U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year ended December 31, 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.
(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)
Issuer's telephone number (920) 845-2345
Securities registered under Section 12(b) of the
Exchange Act: None
Securities registered under Section 12(g) of the
Exchange Act:
Common Stock, par value $0.16-2/3 per share
(Title of Class)
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 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 [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of regulation S-B is not contained
in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by
reference in Part III of this form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
Issuer's revenues for the year ended December 31, 1997.
$7,109,961.
The aggregate market value (determined using the book
value per share) of common stock held by non-affiliates
of the registrant as of March 9, 1998 was $6,845,084.
The number of shares outstanding of the registrant's
common stock as of March 9, 1998 was 243,501.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated March
30, 1998 to be delivered to shareholders in connection
with the Annual Meeting of Shareholders to be held May
2, 1998 are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE COMPANY
Luxemburg Bancshares, Inc. (the "Company"), a
Wisconsin corporation, was formed June 10, 1983 for the
purpose of owning a Wisconsin bank. On December 30,
1983, the Company acquired a controlling interest in
the Bank of Luxemburg (the "Bank"). The Bank is now a
wholly-owned subsidiary of the Company.
THE BANK
The Bank was chartered by the Wisconsin Banking
Department (now the Wisconsin Department of
Financial Institutions ("DFI")) on October 6, 1903.
Bank deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC"). The Bank conducts
business at the Main Office at 630 Main Street,
Luxemburg, Wisconsin with other offices located at E166
County Hwy. S., Luxemburg ("Dyckesville office") and
602 Center Drive, Luxemburg ("IGA Supermarket office")
in Kewaunee County and 1311 Bellevue Street, Green Bay
("Bellevue office") in Brown County. The Bank also
maintains five automated teller machines ("ATMs") in
Kewaunee, Brown and Door Counties.
The Bank provides a full range of consumer and
commercial banking services to individuals, businesses
and farms. The basic services offered include: demand
deposit accounts, money market deposit accounts, NOW
accounts, time deposits, safe deposit services, credit
cards, direct deposits, notary services, money orders,
night depository, travelers' checks, cashier's checks,
savings bonds, secured and unsecured consumer,
commercial and real estate loans and stand-by letters
of credit. The Bank offers automated teller machine
cards through the TYME and Cirrus ATM networks. In
addition, the Bank purchased the financial planning and
alternative investment marketing of Total Financial
Concepts in January of 1996 to provide financial
planning, estate planning and retirement planning
services and to market mutual funds, annuities, life
insurance products, Individual Retirement Accounts
(IRAs) and other pension programs.
As is the case with banking institutions
generally, the Bank derives its revenues from interest
on the loan and investment portfolios and fee income
related to loans and deposits. Income derived from the
sale of alternative investment products provides
additional fee income. The source of funds for the
lending activities are deposits, repayment of loans,
sale and maturity of investment securities and
borrowing from the Federal Home Loan Bank of Chicago.
Principal expenses are the interest paid on deposits
and borrowings and operating and general administrative
expenses.
The Bank's business plan is based on being a
strong, established, locally owned bank providing
financial services to its local communities. The
Bank's main office and two branch offices are located
in western Kewaunee County, serving approximately 25%
of the county's 19,000 population. The Bank also
serves a small portion of southern Door County from
these locations. The Bank serves eastern Brown County
with these locations and an office in the Green Bay,
Wisconsin market. The Bank targets the individual and
small business customers within these markets and
emphasizes the advantages of local ownership, (i.e.,
responsive local loan decisions and community
involvement).
As of December 31, 1997, the Company had total
consolidated assets of $83.6 million and total
stockholders' equity of $8.5 million.
<PAGE>
AREA DEVELOPMENT CORPORATION
The Company formed Area Development Corporation as
a subsidiary to provide the Company with a vehicle to
invest in the community in real estate developments
which assist low and moderate income residents. To
date, the Area Development Corporation has assisted by
working with the low-income housing program in
Luxemburg by providing officers to serve on the board
and to advise on the current and future low-income
housing projects; assisting the low-income housing
development committee in Dyckesville; researching a low-
income housing project and putting aside funds to
purchase property if necessary to begin the project;
and providing funds to determine the need for library
services locally for all community residents.
LUXEMBURG INVESTMENT CORPORATION
Luxemburg Investment Corporation ("Investment
Corporation") is a wholly-owned subsidiary of the Bank.
Investment Corporation is a Nevada corporation, the
business of which is to hold, invest and reinvest a
portion of the investment portfolio of the Bank. See
"INVESTMENTS".
LENDING ACTIVITIES
The Bank offers a range of lending services,
including real estate, consumer, commercial and
industrial and agricultural loans to individuals, small
business and other organizations that are located in or
conduct a substantial portion of their business in the
Bank's market area. The Bank's total loans as of
December 31, 1997 were $60.9 million, or approximately
73% of total consolidated assets. In addition, the
Bank services $17.2 million in consumer real estate
loans sold to the Federal Home Loan Mortgage
Corporation ("FHLMC"). Interest rates charged on loans
vary with the degree of risk, maturity, and amount of
the loan, and are further subject to competitive
pressures, cost and availability of funds and
government regulations.
The Bank maintains a comprehensive loan policy
that establishes guidelines with respect to all
categories of lending activity. The policy establishes
lending authority for each individual loan officer and
officer and board lending authority. All loans to
directors and executive officers are approved by the
Board of Directors. The loans are concentrated in
four major areas: real estate loans, commercial loans,
consumer loans and agricultural loans. The lending
strategy is development of a high quality loan
portfolio.
The Bank's credit customers are subject to
potential losses as a result of Year 2000 exposure in
their own computer systems as well as the computer
systems of their suppliers and customers. The Bank is
working with those customers that may be significantly
affected by the Year 2000 exposure. The exposure, if
not adequately addressed will be taken into account in
assessing the loss potential, if any, associated with
each credit relationship.
The Bank's real estate loans are secured by
mortgages and consist primarily of loans to individuals
for the purchase and improvement of real estate and for
the purchase of residential lots and construction of
single-family residential units. The Bank's
residential real estate loans generally are repayable
in monthly installments based on up to a thirty year
amortization schedule. Typically, loans with terms of
fifteen or thirty years must qualify for and are sold
to the FHLMC.
Commercial loans include loans to individuals and
small businesses including loans for working capital,
machinery and equipment purchases, premise and
equipment acquisitions, purchase, improvement and
investment in real estate development and other
business needs. Commercial lines of credit are
typically for a one year term. Other commercial loans
with terms or amortization schedules of longer than one
year will normally carry interest rates which vary with
the prime lending rate and will become payable in full
and are generally refinanced in three to five years.
Commercial loans typically entail a thorough analysis
of the borrower, its industry, current and projected
economic conditions and other factors. The Bank
typically requires commercial borrowers to have annual
financial statements and requires appraisals or
evaluations in connection with the loans secured by
real estate. The Bank often requires personal
guarantees from principals involved with closely-held
corporate borrowers.
<PAGE>
The Bank's consumer loan portfolio consists
primarily of loans to individuals for various consumer
purposes payable on an installment basis. The loans
are generally for terms of five years or less and are
secured by liens on various personal assets of the
borrower. The Bank also provides consumer credit
through its credit card program. These loans are
limited open-ended credits requiring minimum monthly
payments. Credit card loans are unsecured.
The Bank also provides services to support dairy
farms in the rural areas of Kewaunee and southern Door
counties. About twelve (12%) percent of the Bank's
loan portfolio, $7.2 million, is in agricultural loans
(including agricultural real estate loans). The loans
provide financing for real estate and personal property
purchases, as well as operational lines of credit and
production financing. The credit terms are typically
similar to other commercial loans. The Bank will
provide direct financing, as well as guaranteed
financing through Federal (FmHA) and State of Wisconsin
(WHEDA) sponsored programs.
DEPOSIT ACTIVITIES
Deposits are the major source of the Bank's funds
for lending and other investment activities. The Bank
considers the majority of its regular savings,
investors choice, demand, NOW and money market deposit
accounts to be core deposits. These accounts comprised
approximately 46% of the Bank's total deposits at
December 31, 1997. Approximately 54% of the Bank's
deposits at December 31, 1997 were certificates of
deposit. Generally, the Bank attempts to maintain the
rates paid on its deposits at a competitive level.
Deposits of $100,000 and over made up approximately 6%
of the Bank's total deposits at December 31, 1997. The
majority of the deposits of the Bank are generated from
Kewaunee and Brown Counties. Brokered deposits at
December 31, 1997 made up approximately 3% of the
Bank's total deposits. For additional information
regarding the Bank's deposit accounts, see
"Management's Discussion and Analysis or Plan of
Operation - Liquidity and Interest Rate Sensitivity"
and Note 8 of Notes to Consolidated Financial
Statements.
INVESTMENTS
The Bank invests a portion of its assets in U.S.
Treasury and U.S. Governmental agency obligations,
FHLMC, FNMA and FHLB securities, state, county and
municipal obligations, collateralized mortgage
obligations ("CMO's") and federal funds sold. The
investments are managed in relation to the loan demand
and deposit growth and are generally used to provide
for the investment of excess funds at reduced yields
and risks relative to yields and risks of the loan
portfolio, while providing liquidity to fund increases
in loan demand or to offset fluctuations in deposits.
The investments are held in Investment Corporation as
well as in the Bank. The Bank portfolio is to provide
for immediate liquidity needs and therefore maintains
shorter term investments. Investment Corporation
provides for greater investment yields and therefore
maintains longer term investments. For further
information regarding the Company's investment
portfolio, see Note 3 of Notes to Consolidated
Financial Statements.
SUPERVISION AND REGULATION
Bank Holding Company Regulation. The Company is a
one-bank holding company, registered with the Federal
Reserve under the Bank Holding Company Act of 1956, as
amended ("BHC Act"). As such, the Company is subject
to the supervision, examination, and reporting
requirements of the BHC Act and the regulations of the
Federal Reserve. The Company is required to furnish to
the Federal Reserve an annual report of its operations
at the end of each fiscal year, and such additional
information as the Federal Reserve may require pursuant
to the BHC Act.
The BHC Act requires every bank holding company to
obtain the prior approval of the Federal Reserve before
(i) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or
indirectly own or control more than 5% of the total
voting shares of the bank, (ii) it or any of its
subsidiaries, other than a bank, may acquire all or
substantially all of the assets of the bank, or (iii)
it may merge or consolidate with any other bank holding
company.
<PAGE>
The BHC Act further provides that the Federal
Reserve may not approve any transaction that would
result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any section of
the United States, or the effect of which may be
substantially to lessen competition or to tend to
create a monopoly in any section of the country, or
that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the
proposed transaction are clearly outweighed by the
public interest in meeting the convenience and needs of
the community to be served. The Federal Reserve is
also required to consider the financial and managerial
resources and future prospects of the bank holding
companies and banks concerned, which generally focuses
on capital adequacy. The Federal Reserve must also
consider the convenience and needs of the community to
be served, including the parties' performance under the
Community Reinvestment Act of 1977, as amended (the
"CRA"), which is discussed below.
The BHC Act generally prohibits the Company from
engaging in activities other than banking or managing
or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect
control of any company engaged in any activities other
than those activities determined by the Federal Reserve
to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
In determining whether a particular activity is
permissible, the Federal Reserve must consider whether
the performance of such an activity reasonably can be
expected to produce benefits to the public, such as
greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound
banking practices. For example, factoring accounts
receivable, acquiring or servicing loans, leasing
personal property, conducting discount securities
brokerage activities, performing certain data
processing services, acting as agent or broker in
selling credit life insurance and certain other types
of insurance in connection with credit transactions,
and performing certain insurance underwriting
activities all have been determined by the Federal
Reserve to be permissible activities of bank holding
companies. Despite prior approval, the Federal Reserve
has the power to order a bank holding company or its
subsidiaries to terminate any activity or to terminate
its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a
serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding
company.
Banks are subject to the provisions of the CRA.
Under the terms of the CRA, the appropriate federal
bank regulatory agency is required, in connection with
its examination of a bank, to assess such bank's record
in meeting the credit needs of the community served by
that bank, including low- and moderate-income
neighborhoods. The regulatory agency's assessment of
the bank's record is made available to the public.
Further, such assessment is required of any bank which
has applied to (i) charter a national bank, (ii) obtain
deposit insurance coverage for a newly chartered
institution, (iii) establish a new branch office that
will accept deposits, (iv) relocate an office, or (v)
merge or consolidate with, or acquire the assets or
assume the liabilities of, a federally regulated
financial institution. In the case of a bank holding
company applying for approval to acquire a bank or
other bank holding company, the Federal Reserve will
assess the record of each subsidiary bank of the
applicant bank holding company, and such records may be
the basis for denying the application.
Bank Regulation. The Bank is chartered under the
laws of the State of Wisconsin and its deposits are
insured by the Federal Deposit Insurance Corporation
(the "FDIC") to the extent provided by law. The Bank
is subject to comprehensive regulation, examination and
supervision by the FDIC and DFI and to other laws and
regulations applicable to banks. Such regulations
include limitations on loans to a single borrower and
to its directors, officers and employees; restrictions
on the opening and closing of branch offices; the
maintenance of required capital and liquidity ratios;
the granting of credit under equal and fair conditions;
and the disclosure of the costs and terms of such
credit. The Bank is examined periodically by the FDIC
and DFI to which it submits periodic reports regarding
its financial condition and other matters. The FDIC
and DFI have a broad range of powers to enforce
regulations under their jurisdiction, and to take
discretionary actions determined to be for the
protection of the safety and soundness of insured
banks, including the institution of cease and desist
orders and the removal of directors and officers. The
FDIC and DFI also have the authority to approve or
disapprove mergers, consolidations, and similar
corporate actions.
Under federal law, federally insured banks are
subject, with certain exceptions, to certain
restrictions on any extension of credit to their parent
holding companies or other affiliates, on investment in
the stock or other securities of affiliates, and on the
taking of such stock or securities as collateral from
any borrower. In addition,
<PAGE>
such banks are prohibited
from engaging in certain tie-in arrangements in
connection with any extension of credit or the
providing of any property or service.
In 1989, the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") was
enacted. FIRREA contains major regulatory reforms,
stronger capital standards for savings and loan
associations and stronger civil and criminal
enforcement provisions. FIRREA also provides that a
depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected
to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly
controlled FDIC insured depository institution, or (ii)
any assistance provided by the FDIC to a commonly
controlled FDIC insured institution in danger of
default.
In 1991, the FDIC Improvement Act of 1991
("FDICIA") was enacted. FDICIA made a number of
reforms addressing the safety and soundness of deposit
insurance funds, supervision, accounting, and prompt
regulatory action, and also implements other regulatory
improvements. Annual full-scope, on-site examinations
are required of all insured depository institutions.
The cost for conducting an examination of an
institution may be assessed to that institution, with
special consideration given to affiliates and any
penalties imposed for failure to provide information
requested. Insured state banks also are precluded from
engaging as principal in any type of activity that is
impermissible for a national bank, including activities
relating to insurance and equity investments. FDICIA
also recodified current law restricting extensions of
credit to insiders under the Federal Reserve Act.
Dividends. Dividends from the Bank constitute the
primary source of funds for dividends to be paid by the
Company. There are various statutory and contractual
limitations on the ability of Bank to pay dividends,
extend credit, or otherwise supply funds to the
Company. The Federal Reserve, the FDIC and DFI also
have the general authority to limit the dividends paid
by bank holding companies and insured banks,
respectively, if such payment may be deemed to
constitute an unsafe and unsound practice. In general,
under Wisconsin law applicable to the Bank, the board
of directors of a state bank may declare and pay a
dividend from so much of the bank's undivided profits
as the board deems expedient, provided that the payment
of such dividend does not in any way impair or diminish
the bank's capital, other than by reducing undivided
profits.
Effect of Governmental Policies. The earnings and
business of the Company and the Bank are effected by
the policies of various regulatory authorities of the
United States, especially the Federal Reserve. The
Federal Reserve, among other things, regulates the
supply of credit and deals with general economic
conditions within the United States. The instruments
of monetary policy employed by the Federal Reserve for
those purposes influence in various ways the overall
level of investments, loans, other extensions of
credits, and deposits, and the interest rates paid on
liabilities and received on assets.
Enforcement Powers. Congress has provided the
federal bank regulatory agencies with an array of
powers to enforce laws, rules, regulations and orders.
Among other things, the agencies may require that
institutions cease and desist from certain activities,
may preclude persons from participating in the affairs
of insured depository institutions, may suspend or
remove deposit insurance, and may impose civil money
penalties against institution-affiliated parties for
certain violations.
Change of Control. Federal law restricts the
amount of voting stock of a bank holding company and a
bank that a person may acquire without the prior
approval of banking regulators. The overall effect of
such laws is to make it more difficult to acquire a
bank holding company and a bank by tender offer or
similar means than it might be to acquire control of
another type of corporation. Consequently,
shareholders of the Company may be less likely to
benefit from the rapid increases in stock prices that
may result from tender offers or similar efforts to
acquire control of other companies. Federal law also
imposes restrictions on acquisitions of stock in a bank
holding company and a state bank. Under the federal
Change in Bank Control Act and the regulations
thereunder, a person or group must give advance notice
to the Federal Reserve before acquiring control of any
bank holding company and the FDIC and DFI before
acquiring control of an insured state bank (such as the
Bank). Upon receipt of such notice, the Federal
Reserve or the FDIC and DFI, as the case may be, may
approve or disapprove the acquisition. The Change in
Bank Control Act creates a rebuttable presumption of
control if a member or group acquires a certain
percentage or more of a bank holding company's or
bank's voting stock, or if one or more other control
factors set forth in the Act are present.
<PAGE>
Insurance of Deposits. The Bank's deposit
accounts are insured by the FDIC up to a maximum of
$100,000 per insured depositor. The FDIC issues
regulations, conducts periodic examinations, requires
the filing of reports and generally supervises the
operations of its insured banks. Any insured bank
which is not operated in accordance with or does not
conform to FDIC regulations, policies and directives
may be sanctioned for non-compliance. Proceedings may
be instituted against any insured bank or any director,
officer, or employee of such bank engaging in unsafe
and unsound practices, including the violation of
applicable laws and regulations. The FDIC has the
authority to terminate insurance of accounts pursuant
to procedures established for that purpose.
Capital Requirements. The federal bank regulatory
authorities have adopted risk-based capital guidelines
for banks and bank holding companies that are designed
to make regulatory capital requirements more sensitive
to differences in risk profile among banks and bank
holding companies. The resulting capital ratios
represent qualifying capital as a percentage of total
risk-weighted assets and off-balance sheet items. The
guidelines are minimums, and the federal regulators
have noted that banks and bank holding companies
contemplating significant expansion programs should not
allow expansion to diminish their capital ratios and
should maintain all ratios well in excess of the
minimums. The current guidelines generally require
bank holding companies and federally-regulated banks to
maintain a minimum total risk-based capital ratio equal
to 8%, of which at least 4% must be Tier 1 capital.
For bank holding companies with assets less than $150
million, such as the Company, capital ratios are
determined at the subsidiary bank level. Tier 1
capital includes common stockholders' equity,
qualifying perpetual preferred stock, and minority
interests in equity accounts of consolidated
subsidiaries, less the amounts of goodwill and most
other intangibles. Tier 2 capital includes the excess
of any preferred stock not included in Tier 1 capital,
mandatory convertible securities, hybrid capital
instruments, subordinated debt and intermediate term-
preferred stock, and general reserves for loan and
lease losses up to 1.25% of risk-weighted assets. At
December 31, 1997, the Bank's Tier 1 and total risk-
based capital ratios were 13.2% and 14.4%,
respectively.
FDICIA contains "prompt corrective action"
provisions pursuant to which banks are to be classified
into one of five categories based upon capital
adequacy, ranging from "well capitalized" to
"critically undercapitalized" and which require
(subject to certain exceptions) the appropriate federal
banking agency to take prompt corrective action with
respect to an institution which becomes "significantly
undercapitalized" or "critically undercapitalized".
The FDIC has issued regulations to implement the
"prompt corrective action" provisions of FDICIA. In
general, the regulations define the five capital
categories as follows: (i) an institution is "well
capitalized" if it has a total risk-based capital ratio
of 10% or greater, has a Tier 1 risk-based capital
ratio of 6% or greater, has a leverage ratio of 5% or
greater and is not subject to any written capital order
or directive to meet and maintain a specific capital
level for any capital measures; (ii) an institution is
"adequately capitalized" if it has a total risk-based
capital ratio of 8% or greater, has a Tier 1 risk-based
capital ratio of 4% or greater, and has a leverage
ratio of 4% or greater; (iii) an institution is
"undercapitalized" if it has a total risk-based capital
ratio of less than 8%, has a Tier 1 risk-based capital
ratio that is less than 4% or has a leverage ratio that
is less than 4%; (iv) an institution is "significantly
undercapitalized" if it has a total risk-based capital
ratio that is less than 6%, a Tier 1 risk-based capital
ratio that is less than 3% or a leverage ratio that is
less than 3%; and (v) an institution is "critically
undercapitalized" if its "tangible equity" is equal to
or less than 2% of its total assets. The FDIC also,
after an opportunity for a hearing, has authority to
downgrade an institution from "well capitalized" to
"adequately capitalized" or to subject an "adequately
capitalized" or "under-capitalized" institution to the
supervisory actions applicable to the next lower
category, for supervisory concerns. As of December 31,
1997, the Bank had a total risk-based capital ratio of
14.4%, a Tier 1 risk-based capital ratio of 13.2%, and
a leverage ratio of 9.7%.
Additionally, FDICIA requires, among other things,
that (i) only a "well capitalized" depository
institution may accept brokered deposits without prior
regulatory approval and (ii) the appropriate federal
banking agency annually examine all insured depository
institutions, with some exceptions for small, "well
capitalized" institutions and state-chartered
institutions examined by state regulators. FDICIA also
contains a number of consumer banking provisions,
including disclosure requirements and substantive
contractual limitations with respect to deposit
accounts.
Interstate Banking. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 provides
for nationwide interstate banking and branching. Under
the law, interstate acquisitions of banks or bank
holding companies in any state by bank holding
companies in any other state is permissible subject to
certain limitations. Wisconsin also has a law that
allows out-of-state bank holding companies (located in
states that allow Wisconsin
<PAGE>
bank holding companies to
acquire banks and bank holding companies in that state)
to acquire Wisconsin banks and Wisconsin bank holding
companies. The law essentially provides for out-of-
state entry by acquisition only (and not by interstate
branching) and requires the acquired Wisconsin bank to
have been in existence for at least five years.
Interstate branching and consolidation of existing bank
subsidiaries in different states is permissible. Out-of-
state banks that do not operate a branch in Wisconsin
are prohibited from establishing a de novo branch in
Wisconsin. A Wisconsin bank may establish, maintain,
and operate one or more branches in a state other than
Wisconsin pursuant to an interstate merger transaction
in which the Wisconsin bank is the resulting bank. An
interstate merger transaction resulting in the
acquisition by an out-of-state bank of a Wisconsin bank
is not permitted unless the Wisconsin bank has been in
existence and continuously operating, on the day of the
acquisition, for more than five years.
INDUSTRY RESTRUCTURING
For well over a decade, the banking industry has
been undergoing a restructuring process which is
anticipated to continue. The restructuring has been
caused by product and technological innovations in the
financial services industry, deregulation of interest
rates, and increased competition from foreign and
nontraditional banking competitors, and has been
characterized principally by the gradual erosion of
geographic barriers to intrastate and interstate
banking and the gradual expansion of investment and
lending authorities for bank institutions.
COMPETITION
The Bank's service area includes portions of
Kewaunee, Brown and Door Counties. Kewaunee County,
with a population of approximately 19,000 residents,
has six banks with ten offices, one savings bank and
one credit union with two offices. Brown County, with
a population of approximately 195,000 residents, has
sixteen banks with fifty-five offices, three saving
banks with twenty offices and fourteen credit unions
with sixteen offices. Door County, with a population
of approximately 26,000 residents, has three banks with
fourteen offices and one savings bank with two offices.
In addition to the financial institutions, significant
competition comes from security and brokerage firms,
mortgage companies, insurance companies and other
providers of financial services in the area. The Bank
competes as a locally owned banking institution that
responds quickly with personal service.
EMPLOYEES
As of December 31, 1997, the Company employed 34
full-time employees and 16 part-time employees. The
employees are not represented by a collective
bargaining unit. The Company considers relations with
employees to be good.
STATISTICAL PROFILE AND OTHER FINANCIAL DATA
For additional statistical, financial and other
information regarding the Company, see "Management's
Discussion and Analysis or Plan of Operation" and
"Notes to Consolidated Financial Statements."
ITEM 2. DESCRIPTION OF PROPERTIES.
The Company and the Bank have their main office in
Luxemburg, Wisconsin at 630 Main Street. The building
is a two story building. The Bank owns the main
office.
The Bank opened its Dyckesville, Wisconsin office
(located at E166 County Hwy. S, Luxemburg) during May,
1987. This office was purchased on land contract by
the Company on September 30, 1994. The Bank leases
this office from the Company under a five year lease
expiring in 1999.
The Bank opened its Bellevue Office (located at
1311 Bellevue Street, Green Bay, Wisconsin) during
August, 1989. The Bank owns its Bellevue Office.
<PAGE>
On April 17, 1996, the Bank opened its IGA office
(located at 602 Center Street, Luxemburg). The Bank
has executed a lease for this property expiring in
2001.
The Bank has installed an ATM at its Dyckesville
Office, the Main Street Station in Luxemburg, the Hwy.
54 T-Mart in New Franken, FS Fast Stop in Forestville
and the Hwy. 29 & P C-Mart in Henrysville. These
remote ATMs provide additional banking convenience for
the customers of the Bank, and generate an additional
source of fee income.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company, the Bank nor any other
subsidiary are subject to any material pending
litigation at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
No matters were submitted to the shareholders
during the fourth quarter of 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
Following are the persons who were the executive
officers of Luxemburg Bancshares, Inc. as of December
31, 1997, their ages as of March 31, 1998, their
current titles and positions held during the past five
years:
JOHN A. SLATKY, - Age 46. Mr. Slatky is
President, Chief Executive Officer and a director of
the Company. He commenced employment with the Bank in
1984 and has held various executive positions with the
Company or the Bank since 1986. He was employed at the
Kimberly State Bank (an Associated Bank) from 1974
through 1983. Mr. Slatky has been a director of the
Company since 1987 and a director of the Bank since
1986.
THOMAS L. LEPINSKI, C.P.A. - Age 42. Mr. Lepinski
is Vice President-Operations & Finance for the Bank and
is Treasurer of the Company, positions held since
February, 1997. From 1978 through 1992 he was employed
by Wipfli Ullrich Bertelson LLP where he was
responsible for providing tax, audit and examination
services to community banks. He was Controller-
Treasurer of the Sorg Paper Company from 1992 through
1996. At Sorg he was responsible for the company's
financial operations, annual planning and budgeting and
handling shareholder communications and relations. Mr.
Lepinski is a member of the American Institute of CPAs
and is licensed as a CPA in the states of Wisconsin and
Minnesota.
DAVID L. LUEBBERS, - Age 48. Mr. Luebbers is Vice
President of loans at the Bank, a position he has held
since 1984. Mr. Luebbers is responsible for overseeing
all loan operations and servicing accounts. Mr.
Luebbers also serves as one of the Company's Vice
Presidents.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS.
There is no established public trading market for
the Common Stock and such trading activity, as it
occurs, takes place in privately negotiated
transactions.
At December 31, 1997 there were approximately 521
shareholders of record of the Common Stock.
The Company has paid the following cash dividends
on its shares of Common Stock since 1993:
Year Ended December 31 Dividends Per Share
1993 $0.52
1994 $0.57
1995 $0.69
1996 $0.76
1997 $0.85
In determining the dividends to be paid, the Board
of Directors will examine the then-existing
circumstances, including the Company's rate of growth,
profitability, financial condition, existing and
anticipated capital requirements, the amount of funds
legally available for the payment of dividends,
regulatory constraints and such other factors as the
Board determines relevant. The primary source of funds
for payment of dividends by the Company is dividends
paid to the Company by the Bank. The Bank is limited
by Wisconsin statute in the amount of dividends it is
allowed to pay. Under the law, a bank may pay
dividends from its undivided profits after making
provision for payment of all expenses, losses, required
reserves, taxes and interest accrued or due from the
bank. If a bank has declared and paid dividends in
either of two preceding years in excess of its net
income in such year, it may not declare or pay any
dividend which exceeds year-to-date net income except
with the written approval of DFI.
During the year ended December 31, 1997, the
Company sold 315 shares of Common Stock that were not
registered under the Securities Act of 1933, as amended
("Securities Act"). The shares were sold to employees
of the Company in lieu of cash bonuses aggregating
approximately $10,080. The transactions were exempt
from registration under the Securities Act pursuant to
Rule 701, as the Common Stock was sold by the Company
to employees of the Bank pursuant to a written
compensatory benefit plan. The sales of Common Stock
related to services rendered and were not in connection
with capital raising transactions. At the time of the
sales, the Company was not a reporting company under
the Securities Exchange Act of 1934, as amended.
The transactions were also exempt pursuant to
Section 3(a)(11) under the Securities Act as involving
an intrastate offering of securities only to employees
of the Bank resident in the state of Wisconsin.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION.
The following discussion and analysis of the Company
relates to the years ended December 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, 1997 Compared to the Year Ended
December 31, 1996
The Company's results of operations depends
primarily on the level of its net interest margin, its
provision for credit losses, 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 $108,769 or 13.4% to $919,741 for
the year ended December 31, 1997 from $810,972 for the
year ended December 31, 1996. This increase is
primarily due to the growth of the Bank allowing for
more interest earning assets and net interest income
compared to the same period during 1996 and a higher
yield on the bank's taxable investment securities in
1997 compared to 1996. The following table summarizes
the Company's operating performance for the years
specified.
Year Ended December 31,
1997 1996
Return on Assets 1.16% 1.10%
Return on Equity 11.30% 11.01%
Year 2000 Risks. The Company is exposed to
future uncertainty, potential future reduction in
earnings, and future losses, including litigation, due
to business interruption or errors, if its computer
systems are not modified to ensure that dates after
December 31, 1999 are not misrepresented by those
systems. This eventuality is commonly referred to as
the Year 2000 problem.
The Bank uses computer-related technologies and
software throughout its business that will be affected
by the date change in the year 2000. The Bank's
directors, senior management and staff are aware of
these Year 2000 issues and have appointed a technology
committee to study and direct the project to bring all
of the computer-related systems into Year 2000
compliance during 1998 and 1999. In accordance with
the guidelines of the FDIC, the technology committee
will be addressing the issue using the following phases:
1) Awareness
2) Assessment
3) Renovation
4) Validation
5) Implementation
The Bank has recently converted it's main data
processing system. The vendor has provided the Bank
with a copy of its Year 2000 project plan and stated
that the software is Year 2000 compliant. The Bank is
in the process of obtaining similar information and
commitments from the Bank's other vendors. The Bank is
acting upon the belief and understanding that all
federal agencies are actively managing the Year 2000
problems which are inherent in the global banking and
payments system.
Since the Bank is in the Assessment phase, it is
not practicable to estimate the total costs of dealing
with the Year 2000 problem. These costs, when incurred,
will be expensed by the Company and will reduce the
Company's future reported earnings.
<PAGE>
Net Interest Income. Net interest income
increased $332,082 or 11.5% to $3,227,516 for the year
ended December 31, 1997 from $2,895,434 for the year
ended December 31, 1996. Total interest income
increased $588,203 for the year ended December 31, 1997
to $6,221,688 from $5,633,485 for the year ended
December 31, 1996. This increase is primarily a result
of average total loans for the year ended December 31,
1997 being approximately $57,100,000 compared to
average total loans of approximately $50,600,000 for
the year ended December 31, 1996. 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, 1997 and
1996:
Type of Loan December 31, December 31,
1997 1996
Real Estate Loans $ 19,169,168 $ 18,679,905
Commercial and Industrial 22,448,688 17,719,086
Agricultural 6,095,262 5,517,504
Consumer 9,056,693 8,171,887
Other 333,210 461,996
Total gross average loans 57,103,021 50,550,378
Less: Allowance for credit 673,847 607,378
losses
Total net average loans $ 56,429,174 $ 49,943,000
Supplemental Disclosure:
Municipal Loans $ 1,561,998 $ 1,104,933
The Bank does not separately track average real estate
construction loans.
Total interest expense increased $256,121 or 9.4%
to $2,994,172 for the year ended December 31, 1997 from
$2,738,051 for the year ended December 31, 1996. This
increase is due to an increase in interest bearing
deposits and the bank's additional use of external
borrowings in 1997 to fund loan growth. Total interest
bearing liabilities averaged approximately $62,800,000
for the year ended December 31, 1997 as compared to
approximately $58,200,000 for the year ended December
31, 1996. External borrowings averaged $1,700,000 for
the year ended December 31, 1997 compared to $600,000
for the year ended December 31, 1996. The average cost
of interest bearing liabilities for the year ended
December 31, 1997 was approximately 4.77% compared to
an average cost of interest bearing liabilities of
approximately 4.70% for the year ended December 31,
1996.
The following table summarizes the maturities of
time deposits of $100,000 or more as of December 31,
1997:
Certificates of Other Time Deposits
Time Until Maturity Deposit of of
$100,000 or More $100,000 or More
3 months or less $ 556,000
3 through 6 months $1,350,000 $701,000
6 through 12 months $1,362,000
over 12 months $ 611,000
Totals $3,879,000 $701,000
<PAGE>
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, 1997 and
1996. 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.
<TABLE>
<CAPTION>
Year End December 31, 1997 Year End December 31, 1996
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest
Bearing
Loans $57,103,021 $5,239,799 9.18% $50,550,378 $4,634,218 9.17%
Taxable 11,364,032 709,503 6.24% 13,187,931 741,479 5.62%
Investments and
Mortgage Backed
Securities
Fed Funds Sold 332,566 18,084 5.44% 2,278,743 121,515 5.33%
Municipal 4,401,030 218,927 4.97% 2,146,006 105,676 4.92%
Loans and
Investments
Other 630,618 35,375 5.61% 559,700 30,597 5.47%
Total 73,831,267 $6,221,688 8.43% 68,722,758 $5,633,485 8.20%
CSV Life 1,109,921 1,044,941
Insurance
Non-Earning 4,344,366 3,958,511
TOTAL ASSETS $79,285,554 $73,726,210
LIABILITIES:
Interest Bearing
Bearing
Demand $ 4,823,989 $ 84,894 1.76% $ 4,516,169 $ 95,202 2.11%
Savings 18,194,938 631,506 3.47% 16,685,372 $ 536,082 3.21%
Other Time 38,020,245 2,172,177 5.71% 36,416,839 2,070,844 5.69%
Deposits
Other 1,718,079 105,595 6.15% 628,088 35,923 5.72%
Total 62,757,251 $2,994,172 4.77% 58,246,468 $2,738,051 4.70%
Non-Interest- 7,403,356 7,143,527
Bearing
Liabilities
Other 984,955 968,201
Liabilities
Total 71,145,562 66,358,196
Liabilities
Equity 8,139,992 7,368,014
TOTAL $79,285,554 $73,726,210
LIABILITIES &
EQUITY
Recap:
Interest Income $6,221,688 8.43% $5,633,485 8.20%
Interest Expense 2,994,172 4.77% 2,738,051 4.70%
Net Interest
Income/Spread $3,227,516 3.66% $2,895,434 3.50%
Contribution of 0.71% 0.71%
Non-Interest-
Bearing Funds
Net Interest Margin 4.37% 4.21%
Ratio of Average 117.65% 117.99%
Interest-Earning
Assets to Average
Interest-Bearing
Liabilities
</TABLE>
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, 1997 compared to year
ended December 31, 1996.
Increase (Decrease) in Net Interest Income
Net Due to Due to
Change Rate Volume
Interest Earning
Assets:
Loans $605,581 $ 4,311 $601,270
Taxable (31,976) 76,868 (108,844)
Investments and
Mortgage Backed
Securities
Fed Funds Sold (103,431) 2,350 (105,781)
Municipal Loans 113,251 1,087 112,164
and Investments
Other 4,778 817 3,961
TOTAL 588,203 85,433 502,770
Interest Bearing
Liabilities:
Interest Bearing
Demand (10,308) (16,484) 6,176
Savings 95,424 44,861 50,563
Other Time 101,333 9,768 91,565
Deposits
Other 69,672 2,872 66,800
TOTAL 256,121 41,017 215,104
Net Change in $332,082 $44,416 $287,666
Net Interest
Income
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:
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.
<PAGE>
The Bank generally places loans on non-accrual
status, as discussed in Footnotes 1 and 4 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 unless the Bank deems
the loan collateral adequate to secure both the payment
of all loan principal and all uncollected accrued
interest receivable. 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, 1997 and 1996 the Company did not
have any loans that meet the definition of troubled
debt restructuring contained in SFAS No. 15. Loans past
due 90 days or more that were still accruing interest
totaled $291,000 at December 31, 1997. At December 31,
1996 the Company did not have any loans past due 90
days or more that were still accruing interest.
During the year ended December 31, 1997, $120,000
was charged to the provision for loan losses compared
to $109,000 for the year ended December 31, 1996. At
December 31, 1997, the allowance was $677,000 or 1.11%
of total loans. This compares to an allowance of
$654,000 or 1.18% of total loans as of December 31,
1996. Net charge offs were $96,000 for the year ended
December 31, 1997 and $30,000 for the year ended
December 31, 1996. Non-performing loans at December
31, 1997 were $535,000.
The following table summarizes loan charge-offs
and recoveries by type of loan for the years ended
December 31, 1997 and 1996:
Loan Type December 31, 1997 December 31, 1996
Charge-Off Recovery Charge-Off Recovery
Real Estate $ ---- $ 2,000 $ 1,000 $ 1,000
Commercial and 31,000 ---- ---- ----
Industrial
Agricultural ---- 25,000 15,000 14,000
Consumer 101,000 9,000 35,000 6,000
TOTAL $ 132,000 $ 36,000 $ 51,000 $ 21,000
The Company had net charge-offs to average total
loans of .17 % for the year ended December 31, 1997
and .06% for the year ended December 31, 1996.
<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, 1997 December 31, 1996
Period Applicable to:
% of % of
Loans Loans
to to
total total
Amount Loans Amount Loans
Commercial and $ ---- 49% $ 25,000 47%
agricultural
Real Estate- ---- 6% ---- 4%
construction
Real Estate-mortgage ---- 34% 10,000 37%
Consumer 41,000 11% 22,000 12%
Total Domestic 41,000 100% 57,000 100%
Unallocated 636,000 597,000
TOTALS $ 677,000 100% $ 654,000 100%
Other Operating Income. Other operating income
for the year ended December 31, 1997, increased $91,020
or 11.4% to $888,273 from $797,253 for the year ended
December 31, 1996. Alternative Investment Commission
Income increased $34,893 or 17.5% to $234,764 for the
year ended December 31, 1997 from $199,871 for the year
ended December 31, 1996. Mortgage Equity Income for
the year ended December 31, 1997 increased $44,840 or
39.2% to $159,192 from $114,352 for the year ended
December 31, 1996.
Operating Expenses. Operating expenses for the
year ended December 31, 1997 increased $327,906 or
13.9% to $2,687,567 from $2,359,661 for the year ended
December 31, 1996. Salaries and related benefits
increased $122,912 or 9.1% to $1,469,879 for the year
ended December 31, 1997 from $1,346,967 for the year
ended December 31, 1996. This increase is primarily
due to inflationary increases, increased staffing
resulting from the Company's initial filing with the
Securities and Exchange Commission, the conversion to
an in-house data processing system May 15, 1997 and
full year staffing of the IGA supermarket office
opened April 17, 1996. Equipment rentals, depreciation
and maintenance increased $100,246 or 66.1% to $251,908
for the year ended December 31, 1997 from $151,662 for
the year ended December 31, 1996. This increase is
primarily due to additional depreciation expense on
computer equipment acquired to support the conversion
to an in-house data processing system on May 15, 1997.
Other operating expenses increased $96,371 or 18.5% to
$617,239 for the year ended December 31, 1997 from
$520,868 for the year ended December 31, 1996. This
increase results from additional advertising and
marketing efforts, additional costs associated with the
in-house computer system, additional loan collection
expenses and a loss on other real estate in 1997.
Dividends and Equity Capital. The Company paid
its shareholders dividends of $206,593 or $0.85 per
share for the year ended December 31, 1997 and $184,480
or $0.76 per share for the year ended December 31,
1996. The following table summarizes the Company's
dividend pay out ratio and average capital position for
the years specified.
Year Ended December 31,
1997 1996
Dividend Payout 22.46% 22.75%
Ratio
Equity to Assets 10.27% 9.99%
Ratio
<PAGE>
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 purchased, loans from the Federal Home
Loan Bank system and, in 1997, brokered deposits
represent the Company's primary source of immediate
liquidity and were maintained at a level to meet
immediate needs. Federal Funds Sold averaged
approximately $300,000 and $2,300,000 for the years
ended December 31, 1997 and 1996, respectively. Due to
strong loan demand in 1997 the Bank solicited brokered
deposits as a source of funds. At December 31, 1997 the
Bank had $1,897,059 of brokered deposits. 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, 1997, the Company's rate
sensitive assets exceed rate sensitive liabilities due
within one year by $ 6,535,000 .
As part of managing liquidity, the Company
monitors its loan to deposit ratio on a daily basis.
At December 31, 1997 the ratio was 83.8% which is
within the Company's acceptable range. The Company also
monitors the levels of assets and liabilities that
reprice with changes in the prime rate. At December 31,
1997, the Bank had net repriceable prime rate sensitive
assets of $7,089,000.
The Company experienced an increase in cash and
cash equivalents, its primary source of liquidity, of
$1,400,207 during 1997. The primary source of cash
flow for 1997 was the Company's cash flow from
operations of $1,168,603. Cash flow from investing
activities used $5,864,311 to fund loan growth and
$489,180 for capital expenditures, primarily related to
the purchase of the Bank's in-house computer system, in
1997. Cash flows from financing activities provided
$6,488,906 from deposit growth in 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.
<PAGE>
The following table illustrates the projected
maturities and the repricing mechanisms of the major
asset/liability categories of the Company as of
December 31, 1997, 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 1,167,000 -- -- --
Investment 1,473,000 7,726,000 4,297,000 617,000
Securities
Loans:
Variable Rate 9,112,000 -- -- --
Real Estate- 2,843,000 542,000 -- 68,000
Construction
Real Estate-
Other 10,429,000 5,520,000 166,000 190,000
Commercial and 11,871,000 4,879,000 245,000 164,000
Industrial
Agricultural 4,845,000 481,000 64,000 152,000
Consumer 3,946,000 5,024,000 364,000 __
Total Loans 43,046,000 16,446,000 839,000 574,000
Other 893,000 -- -- --
Total Interest 46,579,000 24,172,000 5,136,000 1,191,000
Earning Assets
Interest Bearing
Liabilities:
Interest Bearing -- -- -- 7,126,000
Demand
Savings Deposits 3,964,000 -- -- 9,000,000
Money Market 1,188,000 -- -- 2,772,000
Accounts
Certificates of 24,821,000 5,045,000 -- --
Deposit
Jumbo CD's 3,968,000 611,000 -- --
IRA's 4,908,000 140,000 -- --
Other 1,195,000 78,000 -- --
Total Interest 40,044,000 5,874,000 0 18,898,000
Bearing Liabilities
Interest $6,535,000 $18,298,000 $5,136,000 ($17,707,000)
Sensitivity
Gap per Period
Cumulative Interest $6,535,000 $24,833,000 $29,969,000 $12,262,000
Sensitivity Gap
Interest Sensitivity 8.5% 23.7% 6.7% (23.0%)
Gap as a Percentage of
Earning Assets
Cumulative 8.5% 32.2% 38.9% 15.9%
Sensitivity Gap as a
Percentage of
Earning Assets
<PAGE>
The following table summarizes the weighted
average yield of investment securities by maturity term
and discloses mortgage-related securities separately:
December 31, 1997
Security Maturity Weighted Average
Yield
1 Year or Less 7.03%
1 - 5 Years 6.13%
5 - 10 Years 5.20%
After 10 Years 5.08%
Mortgage Related 6.56%
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 $2,146,006 in
1996 to $4,401,030 in 1997.
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, 1997. Capital for the Bank is above
regulatory requirements at December 31, 1997.
Pertinent capital ratios for the Bank as of December
31, 1997 are as follows:
Minimum
Actual Requirements
Tier 1 Risk-Based 13.2% 4.0%
Capital Ratio
Total Risk-Based 14.4% 8.0%
Capital Ratio
Leverage Ratio 9.7% 4.0%
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 $459,600
and $225,750 in dividends to the Company for the years
ended December 31, 1997 and 1996, respectively. At
December 31, 1997 the Bank could have paid the Company
approximately $3,055,000 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 1997 or 1996.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
Luxemburg Bancshares, Inc.
and Subsidiaries
Luxemburg, Wisconsin
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1997 and 1996
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1997 and 1996
TABLE OF CONTENTS
Page
Independent Auditor's Report 23
Financial Statements:
Consolidated Balance Sheets 24
Consolidated Statements of Income 26
Consolidated Statements of Changes in Stockholders' 27
Equity
Consolidated Statements of Cash Flows 28-29
Notes to Consolidated Financial Statements 30-49
<PAGE>
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, 1997 and 1996, 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, 1997
and 1996, and the results of their operations and their
cash flows for the years then ended in conformity with
generally accepted accounting principles.
Wipfli Ullrich Bertelson LLP
February 10, 1998
Green Bay, Wisconsin
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
Cash and due from banks $3,326,444 $2,858,813
Interest-bearing deposits 639,264 407,688
Federal funds sold 1,167,000 466,000
Cash and cash equivalents 5,132,708 3,732,501
Investment securities available 14,113,429 14,064,569
for sale - Stated at fair value
Total loans 60,904,981 55,170,942
Allowance for credit losses (677,101) (653,535)
Net loans 60,227,880 54,517,407
Premises and equipment 1,711,350 1,380,788
Other investments at cost 253,050 251,650
Other assets 2,115,831 1,953,724
TOTAL ASSETS $83,554,248 $75,900,639
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
Liabilities:
Non-interest-bearing deposits $9,103,744 $7,004,277
Interest-bearing deposits 63,542,623 59,153,184
Total deposits 72,646,367 66,157,461
Short-term borrowings 640,002 880,076
Borrowed funds 632,828 185,558
Other liabilities 1,106,175 997,528
Total liabilities 75,025,372 68,220,623
Stockholders' equity:
Common stock - $.1667 par value: 45,083 45,083
Authorized - 300,000 shares
Issued - 270,500 shares
Capital surplus 3,431,925 3,416,080
Retained earnings 5,293,023 4,579,875
Unrealized gain (loss) on 103,195 (6,913)
investment securities available
for sale - Net of tax
Less - 26,999 shares and (344,350) (354,109)
27,764 shares, respectively,
of treasury common stock, at cost
Total stockholders' equity 8,528,876 7,680,016
TOTAL LIABILITIES AND $83,554,248 $75,900,639
STOCKHOLDERS' EQUITY
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1997 and 1996
1997 1996
Interest income:
Interest and fees on loans $5,321,337 $4,690,655
Interest on investment securities:
Taxable 709,503 741,479
Tax-exempt 137,389 49,239
Other interest and dividend income 53,459 152,112
Total interest income 6,221,688 5,633,485
Interest expense:
Deposits 2,888,577 2,702,128
Short-term borrowings 68,157 21,352
Borrowed funds and capital 37,438 14,571
lease obligation
Total interest expense 2,994,172 2,738,051
Net interest income 3,227,516 2,895,434
Provision for credit losses 120,000 109,000
Net interest income after 3,107,516 2,786,434
provision for credit losses
Other income:
Service charges on deposit accounts 193,259 185,917
Mortgage underwriting fees - 159,192 114,352
Secondary market
Loan servicing fee income 34,929 39,088
Other operating income 500,893 457,896
Total other income 888,273 797,253
Operating expenses:
Salaries and related benefits 1,469,879 1,346,967
Net occupancy expense 162,004 147,201
Equipment rentals, depreciation, 251,908 151,662
and maintenance
Data processing 186,537 192,963
Other operating expenses 617,239 520,868
Total operating expenses 2,687,567 2,359,661
Income before provision for income taxes 1,308,222 1,224,026
Provision for income taxes 388,481 413,054
Net income $ 919,741 $ 810,972
Basic earnings per common share $ 3.78 $ 3.34
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Investment
Securities
Available Treasury
Common Capital Retained for Sale - Common
Stock Surplus Earnings Net of Tax Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance, $45,083 $3,410,071 $3,953,383 $(6,304) $(358,830) $7,043,403
January 1, 1996
Net income 810,972 810,972
Change in unrealized (609) (609)
loss on investment
securities available
for sale - Net of tax
Dividends paid (184,480) (184,480)
Employee stock 6,009 4,721 10,730
bonus - 370 shares
Balance, 45,083 3,416,080 4,579,875 (6,913) (354,109) 7,680,016
December 31, 1996
Net income 919,741 919,741
Change in unrealized 110,108 110,108
gain on investment
securities available
for sale - Net of tax
Dividends paid (206,593) (206,593)
Employee stock 15,845 9,759 25,604
bonuses - 765 shares
Balance, $45,083 $3,431,925 $5,293,023 $103,195 $(344,350) $8,528,876
December 31, 1997
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 and 1996
1997 1996
Cash flows from operating activities:
Net income $ 919,741 $ 810,972
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 258,349 157,113
Provision for loss on other real estate 18,838 -0-
Accretion of discounts on securities (35,084) (60,178)
Amortization of premiums on securities 25,334 57,919
Provision for credit losses 120,000 109,000
Gain on sale of premises and equipment (1,367) -0-
Employee stock bonuses 25,604 10,730
Credit for deferred taxes (33,919) (27,661)
Change in other operating assets (126,802) (110,894)
Change in other operating liabilities (2,091) (91,409)
Total adjustments 248,862 44,620
Net cash provided by operating activities 1,168,603 855,592
Cash flows from investing activities:
Proceeds from maturities of
securities available for sale 6,202,461 7,289,758
Purchase of securities available
for sale (6,073,340) (6,996,800)
Net increase in loans (5,864,311) (5,722,025)
Purchase of additional life insurance (17,300) (17,300)
Proceeds from sale of premises
and equipment 1,367 -0-
Capital expenditures (489,180) (260,873)
Purchase of other investments (1,400) (46,400)
Net cash used in investing activities (6,241,703) (5,753,640)
Cash flows from financing activities:
Net increase (decrease) in deposits 6,488,906 (670,687)
Net increase (decrease) in short-term
borrowings (240,074) 486,805
Proceeds from borrowed funds 500,000 -0-
Principal payments on borrowed
funds and capital lease obligations (68,932) (55,732)
Dividends paid (206,593) (184,480)
Net cash provided by (used in)
financing activities 6,473,307 (424,094)
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1997 and 1996
1997 1996
Net increase (decrease) in cash
and cash equivalents $1,400,207 $(5,322,142)
Cash and cash equivalents at beginning 3,732,501 9,054,643
Cash and cash equivalents at end $5,132,708 $3,732,501
Supplemental information:
Cash paid during the year for:
Interest $2,979,462 $2,770,797
Income taxes $ 478,165 $ 471,069
Noncash investing and financing activities:
In 1997, the Company entered into a capital lease of
$73,931 for the purchase of computer equipment.
In 1996, 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 its
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 Bancorporation of Wisconsin, Inc.
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
243,051 in 1997 and 242,736 in 1996. The basic and
diluted earnings per share are the same for 1997 and
1996.
Reclassifications
Certain reclassifications have been made to the 1996
consolidated financial statements to conform to the
1997 classifications.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Future Accounting Changes
In June 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive
Income." This statement establishes standards for
reporting and display of comprehensive income in a full
set of general-purpose financial statements. This
statement requires that all items that are required to
be recognized under accounting standards as components
of comprehensive income be reported in a financial
statement that is displayed with the same prominence as
other financial statements. This statement requires
that an enterprise display an amount representing total
comprehensive income for the period in a financial
statement, but does not require a specific format for
that financial statement. This statement also requires
that an enterprise (a) classify items of other
comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of
other comprehensive income separately from retained
earnings and additional paid-in capital in the equity
section of the consolidated balance sheet. The
statement is effective for fiscal years beginning after
December 15, 1997. Reclassification of consolidated
financial statements for earlier periods provided for
comparative purposes is required. Management, at this
time, cannot determine the effect that adoption of this
statement may have on the consolidated financial
statements of the Company as comprehensive income is
dependent on the amount and nature of assets and
liabilities held which generate nonincome changes to
equity.
In June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and
Related Information." This statement establishes
standards for the way that public business enterprises
report information about operating segments in annual
financial statements and requires that those
enterprises report selected information about operating
segments in interim financial reports issued to
stockholders. This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business
Enterprise," but retains the requirement to report
information about major customers. It also amends SFAS
No. 94, "Consolidation of All Majority-Owned
Subsidiaries," to remove the special disclosure
requirements for previously unconsolidated
subsidiaries. The statement is effective for fiscal
years beginning after December 15, 1997. In the
initial year of application, comparative information
for earlier years is to be restated. The statement is
not expected to have an effect on the financial
position or operating results of the Company, but may
require additional disclosures in the consolidated
financial statements.
NOTE 2 - RESTRICTIONS ON CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the amount of $222,000
were restricted at December 31, 1997, to meet the
reserve requirements of the Federal Reserve System.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INVESTMENT SECURITIES
The amortized cost and estimated fair value of
investment securities available for sale are as
follows:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
1997
U.S. Treasury securities and $4,079,496 $52,664 $2,175 $4,129,985
obligations of U.S. government
agencies and corporations
Obligations of states and 3,594,785 83,275 -0- 3,678,060
political subdivisions
Mortgage-related securities 6,282,411 38,476 15,503 6,305,384
Total $13,956,692 $174,415 $17,678 $14,113,429
1996
U.S. Treasury securities and $5,993,060 $38,374 $15,733 $6,015,701
obligations of U.S. government
agencies and corporations
Obligations of states and 2,437,075 7,114 17,362 2,426,827
political subdivisions
Mortgage-related securities 5,645,928 16,966 40,853 5,622,041
Total $14,076,063 $62,454 $73,948 $14,064,569
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.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated fair value of
investment securities available for sale at
December 31, 1997, 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
Due in one year or less $ 951,427 $ 952,880
Due after one year through five years 2,867,532 2,902,893
Due after five years through ten years 3,260,125 3,335,693
Due after ten years 595,197 616,579
7,674,281 7,808,045
Mortgage-related securities 6,282,411 6,305,384
Total investment securities $13,956,692 $14,113,429
There were no sales of debt securities during 1997 and
1996.
Investment securities with an amortized cost of
$996,051 and estimated fair value of $1,003,750 were
pledged to secure public deposits, short-term
borrowings, and other purposes required by law as of
December 31, 1997.
NOTE 4 - LOANS
The composition of loans at December 31 follows:
1997 1996
Real estate:
Construction $3,453,016 $2,402,000
Other 20,910,707 20,246,000
Commercial and industrial 24,140,174 20,280,000
Agricultural 5,409,905 5,873,000
Consumer 6,991,179 6,369,942
Total loans $60,904,981 $55,170,942
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS (CONTINUED)
The aggregate amount of nonperforming loans was
approximately $535,000 and $271,000 at December 31,
1997 and 1996, 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, 1997 and
1996.
At December 31, 1997 and 1996, there were no loans
considered to be impaired. There were also no impaired
loans during 1997 and 1996.
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 1997 is summarized below:
Loans outstanding, December 31, 1996 $2,172,380
New loans 1,339,899
Repayment (979,686)
Loans outstanding, December 31, 1997 $2,532,593
An analysis of the allowance for credit losses for the
years ended December 31 follows:
1997 1996
Balance at beginning $ 653,535 $ 574,286
Provision charged to operating expense 120,000 109,000
Recoveries on loans 36,108 21,426
Loans charged off (132,542) (51,177)
Balance at end $ 677,101 $ 653,535
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LOAN SERVICING
The following is an analysis of changes in mortgage
servicing rights:
1997 1996
Balance, January 1 $ 43,271 $ -0-
Capitalized amounts 52,802 51,228
Amortization (15,906) (7,957)
Balance, December 31 $ 80,167 $ 43,271
No impairment of mortgage servicing rights existed at
December 31, 1997; therefore, no valuation allowance
was recorded.
The carrying value of the mortgage servicing rights is
included with other assets and approximates fair market
value at December 31, 1997.
NOTE 6 - PREMISES AND EQUIPMENT
Details of premises and equipment at December 31
follow:
1997 1996
Land $ 70,246 $ 70,246
Buildings and improvements 1,447,459 1,376,602
Furniture and equipment 1,409,553 960,491
Totals 2,927,258 2,407,339
Less - Accumulated depreciation 1,215,908 1,026,551
Net depreciated value $1,711,350 $1,380,788
Depreciation and amortization of premises and equipment
charged to operating expense totaled $232,549 in 1997
and $131,713 in 1996.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - LEASE
In 1997, the Company entered into a lease for computer
equipment. The computer lease, which expires in 2000,
is classified as a capital lease.
Premises and equipment include the following amounts
for the computer lease that has been capitalized:
Furniture and equipment $ 73,931
Less - Accumulated amortization 13,385
Total $ 60,546
Lease amortization is included in depreciation expense.
Future minimum payments, by year and in the aggregate,
under the capital lease as of December 31, 1997,
consist of the following:
1998 $ 28,271
1999 28,271
2000 6,817
Total minimum lease payments 63,359
Amount representing interest 5,630
Present value of net minimum $ 57,729
lease payments
The carrying value of the capital lease obligation is
included with other liabilities and approximates fair
market value at December 31, 1997.
NOTE 8 - DEPOSITS
The distribution of deposits at December 31 is as
follows:
1997 1996
Non-interest-bearing demand deposits $9,103,744 $7,004,277
Interest-bearing demand deposits 7,126,486 6,044,927
Savings deposits 12,963,780 11,997,553
Money market deposits 3,959,132 4,662,156
Time deposits 39,493,225 36,448,548
Total deposits $72,646,367 $66,157,461
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - DEPOSITS (CONTINUED)
Time deposits of $100,000 or more were approximately
$4,580,000 and $2,552,000 at December 31, 1997 and
1996, respectively. Interest expense on time deposits
of $100,000 or more was approximately $180,000 and
$128,000 for the years ended December 31, 1997 and
1996, respectively.
At December 31, 1997, the scheduled maturities of time
deposits are as follows:
1998 $33,312,225
1999 4,935,000
2000 803,000
2001 328,000
Thereafter 115,000
Total $39,493,225
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, an advance of
$500,000 had an original maturity of 99 days with
interest at 5.5%. Interest was payable monthly.
Other short-term borrowings consist of treasury tax and
loan deposits of $640,002 and $380,076 at December 31,
1997 and 1996, respectively, which generally mature
within 1 to 120 days from the transaction date.
The following information relates to FHLB advances and
treasury tax and loan deposits for the years ended
December 31:
1997 1996
As of year-end - Weighted average rate 5.16% 5.47%
For the year:
Highest month-end balance $1,852,902 $1,285,779
Daily average balance 1,197,771 441,143
Weighted average rat 5.69% 4.84%
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - BORROWED FUNDS
Borrowed funds consist of the following:
1997 1996
6.19% FHLB note, secured by pledges $500,000 $ -0-
of mortgage loans and FHLB stock,
due September 18, 1998, interest
payable monthly
6.63% land contract, payable at 55,981 85,179
$2,831 per month including interest,
due September 1, 1999
8.0% note, payable at $2,408 per 76,847 100,379
month including interest, due
December 31, 2000
Totals $ 632,828 $ 185,558
Required payments of principal on the borrowed funds at
December 31, 1997, are summarized as follows:
1998 $ 554,796
1999 50,349
2000 27,683
Total $ 632,828
NOTE 11 - INCOME TAXES
The provision for income taxes consists of the
following:
1997 1996
Current tax expense:
Federal $ 365,550 $ 387,012
State 56,850 53,703
Total current 422,400 440,715
Deferred tax credit:
Federal (28,267) (18,734)
State (7,068) (4,684)
Total deferred (35,335) (23,418)
Change in valuation allowance 1,416 (4,243)
Total provision for income taxes $ 388,481 $ 413,054
<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:
1997 1996
Deferred tax assets:
Reserve for loan losses $ 162,398 $ 153,157
Deferred compensation 106,591 78,877
Intangible assets 13,345 6,595
Net operating loss carryovers 20,224 18,808
Other 7,387 1,470
Unrealized loss on investment
securities available for sale -0- 4,581
Total deferred tax assets 309,945 263,488
Deferred tax liabilities:
Depreciation (144,423) (142,552)
Accretion (10,960) (11,597)
Mortgage servicing rights (31,437) (16,968)
Unrealized gain on investment
securities available for sale (53,542) -0-
Total deferred tax liabilities (240,362) (171,117)
Total valuation allowance recognized
for net deferred tax assets (20,224) (18,808)
Net deferred tax asset $ 49,359 $ 73,563
<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:
1997 1996
% of % of
Pretax Pretax
Amount Income Amount Income
Tax expense at statutory rate $444,795 34.0 $416,169 34.0
Increase (decrease) in taxes
resulting from:
Tax-exempt interest (70,361) (5.4) (26,926) (2.2)
State income taxes - Net of 32,856 2.5 32,804 2.7
federal tax benefit
Cash surrender value of life (16,264) (1.2) (15,659) (1.2)
insurance in excess of
premiums
Other (2,545) (.2) 6,666 .5
Provision for income taxes $388,481 29.7 $413,054 33.8
The Company has state net operating loss carryforwards
of approximately $388,000. The net operating losses
begin to expire in 1999.
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 1997 and 1996
was $46,500 and $41,400, 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 $271,820 and $201,144 at December 31,
1997 and 1996, 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, 1997 and 1996, the cash surrender value
of these policies was $1,137,276 and $1,071,908,
respectively. The amount charged to operations for
deferred compensation was $70,676 and $64,210 for the
years ended December 31, 1997 and 1996, 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, 1997, the redemption price was
determined to be 80% of the book value of the stock.
Thus the maximum commitment at December 31, 1997, would
be $28.02 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
1997 1996
Commitments to extend credit $3,457,000 $4,676,000
Credit card arrangements 590,000 865,000
Standby letters of credit 100,000 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.
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 4. Standby letters of
credit were granted primarily to commercial borrowers.
NOTE 16 - REGULATORY MATTERS
At December 31, 1997, Bank of Luxemburg could have paid
approximately $3,055,000 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, 1997, that the
Bank meets all capital adequacy requirements to which
it is subject.
As of December 31, 1997 and 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 and regulatory capital amounts and
ratios are as follows:
For Capital
Actual Adequacy Purposes
Amount Ratio Amount Ratio
December 31, 1997:
Total capital (to risk-weighted assets) $8,654,000 14.4% >$4,820,000 >8.0%
Tier I capital (to risk-weighted assets) $7,977,000 13.2% >$2,410,000 >4.0%
Tier I capital (to average assets) $7,977,000 9.7% >$3,267,000 >4.0%
December 31, 1996:
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
Fair value estimates, methods, and assumptions for the
Company's financial instruments are summarized below.
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.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
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 loans
is calculated by discounting scheduled cash flows using
discount rates reflecting the credit and interest rate
risk inherent in the loan.
Other Investments
The carrying amount reported in the balance sheets for
other investments approximates the fair value of these
assets.
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 borrowings 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, 1997 and 1996,
were as follows:
1997 1996
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Cash and cash equivalents $5,132,708 $5,132,708 $3,732,501 $3,732,501
Investment securities 14,113,429 14,113,429 14,064,569 14,064,569
available for sale
Net loans receivable 60,227,880 60,975,986 54,517,407 54,668,690
Other investments 253,050 253,050 251,650 251,650
Total financial assets $79,727,067 $80,475,173 $72,566,127 $72,717,410
Financial liabilities:
Deposits $72,646,367 $72,800,822 $66,157,461 $66,266,218
Short-term borrowings 640,002 640,002 880,076 880,076
Borrowed funds 632,828 632,828 185,558 185,558
Total financial liabilities $73,919,197 $74,073,652 $67,223,095 $67,331,852
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, 1997 and 1996
ASSETS
1997 1996
Cash $ 49,238 $ 19,632
Premises and equipment 381,776 149,125
Investment in subsidiaries 8,188,105 7,598,257
Other 20,921 -0-
TOTAL ASSETS $8,640,040 $7,767,014
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowed funds $ 55,981 $ 85,179
Other liabilities 55,183 1,819
Total stockholders' equity 8,528,876 7,680,016
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $8,640,040 $7,767,014
STATEMENTS OF INCOME
Years Ended December 31, 1997 and 1996
1997 1996
Dividends from subsidiaries $ 459,600 $ 225,750
Undistributed equity in earnings
of subsidiaries 479,740 606,392
Other operating income 97,339 19,280
Total income 1,036,679 851,422
Operating expenses 121,033 33,947
Interest expense 8,602 6,503
Total expenses 129,635 40,450
Income before credit for income taxes 907,044 810,972
Credit for income taxes (12,697) -0-
Net income $ 919,741 $ 810,972
<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, 1997 and 1996
1997 1996
Cash flows from operating activities:
Net income $ 919,741 $ 810,972
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 55,092 4,833
Accretion (1,339) (1,280)
Employee stock bonuses 25,604 10,730
Undistributed earnings of subsidiary (479,740) (606,392)
Change in other operating assets (20,921) -0-
Change in other liabilities (3,026) (153)
Total adjustments (424,330) (592,262)
Net cash provided by operating 495,411 218,710
activities
Net cash used in investing
activities - Capital expenditures (213,812) -0-
Cash flows from financing activities:
Principal payments on borrowed (45,400) (27,311)
funds and capital lease obligations
Dividends paid (206,593) (184,480)
Net cash used in financing activities (251,993) (211,791)
Net increase in cash 29,606 6,919
Cash at beginning 19,632 12,713
Cash at end $ 49,238 $ 19,632
Supplemental Information:
Cash paid during the year for interest $ 8,767 $ 6,656
Noncash investing and financing activities:
In 1997, the Company entered into a capital lease of
$73,931 for the purchase of computer equipment.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
This item is not applicable.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT.
Information called for by Item 9 is contained
under "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" of the
Company's Proxy Statement, dated March 30, 1998 with
respect to the Annual Meeting of Shareholders to be
held on May 2, 1998 which was filed pursuant to
Regulation 14A of the Securities Exchange Act of 1934
and which is incorporated herein by reference in
response to this item.
Reference is also made to "Executive Officers Of
The Registrant" included at the end of Part I of this
Form 10-KSB in partial response to Item 9.
ITEM 10. EXECUTIVE COMPENSATION.
The information appearing under "Director
Compensation" and " Executive Compensation" of the
Company's Proxy Statement dated March 30, 1998 is
incorporated herein by reference in response to this
item.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The information appearing under "Beneficial
Ownership of Principal Shareholders, Directors and
Management" of the Company's Proxy Statement dated
March 30, 1998 is incorporated herein by reference in
response to this item.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The information appearing under "Related
Transactions" of the Company's Proxy Statement dated
March 30, 1998 is incorporated herein by reference in
response to this item.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last
quarter of fiscal 1997.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation, incorporated
herein by reference to Exhibit 3.1 of
the Company's Registration Statement on
Form 10-SB
3.2 Bylaws, incorporated herein by reference to
Exhibit 3.2 of the Company's
Registration Statement on Form 10-SB
10.1 Director Deferred Compensation Plan for
Bank of Luxemburg, incorporated
herein by reference to Exhibit 10.1 of
the Company's Registration
Statement on Form 10-SB
21 Subsidiaries of the Registrant
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
LUXEMBURG BANCSHARES, INC.
Date: March 18, 1998 By: /s/ John Slatky
--------------------
John Slatky
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, the report has been signed below by the
following persons on behalf of the registrant and in
the capacities indicated on March 18, 1998.
By:/s/ John A. Slatky
- ---------------------------
John A. Slatky President and Chief Executive Officer and
a Director
By:/s/ Thomas L. Lepinski
- ---------------------------
Thomas L. Lepinski, C.P.A. Treasurer, Chief Financial Officer and
Chief Accounting Officer
By:/s/ Irvin G. Vincent
- ----------------------------
Irvin G. Vincent Chairman of the Board of Directors
By:/s/ Willard Marchant
- ----------------------------
Willard Marchant Director
By:/s/ Thomas J. Rueckl
- ----------------------------
Thomas J. Rueckl Director
By:/s/ James J. Jadin
- ----------------------------
James J. Jadin Director
By:/s/ Ronald A. Ledvina
- ----------------------------
Ronald A. Ledvina Director
By:/s/ Richard L. Dougherty
- ----------------------------
Richard L. Dougherty Director
By:/s/ Donald E. Pritzl
- ---------------------------
Donald E. Pritzl Director
Exhibit 21
Subsidiaries
Name Jurisdiction of Organization
Bank of Luxemburg Wisconsin
Area Development Corporation Wisconsin
Luxemburg Investment Corporation* Nevada
* A wholly-owned subsidiary of Bank of Luxemburg
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Financial Data Schedule
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,326,444
<INT-BEARING-DEPOSITS> 639,264
<FED-FUNDS-SOLD> 1,167,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,113,429
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 60,904,981
<ALLOWANCE> 677,101
<TOTAL-ASSETS> 83,554,248
<DEPOSITS> 72,646,367
<SHORT-TERM> 640,002
<LIABILITIES-OTHER> 1,106,175
<LONG-TERM> 632,828
0
0
<COMMON> 45,083
<OTHER-SE> 8,483,793
<TOTAL-LIABILITIES-AND-EQUITY> 83,554,248
<INTEREST-LOAN> 5,321,337
<INTEREST-INVEST> 846,892
<INTEREST-OTHER> 53,459
<INTEREST-TOTAL> 6,221,688
<INTEREST-DEPOSIT> 2,888,577
<INTEREST-EXPENSE> 2,994,172
<INTEREST-INCOME-NET> 3,227,516
<LOAN-LOSSES> 120,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,687,567
<INCOME-PRETAX> 1,308,222
<INCOME-PRE-EXTRAORDINARY> 1,308,222
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 919,741
<EPS-PRIMARY> 3.78
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.37
<LOANS-NON> 244,000
<LOANS-PAST> 291,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 653,535
<CHARGE-OFFS> 132,542
<RECOVERIES> 36,108
<ALLOWANCE-CLOSE> 677,101
<ALLOWANCE-DOMESTIC> 41,250
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 635,851
</TABLE>
