UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K  Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the
fiscal year ended December 31, 2001.  Commission
file number 0-12292  UPBANCORP, INC. (Exact
name of registrant as specified in its charter)  Delaware
  
  36-3207297(State or other
  jurisdiction of incorporation or organization)
  
  (I.R.S. Employer
  Identification No.)4753 N. Broadway, Chicago, Illinois
  
  60640(Address of principal executive
  offices)
  
  (Zip Code)Registrants telephone
  number, including area code(773) 878-2000  Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common
Stock-$1 par value  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing for the past 90 days. Yesý   No  o  Indicate by check mark if the disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.ý  The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 8, 2002 (based upon the closing price as of such
date), was approximately $30,747,165.  The number of shares outstanding of the registrants common stock,
$1.00 par value, as of March 8, 2002 was 835,055.  DOCUMENTS INCORPORATED BY
REFERENCE  Portions of the proxy statement for the annual shareholders meeting to
be held April 16, 2002, are incorporated by reference into Part III of this
Form 10-K.  
   Upbancorp, Inc.
  Table of Contents  PART IItem 1:  BusinessItem 2:  PropertiesItem 3:  Legal ProceedingsItem
  4:  Submission of Matters to Vote of
  Security HoldersPARTIIItem
  5:  Market for the Registrants Commom
  Equity and Related Stockholder MattersItem 6:  Selected Financial DataItem
  7:  Managements Discussion and
  Analysis of Financial Condition and Results of OperationsItem
  7A:  Quantitative and Qualitative
  Disclosures on Market RiskItem
  8:  Financial Statements and
  Supplementary DataItem
  9:  Changes in and Disagreements with
  Accountants on Accounting and Financial DisclosuresPART  IIIItem
  10:  Directors and Executive Officers
  of the RegistrantItem 11:  Executive CompensationItem
  12:  Security Ownership of Certain
  Beneficial Owners and ManagementItem
  13:  Certain Relationships and Related
  TransactionsPART  IVItem
  14:  Exhibits, Financial Statement
  Schedules and Reports on Form 8-k  2 
   PART I ITEM 1:  BUSINESS  UPBANCORP,
INC.  Upbancorp, Inc. (Upbancorp or the Company), is a
bank holding company organized in 1983 under the laws of the State of Delaware.
Upbancorp owns all of the outstanding common stock of Uptown National Bank of
Chicago (Subsidiary Bank or Uptown), organized in 1929 and located in
Chicago, Illinois.  There are branches
of Uptown located in the metropolitan Phoenix area and operate under the name
of Heritage Bank (Heritage). Heritage was organized in 1977 and was acquired
by the Company in 1988.  Heritage was merged
into Uptown in 2000.  Upbancorp does not
engage in any activities other than providing administrative services and
acting as a holding company for Uptown.  The Company is a publicly traded banking company with
total assets of $389 million at year-end 2001 and its headquarters are in
Chicago, Illinois. The majority of the operational responsibilities of the
Subsidiary Bank rests with its Officers and Directors.  The Company and its Subsidiary Bank employed
approximately 151 full-time equivalent employees at December 31, 2001.  Based on the Companys approach to decision making, it
has decided that its business is comprised of a single segment.  SUBSIDIARY
BANK  Uptown is a full-service community bank, which
operates seven banking offices and one loan production office in the
Chicagoland area and metropolitan Phoenix area. Approximately 73% of its
deposits are related to Uptown, with the remainder related to Heritage.  The Subsidiary Bank is engaged in the general
commercial banking business in addition to offering a complete range of retail
banking services. Uptown conducts a general banking business which embraces all
of the usual functions, both commercial and consumer, and which they may
lawfully provide, including, but not limited to: the acceptance of deposits to
demand, savings and time accounts and the servicing of such accounts;
commercial, industrial, consumer and real estate lending; safe deposit box
operations; and other banking services tailored for both commercial and retail
clients.  Uptown has one wholly-owned subsidiary, Broadway Clark
Building Corporation (BCBC), which is an Illinois corporation. BCBC owns all
of the real estate that is used in connection with the operation of Uptowns
business in the Chicagoland area with the exception of four facilities, which
are leased.  SUPERVISION AND REGULATION  The Company and its Subsidiary Bank are subject to
regulation and supervision by various governmental regulatory authorities
including, but not limited to, the Board of Governors of the Federal Reserve
System (the FRB), the Office of the Comptroller of the Currency (the OCC),
the Federal Deposit Insurance Corporation (the FDIC), the Securities and
Exchange Commission (the SEC), the Internal Revenue Service and state taxing
authorities. Financial institutions and their holding companies are extensively
regulated under federal and state law. The effect of such statutes, regulations
and policies can be significant and cannot be predicted with a high degree of
certainty.  Federal and state laws and regulations generally
applicable to financial institutions, such as the Company and the Subsidiary
Bank, regulate, among other things, the scope of business, investments,
reserves against deposits, capital levels relative to operations, the nature
and amount of collateral for loans, the establishment of branches, mergers,
consolidations and dividends. This supervision and regulation is intended
primarily for the protection of the FDICs Bank Insurance Fund and the
depositors, rather than the shareholders of financial institutions.  The Company is subject to supervision and regulation
by the FRB, under the Bank Holding Company Act of 1956, as amended.  3 
   Uptown is chartered under the National Bank Act, as
amended, and is subject to the examination, supervision, reporting and
enforcement requirements of the OCC, as the chartering authority for national
banks, and the FDIC as the administrator of the Bank Insurance Fund. Uptown is
a member of the Federal Reserve System.  The deposits of the Subsidiary Bank are insured by the
Bank Insurance Fund of the FDIC to the extent permitted by law.  The Companys common stock is registered with the SEC
under the Securities Act of 1934, as amended. Consequently, the Company is
subject to the information, proxy solicitation, insider trading and other
restrictions and requirements of the SEC under such act.  The following references to material statutes and
regulations affecting the Company and the Bank are brief summaries thereof and
are qualified in their entirety by reference to such statutes and
regulations.  Any change in applicable
law or regulations may have a material effect on the business of the Company
and the Bank.  Illinois
Banking Law  Illinois bank holding companies are permitted to
acquire banks and bank holding companies, and be acquired by bank holding
companies, located in any state which authorizes such acquisitions under
qualifications and conditions which are not unduly restrictive, as determined by
the Commissioner of Illinois, when compared to those imposed under Illinois
law.  Under interstate banking legislation, adequately
capitalized and managed bank holding companies are permitted to acquire control
of a bank in any state.  States,
however, may prohibit acquisitions of banks that have not been in existence for
at least five years.  The Federal
Reserve Board is prohibited from approving an application if the applicant
controls more than 10 percent of the total amount of deposits of insured depository
institutions nationwide.  In addition,
interstate acquisitions may also be subject to statewide concentration limits.  The Federal Reserve Board would be prohibited from
approving an application if, prior to consummation, the applicant controls any insured
institution or branch in the home state of the target bank, and the applicant,
following consummation, would control 30 percent or more of the total amount of
deposits of insured depository institutions in that state.  This legislation also provides that the
provisions on concentration limits do not affect the authority of any state to
limit the percentage of the total amount of deposits in the state which would
be held or controlled by any bank or bank holding company to the extent the
application of this limitation does not discriminate against out-of-state
institutions.  States may also waive the
statewide concentration limit.  The
legislation authorizes the Federal Reserve Board to approve an application
without regard to the 30 percent statewide concentration limit, if the state
allows a greater percentage of total deposits to be so controlled, or the
acquisition is approved by the state bank regulator and the standard on which
such approval is based does not have the effect of discriminating against
out-of-state institutions.  Interstate branching under the Interstate Banking and
Branching Act (the Branching Act) permits banks to merge across state lines,
thereby creating a bank headquartered in one state with branches in other
states.  Approval of interstate bank
mergers is subject to certain conditions including: adequate capitalization;
adequate management; Community Reinvestment Act compliance; deposit
concentration limits (as set forth above); and compliance with federal and
state antitrust laws.  An interstate
merger transaction may involve the acquisition of a branch without the
acquisition of the bank only if the law of the state in which the branch is
located permits out-of-state banks to acquire a branch of a bank in that state
without acquiring the bank.  Following
the consummation of an interstate transaction, the resulting bank may establish
additional branches at any location where any bank involved in the transaction
could have established a branch under applicable federal or state law, if such
bank had not been a party to the merger transaction.  Interstate branching is required to comply with host
state community reinvestment, consumer protection, fair lending, and intrastate
branching laws, as if the branch were chartered by the host state.  All other laws of the host state apply to
the branch to the same extent as if the branch were a bank, the main office
being located in the host state.  The interstate branching by merger provisions became
effective on June 1, 1997, and allowed each state, prior to the effective date,
the opportunity to opt out,  thereby prohibiting interstate branching within
that state.  Of those states in which
the Companys banking subsidiaries are located (Illinois and Arizona), neither
has adopted legislation to opt out of the interstate branching
provisions.  Furthermore, pursuant to
the Branching Act, a bank is now able to add new branches in a state in which
it does not already have banking operations if such state enacts a law
permitting such de novo branching.  4 
   The effects on the Company of the changes in
interstate banking and branching laws cannot be accurately predicted, but it is
likely that there will be increased competition from national and regional
banking firms headquartered outside of Illinois and Arizona.  The Illinois legislature has also considered the
adoption of legislation aimed at curbing what some legislators and
consumer-oriented advocacy groups consider to be predatory lending practices by
some mortgage brokers and other lenders active in the State of Illinois.  While the problems of so-called predatory
lending most often involve subprime credit, subprime loans are not
automatically predatory loans. 
So-called predatory lending does not arise from pricing or from
traditional loan terms that can provide real benefits to borrowers, such as
balloon payments or prepayment penalties. 
Rather, predatory lending consists of fraudulent and deceptive sales
practices that occur when borrowers are pressured into taking out loans they do
not need or cannot afford.  The Commissioner of Illinois has adopted predatory
lending regulations.  These regulations
apply to high cost mortgages which are defined as mortgages which exceed a
specified interest rate or are assessed points in excess of a specified
minimum.  Once any of these thresholds
is reached, the regulations impose certain restrictions on the lender including
obligating the lender to verify the borrowers ability to repay the loan based
on the borrowers income and debt obligations; prohibiting deceptive
refinancing knows as loan flipping where a lender refinances existing loans,
charging additional points and fees, without any financial benefit to the
consumer; prohibiting the financing of a single premium credit insurance;
prohibiting the financing of points and fees in excess of 6% of the total loan;
limiting the size and interval of balloon payments; and limiting prepayment
penalties that could be charged to consumers. 
These regulations also require the lender to make certain disclosures to
borrowers who are seeking high cost mortgages. 
The regulations apply to all state licensed financial institutions
making residential loans in Illinois. 
The regulations also require lenders to file with the Commissioner of
Illinois semi-annual reports on mortgage loans, including information relating
to defaults and foreclosures.  Inasmuch as neither the Company nor the Bank indulges
in such practices, it is unlikely that any legislation adopted in Illinois to
combat this perceived problem would have an impact on either the Company or the
Bank other than the creation of additional reporting requirements.  Bank Holding Company Act of 1956, As
Amended (the Act)  A bank holding company is subject to regulation under
the Act and is registered with the Federal Reserve Board under the Act.  A bank holding company is required by the
Act to file an annual report of its operations and such additional information
as the Federal Reserve Board may require and is subject, along with its
subsidiaries, to examination by the Federal Reserve Board.  The Federal Reserve Board has jurisdiction
to regulate the terms of certain debt issues of bank holding companies including
the authority to impose reserve requirements.  The Act currently prohibits a bank holding company, or
any subsidiary thereof, other than the bank, from acquiring all or
substantially all the assets of any bank located outside of Illinois or for a
bank holding company or any subsidiary from acquiring five percent (5%) or more
of the voting shares of any bank located outside of Illinois unless such
acquisition is specifically authorized by the laws of the state in which the
bank is located and the acquirer receives prior approval from the Federal
Reserve Board.  The acquisition of five
percent (5%) or more of the voting shares of any bank located in Illinois
requires the prior approval of the Federal Reserve Board and is subject to
state law limitations.  The Act also prohibits, with certain exceptions, a
bank holding company from acquiring direct or indirect ownership or control of
more than five percent (5%) of the voting shares of any company which is not a
bank and from engaging in any business other than that of banking, managing and
controlling banks, or furnishing services to banks and their subsidiaries,
except that bank holding companies may engage in, and may own shares of,
companies engaged in businesses found by the Federal Reserve Board to be so
closely related to bankingas to be a proper incident thereto.  Under current regulations of the Federal
Reserve Board, a bank holding company and its nonbank subsidiaries are
permitted, among other activities, to engage in such banking-related business ventures
as sales and consumer finance, equipment leasing, computer service bureau and
software operations, mortgage banking and brokerage, and sale and leaseback and
other forms of real estate banking.  The
Act does not place territorial restrictions on the activities of a bank holding
company or its nonbank subsidiaries.  Federal law prohibits acquisition of control of a
bank or bank holding company without prior notice to certain federal bank
regulators.  Control is defined in
certain cases as the acquisition of as little as 10% of the outstanding
shares.  Furthermore, under certain
circumstances, a bank holding company may not be able to purchase its own stock
where the gross consideration will equal 10% or more of the companys net worth
without obtaining approval of the Federal Reserve Board.  5 
   Graham-Leach-Bliley Act of 1999  The enactment of the Grahan-Leach-Bliley Act of 1999
(the GLB Act) represented a pivotal point in the history of the financial
services industry.  The GLB Act swept
away large parts of a regulatory framework that had its origins in the
Depression Era of the 1930s.  Effective
March 11, 2000, new opportunities became available for banks, other depository
institutions, insurance companies and securities firms to enter into
combinations that permit a single financial services organization to offer
customers a more complete array of financial products and services.  To further this goal, the GLB Act amends
section 4 of the Act providing a new regulatory framework for regulation
through the financial holding company (FHC), which will have as its umbrella
regulator the Federal Reserve Board. 
Functional regulation of the FHCs separately regulated subsidiaries
will be conducted by its primary functional regulator.  Pursuant to the GLB Act, bank holding
companies, subsidiary depository institutions thereof and foreign banks
electing to qualify as a FHC must be well managed, well capitalized and at
least rated satisfactory under the Community Reinvestment Act in order for them
to engage in new financial activities.  An FHC may engage in securities, insurance and other
activities that are financial in nature or incidental to a financial
activity.  While aware of the
flexibility of the FHC statute the Company has, for the time being, decided not
to convert to a FHC, but will continue to follow the reception given FHCs in
the marketplace.  The activities of bank
holding companies that are not FHCs will continue to be limited to activities
under the Act.  The GLB Act also prohibits a financial institution
from disclosing non-public information about a consumer to nonaffiliated third
parties unless the institution satisfies various disclosure and opt out
requirements and the consumer has not elected to opt out of the disclosure.  Under the GLB Act, a financial institution
must provide its consumers with a notice of its privacy policies and practices,
and the Federal Reserve Board, the FDIC and other financial regulatory agencies
are authorized to issue regulations to implement notice requirement and
restrictions on a financial institutions ability to disclose non-public
personal information about consumers to nonaffiliated third parties.  Because the Company and the Bank are not now
engaged in selling or transferring non-public customer information to
nonaffiliated third parties, it is anticipated that this burden will not result
in material economic cost to the Company or the Bank.  The GLB Act provides a federal right to privacy for
non-public personal information of individual customers.  The Company and the Bank are also subject to
certain state laws that deal with the use and distribution of non-public
personal information.  The GLB Act is expected, in time, to alter the
competitive landscape of the product markets presently served by the
Company.  Companies that are presently
engaged primarily in insurance activities or securities activities will be
permitted to acquire banks and bank holding companies.  The Company may, in the future, face
increased competition from a broader range of larger, more diversified
financial companies.  Financial Institutions Reform,
Recovery and Enforcement Act of 1989  The passage of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 (FIRREA) resulted in significant changes
in the enforcement powers of federal banking agencies, and more significantly,
the manner in which the thrift industry is regulated.  While FIRREAs primary purpose was to address public concern over
the financial crises of the thrift industry through the imposition of strict
reforms on that industry, FIRREA grants bank holding companies more expansive
rights of entry into the savings institution market through the acquisition
of both healthy and failed savings institutions.  Under the provisions of FIRREA, a bank holding company can expand
its geographic market or increase its concentration in an existing market by
acquiring a savings institution, but it cannot expand its product market by
acquiring a savings institution.  Federal Deposit Insurance Corporation
Improvement Act of 1991  The Federal Deposit Insurance Corporation Improvement
Act of 1991 (the FDIC Improvement Act) introduced a comprehensive and
fundamentally changed approach to banking supervision, generally subjecting
banking institutions to significantly increased regulation and
supervision.  Some of the provisions
contained in the FDIC Improvement Act include the implementation of a
risk-related premium system for FDIC-insured deposits, revisions in the process
of supervision and examination for depository institutions, and federal deposit
insurance reforms.  The FDIC Improvement
Act has had, and is expected to continue to have, a broad and significant
impact on the structure and condition of the banking industry.  6 
   GOVERNMENTAL MONETARY POLICIES AND ECONOMIC CONDITIONS  The earnings of the Company are affected in important
respects by general economic conditions and also by the fiscal and monetary
policies of the federal government and its agencies. In particular, the FRB
regulates the national supply of bank credit in order to achieve, among other
things, maximum employment and a stable price level. Among the instruments of
monetary policy used by the FRB to implement these objectives are: open market
transactions in United States government securities, changes in the discount
rate on member bank borrowings and changes in reserve requirements against
member bank deposits. These means are used in varying combinations to influence
overall growth of bank loans, investments, and deposits, and they may also
affect interest rates charged on loans or paid for deposits.  Interest rate sensitivity has a major impact on the
yields earned on assets of the Subsidiary Bank. As market rates change, yields
earned on assets may not necessarily move to the same degree as rates paid on
liabilities. For this reason, the Subsidiary Bank attempts to minimize earnings
volatility related to fluctuations in interest rates through the use of formal
asset/liability management programs which identify imbalances between the
repricing of earning assets and funding sources, among other things.  In addition to the policy of the FRB, the Companys
earnings are also affected by the FDIC insurance premiums and the annual fees
charged by the various regulatory authorities. The Company cannot fully predict
the nature or the extent of any effect which such fiscal and monetary policies
may have on its business and earnings.  COMPETITION  The principal methods of competition between commercial
banks is generally expressed in terms of price, including interest rates paid
on deposits and interest rates charged on borrowings, fees charged on fiduciary
services, quality of services to customers, ease of access to services, and the
offering of additional services. More recently, technological advances such as
internet banking, PC banking, telebanking, point-of-sale debit cards and
electronic data interchange have also resulted in intensified competition with
traditional banking distribution systems.  Both Illinois and Arizona are highly competitive
markets for banking and related financial services. Since these areas are the
Companys primary focus markets, the Subsidiary Bank is exposed to varying
types and levels of competition. In general, the Subsidiary Bank competes,
anticipates and responds within each individual market area. Both Uptown and
Heritage compete and rely heavily on the high level of quality service provided
to our customers. The Company has seen the level of competition and number of
competitors in its market places increase in recent years and expects a
continuation of these competitive market conditions.  CAPITAL GUIDELINES  The FRB, the OCC and the FDIC have risk-based capital
guidelines which provide a framework for assessing the adequacy of the capital
of banks and bank holding companies (collectively banking institutions).
These guidelines apply to all banking institutions regardless of size and are
used in the examination and supervisory process as well as in the analysis of
applications to be acted upon by the regulatory authorities. These guidelines
require banking institutions to maintain capital based on the credit risk of
their operations.  The risk-based capital guidelines are designed to
require the maintenance of capital commensurate with both on and off-balance
sheet credit risks. The minimum ratios established by the guidelines are based
on both Tier 1 and total capital to total risk-based assets. Total risk-based
assets are calculated by assigning each on-balance sheet asset and off-balance
sheet item to one of four risk categories depending on the nature of each item.
The amount of the items in each category is then multiplied by the risk-weight
assigned to that category (0%, 20%, 50% or 100%). Total risk based assets
equals the sum of the resulting amounts. Tier 1 capital is generally defined as
shareholders equity less intangible assets and total capital is generally
defined to include Tier 1 capital plus limited levels of the allowance for loan
losses.  In addition to the risk-based capital requirements,
the FRB, the OCC and the FDIC require institutions to maintain a minimum
leveraged-capital ratio to supplement the risk-based capital guidelines. The
leverage ratio is intended to ensure that adequate capital is maintained
against risks other than credit risk.  The Company and the Subsidiary Bank exceeded the
minimum required capital guidelines for both risk-based capital ratios and the
leverage ratio at December 31, 2001. A further discussion of the capital guidelines
is included in the Capital Resources section under Item 7 of this Form 10-K.  7 
   DIVIDENDS  General  In addition to the capital guidelines provided in the
discussion above, there are various national and state banking regulations
which limit the ability of the Subsidiary Bank to pay dividends. This limits
the ability of the Company to pay dividends. Since the Company is a legal
entity, separate and distinct from its affiliates, its dividends are not
subject to such bank regulatory guidelines. The holders of the Companys common
stock are entitled to receive such dividends as are declared by the Board of
Directors. For a further discussion of dividends, see Note 12 Dividend
Restrictions and Regulatory Capital Requirements in the Notes to Consolidated
Financial Statements included under Item 8 of this Form 10-K.  National
Banking Association Restrictions  Uptown is a national banking association and is
limited with respect to the amount of dividends which it can pay to its
shareholders under Sections 56 and 60 of the National Bank Act.  Section 56 restricts a national bank from paying
dividends if it would impair the institutions capital by barring any payments
in excess of net profits then on hand. Section 56 further requires that a
bank deduct losses and bad debts from net profits then on hand. It also
specifies that a portion of a banks capital surplus account may be included as
net profits then on hand to the extent that it represents earnings from prior
periods.  Section 60 requires the OCCs approval if the total of
all dividends declared in any calendar year will exceed the institutions net
profits of that year combined with its retained net profits of the preceding
two years, less any required transfers to surplus. In calculating its net
profits under Section 60 a national bank may not add back provisions made to
its allowance for loan losses nor deduct net charge-offs.  8 
   ITEM 2:  PROPERTIES The following table
summarizes the Company and Subsidiary Banks properties by location:  Affiliate
  
  Property Type/Location
  
  Ownership
  
  Square FootageThe Company
  
  4753 N. Broadway
  Chicago, Illinois
  
  
  
  Uptown
  
  Main Office (Illinois):
  Banking Office:
  4753 N. Broadway
  Chicago, Illinois
  
  Owned
  
  149,000 (Note 1)Banking Office:
  6041 N. Clark Street
  Chicago, Illinois
  
  Owned
  
  2,100 (Note 1)Banking Office:
  5345 N. Sheridan Road
  Chicago, Illinois
  
  Leased
  
  1,500Banking Office:
  1058 W. Bryn Mawr Avenue
  Chicago, Illinois
  
  Leased
  
  1,500Aircraft Lending Office:
  43 W 518 Route 30
  Aurora Municipal Airport
  Sugar Grove, Illinois
  
  Leased
  
  1,800Banking Office:
  4553-57 N. Lincoln Avenue
  Chicago, Illinois
  
  Leased
  
  1,870Main Office (Arizona):
  4222 E. Camelback Road
  Suite J200
  Phoenix, Arizona
  
  Leased
  
  4,100Banking Office:
  4222 E. Camelback Road
  Suite J100
  Phoenix, Arizona
  
  Leased
  
  4,100Banking Office:
  1333 W. Broadway
  Tempe, Arizona
  
  Leased
  
  4,700  In addition to the banking locations listed above, the
Subsidiary Bank owns 10 automatic teller machines, strategically located within
the Subsidiarys market places.  At December 31, 2001, the properties and equipment of
the Company had an aggregate net book value of approximately $5.1 million. 
 Note 1:  These
locations are owned by Uptowns wholly-owned subsidiary, BCBC. Uptown utilizes
approximately 49,000 square feet for its main office and the rest of the
facility is leased out by BCBC to independent third parties.  9 
   ITEM 3:  LEGAL PROCEEDINGS  Neither the Company nor its Subsidiary Bank are party
to any litigation, which in the judgment of management after consultation with
counsel, would have a material effect on the financial position or results of
operations of the Company or the Subsidiary Bank.  ITEM
4:  SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS  There were no items submitted to a vote of security
holders during the fourth quarter of 2001.  PART II ITEM
5:  MARKET FOR THE REGISTRANTS COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS  The Companys common stock is traded on the
Over-The-Counter market under the symbol UPBN. As of December 31, 2001, there
were 278 shareholders of record. The following table sets forth common stock
information during each quarter of 2001 and 2000.  2001
  
  2000Fourth
  
  Third
  
  Second
  
  First
  
  Fourth
  
  Third
  
  Second
  
  FirstMarket
  Price of Common Stock:High
  
  $
  32.00
  
  $
  33.00
  
  $
  32.50
  
  $
  33.00
  
  $
  32.25
  
  $
  26.50
  
  $
  26.00
  
  $
  33.00Low
  
  32.00
  
  29.60
  
  31.75
  
  29.81
  
  26.50
  
  24.88
  
  24.75
  
  25.25Quarter-End
  
  32.00
  
  31.00
  
  31.80
  
  32.50
  
  29.75
  
  26.50
  
  24.88
  
  26.00Cash
  Dividends per Share
  
  0.130
  
  0.130
  
  0.130
  
  0.130
  
  0.130
  
  0.130
  
  0.130
  
  0.130  A discussion regarding the regulatory restrictions
applicable to the Subsidiary Banks ability to pay dividends is included in the
Dividends section under Item 1 of this Form 10-K and Note 12 Dividend
Restrictions and Regulatory Capital Requirements in the Notes to Consolidated
Financial Statements included under Item 8 of this Form 10-K.  10 
   ITEM 6:  SELECTED FINANCIAL DATA  The following Selected Financial Data is not covered
by the report of independent public accountants and should be read in
conjunction with the consolidated financial statements and accompanying notes
included under Item 8 of this Form 10-K. A more detailed discussion and
analysis of factors affecting the Companys financial position and operating
results is presented in Managements Discussion and Analysis of Financial
Condition and Results of Operations found under Item 7 of this Form 10-K.  Consolidated financial information reflecting a
summary of the operating results and financial condition of the Company for the
five years ended December 31, 2001, is presented in the following table.  Selected Financial Data
  
  Years Ended December 31,2001
  
  2000
  
  1999
  
  1998
  
  1997(Dollars in thousands, except per share data)Operating
  Results:Interest income
  
  $
  30,985
  
  $
  30,090
  
  $
  23,530
  
  $
  20,040
  
  $
  17,722Interest expense
  
  13,373
  
  13,105
  
  8,547
  
  7,109
  
  6,115Net interest
  income
  
  17,612
  
  16,985
  
  14,983
  
  12,931
  
  11,607Provision for
  loan losses
  
  890
  
  695
  
  885
  
  580
  
  410Other income
  
  2,611
  
  2,285
  
  3,213
  
  3,154
  
  2,667Other expense
  
  13,935
  
  13,943
  
  13,349
  
  11,940
  
  10,760Income before
  income taxes
  
  5,398
  
  4,632
  
  3,962
  
  3,565
  
  3,104Income taxes
  
  1,915
  
  1,611
  
  1,385
  
  1,265
  
  1,127Net income
  
  $
  3,483
  
  $
  3,021
  
  $
  2,577
  
  $
  2,300
  
  $
  1,977Per
  Share Data:Net income
  
  $
  4.17
  
  $
  3.61
  
  $
  3.00
  
  $
  2.63
  
  $
  2.24Cash dividends
  declared
  
  0.52
  
  0.52
  
  0.52
  
  0.50
  
  0.50Dividend payout
  ratio
  
  12.47
  %
  14.40
  %
  17.33
  %
  19.01
  %
  22.32
  %Book value
  
  35.15
  
  31.01
  
  26.90
  
  26.02
  
  23.79Market price
  
  32.00
  
  29.75
  
  33.00
  
  35.25
  
  31.13Weighted average
  shares
  
  835,055
  
  836,478
  
  859,710
  
  875,907
  
  882,800Balance
  Sheet Highlights:Assets
  
  $
  389,453
  
  $
  396,671
  
  $
  324,777
  
  $
  269,462
  
  $
  231,377Loans, net of
  deferred loan fees
  
  303,728
  
  292,305
  
  249,719
  
  195,095
  
  166,252Deposits
  
  324,025
  
  348,548
  
  270,155
  
  226,034
  
  198,132Shareholders
  equity
  
  29,356
  
  25,897
  
  22,524
  
  22,638
  
  21,000Average equity
  to average asset ratio
  
  6.42
  %
  6.54
  %
  7.77
  %
  8.69
  %
  8.73
  %Asset growth
  rate
  
  -1.82
  %
  22.14
  %
  20.53
  %
  16.46
  %
  2.20
  %Performance
  Ratios:Return on
  average assets
  
  0.87
  %
  0.84
  %
  0.87
  %
  0.91
  %
  0.87
  %Return on
  average shareholders equity
  
  13.49
  %
  12.77
  %
  11.22
  %
  10.44
  %
  9.98
  %Net interest
  margin (1)
  
  3.88
  %
  4.16
  %
  4.73
  %
  4.74
  %
  4.84
  %Percentage
  nonperforming loans/total loans
  
  1.68
  %
  0.59
  %
  0.36
  %
  0.67
  %
  0.69
  %Percentage
  nonperforming assets/total assets
  
  1.31
  %
  0.43
  %
  0.28
  %
  0.49
  %
  0.64
  %  
 (1)Interest income and
yields on non-taxable securities are reflected on a tax equivalent basis based
upon a Federal income tax rate of 34%.  11 
   ITEM
7:  MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data)  The following managements discussion and analysis of
financial condition and results of operations should be read in conjunction
with the Companys Consolidated Financial Statements and Notes to Consolidated
Financial Statements presented in Item 8 of this Form 10-K as well as the
Selected Financial Data presented in Item 6 of this Form 10-K.  This discussion and analysis is intended to address
significant factors affecting the Companys consolidated statements of
condition and statements of income for the past three years. The discussion is
designed to provide shareholders with a comprehensive review of the operating
results and financial condition of the Company.  Summary  The Companys consolidated net income for 2001 totaled
$3,483 or $4.17 per share.  This is
compared to net income and earnings per share of $3,021 or $3.61 per share and
$2,577 or $3.00 for 2000 and 1999, respectively. The results of 2001 represent
a 15% improvement in net income from 2000 after a 17% in 2000 over 1999. The
earnings improvement in 2001 is mostly attributable to increased net interest
income and gain on the sale of investments while the 2000 improvement was
attributable to increased interest income.  The operating performance of bank holding companies is
often measured and comparisons made based on net income to average assets and
net income to average equity. The Companys return on average shareholders
equity for 2001 was 13.49% as compared to 12.77% in 2000 and 11.22% in 1999.
Return on average assets for 2001 was .87% as compared to .84% in 2000 and .87%
in 1999. The slight increase in the Companys return on average assets from
2000 to 2001 is a result of increases in other income, due primarily to the
gain on the sale of investments and increased net interest income.  The slight decrease from 1999 to 2000 is the
result of a decrease in other income due primarily to the Companys decision to
terminate its mortgage banking operations in late 1999.  The Companys decrease in total assets and its asset
growth rate are the result of a decision by management to reduce a portion of
the Banks high cost of deposits.  In
addition, the Bank sold aircraft related loans, totaling over $10 million
during the year.  Loans continued to
increase with a 4% growth rate in the current year.  Nonperforming loans increased as a percentage of
outstanding loans during the past year. Nonperforming loans totaled $5,091 or
1.68% of net loans at December 31, 2001 as compared to $1,721 or .59% in 2000,
and $907 or .36% in 1999.  The majority
of this increase relates to two loans, totaling $3,180, to a single borrower
being placed on nonaccrual status during the year.  These loans have been analyzed and included in the banks
measurement process when reviewing the allowance for loan losses as performed
on a quarterly or more frequent basis. 
Absent these loans, there was a slight increase in nonperforming loans
of $190.  Upbancorp continues to maintain a strong capital base
at December 31, 2001. Consolidated capital levels as well as the Subsidiary
Banks capital ratio exceed minimum capital requirements.  Net
Interest Income  Net interest income, which is the difference between
interest and fees earned on assets and the interest paid on deposits and other
funding sources, is the primary source of earnings for the Company. This
component represents 87% of the Companys net revenues in 2001. A detailed
analysis highlighting the changes in net interest income is provided in Table
2. Interest earned on tax-exempt loans and investments is adjusted for
comparative purposes to a taxable equivalent basis using the federal tax rate
of 34%, resulting in a fully taxable equivalent (FTE) net interest income.  Net interest income on a fully taxable equivalent
basis totaled $17,827 in 2001 compared to $17,248 in 2000 and $15,238 in 1999.
The higher net interest income in 2001 includes an increase of $1,470 due to
volume fluctuations following an increase due to volume of $3,134 in 2000. As
anticipated in a falling rate environment such as that experienced in the year
2001, the negative impact of rate fluctuation was slightly lower than that of
the prior year. Rate movements negatively impacted the overall improvement in
net interest income by $839 after negatively impacting net interest income by
$912 in 2000.  The 2001 volume increase was fueled by the earning
assets added to the balance sheet. Average interest earning assets increased by
$37,224 or 11%. The majority of that increase is the result of growth in
average loan  12 
   balances due in large part to the strong loan officer calling efforts
on customers and prospective customers and excellent business relationships in
both the Chicago and Phoenix metropolitan areas.  The loan growth was funded via a more aggressive pricing strategy
with regard to time deposits and a greater utilization of borrowed funds.  Net interest margin represents net interest income as
a percentage of total interest earning assets. The Company attempts to
favorably impact net interest income through investment decisions on interest
earning assets and monitoring interest rates its banking subsidiary offers,
particularly rates for time deposits and short-term borrowings. The Companys
net interest spread measured on a fully taxable equivalent basis decreased to
4.73% in 2001 from 5.07% in 2000 and 5.53% in 1999. This is a result of the
dramatic decline of interest rates in 2001 which resulted in rates falling
faster on interest earning assets than interest bearing liabilities.  Table 1 summarizes Upbancorps average earning assets
and funding sources over the last three years. Additionally, the table shows
interest income and expense related to each category of assets and funding
sources and the yields earned and the rates paid on such assets and funding
sources.  Table 1 Net Interest Income and Margin Analysis  2001
  
  2000
  
  1999Average
  Balance
  
  Interest
  
  Yield/
  Rate
  
  Average
  Balance
  
  Interest
  
  Yield/
  Rate
  
  Average
  Balance
  
  Interest
  
  Yield/
  RateAssets:Investment securities:Taxable
  
  $
  55,087
  
  $
  3,501
  
  6.36
  %
  $
  43,718
  
  $
  2,769
  
  6.33
  %
  $
  36,842
  
  $
  2,228
  
  6.05
  %Nontaxable (1)
  
  7,605
  
  591
  
  7.77
  %
  7,647
  
  651
  
  8.51
  %
  6,987
  
  609
  
  8.72
  %Nonmarketable Equity Securities
  
  1,880
  
  116
  
  6.17
  %
  1,578
  
  114
  
  7.22
  %
  1,262
  
  81
  
  6.42
  %Federal funds sold
  
  8,334
  
  364
  
  4.37
  %
  9,585
  
  621
  
  6.48
  %
  4,174
  
  209
  
  5.01
  %Mortgages held-for-sale
  
  267
  
  44
  
  16.48
  %
  
  
  
  
  0.00
  %
  1,534
  
  86
  
  5.61
  %Loans, net of deferred loan fees(2)(3)
  
  304,061
  
  26,584
  
  8.74
  %
  277,482
  
  26,198
  
  9.44
  %
  224,666
  
  20,572
  
  9.16
  %Total interest earning assets
  
  $
  377,234
  
  $
  31,200
  
  8.27
  %
  $
  340,010
  
  $
  30,353
  
  8.93
  %
  $
  275,465
  
  $
  23,785
  
  8.63
  %Cash and due from banks
  
  17,899
  
  
  
  
  
  13,629
  
  
  
  
  
  11,073Allowance for loan losses
  
  (3,809
  )
  
  
  
  
  (3,426
  )
  
  
  
  
  (2,759
  )Other assets
  
  10,664
  
  
  
  
  
  11,451
  
  
  
  
  
  11,705Total assets
  
  $
  401,988
  
  
  
  
  
  $
  361,664
  
  
  
  
  
  $
  295,484Liabilities & Shareholders Equity:Savings, NOW and money market deposits
  
  $
  131,562
  
  $
  3,626
  
  2.76
  %
  $
  128,336
  
  $
  4,343
  
  3.38
  %
  $
  109,264
  
  $
  3,020
  
  2.76
  %Other time deposits
  
  145,309
  
  8,415
  
  5.79
  %
  118,644
  
  7,058
  
  5.95
  %
  88,203
  
  4,438
  
  5.03
  %Borrowed funds and note payable
  
  27,746
  
  1,332
  
  4.80
  %
  27,715
  
  1,704
  
  6.15
  %
  21,411
  
  1,089
  
  5.09
  %Total interest bearing liabilities
  
  $
  304,617
  
  $
  13,373
  
  4.39
  %
  $
  274,695
  
  $
  13,105
  
  4.77
  %
  $
  218,878
  
  $
  8,547
  
  3.90
  %Demand deposits
  
  66,710
  
  
  
  
  
  58,823
  
  
  
  
  
  49,638Other liabilities
  
  4,835
  
  
  
  
  
  4,482
  
  
  
  
  
  3,994Shareholders equity
  
  25,826
  
  
  
  
  
  23,664
  
  
  
  
  
  22,974Total liabilities and shareholders equity
  
  $
  401,988
  
  
  
  
  
  $
  361,664
  
  
  
  
  
  $
  295,484Net interest income/margin
  
  
  
  $
  17,827
  
  3.88
  %
  
  
  $
  17,248
  
  4.16
  %
  
  
  $
  15,238
  
  4.73
  %Net interest income/earning assets
  
  
  
  
  
  4.73
  %
  
  
  
  
  5.07
  %
  
  
  
  
  5.53
  %  
 (1)Interest income and
yields on nontaxable securities are reflected on a tax equivalent basis based
upon a Federal income tax rate of 34% for 2001, 2000 and 1999.  (2)The allowance for
loan losses is not included as part of this analysis.  13 
   (3)Loan fees included
in the above interest income computations total $1,493, $1,459 and $1,133 for
the years ended December 31, 2001, 2000 and 1999, respectively. At December 31,
2001, 2000 and 1999, deferred loan and commitment fee income, net of direct
loan origination costs, totaled $536, $498 and $438, respectively.  Table 2 analyzes the changes in interest income,
interest expense and net interest income that result from changes in volumes of
earning assets and funding sources, as well as fluctuations in interest rates.
Changes noted in the volume/rate column represent variances attributable
jointly to changes in volume and rate.  Table 2 Changes in Net Interest Income Applicable to Volumes and
Interest Rates  2001 Compared to 2000
  
  Interest
  Income/Expense
  
  Increase/(Decrease)
  due to:2001
  
  2000
  
  Increase
  (Decrease)
  
  Volume
  
  Rate
  
  Volume/
  RateInvestment securities:Taxable
  
  $
  3,501
  
  $
  2,769
  
  $
  732
  
  $
  720
  
  $
  9
  
  $
  3Nontaxable (1)
  
  591
  
  651
  
  (60
  )
  (3
  )
  (57
  )
  Nonmarketable Equity Securities
  
  116
  
  114
  
  2
  
  22
  
  (17
  )
  (3
  )Federal funds sold
  
  364
  
  621
  
  (257
  )
  (81
  )
  (202
  )
  26Mortgages held-for-sale
  
  44
  
  
  
  44
  
  
  
  
  
  44Loans, net of deferred loan fees
  
  26,584
  
  26,198
  
  386
  
  2,509
  
  (1,938
  )
  (185
  )Total interest income (1)
  
  $
  31,200
  
  $
  30,353
  
  $
  847
  
  $
  3,167
  
  $
  (2,205
  )
  $
  (115
  )Savings, NOW and money market deposits
  
  3,626
  
  4,343
  
  (717
  )
  109
  
  (806
  )
  (20
  )Other time deposits
  
  8,415
  
  7,058
  
  1,357
  
  1,586
  
  (187
  )
  (42
  )Borrowed funds
  
  1,332
  
  1,704
  
  (372
  )
  2
  
  (373
  )
  (1
  )Total interest expense
  
  13,373
  
  13,105
  
  268
  
  1,697
  
  (1,366
  )
  (63
  )Net interest income
  
  $
  17,827
  
  $
  17,248
  
  $
  579
  
  $
  1,470
  
  $
  (839
  )
  $
  (52
  )  2000 Compared to 1999
  
  Interest Income/Expense
  
  Increase/(Decrease due to:2000
  
  1999
  
  Increase
  (Decrease)
  
  Volume
  
  Rate
  
  Volume/
  RateInvestment securities:Taxable
  
  $
  2,769
  
  $
  2,228
  
  $
  541
  
  $
  416
  
  $
  106
  
  $
  19Nontaxable (1)
  
  651
  
  609
  
  42
  
  57
  
  (14
  )
  (1
  )Nonmarketable Equity Securities
  
  114
  
  81
  
  33
  
  20
  
  10
  
  3Federal funds sold
  
  621
  
  209
  
  412
  
  271
  
  61
  
  80Mortgages held-for-sale
  
  
  
  86
  
  (86
  )
  (86
  )
  
  
  Loans, net of deferred loan fees
  
  26,198
  
  20,572
  
  5,626
  
  4,836
  
  639
  
  151Total interest income (1)
  
  $
  30,353
  
  $
  23,785
  
  $
  6,568
  
  $
  5,514
  
  $
  802
  
  $
  252Savings, NOW and money market deposits
  
  4,343
  
  3,020
  
  1,323
  
  527
  
  678
  
  118Other time deposits
  
  7,058
  
  4,438
  
  2,620
  
  1,532
  
  809
  
  279Borrowed funds
  
  1,704
  
  1,089
  
  615
  
  321
  
  227
  
  67Total interest expense
  
  13,105
  
  8,547
  
  4,558
  
  2,380
  
  1,714
  
  464Net interest income
  
  $
  17,248
  
  $
  15,238
  
  $
  2,010
  
  $
  3,134
  
  $
  (912
  )
  $
  (212
  )  
 (1)Interest income and
yields on nontaxable securities are reflected on a tax equivalent basis based upon
a Federal income tax rate of 34% for 2001, 2000 and 1999.  Funds
Management Analysis and Interest Rate Sensitivity  The earning asset portfolio of the Subsidiary Bank is
typically the leading determinate of performance for the Company. This is
because the largest percentage of total income for the Company is attributable
to net interest income. The policies and practices for managing liquidity risk
and interest rate risk are set by the Subsidiary Banks Funds Management
Committee (FMC) whose goal is to ensure maximum returns within safe and sound
risk parameters. The FMC monitors exposure in view of market developments and
the Subsidiary Banks financial condition, sets guidance for  14 
   interest rate risk management decisions, ensures consistency in the
measurement of risk and monitors liquidity and capital adequacy. In this
capacity, the FMC places limits on the level of investments in various assets
and off-balance sheet instruments, as well as on the funding levels for loans
and deposits. In addition, the FMC establishes pricing policies for the
Subsidiary Banks products and services.  Interest rate risk is the degree to which market
interest rate fluctuations can effect net interest income. The Company not only
responds to this interest rate risk, but also tries to anticipate and build
strategies based on the current interest rate and maturity characteristics of
the various balance sheet categories of assets and liabilities. This is done
through a formalized funds management process and while there are several ways
in which to analyze interest rate risk, the traditional method is called a
gap analysis. A gap analysis is a static management tool used to identify
mismatches or gaps in the repricing of assets and liabilities within specified
periods of time.  The Companys gap analysis as of December 31, 2001, is
presented in Table 3. Earning assets and interest bearing liabilities are
presented within selected time intervals based upon their repricing and
maturity characteristics. In a perfectly matched gap analysis, an equal amount
of rate sensitive assets and liabilities would be reflected as repricing within
each given time interval. A positive interest rate sensitivity gap indicates
more assets than liabilities will reprice in that time period, while a negative
gap indicates more liabilities will reprice. Generally, a positive gap
position, or asset sensitive position, has a favorable impact on net interest
income in periods of rising interest rates. Conversely, a negative gap would
generally imply a favorable impact on net interest income in periods of
declining interest rates.  Table 3 Remaining Maturity or Earliest Possible Pricing  Up to 3
  Months
  
  3-12 
  Months
  
  1-3 
  Years
  
  3-5 
  Years
  
  Greater than
  5 Years
  
  TotalRate
  Sensitive Assets:Investment
  securities - Debt
  
  $
  7,113
  
  $
  
  
  $
  8,333
  
  $
  10,242
  
  $
  33,441
  
  $
  59,129Investment
  securities - Equity
  
  
  
  
  
  
  
  
  
  1,485
  
  1,485Mortgages
  held-for-sale
  
  945
  
  
  
  
  
  
  
  
  
  945Loans (1)
  
  92,426
  
  19,344
  
  73,423
  
  95,669
  
  18,710
  
  299,572Total Rate
  Sensitive Assets
  
  100,484
  
  19,344
  
  81,756
  
  105,911
  
  53,636
  
  361,131Rate
  Sensitive Liabilities:Savings, NOW,
  and money market deposits
  
  57,884
  
  58,038
  
  75,490
  
  11,369
  
  
  
  202,781Other time
  deposits
  
  38,549
  
  64,606
  
  17,110
  
  979
  
  
  
  121,244Borrowed funds
  & note payable
  
  10,880
  
  21,500
  
  
  
  
  
  
  
  32,380Total Rate
  Sensitive Liabilities
  
  107,313
  
  144,144
  
  92,600
  
  12,348
  
  
  
  356,405Interest
  Sensitivity GAP:Incremental
  
  ($6,829
  )
  ($124,800
  )
  ($10,844
  )
  $
  93,563
  
  $
  53,636
  
  $
  4,726Cumulative
  
  ($6,829
  )
  ($131,629
  )
  ($142,473
  )
  ($48,910
  )
  $
  4,726Cumulative
  Interest Sensitive GAP as a percentage of total earning assets
  
  -1.89
  %
  -36.45
  %
  -39.45
  %
  -13.54
  %
  1.31
  %  
 (1)Deferred loan fees,
allowance for loan losses and nonaccrual loans are not included as a part of
this analysis.  15 
   Table 3 shows the under-one-year net liability
position at December 31, 2001 was $(131,629) (36.45% of total assets) compared
to the under-one-year net liability position at December 31, 2000 of $(81,695)
(20.60% of total assets). A significant under-one-year net liability position
would indicate that the Companys net interest income is exposed to rising
short-term interest rates, while a significant net asset position would mean an
exposure to declining short-term interest rates. Currently, the Company is
focusing on a variety of methods to better match its under-one-year repricing
mix.  Upbancorp and Uptown follow a
policy of maintaining a relatively balanced mix of rate-sensitive assets and
liabilities, making each side of the balance sheet equally flexible in reacting
to changes in market interest rates so that net interest income will not be
materially affected in periods of rising or falling interest rates.  The following table shows the Companys available-for-sale
investment securities maturity distribution and corresponding tax-equivalent
yields at December 31, 2001:  Table 4 Securities Available-for-Sale Maturity Distribution and Portfolio Yields  One year
  or less
  
  One year
  to five years
  
  Five years
  to ten years
  
  After 
  ten yearsAmortized
  Cost
  
  Yield
  (%)
  
  Amortized
  Cost
  
  Yield
  (%)
  
  Amortized
  Cost
  
  Yield
  (%)
  
  Amortized
  Cost
  
  Yield
  (%)U.S. Government agencies
  
  $
  7,000
  
  6.58
  %
  $
  17,150
  
  6.63
  %
  $
  6,300
  
  6.17
  %
  $
  19,254
  
  7.72
  %States and political subdivisions
  
  99
  
  10.75
  %
  788
  
  6.81
  %
  2,237
  
  7.46
  %
  5,718
  
  7.58
  %Total
  
  $
  7,099
  
  6.64
  %
  $
  17,938
  
  6.64
  %
  $
  8,537
  
  6.51
  %
  $
  24,972
  
  7.69
  %  Amortized
  Cost
  
  Yield
  (%)Equity securities
  
  $
  1,500
  
  8.01
  %  Loan
Portfolio  The following table shows the major classifications of
loans at December 31:  Table 5 Loan Portfolio  2001
  
  2000
  
  1999
  
  1998
  
  1997Commercial - Aircraft related
  
  $
  45,726
  
  $
  54,614
  
  $
  53,531
  
  $
  26,617
  
  $
  17,846Commercial -
  Other
  
  56,453
  
  58,404
  
  42,320
  
  33,395
  
  30,361Real estate -
  Construction
  
  65,821
  
  52,637
  
  35,686
  
  22,365
  
  9,440Real estate -
  Residential (1 to 4 family)
  
  33,998
  
  32,431
  
  30,147
  
  30,971
  
  34,899Real estate -
  Residential (5 or more)
  
  37,522
  
  30,264
  
  27,514
  
  29,900
  
  27,635Real estate -
  Non-Residential
  
  61,798
  
  58,467
  
  55,352
  
  45,640
  
  40,984Consumer and all
  other
  
  2,946
  
  5,986
  
  5,607
  
  6,442
  
  5,331Deferred loan
  fees
  
  (536
  )
  (498
  )
  (438
  )
  (235
  )
  (244
  )Total loans
  
  303,728
  
  292,305
  
  249,719
  
  195,095
  
  166,252Less allowance
  for loan losses
  
  (4,098
  )
  (3,817
  )
  (3,114
  )
  (2,499
  )
  (2,010
  )Total loans, net
  of allowance for loan losses
  
  $
  299,630
  
  $
  288,488
  
  $
  246,605
  
  $
  192,596
  
  $
  164,242  16 
   The commercial loan maturities and sensitivity to
changes in interest rates at December 31, 2001, are shown in the following
table:  Table 6 Commercial Loan Maturities and Sensitivities to Changes in
Interest Rates  In one
  yearor less
  
  After one
  throughfive years
  
  Over
  five years
  
  TotalAt
  December 31, 2001Maturities:Commercial loans
  
  $
  36,537
  
  $
  62,495
  
  $
  3,147
  
  $
  102,179Secured by real
  estate - Construction
  
  33,783
  
  31,718
  
  320
  
  65,821Secured by real
  estate - Non-residential
  
  27,691
  
  24,828
  
  9,279
  
  61,798Total
  
  $
  98,011
  
  $
  119,041
  
  $
  12,746
  
  $
  229,798Interest rate
  sensitivity:Fixed rate
  
  $
  23,849
  
  $
  110,755
  
  $
  12,746
  
  $
  147,350Variable rate
  
  74,162
  
  8,286
  
  
  
  82,448Total
  
  $
  98,011
  
  $
  119,041
  
  $
  12,746
  
  $
  229,798  Liquidity
Management  A key element of the Companys FMC process is the
management of liquidity. Liquid funds are needed by the Subsidiary Bank to meet
the needs of its depositors, borrowers and for regulatory requirements. Liquid
funds, however, generally have very low earnings potential and thus careful
control of the Subsidiary Banks liquidity position is needed. Monitoring of
this liquidity position is done daily to ensure constant adequacy and to
maintain optimal levels of liquidity on the balance sheet. Another source of
liquidity is off balance sheet, in the form of pre-approved loan commitments
from the Federal Home Loan Bank and various correspondent banks. For a further
review of the Companys sources and uses of funds, see the Consolidated
Statements of Cash Flows found in Item 8 of this Form 10-K.  The Companys cash flows are composed of three
classifications: cash flows from operating activities, cash flows from
investing activities, and cash flows from financing activities. Net cash
provided by operating activities, consisting primarily of earnings, was $2,229
for the year ended December 31, 2001, and $6,106 for the year ended December
31, 2000. A significant component in the fluctuation of net cash provided by or
used in operating activities is the timing of the sale of loans held-for-sale
to permanent investors. Net cash provided by and (used in) investing
activities, consisting primarily of loan and investment funding was $6,615 and
$(68,427) for the years ended December 31, 2001 and 2000, respectively. Net
cash provided by and (used in) financing activities, consisting of deposit
fluctuations and increased borrowed funds and note payable, was $(10,427) and
$67,114 for the years ended December 31, 2001 and 2000, respectively.  The Company requires adequate liquidity to pay its
expenses and pay shareholder dividends. Liquidity is provided to the Company
from the Subsidiary Bank in the form of dividends. Other liquidity is provided
by cash balances in banks, maturing investments and interest on investments.
For a discussion of dividend payments, please see Note 12 in the Notes to
Consolidated Financial Statements found in Item 8 of this Form 10-K. One method
of analyzing the Companys liquidity position is through a careful review of
available funding sources. The following table provides information as it
pertains to funding sources and reflects a year-to-year comparison of the
sources of the Companys liability funding based upon year-end balances.  Table 7 Funding Sources - Year-end Balances  2001
  
  2000
  
  1999Demand deposits, noninterest-bearing
  
  $
  72,472
  
  $
  65,900
  
  $
  53,213Savings, NOW
  & money market deposits
  
  130,309
  
  133,345
  
  119,309Other time
  deposits of $100 or less
  
  73,169
  
  98,199
  
  60,661Core deposits
  
  275,950
  
  297,444
  
  233,183Other time
  deposits of $100 or more
  
  48,075
  
  51,104
  
  36,972Borrowed funds
  and note payable
  
  32,380
  
  17,849
  
  28,634Total funding
  sources
  
  $
  356,405
  
  $
  366,397
  
  $
  298,789  17 
   Total funding sources decreased 2.73% at December 31,
2001, from prior year levels. Core deposits decreased 7.23% from December 31,
2000 balances while other time deposits $100 or more fell at a 5.93% rate. A
recap of other time deposits $100 and over is presented in the following table.
For a review of total other time deposit maturities, see Note 6 in the Notes to
Consolidated Financial Statements found in Item 8 of this Form 10-K.  A recap of borrowed funds and notes payable
can be found in Note 7 in the Notes to Consolidated Financial Statements found
in Item 8 of this Form 10-K.  Table 8 Remaining Maturity of Other Time Deposits - $100,000 and Over  Three months or
  less
  
  $
  19,610Over 3 through 6
  months
  
  9,742Over 6 through
  12 months
  
  13,640Over 12 months
  
  5,083$
  48,075
  Borrowing facilities are available to the Subsidiary
Bank through various correspondent banks in the amount of $29,000. These lines
are established for the purpose of borrowing on an overnight basis in the form
of Federal Funds.  The Company has a $5 million line of credit, a secured
revolving note payable, with a correspondent bank at December 31, 2001.  This note had an outstanding balance of $3
million. Interest is calculated on the basis of 3-month LIBOR plus 150 basis
points with interest due and payable quarterly. The expiration date of the line
is April 1, 2002. The note also contains certain covenants which limit changes
in capital structure, the purchase of or merger with other banks and/or
businesses, and the guarantees of other liabilities and obligations. In
addition, the Company must meet certain financial ratios. The Company was in
compliance with all covenants of the agreement at December 31, 2001.  Capital
Resources  A strong capital structure is vital for many reasons,
one of which is to allow the Company the opportunity for future growth.
Upbancorp has developed a policy to manage its capital structure and that of
its Subsidiary Bank in accordance with regulatory guidelines and to ensure
appropriate use of this resource. The Companys capital policy requires that
the Company and its Subsidiary Bank maintain a capital ratio in excess of the
minimum regulatory guidelines. At December 31, 2001, both entities exceeded
regulatory established minimums as defined for financial institutions. Please
see Note 12 in the Notes to Consolidated Financial Statements included under
Item 8 of this Form 10-K.  Total shareholders equity increased 13.36% to $29,356
at December 31, 2001. Total equity as a percentage of assets was 7.54% at the
end of 2001 versus 6.53% a year earlier. Included in shareholders equity is the
net unrealized gain on securities classified as available-for-sale, which
amounted to $347 at the end of 2001 against a $64 unrealized loss at the end of
2000.  Provision
and Allowance for Loan Losses  The allowance for loan losses is established through a
provision for loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that the full collection of
the loan principal is unlikely. The level of the provision for loan losses
charged to operating expense as well as the balances maintained in the
allowance for loan losses is dependent upon many factors, including loan
growth, changes in the composition of the loan portfolio, net charge-off
levels, delinquencies, collateral values and managements assessment of current
and prospective economic conditions in the Companys primary market areas.  The Subsidiary Bank measures the allowance for loan
losses on a quarterly or more frequent basis using two measures of reserve
adequacy. The first is a detailed evaluation by all loan officers of classified
or non-performing loans to ensure that an adequate allowance has been
established for these individual assets. The second test measures the allowance
against various loan pools, or types, using historical reserve percentages for
expectations of possible loan losses on each category.  18 
   The allowance for loan losses is comprised of both
allocated and unallocated allowances in order to quantify future loss
potential. The allocated position represents managements assessment as to
potential loss exposure based on both actual loan losses experienced
historically and independent credit ratings on individual credits. The
unallocated portion of the allowance reflects managements estimate of probable
inherent but undetected losses within the portfolio due to uncertainties in
economic conditions, delays in obtaining information, including unfavorable
information about a borrowers financial condition, the difficulty in
identifying triggering events that correlate perfectly to subsequent loss
rates, and risk factors that have not yet manifested themselves in loss
allocation factors.  In addition, the
unallocated allowance includes a component that explicitly accounts for the
inherent imprecision in the allowance for loan loss calculation.  At December 31, 2001, the allowance for loan
losses was comprised of $3,779 and $319 of allocated and unallocated reserves,
respectively.  Table 9 Analysis of the Allowance for Loan Losses  December
  31,2001
  
  2000
  
  1999
  
  1998
  
  1997Balance at
  beginning of year
  
  $
  3,817
  
  $
  3,114
  
  $
  2,499
  
  $
  2,010
  
  $
  1,485Loan
  charge-offs:Commercial -
  Other
  
  514
  
  8
  
  263
  
  130
  
  12Real estate -
  Residential (1 to 4 family)
  
  
  
  
  
  105
  
  
  
  1Real estate -
  Residential (5 or more)
  
  1
  
  
  
  
  
  
  
  Real estate -
  Non-Residential
  
  55
  
  
  
  
  
  
  
  Consumer and all
  other
  
  40
  
  2
  
  25
  
  25
  
  15Total
  charge-offs
  
  610
  
  10
  
  393
  
  155
  
  28Recoveries:Commercial -
  Other
  
  
  
  11
  
  116
  
  64
  
  55Real estate -
  Residential (1 to 4 family)
  
  1
  
  3
  
  
  
  
  
  Real estate -
  Residential (5 or more)
  
  
  
  
  
  
  
  
  
  86Consumer and all
  other
  
  
  
  4
  
  7
  
  
  
  2Total recoveries
  
  1
  
  18
  
  123
  
  64
  
  143Net
  (charge-offs) recoveries
  
  (609
  )
  8
  
  (270
  )
  (91
  )
  115Provision for
  loan losses
  
  890
  
  695
  
  885
  
  580
  
  410Balance at end
  of year
  
  $
  4,098
  
  $
  3,817
  
  $
  3,114
  
  $
  2,499
  
  $
  2,010As a percent of
  average loans:Net loan
  (charge-offs) recoveries
  
  (0.20
  )%
  0.00
  %
  (0.12
  )%
  (0.05
  )%
  0.08
  %Provision for
  loan losses
  
  0.29
  %
  0.25
  %
  0.39
  %
  0.33
  %
  0.28
  %Allowance for
  loan losses as a percentage of total loans:
  
  1.35
  %
  1.31
  %
  1.25
  %
  1.28
  %
  1.21
  %Allocation of
  allowance:Commercial
  -  Aircraft related
  
  $
  483
  
  $
  477
  
  $
  588
  
  $
  426
  
  $
  268Commercial
  -  Other
  
  1,048
  
  545
  
  609
  
  684
  
  772Secured by real
  estate
  
  2,225
  
  1,821
  
  621
  
  377
  
  11Consumer
  
  23
  
  49
  
  51
  
  89
  
  89Unallocated
  
  319
  
  925
  
  1,245
  
  923
  
  870Balance at end
  of year
  
  $
  4,098
  
  $
  3,817
  
  $
  3,114
  
  $
  2,499
  
  $
  2,010Loan balance as
  a percent of total loans:Commercial
  -  Aircraft related
  
  15
  %
  19
  %
  21
  %
  14
  %
  11
  %Commercial
  -  Other
  
  19
  %
  20
  %
  17
  %
  17
  %
  18
  %Secured by real
  estate
  
  66
  %
  59
  %
  60
  %
  66
  %
  68
  %Consumer
  
  1
  %
  2
  %
  2
  %
  3
  %
  3
  %  19 
   As indicated by this table, the provision for loan
losses amounted to $890 in 2001 compared to $695 for 2000 and $885 for 1999.
This increase in the 2001 provision is due to the increase in the amount of
loans charged off during the year 2001 as compared to 2000. Charged off loans
during 2001 totaled $610, an increase from 2000 of $600.  The portion of the allocation for loan losses related
to specific loan types increased in 2001 from 2000 while the unallocated
portion decreased by $606. This is a direct result of a change made by the
Company in calculating its allowance for loan losses due to the increase in net
charge-offs and nonperforming loans and our efforts to adjust specific
allocation factors for qualitative factors, such as economic conditions.  The allowance for loan losses amounted to $4,098 for
2001 compared to $3,817 for 2000 and $3,114 for 1999. Allowance levels are the
result of the Companys analysis of probable loan losses and the adequacy level
as defined by managements internal analysis.  Nonperforming
Assets  One measurement used by management in assessing the
risk inherent in the loan portfolio is the level of nonperforming assets.
Nonperforming assets consist of nonaccrual loans, restructured loans,
investments and other real estate owned. Nonaccrual loans are those loans which
have been determined to have reasonable doubt as to the timely collectibility
of interest or principal. Restructured loans are those loans whose terms or
conditions have been changed and have resulted in a negative impact on the Bank
compared to the original terms.  Other
real estate owned (OREO) represents real property which has been acquired
through foreclosure or real estate which a Subsidiary Bank has obtained
possession of in satisfaction of a debt. OREO is carried at the lower of the
recorded investment value of the loan or the estimated fair market value, less
estimated disposal costs, of the related real estate. Past due loans are loans
whose principal and interest payments are delinquent 90 days or more and are
still accruing interest.  The following table summarizes nonperforming assets
and past due loans for the past five years as well as certain information
related to interest income on nonaccrual loans:  Table 10 Analysis of Nonperforming Assets and Past Due Loans  December
  31,2001
  
  2000
  
  1999
  
  1998
  
  1997Nonaccrual loans
  
  $
  4,692
  
  $
  1,299
  
  $
  849
  
  $
  1,234
  
  $
  252Restructured
  loans
  
  399
  
  422
  
  58
  
  75
  
  896Total
  nonperforming loans
  
  5,091
  
  1,721
  
  907
  
  1,309
  
  1,148Other real
  estate owned
  
  
  
  
  
  
  
  
  
  334Total
  nonperforming assets
  
  $
  5,091
  
  $
  1,721
  
  $
  907
  
  $
  1,309
  
  $
  1,482Percentage of
  nonperforming loans/total loans
  
  1.68
  %
  0.59
  %
  0.36
  %
  0.67
  %
  0.69
  %Percentage of
  nonperforming assets/total assets
  
  1.31
  %
  0.43
  %
  0.28
  %
  0.49
  %
  0.64
  %Interest income
  not recognized due to nonaccrual status of loans
  
  $
  266
  
  $
  109
  
  $
  60
  
  $
  164
  
  $
  64  Nonperforming assets increased as of December 31,
2001, although they still remain at very low levels as a percentage of total
loans. This is a result of adherence to a strong credit culture and the
effectiveness of the Subsidiary Banks loan administration and workout
procedures. As shown in Table 10, at December 31, 2001, nonperforming assets
totaled $5,091 compared to $1,721 in 2000. The percentage of nonperforming
assets to total assets also increased to 1.31% at December 31, 2001 from .43%
at December 31, 2000. The majority of this increase relates to two loans,
secured by real estate, totaling $3,180 to a single borrower being placed on
nonaccrual status during the year.  These
loans have been analyzed and included in the banks measurement process when
reviewing the allowance for loan losses as performed on a quarterly or more
frequent basis.  Absent these loans,
there was a slight increase in nonperforming loans of $190  20 
   Noninterest
Income  Noninterest income consists primarily of service
charges on customer deposit accounts. Total noninterest income increased 14.27%
to $2,611. This increase was primarily the result of income recognition related
to the sale of Concord EFS stock during 2001. The following table analyzes the
various sources of noninterest income for the years ended December 31, 1999
through 2001.  Table 11 Noninterest Income Components  December
  31,2001
  
  2000
  
  1999Service charges
  on deposit accounts
  
  $
  1,609
  
  $
  1,831
  
  $
  1,784Mortgage banking
  fees
  
  
  
  
  
  831Other
  noninterest income
  
  491
  
  455
  
  510Net gains from
  sale of loans
  
  
  
  44
  
  87Net losses from
  sale of OREO
  
  (3
  )
  
  
  Net gains
  (losses) from sale of securities
  
  514
  
  (45
  )
  1Total
  noninterest income
  
  $
  2,611
  
  $
  2,285
  
  $
  3,213
  Service charges on deposit accounts, the largest
component of noninterest income, consists of fees on both interest bearing and
noninterest bearing deposit accounts and charges for items such as insufficient
funds, overdrafts and stop payment requests. These charges decreased 12.12% in
2001 over 2000 levels. The decrease in service charges on deposit accounts was
primarily due to a change in account analysis on deposit accounts.  The increase in net gain (loss) on sale of securities
was primarily the result of the sale of Concord EFS stock during 2001. For a
review of gains and losses related to the investment portfolio, see Note 3 in
the Notes to Consolidated Financial Statements found in Item 8 of this Form
10-K.  The Bank sold its mortgage banking division at the end
of 1999, thereby eliminating the mortgage banking fees and offsetting salaries
and employee benefits seen in Table 12 below in the years 2000 and 2001.  Noninterest
Expense  Total noninterest expense decreased slightly by $8 or
..06% in 2001 after increasing $594 or 4.45% in 2000.  A key indicator of a banks ability to maintain low
overhead while generating net income is the banks efficiency ratio. A lower
ratio indicates a banks ability to maintain a lower cost operation in
comparison to the resulting income produced. The Companys efficiency ratio
continues to improve; for the year ended December 31, 2001, the Company had a 69%
efficiency ratio as compared to 72% for the prior years period. The following
table analyzes the various components of noninterest expense for the years
ended December 31, 1999 through 2001.  21 
   Table 12 Noninterest Expense Components  December
  31,2001
  
  2000
  
  1999Salaries and
  employee benefits:Core bank
  employees
  
  $
  7,619
  
  $
  7,669
  
  $
  6,742Mortgage lending
  group
  
  -
  
  -
  
  761Total
  
  7,619
  
  7,669
  
  7,503Net occupancy
  expense
  
  665
  
  581
  
  627Equipment
  expense
  
  977
  
  932
  
  815Outside fees and
  services
  
  846
  
  877
  
  873Advertising and
  business development expense
  
  466
  
  404
  
  447Supplies and
  postage expense
  
  453
  
  455
  
  451Data processing
  expense
  
  1,245
  
  1,083
  
  1,080Regulatory fees
  and insurance
  
  298
  
  272
  
  177Other operating
  expense
  
  1,366
  
  1,670
  
  1,376Total
  noninterest expense
  
  $
  13,935
  
  $
  13,943
  
  $
  13,349
  An increase of $42 was recognized in noninterest
expense other than salaries and employee benefits from $6,274 at December 31,
2000 to $6,316 at December 31, 2001. 
The marginal increase is the result of slightly higher occupancy,
advertising and business development, and data processing expenses offset by
lower other expenses.  Net occupancy expense increased due to a full year of
rent expense related to one new branch opened at the end of 2000 in addition to
rent expense now being incurred in the last quarter of 2001 related to one
banking office in Metropolitan Phoenix now being rented.  Advertising and business development
increased from the prior year due to increased calling and business development
efforts.  Data processing increased in
2001 compared to 2000 due to final conversion costs incurred in the current
year related to the completion of data processing merger between Uptown and
Heritage.  Management continues to focus on cost containment and
this control of expenses remains a priority as a part of our broader goal of
maximizing long-term profitability.  Forward
Looking Statements  The preceding Business,
Legal Proceeding and Management Discussion and Analysis of Financial
Condition and Results of Operations sections of this Form 10-K contain various
forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which represents the Company expectations and beliefs
concerning future events including, without limitation, the following: the
Companys efforts in retaining and expanding its customer base and
differentiating it from its competition; the FDIC insurance premium
assessments; the impact from liabilities arising from legal proceedings on its
financial condition; the impact of interest rates in general on the volatility
of its net interest income; the impact of policy guidelines and strategies on
net interest income based on future interest rate projections; the ability to
provide funding sources for both the Bank and the Company; the payment of
future dividends based upon Company performance and prospects; the impact of
portfolio diversification and the real estate lending practices on future
levels of loan losses; the effect of loan growth generally on the improvement
in net interest income; and the assessment of its provision and reserve for
loan loss levels based upon future changes in the composition of its loan
portfolio, loan losses, collateral value and economic conditions.  The Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those set forth in the forward looking
statements due to market, economic and other business-related risks and
uncertainties effecting the realization of such statements.  Certain of these risks and uncertainties
included in such forward looking statements include, without limitation, the
following: dynamics of the markets served in terms of competition from
traditional and nontraditional financial service providers can affect both the
funding capabilities of the Company in terms of deposit gathering as well as
the ability to compete for loans and generate the higher yielding assets
necessary to improve net interest income; future legislation and actions by the
Federal Reserve Board may result in the imposition of costs and constraints on
the Company through higher FDIC insurance premiums, significant fluctuations in
market interest rates and operational limitations; significant fluctuations in
market interest rates  22 
   may affect the ability to reinvest proceeds
from the maturities and prepayments on certain categories of securities and
effect the overall yield of the portfolio; business expansion activities and
other efforts to retain customers may increase the need for staffing and the
resulting personnel expense in future periods; and deviations from the
assumptions used to evaluate the appropriate level of the reserve for loan
losses as well as future purchases and sales of loans may affect the
appropriate level of the reserve for loan losses and thereby affect the future
of provisioning.  Additional risks and
uncertainties include:  general economic
or industry conditions, nationally and/or in the communities in which the
Company conducts business, changes in the interest rate environment,
legislation or regulatory requirements, conditions of the securities markets,
deposit flows, cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Companys
loan and investment portfolios, changes in accounting principals, policies or
guidelines, financial or political instability, acts of war or terrorism, other
economic, competitive, governmental, regulatory and technical factors affecting
the Companys operations, products, services, and prices.  Accordingly, results actually achieved may differ
materially from expected results in these statements.  The Company does not undertake, and specifically disclaims, any
obligation to update any forward-looking statements to reflect events or
circumstances occurring after the date of such statements.  23 
   ITEM
7A:  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ON MARKET RISK  While Table 3, found in Item 7 of
this Form 10-K, is a useful tool for management to assess the general
positioning of the Companys balance sheet, management uses an additional
measurement tool to evaluate its asset/liability sensitivity which determines
exposure to changes in interest rates by measuring the change in net interest
income as a percentage of capital, due to changes in rates over a one-year time
horizon.  Management measures such change
assuming an immediate and sustained parallel shift in rates of 50, 100 and 200
basis points, both upward and downward. 
The model uses scheduled amortization, call date or final maturity as
appropriate on all non-rate sensitive assets. 
The model uses repricing frequency on all variable rate assets and
liabilities, it also uses a 5-year decay analysis on all non-rate sensitive
deposits. Prepayment rates on fixed rate loans have been adjusted up or down by
10% per year to incorporate historical experience in both an up-rate and
down-rate environment. Utilizing this measurement concept, the interest rate
risk of the Company, expressed as change in net interest income as a percentage
of capital over a 1-year time horizon due to changes in interest rates, at
December 31, 2001 and 2000, was a follows:  Basis Point Change+200
  
  +100
  
  +50
  
  -50
  
  -100
  
  -200At December 31, 2001
  
  (1.19
  )%
  (0.62
  )%
  (0.40
  )
  (0.04
  )%
  (0.32
  )%
  (0.66
  )%At December 31, 2000
  
  (0.70
  )%
  (0.28
  )%
  (0.23
  )%
  0.13
  %
  0.11
  %
  (0.26
  )%  24 
   ITEM 8:  FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA  UPBANCORP, INC. CONSOLIDATED STATEMENTS OF CONDITION  December
  31,
  
  2001
  
  2000(Dollars in thousands, except share data)AssetsCash and due
  from banks
  
  $
  14,736
  
  $
  16,319Federal funds
  sold
  
  
  
  12,600Securities available-for-sale
  
  60,614
  
  65,517Nonmarketable equity securities
  
  1,818
  
  1,909Mortgages
  held-for-sale
  
  945
  
  Loans, net of
  allowance for loan losses of $4,098 and $3,817 in 2001 and 2000
  
  299,630
  
  288,488Premises and
  equipment, net
  
  5,146
  
  5,526Accrued interest
  and other assets
  
  6,564
  
  6,312Total
  Assets
  
  $
  389,453
  
  $
  396,671Liabilities
  and Shareholders' EquityLiabilitiesDemand deposits,
  noninterest-bearing
  
  $
  72,472
  
  $
  65,900Savings, NOW and
  money market deposits
  
  130,309
  
  133,345Time deposits
  
  121,244
  
  149,303Total deposits
  
  324,025
  
  348,548Borrowed funds
  
  29,380
  
  14,849Note payable
  
  3,000
  
  3,000Accrued interest
  and other liabilities
  
  3,692
  
  4,377Total
  Liabilities
  
  360,097
  
  370,774Shareholders'
  EquityCommon stock, $1
  par value: 3,000,000 shares authorized; 1,000,000 issued in 2001 and 2000
  
  1,000
  
  1,000Additional paid
  in capital
  
  4,500
  
  4,500Retained
  earnings
  
  26,588
  
  23,540Treasury stock -
  164,945 shares in 2001 and 2000
  
  (3,079
  )
  (3,079
  )Accumulated
  other comprehensive income (loss)
  
  347
  
  (64
  )Total
  Shareholders' Equity
  
  29,356
  
  25,897Total
  Liabilities and Shareholders' Equity
  
  $
  389,453
  
  $
  396,671  The accompanying notes to consolidated financial statements
are an integral part of these statements.  25 
   UPBANCORP, INC. CONSOLIDATED
STATEMENTS OF INCOME  Years Ended December 31,
  
  2001
  
  2000
  
  1999(Dollars in thousands, except share data)Interest
  IncomeInterest and
  fees on loans
  
  $
  26,584
  
  $
  26,198
  
  $
  20,572Interest on
  mortgages held-for-sale
  
  44
  
  
  
  86Interest on
  federal funds sold and other
  
  364
  
  621
  
  209Interest and
  dividends on securities:Taxable
  
  3,617
  
  2,883
  
  2,309Nontaxable
  
  376
  
  388
  
  354Total Interest
  Income
  
  30,985
  
  30,090
  
  23,530Interest
  ExpenseInterest on
  savings, NOW, and money market deposits
  
  3,626
  
  4,343
  
  3,020Interest on
  other time deposits
  
  8,415
  
  7,058
  
  4,438Interest on
  borrowed funds
  
  1,154
  
  1,579
  
  1,089Interest on note
  payable
  
  178
  
  125
  
  Total Interest
  Expense
  
  13,373
  
  13,105
  
  8,547Net
  Interest Income
  
  17,612
  
  16,985
  
  14,983Provision
  for Loan Losses
  
  890
  
  695
  
  885Net
  Interest Income after Provision for Loan Losses
  
  16,722
  
  16,290
  
  14,098Noninterest
  IncomeService charges
  on deposit accounts
  
  1,609
  
  1,831
  
  1,784Mortgage banking
  fees
  
  
  
  
  
  831Other
  noninterest income
  
  491
  
  455
  
  510Net gains on
  sale of loans
  
  
  
  44
  
  87Net losses on
  sale of OREO
  
  (3
  )
  
  
  Net gains
  (losses) from sale of securities
  
  514
  
  (45
  )
  1Total
  Noninterest Income
  
  2,611
  
  2,285
  
  3,213Noninterest
  ExpenseSalaries and
  employee benefits
  
  7,619
  
  7,669
  
  7,503Net occupancy
  expense
  
  665
  
  581
  
  627Equipment
  expense
  
  977
  
  932
  
  815Outside fees and
  services
  
  846
  
  877
  
  873Advertising and
  business development expense
  
  466
  
  404
  
  447Supplies and
  postage expense
  
  453
  
  455
  
  451Data processing
  expense
  
  1,245
  
  1,083
  
  1,080Regulatory fees
  and insurance
  
  298
  
  272
  
  177Other operating
  expense
  
  1,366
  
  1,670
  
  1,376Total
  Noninterest Expense
  
  13,935
  
  13,943
  
  13,349Income
  Before Income Taxes
  
  5,398
  
  4,632
  
  3,962Income taxes
  
  1,915
  
  1,611
  
  1,385Net
  Income
  
  $
  3,483
  
  $
  3,021
  
  $
  2,577Basic earnings
  per share
  
  $
  4.17
  
  $
  3.61
  
  $
  3.00Weighted average
  shares outstanding
  
  835,055
  
  836,478
  
  859,710  The accompanying notes to consolidated financial statements
are an integral part of these statements.  26 
   UPBANCORP, INC. CONSOLIDATED
STATEMENTS OF CASH FLOW  Years Ended December 31,
  
  2001
  
  2000
  
  1999(Dollars in thousands, except share data)Cash
  Flows from Operating ActivitiesNet income
  
  $
  3,483
  
  $
  3,021
  
  $
  2,577Adjustments to
  reconcile net income to net cash provided by operating activities:Provision for
  loan losses
  
  890
  
  695
  
  885Depreciation and
  amortization
  
  1,392
  
  1,299
  
  1,282Net losses
  (gains) on securities
  
  (513
  )
  45
  
  (1
  )Net gains on
  sales of loans
  
  
  
  (44
  )
  (87
  )Deferred gain on
  sale of premises and equipment
  
  (252
  )
  
  
  Net losses on
  sale of other real estate owned
  
  3
  
  
  
  Change in
  deferred income taxes
  
  (609
  )
  453
  
  (541
  )Amortization on
  investment securities, net
  
  (797
  )
  (418
  )
  (258
  )Originations of
  mortgages held-for-sale
  
  (13,344
  )
  (938
  )
  (48,941
  )Proceeds from
  sales of mortgages held-for-sale
  
  12,399
  
  2,246
  
  51,831Changes in
  assets and liabilities:(Increase)
  decrease in accrued interest and other assets
  
  10
  
  (1,166
  )
  (120
  )Increase
  (decrease) in accrued interest and other liabilities
  
  (433
  )
  913
  
  771Net cash
  provided by operating activities
  
  2,229
  
  6,106
  
  7,398Cash
  Flows from Investing Activities:Net (increase)
  decrease in federal funds sold
  
  12,600
  
  (7,870
  )
  5,270Purchases of
  available-for-sale and nonmarketable equity securities
  
  (49,565
  )
  (50,893
  )
  (40,670
  )Proceeds from
  maturities and redemptions of available-for-sale and nonmarketable equity
  securities
  
  41,524
  
  28,205
  
  10,479Proceeds from
  sales of available-for-sale securities
  
  15,018
  
  5,447
  
  22,297Proceeds from
  maturities and redemptions of held-to-maturity securities
  
  
  
  
  
  200Net increase in
  loans
  
  (12,198
  )
  (42,578
  )
  (54,894
  )Proceeds from
  sales of premises and equipment
  
  900
  
  
  
  Purchases of
  premises and equipment
  
  (1,827
  )
  (738
  )
  (849
  )Proceeds from
  sale of other real estate
  
  163
  
  
  
  Net cash
  provided by (used in) investing activities
  
  6,615
  
  (68,427
  )
  (58,167
  )Cash
  Flows from Financing ActivitiesNet increase
  (decrease) in total deposits
  
  (24,523
  )
  78,393
  
  44,121Proceeds from
  borrowed funds
  
  20,000
  
  9,215
  
  14,537Payments on
  borrowed funds
  
  (5,469
  )
  (23,000
  )
  (4,000
  )Proceeds from
  note payable
  
  
  
  3,000
  
  Cash dividends
  paid
  
  (435
  )
  (435
  )
  (446
  )Purchase of
  treasury stock
  
  
  
  (59
  )
  (1,082
  )Net cash
  provided by (used in) financing activities
  
  (10,427
  )
  67,114
  
  53,130Net increase
  (decrease) in cash and due from banks
  
  (1,583
  )
  4,793
  
  2,361Cash and due
  from banks at beginning of period
  
  16,319
  
  11,526
  
  9,165Cash and due
  from banks at end of period
  
  $
  14,736
  
  $
  16,319
  
  $
  11,526Supplemental
  disclosure of cash flow information:Cash payments:Interest
  
  $
  14,119
  
  $
  12,123
  
  $
  8,172Income taxes
  
  2,315
  
  1,848
  
  1,901Supplemental
  Schedule of Noncash Investing ActivitiesOther real
  estate acquired in settlement of loans
  
  $
  166
  
  
  
    The accompanying notes to consolidated financial statements
are an integral part of these statements.  27 
   UPBANCORP, INC. CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Dollars in thousands, except share data)  Common
  Stock
  
  Additional
  Paid In Capital
  
  Retained
  Earnings
  
  Treasury
  Stock
  
  Accumulated
  Other Comprehensive Income
  
  TotalBalance,
  December 31, 1998
  
  $
  1,000
  
  $
  4,500
  
  $
  18,823
  
  $
  (1,938
  )
  $
  253
  
  $
  22,638Comprehensive
  Income:Net income
  
  
  
  
  
  2,577
  
  
  
  
  
  2,577Net unrealized
  losses on securities available-for-sale, net of
  tax of $(743)
  
  
  
  
  
  
  
  
  
  (1,162
  )
  (1,162
  )Reclassification
  adjustment for gains realized in net income
  
  
  
  
  
  
  
  
  
  (1
  )
  (1
  )Comprehensive
  income
  
  
  
  
  
  
  
  
  
  
  
  1,414Cash dividends:
  $.52 per share
  
  
  
  
  
  (446
  )
  
  
  
  
  (446
  )Purchase of treasury
  stock
  
  
  
  
  
  
  
  (1,082
  )
  
  
  (1,082
  )Balance,
  December 31, 1999
  
  1,000
  
  4,500
  
  20,954
  
  (3,020
  )
  (910
  )
  22,524Comprehensive
  Income:Net income
  
  
  
  
  
  3,021
  
  
  
  
  
  3,021Net unrealized
  gains on securities available-for-sale, net of tax of $522
  
  
  
  
  
  
  
  
  
  819
  
  819Reclassification
  adjustment for losses realized in net income, net of tax of $18
  
  
  
  
  
  
  
  
  
  27
  
  27Comprehensive
  income
  
  
  
  
  
  
  
  
  
  
  
  3,867Cash dividends:
  $.52 per share
  
  
  
  
  
  (435
  )
  
  
  
  
  (435
  )Purchase of
  treasury stock
  
  
  
  
  
  
  
  (59
  )
  
  
  (59
  )Balance,
  December 31, 2000
  
  1,000
  
  4,500
  
  23,540
  
  (3,079
  )
  (64
  )
  25,897Comprehensive
  Income:Net income
  
  
  
  
  
  3,483
  
  
  
  
  
  3,483Net unrealized
  gains on securities available-for-sale, net of tax of $287
  
  
  
  
  
  
  
  
  
  448
  
  448Reclassification
  adjustment for gains realized in net income, net of tax of $(25)
  
  
  
  
  
  
  
  
  
  (37
  )
  (37
  )Comprehensive
  income
  
  
  
  
  
  
  
  
  
  
  
  3,894Cash dividends:
  $.52 per share
  
  
  
  
  
  (435
  )
  
  
  
  
  (435
  )Balance,
  December 31, 2001
  
  $
  1,000
  
  $
  4,500
  
  $
  26,588
  
  $
  (3,079
  )
  $
  347
  
  $
  29,356  The accompanying notes to consolidated financial statements
are an integral part of these statements.  28 
   UPBANCORP, INC. NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS For the Years
Ended December 31, 2001, 2000 and 1999 (Dollars in thousands, except share data)  Note 1: Summary of Significant
Accounting Policies  Nature of business:  Upbancorp, Inc. (Upbancorp or the Company), is a
bank holding company, organized in 1983 under the laws of the State of
Delaware. The Company owns all of the outstanding common stock of Uptown
National Bank of Chicago (Uptown), organized in 1929 and located in Chicago,
Illinois. Heritage Bank, a division of Uptown National Bank of Chicago
(Heritage), was organized in 1977 and is located in the Phoenix metropolitan
area. Upbancorp does not engage in any activities other than providing
administrative services and acting as a holding company for Uptown.  Uptown is a full-service community bank which operates
seven banking offices and one loan production office in the Chicagoland area
and metropolitan Phoenix area. Uptown is engaged in the general commercial
banking business in addition to offering a complete range of retail banking
services. Uptown conducts general banking business, both commercial and
consumer including: the acceptance and servicing of demand, savings, and time deposit
accounts; commercial, industrial, consumer and real estate lending;
collections; safe deposit box operations; and other banking services tailored
for both commercial and retail clients.  Uptown has a wholly-owned subsidiary, Broadway Clark
Building Corporation (BCBC), which owns all of the real estate that is used
in connection with the operation of Uptowns Chicagoland area business with the
exception of four facilities, which are leased.  Principles of consolidation:  The consolidated financial statements include the
accounts of Upbancorp and its wholly-owned subsidiary Uptown (including its
wholly-owned subsidiary BCBC) after elimination of all intercompany balances
and transactions.  Basis of financial statement presentation:  The accounting and reporting policies of the Company
conform to generally accepted accounting principles. In preparing the
accompanying consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts in the consolidated
financial statements and the accompanying notes. Significant estimates which
are particularly susceptible to change in a short period of time include the
determination of the fair value of securities and the allowance for loan
losses. Actual results could differ from those estimates.  Based on the Companys approach to decision making, it
has concluded that its business is comprised of a single segment.  Securities:  Securities classified as available-for-sale are those
debt securities that the Subsidiary Bank intends to hold for an indefinite
period of time, but not necessarily to maturity and equity securities. Any
decision to sell a security classified as available-for-sale would be based on
various factors, including significant movements in interest rates, changes in
the maturity mix of the Subsidiary Banks assets and liabilities, liquidity
needs, regulatory capital considerations, and other similar factors.  Securities available-for-sale are reported at fair
value with unrealized gains or losses reported as a separate component of other
comprehensive income net of the related deferred tax effect. The amortization
of premiums and accretion of discounts, computed by the interest method over
their contractual lives, are recognized in interest income.  Realized gains or losses, determined on the basis of
the cost of specific securities sold, are included in earnings.  Declines in the fair value of individual securities
classified as either held-to-maturity or available-for-sale below their
amortized cost that are determined to be other than temporary, result in
write-downs of the individual securities to their fair value with the resulting
write-downs included in current earnings as realized losses.  29 
   Nonmarketable equity securities:  The Bank owns an interest in the Federal Reserve
Bank.  Also, as a member of the Federal
Home Loan Bank System, the Bank is required to maintain an investment in
capital stock of the Federal Home Loan Bank in an amount equal to 1 percent of
its outstanding mortgage loans.  No
ready market exists for these securities and they have no quoted market
value.  These securities are redeemable
at par; therefore, market value equals cost.  Mortgages held-for-sale:  Mortgages held-for-sale are those loans the Bank has
the intent to sell in the foreseeable future. 
They are carried at the lower of aggregate cost or market value.  Gains or losses on sales of loans are
recognized at settlement dates and are determined by the difference between the
sales proceeds and the carrying value of the loans.  All sales are made without recourse.  Loans and Allowance for loan losses:  Loans that management has the intent and ability to
hold for the foreseeable future or until maturity or pay-off are reported at
their outstanding unpaid principal balances reduced by any charge-offs, the
allowance for loan losses, and deferred loan fees.  Loan origination and commitment fees are deferred and
the net amount is accreted as an adjustment of the loan yield over the
contractual life of the related loans. Commitment fees based upon a percentage
of a customers unused line of credit and fees related to standby letters of
credit are recognized over the commitment period.  Interest is accrued daily on the outstanding balances.
The accrual of interest is discontinued on loans past due 90 days or more. For
impaired loans, accrual of interest is discontinued when management believes,
after considering collection efforts and other factors, that the borrowers
financial condition is such that collection of interest is doubtful. Interest
income on these loans is recognized to the extent interest payments are
received and the principal is considered fully collectible.  A loan is impaired when it is probable the Subsidiary
Bank will be unable to collect all contractual principal and interest payments
due in accordance with the terms of the loan agreement. Impaired loans are
measured based on the present value of expected future cash flows discounted at
the loans effective interest rate or at the fair value of the collateral if
the loan is collateral dependent. When the measure of the impaired loan is less
than the recorded investment in the loan, the impairment, as well as any
subsequent changes, is recorded through a valuation allowance included in the
allowance for loan losses. The Company considers consumer loans and residential
real estate loans to be smaller homogeneous loans that are not considered as
impaired loans. All other loan types are accounted for as impaired loans when
they meet the above criteria.  The allowance for loan losses is established through a
provision for loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that collectibility of the
principal is unlikely. The allowance is an amount that management believes will
be adequate to absorb probable losses on existing loans, based on an evaluation
of the collectibility of loans and prior loss experience. This evaluation also
takes into consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific problem
loans, and current economic conditions that may affect the borrowers ability
to pay. While management uses the best information available to make its
evaluation, future adjustments to the allowance may be necessary if there are
significant changes in economic conditions. In addition, various regulatory
agencies periodically review the allowance for loan losses. These agencies may
require the Bank to make additions to the allowance for loan losses based on
their judgments of collectibility after reviewing the information available to
them at the time of their examination.  Premises and equipment:  Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed principally by the
straight-line method over their estimated useful lives.  30 
   Intangible assets:  Intangible assets consist of goodwill and other
intangible assets which are being amortized on a straight-line basis over
estimated lives of 3 to 15 years. Intangible assets, net of accumulated
amortization, are included in other assets in the consolidated statements of
condition.  Transfers of financial assets:  Transfers of financial assets are accounted for as
sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to
be surrendered when (1) the assets have been isolated from the Company, (2) the
transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets, and (3)
the Company does not maintain effective control over the transferred assets
through an agreement to repurchase them before their maturity.  Income taxes:  Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.  Comprehensive income:  Accounting principles require that recognized revenue,
expenses, gains and losses be included in net income.  Although certain changes in assets and liabilities, such as
unrealized gains and losses on available for sale securities are reported as a
separate component of the equity sections of the balance sheet, such items,
along with net income, are components of comprehensive income.  Earnings per common share:  Basic earnings per share is computed by dividing net
income for the year by the average number of shares outstanding during the
year. Dilutive earnings per share do not differ from basic earnings per share.  Reclassifications:  Certain amounts in the 2000 and
1999 consolidated financial statements have been reclassified to conform with
the 2001 presentation. Such reclassifications have no effect on previously
reported net income.  Current accounting developments:  In July 2001, the Financial Accounting Standards Board
issued Statement 141, Business Combinations,
and Statement 142, Goodwill and Other
Intangible Assets.  Statement
141 addresses financial accounting and reporting for business combinations and
is effective for all business combinations initiated after June 30, 2001.  Statement 142 addresses financial and
reporting for acquired goodwill and other intangible assets and is effective
for fiscal years beginning after December 15, 2001.  Implementation of the Statements is not expected to have a
material impact on the Companys financial statements.  In August 2001, the Financial Accounting Standards
Board issued Statement 143, Accounting for
Asset Retirement Obligationsand Statement 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.  Statement
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made.  The
associated asset retirement costs are capitalized as part of the carrying
amount of the long-lived asset. 
Statement 144 supersedes FASB Statement 121 and the accounting and
reporting provisions of APB Opinion No. 30. 
Statement 144 establishes a single accounting model for long-lived
assets to be disposed of by sale which includes measuring a long-lived asset
classified as held for sale at the lower of its carrying amount or its fair
value less costs to sell and to cease depreciation or amortization.  For the Company, the provisions of Statement
143 and 144 are effective January 1, 2003, and January 1, 2002,
respectively.  Implementation of the Statements
is not expected to have a material impact on the Companys financial statements.  31 
   Note 2.
Restrictions on Cash and Due From Banks  The Subsidiary Bank is required to maintain reserve
balances in cash or on deposit with the Federal Reserve Bank, based on a
percentage of deposits. The total of these reserve balances was approximately
$439 and $3,221 at December 31, 2001 and 2000.  Note 3.
Securities  The amortized cost and fair value of securities
available-for-sale are as follows at December 31:  2001Amortized
  Cost
  
  Gross 
  Unrealized 
  Gains
  
  Gross 
  Unrealized Losses
  
  Fair 
  ValueU.S. Government agencies
  
  $
  49,704
  
  $
  839
  
  $
  172
  
  $
  50,371States and political subdivisions
  
  8,842
  
  118
  
  202
  
  8,758Total debt securities
  
  58,546
  
  957
  
  374
  
  59,129Equity securities
  
  1,500
  
  30
  
  45
  
  1,485Total securities available-for-sale
  
  $
  60,046
  
  $
  987
  
  $
  419
  
  $
  60,614  2000Amortized
  Cost
  
  Gross 
  Unrealized 
  Gains
  
  Gross 
  Unrealized Losses
  
  Fair 
  ValueU.S. Treasury securities
  
  $
  10,722
  
  $
  
  
  $
  
  
  $
  10,722U.S. Government agencies
  
  38,906
  
  243
  
  44
  
  39,105States and political subdivisions
  
  6,792
  
  86
  
  97
  
  6,781Mortgage-backed securities
  
  5,701
  
  
  
  189
  
  5,512Total debt securities
  
  62,121
  
  329
  
  330
  
  62,120Equity securities
  
  3,501
  
  
  
  104
  
  3,397Total securities available-for-sale
  
  $
  65,622
  
  $
  329
  
  $
  434
  
  $
  65,517  The amortized cost and fair value
of debt securities available-for-sale at December 31, 2001, by contractual
maturity, are shown below.  Amortized 
  Cost
  
  Fair 
  ValueDue in one year or less
  
  $
  7,099
  
  $
  7,113Due after one year through five years
  
  17,938
  
  18,575Due after five years through ten years
  
  8,537
  
  8,683Due after ten years
  
  24,972
  
  24,758Total debt securities
  
  $
  58,546
  
  $
  59,129  Gross gains realized were $595 in
2001, $7 in 2000, and $37 in 1999. Gross losses realized were  $81 in 2001, $52 in 2000, and $36 in 1999.  Investment securities carried at
approximately $34,722 and $29,166 at December 31, 2001 and 2000, respectively,
were pledged to secure public and trust deposits, borrowed funds and for other
purposes as required or permitted by law.  32 
   Note 4. Loans  Major classifications of loans
are as follows at December 31:  2001
  
  2000Commercial - Aircraft related
  
  $
  45,726
  
  $
  54,614Commercial -
  Other
  
  56,453
  
  58,404Real estate -
  Construction
  
  65,821
  
  52,637Real estate -
  Residential (1 to 4 family)
  
  33,998
  
  32,431Real estate -
  Residential (5 or more)
  
  37,522
  
  30,264Real estate -
  Non-Residential
  
  61,798
  
  58,467Consumer and all
  other
  
  2,946
  
  5,986Deferred loan
  fees
  
  (536
  )
  (498
  )Total loans
  
  303,728
  
  292,305Less allowance
  for loan losses
  
  (4,098
  )
  (3,817
  )Total loans, net
  of allowance for loan losses
  
  $
  299,630
  
  $
  288,488
  Changes in the allowance for loan losses account are
summarized below:  Years
  Ended December 31,2001
  
  2000
  
  1999Balance at
  beginning of year
  
  $
  3,817
  
  $
  3,114
  
  $
  2,499Provision for
  loan losses
  
  890
  
  695
  
  885Loans
  charged-off
  
  (610
  )
  (10
  )
  (393
  )Recoveries on
  loans previously charged-off
  
  1
  
  18
  
  123Balance at end
  of year
  
  $
  4,098
  
  $
  3,817
  
  $
  3,114  As of December 31, 2001 and 2000,
the Companys recorded investment in impaired loans and the related valuation
allowance are as follows:  2001
  
  2000Carrying Value
  
  ValuationAllowance
  
  Carrying Value
  
  ValuationAllowanceImpaired loansValuation
  allowance required
  
  $
  446
  
  $
  150
  
  $
  489
  
  $
  177No valuation
  allowance required
  
  4,246
  
  
  
  810
  
  Total impaired
  loans
  
  $
  4,692
  
  $
  150
  
  $
  1,299
  
  $
  177  The valuation allowance is
included in the allowance for loan losses on the balance sheet. The average
recorded investment in impaired loans for years ended December 31, 2001 and
2000, was $3,040 and $945, respectively. No interest income was recognized in
2001, 2000 and 1999 on impaired loans.  33 
   Note 5. Premises
and Equipment  The following is a summary of
bank premises and equipment at December 31:  2001
  
  2000Land
  
  $
  606
  
  $
  1,106Buildings and
  improvements
  
  11,974
  
  12,669Furniture,
  fixtures and equipment
  
  9,138
  
  8,277Total cost
  
  21,718
  
  22,052Accumulated
  depreciation
  
  (16,572
  )
  (16,526
  )Premises and
  equipment, net
  
  $
  5,146
  
  $
  5,526  Depreciation expense on premises
and equipment totaled $1,307, $1,192 and $1,196 for 2001, 2000 and 1999,
respectively.  The building owned by BCBC, in
which the main facility of the Bank is located, has stores and offices which
are rented. Total rent received was $1,146, $1,127 and $1,132 in 2001, 2000 and
1999, respectively and is recorded as a reduction of net occupancy expense.  Note 6. Time
Deposits  The aggregate amount of certificates
of deposits of $100 or more totaled $48,075 and $51,104 at December 31, 2001
and 2000.  Maturities of time deposits are
summarized as follows at December 31:  2002
  
  $
  103,1552003
  
  13,3352004
  
  3,7752005
  
  6402006
  
  339$
  121,244
  Note 7. Borrowed
Funds and Note Payable  At December 31, 2001 and 2000,
borrowed funds consisted of: 2001
  
  2000Federal funds purchased
  
  $
  3,500
  
  $
  Securities sold
  under agreements to repurchase and U.S. Treasury tax and loan note accounts
  
  380
  
  849Federal Home
  Loan Bank borrowing, due May 1, 2001, 6.98% fixed rate
  
  
  
  5,000Federal Home
  Loan Bank borrowing, due July 3, 2002, 6.61% variable rate
  
  4,000
  
  4,000Federal Home
  Loan Bank borrowing, due January 20, 2008, 5.05% fixed rate
  
  5,000
  
  5,000Federal Home
  Loan Bank borrowing, due January 4, 2011, 4.65% fixed rate
  
  7,000
  
  Federal Home
  Loan Bank borrowing, due March 20, 2011, 4.075% fixed rate
  
  5,000
  
  Federal Home
  Loan Bank borrowing, due September 26, 2011, 3.80% fixed rate
  
  4,500
  
  $
  29,380
  
  $
  14,849  Uptown has an arrangement with
the Federal Home Loan Bank of Chicago whereby the FHLB will make advances to
the Bank with repayment terms from overnight to ten years. The Bank is eligible
to obtain credit up to 20 times the member Banks holding of Federal Home Loan
Capital Stock; these eligible borrowings amount to $27,560.  34 
   As required under the agreement, the advances can be
collateralized by the following: qualifying 1-4 family first mortgages, private
mortgage-backed securities or U.S. Treasury and Agency obligations. Uptown has
pledged a combination of U.S. Treasury and Agency mortgage-backed securities.  The Company has a $5 million line of credit, a secured
revolving note payable, with a correspondent bank at December 31, 2001.  This note had an outstanding balance of $3
million at such date. Interest is calculated on the basis of 3-month LIBOR plus
150 basis points with interest due and payable quarterly 4.10% at December 31,
2001. The expiration date of the line is April 1, 2002. The note also contains
certain covenants which limit changes in capital structure, the purchase of or
merger with other banks and/or businesses, and the guarantees of other
liabilities and obligations. In addition, the Company must meet certain
financial ratios.  Note 8. Pension
Plan  Uptown has a defined benefit plan
covering substantially all employees in the Company. The plan is based on years
of service and the employees average compensation during all years of
employment. The Companys funding policy is to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974
(ERISA), plus additional amounts as appropriate. In addition, the Company
also has a Supplemental Executive Retirement Plan (the SERP) for certain
executive officers.  The following table provides a
reconciliation of the changes in the Plans benefit obligations and fair value
of assets over the two year period ended December 31, 2001 and a statement of
the Plans funded status as of December 31 of both years:  Pension
  Benefits2001
  
  2000Amounts in
  ($000)Reconciliation
  of benefit obligation:Net obligation
  at beginning of the year
  
  $
  7,380
  
  $
  6,395Service cost
  
  260
  
  298Interest cost
  
  575
  
  549Plan amendments
  
  8
  
  Actuarial (gain)
  loss
  
  803
  
  495Gross benefits
  paid
  
  (328
  )
  (357
  )Net obligation
  at end of the year
  
  $
  8,698
  
  $
  7,380Reconciliation
  of fair value of plan assets:Fair value of
  plan assets at beginning year
  
  $
  8,256
  
  $
  8,283Actual return on
  plan assets
  
  (409
  )
  330Gross benefits
  paid
  
  (328
  )
  (357
  )Fair value of
  plan assets at end of the year
  
  $
  7,519
  
  $
  8,256Funded status:Funded status at
  end of the year
  
  $
  (1,179
  )
  $
  876Unrecognized
  prior service cost
  
  512
  
  575Actuarial gain
  (loss)
  
  1,384
  
  (511
  )Net amount
  recognized
  
  $
  717
  
  $
  940
  The net amount recognized is recorded in the financial
statements with $1,201 in other assets and $484 in other liabilities  As of December 31, 2001, the benefit obligations of
the defined benefit plan and the SERP were $7,968 and $730, respectively, and
the fair value of plan assets of the defined benefit plan and the SERP were
$7,519 and $-0-, respectively.  35 
   The following table provides the components of net
periodic benefit cost for the plans fiscal years 2001 and 2000:  Pension  Benefits2001
  
  2000
  
  1999Amounts in ($000)Service cost
  
  $
  260
  
  $
  298
  
  $
  372Interest cost
  
  575
  
  549
  
  493Expected return
  on plan assets
  
  (684
  )
  (690
  )
  (660
  )Amortization of
  prior service cost
  
  71
  
  71
  
  70Actuarial loss
  
  
  
  (22
  )
  Net periodic
  benefit cost
  
  $
  222
  
  $
  206
  
  $
  275  The assumptions used in the measurement of the
Companys benefit obligation as of December 31 are shown in the following
table:  Pension  Benefits2001
  
  2000
  
  1999Weighted average
  assumptions as of December 31:Discount rate
  
  7.25
  %
  7.75
  %
  8.00
  %Expected return
  on plan assets
  
  8.50
  %
  8.50
  %
  8.50
  %Rate of
  compensation increase
  
  5.00
  %
  5.00
  %
  5.00
  %  Note 9. Income
Taxes  The provision for income taxes
for the years ended December 31, 2001, 2000 and 1999, is comprised of the
following amounts:  2001
  
  2000
  
  1999Current:Federal
  
  $
  2,317
  
  $
  951
  
  $
  1,733State
  
  207
  
  207
  
  193Deferred
  
  (609
  )
  453
  
  (541
  )Total tax provision
  
  $
  1,915
  
  $
  1,611
  
  $
  1,385  The components of the net deferred
tax assets which are included in other assets, are as follows:  2001
  
  2000Deferred Tax AssetsAllowance for
  loan losses and other real estate owned
  
  $
  1,576
  
  $
  1,206Depreciation
  
  869
  
  797Interest on
  non-accrual loans
  
  159
  
  48Deferred loan
  fees
  
  1
  
  3Securities
  available for sale
  
  
  
  42Gross deferred
  tax assets
  
  2,605
  
  2,096Deferred Tax
  LiabilitiesPension expense
  
  346
  
  438Discount
  accretion
  
  19
  
  30Securities
  available for sale
  
  227
  
  Other
  
  151
  
  106Gross deferred
  tax liabilities
  
  743
  
  574Net deferred tax
  assets
  
  $
  1,862
  
  $
  1,522  Management has determined that a
valuation allowance is not required at December 31, 2001 and 2000.  36 
   The following table reconciles
the statutory Federal income tax rate with the effective income tax as a
percent of pretax income.  2001
  
  2000
  
  1999Federal income tax as statutory rate
  
  35.00
  %
  35.00
  %
  35.00
  %Reduction/increase
  in taxes resulting fromTax-exempt
  interest
  
  (2.63
  )
  (3.70
  )
  (4.20
  )Graduated tax
  rate
  
  (1.00
  )
  (1.00
  )
  (1.00
  )State tax
  
  2.53
  
  3.00
  
  3.20Other, net
  
  1.57
  
  1.50
  
  2.00Effective income
  tax rate
  
  35.47
  %
  34.80
  %
  35.00
  %  Note 10.  Related Parties  The Subsidiary Bank has entered
into transactions with its directors and their affiliates (related parties).
The aggregate amount of loans to such related parties at December 31, 2001 and
2000 was $3,276 and $3,803, respectively. These loans were made using the same
criteria and at interest rates and terms that would be comparable to loans
granted to a borrower who is not an executive officer or director. During 2001,
new loans and advances to such related parties amounted to $3,318 and repayments
amounted to $3,845.  Note 11.
Commitments, Contingencies and Credit Risk  Financial
instruments with off-balance-sheet risk:The
Subsidiary Bank is party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of their
customers. These financial instruments include commitments to extend credit and
standby letters of credit. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the balance sheet.
The contract amounts of these instruments reflect the extent of involvement a
bank has in particular classes of financial instruments.  The Subsidiary Banks exposure to
credit loss in the event of nonperformance by the other party for commitments
to extend credit and standby and commercial letters of credit is presented by
the contractual amount of those instruments. The Subsidiary Bank uses the same
credit policies in making commitments and conditional obligations as they do
for on-balance sheet instruments.  Commitments to extend credit 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.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Subsidiary Bank evaluates each customers creditworthiness on
a case-by-case basis. The amount of collateral obtained if deemed necessary by
the Bank upon an extension of credit is based on managements credit evaluation
of the customer. Collateral held varies but may include accounts receivable,
marketable securities, inventory, property, plant, and equipment, and
income-producing commercial properties and residential properties.  Commercial and standby letters of
credit are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements. 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 various types of collateral
(primarily certificates of deposit) to support those commitments for which
collateral is deemed necessary. Most of the letters of credit expire within
twelve months.  Contract
  Amount2001
  
  2000Off-balance
  sheet financial instrumentsCommitments to
  extend credit
  
  $
  81,030
  
  $
  77,139Commercial
  letters of credit
  
  2,321
  
  2,247  37 
   The Company leases certain office
facilities under various operating lease agreements that provide for payment of
taxes, insurance and maintenance costs. These leases generally include renewal
options. The future minimum rental commitments at December 31, 2001, are as
follows:  2002
  
  $
  3642003
  
  2862004
  
  1672005
  
  1782006 and
  thereafter
  
  1,229Total minimum
  payments
  
  $
  2,224
  Total rent expense was $510, $466, and $471 as of
December 31, 2001, 2000 and 1999, respectively.  Contingencies:  In addition, the Company is defendant in
certain claims and legal actions arising in the ordinary course of business. In
the opinion of management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material adverse effect
on the consolidated financial condition of the Company.  Concentrations
of credit risk:  In addition to financial instruments with
off-balance-sheet risk, the Company, to a certain extent, is exposed to varying
risks associated with concentrations of credit. Concentrations of credit risk
generally exist if a number of counterparties are engaged in similar economic
characteristics that would cause their ability to meet contractual obligations
to be similarly affected by economic or other conditions.  The Company conducts
substantially all of its lending activities throughout northeastern Illinois
and the greater Phoenix metropolitan area. As of December 31, 2001, loans to
customers in Arizona were approximately $94 million. Loans granted to
businesses are primarily secured by business assets, owner-occupied real estate
or personal assets of commercial borrowers. Loans to individuals are primarily
secured by automobiles, residential real estate or other personal assets. Since
the Companys borrowers and its loan collateral have geographic concentration
in the greater Chicago and greater Phoenix metropolitan areas, the Company
could have exposure to a decline in those local economies and real estate
markets. However, management believes that the diversity of its customer base
and local economies, its knowledge of the local markets, and its proximity to
customers limits the risk of exposure to adverse economic conditions.  As of December 31, 2001, the
Companys loan portfolio included $45,726 of loans secured by aircraft. The
Banks lending policies for aircraft loans require loans to be well
collateralized and supported by cash flows. 
Collateral for aircraft loans includes all makes and models of general
aviation manufactured piston driven aircraft. 
Credit losses arising from aircraft loans compare favorably with the
Companys credit loss experience on its loan portfolio as a whole.  The nature of the Banks business
requires that it maintain amounts due from banks and federal funds sold which,
at times, may exceed federally insured limits. 
Management monitors these correspondent relationships and the Bank has
not experienced any losses in such accounts.  Note 12.  Dividend Restrictions and Regulatory Capital
Requirements  Bank regulations place
restrictions upon the amount of dividends that can be paid to the Company by
its Subsidiary Bank.  The availability
of dividends may be further limited because of the need to maintain capital
ratios satisfactory to applicable regulatory agencies.  The Company and the Subsidiary
Bank are subject to various regulatory capital requirements administered by the
Federal banking agencies. Failure to meet minimum capital requirements can
cause regulators to initiate certain mandatory - and possibly additional
discretionary - action that, if undertaken could have a direct material effect
on the Companys financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Company and the Bank
must meet specific capital guidelines that involve quantitative measures of the
Companys and the Banks assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Companys and
the Banks capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors. Prompt corrective action provisions do not apply to bank holding
companies.  38 
   Quantitative measures established
by regulation to ensure capital adequacy require the Bank to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier 1 capital
(as defined in the regulations) to risk-weighted assets (as defined), and of
Tier 1 capital (as defined) to average assets (as defined). Management believes
the Company and the Bank meet all capital adequacy requirements to which they
are subject to at December 31, 2001.  At December 31, 2001, both
entities exceeded regulatory established minimums as defined for financial
institutions. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier 1 risk based, and Tier 1 leverage ratios as set
forth in the table below. There are no conditions or events since that
notification that management believes have changed the Banks category.  The Companys ratios are
presented in the following table:  Actual
  
  For capital adequacy purposes
  
  To be well 
  capitalized under prompt corrective 
  action provisionsAs of December 31,
  2001:
  
  Amount
  
  Ratio
  
  Amount
  
  Ratio
  
  Amount
  
  RatioTotal Capital (to risk-weighted assets)Consolidated
  
  $
  32,605
  
  10.2
  %
  $
  25,550
  
  8.0
  %
  Not applicableUptown National Bank
  
  35,689
  
  11.2
  %
  25,523
  
  8.0
  %
  $
  31,904
  
  10.0
  %Tier 1 Capital (to risk-weighted assets)Consolidated
  
  28,616
  
  9.0
  %
  12,775
  
  4.0
  %
  Not applicableUptown National Bank
  
  31,700
  
  9.9
  %
  12,762
  
  4.0
  %
  19,143
  
  6.0
  %Leverage (Tier 1 to average assets)Consolidated
  
  28,616
  
  7.2
  %
  15,973
  
  4.0
  %
  Not applicableUptown National Bank
  
  31,700
  
  7.9
  %
  15,960
  
  4.0
  %
  19,950
  
  5.0
  %As of December 31, 2000:Total Capital (to risk-weighted assets)Consolidated
  
  $
  29,245
  
  9.6
  %
  $
  24,491
  
  8.0
  %
  Not
  applicableUptown National Bank
  
  32,269
  
  10.6
  %
  24,475
  
  8.0
  %
  $
  30,593
  
  10.0
  %Tier 1 Capital (to risk-weighted assets)Consolidated
  
  25,428
  
  8.3
  %
  12,245
  
  4.0
  %
  Not
  applicableUptown National Bank
  
  28,452
  
  9.3
  %
  12,237
  
  4.0
  %
  18,356
  
  6.0
  %Leverage (Tier 1 to average assets)Consolidated
  
  25,428
  
  6.5
  %
  15,752
  
  4.0
  %
  Not
  applicableUptown National Bank
  
  28,452
  
  7.2
  %
  15,741
  
  4.0
  %
  19,677
  
  5.0
  %  Note 13.  Fair Value of Financial Instruments  The following methods and assumptions were used by the
Company in estimating its fair value of its financial instruments:  Cash
and due from banks and federal funds sold:The carrying amounts reported in the balance sheet for
cash and due from banks and federal funds sold approximate their fair values.  Securities
available-for-sale:Fair
values of securities are based on quoted market prices, where available.  If quoted market prices are not available,
fair values are based on quoted market prices of comparable instruments.  Nonmarketable
equity securities:  No
ready market exists for these securities and they have no quoted market
value.  These securities are redeemable
at par; therefore, market value equals cost.  Mortgages
held-for-sale:  Fair
values of mortgages held-for-sale are based on quoted market prices of similar
loans sold on the secondary market.  39 
   Loans:  The fair values of the loan portfolio are
estimated based upon discounted cash flow analyses that apply using interest
rates currently being offered for loans with similar terms to borrowers with
similar credit quality.  Deposit
liabilities:  The fair
values disclosed for deposits with no defined maturities is equal to their
carrying amounts which represent the amount payable on demand.  The carrying amounts for variable-rate,
fixed-term money market accounts and certificates of deposit approximate their
fair value at the reporting date.  Fair
values for fixed rate certificates of deposit are estimated using a discounted
cash flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on time
deposits.  Borrowed
funds:  The carrying
amounts of borrowings under repurchase agreements and other short-term
borrowings approximate their fair values.  Accrued interest:  The carrying amounts of accrued interest
approximate their fair values.  Off-balance sheet instruments:
Fair values for the Companys off-balance sheet lending commitments (letters of
credit and commitments to extend credit) are based on fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the counterparties credit standing. The fair value for such
commitments is nominal.  The estimated fair values of the
Companys financial instruments were as follows at December 31,  2001
  
  2000Carrying Amount
  
  Estimated Fair Value
  
  Carrying Amount
  
  Estimated Fair ValueFinancial
  AssetsCash and due
  from banks
  
  $
  14,736
  
  $
  14,736
  
  $
  16,319
  
  $
  16,319Federal fund
  sold
  
  
  
  
  
  12,600
  
  12,600Securities
  available-for-sale
  
  60,614
  
  60,614
  
  65,517
  
  65,517Nonmarketable
  equity securities
  
  1,818
  
  1,818
  
  1,909
  
  1,909Mortgages
  held-for-sale
  
  945
  
  945
  
  
  
  Loans, net of
  allowance for loan losses
  
  299,630
  
  306,068
  
  288,488
  
  287,462Accrued interest
  receivable
  
  1,991
  
  1,991
  
  2,463
  
  2,463Financial
  LiabilitiesDeposits
  
  $
  324,025
  
  $
  324,939
  
  $
  348,548
  
  $
  348,855Borrowed funds
  and note payable
  
  32,380
  
  32,380
  
  17,849
  
  17,849Accrued interest
  payable
  
  1,473
  
  1,473
  
  2,219
  
  2,219  40 
   Note 14.
Upbancorp, Inc. - Parent Only Financial
Statements  The Parent Companys condensed financial
information, which follows, conforms with the accounting policies described in
the preceding notes:  Statements
of Condition December 31,
  
  2001
  
  2000(Dollars in thousands, except share data)AssetsCash
  
  $
  154
  
  $
  169Investment in Subsidiary Bank
  
  32,440
  
  28,921Other
  
  331
  
  309Total assets
  
  $
  32,925
  
  $
  29,399LiabilitiesNote payable
  
  $
  3,000
  
  $
  3,000Other liabilities
  
  569
  
  502Total liabilities
  
  $
  3,569
  
  $
  3,502Shareholders' equityCommon stock - $1 par value
  
  $
  1,000
  
  $
  1,000Additional paid in capital
  
  4,500
  
  4,500Retained earnings
  
  26,588
  
  23,540Treasury stock
  
  (3,079
  )
  (3,079
  )Accumulated other comprehensive income (loss)
  
  347
  
  (64
  )Total shareholders' equity
  
  29,356
  
  25,897Total liabilities and shareholders' equity
  
  $
  32,925
  
  $
  29,399  Statements of Income Years ended December
  31,
  
  2001
  
  2000
  
  1999(Dollars in thousands, except share data)Income:Dividends received from bank subsidiary
  
  $
  900
  
  $
  650
  
  $
  135Interest on short term investments
  
  8
  
  6
  
  44Total income
  
  908
  
  656
  
  179Expense:Interest on note payable
  
  178
  
  125
  
  Salaries and employee benefits
  
  458
  
  434
  
  519Other expense
  
  228
  
  247
  
  145Total expense
  
  864
  
  806
  
  664Income before income taxes and undistributed
  income of subsidiary
  
  44
  
  (150
  )
  (485
  )Income tax benefit
  
  331
  
  313
  
  235Income before undistributed income of
  subsidiary
  
  375
  
  163
  
  (250
  )Undistributed income of subsidiary
  
  3,108
  
  2,858
  
  2,827Net income
  
  $
  3,483
  
  $
  3,021
  
  $
  2,577  41 
   Statements of Cash Flows  Years ended December
  31,
  
  2001
  
  2000
  
  1999(Dollars in thousands, except share data)Cash Flows from Operating ActivitiesNet income
  
  $
  3,483
  
  $
  3,021
  
  $
  2,577Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:Equity in undistributed loss of subsidiary
  
  (3,108
  )
  (2,858
  )
  (2,827
  )Other, net
  
  45
  
  21
  
  168Net cash provided by (used in) operating activities
  
  420
  
  184
  
  (82
  )Cash Flows from Investing ActivitiesCapital contributed to Subsidiary Bank
  
  
  
  (2,650
  )
  Net cash (used in) investing activities
  
  
  
  (2,650
  )
  Cash Flows from Financing ActivitiesCash dividends paid
  
  (435
  )
  (435
  )
  (446
  )Proceeds from note payable
  
  
  
  3,000
  
  Treasury stock purchased
  
  
  
  (59
  )
  (1,082
  )Net cash provided by (used in) financing activities
  
  (435
  )
  2,506
  
  (1,528
  )Net increase (decrease) in cash
  
  (15
  )
  40
  
  (1,610
  )Cash at beginning of year
  
  169
  
  129
  
  1,739Cash at end of year
  
  $
  154
  
  $
  169
  
  $
  129  42 
   Note 15. Unaudited Interim Financial
Data (unaudited)  The following table reflects summarized quarterly data
for the periods described, in thousands, except share data:  2001December
  31
  
  September
  30
  
  June 30
  
  March 31Interest income
  
  $
  7,411
  
  $
  7,764
  
  $
  7,813
  
  $
  7,997Interest expense
  
  2,520
  
  3,166
  
  3,697
  
  3,990Net interest
  income
  
  4,891
  
  4,598
  
  4,116
  
  4,007Provision for
  loan losses
  
  390
  
  200
  
  150
  
  150Noninterest
  income
  
  600
  
  726
  
  474
  
  811Noninterest
  expense
  
  3,221
  
  3,437
  
  3,614
  
  3,663Income before
  income taxes
  
  1,880
  
  1,687
  
  826
  
  1,005Income taxes
  
  684
  
  594
  
  279
  
  358Net income
  
  $
  1,196
  
  $
  1,093
  
  $
  547
  
  $
  647Basic earnings
  per share
  
  $
  1.43
  
  $
  1.31
  
  $
  0.66
  
  $
  0.77Diluted earnings
  per share
  
  $
  1.43
  
  $
  1.31
  
  $
  0.66
  
  $
  0.77  2000December
  31
  
  September 30
  
  June 30
  
  March 31Interest income
  
  $
  8,358
  
  $
  8,048
  
  $
  7,181
  
  $
  6,503Interest expense
  
  4,080
  
  3,648
  
  2,861
  
  2,516Net interest
  income
  
  4,278
  
  4,400
  
  4,320
  
  3,987Provision for
  loan losses
  
  210
  
  150
  
  150
  
  185Noninterest
  income
  
  573
  
  533
  
  599
  
  580Noninterest
  expense
  
  3,305
  
  3,605
  
  3,518
  
  3,515Income before
  income taxes
  
  1,336
  
  1,178
  
  1,251
  
  867Income taxes
  
  459
  
  404
  
  438
  
  310Net income
  
  $
  877
  
  $
  774
  
  $
  813
  
  $
  557Basic earnings
  per share
  
  $
  1.04
  
  $
  0.93
  
  $
  0.97
  
  $
  0.67Diluted earnings
  per share
  
  $
  1.04
  
  $
  0.93
  
  $
  0.97
  
  $
  0.67  43 
   Report of Management on
Responsibility for Financial Reporting Upbancorp, Inc.
and Subsidiaries  To the Shareholders of Upbancorp, Inc.:  The accompanying consolidated
financial statements were prepared by Management, who is responsible for the
integrity and objectivity of the data presented. In the opinion of Management,
the financial statements, which necessarily include amounts based on Managements
best estimates and judgments, have been prepared in conformity with accounting
principles generally accepted in the United States of America appropriate to
the circumstances.  Management depends upon the
Companys system of internal controls in meeting its responsibilities for
reliable financial statements. This system is designed to provide reasonable
assurance that assets are safeguarded and that transactions are properly
recorded and executed in accordance with Managements authorization. Judgments
are required to assess and balance the relative cost and the expected benefits
of these controls. As an integral part of the system of internal controls, the
Bank Subsidiary contracts with a professional staff of Independent Internal
Auditors who conduct operational, financial, and special audits, and coordinate
audit coverage with the Independent Auditors.  The consolidated financial
statements have been audited by our Independent Auditors, McGladrey &
Pullen LLP, who render an independent professional opinion on Managements
financial statements.  The Audit Committee of Upbancorp,
Inc.s Board of Directors, composed solely of outside directors, meets
regularly with the Independent Internal Auditors, the Independent Auditors and
Management to assess the scope of the annual examination plan and to discuss
audit, internal control and financial reporting issues, including major changes
in accounting policies and reporting practices. The Independent Internal
Auditors and the Independent Auditors have free access to the Audit Committee,
without Management present, to discuss the results of their audit work and
their evaluations of the adequacy of internal controls and the quality of
financial reporting.  Sincerely,Richard K. OstromChairman of the BoardPresident and Chief Executive
  OfficerKathleen L. HarrisSenior Vice President &
  Chief Financial Officer  44 
   Report of Independent Public
Accountants  To the Shareholders and Board of Directors of
Upbancorp, Inc.:  We have audited the accompanying
consolidated statements of condition of Upbancorp, Inc. and subsidiaries as of
December 31, 2001 and 2000 and the related consolidated statements of income,
cash flows and changes in shareholders equity for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.  We conducted our audit in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.  In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Upbancorp, Inc. and subsidiaries as of December 31, 2001
and 2000 and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.   McGladrey
  & Pullen, LLPChicago, IllinoisMarch 8, 2002  45 
   ITEM 9:  CHANGES IN
AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES  None.  PART III  ITEM 10:  DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT  Information regarding the
Directors and Executive Officers of the Company, their family relationships and
their business experience is contained in the Information about Directors and
Nominees and Executive Officers sections of the Proxy Statement for the 2002
Annual Meeting of Shareholders of the Company to be held on April 16, 2002,
which is incorporated herein by reference.  ITEM
11:  EXECUTIVE COMPENSATION  Information regarding compensation
of the Executive Officers of the Company is contained in the Executive
Compensation section of the Proxy Statement for the 2002 Annual Meeting of
Shareholders of the Company to be held on April 16, 2002, which is incorporated
herein by reference.  ITEM 12:  SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  Information regarding security
ownership of certain beneficial owners and management is contained in the
Security Ownership of Certain Beneficial Owners and Management section of the
Proxy Statement for the 2002 Annual Meeting of Shareholders of the Company to
be held on April 16, 2002, which is incorporated herein by reference.  ITEM 13:  CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS  Information regarding certain
relationships and related transactions of the Company is contained in the
Certain Relationships and Related Transactions section of the Proxy Statement
for the 2002 Annual Meeting of Shareholders of the Company to be held on April
16, 2002, which is incorporated herein by reference. Further information with
respect to loans to the Directors and Executive Officers of the Company is
provided in Note 10 in the Notes to Consolidated Financial Statements found in
Item 8 of this Form 10-K.  46 
  PART IV  ITEM 14:  EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K  (a)The following exhibits, financial statements and financial statement
schedules are filed as part of this report:  FINANCIAL
STATEMENTS Consolidated Statements of
Condition - December 31, 2001 and 2000  Consolidated Statements of Income
- Years ended December 31, 2001, 2000 and 1999  Consolidated Statements of Cash
Flows - Years ended December 31, 2001, 2000 and 1999  Consolidated Statements of
Changes in Shareholders Equity - Years ended December 31, 2001, 2000 and 1999  Notes to Consolidated Financial
Statements  Report of Independent Public
Accountants  FINANCIAL
STATEMENT SCHEDULES All schedules normally required
by Form 10-K are omitted since they are either not  applicable or the required information is shown in the financial
statements or notes thereto.  EXHIBITS (3)Amended
Certificate of Incorporation and by-laws (filed as an Exhibit to the
Registrants 1998 Form 10-K and incorporated herein by reference).  (10.1)Employment Agreement
between Upbancorp, Inc. and Richard K. Ostrom (filed
as an Exhibit to the Registrants 1999 Form 10-K and incorporated herein by
reference).  (10.2)   Indemnity
Agreement between Upbancorp, Inc. and its Directors and Officers (filed as an
Exhibit to the Registrants 1992 Form 10-K and incorporated herein by
reference).  (22)Subsidiaries of
the Registrant (see Item 1 which contains this information).  (28)Proxy Statement
for the 2002 Annual Meeting (filed separately on March 15, 2002 and
incorporated herein by reference).  (b)Reports on Form 8-K - No reports on Form
8-K were filed during the fourth quarter of 2001.  47 
  SIGNATURES  Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.  Date:March 8, 2002
  UPBANCORP, INC.(The Registrant)/s/ Richard K. OstromRichard K. OstromChairman of the Board,President and ChiefExecutive Officer  Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf
of the registrant and in their capacities on March 8, 2002.  /s/
  Richard K. Ostrom
  Chairman of the BoardRichard
  K. Ostrom
  March
  8, 2002/s/
  Stephen W. Edwards, CLU
  DirectorStephen
  W. Edwards, CLU
  March
  8, 2002/s/
  Delbert R. Ellis
  DirectorDelbert
  R. Ellis
  March
  8, 2002/s/
  Alfred E. Hackbarth, Jr.
  DirectorAlfred
  E. Hackbarth, Jr.
  March
  8, 2002/s/
  James E. Heraty
  DirectorJames
  E. Heraty
  March
  8, 2002/s/
  Marvin L. Kocian
  DirectorMarvin
  L. Kocian
  March
  8, 2002  48