** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

**FORM 10-Q**

 

**ý****Quarterly Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934**

 
| **For the quarterly period ended March 31, 2003** |   | **Commission file number 01-12292** |
|---------------------------------------------------|--------|-------------------------------------|

 

**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**             |   | **(773) 878-2000**                                        |
| (Address of principal executive offices)(zip code)              |   | (Registrant’s telephone number  including area code) |

 

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor 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.

Yes  ý                                       No  o

 

Indicate by check mark whetherthe Registrant is an accelerated filer (as defined in Rule 12b-2 of theSecurities Exchange Act of 1934).

Yes  o                                       No  ý

 

The number of shares outandingof the registrant’s common stock, $1.00 par value, as of April 30, 2003, was835,055.

 

 

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PART 1 - Financial Information

Item 1. Financial Statements

 

**UPBANCORP,INC.**

**CONSOLIDATEDSTATEMENTS OF CONDITION**

 
| **(Dollars in thousands, except share data)  (Unaudited)**                                  |   | **March 31,  2003** |    | **December  31, 2002** |   |
|---------------------------------------------------------------------------------------------|--------|---------------------|---------|------------------------|--------|
| **Assets**                                                                                  |   |                |    |                   |   |
| Cash and due from banks                                                                     |   | $                   | 26,988  |                   | $      | 13,758 |   |
| Federal funds sold                                                                          |   | 45,300              |    | 40,500                 |   |
| Securities available-for-sale                                                               |   | 62,724              |    | 57,823                 |   |
| Nonmarketable equity securities                                                             |   | 1,931               |    | 1,891                  |   |
| Loans (net of allowance for loan losses of $4,711  and $4,710 in 2003 and 2002)             |   | 269,444             |    | 281,003                |   |
| Premises and equipment, net                                                                 |   | 5,103               |    | 5,010                  |   |
| Accrued interest  and other assets                                                     |   | 6,373               |    | 7,135                  |   |
| **Total Assets**                                                                            |   | $                   | 417,863 |                   | $      | 407,120 |   |
|                                                                                        |   |                |    |                   |   |
| **Liabilities and Shareholders’ Equity**                                               |   |                |    |                   |   |
| **Liabilities**                                                                             |   |                |    |                   |   |
| Noninterest bearing                                                                         |   | $                   | 94,016  |                   | $      | 89,200 |   |
| Savings, NOW and money market deposits                                                      |   | 126,074             |    | 125,928                |   |
| Other time deposits                                                                         |   | 135,530             |    | 129,537                |   |
| Total deposits                                                                              |   | 355,620             |    | 344,665                |   |
| Borrowed funds - short term                                                                 |   | 289                 |    | 994                    |   |
| Borrowed funds - long term                                                                  |   | 21,500              |    | 21,500                 |   |
| Note payable                                                                                |   | 3,000               |    | 3,000                  |   |
| Accrued interest and other liabilities                                                      |   | 2,672               |    | 3,279                  |   |
| **Total Liabilities**                                                                       |   | 383,081             |    | 373,438                |   |
|                                                                                        |   |                |    |                   |   |
| **Shareholders’ Equity**                                                               |   |                |    |                   |   |
| Common stock, $1 par value: 3,000,000  shares authorized: 1,000,000 issued in 2003 and 2002 |   | 1,000               |    | 1,000                  |   |
| Additional paid in capital                                                                  |   | 4,500               |    | 4,500                  |   |
| Retained earnings                                                                           |   | 31,711              |    | 30,326                 |   |
| Treasury stock - 164,945 shares in 2003 and  2002                                           |   | (3,079              | )       | (3,079                 | )      |
| Accumulated other comprehensive income                                                      |   | 650                 |    | 935                    |   |
| **Total Shareholders’ Equity**                                                         |   | 34,782              |    | 33,682                 |   |
| **Total Liabilities and Shareholders’ Equity**                                         |   | $                   | 417,863 |                   | $      | 407,120 |   |

 

*See accompanying notes to consolidated financial statements*

 

2

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**UPBANCORP,INC.**

**CONSOLIDATEDSTATEMENTS OF INCOME**

 
|                                                           |   | **For the  three months ended  March 31,** |       |
|----------------------------------------------------------------|--------|--------------------------------------------|------------|
| **(Dollars in thousands, except per share data)  (Unaudited)** |   | **2003**                                   | ** ** | **2002** | ** ** |
| **Interest Income**                                            |   |                                       |       |   |   |
| Interest and fees on loans                                     |   | $                                          | 6,164      |   | $ | 6,116 |   |
| Interest on mortgages held-for-sale                            |   | 3                                          |       | 3 |   |
| Interest on federal funds sold                                 |   | 60                                         |       | 0 |   |
| Interest and dividends on securities                           |   |                                       |       |   |   |
| Taxable                                                        |   | 923                                        |       | 763 |   |
| Non-taxable                                                    |   | 156                                        |       | 118 |   |
| Total interest income                                          |   | 7,306                                      |       | 7,000 |   |
|                                                           |   |                                       |       |   |   |
| **Interest Expense**                                           |   |                                       |       |   |   |
| Interest on savings, NOW and money market  deposits            |   | 426                                        |       | 492 |   |
| Interest on other time deposits                                |   | 890                                        |       | 1,151 |   |
| Interest on note payable                                       |   | 21                                         |       | 29 |   |
| Interest on borrowed funds                                     |   | 239                                        |       | 301 |   |
| Total interest expense                                         |   | 1,576                                      |       | 1,973 |   |
|                                                           |   |                                       |       |   |   |
| **Net Interest Income**                                        |   | 5,730                                      |       | 5,027 |   |
| **Provision for Loan Losses**                                  |   | 0                                          |       | 225 |   |
| **Net Interest Income after Provision for  Loan Losses**       |   | 5,730                                      |       | 4,802 |   |
|                                                           |   |                                       |       |   |   |
| **Noninterest Income**                                         |   |                                       |       |   |   |
| Service charges on deposit accounts                            |   | 332                                        |       | 386 |   |
| Other noninterest income                                       |   | 84                                         |       | 90 |   |
| Total noninterest income                                       |   | 416                                        |       | 476 |   |
|                                                           |   |                                       |       |   |   |
| **Noninterest Expense**                                        |   |                                       |       |   |   |
| Salaries and employee benefits                                 |   | 1,991                                      |       | 1,986 |   |
| Net occupancy expense                                          |   | 184                                        |       | 217 |   |
| Equipment expense                                              |   | 175                                        |       | 257 |   |
| Outside fees & services                                    |   | 355                                        |       | 227 |   |
| Advertising & business development  expenses               |   | 130                                        |       | 147 |   |
| Supplies and postage expense                                   |   | 116                                        |       | 118 |   |
| Data processing expense                                        |   | 344                                        |       | 325 |   |
| Regulatory fees and insurance                                  |   | 71                                         |       | 64 |   |
| Other operating expense                                        |   | 517                                        |       | 291 |   |
| Total noninterest expense                                      |   | 3,883                                      |       | 3,632 |   |
|                                                           |   |                                       |       |   |   |
| **Income Before Income Taxes**                                 |   | 2,263                                      |       | 1,646 |   |
| Income taxes                                                   |   | 770                                        |       | 597 |   |
| **Net Income**                                                 |   | $                                          | 1,493      |   | $ | 1,049 |   |
|                                                           |   |                                       |       |   |   |
| **Basic Earnings Per Share**                                   |   | $                                          | 1.79       |   | $ | 1.26 |   |
|                                                           |   |                                       |       |   |   |
| **Weighted Average Shares Outstanding**                        |   | 835,055                                    |       | 835,055 |   |
|                                                           |   |                                       |       |   |   |
| **Cash Dividends Paid**                                        |   | $                                          | 108        |   | $ | 108 |   |
|                                                           |   |                                       |       |   |   |
| **Payout Ratio**                                               |   | 7.23                                       | %          | 10.30 | % |

 

*See accompanying notes to consolidated financial statements*

 

3

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**UPBANCORP,INC.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
|                                                                                                |         | **For the three months ended  March 31,** |   |
|-----------------------------------------------------------------------------------------------------|--------------|-------------------------------------------|--------|
| **(Dollars  in thousands) (Unaudited)**                                                             |         | **2003**                                  |   | **2002** |   |
| **Cash Flows from Operating Activities**                                                            |         |                                      |   |   |   |
| Net Income                                                                                          |         | $                                         | 1,493  |   | $ | 1,049 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities:                  |         |                                      |   |   |   |
| Provision for loan losses                                                                           |         | 0                                         |   | 225 |   |
| Depreciation and amortization                                                                       |         | 245                                       |   | 334 |   |
| Change in deferred income taxes                                                                     |         | 505                                       |   | 482 |   |
| Accretion on securities, net                                                                        |         | (731                                      | )      | (432 | ) |
| Changes in assets and liabilities:                                                                  |         |                                      |   |   |   |
|  Decrease  in accrued interest receivable and other assets                                     |         | 243                                       |   | 239 |   |
|   Decrease  in accrued interest payable and other liabilities                                  |         | (507                                      | )      | (541 | ) |
| Net cash provided by operating activities  before loan originations and sales                       |         | 1,248                                     |   | 1,356 |   |
| Originations of mortgages held-for-sale                                                             |         | (2,517                                    | )      | (2,186 | ) |
| Proceeds from sales of mortgages  held-for-sale                                                     |         | 2,517                                     |   | 2,951 |   |
| **Net cash provided by operating activities**                                                       |         | 1,248                                     |   | 2,121 |   |
|                                                                                                |         |                                      |   |   |   |
| **Cash Flows from Investing Activities**                                                            |         |                                      |   |   |   |
| Net (increase) in federal funds sold                                                                |         | (4,800                                    | )      | 0 |   |
| Purchases of available-for-sale and nonmarketable  equity securities                                |         | (29,908                                   | )      | (1,439 | ) |
| Proceeds from maturities and redemptions of  available-for-sale and nonmarketable equity securities |         | 25,230                                    |   | 7,000 |   |
| Proceeds from sale of other assets owned                                                            |         | 93                                        |   | — |   |
| Net (increase) decrease in loans                                                                    |         | 11,559                                    |   | (8,926 | ) |
| Purchases of premises and equipment                                                                 |         | (334                                      | )      | (417 | ) |
| **Net cash provided by (used in) investing  activities**                                            |         | 1,840                                     |   | (3,782 | ) |
|                                                                                                |         |                                      |   |   |   |
| **Cash Flows from Financing Activities**                                                            |         |                                      |   |   |   |
| Net increase in total deposits                                                                      |         | 10,955                                    |   | 9,488 |   |
| Payments on borrowed funds - short term                                                             |         | (705                                      | )      | 0 |   |
| Payments on borrowed funds - long term                                                              |         | 0                                         |   | (2,962 | ) |
| Cash dividends paid                                                                                 |         | (108                                      | )      | (108 | ) |
| **Net cash provided by financing activities**                                                       |         | 10,142                                    |   | 6,418 |   |
|                                                                                                |         |                                      |   |   |   |
| **Net increase in cash and due from banks**                                                         |         | 13,230                                    |   | 4,757 |   |
| **Cash and due from banks at beginning of  period**                                                 |         | 13,758                                    |   | 14,736 |   |
| **Cash and due from banks at end of period**                                                        |         | $                                         | 26,988 |   | $ | 19,493 |   |
|                                                                                                |         |                                      |   |   |   |
| Supplemental disclosure of cash flow  information:                                                  |         |                                      |   |   |   |
| Cash payments for:                                                                                  | Interest     |                                      | $      | 1,692 |   | $ | 2,149 |   |
|                                                                                                | Income taxes |                                      | 265    |   | 115 |   |
| Supplemental schedule of non-cash investing  activities:                                            |         |                                      |   |   |   |
| Other real estate acquired in settlement of  loans                                                  |         | —                                    |   |   | 805 |   |
| Other assets acquired in settlement of  loans                                                       |         | —                                    |   | — |   |

 

*See accompanying notes to consolidated financial statements*

 

4

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**UPBANCORP,INC.**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

***(Dollars in thousands, except per share data)(Unaudited)***

 
|                                                                 |   | **Common  Stock** | ** ** | **Additional  Paid In  Capital** | ** ** | **Retained  Earnings** | ** ** | **Treasury  Stock** | ** ** | **Accumulated  Other  Comprehensive  Income** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------|--------|-------------------|------------|----------------------------------|------------|------------------------|------------|---------------------|------------|-----------------------------------------------|------------|-----------|------------|
| **Balance, January 1, 2003**                                         |   | $                 | 1,000      |                             | $          | 4,500                  |       | $                   | 30,326     |                                          | $          | (3,079    | )          | $ | 935 |   | $ | 33,682 |   |
| Comprehensive Income:                                                |   |              |       |                             |       |                   |       |                |       |                                          |       |      |       |
| Net income for the three months ended March 31, 2003                 |   |              |       |                             |       | 1,493                  |       |                |       |                                          |       | 1,493     |       |
| Unrealized loss on securities available-for-sale, net of tax of $182 |   |              |       |                             |       |                   |       |                |       | (285                                          | )          | (285      | )          |
| Comprehensive Income                                                 |   |              |       |                             |       |                   |       |                |       |                                          |       | 1208      |       |
| Cash dividends: $.13 per share                                       |   |              |       |                             |       | (108                   | )          |                |       |                                          |       | (108      | )          |
| **Balance March 31, 2003**                                           |   | $                 | 1,000      |                             | $          | 4,500                  |       | $                   | 31,711     |                                          | $          | (3,079    | )          | $ | 650 |   | $ | 34,782 |   |

 

*See accompanying notes to consolidated financial statements*

 

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

***(Dollars in thousands, except per share data) (Unaudited)***

 

**NOTEA: BASIS OF PRESENTATION**

The accompanying unauditedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America  for interim financial information and withthe instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,they do not include all of the information and footnotes required by accountingprinciples generally accepted in the United States of America  for complete financial statements. In theopinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for fair presentation have been included.

 

Operating results of the threemonths ended March 31, 2003 are not necessarily indicative of the results thatmay be expected for the year ended December 31, 2003. For further information,refer to the consolidated financial statements and footnotes thereto includedin the Company’s annual report on Form 10-K for the year ended December 31,2002.

 

Prior period amounts includedin these financial statements have been reclassified to place them on a basis consistentwith the current period’s financial statements.

 

**NOTEB: SECURITIES**

**Securitiesavailable-for-sale**

The amortized cost and fairvalue of these are as follows at March 31 , 2003:

 
|                                |   | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
|-------------------------------------|--------|---------------------|------------|------------------------------|------------|-------------------------------|------------|-----------------|------------|
| U. S. Government agencies           |   | $                   | 46,611     |                         | $          | 463                           |       | $               | 26         |   | $ | 47,048 |   |
| States and political subdivisions   |   | 13,489              |       | 680                          |       | 43                            |       | 14,126          |       |
| Mortgage-backed securities          |   | 61                  |       | 2                            |       | 0                             |       | 63              |       |
| Total debt securities               |   | 60,161              |       | 1,145                        |       | 69                            |       | 61,237          |       |
| Equity securities                   |   | 1,500               |       | 2                            |       | 15                            |       | 1,487           |       |
| Total securities available-for-sale |   | $                   | 61,661     |                         | $          | 1,147                         |       | $               | 84         |   | $ | 62,724 |   |

 

5

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**NOTEC: LOANS AND NONPERFORMING ASSETS**

The following summarizes loansat the dates indicated:

 
|                                                  |   | **March. 31,  2003** |    | **Dec. 31,  2002** |   |
|-------------------------------------------------------|--------|----------------------|---------|--------------------|--------|
| Commercial - Aircraft related                         |   | $                    | 29,498  |               | $      | 32,683 |   |
| Commercial - Other                                    |   | 48,720               |    | 47,365             |   |
| Secured by real estate - Construction                 |   | 62,351               |    | 70,515             |   |
| Secured by real estate - Residential (1 to  4 family) |   | 26,286               |    | 25,882             |   |
| Secured by real estate - Residential (5 or  more)     |   | 33,490               |    | 36,255             |   |
| Secured by real estate - Non-Residential              |   | 71,724               |    | 71,131             |   |
| Consumer and all other                                |   | 2,556                |    | 2,410              |   |
| Deferred loan income                                  |   | (470                 | )       | (528               | )      |
| Total loans                                           |   | 274,155              |    | 285,713            |   |
| Less: Allowance for loan losses                       |   | (4,711               | )       | (4,710             | )      |
| Total loans, net of allowance for loan  losses        |   | $                    | 269,444 |               | $      | 281,003 |   |

 

The following summarizes theanalysis of the allowance for loan losses for the three months ended:

 
|                                                  |   | **March 31,  2003** |   | **March 31,  2002** |    |
|-------------------------------------------------------|--------|---------------------|--------|---------------------|---------|
| Balance at beginning of year                          |   | $                   | 4,710  |                | $       | 4,098 |   |
| Charge-offs:                                          |   |                |   |                |    |
| Commercial - Other                                    |   | 22                  |   | 30                  |    |
| Secured by real estate - Residential (1 to  4 family) |   | 0                   |   | 150                 |    |
| Consumer and all other                                |   | 1                   |   | 13                  |    |
| Total charge-offs                                     |   | 23                  |   | 193                 |    |
|                                                  |   |                |   |                |    |
| Recoveries:                                           |   |                |   |                |    |
| Commercial - Other                                    |   | 23                  |   | 62                  |    |
| Consumer and all other                                |   | 1                   |   | 1                   |    |
| Total recoveries                                      |   | 24                  |   | 63                  |    |
|                                                  |   |                |   |                |    |
| Net recoveries (charge-offs)                          |   | 1                   |   | (130                | )  |
| Provision for loan losses                             |   | 0                   |   | 225                 |    |
| Balance at end of period                              |   | $                   | 4,711  |                | $       | 4,193 |   |

 

The following summarizesnonperforming assets at the dates indicated:

 
|                                                     |   | **March 31,  2003** |   | **Dec. 31,  2002** |   |
|----------------------------------------------------------|--------|---------------------|--------|--------------------|--------|
| Nonaccrual loans                                         |   | $                   | 4,817  |               | $      | 6,683 |   |
| Restructured loans                                       |   | 377                 |   | 377                |   |
| Loans 90 days or more past due, still  accruing interest |   | 0                   |   | 0                  |   |
| Total nonperforming loans                                |   | 5,194               |   | 7,060              |   |
| Other real estate owned (OREO)                           |   | 185                 |   | 185                |   |
| Other assets owned                                       |   | 408                 |   | 601                |   |
| Total nonperforming assets                               |   | $                   | 5,787  |               | $      | 7,846 |   |

 

**NOTED: NOTE PAYABLE**

The Company had a $10 millionline of credit, a secured revolving note payable, with a correspondent bank at March31, 2003. This note has an outstanding balance of $3 million. Interest iscalculated on the basis of 3-month LIBOR plus 150 basis points with interestdue and payable quarterly (2.78% at March 31, 2003). The expiration date of theline is March 1, 2004. The note also contains certain covenants which limitchanges in capital structure, the purchase of, or merger with other banksand/or businesses, and the guarantees of other liabilities and obligations. Inaddition, the Company must meet certain financial ratios.

 

6

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**NOTEE: EARNINGS PER SHARE**

Basic earnings per share arecalculated using the weighted average number of shares outstanding during eachperiod.

 

**NOTEF: DEFINITIVE AGREEMENT**

On February 14, 2003,Upbancorp, Inc., and Bridgeview Bancorp, Inc. (“Bridgeview”), and BridgeviewAcquisition Corp., a wholly owned subsidiary of Bridgeview (“MergerSub”),entered into an Agreement and Plan of Merger, pursuant to which MergerSub willbe merged with and into Upbancorp.  As aresult of the merger, shareholders will receive approximately $67.90 inexchange for each share of common stock.

 

The merger is subject toapproval by the shareholders of Upbancorp who own at least a majority of theissued and outstanding shares of common stock of Upbancorp, receipt of certainregulatory approvals and other customary conditions set forth in the Agreementand Plan of Merger.

 

Bridgeview advised Upbancorp onMay 2, 2003 that Bridgeview has received all regulatory approvals.  Upbancorp will hold its annual meeting ofshareholders at 9:45 a.m. on June 3, 2003, at Uptown National Bank of Chicago,4753 North Broadway, Chicago, Illinois, at which its shareholders will vote onthis transaction.

 

7

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**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*(Dollars in thousands, except per share data)*

 

The following is management’sdiscussion and analysis of certain significant factors which have affected theCompany’s financial condition and results of operations during the periodsincluded in the consolidated financial statements set forth in this filing. TheCompany’s Form 10-Q for the quarter ended March 31, 2002 is incorporated byreference. 

 

The Company operates afull-service community bank through eight banking offices and one loanproduction office in the Chicago and Phoenix metropolitan areas. Uptown’sbranches in the Phoenix area operate under the name of Heritage Bank (“Heritage”).

** **

**RESULTSOF OPERATIONS**

The Company's net income forthe quarter ended March 31, 2003 was $1,493, compared to $1,049 in the sameperiod in 2002, an increase of $444, or 42.32%. On a per share basis, earningsincreased to $1.79 in the quarter, from $1.26 in the previous year. Theincrease in the first quarter's net income is the result of increased netinterest income as well as a provision for loan losses of $0 as of March 31,2003 as compared to $225 for the same period 2002. Both of these contributingfactors are discussed below.

** **

**NetInterest Income**

The Company's net interestincome on a fully taxable basis was $5,797 for the first three months of 2003,compared with the $5,073 registered in the same period of 2002. This is theresult of the roll-off maturity of time deposits that carried a significantlyhigher rate of issue in 2002 than is currently available for such deposits. Inaddition, interest income was recognized in the current year on a loan whichwas carried on non-accrual status throughout 2002.

 

The following tables summarizethe Company’s average earning assets and interest bearing liabilities for thethree month period ended March 31, 2003 and March 31, 2002.

 

**Table 1**

**Net Interest Income and Margin Analysis**

 
|                                        |   | **Three  Months Ended March 31,** |    |
|---------------------------------------------|--------|-----------------------------------|---------|
|                                        |   | **2003**                          |    | **2002** |   |
|                                        |   | **Average  Balance**              |    | **Interest** |   | **Yield/  Rate** |   | **Average  Balance** |   | **Interest** |   | **Yield/  Rate** |   |
| Interest Earning Assets:                    |   |                              |    |   |   |   |   |   |   |   |   |   |   |
| Federal Funds Sold                          |   | $                                 | 21,103  |   | $ | 60 |   | 1.14 | % | $ | 111 |   | $ | 0 |   | 0.00 | % |
| Investment Securities:                      |   |                              |    |   |   |   |   |   |   |   |   |   |   |
| Taxable                                     |   | 58,351                            |    | 880 |   | 6.12 | % | 45,573 |   | 740 |   | 6.58 | % |
| Nontaxable (1)                              |   | 12,587                            |    | 223 |   | 7.10 | % | 9,540 |   | 164 |   | 6.99 | % |
| Nonmarketable Equity Securities             |   | 1,912                             |    | 43 |   | 9.12 | % | 1,838 |   | 23 |   | 5.14 | % |
| Mortgages held-for-sale                     |   | 171                               |    | 3 |   | 7.02 | % | 176 |   | 3 |   | 6.84 | % |
| Loans, net of deferred loan income(2)(3)    |   | 285,990                           |    | 6,164 |   | 8.62 | % | 312,430 |   | 6,116 |   | 7.83 | % |
| Total Interest Earning Assets               |   | $                                 | 380,114 |   | $ | 7,373 |   | 7.87 | % | $ | 369,668 |   | $ | 7,046 |   | 7.73 | % |
|                                        |   |                              |    |   |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities:               |   |                              |    |   |   |   |   |   |   |   |   |   |   |
| Savings, NOW & money market deposits    |   | $                                 | 124,895 |   | $ | 426 |   | 1.38 | % | $ | 128,936 |   | $ | 492 |   | 1.55 | % |
| Other Time Deposits                         |   | 132,111                           |    | 890 |   | 2.73 | % | 120,540 |   | 1,151 |   | 3.87 | % |
| Borrowed Funds - Short Term                 |   | 3,289                             |    | 21 |   | 2.59 | % | 3,994 |   | 29 |   | 2.90 | % |
| Borrowed Funds - Long Term                  |   | 21,659                            |    | 239 |   | 4.48 | % | 33,100 |   | 301 |   | 3.64 | % |
| Total Interest Bearing Liabilities          |   | $                                 | 281,954 |   | $ | 1,576 |   | 2.27 | % | $ | 286,570 |   | $ | 1,973 |   | 2.79 | % |
| Net interest income/interest rate spread(4) |   |                              |    | $ | 5,797 |   | 5.60 | % |   |   | $ | 5,073 |   | 4.94 | % |
| Net interest margin(5)                      |   |                              |    |   |   | 6.28 | % |   |   |   |   | 5.65 | % |

 

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(1) - Nontaxable interest incomeis presented on a fully tax equivalent basis assuming a 35% tax rate.

(2) - Nonaccrual loans areincluded in average loans.

(3)-  Interest income includes loan origination fees of $470 and $573for the three months ended March 31, 2003 and 2002.

(4) -  Interest rate spreadrepresents the difference between the average yield on interest earning assetsand the average cost of interest bearing liabilities and is presented on afully tax equivalent basis.

(5) - Net interest marginrepresents net interest income as a percentage of average earning assets.

 

8

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**Table 2**

**Volume and Rate Analysis of Net InterestIncome**

** **
|                                       |   | **Three  Months Ended  March 31, 2003  Compared to March 31, 2002** |   |
|--------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                       |   | **Change  due to:  Volume**                                         |   | **Change  due to:  Rate** |   | **Total  Change** |   |
| Interest Earning Assets:                   |   |                                                                |   |   |   |   |   |
| Federal Funds Sold                         |   | $                                                                   | 0      |   | $ | 60 |   | $ | 60 |   |
| Investment Securities:                     |   |                                                                |   |   |   |   |   |
| Taxable                                    |   | 188                                                                 |   | (48 | ) | 140 |   |
| Nontaxable (1)                             |   | 54                                                                  |   | 5 |   | 59 |   |
| Nonmarketable Equity Securities            |   | 1                                                                   |   | 19 |   | 20 |   |
| Mortgages held-for-sale                    |   | 0                                                                   |   | (0 | ) | 0 |   |
| Loans, net of deferred loan income         |   | (248                                                                | )      | 296 |   | 48 |   |
| Increase/(Decrease) in Interest Income     |   | (5                                                                  | )      | 332 |   | 327 |   |
|                                       |   |                                                                |   |   |   |   |   |
| Interest Bearing Liabilities:              |   |                                                                |   |   |   |   |   |
| Savings, NOW & money market deposits   |   | (15                                                                 | )      | (51 | ) | (66 | ) |
| Other Time Deposits                        |   | 126                                                                 |   | (387 | ) | (261 | ) |
| Borrowed Funds - Short Term                |   | (5                                                                  | )      | (3 | ) | (8 | ) |
| Borrowed Funds - Long Term                 |   | (162                                                                | )      | 100 |   | (62 | ) |
| Total Decrease in Interest Expense         |   | (56                                                                 | )      | (341 | ) | (397 | ) |
| Increase/(Decrease) in Net Interest Income |   | $                                                                   | 51     |   | $ | 673 |   | $ | 724 |   |

 

----

(1) - Nontaxable interestincome is presented on a fully tax equivalent basis assuming a 35% tax rate.

 

 

**Provisionfor Loan Losses**

The provision for loan lossesfor the three months ended  March 31,2003 was $0, compared to $225 in 2002, reflecting management’s assessment ofoverall risk in the loan portfolio. Net (recoveries) charge-offs were $(1) forthe first three months of 2003, compared to $130 during the same period in2002. The allowance for loan losses as a percent of total loans was 1.72% atMarch 31, 2003, and 1.65% at December 31, 2002. Total nonperforming assets as apercent of total assets were 1.48% at March 31, 2003 and 1.93% at December 31,2002. The company did not make additional provisions for loan losses during thecurrent year based on its assessments of the overall allowance for loan losses.Primarily, nonperforming assets decreased by $833, as of March 31, 2003compared to the same period in 2002. In addition, there was a decrease in theloan portfolio of 12.38% or $38,082 from March 31, 2003 compared to March 31,2002.

 

**NoninterestIncome and Expense**

Total noninterest incomedecreased 12.60% to $416 in the first three months of 2003, compared to thesame period in 2002, primarily due to the reduction in volume of overdraftactivity within the company's commercial portfolio.

 

Total noninterest expense forthe first three months of 2003 increased 6.91% to $3,883 from the year earliertotal of $3,632. The increase is the result of higher outside fees and servicesand other operating expenses offset by lower equipment expense.  The increase in noninterest expense isprimarily the result of the plan of merger discussed elsewhere in thisdocument.

 

**FINANCIALCONDITION CHANGES**

Total assets were $417,863 atMarch 31, 2003 compared to $407,120 at December 31, 2002. The overall increasein cash and due from banks is a function of regular deposit activity andseasonal fluctuation. The increase in the securities portfolio is a reflectionof active funds management and the calendar timing of investment maturities andthe reinvestment of those funds. The decrease in the loan portfolio is a resultof both seasonal fluctuations related to advances on commitments on lines ofcredit in addition to planned exiting of classified credits of the bank.

 

Total deposits increased$10,955 or 3.18% from year-end. Noninterest bearing deposits increased 5.40% or$4,616, due to core growth, as well as seasonal fluctuations at each of thebranches. Interest bearing deposits increased $6,139 as a result of the issuanceof short term, non-core, certificates of deposit purchased in 2003, at ratesprofitable to Uptown. 

 

9

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**Provisionand Allowance for Loan Losses**

The allowance for loan lossesis established through a provision for loan losses charged to expense.  Loans are charged against the allowance forloan losses when management believes the full collection of the loan principalis unlikely.  The level of the provisionfor loan losses charged to operating expense as well as the balances maintainedin the allowance for loan losses is dependent upon many factors, including loangrowth, changes in the composition of the loan portfolio, net charge-offlevels, delinquencies, collateral values and management’s assessment of currentand prospective economic conditions in the Company’s primary market areas.

 

We maintain our allowance forloan losses at a level management believes will be adequate to absorb probablelosses on existing loans based on an evaluation of the collectibility of loansand prior loss experience.  We use arisk rating system to evaluate the adequacy of the allowance for loanlosses.  With this system, each loan isrisk rated between one and eight, by the originating loan officer or loancommittee, with one being the best case and eight being a loss or the worstcase.  Loan loss reserve factors aremultiplied against the balances in each risk-rating category to determined an appropriatelevel for the allowance for loan losses. Loans with risk ratings between five and eight are monitored much closerby the officers, as well as our loan committee.  Control of our loan quality is continually monitored by ourmanagement and our loan committee on a monthly basis.  This is also reviewed and monitored by our board of directors ona quarterly basis and is continually subjected to oversight by our board ofdirectors through its members who serve on the loan committee.  We consistently apply our methodology fordetermining the adequacy of the allowance for loan losses , but may makeadjustments to our methodologies and assumptions based on historicalinformation related to charge-offs and management’s evaluation of the currentloan portfolio.

 

Uptown’s determination as tothe classification of its assets and the amount of its valuation allowances is subjectto review by its primary regulator, who can order the establishment ofadditional general or specific loss allowances, as well as external loanreviewers, who review the classifications of Uptown’s loan portfolio.  The OCC, in conjunction with the otherfederal banking agencies, has adopted an interagency policy statement on theallowance for loan losses.  The policystatement provides guidance for financial institutions on both theresponsibilities of management for the assessment and establishment of adequateallowances and guidance for banking agency examiners to use in determining theadequacy of general valuation guidelines. Generally, the policy statementrecommends that (i) institutions have effective systems and controls toidentify, monitor and address asset quality problems; (ii) management analyzesall significant factors that affect collectibility of the portfolio in areasonable manner; and (iii) management establishes acceptable allowanceevaluation processes that meet the objectives set forth in the policystatement.  Management believes it hasestablished an adequate allowance for loan losses.  Uptown analyzes its process regularly, with modifications made ifneeded, and reports those results quarterly to the Company’s Board ofDirectors.  However, there can be noassurance that the regulator, in reviewing Uptown’s loan portfolio, will not requestUptown to materially increase its allowance for loan losses at the time.  Although management believes adequatespecific and general loan loss allowances have been established, actual lossesare dependent upon future events and as such, further additions to the level ofspecific and general loss allowances may become necessary.

 

The allowance for loan lossesis comprised of both allocated and unallocated allowances in order to quantify futureloss potential.  The allocated postionrepresents mangement’s assessment as to potential loss exposure fornon-classified credits based on including but not limited to historical lossexperience, trend in delinquencies, concentration of volume, management andeconomic conditions and independent assessment of individual credits which havebeen classified by management.  Theunallocated portion of the allowance reflects management’s estimate of probableinherent but undetectable losses within the portfolio due to uncertainties in economicconditions, delays in obtaining information, including unfavorable informationabout a borrower’s financial condition, the difficulty in identifyingtriggering events that correlate perfectly to subsequent loss rates, and riskfactors that have not yet manifested themselves in loss allocationfactors.  In addition, the unallocated allowanceincludes a component that explicitly accounts for the inherent imprecision inthe allowance for loan loss calculation. At March 31, 2003, the allowance for loan losses was comprised of $3,841and $870 of allocated and unallocated reserves, respectively.

 

10

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**NonperformingAssets**

Another measurement used bymanagement in assessing the risk inherent in the loan portfolio is the level ofnonperforming assets. Nonperforming assets consists of nonaccrual loans,restructured loans, investments, other assets owned, and other real estateowned. Nonaccrual loans are those loans which have been determined to havereasonable doubt as to the timely collection of interest or principal.Restructured loans are those loans whose terms or conditions have been changedand have resulted in a negative impact on Uptown  compared to the original terms. Other assets owned includesproperty which the subsidiary bank has obtained in satisfaction of a debt. Otherreal estate owned (“OREO”) represents real property which has been acquiredthrough foreclosure or real estate which Uptown has obtained possession of insatisfaction of a debt. OREO and other assets owned are carried at the lower ofthe recorded investment value of the loan, or the estimated fair market value,less estimated costs of sale, of the related real estate or other assets owned.The majority of the balance in nonaccrual loans relates to seven loans, securedby real estate or other assets, totaling $3,616 to two borrowers, remaining onnonaccrual status during the past year.  These loans have been analyzed and included in Uptown’smeasurement process when reviewing the allowance for loan losses as performed.

 

**LIQUIDITYAND CAPITAL RESOURCES**

The maintenance of an adequatelevel of liquidity is necessary to ensure that sufficient funds are availableto meet customer’s loan demands and deposit withdrawal requests. The bankingsubsidiary’s liquidity sources consist of investment securities, maturing loansand other short-term investments. Liquidity can also be obtained through liabilitiessuch as core deposits, borrowed funds, certificates of deposit and public funddeposits.

 

The Company’s cash flows arecomposed of three classifications: cash flows from operating activities, cash flowsfrom investing activities, and cash flows from financing activities. Net cashprovided by operating activities, consisting primarily of earnings, was $1,248for the three months ended March 31, 2003 and $2,121 for the same period in 2002.

 

Net cash provided by (used in)investing activities, consisting primarily of loan and investment funding was$1,840 and $(3,782) for the three months ended March 31, 2003 and 2002,respectively.  Net cash provided byfinancing activities, consisting of deposit growth and borrowed funds, was$10,142 and $6,418 for the three months ended March 31, 2003 and 2002,respectively.

 

At March 31, 2003,  Shareholders’ Equity was $34,782 compared to$33,682 at December 31, 2002, an increase of $1,100, or 3.27%. Accumulatedother comprehensive income at March 31, decreased $285 due to unrealized lossesin securities available-for-sale, net of tax. Shareholders’ Equity as apercentage of total assets at March 31, 2003 was 8.33%. The following tablerepresents the Company’s consolidated regulatory capital position as of March31, 2003.

 

Regulatory capital at March 31,2003:

 
|                     |   | **Leverage  Ratio** |   | **Tier 1  Risk-Based********Capital** |   | **Total  Risk-Based********Capital** |   |
|--------------------------|--------|---------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
| Upbancorp, Inc. ratio    |   | 8.5                 | %      | 11.2                                  | %      | 12.5                                 | %      |
| Regulatory minimum ratio |   | 4.0                 | %      | 4.0                                   | %      | 8.0                                  | %      |

 

The Company periodicallyreviews the funding status of its pension plan and in light of current marketconditions, it is possible that the Company may be required to record areduction in Shareholders’ Equity through a charge to Other ComprehensiveIncome at year-end.

 

11

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**FORWARDLOOKING STATEMENTS**

Upbancorp and itsrepresentatives may from time to time make written or oral statements that are “forward-looking”and provide other than historical information, including statements containedin the Form 10-K, Upbancorp’s other filings with the Securities and ExchangeCommission or in communications to its shareholders.  These statements involve known and unknown risks, uncertaintiesand other factors that may cause actual results to be materially different fromany results, levels of activity, performance or achievements expressed or impliedby any forward-looking statement.  Thesefactors include, among other things, the risk factors listed below.

 

In some cases, Upbancorp hasidentified forward-looking statements by such words or phrases as “will likely result,”“is confident that,” “expects,” “should,” “could,” “may,” “will continue to,” “believes,”“anticipates,” “predicts,” “forecasts,” “estimates,” “projects,” “potential,” “intends”or similiar expressions identifying “forward-looking statements”  within the meaning of the Private SecuritiesLitigation Reform Act of 1995, including the negative of those words andphrases.  These forward-lookingstatements are based on management’s current views and assumptions regardingfuture events, future business conditions and the outlook for the Company basedon currently available information. These forward-looking statements are subject to certain risks and uncertaintiesthat could casue actual results to differ materially from those expressed in,or implied by, these statements. Upbancorp wishes to caution readers not to place undue reliance on anysuch forward-looking statements, which speak only as of the date made.

 

In connection with the safeharbor provisions of the Private Securities Litigation Reform Act of 1995, Upbancorpis hereby identifying important factors that could affect Upbancorp’s financialperformance and could cause Upbancorp’s actual results for future periods todiffer materially from any opinions or statements expressed with respect tofuture periods in any current statements.

 

Among the factors that couldleave an impact on Upbancorp’s ability to achieve operating results and growth plangoals are;

 

•             Management’s abilityto reduce and effectively manage interest rate risk and the impact of interestrates in general on the volatility of the Company’s net interest income;

 

•             Fluctuations in thevalue of Upbancorp’s investment securities;

 

•             The ability toattract and retain senior management experienced in banking and financialservices;

 

•             The sufficiency ofallowances for possible loan losses to absorb the amount of actual futurelosses inherent in the existing portfolio of loans;

 

•             Upbancorp’s abilityto adapt successfully to technological changes to compete effectively in themarketplace;

 

•             Credit risks andrisks from concentrations (by geographic area and by industry) within the Uptownloan portfolio;

 

•             The effects ofcompetition from other commercial banks, thrifts, mortgage banking firms,consumer finance companies, credit unions, securities brokerage firms,insurance companies, money market and other mutual funds and other financialinstitutions operating in Upbancorp’s market or elsewhere providing similiarservices;

 

•             The failure of assumptionsunderlying the establishment of reserves for loan losses and estimations ofvalues of collateral and various financial assets and liabilities;

 

•             Volatility of ratesensitive deposits;

 

•             Operational risks,including data processing system failures or fraud;

 

•             Asset/liabilitymatching risks and liquidity risks;

 

12

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•             Changes in theeconomic environment, competition or other factors that may influence theanticipated growth rate of loans and deposits, the quality of the loanportfolio and loan and deposit pricing and Upbancorp’s ability to successfullypursue acquisition and expansion strategies;

 

•             The impact fromliabilities arising from legal or administrative proceedings in the financialcondition of Upbancorp;

 

•             Governmental monetaryand fiscal policies, as well as legislative and regulatory changes, that mayresult in the imposition of costs and constraints on Upbancorp through higherFDIC insurance premiums, significant fluctuations in market interest rates andoperational limitations;

 

•             Changes in generaleconomic or industry conditions, nationally or in the communities in whichUpbancorp conducts business;

 

•             Changes in accountingprinciples, policies or guidelines affecting the businesses conducted byUpbancorp or Uptown;

 

•             Acts of war orterrorism; and

 

•             Other economic,competitive, governmental, regulatory and technical factors affecting Upbancorp’soperations, products, services, and prices.

 

Upbancorp wishes to cautionthat the foregoing list of important factors may not be all-inclusive andspecifically declines to undertake any obligation to publicly revise anyforward-looking statements that have been made to reflect events orcircumstances after the date of such statements or to reflect the occurence ofanticipated or unanticipated events.  

 

With respect to forward-lookingstatements set forth in the notes to consolidated financial statements,including those relating to contingent liabilities and legal proceedings, aswell as Upbancorp’s 2003 Quarterly Report on Form 10-Q, some of the factorsthat could affect the ultimate disposition of those contingencies are changesin applicable laws, the development of facts in individual cases, settlementopportunities and the actions of plaintiffs, judges and juries.

 

The following informationshould be read in conjunction with the consolidated financial statements of Upbancorpand notes thereto, appearing elsewhere in this report.

 

**CriticalAccounting Policies**

Upbancorp’s consolidated financialstatements are prepared in accordance with accounting principles generallyaccepted in the United States and are consistent with predominant practices inthe financial services industry.  The applicationof critical accounting policies, those policies Management believes are themost important to Upbancorp’s financial position and results, requiresManagement to make estimates, assumptions, and judgments that affect theamounts reported in the financial statements and accompanying notes and arebased on information available as of the date of the financial statements.  Future changes in information may affect theseestimates, assumptions, and judgments, which in turn may affect amountsreported in the financial statements.

 

Most accounting policies are notconsidered by management to be critical accounting policies.  The most significant of these policies arepresented below.  These policies, alongwith the disclosures presented in the other financial statement notes and inthis discussion, provide information on how significant assets and liabilities arevalued in the financial statements and how those values are determined.  Based on the valuation techniques used andthe sensitivity of financial statement amounts to the methods, assumptions, andestimates underlying those amounts, Management has determined that itsaccounting policies with respect to the allowance for loan losses and definedbenefit plan and supplemental executive retirement plan are the accountingareas requiring subjective or complex judgments that are most important toUpbancorp’s financial position and results of operations.  Those policies are considered to be criticalaccounting policies and are discussed below.

 

13

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**Allowancefor Loan Losses**

Arriving at an appropriatelevel of allowance for loan losses involves a high degree of judgment.  Upbancorp’s allowance for loan lossesprovides for probable losses based upon evaluations of known, and inherentrisks in the loan portfolio.  Managementuses historical information to assess the adequacy of the allowance for loanlosses as well as the prevailing business environment; as it is affected bychanging economic conditions and various external factors, which may impact theportfolio in ways currently unforeseen. The allowance for loan losses is increased by provisions for loan lossesand by recoveries of loans previously charged-off and reduced by loanscharged-off. For a full discussion of Upbancorp’s methodology of assessing theadequacy of the allowance for loan losses, see the Provision and Allowance forLoan Losses section of this Form 10-Q.

 

**DefinedBenefit Plan and Supplemental Executive Retirement Plan**

The Plans’ assets andliabilities are determined on an actuarial basis and are affected by theestimated market-related value of plan assets, estimates of the expected returnon plan assets, discount rates and other assumptions inherent in thesevaluations.  The Company reviewsannually the assumptions underlying the actuarial calculations and makeschanges to these assumptions, based on current market conditions, as necessary.  Actual changes in the fair market value ofplan assets and differences between the actual return on plan assets and theexpected return on plan assets will affect the amount of pension expense(income) ultimately recognized.

 

14

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**ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET RISK**

Management, to augment staticgap analysis, uses an additional measurement tool to evaluate its asset/liabilitysensitivity, which determines exposure to changes in interest rates bymeasuring the change in net interest income as a percentage of Capital, due tochanges in rates over a one-year horizon.

 

Management measures such changeassuming an immediate and sustained parallel shift in rates of 50, 100 and 200basis 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% peryear to incorporate historical experience in both an up-rate and down-rateenvironment. 

 

Utilizing this measurementconcept, the interest rate risk of the Company, expressed as change in net interestincome as a percentage of capital (subject to a policy limit of 2.5% ofcapital) over a 1-year time horizon due to changes in interest rates is asfollows:

 

 
|                 |   | **Basis Point Change** |   |
|----------------------|--------|------------------------|--------|
|                 |   | **+200**               |   | **+100** |   | **+50** |   | **-50** |   | **-100** |   | **-200** |   |
| At March 31, 2003    |   | -0.01                  | %      | 0.00 | % | 0.00 | % | -0.15 | % | -0.43 | % | -2.26 | % |
| At December 31, 2002 |   | -0.90                  | %      | -0.46 | % | -0.23 | % | -0.07 | % | -0.13 | % | -1.53 | % |

 

Based upon these analyses,management has determined that there has been no material change at March 31,2003 in interest rate risk for the Company, from the December 31, 2002calculated results.

** **

**ITEM 4. CONTROLS AND PROCEDURES**

Within the 90 days prior to thefiling date of this report, the Company’s Chief Executive Officer and ChiefFinancial Officer carried out an evaluation, with the participation of othermembers of management as they deemed appropriate, of the effectiveness of thedesign and operation of the Company’s disclosure controls and procedures ascontemplated by Exchange Act Rule 13a-14 and 15d-14. Based upon, and as of thedate of that evaluation, the Chief Executive Officer and Chief FinancialOfficer concluded that the Company’s disclosure controls and procedures areeffective, in all material respects, to ensure that the information required tobe disclosed by the Company in reports that it files or submits under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the Securities and Exchange Commission’s rules and forms.

 

There have been no significantchanges to the Company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date that the internalcontrols were most recently evaluated.  Therewere no significant deficiencies or material weaknesses identified in thatevaluation and therefore, no corrective actions were taken.

 

15

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| **PART 2. -  Other Information** |
|----------------------------------|
|                             |   |   |
| **Item 1 -**                     |   | **Legal Proceedings** |
|                             |   | None  required |
|                             |   |   |
| **Item 2 -**                     |   | **Changes in Securities** |
|                             |   | None  required |
|                             |   |   |
| **Item 3 -**                     |   | **Defaults upon Senior Securities** |
|                             |   | None  required |
|                             |   |   |
| **Item 4 -**                     |   | **Submission of Matters to a Vote of Security Holders** |
|                             |   | None  required |
|                             |   |   |
| **Item 5 -**                     |   | **Other Information** |
|                             |   | None  required |
|                             |   |   |
| **Item 6 -**                     |   | **Exhibits and Reports on Form 8-K** |
|                             |   | Form 8-K Agreement and Plan of Merger was filed on February 18, 2003 |
|                             |   |   |
|                             |   | (99.1)Section  906 Certifications |
|                             |   |   |
|                             |   |   |

 

 

16

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**CONFORMED**

** **

**SIGNATURES**

** **

**Pursuant to therequirements  of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.**

 

 
| Date: May 14,  2003 |   | UPBANCORP, INC.        |   |
|---------------------|--------|------------------------|--------|
|                |   | (The Registrant)       |
|                |   |                   |
|                |   | /s/ Richard K.  Ostrom |   |
|                |   | Richard K. Ostrom      |
|                |   | Chairman of the  Board |
|                |   | President and  Chief   |
|                |   | Executive Officer      |

 

17

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**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION1350,**

**AS ADOPTED PURSUANT TO SECTION 302 OF THE**

**SARBANES-OXLEY ACT OF 2002**

 

I, Richard K. Ostrom, Chairmanof the Board, President and Chief Executive Officer, certify that:

1.)    I have reviewed thisquarterly report on Form 10-Q of Upbancorp, Inc.;

2.)    Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact or omitto state a material fact necessary in order to make the statements made, inlight of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

3.)    Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flow of the registrant as of and for,the periods presented in this quarterly report;

4.)    The registrant’s othercertifying officers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Acts Rules 13a-14 and 15d-14)for the registrant and have: 

a.)    designed such disclosurecontrols and procedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

b.)   evaluated the effectivenessof the registrant’s disclosure controls and procedures as of a date within 90days prior to the filing date of this quarterly report (the “Evaluation Date”);and

c.)    presented in this quarterlyreport our conclusions about the effectiveness of the disclosure controls andprocedures based on our evaluation as of the Evaluation Date;

5.)    The registrant’s othercertifying officers and I have disclosed, based upon our most recentevaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalentfunctions):

a.)    all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

b.)   any fraud, whether or notmaterial, that involves management or other employees who have a significantrole in the registrant’s internal controls; and 

6.)    The registrant’s othercertifying officers and I have indicated in this quarterly report whether ornot there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses. 

 

 
| May 14, 2003 |                                  |
|--------------|---------------------------------------|
|         |                                  |
|         | \s\ Richard  K. Ostrom                |   |
|         | Richard K.  Ostrom                    |   |
|         | Chairman of the Board,  President and |
|         | Chief  Executive Officer              |

 

18

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**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION1350,**

**AS ADOPTED PURSUANT TO SECTION 302 OF THE**

**SARBANES-OXLEY ACT OF 2002**

** **

I, Kathleen L. Harris, SeniorVice President and Chief Executive Officer , certify that:

1.)    I have reviewed thisquarterly report on Form 10-Q of Upbancorp, Inc.;

2.)    Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact or omitto state a material fact necessary in order to make the statements made, inlight of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

3.)    Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flow of the registrant as of and for,the periods presented in this quarterly report;

4.)    The registrant’s othercertifying officers and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Acts Rules 13a-14and 15d-14) for the registrant and have: 

a.)    designed such disclosurecontrols and procedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

b.)   evaluated the effectivenessof the registrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

c.)    presented in this quarterlyreport our conclusions about the effectiveness of the disclosure controls andprocedures based on our evaluation as of the Evaluation Date;

5.)    The registrant’s othercertifying officers and I have disclosed, based upon our most recentevaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalentfunctions):

a.)    all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

b.)   any fraud, whether or notmaterial, that involves management or other employees who have a significantrole in the registrant’s internal controls; and 

6.)    The registrant’s othercertifying officers and I have indicated in this quarterly report whether ornot there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses. 

 

 
| May 14, 2003 |                     |
|--------------|--------------------------|
|         |                     |
|         | \s\ Kathleen  L. Harris, |   |
|         | Kathleen L.  Harris,     |   |
|         | Senior Vice President    |   |
|         | and                      |   |
|         | Chief Financial Officer  |   |

 

19

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