UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended March 31, 1998
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)
(316) 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 March 31, 1998:
$.10 par value common stock 1,655,482 shares
(Class) (Outstanding)
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
<PAGE>
LANDMARK BANCSHARES, INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of
March 31, 1998 (unaudited) and September 30, 1997 1
Statements of Income for the Three and Six
Months Ended March 31, 1998 and 1997 (unaudited) 2
Statements of Cash Flows for the Six Months Ended
March 31, 1998 and 1997 (unaudited) 3 - 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
PART II - OTHER INFORMATION
Item 2. Changes in Securities 13
Item 4. Submission of Matter to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6(b). Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
1
LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY,
LANDMARK FEDERAL SAVINGS BANK
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997
(Unaudited)
------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Interest bearing $ 5,738,632 $ 2,062,879
Non-interest bearing 676,217 678,173
Time deposits in other financial institutions 160,732 110,580
Securities held to maturity 12,989,522 18,837,942
Securities available for sale 8,930,804 7,122,785
Mortgage-backed securities held to maturity 29,726,731 36,689,551
Loans receivable, net 165,396,676 157,672,603
Loans held for sale 2,662,603 490,234
Accrued income receivable 1,394,489 1,446,605
Real estate owned or in judgment and other
repossessed property, net 160,234 251,950
Office properties and equipment, at cost less
accumulated depreciation 1,661,570 1,188,250
Prepaid expenses and other assets 1,769,326 1,233,038
Income taxes receivable - current 0 65,564
------------------------------
TOTAL ASSETS $ 231,267,536 $ 227,850,154
------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits 149,965,557 144,734,739
Other Borrowed Money 43,900,000 46,200,000
Advances from borrowers for taxes and insurance 1,210,523 1,673,057
Accrued expenses and other Liabilities 2,542,085 2,304,593
Deferred income taxes 949,514 692,435
Income taxes
Current 56,783 0
------------------------------
TOTAL LIABILITIES $ 198,624,462 $ 195,604,824
------------------------------
Stockholders' Equity
Common Stock 228,131 228,131
$.10 par value; 10,000,000 shares authorized;
2,281,312 shares issued March 31, 1998
Additional Paid-in Capital 22,207,701 22,173,827
Treasury Stock; 625,830 shares of common stock at cost (10,007,178) (9,249,935)
Retained income (substantially restricted) 20,034,394 19,305,087
Employee Stock Ownership Plan (844,597) (844,597)
Management Stock Bonus Plan (193,045) (289,567)
Net unrealized gain/loss on available for sale securities 1,217,668 922,384
------------------------------
Total Stockholders' Equity 32,643,074 32,245,330
------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 231,267,536 $ 227,850,154
------------------------------
</TABLE>
<PAGE>
2
LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY,
LANDMARK FEDERAL SAVINGS BANK
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended March 31 Six Months Ended March 31
1997 1998 1997 1998
(unaudited) (unaudited)
------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest on loans 2,853,594 3,416,614 5,604,442 6,757,895
Interest and dividends on investment securities 541,311 369,234 1,084,898 802,162
Interest on mortgage-backed securities 692,989 522,540 1,428,324 1,106,708
------------------------------------------------------
Total interest income 4,087,894 4,308,388 8,117,664 8,666,765
INTEREST EXPENSE
Deposits 1,796,919 1,853,397 3,612,181 3,718,202
Borrowed funds 575,658 676,002 1,092,796 1,383,649
------------------------------------------------------
Total interest expense 2,372,577 2,529,399 4,704,977 5,101,851
Net interest income 1,715,317 1,778,989 3,412,687 3,564,914
PROVISION FOR LOSSES ON LOANS 55,000 75,000 100,000 145,000
------------------------------------------------------
Net interest income after provision for losses 1,660,317 1,703,989 3,312,687 3,419,914
NON-INTEREST INCOME
Service charges and late fees 63,410 89,254 123,753 154,615
Net gain (loss) on available for sale investments 64,223 95,042 172,916 95,042
Net gain (loss) on sale of loans 5,224 107,740 64,663 164,189
Service fees on loans sold 40,692 18,772 81,049 58,023
Other income 33,104 41,346 67,502 73,561
------------------------------------------------------
206,653 352,154 509,883 545,430
NON-INTEREST EXPENSE
Compensation and related expenses 514,347 614,785 1,011,779 1,196,942
Occupancy expense 41,695 49,392 82,652 96,674
Advertising 17,499 12,691 31,947 29,021
Federal insurance premium 20,148 39,018 119,814 77,840
Loss (gain) from real estate operations 683 (788) 989 2,759
Data processing 52,327 63,245 95,815 109,244
Other expense 240,824 257,863 416,224 437,852
------------------------------------------------------
887,523 1,036,206 1,759,220 1,950,332
Income before income taxes 979,447 1,019,937 2,063,350 2,015,012
INCOME TAXES EXPENSES 398,300 407,500 829,800 806,450
------------------------------------------------------
Net income 581,147 612,437 1,233,550 1,208,562
------------------------------------------------------
Basic earnings per share $ 0.35 $ 0.39 $ 0.73 $ 0.77
Diluted earnings per share $ 0.32 $ 0.36 $ 0.68 $ 0.70
Dividends per share $ 0.10 $ 0.20 $ 0.20 $ 0.30
</TABLE>
<PAGE>
3
LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
LANDMARK FEDERAL SAVINGS BANK
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended March 31
1997 1998
(unaudited) (unaudited)
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,233,550 $ 1,208,562
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 56,203 64,711
Decrease (increase) in accrued interest receivable (39,090) 48,156
Increase (decrease) in outstanding checks in excess of bank balance (73,144) 0
Increase (decrease) in accrued and deferred income taxes 449,636 379,426
Increase (decrease) in accounts payable and accrued expenses (722,036) 241,397
Amortization of premiums and discounts on investments and loans 5,008 (29,298)
Provision for losses on loans 100,000 145,000
Gain/loss on available for sale investments (172,916) (95,042)
Other non-cash items, net 33,298 (652,233)
Sale of loans held for sale 8,437,797 7,595,266
Gain on sale of loans held for sale (64,663) (164,189)
Origination of loans held for sale (6,394,353) (6,096,336)
Purchase of loans held for sale (744,700) (3,507,110)
-----------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,104,590 $ (861,690)
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations and principal payment on loans held for investment 442,408 409,567
Principal repayments on mortgage-backed securities 4,188,387 6,957,942
Loans purchased for investment (17,105,864) (8,437,257)
Proceeds from sale of mortgage-backed securities available for sale 485,205 0
Acquisition of investment securities held to maturity (3,300,000) (4,000,000)
Acquisition of investment securities available for sale (951,165) (1,503,656)
Proceeds from sale of investment securities available for sale 485,205 0
Proceeds from maturities or calls of investment securities 5,090,000 10,100,000
Net (increase) decrease in time deposits 280,000 (50,000)
Sale of real estate acquired in settlement of loans 2,000 269,114
Acquisition of fixed assets (50,089) (538,587)
-----------------------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (10,919,118) 3,207,123
-----------------------------
</TABLE>
<PAGE>
4
LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY,
LANDMARK FEDERAL SAVINGS BANK
Consolidated Statements of Cash Flows
(Continued)
<TABLE>
<CAPTION>
Six Months Ended March 31
1997 1998
(unaudited) (unaudited)
------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ 5,582,833 $ 5,230,818
Net increase (decrease) in escrow accounts (677,315) (462,479)
Proceeds from FHLB advance and other borrowings 47,223,000 44,100,000
Repayment of FHLB advance and other borrowings (42,056,333) (46,400,000)
Treasury Stock (811,813) (757,243)
Other Financing Activities 96,522 96,522
Dividend Payment (346,705) (479,254)
------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 9,010,189 1,328,364
------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 195,661 3,673,797
BEGINNING CASH AND CASH EQUIVALENTS 473,710 2,741,052
------------------------------
ENDING CASH AND CASH EQUIVALENTS 669,371 6,414,849
------------------------------
SUPPLEMENTAL DISCLOSURES Cash paid during the year for:
Interest on deposits, advances, and other borrowings 4,752,544 5,212,822
Income taxes 829,800 684,103
Transfers from loans to real estate acquired through foreclosure 0 19,155
</TABLE>
<PAGE>
5
LANDMARK BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
LANDMARK FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements were prepared in
accordance with the instructions for form 10-QSB 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 six months ending March 31, 1998, are not
necessarily indicative of the results which may be expected for the fiscal year
ending September 30, 1998.
2. 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 value of investment and mortgage -
backed securities as of March 31, 1998 and September 30, 1997, is as follows:
<TABLE>
<CAPTION>
Investment Securities March 31, 1998 September 30, 1997
-------------------------------------------------------
<S> <C> <C>
Held to maturity:
Government Agency Securities 11,499,522 17,297,942
Municipal Obligations 1,240,000 1,540,000
Other 250,000 0
--------------------------------------------------------
$12,989,522 $18,837,942
Available for sale:
Common Stock 5,627,604 4,086,785
Stock in Federal Home Loan Bank 3,093,200 2,976,000
Other 210,000 60,000
--------------------------------------------------------
$ 8,930,804 $ 7,122,785
</TABLE>
<PAGE>
6
Mortgage - Backed Securities held to maturity:
FNMA - Arms 11,328,080 13,157,644
FHLMC -Arms 3,790,408 4,768,042
FHLMC -Fixed Rate 204,821 245,443
CMO Government Agency 10,260,744 13,310,277
CMO Private Issue 3,336,807 4,245,057
FNMA - Fixed Rate 492,947 589,777
GNMA - Fixed Rate 312,924 373,311
------------------------------
$29,726,731 $36,689,551
4. Loan Receivable, Net
A summary of the Bank's loans receivable at March 31, 1998 and
September 30, 1997, is as follows:
March 31, 1998 September 30, 1997
--------------------------------
Mortgage Loans Secured by
One to Four Family Residences 126,251,871 122,015,418
Secured by Other Properties 3,405,082 3,452,789
Construction Loans 1,254,521 1,936,517
Other 4,431,850 2,666,395
------------------------------
135,343,325 130,071,119
Plus (Less):
Unamortized Premium on Loan Purchase 42,118 29,460
Unearned Discount and Loan Fees (307,850) (348,405)
Undisbursed Loan Proceeds 133,645 (1,724)
Allowance for Loan Losses (670,056) (615,049)
------------------------------
Total Mortgage Loans 134,541,181 129,135,401
------------------------------
Consumer and Other Loans:
Automobile 15,462,484 13,309,943
Commercial leases 4,686,064 4,049,950
Loans on Deposits 371,674 573,654
Home Equity and Second Mortgage 9,895,916 9,986,176
Mobile Home 39,564 46,900
Other 797,091 924,153
--------------------------------
31,252,793 28,890,776
Less:
Allowance for Loan Losses (397,298) (353,574)
------------------------------
Total Consumer and Other Loans 30,855,495 28,537,202
------------------------------
Net Loans Receivable $ 165,396,676 $ 157,672,603
<PAGE>
7
A summary of the Bank's allowance for loan losses for the 3 and 6 months ended
March 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1997 1998 1997 1998
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balance Beginning $ 780,095 $ 1,043,931 $ 740,346 $ 968,623
Provisions Charged to Operations 55,000 75,000 100,000 145,000
Loans Charged Off Net of Recoveries (5,657) (51,577) (10,908) (46,269)
--------------------------------------------------------
Balance Ending $ 829,438 $ 1,067,354 $ 829,438 $ 1,067,354
</TABLE>
There has been no significant change in the level of non performing loans from
September 30, 1997 to March 31, 1998.
5. REAL ESTATE OWNED OR IN JUDGMENT
Real Estate owned or in judgment, including in-substance foreclosures
and other repossessed property:
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997
--------------------------------------------
<S> <C> <C>
Real Estate Acquired by Foreclosure $19,155 $232,851
Real Estate Loans in Judgment and
Subject to Redemption 128,296 19,099
Other Repossessed Assets 12,783 0
--------------------------------------------
$160,234 $251,950
</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
reflect 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.
At March 31, 1998, the Bank had outstanding commitments to fund real estate
loans of $2,622,259. Of the commitments outstanding, $1,707,850 are for fixed
rate loans at rates of 6.625% to 10.00%. Commitments for adjustable rate loans
amount to $914,409 with initial rates of 5.875% to 8.25%. Outstanding loan
commitments to sell as of March 31, 1998 were $282,616. In addition the Bank had
outstanding commercial loan commitments of $3,316,039 with initial rates of
8.00% to 10.00%.
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 the
periods presented potential common
<PAGE>
8
stock includes outstanding stock options and nonvested stock awarded under the
Management Stock Bonus Plan.
Earnings per share for the three and six months ending March 31, 1998
and 1997, was determined as follows;
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Basic Earnings Per Share
Three months ended Six months ended
March 31 March 31
1998 1997 1998 1997
------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding
Net of Treasury shares 1,688,641 1,852,996 1,688,641 1,852,996
Average unallocated ESOP shares (81,000) (96,010) (82,711) (97,721)
Weighted average treasury shares purchased (19,408) (37,611) (9,704) (20,240)
Nonvested MSBP shares (20,526) (38,773) (22,810) (41,059)
Weighted Average Shares for Basic EPS 1,567,707 1,680,602 1,573,416 1,693,976
------------------------------------------------------
Net Earnings 612,437 581,147 1,208,562 1,233,550
------------------------------------------------------
Per share amount $ 0.39 $ 0.35 $ 0.77 $ 0.73
</TABLE>
<TABLE>
<CAPTION>
Diluted Earnings Per Share
Three months ended Six months ended
March 31 March 31
1998 1997 1998 1997
------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average shares for Basic EPS 1,567,707 1,680,602 1,573,416 1,693,976
Dilutive stock options 134,290 107,664 136,424 99,872
Dilutive MSBP shares 6,881 10,375 7,781 10,146
------------------------------------------------
Weighted Average Shares for Diluted EPS 1,708,877 1,798,641 1,717,647 1,803,993
------------------------------------------------
Net Earnings 612,437 581,147 1,208,562 1,233,550
------------------------------------------------
Per share amount $ 0.36 $ 0.32 $ 0.70 $ 0.68
</TABLE>
8. DIVIDENDS
At a January 1998 board meeting, the Directors of the Company declared
a $0.10 per share dividend and a $0.10 per share special dividend. The dividends
were payable to all stockholders of record as of February 2, 1998.
<PAGE>
9
LANDMARK BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 March 31, 1998. The Bank is primarily engaged in the business of accepting
deposit accounts from the general public, using such funds to originate mortgage
loans for the purchase and refinancing of single-family homes located in Central
and Southwestern Kansas and for the purchase of mortgage-backed and investment
securities. In addition, the Bank also offers and purchases loans through
correspondent lending relationships in Wichita, Kansas City, and other cities in
Kansas and in Albuquerque and Santa Fe, New Mexico, and Madison, Wisconsin. 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 and savings deposit loans.
Management Strategy:
Management's strategy has been to maintain profitability and increase
capital. The Bank's lending strategy has historically focused on the origination
of traditional, conforming one to four-family mortgage loans with the primary
emphasis on single-family residences. The Bank's secondary focus has been on
consumer loans, second mortgage loans, home equity loans and savings deposit
loans. This focus, and the application of strict underwriting standards, are
designed to reduce the risk of loss on the Bank's loan portfolio. However, this
lack of diversification in its portfolio structure does increase the Bank's
portfolio concentration risk by making the value of the portfolio more
susceptible to declines in real estate values in its market area. This has been
mitigated in recent years, through the investment in mortgage-backed securities
and the sales of loans in the secondary market.
Certain risks are inherent in the sales of loans in the secondary
market. There is a risk that the Bank will not be able to sell all the loans
that it has originated, or conversely, will be unable to fulfill its commitment
to deliver loans pursuant to a firm commitment to sell loans. In addition, in
periods of rising interest rates, loans originated by the bank may decline in
value. Exposure to market and interest rate risk is significant during the
period between the time the interest rate on a customer's mortgage loan
application is established and the time the mortgage loan closes, and also
during the period between the time the interest rate is established and the time
the Bank commits to sell the loan. If interest rates change in an unanticipated
fashion, the actual percentage of loans that close may differ from projected
percentages. The resultant mismatching of commitments to close loans and
commitments to deliver sold loans may have an adverse effect on the
profitability of loan originations.
A sudden increase in interest rates can cause a higher percentage of
loans to close than projected. To the degree that this was not anticipated, the
Bank will not have made commitments to sell these loans and may incur
significant mark to market losses, adversely affecting results of operations.
The Bank historically sold 30 year fixed rate mortgages in the
secondary market, however the Bank is keeping all currently originated 15 year
and 20 year or shorter mortgages with fixed rates at or above 7.0% and 7.25% for
investment and selling all other fixed rate loans.
Throughout the first six months of fiscal year 1998 rates continued
with moderate decline. As a result of the rates at the end of March 1998, the
Bank has a unrealized gain of $107,740 in loans held for sale. Sustained levels
of gain on sale of loans is dependent on continued stable or downward interest
rate movement and would likely be adversely affected by a continued rise in
interest rates.
Changes in financial condition between March 31, 1998 and September 30, 1997:
<PAGE>
10
Total assets increased by $3,714,382, or approximately 1.49% between
September 30, 1997 and March 31, 1998. This increase is largely attributed to a
$9,896,442 increase in loan receivables.
Results of operations: comparison between the three and six months ended March
31, 1998 and 1997:
Net income for the three-month period ended March 31, 1998 of $612,437
represents an increase of $31,290 or a 5.3% increase from the net income
reported for the three-month period ended March 31, 1997. The increase was
primarily due to an increase of $563,020 on interest income from increased
volume on loans. Mortgage loans purchased from correspondents and originations
are being partially funded through investments maturing or being called.
Net income for the six-month period ended March 31, 1998 of $1,208,562
represents a decrease of $24,988 or a 0.02% decrease over the net income
reported for the six-month period ended March 31, 1997. This decrease was
primarily due to an increase of $191,112 in non-interest expense.
Net interest income before provision for losses on loans for the
three-month period ended March 31, 1998 increased $63,672 or approximately 3.71%
to $1,778,989 as compared with $1,715,317 for the same period ended March 31,
1997. This increase is associated with the increased interest received on the
mortgage loan portfolio.
Net interest income before provision for losses on loans for the
six-month period ended March 31, 1998 increased $152,227 or 4.46% to $3,564,914
as compared with $3,412,687 for the same period ended March 31, 1997. This
increase is associated with the increased interest received on the mortgage
loans.
Interest expense for the three-month period ended March 31, 1998
increased $156,822 or 6.61% to $2,529,399 as compared with $2,372,577 for the
same period ended March 31, 1997. This increase is due to a growth in saving
deposit balances.
Interest expense for the six-month period ended March 31, 1998
increased $396,874 or 8.44% to $5,101,851 as compared with $4,704,977 for the
same period ended March 31, 1997. This increase is due to a growth in saving
deposit balances and a increase in the average balance of borrowed funds.
The Bank added $75,000 for the three month period ending March 31, 1998
and $145,000 for the six month period ending March 31, 1998 to the provision for
loan losses. These additions are due to increased loan production during this
period including increased consumer and commercial loans and related credit
risk.
Other income including non operating items for the three-month period
ended March 31, 1998 increased $145,501 or 70.41% to $352,154 as compared with
$206,653 for the same period ended March 31, 1997 This increase primarily was
due to $30,819 increase in gains of sales of available for sale securities and
an increase of $102,516 on gain of sale of loans during the quarter.
Other income including non operating items for the six-month period
ended March 31, 1998 increased $35,547 or 6.97% to $545,430 as compared with
$509,883 for the same period ended March 31, 1997. This increase was primarily
due to $99,526 increase in net gains of sale of loans.
Non interest expenses for the three-month period ended March 31, 1998
increased $148,683 or 16.75% to $1,036,206 as compared with $887,523 for the
same period ended March 31, 1997. This increase is primarily due to the
expansion of the commercial lending department and staffing at new branch
facility.
Non interest expenses for the six-month period ended March 31, 1998
increased $191,112 or 10.86% to $1,950,220 as compared with $1,759,220 for the
same period ended March 31, 1997. This increase is primarily due to the
expansion of the commercial lending department and staffing at new branch
facility.
<PAGE>
11
Earnings Per Share:
Effective with the quarter ended December 31, 1997, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 128, Earnings per
Share. The Statement is to be applied to financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. The Statement requires restatement of all prior-period
earnings per share (EPS) data presented.
FAS No. 128 simplifies the standards for computing EPS and makes them comparable
to international EPS standards. It replaces the presentation of primary EPS with
a presentation of basic EPS. It also requires presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital
structures. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the company. Diluted EPS is computed
similarly to the previously presented fully diluted earnings per share.
Y2K Compliance
The Bank has developed a plan to attain Y2K compliance of critical operation
systems. That plan includes assessment and testing of vendors systems including
external data processing center and equipment and software upgrades. The plan
currently calls for testing of mission critical systems by August 1998. The Y2K
costs are projected to be approximately $75,000 - $100,000 for conversions cost
and approximately $300,000 for hardware and software upgrades.
Liquidity and Capital Resources:
The Bank is required to maintain minimum levels of liquid assets, as defined by
the Office of Thrift Supervision ("OTS") regulations. This requirement, which
may be varied from time to time depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowing. The
required minimum ratio is currently 4 percent. The Bank's liquidity ratio
averaged 5.25% during March 1998. The Bank manages its liquidity ratio 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 ratio 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 time to time 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.
When applicable, cash in excess of immediate funding needs is invested into
longer-term investments and mortgage-backed securities which typically earn a
higher yield than overnight deposits, some of which may also qualify as liquid
investments under current OTS regulations.
As required by the financial institutions reform, recovery and enforcement act
of 1989 ("FIRREA"), OTS prescribed three separate standards of capital adequacy.
The regulations require financial institutions to have minimum regulatory
capital equal to 1.50 percent of tangible assets; minimum core capital equal to
3.00 percent of adjusted tangible assets; and risk-based capital equal to 8.00
percent of risk-based assets.
<PAGE>
12
The Bank's capital requirements and actual capital under the OTS regulations are
as follows at March 31, 1998:
Amount (Thousands) Percent of Assets
Core Capital:
Actual 25,101 11.19%
Required 8,969 4.00%
Excess 16,132 7.19%
Risk-Based Capital:
Actual 25,868 22.71%
Required 9,113 8.00%
Excess $16,755 14.71%
<PAGE>
13
LANDMARK BANCSHARES, INC.
PART II - OTHER INFORMATION
Item 2. - Changes in Securities
NONE
Item 4. - Submission of Matter to a Vote of Security Holders
An annual meeting was held on January 21, 1998 to elect Larry L.
Schugart and Jim W. Lewis to serve as Directors for three years. In addition the
stockholders did ratify Regier Carr & Monroe, L.L.P. as independent auditors of
Landmark Bancshares, Inc. for the fiscal year ending September 30, 1998.
Votes were as follows: Number Percentage
Larry L. Schugart For 1,260,390 99.80%
Against 2,177 00.20%
Abstain 0
Jim W. Lewis For 1,260,390 99.80%
Against 2,177 00.20%
Abstain 0
Regier Carr & Monroe For 1,261,910 99.90%
Against 0 0.00%
Abstain 906 0.10%
Directors continuing in office following the annual meeting include C. Duane
Ross, Richard A. Ball and David H. Snapp.
Item 5. - Other Information
None
Item 6(b). - Reports on Form 8-K
None
<PAGE>
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 May 5, 1998 LANDMARK BANCSHARES, INC.
By /S/ Larry Schugart
LARRY SCHUGART
President and Chief Executive Officer
(Duly Authorized Representative)
By /S/ James F. Strovas
JAMES F. STROVAS
Senior Vice President and
Chief Financial Officer
(Duly Authorized Representative)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM
THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,415
<INT-BEARING-DEPOSITS> 161
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,931
<INVESTMENTS-CARRYING> 42,716
<INVESTMENTS-MARKET> 42,857
<LOANS> 168,059
<ALLOWANCE> 1,067
<TOTAL-ASSETS> 231,268
<DEPOSITS> 149,966
<SHORT-TERM> 43,900
<LIABILITIES-OTHER> 4,759
<LONG-TERM> 0
0
0
<COMMON> 228
<OTHER-SE> 32,415
<TOTAL-LIABILITIES-AND-EQUITY> 231,268
<INTEREST-LOAN> 6,758
<INTEREST-INVEST> 1,909
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<INTEREST-TOTAL> 8,667
<INTEREST-DEPOSIT> 3,718
<INTEREST-EXPENSE> 1,384
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<INCOME-PRETAX> 2,015
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,209
<EPS-PRIMARY> .77
<EPS-DILUTED> .70
<YIELD-ACTUAL> 285
<LOANS-NON> 13
<LOANS-PAST> 292
<LOANS-TROUBLED> 160
<LOANS-PROBLEM> 1,314
<ALLOWANCE-OPEN> 967
<CHARGE-OFFS> 52
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<ALLOWANCE-CLOSE> 1,067
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