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 September 30, 2000.
[ ] 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 jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 October 18, 2000:
540,528 shares were outstanding.
Transitional Small Business Disclosure Format
(check one): Yes [ ] No [ X ]
<PAGE>
LUXEMBURG BANCSHARES, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Independent Accountant's Report 3
Consolidated Balance Sheets -
September 30, 2000 and
December 31, 1999 4
Consolidated Statements of Income -
Three Months & Nine Months
Ended September 30, 2000 and 1999 5
Consolidated Condensed Statements of
Changes in Stockholders' Equity - Nine Months
Ended September 30, 2000 and 1999 6
Consolidated Statements of Cash Flow - Nine Months
Ended September 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8 - 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 14
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 15
SIGNATURES 15
<PAGE>
PART I - FINANCIAL INFORMATION
Wipfli Ullrich
Bertelson LLP
-----------------------------
CPAS * CONSULTANTS * ADVISORS
-----------------------------
Independent Accountant's Report
Board of Directors and Stockholders
Luxemburg Bancshares, Inc.
Luxemburg, Wisconsin
We have reviewed the accompanying unaudited
consolidated balance sheet of Luxemburg Bancshares,
Inc. and Subsidiaries as of September 30, 2000, and the
related unaudited consolidated statements of income,
changes in stockholders' equity, and cash flows for the
nine-month period then ended. These financial
statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards
established by the American Institute of Certified
Public Accountants. A review of interim financial
information consists principally of applying analytical
procedures to financial data and making inquiries of
persons responsible for financial and accounting
matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted
auditing standards, the objective of which is the
expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated financial statements for them to be in
conformity with generally accepted accounting
principles.
/s/ Wipfli Ullrich Bertelson LLP
Wipfli Ullrich Bertelson LLP
October 31, 2000
Green Bay, Wisconsin
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
September 30, 2000 and December 31, 1999
ASSETS
2000 1999
---- ----
Cash and due from banks $ 3,571,065 $ 4,275,838
Interest-bearing deposits 357,715 240,293
Federal funds sold 388,000 0
---------- ----------
Cash and cash equivalents 4,316,780 4,516,131
Investment securities available for
sale-Stated at fair value 18,508,890 18,276,824
Total loans 96,151,453 82,366,209
Allowance for credit losses (1,068,133) (895,952)
------------ ------------
Net loans 95,083,320 81,470,257
Premises and equipment 2,567,005 2,731,432
Other investments at cost 328,850 318,550
Other assets 2,770,493 2,735,318
------------ ------------
TOTAL ASSETS $123,575,338 $110,048,512
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
2000 1999
---- ----
LIABILITIES:
Non-interest-bearing deposits $ 11,794,983 $ 12,198,310
Interest-bearing deposits 94,778,289 84,761,332
------------ ------------
Total deposits 106,573,272 96,959,642
Short-term borrowings 4,432,133 1,373,649
Borrowed funds 9,443 27,683
Other liabilities 887,033 947,691
------------ ------------
Total liabilities 111,901,881 99,308,665
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock- $1.00 par value:
Authorized - 2,400,000 shares,
Issued - 567,512 shares in 2000
and 564,016 shares in 1999 567,512 564,016
Capital surplus 4,080,186 4,013,461
Retained earnings 7,578,975 6,891,080
Accumulated other comprehensive
deficit (209,057) (384,551)
Less - 26,984 shares of treasury
common stock, at cost (344,159) (344,159)
------------ ------------
Total stockholders' equity 11,673,457 10,739,847
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $123,575,338 $110,048,512
------------ ------------
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $ 2,094,249 $ 1,598,755 $ 5,868,841 $ 4,469,040
Interest on investment
securities:
Taxable 160,920 182,519 488,603 594,312
Tax-exempt 95,753 83,986 283,110 228,264
Other interest and dividend
income 26,159 11,261 96,072 119,414
----------- ----------- ----------- -----------
Total interest income 2,377,081 1,876,521 6,736,626 5,411,030
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits 1,288,326 912,043 3,566,539 2,674,449
Short-term borrowings 57,159 12,133 128,373 20,460
Borrowed funds 14,412 1,192 15,468 4,793
----------- ----------- ----------- -----------
Total interest expense 1,359,897 925,368 3,710,380 2,699,702
----------- ----------- ----------- -----------
Net interest income 1,017,184 951,153 3,026,246 2,711,328
----------- ----------- ----------- -----------
Provision for credit losses 39,000 30,000 117,000 90,000
----------- ----------- ----------- -----------
Net interest income after
provision for credit losses 978,184 921,153 2,909,246 2,621,328
----------- ----------- ----------- -----------
OTHER INCOME:
Service charges on deposit
accounts 65,656 50,050 173,204 148,539
Mortgage underwriting fees
- Secondary market 27,210 43,102 93,656 76,445
Loan servicing fee income 10,652 22,754 38,335 69,841
Other operating income 223,931 127,844 627,271 449,724
----------- ----------- ----------- -----------
Total other income 327,449 243,750 932,466 744,549
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Salaries and related benefits 519,528 479,791 1,553,456 1,288,034
Net occupancy expense 62,516 56,671 184,477 159,556
Equipment rentals, depreciation,
and maintenance 91,181 98,465 271,651 261,592
Data processing 41,843 41,624 125,257 119,874
Other operating expenses 202,074 160,104 597,243 507,650
----------- ----------- ----------- -----------
Total operating expenses 917,142 836,655 2,732,084 2,336,706
----------- ----------- ----------- -----------
Income before provision for
income taxes 388,491 328,248 1,109,628 1,029,171
Provision for income taxes 95,671 77,072 270,385 266,823
----------- ----------- ----------- -----------
Net income $ 292,820 $ 251,176 $ 839,243 $ 762,348
----------- ----------- ----------- -----------
Basic earnings per common
share (*value reflect 2 for
1 stock split of May 15, 2000.) $0.54 $0.47 $1.55 $1.42
----- ----- ----- -----
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY - (UNAUDITED)
Nine Months Ended September 30, 2000 and 1999
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
Shares* Equity Total Shares* Equity Total
------- ------------ ------- ------------
Balance - Beginning of period 537,032 $ 10,739,847 487,002 $ 9,456,433
------- ------------ ------- ------------
Issuance of common stock 3,496 $ 70,221 50,000 $ 1,100,000
----- ------------ ------ ------------
Sale of treasury stock $ 0 30 $ 660
------------ ------ ------------
Comprehensive income:
Net Income $ 839,243 $ 762,348
------------ ------------
Other comprehensive
income (deficit) -
Change in net unrealized
loss on securities
available for sale 175,494 (449,900)
------- ---------
Total comprehensive income 1,014,737 312,448
--------- -------
Dividends Paid (151,348) (126,620)
Balance - End of period 540,528 $ 11,673,457 537,032 $ 10,742,921
------- ------------ ------- ------------
* The number of shares outstanding reflects the 2 for 1 stock
split of May 15, 2000
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW - (UNAUDITED)
Nine Months Ended September 30, 2000 and 1999
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 839,243 $ 762,348
------------- -------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 265,748 270,625
Accretion of discounts on securities (14,611) (15,677)
Amortization of premiums on securities 5,732 14,406
Provision for credit losses 117,000 90,000
(Gain) loss on sale of other real estate (38,145) 0
Gain on sale of premises and equipment (299) 0
Change in other operating assets 21,054 (232,808)
Change in other operating liabilities (143,713) (62,739)
------------- -------------
Total adjustments 212,766 63,807
------------- -------------
Net cash provided by operating activities 1,052,009 826,155
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of
securities available for sale 1,406,524 6,820,627
Purchase of securities available for sale (1,364,386) (7,053,305)
Net (increase) decrease in loans (13,823,858) (13,224,453)
Purchase of additional life insurance (56,229) (54,953)
Proceeds from sale of other real estate 131,940 31,652
Proceeds for the sale of premise
and equipment 299 0
Capital expenditures (101,321) (1,249,295)
Purchase of other investments (10,300) (42,500)
------------- -------------
Net cash provided by (used in)
investing activities (13,817,331) (14,772,227)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 9,613,630 5,494,144
Net increase (decrease) in short-
term borrowings 3,981,760 643,457
Principal payments on borrowed funds (948,292) (43,765)
Proceeds from the issuance of stock 1,100,660
Director and Employee Stock Purchase Plans 70,221 0
Dividends Paid (151,348) (126,620)
------------- -------------
Net cash provided by (used in)
financing activities 12,565,971 7,067,876
------------- -------------
Net increase (decrease) in cash and
cash equivalents (199,351) (6,878,196)
Cash and cash equivalents at beginning 4,516,131 12,320,851
------------- -------------
Cash and cash equivalents at end $ 4,316,780 $ 5,442,655
------------- -------------
Supplemental information:
-------------------------
Cash paid during the period for:
Interest $ 3,683,421 $ 2,865,556
Income taxes $ 287,698 $ 251,129
Loans transferred to Other Real Estate $ 93,799 $ 0
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, 1999 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 required by generally accepted accounting
principles in annual consolidated financial statements.
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
540,528 and 537,032 for the three months and 540,375
and 503,678 for the nine months ended September 30,
2000 and 1999, respectively. The basic and diluted
earnings per share are the same for 2000 and 1999. On
March 17, 2000 the Board of Directors approved a two
(2) for one (1) stock split for shareholders of record
of April 2, 2000 and issued on May 15, 2000. The
earnings per share and number of shares outstanding
reflect the stock split for comparative purposes.
NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank of Luxemburg's ("Bank's") financial statements
do not reflect various commitments and contingent
liabilities which arise in the normal course of
business and which involve elements of credit risk,
interest rate risk, and liquidity risk. These
commitments and contingent liabilities are commitments
to extend credit and standby letters of credit. A
summary of the Bank's commitments and contingent
liabilities at each balance sheet date is as follows:
Notional Amount
September 30, 2000 December 31, 1999
Commitments to extend credit $8,516,000 $7,928,000
Credit card arrangements 1,154,000 1,451,000
Standby letters of credit 538,000 848,000
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 Changes - 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 establishes accounting and
reporting standards for 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. As amended by SFAS No. 137, the statement
is effective for fiscal years beginning after June 15,
2000. 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 Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
Net Earnings $ 292,820 $ 251,176 $ 839,243 $ 762,348
Average Consolidated
Balance Sheet Items:
Loans 92,456,632 72,490,846 88,115,828 66,719,594
Taxable Investment
Securities 10,386,768 11,272,053 10,531,141 12,644,743
Fed Funds Sold 310,076 538,848 1,060,427 2,893,183
Municipal Loans &
Investments 9,850,709 9,633,770 9,609,851 9,165,093
Other Earning Assets 1,033,694 711,103 941,329 875,911
------------ ------------ ------------ ------------
Total Earning
Assets 114,037,879 94,646,620 110,258,576 92,298,524
Total Assets 121,255,732 103,201,269 117,513,447 99,750,727
Deposits 104,873,887 91,415,349 102,816,716 88,612,988
Shareholders' Equity 11,537,732 10,810,805 10,768,428 10,063,750
Key Ratios:
Average Equity to
Average Total Assets 9.52% 10.48% 9.16% 10.09%
Return on Average
Total Assets 0.97% 0.97% 0.95% 1.02%
Return on Average Equity 10.15% 9.29% 10.39% 10.10%
Net Interest Margin 3.58% 3.99% 3.67% 3.93%
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 $66,031 or 6.94% to $1,017,184 for
the three months ended September 30, 2000, from
$951,153 for the three months ended September 30, 1999.
Net interest income has increased $314,918 or 11.61% to
$3,026,246 for the nine months ended September 30,
2000, from $2,711,328 for the nine months ended
September 30, 1999. The increase in net interest
income reflects the loan and deposit growth. The
increase was reduced because deposit interest rates
increased faster than loan interest rates.
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
Interest Income $ 2,377,081 $ 1,876,521 $ 6,736,626 $ 5,411,030
Interest Expense 1,359,897 925,368 3,710,380 2,699,702
----------- ----------- ----------- -----------
Net Interest Income $ 1,017,184 $ 951,153 $ 3,026,246 $ 2,711,328
----------- ----------- ----------- -----------
Net Interest Margin 3.58% 3.99% 3.67% 3.93%
RATE/VOLUME ANALYSIS
The impact of changes in volume and interest rates on
net interest income for the three and nine months ended
September 30, 2000 is illustrated in the following table:
Three Months Ended September 30, 2000 Compared to Three
Months Ended September 30, 1999.
Increase (Decrease) in Net Interest Income
Net Change Due To Rate Due To Volume
---------- ----------- -------------
Interest Income $ 500,560 $ 84,963 $ 415,597
Interest Expense 434,529 157,169 277,360
---------- ----------- -------------
Net Interest Income $ 66,031 $ (72,206) $ 138,237
---------- ----------- -------------
<PAGE>
Nine Months Ended September 30, 2000 Compared to Nine
Months Ended September 30, 1999.
Increase (Decrease) in Net Interest Income
Net Change Due To Rate Due To Volume
---------- ----------- -------------
Interest Income $1,325,596 $ 73,844 $ 1,251,752
Interest Expense 1,010,678 268,471 742,207
---------- ----------- -------------
Net Interest Income $ 314,918 $ (194,627) $ 509,545
---------- ----------- -------------
Interest rates on the Bank's earning assets and
interest bearing liabilities were generally higher for
the three months and nine months ended September 30,
2000 compared to the three months and nine months ended
September 30, 1999. Earning assets increased 20.5% and
19.5%, respectively to $114,037,879 for the three
months ended September 30, 2000 from $94,646,620 for
the three months ended September 30, 1999 and to
$110,258,576 for the nine months ended September 30,
2000 from $92,298,524 for the nine months ended
September 30, 1999. Interest bearing liabilities
increased 24.6% and 20.4%, respectively to $95,837,614
for the three months ended September 30, 2000 compared
to $76,896,788 for the three months ended September 30,
1999 and to $92,672,896 for the nine months ended
September 30, 2000 compared to $76,996,708 for the nine
months ended September 30, 1999.
OPERATING RESULTS
Net income for the three months ended September 30,
2000, was $292,820 compared to $251,176 for the three
months ended September 30, 1999. The increase of
$41,644 reflects an increase in net interest income and
fee income with higher operating costs. The increase
in net interest income of $66,031 for the three months
ended September 30, 2000, compared to the three months
ended September 30, 1999 is discussed in "Net Interest
Income" and "Rate/Volume Analysis" elsewhere in this
report. Other operating income, including other loan
fees, debit card, ATM fees, and including a $38,143
profit from the sale of other real estate increased
$96,087 or 75% to $223,931 for the three months ending
September 30, 2000 compared to $127,844 for the three
months ending September 30, 1999.
Total operating expenses increased $80,487 or 9.6% to
$917,142 for the three months ended September 30, 2000
from $836,655 for the three months ended September 30,
1999. Salaries and related benefits increased $39,737
or 8.3% to $519,528 for the three months ended
September 30, 2000 compared to $479,791 for the three
months ended September 30, 1999. Additional staffing in
the Financial Resource Center plus increases in
insurance and training costs account for the increase.
Net occupancy expense increased $5,845 or 10.3% to
$62,516 for the three months ended September 30, 2000
compared to $56,671 for the three months ended
September 30, 1999. Equipment rentals, depreciation,
and maintenance for the three months ended September
30, 2000 decreased $7,284 or 7.4% to $91,181 compared
to $98,465 for the three months ended September 30,
1999. Finally, other operating expenses for the three
months ended September 30, 2000 increased $41,970 or
26.2% to $202,074 from $160,104 for the three months
ended September 30, 1999. The additional expenses were
increases in accounting fees, telecommunication
expenses and the FDIC assessments.
Net income for the nine months ended September 30,
2000, was $839,243 compared to $762,348 for the nine
months ended September 30, 1999. The increase of
$76,895 reflects an increase in net interest income and
fee income with higher personnel costs. The increase
in net interest income of $314,918 for the nine months
ended September 30, 2000, compared to the nine months
ended September 30, 1999 is discussed in "Net Interest
Income" and "Rate/Volume Analysis" elsewhere in this
report. Other operating income, including other loan
fees, debit card and ATM fees, increased $177,547 or
39.5% to $627,271 for the nine months ended September
30, 2000 compared to $449,724 for the nine months ended
September 30, 1999. Of the increase other loan fees
accounted for $36,061, alternative investment sales
accounted for $33,490 and card services and ATM
services accounted for $19,903.
Total operating expenses increased $395,378 or 16.9% to
$2,732,084 for the nine months ended September 30, 2000
from $2,336,706 for the nine months ended September 30,
1999. Salaries and related benefits increased $265,422
or 20.6% to $1,553,456 for the nine months ended
September 30, 2000 compared to $1,288,034 for the nine
months ended September 30, 1999. Higher salaries and
wages in addition to the Financial Resource Center
increase in sales staff plus increases in insurance and
training costs account for
<PAGE>
the increase. Net occupancy
expense increased $24,921 or 15.6% to $184,477 for the
nine months ended September 30, 2000 compared to
$159,556 for the nine months ended September 30, 1999,
largely related to the additional depreciation and real
estate taxes of the new Casco office. Equipment
rentals, depreciation, and maintenance for the nine
months ended September 30, 2000 increased $10,059 or
3.8% to $271,651 compared to $261,592 for the nine
months ended September 30, 1999. Other operating
expenses for the nine months ended September 30, 2000
increased $89,593 or 17.6% to $597,243 from $507,650
for the nine months ended September 30, 1999. The
additional expenses were increases in accounting fees,
telecommunication expenses and the FDIC assessments.
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. 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. Loans are entirely to borrowers
in Northeast Wisconsin.
The Bank generally places loans on non-accrual status
when the loan is past due as to the payment of interest
and/or principal in excess of 90 days. The Bank also
places loans on a non-accrual status when it deems the
collection of such interest unlikely. Loans are
returned to full accrual status when the loan is
brought current according to all terms of the loan
agreement, all past due principal and interest is paid
and the Bank deems its collateral position adequate to
warrant a return to accrual status.
At September 30, 2000 the Company had $948,000 in loans
past due 90 days or more that were still accruing
interest as compared to $160,000 for September 30,
1999. The loans were adequately secured to allow for
the repayment of both the principal and interest due.
At September 30, 2000 and 1999 the Company did not have
any loans that met the definition of "Troubled Debt
Restructuring". In addition, there were no loans
considered to be impaired. The Bank had $364,000 of
nonaccrual loans at September 30, 2000 and $200,000 of
nonaccrual loans at September 30, 1999.
During the three months ended September 30, 2000,
$2,000 was charged to the allowance for loan losses
compared to $13,000 for the three months ended
September 30, 1999. At September 30, 2000 the allowance
was $1,068,000 or 1.11% of total loans. This compares
to an allowance of $845,000 or 1.09% of total loans as
of September 30, 1999. For the three months ended
September 30, 2000 the Bank had net recoveries of
$7,000 compared to net charge-offs of $3,000 for the
three months ended September 30, 1999. For the nine
months ended September 30, 2000 the Bank had net
recoveries of $56,000 compared to net charge-offs of
$19,000 for the nine months ended September 30, 1999.
The following table summarizes loan charge-offs and
recoveries by type of loan for the three months ended
September 30, 2000 and 1999:
Loan Type September 30, 2000 September 30, 1999
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 1,000
Commercial and Industrial 0 0 0 0
Agricultural 0 1,000 0 2,000
Consumer 2,000 8,000 13,000 7,000
------- ------- ------- -------
TOTALS $ 2,000 $ 9,000 $13,000 $10,000
------- ------- ------- -------
<PAGE>
The following table summarizes loan charge-offs and
recoveries by type of loan for the nine months ended
September 30, 2000 and 1999:
Loan Type September 30, 2000 September 30, 1999
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 1,000
Commercial and Industrial 0 33,000 0 2,000
Agricultural 0 26,000 0 8,000
Consumer 24,000 21,000 40,000 10,000
-------- -------- -------- -------
TOTALS $ 24,000 $ 80,000 $ 40,000 $ 21,000
-------- -------- -------- --------
The Bank has allocated its allowance for credit losses
at the end of each period presented as follows:
September 30, 2000 September 30, 1999
% of % of
loans to loans to
Balance at End of total total
Period Applicable to: Amount Loans Amount Loans
Commercial and
agricultural $ 639,618 55% $ 548,519 59%
Real Estate-
construction 89,070 10% 54,675 6%
Real Estate-mortgage 95,766 21% 76,722 20%
Consumer 169,454 15% 112,161 15%
----------- ---- --------- ----
Total Domestic 993,908 100% 792,077 100%
---- ----
Unallocated 74,225 52,546
----------- ---------
TOTALS $ 1,068,133 100% $ 844,623 100%
----------- ---------
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 $310,076 and $538,848 for the three
months ended September 30, 2000 and 1999, 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 strives to
pay competitive interest rates to retain and attract
certificates of deposit. Should competitive pressures
dictate, the Bank may have to increase rates paid to
retain the certificates of 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 September 30, 2000 the Company's rate sensitive
liabilities exceed rate sensitive assets due within one
year by $13,121,000.
<PAGE>
As part of managing liquidity, the Company monitors its
loan to deposit ratio on a daily basis. At September
30, 2000 the ratio was 90.2% which is within the
Company's acceptable range.
The Company experienced a decrease in cash and cash
equivalents, its primary source of liquidity, of
$199,351 for the nine months ended September 30, 2000.
The primary source of cash flow for the nine months
ended September 30, 2000 was cash provided by financing
activities of $12,565,971 which consisted of an
increase in deposits of $9,613,630 and an increase in
short term borrowing of $3,981,760. Cash outflow for
the three months ended September 30, 2000 was primarily
an increase in loans of $13,823,858. 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 following table illustrates the projected
maturities and the repricing mechanisms of the major
asset/liability categories of the Company as of
September 30, 2000, 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 $ 4,316,000
Investment Securities $ 2,932,000 $ 8,033,000 $ 5,004,000 $ 2,540,000
Loans
Variable Rate $ 11,990,000
Real Estate-
Construction $ 7,965,000 942,000
Real Estate-Other $ 11,102,000 $ 22,252,000 $ 979,000 $ 230,000
Commercial and
Industrial $ 8,480,000 $ 13,755,000 $ 1,789,000 $ 0
Agricultural $ 3,044,000 $ 3,175,000 $ 765,000
Consumer $ 1,136,000 $ 6,436,000 $ 203,000 $ 2,000
Other $ 683,000 $ 378,000 $ 845,000 $ 0
------------ ------------ ----------- -----------
Total Interest
Earning Assets $ 51,648,000 $ 54,971,000 $ 8,820,000 $ 3,537,000
------------ ------------ ----------- -----------
Interest Bearing
Liabilities:
Interest Bearing
Demand $ 5,215,000
Savings Deposits $ 5,737,000 $13,385,000
Money Market
Accounts $ 1,011,000 $ 2,361,000
Certificates of
Deposit $ 39,248,000 $ 9,079,000
Jumbo CD's $ 11,325,000 $ 1,836,000
IRA's $ 5,016,000 $ 566,000
Other $ 2,432,000 $ 2,009,000 -0- -0-
------------ ------------ ----------- -----------
Total Interest
Bearing Liabilities $ 64,769,000 $ 13,490,000 -0- $20,961,000
------------ ------------ ----------- -----------
Interest Sensitivity
Gap per Period $(13,121,000) $ 41,481,000 $ 8,820,000 $(17,424,000)
------------ ------------ ----------- ------------
Cumulative Interest
Sensitivity Gap $(13,121,000) $ 28,360,000 $37,180,000 $19,756,000
------------ ------------ ----------- -----------
Interest Sensitivity
Gap as a Percentage
of Earning Assets (11.0%) 34.9% 7.4% (14.6%)
Cumulative Sensitivity
Gap as a Percentage
of Earning Assets (11.0%) 23.8% 31.3% 16.6%
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 30, 2000,
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, C.P.A.
------------------------------- ------------------------------
John A. Slatky, John H. Kaye, C. P. A.
President and Chief Treasurer
Executive Officer (Principal Accounting Officer)
Date: November 8, 2000 Date: November 8, 2000
