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 March 31, 2005.    
| | [     ]    | 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 of the issuers classes of common equity, as of April 30, 2005:

560,635 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                                       |  |  |         
| | Item 1  Financial Statements (Unaudited)                            |  |  |         
| | Consolidated Balance Sheets  March 31, 2005 and                     |  |  |         
| | December 31, 2004                                                    |  |  | 3       
| |                                                                      |  |  |         
| | Consolidated Statements of Income  Three Months                     |  |  |         
| | Ended March 31, 2005 and 2004                                        |  |  | 4       
| |                                                                      |  |  |         
| | Consolidated Condensed Statements of Changes                         |  |  |         
| | in Stockholders Equity - Three Months Ended                         |  |  |         
| | March 31, 2005 and 2004                                              |  |  | 5       
| |                                                                      |  |  |         
| | Consolidated Statements of Cash Flow  Three Months                  |  |  |         
| | Ended March 31, 2005 and 2004                                        |  |  | 6       
| |                                                                      |  |  |         
| | Notes to Consolidated Financial Statements                           |  |  | 7  9   
| |                                                                      |  |  |         
| | Item 2 - Managements Discussion and Analysis or                     |  |  |         
| | Plan of Operation                                                    |  |  | 10  15 
| |                                                                      |  |  |         
| | Item 3 -  Controls and Procedures                                    |  |  | 15      
| |                                                                      |  |  |         
| | PART II - OTHER INFORMATION                                          |  |  |         
| |                                                                      |  |  |         
| | Item 2  Unregistered Sales of Equity Securities and Use of Proceeds |  |  | 16      
| |                                                                      |  |  |         
| | Item 6 - Exhibits                                                    |  |  | 16      
| |                                                                      |  |  |         
| | SIGNATURES                                                           |  |  | 17      
| |                                                                      |  |  |         
| |                                                                      |  |  |         
| |                                                                      |  |  |         

2





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Item 1:



LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



ASSETS



|                                                              | March 31,      | December 31, 
|------------------------------------------------------------- | -------------- | -------------
|                                                              | 2005           | 2004         
|                                                              |                |              
|Cash and due from banks                                       | $    3,745,481 | $   7,882,821
|Interest-bearing deposits                                     | 731,075        | 479,614      
|Federal funds sold                                            | 383,000        | 489,000      
|Cash and cash equivalents                                     | 4,859,556      | 8,851,435    
|                                                              |                |              
|Investment securities available for sale-stated at fair value | 13,583,544     | 14,063,919   
|Loans held for sale                                           | 60,000         | 51,000       
|                                                              |                |              
|Total loans                                                   | 148,877,963    | 150,975,058  
|Allowance for loan losses                                     | (2,182,835)    | (2,099,587)  
|Net loans                                                     | 146,695,128    | 148,875,471  
|                                                              |                |              
|Premises and equipment                                        | 2,926,644      | 2,914,404    
|Other investments at cost                                     | 569,518        | 563,818      
|Mortgage servicing rights, net                                | 711,754        | 797,527      
|Other assets                                                  | 4,343,212      | 4,381,506    
|                                                              |                |              
|TOTAL ASSETS                                                  | $173,749,356   | $ 180,499,080



LIABILITIES AND STOCKHOLDERS EQUITY

|LIABILITIES:                                                                              |                |               
|----------------------------------------------------------------------------------------- | -------------- | --------------
|                                                                                          |                |               
|Non-interest-bearing deposits                                                             | $   21,752,878 | $   23,017,559
|Interest-bearing deposits                                                                 | 129,432,646    | 134,593,562   
|Total deposits                                                                            | 151,185,524    | 157,611,121   
|                                                                                          |                |               
|Short-term borrowings                                                                     | 287,518        | 285,231       
|Borrowed funds                                                                            | 2,000,000      | 3,000,000     
|Other liabilities                                                                         | 1,869,842      | 1,808,682     
|                                                                                          |                |               
|Total liabilities                                                                         | 155,342,884    | 162,705,034   
|                                                                                          |                |               
|STOCKHOLDERS EQUITY:                                                                     |                |               
|                                                                                          |                |               
|Common stock - $1.00 par value:                                                           |                |               
|Authorized - 2,400,000 shares,
Issued  588,917 shares in 2005 and 586,044 shares in 2004 | 588,917        | 586,044       
|Capital surplus                                                                           | 4,629,231      | 4,539,306     
|Retained earnings                                                                         | 13,522,198     | 12,899,878    
|Accumulated other comprehensive income                                                    | 62,205         | 164,897       
|Treasury stock, at cost - 28,282 shares in 2005 and 2004                                  | (396,079)      | (396,079)     
|                                                                                          |                |               
|Total stockholders equity                                                                | 18,406,472     | 17,794,046    
|                                                                                          |                |               
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                | $ 173,749,356  | $ 180,499,080 



See accompanying notes to consolidated financial statements.

3





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LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



|                                                    | Three Months Ended March 31, 2005 | Three Months Ended March 31, 2004
|--------------------------------------------------- | --------------------------------- | ---------------------------------
|INTEREST INCOME:                                    |                                   |                                  
|                                                    |                                   |                                  
|Interest and fees on loans                          | $  2,303,123                      | $  1,945,849                     
|Interest on investment securities:                  |                                   |                                  
|Taxable                                             | 48,604                            | 27,842                           
|Tax-exempt                                          | 116,192                           | 97,972                           
|Other interest and dividend income                  | 20,888                            | 27,785                           
|                                                    |                                   |                                  
|Total interest income                               | 2,488,807                         | 2,099,448                        
|                                                    |                                   |                                  
|INTEREST EXPENSE:                                   |                                   |                                  
|                                                    |                                   |                                  
|Deposits                                            | 652,223                           | 570,053                          
|Short-term borrowings                               | 5,996                             | 344                              
|Borrowed funds and capital lease obligation         | 14,768                            | 20,459                           
|                                                    |                                   |                                  
|Total interest expense                              | 672,987                           | 590,856                          
|                                                    |                                   |                                  
|Net interest income                                 | 1,815,820                         | 1,508,592                        
|Provision for loan losses                           | 105,000                           | 75,000                           
|                                                    |                                   |                                  
|Net interest income after provision for loan losses | 1,710,820                         | 1,433,592                        
|                                                    |                                   |                                  
|OTHER INCOME:                                       |                                   |                                  
|                                                    |                                   |                                  
|Service charges on deposit accounts                 | 156,867                           | 95,768                           
|Loan fees                                           | 57,968                            | 46,351                           
|Mortgage underwriting fees - secondary market       | 26,114                            | 33,876                           
|Loan servicing fee income                           | 15,583                            | 46,520                           
|Gain on sale of loans                               | 20,952                            | 53,066                           
|Commission and managed fees                         | 130,211                           | 105,549                          
|Gain on Sale of Investments                         | 192,892                           | 0                                
|Other operating income                              | 154,218                           | 85,719                           
|                                                    |                                   |                                  
|Total other income                                  | 754,805                           | 466,849                          
|                                                    |                                   |                                  
|OPERATING EXPENSES:                                 |                                   |                                  
|                                                    |                                   |                                  
|Salaries and related benefits                       | 883,197                           | 818,471                          
|Net occupancy expense                               | 95,988                            | 101,214                          
|Equipment rentals, depreciation, and maintenance    | 95,095                            | 109,933                          
|Data processing                                     | 77,527                            | 57,459                           
|Other operating expenses                            | 373,874                           | 265,373                          
|                                                    |                                   |                                  
|Total operating expenses                            | 1,525,681                         | 1,352,450                        
|                                                    |                                   |                                  
|Income before provision for income taxes            | 939,944                           | 547,991                          
|Provision for income taxes                          | 317,624                           | 185,101                          
|                                                    |                                   |                                  
|Net income                                          | $      622,320                    | $    362,890                     
|                                                    |                                   |                                  
|Dividends per common share                          | $0.00                             | $0.00                            
|Basic earnings per common share                     | $1.11                             | $.65                             



See accompanying notes to consolidated financial statements.

4



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LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF

CHANGES IN STOCKHOLDERS EQUITY

(UNAUDITED)





|                                                     | Three Months EndedMarch 31, 2005 | Three Months EndedMarch 31, 2004
|---------------------------------------------------- | -------------------------------- | --------------------------------
|                                                     |                                  |                                 
|                                                     | Shares                           | Equity Total                    
|                                                     |                                  |                                 
|Balance  Beginning of period                        | 586,044                          | $  17,794,046                   
|                                                     |                                  |                                 
|Issuance of common stock                             | 2,873                            | 92,798                          
|                                                     |                                  |                                 
|Purchase of Treasury Stock                           |                                  | 0                               
|                                                     |                                  |                                 
|Comprehensive income:                                |                                  |                                 
|Net Income                                           |                                  | 622,320                         
|Other comprehensive income (loss) - Change in        |                                  |                                 
|net unrealized gain on securities available for sale |                                  | (102,692)                       
|                                                     |                                  |                                 
|Total comprehensive income                           |                                  | 519,628                         
|                                                     |                                  |                                 
|Balance - End of period                              | 588,917                          | $  18,406,472                   
|                                                     |                                  |                                 
|                                                     |                                  |                                 
|                                                     |                                  |                                 
|                                                     |                                  |                                 
|                                                     |                                  |                                 
|                                                     |                                  |                                 





















See accompanying notes to consolidated financial statements.

5





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LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                                                                                                                                                                                    | Three Months Ended March 31, 2005                        | Three Months Ended March 31, 2004                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | -------------------------------------------------------
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                                                                                                                                               |                                                          |                                                        
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Net income                                                                                                                                                                                                                                          | $    622,320                                             | $    362,890                                           
|Adjustments to reconcile net income to net cash                                                                                                                                                                                                     |                                                          |                                                        
|provided by operating activities:                                                                                                                                                                                                                   |                                                          |                                                        
|Depreciation and amortization                                                                                                                                                                                                                       | 65,913                                                   | 83,847                                                 
|Accretion of discounts on securities                                                                                                                                                                                                                | 7,962                                                    | ( 492)                                                 
|Amortization of premiums on securities                                                                                                                                                                                                              | 780                                                      | 1,885                                                  
|Provision for loan losses                                                                                                                                                                                                                           | 105,000                                                  | 75,000                                                 
|Stock dividend on other investments at cost
Proceeds from sales of loans held for sale
Originations of loans held for sale
(Gain) on sale of loans held for sale
Change in operating assets and liabilities:
Mortgage servicing rights
Other assets | (5,700)
3,294,632
(3,282,680)
(20,952)

85,773
(154,598) | (6,300)
5,686,201
(5,865,471)
(53,066)

44,657
(17,742)
|Other liabilities                                                                                                                                                                                                                                   | 114,722                                                  | 29,613                                                 
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Total adjustments                                                                                                                                                                                                                                   | 210,852                                                  | (21,868)                                               
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Net cash provided by operating activities                                                                                                                                                                                                           | 833,172                                                  | 341,022                                                
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                                                                                                                                               |                                                          |                                                        
|Proceeds from maturities of securities available for sale                                                                                                                                                                                           | 660,112                                                  | 774,400                                                
|Purchase of securities available for sale                                                                                                                                                                                                           | (151,841)                                                | (1,865,153)                                            
|Net decrease (increase) in loans                                                                                                                                                                                                                    | 2,075,343                                                | (6,227,554)                                            
|Capital expenditures                                                                                                                                                                                                                                | (78,153)                                                 | (157,881)                                              
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Net cash provided by (used in) investing activities                                                                                                                                                                                                 | 2,505,461                                                | (7,476,188)                                            
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                                                                                                                                               |                                                          |                                                        
|Net decrease in deposits                                                                                                                                                                                                                            | (6,425,597)                                              | (1,516,423)                                            
|Net increase (decrease) in short-term borrowings                                                                                                                                                                                                    | 2,287                                                    | (201,313)                                              
|Director and employee stock purchase plan                                                                                                                                                                                                           | 92,798                                                   | 165,892                                                
|Proceeds from borrowed funds                                                                                                                                                                                                                        | 0                                                        | 2,000,000                                              
|Principal payments on borrowed funds                                                                                                                                                                                                                | (1,000,000)                                              | 0                                                      
|Purchase of treasury stock                                                                                                                                                                                                                          | 0                                                        | (3,920)                                                
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Net cash provided by (used in) financing activities                                                                                                                                                                                                 | (7,330,512)                                              | 444,236                                                
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Net decrease in cash and cash equivalents                                                                                                                                                                                                           | (3,991,879)                                              | (6,690,930)                                            
|Cash and cash equivalents at beginning                                                                                                                                                                                                              | 8,851,435                                                | 16,542,020                                             
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Cash and cash equivalents at end                                                                                                                                                                                                                    | $    4,859,556                                           | $ 9,851,090                                            
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Supplemental information:                                                                                                                                                                                                                           |                                                          |                                                        
|                                                                                                                                                                                                                                                    |                                                          |                                                        
|Cash paid during the period for:                                                                                                                                                                                                                    |                                                          |                                                        
|Interest                                                                                                                                                                                                                                            | $  628,871                                               | $  567,194                                             
|Income taxes                                                                                                                                                                                                                                        | $  163,906                                               | $  233,086                                             
|                                                                                                                                                                                                                                                    |                                                          |                                                        



See accompanying notes to consolidated financial statements

6





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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, 2004 for the Companys accounting policies which are pertinent to these financial statements.



NOTE 1: BASIS OF PRESENTATION

The consolidated financial statements of the Company, a bank holding company, include the accounts of the 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.



Certain reclassifications have been made to the 2004 consolidated financial statements to conform to the 2005 classifications.



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 560,443 in March 2005 and 556,152 in March 2004. The basic and diluted earnings per share are the same for 2005 and 2004.



Critical Accounting Policies



The Company has established various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of the Company's consolidated financial statements.  The significant accounting policies of the Company are described in the footnotes to the consolidated financial statements contained in the Company's Annual Report on Form 10-KSB and updated as necessary in its Quarterly Reports on Form 10-QSB.  Certain accounting policies involve significant judgments and assumptions by management which may have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies.  The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances.  Because of the nature of judgments and assumptions made by management, actual results could differ from these judgments and estimates which could have a material impact on the carrying values of assets and liabilities and the results of the operations of the Company.



Management considers the following to be those accounting policies that require significant judgments and assumptions:



Allowance for Loan Losses



The allowance for loan losses is determined using a methodology which reserves currently for those loans in which it is determined that a loss is probable based on characteristics of the individual loan, historical loss patterns of similar "homogeneous" loans and environmental factors unique to each measurement date.  This reserving methodology has the following components:



Specific Reserve.  The amount of specific reserves is determined through a loan-by-loan analysis of problem loans over a minimum size that considers expected future cash flows, the value of collateral and other factors that may impact the borrower's ability to make payments when due.  Included in this group are those non-accrual or renegotiated loans, that meet the criteria as being "impaired" under the definition in SFAS 114.  A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Problem loans also include those credits that have been internally classified as credits requiring management's attention due to underlying problems in the borrower's business or collateral concerns.  Ranges of loss are determined based on best-and worst-case scenarios for each loan.

7





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Collective Loan Impairment.  This component of the allowance for loan losses is based on the following:



The Company makes a significant number of loans, which due to their underlying similar characteristics, are assessed for loss as "homogeneous" pools.  Included in the homogeneous pools are loans from the retail sector and commercial loans under a certain size, which have been excluded from the specific reserve allocation previously discussed.   The Company segments the homogeneous pools by type of loan and applies historical loss percentages to estimate a loss reserve for each pool.



The Company's senior lending management also allocates reserves for environmental conditions which are unique to the measurement period.  These include environmental factors, such as economic conditions in certain geographical or industry segments of the portfolio, economic trends in the retail lending sector, Companys levels and trends for delinquency and non-accruals, Companys loan personnel experience, Companys changes in lending policy and procedures, and companys loan growth.  Reserves allocated are now based on estimates of loss that senior lending management has isolated based on these economic trends or conditions.



The Company has not substantively changed any aspect to its overall approach in the determination of the allowance for loan losses.  Except as described above, there have been no material changes in assumptions or estimation techniques as compared to prior periods that impacted the determination of the current period allowance.  Management recognizes there are significant estimates in the process and the ultimate losses could be significantly different from those currently estimated.



Mortgage Servicing Rights



Mortgage servicing rights  (MSR's) are established on loans (primarily mortgage loans) that we originate and sell, but continue to service as we collect the payments.  Generally accepted accounting principles require that the Company recognize as income the estimated fair market value of the asset when originated. The estimated value of MSR's is the present value of future net cash flows from the servicing relationship using current market assumptions for factors such as prepayments and servicing costs. As the loans are repaid and the servicing revenue is earned,  MSR's are amortized.  Net servicing revenues and newly originated MSR's generally exceed this amortization expense.  However, if actual prepayment experience is greater than anticipated and new loan volume declines, net servicing revenues may be less than expected and a charge to earnings may result. In December 2004, the Bank analyzed the estimated life of the servicing portfolio and the estimated duration of the mortgage servicing rights asset. The estimated life was increased from 4.5 years to 6.5 years due to the decrease of  loan repayment speeds resulting from changes in the loan portfolio and the mortgage interest rate market. Management does not intend to sell mortgage servicing rights.



Determining the Amount of Current and Deferred Income Taxes



The determination of current and deferred income taxes is based on complex analyses of many factors, including interpretation of federal and state income tax laws, the difference between tax and financial reporting of reversals of temporary differences and current accounting standards.  The federal and state taxing authorities who make assessments based on their determination of tax laws periodically review the Companys interpretation of federal and state tax laws.  Tax liabilities could differ significantly from the estimates and interpretations used in determining the current and deferred income tax liabilities based on the completion of taxing authority examinations.





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
|---------------------------- | ---------------
|                             | March 31, 2005 
|                             |                
|Commitments to extend credit | $526,700       
|Credit card arrangements     | 1,732,753      
|Standby letters of credit    | 2,204,342      



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,

8





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thus representing future cash requirements. The Company 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 Company to guarantee the financial 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 Company 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 Company. Management does not anticipate any material losses as a result of these letters of credit.



The Companys commitments to sell residential mortgage loans to the secondary market and commitments to fund such loans to individual borrowers represent mortgage derivatives.  Commitments outstanding at March 31, 2005 were $526,700.





NOTE 3: ACCOUNTING CHANGES:



None

9





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Item 2:



MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES



SELECTED QUARTERLY FINANCIAL DATA



|                                          | Three Months Ended March 31,
|----------------------------------------- | ----------------------------
|                                          | 2005                        
|                                          |                             
|Net Earnings                              | $     622,320               
|Average Consolidated Balance Sheet Items: |                             
|Loans                                     | 146,748,371                 
|Taxable Investment Securities             | 5,566,603                   
|Fed Funds Sold                            | 315,667                     
|Municipal Loans & Investments             | 10,761,229                  
|Other Earning Assets                      | 1,061,977                   
|Total Earning Assets                      | 164,453,847                 
|Total Assets                              | 177,750,381                 
|Interest Bearing Deposits                 | 132,166,397                 
|Borrowings                                | 3,505,466                   
|Shareholders Equity                      | 18,293,549                  
|                                          |                             
|Key Ratios:                               |                             
|Average Equity to Average Total Assets    | 10.29%                      
|Return on Average Total Assets            | 1.42%                       
|Return on Average Equity                  | 13.80%                      
|Net Interest Margin                       | 4.48%                       
|                                          |                             



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 20.4% to $1,815,820 for the three months ended March 31, 2005 from $1,508,592 for the three months ended March 31, 2004. The net interest income increased $160,669 due to volume and increased $146,559 due to an increase in the interest rates.  Approximately $66,000 of the rate increase is due to collection of interest on a non-accrual loan portfolio.  As noted above, average assets for the three months ended March 31, 2005 were $177,750,381 compared to average assets for the three months ended March 31, 2004 of $166,904,562.



|                    | Three Months Ended March 31,
|------------------- | ----------------------------
|                    | 2005                        
|Interest Income     | $  2,488,807                
|Interest Expense    | 672,987                     
|Net Interest Income | $  1,815,820                
|                    |                             
|Net Interest Margin | 4.48%                       
|                    |                             



RATE/VOLUME ANALYSIS



The impact of changes in volume and interest rates on net interest income for the three months ended March 31, 2005 is illustrated in the following table:



10





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Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004.



|                    | Increase in Net Interest Income
|------------------- | -------------------------------
|                    | Net Change                     
|Interest Income     | $  389,359                     
|Interest Expense    | 82,131                         
|Net Interest Income | $ 307,228                      



Interest rates on the Banks average earning assets and interest bearing liabilities were generally higher for the three months ended March 31, 2005 compared to the three months ended March 31, 2004.  Average earning assets had an average yield of 6.14% at March 31, 2005 as compared to 5.67% at March 31, 2004.  Average interest bearing liabilities had an average rate of 2.01% at March 31, 2005 as compared to 1.85% at March 31, 2004.  Average earning assets increased 10.5% to $164,453,847 for the three months ended March 31, 2005 compared to $148,860,503 for the three months ended March 31, 2004. Interest bearing liabilities increased 5.6% to $135,671,863 for the three months ended March 31, 2005 compared to $128,505,626 for the three months ended March 31, 2004.



OPERATING RESULTS



Net income for the three months ended March 31, 2005, was $622,320 compared to $362,890 for the three months ended March 31, 2004.  The increase of $259,430 reflects a gain on sale of securities of $192,892. The gain on sale of securities included $181,792 that related to the Pulse/Discover merger payout for the shares of the previously issued Tyme Corporation stock, which was owned by the bank. The increase in net interest income of $307,228 for the three months ended March 31, 2005, compared to the three months ended March 31, 2004 is discussed in Net Interest Income and Rate/Volume Analysis elsewhere in this report.



Total operating expenses increased 12.8% from $1,352,450 for the three months ended March 31, 2004 to $1,525,681 for the three months ended March 31, 2005.   Salaries and related benefits increased 7.9% to $883,197 for the three months ended March 31, 2005 compared to $818,471 for the three months ended March 31, 2004.  Increases over 2004 salaries were due to the following:  annual raises, the addition of 3 full-time equivalent employees, annual increase in insurance and more employees using health insurance benefits.  Other operating expenses for the three months ended March 31, 2005 increased 40.9% to $373,874 from $265,373 for the three months ended March 31, 2004 because of increases in other real estate expenses, accounting fees, and other professional fee expenses.  The increase in accounting fees and professional fees can be tied to increased regulation under the Sarbanes-Oxley Act.



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ALLOWANCE FOR LOAN LOSSES



The amount charged to the provision for loan losses by the Company 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.  Company 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 Company 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 Company 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 Company deems its collateral position adequate to warrant a return to accrual status.



At March 31, 2005 the Company had $8,000 in loans past due 90 days or more that were still accruing interest as compared to $63,000 for March 31, 2004.  At March 31, 2005 the Company had one loan that met the definition of troubled debt restructuring contained in SFAS No. 15.  In 2004 the Company had two loans that met the definition of troubled debt restructuring contained in SFAS No. 15. In addition, for each period ending as of March 31, 2005 and March 31, 2004 seven loans total were considered to be impaired under SFAS Nos 114 and 118.  The Bank had $968,000 of non-accrual loans at March 31, 2005, $1,782,000 at December 31, 2004 and $2,703,000 of non-accrual loans at March 31, 2004.



During the three months ended March 31, 2005, $105,000 was charged to the provision for loan losses compared to $75,000 for the three months ended March 31, 2004. At March 31, 2005 the allowance was $2,182,835 or 1.47% of total loans. This compares to an allowance of $1,950,739 or 1.40% of total loans as of March 31, 2004.  For the three months ended March 31, 2005 the Company had net charge-offs of $22,000 compared to net charge offs of $4,000 for the three months ended March 31, 2004.



The following table summarizes loan charge-offs and recoveries by type of loan for the three months ended March 31, 2005 and 2004:



|Loan Type                 | March 31, 2005 | March 31, 2004
|------------------------- | -------------- | --------------
|                          | Charge-Off     | Recovery      
|                          |                |               
|Real Estate               | $      0       | $         0   
|Commercial and Industrial | 0              | 0             
|Agricultural              | 0              | 0             
|Consumer                  | 28,000         | 6,000         
|                          |                |               
|TOTALS                    | $ 28,000       | $ 6,000       

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The Bank has allocated its allowance for loan losses at the end of each period presented as follows:



|                                        | March 31, 2005 | March 31, 2004     
|--------------------------------------- | -------------- | -------------------
|Balance at End of Period Applicable to: |                | % of
Loans to
Total
|                                        | Amount         | Loans              
|Commercial and agricultural             | $332,000       | 68%                
|Real estate-construction                | 2,000          | 3%                 
|Real estate-mortgage                    | 8,000          | 13%                
|Consumer                                | 69,000         | 16%                
|                                        |                |                    
|Total Domestic                          | 411,000        |                    
|                                        |                |                    
|Specific Loan Allocation                | 1,160,000      |                    
|Unallocated                             | 612,000        |                    
|                                        |                |                    
|TOTALS                                  | $ 2,183,000    | 100%               



The unallocated allowance for loan losses includes reserve allocations related to commercial loan growth, changes in lending policy and procedures, levels and trends for delinquency and non-accruals, national and local economic trends and the experience and ability of the loan department.



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 $315,667 and $3,425,231 for the three months ended March 31, 2005 and 2004, 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 Company 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 Company 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 Company also monitors the assets and liabilities that reprice each month to determine the impact on future earnings from anticipated repricings. At March 31, 2005 the Companys rate sensitive liabilities exceed rate sensitive assets due within one year by $17,443,000.



The Company experienced a decrease in cash and cash equivalents, its primary source of liquidity, of $3,991,879 for the three months ended March 31, 2005. The primary source of cash flow for the three months ended March 31, 2005 was cash provided by a decrease in loan principal of $2,075,343. Cash outflow for the three months ended March 31, 2005 was primarily used for financing activities, specifically decrease in deposits of $6,425,597 and principal payments on borrowed funds of $1,000,000.  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.



13



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The following table illustrates the projected maturities and the repricing mechanisms of the major asset/liability categories of the Company as of March 31, 2005, 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 or Less | 1 - 5 Years   | 5  10 Years       | After 10 Years
|----------------------------------- | -------------- | ------------- | ------------------ | --------------
|                                    |                |               |                    |               
|Interest Earning Assets:            |                |               |                    |               
|Short Term Investments              | $    1,114,000 |               |                    |               
|Investment Securities               | 3,459,000      | $   4,906,000 | $  3,520,000       | $  1,699,000  
|Loans                               |                |               |                    |               
|Variable Rate                       | 15,168,000     | 14,435,000    | 698,000            | 2,679,000     
|Real Estate-Construction            | 4,019,000      | 223,000       |                    |               
|Real Estate-Other                   | 6,092,000      | 13,091,000    | 206,000            | 311,000       
|Commercial and Industrial           | 24,801,000     | 26,869,000    | 279,000            | 2,030,000     
|Agricultural                        | 3,627,000      | 5,509,000     | 358,000            | 1,164,000     
|Consumer                            | 3,813,000      | 18,445,000    | 552,000            | 73,000        
|Municipals                          | 43,000         | 309,000       | 1,961,000          | -0-           
|Other                               | 570,000        | -0-           | -0-                | -0-           
|                                    |                |               |                    |               
|Total Interest Earning Assets       | $  62,706,000  | $ 83,787,000  | $  7,574,000       | $  7,956,000  
|                                    |                |               |                    |               
|Interest Bearing Liabilities:       |                |               |                    |               
|Interest Bearing Demand             |                |               |                    | $  8,665,000  
|Savings Deposits                    | $   11,198,000 |               |                    | 26,128,000    
|Money Market Accounts               | 1,471,000      |               |                    | 3,431,000     
|Certificates of Deposit             | 47,671,000     | $  9,080,000  |                    |               
|Jumbo CDs                          | 18,521,000     | 3,268,000     |                    |               
|Other                               | 1,288,000      | 1,000,000     | -0-                | -0-           
|                                    |                |               |                    |               
|                                    |                |               |                    |               
|Total Interest Bearing Liabilities  | $  80,149,000  | $13,348,000   | $              -0- | $38,224,000   
|                                    |                |               |                    |               
|Interest Sensitivity Gap per Period | $(17,443,000)  | $70,439,000   | $  7,574,000       | $(30,268,000) 
|                                    |                |               |                    |               
|Cumulative Interest Sensitivity     |                |               |                    |               
|Gap                                 | $(17,443,000)  | $52,996,000   | $60,570,000        | $  30,302,000 
|                                    |                |               |                    |               
|Interest Sensitivity Gap as a       |                |               |                    |               
|Percentage of Earning Assets        | (10.77)%       | 43.47%        | 4.67%              | (18.68%)      
|                                    |                |               |                    |               
|Cumulative Sensitivity Gap as a     |                |               |                    |               
|Percentage of Earning Assets        | (10.77)%       | 32.71%        | 37.38%             | 18.70%        



OFF-BALANCE SHEET ARRANGEMENTS



At March 31, 2005, there have been no substantive changes with respect to the Companys off-balance sheet activities. See Note 2 to the Consolidated Financial Statements for a description of the Companys financial instruments with off-balance sheet risk. Based upon the off-balance sheet arrangements with which it is presently involved, the Company does not believe that such off-balance sheet arrangements either have, or are reasonably likely to have, a material impact on its current or future financial condition, results of operation, liquidity or capital.



14



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Item 3.

Controls and Procedures



(a)

The Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) as of March 31, 2005.  Based upon that evaluation, the Companys Chief Executive Officer and Chief Financial Officer has each concluded that the Companys disclosure controls and procedures are effective to timely alert them to material information relating to the Company (including its consolidated subsidiaries) required to be included in Companys filings under the Securities and Exchange Act of 1934, as amended.



(b)

There were no significant changes in the Companys internal controls or in other factors that

could significantly affect the controls subsequent to the date of their evaluation.





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PART II - OTHER INFORMATION



Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds



On January 7, 2005, the Company sold 2,873 shares of stock at $32.30 per share to employees of the Bank pursuant to the Companys 2000 Employee Stock Purchase Plan.  The Plan is a qualified stock purchase plan under Section 423 of the Internal Revenue Code, and allows employees to purchase stock at 85% of fair market value.  The offering was exempt from registration under the Securities Act of 1933 pursuant to Section 3(a)(11) of the Act and Rule 147 thereunder, because all employees are residents of the State of Wisconsin.  Resale of the stock is restricted for nine (9) months to residents of the State of Wisconsin.





Item 6.     Exhibits



Exhibits



31.1 Rule 13a-14(a) Certification of CEO



31.2 Rule 13a-14(a) Certification of CFO



32.1 Section 1350 Certification of CEO



32.2 Section 1350 Certification of CFO











16





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SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                                      | LUXEMBURG BANCSHARES, INC.
|------------------------------------- | --------------------------
|                                      | (Registrant)              
|                                      |                           
|/s/ John A. Slatky                    | /s/ Sheri L. Knope        
|John A. Slatky,                       | Sheri L. Knope, CPA, CIA, 
|President and Chief Executive Officer | Chief Financial Officer   
|                                      |                           
|Date:   May 11, 2005                  | Date:  May 11, 2005       
|                                      |                           
|                                      |