1
UNITED STATES
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, 2001.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER 0-22471
LUXEMBURG BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
WISCONSIN 39-1457904
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
630 MAIN STREET, LUXEMBURG, WISCONSIN 54217
(Address of principal executive offices)
(920) 845-2345
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each issuer's classes of common
equity, as of July 30, 2001:
544,241 shares were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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LUXEMBURG BANCSHARES, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Independent Accountant's Report 3
Consolidated Balance Sheets - June 30, 2001 and
December 31, 2000 4
Consolidated Statements of Income - Three Months & Six
Months Ended June 30, 2001 and 2000 5
Consolidated Condensed Statements of Changes
in Stockholders' Equity - Six Months Ended
June 30, 2001 and 2000 6
Consolidated Statements of Cash Flow - Six Months
Ended June 30, 2001 and 2000 7
Notes to Consolidated Financial Statements 8 - 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 14
PART II - OTHER INFORMATION
Item 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
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PART I - FINANCIAL INFORMATION
[WIPFLI ULLRICH BERTELSON LLP LOGO]
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, 2001, 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.
Wipfli Ullrich Bertelson LLP
July 31, 2001
Green Bay, Wisconsin
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LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
ASSETS
June 30, December 31,
2001 2000
Cash and due from banks $ 3,958,945 $ 4,151,822
Interest-bearing deposits 2,197,087 497,328
Federal funds sold 3,219,000 1,797,000
------------- -------------
Cash and cash equivalents 9,375,032 6,446,150
Investment securities available for sale-Stated at fair value 18,462,950 19,222,546
Total loans 97,329,084 94,669,517
Allowance for loan losses (1,149,141) (1,060,046)
------------- -------------
Net loans 96,179,943 93,609,471
Premises and equipment 2,471,710 2,577,762
Other investments at cost 459,954 434,635
Other assets 2,972,307 2,802,269
------------- -------------
TOTAL ASSETS $ 129,921,896 $ 125,092,833
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Non-interest-bearing deposits $ 12,596,266 $ 13,919,970
Interest-bearing deposits 98,622,550 93,724,921
------------- -------------
Total deposits 111,218,816 107,644,891
Short-term borrowings 479,334 99,530
Borrowed funds 4,000,000 4,002,314
Other liabilities 1,379,546 1,270,754
------------- -------------
Total liabilities 117,077,696 113,017,489
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock- $1.00 par value:
Authorized - 2,400,000 shares,
Issued - 571,225 shares in 2001 and 567,512 shares in 2000 571,225 567,512
Capital surplus 4,151,271 4,080,186
Retained earnings 8,246,536 7,747,796
Accumulated other comprehensive income 219,327 24,009
Less - 26,984 shares of treasury
common stock, at cost (344,159)
------------- -------------
(344,159)
Total stockholders' equity 12,844,200 12,075,344
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 129,921,896 $ 125,092,833
------------- -------------
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5
See accompanying notes to consolidated financial statements.
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $2,052,124 $1,964,072 $4,124,290 $3,774,592
Interest on investment securities:
Taxable 141,995 162,870 297,310 327,683
Tax-exempt 105,694 93,222 208,979 187,357
Other interest and dividend income 82,741 45,879 140,073 69,913
---------- ---------- ---------- ----------
Total interest income 2,382,554 2,266,043 4,770,652 4,359,545
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposits 1,257,150 1,219,669 2,541,123 2,278,213
Short-term borrowings 57,323 42,381 63,184 71,214
Borrowed funds 3,169 452 63,561 1,056
---------- ---------- ---------- ----------
Total interest expense 1,317,642 1,262,502 2,667,868 2,350,483
---------- ---------- ---------- ----------
Net interest income 1,064,912 1,003,541 2,102,784 2,009,062
Provision for loan losses 45,045 39,000 90,000 78,000
---------- ---------- ---------- ----------
Net interest income after provision for credit
losses 1,019,867 964,541 2,012,784 1,931,062
---------- ---------- ---------- ----------
OTHER INCOME:
Service charges on deposit accounts 75,760 58,606 136,605 107,548
Mortgage underwriting fees - Secondary market 103,031 39,769 212,381 66,446
Loan servicing fee income 42,137 16,681 79,165 27,683
Other operating income 225,148 212,842 414,869 403,340
---------- ---------- ---------- ----------
Total other income 446,076 327,898 843,020 605,017
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Salaries and related benefits 582,421 532,959 1,121,259 1,033,928
Net occupancy expense 60,268 58,460 130,380 121,961
Equipment rentals, depreciation, and maintenance 80,171 90,022 166,826 180,470
Data processing 51,033 42,307 98,502 83,414
Other operating expenses 208,293 206,094 390,387 395,169
---------- ---------- ---------- ----------
Total operating expenses 982,186 929,842 1,907,354 1,814,942
---------- ---------- ---------- ----------
Income before provision for income taxes 483,757 362,597 948,450 721,137
Provision for income taxes 151,830 87,476 275,555 174,714
---------- ---------- ---------- ----------
Net income $ 331,927 $ 275,121 $ 672,895 $ 546,422
---------- ---------- ---------- ----------
Basic and diluted earnings per common share $ 0.61 $ 0.51 $ 1.24 $ 1.01
---------- ---------- ---------- ----------
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LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
Shares Equity Total Shares Equity Total
------ ------------ ------ ------------
Balance - Beginning of period 567,512 $12,075,344 537,032 $10,739,847
-------- ----------- ------- -----------
Issuance of common stock 3,713 $ 74,799 3,496 $ 70,221
-------- ----------- ------- -----------
Comprehensive income:
Net Income $ 672,895 $ 546,422
----------- -----------
Other comprehensive income - Change in
net unrealized gain on securities available for sale 195,318 17,215
----------- -----------
Total comprehensive income 868,213 563,637
----------- -----------
Dividends Paid 174,156 151,348
----------- -----------
Balance - End of period 571,225 $12,844,200 540,528 $11,222,357
-------- ----------- ------- -----------
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LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 672,895 $ 546,422
----------- ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 168,008 117,964
Accretion of discounts on securities (10,385) (8,954)
Amortization of premiums on securities 3,550 3,983
Provision for loan losses 90,000 78,000
Change in other operating assets (184,257) 178,902
Change in other operating liabilities (3,146) (129,310)
----------- ------------
Total adjustments 63,770 240,585
----------- ------------
Net cash provided by operating activities 736,665 787,007
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale 1,751,812 1,011,946
Purchase of securities available for sale (678,125) (736,950)
Net increase in loans (2,660,472) (10,836,170)
Purchase of additional life insurance (11,100) (42,707)
Capital expenditures (61,956) (6,530)
Purchase of other Investments 0 (354,985)
----------- ------------
Net cash used in investing activities (1,659,841) (10,965,396)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 3,573,925 8,823,504
Net increase in short-term borrowings 379,804 1,463,738
Principal payments on borrowed funds (2,314) (6,776)
Director and Employee Stock Purchase Plans 74,799 70,221
Dividends Paid (174,156) (151,348)
----------- ------------
Net cash provided by financing activities 3,852,058 10,199,339
----------- ------------
Net increase in cash and cash equivalents 2,928,882 20,950
Cash and cash equivalents at beginning 6,446,150 4,516,131
----------- ------------
Cash and cash equivalents at end $ 9,375,032 $ 4,537,081
----------- ------------
Supplemental information:
Cash paid during the period for:
Interest $ 2,728,330 $ 2,368,249
Income taxes $ 230,000 $ 212,986
See accompanying notes to consolidated financial statements
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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, 2000 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.
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
543,700 in June 2001 and 540,297 in June 2000. The basic and diluted earnings
per share are the same for 2001 and 2000.
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, 2001 December 31, 2000
------------- -----------------
Commitments to extend credit $8,835,000 $4,560,000
Credit card arrangements 1,142,000 1,513,000
Standby letters of credit 322,000 473,000
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 payment 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.
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LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3: ACCOUNTING CHANGES
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 supersedes
Accounting Principles Board (APB) Opinion No. 16, "Business Combinations", and
SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises." SFAS No. 141 requires the use of the purchase method of accounting
for business combinations initiated after June 30, 2001. SFAS No. 142 supersedes
APB Opinion No. 17, "Intangible Assets." SFAS No. 142 addresses how intangible
assets acquired outside of a business combination should be accounted for upon
acquisition and how goodwill and other intangible assets should be accounted for
after they have been initially recognized. SFAS No. 142 eliminates the
amortization for goodwill and other intangible assets with indefinite lives.
Other intangible assets with a finite life will be amortized over their useful
life. Goodwill and other intangible assets with indefinite useful lives shall be
tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset may be impaired. SFAS No. 142 is effective
for fiscal years beginning after December 15, 2001. The Corporation's adoption
of SFAS No. 142 on January 1, 2002 is not anticipated to have a material impact
on the consolidated financial statements as of the date of adoption.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 2001 2000
---- ---- ---- ----
Net Earnings $ 331,927 $ 275,121 $ 672,895 $ 546,422
Average Consolidated Balance Sheet Items:
Loans 93,034,529 88,757,468 92,824,622 86,461,776
Taxable Investment Securities 9,415,356 10,544,996 9,848,820 10,604,125
Fed Funds Sold 3,889,209 1,888,330 2,974,694 1,304,159
Municipal Loans & Investments 10,298,001 9,568,602 10,220,464 9,482,088
Other Earning Assets 2,132,187 1,184,186 1,847,945 888,046
------------ ------------ ------------ ------------
Total Earning Assets 118,769,282 111,943,582 117,716,545 108,740,194
Total Assets 127,100,274 119,218,249 125,899,830 115,995,469
Deposits 112,941,244 107,007,330 112,021,537 104,431,967
Shareholders' Equity 12,791,118 11,178,093 12,658,686 10,493,696
Key Ratios:
Average Equity to Average Total Assets 10.06% 9.38% 10.05% 9.05%
Return on Average Total Assets 1.04% 0.93% 1.07% 0.95%
Return on Average Equity 10.38% 9.85% 10.63% 10.42%
Net Interest Margin 3.64% 3.64% 3.60% 3.73%
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 $61,370
or 6.12% to $1,064,912 for the three months ended June 30, 2001, from $1,003,542
for the three months ended June 30, 2000. Net interest income has increased
$93,722 or 4.66% to $2,102,784 for the six months ended June 30, 2001, from
$2,009,062 for the six months ended June 30, 2000. The net interest income has
increased due to Bank growth. However, the increase in net interest income is
weaker for the six months ended June 30 2001, than for the six months ended June
30, 2000 due to loan interest rates declining faster than deposit interest
rates.
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 2001 2000
---- ---- ---- ----
Interest Income $2,382,554 $2,266,043 $4,770,652 $4,359,545
Interest Expense 1,317,642 1,262,501 2,667,868 2,350,483
---------- ---------- ---------- ----------
Net Interest Income $1,064,912 $1,003,542 $2,102,784 $2,009,062
---------- ---------- ---------- ----------
Net Interest Margin 3.64% 3.64% 3.60% 3.73%
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, 2001 is illustrated in the following
table:
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000.
Increase (Decrease) in Net Interest
Income Net Change Due To Rate Due To Volume
---------- ----------- -------------
Interest Income $116,511 $ 11,534 $104,977
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Interest Expense 55,141 20,696 34,445
-------- -------- --------
Net Interest Income $ 61,370 $ (9,162) $ 70,532
-------- -------- --------
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000.
Increase (Decrease) in Net Interest
Income Net Change Due To Rate Due To Volume
---------- ----------- -------------
Interest Income $411,107 $ 79,235 $331,872
Interest Expense 317,385 155,256 162,129
-------- --------- --------
Net Interest Income $ 93,722 $ (76,021) $169,743
-------- --------- --------
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, 2001
compared to the three months and six months ended June 30, 2000. Average earning
assets increased 6.1% and 8.3%, respectively to $118,769,282 for the three
months ended June 30, 2001 from $111,943,582 for the three months ended June 30,
2000 and to $117,716,545 for the six months ended June 30, 2001 from
$108,740,194 for the six months ended June 30, 2000. However, interest bearing
liabilities increased 5.0% and 7.7%, respectively to $100,638,903 for the three
months ended June 30, 2001 compared to $95,837,614 for the three months ended
June 30, 2000 and to $99,803,236 for the six months ended June 30, 2001 compared
to $92,672,896 for the six months ended June 30, 2000.
OPERATING RESULTS
Net income for the three months ended June 30, 2001, was $331,927 compared to
$275,121 for the three months ended June 30, 2000. The increase of $56,806
reflects an increase in mortgage underwriting and loan servicing fee income.
Mortgage underwriting fees - Secondary market and loan service fee income
increased $88,718 to $145,168 for the three months ended June 30, 2001, compared
to $56,450 for the three months ended June 30, 2000. This increase is primarily
due to the Company originating $10,348,384 of loans sold to the secondary market
and collecting service fee income on $32,712,143 of loans previously sold to the
market. The increase in net interest income of $61,370 for the three months
ended June 30, 2001, compared to the three months ended June 30, 2000 is
discussed in "Net Interest Income" and "Rate/Volume Analysis" elsewhere in this
report.
Total operating expenses increased $52,344 or 5.6% from $929,842 for the three
months ended June 30, 2000 to $982,186 for the three months ended June 30, 2001.
Salaries and related benefits increased $49,462 or 9.3% to $582,421 for the
three months ended June 30, 2001 compared to $532,959 for the three months ended
June 30, 2000. An increase in performance based compensation accounted for the
majority of the increase. Net occupancy expense increased $1,808 or 3.1% to
$60,268 for the three months ended June 30, 2001 compared to $58,460 for the
three months ended June 30, 2000. Equipment rentals, depreciation, and
maintenance for the three months ended June 30, 2001 decreased $9,851 or 10.9%
to $80,171 compared to $90,022 for the three months ended June 30, 2000.
Finally, other operating expenses for the three months ended June 30, 2001
increased $2,199 or 1.1% to $208,293 from $206,094 for the three months ended
June 30, 2000.
Net income for the six months ended June 30, 2001, was $672,895 compared to
$546,422 for the six months ended June 30, 2000. The increase of $126,473
reflects an increase in mortgage servicing rights and fee income. The increase
in net interest income of $93,722 for the six months ended June 30, 2001,
compared to the three months ended June 30, 2000 is discussed in "Net Interest
Income" and "Rate/Volume Analysis" elsewhere in this report.
Total operating expenses increased a $92,412 or 5.1% from $1,814,942 for the six
months ended June 30, 2000 to $1,907,354 for the six months ended June 30, 2001.
Salaries and related benefits increased $87,331 or 8.4% to $1,121,259 for the
six months ended June 30, 2001 compared to $1,033,928 for the six months ended
June 30, 2000. Higher performance based compensation account for the increase.
Net occupancy expense increased $8,419 or 6.9% to $130,380 for the six months
ended June 30, 2001 compared to $121,961 for the six months ended June 30, 2000.
Equipment rentals, depreciation, and maintenance for the six months ended June
30, 2001 decreased $13,644 or 7.6% to $166,826 compared to $180,470 for the
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six months ended June 30, 2000. Other operating expenses for the six months
ended June 30, 2001 decreased $4,782 or -1.2% to $390,387 from $395,169 for the
six months ended June 30, 2000.
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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. 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 with the exception of purchased loans.
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, 2001 the Company had $926,000 in loans past due 90 days or more that
were still accruing interest as compared to $107,000 for June 30, 2000. The
loans were adequately secured to allow for the repayment of both the principal
and interest due. At June 30, 2001 and June 30, 2000 the Company did not have
any loans that met the definition of "Troubled Debt Restructuring". In addition
there was one loan for $150,000 considered impaired under SFAS Nos 114 & 118 as
of June 30, 2001. No loans were considered to be impaired as of June 30, 2000.
The Bank had $787,000 of non-accrual loans at June 30, 2001 and $399,000 of
non-accrual loans at June 30, 2000.
During the three months ended June 30, 2001, $45,000 was charged to the
provision for loan losses compared to $39,000 for the three months ended June
30, 2000. At June 30, 2001 the allowance was $1,149,000 or 1.18% of total loans.
This compares to an allowance of $1,022,000 or 1.12% of total loans as of June
30, 2000. For the three months ended June 30, 2001 the Bank had net recoveries
of $5,000 compared to net charge-offs of $6,000 for the three months ended June
30, 2000. For the six months ended June 30, 2001 the Bank had net charge-offs of
$1,000 compared to net recoveries of $48,000 for the six months ended June 30,
2000.
The following table summarizes loan charge-offs and recoveries by type of loan
for the three months ended June 30, 2001 and 2000:
LOAN TYPE JUNE 30, 2001 JUNE 30, 2000
--------- ------------- -------------
Charge-Off Recovery Charge-Off Recovery
---------- -------- ---------- --------
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and Industrial 0 0 0 0
Agricultural 0 1,000 0 0
Consumer 2,000 6,000 12,000 6,000
------ ------ ------- ------
TOTALS $2,000 $7,000 $12,000 $6,000
------ ------ ------- ------
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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, 2001 JUNE 30, 2000
--------- ------------- -------------
Charge-Off Recovery Charge-Off Recovery
---------- -------- ---------- --------
Real Estate $ 0 $ 0 $ 0 $ 0
Commercial and Industrial 0 0 0 32,000
Agricultural 0 1,000 0 25,000
Consumer 9,000 7,000 22,000 13,000
------ ------ ------- -------
TOTALS $9,000 $8,000 $22,000 $70,000
------ ------ ------- -------
The Bank has allocated its allowance for loan losses at the end of each period
presented as follows:
June 30, 2001 June 30, 2000
------------- -------------
% of % of
Balance at End of Period Applicable to: loans to loans to
- --------------------------------------- total total
Amount Loans Amount Loans
------ ----- ------ -----
Commercial and agricultural $ 685,750 58% $ 651,048 56%
Real Estate-construction 57,796 6% 85,486 9%
Real Estate-mortgage 91,794 20% 90,396 20%
Consumer 194,312 16% 145,085 15%
---------- ---- ---------- ----
Total Domestic 1,029,652 100% 972,015 100%
---- ----
Specific Loan Allocation 25,000
Unallocated 94,589 50,397
---------- ----------
TOTALS $1,149,241 100% $1,022,412 100%
---------- ----------
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, interest bearing deposits, 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 $3,889,209 and $1,888,330 for
the three months ended June 30, 2001 and 2000, 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, 2001 the Company's rate sensitive
liabilities exceed rate sensitive assets due within one year by $7,619,000.
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As part of managing liquidity, the Company monitors its loan to deposit ratio on
a daily basis. At June 30, 2001 the ratio was 87.5% which is within the
Company's acceptable range.
The Company experienced an increase in cash and cash equivalents, its primary
source of liquidity, of $2,928,882 for the six months ended June 30, 2001. The
primary source of cash flow for the six months ended June 30, 2001 was cash
provided by financing activities of $3,852,058 which consisted of an increase in
deposits of $3,573,925 and an increase in short term borrowing of $379,804. Cash
outflow for the three months ended June 30, 2001 was primarily an increase in
loans of $2,660,472. 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,
2001, based on certain assumptions. No prepayment rate assumptions have been
made for the loan portfolio. Non-earning loans such as overdrafts, non-accrual
loans and loans in process are not included in the table below. Maturities and
repricing dates for investments have been projected by applying the assumptions
set forth below to contractual maturities and repricing dates.
1 Year or Less 1 - 5 Years 5 - 10 Years After 10 Years
-------------- ----------- ------------ --------------
Interest Earning Assets:
Short Term Investments $ 5,416,000
Investment Securities $ 3,239,000 $ 7,348,000 $ 5,729,000 $ 2,147,000
Loans
Variable Rate $15,630,000
Real Estate-Construction $ 4,217,000 $ 270,000
Real Estate-Other $ 9,135,000 $15,409,000 $ 81,000 $ 627,000
Commercial and Industrial $12,361,000 $14,635,000 $ 328,000 $ 2,000
Agricultural $ 4,805,000 $ 1,949,000 $ 445,000
Consumer $ 2,959,000 $11,803,000 $ 398,000 $ 245,000
Municipal $ 100,000 $ 453,000 $ 628,000
Other $ 460,000 $ -0- $ -0- $ -0-
----------- ----------- ----------- ------------
Total Interest Earning Assets $58,322,000 $51,867,000 $7,164,000 $ 3,466,000
----------- ----------- ----------- ------------
Interest Bearing Liabilities:
Interest Bearing Demand $ 5,869,000
Savings Deposits $ 7,165,000 $ 16,717,000
Money Market Accounts $ 944,000 $ 2,203,000
Certificates of Deposit $43,135,000 $ 8,216,000
Jumbo CD's $12,218,000 $ 2,156,000
Other $ 2,479,000 $ 2,000,000 -0- -0-
----------- ----------- ----------- ------------
Total Interest Bearing Liabilities $65,941,000 $12,372,000 -0- $ 24,789,000
Interest Sensitivity Gap per Period $(7,619,000) $39,495,000 $ 7,164,000 $(21,323,000)
----------- ----------- ----------- ------------
Cumulative Interest Sensitivity Gap $(7,619,000) $31,876,000 $39,040,000 $ 17,717,000
----------- ----------- ----------- ------------
Interest Sensitivity Gap as a
Percentage of Earning Assets (6.3%) 32.7% 5.9% (17.7%)
Cumulative Sensitivity Gap as a
Percentage of Earning Assets (6.3%) 26.4% 32.3% 14.7%
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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 28, 2001. The following three directors were elected: John A. Slatky,
Willard J. Marchant, and Donald E. Pritzel. John A. Slatky received 405,926
shares for, 3,030 against and 4,419 abstained. Willard J. Marchant received
405,194 shares for, 2,762 against and 4,419 abstained. Donald E. Pritzel 404,676
shares for, 4,280 against and 4,419 abstained.
Item 6. Exhibits and reports on Form 8-K
(a) Reports on Form 8-K
During the quarter ended June 30, 2001, 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/ Sheri L. Knope
- ------------------------------- -----------------------------
John A. Slatky, Sheri L. Knope,
President and Chief Executive Officer Treasurer/CFO
Date August 8, 2001 Date August 8, 2001
-------------------------- ------------------------
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