Landmark Bancorp, Inc. (Nasdaq: LARK), a bank holding company based in Manhattan, reported net earnings of $1.1 million ($0.44 per diluted share) for the quarter ended Sept. 30, compared to net earnings of $113,000 ($0.05 per diluted share) for the third quarter of 2009. For the nine months ended Sept. 30, the company reported net earnings of $1.2 million ($0.48 per diluted share), compared to net earnings of $2.1 million ($0.86 per diluted share) in the first nine months of 2009. Management will host a conference call to discuss these results on Thursday, Oct. 28, at 100 a.m. (CT). Investors may participate in the Company’s earnings call via telephone by dialing (877) 317-6789. A replay of the call will be available through November 28, 2010, by dialing (877) 344-7529 and using conference number 444749.
Additionally, the company announced that its Board of Directors declared a cash dividend of $0.19 per share, to be paid Nov. 22, to common stockholders of record on Nov. 10. The Board of Directors also declared a 5% stock dividend. The 5% stock dividend will be issued Dec. 15, to common stockholders of record on Dec. 1. This is the 10th consecutive year that the Board has declared a 5% stock dividend. 
Patrick L. Alexander, President and Chief Executive Officer, commented: “We are pleased to report net earnings of $1.1 million for the third quarter of 2010, an increase of $990,000 over the same period of 2009. The improvement is primarily the result of a lower provision for loan losses in the third quarter of 2010 compared to 2009, as we have made progress in reducing nonperforming assets. Year-to-date, the decline in net earnings is primarily due to a substantial provision taken in the second quarter of 2010. We continue to take aggressive actions to manage our loan portfolio and strengthen our business in this challenging economic and credit environment. Our ratio of nonperforming loans to total loans has decreased to 1.4% at September 30, 2010, compared to 3.5% at September 30, 2009. While it is difficult to forecast future events in this economy, we believe our strong capital position, loan portfolio management, and underlying fundamental earnings before provision for loan losses all position us to deal with the current challenges and give us reason for optimism for the fourth quarter of 2010 and beyond.”
Third-Quarter Financial Highlights
Net interest income for the quarter ended Sept. 30, decreased $139,000, or 3.0%, to $4.5 million compared to the third quarter of 2009. While our net interest margin, on a tax equivalent basis, increased to 3.76% for the third quarter of 2010 from 3.59% for the same period of 2009, our higher net interest margin was more than offset by lower average interest-earning asset balances. The provision for loan losses decreased to $500,000 during the third quarter of 2010, compared to $1.9 million during the third quarter of 2009. Our provision for loan losses declined in the third quarter of 2010 due to decreased charge-offs and lower levels of nonperforming loans.
Total non-interest income was $2.4 million for the third quarter of 2010, up $278,000, or 13.2%, from the same period in 2009. The increase in non-interest income was primarily attributable to a $139,000 increase in fees and service charges and a $111,000 increase in gains on sale of loans as origination volumes of residential real estate loans that were sold in the secondary market increased in the third quarter of 2010 compared to the same period of 2009. 
During the third quarter of 2010, we recorded a credit-related, other-than-temporary impairment loss of $242,000 on one of our investments in pooled trust preferred investment securities. In addition, we also recorded a $9,000 other-than-temporary impairment loss on a common stock investment during the third quarter of 2010. In the same period of 2009, we recorded $133,000 of credit-related, other-than-temporary impairment losses on our portfolio of pooled trust preferred investment securities.
Non-interest expense decreased $64,000, or 1.3%, to $4.8 million for the third quarter of 2010, compared to the same period of 2009. The decline in non-interest expense was primarily due to a decrease of $77,000 in professional fees.
Year-to-Date Financial Highlights
Net interest income for first nine months of 2010 was $13.6 million, an increase of $50,000, or 0.4%, compared to the first nine months of 2009. Net interest margin, on a tax equivalent basis, increased to 3.79% for the first nine months of 2010 from 3.54% for the same period of 2009. The provision for loan losses increased to $5.2 million during the first nine months of 2010, compared to $3.0 million during the same period of 2009. The provision for loan losses reflected the increased charge-offs that occurred in the second quarter of 2010, primarily related to a significant decline in appraised value of the collateral securing a previously identified and impaired construction loan. While it was necessary to recognize the loss based on appraised value, we continue to pursue payment from the guarantor.
Total non-interest income decreased $220,000, or 3.3%, to $6.4 million for the first nine months of 2010 compared to the same period in 2009, primarily attributable to a $392,000 decrease in gains on sales of loans which was partially offset by a $181,000 increase in fees and service charges. 
The net gains and losses on investment securities experienced a favorable change of $881,000 between the first nine months of 2010 and the same period of 2009. We recorded credit-related, other-than-temporary impairment losses on our investment securities portfolio during the first nine months of both 2010 and 2009, however the amount of the net impairment loss declined from $709,000 during the first nine months of 2009 to $391,000 during the first nine months of 2010. Also during the first nine months of 2010, the company realized a $563,000 gain on the sale of investments based on the sale of a portion of our mortgage-backed investment securities portfolio.
Non-interest expense increased $116,000, or 0.8%, to $14.3 million for the first nine months of 2010, compared to the same period of 2009.  The May 2009 acquisition of a branch in Lawrence, Kansas, contributed to increases in compensation and benefits and occupancy and equipment costs in the first nine months of 2010 compared to the first nine months of 2009.  During the nine months ended September 30, 2010 we recorded a tax benefit of $531,000 compared to a tax expense of $139,000, or an effective tax rate of 6.1%, during the same period of 2009.  The decline in the effective tax rate was driven by lower taxable income, primarily as a result of our increased provision for loan losses, while our tax exempt investment income and bank owned life insurance income remained similar between the periods.
Balance Sheet Highlights
Total assets decreased to $567.3 million at Sept. 30, compared to $584.2 million at Dec. 31, 2009. Stockholders’ equity was $55.1 million (book value of $22.01 per share) at Sept. 30, compared to $53.9 million (book value of $21.65 per share) as of Dec. 31, 2009. Net loans decreased to $322.9 million at Sept. 30,  compared to $342.7 million at Dec. 31, 2009.  At Sept. 30, the allowance for loan losses was $4.6 million, or 1.4% of gross loans outstanding, compared to $5.5 million, or 1.6% of gross loans outstanding at Dec. 31, 2009. Loans past due 30-89 days and still accruing interest totaled $2.7 million, or 0.8% of gross loans, at Sept. 30, compared to $2.5 million, or 0.7% of gross loans, at Dec. 31, 2009. Non-accrual loans, which primarily consist of loans greater than 90 days past due totaled $4.5 million, or 1.4% of gross loans, at Sept. 30, down from $11.8 million, or 3.4% of gross loans, at Dec. 31, 2009. Net loan charge-offs were $6.1 million during the first nine months of 2010, compared to $1.6 million during the first nine months of 2009.