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, 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 (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 July 21, 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 - June 30, 2000 and
December 31, 1999 4
Consolidated Statements of Income -
Three Months & Six
Months Ended June 30, 2000 and 1999 5
Consolidated Condensed Statements of Changes
in Stockholders' Equity - Six Months Ended
June 30, 2000 and 1999 6
Consolidated Statements of Cash Flow -
Six Months Ended June 30, 2000 and 1999 7
Notes to Consolidated Financial 8 - 9
Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 14
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds 15
Item 4 - Submission of Matters to a Vote of
Security Holders 15
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 June 30, 2000, and the
related unaudited consolidated statements of income,
changes in stockholders' equity, and cash flows for the
six-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
July 31, 2000
Green Bay, Wisconsin
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
June 30, 2000 and December 31, 1999
ASSETS
2000 1999
---- ----
Cash and due from banks $ 4,240,472 $ 4,275,838
Interest-bearing deposits 243,609 240,293
Federal funds sold 53,000 0
------------ -------------
Cash and cash equivalents 4,537,081 4,516,131
Investment securities available
for sale-Stated at fair value 18,384,174 18,276,824
Total loans 93,250,839 82,366,209
Allowance for credit losses (1,022,412) (895,952)
------------ -------------
Net loans 92,228,427 81,470,257
Premises and equipment 2,619,998 2,731,432
Other investments at cost 323,550 318,550
Other assets 2,599,123 2,735,318
------------ -------------
TOTAL ASSETS $120,691,353 $110,048,512
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
2000 1999
LIABILITIES: ---- ----
Non-interest-bearing deposits $ 13,124,550 $ 12,198,310
Interest-bearing deposits 92,658,596 84,761,332
------------ ------------
Total deposits 105,783,146 96,959,642
Short-term borrowings 2,850,953 1,373,649
Borrowed funds 14,117 27,683
Other liabilities 820,780 947,691
------------ ------------
Total liabilities 109,468,996 99,308,665
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock- $1.00 par value:
Authorized - 2,400,000 shares,
Issued - 594,496 shares in 2000
and 591,000 shares in 1999 594,496 591,000
Capital surplus 4,053,202 3,986,477
Retained earnings 7,286,154 6,891,080
Accumulated other comprehensive deficit (367,336) (384,551)
Less - 26,984 shares of treasury
common stock, at cost (344,159) (344,159)
------------ ------------
Total stockholders' equity
11,222,357 10,739,847
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $120,691,353 $110,048,512
============ ============
See accompanying notes to consolidated financial statements.
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
INTEREST INCOME:
Interest and fees on loans $1,964,072 $1,481,876 $3,774,592 $2,870,285
Interest on investment
securities:
Taxable 162,870 207,930 327,683 411,793
Tax-exempt 93,222 79,089 187,357 144,278
Other interest and dividend
income 45,879 21,394 69,913 108,153
---------- ---------- ---------- ----------
Total interest income 2,266,043 1,790,289 4,359,545 3,534,509
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposits 1,219,669 874,296 2,278,213 1,762,406
Short-term borrowings 42,381 6784 71,214 8,327
Borrowed funds 452 1,626 1,056 3,601
----------- ---------- ---------- ----------
Total interest expense 1,262,502 882,706 2,350,483 1,774,334
----------- ---------- ---------- ----------
Net interest income 1,003,541 907,583 2,009,062 1,760,175
Provision for credit losses 39,000 30,000 78,000 60,000
----------- ---------- ---------- ----------
Net interest income after
provision for credit losses 964,541 877,583 1,931,062 1,700,175
----------- ---------- ---------- ----------
OTHER INCOME:
Service charges on deposit
accounts 58,606 48,096 107,548 98,489
Mortgage underwriting fees -
Secondary market 39,769 20,989 66,446 33,343
Loan servicing fee income 16,681 17,665 27,683 47,087
Other operating income 212,842 157,857 403,340 321,880
----------- ---------- ---------- ----------
Total other income 327,898 244,607 605,017 500,799
OPERATING EXPENSES:
Salaries and related benefits 532,959 413,078 1,033,928 808,243
Net occupancy expense 58,460 51,583 121,961 102,885
Equipment rentals,
depreciation, and maintenance 90,022 84,013 180,470 163,127
Data processing 42,307 45,613 83,414 78,250
Other operating expenses 206,094 199,593 395,169 347,546
----------- ---------- ---------- ----------
Total operating expenses 929,842 793,880 1,814,942 1,500,051
----------- ---------- ---------- ----------
Income before provision
for income taxes 362,597 328,310 721,137 700,923
Provision for income taxes 87,476 91,910 174,714 189,751
----------- ---------- ---------- ----------
Net income $ 275,121 $ 236,400 $ 546,422 $ 511,172
----------- ---------- ---------- ----------
Basic earnings per common $0.51 $0.49 $1.01 $1.05
share (*value reflect 2 for ----- ----- ----- -----
1 stock split of May 15, 2000.)
<PAGE>
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Six Months Ended June 30, 2000 and 1999
Six Months Ended Six Months Ended
June 30, 2000 June 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
------- -----------
Comprehensive income:
Net Income $ 546,422 $ 511,172
Other comprehensive income ----------- -----------
(deficit) - Change in net
unrealized loss on securities
available for sale 17,215 (337,029)
----------- -----------
Total comprehensive income 563,637 174,143
----------- -----------
Dividends Paid 151,348 126,600
Balance - End of period 540,528 $ 487,002 487,002 $ 9,503,976
------- ----------- ------- -----------
* 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)
Six Months Ended June 30, 2000 and 1999
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 546,422 $ 511,172
Adjustments to reconcile net income to net ------------ ------------
cash provided by operating activities:
Depreciation and amortization 117,964 165,692
Accretion of discounts on securities ( 8,954) (10,963)
Amortization of premiums on securities 3,983 11,714
Provision for credit losses 78,000 60,000
Change in other operating assets 178,902 (156,858)
Change in other operating liabilities (129,310) 30,708
------------ ------------
Total adjustments 240,585 100,293
------------ ------------
Net cash provided by operating activities 787,007 611,465
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available for sale 1,011,946 5,368,751
Purchase of securities available for sale (736,950) (6,749,039)
Net (increase) decrease in loans (10,836,170) (8,777,284)
Purchase of additional life insurance (42,707) (42,491)
Proceeds from sale of other real estate 31,652
Capital expenditures (6,530) (1,229,580)
Purchase of other Investments (354,985) (42,500)
------------ ------------
Net cash provided by (used in) investing activities (10,965,396) (11,440,491)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 8,823,504 48,665
Net increase (decrease) in short-term borrowings 1,463,738 2,154,451
Principal payments on borrowed funds (6,776) (28,914)
Director and Employee Stock Purchase Plans 70,221 0
Dividends Paid (151,348) (126,600)
------------ ------------
Net cash provided by (used in) financing activities 10,199,339 2,047,602
------------ ------------
Net increase (decrease) in cash and cash equivalents 20,950 (8,781,424)
Cash and cash equivalents at beginning 4,516,131 12,320,851
------------ ------------
Cash and cash equivalents at end $ 4,537,081 $ 3,539,427
------------ ------------
Supplemental information:
Cash paid during the period for:
Interest $ 2,368,249 $ 1,697,613
Income taxes $ 212,986 $ 173,228
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
540,297 in June 2000 and 487,002 in June 1999. 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 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
June 30, 2000 December 31, 1999
Commitments to extend credit $8,547,000 $7,928,000
Credit card arrangements 1,456,000 1,451,000
Standby letters of credit 567,000 848,000
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 Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Net Earnings $ 275,121 $ 236,400 $ 546,422 $ 511,172
Average Consolidated
Balance Sheet Items:
Loans 88,757,468 66,230,906 86,461,776 63,786,140
Taxable Investment 10,544,996 13,502,533 10,604,125 13,277,014
Fed Funds Sold 1,888,330 1,443,649 1,304,159 4,089,862
Municipal Loans &
Investments 9,568,602 9,192,985 9,482,088 8,879,403
Other Earning Assets 1,184,186 676,607 888,046 959,680
----------- ----------- ----------- -----------
Total Earning Assets 110,243,582 91,046,680 108,740,194 90,992,099
Total Assets 119,218,249 98,556,097 115,995,469 97,997,030
Deposits 104,356,150 86,984,883 102,056,648 86,714,930
Shareholders' Equity 11,178,093 9,777,274 10,493,696 9,689,875
Key Ratios:
Average Equity to
Average Total Assets 9.38% 10.73% 9.05% 10.20%
Return on Average
Total Assets 0.93% 0.96% 0.95% 1.04%
Return on Average Equity 9.85% 9.67% 10.42% 10.55%
Net Interest Margin 3.60% 4.00% 3.76% 3.90%
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 $95,958 or 10.57% to $1,003,542
for the three months ended June 30, 2000, from $907,583
for the three months ended June 30, 1999. Net interest
income has increased $248,887 or 14.14% to $2,009,062
for the six months ended June 30, 2000, from $1,760,175
for the six months ended June 30, 1999. The increase
in net interest income reflects the loan and deposit
growth. The increase was reduce because deposit
interest rates increased faster than loan interest
rates.
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
Interest Income $ 2,266,043 $ 1,790,289 $ 4,359,545 $ 3,534,509
Interest Expense 1,262,502 882,706 2,350,483 1,774,334
----------- ----------- ----------- -----------
Net Interest Income $ 1,003,541 $ 907,583 $ 2,009,062 $ 1,760,175
----------- ----------- ----------- -----------
Net Interest Margin 3.60% 4.00% 3.76% 3.90%
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, 2000 is illustrated in the following table:
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999.
Increase (Decrease) in Net Interest
Income Net Change Due To Rate Due To Volume
Interest Income $ 475,754 $ 19,581 $ 456,173
Interest Expense 379,795 88,894 290,902
--------- --------- ---------
Net Interest Income $ 95,958 $ (69,313) $ 165,271
--------- --------- ---------
<PAGE>
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999.
Increase (Decrease) in Net Interest
Income Net Change Due To Rate Due To Volume
Interest Income $ 825,036 $ (22,585) $ 847,621
Interest Expense 576,149 104,209 471,940
--------- --------- ---------
Net Interest Income $ 248,887 $(126,794) $ 375,681
--------- --------- ---------
Interest rates on the Bank's earning assets and
interest bearing liabilities were generally higher for
the three months and six months ended June 30, 2000
compared to the three months and six months ended June
30, 1999. Earning assets increased 22.2% and 19.5%,
respectively to $111,270,838 for the three months ended
June 30, 2000 from $91,046,680 for the three months
ended June 30, 1999 and to $108,740,194 for the six
months ended June 30, 2000 from $90,992,009 for the six
months ended June 30, 1999. However, interest bearing
liabilities increased 24.6% and 20.4%, respectively to
$95,837,614 for the three months ended June 30, 2000
compared to $76,896,788 for the three months ended June
30, 1999 and to $92,672,896 for the six months ended
June 30, 2000 compared to $76,996,708 for the six
months ended June 30, 1999.
OPERATING RESULTS
Net income for the three months ended June 30, 2000,
was $275,121 compared to $236,400 for the three months
ended June 30, 1999. The increase of $38,721 reflects
an increase in net interest income and fee income with
higher personnel costs. The increase in net interest
income of $95,958 for the three months ended June 30,
2000, compared to the three months ended June 30, 1999
is discussed in "Net Interest Income" and "Rate/Volume
Analysis" elsewhere in this report. Mortgage
underwriting fees - Secondary market and loan service
fee income increased $17,796 to $56,450 for the three
months ended June 30, 2000, compared to $38,654 for the
three months ended June 30, 1999. This increase is
primarily due to the Company originating $1,130,500 of
loans sold to the secondary market and collecting
service fee income on $28,029,931 of loans previously
sold to the market. Other operating income, including
other loan fees, debit card and ATM fees, increased
$54,985 or 34% to $212,842 for the three months ending
June 30, 2000 compared to $157,857 for the three months
ending June 30, 1999.
Total operating expenses increased a $135,962 or 17.1%
from $793,880 for the three months ended June 30, 1999
to $929,842 for the three months ended June 30, 2000.
Salaries and related benefits increased $119,881 or
29.0% to $532,959 for the three months ended June 30,
2000 compared to $413,078 for the three months ended
June 30, 1999. Additional staffing in the Financial
Resource Center plus increases in insurance and
training costs along with the employment expenses at
the Casco office account for the increase. Net
occupancy expense increased $6,877 or 13.3% to $58,460
for the three months ended June 30, 2000 compared to
$51,583 for the three months ended June 30, 1999.
Equipment rentals, depreciation, and maintenance for
the three months ended June 30, 2000 increased $6,009
or 7.1% to $90,022 compared to $84,013 for the three
months ended June 30, 1999. Finally, other operating
expenses for the three months ended June 30, 2000
increased $6,051 or 3.0% to $206,094 from $199,593 for
the three months ended June 30, 1999.
Net income for the six months ended June 30, 2000, was
$546,422 compared to $511,172 for the six months ended
June 30, 1999. The increase of $35,250 reflects an
increase in net interest income and fee income with
higher personnel costs. The increase in net interest
income of $248,887 for the six months ended June 30,
2000, compared to the three months ended June 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 $81,460 or 25.3% to $403,340 for the
six months ending June 30, 2000 compared to $321,880
for the six months ending June 30, 1999. Of the
increase other loan fees accounted for $26,578,
alternative investment sales accounted for $31,348 and
card services and ATM services accounted for $12,717.
Total operating expenses increased a $314,891 or 17.3%
from $1,500,051 for the six months ended June 30, 1999
to $1,814,942 for the six months ended June 30, 2000.
Salaries and related benefits increased $225,685 or
27.9% to $1,033,928 for the six months ended June 30,
2000 compared to $808,243 for the six months ended June
30, 1999. Higher salaries and wages in addition to the
Financial Resource Center increase in sales staff plus
increases in insurance and training costs and the
employment expenses at the Casco office
<PAGE>
account for the increase. Net occupancy expense increased
$19,076 or 18.3% to $121,961 for the six months ended
June 30, 2000 compared to $102,885 for the six months
ended June 30, 1999, largely related to the additional
depreciation and real estate taxes of the new Casco
office. Equipment rentals, depreciation, and
maintenance for the six months ended June 30, 2000
increased $17,343 or 10.6% to $180,470 compared to
$163,127 for the six months ended June 30, 1999.
Other operating expenses for the six months ended June
30, 2000 increased $47,623 or 13.7% to $395,169 from
$347,546 for the six months ended June 30, 1999. The
additional expenses were increases in accounting fees,
telecommunication expenses and the FDIC assessments
from the first quarter of the year.
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 June 30, 2000 the Company had $107,000 in loans past
due 90 days or more that were still accruing interest
as compared to $0 for June 30, 1999. The loans were
adequately secured to allow for the repayment of both
the principal and interest due. At June 30, 2000 and
1999 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 $399,000 of nonaccrual loans at
June 30, 2000 and $245,000 of nonaccrual loans at June
30, 1999.
During the three months ended June 30, 2000, $39,000
was charged to the provision for loan losses compared
to $30,000 for the three months ended June 30, 1999. At
June 30, 2000 the allowance was $1,022,000 or 1.12% of
total loans. This compares to an allowance of $817,000
or 1.12% of total loans as of June 30, 1999. For the
three months ended June 30, 2000 the Bank had net
charge-offs of $6,000 compared to net charge-offs of
$7,000 for the three months ended June 30, 1999. For
the six months ended June 30, 2000 the Bank had net
recoveries of $48,000 compared to net charge-offs
$7,000 for the six months ended June 30, 1999.
The following table summarizes loan charge-offs and
recoveries by type of loan for the three months ended
June 30, 2000 and 1999:
Loan Type June 30, 2000 June 30, 1999
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and Industrial 0 0 0 6,000
Agricultural 0 0 0 0
Consumer 12,000 6,000 14,000 1,000
-------- -------- -------- --------
TOTALS $ 12,000 $ 6,000 $ 14,000 $ 7,000
-------- -------- -------- --------
<PAGE>
The following table summarizes loan charge-offs and
recoveries by type of loan for the six months ended
June 30, 2000 and 1999:
Loan Type June 30, 2000 June 30, 1999
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and Industrial 0 32,000 0 6,000
Agricultural 0 25,000 0 3,000
Consumer 22,000 13,000 27,000 2,000
-------- -------- -------- --------
TOTALS $ 22,000 $ 70,000 $ 27,000 $ 11,000
-------- -------- -------- --------
The Bank has allocated its allowance for credit losses
at the end of each period presented as follows:
June 30, 2000 June 30, 1999
% of % of
loans loans
Balance at End of to to
Period Applicable to: total total
Amount Loans Amount Loans
Commercial and agricultural $ 651,048 56% $ 505,282 49%
Real Estate-construction 85,846 9% 32,813 5%
Real Estate-mortgage 90,396 20% 76,710 34%
Consumer 145,085 15% 110,998 12%
---------- ---- ---------- ----
Total Domestic 972,014 100% 725,803 100%
Unallocated 50,398 91,811
---------- ----------
TOTALS $1,022,412 100% $ 817,614 100%
---------- ---- ---------- ----
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 $1,888,330 and $1,443,649 for the three
months ended June 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 June 30, 2000 the Company's rate sensitive
liabilities exceed rate sensitive assets due within one
year by $13,316,000.
<PAGE>
As part of managing liquidity, the Company monitors its
loan to deposit ratio on a daily basis. At June 30,
2000 the ratio was 88.1% which is within the Company's
acceptable range.
The Company experienced an increase in cash and cash
equivalents, its primary source of liquidity, of
$20,950 for the six months ended June 30, 2000. The
primary source of cash flow for the six months ended
June 30, 2000 was cash provided by financing activities
of $10,199,339 which consisted of an increase in
deposits of $8,823,504 and an increase in short term
borrowing of $1,463,738. Cash outflow for the three
months ended June 30, 2000 was primarily an increase in
loans of $10,836,170. 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 June
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 $ 4,537,000
Investment Securities $ 2,050,000 $ 8,936,000 $ 5,316,000 $ 2,290,000
Loans
Variable Rate $11,301,000
Real Estate-
Construction $ 7,035,000 $ 1,514,000
Real Estate-Other $ 7,426,000 $23,500,000 $ 1,199,000
Commercial and
Industrial $ 7,094,000 $16,596,000 $ 347,000 $ 877,000
Agricultural $ 2,034,000 $ 3,966,000 $ 767,000
Consumer $ 1,244,000 $ 6,255,000 $ 457,000
Other $ 544,000 $ 330,000 $ 765,000 $ 0
----------- ----------- ----------- -----------
Total Interest Earning
Assets $43,265,000 $61,097,000 $ 8,084,000 $ 3,934,000
Interest Bearing Liabilities:
Interest Bearing Demand $ 4,394,000
Savings Deposits $ 5,760,000 $13,439,000
Money Market $ 1,066,000 $ 2,488,000
Certificates of Deposit $32,707,000 $16,080,000
Jumbo CD's $ 9,524,000 $ 1,703,000
IRA's $ 4,659,000 $ 839,000
Other $ 2,865,000 -0- -0- -0-
----------- ----------- ----------- -----------
Total Interest Bearing
Liabilities $56,581,000 $18,622,000 -0- $20,321,000
----------- ----------- ----------- -----------
Interest Sensitivity Gap
per Period $(13,316,000) $42,475,000 $ 8,084,000 $(16,387,000)
------------ ----------- ----------- -----------
Cumulative Interest
Sensitivity Gap $(13,316,000) $29,159,000 $37,243,000 $20,856,000
------------ ----------- ----------- -----------
Interest Sensitivity Gap
as a Percentage of
Earning Assets (11.9%) 37.9% 7.2% (14.6%)
Cumulative Sensitivity
Gap as a Percentage of
Earning Assets (11.9%) 26.0% 33.2% 18.6%
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On May 15, 2000, the Company paid a 2-for-1
stock split in the form of a stock dividend to
shareholders of record on April 2, 2000. The issuance
of the stock was not required to be registered under
the Securities Act, because no "offer" or "sale" of
securities was involved.
On December 31, 1999, the Company sold 3,496 shares of
common stock (adjusted for the stock split). The
details of the stock issuance are described in the
Company's report on Form 10-KSB for the year end
December 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Luxemburg Bancshares, Inc.
was held on April 29, 2000. The following three
directors were elected: David L. Luebbers, Irvin G.
Vincent and Thomas J. Rueckl. Mr. Jadin, who was
listed as a nominee in the proxy statement, withdrew
his candidacy prior to the meeting. David L. Luebbers
received 164,674 shares for, 1,009 against and none
abstained. Irvin G. Vincent received 165,384 shares
for, 299 against and none abstained. Thomas J. Rueckl
received 165,049 shares for, 634 against and none
abstained.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 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 Executive Officer Treasurer
(Principal Accounting Officer)
Date: 8/1/00 Date: 8/1/00
