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, 1999
--------------
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 14, 1999
- ----------------------------- -----------------------------------
Common Stock, Par Value $1.00 4,042,359
CONTENTS
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
o Consolidated Balance Sheets 1
o Consolidated Statements of Income 2
o Consolidated Statements of Comprehensive Income 3
o Consolidated Statements of Cash Flows 4
o Notes to Unaudited Consolidated Financial Statements 5 - 7
Item 2. Management's Discussion and Analysis of Financial Condition and 8 - 18
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
UNIONBANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
--------- ---------
ASSETS
Cash and cash equivalents $ 17,267 $ 24,613
Federal funds sold 125 450
Securities available-for-sale 131,245 133,772
Securities held-to-maturity 42,994 41,847
Loans 416,662 398,388
Allowance for loan losses (4,043) (3,858)
--------- ---------
Net loans 412,619 394,530
Premises and equipment, net 13,827 13,853
Intangible assets, net 8,879 9,099
Other assets 8,505 9,030
--------- ---------
TOTAL ASSETS $ 635,461 $ 627,194
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing $ 55,756 $ 67,227
Interest bearing 464,193 450,411
--------- ---------
Total deposits 519,949 517,638
Federal funds purchased and securities sold
under agreements to repurchase 18,287 14,855
Advances from the Federal Home Loan Bank 25,208 23,208
Notes payable 10,000 7,000
Other liabilities 6,153 6,545
--------- ---------
TOTAL LIABILITIES 579,597 569,246
--------- ---------
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;
4,533,622 shares outstanding 4,534 4,534
Surplus 21,471 21,471
Retained earnings 32,475 31,262
Accumulated other comprehensive income 45 31
Unearned compensation under stock option plans (168) (185)
--------- ---------
58,857 57,613
Treasury stock, at cost; 491,263 shares
at March 31, 1999 and 271,263 at December 31, 1998 (3,850) (522)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 55,007 57,091
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 635,461 $ 627,194
========= =========
See Accompanying Notes to Unaudited Financial Statements
1.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------
Three Months Ended
March 31,
-------------------
1999 1998
-------- --------
Interest income
Loans and fees on loans $ 8,888 $ 8,546
Securities
Taxable 2,152 2,592
Exempt from federal income taxes 486 481
Federal funds sold and other 19 78
-------- --------
TOTAL INTEREST INCOME 11,545 11,697
-------- --------
Interest expense
Deposits 5,007 5,453
Federal funds purchased and securities sold
under agreements to repurchase 252 214
Advances from the Federal Home Loan Bank 332 237
Notes payable 133 187
-------- --------
TOTAL INTEREST EXPENSE 5,724 6,091
-------- --------
NET INTEREST INCOME 5,821 5,606
Provision for loan losses 298 562
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,523 5,044
-------- --------
Noninterest income
Service charges 482 523
Merchant fee income 246 182
Trust income 179 150
Mortgage banking income 316 392
Insurance commissions and fees 588 --
Securities gains, net 22 (14)
Other income 367 401
-------- --------
2,300 1,634
-------- --------
Noninterest expenses
Salaries and employee benefits 3,123 2,551
Occupancy expense, net 384 367
Furniture and equipment expense 440 416
Supplies and printing 99 137
Telephone 161 132
Postage 88 106
Amortization of intangible assets 220 229
Other expenses 1,185 893
-------- --------
5,715 4,831
-------- --------
2,108 1,847
Minority interest -- 15
-------- --------
INCOME BEFORE INCOME TAXES 2,108 1,832
Income taxes 670 589
-------- --------
NET INCOME 1,438 1,243
Preferred stock dividends 65 65
-------- --------
NET INCOME FOR COMMON STOCKHOLDERS $ 1,373 $ 1,178
======== ========
BASIC EARNINGS PER COMMON SHARE 0.33 0.28
======== ========
DILUTED EARNINGS PER COMMON SHARE 0.32 0.28
======== ========
See Accompanying Notes to Unaudited Financial Statements
2.
UNIONBANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------------------
Three Months Ended
March 31,
-----------------------------
1999 1998
------------- -------------
Net Income $ 1,438 $ 1,243
Change in unrealized gains on securities available-for-sale 14 (589)
------------- -------------
COMPREHENSIVE INCOME $ 1,452 $ 654
============= =============
See Accompanying Notes to Unaudited Financial Statements
3.
UNIONBANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------------------
Three Months Ended
March 31,
--------------------
1999 1998
-------- --------
Cash flows from operating activities
Net income $ 1,438 $ 1,243
Adjustments to reconcile net income to
net cash provided by (used in) operating activities
Depreciation 402 384
Amortization of intangible assets 220 230
Amortization of unearned compensation under stock option plans 17 10
Amortization of bond premiums, net 68 90
Provision for loan losses 298 562
Securities (gains) losses, net (122) 14
(Gain) loss on sale of equipment 40 (11)
Loss on sale of real estate acquired in settlement of loans 2 --
Gain on sale of loans (243) (327)
Proceeds from sales of loans held for sale 17,025 7,239
Origination of loans held for sale (17,017) (17,009)
Minority interest in net income of subsidiary -- 15
Change in assets and liabilities
(Increase) decrease in other assets 670 (878)
Increase (decrease) in other liabilities (392) 1,539
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,406 (6,899)
Cash flows from investing activities
Securities
Held-to-maturity
Proceeds from calls, maturities, and paydowns 841 1,036
Purchases (2,009) (6,894)
Available-for-sale
Proceeds from maturities and paydowns 13,125 19,386
Proceeds from sales 4,142 1,227
Purchases (14,415) (17,104)
Net (increase) decrease in federal funds sold 325 (1,937)
Net (increase) decrease in loans (18,345) 2,068
Purchase of premises and equipment (513) (446)
Proceeds from sale of real estate acquired in settlement of loans 6 10
Proceeds from sale of equipment 97 11
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (16,940) (2,643)
Cash flows from financing activities
Net increase in deposits $ 2,311 $ 1,318
Net increase in federal funds purchased
and securities sold under agreements to repurchase 3,432 718
Net increase in advances from the
Federal Home Loan Bank 2,000 3,000
Payments on notes payable -- (4)
Proceeds from notes payable 3,000 95
Purchase of treasury stock (3,328) --
Dividends on common stock (162) (144)
Dividends on preferred stock (65) (65)
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 7,188 4,918
NET DECREASE IN CASH AND CASH EQUIVALENTS (7,346) (4,624)
Cash and cash equivalents
Beginning of year 24,613 22,826
-------- --------
End of period $ 17,267 $ 18,202
======== ========
See Accompanying Notes to Unaudited Financial Statements
4.
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, 1998. The results of the interim period ended March 31, 1999 are not
necessarily indicative of the results expected for the year ending December 31,
1999.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (Statement) No. 133 on derivatives
will, in 2000, require all derivatives to be recorded at fair value in the
balance sheet, with changes in fair value charged or credited to income. If
derivatives are documented and effective as hedges, the change in the derivative
fair value will be offset by an equal change in the fair value of the hedged
item. Under the new standard, securities held-to-maturity can no longer be
hedged, except for changes in the issuer's creditworthiness. Therefore, upon
adoption of Statement No. 133, companies will have another one-time window of
opportunity to reclassify held-to-maturity securities to either trading or
available-for-sale, provided certain criteria are met. This Statement may be
adopted early at the start of a calendar quarter. Since the Company has no
significant derivative instruments or hedging activities, adoption of Statement
No. 133 is not expected to have a material impact on the Company's financial
statements. Management has not decided whether to adopt Statement No. 133 early.
Statement No. 134 on mortgage banking will, in 1999, allow mortgage loans that
are securitized to be classified as trading; available-for-sale; or, in certain
circumstances, held-to-maturity. Currently, these must be classified as trading.
Since the Company has not securitized mortgage loans, Statement No. 134 is not
expected to affect the Company.
American Institute of Certified Public Accountants Statement of Position 98-1,
effective in 1999, sets the accounting requirement to capitalize costs incurred
to develop or obtain software that is to be used solely to meet internal needs.
Costs to capitalize are those direct costs incurred after the preliminary
project stage, up to the date when all testing has been completed and the
software is substantially ready for use. All training costs, research and
development costs, costs incurred to convert data, and all other general and
administrative costs are to be expensed as incurred. The capitalized cost of
internal-use software is amortized over its useful life and reviewed for
impairment using the criteria in Statement No. 121. Statement of Position 98-1
will not have a material impact on the Company.
American Institute of Certified Public Accountants Statement of Position 98-5,
also effective in 1999, requires all start-up, pre-opening, and organization
costs to be expensed as incurred. Any such costs previously capitalized for
financial reporting purposes must be written off to income at the start of the
year. Statement of Position 98-5 will not have a material impact on the Company.
5.
UNIONBANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Financial Accounting Standards Board continues to study several issues,
including recording all financial instruments at fair value and abolishing
pooling-of-interests accounting. Also, it is likely that APB 25's measurement
for stock option plans will be limited to employees and not to nonemployees such
as directors, thereby causing compensation expense to be required for 1999
awards of stock options to outside directors.
NOTE 2. SECURITIES
Securities Held to Maturity - The amortized cost and fair value of securities
held to maturity at March 31, 1999 and December 31, 1998 are as follows:
March 31, 1999 December 31, 1998
--------------------------------------- ----------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
HELD-TO-MATURITY Cost Gains Losses Value Cost Gains Losses Value
-------- -------- -------- -------- ------- -------- ------- --------
States and political subdivisions $ 42,994 $ 1,139 $ (40) $ 44,093 $41,847 $ 1,245 $ (19) $ 43,073
======== ======== ======== ======== ======= ======== ======= ========
Securities Available for Sale - The amortized cost and fair value of securities
available for sale at March 31, 1999 and December 31, 1998 are as follows:
March 31, 1999 December 31, 1998
--------------------------------------- ----------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
AVAILABLE-FOR-SALE Cost Gains Losses Value Cost Gains Losses Value
-------- -------- -------- -------- -------- -------- ------- --------
U.S. Treasury $ 5,771 $ 61 $ (13) $ 5,819 $ 6,753 $ 138 $ -- $ 6,891
U.S. government agencies and
corporations 49,430 99 (271) 49,258 49,203 222 (95) 49,330
U.S. government mortgage-backed
securities 32,350 53 (219) 32,184 31,111 52 (158) 31,005
Collateralized mortgage obligations 40,266 462 (96) 40,632 43,315 474 (581) 43,208
Corporate bonds -- -- -- -- 100 -- -- 100
Other 3,352 -- -- 3,352 3,238 -- -- 3,238
-------- -------- -------- -------- -------- -------- ------- --------
$131,169 $ 675 $ (599) $131,245 $133,720 $ 886 $ (834) $133,772
======== ======== ======== ======== ======== ======== ======= ========
NOTE 3. LOANS
The following table provides the book value of loans, by major classification,
as of the dates indicated:
March 31, 1999 December 31, 1998
------------------------- --------------------------
$ % $ %
----------- ----------- ----------- ------------
Commercial $ 83,113 19.95% $ 74,481 18.69%
Agricultural 34,779 8.35 41,821 10.50
Real estate:
Commercial mortgages 113,603 27.26 99,872 25.07
Construction 13,451 3.23 13,935 3.50
Agricultural 40,145 9.63 35,790 8.98
1-4 family mortgages 95,839 23.00 96,921 24.33
Installment 33,318 8.00 32,714 8.21
Other 2,435 0.58 2,884 0.72
----------- ----------- ----------- ------------
416,683 100.00% 398,418 100.00%
=========== ============
Unearned Income (21) (30)
----------- -----------
Total loans 416,662 398,388
Allowance for loan losses (4,043) (3,858)
----------- -----------
Loans, net $ 412,619 $ 394,530
=========== ===========
6.
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, 1999 and 1998 are summarized below:
March 31,
-------------------------
1999 1998
----------- -----------
Beginning balance $ 3,858 $ 3,188
Charge-offs:
Commercial 67 80
Real estate mortgages 50 89
Installment and other loans 85 100
----------- -----------
Total charge-offs 202 269
----------- -----------
Recoveries:
Commercial 58 29
Real estate mortgages 2 6
Installment and other loans 29 35
----------- -----------
Total recoveries 89 70
----------- -----------
Net charge-offs 113 199
----------- -----------
Provision for loan losses 298 562
----------- -----------
Ending balance $ 4,043 $ 3,551
=========== ===========
Period end total loans, net of
unearned interest $ 416,662 $ 378,611
=========== ===========
Average loans $ 404,781 $ 365,202
=========== ===========
Ratio of net charge-offs to
average loans 0.03% 0.05%
Ratio of provision for loan losses
to average loans 0.07 0.15
Ratio of allowance for loan losses
to ending total loans 0.97 0.94
Ratio of allowance for loan losses
to total nonperforming loans 106.23 145.12
Ratio of allowance at end of period
to average loans 1.00 0.97
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.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
During the first quarter of 1999, UnionBank/ West opened its newest branch
office in Quincy, Illinois in order to further reinvest into growth markets. In
addition, the Company announced that it had purchased 220,000 of its own shares
in a privately negotiated transaction.
The discussion presented below provides an analysis of the Company's results of
operations and financial condition for the three months ended March 31, 1999 as
compared to the same period in 1998. 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
1998 Annual Report on Form 10-K. Results of operations for the three months
ended March 31, 1999 are not necessarily indicative of results to be expected
for the full year of 1999.
SUMMARY OF PERFORMANCE
Net income for the first quarter increased to $1,438,000, or $0.32 per share
(diluted), compared to the $1,243,000, or $0.28 per share (diluted), earned in
the same period of 1998. This represents a 15.7% increase in net income and a
14.3% increase in per share earnings.
Return on average assets was 0.93% for the first quarter of 1999, as compared to
0.82% for the same period in 1998. Return on average stockholders' equity was
10.26% for the first quarter of 1999, as compared to 9.71% for the same period
in 1998.
NET INTEREST INCOME
Net interest income on a tax equivalent basis totaled $6,093,000 for the first
quarter of 1999, representing an increase of $224,000 or 3.8% over the
$5,869,000 earned during the same period in 1998. As shown in the Volume/Rate
Analysis on page 9, the improvement in net interest income was attributable to
lower interest expense of $367,000 which was partially offset by lower interest
income of $143,000. The net interest margin for the first quarter of 1999
increased to 4.24% as compared to 4.17% for the same time frame in 1998. The
improvement in the net interest margin was primarily attributable to a reduction
in interest expense as interest bearing liabilities repriced at lower rates
coupled with the continued growth in the loan portfolio.
As indicated in the Volume/Rate Analysis, the $143,000 decrease in interest
income for the quarter resulted from a $590,000 decrease associated with rate
that was offset by a $447,000 increase due to volume. This variance 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. Specifically, a large percentage was related to volume on the
loan portfolio, totaling an increase of $346,000, offset by a decrease in the
investment portfolio of $445,000.
The $367,000 decrease in interest expense resulted from a $401,000 decrease
associated with rate that was partially offset by a $34,000 increase in volume.
A major contributor to the decrease in interest expense related to lower volumes
and rates on time deposits that repriced at lower rates and lower volume and
rates of notes payable. The increase in volume associated with advances from the
FHLB is connected
8.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
to the Company's utilization of this favorable funding alternative. This
particular funding mechanism is employed to attract certain maturities to match
and fund term assets.
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,
1999 and 1998. 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.
For the Three Months Ended March 31,
-------------------------------------------------
1999 1998
------------------------ ------------------------
Interest Interest Change Due To:
Average Income/ Average Average Income/ Average ------------------------
Balance Expense Rate Balance Expense Rate Volume Rate Net
-------- ------ ------- -------- ------- ------- ------ ------ -------
ASSETS
INTEREST-EARNING ASSETS
Interest-earning deposits $ 1,309 $ 17 5.27% $ 126 $ 2 6.44% $ 15 $ -- $ 15
Securities (1)
Taxable 135,440 2,135 6.39% 163,991 2,595 6.42% (448) (12) (460)
Non-taxable (2) 39,934 736 7.47% 36,820 721 7.94% 32 (17) 15
-------- ------ ------ -------- ------- ------ ------ ------ -------
Total securities (tax equivalent) 175,374 2,871 6.64% 200,811 3,316 6.70% (416) (29) (445)
-------- ------ ------ -------- ------- ------ ------ ------ -------
Federal funds sold 1,639 19 4.70% 4,930 78 6.42% (42) (17) (59)
-------- ------ ------ -------- ------- ------ ------ ------ -------
Loans (3)(4)
Commercial 113,587 2,510 8.96% 97,403 2,316 9.64% 366 (172) 194
Real estate 255,190 5,242 8.33% 224,129 4,872 8.82% 651 (281) 370
Installment and other 35,642 829 9.43% 43,321 1,013 9.48% (179) (5) (184)
Fees on loans -- 329 -- -- 363 -- 52 (86) (34)
-------- ------ ------ -------- ------- ------ ------ ------ -------
Net loans (tax equivalent) 404,419 8,910 8.94% 364,853 8,564 9.52% 890 (544) 346
-------- ------ ------ -------- ------- ------ ------ ------ -------
Total interest-earning assets 582,741 11,817 8.22% 570,720 11,960 8.50% 447 (590) (143)
-------- ------ ------ -------- ------- ------ ------ ------ -------
NONINTEREST-EARNING ASSETS
Cash and cash equivalents 19,703 17,936
Premises and equipment, net 13,383 14,575
Other assets 13,648 15,606
-------- --------
Total nonearning assets 47,189 48,117
-------- --------
Total assets $629,930 $618,837
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW accounts $ 54,373 308 2.30% $53,974 $ 325 2.44% $ 2 $ (19) (17)
Money market accounts 31,687 263 3.37% 30,613 258 3.42% 9 (4) 5
Savings deposits 58,104 415 2.90% 59,756 412 2.80% (12) 15 3
Time deposits 307,723 4,021 5.30% 315,787 4,458 5.73% (111) (326) (437)
Federal funds purchased and
repurchase agreements 20,581 252 4.97% 14,363 214 6.04% 81 (43) 38
Advances from FHLB 24,422 332 5.51% 16,892 237 5.69% 102 (9) 93
Notes payable 8,121 133 6.64% 10,310 187 7.36% (37) (15) (52)
-------- ------ ------ -------- ------- ------ ------ ------ -------
Total interest-bearing liabilities 505,011 5,724 4.60% 501,695 6,091 4.92% 34 (401) (367)
-------- ------ ------ -------- ------- ------ ------ ------ -------
NONINTEREST-BEARING LIABILITIES
Noninterest-bearing deposits 60,660 57,202
Other liabilities 7,411 7,185
-------- --------
Total noninterest-bearing liabilities 68,071 64,387
-------- --------
Stockholders' equity 56,848 52,755
-------- --------
Total liabilities and
stockholders' equity $629,930 $618,837
======== ========
Net interest income (tax equivalent) $6,093 $ 5,869 $ 413 $ (189) $ 224
====== ======= ====== ====== ========
Net interest income (tax equivalent) to
total earning assets 4.24% 4.17%
Interest-bearing liabilities
to earning assets 86.66% 87.91%
-------- --------
- ----------------------------------------------
(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.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
PROVISION FOR LOAN LOSSES
The provision for loan losses charged to operating expense for the first quarter
of 1999 equaled $298,000 as compared to $562,000 for the same quarter in 1998.
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.
NONINTEREST INCOME
Noninterest income totaled $2,300,000 for the quarter ended March 31, 1999, as
compared to $1,634,000 for the same time frame in 1998. Exclusive of net
securities gains, which totaled $122,000 for the first quarter 1999 as compared
to net securities loss of $14,000 for the like period in 1998, noninterest
income increased by $ 530,000 or a 32.16% improvement. The bulk of the increase
was largely related to insurance commissions and fees totaling $588,000 that
were associated with the 1998 fourth quarter acquisition of an insurance agency.
Also contributing to the improvement in noninterest income was growth in
merchant fee income of $64,000, a $29,000 increase in income from trust
services, and increases in UnionData's income associated with ISP internet fees
of $50,000. This was partially offset by decreases in service charges of $41,000
and mortgage banking income of $76,000.
NONINTEREST EXPENSE
Noninterest expense totaled $5,715,000 for the quarter ended March 31, 1999,
increasing by $884,000 (18.3%) from the same time frame in 1998. Increases in
salaries and employee benefits accounted for a large percentage of the increase
and for the most part were attributable to regular merit increases, basic
incentive compensation, and incremental cost of salaries and commissions
associated with the insurance agency that was acquired in the fourth quarter of
1998. The increase in the other expense category was primarily associated with
normal operating expense from the acquired insurance agency and accounting fees,
of which the increase in expense was related to the outsourcing of the internal
audit function that was implemented at the beginning of the second quarter of
1998. Neither of these expenses existed during the first quarter of 1998.
INCOME TAX EXPENSE
Income tax expense totaled $670,000 for the quarter ended March 31, 1999,
increasing from $589,000 for the same period in 1998 and reflected effective tax
rates of 31.8% and 32.2% respectively.
10.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
NONPERFORMING ASSETS AND 90 DAY PAST DUE LOANS
At March 31, 1999, nonperforming assets totaled $4,204,000 versus the $2,899,000
that existed as of December 31, 1998. The level of nonperforming loans was 0.91%
of total loans at March 31, 1999, as compared to 0.65% at December 31, 1998. The
increase in nonperforming loans was primarily related to the inclusion of two
large credits placed on nonaccrual status during the first quarter of 1999. The
following table summarizes nonperforming assets and loans past 90 days or more
and still accruing for the previous five quarters.
1999 1998
------ ------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
------ ------ ------ ------ ------
Nonaccrual and impaired loans not
accruing $2,291 $1,487 $1,783 $1,303 $1,081
Impaired and other loans 90 days past
due and still accruing interest 1,515 1,111 655 1,521 1,362
------ ------ ------ ------ ------
Total nonperforming loans 3,806 2,598 2,438 2,824 2,443
Other real estate owned 398 201 322 468 204
Other nonperforming assets (1) -- 100 100 100 100
------ ------ ------ ------ ------
Total nonperforming assets $4,204 $2,899 $2,860 $3,392 $2,747
====== ====== ====== ====== ======
Nonperforming loans to total end of period loans 0.91% 0.65% 0.60% 0.71% 0.67%
Nonperforming assets to total end of period loans 1.01 0.73 0.70 0.85 0.75
Nonperforming assets to total end of period assets 0.66 0.46 0.44 0.52 0.44
- ------------------------
(1) Represents a single municipal security in default status.
ALLOWANCE FOR LOAN LOSSES
In originating loans, the Company recognizes that credit losses will be
experienced and the risk of loss will vary with, among other things, general
economic conditions; the type of loan being made; the creditworthiness of the
borrower over the term of the loan; and in the case of a collateralized loan,
the quality of the collateral for such loan. The allowance for loan losses
represents the Company's estimate of the allowance necessary to provide for
possible losses in the loan portfolio. In making this determination, the Company
analyzes the ultimate collectibility of the loans in its portfolio,
incorporating feedback provided by internal loan staff, the loan review
function, and information provided by examinations performed by regulatory
agencies. The Company makes an ongoing evaluation as to the adequacy of the
allowance for loan losses. The analysis of the allowance for loan losses is
comprised of three components: specific credit allocation, general portfolio
allocation, and subjective determined allocation. Once these three components of
the allowance are calculated, management calculates a historical component for
each loan category based on the past five years of loan history and the
Company's evaluation of qualitative factors including future economic and
industry outlooks. The unallocated portion of the allowance is determined based
on current economic conditions and trends in the portfolio including
delinquencies and impairments, as well as changes in the composition of the
portfolio.
Transactions in the allowance for loan losses during the three months ended
March 31, 1999 and 1998 are summarized in the table on page 7. At March 31,
1999, the allowance for loan losses totaled $4,043,000
11.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
and increased to 0.97% of total loans outstanding as compared to $3,551,000 or
0.94% at March 31, 1998. During the same time frame, net charge-offs decreased
to $113,000 during the first quarter of 1999 as compared to $199,000 for the
like period in 1998.
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 to 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:
December 31, Minimum Well
March 31, --------------------------- Capital Capitalized
1999 1998 1997 Ratios Ratios
---------- ----------- ------------ ------- -----------
Tier 1 risk-based capital $ 48,491 $ 47,297 $ 41,180
Tier 2 risk-based capital 5,400 5,215 4,545
Total capital 53,891 52,512 45,725
Risk-weighted assets 437,852 429,325 385,685
Capital ratios
Tier 1 risk-based capital 11.07% 11.02% 10.68% 4.00% 6.00%
Tier 2 risk-based capital 12.31 12.23 11.86 8.00 10.00
Leverage ratio 7.75 7.66 6.64 4.00 5.00
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, 1999, was 7.75%, a modest increase from 7.66%
at December 31, 1998. The ratio exceeds the regulatory minimum, and management
believes the Company is maintaining a strong capital position. The Company's
March 31, 1999, total risk weighted capital ratio also increased slightly to
12.31% from 12.23% at December 31, 1998. The Tier 1 Capital ratio increased from
11.02% at December 31, 1998, to 11.07% at March 31, 1999. 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 $7,346,000 from December 31, 1998
12.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
to March 31, 1999. This usage was primarily related to the net increase in
loans. This was partially offset by increased deposits, federal funds purchased,
proceeds from notes payable, and further 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 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, 1999. 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.
13.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
March 31, 1999
------------------------------------------------------------------------------
3 months 3 months to 6 months 1 year to Over
or less 6 months to 1 year 5 years 5 years Total
--------- --------- --------- --------- --------- ---------
INTEREST-EARNING ASSETS
Interest-bearing balances $ 1,039 $ -- $ -- $ -- $ -- $ 1,039
Federal funds sold 125 -- -- -- -- 125
Securities 50,006 8,066 24,427 43,278 48,462 174,239
Loans 101,228 35,028 60,550 173,124 46,732 416,662
--------- --------- --------- --------- --------- ---------
Total interest-earning assets $ 152,398 $ 43,094 $ 84,977 $ 216,402 $ 95,194 $ 592,065
========= ========= ========= ========= ========= =========
INTEREST-BEARING LIABILITIES
NOW accounts $ 53,301 $ -- $ -- $ -- $ -- $ 53,301
Money market accounts 31,756 -- -- -- -- 31,756
Savings 59,280 -- -- -- -- 59,280
Time deposits 81,184 55,624 111,796 70,997 255 319,856
--------- --------- --------- --------- --------- ---------
Total interest-bearing deposits 225,521 55,624 111,796 70,997 255 464,193
Federal funds and repurchase agreements 14,199 2,697 504 887 -- 18,287
Advances from FHLB 4,500 1,000 2,000 13,408 4,300 25,208
Notes payable 10,000 -- -- -- -- 10,000
--------- --------- --------- --------- --------- ---------
Total interest-bearing liabilities $ 254,220 $ 59,321 $ 114,300 $ 85,292 $ 4,555 $ 517,688
========= ========= ========= ========= ========= =========
Period interest sensitivity gap $(101,822) $ (16,227) $ (29,323) $ 131,110 $ 90,639 $ 74,377
Cumulative interest sensitivity gap (101,822) (118,049) (147,372) (16,262) 74,377
Cumulative gap as a percent of total assets (15.73)% (18.24)% (22.77)% (2.51)% 11.49%
Cumulative interest-sensitive assets as a
percent of cumulative interest-sensitive
liabilities 59.95% 62.35% 65.55% 96.83% 114.37%
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 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, 1999, the Company held approximately
$32,350,000 (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 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
14.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
market interest rates. The assumption in the tables below is 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, 1999.
March 31, 1999
-------------------------------------------------
Net Interest Income
-------------------------------------------------
Amount Change Change
----------- ----------- ------
(Dollars in Thousands)
+200 bp $ 22,602 $ (708) (3.04)%
+100 bp 22,993 (317) (1.36)
Base 23,310 -- --
-100 bp 23,337 27 0.12
-200 bp 22,609 (701) (3.01)
Based upon the Company's model at March 31, 1999, the effect of an immediate 200
basis point increase in interest rates would decrease the Company's net interest
income by 3.04% or approximately $708,000. The effect of an immediate 200 basis
point decrease in rates would reduce the Company's net income by 3.01% or
approximately $701,000. The reason for this is even though the preceding table
shows the Company as having a negative gap, certain core deposits may not
reprice when rates decrease depending on market conditions. This causes the
decline in net interest income.
December 31, 1998
-------------------------------------------------
Net Interest Income
-------------------------------------------------
Amount Change Change
----------- ----------- ------
(Dollars in Thousands)
+200 bp $ 20,811 $ (652) (3.04)%
+100 bp 21,155 (308) (1.43)
Base 21,463 -- --
-100 bp 21,542 80 0.37
-200 bp 20,882 (580) (2.70)
Based upon the Company's model at December 31, 1998, the effect of an immediate
200 basis point increase in interest rates would decrease the Company's net
interest income by 3.04% or approximately $652,000. The effect of an immediate
200 basis point decrease in rates would reduce the Company's net interest income
by 2.70% or approximately $580,000. The reason for this is even though the
preceding table shows the Company as having a negative gap, certain core
deposits may not reprice when rates decrease depending on market conditions.
This causes the decline in net interest income.
15.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
YEAR 2000
The year 2000 has posed a unique set of challenges to those industries reliant
on information technology. As a result of methods employed by early programmers,
many software applications and operational programs may be unable to distinguish
the year 2000 from the year 1900. If not effectively addressed, this problem
could result in the production of inaccurate data, or, in the worst cases, the
inability of the systems to continue to function altogether. Financial
institutions are particularly vulnerable due to the industry's dependence on
electronic data processing systems. In 1997, the Company started the process of
identifying the hardware and software issues related to the year 2000 and the
potential for those issues to adversely affect the Company's operations and
those of its subsidiaries.
The Company has spent considerable time and resources regarding the impact of
the Year 2000 issue with respect to its computer systems and applications as
well as to its general operations, customers, and suppliers. The Company has
developed a strategic plan for Year 2000 compliance which is being administered
by a committee comprised of individuals from all functional areas of the Company
as well as being reviewed by senior management and the Board of Directors. The
plan follows guidelines set forth by the FFIEC.
The status of each of the five phases of the FFIEC Year 2000 plan are:
1. Awareness 100% complete
2. Assessment 100% complete
3. Renovation 100% complete
4. Validation 95% complete
5. Implementation 80% complete
The 5% of validation which remains to be completed consists of the on-line
communication between the Banks and outside correspondents. This ongoing
evaluation is being conducted pursuant to the testing schedules provided by the
correspondents.
The 20% of implementation which remains to be completed consists of testing a
legacy system for ACH originations, which was replaced during the first quarter
of 1999 by a new system that is documented and tested by the vendor as being
Year 2000 compliant.
While the Company will incur some expenses during the next two years, the
Company has not identified any situations at this time that will require
material cost expenditures to become fully compliant. It is impossible at this
time to quantify the estimated future costs due to possible business disruption
caused by vendors, suppliers, customers, or even the possible loss of electric
power or phone service; however, such cost could be substantial.
The Company is committed to achieving compliance, by focusing not only on its
own data processing systems, but also in assisting its customers needs as well.
Management has taken steps to educate and assist its customers with
identification of Year 2000 compliance problems. In addition, management has
proposed policy and procedure changes to help identify potential risks to the
Company and to gain an understanding of how its customers are managing the risks
associated with the Year 2000 issue. The Company has assessed the impact, if
any, the Year 2000 will have on its credit risk and loan underwriting. In
connection with potential credit risk related to the Year 2000 issue, the
Company has contacted its
16.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
commercial loan customers regarding their level of preparedness for the Year
2000. The corporate loan review officer maintains a current list of all
customers that pose a potential liability to the Company due to the Year 2000
issue and regularly updates the Board of Directors.
Further, the Company has analyzed its liquidity position and how it could be
affected by the Year 2000 issue. A plan has been developed that addresses
liquidity issues that may arise. Overall, the Company feels that there are
adequate sources available and that the costs associated with such sources will
not have a material impact on the profits of the Company.
The Company has developed contingency plans for various Year 2000 problems and
continues to revise those plans based on testing results and vendor
notifications.
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.
17.
UNIONBANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
SEGMENT INFORMATION
The reportable segments are determined by the products and services offered,
primarily distinguished between banking and other operations. Loans,
investments, and deposits provide the revenues in the banking segment, and
mortgage banking, insurance, trust and holding company services are categorized
as other segments. Prior to 1998, the Company did not offer insurance services.
The accounting policies used are the same as those described in the summary of
significant accounting policies. Segment performance is evaluated using net
interest income. Information reported internally for performance assessment
follows.
March 31, 1999
------------------------------------------
Banking Other Consolidated
Segment Segments Totals
---------- -------- ---------
Net interest income (loss) $ 5,959 $ (138) $ 5,821
Other revenue 1,427 873 2,300
Other expense 4,299 1,416 5,715
Noncash items
Depreciation 226 170 396
Provision for loan loss 298 -- 298
Goodwill and other intangibles 171 49 220
Segment profit 2,786 (678) 2,108
Segment assets 631,355 4,106 635,461
March 31, 1998
------------------------------------------
Banking Other Consolidated
Segment Segments Totals
---------- -------- ---------
Net interest income (loss) $ 5,810 $ (204) $ 5,606
Other revenue 1,539 95 1,634
Other expense 4,281 550 4,831
Noncash items
Depreciation 257 126 383
Provision for loan loss 562 -- 562
Goodwill and other intangibles 216 13 229
Segment profit 2,507 (675) 1,832
Segment assets 630,865 1,321 632,186
18.
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 29, 1999, the annual meeting of stockholders was held. At the
meeting, Richard J. Berry, Walter E. Breipohl, Lawrence J. McGrogan,
and John A. Trainor were elected to serve as Class I directors with
terms expiring in 2002. 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. Continuing as Class III directors until 2001
are R. Scott Grigsby, H. Dean Reynolds, John A. Shinkle, and Scott C.
Sullivan.
There were 4,262,359 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:
Election of Directors For Withheld
--------------------- --- --------
Richard J. Berry 3,194,609 227,650
Walter E. Breipohl 3,194,609 227,650
Lawrence J. McGrogan 3,194,609 227,650
John A. Trainor 3,194,609 227,650
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.
19.
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:
------------------- ---------------------------------------
R. Scott Grigsby
Chairman of the Board and
Chief Executive Officer
Date:
------------------- ---------------------------------------
Charles J. Grako
President and Chief Financial Officer
20.