U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark one)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED September 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 [X] No [ ]
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date. As of November 10, 1997 243,051
shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format
(Check one): Yes No [X]
LUXEMBURG BANCSHARES, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets - September 30, 1997
and December 31, 1996 2
Consolidated Statements of Income- Nine and Three
Months Ended September 30, 1997 and 1996 3
Consolidated Statements of Cash Flow -Nine Months
Ended September 30, 1997 and 1996 4
Notes to Consolidated Financial Statements 5 - 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 13
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on form 8-K 14
SIGNATURES 14
<PAGE>
PART I - FINANCIAL INFORMATION
LUXEMBURG BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 1997 and December 31, 1996
ASSETS
1997 1996
Cash and due from banks $2,665,360 $2,858,813
Interest-bearing deposits 160,733 407,688
Federal funds sold 1,657,000 466,000
Cash and cash equivalents 4,483,093 3,732,501
Investment securities available for
sale-Stated at fair value 14,508,203 14,064,569
Total loans 60,100,231 55,170,942
Allowance for credit losses (644,791) (653,535)
Net loans 59,455,440 54,517,407
Premises and equipment 1,775,908 1,380,788
Other investments at cost 253,050 251,650
Other assets 2,179,930 1,953,724
TOTAL ASSETS $82,655,624 $75,900,639
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
LIABILITIES:
Non-interest-bearing deposits $7,679,391 $7,004,277
Interest-bearing deposits 63,300,217 59,153,184
Total deposits 70,979,608 66,157,461
Short-term borrowings 1,655,681 880,076
Borrowed funds 709,467 185,558
Other liabilities 987,444 997,528
Total liabilities 74,332,200 68,220,623
STOCKHOLDERS' EQUITY:
Common stock- $.1667 par value:
Authorized - 300,000 shares,
Issued - 270,500 shares 45,083 45,083
Capital surplus 3,422,141 3,416,080
Retained earnings 5,147,480 4,579,875
<PAGE>
Unrealized gain (loss) on investment
securities available for sale
- Net of tax 58,810 (6,913)
Less - 27,449 shares and 27,764
shares, respectively, of
treasury common stock, at cost (350,090) (354,109)
Total stockholders' equity 8,323,424 7,680,016
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $82,655,624 $75,900,639
See accompanying notes to consolidated financial
statements.
<PAGE>
LUXEMBURG BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on
loans $ 3,912,117 $ 3,451,015 $ 1,372,085 $ 1,189,046
Interest on investment
securities:
Taxable 536,364 563,803 182,186 183,502
Tax-Exempt 95,920 28,224 36,098 11,556
Other interest and
dividend income 34,379 121,146 9,816 21,713
Total interest
income 4,578,780 4,164,188 1,600,185 1,405,817
INTEREST EXPENSE:
Deposits 2,122,710 2,028,526 737,913 662,800
Short-term borrowings 50,067 9,895 23,106 3,374
Borrowed funds 25,680 11,736 12,159 3,724
Total interest
expense 2,198,457 2,050,157 773,178 669,898
Net interest income 2,380,323 2,114,031 827,007 735,919
Provision for credit
losses 90,000 66,000 30,000 29,500
Net interest income
after provision for
credit losses 2,290,323 2,048,031 797,007 706,419
OTHER INCOME:
Service charges on
deposit accounts 142,771 137,351 50,401 50,065
Mortgage underwriting
fees - Secondary market 91,296 79,975 50,724 51,305
Loan servicing fee
income 36,544 34,204 15,271 12,582
Other operating income 375,969 352,979 113,782 120,529
Total other income 646,580 604,509 230,178 234,481
OPERATING EXPENSES:
Salaries and related
benefits 1,092,114 999,634 374,779 353,774
Net occupancy expense 122,651 125,530 38,040 42,162
Equipment rentals,
depreciation, and
maintenance 157,403 126,207 60,922 38,028
Data processing 155,473 148,414 26,256 58,988
Other operating
expenses 464,805 396,239 172,726 127,687
<PAGE>
Total operating
expenses 1,992,446 1,796,024 672,723 620,639
Income before provision
for income taxes 944,457 856,516 354,462 320,261
Provision for income
taxes 279,632 292,142 106,857 105,729
Net income $ 664,825 $ 564,374 $ 247,605 $ 214,532
Earnings per common
share $2.74 $2.33 $1.02 $0.88
See accompanying notes to consolidated financial
statements.
<PAGE>
LUXEMBURG BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Nine Months Ended September 30, 1997 and 1996
1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $664,825 $564,374
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 138,584 114,605
Accretion of discounts on
securities (28,935) (51,653)
Amortization of premiums on
securities 22,038 47,727
Provision for credit losses 90,000 66,000
Employee stock bonus 10,080 10,730
Gain on sale of premises and
equipment (443)
Provision for deferred taxes (12,911)
Change in other operating assets (197,251) (110,584)
Change in other operating
liabilities (10,084) (256,513)
Total adjustments 11,078 (179,688)
Net cash provided by operating
activities 675,903 384,686
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of securities
available for sale 1,730,000
Proceeds from maturities of
securities available for sale 5,070,306 4,087,018
Purchase of securities
available for sale (5,406,226) (5,507,198)
Net increase in loans (5,061,871) (3,852,500)
Purchase of additional life
insurance (17,300) (17,300)
Proceeds from sale of premises
and equipment 1,584
Capital expenditures (460,914) (229,225)
Purchase of other investments (1,400) (46,400)
Net cash used in investing
activities (5,875,821) (3,835,605)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase (decrease) in
deposits 4,822,147 (1,432,472)
Net increase in short-term
borrowings 775,605 392,508
Loan from FHLMC 500,000 500,000
Principal payments on borrowed
funds (50,022) (45,282)
Dividends paid (97,220) (87,384)
Net cash provided by (used in)
financing activities 5,950,510 (672,630)
Net increase (decrease) in cash and
cash equivalents 750,592 (4,123,549)
Cash and cash equivalents at
beginning 3,732,501 9,054,643
Cash and cash equivalents at end $4,483,093 $4,931,094
<PAGE>
Supplemental information:
Cash paid during the period for:
Interest $ 2,275,105 $ 2,227,057
Income taxes $ 276,545 $ 328,741
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
September 30, December 31,
1997 1996
Commitments to extend credit $5,471,000 $4,676,000
Credit card arrangements 604,000 865,000
Standby letters of credit 90,000 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 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
<PAGE>
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 by recording income of $36,700 in the
third quarter of 1996. During 1997 the company recorded
income of $2,490 in the first quarter, $11,330 in the
second quarter and $15,511 in the third quarter. 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. 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
<PAGE>
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
Nine Months Ended September 30, 1997 $664,825 $730,548
Nine Months Ended September 30, 1996 $564,374 $504,834
Three Months Ended September 30, 1997 $247,605 $301,590
Three Months Ended September 30, 1996 $214,532 $236,112
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 Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Net Earnings $ 247,605 $ 214,532 $ 664,825 $564,374
Average Consolidated
Balance Sheet Items:
Loans 58,399,002 51,571,601 56,336,197 49,706,892
Taxable Investment
Securities 11,385,419 13,200,137 11,605,020 13,449,236
Municipal Loans &
Investments 4,430,925 2,120,912 4,119,411 1,851,930
Other Earning Assets 673,994 1,688,787 823,641 3,071,443
Total Earning
Assets 74,889,340 68,581,437 72,884,269 68,079,501
Total Assets 80,648,388 73,688,449 78,297,992 73,013,921
Deposits 71,463,836 65,480,026 69,298,202 64,763,722
Shareholders' Equity 8,198,693 7,376,127 8,025,696 7,262,917
Key Ratios:
Average Equity to
Average Total Assets 10.17% 10.01% 10.25% 9.95%
Return on Average
Total Assets 1.23% 1.16% 1.13% 1.03%
Return on Average
Equity 12.08% 11.63% 11.04% 10.36%
Net Interest Margin 4.38% 4.27% 4.37% 4.15%
NET INTEREST INCOME
Net interest income, the principle 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 $91,088 or 12.38% to $827,007 for
the three months ended September 30, 1997, from
$735,919 for the three months ended September 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, and an
increase in the average yield on loans and taxable
investments.
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Interest Income 1,600,185 1,405,817 4,578,780 4,164,188
Interest Expense 773,178 669,898 2,198,457 2,050,157
Net Interest Income 827,007 735,919 2,380,323 2,114,031
Net Interest Margin 4.38% 4.27% 4.37% 4.15%
<PAGE>
RATE/VOLUME ANALYSIS
The impact of changes in volume and interest rates on
net interest income for the three and nine months ended
September 30, 1997, and 1996 is illustrated in the
following tables :
Three Months Ended September 30, 1997 Compared to Three
Months Ended September 30, 1996.
Increase (Decrease) in Net Interest Income
Net Change Due To Due To
Rate Volume
Interest Income $ 194,366 $ 46,171 $ 148,195
Interest Expense 103,278 5,930 97,348
Net Interest Income $ 91,088 $ 40,241 $ 50,847
Nine Months Ended September 30, 1997 Compared to Nine
Months Ended September 30, 1996.
Increase (Decrease) in Net Interest Income
Net Change Due To Due To
Rate Volume
Interest Income $ 414,592 $51,326 $ 363,266
Interest Expense 148,300 (36,892) 185,192
Net Interest Income $ 266,292 $88,218 $ 178,074
Generally higher rates on earning assets for the third
quarter of 1997, compared to the third quarter of 1996,
and additional loan volume raised the average yield on
all earning assets to 8.48% for the three months ended
September 30, 1997 from 8.15% for the three months
ended September 30, 1996. Except for certificates of
deposits and other borrowings rates paid on the bank's
deposits were generally lower for the three months
ended September 30, 1997, compared to the three months
ended September 30, 1996. Interest expense was $773,178
for the three months ended September 30, 1997 compared
to $669.898 for the three months ended September 30,
1996 and reflects the growth in interest bearing
deposits to $63,839,728 for the three months ended
September 30, 1997 from $57,872,446 for the three
months ended September 30, 1996.
OPERATING RESULTS
Net income for the three months ended September 30,
1997, increased $33,073 or 15.4% to $247,605 from
$214,532 for the three months ended September 30, 1996.
The increase in net interest income is $91,088 for the
three months ended September 30, 1997, compared to the
three months ended September 30, 1996, and is discussed
in "Net Interest Income" and "Rate/Volume Analysis"
elsewhere in this report.
Net income for the nine months ended September 30, 1997
increased $100,451 or 17.8% to $664,825 from $564,374
for the nine months ended September 30, 1996. The
increase in net interest income is $266,292 for the
nine months ended September 30, 1997 compared to the
nine months ended September 30, 1996 and is primarily
due to higher loan volume and a shift of earning assets
to loans from fed funds sold and investment securities.
Higher operating expenses for salaries and related
benefits, equipment rentals, depreciation and
maintenance and other operating expenses for the nine
months ended September 30, 1997 compared to the nine
months ended September 30, 1996 partially offset the
company's increase in net interest margin. The increase
in salaries and related benefits is due to inflationary
increases, 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
<PAGE>
second quarter of 1997. Income tax benefit of
$9,593 for 1997 was recorded by Luxemburg Bancshares,
Inc. Previously the company's accountant recorded
income tax benefit only at December 31.
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 September 30, 1997, loans past due 90 days or more
that were still accruing interest totaled $369,000. At
September 30, 1996 the Company did not have any loans
past due 90 days or more that were still accruing
interest. At September 30, 1997 and 1996 the Company
did not have 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 $246,000 of nonaccrual loans at
September 30, 1997 and $519,000 of nonaccrual loans at
September 30, 1996.
During the three months ended September 30, 1997,
$30,000 was charged to the provision for loan losses
compared to $29,500 for the three months ended
September 30, 1996. At September 30, 1997 the allowance
was $645,000 or 1.07% of total loans. This compares to
an allowance of $654,000 or 1.18% of total loans as of
September 30, 1996. For the nine months ended
September 30, 1997 the Bank had net charge-offs of
$98,000 compared to net charge-offs of $9,000 for the
nine months ended September 30, 1996.
The following table summarizes loan charge-offs and
recoveries by type of loan for the nine months ended
September 30, 1997 and 1996:
Loan Type September 30, 1997 September 30, 1996
Charge- Recovery Charge- Recovery
Off Off
Real Estate $ 0 $ 2,000 $ 1,000 $ 1,000
Commercial and 5,000
Industrial 68,000 3,000
Agricultural 20,000 10,000
Consumer 60,000 5,000 24,000
TOTALS $128,000 $30,000 $25,000 $16,000
The Bank has allocated its allowance for credit losses
at the end of each period presented as follows:
<PAGE>
Balance at End of Period September 30, 1997 September 30, 1996
Applicable to:
% of loans % of loans
to total to total
Amount Loans Amount Loans
Commercial and agricultural $ 0 47% $ 31,000 46%
Real Estate-construction 0 6% 0 4%
Real Estate-mortgage 0 35% 0 38%
Consumer 38,000 12% 25,000 12%
Total Domestic 38,000 100% 56,000 100%
Unallocated 607,000 598,000
TOTALS $645,000 100% $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. Primary liquid assets of the Company
are cash 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 $166,000
and $973,000 for the three months ended September 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 monitered
to provide the proper balance between liquidity, safety, and
profitability. This monitoring process must be continuous due
to the constant flow of cash that 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 Deposits 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
from anticipated repricings. At September 30, 1997, the
Company's rate sensitive assets exceed rate sensitive
liabilities due within one year by $5,837,000.
As part of managing liquidity, the Company monitors its loan
to deposit ratio on a daily basis. At September 30, 1997
the ratio was 84.7% which is within the Company's acceptable
range.
<PAGE>
The Company experienced an increase in cash and cash
equivalents, its primary source of liquidity, of
$750,592 for the nine months ended September 30, 1997. The
primary source of cash flow for the nine months ended September
30, 1997 was cash provided by operating activities of $675,903,
an increase in deposits of $4,822,147 and an increase in net
borrowings of $1,225,583. Cash flow from investing activities
used $5,061,871 to fund loan growth and $460,914 for capital
expenditures for the nine months ended September 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 September 30, 1997, based on certain
assumptions. No prepayment rate assumptions have been made for
the loan portfolio. Maturities and repricing dates for investments
having been projected by applying the assumptions set forth below
to contractual maturities and repricing dates.
<PAGE>
<TABLE>
<CAPTION>
1 Year or 1-5 Years 5-10 Years After 10
Less Years
<S> <C> <C> <C> <C>
Interest Earning Assets:
Fed Funds Sold $ 1,657,000
Investment Securities $ 1,758,000 $ 2,947,000 $ 5,934,000 $ 3,869,000
Loans
Variable Rate $ 9,217,000
Real Estate-Construction $ 3,696,000
Real Estate-Other $ 9,192,000 $ 5,557,000 $ 501,000
Commercial and Industrial $11,386,000 $ 4,529,000 $ 776,000
Agricultural $ 4,497,000 $ 594,000 $ 281,000
Consumer $ 2,416,000 $ 6,795,000 $ 663,000
Other $ 414,000
Total Interest Earning Assets $44,233,000 $20,422,000 $ 8,155,000 $ 3,869,000
Interest Bearing Liabilities:
Interest Bearing Demand $ $ 6,592,000
Savings Deposits $ 2,540,000 $10,249,000
Money Market Accounts $ 1,156,000 $ 2,695,000
Certificates of Deposit $23,654,000 $ 7,255,000
Jumbo CD's $ 3,092,000 $ 201,000
IRA's $ 5,660,000 $ 206,000
Other $ 2,294,000 $ 71,000
Total Interest Bearing
Liabilities $38,396,000 $ 7,733,000 $19,536,000
Interest Sensitivity Gap
per Period $ 5,837,000 $12,689,000 $ 8,155,000 ($15,667,000)
Cumulative Interest
Sensitivity Gap $ 5,837,000 $18,526,000 $26,681,000 $11,014,000
Interest Sensitivity
Gap as a Percentage of
Earning Assets 7.6% 16.6% 10.6% (20.4%)
Cumulative Sensitivity
Gap as a Percentage of
Earning Assets 7.6% 24.2% 34.8% 14.4%
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and report on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 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, President Thomas L. Lepinski, C.P.A.
and Chief Executive Officer Treasurer (Principal Accounting
Officer)
Date: November 11, 1997 Date: November 11, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,665,360
<INT-BEARING-DEPOSITS> 160,733
<FED-FUNDS-SOLD> 1,657,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,508,203
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 60,100,231
<ALLOWANCE> 644,791
<TOTAL-ASSETS> 82,655,624
<DEPOSITS> 70,979,608
<SHORT-TERM> 1,655,681
<LIABILITIES-OTHER> 987,444
<LONG-TERM> 709,467
0
0
<COMMON> 45,083
<OTHER-SE> 8,278,341
<TOTAL-LIABILITIES-AND-EQUITY> 82,655,624
<INTEREST-LOAN> 3,912,117
<INTEREST-INVEST> 632,284
<INTEREST-OTHER> 34,379
<INTEREST-TOTAL> 4,578,780
<INTEREST-DEPOSIT> 2,122,710
<INTEREST-EXPENSE> 2,198,457
<INTEREST-INCOME-NET> 2,380,323
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,992,446
<INCOME-PRETAX> 944,457
<INCOME-PRE-EXTRAORDINARY> 664,825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 664,825
<EPS-PRIMARY> 2.74
<EPS-DILUTED> 2.74
<YIELD-ACTUAL> 8.40
<LOANS-NON> 246,000
<LOANS-PAST> 369,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 653,000
<CHARGE-OFFS> 128,000
<RECOVERIES> 30,000
<ALLOWANCE-CLOSE> 645,000
<ALLOWANCE-DOMESTIC> 38,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 607,000
</TABLE>
