##### 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 June 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
  o o þ
 o þ
  Common stock, par value $.01 per share
    
    4,941,269 shares outstanding at August 3, 2006




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##### 



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
  PagePart I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets- at June 30, 2006 (Unaudited) and at December 31, 2005
    
    
    2Condensed Consolidated Statements of Income (Unaudited)  Three and Six months ended June 30, 2006 and 2005
    
    
    3Condensed Consolidated Statements of Shareholders Equity (Unaudited)  Six months ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited)  Six months ended June 30, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6-10Item 2. Managements Discussion and Analysis
    
    
    11-17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3. Defaults upon Senior Securities
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    20SIGNATURES
    
    
    21Ex-21.1 Subsidiaries of RegistrantEx-31.1 Section 302 CertificationEx-31.2 Section 302 CertificationEx-32.1 Section 906 CertificationEx-32.2 Section 906 Certification
  1




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##### 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
    
    
    AtJune 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCash and due from banks
    
    $
    14,537
    
    
    $
    21,604Federal funds sold
    
    
    130,703
    
    
    
    126,119Total cash and cash equivalents
    
    
    145,240
    
    
    
    147,723Securities available for sale
    
    
    155,309
    
    
    
    164,050Securities held to maturity
    
    
    30,990
    
    
    
    21,119Loans, net of allowance for loan losses of $4,975 and $4,580
    
    
    392,400
    
    
    
    360,425Accrued interest receivable
    
    
    2,715
    
    
    
    2,599Property and equipment, net
    
    
    9,552
    
    
    
    7,527Net deferred tax asset
    
    
    4,189
    
    
    
    2,771Goodwill
    
    
    950
    
    
    
    950Core deposit intangible, net
    
    
    167
    
    
    
    200Other assets
    
    
    565
    
    
    
    530Total assets
    
    $
    742,077
    
    
    $
    707,894Liabilities and Shareholders EquityLiabilities:Deposits:Noninterest-bearing demand deposits
    
    $
    110,340
    
    
    $
    98,082Savings, NOW and money-market deposits
    
    
    244,730
    
    
    
    272,895Time deposits
    
    
    273,740
    
    
    
    245,559Total deposits
    
    
    628,810
    
    
    
    616,536Borrowings
    
    
    50,719
    
    
    
    31,884Other liabilities
    
    
    1,558
    
    
    
    1,687Total liabilities
    
    
    681,087
    
    
    
    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
    
    
    55,426
    
    
    
    54,361Retained earnings
    
    
    9,052
    
    
    
    5,338Accumulated other comprehensive loss
    
    
    (3,537
    )
    
    
    (1,961
    )Total shareholders equity
    
    
    60,990
    
    
    
    57,787Total liabilities and shareholders equity
    
    $
    742,077
    
    
    $
    707,894
  2




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Condensed Consolidated Statements of Income (Unaudited)
($ in thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest income:Loans
    
    $
    8,119
    
    
    $
    4,679
    
    
    $
    15,539
    
    
    $
    8,738Securities
    
    
    1,859
    
    
    
    1,041
    
    
    
    3,711
    
    
    
    1,781Other
    
    
    1,299
    
    
    
    777
    
    
    
    2,359
    
    
    
    1,285Total interest income
    
    
    11,277
    
    
    
    6,497
    
    
    
    21,609
    
    
    
    11,804Interest expense:Deposits
    
    
    4,770
    
    
    
    2,710
    
    
    
    8,911
    
    
    
    4,784Borrowings
    
    
    294
    
    
    
    31
    
    
    
    509
    
    
    
    43Total interest expense
    
    
    5,064
    
    
    
    2,741
    
    
    
    9,420
    
    
    
    4,827Net interest income
    
    
    6,213
    
    
    
    3,756
    
    
    
    12,189
    
    
    
    6,977Provision for loan losses
    
    
    95
    
    
    
    491
    
    
    
    395
    
    
    
    677Net interest income after provision
for loan losses
    
    
    6,118
    
    
    
    3,265
    
    
    
    11,794
    
    
    
    6,300Noninterest income:Service charges and fees on deposit accounts
    
    
    176
    
    
    
    133
    
    
    
    363
    
    
    
    256Other
    
    
    82
    
    
    
    72
    
    
    
    128
    
    
    
    106Total noninterest income
    
    
    258
    
    
    
    205
    
    
    
    491
    
    
    
    362Noninterest expense:Salaries and employee benefits
    
    
    1,708
    
    
    
    1,448
    
    
    
    3,381
    
    
    
    2,659Occupancy and equipment
    
    
    663
    
    
    
    535
    
    
    
    1,322
    
    
    
    1,002Other
    
    
    885
    
    
    
    753
    
    
    
    1,768
    
    
    
    1,409Total noninterest expense
    
    
    3,256
    
    
    
    2,736
    
    
    
    6,471
    
    
    
    5,070Income before income taxes
    
    
    3,120
    
    
    
    734
    
    
    
    5,814
    
    
    
    1,592Income taxes
    
    
    1,120
    
    
    
    278
    
    
    
    2,100
    
    
    
    610Net income
    
    $
    2,000
    
    
    $
    456
    
    
    $
    3,714
    
    
    $
    982Earnings per share:Basic
    
    $
    .41
    
    
    $
    .09
    
    
    $
    .76
    
    
    $
    .24Diluted
    
    $
    .40
    
    
    $
    .09
    
    
    $
    .74
    
    
    $
    .23Dividends per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  3




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Condensed Consolidated Statements of Shareholders Equity (Unaudited)
 Six Months Ended June 30, 2006 and 2005
($ in thousands)
 AccumulatedOtherCommon Stock
    
    
    Additional
    
    
    
    
    
    
    Compre-
    
    
    TotalNumber of
    
    
    Par
    
    
    Paid-In
    
    
    Retained
    
    
    hensive
    
    
    ShareholdersShares
    
    
    Value
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    EquityBalance at December 31, 2004
    
    
    3,263,406
    
    
    $
    33
    
    
    $
    32,021
    
    
    $
    2,003
    
    
    $
    (267
    )
    
    $
    33,790Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    982
    
    
    
    
    
    
    
    982Other comprehensive loss-change in
unrealized loss on securities available
for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (397
    )
    
    
    (397
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    585Net proceeds from the sale of common stock
under a private placement offering
    
    
    1,537,222
    
    
    
    15
    
    
    
    21,463
    
    
    
    
    
    
    
    
    
    
    
    21,478Proceeds from stock options exercised
    
    
    6,390
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Balance at June 30, 2005
    
    
    4,807,018
    
    
    $
    48
    
    
    $
    53,534
    
    
    $
    2,985
    
    
    $
    (664
    )
    
    $
    55,903Balance at December 31, 2005
    
    
    4,871,908
    
    
    
    49
    
    
    
    54,361
    
    
    
    5,338
    
    
    
    (1,961
    )
    
    
    57,787Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,714
    
    
    
    
    
    
    
    3,714Other comprehensive loss-change in
unrealized loss on securities available
for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,576
    )
    
    
    (1,576
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,138Proceeds from stock options exercised
    
    
    69,361
    
    
    
    
    
    
    
    863
    
    
    
    
    
    
    
    
    
    
    
    863Share-based compensation
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    135Tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    67Balance at June 30, 2006
    
    
    4,941,269
    
    
    $
    49
    
    
    $
    55,426
    
    
    $
    9,052
    
    
    $
    (3,537
    )
    
    $
    60,990
 
 4




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 Six Months EndedJune 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    3,714
    
    
    
    982Adjustments to reconcile net income
to net cash provided by operating activities:Provision for loan losses
    
    
    395
    
    
    
    677Depreciation and amortization of property and equipment
    
    
    475
    
    
    
    335Deferred income tax benefit
    
    
    (467
    )
    
    
    (146
    )Net amortization of premiums and discounts on securities
    
    
    237
    
    
    
    350Share-based compensation
    
    
    135
    
    
    
    Amortization of core deposit intangible
    
    
    33
    
    
    
    34Net change in period-end balances of:Other assets
    
    
    (151
    )
    
    
    (594
    )Other liabilities
    
    
    (129
    )
    
    
    (43
    )Net cash provided by operating activities
    
    
    4,242
    
    
    
    1,595Cash flows from investing activities:Purchase of securities available for sale
    
    
    (10,063
    )
    
    
    (61,408
    )Principal collections, calls and maturities of securities available for sale
    
    
    16,046
    
    
    
    11,182Purchase of securities held to maturity
    
    
    (9,877
    )
    
    
    (3,534
    )Net funding of loans
    
    
    (32,370
    )
    
    
    (52,288
    )Purchase of premises and equipment
    
    
    (2,500
    )
    
    
    (574
    )Net cash used in investing activities
    
    
    (38,764
    )
    
    
    (106,622
    )Cash flows from financing activities:Net increase in deposits
    
    
    12,274
    
    
    
    159,135Net increase (decrease) in borrowings
    
    
    18,835
    
    
    
    (1,669
    )Proceeds from stock options exercised
    
    
    863
    
    
    
    21,528Tax benefit from stock options exercised
    
    
    67
    
    
    
    Net cash provided by financing activities
    
    
    32,039
    
    
    
    178,994Net (decrease) increase in cash and cash equivalents
    
    
    (2,483
    )
    
    
    73,967Cash and cash equivalents at beginning of period
    
    
    142,723
    
    
    
    85,971Cash and cash equivalents at end of period
    
    $
    145,240
    
    
    
    159,938Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    9,742
    
    
    
    4,743Income taxes
    
    $
    2,500
    
    
    
    995Noncash transaction-Accumulated other comprehensive loss, net change in
unrealized loss on securities available for sale, net of tax
    
    $
    (1,576
    )
    
    
    (397
    )
  5




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1.
    
    General and Basis of Presentation.United Heritage Bankshares of Florida, Inc. (the Holding
Company) owns 100% of the common stock of United Heritage Bank (the Bank) (together, the
Company), a full service, FDIC-insured commercial-banking institution. The Company provides
a variety of financial services to individuals and commercial customers through its eleven
banking offices located in Orange and Seminole Counties, Florida.In the opinion of the management of the Company, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position at June 30, 2006 and the results of
operations for the three and six months ended June 30, 2006 and 2005 and cash flows for the
six months ended June 30, 2006 and 2005. The results of operations for the three and six
months ended June 30, 2006, are not necessarily indicative of results that may be expected
for the year ending December 31, 2006.The condensed consolidated financial statements include the accounts of the Holding Company
and the Bank. All significant intercompany accounts and transactions have been eliminated in
consolidation.
 2. Loans .
 At
    
    
    AtJune 30,
    
    
    December 31,2006
    
    
    2005Real estate  mortgage
    
    $
    197,055
    
    
    $
    179,323Construction and land development
    
    
    130,991
    
    
    
    111,698Commercial, financial and agricultural
    
    
    64,281
    
    
    
    69,266Installment and consumer lines
    
    
    5,706
    
    
    
    5,349Total loans
    
    
    398,033
    
    
    
    365,636Allowance for loan losses
    
    
    (4,975
    )
    
    
    (4,580
    )Deferred loan fees, net
    
    
    (658
    )
    
    
    (631
    )Loans, net
    
    $
    392,400
    
    
    $
    360,425
  6




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 3.
    
    Loan Impairment and Loan Losses.An analysis of the change in the allowance for loan losses
follows (in thousands):
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Beginning balance
    
    $
    4,878
    
    
    $
    3,253
    
    
    $
    4,580
    
    
    $
    3,077Provision for loan losses
    
    
    96
    
    
    
    491
    
    
    
    395
    
    
    
    677Net loan recoveries (charge-offs)
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Balance at June 30
    
    $
    4,975
    
    
    $
    3,744
    
    
    $
    4,975
    
    
    $
    3,744
  AtJune 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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Average net investment in impaired
loans
    
    $
    41
    
    
    $
    52
    
    
    $
    41
    
    
    $
    56Interest income recognized on
impaired loans
    
    $
    
    
    
    $
    1
    
    
    $
    
    
    
    $
    1Interest income received on
impaired loans
    
    $
    
    
    
    $
    1
    
    
    $
    
    
    
    $
    1
  7




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 3.
    
    Loan Impairment and Loan Losses, Continued.Nonaccrual and accruing loans past due 90 days
or more follows (in thousands):
 AtJune 30,
    
    
    December 31,2006
    
    
    2005Nonaccrual loans
    
    $
    40
    
    
    $
    44Accruing loans past due 90 days or more
    
    
    
    
    
    
    Total
    
    $
    40
    
    
    $
    44
 4.
    
    Earnings Per Share.Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted earnings per
share is computed by adding the dilutive effect of any unexercised stock options, using the
treasury stock method to determine dilution.
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Weighted-average common
shares outstanding
    
    
    4,935,672
    
    
    
    4,804,982
    
    
    
    4,906,736
    
    
    
    4,157,954Dilutive shares issuable under
stock option plan
    
    
    117,908
    
    
    
    83,954
    
    
    
    117,908
    
    
    
    84,894Weighted-average common
shares on a diluted basis
    
    
    5,053,580
    
    
    
    4,888,936
    
    
    
    5,024,644
    
    
    
    4,242,848
 5.
    
    Stock Option Plans.The Company has two stock option plans permitting the granting of stock
options for up to 915,956 shares of the Companys common stock to selected officers, employees
and directors of the Company.
  8




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
 5.
    
    Stock Option Plans, Continued.The following is a summary of stock option transactions during the
six-month periods ended June 30, 2006:
 Weighted-AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term
    
    
    Value(in years)Outstanding, December 31, 2005
    
    
    700,810
    
    
    $
    12.22Granted
    
    
    20,200
    
    
    
    15.00Exercised
    
    
    (69,361
    )
    
    
    12.44Outstanding, June 30, 2006
    
    
    651,649
    
    
    $
    12.29
    
    
    
    7.3
    
    
    $
    1,766Options exercisable at June 30, 2006
    
    
    425,785
    
    
    $
    11.47
    
    
    
    6.1
    
    
    $
    1,503
 Accounting for
Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for
Stock-Based Compensation Transition and Disclosure Share-Based Payment ,
    9




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##### 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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2005Net income, as reported
    
    $
    456
    
    
    $
    982Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards
    
    
    (281
    )
    
    
    (313
    )Proforma net income
    
    $
    175
    
    
    $
    669Basic earnings per share:As reported
    
    $
    .09
    
    
    $
    .24Proforma
    
    $
    .04
    
    
    $
    .16Diluted earnings per share:As reported
    
    $
    .09
    
    
    $
    .23Proforma
    
    $
    .04
    
    
    $
    .16
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005N/A
    
    
    $
    4.98
    
    
    $
    4.79
    
    
    $
    4.97
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Average risk free rate
    
    
    N/A
    
    
    
    4.23
    %
    
    
    4.43
    %
    
    
    4.23
    %Expected life (years)
    
    
    N/A
    
    
    
    10.0
    
    
    
    7.5
    
    
    
    10.0Dividend yield
    
    
    N/A
    
    
    
    
    %
    
    
    
    %
    
    
    
    %Estimated volatility
    
    
    N/A
    
    
    
    
    %
    
    
    14.6
    %
    
    
    
    %
 6. Reclassifications .
 10




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##### 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
    
    $
    273,740Borrowings
    
    
    50,719Operating leases
    
    
    6,873Loan commitments and unused lines of credit
    
    
    78,154Standby letters of credit
    
    
    7,223Undisbursed construction loans in process
    
    
    86,024Total
    
    $
    502,733
  Regulatory Capital Requirements
  11




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
   MinimumTo Be WellCapitalized UnderMinimum Capital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    %
    
    Amount
    
    %
    
    Amount
    
    %As of June 30, 2006:Total capital to Risk-Weighted assets:Consolidated
    
    $
    68,384
    
    
    
    13.66
    %
    
    $
    40,041
    
    
    
    8.00
    %
    
    $
    50,051
    
    
    
    10.00
    %Bank
    
    $
    66,175
    
    
    
    13.23
    %
    
    $
    40,025
    
    
    
    8.00
    %
    
    $
    50,032
    
    
    
    10.00
    %Tier I Capital to Risk-Weighted Assets:Consolidated
    
    $
    63,409
    
    
    
    12.67
    %
    
    $
    20,021
    
    
    
    4.00
    %
    
    $
    30,031
    
    
    
    6.00
    %Bank
    
    $
    61,200
    
    
    
    12.23
    %
    
    $
    20,012
    
    
    
    4.00
    %
    
    $
    30,019
    
    
    
    6.00
    %Tier I Capital
to Average Assets:Consolidated
    
    $
    63,409
    
    
    
    8.98
    %
    
    $
    28,253
    
    
    
    4.00
    %
    
    $
    35,317
    
    
    
    5.00
    %Bank
    
    $
    61,200
    
    
    
    8.67
    %
    
    $
    28,245
    
    
    
    4.00
    %
    
    $
    35,306
    
    
    
    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
    %
 12




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Results of Operation
  Six Months
    
    
    
    
    
    Six MonthsEnded
    
    Year Ended
    
    EndedJune 30,
    
    December 31,
    
    June 30,2006
    
    2005
    
    2005Average equity as a percentage
of average assets
    
    
    8.18
    %
    
    
    9.19
    %
    
    
    9.57
    %Total equity to total assets at end of period
    
    
    8.22
    %
    
    
    8.16
    %
    
    
    9.54
    %Return on average assets (1)
    
    
    1.07
    %
    
    
    .59
    %
    
    
    .40
    %Return on average equity (1)
    
    
    13.11
    %
    
    
    6.45
    %
    
    
    4.20
    %Noninterest expense to average assets (1)
    
    
    1.87
    %
    
    
    1.97
    %
    
    
    2.07
    %Nonperforming loans and foreclosed assets to
total assets at end of period
    
    NIL
    
    NIL
    
    
    .01
    %
 
 (1)
    
    Annualized for the six months ended June 30, 2006 and 2005.  Six
    
    
    
    
    
    SixMonths Ended
    
    Year Ended
    
    Months EndedJune 30,
    
    December 31,
    
    June 30,2006
    
    2005
    
    2005Loans
    
    
    7.89
    %
    
    
    7.10
    %
    
    
    6.71
    %Investment securities
    
    
    4.15
    %
    
    
    3.75
    %
    
    
    3.54
    %Other interest-earning assets
    
    
    4.39
    %
    
    
    3.29
    %
    
    
    2.66
    %All interest-earning assets
    
    
    6.13
    %
    
    
    5.54
    %
    
    
    5.16
    %Savings, NOW and money-market deposits
    
    
    2.82
    %
    
    
    2.21
    %
    
    
    2.00
    %Time deposits
    
    
    4.11
    %
    
    
    3.49
    %
    
    
    3.21
    %All interest-bearing liabilities
    
    
    3.52
    %
    
    
    2.84
    %
    
    
    2.60
    %Interest-rate spread
    
    
    2.61
    %
    
    
    2.68
    %
    
    
    2.56
    %
 Changes in Financial Condition
  13




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
  Three Months Ended June 30,2006
    
    
    2005Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    and
    
    
    Yield/
    
    
    Average
    
    
    and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost($ in thousands)Interest-earning assets:Loans
    
    $
    393,918
    
    
    $
    8,119
    
    
    
    8.24
    %
    
    $
    273,119
    
    
    $
    4,679
    
    
    
    6.85
    %Securities
    
    
    179,008
    
    
    
    1,859
    
    
    
    4.15
    %
    
    
    115,131
    
    
    
    1,041
    
    
    
    3.62
    %Other (1)
    
    
    107,457
    
    
    
    1,299
    
    
    
    4.84
    %
    
    
    108,404
    
    
    
    777
    
    
    
    2.87
    %Total interest-earning assets
    
    
    680,383
    
    
    
    11,277
    
    
    
    6.39
    %
    
    
    496,654
    
    
    
    6,497
    
    
    
    5.23
    %Noninterest-earning assets
    
    
    25,010
    
    
    
    
    
    
    
    
    
    
    
    34,131Total assets
    
    $
    705,393
    
    
    
    
    
    
    
    
    
    
    $
    530,785Interest-bearing liabilities:Savings, NOW and money-market accounts
    
    
    239,513
    
    
    
    1,811
    
    
    
    3.02
    %
    
    
    197,398
    
    
    
    1,059
    
    
    
    2.15
    %Time deposits
    
    
    269,610
    
    
    
    2,959
    
    
    
    4.39
    %
    
    
    197,671
    
    
    
    1,651
    
    
    
    3.34
    %Other borrowings (2)
    
    
    26,638
    
    
    
    294
    
    
    
    4.41
    %
    
    
    4,913
    
    
    
    31
    
    
    
    2.52
    %Total interest-bearing liabilities
    
    
    535,761
    
    
    
    5,064
    
    
    
    3.78
    %
    
    
    399,982
    
    
    
    2,741
    
    
    
    2.74
    %Noninterest-bearing deposits
    
    
    109,951
    
    
    
    
    
    
    
    
    
    
    
    73,149Noninterest-bearing liabilities
    
    
    2,428
    
    
    
    
    
    
    
    
    
    
    
    2,300Stockholders equity
    
    
    57,253
    
    
    
    
    
    
    
    
    
    
    
    55,354Total liabilities and stockholders equity
    
    $
    705,393
    
    
    
    
    
    
    
    
    
    
    $
    530,785Net interest income
    
    
    
    
    
    $
    6,213
    
    
    
    
    
    
    
    
    
    
    $
    3,756Interest-rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.61
    %
    
    
    
    
    
    
    
    
    
    
    2.49
    %Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    
    
    
    
    3.03
    %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. 14




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
  Six Months Ended June 30,2006
    
    
    2005Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    and
    
    
    Yield/
    
    
    Average
    
    
    and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost($ in thousands)Interest-earning assets:Loans
    
    $
    386,280
    
    
    $
    15,539
    
    
    
    7.89
    %
    
    $
    260,284
    
    
    $
    8,738
    
    
    
    6.71
    %Securities
    
    
    180,186
    
    
    
    3,711
    
    
    
    4.15
    %
    
    
    100,641
    
    
    
    1,781
    
    
    
    3.54
    %Other (1)
    
    
    100,993
    
    
    
    2,359
    
    
    
    4.39
    %
    
    
    96,672
    
    
    
    1,285
    
    
    
    2.66
    %Total interest-earning assets
    
    
    667,459
    
    
    
    21,609
    
    
    
    6.13
    %
    
    
    457,597
    
    
    
    11,804
    
    
    
    5.16
    %Noninterest-earning assets
    
    
    24,978
    
    
    
    
    
    
    
    
    
    
    
    31,294Total assets
    
    $
    692,437
    
    
    
    
    
    
    
    
    
    
    $
    488,891Interest-bearing liabilities:Savings, NOW and money-market accounts
    
    
    240,269
    
    
    
    3,372
    
    
    
    2.82
    %
    
    
    186,556
    
    
    
    1,870
    
    
    
    2.00
    %Time deposits
    
    
    262,859
    
    
    
    5,539
    
    
    
    4.11
    %
    
    
    181,419
    
    
    
    2,914
    
    
    
    3.21
    %Other borrowings (2)
    
    
    24,279
    
    
    
    509
    
    
    
    3.82
    %
    
    
    3,626
    
    
    
    43
    
    
    
    2.37
    %Total interest-bearing liabilities
    
    
    527,407
    
    
    
    9,420
    
    
    
    3.52
    %
    
    
    371,601
    
    
    
    4,827
    
    
    
    2.60
    %Noninterest-bearing deposits
    
    
    106,153
    
    
    
    
    
    
    
    
    
    
    
    69,208Noninterest-bearing liabilities
    
    
    2,223
    
    
    
    
    
    
    
    
    
    
    
    1,274Stockholders equity
    
    
    56,654
    
    
    
    
    
    
    
    
    
    
    
    46,809Total liabilities and stockholders equity
    
    $
    692,437
    
    
    
    
    
    
    
    
    
    
    $
    488,891Net interest income
    
    
    
    
    
    $
    12,189
    
    
    
    
    
    
    
    
    
    
    $
    6,977Interest-rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.61
    %
    
    
    
    
    
    
    
    
    
    
    2.56
    %Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    
    
    
    
    3.05
    %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. 15




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 Comparison of the Three-Month Periods Ended June 30, 2006 and 2005
 General Operating Results.
 Interest Income.
 Interest Expense.
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
 Income Taxes.
 16




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##### Table of Contents



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




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##### 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.
 18




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##### 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, Use of Proceeds and
Issuer Purchases of Equity Securities
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
   Proposal I.
  For
    
    Against
    
    AbstainJ. Michael Hattway
    
    
    2,879,783
    
    
    
    
    
    
    
    James L. Hewitt
    
    
    2,879,783
    
    
    
    
    
    
    
    Vincent S. Hughes
    
    
    2,879,783
    
    
    
    
    
    
    
    David G. Powers
    
    
    2,879,783
    
    
    
    
    
    
    
    Randy O. Burden
    
    
    2,879,783
    
    
    
    
    
    
    
    
 
 Item 5.
Other Information
  19




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##### Table of Contents



UNITED HERITAGE BANKSHARES OF FLORIDA, INC.
 
 Item 6. Exhibits
  21.1
    
    -
    
    Subsidiaries of Registrant31.1
    
    -
    
    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.
 20




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##### Table of Contents



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

David G. Powers, President andChief Executive OfficerBy:
    
    /s/ Shirley L. TylerName:
    
    Shirley L. Tyler, Executive VicePresident and Treasurer
 21




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Exhibit21.1
    
    Subsidiaries of Registrant31.1
    
    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