<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 0-28846
UNIONBANCORP, INC.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 36-3145350
------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer ID Number)
of incorporation or organization)
122 West Madison Street, Ottawa, IL 61350
------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (815) 434-3900
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Class Shares outstanding at May 12, 1998
- ----------------------------- -----------------------------------
Common Stock, Par Value $1.00 4,135,830
<PAGE>
CONTENTS
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
- - Consolidated Balance Sheets 1
- - Consolidated Statements of Income 2
- - Consolidated Statements of Comprehensive Income 3
- - Consolidated Statements of Cash Flows 4
- - Notes to Unaudited Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial Condition and 8-16
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
<TABLE>
<CAPTION>
UNIONBANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------------------------------------
MARCH 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 18,202 $ 22,826
Federal funds sold 3,341 1,404
Securities available-for-sale 158,975 163,568
Securities held-to-maturity 43,009 37,170
Loans 378,611 370,985
Allowance for loan losses (3,551) (3,188)
----------- -----------
Net loans 375,060 367,797
Premises and equipment, net 14,693 14,631
Intangible assets, net 9,668 9,898
Other assets 9,238 8,166
----------- -----------
TOTAL ASSETS $ 632,186 $ 625,460
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing $ 60,684 $ 62,095
Interest bearing 468,381 465,652
----------- -----------
Total deposits 529,065 527,747
Federal funds purchased and securities sold
under agreements to repurchase 12,479 11,761
Advances from the Federal Home Loan Bank 19,455 16,455
Notes payable 10,352 10,261
Other liabilities 7,295 6,154
----------- -----------
TOTAL LIABILITIES 578,646 572,378
----------- -----------
Minority interest in subsidiaries 647 644
Mandatory redeemable preferred stock, Series B, no par value;
1,092 shares authorized; 857 shares issued and outstanding 857 857
----------- -----------
Stockholders' equity
Preferred stock; 200,000 shares authorized; none issued - -
Series A convertible preferred stock; 2,765 shares authorized,
2,762.24 shares outstanding (aggregate liquidation preference of $2,762) 500 500
Series C preferred stock; 4,500 shares authorized; none issued - -
Common stock, $1 par value; 10,000,000 shares authorized;
4,407,093 shares outstanding at March 31, 1998 and
December 31, 1997 4,407 4,407
Surplus 19,705 19,705
Retained earnings 27,799 26,765
Accumulated other comprehensive income 267 856
Unearned compensation under stock option plans (120) (130)
----------- -----------
52,558 52,103
Treasury stock, at cost; 271,263 shares
at March 31, 1998 and December 31, 1997 (522) (522)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 52,036 51,581
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 632,186 $ 625,460
----------- -----------
----------- -----------
</TABLE>
See Accompanying Notes to Unaudited Financial Statements
1.
<PAGE>
<TABLE>
<CAPTION>
UNIONBANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
------------------------------
1998 1997
-------- -----------
<S> <C> <C>
Interest income
Loans and fees on loans $ 8,546 $ 7,889
Securities
Taxable 2,592 2,999
Exempt from federal income taxes 481 396
Federal funds sold and other 78 106
----------- -----------
TOTAL INTEREST INCOME 11,697 11,390
----------- -----------
Interest expense
Deposits 5,453 5,457
Federal funds purchased and securities sold
under agreements to repurchase 214 279
Advances from the Federal Home Loan Bank 237 118
Notes payable 187 304
----------- -----------
TOTAL INTEREST EXPENSE 6,091 6,158
----------- -----------
NET INTEREST INCOME 5,606 5,232
Provision for loan losses 562 157
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,044 5,075
----------- -----------
Noninterest income
Service charges 523 430
Merchant fee income 182 161
Trust income 150 122
Mortgage banking income 396 83
Securities gains, net (14) 85
Other income 401 295
----------- -----------
1,638 1,176
----------- -----------
Noninterest expenses
Salaries and employee benefits 2,551 2,425
Occupancy expense, net 367 391
Furniture and equipment expense 416 352
FDIC insurance assessment 16 14
Supplies and printing 137 128
Telephone 132 91
Postage 106 108
Amortization of intangible assets 229 229
Other expenses 881 973
----------- -----------
4,835 4,711
----------- -----------
1,847 1,540
Minority interest 15 20
----------- -----------
INCOME BEFORE INCOME TAXES 1,832 1,520
Income taxes 589 382
----------- -----------
NET INCOME 1,243 1,138
Preferred stock dividends 65 65
----------- -----------
NET INCOME FOR COMMON STOCKHOLDERS $ 1,178 $ 1,073
----------- -----------
----------- -----------
BASIC EARNINGS PER COMMON SHARE $ 0.28 $ 0.26
----------- -----------
----------- -----------
DILUTED EARNINGS PER COMMON SHARE 0.28 0.26
----------- -----------
----------- -----------
</TABLE>
See Accompanying Notes to Unaudited Financial Statements
2.
<PAGE>
<TABLE>
<CAPTION>
UNIONBANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
------------------------------
1998 1997
-------- -----------
<S> <C> <C>
Net Income $ 1,243 $ 1,138
Change in unrealized gains on securities available-for-sale (589) (236)
----------- -----------
COMPREHENSIVE INCOME $ 654 $ 902
----------- -----------
----------- -----------
</TABLE>
See Accompanying Notes to Unaudited Financial Statements
3.
<PAGE>
<TABLE>
<CAPTION>
UNIONBANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
------------------------------
1998 1997
-------- -----------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 1,243 $ 1,138
Adjustments to reconcile net income to
net cash provided by (used in) operating activities
Depreciation 384 331
Amortization of intangible assets 230 180
Amortization of unearned compensation under stock option plans 10 7
Amortization of bond premiums, net 90 123
Provision for loan losses 562 157
Securities losses (gains), net 14 (85)
Gain on sale of equipment (11) -
Gain on sale of loans (327) -
Proceeds from sales of loans held for sale 7,239 2,438
Origination of loans held for sale (17,009) (5,120)
Minority interest in net income of subsidiary 15 20
Change in assets and liabilities
(Increase) decrease in other assets (878) 1,305
Increase in other liabilities 1,539 675
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,899) 1,169
Cash flows from investing activities
Securities
Held-to-maturity
Proceeds from calls, maturities, and paydowns 1,036 1,713
Purchases (6,894) (1,265)
Available-for-sale
Proceeds from maturities and paydowns 19,386 4,914
Proceeds from sales 1,227 13,992
Purchases (17,104) (3,650)
Net (increase) decrease in federal funds sold (1,937) 6,048
Net (increase) decrease in loans 2,068 (3,487)
Purchase of premises and equipment (446) (903)
Proceeds from sale of real estate acquired in settlement of loans 10 -
Proceeds from sale of equipment 11 -
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,643) 17,362
Cash flows from financing activities
Net increase (decrease) in deposits $ 1,318 $ (18,788)
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase 718 (3,969)
Net increase (decrease) in advances from the
Federal Home Loan Bank 3,000 (1,000)
Payments on notes payable (4) (1,000)
Proceeds from notes payable 95 278
Dividends on common stock (144) (405)
Dividends on preferred stock (65) (65)
Proceeds from exercise of stock options - 8
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 4,918 (24,941)
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,624) (6,410)
Cash and cash equivalents
Beginning of year 22,826 29,236
----------- -----------
End of year $ 18,202 $ 22,826
----------- -----------
----------- -----------
</TABLE>
See Accompanying Notes to Unaudited Financial Statements.
4.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements of
UnionBancorp, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles and with the rules and regulations
of the Securities and Exchange Commission for interim financial reporting.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all normal and recurring
adjustments which are necessary to fairly present the results for the interim
periods presented have been included. The preparation of financial statements
requires management to make estimates and assumptions that affect the
recorded amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. For further information with
respect to significant accounting policies followed by the Company in the
preparation of its consolidated financial statements, refer to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
NEW ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities", which has been amended by SFAS No. 127. This statement, as
amended, provides authoritative guidance as to the accounting and financial
reporting for transfers and servicing of financial assets and extinguishments
of liabilities. SFAS No. 125 is based on a consistent application of a
financial components approach that focuses on control and provides consistent
standards for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. The statement also requires
measuring instruments that have a substantial prepayment risk at fair value,
much like debt instruments classified as available-for-sale or trading. SFAS
No. 125, as amended by SFAS No. 127, is effective on a prospective basis for
some transactions in 1997 and others in 1998. The adoption of SFAS No. 125
will not have a material impact on the Company.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." The
overall objective of SFAS No. 128 is to simplify the calculation of earnings
per share (EPS) and achieve comparability with the recently issued
International Accounting Standard No. 33, "Earnings Per Share." Under this
statement, primary EPS computed in accordance with APB Opinion No. 15 will be
replaced with a new, simpler calculation called basic EPS. Basic EPS will be
calculated by dividing income available to common shareholders (i.e., net
income less preferred stock dividends) by the weighted average common shares
outstanding without consideration for common stock equivalents such as
options, warrants, and convertible securities. Fully diluted EPS will not
change significantly but has been renamed diluted EPS. SFAS No. 128 is
effective for both interim and annual financial statements for periods ending
after December 15, 1997. Earlier application is not permitted. Upon adoption,
the Company will be required to change the method currently used to compute
EPS and to restate all prior periods.
Effective for fiscal years beginning after December 15, 1997, under a new
accounting standard (SFAS 130), comprehensive income is now reported for all
periods. Comprehensive income includes both net income and other comprehensive
income. Other comprehensive income includes the change in unrealized gains and
losses on securities available-for-sale. Comprehensive income has been disclosed
in the Consolidated Statement of Comprehensive Income.
5.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Effective for fiscal years beginning after December 15, 1997, a new
accounting standard (SFAS 131), establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
This standard will have no impact on the Company.
NOTE 2. SECURITIES
Securities Held to Maturity - The amortized cost and fair value of securities
held to maturity at March 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
------------------------------------------- -------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
HELD-TO-MATURITY Cost Gains Losses Value Cost Gains Losses Value
--------- ---------- ---------- ----- --------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
States and political subdivisions $ 43,009 $ 925 $ (42) $ 43,892 $ 37,170 $ 805 $ (135) $ 37,840
-------- ------ ----- -------- -------- ------ ------ --------
-------- ------ ----- -------- -------- ------ ------ --------
</TABLE>
Securities Available for Sale - The amortized cost and fair value of
securities available for sale at March 31, 1998 and December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
------------------------------------------- -------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
AVAILABLE-FOR-SALE Cost Gains Losses Value Cost Gains Losses Value
--------- ---------- ---------- ----- --------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 17,159 $ 97 $ (12) $ 17,244 $ 19,071 $ 98 $ (6) $ 19,163
U.S. government agencies and
corporations 60,811 135 (247) 60,699 59,341 173 (199) 59,315
U.S. government mortgage-backed
securities 18,891 228 (37) 19,082 21,797 907 (9) 22,695
Collateralized mortgage obligations 57,666 455 (160) 57,961 57,800 528 (28) 58,300
Corporate bonds 100 - - 100 100 - - 100
Other 3,889 - - 3,889 4,001 - (6) 3,995
-------- ------ ----- -------- -------- ------ ------ --------
$158,516 $ 915 $(456) $158,975 $162,110 $1,706 $ (248) $163,568
-------- ------ ----- -------- -------- ------ ------ --------
-------- ------ ----- -------- -------- ------ ------ --------
</TABLE>
NOTE 3. LOANS
The following table provides the book value of loans, by major
classification, as of the dates indicated:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
------------------- -------------------
$ % $ %
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Commercial $ 57,660 15.22% $ 62,936 16.96%
Agricultural 35,636 9.41 39,431 10.62
Real estate:
Commercial mortgages 87,170 23.02 72,730 19.60
Construction 13,115 3.46 14,393 3.88
Agricultural 25,557 6.75 27,955 7.53
1-4 family mortgages 116,705 30.82 109,411 29.48
Installment 40,032 10.57 41,210 11.10
Other 2,847 0.75 3,076 0.83
-------- ------ -------- ------
378,722 100.00% 371,142 100.00%
Unearned Income (111) ------ (157) ------
-------- ------ -------- ------
Total loans 378,611 370,985
Allowance for loan losses (3,551) (3,188)
-------- --------
Loans, net $375,060 $367,797
-------- --------
-------- --------
</TABLE>
6.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 4. ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses for the three months ended
March 31, 1998 and 1997 are summarized below:
<TABLE>
<CAPTION>
March 31,
-------------------
1998 1997
------- -------
<S> <C> <C>
Beginning balance $ 3,188 $ 3,068
Charge-offs:
Commercial 80 10
Real estate mortgages 89 24
Installment and other loans 100 153
-------- --------
Total charge-offs 269 187
-------- --------
Recoveries:
Commercial 29 10
Real estate mortgages 6 18
Installment and other loans 35 32
-------- --------
Total recoveries 70 60
-------- --------
Net charge-offs 199 127
-------- --------
Provision for loan losses 562 157
-------- --------
Ending balance $ 3,551 $ 3,098
-------- --------
-------- --------
Period end total loans, net of
unearned interest $378,611 $352,538
-------- --------
-------- --------
Average loans $365,202 $349,120
-------- --------
-------- --------
Ratio of net charge-offs to
average loans 0.05% 0.04%
Ratio of provision for loan losses
to average loans 0.15 0.04
Ratio of allowance for loan losses
to ending total loans 0.94 0.88
Ratio of allowance for loan losses
to total nonperforming loans 145.12 77.49
Ratio of allowance at end of period
to average loans 0.97 0.89
</TABLE>
NOTE 5. CONTINGENT LIABILITIES AND OTHER MATTERS
Neither the Company nor any of its subsidiaries are involved in any pending
legal proceedings other than routine legal proceedings occurring in the
normal course of business, which, in the opinion of management, in the
aggregate, are not material to the Company's consolidated financial
condition.
7.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
GENERAL
The discussion presented below provides an analysis of the Company's results
of operations and financial condition for the three months ended March 31,
1998 as compared to the same period in 1997. Management's discussion and
analysis should be read in conjunction with the consolidated financial
statements and accompanying notes presented elsewhere in this report as well
as the Company's 1997 Annual Report on Form 10-K. Results of operations for
the three months ended March 31, 1998 are not necessarily indicative of
results to be expected for the full year of 1998.
SUMMARY OF PERFORMANCE
Net income for the first quarter increased to $1,243,000 from the $1,138,000
earned in the first quarter of 1997, representing an increase of 9%. Per
share (diluted) earnings increased to $0.28 from $0.26 a year ago.
Return on average assets was 0.82% for the first quarter of 1998, as compared
to 0.74% for the same quarter in 1997. Return on average stockholders' equity
was 9.56% for the first quarter of 1998, as compared to 9.65% for the same
1997 quarter.
NET INTEREST INCOME
Net interest income on a tax equivalent basis totaled $5,869,000 for the
first quarter of 1998, representing an increase of $412,000 or 7.5% over the
$5,457,000 earned during the quarter ended March 31, 1997. As shown in the
Volume/Rate Analysis on page 9, the improvement in net interest income is
attributable to increased interest income of $345,000, along with a lower
interest expense of $67,000. The net interest margin for the first quarter of
1998 increased to 4.17% as compared to 3.83% for the same time frame in 1997.
The improvement in the net interest margin was primarily attributable to the
higher yields on earning assets coupled with decreasing interest costs for
paying liabilities.
As indicated in the Volume/Rate Analysis, the $345,000 increase in interest
income for the quarter was primarily related to volume and interest rate
variances on the loan portfolio, totaling an increase of $653,000 and
resulted from a strategic shift in the asset mix toward loans which have a
higher yield than securities. Consequently, the decrease in the securities
portfolio interest income resulted from securities volumes which were
reduced to fund the loan portfolio growth.
The $67,000 decrease in interest expense resulted from a $128,000 decrease
associated with volume that was partially offset by a $61,000 increase in
rate. The decrease in interest expense relating to volume is primarily
associated with a decrease in savings deposits balances along with a net
reduction in reliance on short term borrowings. The increase in interest
expense related to rate reflected a nominal increase in average rates paid on
interest-bearing liabilities, primarily related to increases in the interest
rates on time deposits reflecting pressures in the marketplace for deposits.
8.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
VOLUME/RATE ANALYSIS
The table below summarizes the changes in average interest-earning assets and
interest -bearing liabilities as well as the average rates earned and paid on
these assets and liabilities, respectively, for the quarters ended March 31,
1998 and 1997. The table also details the increase and decrease in income and
expense for each major category of assets and liabilities and analyzes the
extent to which such variances are attributable to volume and rate changes.
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
----------------------------------------------------------------------
1998 1997
-------------------------------- --------------------------------
Interest Interest
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS
Interest-earning deposits $ 126 $ 36 115.87% $ 67 $ 1 6.05%
Securities (1)
Taxable 163,991 2,561 6.33% 190,275 2,997 6.39%
Non-taxable (2) 36,820 721 7.94% 30,623 600 7.95%
-------- ------- ------ -------- ------- ----
Total securities (tax equivalent) 200,811 3,282 6.63% 220,898 3,597 6.60%
-------- ------- ------ -------- ------- ----
Federal funds sold 4,930 78 6.42% 8,090 106 5.31%
-------- ------- ------ -------- ------- ----
Loans (3)(4)
Commercial 97,403 2,316 9.64% 96,871 2,251 9.42%
Real estate 224,129 4,872 8.82% 207,761 4,398 8.59%
Installment and other 43,321 1,013 9.48% 44,212 999 9.16%
Fees on loans - 363 - - 263 -
-------- ------- ------ -------- ------- ----
Net loans (tax equivalent) 364,853 8,564 9.52% 348,844 7,911 9.20%
-------- ------- ------ -------- ------- ----
Total interest-earning assets 570,720 11,960 8.50% 577,899 11,615 8.15%
-------- ------- ------ -------- ------- ----
NONINTEREST-EARNING ASSETS
Cash and cash equivalents 17,936 19,562
Premises and equipment, net 14,575 13,727
Other assets 15,606 15,441
-------- --------
Total nonearning assets 48,117 48,730
-------- --------
Total assets $618,837 $626,629
-------- --------
-------- --------
INTEREST-BEARING LIABILITIES
NOW accounts $ 53,974 325 2.44% $ 55,811 $ 349 2.54%
Money market accounts 30,613 258 3.42% 31,619 257 3.30%
Savings deposits 59,756 412 2.80% 66,879 500 3.03%
Time deposits 315,787 4,458 5.73% 316,353 4,352 5.58%
Federal funds purchased and
repurchase agreements 14,363 214 6.04% 20,883 278 5.40%
Advances from FHLB 16,892 237 5.69% 7,601 118 6.30%
Notes payable 10,310 187 7.36% 14,645 304 8.42%
-------- ------- ------ -------- ------- ----
Total interest-bearing liabilities 501,695 6,091 4.92% 513,791 6,158 4.86%
-------- ------- ------ -------- ------- ----
NONINTEREST-BEARING LIABILITIES
Noninterest-bearing deposits 57,202 58,476
Other liabilities 7,185 6,561
-------- --------
Total noninterest-bearing liabilities 64,387 65,037
-------- --------
Stockholders' equity 52,755 47,801
-------- --------
Total liabilities and stockholders' equity $618,837 $626,629
-------- --------
-------- --------
Net interest income (tax equivalent) $ 5,869 $ 5,457
------- -------
------- -------
Net interest income (tax equivalent) to
total earning assets 4.17% 3.83%
Interest-bearing liabilities to earning assets 87.91% 88.91%
-------- --------
-------- --------
</TABLE>
______________________________________________
(1) Average balance and average rate on securities classified as
available-for-sale is based on historical amortized cost balances.
(2) Interest income and average rate on non-taxable securities are reflected
on a tax equivalent basis based upon a statutory federal income tax rate
of 34%
(3) Nonaccrual loans are included in the average balances.
(4) Overdraft loans are excluded in the average balances.
9.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Months Ended March 31,
------------------------------
1998 Compared to 1997
------------------------------
Change Due to
------------------------------
Volume Rate Net
------ ---- ---
<S> <C> <C> <C>
INTEREST INCOME:
Interest-earning deposits $ 1 $ 34 $ 35
Investment securities:
Taxable (407) (29) (436)
Non-taxable 122 (1) 121
Federal funds sold (47) 19 (28)
Loans 442 211 653
------- ------- -------
Total interest income 111 234 345
------- ------- -------
INTEREST EXPENSE:
NOW accounts (12) (12) (24)
Money market accounts (8) 9 1
Savings deposits (51) (37) (88)
Time deposits (12) 119 107
Federal funds purchased and
repurchase agreements (94) 30 (64)
Advances from FHLB 131 (12) 119
Notes payable (82) (36) (118)
------- ------- -------
Total interest expense (128) 61 (67)
------- ------- -------
Net interest margin $ 239 $ 173 $ 412
------- ------- -------
------- ------- -------
</TABLE>
NONINTEREST INCOME
Noninterest income totaled $1,638,000 for the quarter ended March 31, 1998,
as compared to $1,176,000 for the same time frame in 1997, which represents
an increase of $462,000 or a 39.3% improvement. Basically, all categories of
operating income, other than security gains, contributed to the increase with
the bulk of the increase largely related to growth in mortgage banking and
service charge income. Specifically, mortgage banking income increased by
$313,000 to a level of $396,000 for the quarter ended March 31, 1998 and is
related to gains from sales of loans and servicing. This was a result of
increased loan originations due to refinancing because of lower interest
rates. Service charges on deposit accounts was $93,000 in excess of the like
period in 1997 and was essentially attributable to a higher volume of NSF
fees. Also contributing to the improvement in income was growth in ATM
revenues of $49,000 along with a $28,000 increase in income from trust
operations.
NONINTEREST EXPENSE
Noninterest expense totaled $4,835,000 for the quarter ended March 31, 1998,
increasing by $124,000 from the same time frame in 1997, which equates to a
2.6% increase. Increases in salaries and employee benefits account for
approximately all of the increase and were for the most part directly related
to merit increases. Increases in furniture and equipment expenses along with
telephone expense, which were largely related to the computer conversion of
the newly acquired entities, were offset by reductions in the other expense
category that is essentially attributable to lower correspondent bank fees,
legal fees and insurance expense.
10.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
The efficiency ratio was 61.3% for the quarter ended March 31, 1998, as
compared to 68.9% recorded during the like period in 1997. The improvement in
the 1998 efficiency ratio reflected the Company's continued improvement in
controlling overhead and realization of the cost benefits of the operating
strategy of capturing the economies of scale available by centralizing back
room operations along with the consolidation of several of the Company's
subsidiaries.
INCOME TAX EXPENSE
Income tax expense totaled $589,000 for the quarter ended March 31, 1998,
increasing from $382,000 for the same period in 1997 and reflected effective
tax rates of 32.2% and 25.1% respectively.
NONPERFORMING ASSETS AND 90 DAY PAST DUE LOANS
At March 31, 1998, nonperforming assets totaled $2,747,000 versus the
$3,042,000 that existed as of December 31,1997. The following table
summarizes nonperforming assets and loans past 90 days or more and still
accruing as of March 31, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Nonaccrual and impaired loans not
accruing $ 1,081 $ 1,714
Impaired and other loans 90 days past
due and still accruing interest 1,362 1,013
------- -------
Total nonperforming loans 2,443 2,727
Other real estate owned 204 215
Other nonperforming assets (1) 100 100
------- -------
Total nonperforming assets $ 2,747 $ 3,042
------- -------
------- -------
Nonperforming loans to total loans 0.67% 0.74%
Nonperforming assets to total loans 0.75 0.82
Nonperforming assets to total assets 0.44 0.49
</TABLE>
________________________
(1) Represents a single municipal security in default status.
11.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
PROVISION FOR LOAN LOSSES
Transactions in the allowance for loan losses during the three months ended
March 31, 1998 and 1997 are summarized in the table on page 7. The provision
for loan losses charged to operating expense for the first quarter of 1998
equaled $562,000 as compared to $157,000 for the same quarter in 1997. The
amount of the provision for loan losses in any given period is dependent upon
many factors, including loan growth, changes in the composition of the loan
portfolio, net charge-offs, delinquencies, collateral values, and
Management's assessment of current and prospective economic conditions. The
increase in the provision for loan losses during the first quarter of 1998,
as compared to the same time frame in 1997, was primarily reflective of the
expansion of the loan portfolio that resulted from a strategic shift in the
asset mix of the Company toward loans. In addition, net charge-offs totaled
$199,000 during the first quarter of 1998 as compared to $127,000 for the
like period in 1997.
At March 31, 1998, the allowance for loan losses totaled $3,551,000 or .94%
of total loans outstanding as compared to $3,098,000 or .88% at March 31,
1997. Such allowance level is considered adequate in relation to the
estimated risk of future losses within the loan portfolio.
CAPITAL
The Board of Governors of the Federal Reserve System ("FRB") has a policy
known as the "source of strength doctrine" that requires a bank holding
company to serve as a source of financial and managerial strength for its
subsidiary banks. The FRB has interpreted this requirement to require that a
bank holding company, such as the Company, stand ready to use available
resources to provide adequate capital funds in its subsidiary banks during
periods of financial stress or adversity. The FRB has stated that it would
generally view a failure to assist a troubled or failing subsidiary bank in
these circumstances as an unsound or unsafe banking practice or a violation
of the FRB's Regulation Y or both, justifying a cease and desist order or
other enforcement action, particularly if appropriated resources are
available to the bank holding company on a reasonable basis. The Company's
capital ratios were as follows for the dates indicated:
<TABLE>
<CAPTION>
December 31, Minimum Well
March 31, -------------------- Capital Capitalized
1998 1997 1996 Ratios Ratios
-------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
Tier 1 risk-based capital $ 42,296 $ 41,180 $ 36,242
Tier 2 risk-based capital 4,908 4,545 4,425
Total capital 47,204 45,725 40,667
Risk-weighted assets 393,075 385,685 374,028
Capital ratios
Tier 1 risk-based capital 10.76% 10.68% 9.69% 4.00% 6.00%
Tier 2 risk-based capital 12.01 11.86 10.87 8.00 10.00
Leverage ratio 6.80 6.64 7.76 4.00 5.00
</TABLE>
12.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
The Company is committed to maintaining strong capital positions in each of
its subsidiaries and on a consolidated basis. Management monitors, analyzes
and forecasts capital positions for each entity to ensure that adequate
capital is available to support growth and maintain financial soundness. The
Company's tier 1 leverage ratio as of March 31, 1998, was 6.80%, a modest
increase from 6.64% at December 31, 1997. The ratio exceeds the regulatory
minimum, and management believes the Company is maintaining a strong capital
position. The Company's March 31, 1998, total risk weighted capital ratio
also increased slightly to 12.01% from 11.86% at December 31, 1997. The Tier
1 Capital ratio increased from 10.68% at December 31, 1997, to 10.76% at
March 31, 1998. Both the total risk weighted and Tier 1 Capital ratios also
continue to exceed regulatory minimums.
LIQUIDITY
Liquidity is measured by a financial institution's ability to raise funds
through deposits, borrowed funds, capital, or the sale of assets. Additional
sources of liquidity, including cash flow from both the repayment of loans
and the securitization of assets, are also considered in determining whether
liquidity is satisfactory. Cash flows used in operating and investing
activities, offset by those provided by financing activities, resulted in a
net decrease in cash and cash equivalents of $4,624,000 from December 31,
1997 to March 31, 1998. This usage was primarily related to the increase in
the origination of loans held for sale which is related to the Company's
mortgage banking operation. This was partially offset by increased
utilization of advances from the Federal Home Loan Bank. For more detailed
cash flow information, see the Company's Consolidated Statement of Cash Flow
located on page 4.
INTEREST RATE SENSITIVITY MANAGEMENT
The business of the Company and the composition of its balance sheet consist
of investments in interest-earning assets ( primarily loans and securities)
which are primarily funded by interest-bearing liabilities (deposits and
borrowings). Other than loans held for sale, all of the financial instruments
of the Company are for other than trading purposes. Such financial
instruments have varying levels of sensitivity to changes in market rates of
interest. The operating income and net income of the Banks depend, to a
substantial extent, on "rate differentials," i.e., the differences between
the income the Banks receive from loans, securities, and other earning assets
and the interest expense they pay to obtain deposits and other liabilities.
These rates are highly sensitive to many factors that are beyond the control
of the Banks, including general economic conditions and the policies of
various governmental and regulatory authorities.
The objective of monitoring and managing the interest rate risk position of the
balance sheet is to contribute to earnings and to minimize fluctuations in net
interest income. The potential for earnings to be affected by changes in
interest rates is inherent in a financial institution. Interest rate
sensitivity is the relationship between changes in market interest rates and
changes in net interest income due to the repricing characteristics of assets
and liabilities. An asset sensitive position in a given period will result in
more assets being subject to repricing; therefore, as interest rates rise, such
a position will have a positive effect on net interest income. Conversely, in a
liability sensitive position, where liabilities reprice more quickly than assets
in a given period, a rise in interest rates will have an adverse effect on net
interest income. The Company's exposure to interest rate risk is managed
primarily through the Company's strategy of selecting the types and terms of
interest-earning assets and interest-bearing liabilities which generate
favorable earnings, while limiting the potential negative effects of changes in
market interest rates. Since the Company's primary source of interest-bearing
liabilities is customer deposits, the
13.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
Company's ability to manage the types and terms of such deposits may be
somewhat limited by customer maturity preferences in the market areas in
which the Company operates. The rates, terms, and interest rate indices of
the Company's interest-earning assets result primarily from the Company's
strategy of investing in loans and securities (a substantial portion of which
have adjustable rate terms) which permit the Company to limit its exposure to
interest rate risk, together with credit risk, while at the same time
achieving a positive interest rate spread.
One method of analyzing interest rate risk is to evaluate the balance of the
Company's interest rate sensitivity position. A mix of assets and liabilities
that are roughly equal in volume, term, and repricing represents a matched
interest rate sensitivity position. Any excess of assets or liabilities in a
particular period results in an interest rate sensitivity gap. The following
table presents the interest rate sensitivity for the Company's interest-earning
assets and interest-bearing liabilities at March 31, 1998. The table was
prepared assuming loans prepay at varying degrees, based on type, maturity, and
rate. All the NOW accounts, money market accounts, and savings accounts reprice
in three months or less, and certificates of deposit have been included based on
contractual maturity.
<TABLE>
<CAPTION>
March 31, 1998
----------------------------------------------------------------------
3 months 3 months to 6 months 1 year to Over
or less 6 months to 1 year 5 years 5 years Total
-------- ----------- --------- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Federal funds sold $ 3,341 $ - $ - $ - $ - $ 3,341
Securities 85,938 12,152 23,798 49,386 30,710 201,984
Loans 83,544 39,017 61,564 143,876 50,610 378,611
----------- ---------- ---------- --------- ---------- ---------
Total interest-earning assets $ 172,823 $ 51,169 $ 85,362 $ 193,262 $ 81,320 $ 583,936
----------- ---------- ---------- --------- ---------- ---------
----------- ---------- ---------- --------- ---------- ---------
INTEREST-BEARING LIABILITIES
NOW accounts $ 58,145 $ - $ - $ - $ - $ 58,145
Money market accounts 28,566 - - - - 28,566
Savings 61,646 - - - - 61,646
Time deposits 91,596 62,925 96,572 68,692 239 320,024
----------- ---------- ---------- --------- ---------- ---------
Total interest-bearing deposits 239,953 62,295 96,572 68,692 239 468,381
Federal funds and repurchase agreements 4,132 2,843 4,754 750 - 12,479
Advances from FHLB 3,300 4,660 6,000 2,350 3,145 19,455
Notes payable 10,000 - - 352 - 10,352
----------- ---------- ---------- --------- ---------- ---------
Total interest-bearing liabilities $ 257,385 $ 70,428 $ 107,326 $ 72,144 $ 3,384 $ 510,667
----------- ---------- ---------- --------- ---------- ---------
----------- ---------- ---------- --------- ---------- ---------
Period interest sensitivity gap $ (84,562) $ (19,259) $ (21,964) $ 121,118 $ 77,936 $ 73,269
Cumulative interest sensitivity gap (84,562) (103,821) (125,785) (4,667) 73,269
Cumulative gap as a percent of total assets (13.38)% (16.42)% (19.90)% (0.74)% 11.59%
Cumulative interest-sensitive assets as a
percent of cumulative interest-sensitive
liabilities 67.15% 68.33% 71.09% 99.08% 114.35%
</TABLE>
The Company undertakes this interest rate-sensitivity analysis to monitor the
potential risk to future earnings from the impact of possible future changes
in interest rates on currently existing net assets or net liability
positions. However, this type of analysis is as of a point-in-time, when in
fact, the Company's interest rate sensitivity can quickly change as market
conditions, customer needs, and management strategies change. Thus, interest
rate changes do not affect all categories of assets and liabilities equally
14.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
or at the same time. Pursuant to its investment policy, the Company does not
purchase off-balance-sheet derivative financial instruments.
The preceding table does not necessarily indicate the impact of general
interest rate movements on the Company's net interest income because the
repricing of certain assets and liabilities is discretionary and is subject
to competitive and other pressures. As of March 31, 1998, the Banks held
approximately $19,082,000 (at amortized cost) in mortgage-backed securities.
Although the mortgage-backed securities have various stated maturities, it
is not uncommon for mortgage-backed securities to prepay outstanding
principal prior to stated maturities. As a result, assets and liabilities
indicated as repricing within the same period may, in fact, reprice at
different times and at different rate levels.
In addition to the aforementioned interest rate-sensitivity analysis, the
Company also measures its overall interest rate sensitivity through a net
interest income analysis. The net interest income analysis measures the
change in net income in the event of hypothetical changes in interest rates.
This analysis assesses the risk of changes in net interest in the event of
sudden and sustained 1.0% to 2.0% increases and decreases in market interest
rates. The assumption in this table are that assets will reprice faster than
liabilities due to market constraints and management's assessment of their
assets and liabilities. The table below presents the Company's projected
changes in net interest income for the various rate shock levels at March 31,
1998.
<TABLE>
<CAPTION>
Net Interest Income
--------------------------------------
Amount Change Change
------ -------- ------
(Dollars in Thousands)
<S> <C> <C> <C>
+200 bp $ 24,977 $ 232 0.94%
+100 bp 24,889 144 0.06
Base 24,745 - -
-100 bp 24,306 (439) (1.77)
-200 bp 22,997 (1,748) (7.06)
</TABLE>
Based upon the Company's model at March 31, 1998, the effect of an immediate
200 basis point increase in interest rates would increase the Company's net
interest income by 0.94% or approximately $232,000. The effect of an
immediate 200 basis point decrease in rates would reduce the Company's net
income by 7.06% or approximately $1,748.
YEAR 2000
The federal banking regulators have issued several statements providing
guidance to financial institutions on the steps the regulators expect
financial institutions to take to become Year 2000 compliant. Each of the
federal banking regulators is also examining the financial institutions under
its jurisdiction to assess each institution's compliance with the outstanding
guidance. If an institution's progress in addressing the Year 2000 problem is
deemed by its primary federal regulator to be less than satisfactory, the
institution will be required to enter into a memorandum of understanding with
the regulator which will, among
15.
<PAGE>
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- ------------------------------------------------------------------------------
other things, require the institution to promptly develop and submit an
acceptable plan for becoming Year 2000 compliant and to provide periodic
reports describing the institution's progress in implementing the plan.
Failure to satisfactorily address the Year 2000 problem may also expose a
financial institution to other forms of enforcement action that its primary
federal regulator deems appropriate to address the deficiencies in the
institution's Year 2000 remediation program.
The Company has a Year 2000 committee, comprised of members of UnionBancorp,
Inc. which has already taken steps regarding this issue. UnionData (a
subsidiary company), has completed a survey of all core processing systems
and support systems. This survey included contact with each hardware and
software vendor. As of December 31, 1997, all core processing systems were
documented as being year 2000 compliant. Three vendors of non core
processing subsystems have notified UnionBancorp, Inc. that their systems
will be upgraded to year 2000 compliance by year end 1998.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report contains certain forward looking statements within the meaning of
Section 27a of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material
adverse affect on the operations and future prospects of the Company and the
subsidiaries include, but are not limited to, changes in: interest rates,
general economic conditions, legislative/regulatory provisions, monetary and
fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles, policies and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements. Further information
concerning the Company and its business, including additional factors that
could materially affect the Company's financial results, is included in the
Company's filings with the SEC.
16.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or
its subsidiaries is a party other than ordinary routine litigation
incidental to their respective businesses.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 23, 1998, the annual meeting of stockholders was held. At the
meeting, R. Scott Grigsby, H. Dean Reynolds, John A. Shinkle and Scott
C. Sullivan were elected to serve as Class III directors with terms
expiring in 2001. Continuing as Class I directors until 1999 are
Richard J. Berry, Walter E. Breipohl and Lawrence J. McGrogan.
Continuing as Class II directors until 2000 are L. Paul Broadus, John
Michael Daw, Robert J. Doty, Jimmie D. Lansford and I.J. Reinhardt, Jr.
There were 4,135,830 issued and outstanding shares of Common Stock
entitled to vote at the annual meeting. The voting on each item
presented at the annual meeting was as follows:
<TABLE>
<CAPTION>
Election of Directors For Withheld
--- --------
<S> <C> <C>
R. Scott Grigsby 3,192,573 13
H. Dean Reynolds 3,191,973 613
John A. Shinkle 3,192,573 13
Scott C. Sullivan 3,192,573 13
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
27.1 Financial Data Schedule
Reports on Form 8K:
None.
17.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIONBANCORP, INC.
Date: May 13, 1998 /s/ R. Scott Grigsby
------------------------------------
R. Scott Grigsby
Chairman of the Board, President and
Chief Executive Officer
Date: May 13, 1998 /s/ Charles J. Grako
------------------------------------
Charles J. Grako
Executive Vice President and
Chief Financial Officer
18.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 18,202
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,341
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 158,975
<INVESTMENTS-CARRYING> 43,009
<INVESTMENTS-MARKET> 43,892
<LOANS> 378,611
<ALLOWANCE> 3,551
<TOTAL-ASSETS> 632,186
<DEPOSITS> 529,065
<SHORT-TERM> 22,831
<LIABILITIES-OTHER> 7,942
<LONG-TERM> 19,455
857
500
<COMMON> 4,407
<OTHER-SE> 47,129
<TOTAL-LIABILITIES-AND-EQUITY> 632,186
<INTEREST-LOAN> 8,546
<INTEREST-INVEST> 3,151
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 11,697
<INTEREST-DEPOSIT> 5,453
<INTEREST-EXPENSE> 6,091
<INTEREST-INCOME-NET> 5,606
<LOAN-LOSSES> 562
<SECURITIES-GAINS> (14)
<EXPENSE-OTHER> 4,835
<INCOME-PRETAX> 1,832
<INCOME-PRE-EXTRAORDINARY> 1,832
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,243
<EPS-PRIMARY> $0.28
<EPS-DILUTED> $0.28
<YIELD-ACTUAL> 8.50
<LOANS-NON> 1,081
<LOANS-PAST> 1,362
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,188
<CHARGE-OFFS> 269
<RECOVERIES> 70
<ALLOWANCE-CLOSE> 3,551
<ALLOWANCE-DOMESTIC> 3,551
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Includes Minority Interest
</FN>
</TABLE>
