** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

** **

** **

**FORM 10-Q**

 
| **ý**                                        | **Quarterly Report Pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934** |
|---------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                              |                                                                                         |
| **For the  quarterly period ended June 30, 2002** |                                                                                         | **Commission file number 01-12292** |
|                                                   |                                                                                              |  |  |

 

 

**UPBANCORP, INC.**

(Exact name of registrant as specified in its charter)

 

 

| **Delaware**                                                   |   | **36-3207297**                                             |
|----------------------------------------------------------------|--------|------------------------------------------------------------|
| (State  or other jurisdiction ofincorporation 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 whether the registrant(1) has filed all reports required to be filed by Section13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorterperiod that the registrantwas required to file such reports), and (2) has been subject to such filing forthe past 90days.   Yes  ý   No  o

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock as ofthe latest practicable date:Eight hundred thirty five thousand fifty five (835,055) common shareswereoutstanding as of August 9, 2002.

 

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**URBANCORP,INC.**

**INDEX — 10Q6/30/02**

 

Index
|                                | Description                                                                                           |  Page #    |   |
|-------------------------------------|-------------------------------------------------------------------------------------------------------|-----------------|--------|
|                                | Cover Page                                                                                            |            |   |
| **PART I -  FINANCIAL INFORMATION** |                                                                                                  |            |
| **Item 1**.                         | Financial Statements                                                                                  |            |   |
|                                | Consolidated  Statements of Condition                                                                 |  2         |   |
|                                |                                                                                                  |            |   |
|                                | Consolidated  Statements of Income and Comprehensive Income                                           |  3         |   |
|                                |                                                                                                  |            |   |
|                                | Consolidated  Statements of Cash flow                                                                 |  4         |   |
|                                |                                                                                                  |            |   |
|                                | Consolidated  Statements of Changes in Equity Capital and Notes  to Consolidated Financial Statements |  5 & 6 |   |
|                                |                                                                                                  |            |   |
| **Item 2**.                         | Management’s  Discussion and Analysis of Financial Condition  and Results of Operations          |  7-10      |   |
|                                |                                                                                                  |            |   |
| **Item 3.**                         | Quantitative  and Qualitative Disclosures on Market Risk                                              |  10        |   |
|                                |                                                                                                  |            |   |
| **PART II**                         | **OTHER  INFORMATION**                                                                                |  11        |   |
|                                |                                                                                                  |            |   |
|                                | Signature Page                                                                                        |  12        |   |
|                                |                                                                                                  |            |   |
|                                | Certification                                                                                         | 13              |   |

 

 

----

 

PART 1 - Financial Information

Item 1. Financial Statements

 

**UPBANCORP, INC.**

**CONSOLIDATEDSTATEMENTS OF CONDITION**

 
| ***(Dollars in thousands, except share data) (Unaudited)***                                |   | **June 30,  2002** |    | **December  31, 2001** |   |
|--------------------------------------------------------------------------------------------|--------|--------------------|---------|------------------------|--------|
| **Assets**                                                                                 |   |               |    |                   |   |
| Cash and due from banks                                                                    |   | $                  | 16,750  |                   | $      | 14,736 |   |
| Federal funds sold                                                                         |   | 6,800              |    | 0                      |   |
| Securities available-for-sale                                                              |   | 60,309             |    | 60,614                 |   |
| Nonmarketable equity securities                                                            |   | 1,855              |    | 1,818                  |   |
| Mortgages held-for-sale                                                                    |   | 0                  |    | 945                    |   |
| Loans (net of allowance for loan losses of$4,363 and  $4,098 in 2002 and 2001)             |   | 297,491            |    | 299,630                |   |
| Premises and equipment, net                                                                |   | 5,415              |    | 5,146                  |   |
| Accrued interest and other assets                                                          |   | 6,474              |    | 6,564                  |   |
| **Total Assets**                                                                           |   | $                  | 395,094 |                   | $      | 389,453 |   |
|                                                                                       |   |               |    |                   |   |
| **Liabilities and Shareholders’ Equity**                                              |   |               |    |                   |   |
| **Liabilities**                                                                            |   |               |    |                   |   |
| Noninterest bearing                                                                        |   | $                  | 76,609  |                   | $      | 72,472 |   |
| Savings, NOW and money market deposits                                                     |   | 122,945            |    | 130,309                |   |
| Other time deposits                                                                        |   | 131,380            |    | 121,244                |   |
| Total deposits                                                                             |   | 330,934            |    | 324,025                |   |
| Borrowed funds - short term                                                                |   | 7,907              |    | 7,880                  |   |
| Borrowed funds - long term                                                                 |   | 21,500             |    | 24,500                 |   |
| Accrued interest and other liabilities                                                     |   | 3,063              |    | 3,692                  |   |
| **Total Liabilities**                                                                      |   | 363,404            |    | 360,097                |   |
|                                                                                       |   |               |    |                   |   |
| **Shareholders’ Equity**                                                              |   |               |    |                   |   |
| Common stock, $1 par value: 3,000,000 shares authorized:1,000,000  issued in 2002 and 2001 |   | 1,000              |    | 1,000                  |   |
| Additional paid in capital                                                                 |   | 4,500              |    | 4,500                  |   |
| Retained earnings                                                                          |   | 28,665             |    | 26,588                 |   |
| Treasury stock - 164,945 shares in 2002 and 2001                                           |   | (3,079             | )       | (3,079                 | )      |
| Accumulated other comprehensive income (loss)                                              |   | 604                |    | 347                    |   |
| **Total Shareholders’ Equity**                                                        |   | 31,690             |    | 29,356                 |   |
| **Total Liabilities and Shareholders’ Equity**                                        |   | $                  | 395,094 |                   | $      | 389,453 |   |

 

*Seeaccompanying notes to consolidated financial statements*

* *

 

2

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**UPBANCORP, INC.**

**CONSOLIDATEDSTATEMENTS OF INCOME**

 
|                                                             |   | **For the  three months ended** |   | **For the  six months ended** |   |
|------------------------------------------------------------------|--------|---------------------------------|--------|-------------------------------|--------|
|                                                             |   | **June 30,**                    |   | **June 30,**                  |   |
| ***(Dollars in thousands, except per  share data) (Unaudited)*** |   | **2002**                        |   | **2001**                      |   | **2002** |   | **2001** |   |
| **Interest Income**                                              |   |                            |   |                          |   |   |   |   |   |
| Interest and fees on loans                                       |   | $                               | 6,157  |                          | $      | 6,639 |   | $ | 12,273 |   | $ | 13,328 |   |
| Interest on mortgages held-for-sale                              |   | 3                               |   | 13                            |   | 6 |   | 28 |   |
| Interest on federal funds sold                                   |   | 33                              |   | 185                           |   | 33 |   | 312 |   |
| Interest and dividends on securities                             |   |                            |   |                          |   |   |   |   |   |
| Taxable                                                          |   | 781                             |   | 881                           |   | 1,544 |   | 1,960 |   |
| Non-taxable                                                      |   | 132                             |   | 95                            |   | 250 |   | 182 |   |
| Total interest income                                            |   | 7,106                           |   | 7,813                         |   | 14,106 |   | 15,810 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Interest Expense**                                             |   |                            |   |                          |   |   |   |   |   |
| Interest on savings, NOW and money market deposits               |   | 518                             |   | 953                           |   | 1,010 |   | 2,097 |   |
| Interest on other time deposits                                  |   | 1,138                           |   | 2,415                         |   | 2,289 |   | 4,896 |   |
| Interest on borrowed funds - short term                          |   | 50                              |   | 7                             |   | 112 |   | 15 |   |
| Interest on borrowed funds - long term                           |   | 240                             |   | 322                           |   | 508 |   | 679 |   |
| Total interest expense                                           |   | 1,946                           |   | 3,697                         |   | 3,919 |   | 7,687 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Net Interest Income**                                          |   | 5,160                           |   | 4,116                         |   | 10,187 |   | 8,123 |   |
| **Provision for Loan Losses**                                    |   | 225                             |   | 150                           |   | 450 |   | 300 |   |
| **Net Interest Income after Provision for Loan Losses**          |   | 4,935                           |   | 3,966                         |   | 9,737 |   | 7,823 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Noninterest Income**                                           |   |                            |   |                          |   |   |   |   |   |
| Service charges on deposit accounts                              |   | 371                             |   | 355                           |   | 757 |   | 797 |   |
| Other noninterest income                                         |   | 88                              |   | 119                           |   | 178 |   | 235 |   |
| Net loss on sales of loans                                       |   | (18                             | )      | 0                             |   | (18 | ) | 0 |   |
| Net gain on sales of other real estate owned                     |   | 65                              |   | 0                             |   | 65 |   | 0 |   |
| Net gain on sales of securities                                  |   | 0                               |   | 0                             |   | 0 |   | 253 |   |
| Total noninterest income                                         |   | 506                             |   | 474                           |   | 982 |   | 1,285 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Noninterest Expense**                                          |   |                            |   |                          |   |   |   |   |   |
| Salaries and employee benefits                                   |   | 1,923                           |   | 1,915                         |   | 3,909 |   | 3,893 |   |
| Net occupancy expense                                            |   | 207                             |   | 220                           |   | 424 |   | 446 |   |
| Equipment expense                                                |   | 256                             |   | 249                           |   | 513 |   | 487 |   |
| Outside fees & services                                      |   | 264                             |   | 237                           |   | 491 |   | 428 |   |
| Advertising & business development expenses                  |   | 94                              |   | 130                           |   | 241 |   | 209 |   |
| Supplies and postage expense                                     |   | 131                             |   | 142                           |   | 249 |   | 261 |   |
| Data processing expense                                          |   | 336                             |   | 345                           |   | 661 |   | 676 |   |
| Regulatory fees and insurance                                    |   | 73                              |   | 73                            |   | 137 |   | 164 |   |
| Other operating expense                                          |   | 255                             |   | 303                           |   | 546 |   | 713 |   |
| Total noninterest expense                                        |   | 3,539                           |   | 3,614                         |   | 7,171 |   | 7,277 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Income Before Income Taxes**                                   |   | 1,902                           |   | 826                           |   | 3,548 |   | 1,831 |   |
| Income taxes                                                     |   | 658                             |   | 279                           |   | 1,255 |   | 637 |   |
| **Net Income**                                                   |   | $                               | 1,244  |                          | $      | 547 |   | $ | 2,293 |   | $ | 1,194 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Basic Earnings Per Share**                                     |   | $                               | 1.49   |                          | $      | 0.66 |   | $ | 2.75 |   | $ | 1.43 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Weighted Average Shares Outstanding**                          |   | 835,055                         |   | 835,055                       |   | 835,055 |   | 835,055 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Cash Dividends Paid**                                          |   | $                               | 108    |                          | $      | 108 |   | $ | 216 |   | $ | 217 |   |
|                                                             |   |                            |   |                          |   |   |   |   |   |
| **Payout Ratio**                                                 |   | 8.68                            | %      | 19.74                         | %      | 9.42 | % | 18.17 | % |

 

*Seeaccompanying notes to consolidated financial statements*

* *

 

3

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**UPBANCORP, INC.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
|                                                                                               |         | **For the  six months ended June 30,** |   |
|----------------------------------------------------------------------------------------------------|--------------|----------------------------------------|--------|
| ***(Dollars in thousands) (Unaudited)***                                                           |         | **2002**                               |   | **2001** |   |
| **Cash Flows from Operating Activities**                                                           |         |                                   |   |   |   |
| Net Income                                                                                         |         | $                                      | 2,293  |   | $ | 1,194 |   |
| Adjustments to reconcile net income to net cashprovided by  operating activities:                  |         |                                   |   |   |   |
| Provision for loan losses                                                                          |         | 450                                    |   | 300 |   |
| Depreciation and amortization                                                                      |         | 680                                    |   | 645 |   |
| Net gain on sales of securities                                                                    |         | 0                                      |   | (253 | ) |
| Net gain on sales of other real estate owned                                                       |         | (65                                    | )      | 0 |   |
| Net loss on sales of loans                                                                         |         | 18                                     |   | 0 |   |
| Change in deferred income taxes                                                                    |         | (403                                   | )      | (475 | ) |
| Accretion on securities, net                                                                       |         | (929                                   | )      | (243 | ) |
| Changes in assets and liabilities:                                                                 |         |                                   |   |   |   |
| (Increase)decrease in accrued interest receivable and other assets                                 |         | 654                                    |   | (7 | ) |
| Increase (decrease) in accrued interest payable and other liabilities                              |         | (629                                   | )      | 442 |   |
| Net cash provided by operating activities before loan originations  and sales                      |         | 2,069                                  |   | 1,603 |   |
| Originations of mortgages held-for-sale                                                            |         | (5,069                                 | )      | (6,188 | ) |
| Proceeds from sales of mortgages held-for-sale                                                     |         | 6,014                                  |   | 5,541 |   |
| **Net cash provided by operating activities**                                                      |         | 3,014                                  |   | 956 |   |
|                                                                                               |         |                                   |   |   |   |
| **Cash Flows from Investing Activities**                                                           |         |                                   |   |   |   |
| Net (increase) decrease in federal funds sold                                                      |         | (6,800                                 | )      | 11,600 |   |
| Purchases of available-for-sale and nonmarketable equity securities                                |         | (10,382                                | )      | (27,451 | ) |
| Proceeds from maturities and redemptions ofavailable-for-sale  and nonmarketable equity securities |         | 12,000                                 |   | 27,850 |   |
| Proceeds from sale of available-for-sale securities                                                |         | 0                                      |   | 0 |   |
| Proceeds from sale of other real estate owned                                                      |         | 870                                    |   | 0 |   |
| Net (increase) decrease in loans                                                                   |         | 532                                    |   | (16,774 | ) |
| Purchases of premises and equipment                                                                |         | (940                                   | )      | (509 | ) |
| **Net cash used in investing activities**                                                          |         | (4,720                                 | )      | (5,284 | ) |
|                                                                                               |         |                                   |   |   |   |
| **Cash Flows from Financing Activities**                                                           |         |                                   |   |   |   |
| Net increase in total deposits                                                                     |         | 6,909                                  |   | 4,168 |   |
| Proceeds from borrowed funds - short term                                                          |         | 3,527                                  |   | 60 |   |
| Payments on borrowed funds - short term                                                            |         | (3,500                                 | )      | 0 |   |
| Proceeds from borrowed funds - long term                                                           |         | 0                                      |   | 12,000 |   |
| Payments on borrowed funds - long term                                                             |         | (3,000                                 | )      | (5,000 | ) |
| Cash dividends paid                                                                                |         | (216                                   | )      | (217 | ) |
| **Net cash provided by financing activities**                                                      |         | 3,720                                  |   | 11,011 |   |
|                                                                                               |         |                                   |   |   |   |
| **Net increase in cash and due from banks**                                                        |         | 2,014                                  |   | 6,683 |   |
| **Cash and due from banks at beginning of period**                                                 |         | 14,736                                 |   | 16,319 |   |
| **Cash and due from banks at end of period**                                                       |         | $                                      | 16,750 |   | $ | 23,002 |   |
|                                                                                               |         |                                   |   |   |   |
| Supplemental disclosure of cash flow information:                                                  |         |                                   |   |   |   |
| Cash payments for:                                                                                 | Interest     |                                   | $      | 4,401 |   | $ | 7,007 |   |
|                                                                                               | Income taxes |                                   | 1,657  |   | 1,110 |   |
| Supplemental schedule of non-cash investing activities:                                            |         |                                   |   |   |   |
| Other real estate acquired in settlement of loans                                                  |         | $                                      | 1,139  |   | $ | 98 |   |

 

*Seeaccompanying notes to consolidated financial statements*

* *

 

4

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**UPBANCORP, INC.**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

***(Dollars in thousands, except pershare data) (Unaudited)***

 
| ** **                                                           | ** ** | **Common  Stock** | ** ** | **Additional  Paid In********Capital** | ** ** | **Retained  Earnings** | ** ** | **Treasury  Stock** | ** ** | **Accumulated********Other  Comprehensive  Income** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------|------------|-------------------|------------|----------------------------------------|------------|------------------------|------------|---------------------|------------|-----------------------------------------------------|------------|-----------|------------|
| **Balance, January 1, 2002**                                         |       | $                 | 1,000      |                                   | $          | 4,500                  |       | $                   | 26,588     |                                                | $          | (3,079    | )          | $ | 347 |   | $ | 29,356 |   |
| Comprehensive Income:                                                |       |              |       |                                   |       |                   |       |                |       |                                                |       |      |       |
| Net income for the six monthsended June 30,  2002                    |       |              |       |                                   |       | 2,293                  |       |                |       |                                                |       | 2,293     |       |
| Unrealized gain on securitiesavailable-for-sale,  net of tax of $165 |       |              |       |                                   |       |                   |       |                |       | 257                                                 |       | 257       |       |
| Comprehensive Income                                                 |       |              |       |                                   |       |                   |       |                |       |                                                |       | 2,550     |       |
| Cash dividends: $.26 per share                                       |       |              |       |                                   |       | (216                   | )          |                |       |                                                |       | (216      | )          |
| Purchase of treasury stock                                           |       |              |       |                                   |       |                   |       | 0                   |       |                                                |       | 0         |       |
| **Balance June 30, 2002**                                            |       | $                 | 1,000      |                                   | $          | 4,500                  |       | $                   | 28,665     |                                                | $          | (3,079    | )          | $ | 604 |   | $ | 31,690 |   |

 

*Seeaccompanying notes to consolidated financial statements*

* *

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

***(Dollars in thousands, except pershare data) (Unaudited)***

 

**NOTE A: BASIS OF PRESENTATION**

The accompanying unaudited financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States of Americafor interim financial information and with the instructions toForm 10-Q and Rule 10-01 of Regulation S-X.Accordingly, they do not include all of the information and footnotes requiredby accounting principles generally accepted in the United States of America forcomplete financial statements.  In theopinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for fair presentation have been included.

 

Operating results of the three and six monthsended June 30, 2002 are not necessarily indicative of the results thatmay be expected for the year ended December 31,2002. For further information, refer to the consolidated financialstatements and footnotes thereto included in theCompany’s annual report on Form 10-K for the year endedDecember 31, 2001.

 

Prior period amounts included in these financial statements have beenreclassified to place them on a basisconsistent with the currentperiod’s financial statements.

 

**Current Accounting Developments**

In August 2001, the Financial AccountingStandards Board issued Statement 143, Accounting for Asset RetirementObligations andStatement 144, Accounting for Impairment or Disposal of Long-lived Assets.Statement 143 requiresthat the fairvalue of a liability for an asset retirement obligation be recognized in theperiod in which it is incurred if areasonable estimate of fairvalue can be made. The associated retirement costs are capitalized as part of thecarrying amount of the long-lived asset. Statement 144 supersedes Statement 121and the accounting and reporting provisions of APB Opinion No. 30. Statement144 establishes a single accounting model for long-lived assets to bedisposed of bysale which includes measuring a long-lived asset classified as held for sale atthe lower of its carryingamount or its fair value lesscosts to sell and to cease depreciation or amortization. For the Company, theprovisions ofStatement 144 were effectiveJanuary 1, 2002 and Statement 143 will be effective January 1, 2003.Implementation of the Statements are not expected to have a material impact onthe company’s financial Statements.

 

**NOTE B: SECURITIES**

**Securities available-for-sale**

The amortized cost and fair value of theseare as follows at June 30 , 2002:

 
| ** **                          | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized********Gains** | ** ** | **Gross********Unrealized********Losses** | ** ** | **Fair  Value** | ** ** |
|-------------------------------------|------------|---------------------|------------|------------------------------------|------------|-------------------------------------------|------------|-----------------|------------|
| U. S. Government agencies           |       | $                   | 47,009     |                               | $          | 915                                       |       | $               | 163        |   | $ | 47,761 |   |
| States and political subdivisions   |       | 10,722              |       | 329                                |       | 64                                        |       | 10,987          |       |
| Mortgage-backed securities          |       | 88                  |       | 3                                  |       | 0                                         |       | 91              |       |
| Total debt securities               |       | 57,819              |       | 1,247                              |       | 227                                       |       | 58,839          |       |
| Equity securities                   |       | 1,500               |       | 5                                  |       | 35                                        |       | 1,470           |       |
| Total securities available-for-sale |       | $                   | 59,319     |                               | $          | 1,252                                     |       | $               | 262        |   | $ | 60,309 |   |

 

 

5

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**NOTE C: LOANS AND NONPERFORMING ASSETS**

The following summarizes loans at the dates indicated:

 
| ** **                                           | ** ** | **June 30,  2002** | ** ** | **Dec. 31,********2001** | ** ** |
|------------------------------------------------------|------------|--------------------|------------|--------------------------|------------|
| Commercial - Aircraft related                        |       | $                  | 33,739     |                     | $          | 45,726 |   |
| Commercial - Other                                   |       | 55,590             |       | 56,453                   |       |
| Secured by real estate - Construction                |       | 75,963             |       | 65,821                   |       |
| Secured by real estate - Residential (1 to 4 family) |       | 29,805             |       | 33,998                   |       |
| Secured by real estate - Residential (5 or more)     |       | 39,465             |       | 37,522                   |       |
| Secured by real estate - Non-Residential             |       | 65,610             |       | 61,798                   |       |
| Consumer and all other                               |       | 2,210              |       | 2,946                    |       |
| Deferred loan income                                 |       | (528               | )          | (536                     | )          |
| Total loans                                          |       | 301,854            |       | 303,728                  |       |
| Less: Allowance for loan losses                      |       | (4,363             | )          | (4,098                   | )          |
| Total loans, net of allowance for loan losses        |       | $                  | 297,491    |                     | $          | 299,630 |   |

 

The following summarizes the analysis of theallowance for loan losses for the six months ended:

 
| ** **                                           | ** ** | **June 30,********2002** | ** ** | **June 30,  2001** | ** ** |
|------------------------------------------------------|------------|--------------------------|------------|--------------------|------------|
| Balance at beginning of year                         |       | $                        | 4,098      |               | $          | 3,817 |   |
| Charge-offs:                                         |       |                     |       |               |       |
| Commercial - Other                                   |       | 82                       |       | 335                |       |
| Secured by real estate - Residential (1 to 4 family) |       | 150                      |       | 0                  |       |
| Secured by real estate - Residential (5 or more)     |       | 0                        |       | 1                  |       |
| Secured by real estate - Non-Residential             |       | 0                        |       | 49                 |       |
| Consumer and all other                               |       | 17                       |       | 20                 |       |
| Total charge-offs                                    |       | 249                      |       | 405                |       |
|                                                 |       |                     |       |               |       |
| Recoveries:                                          |       |                     |       |               |       |
| Commercial - Other                                   |       | 63                       |       | 0                  |       |
| Secured by real estate - Non-Residential             |       | 1                        |       | 0                  |       |
| Total recoveries                                     |       | 64                       |       | 0                  |       |
|                                                 |       |                     |       |               |       |
| Net charge-offs                                      |       | (185                     | )          | (405               | )          |
| Provision for loan losses                            |       | 450                      |       | 300                |       |
| Balance at end of period                             |       | $                        | 4,363      |               | $          | 3,712 |   |

 

The following summarizes nonperforming assets at the dates indicated:

 
|                           |   | **June 30,  2002** | ** ** | **Dec. 31,********2001** |   |
|--------------------------------|--------|--------------------|------------|--------------------------|--------|
| Nonaccrual loans               |   | $                  | 5,441      |                     | $      | 4,692 |   |
| Restructured loans             |   | 383                |       | 399                      |   |
| Total nonperforming loans      |   | 5,824              |       | 5,091                    |   |
| Other real estate owned (OREO) |   | 334                |       | 0                        |   |
| Total nonperforming assets     |   | $                  | 6,158      |                     | $      | 5,091 |   |

 

**NOTE D: NOTE PAYABLE**

TheCompany had a $10 million line of credit, a secured revolving note payable,with a correspondent bank at June 30, 2002. This note has an outstandingbalance of $3 million. Interest is calculated on the basis of3-month LIBOR plus 150 basispoints with interest due and payable quarterly (3.36% at June 30, 2002). Theexpiration date of the lineis March 1, 2003. The note also contains certain covenants which limit changesin capital structure, thepurchase of, or merger with other banks and/or businesses, and the guaranteesof other liabilities andobligations. In addition, the Company must meet certain financial ratios.

 

 

6

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| **ITEM 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|
|        | *(Dollars in thousands, except per share data)*                                                 |

* *

 

The following is management’s discussion andanalysis of certain significant factors which have affectedthe Company’sfinancial condition and results of operations during the periods included inthe consolidatedfinancial statements setforth in this filing. The Company’s Form 10-Q for the quarter ended June 30, 2001is incorporated by reference.

 

The Company operates a full-service communitybank through eight banking offices and one loan production officein the Chicago andPhoenix metropolitan areas. Uptown’s branches in the Phoenix area operate underthe name ofHeritage Bank (“Heritage”).

 

**RESULTS OF OPERATIONS**

The Company’s net income for the quarter ended June 30, 2002 was$1,244, compared to $547 in the sameperiod in 2001, an increaseof $697, or 127.42%. On a per share basis, earnings increased to $1.49 in thequarter, from$.66 in the previous year. The improvement in the second quarter net incomeresults is due to theincrease in net interestincome, which is described in its entirety below.

 

The Company’s net income for the six monthsended June 30, 2002 was $2,293 compared to $1,194 in 2001. Basicearnings per share was $2.75, a 92.31% increase fromlast year’s $1.43. Return on average equity was 15.30%, compared to 9.07% inthe previous year, an increase of 68.69%. Return on average assets was 1.18%for 2002,compared to .59% in 2001.Most of these increases are due to the 25.41 % increase in net interest incomein 2002.

 

**Net Interest Income**

The Company’s net interest income was $10,187for the first six months of 2002, compared with the $8,123registered inthe same period of 2001. The decrease in yields on average earning assets, from8.46% in 2001 to 7.88% in 2002, was more than offset, by lower average ratespaid on deposits, 2.72% in 2002, as comparedto 5.01% in 2001. The decrease in rates earned on assets was eased byan increase in loan fees earned, to $1,109 in 2002, versus $593 in 2001. Themajority of these fees were earned on loans with a 1 year or less term,and thereforenot subject to deferral. The single largest factor in the decrease in interestexpense was theroll-off/maturity of timedeposits that carried a significantly higher rate at issue in 2001, than iscurrently availablefor such deposits. Thisresulted in the higher net margin of 5.71% in 2002, compared to the 4.37% netmargin for2001.

 

The following tables summarize the Company’s average earning assets andinterest bearing liabilities for boththe six month and threemonth periods ended June 30, 2002 and June 30, 2001.

 

**Table 1**

**Net Interest Income and Margin Analysis**

 
|                                        |       | **Six Months  Ended June 30,** |       |         |
|---------------------------------------------|------------|--------------------------------|------------|--------------|
|                                        |       | **2002**                       |       | **2001**     |   |   |
| ** **                                  | ** ** | **Average  Balance**           | ** ** | **Interest** | ** ** | **Yield/  Rate** | ** ** | **Average********Balance** | ** ** | **Interest** | ** ** | **Yield/  Rate** | ** ** |
| Interest Earning Assets                     |       |                           |       |         |   |   |   |   |   |   |   |   |   |
| Federal Funds Sold                          |       | $                              | 4,209      |         | $ | 33 |   | 1.56 | % | $ | 12,749 |   | $ | 312 |   | 4.94 | % |
| Investment Securities:                      |       |                           |       |         |   |   |   |   |   |   |   |   |   |
| Taxable                                     |       | 45,730                         |       | 1,495        |   | 6.59 | % | 60,130 |   | 1,897 |   | 6.36 | % |
| Nontaxable (3)                              |       | 10,069                         |       | 376          |   | 7.42 | % | 7,448 |   | 274 |   | 7.42 | % |
| Nonmarketable Equity Securities             |       | 1,846                          |       | 49           |   | 5.30 | % | 1,938 |   | 63 |   | 6.60 | % |
| Mortgages held-for-sale                     |       | 159                            |       | 6            |   | 7.52 | % | 649 |   | 28 |   | 8.63 | % |
| Loans, net of deferred loan income(1)(2)    |       | 307,476                        |       | 12,273       |   | 7.94 | % | 298,268 |   | 13,328 |   | 8.94 | % |
| Total Interest Earning Assets               |       | $                              | 369,489    |         | $ | 14,232 |   | 7.88 | % | $ | 381,182 |   | $ | 15,902 |   | 8.46 | % |
|                                        |       |                           |       |         |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities                |       |                           |       |         |   |   |   |   |   |   |   |   |   |
| Savings, NOW & money market deposits    |       | $                              | 128,191    |         | $ | 1,010 |   | 1.59 | % | $ | 129,950 |   | $ | 2,097 |   | 3.25 | % |
| Other Time Deposits                         |       | 129,210                        |       | 2,289        |   | 3.57 | % | 153,842 |   | 4,896 |   | 6.42 | % |
| Borrowed Funds - Short Term                 |       | 6,159                          |       | 112          |   | 3.62 | % | 659 |   | 15 |   | 4.53 | % |
| Borrowed Funds - Long Term                  |       | 26,781                         |       | 508          |   | 3.77 | % | 25,044 |   | 679 |   | 5.39 | % |
| Total Interest Bearing Liabilities          |       | $                              | 290,341    |         | $ | 3,919 |   | 2.72 | % | $ | 309,495 |   | $ | 7,687 |   | 5.01 | % |
| Net interest income/interest rate spread(4) |       |                           |       | $            | 10,313 |   | 5.16 | % |   |   | $ | 8,215 |   | 3.45 | % |
| Net interest margin(5)                      |       |                           |       |         |   | 5.71 | % |   |   |   |   | 4.37 | % |
|                                             |            |                                |            |              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

| (1)   - | Nonaccrual  loans are included in average loans.                                                                                                                                                              |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   - | Interest  income includes loan origination fees of $1,109 and $593 for the six months  ended June 30, 2002 and 2001                                                                                           |
| (3)   - | Nontaxable  interest income is presented on a fully tax equivalent basis assuming a 35%  tax rate.                                                                                                            |
| (4)   - | Interest  rate spread represents the difference between the average yield on interest  earning assets and the average cost of interest bearing liabilities and is  presented on a fully tax equivalent basis. |
| (5)   - | Net  interest margin represents net interest income as a percentage of average earning  assets.                                                                                                               |

 

 

7

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**Table 2**

**Net Interest Income and Margin Analysis**

 
|                                        |       | **Three  Months Ended June 30,** |       |
|---------------------------------------------|------------|----------------------------------|------------|
|                                        |       | **2002**                         |       | **2001** |   |
| ** **                                  | ** ** | **Average********Balance**       | ** ** | **Interest** | ** ** | **Yield/  Rate** | ** ** | **Average********Balance** | ** ** | **Interest** | ** ** | **Yield/  Rate** | ** ** |
| Interest Earning Assets                     |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Federal Funds Sold                          |       | $                                | 8,208      |   | $ | 33 |   | 1.59 | % | $ | 15,767 |   | $ | 185 |   | 4.64 | % |
| Investment Securities:                      |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Taxable                                     |       | 45,885                           |       | 757 |   | 6.62 | % | 54,275 |   | 849 |   | 6.27 | % |
| Nontaxable (3)                              |       | 10,592                           |       | 212 |   | 7.92 | % | 7,714 |   | 95 |   | 7.48 | % |
| Nonmarketable Equity Securities             |       | 1,849                            |       | 24 |   | 5.25 | % | 1,991 |   | 32 |   | 6.45 | % |
| Mortgages held-for-sale                     |       | 142                              |       | 3 |   | 8.35 | % | 602 |   | 13 |   | 8.54 | % |
| Loans, net of deferred loan income(1)(2)    |       | 307,453                          |       | 6,157 |   | 7.92 | % | 302,778 |   | 6,639 |   | 8.67 | % |
| Total Interest Earning Assets               |       | $                                | 374,130    |   | $ | 7,186 |   | 7.81 | % | $ | 383,127 |   | $ | 7,813 |   | 8.30 | % |
|                                        |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities                |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Savings, NOW & money market deposits    |       | $                                | 127,463    |   | $ | 518 |   | 1.63 | % | $ | 128,261 |   | $ | 953 |   | 2.98 | % |
| Other Time Deposits                         |       | 137,785                          |       | 1,138 |   | 3.31 | % | 154,011 |   | 2,415 |   | 6.29 | % |
| Borrowed Funds - Short Term                 |       | 7,005                            |       | 50 |   | 2.82 | % | 721 |   | 7 |   | 3.84 | % |
| Borrowed Funds - Long Term                  |       | 21,820                           |       | 240 |   | 4.35 | % | 25,358 |   | 322 |   | 5.02 | % |
| Total Interest Bearing Liabilities          |       | $                                | 294,072    |   | $ | 1,946 |   | 2.65 | % | $ | 308,351 |   | $ | 3,697 |   | 4.81 | % |
| Net interest income/interest rate spread(4) |       |                             |       | 5,240 |   | 5.16 | % |   |   | 4,116 |   | 3.49 | % |
| Net interest margin(5)                      |       |                             |       |   |   | 5.70 | % |   |   |   |   | 4.40 | % |

----

| (1)   - | Nonaccrual  loans are included in average loans.                                                                                                                                                              |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   - | Interest  income includes loan origination fees of $536 and $292 for the three months  ended June 30, 2002 and 2001                                                                                           |
| (3)   - | Nontaxable  interest income is presented on a fully tax equivalent basis assuming a 35%  tax rate.                                                                                                            |
| (4)   - | Interest  rate spread represents the difference between the average yield on interest  earning assets and the average cost of interest bearing liabilities and is  presented on a fully tax equivalent basis. |
| (5)   - | Net  interest margin represents net interest income as a percentage of average  earning assets.                                                                                                               |

 

**Provision for Loan Losses**

The provision for loan losses was $450 in 2002 and $300 in 2001,reflecting management’s assessment ofoverall risk in the loanportfolio. Net charge-offs were $185 for the first six months of 2002, comparedto $405 during the same period in 2001. The allowance for loan losses as apercent of total loans was 1.45% at June 30, 2002, and 1.35% at December 31,2001. Total nonperforming assets as a percent of total assets were1.56% at June30, 2002 and 1.31% at December 31, 2001.

 

**Noninterest Income and Expense**

Total noninterest income, excluding thesecurities gains, decreased 4.85% to $982 in the first six monthsof 2002,compared to the same period in 2001, due to regular seasonal fluctuations inclient activity subject toservicecharges. The securities gains of $253, recognized in 2001, arose because theChicago branch held aninvestment incommon stock in Cash Station (an ATM consortium), the cost basis of which was$0. Cash Station entered into a merger transaction with a listed publiccompany, Concord EFS, Inc. (Concord), whereby theshareholders of Cash Stationreceived common stock of Concord in exchange for their common stock. The fairvalue of theConcord stock at the merger date was $253 and is included as a part of gains onsecurities transactions in 2001.

 

Total noninterest expense for the first six months of 2002 decreased1.46% to $7,171 from the year earlier totalof $7,277. The increase insalaries and employee benefits in 2002 to $3,909 from $3,893 in 2001, is a resultof higher payroll taxes and benefits payments required. Net occupancy andequipment expense increased$4 to $937 from $933 in2001, primarily due to higher utilities cost. Other noninterest expensedecreased $126or 5.42% to $2,325 from$2,451 the preceding year.

 

**FINANCIAL CONDITION CHANGES**

Total assets were $395,094 at June 30, 2002 compared to $389,453 atDecember 31, 2001. The overallincrease in cash and duefrom banks is a function of regular deposit activity and seasonal fluctuation. Thedecrease in the securities portfolio is a reflection of active funds managementand the calendar timing ofinvestment maturities andthe reinvestment of those funds. The decrease in the loan portfolio is a resultof a decrease in demand.

 

Total deposits increased $6,909 or 2.13% fromyear-end. Noninterest bearing deposits increased 5.71% or$4,137, due tocore growth, as well as seasonal fluctuations at each of the branches. Interestbearing deposits increased $2,772 as a result of the issuance of short term,non-core, certificates of depositpurchased in 2002, at ratesprofitable to Uptown. Borrowed funds decreased $2,973 from year-end levelsas a result ofreduced need brought about by the increased deposits.

 

 

8

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**Allowance for Loan Losses**

Uptown National Bank("Uptown") utilizes an internalclassification system as a means of reporting problem and potential problemassets. A classified loan analysis is presented quarterly to the Company'sBoard of Directors, showing all assets listed as "Special Mention","Substandard", "Doubtful" and "Loss". An asset isclassified as Substandard if it is inadequately protected by the current networth and paying capacity of the obligor or of the collateral pledged, if any. Substandardassets include those characterized by the distinct possibility that Uptown willsustain some loss if the deficiencies are not corrected. Assets classified asDoubtful have all the weaknesses inherent in those classified Substandard withthe added characteristic that the weaknesses present make collection orliquidation in full, on the basis of currently existing facts, conditions andvalues, highly questionable and improbable. Assets classified as Loss are thoseconsidered uncollectible and viewed as nonbankable assets worthy of charge-off.Assets which do not currently expose Uptown to sufficient risk to warrantclassification in one of the aforementioned categories, but possess weaknesseswhich may or may not be out of the control of the customer, are deemed to beSpecial Mention.

 

Uptown's determination as to the classification of its assets and theamount of its valuation allowances is subject to review by their primaryregulators, as well as external loan review auditors, who can order the establishmentof additional general or specific loss allowances. The OCC, in conjunction withthe other federal banking agencies, has adopted an interagency policy statementon the allowance for loan losses. The policy statement provides guidance forfinancial institutions on both the responsibilities of management for theassessment and establishment of adequate allowances and guidance for bankingagency examiners to use in determining the adequacy of general valuationguidelines. Generally, the policy statement recommends that (i) institutionshave effective systems and controls to identify, monitor and address assetquality problems; (ii) management has analyzed all significant factors thataffect collectibility of the portfolio in a reasonable manner; and (iii)management has established acceptable allowance evaluation processes that meetthe objectives set forth in the policy statement. Management believes it hasestablished an adequate allowance for loan losses. Uptown analyzes its processregularly, with modifications made if needed, and reports those resultsquarterly at Board of Directors meetings. However, there can be no assurancethat the regulators, in reviewing Uptown's loan portfolio, will not requestUptown to materially increase it allowance for loan losses at the time.Although management believes that adequate specific and general loan lossallowances have been established, actual losses are dependent upon futureevents and as such, further additions to the level of specific and general lossallowance may become necessary.

 

The aggregate principal amount of potential problem loans as of June30, 2002 and 2001 were approximately $16.3 million and $6.3 million,respectively. Include in these problem loan totals are non-accrual, SpecialMention, Substandard and Doubtful classifications, which represent the watchlist presented to the Board of Directors. All loans classified as Loss havebeen charged-off. Loans in this category generally include loans that areclassified for regulatory purposes.

 

**Nonperforming Assets**

Another measurement used by management in assessing the risk inherentin the loan portfolio is the level ofnonperforming assets.Nonperforming assets consists of nonaccrual loans, restructured loans,investments andother real estate owned.Nonaccrual loans are those loans which have been determined to have reasonabledoubt as to thetimely collection of interest or principal. Restructured loans are those loanswhose terms or conditions have been changed and have resulted in a negative impacton the Subsidiary Bank (“Bank”) compared to the original terms. Other realestate owned (“OREO”) represents real property which has been acquired throughforeclosure orreal estate which the Bank has obtained possession of in satisfaction of adebt. OREO is carriedat the lower of the recordedinvestment value of the loan, or the estimated fair market value, lessestimated costsof sale, of the related realestate. The majority of the balance in nonaccrual loans relates to three loans,secured by real estate, totaling $4,017 to two borrowers, placed on nonaccrualstatus during the past year. These loanshave been analyzed andincluded in the Banks measurement process when reviewing the allowance forloan losses asperformed.

 

**LIQUIDITY AND CAPITAL RESOURCES**

The maintenance of an adequate level of liquidity is necessary toensure that sufficient funds are available to meetcustomer’s loan demands and deposit withdrawalrequests. The banking subsidiary’s liquidity sourcesconsist of investment securities, maturing loans andother short-term investments. Liquidity can also be obtainedthrough liabilities such ascore deposits, borrowed funds, certificates of deposit and public funddeposits.

 

The Company’s cash flows are composed of three classifications: cashflows from operating activities, cashflows from investing activities, and cash flows fromfinancing activities. Net cash provided by operating activities,consisting primarily ofearnings, was $3,014 for the six months ended June 30, 2002 and $956 for thesameperiod in 2001.A significant component in the net fluctuation of net cash provided by or usedin operating activities is the timing of the sale of loans held-for-sale topermanent investors. Net cash used in investingactivities, consisting primarily of loan andinvestment funding was $4,720 and $5,284 for the six months ended June 30, 2002and 2001, respectively. Net cash provided by financing activities, consistingof deposit growth and borrowed funds, was $3,720 and $11,011 for the six monthsended June 30, 2002 and 2001.

 

At June 30, 2002,  Shareholders’Equity was $31,690 compared to $29,356 at December 31, 2001, an increaseof $2,334, or7.95%. Accumulated other comprehensive income at June 30, increased $257 due tounrealized gains in securities available-for-sale, net of tax. Shareholders’Equity as a percentage of total assets atJune 30, 2002 was 8.02%. Thefollowing table represents the Company’s consolidated regulatory capitalposition as ofJune 30, 2002.

 

Regulatory capital at June 30, 2002:

 
| ** **               | ** ** | **Leverage  Ratio** | ** ** | **Tier 1  Risk-Based********Capital** | ** ** | **Total  Risk-Based  Capital** | ** ** |
|--------------------------|------------|---------------------|------------|---------------------------------------|------------|--------------------------------|------------|
| Upbancorp, Inc. ratio    |       | 7.8                 | %          | 9.8                                   | %          | 11.0                           | %          |
| Regulatory minimum ratio |       | 4.0                 | %          | 4.0                                   | %          | 8.0                            | %          |

 

 

9

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**FORWARD LOOKING STATEMENTS**

The preceding “Management Discussion and Analysis of FinancialCondition and Results of Operations”section of this Form 10-Q contains various “forwardlooking statements” within the meaning of Section 27A ofthe Securities Act of 1933,as amended, and section 21E of the Securities Exchange Act of 1934, as amended,which represents the Company’sexpectations and beliefs concerning future events including, without limitationthe following: the company’sefforts in retaining and expanding its customer base and differentiating itfrom itscompetition;the FDIC insurance premium assessments; the impact from liabilities arisingfrom legal proceedings on its financial condition; the impact of interest ratesin general on the volatility of its net interest income; the impact of policyguidelines and strategies on net interest income based on future rateprojections; the ability to provide funding sources for both the Bank and theCompany; the payment of future dividends based upon Company performance andprospects; the impact of portfolio diversification and the real estate lendingand future levels of loan losses; the effect of loan growth generally on theimprovement in net interestincome; and the assessment of its provision and reserve for loan losslevels based upon future changes in thecomposition of its loan portfolio, loan losses,collateral value and economic conditions.

 

The Company cautions that these statements are further qualified byimportant factors that could causeactual results to differ materially from those setforth in the forward looking statements due to market,economic and otherbusiness-related risks and uncertainties affecting the realization of suchstatements. Certain of these risks and uncertainties included in such forwardlooking statements include, without limitation, the following; dynamics of themarket served in terms of competition from traditional and nontraditionalfinancial service providers can affect both the funding capabilities of theCompany in terms of deposit gathering as well as the ability to compete forloans and generate the higher yielding assets necessary to improvenet interest income; futurelegislation and action by the Federal Reserve Board may result in theimpositionof costs andconstraints on the Company through higher FDIC insurance premiums, significantfluctuations in market interest rates and operational limitations; significantfluctuations in market interest rates may affect the ability to reinvestproceeds from the maturities and prepayments on certain categories ofsecurities and the overall yield of the portfolio; business expansionactivities and other efforts to retain customers may increase the need forstaffing and the resulting personnel expense in future periods; and deviationsfrom the assumptions used to evaluate the appropriate level of the reserve forloan losses as well as future purchases and sales of loans may affect theappropriate level of the reserve for loan losses and thereby affect futureprovisions.

 

Additional risks and uncertainties include: general economic orindustry conditions, nationally and/or in thecommunities in which the Company conducts business,changes in the interest rate environment,legislation or regulatory requirements, conditionsof the securities markets, deposit flows, cost of funds,demand for loan products,demand for financial services, competition, changes in the quality orcompositionof the Company’sloan and investment portfolios, acts of war or terrorism, other economic, competitive,governmental, regulatory and technical factors affecting the Company’soperations, products, services and prices.

 

Accordingly, results actually achieved may differ materially fromexpected results in these statements. TheCompany does not undertake, and specificallydisclaims, any obligation to update any forward lookingstatements to reflect eventsor circumstances occurring after the date of such statements.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKETRISK**

Management, to augment static gap analysis, uses an additionalmeasurement tool to evaluate itsasset/liability sensitivity, which determinesexposure to changes in interest rates by measuring the changein net interest income as apercentage of Capital, due to changes in rates over a one-year horizon.

 

Management measures such change assuming an immediate and sustainedparallel shift in rates of 50,100 and 200 basis points, both upward and downward.The model uses scheduled amortization, call dateor final maturity as appropriate on all non-ratesensitive assets. The model uses repricing frequency onall variable rate assets andliabilities, it also uses a 5-year decay analysis on all non-rate sensitivedeposits. Prepayment rateson fixed rate loans have been adjusted up or down by 10% per year toincorporate historicalexperience in both an up-rate and down-rate environment.

 

Utilizing this measurement concept, theinterest rate risk of the Company, expressed as change in netinterest income as apercentage of capital (subject to a policy limit of 2.5% of capital) over a1-year timehorizon due tochanges in interest rates is as follows:

 
|                 |   | **Basis  Point Change** |   |
|----------------------|--------|-------------------------|--------|
|                 |   | **+200**                |   | **+100** |   | **+50** |   | **-50** |   | **-100** |   | **-200** |   |
| At June 30, 2002     |   | -0.96                   | %      | -0.95 | % | -0.24 | % | 0.03 | % | 0.07 | % | -0.76 | % |
| At December 31, 2001 |   | -1.19                   | %      | -0.62 | % | -0.40 | % | -0.04 | % | -0.32 | % | -0.66 | % |

 

Basedupon these analyses, management has determined that there has been no materialchange at June 30, 2002 in interest rate risk for the Company, from theDecember 31, 2001 calculated results.

 

 

10

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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**                    |
|         | None required                                            |

 

 

11

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**SIGNATURES**

 

**Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934,********the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto********duly authorized.**

 

 
| Date: August 9, 2002 |   | UPBANCORP, INC.        |
|----------------------|--------|------------------------|
|                 |   | (The Registrant)       |
|                 |   |                   |
|                 |   | \s\Richard K. Ostrom   |
|                 |   | Richard K. Ostrom      |
|                 |   | Chairman of the Board, |
|                 |   | President and Chief    |
|                 |   | Executive Officer      |

 

 

12

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**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,**

**AS ADOPTED PURSUANT TO SECTION 906 OF THE**

**SARBANES-OXLEY ACT OF 2002**

 

In connection with the Quarterly Report ofUpbancorp, Inc. (the “Company”) on Form 10Q for the period ending June 30, 2002as filed with the Securities and Exchange Commission on the date hereof (the “Report”),I, Richard K. Ostrom, Chairman of the Board, President and Chief ExecutiveOfficer of the Company,certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002, that:

 

(1)  The Report fully complies with therequirements of section 13(a) or 15(d) of the Securities ExchangeAct of 1934;and

 

(2)  The information contained in the Report fairlypresents, in all material respects, the financial conditionand result ofoperations of the Company.

 

 

 
| \s\ Richard K. Ostrom  |
|------------------------|
|                   |
| Richard K. Ostrom      |
| Chairman of the Board, |
| President and Chief    |
| Executive Officer      |
| August 9, 2002         |

 

 

 

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,**

**AS ADOPTED PURSUANT TO SECTION 906 OF THE**

**SARBANES-OXLEY ACT OF 2002**

 

In connection with the Quarterly Report ofUpbancorp, Inc. (the “Company”) on Form 10Q for the period ending June 30, 2002as filed with the Securities and Exchange Commission on the date hereof (the“Report”), I,Kathleen L. Harris, Senior Vice President and Chief Financial Officer of theCompany, certify,pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, that:

 

(1)  The Report fully complies with therequirements of section 13(a) or 15(d) of the Securities ExchangeAct of 1934;and

 

(2)  The information contained in the Reportfairly presents, in all material respects, the financial conditionand result ofoperations of the Company.

 

 

 
| \s\ Kathleen L. Harris    |
|---------------------------|
|                      |
| Kathleen L. Harris        |
| Senior Vice President and |
| Chief Financial Officer   |
| August 9, 2002            |

 

 

13

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