1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington. D. C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _______________ to _______________.
Commission file number 0-22471
Luxemburg Bancshares, Inc.
(Exact name of small business issuer as specified in its charter)
Wisconsin 39-1457904
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
630 Main Street, Luxemburg, Wisconsin 54217
(Address of principal executive offices)
(920) 845-2345
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period
that the registrant was required to file such reports),
and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
State the number of shares outstanding of each issuer's
classes of common equity, as of August 6, 1999:
268,501 shares were outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE>
LUXEMBURG BANCSHARES, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets - June 30, 1999 and
December 31, 1998 3
Consolidated Statements of Income -
Six Months Ended June 30, 1999 and 1998 4
Consolidated Condensed Statements of
Changes in Stockholders' Equity - Six Months
Ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flow -
Six Months Ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7 - 8
Management's Discussion and Analysis
of Financial Condition and Results of Operations 9 - 15
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 16
Item 6 - Exhibits and Reports on Form 8-K 16
SIGNATURES 16
<PAGE>
PART I - FINANCIAL INFORMATION
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
June 30, 1999 and December 31, 1998
ASSETS
1999 1998
Cash and due from banks $ 3,276,464 $ 2,931,179
Interest-bearing deposits 262,963 907,672
Federal funds sold 0 8,482,000
Cash and cash equivalents 3,539,427 12,320,851
Investment securities available for
sale-Stated at fair value 19,044,069 18,064,562
Total loans 72,814,030 64,052,248
Allowance for credit losses (817,614) (773,116)
Net loans 71,996,416 63,279,132
Premises and equipment 2,906,364 1,779,477
Other investments at cost 318,550 276,050
Other assets 2,418,250 2,250,553
TOTAL ASSETS $ 100,223,076 $ 97,970,625
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
LIABILITIES:
Non-interest-bearing deposits $ 10,978,796 $ 10,758,991
Interest-bearing deposits 76,382,036 76,553,176
Total deposits 87,360,832 87,312,167
Short-term borrowings 2,234,025 79,574
Borrowed funds 49,117 78,031
Other liabilities 1,075,126 1,044,420
Total liabilities 90,719,100 88,514,192
STOCKHOLDERS' EQUITY:
Common stock- $1.00 par value:
Authorized - 2,400,000 shares,
Issued - 270,500 shares 270,500 270,500
Capital surplus 3,206,510 3,206,510
Retained earnings 6,504,907 6,120,354
Accumulated other comprehensive
income (loss) (133,591) 203,419
Less - 26,999 shares of treasury
common stock, at cost (344,350) (344,350)
Total stockholders' equity 9,503,976 9,456,433
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $100,223,076 $ 97,970,625
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
INTEREST INCOME:
Interest and fees on loans $ 1,481,876 $ 1,329,945 $ 2,870,285 $ 2,677,644
Interest on investment
securities:
Taxable 207,930 163,892 411,793 338,273
Tax-Exempt 79,089 50,706 144,278 95,789
Other interest and dividend
income 21,394 67,042 108,153 102,758
Total interest income 1,790,289 1,611,585 3,534,509 3,214,464
INTEREST EXPENSE:
Deposits 874,296 783,214 1,762,406 1,538,739
Short-term borrowings 6,784 2,901 8,327 5,934
Borrowed funds 1,626 10,936 3,601 22,137
Total interest expense 882,706 797,051 1,774,334 1,566,810
Net interest income 907,583 814,534 1,760,175 1,647,654
Provision for credit losses 30,000 37,500 60,000 75,000
Net interest income after
provision for credit losses 877,583 777,034 1,700,175 1,572,654
OTHER INCOME:
Service charges on deposit
accounts 48,096 50,814 98,489 93,488
Mortgage underwriting fees -
Secondary market 20,989 58,977 33,343 133,981
Loan servicing fee income 17,665 22,671 47,087 39,693
Other operating income 157,857 164,946 321,880 336,428
Total other income 244,607 297,408 500,799 603,590
OPERATING EXPENSES:
Salaries and related benefits 413,078 384,401 808,243 782,681
Net occupancy expense 51,583 38,930 102,885 83,339
Equipment rentals, 84,013 74,684 163,127 150,477
depreciation, and maintenance
Data processing 45,613 30,085 78,250 57,367
Other operating expenses 199,593 170,445 347,546 321,391
Total operating expenses 793,880 698,545 1,500,051 1,395,255
Income before provision for
income taxes 328,310 375,897 700,923 780,989
Provision for income taxes 91,910 113,159 189,751 236,480
Net income $ 236,400 $ 262,738 $ 511,172 $ 544,509
Basic earnings per common share $.97 $1.08 $2.10 $2.24
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY - (UNAUDITED)
Six Months Ended June 30, 1999 and 1998
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
Shares Equity Total Shares Equity Total
Balance - Beginning of period 243,501 $ 9,456,433 243,501 $ 8,528,876
Comprehensive income:
Net Income 511,172 544,509
Other comprehensive income
- Change in net unrealized
gain(loss) on securities
available for sale (337,029) (723)
Total comprehensive income 174,143 543,786
Dividends paid (126,600) (114,445)
Balance - End of period 243,501 $ 9,503,976 243,501 $ 8,958,217
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW - (UNAUDITED)
Six Months Ended June 30, 1999 and 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 511,172 $ 544,509
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 165,692 154,783
Accretion of discounts on securities ( 10,963) (16,602)
Amortization of premiums on securities 11,714 5,433
Provision for credit losses 60,000 75,000
Gain on sale of other real estate 0 (164)
Provision for deferred taxes 0 (23,324)
Change in other operating assets (156,858) (140,124)
Change in other operating liabilities 30,708 220,433
Total adjustments 100,293 275,435
Net cash provided by operating activities 611,465 819,944
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available for sale 5,368,751 1,505,929
Purchase of securities available for sale (6,749,039) (1,690,625)
Net (increase) decrease in loans (8,777,284) 2,591,025
Purchase of additional life insurance (42,491) (17,300)
Proceeds from sale of other real estate 31,652 15,164
Capital expenditures (1,229,580) (87,072)
Purchase of other investments (22,000) (42,500)
Net cash provided by (used in) investing
activities (11,440,491) 2,295,121
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 48,665 (73,513)
Net increase (decrease) in short-term
borrowings 2,154,451 (268,595)
Principal payments on borrowed funds (28,914) (26,909)
Dividends paid (126,600) (114,445)
Net cash provided by (used in)
financing activities 2,047,602 (483,462)
Net increase (decrease) in cash and
cash equivalents (8,781,424) 2,631,603
Cash and cash equivalents at beginning 12,320,851 5,132,708
Cash and cash equivalents at end $ 3,539,427 $ 7,764,311
Supplemental information:
Cash paid during the period for:
Interest $ 1,697,613 $ 1,484,239
Income taxes $ 173,228 $ 254,015
See accompanying notes to consolidated financial statements
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
(UNAUDITED)
The consolidated financial statements for interim
periods are unaudited; however, in the opinion of the
management of Luxemburg Bancshares, Inc. ("Company"),
all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation have
been included. Refer to the Notes to Consolidated
Financial Statements which appear in the Company's Form
10-KSB for the Fiscal Year ended December 31, 1998 for
the Company's accounting policies which are pertinent
to these financial statements.
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements of Company, a
bank holding company, include the accounts of Company
and Subsidiaries - Bank of Luxemburg, Luxemburg
Investment Corporation, and Area Development
Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.
Goodwill acquired in a business acquisition is being
amortized on a straight-line basis over five years.
The accompanying financial statements have been
prepared in accordance with the instructions for Form
10-QSB and, therefore, do not include all information
and footnotes necessary to be in conformity with
generally accepted accounting principles.
For purposes of reporting cash flows, the Company
considers cash on hand, interest-bearing and non-
interest bearing deposits in banks and federal funds
sold as cash and cash equivalents.
Earnings per common share are based upon the weighted
average number of common shares outstanding. The
weighted average number of shares outstanding was
243,501 in 1999 and 1998. The basic and diluted
earnings per share are the same for 1999 and 1998.
NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank of Luxemburg's ("Bank's") financial statements
do not reflect various commitments and contingent
liabilities which arise in the normal course of
business and which involve elements of credit risk,
interest rate risk, and liquidity risk. These
commitments and contingent liabilities are commitments
to extend credit and standby letters of credit. A
summary of the Bank's commitments and contingent
liabilities at each balance sheet date is as follows:
Notional Amount
June 30, 1999 December 31, 1998
Commitments to extend credit $8,988,000 $4,545,000
Credit card arrangements 1,402,000 561,000
Standby letters of credit 756,000 132,000
Commitments to extend credit and credit card
arrangements are agreements to lend to a customer as
long as there is no violation of any condition
established in the contract. Commitments generally
have fixed expiration dates or other termination
clauses and may require payment of a fee. A portion of
the commitments are expected to be drawn upon, thus
representing future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-
case basis. The amount of collateral obtained upon
extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies
but may include accounts receivable; inventory;
property, plant, and equipment; real estate; and stocks
and bonds. Management does not anticipate any material
losses as a result of these commitments.
Standby letters of credit are conditional commitments
issued by the Bank to guarantee the performance of a
customer to a third party. The credit risk involved in
issuing letters of credit is essentially the same as
that involved in extending loan facilities to
customers. The Bank holds collateral supporting those
commitments for which collateral is deemed necessary.
Because these instruments have fixed maturity dates and
because many of them expire without being drawn upon,
they do not generally present any significant liquidity
risk to the Bank. Management does not anticipate any
material losses as a result of these letters of credit.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
NOTE 3: ACCOUNTING CHANGES
Future Accounting Change - In June, 1998, the Financial
Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging
Activities." This statement established accounting and
reporting standards for derivative instruments and for
hedging activities. This statement requires an entity
to recognize all derivative instruments and for
hedging activities. This statement requires an entity
to recognize all derivatives as either assets or
liabilities in the balance sheet and measure those
instruments at fair value. The accounting for changes
in the fair value of a derivative depends on the
intended use of the derivative and the resulting
designation. This statement is effective for fiscal
years beginning after June 15, 2000 as amended.
Management, at this time cannot determine the effect
adoption of this statement may have on the consolidated
financial statements of the Company as the accounting
for derivatives is dependent on the amount and nature
of derivatives in place at the time of adoption.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Net Earnings $ 236,400 $ 262,738 $ 511,172 $ 544,509
Average Consolidated
Balance Sheet Items:
Loans 66,230,906 56,826,343 63,786,140 57,280,629
Taxable Investment
Securities 13,502,533 10,043,996 13,277,014 10,338,974
Fed Funds Sold 1,443,649 4,242,374 4,089,862 3,152,346
Municipal Loans &
Investments 9,192,985 5,328,887 8,879,403 5,295,503
Other Earning Assets 676,607 687,294 959,680 616,805
Total Earning Assets 91,046,608 77,128,894 90,992,099 76,684,257
Total Assets 98,556,097 82,923,315 97,997,030 82,401,483
Deposits 86,984,883 72,863,043 86,714,930 72,495,066
Shareholders' Equity 9,777,274 8,898,929 9,689,875 8,814,622
Key Ratios:
Average Equity to Average
Total Assets 9.92% 10.73% 10.20% 10.70%
Return on Average Total Assets .96% 1.27% 1.04% 1.32%
Return on Average Equity 9.67% 11.81% 10.55% 12.35%
Net Interest Margin 4.00% 4.24% 3.90% 4.33%
NET INTEREST INCOME
Net interest income, the principle source of earnings,
is the amount by which interest generated by earning
assets exceeds the interest costs of liabilities
obtained to fund them. As shown below, net interest
income has increased $93,049 or 11.42% to $907,583 for
the three months ended June 30, 1999 from $814,534 for
the three months ended June 30, 1998. The increase in
net interest income is due to bank growth. As noted
above, average assets for the three months ended June
30, 1999 were $98,556,097 compared to average assets
for the three months ended June 30, 1998 of $82,923,315.
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Interest Income $1,790,289 $1,611,585 $3,534,509 $3,214,464
Interest Expense 882,706 797,051 1,774,334 1,566,810
Net Interest Income $ 907,583 $ 814,534 $1,760,175 $1,647,654
Net Interest Margin 4.00% 4.24% 3.90% 4.33%
RATE/VOLUME ANALYSIS
The impact of changes in volume and interest rates on
net interest income for the three and six months ended
June 30, 1999 is illustrated in the following table:
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998.
Increase (Decrease) in Net Interest Income
Net Change Due To Rate Due To Volume
Interest Income $ 178,704 $ (96,118) $ 274,822
Interest Expense 85,655 (51,234) 136,889
Net Interest Income $ 93,049 $ (44,884) $ 137,933
<PAGE>
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998.
Increase (Decrease) in Net Interest Income
Net Change Due To Rate Due To Volume
Interest Income $ 320,045 $ (176,874) $ 496,919
Interest Expense 207,524 (79,692) 287,216
Net Interest Income $ 112,521 $ (97,182) $ 209,703
Interest rates on the Bank's earning assets and
interest bearing liabilities were generally lower for
the three months and six months ended June 30, 1999
compared to the three months and the six months ended
June 30, 1998. Earning assets increased 18.66% and
18.04%, respectively, to $90,992,099 for the three
months and $91,046,680 for the six months ended June
30, 1999 from $76,684,257 for the three months and
$77,128,894 for the six months ended June 30, 1998.
However, interest bearing liabilities increased 19.61%
and 19.38% to $86,714,930 for the three months and
$867,984,883 for the six months ended June 30, 1999
compared to $72,495,066 for the three months and
$72,863,043 for the six months ended June 30, 1998.
OPERATING RESULTS
Net income for the three months ended June 30, 1999,
was $236,400 compared to $262,738 for the three months
ended June 30, 1998. The decrease of $26,338 reflects
the lower interest rate margin and increased net
occupancy expense of $12,653 for the construction of
the new branch office. The increase in net interest
income of $93,049 for the three months ended June 30,
1999, compared to the three months ended June 30, 1998,
and is discussed in "Net Interest Income" and
"Rate/Volume Analysis" elsewhere in this report.
Mortgage underwriting fees - Secondary market decreased
$37,988 to $20,989 for the three months ended June 30,
1999, compared to $58,977 for the three months ended
June 30, 1998.
Total operating expenses increased a $95,335 or 13.65%
from $698,545 for the three months ended June 30, 1998
to $793,880 for the three months ended June 30, 1999.
Salaries and related benefits increased $28,677 or
7.46% to $413,078 for the three months ended June 30,
1999 compared to $384,401 for the three months ended
June 30, 1998. Equipment rentals, depreciation, and
maintenance for the three months ended June 30, 1999
increased $9,329 or 12.49% to $84,013 compared to
$74,684 for the three months ended June 30, 1998.
Finally, other operating expenses for the three months
ended June 30, 1999 increased $29,148 or
17.10% to $199,593 from $170,445 for the three months
ended June 30, 1998.
Net income for the six months ended June 30, 1999,
decreased $33,337 or 6.12% to $511,172 from $544,509
for the six months ended June 30, 1998. The increase in
net interest income is $112,521 for the six months
ended June 30, 1999, compared to the six months ended
June 30, 1998, and is discussed in "Net Interest
Income" and "Rate/Volume Analysis" elsewhere in this
report. Mortgage underwriting fees - Secondary market
decreased $86,894 or 67.09% to $47,087 for the six
months ended June 30, 1999, compared to $133,981 for
the six months ended June 30, 1998. This decrease is
primarily due to decreased volume as for the six months
ended June 30, 1999, the Company originated less loans
for the secondary market compared to the six months
ended June 30, 1998.
Operating expenses for the six months ended June 30,
1999 increased $104,796 or 7.0% to $1,500,051 compared
to $1,395,255 for the six months ended June 30, 1998.
Salaries and related benefits increased $25,562 or 3.3%
to $808,243 for the six months ended June 30, 1999
compared to $782,681 for the six months ended June 30,
1998. The increase is due to inflationary increases and
higher costs for employee benefit programs. Equipment
rentals, depreciation, and maintenance for the six
months ended June 30, 1999 increased $12,650 or 8.40%
to $163,127 compared to $150,477 for the six months
ended June 30, 1998. Data processing expense increased
$20,883 or 36.4% from $57,367 for the six months ended
June 30, 1998 to $78,250 for the six months ended June
30, 1999.
A new branch office of the Bank was opened on May 24, 1999 in Casco, WI.
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.
<PAGE>
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
Percent Completed
1) Awareness 100%
2) Assessment 100%
3) Renovation 100%
4) Validation 90%
5) Implementation 90%
The Bank has recently converted its 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.
The Company spent approximately $30,000 in 1998 on Year
2000 renovation and testing. The Technology Committee
of the Bank of Luxemburg has budgeted $20,000.00 for
technology improvements for 1999, a portion which may
be required for consulting and technical assistance in
testing of information and non-information systems.
During the six months ended June 30, 1999 $3,255 was
spent for year 2000 related issues.
The Company completed a Y2K Contingency Plan and is in
the process of testing the alternative processing
systems. The testing should be complete by August 31,
1999. The written plan is being review by Bankers'
Financial Services to provide an independent review of
the plan. The Company has alternative resources for
additional liquidity and cash reserves for the fourth
quarter of 1999, but to date has not noticed any
significant reduction in deposits.
ALLOWANCE FOR LOAN LOSSES
The amount charged to the provision for loan losses by
the Bank is based on management's evaluation as to the
amounts required to maintain an allowance adequate to
provide for potential losses inherent in the loan
portfolio. The level of this allowance is dependent
upon the total amount of past due and non-performing
loans, general economic conditions and management's
assessment of potential losses based upon internal
credit evaluations of the loan portfolio and particular
loans. In 1999 the Bank management allocated the
allowance based on an assigned risk factor for each
category of loans and adjusting the allocation by
potential losses of individual loans. 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. Loans are entirely to
borrowers in Northeast Wisconsin.
The Bank generally places loans on non-accrual status
when the loan is past due as to the payment of interest
and/or principal in excess of 90 days. The Bank also
places loans on a non-accrual status when it deems the
collection of such interest unlikely. Loans are
returned to full accrual status when the loan is
brought current according to all terms of the loan
agreement, all past due principal and interest is paid
and the Bank deems its collateral position adequate to
warrant a return to accrual status.
At June 30, 1999 and 1998 the Company had $0 and
$44,000 in loans past due 90 days or more that were
still accruing interest. At June 30, 1999 and 1998 the
Company did not have any loans that meet the definition
of "Troubled Debt Restructuring". In addition, there
were no loans considered to be impaired. The Bank had
$245,000 of nonaccrual loans at June 30, 1999 and
$217,000 of nonaccrual loans at June 30, 1998.
<PAGE>
During the three months ended June 30, 1999, $30,000
was charged to the provision for loan losses compared
to $37,500 for the three months ended June 30, 1998. At
June 30, 1999 the allowance was $817,614 or 1.12% of
total loans. This compares to an allowance of $794,000
or 1.23% of total loans as of June 30, 1998. For the
three months ended June 30, 1999 the Bank had net
charge-offs of $7,000 compared to net charge-offs of
$21,000 for the three months ended June 30, 1998.
The following table summarizes loan charge-offs and
recoveries by type of loan for the three months ended
June 30, 1999 and 1998:
Loan Type June 30, 1999 June 30, 1998
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and 0 6,000 13,000 5,000
Agricultural 0 0 0 0
Consumer 14,000 1,000 13,000 0
TOTALS $ 14,000 $ 7,000 $26,000 $5,000
<PAGE>
The following table summarizes loan charge-offs and
recoveries by type of loan for the six months ended
June 30, 1999 and 1998:
Loan Type June 30, 1999 June 30, 1998
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and Industrial 0 6,000 13,000 5,000
Agricultural 0 3,000 0 0
Consumer 27,000 2,000 31,000 7,000
TOTALS $ 27,000 $ 11,000 $ 44,000 $12,000
The Bank has allocated its allowance for credit losses
at the end of each period presented as follows:
June 30, 1999 June 30, 1998
% of loans % of loans
Balance at End of to total to total
Period Applicable to: Amount Loans Amount Loans
Commercial and agricultural $505,282 58% $ 3,000 49%
Real Estate-construction 32,813 4% 5%
Real Estate-mortgage 76,710 22% 34%
Consumer 110,998 16% 34,000 12%
Total Domestic 725,803 100% 37,000 100%
Unallocated 91,811 683,000
TOTALS $817,614 100% $720,000 100%
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Company must maintain an adequate liquidity
position in order to respond to the short-term demand
for funds caused by withdrawals from deposit accounts,
extensions of credit and for the payment of operating
expenses. Maintaining this position of adequate
liquidity is accomplished through the management of a
combination of liquid assets; those which can be
converted into cash and access to additional sources of
funds. Primary liquid assets of the Company are cash
and due from banks, federal funds sold, investments
held as "available for sale" and maturing loans.
Federal funds purchased and loans from the Federal Home
Loan Bank system represent the Company's primary source
of immediate liquidity and were maintained at a level
to meet immediate needs. Federal Funds Sold averaged
approximately $1,443,649 and $4,242,374 for the three
months ended June 30, 1999 and 1998, respectively.
Maturities in the Company's loan and investment
portfolios are monitored regularly to avoid matching
short-term deposits with long-term loans and
investments. Other assets and liabilities are also
monitored to provide the proper balance between
liquidity, safety, and profitability. This monitoring
process must be continuous due to the constant flow of
cash that is inherent in a financial institution.
The Company actively manages its interest rate
sensitive assets and liabilities to reduce the impact
of interest rate fluctuations. In addition, the Bank
monitors the interest rates paid on Certificates of
Deposit as advertised by its competitors and strive to
pay competitive interest rates to retain and attract
Certificates of Deposit. Should competitive pressures
dictate, the Bank might have to increase rates paid to
retain the Certificates of the Deposit that mature in
the next year and any increase in interest rates paid
on Certificates of Deposit may reduce future Company
earnings. The Bank also monitors the assets and
liabilities that reprice each month to determine the
impact on future earnings from anticipated repricings.
At June 30, 1999 the Company's rate sensitive
liabilities exceed rate sensitive assets due within one
year by $10,851,000.
<PAGE>
As part of managing liquidity, the Company monitors its
loan to deposit ratio on a daily basis. At June 30,
1999 the ratio was 83.3% which is within the Company's
acceptable range.
The Company experienced a decrease in cash and cash
equivalents, its primary source of liquidity, of
$8,781,424 for the six months ended June 30, 1999. The
primary source of cash flow for the six months ended
June 30, 1999 was cash provided by operating activities
of $611,465. Cash outflow for the six months ended June
30, 1999 primarily consisted of the following: Net
security purchases of $1,380,288, dividends paid of
$126,600 and an increase in capital expenditures of
$1,229,580. The Company experienced an increase in
loans in the first six months of 1999 of $8,717,284.
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
operations or liquidity position.
The Company has commenced a stock offering for up to
25,000 shares of stock at $44.00 a share. The Bank
intends to use the net proceeds to replenish short-term
investments that were liquidated in order to pay for the
acquisition and construction of our new Casco branch.
<PAGE>
The following table illustrates the projected
maturities and the repricing mechanisms of the major
asset/liability categories of the Company as of June
30, 1999, based on certain assumptions. No prepayment
rate assumptions have been made for the loan portfolio.
Maturities and repricing dates for investments have
been projected by applying the assumptions set forth
below to contractual maturities and repricing dates.
1 Year 1 - 5 5 - 10 After 10
or Less Years Years Years
Interest Earning Assets:
Fed Funds Sold
Investment Securities $ 2,117,000 $ 9,174,000 $ 5,787,000 $ 1,966,000
Loans
Variable Rate $12,143,000
Real Estate-Construction $ 1,753,000 $ 495,000
Real Estate-Other $ 8,401,000 $12,606,000 $ 872,000
Commercial and Industrial $10,070,000 $ 8,753,000 $ 443,000 $ 931,000
Agricultural $ 3,420,000 $ 2,608,000
Consumer $ 1,645,000 $ 5,235,000 $ 95,000
Other $ 1,900,000 $ 605,000 $ 839,000 -0-
Total Interest Earning Assets $41,449,000 $39,476,000 $ 8,036,000 $ 2,897,000
Interest Bearing Liabilities:
Interest Bearing Demand $ 5,334,000
Savings Deposits $ 5,704,000 $13,308,000
Money Market Accounts $ 1,151,000 $ 2,686,000
Certificates of Deposit $34,594,000 $ 4,117,000
Jumbo CD's $ 3,534,000 $ 380,000
IRA's $ 5,048,000 $ 125,000
Other $ 2,269,000 $ 14,000 -0- -0-
Total Interest Bearing
Liabilities $52,300,000 $ 4,363,000 -0- $21,328,000
Interest Sensitivity
Gap per Period $(10,851,000) $34,840,000 $8,036,000 $(18,431,000)
Cumulative Interest
Sensitivity Gap $(10,851,000) $23,989,000 $32,025,000 $13,594,000
Interest Sensitivity
Gap as a Percentage
of Earning Assets (11.8) 37.9 8.7 20.0
Cumulative Sensitivity
Gap as a Percentage
of Earning Assets (11.8) 26.1 34.8 14.8
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Luxemburg Bancshares, Inc. was held on April 24, 1999.
The following two directors were elected: Richard Dougherty and Ronald
Ledvina. Also, the director and employee stock purchase plans were
approved by the shareholders.
The exact voting on these matters will be reported in an amendment
to the Form 10-QSB.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
10.1 Director Stock Purchase Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, the registrant did
not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto
duly authorized.
LUXEMBURG BANCSHARES, INC.
----------------------------
(Registrant)
/s/ John A. Slatky /s/ John H. Kaye, CPA
- ------------------------ ------------------------
John A. Slatky John H. Kaye, CPA
President and Chief Executive Officer Treasurer
(Pincipal Accounting Officer)
Date: 8/13/99 Date: 8/13/99
LUXEMBURG BANCSHARES, INC.
1999 DIRECTOR STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to
enable the Company to attract and retain directors and
to strengthen the mutuality of interests between such
directors and the Company's shareholders.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Company" shall mean Luxemburg
Bancshares, Inc., and any subsidiary of
the Company that the Board authorizes to
participate in the Plan.
(d) "Eligible Director" shall mean any
individual who, on the first day of each
Offering Period, is a Director of the
Company.
(e) "Fair Market Value" shall mean, as of
any date, the value of Common Stock
determined as follows:
(1) If the Common Stock is listed
on any established stock exchange or
a national market system, including
without limitation The Nasdaq
National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall
be the closing sales price for such
stock (or the closing bid, if no
sales were reported) as quoted on
such exchange or system for the last
Trading Day on the date of such
determination, as reported in The
Wall Street Journal or such other
source as the Board deems reliable;
or
(2) If the Common Stock is not so
listed, the Fair Market Value
thereof shall be determined in good
faith by the Board.
(f) "Offering Period" shall mean a period of
approximately thirty (30) days during
which Eligible Directors may be offered
the opportunity to purchase Common
Stock. The Board shall have the power
to change the duration of the Offering
Period from time to time in its sole
discretion.
(g) "Plan" shall mean this 1999 Director Stock Purchase Plan.
<PAGE>
3. Administration. The Plan shall be
administered by the Board or a committee of members of
the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary
authority to establish Offering Periods; determine
which Eligible Directors will be offered an opportunity
to purchase Common Stock and the amount each such
person can purchase; construe, interpret and apply the
terms of the Plan; determine eligibility; and
adjudicate all disputed claims filed under the Plan.
Every finding, decision and determination made by the
Board or its committee shall, to the full extent
permitted by law, be final and binding upon all
parties.
4. Shares. The maximum aggregate number of
shares of Common Stock that may be issued under the
Plan shall be 10,000 shares of Common Stock (subject to
any increase or decrease pursuant to Section 11), which
may be either authorized and unissued shares of Common
Stock or issued shares of Common Stock that have been
reacquired by the Company.
5. Offers of Common Stock. All offers to
purchase Common Stock to Eligible Directors shall be
determined by the Board. The Board may establish a
formula by which offers under the Plan shall be
automatically granted to Eligible Directors from time
to time. Acceptance of an offer shall occur as
provided in Section 7 hereof.
6. Terms of Offers. Offers to purchase Common
Stock under the Plan shall be subject to the following
terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms
of the Plan, as the Board shall, in its discretion,
determine:
(a) Eligible Directors. Only Eligible
Directors shall be offered the
opportunity to purchase Common Stock
under the Plan.
(b) Purchase Price. The purchase price per
share of Common Stock shall be equal to
the Fair Market Value of a share of
Common Stock on the first day of the
Offering Period.
(c) Number of Shares. The number of shares
of Common Stock that may be purchased by
an Eligible Director shall be determined
by the Board from time to time. No
fractional shares may be purchased.
(d) Voting Rights. An Eligible Director
shall have no interest or voting right
in Common Stock subject to this Plan
until the Common Stock is issued
hereunder.
(e) Transferability of Rights. Unless
determined by the Board, no offer under
the Plan may be assigned, transferred,
pledged, or otherwise disposed of in any
way by an Eligible Director; provided,
however, the Board may allow a
representative of an Eligible Director's
estate to accept an offer hereunder.
<PAGE>
(f) Payment. The purchase price of Common
Stock may be paid in cash or by such
other consideration as the Board may
deem appropriate.
(g) Legend. The Company may require each
Eligible Director purchasing Common
Stock to represent to the Company in
writing that the Eligible Director is
acquiring the Common Stock for
investment purposes only and not for
resale or with a view to distribution
and to make such other representations
as the Company may require. The stock
certificates representing such shares
may bear a legend, as determined by the
Company, which the Company believes is
necessary or desirable to comply with
applicable federal and state securities
laws.
(h) Additional Terms and Conditions. The
Board may establish such other terms,
conditions, restrictions and/or
limitations, if any, of any sale of
Common Stock provided they are not
inconsistent with the Plan.
7. Purchase of Common Stock. An Eligible
Director may purchase Common Stock by completing a
subscription agreement in the form of Exhibit A to this
Plan, or such other form as approved by the Board, and
filing it with the Company's Treasurer during the
Offering Period.
8. Delivery. As promptly as practicable after
the last day of the Offering Period, the Company shall
arrange the delivery to each Eligible Director, as
appropriate, the shares purchased in accordance with
this Plan.
9. Conditions Upon Issuance of Common Stock.
The Common Stock sold hereunder has not been
registered under the Securities Act of 1933 and cannot
be sold, offered for sale, pledged, or hypothecated
unless it has been effectively registered under the
Securities Act of 1933, as amended, and applicable
state securities laws, or it becomes eligible for sale
pursuant to exemptions from such registration.
Common Stock shall not be issued under this Plan
unless the sale, issuance and delivery of such shares
shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, the Change in Bank
Control Act, the Federal Bank Holding Company Act,
state securities laws, and the rules and regulations
promulgated thereunder, and shall be further subject to
the approval of counsel for the Company with respect to
such compliance.
10. Change in Bank Control. Any provisions of
the Plan to the contrary, no Eligible Director shall
purchase Common Stock under the Plan if, after such
purchase, the Eligible Director would own, control, or
hold power to vote 10% or more of the Common Stock,
unless the Eligible Director has received prior
regulatory approval, in accordance with the Change in
Bank Control Act.
<PAGE>
11. Adjustments to Common Stock. If there is any
change in the number of outstanding shares of Common
Stock through the declaration of stock dividends, stock
splits or the like, the number of shares available for
purchase under this Plan shall be automatically
adjusted. Such adjustments shall be made by the Board,
whose determination in that respect shall be final,
binding and conclusive.
12. Amendment or Termination. The Board may at
any time and for any reason terminate or amend the
Plan.
13. Cessation of Director Duties. If an Eligible
Director ceases to be a Director of the Company for any
reason, he or she will be deemed to be no longer
eligible to participate in the Plan.
14. Other Plans. Nothing contained in the Plan
shall prevent the Board from adopting other or
additional compensation arrangements; and such
arrangements may be either generally applicable or
applicable only in specific cases.
15. No Right to Continue Relationship. Neither
the Plan nor any offer under the Plan shall confer upon
any person any right to continue as a Director of the
Company or obligate the Company to nominate any
Director for reelection by the Company's shareholders.
16. Severability. If any part of the Plan shall
be determined to be invalid or void in any respect,
such determination shall not affect, impair, invalidate
or nullify the remaining provisions of the Plan which
shall continue in full force and effect.
17. Liability of Board. No member of the Board
nor any employee of the Company or any of its
subsidiaries shall be liable for any act or action
hereunder, whether of omission or commission, by any
other member of the Board or employee or by any agent
to whom duties in connection with the administration of
the Plan have been delegated or, except in
circumstances involving bad faith, gross negligence or
fraud, for anything done or omitted to be done by
himself.
18. Successors. The Plan shall be binding upon
and inure to the benefit of any successor or successors
of the Company.
19. Term of Plan. The Plan shall become effective
upon its adoption by the Board, but shall be subject to
its approval by the shareholders of the Company.
<PAGE>
EXHIBIT A
LUXEMBURG BANCSHARES, INC.
1999 DIRECTOR STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Offering Period: _____________ to _____________
On _____________, the Board of Directors of
Luxemburg Bancshares, Inc. (the "Company") adopted the
1999 Director Stock Purchase Plan (the "Director Stock
Purchase Plan") reserving 10,000 shares for issuance
upon exercise of options issued pursuant to the
Director Stock Purchase Plan. Under the terms of the
Director Stock Purchase Plan, the Board of Directors of
the Company may, from time to time, offer Directors the
opportunity to purchase shares of common stock of the
Company ("Common Stock").
On ____________, the Board of Directors granted
each Director of the Company the opportunity to
purchase up to 150 shares of Common Stock, plus an
additional 2 shares of Common Stock for each year that
the Director has been a member of the Board of
Directors. The Offering Period during which you can
accept this offer is ________ to ________. In order to
accept this offer, you must complete this Subscription
Agreement and file it with the Treasurer during the
Offering Period.
1. ___________________ hereby agrees to purchase the
following number of shares of the Company's Common
Stock in accordance with this Subscription Agreement
and the Director Stock Purchase Plan:
Number of Shares: __________
2. I hereby tender payment in full of the
subscription price for all shares subscribed at a price
of $________ per share of Common Stock.
3. Shares purchased for me under the Director Stock
Purchase Plan should be issued in the name(s) of
(Director or Director and Spouse only):
4. I hereby agree to be bound by the terms of the
Director Stock Purchase Plan. The effectiveness of
this Subscription Agreement is dependent upon my
eligibility to participate in the Director Stock
Purchase Plan.
<PAGE>
5. I am acquiring the Common Stock for my own
account, for investment purposes only. I have no
intention to resell the Common Stock in the foreseeable
future.
6. I acknowledge that the Company's Common stock is
not registered under federal or state securities laws.
I agree not to resell any of the Common Stock acquired
hereunder unless such resale is permitted by federal
and state securities laws.
IN WITNESS WHEREOF, the undersigned has executed
this Subscription Agreement this _______ day of
_____________________, _____.
- -----------------------------------
Name
- -----------------------------------
Signature
- -----------------------------------
Title (if applicable
- -----------------------------------
Tax Identification or
Social Security Number
THIS SUBSCRIPTION AGREEMENT MUST BE POSTMARKED ON
OR BEFORE THE LAST DAY OF THE OFFERING PERIOD AND
MAILED TO LUXEMBURG BANCSHARES, INC., C/O
__________________, 630 MAIN STREET, P.O. BOX 440,
LUXEMBURG, WISCONSIN 54217-0440, OR DELIVERED ON
OR BEFORE 5:00 P.M. OF THE LAST DAY OF THE
OFFERING PERIOD TO THE COMPANY, C/O
_________________.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,276,464
<INT-BEARING-DEPOSITS> 262,963
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19,044,069
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 72,814,030
<ALLOWANCE> 817,614
<TOTAL-ASSETS> 100,223,076
<DEPOSITS> 87,360,832
<SHORT-TERM> 2,234,025
<LIABILITIES-OTHER> 1,054,825
<LONG-TERM> 69,418
0
0
<COMMON> 270,500
<OTHER-SE> 9,233,476
<TOTAL-LIABILITIES-AND-EQUITY> 100,223,076
<INTEREST-LOAN> 2,870,285
<INTEREST-INVEST> 556,071
<INTEREST-OTHER> 108,153
<INTEREST-TOTAL> 3,534,509
<INTEREST-DEPOSIT> 1,762,406
<INTEREST-EXPENSE> 1,774,334
<INTEREST-INCOME-NET> 1,760,175
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,500,051
<INCOME-PRETAX> 700,923
<INCOME-PRE-EXTRAORDINARY> 700,923
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511,172
<EPS-BASIC> 2.10
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.90
<LOANS-NON> 245,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 773,116
<CHARGE-OFFS> 27,377
<RECOVERIES> 11,875
<ALLOWANCE-CLOSE> 817,614
<ALLOWANCE-DOMESTIC> 725,803
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 91,811
</TABLE>
