. This decrease in 2007 was generally the result of certain items recognized during 2006, including $717,000 in gains on the sale of certain assets, primarily our former main banking facility located at 800 Poyntz, Manhattan, Kansas. These gains in 2006 were partially offset by $300,000 in losses on sale of investments and purchasing higher yielding, longer-term investments during the second quarter of 2006. Furthering this decline was a decrease in gains on sale of loans of $185,000, or 16.2%, while deposit related income remained stable, declining by $3,000.

NON-INTEREST EXPENSE. Non-interest expense decreased $706,000, or 4.1%, to $16.6 million for 2007, as compared to 2006. The decrease in non-interest expense for 2007 resulted primarily from a $498,000 decrease in compensation and benefits, a $114,000 decrease in amortization of intangible assets expense, and the achievement of cost savings resulting from the acquisition of First Manhattan Bancorporation.

INCOME TAXES. Income tax expense decreased $776,000, or 37.3%, to $1.3 million for 2007, from $2.1 million for 2006. The decrease in income tax expense for 2007 resulted from a decrease in taxable income during 2007 as compared to 2006 as well as a decline in the effective tax rate for 2007, which decreased to 19.4% from 25.7% for 2006. The effective tax rate for 2007 was lower than 2006 primarily because of our increase in non-taxable income related to tax exempt municipal investments, higher income on bank owned life insurance and the recognition of $50,000 of previously unrecognized tax benefits.

AVERAGE ASSETS/LIABILITIES. The following table sets forth information relating to average balances of interest-earning assets and interest-bearing liabilities for the years ended December 31, 2008, 2007 and 2006. This table reflects the average 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 the "net interest margin" (which reflects the effect of the net earnings balance) for the periods shown.

                           Year ended December 31, 2008          Year ended December 31, 2007          Year ended December 31, 2006
                                                    Average                               Average                               Average
. . .