##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    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
 UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 Florida
    
    04-3691059(State or Other Jurisdiction 
of Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)1411 Edgewater Drive, Suite 100, Orlando, Florida
    
    32804(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants Telephone Number, Including Area Code (407) 712-6151
 Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ
  Common stock, par value $.01 per share
    
    4,953,615 shares outstanding at November 7, 2006




---



##### 



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
  PagePart I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets -
at September 30, 2006 (Unaudited) and at December 31, 2005
    
    
    2Condensed Consolidated Statements of Income (Unaudited) -
Three and Nine months ended September 30, 2006 and 2005
    
    
    3Condensed Consolidated Statements of Shareholders Equity (Unaudited) -
Nine months ended September 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine months ended September 30, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6-11Item 2. Managements Discussion and Analysis
    
    
    12-18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22EX-31.1  SECTION 302 CERTIFICATION OF THE CEOEX-31.2  SECTION 302 CERTIFICATION OF THE EXEC VPEX-32.1  SECTION 906 CERTIFICATION OF THE CEOEX-32.2  SECTION 906 CERTIFICATION OF THE EXEC VP
  1




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Part I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Condensed Consolidated Balance Sheets
 ($ in thousands, except per share amounts)
 At
    
    
    AtSeptember 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCash and due from banks
    
    $
    14,088
    
    
    $
    21,604Federal funds sold
    
    
    95,498
    
    
    
    126,119Total cash and cash equivalents
    
    
    109,586
    
    
    
    147,723Securities available for sale
    
    
    155,462
    
    
    
    164,050Securities held to maturity
    
    
    42,892
    
    
    
    21,119Loans, net of allowance for loan losses of $5,201 and $4,580
    
    
    410,257
    
    
    
    360,425Accrued interest receivable
    
    
    2,803
    
    
    
    2,599Property and equipment, net
    
    
    9,921
    
    
    
    7,527Net deferred tax asset
    
    
    2,919
    
    
    
    2,771Goodwill
    
    
    950
    
    
    
    950Core deposit intangible, net
    
    
    150
    
    
    
    200Other assets
    
    
    1,154
    
    
    
    530Total assets
    
    $
    736,094
    
    
    $
    707,894Liabilities and Shareholders EquityLiabilities:Deposits:Noninterest-bearing demand deposits
    
    $
    106,570
    
    
    $
    98,082Savings, NOW and money-market deposits
    
    
    232,449
    
    
    
    272,895Time deposits
    
    
    290,822
    
    
    
    245,559Total deposits
    
    
    629,841
    
    
    
    616,536Borrowings
    
    
    39,093
    
    
    
    31,884Other liabilities
    
    
    2,231
    
    
    
    1,687Total liabilities
    
    
    671,165
    
    
    
    650,107Shareholders equity:Common stock, $.01 par value, 20 million shares authorized,
4,941,269 and 4,871,908 shares issued and outstanding
    
    
    49
    
    
    
    49Additional paid-in capital
    
    
    55,501
    
    
    
    54,361Retained earnings
    
    
    11,066
    
    
    
    5,338Accumulated other comprehensive loss
    
    
    (1,687
    )
    
    
    (1,961
    )Total shareholders equity
    
    
    64,929
    
    
    
    57,787Total liabilities and shareholders equity
    
    $
    736,094
    
    
    $
    707,894
 
 2




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Condensed Consolidated Statements of Income (Unaudited)
 ($ in thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest income:Loans
    
    $
    8,702
    
    
    $
    5,740
    
    
    $
    24,241
    
    
    $
    14,478Securities
    
    
    2,074
    
    
    
    1,215
    
    
    
    5,785
    
    
    
    2,996Other
    
    
    1,162
    
    
    
    1,112
    
    
    
    3,521
    
    
    
    2,397Total interest income
    
    
    11,938
    
    
    
    8,067
    
    
    
    33,547
    
    
    
    19,871Interest expense:Deposits
    
    
    5,287
    
    
    
    3,399
    
    
    
    14,198
    
    
    
    8,183Borrowings
    
    
    323
    
    
    
    44
    
    
    
    832
    
    
    
    87Total interest expense
    
    
    5,610
    
    
    
    3,443
    
    
    
    15,030
    
    
    
    8,270Net interest income
    
    
    6,328
    
    
    
    4,624
    
    
    
    18,517
    
    
    
    11,601Provision for loan losses
    
    
    223
    
    
    
    485
    
    
    
    618
    
    
    
    1,162Net interest income after provision
for loan losses
    
    
    6,105
    
    
    
    4,139
    
    
    
    17,899
    
    
    
    10,439Noninterest income:Service charges and fees on deposit accounts
    
    
    191
    
    
    
    152
    
    
    
    554
    
    
    
    408Other
    
    
    73
    
    
    
    66
    
    
    
    201
    
    
    
    172Total noninterest income
    
    
    264
    
    
    
    218
    
    
    
    755
    
    
    
    580Noninterest expense:Salaries and employee benefits
    
    
    1,678
    
    
    
    1,523
    
    
    
    5,059
    
    
    
    4,182Occupancy and equipment
    
    
    677
    
    
    
    578
    
    
    
    1,999
    
    
    
    1,580Other general and administrative
    
    
    923
    
    
    
    833
    
    
    
    2,691
    
    
    
    2,242Total noninterest expense
    
    
    3,278
    
    
    
    2,934
    
    
    
    9,749
    
    
    
    8,004Income before income taxes
    
    
    3,091
    
    
    
    1,423
    
    
    
    8,905
    
    
    
    3,015Income taxes
    
    
    1,077
    
    
    
    525
    
    
    
    3,177
    
    
    
    1,135Net income
    
    $
    2,014
    
    
    $
    898
    
    
    $
    5,728
    
    
    $
    1,880Earnings per share:Basic
    
    $
    .41
    
    
    $
    .19
    
    
    $
    1.16
    
    
    $
    .43Diluted
    
    $
    .40
    
    
    $
    .18
    
    
    $
    1.13
    
    
    $
    .42Dividends per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  3




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Condensed Consolidated Statements of Shareholders Equity (Unaudited)
 Nine Months Ended September 30, 2006 and 2005
($ in thousands)
 AccumulatedOtherCompre-Common Stock
    
    
    Additional
    
    
    Retained
    
    
    hensive
    
    
    TotalNumber of
    
    
    Par
    
    
    Paid-In
    
    
    Earnings
    
    
    Income
    
    
    ShareholdersShares
    
    
    Value
    
    
    Capital
    
    
    (Deficit)
    
    
    (Loss)
    
    
    EquityBalance at December 31, 2004
    
    
    3,263,406
    
    
    $
    33
    
    
    $
    32,021
    
    
    $
    2,003
    
    
    $
    (267
    )
    
    $
    33,790Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,880
    
    
    
    
    
    
    
    1,880Other comprehensive loss-change in
unrealized loss on securities available
for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (979
    )
    
    
    (979
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    901Net proceeds from the sale of common stock
under a private placement offering
    
    
    1,537,222
    
    
    
    15
    
    
    
    21,463
    
    
    
    
    
    
    
    
    
    
    
    21,478Proceeds from stock options exercised
    
    
    71,280
    
    
    
    1
    
    
    
    828
    
    
    
    
    
    
    
    
    
    
    
    829Tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    49Balance at September 30, 2005
    
    
    4,871,908
    
    
    $
    49
    
    
    $
    54,361
    
    
    $
    3,883
    
    
    $
    (1,246
    )
    
    $
    57,047Balance at December 31, 2005
    
    
    4,871,908
    
    
    
    49
    
    
    
    54,361
    
    
    
    5,338
    
    
    
    (1,961
    )
    
    
    57,787Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,728
    
    
    
    
    
    
    
    5,728Other comprehensive income-change in
unrealized loss on securities available
for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    274
    
    
    
    274Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,002Proceeds from stock options exercised
    
    
    69,361
    
    
    
    
    
    
    
    863
    
    
    
    
    
    
    
    
    
    
    
    863Share-based compensation
    
    
    
    
    
    
    
    
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    210Tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    67Balance at September 30, 2006
    
    
    4,941,269
    
    
    $
    49
    
    
    $
    55,501
    
    
    $
    11,066
    
    
    $
    (1,687
    )
    
    $
    64,929
 
 4




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (In thousands)
 Nine Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    5,728
    
    
    $
    1,880Adjustments to reconcile net income
to net cash provided by operating activities:Provision for loan losses
    
    
    618
    
    
    
    1,162Depreciation and amortization of property and equipment
    
    
    717
    
    
    
    503Deferred income tax benefit
    
    
    (312
    )
    
    
    (521
    )Net amortization of premiums and discounts on securities
    
    
    293
    
    
    
    596Amortization of core deposit intangible
    
    
    50
    
    
    
    50Share-based compensation
    
    
    210
    
    
    
    Tax benefit from stock options exercised
    
    
    
    
    
    
    49Net change in period-end balances of:Other assets
    
    
    (828
    )
    
    
    (1,074
    )Other liabilities
    
    
    544
    
    
    
    584Net cash provided by operating activities
    
    
    7,020
    
    
    
    3,229Cash flows from investing activities:Purchase of securities available for sale
    
    
    (16,590
    )
    
    
    (106,905
    )Principal collections, calls and maturities of securities available for sale
    
    
    25,323
    
    
    
    17,232Purchase of securities held to maturity
    
    
    (21,773
    )
    
    
    (10,711
    )Net funding of loans
    
    
    (50,450
    )
    
    
    (89,700
    )Purchase of premises and equipment
    
    
    (3,111
    )
    
    
    (1,098
    )Net cash used in investing activities
    
    
    (66,601
    )
    
    
    (191,182
    )Cash flows from financing activities:Net increase in deposits
    
    
    13,305
    
    
    
    204,183Net increase (decrease) in borrowings
    
    
    7,209
    
    
    
    (1,600
    )Net proceeds from sale of common stock
    
    
    863
    
    
    
    22,307Tax benefit from stock options exercised
    
    
    67
    
    
    
    Net cash provided by financing activities
    
    
    21,444
    
    
    
    224,890Net (decrease) increase in cash and cash equivalents
    
    
    (38,137
    )
    
    
    36,937Cash and cash equivalents at beginning of period
    
    
    147,723
    
    
    
    85,971Cash and cash equivalents at end of period
    
    $
    109,586
    
    
    $
    122,908Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    14,335
    
    
    $
    8,137Income taxes
    
    $
    3,528
    
    
    $
    1,485Noncash transaction-Accumulated other comprehensive income (loss)  change in
unrealized loss on securities available for sale, net of tax
    
    $
    274
    
    
    $
    (979
    )
  5




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. General and Basis of Presentation.
   2. Loans .
 At
    
    
    AtSeptember 30,
    
    
    December 31,2006
    
    
    2005Real estate  mortgage
    
    $
    201,957
    
    
    $
    179,323Construction and land development
    
    
    141,716
    
    
    
    111,698Commercial, financial and agricultural
    
    
    66,509
    
    
    
    69,266Installment and consumer lines
    
    
    5,943
    
    
    
    5,349Total loans
    
    
    416,125
    
    
    
    365,636Allowance for loan losses
    
    
    (5,201
    )
    
    
    (4,580
    )Deferred loan fees, net
    
    
    (667
    )
    
    
    (631
    )Loans, net
    
    $
    410,257
    
    
    $
    360,425
  6




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 3. Loan Impairment and Loan Losses .
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Beginning balance
    
    $
    4,975
    
    
    $
    3,744
    
    
    $
    4,580
    
    
    $
    3,077Provision for loan losses
    
    
    223
    
    
    
    485
    
    
    
    618
    
    
    
    1,162Net loan (charge-offs) recoveries
    
    
    3
    
    
    
    (27
    )
    
    
    3
    
    
    
    (37
    )Balance at September 30
    
    $
    5,201
    
    
    $
    4,202
    
    
    $
    5,201
    
    
    $
    4,202
  AtSeptember 30,
    
    
    December 31,2006
    
    
    2005Impaired loans with a valuation allowance
    
    $
    40
    
    
    $
    44Impaired loans without a valuation allowance
    
    
    
    
    
    
    Less: Valuation allowance on impaired loans
    
    
    (4
    )
    
    
    (4
    )Total net impaired loans
    
    $
    36
    
    
    $
    40
  Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Average net investment in impaired
loans
    
    $
    40
    
    
    $
    52
    
    
    $
    41
    
    
    $
    55Interest income recognized on
impaired loans
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1Interest income received on
impaired loans
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1
  7




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 3. Loan Impairment and Loan Losses, Continued .
 AtSeptember 30,
    
    
    December 31,2006
    
    
    2005Nonaccrual loans
    
    $
    40
    
    
    $
    44Accruing loans past due 90 days or more
    
    
    
    
    
    
    Total
    
    $
    40
    
    
    $
    44
 4. Computation of Earnings Per Share.
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Weighted-average common
shares outstanding
    
    
    4,941,269
    
    
    
    4,850,115
    
    
    
    4,918,374
    
    
    
    4,391,209Dilutive shares issuable under
stock option plan
    
    
    151,236
    
    
    
    79,239
    
    
    
    151,236
    
    
    
    82,988Weighted-average common
shares on a diluted basis
    
    
    5,092,505
    
    
    
    4,929,354
    
    
    
    5,069,610
    
    
    
    4,474,197
 5. Stock Option Plans.
  Weighted-AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term
    
    
    Value(in years)
    
    
    (in thousands)Outstanding, December 31, 2005
    
    
    700,810
    
    
    $
    12.22Granted
    
    
    21,200
    
    
    $
    15.07Exercised
    
    
    (69,361
    )
    
    $
    12.44Outstanding, September 30, 2006
    
    
    652,649
    
    
    $
    12.29
    
    
    
    7.1
    
    
    $
    2,421Options exercisable at September
30, 2006
    
    
    446,085
    
    
    $
    11.59
    
    
    
    5.8
    
    
    $
    1,976
  8




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 5. Stock Option Plans, Continued. Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation Transition and Disclosure Share-Based Payment ,
    9




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 5. Stock Option Plans, Continued.
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2005Net income, as reported
    
    $
    898
    
    
    $
    1,880Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards
    
    
    (31
    )
    
    
    (344
    )Proforma net income
    
    $
    867
    
    
    $
    1,536Basic earnings per share:As reported
    
    $
    .19
    
    
    $
    .43Proforma
    
    $
    .18
    
    
    $
    .35Diluted earnings per share:As reported
    
    $
    .18
    
    
    $
    .42Proforma
    
    $
    .18
    
    
    $
    .34
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005$
    5.57
    
    
    
    N/A
    
    
    $
    4.83
    
    
    $
    4.97
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Average risk free rate
    
    
    4.91
    %
    
    
    
    %
    
    
    4.45
    %
    
    
    4.41
    %Expected life (years)
    
    
    7.5
    
    
    
    
    
    
    
    7.5
    
    
    
    10.0Dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Estimated volatility
    
    
    14.6
    %
    
    
    
    %
    
    
    14.6
    %
    
    
    
    %
  10




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 5. Stock Option Plans, Continued.
 6. Reclassifications .
 11




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Item 2. Managements Discussion and Analysis
 Capital Resources and Commitments
    Contractual Obligations
    
    AmountTime deposit maturities
    
    $
    290,822Borrowings
    
    
    39,093Operating leases
    
    
    19,127Loan commitments and unused lines of credit
    
    
    106,360Standby letters of credit
    
    
    7,360Undisbursed construction loans in process
    
    
    180,755Total
    
    $
    643,517
  Regulatory Capital Requirements
  12




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
   MinimumTo Be WellCapitalized UnderMinimum Capital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    %
    
    Amount
    %
    Amount
    %As of September 30, 2006:Total capital to Risk-
Weighted assets:Consolidated
    
    $
    70,716
    
    
    
    13.65
    %
    
    $
    41,419
    
    
    
    8.00
    %
    
    $
    51,796
    
    
    
    10.00
    %Bank
    
    $
    68,532
    
    
    
    13.24
    %
    
    $
    41,419
    
    
    
    8.00
    %
    
    $
    51,773
    
    
    
    10.00
    %Tier I Capital to Risk-
Weighted Assets:Consolidated
    
    $
    65,515
    
    
    
    12.65
    %
    
    $
    20,718
    
    
    
    4.00
    %
    
    $
    31,077
    
    
    
    6.00
    %Bank
    
    $
    63,331
    
    
    
    12.23
    %
    
    $
    20,709
    
    
    
    4.00
    %
    
    $
    31,064
    
    
    
    6.00
    %Tier I Capital
to Average Assets:Consolidated
    
    $
    65,515
    
    
    
    9.23
    %
    
    $
    28,386
    
    
    
    4.00
    %
    
    $
    35,483
    
    
    
    5.00
    %Bank
    
    $
    63,331
    
    
    
    8.93
    %
    
    $
    28,376
    
    
    
    4.00
    %
    
    $
    35,470
    
    
    
    5.00
    %As of December 31, 2005:Total capital to Risk-
Weighted assets:Consolidated
    
    $
    63,178
    
    
    
    13.96
    %
    
    $
    36,200
    
    
    
    8.00
    %
    
    $
    45,250
    
    
    
    10.00
    %Bank
    
    $
    61,852
    
    
    
    13.59
    %
    
    $
    36,416
    
    
    
    8.00
    %
    
    $
    45,520
    
    
    
    10.00
    %Tier I Capital to Risk-
Weighted Assets:Consolidated
    
    $
    58,598
    
    
    
    12.95
    %
    
    $
    18,100
    
    
    
    4.00
    %
    
    $
    27,150
    
    
    
    6.00
    %Bank
    
    $
    57,272
    
    
    
    12.58
    %
    
    $
    18,208
    
    
    
    4.00
    %
    
    $
    27,312
    
    
    
    6.00
    %Tier I Capital
to Average Assets:Consolidated
    
    $
    58,598
    
    
    
    8.97
    %
    
    $
    26,140
    
    
    
    4.00
    %
    
    $
    32,676
    
    
    
    5.00
    %Bank
    
    $
    57,272
    
    
    
    8.77
    %
    
    $
    26,134
    
    
    
    4.00
    %
    
    $
    32,668
    
    
    
    5.00
    %
 13




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Results of Operation
  Nine Months
    
    
    
    
    
    Nine MonthsEnded
    
    Year Ended
    
    EndedSeptember 30,
    
    December 31,
    
    September 30,2006
    
    2005
    
    2005Average equity as a percentage
of average assets
    
    
    8.17
    %
    
    
    9.19
    %
    
    
    9.40
    %Total equity to total assets at end of period
    
    
    8.82
    %
    
    
    8.16
    %
    
    
    9.01
    %Return on average assets (1)
    
    
    1.08
    %
    
    
    .59
    %
    
    
    .47
    %Return on average equity (1)
    
    
    13.26
    %
    
    
    6.45
    %
    
    
    5.04
    %Noninterest expense to average assets (1)
    
    
    1.84
    %
    
    
    1.97
    %
    
    
    2.02
    %Nonperforming loans and foreclosed assets to
total assets at end of period
    
    NIL
    
    
    NIL
    
    
    
    .01
    %
 
 (1)
    
    Annualized for the nine months ended September 30, 2006 and 2005.  Nine
    
    
    
    
    
    NineMonths Ended
    
    Year Ended
    
    Months EndedSeptember 30,
    
    December 31,
    
    September 30,2006
    
    2005
    
    2005Loans
    
    
    8.24
    %
    
    
    7.10
    %
    
    
    6.91
    %Investment securities
    
    
    4.18
    %
    
    
    3.75
    %
    
    
    3.61
    %Other interest-earning assets
    
    
    4.87
    %
    
    
    3.29
    %
    
    
    2.97
    %All interest-earning assets
    
    
    6.65
    %
    
    
    5.54
    %
    
    
    5.33
    %Savings, NOW and money-market deposits
    
    
    3.00
    %
    
    
    2.21
    %
    
    
    2.13
    %Time deposits
    
    
    4.39
    %
    
    
    3.49
    %
    
    
    3.35
    %All interest-bearing liabilities
    
    
    3.77
    %
    
    
    2.84
    %
    
    
    2.74
    %Interest-rate spread
    
    
    2.88
    %
    
    
    2.68
    %
    
    
    2.59
    %
 Changes in Financial Condition
 
 14




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
  Three Months Ended September 30,2006
    
    
    2005Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    and
    
    
    Yield/
    
    
    Average
    
    
    and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost($in thousands)Interest-earning assets:Loans
    
    $
    403,554
    
    
    $
    8,702
    
    
    
    8.63
    %
    
    $
    317,113
    
    
    $
    5,740
    
    
    
    7.24
    %Securities
    
    
    192,509
    
    
    
    2,074
    
    
    
    4.31
    %
    
    
    130,528
    
    
    
    1,215
    
    
    
    3.72
    %Other (1)
    
    
    87,585
    
    
    
    1,162
    
    
    
    5.31
    %
    
    
    128,964
    
    
    
    1,112
    
    
    
    3.45
    %Total interest-earning assets
    
    
    683,648
    
    
    
    11,938
    
    
    
    6.99
    %
    
    
    576,605
    
    
    
    8,067
    
    
    
    5.60
    %Noninterest-earning assets
    
    
    32,683
    
    
    
    
    
    
    
    
    
    
    
    34,435Total assets
    
    $
    716,331
    
    
    
    
    
    
    
    
    
    
    $
    611,040Interest-bearing liabilities:Savings, NOW and money-market accounts
    
    
    227,462
    
    
    
    1,940
    
    
    
    3.41
    %
    
    
    224,364
    
    
    
    1,306
    
    
    
    2.33
    %Time deposits
    
    
    284,373
    
    
    
    3,347
    
    
    
    4.71
    %
    
    
    234,501
    
    
    
    2,093
    
    
    
    3.57
    %Other borrowings (2)
    
    
    28,130
    
    
    
    323
    
    
    
    4.58
    %
    
    
    5,991
    
    
    
    44
    
    
    
    2.94
    %Total interest-bearing liabilities
    
    
    539,965
    
    
    
    5,610
    
    
    
    4.16
    %
    
    
    464,856
    
    
    
    3,443
    
    
    
    2.96
    %Noninterest-bearing deposits
    
    
    106,935
    
    
    
    
    
    
    
    
    
    
    
    87,298Noninterest-bearing liabilities
    
    
    9,994
    
    
    
    
    
    
    
    
    
    
    
    3,187Stockholders equity
    
    
    59,437
    
    
    
    
    
    
    
    
    
    
    
    55,699Total liabilities and stockholders equity
    
    $
    716,331
    
    
    
    
    
    
    
    
    
    
    $
    611,040Net interest income
    
    
    
    
    
    $
    6,328
    
    
    
    
    
    
    
    
    
    
    $
    4,624Interest-rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.83
    %
    
    
    
    
    
    
    
    
    
    
    2.64
    %Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.70
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Ratio of interest-earning assets to
interest-bearing liabilities
    
    
    1.27
    
    
    
    
    
    
    
    
    
    
    
    1.24
 
 (1)
    
    Includes interest-earning demand deposits, federal funds sold and Federal Home Loan Bank
stock.(2)
    
    Includes securities sold under agreements to repurchase and federal funds purchased lines of
credit.(3)
    
    Interest-rate spread represents the difference between the average yield on interest-earning
assets and the average cost of interest-bearing liabilities.(4)
    
    Net interest margin is annualized net interest income divided by average interest-earning
assets. 15




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
  Nine Months Ended September 30,2006
    
    
    2005Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    and
    
    
    Yield/
    
    
    Average
    
    
    and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost($ in thousands)Interest-earning assets:Loans
    
    $
    392,101
    
    
    $
    24,241
    
    
    
    8.24
    %
    
    $
    279,227
    
    
    $
    14,478
    
    
    
    6.91
    %Securities
    
    
    184,322
    
    
    
    5,785
    
    
    
    4.18
    %
    
    
    110,603
    
    
    
    2,996
    
    
    
    3.61
    %Other (1)
    
    
    96,474
    
    
    
    3,521
    
    
    
    4.87
    %
    
    
    107,436
    
    
    
    2,397
    
    
    
    2.97
    %Total interest-earning assets
    
    
    672,897
    
    
    
    33,547
    
    
    
    6.65
    %
    
    
    497,266
    
    
    
    19,871
    
    
    
    5.33
    %Noninterest-earning assets
    
    
    31,788
    
    
    
    
    
    
    
    
    
    
    
    32,341Total assets
    
    $
    704,685
    
    
    
    
    
    
    
    
    
    
    $
    529,607Interest-bearing liabilities:Savings, NOW and money-market accounts
    
    
    235,953
    
    
    
    5,311
    
    
    
    3.00
    %
    
    
    199,159
    
    
    
    3,176
    
    
    
    2.13
    %Time deposits
    
    
    270,109
    
    
    
    8,887
    
    
    
    4.39
    %
    
    
    199,113
    
    
    
    5,007
    
    
    
    3.35
    %Other borrowings (2)
    
    
    25,577
    
    
    
    832
    
    
    
    4.34
    %
    
    
    4,414
    
    
    
    87
    
    
    
    2.63
    %Total interest-bearing liabilities
    
    
    531,639
    
    
    
    15,030
    
    
    
    3.77
    %
    
    
    402,686
    
    
    
    8,270
    
    
    
    2.74
    %Noninterest-bearing deposits
    
    
    106,417
    
    
    
    
    
    
    
    
    
    
    
    75,238Noninterest-bearing liabilities
    
    
    9,037
    
    
    
    
    
    
    
    
    
    
    
    1,911Stockholders equity
    
    
    57,592
    
    
    
    
    
    
    
    
    
    
    
    49,772Total liabilities and stockholders equity
    
    $
    704,685
    
    
    
    
    
    
    
    
    
    
    $
    529,607Net interest income
    
    
    
    
    
    $
    18,517
    
    
    
    
    
    
    
    
    
    
    $
    11,601Interest-rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    2.59
    %Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.67
    %
    
    
    
    
    
    
    
    
    
    
    3.11
    %Ratio of interest-earning assets to
interest-bearing liabilities
    
    
    1.27
    
    
    
    
    
    
    
    
    
    
    
    1.23
 
 (1)
    
    Includes interest-earning demand deposits, federal funds sold and Federal Home Loan Bank
stock.(2)
    
    Includes securities sold under agreements to repurchase and federal funds purchased lines of
credit.(3)
    
    Interest-rate spread represents the difference between the average yield on interest-earning
assets and the average cost of interest-bearing liabilities.(4)
    
    Net interest margin is annualized net interest income divided by average interest-earning
assets. 16




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Comparison of the Three-Month Periods Ended September 30, 2006 and 2005
 General Operating Results.
 Interest Income.
 Interest Expense.
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
 Income Taxes.
 17




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Comparison of the Nine-Month Periods Ended September 30, 2006 and 2005
 General Operating Results.
 Interest Income.
 Interest Expense.
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
 Income Taxes.
 18




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 a.
    
    Evaluation of disclosure controls and procedures. The Company maintains
controls and procedures designed to ensure that information required to be disclosed in the
reports that the Company files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this report, the
Chief Executive and Chief Financial officers of the Company concluded that the Companys
disclosure controls and procedures were adequate.b.
    
    Changes in internal controls. The Company made no significant changes in its
internal controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation of those controls by the Chief Executive and Chief
Financial officers.
 19




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1(A). Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5.
 Other Information
  20




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Item 6. Exhibits
  10.1       -
    
    Salary Continuation Agreements *10.2       -
    
    Amendment to Employment Agreement for David G. Powers *10.3       -
    
    Amendment to Employment Agreement for Shirley L. Tyler *31.1       -
    
    Certification of Chief Executive Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act31.2       -
    
    Certification of Chief Financial Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act32.1       -
    
    Certification of Chief Executive Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2       -
    
    Certification of Chief Financial Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference to Form 8-K filed September 25, 2006. 21




---



##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 SIGNATURES
  Date: November 7, 2006United Heritage Bankshares of Florida, Inc.By:
Name:
    
    /s/ David G. Powers

David G. Powers, President andChief Executive OfficerBy:
Name:
    
    /s/ Shirley L. Tyler

Shirley L. Tyler, Executive VicePresident and Treasurer
 22




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Exhibit10.1
    
    Salary Continuation Agreements *10.2
    
    Amendments to Employment Agreement for David G. Powers *10.3
    
    Amendment to Employment Agreement for Shirley L. Tyler *31.1
    
    Certification of President and Chief Executive Officer under §302 of the Sarbanes-Oxley Act
of 200231.2
    
    Certification of Executive Vice President and Treasurer under §302 of the Sarbanes-Oxley Act
of 200232.1
    
    Certification of President and Chief Executive Officer under §906 of the Sarbanes-Oxley Act
of 200232.2
    
    Certification of Executive Vice President and Treasurer under §906 of the Sarbanes-Oxley Act
of 2002
 
 *
    
    Incorporated by reference to Form 8-K filed September 25, 2006.