1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington. D. C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _______________ to _______________.
Commission file number 0-22471
Luxemburg Bancshares, Inc.
(Exact name of small business issuer as specified in its charter)
Wisconsin 39-1457904
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
630 Main Street, Luxemburg, Wisconsin 54217
(Address of principal executive offices)
(920) 845-2345
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period
that the registrant was required to file such reports),
and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
State the number of shares outstanding of each issuer's
classes of common equity, as of August 6, 1999:
268,501 shares were outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
LUXEMBURG BANCSHARES, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets - June 30, 1999 and
December 31, 1998 3
Consolidated Statements of Income -
Six Months Ended June 30, 1999 and 1998 4
Consolidated Condensed Statements of
Changes in Stockholders' Equity - Six Months
Ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flow -
Six Months Ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7 - 8
Management's Discussion and Analysis
of Financial Condition and Results of Operations 9 - 15
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 16
Item 6 - Exhibits and Reports on Form 8-K 16
SIGNATURES 16
PART I - FINANCIAL INFORMATION
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
June 30, 1999 and December 31, 1998
ASSETS
1999 1998
Cash and due from banks $ 3,276,464 $ 2,931,179
Interest-bearing deposits 262,963 907,672
Federal funds sold 0 8,482,000
Cash and cash equivalents 3,539,427 12,320,851
Investment securities available for
sale-Stated at fair value 19,044,069 18,064,562
Total loans 72,814,030 64,052,248
Allowance for credit losses (817,614) (773,116)
Net loans 71,996,416 63,279,132
Premises and equipment 2,906,364 1,779,477
Other investments at cost 318,550 276,050
Other assets 2,418,250 2,250,553
TOTAL ASSETS $ 100,223,076 $ 97,970,625
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
LIABILITIES:
Non-interest-bearing deposits $ 10,978,796 $ 10,758,991
Interest-bearing deposits 76,382,036 76,553,176
Total deposits 87,360,832 87,312,167
Short-term borrowings 2,234,025 79,574
Borrowed funds 49,117 78,031
Other liabilities 1,075,126 1,044,420
Total liabilities 90,719,100 88,514,192
STOCKHOLDERS' EQUITY:
Common stock- $1.00 par value:
Authorized - 2,400,000 shares,
Issued - 270,500 shares 270,500 270,500
Capital surplus 3,206,510 3,206,510
Retained earnings 6,504,907 6,120,354
Accumulated other comprehensive
income (loss) (133,591) 203,419
Less - 26,999 shares of treasury
common stock, at cost (344,350) (344,350)
Total stockholders' equity 9,503,976 9,456,433
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $100,223,076 $ 97,970,625
See accompanying notes to consolidated financial statements.
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
INTEREST INCOME:
Interest and fees on loans $ 1,481,876 $ 1,329,945 $ 2,870,285 $ 2,677,644
Interest on investment
securities:
Taxable 207,930 163,892 411,793 338,273
Tax-Exempt 79,089 50,706 144,278 95,789
Other interest and dividend
income 21,394 67,042 108,153 102,758
Total interest income 1,790,289 1,611,585 3,534,509 3,214,464
INTEREST EXPENSE:
Deposits 874,296 783,214 1,762,406 1,538,739
Short-term borrowings 6,784 2,901 8,327 5,934
Borrowed funds 1,626 10,936 3,601 22,137
Total interest expense 882,706 797,051 1,774,334 1,566,810
Net interest income 907,583 814,534 1,760,175 1,647,654
Provision for credit losses 30,000 37,500 60,000 75,000
Net interest income after
provision for credit losses 877,583 777,034 1,700,175 1,572,654
OTHER INCOME:
Service charges on deposit
accounts 48,096 50,814 98,489 93,488
Mortgage underwriting fees -
Secondary market 20,989 58,977 33,343 133,981
Loan servicing fee income 17,665 22,671 47,087 39,693
Other operating income 157,857 164,946 321,880 336,428
Total other income 244,607 297,408 500,799 603,590
OPERATING EXPENSES:
Salaries and related benefits 413,078 384,401 808,243 782,681
Net occupancy expense 51,583 38,930 102,885 83,339
Equipment rentals, 84,013 74,684 163,127 150,477
depreciation, and maintenance
Data processing 45,613 30,085 78,250 57,367
Other operating expenses 199,593 170,445 347,546 321,391
Total operating expenses 793,880 698,545 1,500,051 1,395,255
Income before provision for
income taxes 328,310 375,897 700,923 780,989
Provision for income taxes 91,910 113,159 189,751 236,480
Net income $ 236,400 $ 262,738 $ 511,172 $ 544,509
Basic earnings per common share $.97 $1.08 $2.10 $2.24
See accompanying notes to consolidated financial statements.
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY - (UNAUDITED)
Six Months Ended June 30, 1999 and 1998
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
Shares Equity Total Shares Equity Total
Balance - Beginning of period 243,501 $ 9,456,433 243,501 $ 8,528,876
Comprehensive income:
Net Income 511,172 544,509
Other comprehensive income
- Change in net unrealized
gain(loss) on securities
available for sale (337,029) (723)
Total comprehensive income 174,143 543,786
Dividends paid (126,600) (114,445)
Balance - End of period 243,501 $ 9,503,976 243,501 $ 8,958,217
See accompanying notes to consolidated financial statements.
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW - (UNAUDITED)
Six Months Ended June 30, 1999 and 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 511,172 $ 544,509
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 165,692 154,783
Accretion of discounts on securities ( 10,963) (16,602)
Amortization of premiums on securities 11,714 5,433
Provision for credit losses 60,000 75,000
Gain on sale of other real estate 0 (164)
Provision for deferred taxes 0 (23,324)
Change in other operating assets (156,858) (140,124)
Change in other operating liabilities 30,708 220,433
Total adjustments 100,293 275,435
Net cash provided by operating activities 611,465 819,944
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available for sale 5,368,751 1,505,929
Purchase of securities available for sale (6,749,039) (1,690,625)
Net (increase) decrease in loans (8,777,284) 2,591,025
Purchase of additional life insurance (42,491) (17,300)
Proceeds from sale of other real estate 31,652 15,164
Capital expenditures (1,229,580) (87,072)
Purchase of other investments (22,000) (42,500)
Net cash provided by (used in) investing
activities (11,440,491) 2,295,121
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 48,665 (73,513)
Net increase (decrease) in short-term
borrowings 2,154,451 (268,595)
Principal payments on borrowed funds (28,914) (26,909)
Dividends paid (126,600) (114,445)
Net cash provided by (used in)
financing activities 2,047,602 (483,462)
Net increase (decrease) in cash and
cash equivalents (8,781,424) 2,631,603
Cash and cash equivalents at beginning 12,320,851 5,132,708
Cash and cash equivalents at end $ 3,539,427 $ 7,764,311
Supplemental information:
Cash paid during the period for:
Interest $ 1,697,613 $ 1,484,239
Income taxes $ 173,228 $ 254,015
See accompanying notes to consolidated financial statements
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
(UNAUDITED)
The consolidated financial statements for interim
periods are unaudited; however, in the opinion of the
management of Luxemburg Bancshares, Inc. ("Company"),
all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation have
been included. Refer to the Notes to Consolidated
Financial Statements which appear in the Company's Form
10-KSB for the Fiscal Year ended December 31, 1998 for
the Company's accounting policies which are pertinent
to these financial statements.
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements of Company, a
bank holding company, include the accounts of Company
and Subsidiaries - Bank of Luxemburg, Luxemburg
Investment Corporation, and Area Development
Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.
Goodwill acquired in a business acquisition is being
amortized on a straight-line basis over five years.
The accompanying financial statements have been
prepared in accordance with the instructions for Form
10-QSB and, therefore, do not include all information
and footnotes necessary to be in conformity with
generally accepted accounting principles.
For purposes of reporting cash flows, the Company
considers cash on hand, interest-bearing and non-
interest bearing deposits in banks and federal funds
sold as cash and cash equivalents.
Earnings per common share are based upon the weighted
average number of common shares outstanding. The
weighted average number of shares outstanding was
243,501 in 1999 and 1998. The basic and diluted
earnings per share are the same for 1999 and 1998.
NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank of Luxemburg's ("Bank's") financial statements
do not reflect various commitments and contingent
liabilities which arise in the normal course of
business and which involve elements of credit risk,
interest rate risk, and liquidity risk. These
commitments and contingent liabilities are commitments
to extend credit and standby letters of credit. A
summary of the Bank's commitments and contingent
liabilities at each balance sheet date is as follows:
Notional Amount
June 30, 1999 December 31, 1998
Commitments to extend credit $8,988,000 $4,545,000
Credit card arrangements 1,402,000 561,000
Standby letters of credit 756,000 132,000
Commitments to extend credit and credit card
arrangements are agreements to lend to a customer as
long as there is no violation of any condition
established in the contract. Commitments generally
have fixed expiration dates or other termination
clauses and may require payment of a fee. A portion of
the commitments are expected to be drawn upon, thus
representing future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-
case basis. The amount of collateral obtained upon
extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies
but may include accounts receivable; inventory;
property, plant, and equipment; real estate; and stocks
and bonds. Management does not anticipate any material
losses as a result of these commitments.
Standby letters of credit are conditional commitments
issued by the Bank to guarantee the performance of a
customer to a third party. The credit risk involved in
issuing letters of credit is essentially the same as
that involved in extending loan facilities to
customers. The Bank holds collateral supporting those
commitments for which collateral is deemed necessary.
Because these instruments have fixed maturity dates and
because many of them expire without being drawn upon,
they do not generally present any significant liquidity
risk to the Bank. Management does not anticipate any
material losses as a result of these letters of credit.
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
NOTE 3: ACCOUNTING CHANGES
Future Accounting Change - In June, 1998, the Financial
Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging
Activities." This statement established accounting and
reporting standards for derivative instruments and for
hedging activities. This statement requires an entity
to recognize all derivative instruments and for
hedging activities. This statement requires an entity
to recognize all derivatives as either assets or
liabilities in the balance sheet and measure those
instruments at fair value. The accounting for changes
in the fair value of a derivative depends on the
intended use of the derivative and the resulting
designation. This statement is effective for fiscal
years beginning after June 15, 2000 as amended.
Management, at this time cannot determine the effect
adoption of this statement may have on the consolidated
financial statements of the Company as the accounting
for derivatives is dependent on the amount and nature
of derivatives in place at the time of adoption.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Net Earnings $ 236,400 $ 262,738 $ 511,172 $ 544,509
Average Consolidated
Balance Sheet Items:
Loans 66,230,906 56,826,343 63,786,140 57,280,629
Taxable Investment
Securities 13,502,533 10,043,996 13,277,014 10,338,974
Fed Funds Sold 1,443,649 4,242,374 4,089,862 3,152,346
Municipal Loans &
Investments 9,192,985 5,328,887 8,879,403 5,295,503
Other Earning Assets 676,607 687,294 959,680 616,805
Total Earning Assets 91,046,608 77,128,894 90,992,099 76,684,257
Total Assets 98,556,097 82,923,315 97,997,030 82,401,483
Deposits 86,984,883 72,863,043 86,714,930 72,495,066
Shareholders' Equity 9,777,274 8,898,929 9,689,875 8,814,622
Key Ratios:
Average Equity to Average
Total Assets 9.92% 10.73% 10.20% 10.70%
Return on Average Total Assets .96% 1.27% 1.04% 1.32%
Return on Average Equity 9.67% 11.81% 10.55% 12.35%
Net Interest Margin 4.00% 4.24% 3.90% 4.33%
NET INTEREST INCOME
Net interest income, the principle source of earnings,
is the amount by which interest generated by earning
assets exceeds the interest costs of liabilities
obtained to fund them. As shown below, net interest
income has increased $93,049 or 11.42% to $907,583 for
the three months ended June 30, 1999 from $814,534 for
the three months ended June 30, 1998. The increase in
net interest income is due to bank growth. As noted
above, average assets for the three months ended June
30, 1999 were $98,556,097 compared to average assets
for the three months ended June 30, 1998 of $82,923,315.
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Interest Income $1,790,289 $1,611,585 $3,534,509 $3,214,464
Interest Expense 882,706 797,051 1,774,334 1,566,810
Net Interest Income $ 907,583 $ 814,534 $1,760,175 $1,647,654
Net Interest Margin 4.00% 4.24% 3.90% 4.33%
RATE/VOLUME ANALYSIS
The impact of changes in volume and interest rates on
net interest income for the three and six months ended
June 30, 1999 is illustrated in the following table:
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998.
Increase (Decrease) in Net Interest Income
Net Change Due To Rate Due To Volume
Interest Income $ 178,704 $ (96,118) $ 274,822
Interest Expense 85,655 (51,234) 136,889
Net Interest Income $ 93,049 $ (44,884) $ 137,933
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998.
Increase (Decrease) in Net Interest Income
Net Change Due To Rate Due To Volume
Interest Income $ 320,045 $ (176,874) $ 496,919
Interest Expense 207,524 (79,692) 287,216
Net Interest Income $ 112,521 $ (97,182) $ 209,703
Interest rates on the Bank's earning assets and
interest bearing liabilities were generally lower for
the three months and six months ended June 30, 1999
compared to the three months and the six months ended
June 30, 1998. Earning assets increased 18.66% and
18.04%, respectively, to $90,992,099 for the three
months and $91,046,680 for the six months ended June
30, 1999 from $76,684,257 for the three months and
$77,128,894 for the six months ended June 30, 1998.
However, interest bearing liabilities increased 19.61%
and 19.38% to $86,714,930 for the three months and
$867,984,883 for the six months ended June 30, 1999
compared to $72,495,066 for the three months and
$72,863,043 for the six months ended June 30, 1998.
OPERATING RESULTS
Net income for the three months ended June 30, 1999,
was $236,400 compared to $262,738 for the three months
ended June 30, 1998. The decrease of $26,338 reflects
the lower interest rate margin and increased net
occupancy expense of $12,653 for the construction of
the new branch office. The increase in net interest
income of $93,049 for the three months ended June 30,
1999, compared to the three months ended June 30, 1998,
and is discussed in "Net Interest Income" and
"Rate/Volume Analysis" elsewhere in this report.
Mortgage underwriting fees - Secondary market decreased
$37,988 to $20,989 for the three months ended June 30,
1999, compared to $58,977 for the three months ended
June 30, 1998.
Total operating expenses increased a $95,335 or 13.65%
from $698,545 for the three months ended June 30, 1998
to $793,880 for the three months ended June 30, 1999.
Salaries and related benefits increased $28,677 or
7.46% to $413,078 for the three months ended June 30,
1999 compared to $384,401 for the three months ended
June 30, 1998. Equipment rentals, depreciation, and
maintenance for the three months ended June 30, 1999
increased $9,329 or 12.49% to $84,013 compared to
$74,684 for the three months ended June 30, 1998.
Finally, other operating expenses for the three months
ended June 30, 1999 increased $29,148 or
17.10% to $199,593 from $170,445 for the three months
ended June 30, 1998.
Net income for the six months ended June 30, 1999,
decreased $33,337 or 6.12% to $511,172 from $544,509
for the six months ended June 30, 1998. The increase in
net interest income is $112,521 for the six months
ended June 30, 1999, compared to the six months ended
June 30, 1998, and is discussed in "Net Interest
Income" and "Rate/Volume Analysis" elsewhere in this
report. Mortgage underwriting fees - Secondary market
decreased $86,894 or 67.09% to $47,087 for the six
months ended June 30, 1999, compared to $133,981 for
the six months ended June 30, 1998. This decrease is
primarily due to decreased volume as for the six months
ended June 30, 1999, the Company originated less loans
for the secondary market compared to the six months
ended June 30, 1998.
Operating expenses for the six months ended June 30,
1999 increased $104,796 or 7.0% to $1,500,051 compared
to $1,395,255 for the six months ended June 30, 1998.
Salaries and related benefits increased $25,562 or 3.3%
to $808,243 for the six months ended June 30, 1999
compared to $782,681 for the six months ended June 30,
1998. The increase is due to inflationary increases and
higher costs for employee benefit programs. Equipment
rentals, depreciation, and maintenance for the six
months ended June 30, 1999 increased $12,650 or 8.40%
to $163,127 compared to $150,477 for the six months
ended June 30, 1998. Data processing expense increased
$20,883 or 36.4% from $57,367 for the six months ended
June 30, 1998 to $78,250 for the six months ended June
30, 1999.
A new branch office of the Bank was opened on May 24, 1999 in Casco, WI.
Year 2000 Risks. The Company is exposed to
future uncertainty, potential future reduction in
earnings, and future losses, including litigation, due
to business interruption or errors, if its computer
systems are not modified to ensure that dates after
December 31, 1999 are not misrepresented by those
systems. This eventuality is commonly referred to as
the Year 2000 problem.
The Bank uses computer-related technologies and
software throughout its business that will be affected
by the date change in the year 2000. The Bank's
directors, senior management and staff are aware of
these Year 2000 issues and have appointed a technology
committee to study and direct the project to bring all
of the computer-related systems into Year 2000
compliance during 1998 and 1999. In accordance with the
guidelines of the FDIC, the technology committee will
be addressing the issue using the following phases
Percent Completed
1) Awareness 100%
2) Assessment 100%
3) Renovation 100%
4) Validation 90%
5) Implementation 90%
The Bank has recently converted its main data
processing system. The vendor has provided the Bank
with a copy of its Year 2000 project plan and stated
that the software is Year 2000 compliant. The Bank is
in the process of obtaining similar information and
commitments from the Bank's other vendors. The Bank is
acting upon the belief and understanding that all
federal agencies are actively managing the Year 2000
problems which are inherent in the global banking and
payments system.
The Company spent approximately $30,000 in 1998 on Year
2000 renovation and testing. The Technology Committee
of the Bank of Luxemburg has budgeted $20,000.00 for
technology improvements for 1999, a portion which may
be required for consulting and technical assistance in
testing of information and non-information systems.
During the six months ended June 30, 1999 $3,255 was
spent for year 2000 related issues.
The Company completed a Y2K Contingency Plan and is in
the process of testing the alternative processing
systems. The testing should be complete by August 31,
1999. The written plan is being review by Bankers'
Financial Services to provide an independent review of
the plan. The Company has alternative resources for
additional liquidity and cash reserves for the fourth
quarter of 1999, but to date has not noticed any
significant reduction in deposits.
ALLOWANCE FOR LOAN LOSSES
The amount charged to the provision for loan losses by
the Bank is based on management's evaluation as to the
amounts required to maintain an allowance adequate to
provide for potential losses inherent in the loan
portfolio. The level of this allowance is dependent
upon the total amount of past due and non-performing
loans, general economic conditions and management's
assessment of potential losses based upon internal
credit evaluations of the loan portfolio and particular
loans. In 1999 the Bank management allocated the
allowance based on an assigned risk factor for each
category of loans and adjusting the allocation by
potential losses of individual loans. The Bank's
credit customers are subject to potential losses as a
result of Year 2000 exposure in their own computer
systems as well as the computer systems of their
suppliers and customers. The Bank is working with
those customers that may be significantly affected by
the Year 2000 exposure. The exposure, if not
adequately addressed, will be taken into account in
assessing the loss potential, if any, associated with
each credit relationship. Loans are entirely to
borrowers in Northeast Wisconsin.
The Bank generally places loans on non-accrual status
when the loan is past due as to the payment of interest
and/or principal in excess of 90 days. The Bank also
places loans on a non-accrual status when it deems the
collection of such interest unlikely. Loans are
returned to full accrual status when the loan is
brought current according to all terms of the loan
agreement, all past due principal and interest is paid
and the Bank deems its collateral position adequate to
warrant a return to accrual status.
At June 30, 1999 and 1998 the Company had $0 and
$44,000 in loans past due 90 days or more that were
still accruing interest. At June 30, 1999 and 1998 the
Company did not have any loans that meet the definition
of "Troubled Debt Restructuring". In addition, there
were no loans considered to be impaired. The Bank had
$245,000 of nonaccrual loans at June 30, 1999 and
$217,000 of nonaccrual loans at June 30, 1998.
During the three months ended June 30, 1999, $30,000
was charged to the provision for loan losses compared
to $37,500 for the three months ended June 30, 1998. At
June 30, 1999 the allowance was $817,614 or 1.12% of
total loans. This compares to an allowance of $794,000
or 1.23% of total loans as of June 30, 1998. For the
three months ended June 30, 1999 the Bank had net
charge-offs of $7,000 compared to net charge-offs of
$21,000 for the three months ended June 30, 1998.
The following table summarizes loan charge-offs and
recoveries by type of loan for the three months ended
June 30, 1999 and 1998:
Loan Type June 30, 1999 June 30, 1998
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and 0 6,000 13,000 5,000
Agricultural 0 0 0 0
Consumer 14,000 1,000 13,000 0
TOTALS $ 14,000 $ 7,000 $26,000 $5,000
The following table summarizes loan charge-offs and
recoveries by type of loan for the six months ended
June 30, 1999 and 1998:
Loan Type June 30, 1999 June 30, 1998
Charge-Off Recovery Charge-Off Recovery
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and Industrial 0 6,000 13,000 5,000
Agricultural 0 3,000 0 0
Consumer 27,000 2,000 31,000 7,000
TOTALS $ 27,000 $ 11,000 $ 44,000 $12,000
The Bank has allocated its allowance for credit losses
at the end of each period presented as follows:
June 30, 1999 June 30, 1998
% of loans % of loans
Balance at End of to total to total
Period Applicable to: Amount Loans Amount Loans
Commercial and agricultural $505,282 58% $ 3,000 49%
Real Estate-construction 32,813 4% 5%
Real Estate-mortgage 76,710 22% 34%
Consumer 110,998 16% 34,000 12%
Total Domestic 725,803 100% 37,000 100%
Unallocated 91,811 683,000
TOTALS $817,614 100% $720,000 100%
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Company must maintain an adequate liquidity
position in order to respond to the short-term demand
for funds caused by withdrawals from deposit accounts,
extensions of credit and for the payment of operating
expenses. Maintaining this position of adequate
liquidity is accomplished through the management of a
combination of liquid assets; those which can be
converted into cash and access to additional sources of
funds. Primary liquid assets of the Company are cash
and due from banks, federal funds sold, investments
held as "available for sale" and maturing loans.
Federal funds purchased and loans from the Federal Home
Loan Bank system represent the Company's primary source
of immediate liquidity and were maintained at a level
to meet immediate needs. Federal Funds Sold averaged
approximately $1,443,649 and $4,242,374 for the three
months ended June 30, 1999 and 1998, respectively.
Maturities in the Company's loan and investment
portfolios are monitored regularly to avoid matching
short-term deposits with long-term loans and
investments. Other assets and liabilities are also
monitored to provide the proper balance between
liquidity, safety, and profitability. This monitoring
process must be continuous due to the constant flow of
cash that is inherent in a financial institution.
The Company actively manages its interest rate
sensitive assets and liabilities to reduce the impact
of interest rate fluctuations. In addition, the Bank
monitors the interest rates paid on Certificates of
Deposit as advertised by its competitors and strive to
pay competitive interest rates to retain and attract
Certificates of Deposit. Should competitive pressures
dictate, the Bank might have to increase rates paid to
retain the Certificates of the Deposit that mature in
the next year and any increase in interest rates paid
on Certificates of Deposit may reduce future Company
earnings. The Bank also monitors the assets and
liabilities that reprice each month to determine the
impact on future earnings from anticipated repricings.
At June 30, 1999 the Company's rate sensitive
liabilities exceed rate sensitive assets due within one
year by $10,851,000.
As part of managing liquidity, the Company monitors its
loan to deposit ratio on a daily basis. At June 30,
1999 the ratio was 83.3% which is within the Company's
acceptable range.
The Company experienced a decrease in cash and cash
equivalents, its primary source of liquidity, of
$8,781,424 for the six months ended June 30, 1999. The
primary source of cash flow for the six months ended
June 30, 1999 was cash provided by operating activities
of $611,465. Cash outflow for the six months ended June
30, 1999 primarily consisted of the following: Net
security purchases of $1,380,288, dividends paid of
$126,600 and an increase in capital expenditures of
$1,229,580. The Company experienced an increase in
loans in the first six months of 1999 of $8,717,284.
The Company's management believes its liquidity sources
are adequate to meet its operating needs and does not
know of any trends, events or uncertainties that may
result in a significant adverse effect on the Company's
operations or liquidity position.
The Company has commenced a stock offering for up to
25,000 shares of stock at $44.00 a share. The Bank
intends to use the net proceeds to replenish short-term
investments that were liquidated in order to pay for the
acquisition and construction of our new Casco branch.
The following table illustrates the projected
maturities and the repricing mechanisms of the major
asset/liability categories of the Company as of June
30, 1999, based on certain assumptions. No prepayment
rate assumptions have been made for the loan portfolio.
Maturities and repricing dates for investments have
been projected by applying the assumptions set forth
below to contractual maturities and repricing dates.
1 Year 1 - 5 5 - 10 After 10
or Less Years Years Years
Interest Earning Assets:
Fed Funds Sold
Investment Securities $ 2,117,000 $ 9,174,000 $ 5,787,000 $ 1,966,000
Loans
Variable Rate $12,143,000
Real Estate-Construction $ 1,753,000 $ 495,000
Real Estate-Other $ 8,401,000 $12,606,000 $ 872,000
Commercial and Industrial $10,070,000 $ 8,753,000 $ 443,000 $ 931,000
Agricultural $ 3,420,000 $ 2,608,000
Consumer $ 1,645,000 $ 5,235,000 $ 95,000
Other $ 1,900,000 $ 605,000 $ 839,000 -0-
Total Interest Earning Assets $41,449,000 $39,476,000 $ 8,036,000 $ 2,897,000
Interest Bearing Liabilities:
Interest Bearing Demand $ 5,334,000
Savings Deposits $ 5,704,000 $13,308,000
Money Market Accounts $ 1,151,000 $ 2,686,000
Certificates of Deposit $34,594,000 $ 4,117,000
Jumbo CD's $ 3,534,000 $ 380,000
IRA's $ 5,048,000 $ 125,000
Other $ 2,269,000 $ 14,000 -0- -0-
Total Interest Bearing
Liabilities $52,300,000 $ 4,363,000 -0- $21,328,000
Interest Sensitivity
Gap per Period $(10,851,000) $34,840,000 $8,036,000 $(18,431,000)
Cumulative Interest
Sensitivity Gap $(10,851,000) $23,989,000 $32,025,000 $13,594,000
Interest Sensitivity
Gap as a Percentage
of Earning Assets (11.8) 37.9 8.7 20.0
Cumulative Sensitivity
Gap as a Percentage
of Earning Assets (11.8) 26.1 34.8 14.8
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Luxemburg Bancshares, Inc. was held on April 24, 1999.
The following two directors were elected: Richard Dougherty and Ronald
Ledvina. Also, the director and employee stock purchase plans were
approved by the shareholders.
The exact voting on these matters will be reported in an amendment
to the Form 10-QSB.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
10.1 Director Stock Purchase Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, the registrant did
not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto
duly authorized.
LUXEMBURG BANCSHARES, INC.
----------------------------
(Registrant)
/s/ John A. Slatky /s/ John H. Kaye, CPA
- ------------------------ ------------------------
John A. Slatky John H. Kaye, CPA
President and Chief Executive Officer Treasurer
(Pincipal Accounting Officer)
Date: 8/13/99 Date: 8/13/99