U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB/A
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
_________________________________
LUXEMBURG BANCSHARES, INC.
(Name of Small Business Issuer in Its Charter)
Wisconsin 39-1457904
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
_________________________________
630 Main Street, Luxemburg, Wisconsin 54217
(Address of Principal Executive Offices) (Zip Code)
_________________________________
(414) 845-2345
(Issuer's Telephone Number)
_________________________________
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.16-2/3 per share
(Title of Class)
<PAGE>
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION
The following discussion and analysis of the Company
relates to the years ended December 31, 1996 and 1995
and quarters ended March 31, 1997 and 1996 and should
be read in conjunction with the Company's consolidated
financial statements and notes thereto included
elsewhere herein.
Results of Operations
Year ended December 31, 1996 Compared to the Year Ended
December 31, 1995
The Company's results of operations depends
primarily on the level of its net interest margin, its
non-interest income and its operating expenses. Net
interest income depends on the volume of and rates
associated with interest earning assets and interest
bearing liabilities which results in the net interest
margin. Net income increased $113,588 or 16.3% to
$810,972 for the year ended December 31, 1996 from
$697,384 for the year ended December 31, 1995. This
increase is primarily due to the growth of the Bank
allowing for more interest earning assets and net
<PAGE>
interest income compared to the same period during
1995. During 1996 the Bank adopted SFAS No. 122,
"Accounting for Mortgage Servicing Rights," which
increased income by $43,271. The following table
summarizes the Company's operating performance for the
years specified.
Year Ended December 31,
1996 1995
Return on Assets 1.10% 1.00%
Return on Equity 11.01% 10.28%
Net Interest Income. Net interest income
increased $231,328 or 8.7% to $2,895,434 for the year
ended December 31, 1996 from $2,664,106 for the year
ended December 31, 1995. Total interest income
increased $407,681 for the year ended December 31, 1996
to $5,633,485 from $5,225,804 for the year ended
December 31, 1995. This increase is primarily a result
of average total loans for the year ended December 31,
1996 being approximately $49,900,000 compared to
average total loans of approximately $46,900,000 for
the year ended December 31, 1995. The loan portfolio
produces the highest yield of all earning assets.
The following table summarizes average total loans
by category for the years ended December 31, 1996 and
1995:
Type of Loan December 31, December 31,
1996 1995
Real Estate Loans $18,679,906 $19,483,110
Commercial and Industrial 17,719,086 13,973,672
Agricultural 5,517,504 5,632,283
Consumer 8,171,887 8,085,658
Other 461,996 284,571
Total gross average loans 50,550,379 47,459,294
Less: Allowance for credit 607,378
losses 539,443
Total net average loans $49,943,001 $46,919,851
Supplemental Disclosure:
Municipal Loans $1,104,933 $985,262
The Bank does not separately track average real estate
construction loans.
<PAGE>
Total interest expense increased $176,353 or 6.9%
to $2,738,051 for the year ended December 31, 1996 from
$2,561,698 for the year ended December 31, 1995. This
increase is due to an increase in interest bearing
deposits and the introduction of the Investors Choice
account in December, 1995. Interest expense on the
Investors Choice account increased $171,501 from the
year ended December 31, 1995 to the year ended December
31, 1996 and allowed the Bank to reduce it's reliance
on certificates of deposit over $100,000 as a source of
funds. Also the Bank attracted new certificates of
deposit in August, 1995 which increased the average
balance of certificates of deposit under $100,000 in
1996 due to the Bank being able to retain a large
percentage of these deposits at their maturity. Total
interest bearing liabilities averaged approximately
$58,300,000 for the year ended December 31, 1996 as
compared to approximately $55,600,000 for the year
ended December 31, 1995. The average cost of interest
bearing liabilities for the year ended December 31,
1996 was approximately 4.69% compared to an average
cost of interest bearing liabilities of approximately
4.61% for the year ended December 31, 1995.
The following table details average balances,
interest income/expense and average rates/yields for
the Company's earning assets and interest bearing
liabilities for the years ended December 31, 1996 and
1995. For purposes of the analysis below, any
adjustments of interest income due to loans being
placed on non-accrual status, the recovery of
previously charged off past due interest or the return
of a loan to full accrual status have been included in
interest income on loans and have been included in the
analysis of the reported yield on loans. The analysis
below excludes any changes in the fair market value of
investment securities available for sale. For purposes
of the analysis below, the Company does not report
yields and earnings on its tax-exempt investments and
loans on a tax-equivalent basis.
<PAGE>
Year End December 31, 1996 Year End December 31, 1995
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
ASSETS:
Interest
Bearing
Loans $49,943,001 $4,634,218 9.28% $46,919,851 $4,277,355 9.12%
Taxable
Investments
and Mortgage
Backed
Securities 13,187,931 741,479 5.62% 13,292,898 706,453 5.31%
Fed Funds
Sold 2,278,743 121,515 5.33% 2,453,699 140,649 5.73%
Municipal
Loans and
Investments 2,146,006 105,676 4.92% 1,471,541 83,545 5.68%
Other 559,700 30,597 5.47% 366,880 17,802 4.85%
Total $68,115,381 $5,633,485 8.27% $64,504,869 $51,225,804 8.10%
CSV Life
Insurance 1,044,941 994,414
Non-Earning
Assets 4,623,735 4,238,444
TOTAL
ASSETS $73,784,057 $69,737,727
LIABILITIES:
Interest
Bearing
Demand $4,516,169 $ 95,202 2.11% $4,480,440 $ 96,507 2.15%
Investors
Choice 3,596,690 175,598 4.88% 80,645 4,097 5.08%
Savings 7,419,895 219,869 2.96% 6,507,033 180,911 2.78%
CD's under
$100,000 27,936,618 1,575,125 5.64% 25,016,438 1,377,570 5.51%
CD's over
$100,000 1,989,579 128,015 6.43% 4,334,837 271,266 6,26%
Individual
Retirement
Accounts 6,490,642 367,704 5.67% 6,369,954 368,184 5.78%
Money Market
Deposits 4,803,935 123,144 2.56% 6,522,037 170,897 2.62%
Other 1,573,398 53,394 3.39% 2,266,684 92,266 4.07%
Total 58,326,926 $2,738,051 4.69% 55,578,068 2,561,698 4.61%
Non-Interest-
bearing
Liabilities 7,063,069 6,564,093
Other
Liabilities 968,201 802,401
Total
Liabilities 66,358,196 62,944,562
Equity 7,368,014 6,783,331
TOTAL
LIABILITIES
& EQUITY $73,726,210 $69,727,893
Recap:
Interest Income $5,633,485 8.27% $5,225,804 8.10%
Interest Expense 2,738,051 4.69% 2,561,697 4.61%
Net Interest
Income/Spread $2,895,434 3.58% $2,664,106 3.49%
Contribution of
Non-Interest-
bearing Funds 0.67% 0.64%
Net Interest Margin 4.25% 4.13%
Ratio of Average
Interest-Earning
Assets to Average
Interest-Bearing
Liabilities 116.78% 116.06%
Average balances are computed using daily average balances.
<PAGE>
The following table sets forth an analysis of
volume and rate changes in interest income and interest
expense of the Company's average earning assets and
average interest bearing liabilities. The table
distinguishes between the changes related to average
outstanding balances of assets and liabilities (changes
in volume holding the initial average rate constant)
and the changes related to average interest rates
(changes in the average rate holding the initial
average outstanding balance constant). The change in
interest due to both volume and rate has been allocated
to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of the
change in each.
Year ended December 31, 1996 compared to year
ended December 31, 1995.
Increase (Decrease) in Net
Interest Income
Net Due to Due to
Change Rate Volume
Interest Earning
Assets:
Loans $356,863 $77,412 $279,451
Taxable
Investments and
Mortgage Backed
Securities 35,026 40,553 (5,527)
Fed Funds Sold (19,134) (9,459) (9,675)
Municipal Loans
and Investments 22,131 (9,013) 31,144
Other 12,795 2,484 10,311
TOTAL 407,681 101,977 305,704
Interest Bearing
Liabilities:
Interest
Bearing Demand (1,305) (2,084) 779
Investors Choice 171,501 (154) 171,655
Savings 38,958 12,441 26,517
CD's under
$100,000 197,555 33,562 163,993
CD's over
$100,000 (143,251) 7,877 (151,128)
Individual
Retirement
Accounts (480) (10,289) 9,809
Money Market
Deposits (47,753) (3,637) (44,116)
Other (38,872) (13,692) (25,180)
TOTAL 176,353 24,024 152,329
Net Change in
Net Interest
Income $231,328 $77,953 $153,375
NOTE: Due to Rate Increase was calculated by
taking the change in rate times prior year average
balance. Due to Volume Increase was calculated by
taking the change in average balance times the
prior year rate.
Provision for Loan Losses. The amount charged to
the provision for loan losses by the Bank is based on
management's evaluation as to the amounts required to
maintain an allowance adequate to provide for potential
losses inherent in the loan portfolio. The level of
this allowance is dependent upon the total amount of
past due and non-performing loans, general economic
conditions and management's assessment of potential
losses based upon internal credit evaluations of loan
portfolios and particular loans. Specific factors
considered by management in setting the reserve for
loan losses consist of the following:
<PAGE>
Total loans outstanding.
The balance of the allowance for credit losses as
a percent of total loans outstanding.
The allowance for credit losses as a percent of
past due loans, classified loans and non-performing
loans.
The level of past due loans.
Non-accrual loans.
The level of watch list loans which include past
due loans, loans identified as potential problem loans,
loans with inadequate collateral, work out loans and
loans where a change in repayment ability has occurred
due to death or divorce.
Loans are entirely to borrowers in Northeast Wisconsin.
The Bank generally places loans on non-accrual
status, as discussed in Footnote 5 of the Company's
Consolidated Financial Statements, when the loan is
past due as to the payment of interest and/or principal
in excess of 90 days. The Bank also places loans on a
non-accrual status when it deems the collection of such
interest unlikely. Loans are returned to full accrual
status when the loan is brought current according to
all terms of the loan agreement and all past due
principal and interest is paid and the Bank deems its
collateral position adequate to warrant a return to
accrual status.
At December 31, 1996 and 1995 the Company did not
have any loans past due 90 days or more that were still
accruing interest nor any loans that meet the
definition of troubled debt restructuring contained in
SFAS No. 15.
During the year ended December 31, 1996, $109,000
was charged to the provision for loan losses compared
to $95,000 for the year ended December 31, 1995. At
December 31, 1996, the allowance was $654,000 or 1.18%
of total loans. This compares to an allowance of
$574,000 or 1.16% of total loans as of December 31,
1995. Net charge offs were $30,000 for the year ended
December 31, 1996 and $35,000 for the year ended
December 31, 1995. Non-performing loans at December
31, 1996 were $472,000.
The following table summarizes loan charge-offs
and recoveries by type of loan for the years ended
December 31, 1996 and 1995:
Loan Type December 31, 1996 December 31, 1995
Charge- Recovery Charge- Recovery
Off Off
Real Estate $ 1,000 $ 1,000 $ ---- $ ----
Commercial and ---- ---- ---- ----
Industrial
Agricultural 15,000 14,000 ---- 22,000
Consumer 35,000 6,000 63,000 6,000
TOTALS $ 51,000 $ 21,000 $63,000 $28,000
The Company had net charge-offs to average total
loans of .06 % for the year ended December 31, 1996
and .07% for the year ended December 31, 1995.
<PAGE>
The Bank has allocated its allowance for credit
losses at the end of each period presented as follows:
Balance at End of December 31, 1996 December 31, 1995
Period Applicable to:
% of % of
Loans Loan
to s to
total total
Amount Loans Amount Loan
s
Commercial and
agricultural $ 25,000 47% $ 30,000 43%
Real Estate-
construction ---- 4% ---- 4%
Real Estate-mortgage 10,000 37% 10,000 40%
Consumer 22,000 12% 24,000 13%
Total Domestic 57,000 100% 64,000 100%
Unallocated 597,000 510,000
TOTALS $ 654,000 100% 574,000 100%
Other Operating Income. Other operating income
for the year ended December 31, 1996, increased
$279,891 or 54.1% to $797,253 from $517,362 for the
year ended December 31, 1995. Effective January 1,
1996 the Bank purchased Total Financial Concepts to
expand the marketing of alternative investments.
Alternative Investment Commission Income increased
$165,149 or 475.6% to $199,871 for the year ended
December 31, 1996 from $34,722 for the year ended
December 31, 1995. Mortgage Equity Income for the year
ended December 31, 1996 increased $78,631 or 220.1% to
$114,352 from $35,721 for the year ended December 31,
1995. The adoption of SFAS 122, "Accounting for
Mortgage Servicing Rights" effective January 1, 1996
increased Mortgage Equity Income by $43,271 for the
year ended December 31, 1996.
Other Operating Expenses. Other operating
expenses for the year ended December 31, 1996 increased
$301,424 or 14.6% to $2,359,661 from $2,058,237 for the
year ended December 31, 1995. Salaries and related
benefits increased $231,443 or 20.7% to $1,346,967 for
the year ended December 31, 1996 from $1,115,524 for
the year ended December 31, 1995. This increase is
primarily due to increased staffing resulting from the
purchase of Total Financial Concepts effective January
1, 1996 and the opening of the IGA supermarket office
effective April 17, 1996. Equipment rentals,
depreciation and maintenance increased $39,393 or 35.1%
to $151,662 for the year ended December 31, 1996 from
$112,269 for the year ended December 31, 1995. This
increase is primarily due to personal computer
acquisitions to support the Bank's conversion to in-
house data processing in 1997.
Dividends and Equity Capital. The Company paid
its shareholders dividends of $184,480 or $0.76 per
share for the year ended December 31, 1996 and $167,233
or $0.69 per share for the year ended December 31,
1995. The following table summarizes the Company's
dividend pay out ratio and average capital position for
the years specified.
Year Ended December 31,
1996 1995
Dividend Payout
Ratio 22.75% 23.98%
Equity to Assets
Ratio 9.99% 9.73%
<PAGE>
Quarter Ended March 31, 1997 Compared to Quarter Ended
March 31, 1996
Net Interest Income. Net interest income, the
principal source of earnings, is the amount by which
interest generated by earning assets exceeds the
interest costs of liabilities obtained to fund them. As
shown below, net interest income has increased $88,043
or 13.08% to $760,978 for the three months ended March
31, 1997 from $672,935 for the three months ended March
31, 1996. The increase in net interest income is
primarily due to a mix shift in earning assets to
loans, which provide the highest yield of all earning
assets, and a reduction in the average interest rate
paid on the Bank's certificates of deposit.
Three Months Ended
March 31,
1997 1996
Interest Income $1,453,152 $1,377,346
Interest Expense 692,174 704,411
Net Interest Income $760,978 $672,935
Net Interest Margin 4.38% 4.01%
Rate/Volume Analysis. The impact of changes in
volume and interest rates on net interest income for
the three months ended March 31, 1997 and 1996 is
illustrated in the following table.
Three Months Ended March 31, 1997 Compared to
Three Months Ended March 31, 1996.
Increase (Decrease) in Net
Interest Income
Net Change Due To Due To
Rate Volume
Interest Income $ 75,806 $(5,115) $ 80,921
Interest Expense (12,237) (22,164) 9,927
Net Interest Income $ 88,043 $17,049 $ 70,994
Even though the average yield on the banks loan
portfolio decreased in the first quarter of 1997
compared to the first quarter of 1996 additional loan
volume raised the average yield on all earning assets
to 8.37% for the three months ended March 31, 1997 from
8.20% for the three months ended March 31, 1996. Except
for savings deposits, rates paid on the bank's deposits
were generally lower for the three months ended March
31, 1997 compared to the three months ended March 31,
1996. Interest expense was $692,174 for the three
months ended March 31, 1997 compared to $704,411 for
the three months ended March 31, 1996.
Operating Results. Net income for the three
months ended March 31, 1997 increased $58,879 or 34.7%
to $228,510 from $169,631 for the three months ended
March 31, 1996. The increase in net interest income is
discussed in "Net Interest Income" and "Rate/Volume
Analysis" elsewhere in this report. Other operating
income includes commissions from the Bank's Financial
Resource Center which markets alternative investments.
Commission income for the three months ended March 31,
1997 increased by $27,006 or 66.0% to $67,898 from
$40,892 for the three months ended March 31, 1996.
Salaries and related benefits increased 10.3% to
$344,637 for the three months ended March 31, 1997
compared to $312,550 for the three months ended March
31, 1996. The increase reflects staffing at the IGA
Supermarket location which opened in the second quarter
of 1996, increased staffing at the Bank, the
anticipated conversion to an in-house data processing
system in the second quarter of 1997 and inflationary
increases.
Provision for Loan Losses. At March 31, 1997 and
1996 the Company did not have any loans past due 90
days or more that were still accruing interest nor any
loans that meet the definition of "Troubled Debt
Restructuring" contained in SFAS No. 15. The Bank had
$410,000 of nonaccrual loans at March 31, 1997 and
$431,000 of nonaccrual loans at March 31, 1996
<PAGE>
During the three months ended March 31, 1997,
$30,000 was charged to the provision for loan losses
compared to $18,500 for the three months ended March
31, 1996. At March 31, 1997 the allowance was $686,000
or 1.22% of total loans. This compares to an allowance
of $654,000 or 1.18% of total loans as of March 31,
1996. For the three months ended March 31, 1997 the
Bank had net recoveries of $2,000 compared to net
charge-offs of $2,000 for the three months ended March
31, 1996.
The following table summarizes loan charge-offs
and recoveries by type of loan for the three months
ended March 31, 1997 and 1996:
Loan Type March 31, 1997 March 31, 1996
Charge- Recovery Charge- Recovery
Off Off
Real Estate $ --- $ --- $ --- $ ---
- - - -
Commercial and ---- ---- ---- ----
Industrial
Agricultural ---- 12,000 ---- 4,000
Consumer 12,000 2,000 7,000 1,000
TOTALS $12,000 $14,000 $7,000 $5,000
The Bank has allocated its allowance for credit
losses at the end of each period presented as follows:
Balance at End of March 31, 1997 March 31, 1996
Period Applicable to:
% of % of
Loans Loan
to s to
total total
Amount Loans Amount Loans
Commercial and
agricultural $ 40,000 48% $ 30,000 45%
Real Estate-
construction ---- 4% ---- 4%
Real Estate-mortgage 5,000 37% 10,000 38%
Consumer 51,000 11% 33,000 13%
Total Domestic 96,000 100% 73,000 100%
Unallocated 590,000 581,000
TOTALS $ 686,000 100% $ 654,000 100%
Liquidity and Interest Rate Sensitivity
The Company must maintain an adequate liquidity
position in order to respond to the short-term demand
for funds caused by withdrawals from deposit accounts,
extensions of credit and for the payment of operating
expenses. Maintaining this position of adequate
liquidity is accomplished through the management of a
combination of liquid assets; those which can be
converted into cash and access to additional sources of
funds. Primarily liquid assets of the Company are cash
and due from banks, federal funds sold, investments
held as "available for sale" and maturing loans.
Federal funds sold and loans from the Federal Home Loan
Bank system represent the Company's primary source of
immediate liquidity and were maintained at a level to
meet immediate
<PAGE>
needs. Federal Funds Sold averaged
approximately $2,300,000 and $2,500,000 for the years
ended December 31, 1996 and 1995, respectively and
$400,000 and $4,600,000 for the three months ended
March 31, 1997 and 1996, respectively. Maturities in
the Company's loan and investment portfolios are
monitored regularly to avoid matching short-term
deposits and long-term loans and investments. Other
assets and liabilities are also monitored to provide
the proper balance between liquidity, safety, and
profitability. This monitoring process must be
continuous due to the constant flow of cash which is
inherent in a financial institution.
The Company actively manages its interest rate
sensitive assets and liabilities to reduce the impact
of interest rate fluctuations. In addition, the Bank
monitors the interest rates paid on certificates of
deposit as advertised by its competitors and endeavors
to pay competitive interest rates to retain and attract
certificates of deposit. Should competitive pressures
dictate, the Bank may have to increase rates paid to
retain the certificates of deposit that mature in the
next year and any increase in interest rates paid on
certificates of deposit may reduce future Company
earnings. The Bank also monitors the assets and
liabilities that reprice each month to determine the
impact on future earnings due to anticipated
repricings. At December 31, 1996 and March 31, 1997,
the Company's rate sensitive assets exceed rate
sensitive liabilities due within one year by
$13,048,000 and $6,321,000, respectively.
As part of managing liquidity, the Company
monitors its loan to deposit ratio on a daily basis.
At December 31, 1996 and March 31, 1997 the ratio was
83.4% and 84.4%, respectively, which is within the
Company's acceptable range.
The Company experienced a decrease in cash and
cash equivalents, its primary source of liquidity, of
$5,322,142 during 1996 and $155,229 for the three
months ended March 31, 1997. The primary source of
cash flow for 1996 was the Company's cash flow from
operations of $855,592. Cash flow from investing
activities used $5,722,025 to fund loan growth in 1996.
The primary source of cash flow for the three months
ended March 31, 1997 was an increase in deposits of
$664,513 and an increase in net borrowings of $636,312.
Cash flow from investing activities used $1,237,898 to
fund loan growth for the three months ended March 31,
1997. The Company's management believes its liquidity
sources are adequate to meet its operating needs and
does not know of any trends, events or uncertainties
that may result in a significant adverse effect on the
Company's liquidity position.
The following table illustrates the projected
maturities and the repricing mechanisms of the major
asset/liability categories of the Company as of
December 31, 1996, based on certain assumptions. No
prepayment assumptions have been made for the loan
portfolio. Maturities and repricing dates for
investments have been projected by applying the
classifications set forth below to contractual
maturities and repricing dates. The Bank's variable
rate loans consist primarily of commercial loans which
reprice with changes in the prime rate and are
generally written for a 1 year term.
1 Year 1 - 5 5 - 10 After 10
or Less Years Years Years
Interest Earning
Assets:
Fed Funds Sold $ 466,000 $ -- $ -- $ --
Investment
Securities 6,524,000 4,612,000 2,436,000 493,000
Loans:
Variable Rate 7,420,000 -- -- --
Real Estate-
Construction 2,286,000 -- -- --
Real Estate-
Other 11,979,000 7,724,000 139,000 94,000
Commercial
and Industrial 10,084,000 3,897,000 259,000
Agricultural 4,344,000 466,000 78,000 70,000
Consumer 2,716,000 3,344,000 271,000 --
Total Loans 38,829,000 15,431,000 747,000 164,0000
Other 659,000 -- -- --
Total Interest
Earning Assets 46,478,000 20,043,000 3,183,000 657,000
<PAGE>
Interest Bearing
Liabilities:
Interest Bearing
Demand -- -- -- 6,045,000
Savings Deposits 1,427,000 -- -- 10,570,000
Money Market
Accounts 1,399,000 -- -- 3,263,000
Certificates
of Deposit 21,535,000 6,043,000 -- --
Jumbo CD's 2,246,000 306,000 -- --
IRA's 5,892,000 427,000 -- --
Other 931,0000 135,000 -- --
Total Interest
Bearing
Liabilities 33,430,000 6,911,000 -- 19,878,000
Interest
Sensitivity
Gap per Period $13,048,000 $13,132,000 $3,183,000 ($19,221,000)
Cumulative
Interest
Sensitivity Gap $13,048,000 $26,180,000 $29,363,000 $10,142,000
Interest
Sensitivity
Gap as a
Percentage
of Earning Assets 18.5% 18.7% 4.5% (27.3%)
Cumulative
Sensitivity
Gap as a
Percentage of
Earning Assets 18.5% 37.2% 41.7% 14.4%
The following table summarizes the weighted
average yield of investment securities by maturity term
and discloses mortgage-related securities separately:
December 31, 1996 March 31, 1997
Security Maturity Weighted Average Weighted Average
Yield Yield
1 Year or Less 5.16% 5.61%
1 - 5 Years 6.41% 6.17%
5 - 10 Years 5.38% 5.38%
After 10 Years 5.17% 5.17%
Mortgage Related 5.91% 6.26%
Securities
The Bank's securities that mature after 5 years
generally consist of tax-exempt municipals which carry
a lower yield. The yield has not been adjusted to give
effect to the tax-equivalent yield.
The Company does not have any security
concentrations exceeding 10% of stockholder's equity
that are required to be disclosed.
The Company evaluates its tax position and the
relative tax equivalent yield of various alternative
investments and reviews the yield curve in making its
investment decisions. The Company has increased its
municipal loan and investment position based on this
evaluation from an average investment of $1,471,541 in
1995 to $2,146,006 in 1996.
The following table illustrates the projected
maturities and the repricing mechanisms of the major
asset/liability categories of the Company as of March
31, 1997, based on certain assumptions. No prepayment
rate assumptions have been made for the loan portfolio.
Maturities and repricing dates for investments have
been projected by applying the assumptions set forth
below to contractual maturities and repricing dates.
<PAGE>
1 Year 1 - 5 5 - 10 After 10
or Less Years Years Years
Interest Earning
Assets:
Fed Funds Sold $ 443,000 $ ---- $ ---- $ ----
Investment
Securities 3,072,000 2,920,000 4,951,000 3,404,000
Loans:
Variable Rate 7,890,000 ---- ---- ----
Real Estate-
Construction 2,014,000 ---- ---- ----
Real Estate-
Other 11,995,000 8,407,000 732,000 ----
Commercial
and Industrial 9,469,000 4,084,000 946,000 ----
Agricultural 3,929,000 430,000 241,000 ----
Consumer 2,773,000 3,206,000 295,000 ----
Other 340,000 ---- ---- ----
Total Interest
Earning Assets 41,925,000 19,047,000 7,165,000 3,404,000
Interest Bearing
Liabilities:
Interest Bearing
Demand ---- ---- ---- 5,243,000
Savings Deposits 1,958,000 ---- ---- 11,848,000
Money Market
Accounts 1,281,000 ---- ---- 2,988,000
Certificates
of Deposit 24,520,000 4,215,000 ---- ----
Jumbo CD's 988,000 206,000 ---- ----
IRA's 5,655,000 540,000 ---- ----
Other 1,202,000 500,000 ---- ----
Total Interest
Bearing
Liabilities 35,604,000 5,461,000 0 20,079,000
Interest
Sensitivity
Gap Per Period $6,321,000 $13,586,000 $7,165,000 ($16,675,000)
Cumulative Interest
Sensitivity Gap $6,321,000 $19,907,000 $27,072,000 $10,397,000
Interest Sensitivity 8.8% 19.0% 10.0% (23.3%)
Gap as a Percentage
of Earning Assets
Cumulative 8.8% 27.8% 37.8% 14.5%
Sensitivity Gap as a
Percentage of Earning
Assets
CAPITAL RESOURCES
The Company's primary source of capital since
commencing operations has been from issuance of common
stock and retained operating profit. The Company does
not have any long term debt facility arrangements at
December 31, 1996. Capital for the Bank is above
regulatory requirements at December 31, 1996.
Pertinent capital ratios for the Bank as of December
31, 1996 are as follows:
Minimum
Actual Requirements
Tier 1 Risk-Based 14.5% 4.0%
Capital Ratio
Total Risk-Based 15.8% 8.0%
Capital Ratio
Leverage Ratio 10.2% 4.0%
<PAGE>
Dividends from the Bank to the Company may not
exceed the undivided profits of the Bank (included in
consolidated retained earnings) without prior approval
of a federal regulatory agency. The Bank paid $225,750
and $183,750 in dividends to the Company for the years
ended December 31, 1996 and 1995, respectively. At
December 31, 1996 the Bank could have paid the Company
approximately $2,575,000 of additional dividends
without prior regulatory approval. In addition,
Federal banking laws limit the amount of loans the bank
may make to the Company, subject to certain collateral
requirements. No loans were made by the Bank to the
Company during 1996 or 1995.
<PAGE>
Part F/S
Luxemburg Bancshares, Inc.
and Subsidiaries
Luxemburg, Wisconsin
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996 and 1995
Quarters Ended March 31, 1997 and 1996
<PAGE>
TABLE OF CONTENTS
Page
Independent Auditor's Report 15
Annual Financial Statements
(Years Ended December 31, 1996 and 1995):
Consolidated Balance Sheets 16-17
Consolidated Statements of Income 18
Consolidated Statements of Changes in Stockholders'
Equity 19
Consolidated Statements of Cash Flows 20-21
Notes to Consolidated Financial Statements 22-40
Interim Financial Statements (Quarters Ended March 31,
1997 and 1996)
Consolidated Balance Sheet - Unaudited 41
Consolidated Statements of Income - Unaudited 42
Consolidated Statements of Cash Flows - Unaudited 43
Notes to Consolidated Financial Statements -
Unaudited 44-45
<PAGE>
Wipfli Ullrich Bertelson LLP
CPAs * Consultants * Advisors
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Luxemburg Bancshares, Inc.
Luxemburg, Wisconsin
We have audited the accompanying consolidated balance
sheets of Luxemburg Bancshares, Inc. and Subsidiaries
as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then
ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of Luxemburg
Bancshares, Inc. and Subsidiaries at December 31, 1996
and 1995, and the results of their operations and their
cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Wipfli Ullrich Bertelson LLP
--------------------------------
Wipfli Ullrich Bertelson LLP
February 11, 1997
Green Bay, Wisconsin
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
Cash and due from banks $2,858,813 $3,614,997
Interest-bearing deposits 407,688 39,646
Federal funds sold 466,000 5,400,000
Cash and cash equivalents 3,732,501 9,054,643
Investment securities available
for sale - Stated at 14,064,569 14,353,462
Total loans 55,170,942 49,478,668
Allowance for credit losses (653,535) (574,286)
Net loans 54,517,407 48,904,382
Premises and equipment 1,380,788 1,251,628
Other investments at cost 251,650 205,250
Other assets 1,953,724 1,696,884
TOTAL ASSETS $75,900,639 $75,466,249
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
Liabilities:
Non-interest-bearing deposits $7,004,277 $7,897,224
Interest-bearing deposits 59,153,184 58,930,924
Total deposits 66,157,461 66,828,148
Short-term borrowings 880,076 393,271
Borrowed funds 185,558 112,490
Other liabilities 997,528 1,088,937
Total liabilities 68,220,623 68,422,846
Stockholders' equity:
Common stock - $.1667 par value:
Authorized - 300,000 shares
Issued - 270,500 shares 45,083 45,083
Capital surplus 3,416,080 3,410,071
Retained earnings 4,579,875 3,953,383
Unrealized loss on investment
securities available for sale -
Net of tax (6,913) (6,304)
Less - 27,764 shares and 28,134
shares, respectively, of treasury
common stock, at cost (354,109) (358,830)
Total stockholders' equity 7,680,016 7,043,403
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $75,900,639 $75,466,249
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
1996 1995
Interest income:
Interest and fees on loans $4,690,655 $4,326,739
Interest on investment securities:
Taxable 741,479 706,453
Tax-exempt 49,239 34,161
Other interest and dividend income 152,112 158,451
Total interest income 5,633,485 5,225,804
Interest expense:
Deposits 2,702,128 2,486,490
Short-term borrowings 21,352 66,190
Borrowed funds 14,571 9,018
Total interest expense 2,738,051 2,561,698
Net interest income 2,895,434 2,664,106
Provision for credit losses 109,000 95,000
Net interest income after
provision for credit losses 2,786,434 2,569,106
Other income:
Service charges on deposit accounts 185,917 157,518
Mortgage underwriting fees -
Secondary market 114,352 35,721
Loan servicing fee income 39,088 33,818
Other operating income 457,896 290,305
Total other income 797,253 517,362
Operating expenses:
Salaries and related benefits 1,346,967 1,115,524
Net occupancy expense 147,201 130,859
Equipment rentals, depreciation,
and maintenance 151,662 112,269
Data processing 192,963 199,833
Other operating expenses 520,868 499,752
Total operating expenses 2,359,661 2,058,237
Income before provision for income taxes 1,224,026 1,028,231
Provision for income taxes 413,054 330,847
Net income $ 810,972 $ 697,384
Earnings per common share $ 3.34 $ 2.88
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
<TABLE>
Unrealized
Loss on
Investment
Securities
Available Treasury
Common Capital Retained for Sale - Common
Stock Surplus Earnings Net of Tax Stock Total
Balance,
January 1, 1995
<S> <C> <C> <C> <C> <C> <C>
$ 45,083 $ 3,405,230 $ 3,423,232 $ (15,188) $(363,169) $6,495,188
Net income 697,384 697,384
Change in unrealized
loss on investment
securities available
for sale - Net of tax 8,884 8,884
Dividends paid (167,233) (167,233)
Employee stock
bonus - 340 shares 4,841 4,339 9,180
Balance,
December 31, 1995
45,083 3,410,071 3,953,383 (6,304) (358,830) 7,043,403
Net income 810,972 810,972
Change in unrealized
loss on investment
securities available
for sale - Net of tax (609) (609)
Dividends paid (184,480) (184,480)
Employee stock
bonus - 370 shares 6,009 4,721 10,730
Balance,
December 31, 1996
$ 45,083 $ 3,416,080 $4,579,875 $(6,913) $(354,109) $7,680,016
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net income $ 810,972 $ 697,384
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 131,713 100,195
Accretion of discounts on securities (60,178) (15,929)
Amortization of premiums on securities 57,919 59,971
Provision for credit losses 109,000 95,000
Employee stock bonus 10,730 9,180
Credit for deferred taxes (27,661) (16,024)
Change in other operating assets (85,494) (357,570)
Change in other operating liabilities (91,409) 537,993
Total adjustments 44,620 412,816
Net cash provided by operating activities 855,592 1,110,200
Cash flows from investing activities:
Proceeds from sale of securities
available for sale -0- 500,000
Proceeds from maturities of
securities held to maturity -0- 1,081,009
Proceeds from maturities of
securities available for sale 7,289,758 1,025,821
Purchase of securities held to
maturity -0- (964,471)
Purchase of securities available
for sale (6,996,800) (2,395,482)
Net increase in loans (5,722,025) (3,461,759)
Purchase of additional life insurance (17,300) -0-
Capital expenditures (260,873) (157,500)
Purchase of other investments (46,400) (179,500)
Net cash used in investing activities (5,753,640) (4,551,882)
Cash flows from financing activities:
Net increase (decrease) in deposits (670,687) 10,258,883
Net increase (decrease) in short-term
borrowings 486,805 (1,704,910)
Principal payments on borrowed funds (55,732) (25,582)
Dividends paid (184,480) (167,233)
Net cash provided by (used in) financing
activities (424,094) 8,361,158
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1996 and 1995
1996 1995
Net increase (decrease) in cash and
cash equivalents $(5,322,142) $4,919,476
Cash and cash equivalents at beginning 9,054,643 4,135,167
Cash and cash equivalents at end $3,732,501 $9,054,643
Supplemental information:
Cash paid during the year for:
Interest $2,770,797 $2,175,344
Income taxes $ 471,069 $ 318,380
The Bank purchased the assets of Total Financial
Concepts, Inc. for $135,800. In conjunction with the
acquisition, the Bank incurred debt of $128,800.
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Luxemburg
Bancshares, Inc. (the "Company") and its subsidiaries
conform to generally accepted accounting principles and
general practices within the banking industry.
Significant accounting and reporting policies are
summarized below.
Organization
The Company provides banking services to individual and
corporate customers through its wholly owned
subsidiary, Bank of Luxemburg (the "Bank"). The Bank
operates as a full-service financial institution with a
primary market area including, but not limited to, west
Kewaunee County and northeast Brown County. The Bank
emphasizes variable rate commercial and consumer real
estate loans. In addition, the Bank holds a variety of
securities through its wholly owned subsidiary,
Luxemburg Investment Corporation, a Nevada investment
corporation. The Company is subject to the regulations
of certain federal and state agencies and undergoes
periodic examinations by those regulatory authorities.
Principles of Consolidation
The consolidated financial statements include the
accounts of Luxemburg Bancshares, Inc. and
Subsidiaries, Bank of Luxemburg, Luxemburg Investment
Corporation, and Area Development Corporation. All
significant intercompany balances and transactions have
been eliminated.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
at the date of the financial statements and the
reported amounts of revenue and expenses during the
reporting period. Actual results may differ from these
estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, interest-bearing and
non-interest-bearing deposits in banks, and federal
funds sold. Generally, federal funds are purchased and
sold for one-day periods.
Investment in Securities
The Company's investments in securities are classified
as available for sale and accounted for as follows:
Securities available for sale consist of debt,
equity, and mortgage-related securities. These
securities are stated at fair value. Unrealized
holding gains and losses, net of tax, on securities
available for sale are reported as a net amount in
a separate component of stockholders' equity until
realized.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Gains and losses on the sale of securities available
for sale are determined using the specific-
identification method.
Loans and Related Interest Income and Fees
Interest on loans is credited to income as earned.
Interest income is not accrued on loans where
management has determined collection of such interest
is doubtful. When a loan is placed on nonaccrual
status, previously accrued but unpaid interest deemed
uncollectible is reversed and charged against current
income. Loan-origination fees and certain direct
origination costs are capitalized and recognized as an
adjustment of the yield on the related loan.
Allowance for Credit Losses
The allowance for credit losses includes specific
allowances related to commercial loans which have been
judged to be impaired. A loan is impaired when, based
on current information, it is probable that the Company
will not collect all amounts due in accordance with the
contractual terms of the loan agreement. These
specific allowances are based on discounted cash flows
of expected future payments using the loan's initial
effective interest rate or the fair value of the
collateral if the loan is collateral dependent.
The Company continues to maintain a general allowance
for credit losses for loans not considered impaired.
The allowance for credit losses is maintained at a
level which management believes is adequate to provide
for possible credit losses. Management periodically
evaluates the adequacy of the allowance using the
Company's past loan loss experience, known and inherent
risks in the portfolio, composition of the portfolio,
current economic conditions, and other relevant
factors. This evaluation is inherently subjective
since it requires material estimates that may be
susceptible to significant change.
Mortgage Servicing Rights
The cost of mortgage servicing rights is amortized in
proportion to, and over the period of, estimated net
servicing revenue. Impairment of mortgage servicing
rights is assessed based on the fair value of those
rights. Fair values are estimated using discounted
cash flows based on a current market interest rate.
For purposes of measuring impairment, the rights are
stratified by rate in the quarter in which the related
mortgage loans were sold.
Premises and Equipment
Premises and equipment are stated at cost. Maintenance
and repair costs are charged to expense as incurred.
Gains or losses on disposition of premises and
equipment are reflected in income. Depreciation is
computed on the straight-line method and is based on
the estimated useful lives of the assets which range
from three to thirty-five years.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Other Investments
Other investments consist of Federal Home Loan Bank
stock and Bankers Bank stock which are carried at cost.
Other investments are evaluated for impairment on an
annual basis.
Goodwill
Goodwill acquired in a business acquisition is being
amortized on a straight-line basis over five years.
Income Taxes
Deferred income taxes have been provided under the
liability method. Deferred tax assets and liabilities
are determined based on the difference between the
consolidated financial statement and tax bases of
assets and liabilities as measured by the current
enacted tax rates which will be in effect when these
differences are expected to reverse. Deferred tax
expense (benefit) is the result of changes in the net
deferred tax asset and liability.
Advertising Costs
Advertising costs are expensed as incurred.
Off-Balance-Sheet Financial Instruments
In the ordinary course of business, the Bank has
entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commitments
under credit card arrangements, commercial letters of
credit, and standby letters of credit. Such financial
instruments are recorded in the consolidated financial
statements when they become payable.
Earnings Per Share
Earnings per common share are based upon the weighted
average number of common shares outstanding. The
weighted average number of shares outstanding was
242,736 in 1996 and 242,366 in 1995.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Future Accounting Changes
The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No.
125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities,"
in June 1996. SFAS No. 125 provides accounting and
reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities.
The statement provides guidelines for classification of
a transfer as a sale. The statement also requires
liabilities incurred or obtained by transferors as part
of a transfer of financial assets be initially recorded
at fair value. Subsequent to acquisition, the
servicing assets and liabilities are to be amortized
over the estimated net servicing period. This
statement is required to be adopted for transfers and
servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996.
In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions
of FASB Statement No. 125." This statement defers
implementation of certain provisions of SFAS No. 125
for one year.
NOTE 2 - CHANGE IN ACCOUNTING PRINCIPLE
The FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," in May 1995. As required under the
statement, the Company adopted the provisions of the
new standard effective January 1, 1996. SFAS No. 122
requires accounting recognition of the rights to
service mortgage loans for others. In accordance with
SFAS No. 122, prior-period consolidated financial
statements have not been restated to reflect the change
in accounting principle.
NOTE 3 - RESTRICTIONS ON CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the amount of $194,000
were restricted at December 31, 1996, to meet the
reserve requirements of the Federal Reserve System.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVESTMENT SECURITIES
The amortized cost and estimated fair value of
investment securities are as follows:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
Securities Available for Sale:
1996
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 5,993,060 $ 38,374 $ 15,733 $6,015,701
Obligations of states and
political subdivisions 2,437,075 7,114 17,362 2,426,827
Mortgage-related securities 5,645,928 16,966 40,853 5,622,041
Total $ 14,076,063 $ 62,454 $ 73,948 $14,064,569
1995
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 6,792,333 $ 63,143 $ 21,246 $6,834,230
Obligations of states and
political subdivisions 375,654 -0- 2,060 373,594
Mortgage-related securities 7,198,776 5,570 58,708 7,145,638
Total $ 14,366,763 $ 68,713 $ 82,014 $14,353,462
Fair values of securities are estimates based on
financial models or prices paid for similar securities.
It is possible interest rates could change considerably
resulting in a material change in the estimated fair
value.
As of December 1, 1995, securities with a book value of
$11,663,275 and an estimated fair value of $11,621,299
were transferred from the held-to-maturity
classification to the available-for-sale
classification. The transfer was made in accordance
with the Financial Accounting Standards Board Guide to
Implementation of SFAS No. 115.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated fair value of
investment securities at December 31, 1996, by
contractual maturity, are shown below. Expected
maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations with or without call or prepayment
penalties.
Amortized Estimated
Cost Fair Value
Securities Available for Sale:
Due in one year or less $3,554,692 $3,552,645
Due after one year through five years 1,928,818 1,944,668
Due after five years through ten years 2,946,625 2,945,215
8,430,135 8,442,528
Mortgage-related securities 5,645,928 5,622,041
Total investment securities $14,076,063 $14,064,569
In 1995, one available-for-sale debt security with an
amortized cost of $500,000 was sold. There was no gain
or loss on the sale. There were no sales of debt
securities during 1996.
Investment securities with an amortized cost of
$994,833 and estimated fair value of $995,200 were
pledged to secure public deposits, short-term
borrowings, and other purposes required by law as of
December 31, 1996.
NOTE 5 - LOANS
The composition of loans at December 31 follows:
1996 1995
Real estate:
Construction $2,402,000 $2,087,000
Other 20,246,000 19,504,000
Commercial and industrial 20,280,000 15,586,000
Agricultural 5,873,000 5,722,000
Consumer 6,369,942 6,579,668
Total loans $55,170,942 $49,478,668
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LOANS (CONTINUED)
The aggregate amount of nonperforming loans was
approximately $472,000 and $358,000 at December 31,
1996 and 1995, respectively. Nonperforming loans are
those which are contractually past due 90 days or more
as to interest or principal payments, on a nonaccrual
of interest status, or loans the terms of which have
been renegotiated to provide a reduction or deferral of
interest or principal. The interest income recorded
and that which would have been recorded had nonaccrual
and renegotiated loans been current, or not troubled,
are not material to the consolidated financial
statements for the years ended December 31, 1996 and
1995.
At December 31, 1996 and 1995, there were no loans
considered to be impaired. There were also no impaired
loans during 1996 and 1995.
The subsidiary bank in the ordinary course of banking
business grants loans to the Company's executive
officers and directors, including their families and
firms in which they are principal owners.
Substantially all loans to employees, officers,
directors, and stockholders owning 5% or more of the
Company were made on the same terms, including interest
rates and collateral, as those prevailing at the time
for comparable transactions with others and did not
involve more than the normal risk of collectibility or
present other unfavorable features.
Activity in such loans during 1996 is summarized below:
Loans outstanding, December 31, 1995 $2,652,064
New loans 846,360
Repayment 1,326,044
Loans outstanding, December 31, 1996 $2,172,380
An analysis of the allowance for credit losses for the
years ended December 31 follows:
1996 1995
Balance at beginning $ 574,286 $ 514,103
Provision charged to operating expense 109,000 95,000
Recoveries on loans 21,426 28,094
Loans charged off (51,177) (62,911)
Balance at end $ 653,535 $ 574,286
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LOAN SERVICING
The following is an analysis of changes in mortgage
servicing rights in 1996:
Balance January 1, 1996 $ -0-
Capitalized amounts 51,228
Less - Amortization (7,957)
Balance December 31, 1996 $ 43,271
No impairment of mortgage servicing rights existed at
December 31, 1996; therefore, no valuation allowance
was recorded.
NOTE 7 - PREMISES AND EQUIPMENT
Details of premises and equipment at December 31
follow:
1996 1995
Land $70,246 $ 70,246
Buildings and improvements 1,376,602 1,309,364
Furniture and equipment 960,491 766,856
Totals 2,407,339 2,146,466
Less - Accumulated depreciation 1,026,551 894,838
Net depreciated value $1,380,788 $1,251,628
Depreciation charged to operating expense totaled
$131,713 in 1996 and $100,195 in 1995.
NOTE 8 - DEPOSITS
The distribution of deposits at December 31 is as
follows:
1996 1995
Non-interest-bearing demand deposits $7,004,277 $7,897,224
Interest-bearing demand deposits 6,044,927 6,093,358
Savings deposits 11,997,553 8,527,000
Money market deposits 4,662,156 5,672,000
Time deposits 36,448,548 38,638,566
Total deposits $66,157,461 $66,828,148
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - DEPOSITS (CONTINUED)
Time deposits of $100,000 or more were approximately
$2,552,000 and $3,792,000 at December 31, 1996 and
1995, respectively. Interest expense on time deposits
of $100,000 or more was approximately $128,000 and
$271,000 for the years ended December 31, 1996 and
1995, respectively.
At December 31, 1996, the scheduled maturities of time
deposits are as follows:
1997 $29,692,623
1998 4,687,548
1999 1,254,820
2000 507,049
Thereafter 306,508
Total $36,448,548
NOTE 9 - SHORT-TERM BORROWINGS
As a member of the Federal Home Loan Bank (FHLB)
system, the Bank may utilize various borrowing
alternatives secured by pledges of mortgage loans and
FHLB stock. At December 31, 1996, the advance of
$500,000 has an original maturity of 99 days with
interest at 5.5%. Interest is payable monthly. There
were no FHLB borrowings outstanding at December 31,
1995.
Other short-term borrowings consist of treasury tax and
loan deposits of $380,076 and $393,271 at December 31,
1996 and 1995, respectively, which generally mature
within 1 to 120 days from the transaction date.
NOTE 10 - BORROWED FUNDS
Borrowed funds consist of the following:
1996 1995
6.63% land contract,
payable at $2,831 per month
including interest, due
September 1, 1999 $85,179 $112,490
8.0% note, payable at $2,408
per month including interest,
due December 31, 2000 100,379 -0-
Totals $ 185,558 $112,490
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - BORROWED FUNDS (CONTINUED)
Required payments of principal on the borrowed funds at
December 31, 1996, are summarized as follows:
1997 $ 50,844
1998 54,636
1999 50,175
2000 29,903
Total $ 185,558
NOTE 11 - INCOME TAXES
The provision for income taxes consists of the
following:
1996 1995
Current tax expense:
Federal $387,012 $310,348
State 53,703 36,523
Total current 440,715 346,871
Deferred tax credit:
Federal (18,734) (12,796)
State (4,684) (3,228)
Total deferred (23,418) (16,024)
Change in valuation allowance (4,243) -0-
Total provision for income taxes $ 413,054 $ 330,847
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - INCOME TAXES (CONTINUED)
Deferred income taxes are provided for the temporary
differences between the financial reporting basis and
the tax basis of the Company's assets and liabilities
net of a valuation allowance for deferred tax assets
not likely to be realized. The major components of net
deferred tax assets at December 31 are as follows:
1996 1995
Deferred tax assets:
Reserve for loan losses $ 153,157 $ 122,080
Deferred compensation 78,877 53,697
Intangible assets 6,595 -0-
Net operating loss carryovers 18,808 23,051
Other 701 178
Unrealized loss on investment
securities available for sale 4,581 6,997
Total deferred tax assets 262,719 206,003
Deferred tax liabilities:
Depreciation (142,552) (126,023)
Accretion (11,597) (8,612)
Mortgage servicing rights (16,968) -0-
Other 769 -0-
Total deferred tax liabilities (170,348) (134,635)
Total valuation allowance recognized
for net deferred tax assets (18,808) (23,051)
Net deferred tax asset $ 73,563 $ 48,317
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - INCOME TAXES (CONTINUED)
A summary of the source of differences between income
taxes at the federal statutory rate and the provision
for income taxes for the years ended December 31
follows:
1996 1995
% of % of
Pretax Pretax
Amount Income Amount Income
Tax expense at statutory rate $416,169 34.0 $349,599 34.0
Increase (decrease) in taxes
resulting from:
Tax-exempt interest (26,926) (2.2) (28,520) (2.8)
State income taxes - Net of
federal tax benefit 32,804 2.7 20,409 2.0
Cash surrender value of life
insurance in excess of premiums (15,659) (1.2) (9,020) (.9)
Other 6,666 .5 (1,621) (.1)
Provision for income taxes $413,054 33.8 $330,847 32.2
The Company has state net operating loss carryforwards
of approximately $342,000. The net operating losses
fully expire in 2011.
NOTE 12 - PROFIT-SHARING PLAN
The Bank has a 401(k) profit-sharing plan covering
substantially all employees. The plan provides for
discretionary contributions and matching contributions
up to 8% of employee compensation; however, all
contributions are at the discretion of the Board of
Directors. Profit-sharing expense for 1996 and 1995
was $41,400 and $34,832, respectively.
NOTE 13 - DEFERRED COMPENSATION
The Company has a deferred compensation plan which
permits directors to defer a portion of their
compensation. The deferred compensation is accrued but
unfunded, is distributable in cash after retirement,
and amounted to $201,144 and $136,934 at December 31,
1996 and 1995, respectively. The Company has insured
the lives of the directors who participate in the
deferred compensation plan to assist in the funding of
the deferred compensation liability. The Company is
the owner and beneficiary of the insurance policies.
At December 31, 1996 and 1995, the cash surrender value
of these policies was $1,071,908 and $1,008,000,
respectively. The amount charged to operations for
deferred compensation was $64,210 and $53,277 for the
years ended December 31, 1996 and 1995, respectively.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Stock Redemption Policy
Luxemburg Bancshares, Inc. adopted a stock redemption
policy to assist in the establishment of a fair price
for its shares. The Company can redeem stock up to 10%
of stockholders' equity in any 12-month period without
specific prior approval from the Federal Reserve Bank.
At December 31, 1996, the redemption price was
determined to be 80% of the book value of the stock.
Thus the maximum commitment at December 31, 1996, would
be $25.31 per share.
Financial Instruments With Off-Balance-Sheet Risk
The Bank's financial statements do not reflect various
commitments and contingent liabilities which arise in
the normal course of business and which involve
elements of credit risk, interest rate risk, and
liquidity risk. These commitments and contingent
liabilities are commitments to extend credit and
standby letters of credit. A summary of the Bank's
commitments and contingent liabilities at December 31
is as follows:
Notional Amount 1996 1995
Commitments to extend credit $4,676,000 $4,703,000
Credit card arrangements 865,000 520,000
Standby letters of credit 84,000 40,000
Commitments to extend credit and credit card
arrangements are agreements to lend to a customer as
long as there is no violation of any condition
established in the contract. Commitments generally
have fixed expiration dates or other termination
clauses and may require payment of a fee. A portion of
the commitments are expected to be drawn upon, thus
representing future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-
case basis. The amount of collateral obtained upon
extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies
but may include accounts receivable; inventory;
property, plant, and equipment; real estate; and stocks
and bonds.
Standby letters of credit are conditional commitments
issued by the Bank to guarantee the performance of a
customer to a third party. The credit risk involved in
issuing letters of credit is essentially the same as
that involved in extending loan facilities to
customers. The Bank holds collateral supporting those
commitments for which collateral is deemed necessary.
Because these instruments have fixed maturity dates and
because many of them expire without being drawn upon,
they do not generally present any significant liquidity
risk to the Bank.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - CONCENTRATIONS OF CREDIT RISK
All of the Bank's loans, commitments, and standby
letters of credit have been granted to customers in the
Bank's market area. The concentrations of credit by
type are set forth in Note 5. Standby letters of
credit were granted primarily to commercial borrowers.
NOTE 16 - REGULATORY MATTERS
At December 31, 1996, Bank of Luxemburg could have paid
approximately $2,575,000 of additional dividends to the
Company without prior regulatory approval. The payment
of dividends is subject to the statutes governing state
chartered banks and may be further limited because of
the need for the Bank to maintain capital ratios
satisfactory to applicable regulatory agencies.
The Bank is subject to various regulatory capital
requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements
can initiate certain mandatory_and possibly additional
discretionary_actions by regulators that, if
undertaken, could have a direct material effect on the
Bank's financial statements. 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. The Bank's capital amounts and
classification are also subject to qualitative
judgments by the regulators about components, risk
weightings, and other factors.
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 total and Tier I capital to risk-weighted
assets and of Tier I capital to average assets.
Management believes, as of December 31, 1996, that the
Bank meets all capital adequacy requirements to which
it is subject.
As of December 31, 1996, the most recent notification
from the Office of the Commissioner of Banking
categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To
be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios of 8.0%, 4.0%, and 4.0%,
respectively. There are no conditions or events since
that notification that management believes have changed
the institution's category.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - REGULATORY MATTERS (CONTINUED)
The Bank's actual capital amounts and ratios as of
December 31, 1996, are also presented in the table.
For Capital
Actual Adequacy Purposes
Amount Ratio Amount Ratio
Total capital
(to risk-weighted assets) $8,332,000 15.8% >$4,230,000 >8.0%
Tier I capital
(to risk-weighted assets) $7,678,000 14.5% >$2,115,000 >4.0%
Tier I capital
(to average assets) $7,678,000 10.2% >$3,024,000 >4.0%
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," requires the Company to
disclose estimated fair values for its financial
instruments. Fair value estimates, methods, and
assumptions for the Company's financial instruments
are summarized as follows.
Cash and Cash Equivalents
The carrying values approximate the fair values for
these assets.
Investment Securities Available for Sale
Fair value is based on quoted market prices, where
available. If a quoted market price is not available,
fair value is estimated using quoted market prices for
similar securities.
Loans
Fair value is estimated for portfolios of loans with
similar financial characteristics. Loans are
segregated by type, such as commercial, residential
mortgage, and other consumer. The fair value of the
loans is calculated by discounting scheduled cash flows
using discount rates reflecting the credit and interest
rate risk inherent in the loan.
Impaired loans are measured at the estimated fair value
of the expected future cash flows at the loan's
effective interest rate, the loan's observable market
price, or the fair value of the collateral for loans
which are collateral dependent. Therefore, the
carrying values of impaired loans approximate the
estimated fair values for these assets.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
Mortgage Servicing Rights
The fair value of mortgage servicing rights is based on
the present value of future cash flows using discounted
rates applicable to the level of risk of the underlying
loans.
Deposits
The fair value of deposits with no stated maturity,
such as demand deposits, savings, and money market
accounts, is the amount payable on demand at the
reporting date. The fair value of fixed-rate time
deposits is calculated using discounted cash flows
applying interest rates currently being offered on
similar certificates.
Short-Term Borrowings and Borrowed Funds
The carrying amount reported in the balance sheets for
short-term and borrowed funds approximates the fair
value of the liabilities.
Off-Balance-Sheet Instruments
The fair value of commitments is estimated using the
fees currently charged to enter into similar
agreements, taking into account the remaining terms of
the agreements, the current interest rates, and the
present creditworthiness of the counterparties. Since
this amount is immaterial, no amounts for fair value
are presented.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
The carrying value and estimated fair value of
financial instruments at December 31, 1996 and 1995,
were as follows:
1996 1995
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Cash and cash equivalents $ 3,732,501 $3,732,501 $9,054,643 $9,054,643
Investment securities
available for sale 14,064,569 14,064,569 14,353,462 14,353,462
Net loans receivable 54,517,407 54,668,690 48,904,382 49,114,052
Mortgage servicing rights 43,271 58,930 -0- -0-
Other investments 251,650 251,650 205,250 205,250
Total financial assets $72,609,398 $72,776,340 $72,517,737 $72,727,407
Financial liabilities:
Deposits $66,157,461 $66,266,218 $66,828,148 $67,091,456
Short-term borrowings 880,076 880,076 393,271 393,271
Borrowed funds 185,558 185,558 112,490 112,490
Total financial liabilities $67,223,095 $67,331,852 $67,333,909 $67,597,217
Limitations
Fair value estimates are made at a specific point in
time based on relevant market information and
information about the financial instrument. These
estimates do not reflect any premium or discount that
could result from offering for sale at one time the
Company's entire holdings of a particular instrument.
Because no market exists for a significant portion of
the Company's financial instruments, fair value
estimates are based on judgments regarding future
expected loss experience, current economic conditions,
risk characteristics of various financial instruments,
and other factors. These estimates are subjective in
nature and involve uncertainties and matters that could
affect the estimates. Fair value estimates are based
on existing on- and off-balance-sheet financial
instruments without attempting to estimate the value of
anticipated future business and the value of assets and
liabilities that are not considered financial
instruments. Deposits with no stated maturities are
defined as having a fair value equivalent to the amount
payable on demand. This prohibits adjusting fair value
derived from retaining those deposits for an expected
future period of time. This component, commonly
referred to as a deposit base intangible, is neither
considered in the above amounts nor is it recorded as
an intangible asset on the balance sheet. Significant
assets and liabilities that are not considered
financial assets and liabilities include premises and
equipment. In addition, the tax ramifications related
to the realization of the unrealized gains and losses
can have a significant effect on fair value estimates
and have not been considered in the estimates.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
Cash $ 19,632 $ 12,713
Premises and equipment 149,125 153,958
Investment in subsidiary 7,598,257 6,992,474
TOTAL ASSETS $7,767,014 $7,159,145
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowed funds $ 85,179 $ 112,490
Other liabilities 1,819 3,252
Total stockholders' equity 7,680,016 7,043,403
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $7,767,014 $7,159,145
STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
1996 1995
Dividends from subsidiaries $ 225,750 $ 183,750
Undistributed equity in earnings
of subsidiaries 606,392 513,989
Other operating income 19,280 19,280
Total income 851,422 717,019
Operating expenses 33,947 10,617
Interest expense 6,503 9,018
Total expenses 40,450 19,635
Net income $ 810,972 $ 697,384
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
(CONTINUED)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net income $ 810,972 $ 697,384
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 4,833 4,833
Accretion (1,280) (1,280)
Employee stock bonuses 10,730 9,180
Undistributed earnings of subsidiary (606,392) (513,989)
Change in other liabilities (153) 634
Total adjustments (592,262) (500,622)
Net cash provided by operating
activities 218,710 196,762
Cash flows from financing activities:
Principal payments on borrowed funds (27,311) (25,582)
Dividends paid (184,480) (167,233)
Net cash used in financing activities (211,791) (192,815)
Net increase in cash 6,919 3,947
Cash at beginning 12,713 8,766
Cash at end $ 19,632 $ 12,713
Supplemental Information:
Cash paid during the year for interest $ 6,656 $ 8,385
NOTE 19 - RECLASSIFICATIONS
Certain reclassifications have been made to the 1995
consolidated financial statements to conform to the
1996 classifications.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 1997
ASSETS
1997
Cash and due from banks $3,045,472
Interest-bearing deposits 88,800
Federal funds sold
443,000
Cash and cash equivalents 3,577,272
Investment securities available for 14,346,869
sale-Stated at fair value
Total loans 56,411,251
Allowance for credit losses
(685,946)
Net loans 55,725,305
Premises and equipment 1,502,818
Other investments at cost 251,650
Other assets
2,082,494
TOTAL ASSETS $77,486,408
LIABILITIES AND STOCKHOLDERS' EQUITY
1997
LIABILITIES:
Non-interest-bearing deposits $7,379,007
Interest-bearing deposits
59,442,967
Total deposits 66,821,974
Short-term borrowings 1,030,550
Borrowed funds 671,396
Other liabilities
1,083,198
Total liabilities
69,607,118
STOCKHOLDERS' EQUITY:
Common stock- $.1667 par value:
Authorized - 300,000 shares, 45,083
Issued - 270,500 shares
Capital surplus 3,422,141
Retained earnings 4,808,385
Unrealized loss on investment
securities available (46,229)
for sale - Net of tax
Less - 27,449 shares and 27,764
shares, respectively, (350,090)
of treasury common stock, at cost
Total stockholders' equity
7,879,290
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $77,486,408
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March 31, 1997 and 1996
1997 1996
INTEREST INCOME:
Interest and fees on loans $1,237,871 $1,108,261
Interest on investment securities:
Taxable 171,405 195,341
Tax-exempt 29,530 5,438
Other interest and dividend income
14,346 68,306
Total interest income
1,453,152 1,377,346
INTEREST EXPENSE:
Deposits 678,470 696,324
Short-term borrowings 8,578 3,995
Borrowed funds
5,126 4,092
Total interest expense
692,174 704,411
Net interest income 760,978 672,935
Provision for credit losses
30,000 18,500
Net interest income after provision
for credit losses 730,978 654,435
OTHER INCOME:
Service charges on deposit accounts 45,399 40,548
Mortgage underwriting fees - 14,184 20,347
Secondary market
Loan servicing fee income 11,299 10,053
Other operating income
130,351 100,580
Total other income
201,233 171,528
OPERATING EXPENSES:
Salaries and related benefits 344,637 312,550
Net occupancy expense 43,540 41,990
Equipment rentals, depreciation, and 43,285 44,752
maintenance
Data processing 45,121 42,914
Other operating expenses
127,603 127,172
Total operating expenses
604,186 569,378
Income before provision for income 328,025 256,585
taxes
Provision for income taxes
99,515 86,954
Net income $228,510 $169,631
Earnings per common share $0.94 $0.70
See accompanying notes to consolidated financial
statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, 1997 and 1996
1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $228,510 $169,631
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation 36,646 40,838
Accretion of discounts on (13,245) (20,172)
securities
Amortization of premiums on 10,991 16,720
securities
Provision for credit losses 30,000 18,500
Employee stock bonus 10,080 10.730
Change in other operating assets (91,033) 4,878
Change in other operating
liabilities 85,670 (1,275)
Total adjustments
69,109 70,219
Net cash provided by operating
activities 297,619 239,850
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from maturities of 2,092,878 2,265,711
securities available for sale
Purchase of securities available (2,432,677) (2,161,852)
or sale
Net increase in loans (1,237,898)
Purchase of additional life (17,300) (17,300)
insurance
Capital expenditures (158,676) (56,665)
Purchase of other investments
-0- (46,400)
Net cash used in investing (1,753,673) (16,506)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net decrease in loans 358,190
Net increase (decrease) in 664,513 (2,939,271)
deposits
Net increase in short-term 150,474 96,298
borrowings
Loan from FHLMC 500,000
Principal payments on borrowed (14,162) (21,586)
funds
Dividends paid
-0- -0-
Net cash provided by (used in) 1,300,825 (2,506,369)
financing activities
Net decrease in cash and cash (155,229) (2,283,025)
equivalents
Cash and cash equivalents at
beginning 3,732,501 9,054,643
Cash and cash equivalents at end $3,577,272 $6,771,618
Supplemental information:
Cash paid during the period for:
Interest $653,890 $616,675
Income taxes 104,536 135,007
The Bank purchased the assets of Total Financial
concepts, Inc. in 1996 for $135,800. In conjunction
with the acquisition, the Bank incurred debt of
$128,800.
See accompanying notes to consolidated financial
statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The consolidated financial statements for interim
periods are unaudited; however, in the opinion of the
management of the Company, all adjustments (consisting
of only normal recurring adjustments) necessary for a
fair presentation have been included. Refer to the
Notes to Consolidated Financial Statements for the
years ended December 31, 1996 and 1995 which appear in
this Form 10-SB for the Company's accounting policies
which are pertinent to these financial statements.
NOTE 1: - BASIS OF PRESENTATION
The consolidated financial statements of the
Company, a bank holding company, include the accounts
of Company and subsidiaries - Bank of Luxemburg,
Luxemburg Investment Corporation, and Area Development
Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.
Goodwill acquired in a business acquisition is being
amortized on a straight-line basis over five years.
The accompanying interim financial statements have
been prepared in accordance with the instructions for
Form 10-SB and, therefore, do not include all
information and footnotes necessary under generally
accepted accounting principles for fiscal year end
financial statements.
The Consolidated Statements of Cash Flows has been
presented utilizing the indirect method. For purposes
of reporting cash flows, the Company considers cash on
hand, interest-bearing and non-interest bearing
deposits in banks and federal funds sold as cash and
cash equivalents.
Earnings per common share are based upon the
weighted average number of common shares outstanding.
The weighted average number of shares outstanding was
243,051 in 1997 and 242,736 in 1996.
NOTE 2: - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET
RISK
The Bank's financial statements do not reflect
various commitments and contingent liabilities which
arise in the normal course of business and which
involve elements of credit risk, interest rate risk,
and liquidity risk. These commitments and contingent
liabilities are commitments to extend credit and
standby letters of credit. A summary of the Bank's
commitments and contingent liabilities at each balance
sheet date is as follows:
Notional Amount
March 31, December 31,
1997 1996
Commitments to extend credit $6,272,000 $4,676,000
Credit card arrangements 591,000 865,000
Standby letters of credit 135,000 84,000
Commitments to extend credit and credit card
agreements to lend to a customer as long as there is no
violation of any condition established in the contract.
Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a
fee. A portion of the commitments are expected to be
drawn upon, thus representing future cash requirements.
The Bank evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral
obtained upon extension of credit is based on
management's credit evaluation of the counterparty.
Collateral held varies but may include accounts
receivable; inventory; property, plant, and equipment;
real estate; and stocks and bonds. Management does not
anticipate any material losses as a result of these
commitments.
Standby letters of credit are conditional
commitments issued by the Bank to guarantee the
performance of a customer to a third party. The credit
risk involved in issuing letters of credit is
essentially the same as that involved in extending loan
facilities to customers. The Bank holds collateral
supporting those commitments for which collateral is
deemed necessary. Because these instruments have fixed
maturity dates and because many of them expire without
being drawn upon, they do not generally present any
significant liquidity risk to the Bank. Management does
not anticipate any material losses as a result of these
letters of credit.
<PAGE>
NOTE 3: - ACCOUNTING CHANGES
The Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards
(SFAS) No. 122, "Accounting for Mortgage Servicing
Rights," in May 1995. As required under the statement,
the Company adopted the provisions of the new standard
effective January 1, 1996. SFAS No. 122 requires
accounting recognition of the rights to service
mortgage loans for others. In accordance with SFAS No.
122, prior-period consolidated financial statements
have not been restated to reflect the change in
accounting principle.
The FASB issued SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," in June 1996. SFAS
No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and
extinguishments of liabilities. The statement provides
guidelines for classification of a transfer as a sale.
The statement also requires liabilities incurred or
obtained by transferors as part of a transfer of
financial assets be initially recorded at fair value.
Subsequent to acquisition, the servicing assets and
liabilities are to be amortized over the estimated net
servicing period. This statement is required to be
adopted for transfers and servicing of financial assets
and extinguishments of liabilities occurring after
December 31, 1996.
In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions
of FASB Statement No. 125." This statement defers
implementation of certain provisions of SFAS No. 125
for one year.
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1* Articles of Incorporation.
3.2* Bylaws.
10.1* Director Deferred Compensation Plan for
Bank of Luxemburg
21* Subsidiaries of the Registrant
27 Financial Data Schedule - Annual Periods
27.1 Financial Data Schedule - Interim Period
* Filed on April 30, 1997
SIGNATURES
In accordance with Section 12 of the Securities
Exchange Act of 1934, the Registrant caused this
amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
LUXEMBURG BANCSHARES, INC.
Date: June 19, 1997 By:/s/ John Slatky
-------------------
John Slatky
President and Chief
Executive Officer
By:/s/ Thomas L. Lepinski
----------------------
Thomas L. Lepinski
Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 2,858,813 3,614,997
<INT-BEARING-DEPOSITS> 407,688 39,646
<FED-FUNDS-SOLD> 466,000 5,400,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 14,064,569 14,353,462
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 55,170,942 49,478,668
<ALLOWANCE> 653,535 574,286
<TOTAL-ASSETS> 75,900,639 75,466,249
<DEPOSITS> 66,157,461 66,828,148
<SHORT-TERM> 1,065,634 505,761
<LIABILITIES-OTHER> 880,076 393,271
<LONG-TERM> 185,558 112,490
0 0
0 0
<COMMON> 45,083 45,083
<OTHER-SE> 7,634,933 6,998,320
<TOTAL-LIABILITIES-AND-EQUITY> 75,900,639 75,466,249
<INTEREST-LOAN> 4,690,655 4,326,739
<INTEREST-INVEST> 790,718 740,614
<INTEREST-OTHER> 152,112 158,451
<INTEREST-TOTAL> 5,633,485 5,225,804
<INTEREST-DEPOSIT> 2,702,128 2,486,490
<INTEREST-EXPENSE> 2,738,051 2,561,698
<INTEREST-INCOME-NET> 2,895,434 2,664,106
<LOAN-LOSSES> 109,000 95,000
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 2,359,661 2,058,237
<INCOME-PRETAX> 1,224,026 1,028,231
<INCOME-PRE-EXTRAORDINARY> 1,224,026 1,028,231
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 810,972 697,384
<EPS-PRIMARY> 3.34 2.88
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 4.25 4.13
<LOANS-NON> 472,000 358,000
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 574,286 514,103
<CHARGE-OFFS> 51,177 62,911
<RECOVERIES> 21,426 28,094
<ALLOWANCE-CLOSE> 653,535 574,286
<ALLOWANCE-DOMESTIC> 57,000 64,000
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 596,535 510,286
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,045,472
<INT-BEARING-DEPOSITS> 88,800
<FED-FUNDS-SOLD> 443,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,346,869
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 56,411,251
<ALLOWANCE> 685,946
<TOTAL-ASSETS> 77,486,408
<DEPOSITS> 66,821,974
<SHORT-TERM> 1,030,550
<LIABILITIES-OTHER> 1,083,198
<LONG-TERM> 671,396
0
0
<COMMON> 45,083
<OTHER-SE> 7,834,207
<TOTAL-LIABILITIES-AND-EQUITY> 77,486,408
<INTEREST-LOAN> 1,237,871
<INTEREST-INVEST> 200,935
<INTEREST-OTHER> 14,346
<INTEREST-TOTAL> 1,453,152
<INTEREST-DEPOSIT> 678,470
<INTEREST-EXPENSE> 692,174
<INTEREST-INCOME-NET> 760,978
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 604,186
<INCOME-PRETAX> 328,025
<INCOME-PRE-EXTRAORDINARY> 328,025
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 228,510
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
<YIELD-ACTUAL> 8.37
<LOANS-NON> 410,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 653,535
<CHARGE-OFFS> 12,000
<RECOVERIES> 14,000
<ALLOWANCE-CLOSE> 685,946
<ALLOWANCE-DOMESTIC> 96,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 589,946
</TABLE>
