##### 



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 Commission File No. 2-78572
 UNITED BANCORPORATION OF ALABAMA, INC.
  Delaware
    
    63-0833573(State or other jurisdiction
organization)
    
    (I.R.S.Employer Identification of incorporation or No.)
 P.O. Drawer 8, Atmore, Alabama 36504
     o þ
 o þ
 þ o
 þ
  o o þ
 o þ
   Common Stock
    
    Par Value
    
    
    
    
    Outstanding at March 27, 2006Class A
    
    $
    .01
    
    
    
    
    
    
    2,226,440
    
    Shares*Class B
    
    $
    .01
    
    
    
    
    
    
    0
    
    Shares




---



##### 



ITEM 1. BUSINESS
   www.ubankal.com.
 Competition
 Employees
 Supervision, Regulation and Government Policy




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##### 








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##### 








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##### 








---



##### 



2005
    
    
    2004
    
    
    2003AssetsCash and due from banks
    
    
    13,986
    
    
    
    7,231
    
    
    
    8,054Interest  bearing deposits
with other financial institutions
    
    
    6,847
    
    
    
    8,147
    
    
    
    8,055Federal funds sold and repurchase
agreements
    
    
    9,784
    
    
    
    3,176
    
    
    
    3,612Taxable securities available for sale
    
    
    42,604
    
    
    
    32,878
    
    
    
    27,766Tax-exempt securities available for sale
    
    
    26,117
    
    
    
    23,966
    
    
    
    20,695Loans, net
    
    
    213,311
    
    
    
    184,634
    
    
    
    163,897Premises and equipment, net
    
    
    8,179
    
    
    
    7,962
    
    
    
    7,330Interest receivable and other assets
    
    
    9,484
    
    
    
    11,118
    
    
    
    6,960Total Assets
    
    
    330,312
    
    
    
    279,112
    
    
    
    246,369Liabilities and Stockholders EquityDemand deposits-noninterest-bearing
    
    
    63,211
    
    
    
    48,950
    
    
    
    40,662Demand deposits-interest bearing
    
    
    49,350
    
    
    
    41,479
    
    
    
    31,239Savings deposits
    
    
    25,012
    
    
    
    21,034
    
    
    
    17,672Time deposits
    
    
    122,387
    
    
    
    109,333
    
    
    
    101,986Other borrowed funds
    
    
    13,500
    
    
    
    13,790
    
    
    
    15,094Repurchase agreements
    
    
    27,580
    
    
    
    17,148
    
    
    
    13,815Accrued expenses and other liabilities
    
    
    2,789
    
    
    
    1,697
    
    
    
    1,510Total liabilities
    
    
    303,829
    
    
    
    253,431
    
    
    
    221,978Stockholders EquityCommon stock
    
    
    24
    
    
    
    24
    
    
    
    24Additional Paid in Capital
    
    
    5,423
    
    
    
    5,506
    
    
    
    5,243Retained earnings
    
    
    21,942
    
    
    
    20,474
    
    
    
    19,241Accumulated other comprehensive
income net of deferred taxes
    
    
    (71
    )
    
    
    533
    
    
    
    725Less: shares held in treasury, at cost
    
    
    (835
    )
    
    
    (856
    )
    
    
    (842
    )Total stockholders equity
    
    
    26,483
    
    
    
    25,681
    
    
    
    24,391Total liabilities and stockholders equity
    
    
    330,312
    
    
    
    279,112
    
    
    
    246,369




---



##### 



(Dollars in Thousands)Interest Income
    
    
    Average RatesAverage Balance
    
    
    Expense
    
    
    Earned Paid2005Loans, net (1)
    
    
    213,311
    
    
    
    15,786
    
    
    
    7.40
    %Taxable securities available for sale
    
    
    42,604
    
    
    
    1,822
    
    
    
    4.28
    %Tax exempt sec available for sale (2)
    
    
    26,117
    
    
    
    1,575
    
    
    
    6.03
    %Federal funds sold and repurchase agreements
    
    
    9,784
    
    
    
    243
    
    
    
    2.48
    %Interest-bearing deposits with other
financial institutions
    
    
    6,847
    
    
    
    204
    
    
    
    2.98
    %Total interest-earning assets
    
    
    298,663
    
    
    
    19,630
    
    
    
    6.57
    %Saving deposits and demand deposits interest-bearing
    
    
    74,362
    
    
    
    893
    
    
    
    1.20
    %Time deposits
    
    
    122,387
    
    
    
    3,290
    
    
    
    2.69
    %Repurchase agreements
    
    
    27,580
    
    
    
    642
    
    
    
    2.33
    %Other borrowed funds
    
    
    13,500
    
    
    
    678
    
    
    
    5.02
    %Total interest-bearing liabilities
    
    
    237,829
    
    
    
    5,503
    
    
    
    2.31
    %Net interest income/net yield on interest earning assets
    
    
    
    
    
    
    14,127
    
    
    
    4.73
    %
 Interest Income
    
    
    Average RatesAverage Balance
    
    
    Expense
    
    
    Earned Paid2004Loans, net (1)
    
    
    184,634
    
    
    
    11,980
    
    
    
    6.49
    %Taxable securities available for sale
    
    
    32,878
    
    
    
    1,223
    
    
    
    3.72
    %Tax exempt sec available for sale (2)
    
    
    23,966
    
    
    
    1,500
    
    
    
    6.26
    %Federal funds sold and repurchase agreements
    
    
    3,176
    
    
    
    53
    
    
    
    1.67
    %Interest-bearing deposits with other
financial institutions
    
    
    8,147
    
    
    
    107
    
    
    
    1.31
    %Total interest-earning assets
    
    
    252,801
    
    
    
    14,863
    
    
    
    5.88
    %Saving deposits and demand deposits interest-bearing
    
    
    62,513
    
    
    
    578
    
    
    
    0.92
    %Time deposits
    
    
    109,333
    
    
    
    2,306
    
    
    
    2.11
    %Repurchase agreements
    
    
    17,148
    
    
    
    79
    
    
    
    0.46
    %Other borrowed funds
    
    
    13,790
    
    
    
    576
    
    
    
    4.18
    %Total interest-bearing liabilities
    
    
    202,784
    
    
    
    3,539
    
    
    
    1.75
    %Net interest income/net yield on interest earning assets
    
    
    
    
    
    
    11,324
    
    
    
    4.48
    %




---



##### 



Average Balance
    
    
    Expense
    
    
    Earned Paid2003Loans, net (1)
    
    
    163,897
    
    
    
    11,277
    
    
    
    6.88
    %Taxable securities available for sale
    
    
    27,766
    
    
    
    1,003
    
    
    
    3.61
    %Tax exempt sec available for sale (2)
    
    
    20,695
    
    
    
    1,423
    
    
    
    6.88
    %Federal funds sold and repurchase agreements
    
    
    3,612
    
    
    
    36
    
    
    
    1.00
    %Interest-bearing deposits with other
financial institutions
    
    
    8,055
    
    
    
    87
    
    
    
    1.08
    %Total interest-earning assets
    
    
    224,025
    
    
    
    13,826
    
    
    
    6.17
    %Saving deposits and demand deposits interest-bearing
    
    
    48,911
    
    
    
    516
    
    
    
    1.05
    %Time deposits
    
    
    101,986
    
    
    
    2,538
    
    
    
    2.49
    %Repurchase agreements
    
    
    13,815
    
    
    
    25
    
    
    
    0.18
    %Other borrowed funds
    
    
    15,094
    
    
    
    571
    
    
    
    3.78
    %Total interest-bearing liabilities
    
    
    179,806
    
    
    
    3,650
    
    
    
    2.03
    %Net interest income/net yield on interest earning assets
    
    
    
    
    
    
    10,176
    
    
    
    4.54
    %
 
 (1)
    
    Loans on nonaccrual status have been included in the computation of average balances.(2)
    
    Yields on tax-exempt obligations have been computed on a full federal tax-equivalent basis
using an income tax rate of 34% for 2005, 2004 and 2003.




---



##### 



Average Balances
    
    
    
    Expense
    
    
    
    
    
    Variance As to2005
    
    2004
    
    
    
    2005
    
    2004
    
    Variance
    
    Rate
    
    Volume$
    213,311
    
    
    
    184,634
    
    
    Loans (Net)
    
    
    15,786
    
    
    
    11,980
    
    
    
    3,806
    
    
    
    1,847
    
    
    
    1,95942,604
    
    
    
    32,878
    
    
    Taxable Securities AFS(1)
    
    
    1,822
    
    
    
    1,223
    
    
    
    599
    
    
    
    207
    
    
    
    39226,117
    
    
    
    23,966
    
    
    Tax Exempt Securities AFS (2)
    
    
    1,575
    
    
    
    1,500
    
    
    
    75
    
    
    
    (28
    )
    
    
    1039,784
    
    
    
    3,176
    
    
    Fed Funds Sold
    
    
    243
    
    
    
    53
    
    
    
    190
    
    
    
    150
    
    
    
    406,847
    
    
    
    8,147
    
    
    Interest Bearing Deposits
    
    
    204
    
    
    
    107
    
    
    
    97
    
    
    
    92
    
    
    
    5298,663
    
    
    
    252,801
    
    
    Total Interest Earning Assets
    
    
    19,960
    
    
    
    14,863
    
    
    
    4,767
    
    
    
    2,268
    
    
    
    2,499Savings and Interest Bearing74,362
    
    
    
    62,513
    
    
    Demand Deposits
    
    
    893
    
    
    
    578
    
    
    
    315
    
    
    
    252
    
    
    
    63122,387
    
    
    
    109,333
    
    
    Other Time Deposits
    
    
    3,290
    
    
    
    2,306
    
    
    
    984
    
    
    
    731
    
    
    
    25527,580
    
    
    
    17,148
    
    
    Repurchase Agreements
    
    
    642
    
    
    
    79
    
    
    
    563
    
    
    
    350
    
    
    
    21313,500
    
    
    
    13,790
    
    
    Other Borrowed Funds
    
    
    678
    
    
    
    576
    
    
    
    102
    
    
    
    62
    
    
    
    40237,329
    
    
    
    202,784
    
    
    Total Int Bearing Liabilities
    
    
    5,503
    
    
    
    3,539
    
    
    
    1,964
    
    
    
    1,395
    
    
    
    571
  
 (1)
    
    Available for Sale (AFS)(2)
    
    Yields on tax-exempt obligations have been computed on a full federal tax equivalent basis
using an income tax rate of 34% for 2005 and 2004.




---



##### 



Average Balances
    
    
    
    Expense
    
    
    
    
    
    Variance As to2004
    
    2003
    
    
    
    2004
    
    2003
    
    Variance
    
    Rate
    
    Volume$
    184,634
    
    
    
    163,897
    
    
    Loans (Net)
    
    
    11,980
    
    
    
    11,277
    
    
    
    703
    
    
    
    (571
    )
    
    
    1,27432,878
    
    
    
    27,766
    
    
    Taxable Securities AFS(1)
    
    
    1,223
    
    
    
    1,003
    
    
    
    220
    
    
    
    31
    
    
    
    18923,966
    
    
    
    20,695
    
    
    Tax Exempt Securities AFS (2)
    
    
    1,500
    
    
    
    1,423
    
    
    
    77
    
    
    
    (102
    )
    
    
    1793,176
    
    
    
    3,612
    
    
    Fed Funds Sold
    
    
    53
    
    
    
    36
    
    
    
    17
    
    
    
    21
    
    
    
    (4
    )8,147
    
    
    
    8,055
    
    
    Interest Bearing Deposits
    
    
    107
    
    
    
    87
    
    
    
    20
    
    
    
    19
    
    
    
    1252,801
    
    
    
    224,025
    
    
    Total Interest Earning Assets
    
    
    14,863
    
    
    
    13,826
    
    
    
    1037
    
    
    
    (602
    )
    
    
    1,639Savings and Interest Bearing62,513
    
    
    
    48,911
    
    
    Demand Deposits
    
    
    578
    
    
    
    516
    
    
    
    62
    
    
    
    (15
    )
    
    
    77109,333
    
    
    
    101,986
    
    
    Other Time Deposits
    
    
    2,306
    
    
    
    2,538
    
    
    
    (232
    )
    
    
    (439
    )
    
    
    20717,148
    
    
    
    13,815
    
    
    Other Borrowed Funds
    
    
    79
    
    
    
    25
    
    
    
    (54
    )
    
    
    54
    
    
    
    013,790
    
    
    
    15,094
    
    
    Repurchase Agreements
    
    
    576
    
    
    
    571
    
    
    
    5
    
    
    
    6
    
    
    
    (1
    )202,784
    
    
    
    179,806
    
    
    Total Int Bearing Liabilities
    
    
    3,539
    
    
    
    3,650
    
    
    
    (111
    )
    
    
    (395
    )
    
    
    284
   
 (1)
    
    Available for Sale (AFS)(2)
    
    Yields on tax-exempt obligations have been computed on a full federal tax equivalent basis
using an income tax rate of 34% for 2004 and 2003.




---



##### 



2005
    
    
    2004
    
    
    2003Amortized
    
    
    Percentage of
    
    
    Amortized
    
    
    Percentage of
    
    
    Amortized
    
    
    Percentage ofCost
    
    
    Portfoilio
    
    
    Cost
    
    
    Portfoilio
    
    
    Cost
    
    
    PortfoilioU. S. Treasury
    
    $
    
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %
    
    
    1,006
    
    
    
    1.9
    %U.S. Govt Agencies
    
    
    19,103
    
    
    
    26.6
    %
    
    
    8,082
    
    
    
    14.8
    %
    
    
    1,874
    
    
    
    3.5
    %Mortgage Backed Sec
    
    
    23,773
    
    
    
    33.1
    %
    
    
    22,604
    
    
    
    41.5
    %
    
    
    24,805
    
    
    
    46.9
    %State and Municpal
    
    
    28,894
    
    
    
    40.3
    %
    
    
    23,816
    
    
    
    43.7
    %
    
    
    23,729
    
    
    
    44.9
    %Other
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    1,495
    
    
    
    2.8
    %Total
    
    $
    71,770
    
    
    
    100.0
    %
    
    $
    54,502
    
    
    
    100.0
    %
    
    
    52,909
    
    
    
    100.0
    %




---



##### 



2005
    
    
    2004
    
    
    2003Amortized
    
    
    Weighted
    
    
    Amortized
    
    
    Weighted
    
    
    Amortized
    
    
    WeightedCost
    
    
    Avg Yld
    
    
    Cost
    
    
    Avg Yld
    
    
    Cost
    
    
    Avg YldUS Treasury SecWithin one year
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    1,006
    
    
    
    1.59
    %1-5 years
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %Total
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    1,006
    
    
    
    1.59
    %US Government Agencies
excluding Mortgage Backed
securitiesWithin one year
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %1-5 years
    
    
    17,103
    
    
    
    4.06
    %
    
    
    6,199
    
    
    
    3.21
    %
    
    
    
    
    
    
    0.00
    %5-10 years
    
    
    2,000
    
    
    
    4.89
    %
    
    
    1,883
    
    
    
    4.67
    %
    
    
    1,874
    
    
    
    4.68
    %After 10 years
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %Total
    
    
    19,103
    
    
    
    4.15
    %
    
    
    8,082
    
    
    
    3.55
    %
    
    
    1,874
    
    
    
    4.68
    %Mortgage Backed SecuritiesWithin one year
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %1-5 years
    
    
    4,292
    
    
    
    3.83
    %
    
    
    1,914
    
    
    
    3.61
    %
    
    
    1,910
    
    
    
    2.72
    %5-10 years
    
    
    8,358
    
    
    
    4.06
    %
    
    
    8,218
    
    
    
    3.86
    %
    
    
    9,828
    
    
    
    3.76
    %After 10 years
    
    
    11,123
    
    
    
    4.98
    %
    
    
    12,472
    
    
    
    4.26
    %
    
    
    13,067
    
    
    
    3.71
    %Total
    
    
    23,773
    
    
    
    4.45
    %
    
    
    22,604
    
    
    
    4.06
    %
    
    
    24,805
    
    
    
    3.65
    %State & Municipal (1)Within one year
    
    
    1,000
    
    
    
    3.13
    %
    
    
    165
    
    
    
    11.72
    %
    
    
    100
    
    
    
    10.85
    %1-5 years
    
    
    4,709
    
    
    
    3.76
    %
    
    
    3,606
    
    
    
    7.59
    %
    
    
    1,755
    
    
    
    8.70
    %5-10 years
    
    
    10,416
    
    
    
    4.11
    %
    
    
    8,654
    
    
    
    9.24
    %
    
    
    11,435
    
    
    
    9.63
    %After 10 years
    
    
    12,769
    
    
    
    4.01
    %
    
    
    11,391
    
    
    
    9.94
    %
    
    
    10,439
    
    
    
    10.33
    %Total
    
    
    28,894
    
    
    
    3.97
    %
    
    
    23,816
    
    
    
    9.34
    %
    
    
    23,729
    
    
    
    9.87
    %Other SecuritiesWithin one year
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    995
    
    
    
    2.39
    %1-5 years
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    500
    
    
    
    3.05
    %5-10 years
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    0
    
    
    
    0.00
    %After 10 years
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    0
    
    
    
    0.00
    %Total
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    1,495
    
    
    
    2.61
    %Totals
    
    
    71,770
    
    
    
    4.18
    %
    
    
    54,502
    
    
    
    6.28
    %
    
    
    52,909
    
    
    
    6.41
    %
 
 (1)
    
    Yields on tax-exempt obligations have been computed on a full federal tax-equivalent basis
using an
income tax rate of 34% for 2005, 2004 and 2003.




---



##### 


























---



##### 



One year
    
    
    One - five
    
    
    After fiveor less
    
    
    years
    
    
    years
    
    
    TotalCommercial, financial
and agricultural
    
    $
    68,700
    
    
    
    74,331
    
    
    
    18,401
    
    
    $
    161,432Real estate  construction
    
    
    14,123
    
    
    
    5,278
    
    
    
    81
    
    
    $
    19,482Real estate  mortgage
1-4 family
    
    
    7,275
    
    
    
    21,902
    
    
    
    6,651
    
    
    $
    35,828Installment loans to
individuals
    
    
    6,264
    
    
    
    7,144
    
    
    
    161
    
    
    $
    13,569Totals
    
    $
    96,362
    
    
    
    108,655
    
    
    
    25,294
    
    
    
    230,311
 
 Predetermined
    
    
    FloatingRate
    
    
    Rate
    
    
    TotalCommercial, financial
and agricultural
    
    $
    91,106
    
    
    
    1,626
    
    
    
    92,732Real estate  construction
    
    
    5,359
    
    
    
    
    
    
    
    5,359Real estate  mortgage
1-4 family
    
    
    19,796
    
    
    
    8,757
    
    
    
    28,553Installment loans to
individuals
    
    
    7,302
    
    
    
    3
    
    
    
    7,305Totals
    
    $
    123,563
    
    
    
    10,386
    
    
    
    133,949




---



##### 



Descriptions
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(Dollars in Thousands)A
    
    
    Loans accounted for on
a nonaccrual basis
    
    $
    1,406
    
    
    $
    1,202
    
    
    $
    2,171
    
    
    $
    1,169
    
    
    $
    2,185B
    
    
    Loans which are contractually
past due ninety days or more
as to interest or principal payments
(excluding balances included in (A)
above)
    
    
    4
    
    
    
    14
    
    
    
    15
    
    
    
    10
    
    
    
    18C
    
    
    Loans, the terms of which have been
renegotiated to provide a reduction
or deferral of interest or principal
because of a deterioration in the
financial position of the borrower.
    
    
    318
    
    
    
    351
    
    
    
    229
    
    
    
    968
    
    
    
    861D
    
    
    Other non-performing assets
    
    
    1,131
    
    
    
    1,384
    
    
    
    1,108
    
    
    
    350
    
    
    
    556Total
    
    $
    2,859
    
    
    $
    2,951
    
    
    $
    3,523
    
    
    $
    2,497
    
    
    $
    3,620




---



##### 








---



##### 



2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Average amount of loans outstanding, net
    
    
    213,311
    
    
    
    163,897
    
    
    
    152,869
    
    
    
    152,869
    
    
    
    146,868Allowance for loan losses beginning January 1
    
    
    2,562
    
    
    
    2,117
    
    
    
    2,117
    
    
    
    1,993
    
    
    
    1,939Loans Charged off:Commercial, financial and
agriculture
    
    
    (365
    )
    
    
    (155
    )
    
    
    (451
    )
    
    
    (563
    )
    
    
    (176
    )Real estate  mortgage
    
    
    
    
    
    
    (45
    )
    
    
    (117
    )
    
    
    (7
    )
    
    
    (49
    )Installment loans to
individuals
    
    
    (108
    )
    
    
    (158
    )
    
    
    (238
    )
    
    
    (195
    )
    
    
    (255
    )Total Charged off
    
    
    (473
    )
    
    
    (358
    )
    
    
    (806
    )
    
    
    (765
    )
    
    
    (480
    )Recoveries during the period
Commercial, financial and
agriculture
    
    
    2
    
    
    
    2
    
    
    
    27
    
    
    
    5
    
    
    
    20Real estate  mortgage
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    Installment loans to
individuals
    
    
    57
    
    
    
    81
    
    
    
    31
    
    
    
    47
    
    
    
    34Total Recoveries
    
    
    59
    
    
    
    83
    
    
    
    65
    
    
    
    52
    
    
    
    54Loans Charged off, net
    
    
    (414
    )
    
    
    (275
    )
    
    
    (741
    )
    
    
    (713
    )
    
    
    (426
    )Additions to the allowance charged to operations
    
    
    880
    
    
    
    720
    
    
    
    741
    
    
    
    837
    
    
    
    4803,028
    
    
    
    2,562
    
    
    
    2,117
    
    
    
    2,117
    
    
    
    1,993Ratio of net charge offs during the period to
average loans outstanding
    
    
    0.19
    %
    
    
    0.17
    %
    
    
    0.46
    %
    
    
    0.46
    %
    
    
    0.29
    %




---



##### 








---



##### 



Percentage of Loans toAllowance
    
    
    
    Total Loans2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Commercial, financial
and agricultural
    
    
    2,271
    
    
    
    1,942
    
    
    
    1,505
    
    
    
    1,453
    
    
    
    1,311
    
    
    
    
    75.0
    %
    
    
    75.8
    %
    
    
    71.1
    %
    
    
    68.6
    %
    
    
    65.8
    %Real estate  construction
    
    
    91
    
    
    
    85
    
    
    
    87
    
    
    
    107
    
    
    
    98
    
    
    
    
    3.0
    %
    
    
    3.3
    %
    
    
    4.1
    %
    
    
    5.1
    %
    
    
    4.9
    %Real estate  mortgage
1-4 family
    
    
    454
    
    
    
    374
    
    
    
    379
    
    
    
    362
    
    
    
    363
    
    
    
    
    15.0
    %
    
    
    14.6
    %
    
    
    17.9
    %
    
    
    17.1
    %
    
    
    18.2
    %Installment loans to
individuals
    
    
    212
    
    
    
    161
    
    
    
    146
    
    
    
    195
    
    
    
    221
    
    
    
    
    7.0
    %
    
    
    6.3
    %
    
    
    6.9
    %
    
    
    9.2
    %
    
    
    11.1
    %Lease financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Foreign
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Total
    
    
    3,028
    
    
    
    2,562
    
    
    
    2,117
    
    
    
    2,117
    
    
    
    1,993
    
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %




---



##### 



AverageDeposits
    
    
    Average Rate Paid2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003Noninterest-bearing
demand deposits
    
    $
    63,211
    
    
    $
    48,950
    
    
    
    40,662
    
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Interest  bearingDemand
    
    
    49,350
    
    
    
    41,479
    
    
    
    31,239
    
    
    
    1.38
    %
    
    
    1.26
    %
    
    
    1.32
    %Savings
    
    
    25,012
    
    
    
    21,034
    
    
    
    17,672
    
    
    
    0.25
    %
    
    
    0.25
    %
    
    
    0.39
    %Time
    
    
    122,387
    
    
    
    109,333
    
    
    
    101,986
    
    
    
    2.68
    %
    
    
    2.11
    %
    
    
    2.49
    %$
    196,749
    
    
    $
    171,846
    
    
    
    150,897
    
    
    
    2.05
    %
    
    
    1.68
    %
    
    
    2.00
    %




---



##### 



$100,000 or GreaterCertificates of
    
    
    Other TimeDeposits
    
    
    DepositsMaturityThree months or less
    
    $
    9,450
    
    
    
    24,195Three to six months
    
    
    10,605
    
    
    
    18,562Six to twelve months
    
    
    16,859
    
    
    
    21,215Twelve months or more
    
    
    13,747
    
    
    
    17,774Totals
    
    $
    50,661
    
    
    
    81,746




---



##### 



Maximum
    
    
    
    
    
    AverageOutstanding
    
    Average
    
    interest
    
    Ending
    
    Average interestat any month end
    
    balance
    
    rate
    
    balance
    
    rate at year end2005Securities sold under
agreements to repurchase
    
    
    34,429
    
    
    
    27,580
    
    
    
    2.30
    %
    
    
    34,429
    
    
    
    3.14
    %Other short term borrowings
    
    
    1,001
    
    
    
    346
    
    
    
    3.45
    %
    
    
    1,001
    
    
    
    3.45
    %2004Securities sold under
agreements to repurchase
    
    
    23,838
    
    
    
    17,148
    
    
    
    0.46
    %
    
    
    18,381
    
    
    
    1.27
    %Other short term borrowings
    
    
    3,250
    
    
    
    263
    
    
    
    1.82
    %
    
    
    7
    
    
    
    1.53
    %2003Securities sold under
agreements to repurchase
    
    
    23,938
    
    
    
    13,815
    
    
    
    0.18
    %
    
    
    13,495
    
    
    
    0.13
    %Other short term borrowings
    
    
    2,174
    
    
    
    258
    
    
    
    1.16
    %
    
    
    563
    
    
    
    0.96
    %




---



##### 



2005
    
    2004
    
    2003Return on average assets
    
    
    0.88
    %
    
    
    0.77
    %
    
    
    0.86
    %Return on average equity
    
    
    10.93
    %
    
    
    8.38
    %
    
    
    8.73
    %Dividend pay-out ratio
    
    
    23.08
    %
    
    
    30.87
    %
    
    
    28.34
    %Ratio of average equity to
average assets
    
    
    8.02
    %
    
    
    9.20
    %
    
    
    9.90
    %
 ITEM 1A. RISK FACTORS




---



##### 








---



##### 








---



##### 








---



##### 



(1)
    
    5,000,000 shares of Class A common stock, $.01 par value per share, of which 2,366,871 shares
are issued and 2,226,871 are outstanding and held by approximately 701 shareholders of record,
as of March 27, 2006.
 (2)
    
    250,000 shares of Class B common stock, $.01 par value per share, none of which were issued,
as of March 27, 2006.




---



##### 



Dollars in ThousandsExcept Per Share Data2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Income statement data:Interest Income
    
    $
    19,094
    
    
    $
    14,353
    
    
    $
    13,343
    
    
    $
    14,017
    
    
    $
    16,221Interest Expense
    
    
    5,503
    
    
    
    3,539
    
    
    
    3,650
    
    
    
    4,575
    
    
    
    7,451Net interest income
    
    
    13,592
    
    
    
    10,814
    
    
    
    9,693
    
    
    
    9,442
    
    
    
    8,769Provision for loan losses
    
    
    880
    
    
    
    720
    
    
    
    741
    
    
    
    837
    
    
    
    480Net interest income after
provision for loan losses
    
    
    12,712
    
    
    
    10,094
    
    
    
    8,952
    
    
    
    8,605
    
    
    
    8,289Investment securities gains
(losses), net
    
    
    34
    
    
    
    171
    
    
    
    489
    
    
    
    77
    
    
    
    173Noninterest income
    
    
    3,136
    
    
    
    3,045
    
    
    
    3,467
    
    
    
    2,726
    
    
    
    2,304Noninterest expense
    
    
    11,913
    
    
    
    10,374
    
    
    
    9,614
    
    
    
    8,693
    
    
    
    7,881Net earnings
    
    
    2,895
    
    
    
    2,153
    
    
    
    2,131
    
    
    
    2,035
    
    
    
    2,070Balance sheet data:Total assets
    
    
    369,829
    
    
    
    311,963
    
    
    
    254,979
    
    
    
    232,822
    
    
    
    219,955Total loans, net
    
    
    227,282
    
    
    
    194,617
    
    
    
    162,031
    
    
    
    160,319
    
    
    
    147,052Total deposits
    
    
    291,020
    
    
    
    250,957
    
    
    
    199,406
    
    
    
    182,565
    
    
    
    180,509Total Stockholders equity
    
    
    27,794
    
    
    
    26,345
    
    
    
    24,969
    
    
    
    23,453
    
    
    
    21,846Per share data:Basic earnings per share
    
    
    1.30
    
    
    
    0.97
    
    
    
    0.98
    
    
    
    0.93
    
    
    
    0.95Fully diluted earnings per share
    
    
    1.30
    
    
    
    0.97
    
    
    
    0.98
    
    
    
    0.91
    
    
    
    0.94Cash dividend per share*
    
    $
    0.30
    
    
    $
    0.30
    
    
    $
    0.28
    
    
    $
    0.28
    
    
    $
    0.30
 
 *Adjusted for 2-for-1 stock split effective June 2004




---



##### 








---



##### 



2005
    
    
    2004
    
    
    2003Interest income (1)
    
    $
    19,703
    
    
    
    14,863
    
    
    
    13,826Interest expense
    
    
    5,503
    
    
    
    3,539
    
    
    
    3,650Net interest income
    
    
    14,200
    
    
    
    11,324
    
    
    
    10,176Provision for loan losses
    
    
    880
    
    
    
    720
    
    
    
    741Net interest income after
provision for loan losses
on a tax equivalent basis
    
    
    13,320
    
    
    
    10,604
    
    
    
    9,435Less: tax equivalent adjustment
    
    
    609
    
    
    
    510
    
    
    
    483Net interest income after
provision for loan losses
    
    $
    12,711
    
    
    $
    10,094
    
    
    
    8,952
 
 (1)
    
    Yields on tax-exempt obligations have been computed on a full federal tax-equivalent (FTE)
basis using an income tax rate of 34% for 2005, 2004, and 2003.




---



##### 








---



##### 



2005
    
    
    2004
    
    
    2003Service Charge Income
    
    $
    831,560
    
    
    
    758,307
    
    
    
    667,547Nonsufficient Fund Charges, net
    
    $
    1,486,699
    
    
    
    1,500,874
    
    
    
    1,460,002Mortgage Origination Fees
    
    $
    241,460
    
    
    
    196,740
    
    
    
    302,836Investment Securities Gains, (net)
    
    $
    33,916
    
    
    
    170,898
    
    
    
    488,647Other
    
    $
    542,516
    
    
    
    418,099
    
    
    
    547,587$
    3,136,151
    
    
    
    3,044,918
    
    
    
    3,466,619




---



##### 



NONINTEREST EXPENSE
 2005
    
    
    2004
    
    
    2003Salaries and benefits
    
    $
    6,512,743
    
    
    
    5,779,483
    
    
    
    5,360,972Net occupancy
    
    
    2,023,492
    
    
    
    1,988,538
    
    
    
    1,828,286Other
    
    
    3,376,458
    
    
    
    2,605,966
    
    
    
    2,424,717Total
    
    $
    11,912,693
    
    
    
    10,373,987
    
    
    
    9,613,975
  th




---



##### 



2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Commercial, financial and
agriculture
    
    $
    161,432,166
    
    
    
    151,295,232
    
    
    
    115,721,929
    
    
    
    111,429,905
    
    
    
    97,881,448Real estate  construction
    
    
    19,481,344
    
    
    
    6,505,508
    
    
    
    6,791,566
    
    
    
    8,295,383
    
    
    
    7,377,897Real estate  mortgage
    
    
    35,828,254
    
    
    
    28,794,030
    
    
    
    30,324,415
    
    
    
    27,784,873
    
    
    
    27,233,771Installment loans to
indiviuals
    
    
    13,569,093
    
    
    
    12,565,675
    
    
    
    11,309,245
    
    
    
    14,926,017
    
    
    
    16,552,493Lease Financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign government and
official institutions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Banks and other financial
institutions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial and industrial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    $
    230,310,857
    
    
    
    199,160,445
    
    
    
    164,147,155
    
    
    
    162,436,178
    
    
    
    149,045,609




---



##### 








---



##### 



Less Than
    
    
    
    
    
    
    
    
    
    More Than1 Year
    
    2-3 Years
    
    4-5 Years
    
    5 YearsTime Deposits
    
    $
    100,886
    
    
    
    18,279
    
    
    
    15,248
    
    
    
    13FHLB Advances
    
    
    9
    
    
    
    0
    
    
    
    5,000
    
    
    
    4,104Long-term debt
    
    
    0
    
    
    
    4,124
    
    
    
    0
    
    
    
    0Operating Leases
    
    
    148
    
    
    
    296
    
    
    
    216
    
    
    
    107Letters of Credit
    
    
    5,712
    
    
    
    0
    
    
    
    0
    
    
    
    0Commitments to extend credit
    
    
    36,283
    
    
    
    825
    
    
    
    465
    
    
    
    461Credit Card Lines
    
    
    3,320
    
    
    
    0
    
    
    
    0
    
    
    
    0




---



##### 



Percent ChangeInterest Income/ExpenseEnding Balances
    
    
    Down 200
    
    
    Up 200as of 12/31/05
    
    
    Basis Points
    
    
    Basis PointsEarning Assets:Cash & Short-term Investments
    
    
    29,977,631
    
    
    
    -41.80
    %
    
    
    41.89
    %Investment securities, taxable
    
    
    42,989,915
    
    
    
    -10.80
    %
    
    
    6.39
    %Investment securities, tax-exempt
    
    
    28,894,269
    
    
    
    -4.20
    %
    
    
    3.36
    %Loans**
    
    
    227,282,010
    
    
    
    -18.39
    %
    
    
    17.94
    %Total Assets
    
    
    371,840,260
    
    
    
    -18.06
    %
    
    
    17.10
    %Interest Bearing Liabilities:Interest Bearing Deposits
    
    
    91,840,397
    
    
    
    -19.22
    %
    
    
    107.93
    %Certificates of Deposit less than $100,000
    
    
    85,961,902
    
    
    
    -24.72
    %
    
    
    24.72
    %Certificates of Deposit greater than $100,000
    
    
    38,165,203
    
    
    
    -20.70
    %
    
    
    20.70
    %Total Interest Bearing Deposits
    
    
    215,967,502
    
    
    
    -22.50
    %
    
    
    42.27
    %Federal funds sold & securities
purchased under agreement ot resale
    
    
    34,429,374
    
    
    
    -49.90
    %
    
    
    49.93
    %Federal Home Loan Bank borrowings
    
    
    10,113,915
    
    
    
    -6.79
    %
    
    
    6.79
    %Total Purchased Funds
    
    
    44,543,289
    
    
    
    -37.86
    %
    
    
    37.88
    %Total Liabilities
    
    
    343,219,790
    
    
    
    -25.79
    %
    
    
    41.33
    %Net Interest Income
    
    
    
    
    
    
    -14.29
    %
    
    
    5.29
    %
 
 *Information pertains to the Bank only**Includes interest rate floor contract




---



##### 








---



##### 








---



##### 



(In thousands)in
    
    
    
    
    
    Change in
    
    Change inInterest Rates
    
    Market Value
    
    Market Value
    
    Market Value(Basis Points)
    
    Equity
    
    Equity
    
    Equity Percent300
    
    $
    70,721
    
    
    
    14,888
    
    
    
    27
    %200
    
    
    66,780
    
    
    
    10,947
    
    
    
    20
    %100
    
    
    61,843
    
    
    
    6,010
    
    
    
    11
    %0
    
    
    55,833
    
    
    
    
    
    
    
    0
    %(100)
    
    
    48,864
    
    
    
    (6,969
    )
    
    
    -12
    %(200)
    
    
    40,018
    
    
    
    (15,815
    )
    
    
    -28
    %(300)
    
    
    29,751
    
    
    
    (26,082
    )
    
    
    -47
    %




---



##### 



Index to Financial Statements
    
    Page(s)Report of Independent Registered Public Accounting Firm
    
    
    F1Consolidated Balance Sheets as of December 31,
2005 and 2004
    
    
    F3Consolidated Statements of Operations for
the years ended December 31, 2005, 2004,
and 2003
    
    
    F5Consolidated Statements of Stockholders
Equity and Other Comprehensive Income
for the years ended December 31,
2005, 2004, and 2003
    
    
    F6Consolidated Statements of Cash Flows for
the years ended December 31, 2005, 2004,
and 2003
    
    
    F7Notes to Consolidated Financial
Statements  December 31, 2005, 2004,
and 2003
    
    
    F9




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
 To the Board of Directors
United Bancorporation of Alabama, Inc.
Atmore, Alabama
 United Bancorporation of
Alabama, Inc. and Subsidiary
    
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
 
     
 F-2




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 2005
    
    
    2004AssetsCash and due from banks
    
    $
    20,876,806
    
    
    $
    16,446,574Federal funds sold and securities purchased under agreements
to resell
    
    
    29,990,037
    
    
    
    27,494,426Cash and cash equivalents
    
    
    50,866,843
    
    
    
    43,941,000Securities available for sale, at fair value (amortized cost of
$71,770,277 and $54,502,411 at December 31, 2005 and 2004,
respectively)
    
    
    70,932,624
    
    
    
    55,004,982Loans
    
    
    230,310,857
    
    
    
    199,160,445Less:Allowance for loan losses
    
    
    3,028,847
    
    
    
    2,562,239Net loans
    
    
    227,282,010
    
    
    
    196,598,206Premises and equipment, net
    
    
    9,849,934
    
    
    
    7,249,946Interest receivable
    
    
    3,073,531
    
    
    
    2,711,694Intangible assets
    
    
    917,263
    
    
    
    908,336Other assets
    
    
    6,907,554
    
    
    
    5,417,060Total assets
    
    $
    369,829,759
    
    
    $
    311,831,224
 F-3




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    $
    66,774,418
    
    
    $
    68,763,895Interest bearing
    
    
    224,246,053
    
    
    
    184,174,772Total deposits
    
    
    291,020,471
    
    
    
    252,938,667Securities sold under agreements to repurchase
    
    
    34,429,374
    
    
    
    18,381,063Advances from Federal Home Loan Bank of Atlanta
    
    
    9,112,915
    
    
    
    8,292,612Treasury, tax, and loan account
    
    
    1,001,000
    
    
    
    712,768Accrued expenses and other liabilities
    
    
    2,468,890
    
    
    
    1,168,375Note payable to Trust, net of debt issuance costs
of $121,251 and $131,355
in 2005 and 2004, respectively
    
    
    4,002,749
    
    
    
    3,992,645Total liabilities
    
    
    342,035,399
    
    
    
    285,486,130Stockholders equity:Class A common stock, $0.01 par valueAuthorized 5,000,000 shares; issued and outstanding,
2,366,871 and 2,363,762 shares in 2005 and 2004, respectively
    
    
    23,669
    
    
    
    23,638Class B common stock, $0.01 par valueAuthorized 250,000 shares; no shares issued or outstanding
    
    
    0
    
    
    
    0Preferred stock of $.01 par valueAuthorized 250,000 shares; no shares issued or outstanding
    
    
    0
    
    
    
    0Additional paid in capital
    
    
    5,445,822
    
    
    
    5,444,563Accumulated other comprehensive
income (loss), net of tax
    
    
    (512,299
    )
    
    
    301,542Retained earnings
    
    
    23,642,879
    
    
    
    21,414,37028,600,071
    
    
    
    27,184,113Less: 143,307 and 147,706 treasury shares, at cost, respectively
    
    
    805,711
    
    
    
    839,019Total stockholders equity
    
    
    27,794,360
    
    
    
    26,345,094Total liabilities and stockholders equity
    
    $
    69,829,759
    
    
    $
    11,831,224
  F-4




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 2005
    
    
    2004
    
    
    2003Interest income:Interest and fees on loans
    
    $
    15,786,028
    
    
    $
    11,979,772
    
    
    $
    11,277,285Interest on investment securities available for sale:Taxable
    
    
    1,821,861
    
    
    
    1,223,185
    
    
    
    1,002,576Nontaxable
    
    
    1,039,290
    
    
    
    990,195
    
    
    
    939,453Total investment income
    
    
    2,861,151
    
    
    
    2,213,380
    
    
    
    1,942,029Other interest income
    
    
    446,971
    
    
    
    159,834
    
    
    
    123,250Total interest income
    
    
    19,094,150
    
    
    
    14,352,986
    
    
    
    13,342,564Interest expense:Interest on deposits
    
    
    4,182,554
    
    
    
    2,882,638
    
    
    
    3,053,714Interest on other borrowed funds
    
    
    1,320,086
    
    
    
    655,420
    
    
    
    596,421Total interest expense
    
    
    5,502,640
    
    
    
    3,538,058
    
    
    
    3,650,135Net interest income
    
    
    13,591,510
    
    
    
    10,814,928
    
    
    
    9,692,429Provision for loan losses
    
    
    880,000
    
    
    
    720,000
    
    
    
    740,704Net interest income after
provision for loan losses
    
    
    12,711,510
    
    
    
    10,094,928
    
    
    
    8,951,725Noninterest income:Service charge on deposits
    
    
    2,318,259
    
    
    
    2,259,181
    
    
    
    2,127,549Commission on credit life
    
    
    49,195
    
    
    
    50,016
    
    
    
    66,327Investment securities gains, net
    
    
    33,916
    
    
    
    170,898
    
    
    
    488,647Mortgage fee income
    
    
    241,460
    
    
    
    196,740
    
    
    
    306,781Other
    
    
    493,321
    
    
    
    368,083
    
    
    
    477,315Total noninterest income
    
    
    3,136,151
    
    
    
    3,044,918
    
    
    
    3,466,619Noninterest expense:Salaries and benefits
    
    
    6,512,743
    
    
    
    5,779,483
    
    
    
    5,360,972Net occupancy expense
    
    
    2,023,492
    
    
    
    1,988,538
    
    
    
    1,828,286Other
    
    
    3,376,458
    
    
    
    2,605,966
    
    
    
    2,424,717Total noninterest expense
    
    
    11,912,693
    
    
    
    10,373,987
    
    
    
    9,613,975Earnings before income tax expense
    
    
    3,934,968
    
    
    
    2,765,859
    
    
    
    2,804,369Income tax expense
    
    
    1,040,184
    
    
    
    612,602
    
    
    
    673,353Net earnings
    
    $
    2,894,784
    
    
    $
    2,153,257
    
    
    $
    2,131,016Basic earnings per share
    
    $
    1.30
    
    
    $
    0.97
    
    
    $
    0.98Basic weighted average shares outstanding
    
    
    2,220,553
    
    
    
    2,216,032
    
    
    
    2,173,970Diluted earnings per share
    
    $
    1.30
    
    
    $
    0.97
    
    
    $
    0.98Diluted weighted average shares outstanding
    
    
    2,227,583
    
    
    
    2,218,381
    
    
    
    2,174,478
  F-5




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 AccumulatedAdditional
    
    
    
    
    
    
    other
    
    
    
    
    
    
    TotalCommon
    
    
    paid in
    
    
    Retained
    
    
    comprehensive
    
    
    Treasury
    
    
    stockholders
    
    
    ComprehensiveShares
    
    
    stock
    
    
    Capital
    
    
    earnings
    
    
    income (loss)
    
    
    stock
    
    
    equity
    
    
    IncomeBalance December 31, 2002
    
    
    1,161,481
    
    
    $
    11,615
    
    
    $
    5,092,727
    
    
    $
    18,398,823
    
    
    $
    797,255
    
    
    $
    (847,116
    )
    
    $
    23,453,304Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,131,016
    
    
    
    
    
    
    
    
    
    
    
    2,131,016
    
    
    $
    2,131,016Other comprehensive loss (Note 18)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (342,584
    )
    
    
    
    
    
    
    (342,584
    )
    
    
    (342,584
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,788,432Cash dividends declared ($.28 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (603,913
    )
    
    
    
    
    
    
    
    
    
    
    (603,913
    )Exercise of stock options
    
    
    20,400
    
    
    
    204
    
    
    
    326,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    326,400Sale of 176 shares of treasury stock
    
    
    
    
    
    
    
    
    
    
    (748
    )
    
    
    
    
    
    
    
    
    
    
    5,462
    
    
    
    4,714Balance December 31, 2003
    
    
    1,181,881
    
    
    
    11,819
    
    
    
    5,418,175
    
    
    
    19,925,926
    
    
    
    454,671
    
    
    
    (841,654
    )
    
    
    24,968,937Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,153,257
    
    
    
    
    
    
    
    
    
    
    
    2,153,257
    
    
    $
    2,153,257Other comprehensive loss (Note 18)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (153,129
    )
    
    
    
    
    
    
    (153,129
    )
    
    
    (153,129
    )Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,000,128Stock Split Two for One
    
    
    1,181,881
    
    
    
    11,819
    
    
    
    (11,819
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends declared ($.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (664,813
    )
    
    
    
    
    
    
    
    
    
    
    (664,813
    )Purchase of Treasury Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,366
    )
    
    
    (30,366
    )Sale of 2,339 shares of treasury stock
    
    
    
    
    
    
    
    
    
    
    38,207
    
    
    
    
    
    
    
    
    
    
    
    33,001
    
    
    
    71,208Balance December 31, 2004
    
    
    2,363,762
    
    
    
    23,638
    
    
    
    5,444,563
    
    
    
    21,414,370
    
    
    
    301,542
    
    
    
    (839,019
    )
    
    
    26,345,094Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,894,784
    
    
    
    
    
    
    
    
    
    
    
    2,894,784
    
    
    $
    2,894,784Other comprehensive loss (Note 18)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (813,841
    )
    
    
    
    
    
    
    (813,841
    )
    
    
    (813,841
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,080,943Cash dividends declared ($.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (666,275
    )
    
    
    
    
    
    
    
    
    
    
    (666,275
    )Exercise of stock options
    
    
    2,200
    
    
    
    22
    
    
    
    22,214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,236Sale of common stock
    
    
    909
    
    
    
    9
    
    
    
    12,353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,362Treasury shares issued to
dividend reinvestment plan
    
    
    
    
    
    
    
    
    
    
    (33,308
    )
    
    
    
    
    
    
    
    
    
    
    33,308
    
    
    
    Balance December 31, 2005
    
    
    2,366,871
    
    
    $
    23,669
    
    
    $
    5,445,822
    
    
    $
    23,642,879
    
    
    $
    (512,299
    )
    
    $
    (805,711
    )
    
    $
    27,794,360
  F-6




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet earnings
    
    $
    2,894,784
    
    
    $
    2,153,257
    
    
    $
    2,131,016Adjustments to reconcile net earnings to net
cash provided by operating activities
Provision for loan losses
    
    
    880,000
    
    
    
    720,000
    
    
    
    740,704Depreciation of premises and equipment
    
    
    908,320
    
    
    
    858,498
    
    
    
    755,612Net amortization of premium on investment securities
    
    
    185,936
    
    
    
    168,199
    
    
    
    255,854Gains on sales of investment securities available for sale, net
    
    
    (33,916
    )
    
    
    (170,898
    )
    
    
    (488,647
    )Loss (gain) on sale of other real estate
    
    
    2,666
    
    
    
    (897
    )
    
    
    Writedown of other real estate
    
    
    128,201
    
    
    
    50,000
    
    
    
    Gain on disposal of equipment
    
    
    
    
    
    
    (4,850
    )
    
    
    (14,000
    )Deferred income taxes (benefit)
    
    
    (384,025
    )
    
    
    (58,147
    )
    
    
    147,215Increase in interest receivable
    
    
    (361,837
    )
    
    
    (632,804
    )
    
    
    (337,951
    )Increase in other assets
    
    
    (749,414
    )
    
    
    (2,943,919
    )
    
    
    (744,720
    )Increase in accrued expenses and other liabilities
    
    
    1,282,803
    
    
    
    1,667,234
    
    
    
    488Net cash provided by operating activities
    
    
    4,753,518
    
    
    
    1,805,673
    
    
    
    2,445,571Cash flows from investing activitiesProceeds from maturities, calls, and principal
repayments of investment securities available for sale
    
    
    10,080,772
    
    
    
    10,757,098
    
    
    
    16,828,094Proceeds from sales of investment securities available for sale
    
    
    2,827,009
    
    
    
    4,877,992
    
    
    
    13,121,623Purchases of investment securities available for sale
    
    
    (30,327,665
    )
    
    
    (17,225,998
    )
    
    
    (33,211,567
    )Net increase in loans
    
    
    (31,663,804
    )
    
    
    (35,588,112
    )
    
    
    (2,452,432
    )Purchases of premises and equipment, net
    
    
    (3,572,323
    )
    
    
    (469,311
    )
    
    
    (2,011,950
    )Proceeds from sale of premises and equipment
    
    
    
    

    
    
    4,850Proceeds from sale of other real estate
    
    
    221,363
    
    
    
    5,000
    
    
    
    192,000Net cash used in investing activities
    
    $
    (52,434,648
    )
    
    $
    (37,638,481
    )
    
    $
    (7,534,232
    )
 F-7




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 2005
    
    
    2004
    
    
    2003Cash flows from financing activitiesNet increase in deposits
    
    $
    38,081,804
    
    
    $
    53,533,085
    
    
    $
    16,840,267Net increase in securities sold under
agreements to repurchase
    
    
    16,048,311
    
    
    
    4,885,393
    
    
    
    5,355,164Cash dividends
    
    
    (666,275
    )
    
    
    (664,813
    )
    
    
    (603,911
    )Issuance of common stock
    
    
    34,598
    
    
    
    
    
    
    
    326,400Purchase of treasury stock
    
    
    
    
    
    
    (30,366
    )
    
    
    (31,115
    )Proceeds from sale of treasury stock
    
    
    
    
    
    
    71,208
    
    
    
    35,829Advances from FHLB Atlanta
    
    
    9,970,000
    
    
    
    
    
    
    
    Repayments of advances from FHLB Atlanta
    
    
    (9,149,697
    )
    
    
    (2,617,363
    )
    
    
    (617,363
    )Increase (decrease) in other borrowed funds
    
    
    288,232
    
    
    
    149,039
    
    
    
    (856,300
    )Net cash provided by financing activites
    
    
    54,606,973
    
    
    
    55,326,183
    
    
    
    20,448,971Net increase in cash and cash equivalents
    
    
    6,925,843
    
    
    
    19,493,375
    
    
    
    15,360,310Cash and cash equivalents, beginning of year
    
    
    43,941,000
    
    
    
    24,447,625
    
    
    
    9,087,315Cash and cash equivalents, end of year
    
    $
    50,866,843
    
    
    $
    43,941,000
    
    
    $
    24,447,625Supplemental disclosuresCash paid during the year for:Interest
    
    $
    5,276,123
    
    
    $
    3,492,119
    
    
    $
    3,778,217Income taxes
    
    
    1,250,000
    
    
    
    650,000
    
    
    
    903,000Noncash transactionsTransfer of loans to other real estate
through foreclosure
    
    
    100,000
    
    
    
    301,001
    
    
    
    949,303
 F-8




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
 (1) Summary of Significant Accounting Policies
 (a)
    
    Principles of Consolidation
  (b)
    
    Concentrations
   (c)
    
    Basis of Presentation
    (d)
    
    Cash Equivalents
  F-9




---



##### 



(e)
    
    Investment Securities
    (f)
    
    Loans
     F-10




---



##### 



(g)
    
    Allowance for Loan Losses
   (h)
    
    Premises and Equipment
  (i)
    
    Other Real Estate
  (j)
    
    Intangible Assets
  (k)
    
    Income Taxes
  F-11




---



##### 



(l)
    
    Stock Option Plan
    2005
    
    2004
    
    2003Reported net earnings
    
    $
    2,894,784
    
    
    $
    2,153,257
    
    
    $
    2,131,016Compensation expense, net of taxes
    
    
    23,885
    
    
    
    21,258
    
    
    
    26,287Pro forma net earnings
    
    
    2,870,899
    
    
    
    2,131,999
    
    
    
    2,104,729Reported basic earnings per share
    
    
    1.30
    
    
    
    0.97
    
    
    
    0.98Proforma basic earnings per share
    
    
    1.29
    
    
    
    0.96
    
    
    
    0.97Reported diluted earnings per share
    
    
    1.30
    
    
    
    0.97
    
    
    
    0.98Pro forma diluted earnings per share
    
    
    1.29
    
    
    
    0.96
    
    
    
    0.97
  (m)
    
    Earnings per Share and Stock Split
  (n)
    
    Business Segments
  F-12




---



##### 



(o)
    
    Derivative Financial Instruments
    (p)
    
    Recent Accounting Pronouncements
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
  F-13




---



##### 



(q)
    
    Reclassifications
  (2) Cash and Due From Banks
  F-14




---



##### 



(3) Investment Securities
  Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    value2005:U.S. government agencies,
excluding mortgagebacked
securities
    
    $
    19,103,350
    
    
    $
    692
    
    
    $
    (212,561
    )
    
    $
    18,891,481State and political subdivisions
    
    
    28,894,269
    
    
    
    266,059
    
    
    
    (313,135
    )
    
    
    28,847,193Mortgagebacked securities
    
    
    23,772,658
    
    
    
    23,699
    
    
    
    (602,407
    )
    
    
    23,193,950$
    71,770,277
    
    
    $
    290,450
    
    
    $
    (1,128,103
    )
    
    $
    70,932,6242004:U.S. government agencies,
excluding mortgagebacked
securities
    
    $
    8,081,782
    
    
    $
    27,996
    
    
    $
    (6,785
    )
    
    $
    8,102,993State and political subdivisions
    
    
    23,816,625
    
    
    
    596,909
    
    
    
    (90,042
    )
    
    
    24,323,492Mortgagebacked securities
    
    
    22,604,004
    
    
    
    144,112
    
    
    
    (169,620
    )
    
    
    22,578,496$
    54,502,411
    
    
    $
    769,017
    
    
    $
    (266,447
    )
    
    $
    55,004,981
  F-15




---



##### 



Less than 12 months
    
    
    12 months or more
    
    
    Total2005
    
    Fair Value
    
    
    Unrealized
    
    
    Fair Value
    
    
    Unrealized
    
    
    Fair Value
    
    
    UnrealizedDescription of
SecuritiesU.S. Government
agencies &
mortgage-backed
securities
    
    $
    25,507,595
    
    
    $
    392,119
    
    
    $
    13,068,556
    
    
    $
    422,849
    
    
    $
    38,576,151
    
    
    $
    814,968State and political
subdivdisions
    
    
    8,702,524
    
    
    
    121,505
    
    
    
    6,718,553
    
    
    
    191,630
    
    
    
    15,421,077
    
    
    
    313,135Total temporarily
impaired
securities
    
    $
    34,210,119
    
    
    $
    513,624
    
    
    $
    19,787,109
    
    
    $
    614,479
    
    
    $
    53,997,228
    
    
    $
    1,128,103
 Less than 12 months
    
    
    12 months or more
    
    
    Total2005
    
    Fair Value
    
    
    Unrealized
    
    
    Fair Value
    
    
    Unrealized
    
    
    Fair Value
    
    
    UnrealizedDescription of
SecuritiesU.S. Government
agencies &
mortgage-backed
securities
    
    $
    10,198,819
    
    
    $
    59,910
    
    
    $
    10,683,829
    
    
    $
    116,495
    
    
    $
    20,882,648
    
    
    $
    176,405State and political
subdivdisions
    
    
    6,848,792
    
    
    
    90,042
    
    
    
    
    
    
    
    
    
    
    
    6,848,792
    
    
    
    90,042Total temporarily
impaired
securities
    
    $
    17,047,611
    
    
    $
    149,952
    
    
    $
    10,683,829
    
    
    $
    116,495
    
    
    $
    27,731,440
    
    
    $
    266,447
   F-16




---



##### 



Amortized
    
    
    Faircost
    
    
    valueInvestment securities available for sale:Due in one year or less
    
    $
    1,000,082
    
    
    $
    996,176Due after one year through five years
    
    
    21,812,259
    
    
    
    21,601,068Due after five years through ten years
    
    
    12,416,216
    
    
    
    12,405,695Due after ten years
    
    
    12,769,062
    
    
    
    12,735,735Subtotal
    
    
    47,997,619
    
    
    
    47,738,674Mortgagebacked securities
    
    
    23,772,658
    
    
    
    23,193,950Total
    
    $
    71,770,277
    
    
    $
    70,932,624
   (4) Loans and Allowance for Loan Losses
  2005
    
    
    2004Commercial and financial
    
    $
    126,024,692
    
    
    $
    123,836,516Agricultural
    
    
    35,407,474
    
    
    
    27,458,716Real estate  construction
    
    
    19,481,344
    
    
    
    6,505,508Real estate  14 family residential mortgage
    
    
    35,828,254
    
    
    
    28,794,030Installment loans to individuals
    
    
    13,569,093
    
    
    
    12,565,675Total
    
    $
    230,310,857
    
    
    $
    199,160,445
  F-17




---



##### 



2005
    
    
    2004
    
    
    2003Balance, beginning of year
    
    $
    2,562,239
    
    
    $
    2,116,060
    
    
    $
    2,116,811Provision charged to earnings
    
    
    880,000
    
    
    
    720,000
    
    
    
    740,704Less loans chargedoff
    
    
    (472,735
    )
    
    
    (357,734
    )
    
    
    (804,067
    )Plus loan recoveries
    
    
    59,343
    
    
    
    83,913
    
    
    
    62,612Net chargeoffs
    
    
    (413,392
    )
    
    
    (273,821
    )
    
    
    (741,455
    )Balance, end of year
    
    $
    3,028,847
    
    
    $
    2,562,239
    
    
    $
    2,116,060
   (5) Premises and Equipment
  2005
    
    
    2004Land
    
    $
    2,365,033
    
    
    $
    2,281,005Buildings and leasehold improvements (depreciated over
5 to 50 years)
    
    
    6,788,752
    
    
    
    6,157,962Furniture, fixtures, and equipment (depreciated over
3 to 10 years)
    
    
    5,234,311
    
    
    
    4,562,128Automobiles (depreciated over 3 years)
    
    
    108,034
    
    
    
    108,034Construction in process
    
    
    2,170,743
    
    
    
    57,74416,666,873
    
    
    
    13,166,873Less accumulated depreciation
    
    
    6,816,939
    
    
    
    5,916,927$
    9,849,934
    
    
    $
    7,249,946
   F-18




---



##### 



(6) Intangible Assets
   (7) Deposits
  2005
    
    
    2004Noninterest bearing accounts
    
    $
    66,774,418
    
    
    $
    68,763,895NOW accounts
    
    
    55,954,938
    
    
    
    29,566,772Money market investment accounts
    
    
    13,172,550
    
    
    
    13,552,898Savings account
    
    
    22,712,909
    
    
    
    26,481,202Time deposits:Time deposits less than $100,000
    
    
    81,744,612
    
    
    
    72,196,657Time deposits greater than $100,000
    
    
    50,661,044
    
    
    
    42,377,243Total deposits
    
    $
    291,020,471
    
    
    $
    252,938,667
  2005
    
    
    2004
    
    
    2003NOW accounts
    
    $
    368,886
    
    
    $
    208,816
    
    
    $
    196,595Money market investment accounts
    
    
    313,329
    
    
    
    315,353
    
    
    
    250,294Savings accounts
    
    
    62,313
    
    
    
    52,534
    
    
    
    68,745Time deposits:Time deposit less than $100,000
    
    
    2,285,009
    
    
    
    1,718,198
    
    
    
    1,933,281Time deposit greater than $100,000
    
    
    1,153,017
    
    
    
    587,738
    
    
    
    604,799Total interest expense on deposits
    
    $
    4,182,554
    
    
    $
    2,882,638
    
    
    $
    3,053,714
 F-19




---



##### 



Due in one year
    
    $
    100,885,380Due in one to two years
    
    
    12,778,532Due in two to three years
    
    
    5,500,016Due in three to four years
    
    
    9,747,505Due in four to five years
    
    
    3,494,223$
    132,405,656
  (8) Securities Sold Under Agreements to Repurchase
  F-20




---



##### 



(9) Borrowed Funds
  2005Maturity date
    
    Interest rateJune 2006
    
    
    7.19
    %
    
    $
    8,615September 2010
    
    
    4.02
    %
    
    
    5,000,000March 2011
    
    
    4.22
    %
    
    
    2,000,000May 2012
    
    
    7.41
    %
    
    
    76,267July 2017
    
    
    6.93
    %
    
    
    780,000August 2017
    
    
    6.84
    %
    
    
    128,075June 2020
    
    
    4.62
    %
    
    
    937,667July 2020
    
    
    7.54
    %
    
    
    182,291Total (weighted average rate of 4.52%)
    
    
    
    
    
    $
    9,112,915
 2004Maturity date
    
    Interest rateJune 2006
    
    
    7.19
    %
    
    $
    25,845September 2007
    
    
    2.82
    %
    
    
    5,000,000March 2011
    
    
    4.22
    %
    
    
    2,000,000May 2012
    
    
    7.41
    %
    
    
    88,000July 2017
    
    
    6.93
    %
    
    
    845,000August 2017
    
    
    6.84
    %
    
    
    138,975July 2020
    
    
    7.54
    %
    
    
    194,792Total (weighted average rate of 3.82%)
    
    
    
    
    
    $
    8,292,612
  (10) Note Payable to Trust
  F-21




---



##### 



(11) Income Taxes
  2005
    
    2004
    
    2003Income from continuing operations
    
    $
    1,040,184
    
    
    $
    612,602
    
    
    $
    673,353Stockholders equity, for other
comprehensive income
    
    $
    542,559
    
    
    $
    102,086
    
    
    $
    (228,388
    )
  2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    1,254,044
    
    
    $
    560,929
    
    
    $
    490,776State
    
    
    170,165
    
    
    
    109,820
    
    
    
    35,362Total
    
    
    1,424,209
    
    
    
    670,749
    
    
    
    526,138Deferred:Federal
    
    
    (336,686
    )
    
    
    (40,622
    )
    
    
    129,620State
    
    
    (47,339
    )
    
    
    (17,525
    )
    
    
    17,595Total
    
    
    (384,025
    )
    
    
    (58,147
    )
    
    
    147,215Total income tax expense
    
    $
    1,040,184
    
    
    $
    612,602
    
    
    $
    673,353
 F-22




---



##### 



2005
    
    
    2004
    
    
    2003Income tax at statutory rate
    
    $
    1,337,889
    
    
    $
    940,392
    
    
    $
    955,203Increase (decrease) resulting from:Tax exempt interest
    
    
    (412,592
    )
    
    
    (377,744
    )
    
    
    (353,753
    )Interest disallowance
    
    
    30,556
    
    
    
    20,468
    
    
    
    21,127State income tax net of federal benefit
    
    
    81,065
    
    
    
    60,915
    
    
    
    34,952Premium amortization on tax exempt
investment securities
    
    
    20,928
    
    
    
    11,910
    
    
    
    7,030Cash surrendered value of life insurance
    
    
    (29,527
    )
    
    
    (31,030
    )
    
    
    (32,459
    )Other, net
    
    
    11,865
    
    
    
    (12,309
    )
    
    
    41,253$
    1,040,184
    
    
    $
    612,602
    
    
    $
    673,353
  2005
    
    
    2004Deferred tax assets:Loans, principally due to the allowance for loan losses
    
    $
    831,582
    
    
    $
    659,427Other real estate, principally due to differences in
carrying value
    
    
    62,796
    
    
    
    18,448Accrued expenses
    
    
    132,054
    
    
    
    105,118Investment securities available for sale
    
    
    343,216
    
    
    
    Other
    
    
    60,935
    
    
    
    37,771Total deferred tax assets
    
    
    1,430,583
    
    
    
    820,764Deferred tax liabilities:Premises and equipment, principally due to difference in
depreciation
    
    
    411,021
    
    
    
    560,261Investment securities available for sale
    
    
    
    
    
    
    201,024Discount accretion
    
    
    24,571
    
    
    
    20,250Other
    
    
    41,287
    
    
    
    13,790Total deferred tax liabilities
    
    
    476,879
    
    
    
    795,325Net deferred tax assets
    
    $
    953,704
    
    
    $
    25,439
  F-23




---



##### 



(12) Stock Option Plan
  WeightedaverageShares under
    
    
    exercise priceoption
    
    
    per shareBalance at December 31, 2002
    
    
    113,200
    
    
    $
    12.29Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    (40,800
    )
    
    
    8.00Balance at December 31, 2003
    
    
    72,400
    
    
    
    14.70Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Balance at December 31, 2004
    
    
    72,400
    
    
    
    14.70Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    (2,200
    )
    
    
    10.11Balance at December 31, 2005
    
    
    70,200
    
    
    
    14.50
 F-24




---



##### 



2005Weighted averageExercise price per share
    
    
    
    
    
    remaining contractualOutstanding:
    
    Shares under option
    
    
    life in years$

8.00
    
    
    4,000
    
    
    
    3.011.25
    
    
    8,160
    
    
    
    3.012.87
    
    
    8,160
    
    
    
    4.015.65
    
    
    8,160
    
    
    
    5.015.75
    
    
    33,560
    
    
    
    7.016.25
    
    
    8,160
    
    
    
    6.070,200Excercisable:$
    8.00
    
    
    4,000
    
    
    
    3.011.25
    
    
    8,160
    
    
    
    3.012.87
    
    
    8,160
    
    
    
    4.015.65
    
    
    8,160
    
    
    
    5.015.75
    
    
    26,728
    
    
    
    7.716.25
    
    
    8,160
    
    
    
    6.063,368
 2004Weighted averageExercise price per share
    
    
    
    
    
    remaining contractualOutstanding:
    
    Shares under option
    
    
    life in years$
    8.00
    
    
    5,600
    
    
    
    4.011.25
    
    
    8,160
    
    
    
    4.012.87
    
    
    8,160
    
    
    
    5.015.65
    
    
    8,160
    
    
    
    6.015.75
    
    
    34,160
    
    
    
    8.016.25
    
    
    8,160
    
    
    
    7.072,400Excercisable:$
    8.00
    
    
    5,600
    
    
    
    4.011.25
    
    
    8,160
    
    
    
    4.012.87
    
    
    8,160
    
    
    
    5.015.65
    
    
    8,160
    
    
    
    6.015.75
    
    
    18,496
    
    
    
    8.716.25
    
    
    6,528
    
    
    
    7.055,104
 F-25




---



##### 



(13) Net Earnings per Share
  2005
    
    
    2004
    
    
    2003Diluted earnings per share:Basic weighted average common shares
outstanding
    
    
    2,220,553
    
    
    
    2,216,032
    
    
    
    2,173,970Effect of the assumed exercise of stock
options-based on the treasury stock
method using average market price
    
    
    7,030
    
    
    
    2,349
    
    
    
    508Diluted weighted average
common shares outstanding
    
    
    2,227,583
    
    
    
    2,218,381
    
    
    
    2,174,478
 (14) Dividend Reinvestment and Share Purchase Plan
  (15) Employee Benefit Plans
 4 01(k) Savings Plan
  F-26




---



##### 



Profit-Sharing Plan
  Salary Continuation Plan
   Employee Stock Purchase Plan
  (16) Fair Value of Financial Instruments
   (a)
    
    Cash, Cash Equivalents, and Interest Earning Deposits With Other Financial
Institutions
  (b)
    
    Investment Securities and Other Securities
  F-27




---



##### 



(c)
    
    Loans
  (d)
    
    Bank Owned Life Insurance
  (e)
    
    Deposits
   (f)
    
    Securities Sold Under Agreements to Repurchase
  (g)
    
    FHLB, Other Borrowed Funds and Subordinated Debt
  (h)
    
    Accrued Interest
  (i)
    
    Commitments to Extend Credit and Standby Letters of Credit
   F-28




---



##### 



2005
    
    2004Carrying
    
    Estimated
    
    Carrying
    
    Estimatedamount
    
    fair value
    
    amount
    
    fair value(Dollars in Thousands)Financial assets:Cash and shortterm
investments
    
    $
    50,867
    
    
    $
    50,867
    
    
    $
    43,941
    
    
    $
    43,941Investment securities
    
    
    70,933
    
    
    
    70,933
    
    
    
    55,005
    
    
    
    55,005Other securities
    
    
    1,660
    
    
    
    1,660
    
    
    
    1,276
    
    
    
    1,276Loans, net of the
allowance for loan losses
    
    
    227,282
    
    
    
    231,383
    
    
    
    196,598
    
    
    
    195,651Bank owned life insurance
    
    
    2,330
    
    
    
    2,330
    
    
    
    2,255
    
    
    
    2,255Accured interest receivable
    
    
    3,074
    
    
    
    3,074
    
    
    
    2,712
    
    
    
    2,712Financial liabilities:Deposits
    
    
    291,020
    
    
    
    291,250
    
    
    
    252,939
    
    
    
    253,182Securities sold under
agreements to repurchase
    
    
    34,429
    
    
    
    34,429
    
    
    
    18,381
    
    
    
    18,381Other borrowed funds
    
    
    1,001
    
    
    
    1,001
    
    
    
    713
    
    
    
    713FHLB advances
    
    
    9,113
    
    
    
    9,205
    
    
    
    8,293
    
    
    
    8,487Subordinated Debt
    
    
    4,003
    
    
    
    4,003
    
    
    
    3,993
    
    
    
    3,993Accrued interest payable
    
    
    596
    
    
    
    596
    
    
    
    379
    
    
    
    379
 F-29




---



##### 



(17) Dividends From Bank
  (18) Comprehensive Income (Loss)
  Years ended December 312005
    
    
    2004
    
    
    2003Other comprehensive income before tax:Unrealized holding losses arising during
the period for securities, net
    
    $
    (1,306,310
    )
    
    $
    (84,317
    )
    
    $
    (1,059,620
    )Less reclassification adjustment for gains
on sales of securities included in net earnings
    
    
    33,916
    
    
    
    170,898
    
    
    
    488,647Unrealized holding losses arising during
the period for cash flow hedges
    
    
    (16,174
    )
    
    
    
    
    
    
    Other comprehensive income (loss),
before income taxes
    
    
    (1,356,400
    )
    
    
    (255,215
    )
    
    
    (570,973
    )Income tax expense related to other
comprehensive income:Unrealized holding losses arising during
the period for securities, net
    
    
    (522,523
    )
    
    
    (33,727
    )
    
    
    (423,848
    )Less reclassification adjustment for gains
on sales of securities included in net earnings
    
    
    13,566
    
    
    
    68,359
    
    
    
    195,459Unrealized holding losses arising during
the period for cash flow hedges
    
    
    (6,470
    )
    
    
    
    
    
    
    Total income tax expense related
to other comprehensive income (loss)
    
    
    (542,559
    )
    
    
    (102,086
    )
    
    
    (228,389
    )Other comprehensive income (loss)
after taxes
    
    $
    (813,841
    )
    
    $
    (153,129
    )
    
    $
    (342,584
    )
 F-30




---



##### 



(19)
    
    Litigation
  (20)
    
    Commitments
  Years ending December 31:2006
    
    $
    148,1042007
    
    
    148,1042008
    
    
    148,1042009
    
    
    107,9042010
    
    
    107,904Thereafter
    
    
    107,904$
    768,024
     Commitments to extend credit
    
    $
    38,034,000Standby letters of credit
    
    
    5,712,000
 F-31




---



##### 



(21)
    
    Other Noninterest Income and Expense
  2005
    
    2004
    
    2003Advertising
    
    $
    279,233
    
    
    $
    252,103
    
    
    $
    225,609Accounting and audit
    
    
    228,316
    
    
    
    180,915
    
    
    
    140,145Supplies expenses
    
    
    24,567
    
    
    
    213,213
    
    
    
    232,192Board fees
    
    
    180,095
    
    
    
    198,024
    
    
    
    169,205
 (22)
    
    Regulatory Matters
     F-32




---



##### 



Total Qualifying Capital
    
    Tier I Capital
    
    LeverageAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2005:United Bancorporation
    
    $
    34,418
    
    
    
    13.03
    %
    
    $
    31,389
    
    
    
    11.89
    %
    
    $
    31,389
    
    
    
    8.86
    %United Bank
    
    
    31,132
    
    
    
    11.82
    %
    
    
    28,103
    
    
    
    10.67
    %
    
    
    28,103
    
    
    
    7.93
    %As of December 31, 2004:United Bancorporation
    
    $
    31,827
    
    
    
    14.12
    %
    
    $
    29,265
    
    
    
    12.99
    %
    
    $
    29,265
    
    
    
    9.93
    %United Bank
    
    
    28,062
    
    
    
    12.65
    %
    
    
    25,500
    
    
    
    11.50
    %
    
    
    25,500
    
    
    
    8.60
    %
 (23)
    
    Derivative Financial Instruments
  F-33




---



##### 



(24)
    
    Parent Company Financial Information
  2005
    
    
    2004AssetsCash
    
    $
    447,885
    
    
    $
    563,467Premises and equipment
    
    
    3,141,329
    
    
    
    3,285,628Investment in subsidiary
    
    
    28,507,890
    
    
    
    26,708,355Other assets
    
    
    124,000
    
    
    
    124,000Total assets
    
    $
    32,221,104
    
    
    $
    30,681,450Liabilities and Stockholders EquityOther liabilities
    
    $
    423,995
    
    
    $
    343,711Note payable to Trust
    
    
    4,002,749
    
    
    
    3,992,645Total liabilities
    
    
    4,426,744
    
    
    
    4,336,356Stockholders equity:Class A common stock of $0.01 par value. Authorized
5,000,000 shares; issued 2,366,871 and 2,363,762 shares
in 2005 and 2004, respectively
    
    
    23,669
    
    
    
    23,638Class B common stock of $0.01 par value. Authorized
250,000 shares; no shares issued
    
    
    
    
    
    
    Preferred stock of $.01 par value. Authorized 250,000
shares; no shares issued
    
    
    
    
    
    
    Additional paidin capital
    
    
    5,445,822
    
    
    
    5,444,563Retained earnings
    
    
    23,642,879
    
    
    
    21,414,370Accumulated other comprehensive income (loss), net of tax
    
    
    (512,299
    )
    
    
    301,542Less: 143,307 and 147,706 treasury shares at cost in 2005
and 2004, respectively
    
    
    805,711
    
    
    
    839,019Total stockholders equity
    
    
    27,794,360
    
    
    
    26,345,094Total liabilities and stockholders equity
    
    $
    32,221,104
    
    
    $
    30,681,450
 F-34




---



##### 



2005
    
    
    2004
    
    
    2003Income:Cash dividends from subsidiary
    
    $
    748,579
    
    
    $
    902,224
    
    
    $
    332,189Other
    
    
    143,251
    
    
    
    131,870
    
    
    
    78,055Expense:Interest on other borrowed funds
    
    
    304,434
    
    
    
    225,271
    
    
    
    199,392Other
    
    
    304,801
    
    
    
    347,087
    
    
    
    272,024Earnings (losses) before equity in
undistributed earnings of
subsidiary
    
    
    282,595
    
    
    
    461,736
    
    
    
    (61,172
    )Equity in undistributed earnings
of subsidiary
    
    
    2,612,189
    
    
    
    1,691,521
    
    
    
    2,192,188Net earnings
    
    $
    2,894,784
    
    
    $
    2,153,257
    
    
    $
    2,131,016
 F-35




---



##### 



2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net earnings
    
    $
    2,894,784
    
    
    $
    2,153,257
    
    
    $
    2,131,016Adjustments to reconcile net earnings to
net cash provided by (used in) operating
activities:Equity in undistributed earnings of
subsidiary
    
    
    (2,612,189
    )
    
    
    (1,691,521
    )
    
    
    (2,192,188
    )Depreciation of premies and equipment
    
    
    144,648
    
    
    
    131,148
    
    
    
    Amortization of Trust Perferred Cost
    
    
    10,104
    
    
    
    10,104
    
    
    
    Increase (decrease) in other liabilities
    
    
    78,748
    
    
    
    (5,522
    )
    
    
    21,134Decrease (increase) in receivables
    
    
    
    
    
    
    332,189
    
    
    
    (332,189
    )Net cash provided by (used in)
operating activities
    
    
    516,095
    
    
    
    929,655
    
    
    
    (372,227
    )Cash flows from investing activities:Purchases of premises and equipment, net
    
    
    
    
    
    
    (123,421
    )
    
    
    (1,604,004
    )Net cash used in investing
activities
    
    
    
    
    
    
    (123,421
    )
    
    
    (1,604,004
    )Cash flows from financing activities:Cash dividends
    
    
    (666,275
    )
    
    
    (664,813
    )
    
    
    (603,914
    )Purchase of treasury stock
    
    
    
    
    
    
    (30,366
    )
    
    
    Proceeds from sale of treasury stock
    
    
    
    
    
    
    71,208
    
    
    
    5,462Issuance of common stock
    
    
    34,598
    
    
    
    
    
    
    
    325,652Net cash used in
financial activities
    
    
    (631,677
    )
    
    
    (623,971
    )
    
    
    (272,800
    )Net increase (decrease)
in cash
    
    
    (115,582
    )
    
    
    182,263
    
    
    
    (2,249,031
    )Cash, beginning of year
    
    
    563,467
    
    
    
    381,204
    
    
    
    2,630,235Cash, end of year
    
    $
    447,885
    
    
    $
    563,467
    
    
    $
    381,204
 F-36




---



##### 



SELECTED QUARTERLY FINANCIAL DATA 2005  2004  (Dollars in thousands, except for per share amounts)
 2005
    
    2004Dec. 31
    
    Sep. 30
    
    Jun. 30
    
    Mar. 31
    
    Dec. 31
    
    Sep. 30
    
    Jun. 30
    
    Mar. 31Net interest income
    
    $
    3,625
    
    
    $
    3,549
    
    
    $
    3,391
    
    
    $
    3,027
    
    
    $
    2,955
    
    
    $
    2,771
    
    
    $
    2,617
    
    
    $
    2,472Provision for loan losses
    
    
    195
    
    
    
    295
    
    
    
    195
    
    
    
    195
    
    
    
    180
    
    
    
    180
    
    
    
    180
    
    
    
    180Earnings before income tax expense
    
    
    1,054
    
    
    
    1,111
    
    
    
    925
    
    
    
    845
    
    
    
    698
    
    
    
    864
    
    
    
    566
    
    
    
    638Income tax expense
    
    
    301
    
    
    
    251
    
    
    
    295
    
    
    
    193
    
    
    
    128
    
    
    
    229
    
    
    
    79
    
    
    
    177Net earnings
    
    
    753
    
    
    
    860
    
    
    
    630
    
    
    
    652
    
    
    
    570
    
    
    
    635
    
    
    
    487
    
    
    
    461Net earnings per share (basic and diluted)
    
    $
    0.34
    
    
    $
    0.39
    
    
    $
    0.28
    
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.29
    
    
    $
    0.22
    
    
    $
    0.22Cash dividends declared per share
    
    
    0.17
    
    
    
    
    
    
    
    0.13
    
    
    
    
    
    
    
    0.15
    
    
    
    
    
    
    
    0.15
    
    
    Total Assets
    
    $
    369,830
    
    
    $
    399,019
    
    
    $
    323,920
    
    
    $
    315,055
    
    
    $
    311,831
    
    
    $
    281,102
    
    
    $
    278,631
    
    
    
    $267,004




---



##### 








---



##### 



(a)
    
    
    (1
    )
    
    The financial statements listed in the Index to Financial
Statements contained in Item 8 hereof are filed as part
of this Annual Report on Form 10-K.(2
    )
    
    Financial statement schedules have been omitted as inapplicable.(3
    )
    
    The Exhibits listed below are filed as part of this
Report. Management contracts and compensatory plans and arrangements required to be
filed pursuant to Item 15(b) are identified by an asterisk (*).3.1
    
    
    Restated Certificate of Incorporation of the Registrant
(Incorporated by reference herein from Exhibit 3a to the
Registrants Annual Report on Form 10-K for the fiscal
year ended December 31, 1988).3.1.1
    
    
    Certificate of Amendment to Restated Certificate of Incorporation Of the
Registrant(Incorporated by reference herein from Exhibit 3.1.1 to Registrants Quarterly
Report on Form 10-Q for the Quarter Ended March 31, 1999).3.2
    
    
    Amended and Restated Bylaws of the Registrant (Incorporated by reference herein
from Exhibit 3.2 to the Registrants Annual Report on Form 10-K for the fiscal year
ended December 31, 1992).10.1
    
    
    Form of Employment Agreement between United Bank and
Robert R. Jones, III(Incorporated by reference herein
from Exhibit 10.1 to the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.*10.2
    
    
    Supplemental Agreement between United Bank, the
Registrant and Robert R. Jones, III (Incorporated by reference herein from Exhibit
10.2 to the Registrants Annual Report on Form 10-K for the fiscal year ended December
31, 1998)*.10.3
    
    
    1998 Stock Option Plan of United Bancorporation of Alabama, Inc. (Incorporated by
reference herein from Exhibit 3.1.1 to Registrants Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1999).10.4
    
    
    1999 Employee Stock Purchase Plan of United Bancorporation of Alabama, Inc.
(incorporated herein by reference from appendix A to the Registrants definitive
proxy statement dated April 10, 2000)*.10.5
    
    
    Supplemental Compensation Agreement and Amendment Agreement between United Bank and
Robert R. Jones, III (Incorporated by reference herein from Exhibit 10.4 to the
Registrants Quarterly




---



##### 



Report on Form 10-Q for the Quarter Ended June 30, 2001).*10.6
    
    
    Placement Agreement for Floating Rate Cumulative Trust Preferred Securities of United Bancorp
Capital Trust I effective as of June 27, 2002 among the Registrant, United Bancorp Capital
Trust I and SAMCO Capital Markets, a division of Service Asset Management Company
(Incorporated by reference herein from Exhibit 1.1 to the Registrants report on Form 8-K
dated June 27, 2002).10.7
    
    
    Indenture effective as of June 27, 2002, by and between the Registrant and Wells Fargo Bank,
National Association, as Trustee (Incorporated by reference herein from Exhibit 4.1 to the
Registrants report on Form 8-K dated June 27, 2002).10.8
    
    
    United Bancorp Capital Trust I Amended and Restated Trust Agreement effective as of June 27,
2002, among the Registrant as Depositor, Wells Fargo Bank, National Association, as Property
Trustee, Wells Fargo Delaware Trust Company, as Resident Trustee and Robert R. Jones, III,
Mitchell D. Staples and Charles E. Karrick, as Administrative Trustees (Incorporated by
reference herein from Exhibit 4.2 to the Registrants report on Form 8-K dated June 27, 2002).10.9
    
    
    Trust Preferred Securities Guarantee Agreement effective as of June 27, 2002, by and between
the Registrant and Wells Fargo Bank, National Association (Incorporated by reference herein
from Exhibit 4.3 to the Registrants report on Form 8-K dated June 27, 2002).21
    
    
    Subsidiaries of the Registrant.23.1
    
    
    Consent of Independent Registered Public Accounting Firm (Mauldin & Jenkins, LLC)23.2
    
    
    Consent of Independent Registered Public Accounting Firm (KPMG LLP)31.1
    
    
    Certification of Chief Executive Officer under Securities Exchange Act Rules 13a-15(e) and
15d-15(e)31.2
    
    
    Certification of Chief Financial Officer under Securities Exchange Act Rules 13a-15(e) and
15d-15(e)32.1
    
    
    Certificate pursuant to 18 U.S.C Section 135032.2
    
    
    Certificate pursuant to 18 U.S.C Section 1350




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.(Registrant)BY:
    
    /s/Robert R. Jones, IIIRobert R. Jones, IIIPresident and Chief Executive OfficerMarch 30, 2006
  SIGNATURES
    
    CAPACITY IN WHICH SIGNED
    
    DATE/s/ Robert R. Jones, III
    
    President, Chief
    
    March 30, 2006Robert R. Jones, III
    
    Executive Officer, andDirector/s/ Robert R. Jones, III
    
    
    
    March 30, 2006Robert R. Jones, III
    
    Interim Principal Financial andPrincipal Accounting Officer/s/ H. Leon Esneul
    
    Director
    
    March 30, 2006H. Leon Esneul/s/ David D. Swift
    
    Director
    
    March 30, 2006David D. Swift/s/ William J. Justice
    
    Director
    
    March 30, 2006William J. Justice/s/ Dale M. Ash
    
    Director
    
    March 30, 2006Dale M. Ash/s/ Michael Andreoli
    
    Director
    
    March 30, 2006Michael Andreoli/s/ L. Walter Crim
    
    Director
    
    March 30, 2006L. Walter Crim




---



##### 



INDEX TO EXHIBITS
 Exhibit21
    
    Subsidiaries of the registrant23.1
    
    Consent of Independent Registered Public Accounting Firm (Mauldin & Jenkins, LLC)23.2
    
    Consent of Independent Registered Public Accounting Firm (KPMG LLP)31.1
    
    Certification of Chief Executive Officer under Securities
Exchange Act Rules 13a-15(e) and 15d-15(e)31.2
    
    Certification of Chief Financial Officer under Securities
Exchange Act Rules 13a-15(e) and 15d-15(e)32.1
    
    Certificate pursuant to 18 U.S.C Section 135032.2
    
    Certificate pursuant to 18 U.S.C Section 1350