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, 2002.              
|[     ]  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, 2002:

548,573 shares were outstanding.



Transitional Small Business Disclosure Format (check one):  Yes  [     ]   No  [   X  ]









LUXEMBURG BANCSHARES, INC.



INDEX



| |                                                              |  |  | Page No.
| | ------------------------------------------------------------ |  |  | --------
| | PART I - FINANCIAL INFORMATION                               |  |  |         
| |                                                              |  |  |         
| |                                                              |  |  |         
| | Consolidated Balance Sheets - June 30, 2002 and              |  |  |         
| | December 31, 2001                                            |  |  | 4       
| |                                                              |  |  |         
| | Consolidated Statements of Income - Three Months & Six       |  |  |         
| | Months Ended June 30, 2002 and 2001                          |  |  | 5       
| |                                                              |  |  |         
| | Consolidated Condensed Statements of Changes                 |  |  |         
| | in Stockholders Equity - Six Months Ended                   |  |  |         
| | June 30, 2002 and 2001                                       |  |  | 6       
| |                                                              |  |  |         
| | Consolidated Statements of Cash Flow - Six Months            |  |  |         
| | Ended June 30, 2002 and 2001                                 |  |  | 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 4 - Submission of Matters to a Vote of Security Holders |  |  | 15      
| |                                                              |  |  |         
| | Item 6 - Exhibits and Reports on Form 8-K                    |  |  | 15      
| |                                                              |  |  |         
| | SIGNATURES                                                   |  |  | 15      
| |                                                              |  |  |         
| |                                                              |  |  |         
| |                                                              |  |  |         





LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (UNAUDITED)



ASSETS



|                                                              | June 30,       | December 31, 
|------------------------------------------------------------- | -------------- | -------------
|                                                              | 2002           | 2001         
|Cash and due from banks                                       | $    6,074,091 | $   6,371,932
|Interest-bearing deposits                                     | 1,107,979      | 5,086,511    
|Federal funds sold                                            | 2,079,000      | 2,434,000    
|                                                              |                |              
|Cash and cash equivalents                                     | 9,261,070      | 13,892,443   
|                                                              |                |              
|Investment securities available for sale-Stated at fair value | 15,561,726     | 16,759,568   
|Loans held for sale                                           | 226,100        | 785,545      
|Total loans                                                   | 113,075,209    | 102,450,409  
|Allowance for loan losses                                     | (1,232,672)    | (1,102,757)  
|                                                              |                |              
|Net loans                                                     | 111,842,537    | 101,347,652  
|Premises and equipment                                        | 2,463,366      | 2,469,394    
|Other investments at cost                                     | 527,169        | 520,454      
|Other assets                                                  | 3,446,540      | 3,612,355    
|                                                              |                |              
|TOTAL ASSETS                                                  | $143,328,508   | $ 139,387,411
|                                                              |                |              





LIABILITIES AND STOCKHOLDERS EQUITY



|LIABILITIES:                                                                              |                |               
|----------------------------------------------------------------------------------------- | -------------- | --------------
|                                                                                          |                |               
|Non-interest-bearing deposits                                                             | $   15,498,732 | $   16,104,869
|Interest-bearing deposits                                                                 | 107,430,291    | 104,204,274   
|                                                                                          |                |               
|Total deposits                                                                            | 122,929,023    | 120,309,143   
|                                                                                          |                |               
|Short-term borrowings                                                                     | 342,285        | 46,201        
|Borrowed funds                                                                            | 4,000,000      | 4,000,000     
|Other liabilities                                                                         | 1,575,833      | 1,542,353     
|                                                                                          |                |               
|Total liabilities                                                                         | 128,847,141    | 125,897,697   
|                                                                                          |                |               
|STOCKHOLDERS EQUITY:                                                                     |                |               
|                                                                                          |                |               
|Common stock- $1.00 par value:                                                            |                |               
|Authorized - 2,400,000 shares,
Issued - 575,557 shares in 2002 and 571,225 shares in 2001 | 575,557        | 571,225       
|Capital surplus                                                                           | 4,245,948      | 4,151,271     
|Retained earnings                                                                         | 9,569,542      | 8,915,855     
|Accumulated other comprehensive income                                                    | 434,479        | 195,522       
|Less - 26,984 shares of treasury
common stock, at cost                                    | (344,159)      | (344,159)     
|                                                                                          |                |               
|Total stockholders equity                                                                | 14,481,367     | 13,489,714    
|                                                                                          |                |               
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                | $ 143,328,508  | $ 139,387,411 



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,
|----------------------------------------------------- | --------------------------- | -------------------------
|                                                      |                             |                          
|                                                      | 2002                        | 2001                     
|INTEREST INCOME:                                      |                             |                          
|                                                      |                             |                          
|Interest and fees on loans                            | $  1,948,239                | $  2,052,124             
|Interest on investment securities:                    |                             |                          
|Taxable                                               | 94,772                      | 141,995                  
|Tax-exempt                                            | 102,578                     | 105,694                  
|Other interest and dividend income                    | 32,760                      | 82,741                   
|                                                      |                             |                          
|Total interest income                                 | 2,178,349                   | 2,382,554                
|                                                      |                             |                          
|INTEREST EXPENSE:                                     |                             |                          
|                                                      |                             |                          
|Deposits                                              | 904,193                     | 1,257,150                
|Short-term borrowings                                 | 17,331                      | 57,323                   
|Borrowed funds                                        | 17,107                      | 3,169                    
|                                                      |                             |                          
|Total interest expense                                | 938,631                     | 1,317,642                
|                                                      |                             |                          
|Net interest income                                   | 1,239,718                   | 1,064,912                
|Provision for loan losses                             | 60,000                      | 45,045                   
|                                                      |                             |                          
|Net interest income after provision for
credit losses | 1,179,718                   | 1,019,867                
|                                                      |                             |                          
|OTHER INCOME:                                         |                             |                          
|                                                      |                             |                          
|Service charges on deposit accounts                   | 92,551                      | 75,760                   
|Mortgage underwriting fees -
Secondary market         | 16,199                      | 103,031                  
|Loan servicing fee income                             | 70,859                      | 42,137                   
|Other operating income                                | 274,638                     | 225,148                  
|                                                      |                             |                          
|Total other income                                    | 454,247                     | 446,076                  
|                                                      |                             |                          
|OPERATING EXPENSES:                                   |                             |                          
|                                                      |                             |                          
|Salaries and related benefits                         | 607,336                     | 582,421                  
|Net occupancy expense                                 | 68,572                      | 60,268                   
|Equipment rentals, depreciation, and
maintenance      | 58,238                      | 80,171                   
|Data processing                                       | 50,855                      | 51,033                   
|Other operating expenses                              | 272,403                     | 208,293                  
|                                                      |                             |                          
|Total operating expenses                              | 1,057,404                   | 982,186                  
|                                                      |                             |                          
|Income before provision for income
taxes              | 576,561                     | 483,757                  
|Provision for income taxes                            | 162,892                     | 151,830                  
|                                                      |                             |                          
|Net income                                            | $    413,669                | $    331,927             
|                                                      |                             |                          
|Basic and diluted earnings per common
share           | $0.75                       | $0.61                    



See accompanying notes to consolidated financial statements







LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF

CHANGES IN STOCKHOLDERS EQUITY

(UNAUDITED)





|                                                                                            |         | Six Months Ended
June 30, 2002 | Six Months Ended
June 30, 2001
|------------------------------------------------------------------------------------------- | ------- | ------------------------------ | ------------------------------
|                                                                                            |         |                                |                               
|                                                                                            | Shares  | Equity Total                   | Shares                        
|                                                                                            |         |                                |                               
|Balance - Beginning of period                                                               | 571,225 | $  13,489,714                  | 567,512                       
|                                                                                            |         |                                |                               
|Issuance of common stock                                                                    | 4,332   | $99,009                        | 3,713                         
|                                                                                            |         |                                |                               
|Comprehensive income:                                                                       |         |                                |                               
|Net Income                                                                                  |         | $     862,145                  |                               
|Other comprehensive income - Change in net unrealized gain on securities available for sale |         | 238,957                        |                               
|                                                                                            |         |                                |                               
|                                                                                            |         |                                |                               
|Total comprehensive income                                                                  |         | 1,101,102                      |                               
|                                                                                            |         |                                |                               
|Dividends Paid                                                                              |         | 208,458                        |                               
|                                                                                            |         |                                |                               
|Balance - End of period                                                                     | 575,557 | $  14,481,367                  | 571,225                       
|                                                                                            |         |                                |                               





See accompanying notes to consolidated financial statements







LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(UNAUDITED)



|                                                          | Six Months Ended
June 30, 2002 | Six Months Ended
June 30, 2001
|--------------------------------------------------------- | ------------------------------ | ------------------------------
|CASH FLOWS FROM OPERATING ACTIVITIES:                     |                                |                               
|                                                          |                                |                               
|Net income                                                | $    862,145                   | $    672,895                  
|Adjustments to reconcile net income to net cash           |                                |                               
|provided by operating activities:                         |                                |                               
|Depreciation and amortization                             | 145,543                        | 168,008                       
|Accretion of discounts on securities                      | ( 8,196)                       | ( 10,385)                     
|Amortization of premiums on securities                    | 3,416                          | 3,550                         
|Provision for loan losses                                 | 121,000                        | 90,000                        
|Stock dividend on other investments @ cost                | (9,300)                        | 0                             
|Change in other operating assets                          | 977,109                        | (184,257)                     
|Change in other operating liabilities                     | (90,378)                       | (3,146)                       
|                                                          |                                |                               
|Total adjustments                                         | 1,139,194                      | 63,770                        
|                                                          |                                |                               
|Net cash provided by operating activities                 | 2,001,339                      | 736,665                       
|                                                          |                                |                               
|CASH FLOWS FROM INVESTING ACTIVITIES:                     |                                |                               
|Proceeds from maturities of securities available for sale | 1,765,437                      | 1,751,812                     
|Purchase of securities available for sale                 | (200,000)                      | (678,125)                     
|Net increase in loans                                     | (10,864,299)                   | (2,660,472)                   
|Purchase of additional life insurance                     | 0                              | (11,100)                      
|Capital expenditures                                      | (140,365)                      | (61,956)                      
|                                                          |                                |                               
|Net cash used in investing activities                     | (9,439,227)                    | (1,659,841)                   
|                                                          |                                |                               
|CASH FLOWS FROM FINANCING ACTIVITIES:                     |                                |                               
|Net increase in deposits                                  | 2,619,880                      | 3,573,925                     
|Net increase in short-term borrowings                     | 296,084                        | 379,804                       
|Principal payments on borrowed funds                      | (2,000,000)                    | (2,314)                       
|Proceeds from borrowed funds                              | 2,000,000                      |                               
|Director and Employee Stock Purchase Plans                | 99,009                         | 74,799                        
|Dividends Paid                                            | (208,458)                      | (174,156)                     
|                                                          |                                |                               
|Net cash provided by financing activities                 | 2,806,515                      | 3,852,058                     
|                                                          |                                |                               
|Net (decrease) increase in cash and cash equivalents      | (4,631,373)                    | 2,928,882                     
|Cash and cash equivalents at beginning                    | 13,892,443                     | 6,446,150                     
|                                                          |                                |                               
|Cash and cash equivalents at end                          | $  9,261,070                   | $  9,375,032                  
|                                                          |                                |                               
|Supplemental information:                                 |                                |                               
|                                                          |                                |                               
|Cash paid during the period for:                          |                                |                               
|Interest                                                  | $  1,933,148                   | $  2,728,330                  
|Income taxes                                              | $    292,597                   | $    230,000                  



See accompanying notes to consolidated financial statements







LUXEMBURG BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



The consolidated financial statements for interim periods are unaudited; however, in the opinion of the management of Luxemburg Bancshares, Inc. (Company), all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation have been included. Refer to the Notes to Consolidated Financial Statements which appear in the Companys Form 10-KSB for the Fiscal Year ended December 31, 2001 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 548,138 in June 2002 and 543,700 in June 2001. The basic and diluted earnings per share are the same for 2002 and 2001.



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, 2002  
|                             |                
|Commitments to extend credit | $9,675,000     
|Credit card arrangements     | 1,387,000      
|Standby letters of credit    | 699,000        



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.





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 Companys adoption of SFAS No. 142 on January 1, 2002 did not have a material impact on the consolidated financial statements.











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,
| |  | --------------------------- | ---- | -------------------------
| |  | 2002                        | 2001 |                          



|Net Earnings                              | $     413,669 | $     331,927 |  | $     862,145 | $     672,895
|----------------------------------------- | ------------- | ------------- |  | ------------- | -------------
|Average Consolidated Balance Sheet Items: |               |               |  |               |              
|Loans                                     | 108,061,261   | 93,034,529    |  | 105,590,614   | 92,824,622   
|Taxable Investment Securities             | 6,651,098     | 9,415,356     |  | 7,111,150     | 9,848,820    
|Fed Funds Sold                            | 1,389,934     | 3,889,209     |  | 1,992,474     | 2,974,694    
|Municipal Loans & Investments             | 10,108,239    | 10,298,001    |  | 10,135,628    | 10,220,464   
|Other Earning Assets                      | 2,253,042     | 2,132,187     |  | 3,226,715     | 1,847,945    
|Total Earning Assets                      | 128,463,574   | 118,769,282   |  | 128,056,581   | 117,716,545  
|Total Assets                              | 139,804,192   | 127,100,274   |  | 139,284,825   | 125,899,830  
|Deposits                                  | 121,601,516   | 108,731,402   |  | 120,568,227   | 107,718,337  
|Shareholders Equity                      | 14,325,355    | 12,791,118    |  | 14,170,247    | 12,658,686   
|                                          |               |               |  |               |              
|Key Ratios:                               |               |               |  |               |              
|Average Equity to Average Total Assets    | 10.25%        | 10.06%        |  | 10.17%        | 10.05%       
|Return on Average Total Assets            | 1.19%         | 1.05%         |  | 1.25%         | 1.08%        
|Return on Average Equity                  | 11.58%        | 10.40%        |  | 12.27%        | 10.72%       
|Net Interest Margin                       | 3.87%         | 3.60%         |  | 3.88%         | 3.60%        
|                                          |               |               |  |               |              



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 $174,806 or 16.4% to $1,239,718 for the three months ended June 30, 2002, from $1,064,912 for the three months ended June 30, 2001. Net interest income has increased $361,701 or 17.2% to $2,464,485 for the six months ended June 30, 2002, from $2,102,784 for the six months ended June 30, 2001.  The net interest income has increased due to Bank growth.





|                    | Three Months Ended June 30, | Six Months Ended June 30,
|------------------- | --------------------------- | -------------------------
|                    | 2002                        | 2001                     
|Interest Income     | $  2,178,349                | $  2,382,554             
|Interest Expense    | 938,631                     | 1,317,642                
|Net Interest Income | $  1,239,718                | $  1,064,912             
|                    |                             |                          
|Net Interest Margin | 3.87%                       | 3.60%                    
|                    |                             |                          



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, 2002 is illustrated in the following table:



Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001.

Increase (Decrease) in Net Interest

|Income              | Net Change   | Due To Rate  | Due To Volume
|------------------- | ------------ | ------------ | -------------
|Interest Income     | $  (204,205) | $  (446,401) | $ 242,196    
|Interest Expense    | (379,011)    | (471,779)    | 92,768       
|Net Interest Income | $   174,806  | $   25,378   | $ 149,428    







Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001.

Increase (Decrease) in Net Interest

|Income              | Net Change   | Due To Rate | Due To Volume
|------------------- | ------------ | ----------- | -------------
|Interest Income     | $  (399,933) | $ (856,398) | $ 456,465    
|Interest Expense    | (761,634)    | (951,015)   | 189,381      
|Net Interest Income | $  361,701   | $  94,617   | $ 267,084    



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, 2002 compared to the three months and six months ended June 30, 2001.  Average earning assets increased 8.2% and 8.8%, respectively to $128,463,574 for the three months ended June 30, 2002 from $118,769,282 for the three months ended June 30, 2001 and to $128,056,581 for the six months ended June 30, 2002 from $117,716,545 for the six months ended June 30, 2001. However, interest bearing liabilities increased 9.2% and 9.6%, respectively to $109,866,511 for the three months ended June 30, 2002 compared to $100,638,903 for the three months ended June 30, 2001 and to $109,413,936 for the six months ended June 30, 2002 compared to $99,803,236 for the six months ended June 30, 2001.



OPERATING RESULTS



Net income for the three months ended June 30, 2002, was $413,669 compared to $331,927 for the three months ended June 30, 2001.  The increase of $81,742 reflects an increase in service charges on deposit accounts and loan servicing fee income. Service charges on deposit accounts and loan service fee income increased $45,513 to $163,410 for the three months ended June 30, 2002, compared to $117,897 for the three months ended June 30, 2001.  The increase in net interest income of $174,806 for the three months ended June 30, 2002, compared to the three months ended June 30, 2001 is discussed in Net Interest Income and Rate/Volume Analysis elsewhere in this report.



Total operating expenses increased $75,218 or 7.7% from $982,186 for the three months ended June 30, 2001 to $1,057,404 for the three months ended June 30, 2002.  Salaries and related benefits increased $24,915 or 4.3% to $607,336 for the three months ended June 30, 2002 compared to $582,421 for the three months ended June 30, 2001. An increase in performance based compensation accounted for the majority of the increase.  Net occupancy expense increased $8,304 or 13.8% to $68,572 for the three months ended June 30, 2002 compared to $60,268 for the three months ended June 30, 2001. Equipment rentals, depreciation, and maintenance for the three months ended June 30, 2002 decreased $21,933 or 27.4% to $58,238 compared to $80,171 for the three months ended June 30, 2001. Finally, other operating expenses for the three months ended June 30, 2002 increased $64,110 or 30.8% to $272,403 from $208,293 for the three months ended June 30, 2001 due primarily to increases in postage, and telephone expenses.



Net income for the six months ended June 30, 2002, was $862,145 compared to $672,895 for the six months ended June 30, 2001.  The increase of $189,250 reflects an increase in service charges on deposit accounts and loan fee income. Service charges on deposit accounts and loan service fee income increased $84,010 to $299,780 for the six months ended June 30, 2002  compared to $215,770 for the six months ended June 30, 2001.The increase in net interest income of $361,701 for the six months ended June 30, 2002, compared to the three months ended June 30, 2001 is discussed in Net Interest Income and Rate/Volume Analysis elsewhere in this report.



Total operating expenses increased $151,408 or 7.9% from $1,907,354 for the six months ended June 30, 2001 to $2,058 762 the six months ended June 30, 2002. Salaries and related benefits increased $80,736 or 7.2% to $1,201,995 for the six months ended June 30, 2002 compared to $1,121,259 for the six months ended June 30, 2001. Higher performance based compensation account for the increase.  Net occupancy expense increased $6,959 or 5.3% to $137,339 for the six months ended June 30, 2002 compared to $130,380 for the six months ended June 30, 2001.  Equipment rentals, depreciation, and maintenance for the six months ended June 30, 2002 decreased $21,919 or 13.1% to $144,907 compared to $166,826 for the six months ended June 30, 2001.   Other operating expenses for the six months ended June 30, 2002 increased $74,592 or 19.1% to $464,979 from $390,387 for the six months ended June 30, 2001.



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 primarily to borrowers in Northeast Wisconsin.



The Bank generally places loans on non-accrual status when the loan is past due as to the payment of interest and/or principal in excess of 90 days. The Bank also places loans on a non-accrual status when it deems the collection of such interest unlikely. Loans are generally 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, 2002 the Company had one loan for $120,000 past due 90 days or more that was still accruing interest as compared to $926,000 for June 30, 2001.  The loan was brought current in July and was adequately secured to allow for the repayment of both the principal and interest due.  At June 30, 2002 and June 30, 2001 the Company did not have any loans that met the definition of Troubled Debt Restructuring. 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, 2002.  The Bank had $1,311,000 of non-accrual loans at June 30, 2002 and $787,000 of non-accrual loans at June 30, 2001.



During the three months ended June 30, 2002, $60,000 was charged to the provision for loan losses compared to $45,000 for the three months ended June 30, 2001. At June 30, 2002 the allowance was $1,232,672 or 1.09% of total loans. This compares to an allowance of $1,149,000 or 1.18% of total loans as of June 30, 2001.  Due to the increase in loan volume, the increase in non-accrual loans, and the decrease in the allowance to total loan ratio, the board approved an increase of $5,000 per month to the provision for loan losses starting in July 2002.  For the three months ended June 30, 2002 the Bank had net recoveries of $10,000 compared to net recoveries of $5,000 for the three months ended June 30, 2001.  For the six months ended June 30, 2002 the Bank had net recoveries of $9,000 compared to net charge-offs of $1,000 for the six months ended June 30, 2001.



The following table summarizes loan charge-offs and recoveries by type of loan for the three months ended June 30, 2002 and 2001:



|Loan Type                 | June 30, 2002 | June 30, 2001
|------------------------- | ------------- | -------------
|                          | Charge-Off    | Recovery     
|                          |               |              
|Real Estate               | $      0      | $         0  
|Commercial and Industrial | 0             | 0            
|Agricultural              | 2,000         | 14,000       
|Consumer                  | 2,000         | 0            
|                          |               |              
|TOTALS                    | $ 4,000       | $ 14,000     



The following table summarizes loan charge-offs and recoveries by type of loan for the six months ended June 30, 2002 and 2001:



|Loan Type                 | June 30, 2002 | June 30, 2001
|------------------------- | ------------- | -------------
|                          | Charge-Off    | Recovery     
|                          |               |              
|Real Estate               | $      0      | $         0  
|Commercial and Industrial | 3,000         | 0            
|Agricultural              | 0             | 1,000        
|Consumer                  | 11,000        | 22,000       
|                          |               |              
|TOTALS                    | $ 14,000      | $ 23,000     
|                          |               |              



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

|                                        | June 30, 2002 | June 30, 2001      
|--------------------------------------- | ------------- | -------------------
|Balance at End of Period Applicable to: |               | % of
loans to
total
|                                        | Amount        | Loans              
|Commercial and agricultural             | $891,000      | 59%                
|Real Estate-construction                | 0             | 0%                 
|Real Estate-mortgage                    | 120,000       | 22%                
|Consumer                                | 203,000       | 18%                
|Letters of Credit                       | 3,000         | 1%                 
|Total Domestic                          | 1,217,000     | 100%               
|                                        |               |                    
|Specific Loan Allocation                | 0             |                    
|Unallocated                             | 16,000        |                    
|                                        |               |                    
|TOTALS                                  | $ 1,233,000   | 100%               





LIQUIDITY AND INTEREST RATE SENSITIVITY



The Company must maintain an adequate liquidity position in order to respond to the short-term demand for funds caused by withdrawals from deposit accounts, extensions of credit and for the payment of operating expenses.  Maintaining this position of adequate liquidity is accomplished through the management of a combination of liquid assets; those which can be converted into cash and access to additional sources of funds.  Primary liquid assets of the Company are cash and due from banks, 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 $1,389,934 and $3,889,209 for the three months ended June 30, 2002 and 2001, 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, 2002 the Companys rate sensitive liabilities exceed rate sensitive assets due within one year by $20,036,000.



As part of managing liquidity, the Company monitors its loan to deposit ratio on a daily basis.  At June 30, 2002 the ratio was 92.2% which is above the Companys policy range.  The board of directors approved the ratio at the July board meeting.



The Company experienced a decrease in cash and cash equivalents, its primary source of liquidity, of $4,631,373 for the six months ended June 30, 2002. The primary source of cash flow for the six months ended June 30, 2002 was cash provided by financing activities of $2,806,515 which consisted of an increase in deposits of $2,619,880 and an increase in short term borrowing of $296,084. Cash outflow for the six months ended June 30, 2002 was primarily an increase in loans of $10,864,299.  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, 2002, 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                                       | $  3,187,000    |                   |                     |                   
|Investment Securities                                        | $  1,371,000    | $  6,999,000      | $  5,395,000        | $  1,797,000      
|Loans                                                        |                 |                   |                     |                   
|Variable Rate                                                | $  23,839,000   |                   |                     |                   
|Real Estate-Other                                            | $    8,112,000  | $ 15,509,000      | $       123,000     | $     415,000     
|Commercial and Industrial                                    | $    9,589,000  | $ 21,809,000      | $    1,955,000      | $  5,123,000      
|Agricultural                                                 | $    1,139,000  | $   2,567,000     | $       782,000     | $     329,000     
|Consumer                                                     | $    3,409,000  | $ 15,436,000      | $      350,000      | $     173,000     
|Municipal                                                    |                 | $     448,000     | $      787,000      |                   
|Other                                                        | $       527,000 | $             -0- | $               -0- | $              -0-
|                                                             |                 |                   |                     |                   
|Total Interest Earning Assets                                | $51,173,000     | $62,768,000       | $  9,392,000        | $ 7,837,000       
|                                                             |                 |                   |                     |                   
|Interest Bearing Liabilities:                                |                 |                   |                     |                   
|Interest Bearing Demand                                      |                 |                   |                     | $  5,460,000      
|Savings Deposits                                             | $   8,396,000   |                   |                     | $19,592,000       
|Money Market Accounts                                        | $   1,013,000   |                   |                     | $  2,365,000      
|Certificates of Deposit                                      | $ 46,592,000    | $  8,875,000      |                     |                   
|Jumbo CDs                                                   | $ 12,866,000    | $  2,270,000      |                     |                   
|Other                                                        | $  2,342,000    | $  2,000,000      | -0-                 | -0-               
|                                                             |                 |                   |                     |                   
|                                                             |                 |                   |                     |                   
|Total Interest Bearing Liabilities                           | $71,209,000     | $ 13,145,000      | -0-                 | $27,417,000       
|                                                             |                 |                   |                     |                   
|Interest Sensitivity Gap per Period                          | $(20,036,000)   | $49,623,000       | $  9,392,000        | $(19,580,000)     
|                                                             |                 |                   |                     |                   
|Cumulative Interest Sensitivity Gap                          | $(20,036,000)   | $29,587,000       | $38,979,000         | $  19,399,000     
|                                                             |                 |                   |                     |                   
|Interest Sensitivity Gap as a Percentage of Earning Assets   | (15.3%)         | 37.8%             | 7.2%                | (14.9%)           
|                                                             |                 |                   |                     |                   
|Cumulative Sensitivity Gap as a Percentage of Earning Assets | (15.3%)         | 22.6%             | 29.7%               | 14.8%             







PART II - OTHER INFORMATION



Item 4.     Submission of Matters to a Vote of Security Holders



The annual meeting of Luxemburg Bancshares, Inc. was held on April 27, 2002.  The following three directors were elected:  Richard L. Dougherty, Ronald A. Ledvina, David L. Luebbers.  Richard L. Dougherty received 359,807 shares for, 7,704 against and 181,082 abstained. Ronald A. Ledvina received 365,303 shares for, 2,208 against and 181,082 abstained. David L. Luebbers received 365,221 shares for, 2,290 against and 181,082 abstained.



Item 6.     Exhibits and reports on Form 8-K



(a)  Exhibits



99.1 Certification of CEO pursuant to section 906 of Sarbanes-Oxley Act of 2002.



99.2 Certification of CFO pursuant to section 906 of Sarbanes-Oxley Act of 2002.



(b) Reports on Form 8-K



During the quarter ended June 30, 2002, 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 9, 2002                   |  | Date August 9, 2002