U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB/A
Amendment No. 1
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-22471
LUXEMBURG BANCSHARES, INC.
(Name of Small Business Issuer in Its Charter)
Wisconsin 39-1457904
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
630 Main Street, Luxemburg, Wisconsin 54217
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number (920) 845-2345
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $1.00 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response
to Item 405 of regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-KSB or any
amendment to this Form 10-KSB. [X]
Issuer's revenues for the year ended December 31, 1999 $8,445,831.
The aggregate market value (determined using the book value per
share) of common stock held by non-affiliates of the registrant
as of March 6, 2000 was $8,567,987.
The number of shares outstanding of the registrant's common stock
as of March 6, 2000 was 270,264.
ITEM 7.
LUXEMBURG BANCSHARES, INC.
AND SUBSIDIARIES
Luxemburg, Wisconsin
Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
<PAGE>
Table of Contents
Independent Auditor's Report 1
Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Statements of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
<PAGE>
Independent Auditor's Report
Board of Directors
Luxemburg Bancshares, Inc.
Luxemburg, Wisconsin
We have audited the accompanying consolidated balance sheets of
Luxemburg Bancshares, Inc. and Subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Luxemburg Bancshares, Inc. and Subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles.
Wipfli Ullrich Bertelson LLP
February 10, 2000
Green Bay, Wisconsin
<PAGE>
Consolidated Balance Sheets
December 31, 1999 and 1998
Assets 1999 1998
Cash and due from banks $4,275,838 $2,931,179
Interest-bearing deposits 240,293 907,672
Federal funds sold 0 8,482,000
Cash and cash equivalents 4,516,131 12,320,851
Investment securities available for sale -
Stated at fair value 18,276,824 18,064,562
Loans held for sale 140,000 246,000
Total loans receivable 82,226,209 63,806,248
Allowance for loan losses (895,952) (773,116)
Net loans receivable 81,330,257 63,033,132
Premises and equipment 2,731,432 1,779,477
Other investments at cost 318,550 276,050
Other assets 2,735,318 2,250,553
TOTAL ASSETS $110,048,512 $97,970,625
Liabilities and Stockholders' Equity
Liabilities:
Non-interest-bearing deposits $12,198,310 $10,758,991
Interest-bearing deposits 84,761,332 76,553,176
Total deposits 96,959,642 87,312,167
Short-term borrowings 1,373,649 79,574
Borrowed funds 27,683 78,031
Other liabilities 947,691 1,044,420
Total liabilities 99,308,665 88,514,192
Stockholders' equity:
Preferred stock - $0.01 par value:
Authorized - 400,000 shares, no shares
outstanding
Common stock - $1.00 par value:
Authorized - 2,400,000 shares
Issued - 295,500 shares in 1999 and
270,500 shares in 1998 295,500 270,500
Capital surplus 4,281,977 3,206,508
Retained earnings 6,891,080 6,120,356
Accumulated other comprehensive income(deficit) (384,551) 203,419
Treasury stock at cost - 26,984 shares in 1999
and 26,999 shares in 1998 (344,159) (344,350)
Total stockholders' equity 10,739,847 9,456,433
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $110,048,512 $97,970,625
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Income
Years Ended December 31, 1999 and 1998
1999 1998
Interest income:
Interest and fees on loans $6,192,866 $5,454,302
Interest on investment securities:
Taxable 744,485 694,774
Tax-exempt 319,965 220,713
Other interest and dividend income 152,705 320,494
Total interest income 7,410,021 6,690,283
Interest expense:
Deposits 3,633,153 3,306,559
Short-term borrowings 24,988 13,021
Borrowed funds and capital lease obligation 5,671 34,047
Total interest expense 3,663,812 3,353,627
Net interest income 3,746,209 3,336,656
Provision for loan losses 120,000 150,000
Net interest income after provision
for loan losses 3,626,209 3,186,656
Other income:
Service charges on deposit accounts 201,019 192,236
Mortgage underwriting fees - Secondary market 58,115 291,751
Loan servicing fee income - Net 85,579 44,533
Commissions 362,828 343,230
Other operating income 328,269 257,027
Total other income 1,035,810 1,128,777
Operating expenses:
Salaries and related benefits 1,803,199 1,585,032
Net occupancy expense 228,944 163,442
Equipment rentals, depreciation, and
maintenance 371,892 282,897
Data processing 156,056 129,061
Other operating expenses 714,897 660,301
Total operating expenses 3,274,988 2,820,733
Income before provision for income taxes 1,387,031 1,494,700
Provision for income taxes 347,374 431,171
Net income $1,039,657 $1,063,529
Basic earnings per common share $3.87 $4.37
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1999 and 1998
<TABLE>
Accumulated
Other
Common Capital Retained Comprehensive Treasury
Stock Surplus Earnings Income (Deficit) Stock Total
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 $ 45,083 $3,431,925 $5,293,023 $103,195 ($344,350) $8,528,876
Change in par value 225,417 (225,417) 0
Dividends paid (236,196) (236,196)
Comprehensive income:
Net income 1,063,529 1,063,529
Other comprehensive income 100,224 100,224
Total comprehensive income 1,163,753
Balance, December 31, 1998 270,500 3,206,508 6,120,356 203,419 (344,350) 9,456,433
Issuance of common stock 25,000 1,075,000 1,100,000
Dividends paid (268,933) (268,933)
Sale of treasury stock 469 191 660
Comprehensive income:
Net income 1,039,657 1,039,657
Other comprehensive loss (587,970) (587,970)
Total comprehensive income 451,687
Balance, December 31, 1999 $295,500 $4,281,977 $6,891,080 ($384,551) ($344,159) $10,739,847
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998
1999 1998
Cash flows from operating activities:
Net income $ 1,039,657 $ 1,063,529
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and net amortization 364,311 269,895
Provision for loss on other real estate 0 7,500
Provision for loan losses 120,000 150,000
Proceeds from sales of loans held for sale 5,438,993 19,141,060
Originations of loans held for sale (5,323,500) (19,184,900)
Gain on sale of assets - Net (9,493) (46,324)
Credit for deferred taxes (84,951) (17,928)
Change in operating assets (382,514) (214,129)
Change in operating liabilities 209,521 (8,215)
Total adjustments 332,367 96,959
Net cash provided by operating activities 1,372,024 1,160,488
Cash flows from investing activities:
Proceeds from maturities of securities
available for sale 10,770,259 4,395,681
Purchase of securities available for sale (11,873,304) (8,166,434)
Net increase in loans (18,417,125) (3,150,404)
Purchase of additional life insurance (17,300) (17,300)
Proceeds from sale of assets 0 15,164
Capital expenditures (1,319,703) (340,431)
Purchase of other investments (42,500) (23,000)
Net cash used in investing activities (20,899,673) (7,286,724)
Cash flows from financing activities:
Net increase in deposits 9,647,475 14,665,800
Net increase (decrease) in short-term
borrowings 1,294,075 (560,428)
Principal payments on borrowed funds (50,348) (554,797)
Dividends paid (268,933) (236,196)
Issuance of common stock 1,100,000 0
Sale of treasury stock 660 0
Net cash provided by financing activities 11,722,929 13,314,379
Net increase (decrease) in cash and cash
equivalents (7,804,720) 7,188,143
Cash and cash equivalents at beginning 12,320,851 5,132,708
Cash and cash equivalents at end $4,516,131 $12,320,851
Supplemental information:
Cash paid during the year for:
Interest $3,804,259 $3,465,568
Income taxes 456,042 460,116
See accompanying notes to consolidated financial statements.
<PAGE>
Note 1 Summary of Significant Accounting Policies
The accounting and reporting
policies of Luxemburg Bancshares, Inc. (the "Company") and its
subsidiaries conform to generally accepted accounting principles and
general practices within the banking industry. Significant
accounting and reporting policies are summarized below.
Organization - The Company provides banking services to
individual and corporate customers through its wholly owned
subsidiary, Bank of Luxemburg (the "Bank"). The Bank operates as a
full-service financial institution with a primary market area
including, but not limited to, west Kewaunee County and northeast
Brown County. The Bank emphasizes variable rate commercial and
consumer real estate loans. In addition, the Bank holds a variety
of securities through its wholly owned subsidiary, Luxemburg
Investment Corporation, a Nevada investment corporation. The
Company is subject to the regulations of certain federal and
state agencies and undergoes periodic examinations by those
regulatory authorities.
Principles of Consolidation - The consolidated financial statements
include the accounts of Luxemburg Banchares, Inc. and its
subsidiaries, Bank of Luxemburg, Luxemburg Investment Corporation,
and Area Development Corporation. All significant intercompany
balances and transactions have been eliminated.
Use of Estimates in Preparation of Financial Statements - The
preparation of the accompanying consolidated financial statements
in conformity with generally accepted accounting pronciples requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the reporting period. Actual results may differ from these estimates.
Cash and Cash Equivalents - For purposes of reporting cash flows,
cash and cash equivalents include cash on hand, interest-bearing
and non-interest-bearing deposits in banks, and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods.
Investment in Securities - The Company's investments in securities
are classified as available for sale and consist of debt, equity,
and mortgage-related securities. These securities are stated at
fair value. Unrealized holding gains and losses, net of tax, on
securities available for sale are reported as accumulated other
comprehensive income (deficit) within stockholders' equity until
realized.
Amortization of premiums and accretion of discounts are recognized
in interest income using the interest method over the period to
maturity. Gains and losses on the sale of securities available for
sale are determined using the specific-identification method.
Loans Held for Sale - Loans held for sale consist of the current
origination of certain fixed-rate mortgage loans and are recorded at
the lower of aggregate cost or fair value. A gain or loss is
recognized at the time of the sale reflecting the present value of
the difference between the contractual interest rate of the
loans sold and the yield to the investor, adjusted for the initial
value of mortgage servicing rights. The servicing fee is
recognized as the related loan payments are received.
Loans Receivable and Related Interest Income and Fees -
Interest on loans is credited to income as earned. Interest income
is not accrued on loans where management has determined collection
of such interest is doubtful. When a loan is placed on nonaccrual
status, previously accrued but unpaid interest deemed uncollectible
is reversed and charged against current income. Loan-origination
fees and certain direct origination costs are capitalized and
recognized as an adjustment of the yield on the related loan.
<PAGE>
Note 1 Summary of Significant Accounting Policies (Continued)
Allowance for Loan Losses -The allowance for loan losses includes
specific allowances related to commercial loans which have been
judged to be impaired. A loan is impaired when, based on current
information, it is probable that the Company will not collect all
amounts due in accordance with the contractual terms of the loan
agreement. These specific allowances are based on discounted
cash flows of expected future payments using the loan's initial
effective interest rate or the fair value of the collateral if
the loan is collateral dependent.
The Company continues to maintain a general allowance for loan
losses for loans not considered impaired. The allowance for loan
losses is maintained at a level which management believes is
adequate to provide for possible loan losses. Management
periodically evaluates the adequacy of the allowance using
the Company's past loan loss experience, known and inherent
risks in the portfolio, composition of the portfolio,
current economic conditions, and other relevant factors. This
evaluation is inherently subjective since it requires
material estimates that may be susceptible to significant change.
In management's judgment, the allowance for loan losses is
adequate to cover probable losses inherent in the balance of the
loan portfolio.
Mortgage Servicing Rights - The cost of mortgage servicing is
amoritized in proportion to, and over the period of, estimated
net servicing revenue. Impairment of mortgage servicing rights is
assessed based on the fair value of those rights. Fair values
are estimated using discounted cash flows based on a current market
interest rate. For opurposes of measuring impairment, the rights are
stratified by rate in the quarter in which the related mortgage loans
were sold.
Premises and Equipment - Premises and equipment are stated at cost.
Maintenance and repair costs are charged to expense as incurred.
Gains or losses on disposition of premises and equipemnt are reflected
in income. Depreciation is computed on the straight-line method
and is based on the estimated useful lives of the assets which range
from three to thirty-five years.
Other Investments - Other investments consist of Federal Home Loan
Bank stock and Bankers Bancorporation of Wisconsin, Inc. stock
which are carried at cost. Other investments are evaluated for
impairment on an annual basis.
Goodwill - Goodwill acquired in a business acquisition is being
amortized on a straight-line basis over five years.
Income Taxes - Deferred income taxes have been provided under the
liability method. Deferred tax assets and liabilities are
determined based on the difference between the consolidated financial
statement and tax bases of assets and liabilities as measured by the
current enacted tax rates which will be in effect when these
differences are expected to reverse. Deferred tax expense
(benefit) is the result of changes in the deferred tax asset and
liability.
Advertising Costs - Advertising costs are expensed as incurred.
Off-Balance-Sheet Financial Instruments - In the ordinary course
of business, the Bank has entered into off-balance-sheet
financial instruments consisting of commitments to extend credit,
commitments under credit card arrangements, commercial letters
of credit, and standby letters of credit. Such financial
instruments are recorded in the consolidated financial statements
when they become payable.
Earnings per Share - Earnings per common share are based upon the
weighted average number of common shares outstanding. The weighted
average number of shares outstanding was 255,218 in 1999
and 243,501 in 1998. The basic and diluted earnings per share
computations are the same for 1999 and 1998.
<PAGE>
Note 1 Summary of Significant Accounting Policies (Continued)
Comprehensive Income - Comprehensive income consists of
net income and other comprehensive income. Other comprehensive
income (loss) includes unrealized gains and losses on securities
available for sale, net of tax, which are recognized as a separate
component of equity, accumulated other comprehensive income (deficit).
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 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.
Reclassifications - Certain reclassifications have been made
to the 1998 consolidated financial statements to conform to the 1999
classifications.
Note 2 Restrictions on Cash and Cash Equivalents
Cash and cash equivalents in the amount of $358,000 were restricted
at December 31, 1999, to meet the reserve requirements of the
Federal Reserve System.
Note 3 Investment Securities
The amortized cost and estimated fair value of investment
securities available for sale are as follows:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
December 31, 1999:
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 2,648,101 $2,649 $ 27,190 $ 2,623,560
Obligations of states and
political subdivisions 8,137,008 5,634 263,724 7,878,918
Mortgage-related securities 8,077,026 1,255 303,935 7,774,346
Total $18,862,135 $9,538 $594,849 $18,276,824
<PAGE>
Note 3 Investment Securities (Continued)
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
December 31, 1998:
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 2,396,240 $58,280 $ 0 $ 2,454,520
Obligations of states and
political subdivisions 5,613,364 162,651 0 5,776,015
Mortgage-related securities 7,746,049 104,651 16,673 7,834,027
Commercial paper 2,000,000 0 0 2,000,000
Total $17,755,653 $325,582 $16,673 $18,064,562
Fair values of securities are estimated based on financial
models or prices paid for similar securities. It is possible
interest rates could change considerably resulting in a
material change in the estimated fair value.
The amortized cost, estimated fair value, and weighted average yield
of investment securities available for sale at December 31, 1999, by
contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call
or prepayment penalties.
Amortized Estimated Weighted
Cost Fair Value Average Yield
Due in one year or less $ 610,436 $ 610,302 4.25%
Due after one year through five years 4,224,778 4,188,709 5.44%
Due after five years through ten years 3,321,493 3,264,904 4.81%
Due after ten years 2,628,402 2,438,563 4.67%
10,785,109 10,502,478
Mortgage-related securities 8,077,026 7,774,346 6.27%
Total investment securities $18,862,135 $18,276,824 5.54%
There were no sales of debt securities during 1999 and 1998.
Investment securities with an amortized cost of $999,768 and
estimated fair value of $979,150 were pledged to secure public
deposits, short-term borrowings, and other purposes required by law
as of December 31, 1999.
<PAGE>
Note 4 Loans
The composition of loans at December 31 follows:
1999 1998
Real estate:
Construction $ 5,719,219 $ 3,539,754
Other 15,801,590 19,889,646
Commercial and industrial 41,919,671 27,540,944
Agricultural 6,422,469 5,847,901
Consumer 12,363,260 6,988,003
Total loans $82,226,209 $63,806,248
The aggregate amount of nonperforming loans was approximately $350,000 and
$438,000 at December 31, 1999 and 1998, respectively. Nonperforming
loans are those which are contractually past due 90 days or
more as to interest or principal payments, on a nonaccrual of
interest status, or loans the terms of which have been
renegotiated to provide a reduction or deferral of interest
or principal. The interest income recorded and that which would have
been recorded had nonaccrual and renegotiated loans been current,
or not troubled, are not material to the consolidated financial
statements for the years ended December 31, 1999 and 1998.
At December 31, 1999 and 1998, there were no loans considered to
be impaired. There were also no imparied loans during 1999 and 1998.
The subsidiary bank in the ordinary course of banking
business grants loans to the Company's executive officers and
directors, including their families and firms in which they
are principal owners.
Substantially all loans to employees, officers, directors,
and stockholders owning 5% or more of the Company were made on the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with
others and did not involve more than the normal risk of
collectibility or present other unfavorable features.
Activity in such loans during 1999 is summarized below:
Loans outstanding, December 31, 1998 $ 3,277,539
New loans 1,002,405
Repayment (1,818,464)
Loans outstanding, December 31, 1999 $2,461,480
An analysis of the allowance for loan losses for the years ended
December 31 follows:
1999 1998
Balance at beginning $773,116 $677,101
Provision charged to operating expense 120,000 150,000
Recoveries on loans 64,748 23,636
Loans charged off (61,912) (77,621)
Balance at end $895,952 $773,116
<PAGE>
Note 5 Loan Servicing
Mortgage loans of $22,851,431 and $25,651,000 as of December 31,
1999 and 1998, respectively, were serviced for others. These loans
are not included in the accompanying consolidated balance
sheets. Mortgage servicing rights are capitalized when the serviced
loans are sold. This asset is amortized over the estimated
period that servicing income is recognized. The following is an
analysis of changes in mortgage servicing rights:
1999 1998
Balance, January 1 $175,747 $ 80,167
Capitalized amounts 44,985 131,803
Amortization (50,117) (36,223)
Balance, December 31 $170,615 $175,747
No impairment of mortgage servicing rights existed at
December 31, 1999 or 1998; therefore, no valuation allowance
was recorded.
The carrying value of the mortgage servicing rights is included with
other assets and approximates fair market value at December 31, 1999
and 1998.
Note 6 Premises and Equipment
Details of premises and equipment at December 31 follows:
1999 1998
Land $ 107,122 $ 70,246
Buildings and improvements 2,493,870 1,463,146
Furniture and equipment 1,986,399 1,535,375
Totals 4,587,391 3,068,767
Construction in progress 0 198,921
Less - Accumulated depreciation 1,855,959 1,488,211
Net depreciated value $2,731,432 $1,779,477
Depreciation and amortization of premises and equipment charged to
operating expense totaled $367,748 in 1999 and $272,304 in 1998.
<PAGE>
Note 7 Lease
In 1997, the Company entered into a lease for computer equipment.
The computer lease, which expires in 2000, is classified as a
capital lease.
Premises and equipment include the following amounts for the computer
lease that has been capitalized:
1999 1998
Furniture and equipment $73,931 $73,931
Less - Accumulated amortization 50,351 31,868
Totals $23,580 $42,063
Lease amortization is included in depreciation expense.
The capital lease expires March 31, 2000, with payments of $6,817
in 2000 of which $91 represents interest. The carrying value of
the capital lease obligation is included with other liabilities
and approximates fair market value at December 31, 1999.
Note 8 Deposits
The distribution of deposits at December 31 is as follows:
1999 1998
Non-interest-bearing demand deposits $12,198,310 $10,758,991
Interest-bearing demand deposits 5,541,023 6,805,296
Savings deposits 19,824,412 17,516,126
Money market deposits 3,855,885 3,914,723
Time deposits 55,540,012 48,317,031
Total deposits $96,959,642 $87,312,167
Time deposits of $100,000 or more were approximately $9,463,000 and
$5,092,000 at December 31, 1999 and 1998, respectively. Interest
expense on time deposits of $100,000 or more was approximately
$331,000 and $247,000 for the years ended December 31, 1999 and
1998, respectively.
At December 31, 1999, the scheduled maturities of time
deposits are as follows:
2000 $44,741,012
2001 6,307,000
2002 3,217,000
2003 1,071,000
Thereafter 204,000
Total $55,540,012
<PAGE>
Note 9 Short-Term Borrowings
Short-term borrowings consist of treasury tax and loan deposits and
federal funds purchased of $1,373,649 and $79,574 at December
31, 1999 and 1998, respectively, which generally mature within 1 to
120 days from the transaction date.
Note 10 Borrowed Funds
Borrowed funds consist of the following:
1999 1998
6.63% land contract, payable at
$2,831 per month including
interest, due September 1, 1999 $ 0 $24,787
8.0% note, payable at $2,408 per
month including interest, due
December 31, 2000 27,683 53,244
Totals $27,683 $78,031
Note 11 Income Taxes
The provision for income taxes consists of the following:
1999 1998
Current tax expense:
Federal $374,367 $389,183
State 57,958 59,916
Total current 432,325 449,099
Deferred tax credit:
Federal (69,499) (15,386)
State (17,375) (3,861)
Total deferred (86,874) (19,247)
Change in valuation allowance 1,923 1,319
Total provision for income taxes $347,374 $431,171
<PAGE>
Note 11 Income Taxes (Continued)
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the
Company's assets and liabilities net of a valuation allowance for
deferred tax assets not likely to be realized. The major components
of net deferred tax assets at December 31 are as follows:
1999 1998
Deferred tax assets:
Reserve for loan losses $ 247,106 $ 200,049
Deferred compensation 170,033 137,600
Intangible assets 26,843 20,094
Net operating loss carryovers 23,466 21,543
Other 0 2,941
Total deferred tax assets 467,448 382,227
Deferred tax liabilities:
Depreciation (156,323) (157,988)
Accretion (14,974) (12,950)
Mortgage servicing rights (66,905) (68,917)
Total deferred tax liabilities (238,202) (239,855)
Unrealized (gain) loss on investment
securities available for sale 200,760 (105,490)
Total valuation allowance recognized
for net deferred tax assets (23,466) (21,543)
Net deferred tax asset $ 406,540 $ 15,339
A summary of the source of differences between income taxes
at the federal statutory rate and the provision for income taxes for
the years ended December 31 follows:
1999 1998
% of Pretax % of Pretax
Amount Income Amount Income
Tax expense at statutory rate $471,591 34.0 $508,198 34.0
Increase (decrease) in
taxes resulting from:
Tax-exempt interest (141,111) (10.2) (96,934) (6.5)
State income taxes - Net
of federal tax benefit 28,054 2.0 37,867 2.5
Cash surrender value of
life insurance in
excess of premiums (16,982) (1.2) (16,630) (1.1)
Other 5,822 0.4 (1,330) (0.1)
Provision for income taxes $347,374 25.0 $431,171 28.8
The Company has state net operating loss carryforwards of
approximately $450,000. The net operating losses begin to expire in
2000.
<PAGE>
Note 12 Profit Sharing Plan
The Bank has a 401(k) profit sharing plan covering
substantially all employees. The plan provides for discretionary
contributions and matching contributions up to 8% of employee
compensation; however, all contributions are at the
discretion of the Board of Directors. Profit sharing expense
for 1999 and 1998 was $52,518 and $54,043, respectively.
Note 13 Deferred Compensation
The Company has a deferred compensation plan which permits
directors to defer a portion of their compensation. The deferred
compensation is accrued but unfunded, is distributable in cash
after retirement, and amounted to $433,604 and $350,895 at
December 31, 1999 and 1998, respectively. The Company has insured
the lives of the directors who participate in the deferred
compensation plan to assist in the funding of the
deferred compensation liability. The Company is the owner and
beneficiary of the insurance policies. At December 31, 1999
and 1998, the cash surrender value of these policies was $1,271,195
and $1,203,458, respectively. The amount charged to operations for
deferred compensation was $83,990 and $79,075 for the years ended
December 31, 1999 and 1998, respectively.
Note 14 Stock Purchase Plans
The Company adopted two stock purchase plans in 1999, one for
employees and one for nonemployee directors. Employees are given
the opportunity to purchase shares at 85% of fair market value of the
stock on the enrollment date or on the exercise date, whichever is
lower. Nonemployee directors have the opportunity to purchase the
shares at fair market value. A total of 3,000 shares per year
were made available under the employee plan and a total of
10,000 aggregate shares were made available under the director plan.
There were no shares issued under the plans in 1999.
Note 15 Accumulated Other Comprehensive Income (Deficit)
Comprehensive income is shown in the consolidated statements of
changes in stockholders' equity. The Company's accumulated other
comprehensive income (deficit) is comprised of the unrealized gain
or loss on securities available for sale, net of tax. The
following shows the activity in accumulated other comprehensive
income (deficit):
1999 1998
Accumulated other comprehensive income
at beginning $203,419 $103,195
Activity:
Unrealized gain (loss) on securities
available for sale (894,220) 151,855
Tax impact 306,250 (51,631)
Net unrealized gain (loss) on securities
available for sale (587,970) 100,224
Accumulated other comprehensive income
(deficit) at end ($384,551) $203,419
<PAGE>
Note 16 Commitments and Contingencies
Stock Redemption Policy - Luxemburg Bancshares, Inc. adopted
a stock redemption policy to assist in the establishment of a
fair price for its shares. The Company can redeem stock up to 10%
of stockholders' equity in any 12-month period without specific
prior approval from the Federal Reserve Bank. At December 31,
1999, the redemption price was determined to be 80% of the book
value of the stock. Thus the maximum commitment at December 31,
1999, would be $32.00 per share.
Financial Instruments With Off-Balance-Sheet Risk - The Bank's
financial statements do not reflect various commitments and
contingent liabilities which arise in the normal course of business
and which involve elements of credit risk, interest rate risk,
and liquidity risk. These commitments and contingent
liabilities are commitments to extend credit and standby letters
of credit. A summary of the Bank's commitments and contingent
liabilities at December 31 is as follows:
Notional Amount
1999 1998
Commitments to extend credit $7,928,000 $4,545,000
Credit card arrangements 1,451,000 561,000
Standby letters of credit 848,000 132,000
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.
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.
Note 17 Concentrations of Credit Risk
All of the Bank's loans, commitments, and standby letters
of credit have been granted to customers in the Bank's market
area. The concentrations of credit by type are set forth in
Note 4. Standby letters of credit were granted primarily to
commercial borrowers.
Note 18 Segment Information
The Company, through a branch network of its banking subsidiary,
provides a full range of consumer and commercial banking services to
individuals, businesses, and farms in northeastern Wisconsin. These
services include demand, time, and savings deposits; safe deposit
services; credit cards; notary services; night depository; money
orders, traveler's checks, and cashier's checks; savings bonds;
secured and unsecured consumer, commercial, and real estate loans;
ATM processing; cash management; and financial planning.
<PAGE>
Note 18 Segment Information (Continued)
While the Company's chief decision makers monitor the revenue streams
of various Company products and services, operations are managed
and financial performance is evaluated on a Companywide basis.
Accordingly, all of the Company's banking operations are considered
by management to be aggregated in one reportable operating segment.
Note 19 Stockholders' Equity
The Board of Directors of the Company is authorized to issue
cumulative preferred stock in series and to establish the
relative rights and preferences of each series with respect to rates,
redemption rights and prices, conversion terms, voluntary
liquidation rights, and voting powers. Cumulative preferred
stock will rank prior to common stock as to dividend rights and
liquidation preferences. Under Wisconsin state law, preferred
stockholders are entitled to vote as a separate class or series in
certain circumstances, including any amendment which would
adversely change the specific terms of such series of stock or
which would create or enlarge any class or series ranking prior
thereto in rights and preferences (excluding substituting the
surviving entity in a merger or consolidation of the Company).
At December 31, 1999, the Bank could have paid approximately
$2,311,000 of additional dividends to the Company without prior
regulatory approval. The payment of dividends is subject to the
statutes governing state chartered banks and may be further limited
because of the need for the Bank to maintain capital ratios
satisfactory to applicable regulatory agencies.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory-and
possibly additional discretionary-actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital
to risk-weighted assets and of Tier I capital to average assets.
Management believes, as of December 31, 1999, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1999, the most recent notification from the
regulatory agencies categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage ratios
of 8.0%, 4.0% and 4.0%, respectively. There are no conditions
or events since that notification that managment believes have
changed the institution's category.
<PAGE>
Note 19 Stockholders' Equity (Continued)
The Bank's actual and regulatory capital amounts and ratios are as
follows:
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
December 31, 1999:
Total capital
(to risk-weighted assets) $10,573,000 12.9% $6,550,000 8.0% $8,187,000 10.0%
Tier I capital
(to risk-weighted assets) $9,677,000 11.8% $3,275,000 4.0% $4,912,000 6.0%
Tier I capital
(to average assets) $9,677,000 9.5% $4,082,000 4.0% $5,102,000 5.0%
December 31, 1998:
Total capital
(to risk-weighted assets) $9,657,000 14.6% $5,279,000 8.0% $6,599,000 10.0%
Tier I capital
(to risk-weighted assets) $8,884,000 13.5% $2,640,000 4.0% $3,960,000 6.0%
Tier I capital
(to average assets) $8,884,000 9.4% $3,797,000 4.0% $4,746,000 5.0%
Note 20 Fair Value of Financial Instruments
Fair value estimates, methods, and assumptions for the Company's
financial instruments are summarized below.
Cash and Cash Equivalents - The carrying values approximate the
fair values for these assets.
Investment Securities Available for Sale - Fair value is based on
quoted market prices where available. If a quoted market
price is not available, fair value is estimated using quoted market
prices for similar securities.
Loans Receivable and Loans Held for Sale - For certain homogeneous
categories of loans, such as fixed-rate residential mortgages, fair
value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in
loan characteristics. The fair value of other types of loans is
estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers
with similar credit ratings. Impaired loans are measured at the
estimated fair value of the expected future cash flows at the
loan's effective interest rate, the loan's observable market
price, or the fair value of the collateral for loans which are
collateral dependent. Therefore, the carrying value of impaired
loans approximates the estimated fair value fo these assets.
Other Investments - The carrying amount reported in the
consolidated balance sheets for other investments approximates the
fair value of these assets.
<PAGE>
Note 20 Fair Value of Financial Instruments (Continued)
Deposits - The fair value of deposits with no stated maturity,
such as demand deposits, savings, and money market accounts, is the
amount payable on demand on the reporting date. The fair value of
fixed-rate time deposits is calculated using discounted cash
flows applying interest rates currently being offered on similar
certificates.
Short-Term Borrowings and Borrowed Funds - The carrying amount
reported in the consolidated balance sheets for short-term
borrowings and borrowed funds approximates the fair value of the
liabilities.
Off-Balance-Sheet Instruments - The fair value of commitments is
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the
agreements, the current interest rates, and the present
creditworthiness of the counterparties. Since this amount
is immaterial, no amounts for fair value are presented.
The carrying value and estimated fair value of financial
instruments at December 31, 1999 and 1998, were as follows:
1999 1998
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Cash and cash equivalents $ 4,516,131 $ 4,516,131 $12,320,851 $12,320,851
Investment securities
available for sale 18,276,824 18,276,824 18,064,562 18,064,562
Total loans - Net 81,470,257 81,800,667 63,279,132 64,415,194
Other investments 318,550 318,550 276,050 276,050
Total financial assets $104,581,762 $104,912,172 $93,940,595 $95,076,657
Financial liabilities:
Deposits $ 96,959,642 $ 97,114,590 $87,312,167 $87,826,118
Short-term borrowings 1,373,649 1,373,649 79,574 79,574
Borrowed funds 27,683 27,683 78,031 78,031
Total financial liabilities $ 98,360,974 $ 98,515,922 $87,469,772 $87,983,723
<PAGE>
Note 20 Fair Value of Financial Instruments (Continued)
Limitations - Fair value estimates are made at a specific point in
time based on relevant market information and information about
the financial instrument. These estimates do not reflect any
premium or discount that could result from offering for sale at
one time the Company's entire holdings of a particular
instrument. Because no market exists for a significant portion
of the Company's financial instruments, fair value estimates
are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various
financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters that
could affect the estimates. Fair value estimates are based on
existing on- and off-balance-sheet financial instruments without
attempting to estimate the value of anticipated future business and
the value of assets and liabilities that are not
considered financial instruments. Deposits with no stated maturities
are defined as having a fair value equivalent to the amount payable
on demand. This prohibits adjusting fair value derived from
retaining those deposits for an expected future period of time.
This component, commonly referred to as a deposit base intangible,
is neither considered in the above amounts nor is it recorded as an
intangible asset on the balance sheet. Significant assets and
liabilities that are not considered financial assets and
liabilities include premises and equipment. In addition, the tax
ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
Note 21 Parent Company Only Financial Statements
Balance Sheets
December 31, 1999 and 1998
Assets 1999 1998
Cash $ 905,824 $ 3,618
Premises and equipment 266,209 361,043
Investment in subsidiaries 9,348,438 9,135,401
Other 233,399 16,600
TOTAL ASSETS $10,753,870 $9,516,662
Liabilities and Stockholders' Equity
Borrowed funds $ 0 $ 24,787
Other liabilities 14,023 35,442
Total stockholders' equity 10,739,847 9,456,433
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,753,870 $9,516,662
<PAGE>
Note 21 Parent Company Only Financial Statements (Continued)
Statements of Income
Years Ended December 31, 1999 and 1998
1999 1998
Dividends from subsidiaries $268,950 $216,300
Undistributed equity in earnings
of subsidiaries 801,007 847,072
Other operating income 162,000 174,000
Total income 1,231,957 1,237,372
Operating expenses 181,869 167,325
Interest expense 2,335 6,399
Total expenses 184,204 173,724
Income before provision for income taxes 1,047,753 1,063,648
Provision for income taxes 8,096 119
Net income $1,039,657 $1,063,529
<PAGE>
Note 21 Parent Company Only Financial Statements (Continued)
Statements of Cash Flows
Years Ended December 31, 1999 and 1998
1999 1998
Cash flows from operating activities:
Net income $1,039,657 $1,063,529
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 94,834 85,177
Undistributed earnings of subsidiary (801,007) (847,072)
Change in other operating assets (216,799) 4,321
Change in other liabilities (21,419) (19,741)
Total adjustments (944,391) (777,315)
Net cash provided by operating activities 95,266 286,214
Net cash used in investing activities -
Capital expenditures 0 (64,444)
Cash flows from financing activities:
Principal payments on borrowed
funds and capital lease obligations (24,787) (31,194)
Dividends paid (268,933) (236,196)
Sale of common stock 1,100,000 0
Sale of treasury stock 660 0
Net cash provided by (used in)
financing activities 806,940 (267,390)
Net increase (decrease) in cash 902,206 (45,620)
Cash at beginning 3,618 49,238
Cash at end $905,824 $3,618
Supplemental Information:
Cash paid during the year for interest $2,335 $6,575
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LUXEMBURG BANCSHARES, INC.
Date: March 22, 2000 By: /s/ John A. Slatky
-------------------------
John A. Slatky
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, the report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March 22, 2000.
By: /s/ John A. Slatky
-----------------------
John A. Slatky President and Chief Executive Officer and a Director
By: /s/ John H. Kaye
-------------------
John H. Kaye, C. P. A. Treasurer and Chief Financial and Accounting Officer
By:
---------------------
Irvin G. Vincent Chairman of the Board of Directors
By:
----------------------
Willard Marchant Director
By: /s/ Thomas J. Rueckl
----------------------
Thomas J. Rueckl Director
By: /s/ James J. Jadin
----------------------
James J. Jadin Director
By: /s/ Ronald A. Ledvina
-----------------------
Ronald A. Ledvina Director
By:
-----------------------
Richard L. Dougherty Director
By: /s/ Donald E. Pritzl
----------------------
Donald E. Pritzl Director
