<Page>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------- ----------------------
Commission File Number 0-23164
LANDMARK BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-1142260
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification Number
CENTRAL AND SPRUCE STREETS, DODGE CITY, KANSAS 67801
(Address and Zip Code of principal executive offices)
(620) 227-8111
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, as of August 6, 2001:
$.10 par value common stock 1,092,438 shares
(Class) (Outstanding)
<Page>
LANDMARK BANCSHARES, INC.
INDEX
<Table>
<Caption>
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of
June 30, 2001 and September 30, 2000 (unaudited) 1
Statements of Income for the Three and Nine Months Ended
June 30, 2001 and 2000 (unaudited) 2 - 3
Statements of Comprehensive Income for the Three and
Nine Months Ended June 30, 2001 and 2000 (unaudited) 4
Statements of Cash Flows for the Nine Months Ended
June 30, 2001 and 2000 (unaudited) 5 - 6
Notes to Financial Statements 7 - 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14 - 20*
Item 3. Quantitative and Qualitative Disclosures about Market Risk 21 - 23
PART II OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 24
Item 3. Default Upon Senior Securities 24
Item 4. Submission of Matter to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Report on Form 8-K 24
SIGNATURES 25
* The provision for loan loss discussion for the three and nine months ended
June 30, 2001, has been revised from its original filing on August 14, 2001.
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1
LANDMARK BANCSHARES, INC.
Consolidated Statements of Financial Condition (unaudited)
<Table>
<Caption>
June 30, 2001 September 30, 2000
------------- ------------------
ASSETS
Cash and due from banks:
Non-interest bearing $ 1,054,410 $ 1,335,431
Interest bearing 7,382,825 3,754,540
-------------- ------------------
Total cash and due from banks 8,437,235 5,089,971
Time deposits in other financial institutions 234,957 281,771
Investment securities held-to-maturity 0 28,666,885
Investment securities available-for-sale 25,931,028 9,587,607
Mortgage-backed securities held-to-maturity 0 10,112,018
Mortgage-backed securities available-for-sale 17,867,936 0
Loans receivable, net 148,074,477 182,659,647
Loans held-for-sale 3,251,014 8,854,493
Accrued income receivable 1,414,111 1,641,904
Foreclosed assets, net 665,622 170,724
Office properties and equipment, net 1,479,941 1,635,170
Prepaid expenses and other assets 2,417,180 1,666,882
Income taxes receivable, current 0 99,217
Deferred income taxes 0 209,686
-------------- ------------------
TOTAL ASSETS $ 209,773,501 $ 250,675,975
============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 153,021,402 $ 165,325,440
Advances and other borrowings from
Federal Home Loan Bank 26,000,000 57,000,000
Advances from borrowers for taxes and insurance 1,285,450 2,337,045
Accrued expenses and other liabilities 3,774,956 2,351,486
Income taxes:
Current 45,792 0
Deferred 235,708
-------------- ------------------
TOTAL LIABILITIES 184,363,308 227,013,971
-------------- ------------------
Stockholders' Equity:
Preferred Stock, no par value; 5,000,000 shares
authorized; none issued
Common Stock, $0.10 par value; 10,000,000 shares
authorized; 2,281,312 shares issued 228,131 228,131
Additional paid-in capital 22,393,181 22,475,208
Retained income, substantially restricted 25,398,269 24,022,616
Accumulated other comprehensive income (loss) 614,623 (110,594)
Unamortized stock acquired by Employee Stock
Ownership Plan (418,963) (418,963)
Treasury Stock, at cost, 1,188,874 shares at June 30, 2001 and 1,173,938
shares at September 30, 2000 (22,805,048) (22,534,394)
-------------- ------------------
Total Stockholders' Equity 25,410,193 23,662,004
-------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 209,773,501 $ 250,675,975
============== ==================
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2
LANDMARK BANCSHARES, INC.
Consolidated Statements of Income
<Table>
<Caption>
Three Months Ended June 30 Nine Months Ended June 30
2001 2000 2001 2000
(unaudited) (unaudited)
INTEREST INCOME
Interest on loans $ 3,228,067 $ 3,719,836 $ 10,613,492 $ 10,896,544
Interest and dividends on investment securities 459,273 650,542 1,497,215 2,012,797
Interest on mortgage-backed securities 404,837 188,764 734,649 586,206
------------ ------------ ------------ ------------
Total interest income 4,092,177 4,559,142 12,845,356 13,495,547
------------ ------------ ------------ ------------
INTEREST EXPENSE
Deposits 1,932,182 1,788,288 6,049,640 5,440,149
Borrowed funds 422,404 1,068,290 1,826,158 2,729,216
------------ ------------ ------------ ------------
Total interest expense 2,354,586 2,856,578 7,875,798 8,169,365
------------ ------------ ------------ ------------
Net interest income 1,737,591 1,702,564 4,969,558 5,326,182
PROVISION FOR LOSSES ON LOANS 15,000 135,000 105,000 365,000
------------ ------------ ------------ ------------
Net interest income after provision for losses 1,722,591 1,567,564 4,864,558 4,961,182
------------ ------------ ------------ ------------
NON-INTEREST INCOME
Service charges and late fees 107,526 118,299 340,406 336,591
Net gain on sale of trading investments 0 0 43,618 0
Net gain on sale of available-for-sale investments 283,290 12,352 453,701 55,635
Net gain on sale of loans 197,120 41,478 575,891 133,691
Service fees on loans sold (7,274) 11,406 8,538 52,454
Other income 26,226 67,816 77,676 123,780
------------ ------------ ------------ ------------
Total non-interest income 606,888 251,351 1,499,830 702,151
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE
Compensation and related expenses 613,891 565,114 1,878,837 1,704,996
Occupancy expense 62,472 68,341 195,157 193,140
Advertising 14,005 20,774 52,946 75,308
Federal insurance premium 26,472 12,407 75,766 83,387
Loss (gain) from real estate operations 2,657 24,444 10,572 29,957
Data processing 34,669 32,657 110,775 132,914
Other expense 255,970 243,113 755,101 774,265
------------ ------------ ------------ ------------
Total non-interest expense 1,010,136 966,850 3,079,154 2,993,967
------------ ------------ ------------ ------------
Income before income taxes and cumulative
effect on prior years of accounting change 1,319,343 852,065 3,285,234 2,669,366
INCOME TAXES EXPENSES 488,250 340,600 1,220,794 1,066,900
------------ ------------ ------------ ------------
Net income before cumulative effect
on prior years of accounting change 831,093 511,465 2,064,440 1,602,466
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR DERIVATIVE FINANCIAL INSTRUMENTS,
NET OF INCOME TAX BENEFIT OF $125,144 0 0 (214,553) 0
------------ ------------ ------------ ------------
Net income $ 831,093 $ 511,465 $ 1,849,887 $ 1,602,466
============ ============ ============ ============
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3
LANDMARK BANCSHARES, INC.
Consolidated Statements of Income
Continued
<Table>
<Caption>
Three Months Ended June 30 Nine Months Ended June 30
2001 2000 2001 2000
(unaudited) (unaudited)
-------------------------- -------------------------
Basic earnings per share
- ------------------------
Earnings before cumulative effect of change in
accounting for derivative financial instruments $0.79 $0.46 $1.95 $1.48
Cumulative effect of change in accounting for
derivative financial instruments $0.00 $0.00 ($0.20) $0.00
------------- ------------ ---------- --------
Net income $0.79 $0.46 $1.75 $1.48
============= ============ ========== ========
Diluted earnings per share
- --------------------------
Earnings before cumulative effect of change in
accounting for derivative financial instruments $0.73 $0.44 $1.81 $1.37
Cumulative effect of change in accounting for
derivative financial instruments $0.00 $0.00 ($0.18) $0.00
------------- ------------ ---------- --------
Net income $0.73 $0.44 $1.63 $1.37
============= ============ ========== ========
Dividends per share $0.15 $0.15 $0.45 $0.45
- -------------------
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4
LANDMARK BANCSHARES, INC.
Consolidated Statements of Comprehensive Income
<Table>
<Caption>
Three Months Ended Nine Months Ended
June 30 June 30
2001 2000 2001 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ---------- ----------- -----------
Net income $ 831,093 $ 511,465 $ 1,849,887 $ 1,602,466
----------- ---------- ----------- -----------
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Cumulative effect of change in accounting
for financial instruments 0 0 (719,863) 0
Unrealized holding gains (losses) arising
during the period 168,240 83,523 1,758,391 (239,485)
Less: reclassification adjustment for gains
included in net income (178,473) (7,411) (313,311) (33,381)
----------- ---------- ----------- -----------
Total other comprehensive income (10,233) 76,112 725,217 (272,866)
----------- ---------- ----------- -----------
Comprehensive income $ 820,860 $ 587,577 $ 2,575,104 $ 1,329,600
=========== ========== =========== ===========
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5
LANDMARK BANCSHARES, INC.
Consolidated Statements of Cash Flows
<Table>
<Caption>
Nine Months Ended June 30
2001 2000
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,849,887 $ 1,602,464
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Cumulative effect of change in accounting for financial instruments 214,553 0
Amortization of mortgage servicing rights (229,450) 0
Depreciation 158,443 173,676
Realized gain on sale of investment securities available-for-sale (453,701) (55,635)
Decrease (increase) in accrued interest receivable 219,436 402
Increase (decrease) in income taxes 590,405 (10,653)
Increase (decrease) in accounts payable and accrued expenses 1,448,680 (656,969)
Amortization of premiums and discounts on investments and loans, net (48,087) (14,816)
Provision for losses on loans and investments 105,000 365,000
Net change in trading securities 9,642,188 0
Other non-cash items, net (429,962) (2,808)
Sale of loans held-for-sale 28,225,069 6,820,415
Gain on sale of loans held-for-sale (575,891) (133,691)
Origination of loans held-for-sale (22,029,418) (5,533,026)
Purchase of loans held-for-sale (36,000) (771,400)
------------ ------------
Net cash provided by operating activities $ 18,651,152 $ 1,782,959
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations and principal collections, net $ 17,699,407 $ 1,220,212
Loans purchased for investment (1,809,650) (13,224,384)
Principal repayments on mortgage-backed securities 0 2,507,729
Principal repayments on available-for-sale mortgage-backed securities 3,652,490 0
Acquisition of investment securities available-for-sale (6,610,000) (675,000)
Proceeds from sale of investment securities available-for-sale 16,527,335 3,177,693
Proceeds from maturities or calls of investment securities held to maturity 0 200,000
Net (increase) decrease in time deposits 56,834 0
Proceeds from sale of foreclosed assets 280,850 263,936
Acquisition of fixed assets (3,214) (92,382)
------------ ------------
Net cash provided (used) by investing activities $ 29,794,052 $ (6,622,196)
------------ ------------
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6
LANDMARK BANCSHARES, INC.
Consolidated Statements of Cash Flows
(Continued)
<Table>
<Caption>
Nine Months Ended June 30
2001 2000
(unaudited) (unaudited)
----------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ (12,304,038) $ (10,084,976)
Net increase (decrease) in escrow accounts (1,049,012) (447,313)
Proceeds from FHLB advances and other borrowings 203,000,000 130,500,000
Repayment of FHLB advances and other borrowings (234,000,000) (115,500,000)
Purchase of treasury stock (270,654) 514,503
Dividends paid (474,236) (486,912)
------------- -------------
Net cash provided (used) by financing activities (45,097,940) 4,495,302
------------- -------------
Net increase (decrease) in cash and cash equivalents 3,347,264 (343,935)
Cash and cash equivalents at beginning of period 5,089,971 5,975,730
------------- -------------
Cash and cash equivalents at end of period $ 8,437,235 $ 5,631,795
============= =============
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest on deposits, advances, and other borrowings $ 8,262,790 $ 8,559,182
Income taxes 1,132,640 930,390
Transfers from loans to real estate acquired through foreclosure 870,799 520,782
Exchanged loans receivable for mortgage-backed securities 17,945,036 0
Cumulative effect of change in accounting for financial investments:
Transfer of held-to-maturity securities to trading investments 9,642,188 0
Transfer of held-to-maturity securities to available-for-sale 27,657,273 0
<Page>
7
LANDMARK BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements were prepared in accordance
with the requirements for interim financial statements contained in SEC
regulation S-X and, accordingly, do not include all information and disclosures
necessary to present financial condition, results of operations and cash flows
of Landmark Bancshares, Inc. (the "Company") and its wholly-owned subsidiary
Landmark Federal Savings Bank (the "Bank") in conformity with generally
accepted accounting principles. However, all normal recurring adjustments have
been made which, in the opinion of management, are necessary for the fair
presentation of the financial statements.
The results of operation for the three and nine months ended June 30, 2001 are
not necessarily indicative of the results which may be expected for the fiscal
year ending September 30, 2001, or an other future interim period.
2. LIQUIDATION ACCOUNT
On March 28, 1994, the Bank segregated and restricted $15,144,357 of retained
earnings in a liquidation account for the benefit of eligible savings account
holders who continue to maintain their accounts at the bank after the conversion
of the bank from mutual to stock form. In the event of a complete liquidation of
the Bank, and only in such event, each eligible account holder will be entitled
to receive a distribution from the liquidation account in an amount
proportionate to the current adjusted balances of all qualifying deposits then
held. The liquidation account will be reduced annually at September 30th to the
extent that eligible account holders have reduced their qualifying deposits.
3. INVESTMENTS AND MORTGAGE - BACKED SECURITIES
A summary of the Bank's carrying values of investments and mortgage - backed
securities as of June 30, 2001 and September 30, 2000, is as follows:
<Table>
<Caption>
June 30, 2001 September 30,2000
------------- -----------------
Investment Securities:
Held to maturity:
Government Agency Securities $ 0 $27,481,885
Municipal Obligations 0 1,185,000
Other 0 0
----------- -----------
$ 0 $28,666,885
=========== ===========
Available for sale:
Common Stock 9,515,693 3,643,607
Stock in Federal Home Loan Bank 3,785,000 3,800,000
Government Agency Securities 11,457,490 0
Municipal Obligations 1,013,720 0
Other 159,125 2,144,000
----------- -----------
$25,931,028 $ 9,587,607
=========== ===========
Mortgage - Backed Securities:
Held to Maturity:
FNMA - Arms 0 4,985,758
FHLMC - Arms 0 1,461,099
FHLMC - Fixed Rate 0 49,505
CMO Government Agency 0 2,363,257
CMO Private Issue 0 903,288
FNMA - Fixed Rate 0 305,495
GNMA - Fixed Rate 0 43,616
----------- -----------
$ 0 $10,112,018
=========== ===========
</Table>
<Page>
8
INVESTMENTS AND MORTGAGE - BACKED SECURITIES -- CONTINUED
<Table>
<Caption>
June 30, 2001 September 30, 2000
Available for sale:
FNMA - Arms 3,734,268 0
FHLMC - Arms 1,232,502 0
FHLMC - Fixed Rate 10,577,030 0
CMO Government Agency 1,412,388 0
CMO Private Issue 635,581 0
FNMA - Fixed Rate 258,742 0
GNMA - Fixed Rate 17,425 0
----------- -------------
$17,867,936 $ 0
=========== =============
</Table>
<Page>
9
4. LOAN RECEIVABLE, NET
A summary of the Bank's loans receivable at June 30, 2001 and September 30,
2000, is as follows:
<Table>
<Caption>
Accruing Interest Interest Should
June 30 Past 90 Collected Have Been Collected
2001 Non-Accrual* Days Non-Accrual*** Non-Accrual****
-------------- ------------- ------------- --------------- --------------------
Real Estate loans:
Residential $112,768,982 $ 49,194 $ 902 $ 995
Construction 2,297,266
Commercial 10,248,412
Second mortgage 9,611,949
Commercial loans 7,399,604
Consumer 7,213,063 4,076 76
-------------- ------------- ------------- --------------- --------------------
Gross loans 149,539,276 4,076 49,194 902 1,071
Less: Net deferred loan fees,
premiums and discounts (56,200)
Allowance for Loan Losses (1,408,599)
-------------- ------------- ------------- --------------- --------------------
Total loans, net $148,074,477 $ 4,076 $ 49,194 $ 902 $ 1,071
============== ============= ============= =============== ====================
</Table>
<Table>
<Caption>
Accruing
September 30 Past 90
2000 Non-Accrual* Days**
-------------- ------------- ---------------
Real estate loans:
Residential $147,514,858 $ 661,810 $ 313,729
Construction 857,486
Commercial 9,331,198
Second mortgage 10,403,434
Commercial loans 7,033,573
Consumer 9,050,233 75,645
-------------- ------------- ---------------
Gross loans 184,190,782 737,455 313,729
Less: Net deferred loan fees,
premiums and discounts (154,428)
Allowance for Loan Losses (1,376,707)
-------------- ------------- ---------------
Total loans, net $182,659,647 $ 737,455 $ 313,729
============== ============= ===============
</Table>
The Company has no foreign loans, or loans defined as, "troubled debt
restructurings" in Financial Accounting Standards No.15.
* Loans accounted for on a non-accrual basis
** Accruing loans which are contractually past due 90 days or more as to
principal or interest payments.
*** The amount of interest income on non-accrual loans that was included in
income for the period.
**** The gross interest income that would have been recorded in the period if
the loans had been current in accordance with the original terms and had
been outstanding throughout the period or since origination, if held for
part of the period.
A summary of the Bank's allowance for loan losses for the three and nine months
ended June 30, 2001 and 2000, is as follows:
<Table>
<Caption>
Three Months Ended Nine Months Ended
June 30 June 30
2001 2000 2001 2000
---------------- ---------------- ---------------- -----------------
Balance Beginning $ 1,410,591 $ 1,424,205 $ 1,376,707 $ 1,317,676
Provisions Charged to Operations 15,000 135,000 105,000 365,000
Loans Charged Off Net of Recoveries (16,992) (13,443) (73,108) (136,914)
---------------- ---------------- ---------------- -----------------
Balance Ending $ 1,408,599 $ 1,545,762 $ 1,408,599 $ 1,545,762
================ ================ ================ =================
<Page>
10
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Bank's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, the current level of non-performing assets and current economic
conditions. This evaluation is inherently subjective as it requires estimates
that are susceptible ot significant revision as more information becomes
available.
The Bank has enjoyed a significant reduction in charged off loans, net of
recoveries, from FYE September 30, 1999 to June 30, 2001.
<Table>
<Caption>
Nine Months FYE FYE
June 30 September 30 September 30
2001 2000 1999
------------ ------------- -------------
Loans charged off Net of Recoveries $73,108 $207,939 $604,077
============ ============= =============
</Table>
The decrease is due to improvements in the asset quality of the consumer loan
portfolio. Management, through its Asset Liability Committee, quarterly performs
an analytical review of the loan provision to insure the allowance for loan loss
is in compliance with policy. Based upon this analytical review and the
improvement of the asset quality of the consumer loan portfolio, management has
concluded the additions to the Allowance for Loan Losses account are adequate
for the current fiscal year.
5. FORECLOSED ASSETS - NET
Real Estate owned or in judgment and other repossessed property:
<Table>
<Caption>
June 30, 2001 September 30, 2000
-------------- ------------------
Real Estate Acquired by Foreclosure $ 0 $ 130,000
Real Estate Loans in Judgement and
Subject to Redemption 623,095 40,724
Other Repossessed Assets 42,527 0
------------- -------------
Total Foreclosed Assets - Net $ 665,622 $ 170,724
============= =============
</Table>
6. FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financial needs of its customers and to
reduce its own exposure to fluctuations in interest rates. The financial
instruments include commitments to extend credit and commitments to sell loans.
The instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement of financial
condition. The contract, or notional amounts of those instruments, reflects the
extent of involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of non-performance by the other
party to the financial instrument for loan commitments is represented by the
contractual or notional amount of those instruments. The Bank uses the same
credit policies in making commitments as it does for on-balance-sheet
instruments.
On June 30, 2001, the Bank had outstanding commitments to fund real estate loans
of $2,292,051. Of the commitments outstanding, $2,017,801 were for fixed rate
loans at rates of 6.850% to 9.500%. Commitments for adjustable rate loans amount
to $274,250 with initial rates of 7.375% to 9.000%. Outstanding loan commitments
to sell as of June 30, 2001 were $1,827,950. The Bank had outstanding commercial
loan commitments of $2,385,000 with initial rates of 8.000% to 8.500%, at June
30, 2001.
<Page>
11
7. EARNINGS PER SHARE
Basic earnings per share (EPS) is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock (potential
common stock) were exercised or converted to common stock. For periods presented
potential common stock includes outstanding stock options and nonvested stock
awarded under the management stock bonus plan.
Earnings per share for the three and nine months ended June 30, 2001 and 2000,
were determined as follows:
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<Table>
<Caption>
Basic Earnings Per Share
---------------------------------------------------------
Three months ended Nine months ended
June 30 June 30
2001 2000 2001 2000
------------ ------------- ------------ -----------
Weighted average common shares outstanding
net of treasury shares 1,092,438 1,152,393 1,095,820 1,137,739
Average unallocated ESOP shares (35,015) (48,703) (38,437) (52,125)
------------ ------------- ------------ -----------
Weighted Average Shares for Basic EPS 1,057,423 1,103,690 1,057,383 1,085,614
============ ============= ============ ===========
Net Income before cumulative effect
of accounting change $ 831,093 $ 511,465 $ 2,064,440 $ 1,602,466
============ ============= ============ ===========
Net Income $ 831,093 $ 511,465 $ 1,849,887 $ 1,602,466
============ ============= ============ ===========
Earnings per share amount before cumulative effect
of change in accounting for financial instruments $ 0.79 $ 0.46 $ 1.95 $ 1.48
============ ============= ============ ===========
Earnings Per Share $ 0.79 $ 0.46 $ 1.75 $ 1.48
============ ============= ============ ===========
</Table>
<Table>
<Caption>
Diluted Earnings Per Share
---------------------------------------------------------
Three months ended Nine months ended
June 30 June 30
2001 2000 2001 2000
------------ ------------- ------------ -----------
Weighted average shares for Basic EPS 1,057,423 1,103,690 1,057,383 1,085,614
Dilutive stock options 81,537 65,323 81,633 80,942
------------ ------------- ------------ -----------
Weighted Average Shares for Diluted EPS 1,138,960 1,169,013 1,139,016 1,166,556
============ ============= ============ ===========
Net Income before cumulative effect
of accounting change $ 831,093 $ 511,465 $ 2,064,440 $ 1,602,466
============ ============= ============ ===========
Net Income $ 831,093 $ 511,465 $ 1,849,887 $ 1,602,466
============ ============= ============ ===========
Earnings per share amount before cumulative effect
of change in accounting for financial instruments $ 0.73 $ 0.44 $ 1.81 $ 1.37
============ ============= ============ ===========
Earnings Per Share $ 0.73 $ 0.44 $ 1.63 $ 1.37
============ ============= ============ ===========
</Table>
8. DIVIDENDS
At the Company's April 18, 2001 board meeting, the Directors of the Company
declared a $0.15 per share dividend. The dividend was paid May 15, 2001 to all
stockholders of record as of May 1, 2001.
<Page>
12
9. CHANGE IN ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITY
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement requires the recognition of all
derivative financial instruments as either assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. The accounting for gains and losses associated with changes in the fair
value of a derivative and the effect on the consolidated financial statements
will depend on its hedge designation and whether the hedge is highly effective
in achieving offsetting changes in the fair value or cash flows of the asset or
liability hedged. Management of the Company adopted the provisions of this
statement beginning October 1, 2000.
As permitted by SFAS No. 133, on October 1, 2000, the Company transferred all of
its securities from the held-to-maturity portfolio to the available-for-sale and
trading portfolios as follows:
<Table>
<Caption>
Securities Transferred
-------------------------------------------------------------------------
Available
Trading For Sale Total Total
Security (at fair value) (at fair value) (at fair value) (at book value)
---------------- ---------------- --------------- ----------------
Investment securities $ 9,642,188 $ 17,621,420 $ 27,263,608 $ 28,666,885
Mortgage-backed-securities 10,035,853 10,035,853 10,112,018
---------------- ---------------- --------------- ----------------
Total $ 9,642,188 $ 27,657,273 $ 37,299,461 $ 38,778,903
================ ================ =============== ================
</Table>
As of October 1, 2000, the effect of the transfer of these securities was
reported as a cumulative adjustment from a change in accounting principle, net
of tax benefits, impacting earnings and other comprehensive income as follows:
<Table>
<Caption>
Adjustment to
Adjustment Other
to Comprehensive Total
Earnings Income Adjustments
------------------ ----------------- ------------------
Investment securities $ (339,697) $ (1,063,580) $ (1,403,277)
Mortgage-backed securities (76,165) (76,165)
------------------ ----------------- ------------------
Pre-tax loss (339,697) (1,139,745) (1,479,442)
Income tax benefit 125,144 419,882 545,026
------------------ ----------------- ------------------
Net loss $ (214,553) $ (719,863) $ (934,416)
================== ================= ==================
The impact to earnings resulted in a loss of $214,553 that was recorded against
current operations as of October 1, 2000, as a cumulative adjustment from a
change in accounting principle, net of tax benefits. Future changes in fair
value for any remaining securities in the trading portfolio will be reflected
through current operations. Changes in fair value for any securities in the
available-for-sale portfolio will be adjusted through other comprehensive
income.
10. NEW ACCOUNTING STANDARDS
In July of 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations", and Statement No. 142, "Goodwill and Other
Intangible Assets".
Statement No. 141 requires all business combinations to be accounted for using
the purchase method of accounting as use of the pooling-of-interests method is
prohibited. In addition, this Statement requires that
<Page>
13
negative goodwill that exists after the basis of certain acquired assets is
reduced to zero should be recognized as an extraordinary gain. The provisions
of this Statement apply to all business combinations initiated after June 30,
2001 and to all business combinations accounted for using the purchase method
of accounting for which the acquisition date is July 1, 2001, or later.
Statement No. 142 prescribes that goodwill associated with a business
combination and intangible assets with an indefinite useful life should not
be amortized but should be tested for impairment at least annually. The
Statement requires intangibles that are separable from goodwill and that have
a determinable useful life to be amortized over the determinable useful life.
The provisions of this Statement are required to be applied starting with
fiscal years beginning after December 15,2001. Upon adoption of this
statement, goodwill and other intangible assets arising from acquisitions
completed before adoption of the statement should be accounted for in
accordance with the provisions of this statement. This transition provision
could require a reclassification of a previously separately recognized
intangible to goodwill and vice versa if the intangibles in question do not
meet the new criteria for classification as a separately recognizable
intangible.
The Company has not determined the effect of these new accounting standards
in connection with the proposed merger as described in Note 11.
11. PROPOSED MERGER
We announced on April 19, 2001, an agreement to enter into a merger of equals
with MNB Bancshares, Inc. The proposed merger will be accounted for under the
Purchase Method of accounting. MNB Bancshares, Inc is the holding company for
Security National Bank based in Manhattan, Kansas. It had total assets of
$155 million at June 30, 2001 with branches in Manhattan, Topeka, Osage City,
Auburn and Wamego, Kansas. Pursuant to the agreement to merge, Landmark and
MNB will merge into a newly formed corporation, Landmark Merger Company,
which at the closing of the merger will change its name to Landmark
Bancshares, Inc. As a result of the merger, each issued and outstanding share
of Landmark common stock will be converted into the right to receive one
share of the new company common stock and each issued and outstanding share
of MNB common stock will be converted into the right to receive 0.523 of a
share of the new company common stock. At the closing of the merger, Landmark
Federal Savings Bank will merge with and into Security National Bank, which
will change its name to Landmark National Bank. After the merger, it is
expected that the combined company's common stock will be traded on the
Nasdaq National Market System under the symbol "LARK". We expect the closing
date of this merger transaction to occur late in the third quarter or the
fourth quarter of this year, subject to stockholder and regulatory approvals.
12. CORRECTED PRESS RELEASE
On July 24, 2001, the Company issued a press release for the quarter ended
June 30, 2001. On August 13, 2001, the Company issued a corrected press
release for the same quarter. The amounts as previously reported on July 24,
2001 and revised on August 13, 2001 are set forth below.
<Table>
<Caption>
As
Previously
Reported Increase Revised
July 24, 2001 (Decrease) August 13, 2001
------------- ---------- ---------------
Assets $ 209,873,501 $ (100,000) $ 209,773,501
Stockholders' Equity $ 25,473,193 $ (63,000) $ 25,410,193
Interest Income (3 months ended June 30, 2001) $ 4,192,177 $ (100,000) $ 4,092,177
Interest Income (9 months ended June 30, 2001) $ 12,945,356 $ (100,000) $ 12,845,356
Net Income (3 months ended June 30, 2001) $ 894,094 $ (63,001) $ 831,093
Net Income (9 months ended June 30, 2001) $ 1,912,889 $ (63,002) $ 1,849,887
Basic Earnings per Share (3 months ended June 30, 2001) $ 0.85 $ (0.06) $ 0.79
Diluted Earnings per Share (3 months ended June 30, 2001) $ 0.78 $ (0.05) $ 0.73
Basic Earnings per Share (9 months ended June 30, 2001) $ 1.81 $ (0.06) $ 1.75
Diluted Earnings per Share (9 months ended June 30, 2001) $ 1.68 $ (0.05) $ 1.63
</Table>
<Page>
14
LANDMARK BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995. This quarterly report contains certain forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended
and Section 21E of the Securities Exchange Act of 1934, as amended. We intend
such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities Reform Act
of 1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions. Our ability to
predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse affect on
the operations and future prospects of the Company and the subsidiary
include, but are not limited to, changes in: interest rates, general economic
conditions, legislative/regulatory changes, monetary and fiscal policies of
the U.S. Government, including policies of the U.S. Treasury and the Federal
Reserve Board, the quality or composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in our market area, our implementation of new
technologies, our ability to develop and maintain secure and reliable
electronic systems and accounting principles.
General:
Landmark Bancshares, Inc. ("Company") is the holding company for Landmark
Federal Savings Bank ("Bank"). Apart from the operations of the Bank, the
Company did not engage in any significant operations during the quarter ended
June 30, 2001. The Bank is engaged in the business of accepting deposit
accounts from the general public. These funds are used to originate mortgage
loans for the purchase and refinancing of single-family homes located in
Central and Southwestern Kansas, and the purchase of mortgage-backed and
investment securities. In addition, the Bank offers and purchases loans
through correspondent lending relationships. The Bank also has a Loan
Origination Office located in Overland Park, Kansas. To a lesser extent, the
Bank will purchase adjustable rate mortgage loans to manage its interest rate
risk as deemed necessary. The Bank also makes automobile loans, second
mortgage loans, home equity loans, savings deposit loans, and small business
loans.
We announced on April 19, 2001, an agreement to enter into a merger of equals
with MNB Bancshares, Inc. The proposed merger will be accounted for under the
Purchase Method of accounting. MNB Bancshares, Inc is the holding company for
Security National Bank based in Manhattan, Kansas. It had total assets of
$155 million at June 30, 2001 with branches in Manhattan, Topeka, Osage City,
Auburn and Wamego, Kansas. Pursuant to the agreement to merge, Landmark and
MNB will merge into a newly formed corporation, Landmark Merger Company,
which at the closing of the merger will change its name to Landmark
Bancshares, Inc. As a result of the merger, each issued and outstanding share
of Landmark common stock will be converted into the right to receive one
share of the new company common stock and each issued and outstanding share
of MNB common stock will be converted into the right to receive 0.523 of a
share of the new company common stock. At the closing of the merger, Landmark
Federal Savings Bank will merge with and into Security National Bank, which
will change its name to Landmark National Bank. After the merger, it is
expected that the combined company's common stock will be traded on the
Nasdaq National Market System under the symbol "LARK". We expect the closing
date of this merger transaction to occur late in the third quarter or the
fourth quarter of this year, subject to stockholder and regulatory approvals.
<Page>
15
On April 21, 2001 the Bank's Hoisington Branch Office was damaged by a
tornado. The estimated costs to repair the building are $40,000 to $50,000.
The building is valued at $80,000. Costs to repair the building are covered
by insurance less a $250 deductible. The Bank is also insured for loss of
income and related costs incurred by the Bank during the time period the Bank
is being repaired. The Bank has another branch located approximately 10 miles
from the Hoisington Branch. This branch has assumed responsibility for the
day-to-day operations of the Hoisington Branch. Management does not believe
this event will have a material effect upon the earnings of the Bank, or the
Company, aside from accelerated loan repayments resulting from insurance
claims related to the tornado. The branched opened for business July 30, 2001.
Changes in financial condition between June 30, 2001 and September 30, 2000:
On October 1, 2000, the Company adopted the provisions of Statement of
Financial Accounting Standards 133 (SFAS 133). As permitted by SFAS 133, the
Company transferred all of its securities from the held-to-maturity portfolio
to the available-for-sale and trading portfolios as follows:
<Table>
<Caption>
Securities Transferred
------------------------------------------------------------------------
Available
Trading For Sale Total Total
Security (at fair value) (at fair value) (at fair value) (at book value)
- -------- --------------- --------------- --------------- ---------------
Investment securities $ 9,642,188 $ 17,621,420 $ 27,263,608 $ 28,666,885
Mortgage-backed-securities 10,035,853 10,035,853 10,112,018
--------------- --------------- --------------- ---------------
Total $ 9,642,188 $ 27,657,273 $ 37,299,461 $ 38,778,903
=============== =============== =============== ===============
</Table>
As of October 1, 2000, the effect of the transfer of these securities was
reported as a cumulative adjustment from a change in accounting principle, net
of tax benefits, impacting earnings and other comprehensive income as follows:
<Table>
<Caption>
Adjustment to
Adjustment Other
to Comprehensive Total
Earnings Income Adjustments
--------------- --------------- ---------------
Investment securities $ (339,697) $ (1,063,580) $ (1,403,277)
Mortgage-backed securities (76,165) (76,165)
--------------- --------------- ---------------
Pre-tax loss (339,697) (1,139,745) (1,479,442)
Income tax benefit 125,144 419,882 545,026
--------------- --------------- ---------------
Net loss $ (214,553) $ (719,863) $ (934,416)
=============== =============== ===============
</Table>
The impact to earnings resulted in a loss of $214,553 that was recorded
against current operations as of October 1, 2000, as a cumulative adjustment
from a change in accounting principle, net of tax benefits.
All securities, $9,642,188, transferred to the trading portfolio were sold
between October 1 and December 31, 2000. The pretax profit was $43,618. The
proceeds were used to repay borrowings from Federal Home Loan Bank and fund
current operations.
During the quarter ended December 31, 2000 the Company sold approximately
$16,148,425 of longer term fixed rate loans at a pretax profit of $318,730.
The proceeds were used to repay borrowings from Federal Home Loan Bank and
fund current operations.
The sales of the investments and fixed rate loans noted above, were elements
of the Company's Interest Rate Risk Reduction Plan. The Interest Rate Risk
Reduction Plan is designed to lessen the affects of changing interest rates
on the Company's assets and liabilities.
<Page>
16
Management's Interest Rate Risk Reduction Plan has resulted in a significant
improvement to the Company's interest rate risk. This is illustrated by the
increase in post-shock net present value (NPV) and the decrease in the
difference between pre-shock and post-shock NPV (sensitivity). The table
below points out these values for the quarter ended September 30, 2000, just
prior to the implementation of the Interest Rate Risk Reduction Plan, and the
two quarters following the implementation of the plan. The results for June
30, 2001 are not available.
<Table>
<Caption>
September 30 December 31 March 31
2000 2000 2001
------------ ----------- -----------
* 8.62% 10.33% 10.62%
** 4.25% 6.95% 7.83%
*** 437bp 338bp 279bp
</Table>
* Pre-shock NPV ratio: NPV as a percent of present value of assets, no rate
shift
** Post-shock NPV ratio, 200bp rate shift up and down
*** Sensitivity measure: Decline in NPV ratio
Total assets decreased $13 million, or approximately 6% between March 31, 2001
and June 30, 2001. Components of this change are:
<Table>
<Caption>
(In Millions)
June 30 March 31 Change
---------------- ---------------- ----------------
Investment securities
Held-to-maturity $ 0 $ 0 $ 0
Available-for-sale 26 27 (1)
---------------- ---------------- ----------------
26 27 (1)
---------------- ---------------- ----------------
Mortgaged-backed securities
Held-to-maturity 0 0 0
Available-for-sale 18 24 (6)
---------------- ---------------- ----------------
18 24 (6)
---------------- ---------------- ----------------
Loans receivable, net 148 158 (10)
Loans held-for-sale 3 2 1
---------------- ---------------- ----------------
151 160 (9)
---------------- ---------------- ----------------
Total cash and due from banks 8 7 1
---------------- ---------------- ----------------
Other 3 1 2
---------------- ---------------- ----------------
$ (13)
================
</Table>
Improved market conditions permitted the Company to dispose of some
available-for sale assets during the quarter.
During the quarter $7 million in Mortgage loans were sold. Lower interest rates
have increased refinancing of home loans. This refinancing and principal
repayments account for the remaining decline in loans of $3 million. Loans had a
total decline of $9,856,082. The proceeds were used to repay borrowings from
Federal Home Loan Bank and fund current operations.
Mortgaged-backed securities decreased $6,200,370. Approximately $4,000,000 of
these securities were sold during the quarter. The proceeds were used to repay
borrowings from Federal Home Loan Bank and
<Page>
17
fund current operations. The additional decreases reflect principal payments in
the normal course of business.
Liabilities decreased from March 31, 2001 to June 30, 2001 by $14 million.
Components of this change are:
<Table>
<Caption>
(In Millions)
June 30 March 31 Change
----------- ------------- ---------
Deposits $ 153 $ 152 $ 1
Advances - FHLB 26 42 (16)
Other 5 4 1
---------
Decrease $ (14)
=========
</Table>
Advances from FHLB (Federal Home Loan Bank) decreased from March 31, 2001 to
June 30, 2001, from repayments funded primarily by sales of mortgage-backed
securities and loans.
Results of operations for the three and nine months ended June 30, 2001 and
2000:
Three months ended June 30, 2001 and 2000:
Total interest income decreased $466,965, or 10%. Interest and dividends on
investment securities decreased $191,269, or 29%, due to the sales of investment
securities in this and prior quarters of this fiscal year. Interest income on
mortgage-backed securities increased $216,073, or 114%. The increase is due to
the exchange of loans receivable for mortgage-backed securities in the prior
quarter discussed under changes in financial condition in the prior quarter 10Q.
Total interest expense decreased $501,992, or 18%. Interest expense on deposits
increased $143,894, or 8%. The increase is due primarily to higher interest
rates paid to depositors. The higher interest rates paid were required to
attract and retain deposits in the local market. Although interest rates have
decreased the first quarters of calendar 2001, the effect of the decrease is not
available to reduce expense until maturing deposits are reinvested with the Bank
at current lower interest rates. Interest expense on borrowed funds decreased
$645,886, or 60% due to repayment of principal on loans to Federal Home Loan
Bank previously discussed and declining interest rates on short-term borrowings
from Federal Home Loan Bank.
The provision for loan losses is charged to operations to bring the total
allowance for loan losses to a level that represents management's best
estimates of the losses inherent in the portfolio, based on historical
experience, volume and type of lending conducted by the Company, industry
standards, the level and status of past due and non-performing loans, the
general economic conditions in the Company's lending area and other factors
affecting the collectibility of the loans in its portfolio. For the three
months ended June 30, 2001, the provision for loan losses decreased $120,000
to $15,000 compared to $135,000 for the comparable 2000 period. The decrease
in the provision for loan losses for the three months ended June 30, 2001 as
compared to the same 2000 period resulted from a smaller loan portfolio and a
reduction in nonperforming loans. At June 30, 2001, nonperforming loans
decreased $595,000 to $53,000 from $648,000 at June 30, 2000. For the three
months ended June 30, 2001, net loan receivables decreased $10.0 million to
$148.0 million from $158.0 million at March 31, 2001. As previously
disclosed, during the first quarter of fiscal 2001, the Company reevaluated
its interest rate risk position by reclassifying loans previously held for
investment to loans held for sale. Prior to the adoption of the new interest
rate risk policy, it was the Company's policy to sell its 30 year fixed rate
risk loans in the secondary market and hold its 15 year and 20 year loans to
maturity. With the adoption of the new interest rate risk policy, the Company
has expanded its loans held for sale to also include certain of its 15 year
and 20 year loans which were previously held to maturity.
Net interest income after provision for losses increased $155,027, or 10%.
Components of the increase for the three months ended June 30, are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
--------- ----------- ---------
Interest income $ 4,092 $ 4,559 $ (467)
Interest expense 2,355 2,857 (502)
Provision for losses on loans 15 135 (120)
--------
Increase $ 155
========
</Table>
<Page>
18
Non-interest income increased $355,537, or 141%. The increase is due primarily
to the gain on sales of available-for-sale investments and loans. Components of
the increase are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
---------------- --------------- ---------------
Net gain on sales of available-for-sale investments $ 283 $ 12 $ 271
Net gain on sales of loans 197 41 156
Other (71)
---------------
Increase $ 356
===============
Non-interest expense increased $43,286, or 4%. The increase is due primarily to
increased compensation expenses incurred as a result of filling positions open
at June 30, 2000 and annual increases given employees. Components of the
increase are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
---------------- --------------- -------------
Compensation and related expenses $ 613 $ 565 $ 48
Advertising 14 21 (7)
Data processing 35 33 2
Other expenses 256 243 13
Other changes (13)
------------
Increase $ 43
============
Net income increased $319,628, or 62%. Components of the increase are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
---------------- --------------- -----------
Net interest income after provision for losses $ 1,722 $ 1,568 $ 154
Non-interest income 607 251 356
Non-interest expense 1,010 967 43
Income taxes 488 341 147
------------- --------- -----------
Net income $ 831 $ 511 $ 320
============= ========= ===========
Nine months ended June 30, 2001 and 2000:
Total interest income decreased $650,191, or 5%. Interest on loans decreased
$283,052 or 3%, primarily due to higher loan balances prior to sales of loans
and exchange of loans for mortgage-backed securities in the previous quarter.
Interest and dividends on investment securities decreased $515,582, or 26%, due
to the sales of investment securities in this and prior quarters of this fiscal
year. Interest income on mortgaged backed securities increased $148,443, or 25%.
The increase is due to the exchange of loans receivable for mortgage-backed
securities in the previous quarters.
Total interest expense decreased $293,567, or 4%. Interest expense on deposits
increased $609,491, or 11%. The increase is due primarily to higher interest
rates paid to depositors. The higher interest rates paid were required to
attract and retain deposits in the local market. Although interest rates have
decreased the first and second quarters of calendar 2001, the effect of the
decrease is not available to reduce expense until maturing deposits are
reinvested with the Bank at current lower interest rates. Interest expense on
borrowed funds decreased $903,058, or 33% due to repayment of principal on loans
to Federal Home Loan Bank previously discussed and declining interest rates on
short-term borrowings from Federal Home Loan Bank.
<Page>
19
For the nine months ended June 30, 2001, the provision for loan losses
decreased $260,000 to $105,000 compared to $365,000 for the comparable 2000
period. The decrease in the provision for loan losses for the nine months ended
June 30, 2001 as compared to the same 2000 period resulted from a smaller loan
portfolio, a reduction in nonperforming loans and a reduction in net loan
chargeoffs. For the nine months ended June 30, 2001, net loan chargeoffs
decreased $64,000 to $73,000 from $137,000 for the same 2000 period. At June 30,
2001, net loan receivables decreased $34.6 million to $148.0 million from $182.6
million at September 30, 2001. See ""-- Results of operations for the three
months ended June 30, 2001 and 2000''.
Net interest income after provision for losses decreased $96,624, or 2%.
Components of the increase for the nine months ended June 30, are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
---------------- --------------- -----------
Interest income $ 12,845 $ 13,495 $ (650)
Interest expense 7,876 8,169 (293)
Provision for losses on loans 105 365 (260)
----------
Increase $ (97)
==========
Non-interest income increased $797,679, or 114%. The increase is due primarily
to the gain on sales of available-for-sale investments and loans. Components of
the increase are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
---------------- --------------- -----------
Net gain on sales of available-for-sale investments $ 454 $ 56 $ 398
Net gain on sales of loans 576 134 442
Other (42)
-----------
Increase $ 798
===========
Non-interest expense increased $85,185, or 3%. The increase is due primarily to
increased compensation expenses incurred as a result of filling positions open
at June 30, 2000 and annual increases given employees. Components of the
increase are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
---------------- --------------- -----------
Compensation and related expenses $ 1,879 $ 1,705 $ 174
Advertising 53 75 (22)
Federal insurance premium 76 83 (7)
Data processing 111 133 (22)
Other expense 755 774 (19)
Other charges (19)
-----------
Increase $ 85
===========
Net income increased $247,421, or 15%. Components of the increase are:
<Table>
<Caption>
(In Thousands)
2001 2000 Change
---------------- --------------- ----------
Net interest income after provision for losses $ 4,865 $ 4,961 $ (96)
Non-interest income 1,500 702 798
Non-interest expense 3,079 2,994 85
Income taxes 1,222 1,067 155
Cumulative effect of change in accounting
for derivative financial instruments net of
income tax benefit of $125,144. (214) (214)
-------------- ----------- ----------
Net income $ 1,850 $ 1,602 $ 248
============== =========== ==========
<Page>
20
Liquidity and Capital Resources:
The Bank is required by the regulations of the Office of Thrift Supervision
("OTS") to maintain liquid assets sufficient to ensure its safety and
soundness. The Bank manages its liquidity to meet its funding needs,
including: deposit outflows, disbursement of payments collected from
borrowers for taxes and insurance, and loan principal disbursements. The Bank
also manages its liquidity to meet its asset/liability management objectives.
In addition to funds provided from operations, the Bank's primary sources of
funds are: savings deposits, principal repayments on loans and
mortgage-backed securities, and matured or called investment securities. In
addition, the Bank may borrow funds from the Federal Home Loan Bank of Topeka.
Scheduled loan repayments and maturing investment securities are a relatively
predictable source of funds. However, savings deposit flows and prepayments
on loans and mortgage-backed securities are significantly influenced by
changes in market interest rates, economic conditions and competition. The
Bank strives to manage the pricing of its deposits to maintain a balanced
stream of cash flows commensurate with its loan commitments.
The Bank is subject to various regulatory capital requirements administered
by federal banking agencies. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of core and tangible capital (as defined in regulations) to
assets (as defined) and core and total capital to risk weight assets (as
defined). Management believes, as of June 30, 2001, that the Bank meets all
capital adequacy requirements to which it is subject.
The Bank's actual capital amounts (in thousands) and ratios as of June 30, 2001
are presented in the following table:
<Table>
<Caption>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
Amount Ratio Amount Ratio Amount Ratio
------ ------ ------ ------ ------ ------
As of June 30, 2001:
Total (Risk-Based) Capital 20,042 19.4% 8,247 8.0% 10,309 10.0%
(to Risk Weighted Assets)
Core (Tier 1) Capital 18,751 18.2% N/A N/A 6,185 6.0%
(to Risk Weighted Assets)
Core (Tier 1) Capital - leverage 18,751 9.2% 8,149 4.0% 10,186 5.0%
(to Assets)
<Page>
21
LANDMARK BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Bank has established an Asset/Liability Management Committee ("ALCO") for
the purpose of monitoring and managing interest rate risk. The Bank is
subject to the risk of interest rate fluctuations to the extent that there is
a difference, or mismatch, between the amount of the Bank's interest-earning
assets and interest-bearing liabilities, which mature or reprice in specified
periods. Consequently, when interest rates change, to the extent the Bank's
interest-earning assets have longer maturities or effective repricing periods
than its interest-bearing liabilities, the interest income realized on the
Bank's interest-earning assets will adjust more slowly than the interest
expense on its interest-bearing liabilities. This mismatch in the maturity
and interest rate sensitivity of assets and liabilities is commonly referred
to as the "gap." A gap is considered positive when the amount of interest
rate sensitive assets maturing or repricing during a specified period exceeds
the amount of interest rate sensitive liabilities maturing or repricing
during such period, and is considered negative when the amount of interest
rate sensitive liabilities maturing or repricing during a specified period
exceeds the amount of interest rate assets maturing or repricing during such
period. Generally, during a period of rising interest rates, a negative gap
would adversely affect net interest income while a positive gap would result
in an increase in net interest income, and during a period of declining
interest rates, a negative gap would result in an increase in net interest
income while a positive gap would adversely affect net interest income. The
Bank utilizes externally prepared interest rate sensitivity of the net
portfolio value reports furnished by the OTS to monitor and manage its
interest rate risk.
The Bank has historically invested in interest-earning assets that have a
longer duration than its interest-bearing liabilities. The mismatch in
duration of the interest-sensitive liabilities indicates that the Bank is
exposed to interest rate risk. In a rising rate environment, in addition to
reducing the market value of long-term interest-earning assets, liabilities
will reprice faster than assets; therefore, decreasing net interest income.
To mitigate this risk, the Bank has placed a greater emphasis on
shorter-term, higher yielding assets that reprice more frequently in reaction
to interest rate movements. In addition, the Bank has continued to include in
total assets a concentration of adjustable-rate assets to benefit the
one-year cumulative gap as such adjustable-rate assets reprice and are more
responsive to the sensitivity of more frequently repricing interest-bearing
liabilities.
The OTS prepares a report quarterly on the interest rate sensitivity of the
net portfolio value ("NPV") from information provided by the Bank. The OTS
adopted a rule in August 1993 incorporating an interest rate risk ("IRR")
component into the risk-based capital rules. Implementation of the rule has
been delayed until the OTS has tested the process under which institutions
may appeal such capital deductions. The IRR component is a dollar amount that
will be deducted from total capital for the purpose of calculating an
institution's risk-based capital requirement and is measured in terms of the
sensitivity of its NPV to changes in interest rates. The NPV is the
difference between incoming and outgoing discounted cash flows from assets,
liabilities, and off-balance sheet contracts. An institution's IRR is
measured as the change to its NPV as the result of a hypothetical 200 basis
point change in market interest rates. A resulting change in NPV of more than
2% of the estimated market value of its assets will require the institution
to deduct from its capital 50% of that excess change. The rule provides that
the OTS will calculate the IRR component quarterly for each institution.
<Page>
22
The following tables present the Bank's NPV as well as other data as of
March 31, 2001 (latest information available) as calculated by the OTS, based on
information provided to the OTS by the Bank.
<Table>
<Caption>
Change in Interest
Rates in Basis
Points (Rate Shock) Net Portfolio Value NPV as % of Present Value of Assets
$ Amount $ Change % Change NPV Ratio Change
- ----------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
+300 bp 12,528 (11,326) (47%) 5.96% (466 bp)
+200 bp (1) 16,866 (6,988) (29%) 7.83% (279 bp)
+100 bp 20,923 (2,931) (12%) 9.49% (113 bp)
0 bp 23,854 - - - - - - 10.62% - - -
- -100 bp 24,831 977 4% 10.94% 32 bp
- -200 bp 25,379 1,525 6% 11.08% 46 bp
- -300 bp 25,985 2,131 9% 11.23% 61 bp
</Table>
(1) Denotes rate shock used to compute interest rate risk capital component.
<Table>
<Caption>
March 31, 2001
--------------
Risk Measures (200 Basis Point Rate Shock):
Pre-Shock NPV Ratio: NPV as % of Present Value of Assets 10.62%
Exposure Measure: Post-Shock NPV Ratio 7.83%
Sensitivity Measure: Decline in NPV Ratio 2.79%
</Table>
Utilizing the data above, the Bank, at September 30, 2000, would have been
considered by the OTS to have been subject to "above normal" interest rate
risk. Accordingly, a deduction from risk-based capital would have been
required. However, even with this deduction, the capital of the Bank would
continue to exceed all regulatory requirements.
Set forth below is a breakout, by basis points of the Bank's NPV as of March
31, 2001 (latest information available) by assets, liabilities, and off
balance sheet items.
<Table>
<Caption>
No
Net Portfolio Value -300 bp -200 bp -100 bp Change +100 bp +200 bp +300 bp
- ----------------------------------------------------------------------------------------------------
Assets $231,448 $229,147 $227,055 $224,695 $220,569 $215,480 $210,258
- -Liabilities 205,520 203,806 202,248 200,861 199,647 198,580 197,654
+Off Balance Sheet 56 37 24 20 0 (34) (75)
------------------------------------------------------------------------------
Net Portfolio Value $25,985 $ 25,379 $ 24,831 $ 23,854 $ 20,923 $ 16,866 $ 12,528
==============================================================================
</Table>
Certain assumptions utilized by the OTS in assessing the interest rate risk
of savings associations were employed in preparing the previous table. These
assumptions related to interest rates, loan prepayment rates, deposit decay
rates and the market values of certain assets under the various interest rate
scenarios. It was also assumed that delinquency rates would not change as a
result of changes in interest rates although there can be no assurance that
this will be the case. Even if interest rates change in the designated
amounts, there can be no assurance that the Bank's assets and liabilities
would perform as set forth above.
<Page>
23
Certain shortcomings are inherent in the preceding NPV tables because the
data reflect hypothetical changes in NPV based upon assumptions used by the
OTS to evaluate the Bank as well as other institutions. However, net interest
income should decline with instantaneous increases in interest rates while
net interest income should increase with instantaneous declines in interest
rates. Generally, during periods of increasing interest rates, the Bank's
interest rate sensitive liabilities would reprice faster than its interest
rate sensitive assets causing a decline in the Bank's interest rate spread
and margin. This would result from an increase in the Bank's cost of funds
that would not be immediately offset by an increase in its yield on earning
assets. An increase in the cost of funds without an equivalent increase in
the yield of earning assets would tend to reduce net interest income.
In times of decreasing interest rates, fixed rate assets could increase in
value and the lag in repricing of interest rate sensitive assets could be
expected to have a positive effect on the Bank's net interest income.
However, changes in only certain rates, such as shorter term interest rate
declines without longer term interest rate declines, could reduce or reverse
the expected benefit from decreasing interest rates.
<Page>
24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Report on Form 8-K
On April 19, 2001 the Company filed a form 8-K with the
Securities Exchange Commission which announced the proposed
merger of equals between the Company and MNB Bancshares, Inc.
<Page>
25
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.
Date August 20, 2001 LANDMARK BANCSHARES, INC.
---------------
By /s/ Larry Schugart
-------------------------------------
LARRY SCHUGART
President and Chief Executive Officer
(Duly Authorized Representative)
By /s/ Stephen H. Sundberg
-------------------------------------
STEPHEN H. SUNDBERG
Senior Vice President and
Chief Financial Officer
(Duly Authorized Representative)