U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED June 30, 1997.
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM TO
.
Commission file number 0-22471
Luxemburg Bancshares, Inc.
(Exact name of small business issuer as specified in
its charter)
Wisconsin 39-1457904
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization
630 Main Street, 54217
Luxemburg, Wisconsin
(Address of principal (Zip Code)
executive offices)
(920) 845-2345
(Issuer's Telephone Number)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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 No [X]
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date. As of July 31, 1997, 243,051 shares
of Common Stock were outstanding.
Transitional Small Business Disclosure Format
(Check one):
Yes No [X]
<PAGE>
LUXEMBURG BANCSHARES, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996
Consolidated Statements of Income- Six and Three
Months Ended
June 30, 1997 and 1996
Consolidated Statements of Cash Flow -Six Months
Ended
June 30, 1997 and 1996
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
LUXEMBURG BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 1997 and December 31, 1996
ASSETS
1997 1996
Cash and due from banks
$3,071,658 $2,858,813
Interest-bearing deposits 180,027 407,688
Federal funds sold
-0- 466,000
Cash and cash equivalents 3,251,685 3,732,501
Investment securities available for 14,404,353 14,064,569
sale-Stated at fair value
Total loans 58,979,577 55,170,942
Allowance for credit losses
(701,947) (653,535)
Net loans 58,277,630 54,517,407
Premises and equipment 1,772,299 1,380,788
Other investments at cost 253,050 251,650
Other assets
2,146,541 1,953,724
TOTAL ASSETS $80,105,558 $75,900,639
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
LIABILITIES:
Non-interest-bearing deposits $8,572,109 $7,004,277
Interest-bearing deposits
60,548,329 59,153,184
Total deposits 69,120,438 66,157,461
Short-term borrowings 1,067,275 880,076
Borrowed funds 728,212 185,558
Other liabilities
1,167,800 997,528
Total liabilities
72,083,725 68,220,623
STOCKHOLDERS' EQUITY:
Common stock- $.1667 par value:
Authorized - 300,000 shares, 45,083 45,083
Issued - 270,500 shares
Capital surplus 3,422,141 3,416,080
Retained earnings 4,899,874 4,579,875
Unrealized gain (loss) on investment
securities available 4,825 (6,913)
for sale - Net of tax
Less - 27,449 shares and 27,764
shares, respectively, (350,090) (354,109)
of treasury common stock, at cost
Total stockholders' equity
8,021,833 7,680,016
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $80,105,558 $75,900,639
See accompanying notes to consolidated financial
statements.
<PAGE>
LUXEMBURG BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended June Three Months Ended
30, June 30,
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans
$2,540,032 $2,261,969 $1,302,161 $1,153,708
Interest on investment
securities:
Taxable 354,178 380,301 182,773 184,960
Tax-exempt 59,822 16,668 30,292 11,230
Other interest and dividend
income 24,563 99,433 10,217 31,127
Total interest income
2,978,595 2,758,371 1,525,443 1,381,025
INTEREST EXPENSE:
Deposits 1,384,797 1,365,726 706,327 669,402
Short-term borrowings 26,961 6,521 18,383 2,526
Borrowed funds
13,521 8,012 8,395 3,920
Total interest expense
1,425,279 1,380,259 733,105 675,848
Net interest income 1,553,316 1,378,112 792,338 705,177
Provision for credit losses
60,000 36,500 30,000 18,000
Net interest income after
provision for credit losses 1,493,316 1,341,612 762,338 687,177
OTHER INCOME:
Service charges on deposit 92,370 87,286 46,971 46,738
accounts
Mortgage underwriting fees - 40,572 28,670 29,014 8,323
Secondary market
Loan servicing fee income 21,273 21,622 7,348 11,569
Other operating income
262,187 232,450 131,836 131,870
Total other income
416,402 370,028 215,169 198,500
OPERATING EXPENSES:
Salaries and related benefits 717,335 645,860 372,698 333,310
Net occupancy expense 84,611 83,368 41,071 41,378
Equipment rentals, 96,481 88,179 53,196 43,427
depreciation, and maintenance
Data processing 129,217 89,426 84,096 46,512
Other operating expenses
292,079 268,552 164,476 141,380
Total operating expenses
1,319,723 1,175,385 715,537 606,007
Income before provision for 589,995 536,255 261,970 279,670
income taxes
Provision for income taxes
172,775 186,413 73,260 99,459
Net income $417,220 $349,842 $188,710 $180,211
Earnings per common share $1.72 $1.44 $0.78 $0.74
See accompanying notes to consolidated financial
statements.
<PAGE>
LUXEMBURG BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Six Months Ended June 30, 1997 and 1996
1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $417,220 $349,842
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation 83,801 81,677
Accretion of discounts on (21,812) (37,162)
securities
Amortization of premiums on 17,686 32,792
securities
Provision for credit losses 60,000 36,500
Employee stock bonus 10,080 10.730
Provision for deferred taxes (31,222)
Change in other operating assets (117,256) (75,041)
Change in other operating
liabilities 170,272 (20,429)
Total adjustments
171,549 29,067
Net cash provided by operating
activities 588,769 378,909
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from maturities of 3,800,164 4,310,817
securities available for sale
Purchase of securities available (4,117,287) (4,030,870)
for sale
Net increase in loans (3,854,060) (2,060,346)
Purchase of additional life (17,300) (17,300)
insurance
Capital expenditures (401,381) (222,524)
Purchase of other investments
(1,400) (46,400)
Net cash used in investing (4,591,264) (2,066,623)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase (decrease) in 2,962,977 (2,502,466)
deposits
Net increase (decrease) in short- 187,199 (13,922)
term borrowings
Loan from FHLMC 500,000
Principal payments on borrowed (31,277) (33,327)
funds
Dividends paid
(97,220) (87,384)
Net cash provided by (used in) 3,521,679 (2,637,099)
financing activities
Net decrease in cash and cash (480,816) (4,324,813)
equivalents
Cash and cash equivalents at
beginning 3,732,501 9,054,643
Cash and cash equivalents at end $3,251,685 $4,729,830
Supplemental information:
Cash paid during the period for:
Interest $1,259,676 $1,273,276
Income taxes $187,968 $188,871
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.
The Company entered into capital leases of $73,931 in
1997 for the purchase of computer equipment.
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 Luxemburg Bancshares, Inc. ("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 which appear in the Company's 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 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 financial statements have been
prepared in accordance with the instructions for Form
10-Q and, therefore, do not include all information and
footnotes necessary to be in conformity with generally
accepted accounting principles.
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 of Luxemburg's ("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
June 30, December 31,
1997 1996
Commitments to extend credit $5,055,000 $4,676,000
Credit card arrangements 616,000 865,000
Standby letters of credit 110,000 84,000
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
<PAGE>
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.
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
September 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.
In February 1997 the FASB issued SFAS No. 128,
"Earnings per Share," which is effective for financial
statements issued for periods ending after December 15,
1997. This statement simplifies the standards for
computing earnings per share ("EPS") previously found
in APB No. 15. It replaces the presentation of primary
EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex
capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS
computation.
<PAGE>
Earlier application of this statement is
not permitted. The Company does not have a complex
capital structure and has determined that the impact of
adoption will not have a material effect on the
consolidated financial statements of the Company.
The FASB issued SFAS No. 130, "Reporting Comprehensive
Income", in June 1997. This statement amends FASB No.
52, "Foreign Currency Translation", FASB No. 80,
"Accounting for Futures Contracts", FASB No. 87,
"Employers' Accounting for Pensions" and FASB No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities". This statement is effective for fiscal
years beginning after December 15, 1997. Restatement of
financial statements for earlier periods provided for
comparative purposes is required. Earlier application
is permitted. Under SFAS No. 130 the Company will be
required to report unrealized gains (losses) on
investment securities available for sale as a component
of comprehensive income. Reported Comprehensive Income
would have been as follows for each reported period:
Reported Net Comprehensive
Reporting Period Income Income
Six Months Ended June 30, 1997 $417,220 $428,959
Six Months Ended June 30, 1996 $349,842 $268,722
Three Months Ended June 30, $188,710 $239,765
1997
Three Months Ended June 30, $180,211 $144,862
1996
In June 1997 the FASB issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and related
Information," which is effective for financial
statements issued for periods beginning after December
15, 1997. This statement establishes standards for
reporting operating segments in financial statements
and interim financial reports issued to shareholders.
FASB No. 131 supersedes FASB No. 14, "Financial
Reporting for Segments of a Business Enterprise" and
amends FASB No. 94, "Consolidation of All Majority-
Owned Subsidiaries". This statement requires
restatement of comparative information for earlier
years presented. Also, this statement need not be
applied to interim financial statements in the initial
year of application, but comparative information for
interim periods in the initial year of application must
be reported in financial statements for interim periods
in succeeding years. The Company has determined that the
adoption of SFAS No. 131 will not have a material impact
on the consolidated financial statements of the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Net Earnings $188,710 $180,211 $417,220 $349,842
Average Consolidated
Balance Sheet Items:
Loans 56,029,822 49,421,368 55,287,700 48,763,504
Taxable Investment 11,754,898 13,632,427 11,716,639 13,575,154
Securities
Municipal Loans & 4,038,993 2,005,482 3,961,071 1,715,960
Investments
Other Earning Assets 730,402 2,410,293 899,704 3,770,366
Total Earning 72,554,115 67,469,570 71,865,114 67,824,984
Assets
Total Assets 78,073,540 72,330,688 77,159,052 72,672,157
Deposits 68,988,195 64,050,900 68,197,843 64,401,627
Shareholders' Equity 8,036,694 7,237,424 7,938,566 7,205,697
Key Ratios:
Average Equity to 10.29% 10.01% 10.29% 9.92%
Average Total Assets
Return on Average .97% 1.00% 1.22% 0.96%
Total Assets
Return on Average 9.39% 9.96% 10.51% 9.71%
Equity
Net Interest Margin 4.38% 4.20% 4.38% 4.11%
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 $87,161 or 12.36% to $792,338 for
the three months ended June 30, 1997 from $705,177 for
the three months ended June 30, 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.
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
Interest Income $1,525,443 $1,381,025 $2,978,595 $2,758,371
Interest Expense 733,105 675,848 1,425,279 1,380,259
Net Interest Income $792,338 $705,177 $1,553,316 $1,378,112
Net Interest Margin 4.38% 4.20% 4.38% 4.11%
<PAGE>
RATE/VOLUME ANALYSIS
The impact of changes in volume and interest rates on
net interest income for the three and six months ended
June 30, 1997 and 1996 is illustrated in the following
tables:
Three Months Ended June 30, 1997 Compared to Three
Months Ended June 30, 1996.
Increase (Decrease) in Net Interest Income
Net Change Due To Due To
Rate Volume
Interest Income $ 144,418 $ 14,768 $ 129,650
Interest Expense 57,257 (8,877) 66,134
Net Interest Income $ 87,161 $ 23,645 $ 63,516
Six Months Ended June 30, 1997 Compared to Six Months
Ended June 30, 1996.
Increase (Decrease) in Net Interest Income
Net Change Due To Due To
Rate Volume
Interest Income $ 220,224 $ 3,608 $ 216,616
Interest Expense 45,020 (46,996) 92,016
Net Interest Income $ 175,204 $ 50,604 $ 124,600
Even though the average yield on the banks loan
portfolio decreased in the second quarter of 1997
compared to the second quarter of 1996 additional loan
volume raised the average yield on all earning assets
to 8.43% for the three months ended June 30, 1997 from
8.23% for the three months ended June 30, 1996. Except
for certificates of deposits, other borrowings and
interest bearing demand deposits rates paid on the
bank's deposits were generally lower for the three
months ended June 30, 1997 compared to the three months
ended June 30, 1996. Interest expense was $733,105 for
the three months ended June 30, 1997 compared to
$675.848 for the three months ended June 30, 1996 and
reflects the growth in interest bearing deposits to
$61,749,757 for the three months ended June 30, 1997
from $57,306,871 for the three months ended June 30,
1996.
OPERATING RESULTS
Net income for the three months ended June 30, 1997
increased $8,499 or 4.7% to $188,710 from $180,211 for
the three months ended June 30, 1996. The increase in
net interest income is $87,161 for the three months
ended June 30, 1997 compared to the three months ended
June 30, 1996 and is discussed in "Net Interest Income"
and "Rate/Volume Analysis" elsewhere in this report.
Higher operating expenses for salaries and related
benefits and data processing expense for the three
months ended June 30, 1997 compared to the three months
ended June 30, 1996 offset the company's increase in
net interest margin. The increase in salaries and
related benefits is due to the opening of the company's
IGA branch in the second quarter of 1996 and higher
employee costs due to the implementation of an in-house
computer system in May, 1997 and the initial regulatory
filing in the second quarter of 1997. For the quarter
ended June 30, 1997 income tax benefit of $11,799 was
recorded by Luxemburg Bancshares, Inc. Previously the
company's accountant recorded income tax benefit only
at December 31.
Net income for the six months ended June 30, 1997 increased
$67,378 or 19.3% to 417,220 from $349,842 for the six months
ended June 30, 1996. The increase in net interest income is
$175,204 for the six months ended June 30, 1997 compared to
the six months ended June 30, 1996 and is primarily due to
higher loan volume and a shift of earning assets to loans from
investment secirities. Higher operating expenses for salaries
and related benefits and data processing expense for the six
months ended June 30, 1997 compared to the six months ended June
30, 1996 partially offset the Company's increase in net interest
margin. The increase in salaries and related benefits is due to
the opening of the Company's IGA branch in the second quarter
of 1996 and higher employee costs due to the implementation of
an in-house computer system in May, 1997 and the initial
regulatory filing in the second quarter of 1997. For the
quarter ended June 30, 1997 income tax benefit of $11,799 was
recorded by Luxemburg Bancshares, Inc. Previously, the Company's
accountant recorded income tax benefit only at December 31.
<PAGE>
ALLOWANCE 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 the loan portfolio and particular
loans. Loans are entirely to borrowers in Northeast
Wisconsin.
The Bank generally places loans on non-accrual status
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, all past due principal and interest is paid
and the bank deems its collateral position adequate to
warrant a return to accrual status.
At June 30, 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.
In addition, there were no loans considered to be impaired
in accordance with the requirements of SFAS No. 114.
The Bank had $329,000 of nonaccrual loans at June 30,
1997 and $305,000 of nonaccrual loans at June 30, 1996.
During the three months ended June 30, 1997, $30,000
was charged to the provision for loan losses compared
to $18,000 for the three months ended June 30, 1996. At
June 30, 1997 the allowance was $702,000 or 1.19% of
total loans. This compares to an allowance of $608,000
or 1.18% of total loans as of June 30, 1996. For the
three months ended June 30, 1997 the Bank had net
charge-offs of $13,000 compared to net charge-offs of
$1,000 for the three months ended June 30, 1996.
The following table summarizes loan charge-offs and
recoveries by type of loan for the three months ended
June 30, 1997 and 1996:
Loan Type June 30, 1997 June 30, 1996
Charge-Off Recovery Charge-Off Recovery
Real Estate $ $ $1,000 $1,000
Commercial and
Industrial 3,000 4,000
Agricultural
Consumer 19,000 3,000 7,000 2,000
TOTALS $19,000 $6,000 $8,000 $7,000
The following table summarizes loan charge-offs and recoveries
by type of loan for the six months ended June 30, 1997 and 1996:
Loan Type June 30, 1997 June 30, 1996
Charge-Off Recoveries Charge-Off Recoveries
Real Estate $ $ $ 1,000 $ 1,000
Commercial and
Industrial 3,000 4,000
Agricultural 12,000 4,000
Consumer 31,000 5,000 14,000 3,000
TOTALS $31,000 $20,000 $15,000 $12,000
<PAGE>
The Bank has allocated its allowance for credit losses
at the end of each period presented as follows:
Balance at End of June 30, 1997 June 30, 1996
Period Applicable to:
% of % of
loans loans
to to
total total
Amount Loans Amount Loans
Commercial and $ 32,000 46% $ 22,000 46%
Real Estate- 5% 4%
construction
Real Estate-mortgage 37% 38%
Consumer 15,000 12% 12%
26,000
Total Domestic 47,000 100% 48,000 100%
Unallocated 655,000
560,000
TOTALS $ 702,000 100% $ 608,000 100%
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. Primary 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 needs. Federal Funds Sold averaged
approximately $150,000 and $1,940,000 for the three
months ended June 30, 1997 and 1996, respectively.
Maturities in the Company's loan and investment
portfolios are monitored regularly to avoid matching
short-term deposits with 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 strives 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 the Deposit that mature in
the next year and any increase in interest rates paid
on Certificates of Deposit may reduce future
<PAGE>
Company
Earnings. The Bank also monitors the assets and
liabilities that reprice each month to determine the
impact on future earnings from anticipated repricings.
At June 30, 1997, the Company's rate sensitive assets
exceed rate sensitive liabilities due within one year
by $3,222,000.
As part of managing liquidity, the Company monitors its
loan to deposit ratio on a daily basis. At June 30,
1997 the ratio was 85.3% which is within the Company's
acceptable range.
The Company experienced a decrease in cash and cash
equivalents, its primary source of liquidity, of
$480,816 for the three months ended June 30, 1997. The
primary source of cash flow for the three months ended
June 30, 1997 was an increase in deposits of $2,962,977
and an increase in net borrowings of $655,922. Cash
flow from investing activities used $3,854,060 to fund
loan growth for the three months ended June 30, 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 June
30, 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.
1 Year 1 - 5 5 - 10 After 10
or Less Years Years Years
Interest Earning
Assets:
Fed Funds Sold
Investment
Securities $2,312,000 3,083,000 5,389,000 3,620,000
Loans
Variable Rate $8,686,000
Real Estate- $3,004,000
Construction
Real Estate- 9,570,000 6,134,000 679,000
-Other
Commercial and $10,528,000 $4,648,000 $825,000
Industrial
Agricultural $4,441,000 $ 653,000 $299,000
Consumer $2,153,000 $6,666,000 $694,000
Other $ 433,000
Total Interest $41,127,000 $21,184,000 $7,886,000 $3,620,000
Earning Assets
Interest Bearing
Liabilities:
Interest Bearing $5,837,000
Demand
Savings Deposits $2,350,000 $10,610,000
Money Market $1,170,000 $ 2,730,000
Accounts
Certificates of $24,791,000 $4,437,000
Deposit
Jumbo CD's $2,627,000
IRA's $5,758,000 $ 238,000
Other $1,209,000 $ 586,000
Total Interest $37,905,000 $5,261,000 $19,177,000
Bearing Liabilities
Interest Sensitivity $3,222,000 $15,923,000 $7,886,000 ($15,557,000)
Gap per Period
Cumulative Interest $3,222,000 $19,145,000 $27,031,000 $11,474,000
Sensitivity Gap
Interest Sensitivity 4.3% 21.6% 10.7% (21.1%)
Gap as a Percentage
of Earning Assets
Cumulative 4.3% 25.9% 36.6% 15.5%
Sensitivity Gap as a
Percentage of Earning
Assets
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 1997, the
registrant did not file any reports on Form 8-K.
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 hereunto
duly authorized.
LUXEMBURG BANCSHARES, INC.
(Registrant)
/s/ John A. Slatky /s/ Thomas L. Lepinski
- --------------------- --------------------------
John A. Slatky, Thomas L. Lepinski, C. P. A.
President and Chief Treasurer
Executive Officer (Principal Accounting Officer)
Date August 7, 1997 Date August 7, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE REGISTRANT FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,071,658
<INT-BEARING-DEPOSITS> 180,027
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,404,353
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 58,979,577
<ALLOWANCE> 701,947
<TOTAL-ASSETS> 80,105,558
<DEPOSITS> 69,120,438
<SHORT-TERM> 1,067,275
<LIABILITIES-OTHER> 1,167,800
<LONG-TERM> 728,212
0
0
<COMMON> 45,083
<OTHER-SE> 7,976,750
<TOTAL-LIABILITIES-AND-EQUITY> 80,105,558
<INTEREST-LOAN> 2,540,032
<INTEREST-INVEST> 414,000
<INTEREST-OTHER> 24,563
<INTEREST-TOTAL> 2,978,595
<INTEREST-DEPOSIT> 1,384,797
<INTEREST-EXPENSE> 1,425,279
<INTEREST-INCOME-NET> 1,553,316
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,319,723
<INCOME-PRETAX> 589,995
<INCOME-PRE-EXTRAORDINARY> 589,995
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 417,220
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.72
<YIELD-ACTUAL> 8.43
<LOANS-NON> 329,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 653,000
<CHARGE-OFFS> 31,000
<RECOVERIES> 20,000
<ALLOWANCE-CLOSE> 702,000
<ALLOWANCE-DOMESTIC> 47,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 655,000
</TABLE>
