U N I O N B A N C O R P , I N C .
Together We're Growing Strong.
Dear Fellow Stockholders,
Amidst a sea of geopolitical risks, one story seemed to dominate the headlines
of 2002. Not homeland terror, political unrest, the energy crisis or even the
impending threat of war received more media attention than the issue of
corporate governance. Marked by accounting fraud and improper earnings
calculations, the year 2002 spelled disappointing earnings for many companies
and diminishing portfolios for most investors.
As a company, we, too, felt the profound effects of the global marketplace. Yet,
despite a continued difficult interest rate environment and few signs of an
economic recovery any time soon, we ended 2002 with an overall sense of optimism
for the road ahead. With a stable net interest margin and increasing levels of
fee-based income, the Company experienced a substantial rise in core deposits
and another record year in our mortgage banking division. In an effort to
enhance and more effectively utilize our capital, we also moved forward with the
construction of our new branch facility in Yorkville, one of the fastest growing
Chicago suburbs.
Perhaps, though, the most significant achievement for year 2002 came by way of
improvements with our asset quality. While it continues to be a sizable
challenge, prior steps taken to strengthen reserves and improve our credit
culture yielded a much stronger balance sheet and a 46.4% decrease in
non-performing loans since year-end 2001.
[GRAPHIC OMITTED]
Success was also marked by a notable improvement in our stock price, despite the
third consecutive year of depressed domestic markets. In a year when most stocks
performed status quo, at best, our company experienced 9.35% appreciation in
stock value during 2002. Our management team attributes this accomplishment to
the hard work and dedication of our staff and an unwavering commitment to be our
communities' BEST financial resource by building, earning and serving, together.
As we close the final chapter of 2002, we do so with pride and a great
enthusiasm for our future. Together, with a dedicated board of directors, an
experienced management team and a talented staff, our company is committed to
meeting the needs of our customers, communities and you, our stockholders. On
behalf of the entire UnionBancorp family, we thank you for your continued
support and look forward to serving you throughout 2003.
/s/ DENNIS J. MCDONNELL /s/ CHARLES J. GRAKO
- ---------------------------------- ------------------------------------
Dennis J. McDonnell Charles J. Grako
Chairman of the Board President & CEO
UnionBancorp, Inc. UnionBancorp, Inc.
page 1
UNIONBANCORP, INC. annual report two thousand two
o mortgage lending
o insurance services
o financial planning
o traditional banking products
Just starting out...it can be a new and adventurous time for
young families.
Weddings, births and, of course, that first home are the hallmark
events of this unique phase of life. Together, our team of
skilled professionals helps young families everyday with getting
their first mortgage, meeting insurance needs and planning for
the future with products like education IRA's and mutual funds.
We're also able to meet those "traditional" banking needs such as
checking and savings financial planning accounts, debit/check
cards and safe deposit box. Just as we have done for seven
generations of families, UB continues to be our communities' BEST
financial resource. Building, Earning and Serving-Together, the
financial offerings of UB can ensure that young families get a
solid start for a bright and rewarding future.
[GRAPHIC OMITTED]
ESTATE PLANNING FINANCIAL PLANNING CHECKING SAVINGS INSURANCE
RETIREMENT PLANNING INVESTMENT SERVICES EDUCATION SAVINGS PLANS
STUDENT CHECKING
page 2
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
[GRAPHIC OMITTED]
CHECKING CREDIT CARDS ONLINE BANKING CONSUMER & HOME EQUITY LOANS
COMMERCIAL LOANS MORTGAGE LENDING ASSET MANAGEMENT SERVICES
page 3
UNIONBANCORP, INC. annual report two thousand two
o traditional banking products
o online banking
o consumer lending
o education savings plans
Sending your children off to college can be a bittersweet time.
The pride in a parent's eyes is often coupled with fear and
anxiety over their son or daughter being away from home for the
first time, as well as the enormous financial burden college can
present. Together, the UB family of financial services can help
ease those worries. Our student checking package, complete with
free online banking and a debit/check card are perfect to help
parents and their children make the most of the college years. A
personal loan or the distribution of an educational savings plan
can also help keep college costs from hindering your lifestyle.
Together, we're making a difference in the lives of today's
mature families.
[GRAPHIC OMITTED]
ESTATE PLANNING FINANCIAL PLANNING CHECKING SAVINGS INSURANCE
RETIREMENT PLANNING INVESTMENT SERVICES EDUCATION SAVINGS PLANS
STUDENT CHECKING
page 4
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
[GRAPHIC OMITTED]
CHECKING CREDIT CARDS ONLINE BANKING CONSUMER & HOME EQUITY LOANS
COMMERCIAL LOANS MORTGAGE LENDING ASSET MANAGEMENT SERVICES
page 5
UNIONBANCORP, INC. annual report two thousand two
o prime time 50
o investment services
o personal lines of credit
o retirement planning
Today's empty nesters are more physically active, financially
savvy and entrepreneurial than ever before.
Together, with UB as their financial partner, thousands of
customers have taken advantage of the many benefits of our Prime
Time 50 Club to meet their ever-changing financial needs at this
stage of life. Prime Timers also enjoy free and discounted bank
products and services and personal consultations on their
insurance, brokerage and trust needs. From helping finance a
child's wedding to estate planning, together, the UB family of
financial services brings convenience, opportunities and peace of
mind to our customers everyday.
[GRAPHIC OMITTED]
ESTATE PLANNING FINANCIAL PLANNING CHECKING SAVINGS INSURANCE
RETIREMENT PLANNING INVESTMENT SERVICES EDUCATION SAVINGS PLANS
STUDENT CHECKING
page 6
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
[GRAPHIC OMITTED]
CHECKING CREDIT CARDS ONLINE BANKING CONSUMER & HOME EQUITY LOANS
COMMERCIAL LOANS MORTGAGE LENDING ASSET MANAGEMENT SERVICES
page 7
UNIONBANCORP, INC. annual report two thousand two
o retirement planning
o estate planning
o insurance services
o trust services
There's no better way to spend those golden years than with the
comfort of knowing your financial needs will be met without
becoming a burden to your loved ones.
Together, the broad scope of products and services the UB family
has to offer can make the transition into retirement a smooth
one. Our financial planning experts help customers prepare for
their retirement through investments and IRA plans. Living wills
and estate planning ensure that this time can be spent focusing
on what is most important to our customers without financial UB
as their individuals and families years doing the things with
financial freedom and security.
[GRAPHIC OMITTED]
ESTATE PLANNING FINANCIAL PLANNING CHECKING SAVINGS INSURANCE
RETIREMENT PLANNING INVESTMENT SERVICES EDUCATION SAVINGS PLANS
STUDENT CHECKING
page 8
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
[GRAPHIC OMITTED]
CHECKING CREDIT CARDS ONLINE BANKING CONSUMER & HOME EQUITY LOANS
COMMERCIAL LOANS MORTGAGE LENDING ASSET MANAGEMENT SERVICES
page 9
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
SELECTED CONSOLIDATED FINANCIAL DATA
- ------------------------------------
(Dollars in Thousands, Except Per Share Data)(Unaudited)
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
Statement of Income Data
Interest income $ 45,509 $ 53,829 $ 54,208 $ 48,549 $ 47,720
Interest expense 20,186 29,385 30,685 24,897 25,258
---------- ---------- ---------- ---------- ----------
Net interest income 25,323 24,444 23,523 23,652 22,462
Provision for loan losses 3,574 4,161 4,858 1,522 1,635
---------- ---------- ---------- ---------- ----------
Net interest income after provision for loan losses 21,749 20,283 18,665 22,130 20,827
Noninterest income 12,455 11,920 11,140 9,488 8,071
Noninterest expense 29,026 26,212 25,885 23,597 20,733
---------- ---------- ---------- ---------- ----------
Income (Loss) before income taxes 5,178 5,991 3,920 8,021 8,165
Provision (Benefit) for income taxes 1,134 1,537 1,017 2,514 2,723
---------- ---------- ---------- ---------- ----------
Net income (Loss) 4,044 $ 4,454 $ 2,903 $ 5,507 $ 5,389
---------- ---------- ---------- ---------- ----------
Net income (Loss) on common stock 3,787 $ 4,197 $ 2,644 $ 5,248 $ 5,130
========== ========== ========== ========== ==========
Per Share Data
Basic earnings per common shares $ 0.95 $ 1.06 $ 0.66 $ 1.28 $ 1.23
Diluted earnings per common shares 0.94 1.05 0.66 1.27 1.22
Cash dividends on common stock 0.31 0.27 0.24 0.19 0.15
Dividend payout ratio for common stock 32.59% 25.59% 35.93% 14.65% 12.34%
Book value per common share $ 16.97 $ 15.91 $ 14.76 $ 13.80 $ 13.28
Basic weighted average common shares outstanding 3,979,750 3,974,205 3,979,895 4,085,286 4,157,745
Diluted weighted average common shares outstanding 4,027,441 4,008,867 4,006,793 4,133,554 4,210,739
Period-end common shares outstanding 3,980,946 3,979,056 3,965,548 4,047,309 4,262,359
Balance Sheet Data
Securities $ 227,229 $ 186,282 $ 192,719 $ 173,918 $ 176,069
Loans 483,229 504,968 505,094 472,395 398,388
Allowance for loan losses 6,450 6,295 6,414 3,691 3,858
Total assets 791,616 748,307 758,733 704,077 627,194
Total deposits 641,958 612,144 636,003 594,198 517,638
Stockholders' equity 68,064 63,814 59,035 56,341 57,091
Earnings Performance Data
Return on average total assets 0.53% 0.59% 0.40% 0.83% 0.84%
Return on average stockholders' equity 6.11 7.04 5.09 9.83 9.98
Return on average total assets, including mandatory
redeemable preferred stock 0.53 0.59 0.40 0.83 0.84
Return on average equity, including mandatory
redeemable preferred stock 6.03 6.95 5.01 9.68 9.83
Net interest margin ratio 3.74 3.64 3.67 4.03 4.01
Efficiency ratio (1) 71.73 68.14 69.49 67.11 63.49
Asset Quality Ratios
Nonperforming assets to total assets 0.80% 1.44% 1.10% 0.57% 0.46%
Nonperforming loans to total loans 0.99 1.76 1.56 0.74 0.65
Net loan charge-offs to average loans 0.70 0.85 0.44 0.38 0.20
Allowance for loan losses to total loans 1.33 1.25 1.27 0.78 0.97
Allowance for loan losses to nonperforming loans 135.50 70.93 81.41 105.01 148.50
Capital Ratios
Average equity to average assets 8.71% 8.37% 7.90% 8.42% 8.44%
Total capital to risk adjusted assets 11.84 11.66 10.99 11.04 12.23
Tier 1 leverage ratio 7.48 7.54 6.90 7.20 7.66
(1) Calculated as noninterest expense less amortization of intangibles and
expenses related to other real estate owned, divided by the sum of net
interest income, less investment mark to market adjustments, before
provision for loan losses and total noninterest income excluding securities
gains and losses.
page 10
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
Stockholders and Board of Directors
UnionBancorp, Inc.
Ottawa, Illinois
We have audited, in accordance with auditing standards generally accepted in the
United States of America, the consolidated balance sheets of UnionBancorp, Inc.
as of December 31, 2002 and 2001 the related consolidated statements of income,
stockholder's equity, and cash flows for the years then ended (not presented
herein); and in our report dated January 24, 2003, we expressed an unqualified
opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheets as of December 31, 2002 and 2001, and the condensed
consolidated statements of income and stockholders' equity for the years then
ended is fairly stated, in relation to the consolidated financial statements
from which it has been derived.
Oak Brook, Illinois
January 24, 2003
/s/ CROWE CHIZEK AND COMPANY LLP
Crowe Chizek and Company LLP
ANNUAL MEETING
- --------------------------------------------------------------------------------
April 22, 2003 - Tuesday - 10:00 a.m.
Starved Rock Lodge and Conference Center
Routes 178 & 71, Utica, Illinois, 61373
STOCKHOLDERS SERVICES
- --------------------------------------------------------------------------------
To obtain copies of the 2002 Annual Report and From 10-K, which includes the
full consolidated financial statements of the Company and the related notes
thereto, as required to be filed with the Securities and Exchange Commission,
please send a written request to: Investor Relations, UnionBancorp, Inc., 321
West Main Street, Ottawa, Illinois, 61350.
STOCK TRADING INFORMATION
- --------------------------------------------------------------------------------
UnionBancorp, Inc. common stock is traded on the Nasdaq Stock Market under the
symbol UBCD. Our primary market makers also quote shares: Hoefer & Arnett, Inc.;
Howe Barnes Investments, Inc.; Knight Securities L.P.; and Spear, Leeds &
Kellogg. Crowe, Chizek and Company LLP
ESTATE PLANNING FINANCIAL PLANNING CHECKING SAVINGS INSURANCE
RETIREMENT PLANNING INVESTMENT SERVICES EDUCATION SAVINGS PLANS
STUDENT CHECKING
page 14
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
UNIONBANCORP, INC. OFFICERS
- --------------------------------------------------------------------------------
Charles J. Grako
President & Chief
Executive Officer
Gaylon E. Martin
Senior Vice President/
Chief Credit Officer
Kurt R. Stevenson
Vice President/
Chief Financial Officer
Brian M. Petzold
Chief Technology Officer
Jimmie D. Lansford
Executive Vice President/
Organizational Development
& Planning
Robert L. Davidson
Senior Vice President/
Chief Investment Officer
& Asset Liability Manager
Rodney G. Hewitt
Risk Assessment Officer
Suzanne Fetcher
Secretary/Treasurer
BANKING AND AFFILIATE LOCATIONS
- --------------------------------------------------------------------------------
UnionBank
Directors:
Richard J. Berry
Walter E. Breipohl
Terry H. Cross
Donald L. Haag
Jimmie D. Lansford
Vincent R. Luckey
I.J. Reinhardt, Jr.
Michael Ruiz
Everett J. Solon
John A. Trainor
Locations:
Mendota:
1403 13th Avenue
Ottawa:
122 W. Madison Street
400 Etna Road
401 E. McKinley Road
119 W. Jefferson Street
Peru:
1311 Shooting Park Road
Plano:
15 W. South Street
Sandwich:
202 Indian Springs Drive
Streator:
201 E. Main Street
200 E. Main Street
24 Danny's Drive
UnionBank/Central
Directors:
Randy Cady
Rick R. Clary
Robert J. Doty
Charles J. Grako
Richard A. Palmer
H. Curtis Plautz
Donald R. Rayfield
Robert L. Sharp
John E. Thompson
Locations:
Manlius:
109 W. Maple Street
Princeton:
601 S. Main Street
1839 N. Main Street
Tampico:
120 Main Street
Tiskilwa:
100 Main Street
UnionBank/West
Directors:
Charles J. Grako
Dennis Iversen
Gaylon E. Martin
Alan Mays
James Rinella
Donald L. Sharp
Leroy A. Ufkes
Sam B. White
Locations:
Blandinsville:
135 S. Main Street
Carthage:
1395 Buchanan Street
Macomb:
440 N. Lafayette Street
Paloma:
Highway 24, P.O. Box 71
Quincy:
2442 Broadway Street
Rushville:
116 S. Congress Street
UnionFinancial
Services & Trust Company
Directors:
Jerry L. Halterman
Sheryl H. Kuzma
Dennis J. McDonnell
John A. Shinkle
William E. Steep
Paul R. Tingley
Locations:
Clayton:
110 E. Main Street
Mendota:
1403 13th Avenue
Ottawa:
122 W. Madison Street
Peru:
1311 Shooting Park Road
4 West US Highway 6
Princeton:
1839 N. Main Street
Quincy:
2442 Broadway Street
Rushville:
116 S. Congress Street
Sandwich:
202 Indian Springs Drive
Streator:
200 E. Main Street
UnionBank/Northwest
Directors:
Paul F. Crandall
Shane R. Gerber
Mark S. Klippert
Joseph E. Nack
LaVerle Streicher
Scott C. Sullivan
William M. Wolter
Marvin Wurster
Locations:
Elizabeth:
112 N. Main Street
Hanover:
215 Jefferson Street
CHECKING CREDIT CARDS ONLINE BANKING CONSUMER & HOME EQUITY LOANS
COMMERCIAL LOANS MORTGAGE LENDING ASSET MANAGEMENT SERVICES
page 15
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
THE YEAR IN REVIEW 2002
- --------------------------------------------------------------------------------
January 1, 2002:
UnionBancorp, Inc. begins 2002 with assets of $748.3 million and stockholders'
equity of $63.8 million.
February 22, 2002:
The Company names Shane R. Gerber, President and Chief Executive Officer of
UnionBank/Northwest.
February 22, 2002:
UnionBancorp, Inc. and UnionBank receive awards from the USDA Rural Development
Office for their efforts in successfully facilitating families to purchase their
first homes through the USDA program.
April 15, 2002:
The Board of Directors of UnionBancorp, Inc. declares a quarterly common stock
dividend of $0.07. The dividend is payable on April 26, 2002 to stockholders of
record as of April 12, 2002.
April 19, 2002:
The Company announces first quarter 2002 earnings of $0.30 per fully diluted
share.
May 17, 2002:
The Company names Dennis R. Iversen, President and Chief Executive Officer of
UnionBank/West.
June 26, 2002:
The Company announces that Dennis J. McDonnell has been appointed Chairman of
the Board of UnionBancorp, Inc.
June 26, 2002:
The Board of Directors of UnionBancorp, Inc. declares a quarterly common stock
dividend of $0.08. This represents a 14% increase in the quarterly cash
dividend. The dividend is payable on July 26, 2002 to stockholders of record as
of July 12, 2002.
July 19, 2002:
The Company announces second quarter 2002 earnings of $0.04 per fully diluted
share.
September 27, 2002:
The Board of Directors of UnionBancorp, Inc. declares a quarterly common stock
dividend of $0.08. The dividend is payable on October 25, 2002 to stockholders
of record as of October 11, 2002.
October 18, 2002:
The Company announces third quarter 2002 earnings of $0.27 per fully diluted
share.
December 20, 2002:
The Board of Directors of UnionBancorp, Inc. declares a quarterly common stock
dividend of $0.08. The dividend is payable on January 24, 2003 to stockholders
of record as of January 10, 2003.
December 31, 2002:
UnionBancorp, Inc. ends 2002 with assets of $791.6 million and stockholders'
equity of $68.1 million.
ESTATE PLANNING FINANCIAL PLANNING CHECKING SAVINGS INSURANCE
RETIREMENT PLANNING INVESTMENT SERVICES EDUCATION SAVINGS PLANS
STUDENT CHECKING
page 16
U N I O N B A N C O R P , I N C .
UNIONBANCORP, INC. annual report two thousand two
[GRAPHIC OMITTED]
UNIONBANCORP, INC. BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
standing left to right: front row
Walter E. Breipohl
Broker/Owner
Kaszynski/Breipohl Realtors
Director since 1993
I. J. Reinhardt, Jr.
General Manager
St. Louis Beverage Co.
Director since 1991
Charles J. Grako
President & Chief Executive Officer
UnionBancorp, Inc.
Director since 2000
Scott C. Sullivan
Attorney
Williams & McCarthy
Director since 1996
standing left to right: back row
Richard J. Berry
Attorney
Myers, Berry, O'Conor
& Kuzma, Ltd.
Director since 1985
Dennis J. McDonnell
Chairman of the Board
UnionBancorp, Inc.
McDonnell Investment Management, LLC
Director since 2000
John A. Trainor
President
Trainor Grain & Supply Co.
Director since 1985
Robert J. Doty
Farm Management
Director since 1996
not pictured
John A. Shinkle
Executive Vice President & Director
Synovus Securities, Inc.
Director since 1997
CHECKING CREDIT CARDS ONLINE BANKING CONSUMER & HOME EQUITY LOANS
COMMERCIAL LOANS MORTGAGE LENDING ASSET MANAGEMENT SERVICES
page 17
[GRAPHIC OMITTED]
U N I O N B A N C O R P , I N C
321 West Main Street, Ottawa, IL 61350
www.ubcd.com
NASDAQ: UBCD
[GRAPHIC OMITTED]
ESTATE PLANNING FINANCIAL
PLANNING INVESTMENTS
CREDIT CARDS ONLINE BANKING
page 18