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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, 2009
 Commission File No. 000-25917
 UNITED BANCORPORATION OF ALABAMA, INC.
  Delaware
    
    63-0833573(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S.Employer Identification No.)
 P.O. Drawer 8, Atmore, Alabama 36504
     o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
   Common Stock
    
    Par Value
    
    Outstanding at March 30, 2010Class A..........$.01
    
    
    
    
    2,279,669
    
    
    Shares*Class B..........$.01
    
    
    
    
    0
    
    
    Shares
 
 *
    
    Excludes 109,323 shares held as treasury stock.




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A(T). CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESSIGNATURESINDEX TO EXHIBITSEX-21EX-23EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1EX-99.2    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
 Forward-Looking Statements
  United Bancorporation of Alabama, Inc. and United Bank
   www.unitedbank.com
 2




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Competition
 Employees
 Supervision, Regulation and Government Policy
     3




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Selected Statistical Information
  (Dollars in Thousands)Interest Income
    
    
    Average Rates2009
    
    Average Balance
    
    
    Expense
    
    
    Earned PaidLoans, net (1)
    
    $
    286,548
    
    
    $
    17,014
    
    
    
    5.96
    %Taxable securities
    
    
    65,760
    
    
    
    2,284
    
    
    
    3.47
    %Tax exempt securities (2)
    
    
    30,579
    
    
    
    1,232
    
    
    
    6.10
    %Federal funds sold and repurchase agreements
    
    
    14,141
    
    
    
    39
    
    
    
    0.28
    %Interest-bearing deposits with other
financial institutions
    
    
    38,594
    
    
    
    208
    
    
    
    0.54
    %Total interest-earning assets
    
    $
    435,622
    
    
    $
    20,777
    
    
    
    4.93
    %Saving deposits and demand deposits interest-bearing
    
    $
    106,441
    
    
    $
    703
    
    
    
    0.66
    %Time deposits
    
    
    196,591
    
    
    
    6,067
    
    
    
    3.09
    %Repurchase agreements
    
    
    5
    
    
    
    
    
    
    
    0.00
    %Other borrowed funds
    
    
    12,210
    
    
    
    359
    
    
    
    2.94
    %Total interest-bearing liabilities
    
    $
    315,247
    
    
    $
    7,129
    
    
    
    2.26
    %Net interest income/net yield on interest earning assets
    
    
    
    
    
    $
    13,648
    
    
    
    3.28
    %
 Interest Income
    
    
    Average Rates2008
    
    Average Balance
    
    
    Expense
    
    
    Earned PaidLoans, net (1)
    
    $
    287,491
    
    
    $
    19,557
    
    
    
    6.80
    %Taxable securities
    
    
    84,813
    
    
    
    3,062
    
    
    
    3.61
    %Tax exempt securities (2)
    
    
    33,903
    
    
    
    1,360
    
    
    
    6.08
    %Federal funds sold and repurchase agreements
    
    
    9,204
    
    
    
    179
    
    
    
    1.94
    %Interest-bearing deposits with other
financial institutions
    
    
    14,766
    
    
    
    343
    
    
    
    2.32
    %Total interest-earning assets
    
    $
    430,177
    
    
    $
    24,501
    
    
    
    5.86
    %Saving deposits and demand deposits interest-bearing
    
    $
    99,969
    
    
    $
    1,429
    
    
    
    1.43
    %Time deposits
    
    
    194,524
    
    
    
    7,944
    
    
    
    4.08
    %Repurchase agreements
    
    
    68,257
    
    
    
    834
    
    
    
    1.22
    %Other borrowed funds
    
    
    12,648
    
    
    
    672
    
    
    
    5.31
    %Total interest-bearing liabilities
    
    $
    375,398
    
    
    $
    10,879
    
    
    
    2.90
    %Net interest income/net yield on interest earning assets
    
    
    
    
    
    $
    13,622
    
    
    
    3.33
    %
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Interest Income
    
    
    Average RatesInterest Income
    
    
    Average Rates2007
    
    Average Balance
    
    
    Expense
    
    
    Earned PaidLoans, net (1)
    
    $
    251,348
    
    
    $
    21,195
    
    
    
    8.43
    %Taxable securities
    
    
    73,682
    
    
    
    3,662
    
    
    
    4.97
    %Tax exempt securities (2)
    
    
    35,750
    
    
    
    1,428
    
    
    
    6.05
    %Federal funds sold and repurchase
agreements
    
    
    5,230
    
    
    
    258
    
    
    
    4.93
    %Interest-bearing deposits with other
financial institutions
    
    
    12,832
    
    
    
    667
    
    
    
    5.20
    %Total interest-earning assets
    
    $
    378,842
    
    
    $
    27,210
    
    
    
    7.38
    %Saving deposits and demand deposits
interest-bearing
    
    $
    90,123
    
    
    $
    2,052
    
    
    
    2.28
    %Time deposits
    
    
    174,009
    
    
    
    8,407
    
    
    
    4.83
    %Repurchase agreements
    
    
    40,909
    
    
    
    1,708
    
    
    
    4.18
    %Other borrowed funds
    
    
    18,318
    
    
    
    1,396
    
    
    
    7.62
    %Total interest-bearing liabilities
    
    $
    323,359
    
    
    $
    13,563
    
    
    
    4.19
    %Net interest income/net
yield on interest earning assets
    
    
    
    
    
    $
    13,647
    
    
    
    3.80
    %
 
 (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 2009, 2008, and 2007. 10




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(Dollars in Thousands)Interest IncomeAverage Balances
    
    
    
    
    Expense
    
    
    
    
    
    
    Variance as to2009
    
    
    2008
    
    
    
    
    2009
    
    
    2008
    
    
    Variance
    
    
    Rate
    
    
    Volume$
    286,548
    
    
    $
    287,491
    
    
    Loans (Net)
    
    $
    17,014
    
    
    $
    19,557
    
    
    $
    (2,543
    )
    
    $
    (219
    )
    
    $
    (2,324
    )65,760
    
    
    
    84,813
    
    
    Taxable SecuritiesAFS (1)
    
    
    2,284
    
    
    
    3,062
    
    
    
    (778
    )
    
    
    (801
    )
    
    
    2330,579
    
    
    
    33,903
    
    
    Tax Exempt Securities AFS (2)
    
    
    1,232
    
    
    
    1,360
    
    
    
    (128
    )
    
    
    (137
    )
    
    
    914,141
    
    
    
    9,204
    
    
    Fed Funds Sold
    
    
    39
    
    
    
    179
    
    
    
    (140
    )
    
    
    59
    
    
    
    (199
    )38,594
    
    
    
    14,766
    
    
    Interest Bearing Deposits
    
    
    208
    
    
    
    343
    
    
    
    (135
    )
    
    
    281
    
    
    
    (416
    )$
    435,622
    
    
    $
    430,177
    
    
    Total Earning Assets
    
    $
    20,777
    
    
    $
    24,501
    
    
    $
    (3,724
    )
    
    $
    (817
    )
    
    $
    (2,907
    )Savings and Interest Bearing$
    106,441
    
    
    $
    99,969
    
    
    Demand Deposits
    
    $
    703
    
    
    $
    1,429
    
    
    $
    (726
    )
    
    $
    56
    
    
    $
    (782
    )196,591
    
    
    
    194,524
    
    
    Time Deposits
    
    
    6,067
    
    
    
    7,944
    
    
    
    (1,877
    )
    
    
    764
    
    
    
    (2,641
    )5
    
    
    
    68,257
    
    
    Repurchase Agreements
    
    
    
    
    
    
    834
    
    
    
    (834
    )
    
    
    (416
    )
    
    
    (418
    )12,210
    
    
    
    12,648
    
    
    Other Borrowed Funds
    
    
    359
    
    
    
    672
    
    
    
    (313
    )
    
    
    3
    
    
    
    (316
    )$
    315,247
    
    
    $
    375,398
    
    
    Total Interest Bearing Liabilities
    
    $
    7,129
    
    
    $
    10,879
    
    
    $
    (3,750
    )
    
    $
    407
    
    
    $
    (4,157
    )
  
 (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 2009, 2008, and 2007. 11




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Analysis of Changes in Interest Income and Interest Expense
 (Dollars in Thousands)Interest IncomeAverage Balances
    
    
    
    
    Expense
    
    
    
    
    
    
    Variance as to2008
    
    
    2007
    
    
    
    
    2008
    
    
    2007
    
    
    Variance
    
    
    Rate
    
    
    Volume$
    287,491
    
    
    $
    251,348
    
    
    Loans (Net)
    
    $
    19,557
    
    
    $
    21,195
    
    
    $
    (1,638
    )
    
    $
    (3,942
    )
    
    $
    2,30484,813
    
    
    
    73,682
    
    
    Taxable SecuritiesAFS (1)
    
    
    3,062
    
    
    
    3,662
    
    
    
    (600
    )
    
    
    (1,075
    )
    
    
    47533,903
    
    
    
    35,750
    
    
    Tax Exempt Securities AFS (2)
    
    
    1,360
    
    
    
    1,428
    
    
    
    (68
    )
    
    
    38
    
    
    
    (106
    )9,204
    
    
    
    5,230
    
    
    Fed Funds Sold
    
    
    179
    
    
    
    258
    
    
    
    (79
    )
    
    
    (220
    )
    
    
    14114,766
    
    
    
    12,832
    
    
    Interest Bearing Deposits
    
    
    343
    
    
    
    667
    
    
    
    (324
    )
    
    
    (784
    )
    
    
    460$
    430,177
    
    
    $
    378,842
    
    
    Total Earning Assets
    
    $
    24,501
    
    
    $
    27,210
    
    
    $
    (2,709
    )
    
    $
    (5,983
    )
    
    $
    3,274Savings and Interest Bearing$
    99,969
    
    
    $
    90,123
    
    
    Demand Deposits
    
    $
    1,429
    
    
    $
    2,052
    
    
    $
    (623
    )
    
    $
    (910
    )
    
    $
    287194,524
    
    
    
    174,009
    
    
    Time Deposits
    
    
    7,944
    
    
    
    8,407
    
    
    
    (463
    )
    
    
    (790
    )
    
    
    32768,257
    
    
    
    40,909
    
    
    Repurchase Agreements
    
    
    834
    
    
    
    1,708
    
    
    
    (874
    )
    
    
    (1,620
    )
    
    
    74612,648
    
    
    
    18,318
    
    
    Other Borrowed Funds
    
    
    672
    
    
    
    1,396
    
    
    
    (724
    )
    
    
    (271
    )
    
    
    (453
    )$
    375,398
    
    
    $
    323,359
    
    
    Total Interest Bearing Liabilities
    
    $
    10,879
    
    
    $
    13,563
    
    
    $
    (2,684
    )
    
    $
    (3,591
    )
    
    $
    907
  
 (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 2008 and 2007. Investments
 Securities Portfolio
 12




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2009
    
    
    2008
    
    
    2007U.S. Treasury
securitiesWithin one year
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %1-5 years
    
    
    3,027
    
    
    
    1.06
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %5-10 years
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %After 10 years
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %Total
    
    $
    3,027
    
    
    
    1.06
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %US Government
sponsored agenciesWithin one year
    
    $
    
    
    
    
    0.00
    %
    
    $
    16,520
    
    
    
    0.99
    %
    
    $
    22,434
    
    
    
    4.28
    %1-5 years
    
    
    24,997
    
    
    
    3.12
    %
    
    
    7,662
    
    
    
    4.63
    %
    
    
    14,236
    
    
    
    4.73
    %5-10 years
    
    
    11,472
    
    
    
    3.93
    %
    
    
    15,371
    
    
    
    5.35
    %
    
    
    21,943
    
    
    
    5.49
    %After 10 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,002
    
    
    
    5.75
    %Total
    
    $
    36,469
    
    
    
    3.37
    %
    
    $
    39,553
    
    
    
    3.39
    %
    
    $
    59,615
    
    
    
    4.86
    %Mortgage Backed
SecuritiesWithin one year
    
    $
    
    
    
    
    0.00
    %
    
    $
    170
    
    
    
    3.23
    %
    
    $
    728
    
    
    
    3.60
    %1-5 years
    
    
    
    
    
    
    0.00
    %
    
    
    4,302
    
    
    
    3.93
    %
    
    
    2,356
    
    
    
    4.05
    %5-10 years
    
    
    
    
    
    
    0.00
    %
    
    
    1,519
    
    
    
    4.57
    %
    
    
    4,620
    
    
    
    4.05
    %After 10 years
    
    
    
    
    
    
    0.00
    %
    
    
    6,860
    
    
    
    4.57
    %
    
    
    9,208
    
    
    
    4.74
    %Total
    
    $
    
    
    
    
    0.00
    %
    
    $
    12,851
    
    
    
    4.35
    %
    
    $
    16,912
    
    
    
    4.44
    %State & Municipal (1)Within one year
    
    $
    1,499
    
    
    
    3.98
    %
    
    $
    1,460
    
    
    
    3.51
    %
    
    $
    469
    
    
    
    4.06
    %1-5 years
    
    
    6,727
    
    
    
    3.86
    %
    
    
    7,063
    
    
    
    3.88
    %
    
    
    6,318
    
    
    
    3.90
    %5-10 years
    
    
    11,275
    
    
    
    4.03
    %
    
    
    13,118
    
    
    
    4.08
    %
    
    
    14,160
    
    
    
    4.02
    %After 10 years
    
    
    9,213
    
    
    
    4.16
    %
    
    
    11,481
    
    
    
    4.03
    %
    
    
    14,471
    
    
    
    4.02
    %Total
    
    $
    28,714
    
    
    
    4.03
    %
    
    $
    33,122
    
    
    
    3.99
    %
    
    $
    35,418
    
    
    
    4.00
    %Equity SecuritiesWithin one year
    
    $
    3
    
    
    
    1.00
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %Total
    
    $
    3
    
    
    
    1.00
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %Totals
    
    $
    68,213
    
    
    
    3.55
    %
    
    $
    85,526
    
    
    
    4.52
    %
    
    $
    111,945
    
    
    
    4.52
    %
 
 (1)
    
    Yields on tax-exempt obligations have been computed on a full federal tax-equivalent basis
using an income tax rate of 34% for 2009, 2008 and 2007. 13




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2009
    
    
    2008US Government
sponsored agenciesWithin one year
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    1-5 years
    
    
    6,025
    
    
    
    2.97
    %
    
    
    3,050
    
    
    
    4.34
    %5-10 years
    
    
    9,399
    
    
    
    3.52
    %
    
    
    3,000
    
    
    
    4.48
    %After 10 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    15,424
    
    
    
    3.31
    %
    
    $
    6,050
    
    
    
    4.41
    %Other domestic debt securitiesWithin one year
    
    $
    235
    
    
    
    5.25
    %
    
    $
    
    
    
    
    1-5 years
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    5.25
    %5-10 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    After 10 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    235
    
    
    
    5.25
    %
    
    $
    500
    
    
    
    5.25
    %Totals
    
    $
    15,659
    
    
    
    3.33
    %
    
    $
    6,550
    
    
    
    4.47
    %
 Relative Lending Risk
    14




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One year
    
    
    One - five
    
    
    After fiveor less
    
    
    years
    
    
    years
    
    
    TotalReal estate  construction
    
    $
    33,005
    
    
    $
    16,227
    
    
    $
    89
    
    
    $
    49,321Real estate  mortgage
1-4 family
    
    
    12,698
    
    
    
    39,156
    
    
    
    3,966
    
    
    
    55,820Real estate  commercial
    
    
    17,596
    
    
    
    40,546
    
    
    
    2,932
    
    
    
    61,074Real estate  other
    
    
    11,927
    
    
    
    19,292
    
    
    
    3,547
    
    
    
    34,766Agricultural
    
    
    8,951
    
    
    
    4,204
    
    
    
    411
    
    
    
    13,566Commercial
    
    
    29,510
    
    
    
    21,743
    
    
    
    736
    
    
    
    51,989Other loans
    
    
    5,905
    
    
    
    10,800
    
    
    
    105
    
    
    
    16,810Totals
    
    $
    119,592
    
    
    $
    151,968
    
    
    $
    11,786
    
    
    $
    283,346
   Index
 Prime
    
    
    LIBOR
    
    
    TotalReal estate  construction
    
    $
    34,335
    
    
    $
    2,225
    
    
    $
    36,560Real estate  mortgage
1-4 family
    
    
    21,039
    
    
    
    
    
    
    
    21,039Real estate  commercial
    
    
    13,855
    
    
    
    3,047
    
    
    
    16,902Real estate  other
    
    
    13,662
    
    
    
    
    
    
    
    13,662Agricultural
    
    
    5,603
    
    
    
    
    
    
    
    5,603Commercial
    
    
    21,072
    
    
    
    1,616
    
    
    
    22,688Other loans
    
    
    124
    
    
    
    
    
    
    
    124Totals
    
    $
    109,690
    
    
    $
    6,888
    
    
    $
    116,578
  Impaired Loans
 16




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Non-performing Assets
 Descriptions
    
    2009
    
    
    2008
    
    
    2007A
    
    
    Loans accounted for on
a nonaccrual basis
    
    $
    18,993
    
    
    $
    14,700
    
    
    $
    11,079B
    
    
    Loans which are contractually
past due ninety days or more
as to interest or principal payments
(excluding balances included in (A)
above)
    
    
    210
    
    
    
    28
    
    
    
    26C
    
    
    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.
    
    
    1,657
    
    
    
    1,106
    
    
    
    54D
    
    
    Other non-performing assets
    
    
    7,611
    
    
    
    5,524
    
    
    
    551Total
    
    $
    28,471
    
    
    $
    21,358
    
    
    $
    11,710
   17




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Loan Concentrations
 
 2009
    
    
    2008
    
    
    2007Average amount of loans outstanding, net
    
    $
    286,548
    
    
    $
    287,491
    
    
    $
    251,348Allowance for loan losses beginning January 1
    
    $
    3,591
    
    
    $
    3,981
    
    
    $
    3,011Loans Charged off:Commercial, financial and
agriculture
    
    
    (3,850
    )
    
    
    (2,422
    )
    
    
    (226
    )Real estate  mortgage
    
    
    (512
    )
    
    
    (68
    )
    
    
    Installment loans to
individuals
    
    
    (165
    )
    
    
    (265
    )
    
    
    (213
    )Total Charged off
    
    
    (4,527
    )
    
    
    (2,755
    )
    
    
    (439
    )Recoveries during the periodCommercial, financial and
agriculture
    
    
    53
    
    
    
    30
    
    
    
    12Real estate  mortgage
    
    
    4
    
    
    
    
    
    
    
    Installment loans to
individuals
    
    
    46
    
    
    
    35
    
    
    
    17Total Recoveries
    
    
    103
    
    
    
    65
    
    
    
    29Loans Charged off, net
    
    
    (4,424
    )
    
    
    (2,690
    )
    
    
    (410
    )Other Adjustments
    
    
    
    
    
    
    
    
    
    
    Additions to the allowance charged to operations
    
    
    8,268
    
    
    
    2,300
    
    
    
    1,380$
    7,435
    
    
    $
    3,591
    
    
    $
    3,981Ratio of net charge offs during the period to
average loans outstanding
    
    
    1.54
    %
    
    
    0.94
    %
    
    
    0.16
    %
  Allowance for Loan Losses
  18




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Impaired Loans
     (Dollars in Thousands)Percentage of Loans toAllowance
    
    
    Total Loans2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Commercial, financial and agricultural
    
    $
    4,770
    
    
    $
    1,618
    
    
    $
    2,964
    
    
    
    57.0
    %
    
    
    56.4
    %
    
    
    53.5
    %Real estate  construction
    
    
    1,893
    
    
    
    1,777
    
    
    
    336
    
    
    
    17.4
    %
    
    
    18.8
    %
    
    
    25.7
    %Real estate  mortgage 1-4 family
    
    
    629
    
    
    
    64
    
    
    
    554
    
    
    
    19.7
    %
    
    
    18.8
    %
    
    
    15.6
    %Installment loans to individuals
    
    
    144
    
    
    
    132
    
    
    
    127
    
    
    
    5.9
    %
    
    
    6.0
    %
    
    
    5.2
    %Total
    
    $
    7,436
    
    
    $
    3,591
    
    
    $
    3,981
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 19




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Delinquent Loan Policy
      Deposits
    
    
    Rate Paid2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Noninterest-bearing
demand deposits
    
    $
    140,782
    
    
    $
    63,234
    
    
    $
    60,446
    
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Interest  bearingDemand
    
    
    87,294
    
    
    
    82,357
    
    
    
    71,593
    
    
    
    0.76
    %
    
    
    1.68
    %
    
    
    2.80
    %Savings
    
    
    19,147
    
    
    
    17,612
    
    
    
    18,530
    
    
    
    0.20
    %
    
    
    0.24
    %
    
    
    0.25
    %Time
    
    
    196,591
    
    
    
    194,524
    
    
    
    174,009
    
    
    
    2.94
    %
    
    
    4.08
    %
    
    
    4.83
    %$
    303,032
    
    
    $
    294,493
    
    
    $
    264,132
    
    
    
    2.23
    %
    
    
    3.18
    %
    
    
    3.96
    %
 20




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##### Table of Contents



$100,000 or GreaterCertificates of
    
    
    Other TimeDeposit
    
    
    DepositsMaturityThree months or less
    
    $
    19,889
    
    
    $
    29,611Three to six months
    
    
    17,629
    
    
    
    31,744Six to twelve months
    
    
    20,460
    
    
    
    26,359Twelve months or more
    
    
    16,422
    
    
    
    24,765Totals
    
    $
    74,400
    
    
    $
    112,479
    Maximum Outstanding
    
    
    Average
    
    
    Average interest
    
    
    Ending
    
    
    Average interestat any month end
    
    
    balance
    
    
    rate
    
    
    balance
    
    
    rate at year end2009Securities sold under agreements to repurchase
    
    $
    
    
    
    $
    5
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %Other short term borrowings
    
    $
    947
    
    
    $
    379
    
    
    
    0.00
    %
    
    $
    624
    
    
    
    0.00
    %2008Securities sold under agreements to repurchase
    
    $
    108,160
    
    
    $
    68,257
    
    
    
    1.22
    %
    
    $
    1,861
    
    
    
    0.00
    %Other short term borrowings
    
    $
    661
    
    
    $
    663
    
    
    
    1.59
    %
    
    $
    496
    
    
    
    0.19
    %2007Securities sold under agreements to repurchase
    
    $
    60,504
    
    
    $
    40,909
    
    
    
    4.18
    %
    
    $
    41,204
    
    
    
    3.34
    %Other short term borrowings
    
    $
    1,044
    
    
    $
    422
    
    
    
    6.09
    %
    
    $
    692
    
    
    
    1.02
    %
 21




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##### Table of Contents



Return on Equity and Assets
 2009
    
    
    2008
    
    
    2007Return on average assets
    
    
    -0.91
    %
    
    
    0.11
    %
    
    
    0.23
    %Return on average equity
    
    
    -10.97
    %
    
    
    1.67
    %
    
    
    3.28
    %Dividend pay-out ratio
    
    
    0.00
    %
    
    
    125.00
    %
    
    
    65.22
    %Ratio of average equity
to average assets
    
    
    8.31
    %
    
    
    7.35
    %
    
    
    7.12
    %
 
 ITEM 1A. RISK FACTORS
     22




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23




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Percent ChangeInterest Income/ExpenseEnding Balances
    
    
    Down 200
    
    
    Up 200as of 12/31/09
    
    
    Basis Points
    
    
    Basis PointsEarning Assets:Cash & Short-term Investments
    
    $
    54,668,111
    
    
    
    -99.64
    %
    
    
    526.38
    %Investment securities, taxable
    
    
    55,826,968
    
    
    
    -14.72
    %
    
    
    6.68
    %Investment securities, tax-exempt
    
    
    28,045,024
    
    
    
    -2.51
    %
    
    
    14.06
    %Loans
    
    
    275,910,662
    
    
    
    -7.13
    %
    
    
    16.38
    %Total Assets
    
    $
    414,450,765
    
    
    
    -8.11
    %
    
    
    18.58
    %Interest Bearing Liabilities:Interest Bearing Deposits
    
    $
    96,161,054
    
    
    
    -18.87
    %
    
    
    61.29
    %Certificates of Deposit less than $100,000
    
    
    112,497,802
    
    
    
    -11.47
    %
    
    
    46.28
    %Certificates of Deposit greater than $100,000
    
    
    74,400,183
    
    
    
    -11.18
    %
    
    
    43.52
    %Total Interest Bearing Deposits
    
    
    283,059,039
    
    
    
    -12.54
    %
    
    
    47.84
    %Federal funds sold & securitiespurchased under agreement to resale
    
    
    0
    
    
    
    0.00
    %
    
    
    0.00
    %Federal Home Loan Bank borrowings
    
    
    2,069,242
    
    
    
    2.35
    %
    
    
    16.10
    %Total Purchased Funds
    
    
    2,069,242Total Liabilities
    
    $
    285,128,281
    
    
    
    -12.28
    %
    
    
    46.92
    %Net Interest Income
    
    
    
    
    
    
    -6.87
    %
    
    
    10.21
    %
 
 *
    
    Information pertains to the Bank only    24




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25




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26




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
    
    The Bank expects to face increased regulation of the industry, including the
results of the EESA and the American Recovery and Reinvestment Act of 2009 (ARRA).
Compliance with such regulation may increase the Banks costs and limit our ability to
pursue business opportunities.
    
    Government stimulus packages and other responses to the financial crises may not
stabilize the economy or financial system.
    
    The ability to assess the creditworthiness of the Banks customers may be impaired
if the approaches used to select, manage, and underwrite our customers become less
predictive of future behaviors.
    
    The process used to estimate losses requires difficult, subjective, and complex
judgments, including forecasts of economic conditions and how these economic
predictions might impair the ability of the Banks borrowers to repay their loans.
The current economic conditions may make accurate estimation more difficult and
negatively impact the reliability of this process.
    
    The Bank will be required to pay significantly higher Federal Deposit Insurance
Corporation premiums because of its performance or because market developments have
significantly depleted the insurance fund of the FDIC and reduced the ratio of
reserves to insured deposits.
 27




---



##### Table of Contents




    
    The ability to engage in routine funding transactions could be adversely affected
by the actions and commercial soundness of other financial institutions and government
sponsored entities.
  
   
     
  
   
   28




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##### Table of Contents



(1)
    
    5,000,000 shares of Class A common stock, $.01 par value per share, of which 2,388,992
shares are issued and 2,279,669 are outstanding and held by approximately 862 shareholders
of record, as of March 30, 2010.(2)
    
    250,000 shares of Class B common stock, $.01 par value per share, none of which were
issued, as of March 30, 2010.
   29




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30




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31




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32




---



##### Table of Contents



2009
    
    
    2008Interest income (1)
    
    $
    21,411
    
    
    $
    25,201Interest expense
    
    
    7,129
    
    
    
    10,879Net interest income
    
    
    14,282
    
    
    
    14,322Provision for loan losses
    
    
    8,268
    
    
    
    2,300Net interest income after
provision for loan losses
on a tax equivalent basis
    
    
    6,014
    
    
    
    12,022Less: tax equivalent adjustment
    
    
    634
    
    
    
    699Net interest income after
provision for loan losses
    
    $
    5,380
    
    
    $
    11,323
 
    33




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34




---



##### Table of Contents



2009
    
    
    2008Service Charge Income
    
    $
    1,364,164
    
    
    $
    1,238,089Nonsufficient Fund Charges, net
    
    
    2,170,331
    
    
    
    2,217,484Mortgage Origination Fees
    
    
    159,552
    
    
    
    168,157Investment Securities Gains, (net)
    
    
    176,316
    
    
    
    264,737Other
    
    
    813,233
    
    
    
    881,056$
    4,683,596
    
    
    $
    4,769,523
   35




---



##### Table of Contents



NONINTEREST EXPENSE
 2009
    
    
    2008Salaries and benefits
    
    $
    8,517,858
    
    
    $
    8,548,033Net occupancy
    
    
    2,418,913
    
    
    
    2,504,814Other
    
    
    6,384,435
    
    
    
    4,962,996Total
    
    $
    17,321,206
    
    
    $
    16,015,843
     2009
    
    
    2008Real estate  construction
    
    $
    49,321,129
    
    
    $
    52,649,854Real estate  14 family residential mortgage
    
    
    55,820,121
    
    
    
    52,676,766Real estate  commercial
    
    
    61,073,450
    
    
    
    51,733,848Real estate  other
    
    
    34,765,842
    
    
    
    34,574,419Agriculture
    
    
    13,566,243
    
    
    
    12,024,870Commercial
    
    
    51,989,325
    
    
    
    57,233,574Other loans
    
    
    16,810,061
    
    
    
    18,886,546$
    283,346,171
    
    
    $
    279,779,877
    36




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37




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Index to Financial Statements
    
    Page(s)Report of Independent Registered Public Accounting Firm
    
    F1Consolidated Balance Sheets as of December 31,
2009 and 2008
    
    F2Consolidated Statements of Operations for
the years ended December 31, 2009 and 2008
    
    F3Consolidated Statements of Stockholders
Equity and Other Comprehensive Income (Loss) for
the years ended December 31, 2009 and 2008
    
    F4Consolidated Statements of Cash Flows for
the years ended December 31, 2009 and 2008
    
    F5Notes to Consolidated Financial
Statements  December 31, 2009 and 2008
    
    F6
 38




---



##### Table of Contents



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




---



##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 2009
    
    
    2008AssetsCash and due from banks
    
    $
    13,858,726
    
    
    $
    35,148,646Interest bearing deposits in banks
    
    
    40,809,385
    
    
    
    91,773,852Federal funds sold
    
    
    0
    
    
    
    16,600,000Cash and short-term investments
    
    
    54,668,111
    
    
    
    143,522,498Securities available for sale, at fair value (amortized cost of
$67,627,174 and $84,725,733 at December 31, 2009 and 2008,
respectively)
    
    
    68,212,662
    
    
    
    85,526,712Securities held to maturity (market values of $15,715,993
and $6,596,039 respectively)
    
    
    15,659,330
    
    
    
    6,550,000Loans
    
    
    283,346,171
    
    
    
    279,779,877Less: Allowance for loan losses
    
    
    7,435,509
    
    
    
    3,591,558Net loans
    
    
    275,910,662
    
    
    
    276,188,319Premises and equipment, net
    
    
    17,589,236
    
    
    
    18,856,327Interest receivable
    
    
    2,858,122
    
    
    
    3,253,604Intangible assets
    
    
    934,763
    
    
    
    934,763Other assets
    
    
    21,149,520
    
    
    
    15,212,784Total assets
    
    $
    456,982,406
    
    
    $
    550,045,007Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    $
    121,753,295
    
    
    $
    172,291,464Interest bearing
    
    
    283,056,954
    
    
    
    318,864,162Total deposits
    
    
    404,810,249
    
    
    
    491,155,626Securities sold under agreements to repurchase
    
    
    0
    
    
    
    1,861,237Advances from Federal Home Loan Bank of Atlanta
    
    
    1,445,100
    
    
    
    1,609,900Treasury, tax, and loan account
    
    
    624,143
    
    
    
    495,572Interest payable
    
    
    620,867
    
    
    
    912,570Accrued expenses and other liabilities
    
    
    1,608,243
    
    
    
    1,577,461Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    419,418,602
    
    
    
    507,922,366Stockholders equity:Preferred stock of $.01 par value. Authorized 250,000 shares;
10,300 shares issued in 2009 and 2008 respectively
    
    
    10,014,985
    
    
    
    9,953,381Class A common stock, $0.01 par value. Authorized 5,000,000 shares; issued and outstanding,
2,388,992 and 2,388,125 shares in 2009 and 2008, respectively
    
    
    23,890
    
    
    
    23,881Class B common stock, $0.01 par value. Authorized 250,000 shares; no shares issued or outstanding
    
    
    0
    
    
    
    0Additional paid in capital
    
    
    6,544,079
    
    
    
    6,342,423Accumulated other comprehensive
income, net of tax
    
    
    351,289
    
    
    
    480,584Retained earnings
    
    
    21,685,478
    
    
    
    26,572,18838,619,721
    
    
    
    43,372,457Less: 131,678 and 155,855 treasury shares, at cost, respectively
    
    
    1,055,917
    
    
    
    1,249,816Total stockholders equity
    
    
    37,563,804
    
    
    
    42,122,641Total liabilities and stockholders equity
    
    $
    456,982,406
    
    
    $
    550,045,007
  F-2




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##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 2009
    
    
    2008Interest income:Interest and fees on loans
    
    $
    17,013,596
    
    
    $
    19,556,671Interest on investment securities:Taxable
    
    
    2,283,501
    
    
    
    3,062,502Nontaxable
    
    
    1,231,617
    
    
    
    1,359,884Total investment income
    
    
    3,515,118
    
    
    
    4,422,386Other interest income
    
    
    247,903
    
    
    
    521,611Total interest income
    
    
    20,776,617
    
    
    
    24,500,668Interest expense:Interest on deposits
    
    
    6,770,052
    
    
    
    9,373,000Interest on other borrowed funds
    
    
    358,980
    
    
    
    1,505,520Total interest expense
    
    
    7,129,032
    
    
    
    10,878,520Net interest income
    
    
    13,647,585
    
    
    
    13,622,148Provision for loan losses
    
    
    8,267,561
    
    
    
    2,300,000Net interest income after
provision for loan losses
    
    
    5,380,024
    
    
    
    11,322,148Noninterest income:Service charge on deposits
    
    
    3,534,495
    
    
    
    3,455,573Investment securities gains, net
    
    
    176,316
    
    
    
    264,737Mortgage loan and related fees
    
    
    159,552
    
    
    
    168,157Other
    
    
    813,233
    
    
    
    881,056Total noninterest income
    
    
    4,683,596
    
    
    
    4,769,523Noninterest expense:Salaries and benefits
    
    
    8,517,858
    
    
    
    8,548,033Net occupancy expense
    
    
    2,418,913
    
    
    
    2,504,814Other
    
    
    6,384,435
    
    
    
    4,962,996Total noninterest expense
    
    
    17,321,206
    
    
    
    16,015,843Earnings (loss) before income tax benefits
    
    
    (7,257,586
    )
    
    
    75,828Income tax benefits
    
    
    (3,228,241
    )
    
    
    (470,110
    )Net earnings (losses)
    
    
    (4,029,345
    )
    
    
    545,938Preferred stock dividends
    
    
    460,639
    
    
    
    Accretion on preferred stock discount
    
    
    61,604
    
    
    
    Net earnings (losses) available to common
shareholders
    
    $
    (4,551,588
    )
    
    $
    545,938Basic earnings (losses) per share
    
    
    ($1.79
    )
    
    $
    0.24Basic weighted average shares outstanding
    
    
    2,245,098
    
    
    
    2,251,179Diluted earnings (losses) per share
    
    
    ($1.79
    )
    
    $
    0.24Diluted weighted average shares outstanding
    
    
    2,245,098
    
    
    
    2,254,513
  F-3




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##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 
   AccumulatedAdditional
    
    
    
    
    
    
    other
    
    
    
    
    
    
    TotalCommon
    
    
    Common
    
    
    paid in
    
    
    Retained
    
    
    comprehensive
    
    
    Treasury
    
    
    stockholders
    
    
    ComprehensivePreferred Stock
    
    
    Shares
    
    
    stock
    
    
    Capital
    
    
    earnings
    
    
    income
    
    
    stock
    
    
    equity
    
    
    income (loss)Balance December 31, 2007
    
    $
    
    
    
    
    2,383,097
    
    
    $
    23,831
    
    
    $
    5,864,964
    
    
    $
    26,700,500
    
    
    $
    122,105
    
    
    $
    (790,010
    )
    
    $
    31,921,390Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    545,938
    
    
    
    
    
    
    
    
    
    
    
    545,938
    
    
    $
    545,938Other comprehensive income (Note 20)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    358,479
    
    
    
    
    
    
    
    358,479
    
    
    
    358,479Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    904,417Cash dividends declared ($.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (674,250
    )
    
    
    
    
    
    
    
    
    
    
    (674,250
    )Exercise of stock options
    
    
    
    
    
    
    634
    
    
    
    6
    
    
    
    9,979
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,985Sale of common stock (ESPP)
    
    
    
    
    
    
    440
    
    
    
    4
    
    
    
    6,728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,732Treasury shares issued to
dividend reinvestment plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,442
    
    
    
    
    
    
    
    
    
    
    
    43,917
    
    
    
    125,359Purchased Treasury Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94,923
    )
    
    
    (94,923
    )Received stock to satisfy loan outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (408,800
    )
    
    
    (408,800
    )Stock-based compensation
    
    
    
    
    
    
    3,954
    
    
    
    40
    
    
    
    32,691
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,731Preferred Stock Issued to US Treasury Department
    
    
    9,953,381
    
    
    
    
    
    
    
    
    
    
    
    346,619
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,300,000Balance December 31, 2008
    
    $
    9,953,381
    
    
    
    2,388,125
    
    
    $
    23,881
    
    
    $
    6,342,423
    
    
    $
    26,572,188
    
    
    $
    480,584
    
    
    $
    (1,249,816
    )
    
    $
    42,122,641Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,029,345
    )
    
    
    
    
    
    
    
    
    
    
    (4,029,345
    )
    
    $
    (4,029,345
    )Other comprehensive loss (Note 20)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129,295
    )
    
    
    
    
    
    
    (129,295
    )
    
    
    (129,295
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,158,640
    )Sale of common stock (ESPP)
    
    
    
    
    
    
    425
    
    
    
    4
    
    
    
    5,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,130Treasury shares issued to
dividend reinvestment plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,770
    
    
    
    
    
    
    
    
    
    
    
    16,168
    
    
    
    29,938Treasury shares issued as
stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151,360
    
    
    
    (329,091
    )
    
    
    
    
    
    
    177,731
    
    
    
    Cash portion of stock dividend (fractional shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,031
    )
    
    
    
    
    
    
    
    
    
    
    (6,031
    )Stock-based compensation
    
    
    
    
    
    
    442
    
    
    
    5
    
    
    
    31,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,405Accretion on preferred stock discount
    
    
    61,604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,604
    )
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (460,639
    )
    
    
    
    
    
    
    
    
    
    
    (460,639
    )Balance December 31, 2009
    
    $
    10,014,985
    
    
    
    2,388,992
    
    
    $
    23,890
    
    
    $
    6,544,079
    
    
    $
    21,685,478
    
    
    $
    351,289
    
    
    $
    (1,055,917
    )
    
    $
    37,563,804
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##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows
 Years ended December 31, 2009 and 2008
 2009
    
    
    2008Cash flows from operating activitiesNet earnings (losses)
    
    $
    (4,029,345
    )
    
    $
    545,938Adjustments to reconcile net earnings (losses) to net
cash provided by operating activitiesProvision for loan losses
    
    
    8,267,561
    
    
    
    2,300,000Depreciation of premises and equipment
    
    
    1,318,646
    
    
    
    1,375,022Net (accretion) amortization of premuim / discount
on investment securities available for sale
    
    
    138,424
    
    
    
    (811,325
    )Net amortization of premium on investment securities held to maturity
    
    
    178,013
    
    
    
    Gain on sales of investment securities available for sale, net
    
    
    (176,316
    )
    
    
    (264,737
    )(Gain) loss on sale of other real estate
    
    
    (8,797
    )
    
    
    1,045Stock-based compensation
    
    
    31,405
    
    
    
    32,731(Gain) loss on disposal of equipment
    
    
    9,790
    
    
    
    (14,316
    )Increase in deferred income taxes
    
    
    (2,738,799
    )
    
    
    (625,263
    )Provision for other real estate losses
    
    
    1,032,000
    
    
    
    Writedown of other real estate
    
    
    4,500
    
    
    
    85,000Decrease in interest receivable
    
    
    395,482
    
    
    
    698,473(Increase) decrease in other assets
    
    
    1,290,510
    
    
    
    (207,330
    )Increase in special three year Federal Deposit Insurance Corporation
prepaid deposit assessment
    
    
    (2,294,324
    )
    
    
    Decrease in interest payable
    
    
    (291,703
    )
    
    
    (248,792
    )Increase in accrued expenses and other liabilities
    
    
    30,782
    
    
    
    242,250Net cash provided by operating activities
    
    
    3,157,829
    
    
    
    3,108,696Cash flows from investing activitiesProceeds from maturities, calls, and principal
repayments of investment securities available for sale
    
    
    41,456,614
    
    
    
    1,122,276,179Proceeds from maturities, calls, and principal
repayments of investment securities held to maturity
    
    
    13,315,000
    
    
    
    Proceeds from sales of investment securities available for sale
    
    
    10,849,262
    
    
    
    19,461,248Purchases of investment securities available for sale
    
    
    (35,187,842
    )
    
    
    (1,116,905,637
    )Purchases of investment securities held to maturity
    
    
    (22,602,343
    )
    
    
    (6,550,000
    )Net increase in loans
    
    
    (11,874,427
    )
    
    
    (20,913,368
    )Purchases of premises and equipment, net
    
    
    (69,345
    )
    
    
    (3,432,055
    )Proceeds from sale of premises and equipmet
    
    
    8,000
    
    
    
    23,600Proceeds from sale of other real estate
    
    
    767,310
    
    
    
    113,279Net cash used in investing activities
    
    
    (3,337,771
    )
    
    
    (5,926,754
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    (86,345,377
    )
    
    
    122,253,061Net decrease in securities sold under agreements to repurchase
    
    
    (1,861,237
    )
    
    
    (39,342,614
    )Cash dividends  preferred stock
    
    
    (460,639
    )
    
    
    Cash dividends  common stock
    
    
    (6,031
    )
    
    
    (675,462
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    9,985Purchase of treasury stock
    
    
    
    
    
    
    (94,923
    )Proceeds from sale of common stock
    
    
    5,130
    
    
    
    6,732Proceeds from sale of treasury stock
    
    
    29,938
    
    
    
    125,359Repayments of advances from FHLB Atlanta
    
    
    (164,800
    )
    
    
    (164,800
    )Proceeds from CPP funds provided by U.S. Treasury
    
    
    
    
    
    
    10,300,000Increase (decrease) in other borrowed funds
    
    
    128,571
    
    
    
    (196,096
    )Net cash provided by financing activities
    
    
    (88,674,445
    )
    
    
    92,221,242Net increase (decrease) in cash and short-term investments
    
    
    (88,854,387
    )
    
    
    89,403,183Cash and short-term investments, beginning of period
    
    
    143,522,498
    
    
    
    54,119,315Cash and short-term investments, end of period
    
    $
    54,668,111
    
    
    $
    143,522,498Supplemental disclosuresCash paid during the period for:Interest
    
    $
    7,420,735
    
    
    $
    13,338,614Income taxes
    
    
    55,984
    
    
    
    94,454Noncash transactionsTransfer of loans to other real estate
through foreclosure
    
    $
    3,884,523
    
    
    $
    5,172,049Transfer of loans to treasury stock in satisfaction of loans
    
    
    
    
    
    
    408,000
 See Notes to Consolidated Financial Statements
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##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
 
   (1)
    
    Summary of Significant Accounting Policies
 Nature of Business
 United Bancorporation of Alabama, Inc. (the Corporation) is a bank holding company whose
principal activity is the ownership and management of its wholly-owned subsidiary, United Bank
(the Bank). United Bank is a commercial bank with headquarters in Atmore, Alabama. The Bank
provides a full range of banking services in its primary market areas of Baldwin, Escambia,
and Monroe Counties, Alabama, and Santa Rosa County, Florida.Principles of ConsolidationThe accompanying consolidated financial statements include the financial statements of United
Bancorporation of Alabama, Inc. and United Bank, collectively referred to as the Corporation.
Significant inter-company balances and transactions have been eliminated in consolidation.Market ConcentrationsThe Corporation operates primarily in one business segment, commercial banking, in Southwest
Alabama and Northwest Florida.Basis of PresentationThe consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America. In preparing the financial
statements, management is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities as
of the date of the balance sheet and revenues and expenses for the period. Actual results
could differ significantly from those estimates.Material estimates that are particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses, other real estate, deferred
taxes, the valuation of other than temporary impairment for investment securities, and the
fair value of financial instruments.The Corporation has evaluated all transactions, events, and circumstances for consideration or
disclosure through March 30, 2010, the date these financial statements were issued and has
reflected or disclosed those items within the consolidated financial statements and related
footnotes as deemed appropriate.ReclassificationCertain amounts in the 2008 consolidated financial statements have been reclassified to
conform to the 2009 presentation.Fair Value of Financial Instruments
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Fair values of financial instruments are estimates using relevant market information and other
assumptions, as more fully disclosed in Note 18. Fair value estimates involve uncertainties
and matters of significant judgment. Changes in assumptions or in market conditions could
significantly affect the estimates.Cash and Short-Term InvestmentsThe Corporation considers due from banks, interest-bearing deposits in banks, and federal
funds sold to be cash and short-term investments. Federal funds are generally sold for oneday
periods.Investment SecuritiesInvestment securities are classified in one of three portfolios: (i) trading account
securities, (ii) securities available for sale, or (iii) securities held to maturity. Trading
account securities are stated at fair value. Investment securities available for sale are
stated at fair value with any unrealized gains and losses reported in a separate component of
stockholders equity, net of tax effect, until realized. Once realized, gains and losses on
investment securities available for sale are reflected in current period earnings. Investment
securities held to maturity are stated at cost adjusted for amortization of premiums and
accretion of discounts. As of December 31, 2009, the Corporation had $68,213,000 of
investment securities, or approximately 81%, classified as securities available for sale and
$15,659,000, or approximately 19%, classified as securities held to maturity. As of December
31, 2008, the Corporation
had $85,527,000 of investment securities, or approximately 93%, classified as securities
available for sale and $6,550,000, or approximately 7%, classified as securities held to
maturityThe Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
related to the recognition and presentation of other-than-temporary impairment (FASB ASC
320-10). See the Recent Accounting Pronouncement section for additional information.Prior to the adoption of the recent accounting guidance on April 1, 2009, management
considered, in determining whether other-than-temporary impairment exists, (1) the length of
time and the extent to which the fair value has been less than cost, (2) the financial
condition and near-term prospects of the issuer, and (3) the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value.Net gains and losses on the sale of investment securities available for sale, computed using
the specific identification method, are shown separately in noninterest income in the
consolidated statements of operations. Accretion of discounts and amortization of premiums are
calculated on the effective interest method over the anticipated life of the security.A decline in the fair value of any security below amortized cost that is deemed other than
temporary is charged to income resulting in the establishment of a new cost basis for the
security.Restricted Equity SecuritiesThe Corporation is required to maintain an investment in capital stock of various entities.
Based on redemption provisions of these entities, the stock has no quoted market value and is
carried at cost. At their discretion, these entities may declare dividends on the stock.
Management reviews for impairment based on the ultimate recoverability of the cost basis in
these stocks.LoansInterest income on loans is credited to earnings based on the principal amount outstanding at
the respective rate of interest. Accrual of interest on loans is discontinued when a loan
becomes contractually past due by 90 days or more with respect to interest or principal,
unless, after analysis it is determined that the interest is well secured and in the process
of collection. When a loan is placed on nonaccrual status, all interest
 F-7




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##### Table of Contents



previously accrued,
but not collected, is charged against current period interest income, unless, after analysis
it is determined that the interest is well secured and in the process of collection. Income
on such loans is then recognized only to the extent that cash is received and where the future
collection of principal is probable. Interest accruals are recorded on such loans only when
they are brought fully current with respect to interest and principal and when, in the
judgment of management, the loans are estimated to be fully collectible as to both principal
and interest.As of December 31, 2009 and December 31, 2008, approximately 57% and 52%, respectively, of the
Corporations loans were commercial loans. The Corporations commercial customers are
primarily small to middle market enterprises. The Corporation also specializes in agricultural
loans, which represented approximately 16% and 17% of the Corporations total loans at both
December 31, 2009 and December 31, 2008, respectively.Allowance for Loan LossesManagement considers a loan to be impaired when it is probable that the Corporation will be
unable to collect all amounts due according to the contractual terms of the loan agreement.
When a loan is considered impaired, the amount of impairment is measured based on the present
value of expected future cash flows discounted at the loans effective interest rate. If the
loan is collateraldependent, the fair value of the collateral is used to determine the amount
of impairment. Impairment losses are included in the
allowance for loan losses through a charge to the provision for loan losses. Impaired loans
are charged off against the allowance when such loans are deemed to be uncollectible.
Subsequent recoveries are added to the allowance.When a loan is considered impaired, cash receipts are applied under the contractual terms of
the loan agreement, first to principal and then to interest income. Once the recorded
principal balance has been reduced to zero, future cash receipts are recognized as interest
income, to the extent that any interest has not been recognized. Any further cash receipts are
recorded as recoveries of any amount previously charged off.A loan is also considered impaired if its terms are modified in a troubled debt restructuring.
For those accruing restructuring loans, cash receipts are typically applied to principal and
interest receivable in accordance with the terms of the restructured loan agreement. Interest
income is recognized on these loans using the accrual method of accounting.The ultimate ability to collect a substantial portion of the Corporations loan portfolio is
susceptible to changes in economic and market conditions in the geographic area served by the
Corporation and various other factors.Additions to the allowance for loan losses are based on managements evaluation of the loan
portfolio under current economic conditions, past loan loss experience and such other factors,
which, in managements judgment, deserve recognition in estimating loan losses. Loans are
chargedoff when, in the opinion of management, such loans are deemed to be uncollectible.
Subsequent recoveries are added to the allowance.Premises and EquipmentLand is carried at cost. Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straightline method over the estimated
useful lives of the assets.Other Real EstateOther real estate represents property acquired through foreclosure or deeded to the
Corporation in lieu of foreclosure on real estate mortgage loans on which borrowers have
defaulted. Other real estate is carried in
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##### Table of Contents



other assets at the lower of cost or fair value,
adjusted for estimated selling costs. Reductions in the balance of other real estate at the
date of foreclosure are charged to the allowance for loan losses. Subsequent valuation
decreases in the carrying value of other real estate as well as costs to carry other real
estate are recognized as charges to noninterest expense. In 2009, recognizing the uncertain
valuation of real estate, the Corporation established a reserve for losses on ORE of
$1,032,000 by making a charge to expense. As of December 31, 2009 and 2008, the Corporation
had $7,610,689 (net of reserve) and $5,523,501, respectively, in other real estate which are
included in other assets in the consolidated balance sheets.Intangible AssetsIntangible assets represent purchased assets that lack physical substance but can be
identified because of contractual or other legal rights. Under the provisions of FASB ASC
350, intangible assets with indefinite useful lives are not amortized, but instead are tested
for impairment at least annually. Intangible assets that have finite lives are amortized over
their estimated useful lives and are also subject to impairment testing. The Corporations
intangible assets have indefinite useful lives and are not subject to amortization. See Note
7 for summaries of the Corporations intangible assets.Income TaxesThe Company accounts for income taxes in accordance with income tax accounting guidance (FASB
ASC 740, Income Taxes). On January 1, 2009, the Company adopted the recent accounting
guidance related to
accounting for uncertainty in income taxes, which sets out a consistent framework to determine
the appropriate level of tax reserves to maintain for uncertain tax positions.The Corporation accounts for income taxes under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.Stock Based CompensationAt December 31, 2009, the Corporation had options and other equity awards outstanding as
defined by two stock-based employee compensation plans, which are described more fully in Note
14. The Corporation accounts for its stock based compensation plans under stock compensation
accounting guidance (FASB ASC 718, Compensation  Stock compensation). This guidance requires
that the compensation cost relating to share-based payment transactions be recognized in
financial statements. That cost will be measured based on the grant date fair value of the
equity or liability instruments issued. The stock compensation accounting guidance covers a
wide range of share-based compensation arrangements including stock options, restricted share
plans, performance-based awards, share appreciation rights, and employee share purchase plans.The stock compensation accounting guidance requires that compensation cost for all stock
awards be calculated and recognized over the employees service period, generally defined as
the vesting period. For awards with graded-vesting, compensation cost is recognized on a
straight-line basis over the requisite service period for the entire award. A Black-Scholes
model is used to estimate the fair value of stock options, while the market price of the
Corporations common stock at the date of grant is used for restricted stock awards and stock
grants.
 F-9




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Earnings (Losses) per ShareBasic and diluted earnings (losses) per share are computed on the weighted average number of shares outstanding in accordance with FASB ASC 260, Earnings Per Share. Note 15 provides
additional disclosure information regarding earnings per share.Recent Accounting PronouncementsEffective July 1, 2009, the Corporation adopted a new accounting guidance related to U.S. GAAP
(FASB ASC 105, Generally Accepted Accounting Principles). This guidance establishes FASB ASC
as the source of authoritative U.S. GAAP recognized by FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the SEC under authority of federal securities
laws are also sources of authoritative U.S. GAAP for SEC registrants. FASB ASC supersedes all
existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC
accounting literature not included in FASB ASC has become nonauthoritative. FASB will no
longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues
Task Force Abstracts. Instead, it will issue Accounting Standards Updates (ASUs), which will
serve to update FASB ASC, provide background information about the guidance, and provide the
basis for conclusions on the changes to FASB ASC. FASB ASC is not intended to change U.S.
GAAP or any requirements of the SEC. This guidance is effective for the Corporation as of
December 31, 2009.Effective April 1, 2009, the Corporation adopted new accounting guidance related to
recognition and presentation of other-than-temporary impairment (FASB ASC 320-10). This
recent accounting guidance amends the recognition guidance for other-than-temporary
impairments of debt securities and expands the financial statement disclosures for
other-than-temporary impairment losses on debt and equity securities. The recent guidance
replaced the intent and ability indication in current guidance by specifying that (a) if a
company does not have the intent to sell a debt security prior to recovery and (b) it is more
likely than not that it will not have to sell the debt security prior to recovery, the
security would not be considered other-than-temporarily impaired unless there is a credit
loss. When an entity does not intend to sell the security, and it is more likely than not,
the entity will not have to sell the security before recovery of its cost basis, it will
recognize the credit component of an other-than-temporary impairment of a debt security in
earnings and the remaining portion in other comprehensive income. For held-to-maturity debt
securities, the amount of an other-than-temporary impairment recorded in other comprehensive
income for the noncredit portion of a previous other-than-temporary impairment should be
amortized prospectively over the remaining life of the security on the basis of the timing of
future estimated cash flows of the security.The Corporation adopted accounting guidance related to fair value measurements and disclosures
(FASB ASC 820, Fair Value Measurements and Disclosures). This guidance defines fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value
measurements. This guidance establishes a fair value hierarchy about the assumptions used to
measure fair value and clarifies assumptions about risk and the effect of a restriction on the
sale or use of an asset. The effect of adoption was not material.FASB issued ASU 2009-05 (FASB ASC 820) which describes the valuation techniques companies
should use to measure the fair value of liabilities for which there is limited observable
market data. If a quoted price in an active market is not available for an identical
liability, an entity should use one of the following approaches: (1) the quoted price of the
identical liability when traded as an asset, (2) quoted prices for similar liabilities or
similar liabilities when traded as an asset, or (3) another valuation technique that is
consistent with the accounting guidance in FASB ASC for fair value measurements and
disclosures. When measuring the fair value of liabilities, this guidance reiterates that
companies should apply valuation techniques that maximize the use of relevant observable
inputs, which is consistent with existing accounting provisions for fair value measurements.
In addition, this guidance clarifies when an entity
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should adjust quoted prices of identical
or similar assets that are used to estimate the fair value of liabilities. This guidance is
effective for the Corporation as of December 31, 2009 with adoption applied prospectively.In addition, the following accounting pronouncement was issued by FASB, but is not yet
effective:FASB issued accounting guidance (FASB Statement No. 166) which modifies certain guidance
contained in the Transfers and Servicingtopic of FASB ASC (FASB ASC 860). This standard
eliminates the concept of qualifying special purpose entities, provides guidance as to when a
portion of a transferred financial asset can be evaluated for sale accounting, provides
additional guidance with regard to accounting for transfers of financial assets, and requires
additional disclosures. This guidance is effective for the Corporation as of January 1, 2010,
with adoption applied prospectively for transfers that occur on or after the effective date.
 (2)
    
    Cash and Due From Banks
 The Bank is required by the Federal Reserve Bank to maintain daily cash balances. These
balances were $425,000 at both December 31, 2009 and 2008, respectively.
 (3)
    
    Investment Securities
 The amortized cost and fair value of investment securities available for sale at December 31,
2009 and 2008 were as follows:
 Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    value2009:U.S. Treasury securities
    
    $
    3,024,364
    
    
    $
    3,132
    
    
    $
    (777
    )
    
    $
    3,026,719U.S. government
sponsored agencies
    
    
    36,040,571
    
    
    
    444,446
    
    
    
    (16,504
    )
    
    
    36,468,513State and political subdivisions
    
    
    28,552,086
    
    
    
    517,459
    
    
    
    (355,405
    )
    
    
    28,714,140Mortgagebacked securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    (6,863
    )
    
    
    3,290$
    67,627,174
    
    
    $
    965,037
    
    
    $
    (379,549
    )
    
    $
    68,212,6622008:U.S. government
sponsored agencies
    
    $
    38,977,901
    
    
    $
    574,397
    
    
    $
    
    
    
    $
    39,552,298State and political subdivisions
    
    
    33,040,244
    
    
    
    511,299
    
    
    
    (428,646
    )
    
    
    33,122,897Mortgagebacked securities
    
    
    12,707,588
    
    
    
    193,462
    
    
    
    (49,533
    )
    
    
    12,851,517$
    84,725,733
    
    
    $
    1,279,158
    
    
    $
    (478,179
    )
    
    $
    85,526,712
 F-11




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##### Table of Contents



The amortized cost and fair value of investment securities held to maturity at
December 31, 2009 and 2008 were as follows:
 Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    value2009:U.S. government sponsored
agency securities
    
    $
    15,424,330
    
    
    $
    105,554
    
    
    $
    (48,891
    )
    
    $
    15,480,993Other domestic debt securties
    
    
    235,000
    
    
    
    
    
    
    
    
    
    
    
    235,000$
    15,659,330
    
    
    $
    105,554
    
    
    $
    (48,891
    )
    
    $
    15,715,993
 Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    value2008:U.S. government sponsored
agency securities
    
    $
    6,050,000
    
    
    $
    46,539
    
    
    $
    (500
    )
    
    $
    6,096,039Other domestic debt securties
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000$
    6,550,000
    
    
    $
    46,539
    
    
    $
    (500
    )
    
    $
    6,596,039
 Management evaluates securities for other-than-temporary impairment at least on a
quarterly basis, and more frequently when economic or market concerns warrant such evaluation.
Consideration is given to (1) the length of time and the extent to which the fair value has
been less than cost, (2) the financial condition and near-term prospects of the issuer, and
(3) the intent and ability of the Corporation to retain its investment in the issuer for a
period of time sufficient to allow for any anticipated recovery in fair value. All securities
with unrealized losses are deemed to be other-than-temporarily impaired as the primary source
of the unrealized loss is associated prevailing interest rates and not the credit worthiness
of the debt issuer.
 F-12




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##### Table of Contents



Those investment securities classified as available for sale which have an unrealized loss
position at December 31, 2009 and 2008 are detailed below:
 2009
    
    Less than 12 months
    
    
    12 months or more
    
    
    TotalDescription of Securities
    
    Fair Value
    
    
    Unrealized losses
    
    
    Fair Value
    
    
    Unrealized losses
    
    
    Fair Value
    
    
    Unrealized lossesU.S. Treasury securities
    
    $
    2,025,312
    
    
    $
    777
    
    
    $
    
    
    
    $
    
    
    
    $
    2,025,312
    
    
    $
    777U.S. government
sponsored agencies
    
    
    5,035,326
    
    
    
    16,504
    
    
    
    
    
    
    
    
    
    
    
    5,035,326
    
    
    
    16,504State and political subdivdisions
    
    
    4,412,702
    
    
    
    75,555
    
    
    
    2,204,792
    
    
    
    279,850
    
    
    
    6,617,494
    
    
    
    355,405Equity securities
    
    
    3,290
    
    
    
    6,863
    
    
    
    
    
    
    
    
    
    
    
    3,290
    
    
    
    6,863Total temporarily impaired securities
    
    $
    11,476,630
    
    
    $
    99,699
    
    
    $
    2,204,792
    
    
    $
    279,850
    
    
    $
    13,681,422
    
    
    $
    379,549
 2008
    
    Less than 12 months
    
    
    12 months or more
    
    
    TotalDescription of Securities
    
    Fair Value
    
    
    Unrealized losses
    
    
    Fair Value
    
    
    Unrealized losses
    
    
    Fair Value
    
    
    Unrealized lossesU.S. Government sponsored agencies &
mortgage-backed securities
    
    $
    2,453,105
    
    
    $
    27,224
    
    
    $
    1,191,568
    
    
    $
    22,309
    
    
    $
    3,644,673
    
    
    $
    49,533State and political subdivdisions
    
    
    7,843,035
    
    
    
    387,848
    
    
    
    1,218,280
    
    
    
    40,798
    
    
    
    9,061,315
    
    
    
    428,646Total temporarily impaired securities
    
    $
    10,296,140
    
    
    $
    415,072
    
    
    $
    2,409,848
    
    
    $
    63,107
    
    
    $
    12,705,988
    
    
    $
    478,179
 F-13




---



##### Table of Contents



2009Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesU.S. Government sponsored
agencies
    
    $
    2,967,310
    
    
    $
    48,891
    
    
    $
    
    
    
    $
    
    
    
    $
    2,967,310
    
    
    $
    48,891State and political subdivdisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total temporarily impaired
securities
    
    $
    2,967,310
    
    
    $
    48,891
    
    
    $
    
    
    
    $
    
    
    
    $
    2,967,310
    
    
    $
    48,891
 2008Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesU.S. Government sponsored
agencies
    
    $
    999,500
    
    
    $
    500
    
    
    $
    
    
    
    $
    
    
    
    $
    999,500
    
    
    $
    500State and political subdivdisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total temporarily impaired
securities
    
    $
    999,500
    
    
    $
    500
    
    
    $
    
    
    
    $
    
    
    
    $
    999,500
    
    
    $
    500
  F-14




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##### Table of Contents



The amortized cost and fair value of investment securities available for sale at December 31,
2009, categorized by contractual maturity are shown below.
 Available for sale
    
    
    Held to maturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Faircost
    
    
    value
    
    
    cost
    
    
    valueInvestment securities due in or after:Due in one year or less
    
    $
    1,500,036
    
    
    $
    1,502,434
    
    
    $
    235,000
    
    
    $
    235,000Due after one year through five years
    
    
    34,321,586
    
    
    
    34,750,112
    
    
    
    6,025,212
    
    
    
    6,097,888Due after five years through ten years
    
    
    22,440,716
    
    
    
    22,746,708
    
    
    
    9,399,118
    
    
    
    9,383,105Due after ten years
    
    
    9,364,836
    
    
    
    9,213,408
    
    
    
    
    
    
    
    Total
    
    $
    67,627,174
    
    
    $
    68,212,662
    
    
    $
    15,659,330
    
    
    $
    15,715,993
  2009
    
    
    2008Gross gains realized
    
    $
    193,603
    
    
    $
    264,975Gross losses realized
    
    
    (17,287
    )
    
    
    (238
    )Net gain realized
    
    $
    176,316
    
    
    $
    264,737
    2009
    
    
    2008Federal Home Loan Bank stock
    
    $
    1,064,400
    
    
    $
    903,900First National Bankers Bank stock
    
    
    825,000
    
    
    
    525,000$
    1,889,400
    
    
    $
    1,428,900
 F-15




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##### Table of Contents



(4)
    
    Loans and Allowance for Loan LossesAt December 31, 2009 and 2008, the composition of the loan portfolio was as follows:
 2009
    
    
    2008Real estate  construction
    
    $
    49,321,129
    
    
    $
    52,649,854Real estate - 1-4 family residential mortgage
    
    
    55,820,121
    
    
    
    52,676,766Real estate  commercial
    
    
    61,073,450
    
    
    
    51,733,848Real estate  other
    
    
    34,765,842
    
    
    
    34,574,419Agriculture
    
    
    13,566,243
    
    
    
    12,024,870Commercial
    
    
    51,989,325
    
    
    
    57,233,574Other loans
    
    
    16,810,061
    
    
    
    18,886,546$
    283,346,171
    
    
    $
    279,779,877
 Changes in the allowance for loan losses for the years ended December 31, 2009 and 2008 are as
follows:
 2009
    
    
    2008Balance, beginning of year
    
    $
    3,591,558
    
    
    $
    3,981,922Provision charged to earnings
    
    
    8,267,561
    
    
    
    2,300,000Less loans chargedoff
    
    
    (4,526,727
    )
    
    
    (2,754,386
    )Plus loan recoveries
    
    
    103,117
    
    
    
    64,022Net chargeoffs
    
    
    (4,423,610
    )
    
    
    (2,690,364
    )Balance, end of year
    
    $
    7,435,509
    
    
    $
    3,591,558
 The following is a summary of information pertaining to impaired loans, nonaccrual loans, and
loans past due ninety days or more:
 As of and for the Years EndedDecember 31,2009
    
    
    2008Impaired loans with a valuation allowance
    
    $
    18,405,768
    
    
    $
    14,431,827Impaired loans without a valuation allowance
    
    
    30,634,043
    
    
    
    6,717,490Total impaired loans
    
    $
    49,039,811
    
    
    $
    21,149,317Valuation allowance related to impaired loans
    
    $
    5,062,293
    
    
    $
    1,577,292Total nonaccrual loans
    
    
    18,992,772
    
    
    
    14,699,556Total loans past due ninety days or more and still accruing
    
    
    210,875
    
    
    
    28,436Troubled debt restructured loans
    
    
    1,657,134
    
    
    
    1,105,782
 The average amount of impaired loans for the year 2009 and 2008 totaled approximately,
$26,146,726 and $16,429,746, respectively. If impaired loans had been current throughout their
terms, interest income would have been increased by $1,007,702 and $862,019, for 2009 and
2008, respectively. There was $1,704,552 of interest income recognized from impaired loans
for the year ended December 31, 2009.
 F-16




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##### Table of Contents



There was no significant amount of interest income recognized from impaired loans for the year ended December 31, 2008.During 2009, certain executive officers and directors of the Corporation, including their
immediate families and companies with which they are associated, were loan customers of the
Bank. Total loans outstanding and available lines of credit to these related parties at
December 31, 2009 and 2008, totaled $4,204,151 and $2,900,612, respectively. Such loans are
made in the ordinary course of business at normal credit terms, including interest rate and
collateral requirements, and do not represent more than a normal credit risk.
 (5)
    
    Foreclosed AssetsA summary of foreclosed assets for the years ending December 31, 2009 and 2008 are presented
as follows:
 2009
    
    
    2008Balance, beginning of year
    
    $
    5,523,501
    
    
    $
    550,776Additions
    
    
    3,882,200
    
    
    
    5,172,049Disposals
    
    
    (758,512
    )
    
    
    (114,324
    )Provision for losses
    
    
    (1,032,000
    )
    
    
    Writedowns
    
    
    (4,500
    )
    
    
    (85,000
    )Balance, end of year
    
    $
    7,610,689
    
    
    $
    5,523,501United Bank financed disposals
    
    $
    237,060
    
    
    $
    
 Expenses applicable to foreclosed assets for the year ended December 31, 2009 and 2008 are as
follows:
 2009
    
    
    2008Net (gain) loss on sales of other real estate
    
    $
    (8,798
    )
    
    $
    1,045Provision for other real estate losses
    
    
    1,032,000
    
    
    
    Writedown of other real estate
    
    
    4,500
    
    
    
    85,000Operating expenses, net of lease income
    
    
    174,450
    
    
    
    196,165$
    1,202,152
    
    
    $
    282,210
 F-17




---



##### Table of Contents



(6)
    
    Premises and EquipmentAt December 31, 2009 and 2008, premises and equipment were as follows:
 2009
    
    
    2008Land
    
    $
    5,278,831
    
    
    $
    5,258,831Buildings and leasehold improvements (depreciated over 5 to 50 years)
    
    
    15,694,277
    
    
    
    15,748,566Furniture, fixtures, and equipment (depreciated over 3 to 10 years)
    
    
    8,005,873
    
    
    
    7,952,191Automobiles (depreciated over 3 years)
    
    
    104,883
    
    
    
    104,883Construction in process
    
    
    64,371
    
    
    
    101,66329,148,235
    
    
    
    29,166,134Less accumulated depreciation
    
    
    11,558,999
    
    
    
    10,309,807$
    17,589,236
    
    
    $
    18,856,327
 F-18




---



##### Table of Contents



The balance of 2009 construction in process is associated with building projects and consists
of architect and engineering fees for the construction of a building for future expansion.
The completion of this project has been delayed for the duration of the current economic
downturn.Depreciation expense for the years ended December 31, 2009 and 2008 was $1,318,646 and
$1,375,022, respectively.
 (7)
    
    Intangible AssetsFlorida Charter- On July 2, 2004, the Corporation acquired a State of Florida banking charter
from a financial institution. Subsequent to the purchase, the charter was terminated but the
Corporation retained the legal right to branch into Florida through its existing Alabama bank
charter. The Corporation accounts for the charter cost as an indefinite lived intangible
asset because the legal right acquired does not have an expiration date under Florida banking
laws and there is no renewal process to keep the branching rights. The Corporation tests the
intangible asset each September 30 for impairment. At December 31, 2009, the Corporation
operates three branch offices in Florida.For the years ended December 31, 2009 and 2008, no impairment was recorded related to the
intangible asset. As of December 31, 2009 and 2008, the Corporation had recorded $917,263 in
intangible assets related to the cost of the charter.Internet Domain Address On March 21, 2007, the Bank purchased the rights to the
internet domain name www.unitedbank.com for $17,500. This internet domain is defined as an
intangible asset with an indefinite life under FASB ASC 350 and, as such, is not required to
be amortized over any period of time.
 (8)
    
    DepositsAt December 31, 2009 and 2008, deposits were as follows:
 2009
    
    
    2008Noninterest bearing accounts
    
    $
    121,753,295
    
    
    $
    172,291,464NOW accounts
    
    
    61,964,769
    
    
    
    87,291,512Money market investment accounts
    
    
    15,031,727
    
    
    
    19,158,033Savings account
    
    
    19,180,797
    
    
    
    17,192,088Time deposits:Time deposits less than $100,000
    
    
    112,479,478
    
    
    
    113,501,663Time deposits greater than $100,000
    
    
    74,400,183
    
    
    
    81,720,866Total deposits
    
    $
    404,810,249
    
    
    $
    491,155,626
 As discussed in the 2008 Form 10-K and 2009 Form 10-Q filings, the decline was anticipated as
the two temporary transactions came to their planned conclusions. The $36 million of deposits
held at December 31, 2008 for the local municipal government were dispersed for their intended
use and the $62 million of deposits held at December 31, 2008 for the local customer has
likewise been dispersed to fund the construction project.
 F-19




---



##### Table of Contents



At December 31, 2009 and 2008 interest expense on deposits was as follows:
 2009
    
    
    2008NOW accounts
    
    $
    531,382
    
    
    $
    963,679Money market investment accounts
    
    
    132,407
    
    
    
    422,292Savings accounts
    
    
    39,152
    
    
    
    42,672Time deposits:Time deposit less than $100,000
    
    
    4,938,664
    
    
    
    5,877,791Time deposit greater than $100,000
    
    
    1,128,447
    
    
    
    2,066,566Total interst expense on deposits
    
    $
    6,770,052
    
    
    $
    9,373,000
 F-20




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##### Table of Contents



At December 31, 2009, the contractual maturities of time deposits are as follows:
 Due in 2010
    
    $
    145,692,463Due in 2011
    
    
    30,809,770Due in 2012
    
    
    6,870,172Due in 2013 or later
    
    
    2,041,542Due in 2014 or later
    
    
    1,465,714$
    186,879,661
 (9)
    
    Securities Sold Under Agreements to RepurchaseThe maximum amount of outstanding securities sold under agreements to repurchase during 2009
and 2008 was $0 and $1,861,237, respectively. The weighted average borrowing rate at
December 31, 2009 and 2008 was 0.00%. The average amount of outstanding securities sold under
agreements to repurchase during 2009 and 2008 was $5,099 and $68,257,308 respectively. The
weighted average borrowing rate during the years ended December 31, 2009 and 2008 was 0.00%
and 1.22% respectively. Securities underlying these agreements are under the Corporations
control.
 (10)
    
    Participation in U.S. Treasury Capital Purchase ProgramOn December 23, 2008, the Corporation issued 10,300 shares of preferred stock to the
U.S. Treasury for $10.3 million pursuant to the CPP. Additionally, the Corporation issued
104,040 common stock warrants to the U.S. Treasury as a condition to its participation in the
CPP. The warrants have an exercise price of $14.85 each and are immediately exercisable and
expire 10 years from the date of issuance. Proceeds from this sale of the preferred stock are
expected to be used for general corporate purposes, including supporting the continued,
anticipated growth of the Corporation. The CPP preferred stock is non-voting, other than
having class voting rights on certain matters, and pays cumulative dividends quarterly at a
rate of 5% per annum for the first five years and 9% thereafter. The preferred shares are
redeemable at the option of the Corporation under certain circumstances during the first three
years and thereafter without restriction.Based on a Black-Scholes-Merton options pricing model, the common stock warrants have
been assigned a fair value of $2.55 per warrant, or $265,303 in the aggregate, as of
December 12, 2008. As a result of allocating the fair value of the preferred stock and the
related common stock warrants, $346,619 has been recorded in additional paid in capital as the
discount on the preferred stock obtained above and will be accreted as a reduction in net
income available for common shareholders over the next five years. For purposes of these
calculations, the fair value of the common stock warrants as of December 23, 2008 was
estimated using the Black-Scholes option pricing model with the following assumptions:
 Weighted-average fair value of the underlying common stock
    
    
    14.85Weighted-average expected life (in years)
    
    
    5.00Expected Volatility
    
    
    22.84
    %Risk-free interest rate
    
    
    1.44
    %Expected dividend yield
    
    
    2.02
    %
 The Corporations computation of expected volatility is based on weekly historical
volatility since September of 2002. The risk free interest rate of the award is based on the
closing market bid for U.S. Treasury securities corresponding to the expected life of the common stock warrants in effect
at time of sale.
 F-21




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##### Table of Contents



(11) Borrowed Funds
  2009Maturity date
    
    Interest rateMay 2012
    
    
    7.41
    %
    
    
    29,334July 2017
    
    
    6.93
    %
    
    
    520,000August 2017
    
    
    6.84
    %
    
    
    84,475June 2020
    
    
    4.62
    %
    
    
    679,000July 2020
    
    
    7.54
    %
    
    
    132,291Total (weighted average rate of 5.90%)
    
    
    
    
    
    $
    1,445,100
 2008Maturity date
    
    Interest rateMay 2012
    
    
    7.41
    %
    
    
    41,067July 2017
    
    
    6.93
    %
    
    
    585,000August 2017
    
    
    6.84
    %
    
    
    95,375June 2020
    
    
    4.62
    %
    
    
    743,667July 2020
    
    
    7.54
    %
    
    
    144,791Total (weighted average rate of 5.92%)
    
    
    
    
    
    $
    1,609,900
  F-22




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##### Table of Contents



(12) Note Payable to Trust
 United Bancorp Capital Trust II
   (13) Income Taxes
  2009
    
    
    2008Current:Federal
    
    $
    (381,542
    )
    
    $
    134,049State
    
    
    (107,900
    )
    
    
    21,104Total
    
    
    (489,442
    )
    
    
    155,153Deferred:Federal
    
    
    (2,391,858
    )
    
    
    (577,328
    )State
    
    
    (346,941
    )
    
    
    (47,935
    )Total
    
    
    (2,738,799
    )
    
    
    (625,263
    )Total income tax expense
    
    $
    (3,228,241
    )
    
    $
    (470,110
    )
 F-23




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##### Table of Contents



2009
    
    
    2008Income tax at statutory rate
    
    $
    (2,467,679
    )
    
    $
    27,822Increase (decrease) resulting from:Tax exempt interest
    
    
    (468,605
    )
    
    
    (509,084
    )Interest disallowance
    
    
    31,110
    
    
    
    51,393State income tax net of federal benefit
    
    
    (300,195
    )
    
    
    (17,708
    )Premium amortization on tax exempt
investment securities
    
    
    13,950
    
    
    
    20,350Cash surrendered value of life insurance
    
    
    (43,661
    )
    
    
    (31,886
    )GoZone tax credits
    
    
    
    
    
    
    (31,748
    )Other, net
    
    
    6,739
    
    
    
    20,751$
    (3,228,341)
    
    
    $
    (470,110
    )
  2009
    
    
    2008Deferred tax assets:Loans, principally due to the allowance for loan losses
    
    $
    2,376,315
    
    
    $
    1,079,260Net operating loss carry forward
    
    
    1,211,842
    
    
    
    Other real estate, principally due to differences in
carrying value
    
    
    978,967
    
    
    
    600,240AMT credit carryover
    
    
    
    
    
    
    368,347Accrued expenses
    
    
    294,581
    
    
    
    251,305Investment securities available for sale
    
    
    
    
    
    
    Interest rate floor
    
    
    
    
    
    
    Other
    
    
    17,701
    
    
    
    15,201Total deferred tax assets
    
    
    4,879,406
    
    
    
    2,314,353Deferred tax liabilities:Premises and equipment, principally due to difference
in depreciation
    
    
    269,850
    
    
    
    459,152Investment securities available for sale
    
    
    234,199
    
    
    
    320,395Discount accretion
    
    
    9,041
    
    
    
    40,366Other
    
    
    162,904
    
    
    
    116,023Total deferred tax liabilities
    
    
    675,994
    
    
    
    935,936Net deferred tax asset
    
    $
    4,203,412
    
    
    $
    1,378,417
  F-24




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##### Table of Contents



(14) Stock Based Compensation
 Stock Options
 1998 Stock Option Plan
  WeightedaverageShares under
    
    
    exercise priceoption
    
    
    per shareBalance at December 31, 2007
    
    
    53,600
    
    
    $
    14.38Granted
    
    
    Expired
    
    
    (8,560
    )
    
    
    11.10Surrendered
    
    
    (5,600
    )
    
    
    12.48Exercised
    
    
    (634
    )
    
    
    15.75Balance at December 31, 2008
    
    
    38,806
    
    
    $
    15.36Granted
    
    
    Expired
    
    
    (8,160
    )
    
    
    12.87Surrendered
    
    
    Exercised
    
    
    Balance at December 31, 2009
    
    
    30,646
    
    
    $
    16.02
  2009
    
    
    2008Aggregate intrinsic value
of outstanding options
    
    $
    
    
    
    $
    16,157Aggregate intrinsic value
of exercisable options
    
    $
    
    
    
    $
    16,157
  F-25




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##### Table of Contents



2009
 Weighted averageremaining contractual
    
    Weighted averageExercise price per share Outstanding:
    
    Shares under option
    
    life in years
    
    exercise price$15.65
    
    
    8,960
    
    
    
    1.1
    
    
    $
    15.6515.75
    
    
    9,526
    
    
    
    3.0
    
    
    $
    15.7516.00
    
    
    2,000
    
    
    
    6.0
    
    
    $
    16.0016.25
    
    
    8,160
    
    
    
    2.0
    
    
    $
    16.2518.00
    
    
    2,000
    
    
    
    6.6
    
    
    $
    18.0030,646
    
    
    
    2.6
    
    
    $
    16.02Exercisable:$15.65
    
    
    8,960
    
    
    
    1.1
    
    
    $
    15.6515.75
    
    
    9,526
    
    
    
    3.0
    
    
    
    15.7516.00
    
    
    2,000
    
    
    
    6.0
    
    
    
    16.0016.25
    
    
    8,160
    
    
    
    2.0
    
    
    
    16.2518.00
    
    
    1,600
    
    
    
    6.6
    
    
    
    18.0030,246
    
    
    
    2.6
    
    
    $
    15.99
  2007 Equity Incentive Plan
 WeightedaverageShares under
    
    
    exercise priceoption
    
    
    per shareBalance at December 31, 2007
    
    
    2,000
    
    
    $
    18.50Granted
    
    
    Surrendered
    
    
    (2,000
    )
    
    
    18.50Exercised
    
    
    Balance at December 31, 2008
    
    
    Granted
    
    
    4,000
    
    
    $
    14.85Surrendered
    
    
    Exercised
    
    
    Balance at December 31, 2009
    
    
    4,000
    
    
    $
    14.85
 F-26




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##### Table of Contents



Grant-date fair value is measured on the date of grant using an option-pricing model with
market assumptions. The grant-date fair values are amortized into expense on a straight-line
basis over the vesting period. The company applies the Black-Scholes-Merton option-pricing
model which requires the use of highly subjective assumptions, including but not limited to,
expected stock price volatility, term, dividend rates, forfeiture rates, and risk-free
interest rates, which if changed can materially affect fair value estimates.
 The following is a summary of the weighted average assumptions used to estimate the
weighted-average per share fair value of options granted on the date of grant using the
Black-Scholes-Merton option-pricing model. No shares were granted during the year ended
December 31, 2008.
 2009
    
    
    2008Weighted-average expected life (in years)
    
    
    10.00
    
    
    
    N/AExpected Volatility
    
    
    20.00
    %
    
    
    N/ARisk-free interest rate
    
    
    3.86
    %
    
    
    N/AExpected dividend yield
    
    
    2.02
    %
    
    
    N/AWeighted-average fair value of options granted during the period
    
    $
    3.88
    
    
    
    N/A
 Cash received from the exercise of options was $9,986 for the year ended December 31,
2008. The tax benefit realized for the tax deductions from options exercise of the
share-based payment arrangements totaled $643 for the years ended December 31, 2008.
 As of December 31, 2009, there was $14,563 of total unrecognized compensation costs related to
the nonvested share based compensation arrangements granted under the 1998 and 2007 Plans.
That cost is expected to be recognized over a period of approximately 4 years.Restricted Stock
 During 2009 one restricted stock grant was made by the Corporation totaling 442 shares. As of
December 31, 2009 the Corporation has awarded restricted stock grants in two formats to two
distinct classes of employees. Employees with more than 20 years of service have been awarded
grants with a six month balloon vesting. The expense of these awards is recorded on a
straight-line basis over the six month term. The second type of grant has been awarded to
senior officers of the Corporation. These grants have five year terms (60 months) with 1/3
vesting on the grant anniversary date in years 3, 4, and 5. The expense of these awards is
recorded on a straight-line basis over the 60 month term. As of December 31, 2009 there was
$68,888 of unrecognized stock-based compensation related to these restricted stock grants
which is expected to be recognized over a period of 4 years.
 F-27




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##### Table of Contents



The following tables present restricted stock activity:
 Restricted
    
    
    Weightedstock
    
    
    averageactivity
    
    
    fair valueBalance at December 31, 2007
    
    
    5,626
    
    
    
    18.00Granted
    
    
    4,459
    
    
    
    16.51Surrendered
    
    
    (505
    )
    
    
    18.00Vested
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    9,580
    
    
    
    17.34Granted
    
    
    442
    
    
    
    14.85Surrendered
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    10,022
    
    
    
    17.20
 The following table summarizes stock-based compensation expense for the years ended December
31, 2009 and 2008:
 2009
    
    
    2008Stock Option Expense
    
    
    6,286
    
    
    
    4,244Restricted Stock Expense
    
    
    25,119
    
    
    
    28,487Total Stock Based Compensation Expense
    
    
    31,405
    
    
    
    32,731
 (15)
    
    Net Earnings (Losses) per Share
 Presented below is a summary of the components used to calculate diluted earnings
(losses) per share for the years ended December 31, 2009 and 2008:
 2009
    
    
    2008Diluted earnings (losses) per share:Basic weighted average common shares
outstanding
    
    
    2,245,098
    
    
    
    2,251,179Effect of the assumed exercise of stock
options-based on the treasury stock
method using average market price
    
    
    
    
    
    
    3,334Diluted weighted average
common shares outstanding
    
    
    2,245,098
    
    
    
    2,254,513
 F-28




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##### Table of Contents



(16)
    
    Dividend Reinvestment and Share Purchase Plan
 The Corporation sponsors a dividend reinvestment and share purchase plan. Under the plan,
all holders of record of common stock are eligible to participate in the plan. Participants
in the plan may direct the plan administrator to invest cash dividends declared with respect
to all or any portion of their common stock. Participants may also make optional cash
payments that will be invested through the plan. All cash dividends paid to the plan
administrator are invested within 30 days of cash dividend payment date. Cash dividends and
optional cash payments will be used to purchase common stock of the Corporation in the open
market, from newly-issued shares, from shares held in treasury, in negotiated transactions,
or in any combination of the foregoing. The purchase price of the shares of common stock is
based on the average market price. All administrative costs are borne by the Corporation.
For the year ended December 31, 2008 7,298 shares were purchased under the plan.
 In 2009 no shares were purchased under the Plan as there were no cash dividends declared.
In place of a cash dividend, the Corporation declared a 1% stock dividend to shareholders of
record as of June 30, 2009.
 (17)
    
    Employee Benefit Plans
 401(k)Savings Plan
 Prior to October 1, 2006, employees were eligible in the Corporations 401(k) Employee
Incentive Savings Plan after completing six months of service and attaining age 20.5. Eligible
employees could contribute a minimum of 1% up to 15% of salary to the plan. The Corporation
contributed one dollar for each dollar the employee contributed, up to 4% of the employees
salary, then the company matched fifty cents for each dollar the employee contributed up to 7%
of the employees salary.
 Under a new 401(k) savings plan that became effective October 1, 2006, employees are eligible
after completing ninety days of service and attaining age 20.5. Eligible employees can
contribute a minimum of 1% up to 15% of salary to the plan. The Corporation contributes one
dollar for each dollar the employee contributes, up to 5.5% of the employees salary.
 Contributions to the Plan charged to expense during 2009 and 2008 were $297,646 and
$294,684, respectively.
 Profit-Sharing Plan
 The Corporation also maintains a profitsharing plan for eligible employees. Eligibility
requirements for this plan are the same as the 401(k) Employee Incentive Savings Plan.
Benefits paid under the Plan are subject to approval by the Board of Directors each year.
There was no benefit paid under the Plan for the 2009 year. Annual profit sharing
contributions of $0 and $60,817 were made in 2009 and 2008, respectively.
 Salary Continuation Plan
 The Corporation provides a salary continuation plan providing for death and retirement
benefits for certain executive officers. The present value of the estimated amounts to be
paid under the plan is being accrued over the remaining service period of the executives. The
expense recognized for the salary continuation plan amounted to $92,169 and $86,952 for the
years ended December 31, 2009 and 2008, respectively. The balance of the liability for the
salary continuation plan included in other liabilities at December 31, 2009 and 2008 totaled
$696,458 and $604,283, respectively.
 The cost of the salary continuation plan described above is being offset by earnings from bank
owned life insurance policies on the executives. The balance of the policy surrender values
included in other assets
 F-29




---



##### Table of Contents



totaled $2,728,954 and $2,600,539 at December 31, 2009 and 2008, respectively. Income recognized from
the increase in cash surrender value on these policies totaled $128,415 and $93,783 for the
years ended December 31, 2009 and 2008, respectively.Employee Stock Purchase Plan
 The Corporation sponsors an employee stock purchase plan which is available to all employees
subject to certain minimum service requirements. The Plan is administered by a Board
appointed committee which designates the offering period in which employees may purchase shares and the offering price. All administrative costs are borne by the Corporation. For
the years ended December 31, 2009 and 2008, 425 and 440 shares were purchased under the Plan,
respectively.
 (18)
    
    Fair Value of Financial Instruments
 The Corporation uses fair value measurements to record fair value adjustments to certain
assets and liabilities and to determine fair value disclosures. In accordance with the Fair
Value Measurements and Disclosures topic (FASB ASC 820), the fair value of a financial
instrument is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. Fair
value is best determined based upon quoted market prices. However, in many instances, there
are no quoted market prices for the Corporations various financial instruments. In cases
where quoted market prices are not available, fair values are based on estimates using present
value or other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash flows.
Accordingly, the fair value estimates may not be realized in an immediate settlement of the
instrument.
 The recent fair value guidance provides a consistent definition of fair value, which focuses
on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale)
between market participants at the measurement date under current market conditions. If there
has been a significant decrease in the volume and level of activity for the asset or
liability, a change in valuation technique or the use of multiple valuation techniques may be
appropriate. In such instances, determining the price at which willing market participants
would transact at the measurement date under current market conditions depends on the facts
and circumstances and requires the use of significant judgment. The fair value is a
reasonable point within the range that is most representative of fair value under current
market conditions.
 Fair Value Hierarchy
 In accordance with this guidance, the Corporation groups its financial assets and
financial liabilities generally measured at fair value in three levels, based on the markets
in which the assets and liabilities are traded and the reliability of the assumptions used to
determine fair value.
 Level 1- Valuation is based on quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the measurement date.
Level 1 assets and liabilities generally include debt and equity securities that are traced in
an active exchange market. Valuations are obtained from readily available pricing sources for
market transactions involving identical assets or liabilities.
 Level 2- Valuation is based on inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly or indirectly. The valuation may
be based on quoted prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the asset or liability.
 F-30




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##### Table of Contents



Level 3- Valuation is based on unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or liabilities. Level 3
assets and liabilities include financial instruments whose value is determined using pricing
models, discounted cash flow methodologies, or similar techniques, as well as instruments for
which determination of fair value requires significant management judgment or estimation.
 A financial instruments categorization within the valuation hierarchy is based upon the
lowest level of input that is significant to the fair value measurement.Assets Measured at Fair Value on a Recurring Basis
 Following is a description of the valuation methodologies used for instruments measured at
fair value on a recurring basis and recognized in the accompanying balance sheet, as well as
the general classification of such instruments pursuant to the valuation hierarchy.Available for Sale Securities
 Where quoted market prices are available in an active market, securities are classified within
Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government
bonds, mortgage products and exchange traded equities. If quoted market prices are not
available, then fair values are estimated by using pricing models, quoted prices of securities
with similar characteristics or discounted cash flows. Level 2 securities include U.S. agency
securities, mortgage-backed agency securities, obligations of states and political
subdivisions and certain corporate, asset backed and other securities. In certain cases where
Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the
hierarchy.
 The following table presents financial assets measured at fair value on a recurring basis as
of December 31, 2009:
 Fair Value Measurements at December 31, 2009 UsingQuoted Prices
    
    
    Significant Other
    
    
    SignificantAssets/Liabilities
    
    
    in Active Markets for
    
    
    Observable
    
    
    UnobservableMeasured at
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsFair Value
    
    
    (Level 1)
    
    
    Level (2)
    
    
    (Level 3)AFS Securities
    
    $
    68,212,662
    
    
    $
    3,030,009
    
    
    $
    65,182,653
    
    
    $
    
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices
    
    
    Significant Other
    
    
    SignificantAssets/Liabilities
    
    
    in Active Markets for
    
    
    Observable
    
    
    UnobservableMeasured at
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsFair Value
    
    
    (Level 1)
    
    
    Level (2)
    
    
    (Level 3)AFS Securities
    
    $
    85,526,712
    
    
    $
    
    
    
    $
    85,526,712
    
    
    $
    
 F-31




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##### Table of Contents



Assets Measured at Fair Value on a Non-recurring Basis
 Following is a description of the valuation methodologies used for instruments measured at
fair value on a non-recurring basis and recognized in the accompanying balance sheet, as well
as the general classification of such instruments pursuant to the valuation hierarchy.Impaired Loans
 Loan impairment is reported when full payment under the loan terms is not expected. Impaired
loans are carried at the present value of estimated future cash flows using the loans
existing rate, or the fair value of collateral if the loan is collateral dependent. A portion
of the allowance for loan losses is allocated to impaired loans if the value of such loans is
deemed to be less than the unpaid balance. If these allocations cause the allowance for loan
losses to require increase, such increase is reported as a component of the provision for loan
losses. Loan losses are charged against the allowance when Management believes the
uncollectibility of a loan is confirmed. When the fair value of the collateral is based on an
observable market price or a current appraised value, the Corporation records the loan
impairment as nonrecurring Level 2. When an appraised value is not available or management
determines the fair value of the collateral is further impaired below the appraised value and
there is no observable market price, the Corporation records the loan impairment as
nonrecurring Level 3.Other Real Estate
 Other real estate are adjusted to fair value upon transfer from the loan portfolio.
Subsequently, other real estate assets are carried at the lower of carrying value or fair
value. Fair value is based upon independent market prices, appraised values of the collateral
or managements estimation of the value of the collateral. When the fair value of the
collateral is based on an observable market price or a current appraised value, the
Corporation records the other real estate as nonrecurring Level 2. When an appraised value is
not available or management determines the fair value of the collateral is further impaired
below the appraised value and there is no observable market price, the Corporation records the
other real estate as nonrecurring Level 3.
 F-32




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##### Table of Contents



The following tables present the assets and liabilities carried on the balance sheet by
caption and by level within the (FASB ASC 820) valuation hierarchy (as described above) as of
December 31, 2009 and 2008, for which a nonrecurring change in fair value has been recorded
during the year ended December 31, 2009 and 2008, respectively.
 Carrying Value at December 31, 2009
    
    
    Year EndedDecember 31, 2009TotalTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level3
    
    
    lossesImpaired loans
    
    $
    43,577,517
    
    
    $
    
    
    
    $
    
    
    
    $
    43,577,517
    
    
    $
    (7,952,833
    )Other real estate
    
    
    7,610,690
    
    
    
    
    
    
    
    
    
    
    
    7,610,690
    
    
    
    (1,027,703
    )
 Carrying Value at December 31, 2008
    
    
    Year EndedDecember 31, 2008TotalTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level3
    
    
    lossesImpaired loans
    
    $
    12,885,145
    
    
    $
    
    
    
    $
    3,763,384
    
    
    $
    9,121,761
    
    
    $
    (2,603,454
    )Other real estate
    
    
    5,523,501
    
    
    
    
    
    
    
    5,523,501
    
    
    
    
    
    
    
    (86,045
    )
 Fair Value of Financial Instruments
 The assumptions used in estimating the fair value of the Corporations financial instruments
are explained below. Where quoted market prices are not available, fair values are based on
estimates using discounted cash flow and other valuation techniques. Discounted cash flows can
be significantly affected by the assumptions used, including the discount rate and estimates
of future cash flows. The following fair value estimates cannot be substantiated by comparison
to independent markets and should not be considered representative of the liquidation value of
the Corporations financial instruments, but rather a goodfaith estimate of the fair value of
financial instruments held by the Corporation. (FASB ASC 820), excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
 The following methods and assumptions were used by the Corporation in estimating the fair
value of its financial instruments:
 (a)
    
    Cash and Short-term Investments
 Fair value approximates the carrying value of such assets.
 F-33




---



##### Table of Contents



(b)
    
    Investment Securities and Other Securities
 The fair value of investment securities is based on quoted market prices. The fair value
of other securities, which includes Federal Home Loan Bank stock and other correspondent
stocks, approximates their carrying value.
 (c)
    
    Loans
 The fair value of loans is calculated using discounted cash flows and excludes
leasefinancing arrangements. The discount rates used to determine the present value of
the loan portfolio are estimated market discount rates that reflect the credit and
interest rate risk inherent in the loan portfolio. The estimated maturities are based on
the Corporations historical experience with repayments adjusted to estimate the effect
of current market conditions.
 (d)
    
    Bank Owned Life Insurance
 The fair value of bank owned life insurance approximates its carrying value.
 (e)
    
    Deposits
 The fair value of deposits with no stated maturity, such as noninterest bearing demand
deposits, NOW accounts, savings and money market deposit accounts, approximates the
carrying value. Certificates of deposit have been valued using discounted cash flows. The
discount rates used are based on estimated market rates for deposits of similar remaining
maturities.
 The fair value estimates in the table below do not include the benefit that results from
the lowcost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.
 (f)
    
    Securities Sold Under Agreements to Repurchase
 Due to their shortterm nature, the fair value of securities sold under agreements to
repurchase approximates their carrying value.
 (g)
    
    FHLB, Other Borrowed Funds and Subordinated Debt
 The fair value of the Corporations other borrowed funds and subordinated debt
approximates the carrying value of such liabilities. The fair value of FHLB advances have
been valued using discounted cash flows. The discount rates used are based on estimated
market rates for borrowings of similar remaining maturities.
 (h)
    
    Accrued Interest
 The fair value of accrued interest receivable and payable approximates their carrying
value.
 (i)
    
    Commitments to Extend Credit and Standby Letters of Credit
 There is no market for the commitment to extend credit and standby letters of credit and
they were issued without explicit cost. Therefore, it is not practical to establish their
fair value.
 F-34




---



##### Table of Contents



The carrying value and estimated fair value of the Corporations financial instruments at
December 31, 2009 and 2008 are as follows (in thousands):
 2009
    
    
    2008Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimatedamount
    
    
    fair value
    
    
    amount
    
    
    fair value(Dollars in Thousands)Financial assets:Cash and shortterm
investments
    
    $
    54,668
    
    
    $
    54,668
    
    
    $
    143,522
    
    
    $
    143,546Investment securities
    
    
    83,872
    
    
    
    83,929
    
    
    
    92,077
    
    
    
    92,123Loans, net of the
allowance for loan losses
    
    
    275,911
    
    
    
    276,090
    
    
    
    276,188
    
    
    
    275,720Bank owned life insurance
    
    
    2,729
    
    
    
    2,729
    
    
    
    2,601
    
    
    
    2,601Correspondent bank stock
    
    
    1,889
    
    
    
    1,889
    
    
    
    1,429
    
    
    
    1,429Accrued interest receivable
    
    
    2,858
    
    
    
    2,858
    
    
    
    3,254
    
    
    
    3,254Financial liabilities:Deposits
    
    
    404,810
    
    
    
    405,504
    
    
    
    491,156
    
    
    
    492,531Securities sold under
agreements to repurchase
    
    
    
    
    
    
    
    
    
    
    1,861
    
    
    
    1,861Other borrowed funds
    
    
    624
    
    
    
    624
    
    
    
    496
    
    
    
    496FHLB advances
    
    
    1,445
    
    
    
    1,539
    
    
    
    1,610
    
    
    
    2,206Subordinated Debt
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310Accrued interest payable
    
    
    621
    
    
    
    621
    
    
    
    913
    
    
    
    913
 (19)
    
    Dividends From Bank
 Dividends paid by the Bank are the primary source of funds available to the Corporation
for payment of dividends to its stockholders and for other needs. Applicable federal and state
statutes and regulations impose restrictions on the amounts of dividends that may be declared
by the subsidiary bank. In addition, the subsidiary bank is also required to maintain minimum
amounts of capital to both total riskweighted assets and total assets, as defined by
banking regulators. Capital adequacy considerations could further limit the availability of
dividends from the subsidiary bank. The payment of dividends from the Bank is regulated by the
Alabama State Banking Department and is may be limited based on earnings and credit losses.
Recent earnings and loan losses create a restriction on the ability of the Bank to pay
dividends. Future payments of dividends by the Bank to the Corporation will be dependent on
earnings, loan losses and approval from the Alabama State Banking Department.
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##### Table of Contents



(20)
    
    Comprehensive Income (Loss)
 The following is a summary of the components of other comprehensive income (loss):
 Unrealized holding gains (losses) arising
during the period for securities, net
    
    $
    (39,175
    )
    
    $
    862,203Reclassification adjustment for gains on sales
of securities included in net earnings (losses)
    
    
    (176,316
    )
    
    
    (264,737
    )Other comprehensive income (loss),
before income taxes
    
    
    (215,491
    )
    
    
    597,466Income tax expense (benefits) related to other
comprehensive income (loss):Unrealized holding (gains) losses arising during
the period for securities, net
    
    
    15,670
    
    
    
    (344,881
    )Reclassification adjustment for gains on sales
of securities included in net earnings (losses)
    
    
    70,526
    
    
    
    105,894Total income tax expense (benefits) related
to other comprehensive income (loss)
    
    
    86,196
    
    
    
    (238,987
    )Other comprehensive income (loss)
after taxes
    
    $
    (129,295
    )
    
    $
    358,479
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##### Table of Contents



(21)
    
    LitigationThe Corporation is involved in various legal proceedings arising in connection with their
business. In the opinion of management, based upon consultation with legal counsel, the
ultimate resolution of these proceedings is not expected to have a material adverse effect
upon the financial statements of the Corporation.(22)
    
    CommitmentsThe Corporation leases certain property and equipment for use in its business. These leases
have lease terms generally not in excess of five years. The Corporation is not committed to
any operating leases, which have initial or remaining noncancelable lease terms in excess of
one year as of December 31, 2009.Rental expense for all operating leases charged to earnings aggregated $36,026 and $53,254 for
the years ended December 31, 2009 and 2008, respectively.The Corporation is a party to financial instruments with offbalancesheet risk in the
normal course of business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby letters of credit. Such
instruments involve elements of credit risk in excess of the amounts recognized in the
consolidated financial statements.The Corporations exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to extend credit and standby letters of credit is
represented by the contractual amount of these instruments. The Corporation uses the same
credit policies in making conditional obligations as it does for onbalancesheet
instruments.The financial instruments whose contractual amounts represent credit risk as of December 31,
2009 and 2008 are approximately as follows:
 Years Ended December 31,2009
    
    
    2008Commitments to extend credit
    
    $
    31,047,000
    
    
    $
    38,661,000Standby letters of credit
    
    
    1,155,000
    
    
    
    1,666,000
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##### Table of Contents



Standby letters of credit are commitments issued by the Corporation to guarantee the
performance of a customer to a third party. Those guarantees are primarily issued to support
public and private borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to customers. The
Corporation holds various assets as collateral supporting those commitments for which
collateral is deemed necessary.Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements.(23)
    
    Other Noninterest ExpenseComponents of other noninterest expense exceeding 1% of the total of interest income and other
income for either of the years ended December 31, 2009 or 2008, respectively, include the
following:
 2009
    
    
    2008Advertising
    
    $
    284,178
    
    
    $
    386,671ATM network
    
    
    332,716
    
    
    
    297,044Communications
    
    
    377,327
    
    
    
    399,455Data processing
    
    
    548,975
    
    
    
    492,148FDIC deposit insurance
    
    
    1,293,212
    
    
    
    216,548Legal
    
    
    270,355
    
    
    
    422,528Other real estate expenses
    
    
    1,202,152
    
    
    
    282,210
 (24)
    
    Concentrations of Credit RiskOn December 31, 2009, the Bank had $43,957,653 of agriculture related loans as compared to
$47,599,289 in 2008. Agriculture loans comprised approximately 15% of the Banks loan
portfolio. Additionally, real estate constructions attributed for approximately 17% of the
total portfolio, while 1-4 family residential mortgage loans made up approximately 20% of the
portfolio Real estate construction and 1-4 family residential mortgage loans were $49,321,129
and $55,820,121 respectively in 2009, $52,649,854 and $52,676,766, respectively, in 2008.(25)
    
    Regulatory MattersThe Corporation and its subsidiary bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory  and possibly additional discretionary  actions by regulators
that, if undertaken, could have a direct material effect on the Corporation. Under capital
adequacy guidelines and the regulatory framework of prompt corrective action, the Corporation
and its subsidiary bank must meet specific capital guidelines that involve quantitative
measures of each banks assets, liabilities, and certain offbalancesheet items as
calculated under regulatory accounting practices. The capital amounts and classification of
the Corporation and its subsidiary bank are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.Quantitative measures established by regulation to ensure capital adequacy require the
Corporation and its subsidiary bank to maintain minimum core capital (Tier I Capital) of at
least 4% of riskweighted assets, minimum total capital (Total Qualifying Capital) of at
least 8% of riskweighted assets and a minimum
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##### Table of Contents



leverage ratio of at least 4% of quarterly average assets. Management believes, as of December
31, 2009 and 2008, that the Corporation and its subsidiary bank meet all capital adequacy
requirements to which they are subject.
 As of December 31, 2009, the most recent notification from the appropriate regulatory agencies
categorized the subsidiary bank as adequately capitalized under the regulatory framework for
prompt corrective action. There are no conditions or events since that notification that
management believes have changed the subsidiary banks category.The following table presents the actual capital amounts and ratios of the Corporation and its
subsidiary bank at December 31, 2009 and 2008:
 Total Qualifying Capital
    
    
    Tier I Capital
    
    
    LeverageAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of December 31, 2009:United Bancorporation
    
    $
    45,299
    
    
    
    14.23
    %
    
    $
    41,836
    
    
    
    13.14
    %
    
    $
    41,836
    
    
    
    8.76
    %United Bank
    
    
    45,106
    
    
    
    14.19
    %
    
    
    41,092
    
    
    
    12.93
    %
    
    
    41,092
    
    
    
    8.71
    %As of December 31, 2008:United Bancorporation
    
    $
    54,299
    
    
    
    16.28
    %
    
    $
    50,707
    
    
    
    15.20
    %
    
    $
    50,707
    
    
    
    10.07
    %United Bank
    
    
    52,852
    
    
    
    15.88
    %
    
    
    49,260
    
    
    
    14.80
    %
    
    
    49,260
    
    
    
    10.35
    %
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##### Table of Contents



(26)
    
    Parent Corporation Financial InformationThe condensed financial information for United Bancorporation of Alabama, Inc. (Parent
Corporation Only) follows:
 
 2009
    
    
    2008AssetsCash
    
    $
    556,345
    
    
    $
    1,156,920Investment in subsidiary
    
    
    47,129,776
    
    
    
    50,985,787Other assets
    
    
    208,753
    
    
    
    520,694Total assets
    
    $
    47,894,874
    
    
    $
    52,663,401Liabilities and Stockholders EquityOther liabilities
    
    $
    21,070
    
    
    $
    230,760Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    10,331,070
    
    
    
    10,540,760Stockholders equity:Preferred stock of $.01 par value. Authorized 250,000 shares;
10,300 shares issued in 2009 and 2008, respectively
    
    
    10,014,985
    
    
    
    9,953,381Class A common stock of $0.01 par value. Authorized
5,000,000 shares; issued 2,388,992 and 2,388,125 shares
in 2009 and 2008, respectively
    
    
    23,890
    
    
    
    23,881Class B common stock of $0.01 par value. Authorized
250,000 shares; no shares issued
    
    
    
    
    
    
    Additional paidin capital
    
    
    6,544,079
    
    
    
    6,342,423Accumulated other comprehensive income, net of tax
    
    
    351,289
    
    
    
    480,584Retained earnings
    
    
    21,685,478
    
    
    
    26,572,188Less: 131,678 and 155,855 treasury shares at cost in 2009
and 2008, respectively
    
    
    1,055,917
    
    
    
    1,249,816Total stockholders equity
    
    
    37,563,804
    
    
    
    42,122,641Total liabilities and stockholders equity
    
    $
    47,894,874
    
    
    $
    52,663,401
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##### Table of Contents



2009
    
    
    2008Income:Dividend income from subsidiary
    
    $
    
    
    
    $
    716,000Other income
    
    
    43,415
    
    
    
    16,382Total income
    
    
    43,415
    
    
    
    732,382Expense:Interest on subordinated debentures
    
    
    269,001
    
    
    
    544,842Other operating expense
    
    
    236,491
    
    
    
    406,619Total expense
    
    
    505,492
    
    
    
    951,461Loss before equity in undistributed
earnings (losses) of subsidiaries and taxes
    
    
    (462,077
    )
    
    
    (219,079
    )Income tax benefit
    
    
    (184,569
    )
    
    
    (345,001
    )Income (loss) before equity in undistributed
earnings (losses) of subsidiaries
    
    
    (277,508
    )
    
    
    125,922Equity in undistributed earnings (losses) of subsidiary
    
    
    (3,751,837
    )
    
    
    420,016Net earnings (losses)
    
    $
    (4,029,345
    )
    
    $
    545,938
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##### Table of Contents



2009
    
    
    2008Cash flows from operating activities:Net earnings (losses)
    
    $
    (4,029,345
    )
    
    $
    545,938Adjustments to reconcile net earnings (losses)
to net cash provided by (used in)
operating activities:Equity in undistributed earnings (losses) of
subsidiary
    
    
    3,751,837
    
    
    
    (420,016
    )Stock based compensation
    
    
    6,286
    
    
    
    4,244Increase (decrease) in other liabilities
    
    
    (209,690
    )
    
    
    19,541Decrease in other assets
    
    
    311,939
    
    
    
    113,157Net cash provided by (used in)
operating activities
    
    
    (168,973
    )
    
    
    262,864Cash flows from investing activities:Investment in bank subsidiary
    
    
    
    
    
    
    (9,300,000
    )Net cash used in investing
activities
    
    
    
    
    
    
    (9,300,000
    )Cash flows from financing activities:Cash dividends  preferred stock
    
    
    (460,639
    )
    
    
    Cash dividends  common stock
    
    
    (6,031
    )
    
    
    (675,462
    )Purchase of treasury stock
    
    
    
    
    
    
    (94,923
    )Proceeds from sale of treasury stock
    
    
    29,938
    
    
    
    125,359Proceeds from exercise of stock options
    
    
    
    
    
    
    9,986Proceeds from sale of common stock (ESPP)
    
    
    5,130
    
    
    
    6,732Proceeds from US Treasury CPP
    
    
    
    
    
    
    10,300,000Net cash provided by (used in)
financial activities
    
    
    (431,602
    )
    
    
    9,671,692Net increase (decrease)
in cash
    
    
    (600,575
    )
    
    
    634,556Cash, beginning of year
    
    
    1,156,920
    
    
    
    522,364Cash, end of year
    
    $
    556,345
    
    
    $
    1,156,920
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##### Table of Contents



(a)
    
    Based on evaluation of the Corporations disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the Exchange Act), as of the end of the period covered by this annual report, the principal
executive officer and the principal financial officer of the Corporation have concluded that
as of such date the Corporations disclosure controls and procedures were effective to ensure
that information the Corporation is required to disclose in its filings under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms, and to ensure that information required
to be disclosed by the Corporation in the reports that it files under the Exchange Act is
accumulated and communicated to the Corporations management, including its principal
executive officer and principal financial officer, as appropriate to allow timely decisions
regarding required disclosure.
 (b)
    
    There were no significant changes in the Corporations internal controls or in other factors
that could significantly affect these controls subsequent to the date of the evaluation
referred to in (a) above.
 (c)
    
    This annual report does not include an attestation report of the Corporations independent
registered public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permits the Corporation to provide only managements report in this annual
report.
 (d)
    
    The Corporations management, including its principal executive officer and principal
financial officer, has conducted an evaluation of the effectiveness of the Corporations
internal control over financial reporting as of the end of the period covered by this report
based on the framework in Internal Control  Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
 
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40




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##### Table of Contents



(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 (*).1.1
    
    Purchase Agreement, dated as of September 27, 2006, among the Registrant, United
Bancorp Capital Trust II and TWE, Ltd., as Purchaser (Incorporated by reference herein
from Exhibit 1.1 to Registrants Quarterly Report on Form 10-Q for the Quarter Ended
September 30, 2006).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).4.1
    
    Junior Subordinated Indenture, dated as of September 27, 2006, by and between the
Registrant and Wilmington Trust Company, as Trustee (Incorporated by reference herein
from Exhibit 4.1 to Registrants Quarterly Report on Form 10-Q for the Quarter Ended
September 30, 2006).4.2
    
    United Bancorp Capital Trust II Amended and Restated Trust Agreement, dated as of
September 27, 2006, among the Registrant, as Depositor, Wilmington Trust Company, as
Property Trustee, Wilmington Trust Company, as Delaware Trustee and Robert R. Jones, III
and Allen O. Jones, as Administrative Trustees (Incorporated by reference herein from
Exhibit 4.2 to Registrants Quarterly Report on Form 10-Q for the Quarter Ended
September 30, 2006).4.3
    
    United Bancorp Capital Trust II Guarantee Agreement, dated as of September 27,
2006, by and between the Registrant, as Guarantor and Wilmington Trust Company, as
Guarantee Trustee (Incorporated by reference herein from Exhibit 4.3 to Registrants
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2006).
 41




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##### Table of Contents



4.4
    
    Common Securities Subscription Agreement, dated as of September 27, 2006, by and
between United Bancorp Capital Trust II and the Registrant (Incorporated by reference
herein from Exhibit 4.4 to Registrants Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 2006).4.5
    
    Junior Subordinated Note Subscription Agreement, dated as of September 27, 2006,
by and between United Bancorp Capital Trust II and the Registrant (Incorporated by
reference herein from Exhibit 4.5 to Registrants Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 2006).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 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
    
    United Bancorporation of Alabama, Inc. 2008 Equity Incentive Plan (Incorporated by
reference to Appendix A to the Registrants Definitive Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on April 9, 2008.*10.7
    
    First Amendment to Supplemental Compensation and Amendment Agreement between the
Registrant and Robert R. Jones, III, dated as of December 12, 2008 and effective January
1, 2008 (Incorporated by reference herein from Exhibit 10.12 to the Registrants report
on Form 8-K dated December 12, 2008).*21
    
    Subsidiaries of the Registrant.23
    
    Consent of Independent Registered Public Accounting Firm (Mauldin & Jenkins, LLC)31.1
    
    Certification of Chief Executive Officer under Securities Exchange Act Rules
13a-15(e) and 15d-15(e)
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##### Table of Contents



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 135099.1
    
    Certificate pursuant to 31 C.F.R. Section 30.15 as adopted under TARP
Standards for Compensation and Corporate Governance99.2
    
    Certificate pursuant to 31 C.F.R. Section 30.15 as adopted under TARP
Standards for Compensation and Corporate Governance
 43




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##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.
(Registrant)BY:
    /s/Robert R. Jones, IIIRobert R. Jones, IIIPresident and Chief Executive OfficerMarch 30, 2010  SIGNATURES
    
    CAPACITY IN WHICH SIGNED
    
    DATE/s/ Robert R. Jones, III

Robert R. Jones, III
    
    President, Chief
Executive Officer, and Director
    
    March 30, 2010/s/ Allen O. Jones, Jr.

Allen O. Jones, Jr.
    
    Senior Vice President
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
    
    March 30, 2010/s/ William J. Justice

William J. Justice
    
    Director
    
    March 30, 2010/s/ David D. Swift

David D. Swift
    
    Director
    
    March 30, 2010/s/ Dale M. Ash

Dale M. Ash
    
    Director
    
    March 30, 2010/s/ Michael Andreoli

Michael Andreoli
    
    Director
    
    March 30, 2010/s/ L. Walter Crim

L. Walter Crim
    
    Director
    
    March 30, 2010/s/ Richard K. Maxwell

Richard K. Maxwell
    
    Director
    
    March 30, 2010
 44




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit21
    
    Subsidiaries of the registrant23
    
    Consent of Independent Registered Public Accounting Firm (Mauldin & Jenkins, LLC)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 135099.1
    
    Certificate pursuant to 31 C.F.R. Section 30.15 as adopted under TARP Standards
for Compensation and Corporate Governance99.2
    
    Certificate pursuant to 31 C.F.R. Section 30.15 as adopted under TARP Standards
for Compensation and Corporate Governance