<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended                            Commission File No. 2-78572
   December 31, 1999


                     UNITED BANCORPORATION OF ALABAMA, INC.
                 ----------------------------------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                              63-0833573
----------------------------                               ---------------------
(State or other jurisdiction                                 (I.R.S. Employer
   of incorporation or                                      Identification  No.)
      organization)

                      P.O. Drawer 8, Atmore, Alabama 36504
                    ----------------------------------------
                    (Address of principal executive offices)

Registrant's telephone number, including area code: (334) 368-2525

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                 Class A Common Stock, Par Value $.01 Per Share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X   No
   ---    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of voting stock held by nonaffiliates as of March 20,
2000 was $27,261,390 based upon the price at which the stock was sold on that
date and using beneficial ownership of stock rules adopted pursuant to Section
13 of the Securities Exchange Act of 1934 to exclude voting stock owned by
directors and executive officers, some of whom might not be held to be
affiliates upon judicial determination.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
Common Stock      Par Value                        Outstanding at March 20, 2000
------------      ---------                        -----------------------------
<S>               <C>                              <C>
Class A..........   $.01                                       1,090,531 Shares*
Class B..........   $.01                                            0    Shares
</TABLE>


*Excludes 63,550 shares held as treasury stock.


<PAGE>   2


                                     PART I

ITEM 1. BUSINESS

United Bancorporation of Alabama, Inc. (the "Corporation") is a one-bank holding
company with headquarters in Atmore, Alabama. The Corporation was incorporated
under the laws of Delaware on March 8, 1982 for the purpose of acquiring all of
the issued and outstanding capital stock of The Bank of Atmore, Atmore, Alabama
("Atmore") and Peoples Bank, Frisco City, Alabama ("Peoples"). Atmore was merged
into United Bank of Atmore, a wholly-owned subsidiary of the Corporation, and
Peoples was merged into United Bank of Frisco City ("Frisco City"), also a
wholly-owned subsidiary of the Corporation, later in 1982. Effective March 30,
1984, Frisco City merged into United Bank of Atmore, which had previously
changed its name to simply "United Bank."

The Corporation and its subsidiary, United Bank (herein "United Bank" or the
"Bank"), are in one business segment, commercial banking. United Bank
contributes substantially all of the total operating revenues and consolidated
assets of the Corporation. The Bank serves its customers from seven full service
banking offices located in Atmore, Frisco City, Monroeville, Flomaton, Foley,
Lillian, and Bay Minette, Alabama, and it has a drive up facility in Atmore.

United Bank offers a broad range of banking services. Services to business
customers include providing checking and time deposit accounts and various types
of lending services. Services provided to individual customers include checking
accounts, NOW accounts, money market deposit accounts, statement savings
accounts, repurchase agreements and various other time deposit savings programs
and loans, including business, personal, automobile, home and home improvement
loans. United Bank offers securities brokerage services, Visa and Master Card,
multi-purpose, nationally recognized credit card services, and trust services
through Morgan Trust of Chattanooga, Tennessee.

Competition - The commercial banking business is highly competitive and United
Bank competes actively with state and national banks, savings and loan
associations, insurance companies, brokerage houses, and credit unions in its
market areas for deposits and loans. In addition, United Bank competes with
other financial institutions, including personal loan companies, leasing
companies, finance companies and certain governmental agencies, all of which
engage in marketing various types of loans and other services. The regulatory
environment affects competition in the bank business as well.

Employees - The Corporation and its subsidiary had approximately 114 full-time
equivalent officers and employees at December 31, 1999. All of the employees are
engaged in the operations of United Bank, or the Corporation. The Corporation


                                                                               2
<PAGE>   3


considers its employee relations good, and has not experienced and does not
anticipate any work stoppage attributable to labor disputes.

Supervision, Regulation and Government Policy - Bank holding companies, banks
and many of their nonbank affiliates are extensively regulated under both
federal and state law. The following brief summary of certain statutes, rules
and regulations affecting the Corporation and the Bank is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to below, and is not intended to be an exhaustive description of the
statutes or regulations applicable to the Corporation's business. Any change in
applicable law or regulations could have a material effect on the business of
the Corporation and its subsidiary. Supervision, regulation and examination of
banks by bank regulatory agencies are intended primarily for the protection of
depositors rather than holders of Corporation common stock.

     The Corporation is registered as a bank holding company with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). As such, the
Corporation is subject to the supervision, examination, and reporting
requirements in the BHC Act and the regulations of the Federal Reserve.

     The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before it may acquire substantially all of the
assets of any bank or control of any voting shares of any bank, if, after such
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of such bank. The BHC Act requires the Federal Reserve to
consider, among other things, anticompetitive effects, financial and managerial
resources and community needs in reviewing such a transaction. Under the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, enacted in
September 1994, bank holding companies were permitted to acquire banks located
in any state without regard to whether the transaction is prohibited under any
state law (except that states may establish a minimum age of not more than five
years for local banks subject to interstate acquisitions by out-of-state bank
holding companies), and interstate branching was permitted beginning June 1,
1997 in certain circumstances.

     With the prior approval of the Superintendent of the Alabama State
Department of Banking ("Superintendent") and their primary federal regulators,
state banks are entitled to expand by branching within Alabama.

     The Corporation is a legal entity separate and distinct from the Bank.
Various legal limitations restrict the Bank from lending or otherwise supplying
funds to the Corporation.


                                                                               3
<PAGE>   4


Such transactions, including extensions of credit, sales of securities or assets
and provision of services, also must be on terms and conditions consistent with
safe and sound banking practices, including credit standards, that are
substantially the same or at least as favorable to the Bank as prevailing at the
time for transactions with unaffiliated companies. Also, as a subsidiary of a
bank holding company, the Bank is generally prohibited from conditioning the
extension of credit or other services, or conditioning the lease or sale of
property, on the customer's agreement to obtain or furnish some additional
credit, property or service from or to such subsidiary or an affiliate.

     The Bank is a state bank, subject to state banking laws and regulation,
supervision and regular examination by the Alabama State Department of Banking
(the "Department"), and as a member of the Bank Insurance Fund ("BIF") of the
Federal Deposit Insurance Corporation (the "FDIC"), is also subject to FDIC
regulation and examination. The Bank is not a member of the Federal Reserve
System. Areas subject to federal and state regulation include dividend payments,
reserves, investments, loans, interest rates, mergers and acquisitions, issuance
of securities, borrowings, establishment of branches and other aspects of
operation, including compliance with truth-in-lending and usury laws, and
regulators have the right to prevent the development or continuance of unsafe or
unsound banking practices (regardless of whether the practice is specifically
prescribed or other violations of law.

     Dividends from United Bank constitute the major source of funds for the
Corporation. United Bank is subject to state law restrictions on its ability to
pay dividends, including the general restrictions that dividends in excess of
90% of United Bank's net earnings,(as defined by statue) may not be declared or
paid unless United Bank's surplus is at least equal to 20% of its capital, and
that the prior written approval of the Superintendent is required if the total
of all dividends declared in any calendar year exceeds the total of United
Bank's net earnings of that year combined with its retained net earnings of the
preceding two years, less any required transfers to surplus. United Bank is
subject to restrictions under Alabama law which also prohibit any dividends from
being made from surplus without the Superintendent's prior written approval.
Federal bank regulatory agencies also have the general authority to limit the
dividends paid by insured banks and bank holding companies if such payment is
deemed to constitute an unsafe and unsound practice. Federal law provides that
no dividends may be paid which would render the Bank undercapitalized. United
Bank's ability to make funds available to the Corporation also is subject to
restrictions imposed by federal law on the ability of a bank to extend credit to
its parent company, to purchase the assets thereof, to issue a guarantee,
acceptance or letter of credit on behalf thereof or to invest in the stock or
securities thereof or to take such stock or securities as collateral for loans
to any borrower.


                                                                               4
<PAGE>   5


     The Bank is also subject to the requirements of the Community Reinvestment
Act of 1977 ("CRA"). The CRA and the regulations implementing the CRA are
intended to encourage regulated financial institutions to help meet the credit
needs of their local community, including low and moderate-income neighborhoods,
consistent with the safe and sound operation of financial institutions. The
regulatory agency's assessment of the Bank's CRA record is made available to the
public.

     The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") recapitalized the BIF and included numerous substantially revised
statutory provisions. FDICIA established five capital tiers for insured
depository institutions: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized", and "critically
undercapitalized", as defined by regulations adopted by the Federal Reserve, the
FDIC and other federal depository institution regulatory agencies. At December
31, 1999, the Bank was "well capitalized", and was not subject to restrictions
imposed for failure to satisfy applicable capital requirements. BIF premiums for
each member financial institution depend upon the risk assessment classification
assigned to the institution by the FDIC.

     Banking is a business that depends on interest rate differentials. In
general, the difference between the interest rate paid by a bank on its deposits
and other borrowings and the interest rate received by the bank on its loans and
securities holdings constitutes the major portion of the bank's earnings. As a
result, the earnings and business of the Corporation are and will be affected by
economic conditions generally, both domestic and foreign, and also by the
policies of various regulatory authorities having jurisdiction over the
Corporation and the Bank, especially the Federal Reserve. The Federal Reserve,
among other functions, regulates the supply of credit and deals with general
economic conditions within the United States. The instruments of monetary policy
employed by the Federal Reserve for those purposes influence in various ways the
overall level of investments, loans and other extensions of credit and deposits
and the interest rates paid on liabilities and received on assets.

     The enactment of the Gramm-Leach-Bliley Financial Services Modernization
Act (the"GLB Act") on November 12, 1999 represented a potentially important
development in the powers of banks and their competitors in the financial
services industry by removing many of the barriers between commercial banking,
investment banking, securities brokerages and insurance. Inter-affiliation of
many of these formerly separated businesses is expected by many commentators.
The GLB Act also provides a federal right to financial privacy for certain of
individual customers' information. The impact


                                                                               5
<PAGE>   6


of the passage of the GLB Act on the Corporation and its subsidiary is difficult
to determine at this time, but may included increased competitive pressure. The
Corporation and its subsidiary have not yet undertaken any actions to avail
themselves of any of the advantages provided by the GLB Act.

Selected Statistical Information - The following tables set forth certain
selected statistical information concerning the business and operations of the
Corporation and its wholly-owned subsidiary, United Bank, as of December 31,
1999 and 1998. Averages referred to in the following statistical information are
generally average daily balances.


                       AVERAGE CONSOLIDATED BALANCE SHEETS
                                  1999 and 1998
                                    AVERAGES

                             (Dollars In Thousands)


<TABLE>
<CAPTION>
                  Assets                                 1999           1998
                                                       ---------      ---------
<S>                                                    <C>            <C>
Cash and due from banks                                $   8,550      $   7,077
Interest-bearing deposits with
     other financial institutions                              0             51
Federal funds sold and repurchase
     agreements                                            3,554          4,992
Taxable Securities available for sale                     36,673         47,557
Tax-exempt Securities available for sale                  10,369          6,381
Taxable investment securities held to
     maturity                                              5,473         10,526
Tax-exempt investment securities held
     to maturity                                          10,730         10,356
Loans, net                                               120,323         90,419
Premises and equipment, net                                4,027          2,332
Interest receivable and other assets                       2,034          2,120
                                                       ---------      ---------

                  Total assets                         $ 201,733        181,811
                                                       =========      =========

         Liabilities and Stockholders' Equity
Demand deposits - noninterest-bearing                  $  27,215         22,896
Demand deposits - interest-bearing                        35,631         30,984
Savings Deposits                                          16,086         16,140
Time Deposits                                             83,272         79,966
Other borrowed funds                                      10,233          4,561
Repurchase agreements                                     11,833         10,468
Accrued expenses and other liabilities                     1,181          1,645
                                                       ---------      ---------

                  Total liabilities                      185,451        166,660
                                                       ---------      ---------
         Stockholders' equity:
Common Stock                                                  11             11
Surplus                                                    4,137          3,471
Retained earnings                                         12,600         12,135
Less shares held in treasury,
         At cost                                            (466)          (466)
                                                       ---------      ---------


Total stockholders' equity                                16,282         15,151
                                                       ---------      ---------
Total liabilities and
stockholders' equity                                   $ 201,733        181,811
                                                       =========      =========
</TABLE>


                                                                               6
<PAGE>   7


Analysis of Net Interest Earnings: The following table sets forth interest
earned and the average yield on the major categories of the Corporation's
interest-earning assets and interest-bearing liabilities(Dollars in Thousands).

<TABLE>
<CAPTION>
                                                                         Average
                                                            Interest     Rates
                                                 Average    Income/      Earned/
                 1999                            Balance    Expense       Paid
                 ----
<S>                                              <C>          <C>           <C>
Loans, net (1)                                   $120,323     11,594        9.64%
Taxable securities Available for Sale              36,673      2,144        5.85
Tax Exempt sec. available for Sale (2)             10,369        753        7.26
Taxable Securities Held to Maturity                 5,473        342        6.25
Tax Exempt Held to Maturity (2)                    10,730        797        7.43
Federal funds sold and repurchase
      agreements                                    3,554        235        6.61

                                                 --------   --------    --------
Total interest-earning assets                    $187,122     15,865        8.48%
                                                 ========   ========    ========

Savings deposits and demand
  deposits - interest-bearing                    $ 51,717      1,640        3.17%
Time deposits                                      83,272      4,238        5.09
Repurchase agreements                              11,833        498        4.21
Other borrowed funds                               10,233        559        5.46
                                                 --------   --------    --------

Total interest-bearing liabilities               $157,055      6,935        4.42%
                                                 ========   ========    ========
Net interest income/net yield
   on interest-earning assets                               $  8,930        4.77%
                                                            ========    ========
</TABLE>


                                                                               7
<PAGE>   8


<TABLE>
<CAPTION>
                                                                 Average
                                                    Interest      Rates
                  1998                   Average    Income/      Earned/
                  ----                   Balance    Expense       Paid

<S>                                     <C>           <C>         <C>
Loans, net (1)                          $ 90,419      9,468       10.47%
Taxable securities Available for Sale     47,557      2,844        5.98
Tax Exempt Available for Sale (2)          6,381        489        7.66
Taxable Securities Held to Maturity       10,526        677        6.43
Tax Exempt Held to Maturity (2)           10,356        789        7.62
Federal funds sold                         4,992        278        5.57
Interest-earning deposits with                51          6       11.76
  other financial institutions
                                        --------   --------    --------
Total interest-earning assets           $170,282     14,551        8.55%
                                        ========   ========    ========

Savings deposits and demand
  deposits - interest-bearing           $ 47,124      1,543        3.27%
Time deposits                             79,966      4,384        5.48
Repurchase agreements                     10,468        485        4.63
Other borrowed funds                       4,561        285        6.25

                                        --------   --------    --------

Total interest-bearing liabilities      $142,119      6,697        4.71%
                                        ========   ========    ========
Net interest income/net yield
   on interest-earning assets                      $  7,854        4.61%
                                                   ========    ========
</TABLE>

(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 1999 and 1998.


                                                                               8
<PAGE>   9


Analysis of Changes in Interest Income and Interest Expense: The following is an
Analysis of the dollar amounts of changes in interest income and interest
expense due to changes in rates and volume for the periods indicated.

(Dollars in Thousands)
Average Balances
<TABLE>
<CAPTION>
                                                                        Interest Income
                                                                            Expense                               Variance As to
                                                                        ---------------                           --------------
1999                     1998                                         1999          1998         Variance        Rate     Volume
----                     ----                                         ----          ----         --------        ----     ------
<S>                   <C>         <C>                                <C>           <C>           <C>             <C>      <C>
$120,323                90,419    Loans (Net)                        11,594         9,468           2,126        (670)     2,796
  36,673                47,557    Taxable Securities AFS(1)           2,144         2,844            (700)        (61)      (639)
  10,369                 6,381    Tax Exempt Securities AFS (2)         753           489             264         (24)       288
   5,473                10,526    Taxable Securities HTM(3)             342           677            (335)        (16)      (319)
  10,730                10,356    Tax Exempt HTM (2)                    797           789               8         (15)        23
   3,554                 4,992    Fed Funds Sold                        235           278             (43)         79       (122)
     0                      51    Interest Bearing Deposits               0             6              (6)         (3)        (3)
 187,122               170,282    Total Interest Earning Assets      15,865        14,551           1,314        (710)     2,024

                                  Savings and Interest Bearing
  51,717                47,124    Demand Deposits                     1,640         1,543              97         (44)       141
  83,272                79,966    Other Time Deposits                 4,238         4,384            (146)       (348)       202
  11,833                 4,561    Other Borrowed Funds                  559           285             274         (71)       345
  10,233                10,468    Repurchase Agreements                 498           485              13          15         (2)
 157,055               142,119    Total Int Bearing Liabilities       6,935         6,697             238        (448)       686
</TABLE>

The variance of interest due to both rate and volume has been allocated
proportionately to the rate and the volume components based on the relationship
of the absolute dollar amounts of the change in each.

(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 1999 and 1998.
(3) Held to Maturity (HTM)


                                                                               9
<PAGE>   10


Analysis of Changes in Interest Income and Interest Expense: The following is an
Analysis of the dollar amounts of changes in interest income and interest
expense due to changes in rates and volume for the periods indicated.


(Dollars in Thousands)
Average Balances

<TABLE>
<CAPTION>
                                                                        Interest Income
                                                                             Expense                               Variance As to
                                                                        ---------------                            --------------
1998                    1997                                           1998          1997         Variance        Rate      Volume
----                    ----                                           ----          ----         --------        ----      ------
<S>                    <C>        <C>                                 <C>           <C>           <C>             <C>       <C>
$90,419                 79,023    Loans (Net)                          9,468         8,340           1,128         (63)      1,191
 47,557                 33,694    Taxable Securities AFS(1)            2,844         2,116             728         (96)        824
  6,381                  4,503    Tax Exempt Securities AFS (2)          489           374             115         (27)        142
 10,526                 15,409    Taxable Securities HTM(3)              677           987            (310)         (2)       (308)
 10,356                  7,530    Tax Exempt HTM (2)                     789           592             197         (18)        215
  4,992                  4,191    Fed Funds Sold                         278           232              46           1          45
     51                    102    Interest Bearing Deposits                6            11              (5)          1          (6)
170,282                144,452    Total Interest Earning Assets       14,551        12,652           1,899        (204)      2,103

                                  Savings and Interest Bearing
 47,124                 32,400    Demand Deposits                      1,543           900             643         183         460
 79,966                 75,671    Other Time Deposits                  4,384         4,112             272         102         170
  4,561                  1,822    Other Borrowed Funds                   285           118             167          (4)        171
 10,468                  8,432    Repurchase Agreements                  485           403              82         (12)         94
142,119                118,325    Total Int. Bearing Liabilities       6,697         5,533           1,164         269         895
</TABLE>


                                                                              10
<PAGE>   11


Investments - The investment policy of United Bank provides that funds that are
not otherwise needed to meet the loan demand of United Bank's market area can
best be invested to earn maximum return for the Bank, yet still maintain
sufficient liquidity to meet fluctuations in the Bank's loan demand and deposit
structure. Approximately 27% of the Bank's investments are in investment
securities held to maturity and 73% are securities available for sale. The
Bank's loan policy establishes the optimal loan to deposit ratio as being 75%.
This ratio as of December 31, 1999 was 67.51%. Growth in the loan portfolio is
driven by general economic conditions and the availability of loans meeting the
Bank's credit quality standards. Management intends that funding for this growth
will come from deposit growth, reallocation of maturing investments and advances
from the Federal Home Loan Bank (FHLB).

Securities Portfolio - The Bank's investment policy as approved by the Board of
Directors dictates approved types of securities and the conditions under which
they may be held. Attention is paid to the maturity and risks associated with
each investment. The distribution reflected in the tables below could vary with
economic conditions which could shorten or lengthen maturities. The Corporation
believes the level of risks inherent in the securities portfolio is low.


                     Investment Securities Held to Maturity
                           December 31, 1999 and 1998

                             (Dollars in Thousands)



<TABLE>
<CAPTION>
                                 ----------------------      -----------------------
                                 Amortized                   Amortized
                                   Cost            %           Cost             %

<S>                                <C>            <C>          <C>             <C>
U.S. Government Agencies            2,994          19.3          2,993          17.6
Mortgage Backed Securities          2,141          13.8          2,963          17.4
State and Municipal                10,410          66.9         11,089          65.0
                                  -------       -------        -------       -------
  Total Amortized Cost            $15,545         100.0%       $17,045         100.0%
                                  =======       =======        =======       =======
</TABLE>


                                                                              11
<PAGE>   12


Maturity Distribution of Investment Securities Held to Maturity

The following table sets forth the distribution of maturities of investment
securities.

                           December 31, 1999 and 1998
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                     1999                        1998
                            ------------------------    ------------------------
                               Amortized Weighted          Amortized Weighted
                                 Cost Avg Yld                Cost Avg Yld
<S>                         <C>           <C>           <C>           <C>
U.S. Government Agencies
     Within one year        $        0          0.00%   $        0          0.00%
     1 - 5 years                     0          0.00             0          0.00
     5 - 10 years                2,994          6.51         2,993          6.50
     After 10 years                  0             0             0          0.00

                            ----------    ----------    ----------    ----------
                            $    2,994          6.51%   $    2,993          6.50%
                            ==========    ==========    ==========    ==========
State & Municipal (1)
     Within one year        $      375          7.80%   $      200          6.44%
     1 - 5 years                 1,644          8.19         1,457          7.80
     5 - 10 years                3,728          7.29         3,426          7.53
     After 10 years              4,663          8.31         6,006          8.12

                            ----------    ----------    ----------    ----------
     Total                  $   10,410          7.91%   $   11,089          7.87%
                            ==========    ==========    ==========    ==========

Mortgage Backed
     Securities
     1 - 5 years            $      165          6.01%   $      253          6.04%
     5 - 10 years                1,109          6.55         1,121          6.40
     After 10 years                867          7.59         1,589          7.32

                            ----------    ----------    ----------    ----------
     Total                  $    2,141          6.93%   $    2,963          6.86%
                            ==========    ==========    ==========    ==========



     Total Yield                                7.51%                      7.45%
                                          ==========                  ==========

     Total Amortized Cost   $   15,545                  $   17,045
                            ==========                  ==========
</TABLE>


(1) Yields on tax-exempt obligations have been computed on a full federal
tax-equivalent basis using an income tax rate of 34% for 1999 and 1998.


                                                                              12
<PAGE>   13


                    Investment Securities Available for Sale
                           December 31, 1999 and 1998

                             (Dollars in Thousands)


<TABLE>
<CAPTION>
                                      1999                         1998
                             ----------------------       -----------------------
                             Amortized          %          Amortized          %
                                Cost                          Cost

<S>                           <C>              <C>          <C>              <C>
U.S. Treasury                 $ 8,592          19.4%        $10,618          19.8%
U.S. Government Agencies        1,503           3.4           3,754           7.0
Mortgage Backed Securities     20,434          46.1          27,426          51.0
Collateralized Mortgage
    Obligations                     0             0             596           1.1
State and Municipal            12,617          28.5           9,668          18.0
Other                           1,164           2.6           1,673           3.1

                             -------        -------         -------        -------
        Total                $44,310          100.0%        $53,735          100.0%
                             =======        =======         =======        =======
</TABLE>


                                                                              13
<PAGE>   14


Maturity Distribution of Investment Securities Available for Sale

The following table sets forth the distribution of maturities of investment
securities available for sale.

                           December 31, 1999 and 1998
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                   1999                  1998
                            ------------------    ------------------
                            Amortized Weighted    Amortized Weighted
                              Cost    Avg Yld       Cost    Avg Yld
<S>                         <C>        <C>        <C>       <C>
U.S. Treasury Securities
  Within one year            $ 2,003      6.20%     2,509      5.80%
  1 - 5 years                  6,589      5.91      8,109      6.09

                             -------   -------    -------   -------
                             $ 8,591      5.96     10,618      6.02
                             =======   =======    =======   =======
U.S. Government Agencies
excluding Mortgage Backed
Securities
  1 - 5 years                  1,000      5.81      1,752      5.25
  5 - 10 years                     0      0.00      1,497      6.45
  After 10 years                 503      7.95        505      7.93

                             -------   -------    -------   -------
  Total                      $ 1,503      6.53%     3,754      6.09%
                             =======   =======    =======   =======

Mortgage Backed Securities

 Within one year             $   315      8.48%        92      7.00%
  1 - 5 years                      0      0.00        955      6.98
  5 - 10 years                 2,032      6.75      3,303      6.79
  After 10 years              18,087      6.45     23,076      6.44

                             -------   -------    -------   -------
  Total                      $20,434      6.51%    27,426      6.50%
                             =======   =======    =======   =======

Collateralized Mortgage
Obligations
  After 10 years             $     0         0        596      4.64%

                             -------   -------    -------   -------
  Total                      $     0         0%       596      4.64%
                             =======   =======    =======   =======

State & Municipal (1)
  Less than 1 year                65      7.20%       486     10.12
  1 - 5 years                  1,934      8.04      1,465      7.78
  5 - 10 years                 2,445      8.45      2,594      6.83
  After 10 years               8,173      7.51      5,123      8.02

                             -------   -------    -------   -------
  Total                      $12,617      7.77%     9,668      7.75%
                             =======   =======    =======   =======
</TABLE>


Continued on next page..


                                                                              14
<PAGE>   15


Continued from previous page


<TABLE>
<CAPTION>
                                      1999                        1998
                            ------------------------    -----------------------
                            Amortized      Weighted     Amortized      Weighted
                              Cost         Avg Yld        Cost         Avg Yld
<S>                         <C>            <C>          <C>          <C>
Other Securities
     Less than 1 year       $        0          0.00%   $    1,170         7.71%
     1 - 5 years                     0          0.00             0            0
     5 - 10 years                  503          6.25           503         6.25
     After 10 Years                662          7.25
                            ----------    ----------    ----------   ----------
     Total                  $    1,165          6.82%   $    1,673         8.28%
                            ==========    ==========    ==========   ==========

     Total Yield                                6.77%                      6.60%
                                          ==========                 ==========

     Total amortized cost   $   44,310                  $   53,735
                            ==========                  ==========
</TABLE>

(1) Yields on tax-exempt obligations have been computed on a full federal
tax-equivalent basis using an income tax rate of 34% for 1999 and 1998.

Relative Lending Risk - United Bank is located in a primarily rural market
composed of lower to middle income families. The primary economic influence in
the area is timber and agricultural production, and the Bank's loan portfolio is
reflective of this market. The Bank's ratio of loans to assets or deposits is
comparable to its peer banks serving similar markets.

The risks associated with the Bank's lending are primarily interest rate risk
and credit risks from concentrations or types of loans.

Interest rate risk is a function of the maturity of the loan and method of
pricing. The Bank's loan maturity distribution reflects 32.71% of the portfolio
maturing in one year or less. In addition, 29.55% of all loans float with an
interest rate index. The maturity distribution and floating rate loans help
protect the Bank from unexpected interest rate changes.

Loan concentrations present different risk profiles depending on the type of
loan. The majority of all types of loans offered by the Bank are collateralized.
Regardless of the type of loan, collateralized lending is based upon an
evaluation of the collateral and repayment ability of the borrower. Loan policy,
as approved by the Board of Directors of the Bank, establishes collateral
guidelines for each type of loan.

Small banks located in one community experience a much higher risk due to the
dependence on the economic viability of that single community. United Bank is
more geographically diverse than its local competitors. With offices in seven
communities, the Bank is somewhat insulated from the effects of major economic
disruptions in one community. This geographic diversity affects all types of
loans and plays a part in the Bank's risk management.

Each type of loan exhibits unique profiles of risk that could threaten
repayment.


                                                                              15
<PAGE>   16


Commercial lending requires an understanding of the customers' business and
financial performance. The Bank's commercial customers are primarily small to
middle market enterprises. The larger commercial accounts are managed by the
Senior Commercial Officer. Risks in this category are primarily economic. Shifts
in local and regional conditions could have an effect on individual borrowers;
but, as previously mentioned, the Bank spreads this risk by serving multiple
communities. As with the other categories, these loans are typically
collateralized by assets of the borrower. In most situations, the personal
assets of the business owners also collateralize the credit.

Agricultural lending is a specialized type of lending for the Bank. Due to the
unique characteristics in this type of loan, the Bank has a loan officer
dedicated to this market. Collateral valuation and the experience of the
borrower play heavily into the approval process. This loan category includes
financing of equipment, crop production, timber, dairy operations and others.
Given the broad range of loans offered, it is difficult to generalize risks in
agricultural lending. The area of greatest attention and risk is crop production
loans. Risks associated with catastrophic crop losses may be mitigated by crop
insurance, government support programs, experience of the borrower, collateral
other than the crop and the borrower's other financial resources. Routine
visitations and contact with the borrower help inform the Bank about crop
conditions.

Real estate loans, whether they are construction or mortgage, generally have
lower delinquency rates than other types of loans in the portfolio. The Bank
makes very few long term, fixed rate mortgage loans; however, it does offer
loans with repayment terms based on amortization of up to 15 years with balloon
features of shorter durations. The Bank does offer several different long-term
mortgage programs provided by third party processors.

Installment loans are generally collateralized. Given the small dollar exposure
on each loan, the risk of a significant loss on any one credit is minimized.
Pricing and close monitoring of past due loans enhance the Bank's returns from
this type of loan and minimize risks.

An average loan in the loan portfolio at December 31, 1999 is approximately
$25,662, an increase of $4,590 from 1998. This increase in the average loan size
is due to the shift of loans to commercial real estate, financial, and
agriculture loans, and 1-4 family loans from the installment loan portion of the
portfolio.


                                                                              16
<PAGE>   17


Maturities and sensitivity to change in interest rates in the Corporation's loan
portfolio are as follows:

                            LOAN PORTFOLIO MATURITIES

                                December 31, 1999

                             (Dollars in Thousands)



<TABLE>
<CAPTION>
                                       REMAINING MATURITY
                             -------------------------------------
                                        One-      After
                             One Year   Five      Five
                             or Less    Years     Years     Total
                             --------  -------   -------   -------
<S>                          <C>        <C>       <C>       <C>
Commercial, Financial
     and agricultural        $25,789    29,709    21,208    76,706
Real estate - construction     2,269     1,060       256     3,585
Real estate - mortgage         3,489    17,546     4,288    25,323
Installment loans to
     individuals               8,918     8,719       445    18,082

                             -------   -------   -------   -------
     Total                    40,465    57,034    26,197   123,696
                             =======   =======   =======   =======
</TABLE>

                    SENSITIVITY TO CHANGES IN INTEREST RATES
                            LOANS DUE AFTER ONE YEAR

                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                          Predetermined    Floating
                               Rate          Rate      Total
                          -------------    --------    -----
<S>                       <C>              <C>         <C>
Commercial, financial
  and agricultural           $32,128         18,789    50,917
Real estate - construction       955            361     1,316
Real estate - mortgage        18,873          2,961    18,873
Installment loans to
  individuals                  9,043            121     9,164
</TABLE>

For additional information regarding interest rate sensitivity see Interest Rate
Sensitivity in Item 7 below and Item 7A below.

Non-performing Assets: The Corporation adopted the provisions of SFAS 114,
Accounting by Creditors for Impairment of a Loan, as amended by SFAS 118,
Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures on January 1, 1995. Under the provisions of SFAS 114 and 118,
management 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 note's effective interest rate. If the loan is
collateral-dependent, the fair value of the collateral is used to determine the
amount of impairment.


                                                                              17
<PAGE>   18


Impairment losses are included in the allowance for loan losses through a charge
to the provision for loan losses. Subsequent recoveries are added to the
allowance. Impaired loans are charged to the allowance when such loans are
deemed to be uncollectible. At December 31, 1999, pursuant to the definition
within SFAS 114, the Corporation had one $83,979 impaired loan.

The following table sets forth the Corporation's non-performing assets at
December 31, 1999 and 1998. Under the Corporation's nonaccrual policy, a loan is
placed on nonaccrual status when collectibility of principal and interest is in
doubt or when principal and interest is 90 days or more past due.

<TABLE>
<CAPTION>
            Description
            -----------                               1999           1998
                                                      ----           ----
                                                     (Dollars in Thousands)

<S>                                                  <C>            <C>
(A)      Loans accounted for on                      $ 674          $ 420
         a nonaccrual basis
(B)      Loans which are contractually

         past due ninety days or more
         as to interest or principal
         payments (excluding balances
         included in (A) above).                        28             13
(C)      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.                                     122             41

(D)      Other non-performing assets                   257            248
                                                     -----           ----

                              Total                  1,081            722
                                                     =====           ====
</TABLE>

If the loans in (A) above had been current throughout their term, interest
income would have been increased by $36,625 and $32,821 for 1999 and 1998,
respectively. Of the assets in (D) above, at the end of 1999 $195,337 was other
real estate owned (OREO) and $61,500 was repossessed collateral, and in 1998
$200,344 was OREO and $48,615 was repossessed collateral.

At December 31, 1999, loans with a total outstanding balance of $2,634,347 were
considered potential problem loans. Potential problem loans consist of those
loans for which management has doubts as to the borrower's ability to comply
with present loan repayment terms.

There may be additional loans in the Corporation's portfolio that may become
classified as conditions dictate. However, management is not aware of any such
loans that are material in amount at December 31, 1999. Regulatory examiners may
require the Bank to recognize additions to the allowance based upon their
judgments about information available to them at the time of their examination.


                                                                              18
<PAGE>   19


Loan Concentrations: On December 31, 1999, the Corporation had $13,392,804 of
agriculture-related loans. Agriculture loans accounted for $39,543 and $42,170
of nonaccrual loans in 1999 and 1998, respectively.

                         Summary of Loan Loss Experience

<TABLE>
<CAPTION>
                                           1999         1998         1997
                                           ----         ----         ----
<S>                                   <C>             <C>          <C>
Average amount of loans
   outstanding, net                   $ 120,323       90,419       79,032
                                      =========    =========    =========
Allowance for loan
   losses, beginning January 1            1,428        1,443        1,244
                                      ---------    ---------    ---------

Losses charged off:
   Commercial, financial
      and agricultural                      (27)        (130)         (12)
   Real estate - mortgage                    (0)          (0)          (2)
   Installment loans to
      individuals                          (270)        (175)        (170)
                                      ---------    ---------    ---------

   Total charged off                       (297)        (305)        (184)

Recoveries during the period:
   Commercial, financial and
      agricultural                           13           10            3
   Real estate - mortgage                     0            0            0
   Installment loans to individuals          36           40           40
                                      ---------    ---------    ---------

      Total recoveries                       49           50           43
                                      ---------    ---------    ---------
                                           (248)        (255)        (141)

Additions to the allowance
   charged to operations                    496          240          340

                                      ---------    ---------    ---------
      Total allowance, ending
         December 31                  $   1,676    $   1,428    $   1,443
                                      =========    =========    =========

Ratio of net charge offs during
  the period to average loans
  outstanding                               .21%         .28%         .18%
</TABLE>


Allowance for Loan Losses: The allowance for loan losses is maintained at a
level which, in management's opinion, is appropriate to provide for estimated
losses in the portfolio at the balance sheet date. Factors considered in
determining the adequacy of the allowance include historical loan loss
experience, the amount of past due loans, loans classified from the most recent
regulatory examinations and internal reviews, general economic conditions and
the current portfolio mix. The amount charged to operating expenses is that
amount necessary to maintain the allowance for loan losses at a level indicative
of the associated risk, as determined by management, of the current portfolio.


                                                                              19
<PAGE>   20


The allowance for loan losses consists of two portions: the classified portion
and the nonclassified portion. The classified portion is based on identified
problem loans and is calculated based on an assessment of credit risk related to
those loans. Specific loss estimate amounts are included in the allowance based
on assigned classifications as follows: substandard (15%), doubtful (50%), and
loss (100%).

The nonclassified portion of the allowance is for inherent losses which probably
exist as of the evaluation date even though they may not have been identified by
the more objective processes for the classified portion of the allowance. This
is due to the risk of error and inherent imprecision in the process. This
portion of the allowance is particularly subjective and requires judgments based
upon qualitative factors which do not lend themselves to exact mathematical
calculations. Some of the factors considered are changes in credit
concentrations, loan mix, historical loss experience, and general economic
environment in the Company's markets.

While the total allowance is described as consisting of a classified and a
nonclassified portion, these terms are primarily used to describe a process.
Both portions are available to support inherent losses in the loan portfolio.
Management realizes that general economic trends greatly effect loan losses, and
no assurances can be made that future charges to the allowance for loan losses
will not be significant in relation to the amount provided during a particular
period, or that future evaluations of the loan portfolio based on conditions
then prevailing will not require sizable charges to income. Management does,
however, consider the allowance for loan losses to be appropriate for the
reported periods. The Company has allocated proportionately the nonclassified
portion of the allowance to the individual loan categories for purposes of the
loan loss allowance table below.

The allocated portion of the loan loss provision is summarized in the following
table for the relative periods.

The table below reflects an allocation of the allowance for the years ended
December 31, 1999 and 1998. The allocation represents an estimate for each
category of loans based upon historical experience and management's judgement.
Management realizes that general economic trends greatly affect loan losses, and
no assurances can be made that future charges to the loan loss allowance will
not be significant in relation to the amount provided during a particular
period, or that future evaluations of the loan portfolio based on conditions
then prevailing will not require sizable additions to the allowance, thus
necessitating similarly sizable charges to income. Management does consider,
however, the allowance for loan losses to be adequate for the reported periods.


<TABLE>
<CAPTION>
                                         Loans as a
                       Allowance      percent of total
                     1999     1998     1999      1998
                    ------   ------   ------    ------
<S>                 <C>      <C>      <C>       <C>
Commercial,
Financial &
Agricultural        $1,039      780     62.0      61.0%

Real Estate -
Construction            49       15      2.9       3.1

Real Estate -
Mortgage               352       87     20.5      20.1

Installment Loans      236      546     14.6      15.8

                    ------   ------   ------    ------
Total Allowance     $1,676    1,428    100.0%    100.0%
                    ======   ======   ======    ======
</TABLE>

Delinquent Loan Policy: Installment loans are placed on nonaccrual when the loan
is three payments past due, and single-date maturity notes are placed on
nonaccrual status when such notes are delinquent for 90 days. Exceptions may be
made where there are extenuating circumstances, but any exception is subject to
review by the Board of Directors of the Bank. Delinquent commercial loans are
placed on nonaccrual status when the loan is 90 days past due.

Loans are considered delinquent if payments of principal or interest have not
been made by the end of periods ranging from one to ten days after the due date,
depending upon the type of loan involved. Installment loans are considered
delinquent if payments of principal and interest are past due for a period of
ten days and commercial loans are considered delinquent if payments of principal
and interest are past due for a period of one day. Single-date maturity loans
are considered delinquent if payments are not made by the day following the due
date of such loans.

Loans are reviewed for charge offs, as necessary, on a monthly basis. If
necessary, loans can be charged off at any time with the approval of the Chief
Executive Officer (CEO). The loan officer responsible for the particular loan
initiates the charge off request which then must be approved by the Bank's
senior commercial loan officer and the CEO.


                                                                              20
<PAGE>   21


                                    DEPOSITS
                             (Dollars in Thousands)

The following table sets forth the average amount of deposits for the years 1999
and 1998 by category.

<TABLE>
<CAPTION>
                                                   Average
                           Deposits               rate paid
                        1999       1998        1999        1998
                      --------   --------    --------    --------
<S>                   <C>        <C>         <C>         <C>
Noninterest-bearing
  demand deposits     $ 27,434     22,896           0%          0%
                      ========   ========    ========    ========

Interest-bearing
  deposits:
    Demand            $ 35,631     30,984        4.01%       3.48%
    Savings             16,086     16,140        2.45        2.88
    Time                83,272     79,966        5.09        5.48

                      --------   --------    --------    --------
                      $134,989    127,090        4.68%       4.66%
                      ========   ========    ========    ========
</TABLE>


The following shows the amount of time deposits outstanding at December 31,
1999, classified by time remaining until maturity.

<TABLE>
<CAPTION>
                              $100,000
                            Certificates   Other time
      Maturity               of deposit     deposits

<S>                           <C>            <C>
Three months or less          $ 7,263        15,207
Three to six months             7,049        23,215
Six to twelve months            7,969        13,083
Twelve months to five years     2,253        10,253

                              -------       -------
                              $24,534       $61,750
                              =======       =======
</TABLE>


                                                                              21
<PAGE>   22


The following table shows various amounts of repurchase agreements and other
short term borrowings and their respective rates.

<TABLE>
<CAPTION>
                   Maximum                                                Average
                   Outstanding                 Average                    Interest
                   At Any        Average      Interest     Ending         Rate at
                   Month End     Balance        Rate       Balance        Year-end
                   -----------   -------      ---------    -------        --------
                                     (Dollars In Thousands)
<S>                <C>           <C>          <C>          <C>           <C>
1999

Securities sold    $13,514       11,833         4.23%        8,935         4.62%
under agreements
to repurchase

Other short term
borrowings         $ 4,905          983         4.72           525         5.16

1998

Securities sold    $11,810       10,468         4.62     1   1,810         3.88
under agreements
to repurchase

Other short term
borrowings         $ 5,180          190         6.08             0         0.00
</TABLE>


Return on Equity and Assets: The following table shows the percentage return on
equity and assets of the Corporation for the years ended December 31, 1999 and
1998

<TABLE>
<CAPTION>
                           1999      1998
                           ----      ----
<S>                        <C>      <C>
Return on average assets     .97%    1.06%
                           =====    =====

Return on average equity   11.96%   12.76%
                           =====    =====

Dividend pay-out ratio     29.99%   29.39%
                           =====    =====

Ratio of average equity
 to average assets          8.07%    8.33%
                           =====    =====
</TABLE>

ITEM 2. PROPERTIES

The Corporation's bank subsidiary occupies eight offices which the subsidiary
owns or leases. The offices are located in Escambia County


                                                                              22
<PAGE>   23


(cities of Atmore and Flomaton), Monroe County (cities of Monroeville and Frisco
City), and Baldwin County (cities of Foley, Lillian, and Bay Minette) Alabama,
with the principal office located in Atmore, Alabama. The office in Atmore is a
modern, three story, brick building while the other offices (other than the
present Lillian and Bay Minette offices) are similar, modern, one story, brick
buildings. The subsidiary bank also leases land near the Atmore office on which
a drive through teller facility is located. The land lease is for twenty years,
expiring 2004. The Foley office is leased for a twenty year period, expiring in
2016. The office in Lillian is a modern two story brick building which is
located on property owned by the Corporation and leased to the subsidiary . The
lease is for a five year period ending in June of 2002. The Corporation
purchased a two story brick building in Bay Minette which is leased to the
subsidiary. The lease is for a five year period ending in December of 2003.

ITEM 3. LEGAL PROCEEDINGS

There are presently no pending legal proceedings to which the Corporation or its
subsidiary, United Bank, is a party or to which any of their property is
subject, which management of the Corporation based upon consultation with legal
counsel believes are likely to have a material adverse effect upon the financial
position of the Corporation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the shareholders of the Corporation
during the fourth quarter of the fiscal year.


                                                                              23
<PAGE>   24


                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Corporation's authorized common shares consist of the following:

(1)  5,000,000 shares of Class A common stock, $.01 par value per share, of
     which 1,151,081 shares issued of which 1,091,531 are outstanding and held
     by approximately 550 shareholders of record, as of March 20, 2000.

(2)  250,000 shares of Class B common stock, $.01 par value per share, none of
     which were issued, as of March 20, 2000.


There is no established public trading market for the shares of common stock of
the Corporation and there can be no assurance that any market will develop.

The Corporation paid total cash dividends of $.55 per share in 1999 and $.55 per
share in 1998 (adjusted for effects of two for one stock split in May of 1999).
The Corporation expects to continue to pay cash dividends, subject to the
earnings and financial condition of the Corporation and other relevant factors;
however, dividends on the Corporation's common stock are declared and paid based
on a variety of considerations by the Corporation's Board of Directors and there
can be no assurance that the Corporation will continue to pay regular dividends
or as to the amount of dividends if any. Payment of future dividends will depend
upon business conditions, operating results, capital and reserve requirements
and the Board's consideration of other relevant factors. In addition, the
ability of the Corporation to pay dividends is totally dependent on dividends
received from its banking subsidiary (see Note 14 to the consolidated financial
statements) and is subject to statutory restrictions on dividends applicable to
Delaware corporations, including the restrictions that dividends generally may
be paid only from a corporation's surplus or from its net profits for the fiscal
year in which the dividend is declared and the preceding year. The Corporation
is subject to state law restrictions on its ability to pay dividends.


                                                                              24
<PAGE>   25


ITEM 6. SELECTED FINANCIAL DATA

(Amounts in Thousands except per share data)


<TABLE>
<CAPTION>
                                        1999       1998       1997        1996       1995
                                      --------   --------   --------    --------   --------
<S>                                   <C>        <C>        <C>         <C>        <C>
Income statement data:
  Interest income                     $ 15,338     14,117     12,323      11,093     10,495
  Interest expense                       6,935      6,697      5,533       4,952      4,560

                                      --------   --------   --------    --------   --------
  Net interest income                    8,404      7,420      6,790       6,141      5,935
  Provision for
    loan losses                            496        240        340         171        204

                                      --------   --------   --------    --------   --------
  Net interest income after
Provision for
    loan losses                       $  7,908      7,180      6,450       5,970      5,731
                                      ========   ========   ========    ========   ========
  Investment securities gains/
    (losses), net                     $     32        133        (29)         35         32
                                      ========   ========   ========    ========   ========

  Net Earnings                        $  1,947      1,932      1,730       1,473      1,230
                                      ========   ========   ========    ========   ========

Balance sheet data:
  Total assets                        $221,967    189,193    164,545     145,278    140,466
                                      ========   ========   ========    ========   ========

  Total loans, net                    $122,000    103,090     85,328      63,002     62,603
                                      ========   ========   ========    ========   ========

  Total deposits                      $183,208    152,826    135,282     123,075    117,743
                                      ========   ========   ========    ========   ========

  Total stockholders'
    equity                            $ 17,647     16,048     14,627      13,263     12,398
                                      ========   ========   ========    ========   ========

Per share data:
  Basic earnings per share            $   1.88       1.87       1.67        1.43       1.19
                                      ========   ========   ========    ========   ========

         Diluted earnings per share   $   1.86       1.87       1.67        1.43       1.19
                                      ========   ========   ========    ========   ========
  Cash dividends per
    Share(1)                          $    .55        .55        .55         .25        .25
                                      ========   ========   ========    ========   ========
</TABLE>


     (1) Per Share data prior to 1999 reflects two for one split in May of 1999.


                                                                              25
<PAGE>   26


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following financial review is presented to provide an analysis of the
consolidated results of operations of the Corporation and its subsidiary. This
review should be read in conjunction with the consolidated financial statements
included under Item 8.

                              SUMMARY OF OPERATIONS

The Corporation's 1999 net income was $1,947,776, as compared to a net income in
1998 of $1,932,819. Average net interest spread increased by 22 basis points
from 3.84% in 1998 to 4.06% in 1999. Average interest earning assets, which
increased from $170,282,000 in 1998 to $187,122,000 in 1999, produced a $982,795
increase in net interest income in 1999. Noninterest income decreased by $53,247
from $1,529,260 in 1998 to $1,476,013 in 1999. The provision for loan losses in
1999 was $496,000 as compared to $240,000 in 1998. The 1999 provision was the
amount established by management to maintain the allowance at the appropriate
level. Noninterest expenses for 1999 increased $720,809 from $6,089,203 in 1998
to $6,810,012 in 1999.

The Corporation's 1998 net income was $1,932,819, as compared to a net income in
1997 of $1,729,559. Average net interest spread decreased by 23 basis points
from 4.07% in 1997 to 3.84% in 1998. Average interest earning assets, which
increased from $144,452,000 in 1997 to $170,282,000 in 1998, produced a $730,142
increase in net interest income in 1998. Noninterest income decreased by
$256,463 from $1,785,723 in 1997 to $1,529,260 in 1998. Most of this decrease is
attributed to a $500,000 insurance settlement that was received in 1997. The
provision for loan losses in 1998 was $240,000 as compared to $340,000 in 1997.
The 1998 provision was the amount established by management to maintain the
allowance at the appropriate level. Noninterest expenses for 1998 increased
$286,327 from $5,802,876 in 1997 to $6,089,203 in 1998.


                                                                              26
<PAGE>   27


                               NET INTEREST INCOME
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                    1999      1998     1997
                                                  -------   -------   -------

<S>                                               <C>       <C>       <C>
Interest income (1)...........................    $15,865    14,551    12,652
Interest expense..............................    $ 6,935     6,697     5,533

                                                  -------   -------   -------
   Net interest income........................      8,830     7,854     7,119
Provision for
   loan losses................................        496       240       340

                                                  -------   -------   -------
Net interest income after
   provision for
   loan losses on a tax equivalent
   basis......................................      8,434     7,614     6,779
Less: tax equivalent
   adjustment.................................        527       434       328

                                                  -------   -------   -------
Net interest income after
   provision for
   loan losses................................    $ 7,907     7,180     6,451
                                                  =======   =======   =======
</TABLE>

(1) Yields on tax-exempt obligations have been computed on a full federal
tax-equivalent (FTE) basis using an income tax rate of 34% for 1999, 1998, and
1997.

Total interest income (on a FTE) increased to $15,865,000 in 1999, from
$14,551,000 in 1998, an increase of $1,314,000, or 9.03%. This increase is a
function of the average earning assets increasing $16,840,000 while slightly
lower interest rates offset the increase. Average loans increased $29,904,000
while the average rate earned decreased 0.83%. The average interest rate (FTE)
earned on all earning assets in 1999 decreased to 8.48% from 8.55% in 1998. The
interest rate spread increased from 3.83% in 1998 to 4.06% in 1999, as interest
rates dropped on interest bearing liabilities, and decreased slightly on the
interest earning assets. Average taxable investment securities for 1999 were
$42,807,000, as compared to $58,083,000 for 1998, a decrease of $15,276,000, or
26.30%. Average tax-exempt investment securities increased $4,362,000, or
26.06%, to $21,099,000 in 1999 from $16,737,000 in 1998. This total decrease was
the result of the growth in the loan portfolio. The average volume of federal
funds sold decreased to $2,893,000 in 1999 from $4,992,000 in 1998, a decrease
of $2,099,000 or 42.05%. Average interest earning deposits with other financial
institutions decreased to $0 in 1999, from $51,000 in 1998 as a result of the
certificate of deposit maturing.

Total interest expense increased $238,000, or 3.55%, to $6,935,000 in 1999, from
$6,697,000 in 1998. This increase is a function of the increase in the volume of
interest bearing liabilities and the decrease in interest rates. The average
rate paid on interest-bearing liabilities in 1999 was 4.42% as compared to 4.71%
in 1998. Average interest-bearing liabilities increased to $157,055,000 in 1999,
from $142,119,000 in 1998, an increase of $14,936,000, or 10.51%. Average
savings and interest-bearing demand deposits increased $4,593,000 or 9.75% to
$51,717,000 in 1999, from $47,124,000 in 1998. Average time deposits


                                                                              27
<PAGE>   28


increased to $83,272,000 in 1999, from $79,966,000 in 1998, an increase of
$3,306,000, or 4.13%. The average rate paid on time deposits decreased to 5.09%
in 1999 from 5.48% in 1998. This slight decrease in the rate paid on time
deposits during 1999 was due to the lower interest rates in the first half of
the year.

Total interest income (on a FTE) increased to $14,551,000 in 1998, from
$12,652,000 in 1997, an increase of $1,899,000, or 15.01%. Of this increase
110.74% was due to the average earning assets increasing $25,881,000 while
slightly lower interest rates in interest income off set the increase. Average
loans increased $11,396,000 while the average rate earned decreased 0.08%. The
average interest rate (FTE) earned on all earning assets in 1998 decreased to
8.55% from 8.75% in 1997. The interest rate spread decreased from 4.07% in 1997
to 3.84% in 1998, as interest rates rose slightly on interest bearing
liabilities, and decreased on the interest earning assets. Average taxable
investment securities for 1998 were $58,083,000, as compared to $49,103,000 for
1997, an increase of $8,980,000, or 18.29%. Average tax-exempt investment
securities increased $4,704,000, or 39.09%, to $16,737,000 in 1998 from
$12,033,000 in 1997. These average increases were funded largely by a public
fund deposit in the first quarter of 1998. The deposit is under a three year
contract to end in 2001. The rate paid on the deposit is 61.8% of prime.
Currently the deposit is earning 4.790%. The deposit account averaged
$11,510,585 in 1998. The average volume of federal funds sold increased to
$4,992,000 in 1998 from $4,191,000 in 1997, an increase of $801,000 or 19.11%.
Average interest earning deposits with other financial institutions decreased to
$51,000 in 1998, from $102,000 in 1997. The single certificate of deposit
matured in 1998.

Total interest expense increased $1,164,000, or 21.04%, to $6,697,000 in 1998,
from $5,533,000 in 1997. Of this increase, 76.90% was due to the increase in
average interest bearing liabilities, and 23.10% was due to the increase in
interest rates in 1998. The average rate paid on interest-bearing liabilities in
1998 was 4.71% as compared to 4.68% in 1997. Average interest-bearing
liabilities increased to $142,119,000 in 1998, from $118,325,000 in 1997, an
increase of $23,794,000, or 20.11%. Average savings and interest-bearing demand
deposits increased $14,724,000 or 45.44% to $47,124,000 in 1998, from
$32,400,000 in 1997. Average time deposits increased to $79,966,000 in 1998,
from $75,671,000 in 1997, an increase of $4,295,000, or 5.68%. The average rate
paid on time deposits increased to 5.48% in 1998 from 5.43% in 1997. This slight
increase in time deposits during 1998 was due to the fact that the Bank expanded
into a new market and sought deposits more aggressively in this new market.

                            PROVISION FOR LOAN LOSSES

The provision for loan losses is that amount necessary to maintain the allowance
for loan losses at a level appropriate and indicative of the associated risk, as
determined by management in accordance with Generally Accepted Accounting
Principles (GAAP), in the current portfolio. The provision for loan losses for
the year ended December 31, 1999 was $496,000, as compared to $240,000 in 1998,
an increase of


                                                                              28
<PAGE>   29


$256,000, or 106.67%. The change in provision is primarily a function the
increase in volume in the loan portfolio. The charge in the provision maintains
the allowance at a level that is determined to be appropriate by management and
the board of directors of the Bank.

The allowance for loan losses at December 31, 1999 represents 1.36% of gross
loans, as compared to 1.37% at December 31, 1998. The overall allowance as a
percentage of the loan portfolio as of December 31, 1999 remained relatively
unchanged as compared to that at December 31, 1998.

While it is the Bank's policy to chargeoff loans on which a loss is considered
probable, there exists the risk of future losses which cannot be quantified
precisely or attributed to particular loans or classes of loans. Because this
risk is continually changing in response to factors beyond the control of the
Bank, management's judgment as to the appropriateness of the allowance for loan
losses is necessarily approximate and imprecise. Adjustments to the allowance
for loan losses may also be required by the FDIC or the Alabama Superintendent
of Banks in the course of their examinations of the Bank. Accordingly, no
assurances can be given that continued evaluations of the loan portfolio in
light of economic conditions then prevailing, results of upcoming examinations,
or other factors will not require significant changes to the allowance.

                               NONINTEREST INCOME

<TABLE>
<CAPTION>
                                   1999         1998         1997
                                ----------   ----------   ----------
<S>                             <C>          <C>          <C>
Service charges on
     deposits                   $1,108,164    1,010,712      996,164
Commission - credit
     life insurance             $   45,878       46,242       68,704
Investment securities
     gains and (losses) (net)       31,907      132,828      (28,602)
Other                              290,064      339,478      749,457
                                ----------   ----------   ----------

     Total                      $1,476,013   $1,529,260    1,785,723
                                ==========   ==========   ==========
</TABLE>


Total noninterest income decreased $53,247 or 3.48%, to $1,476,013 in 1999, as
compared to $1,529,260 in 1998.

Service charge income increased to $1,108,164 in 1999, from $1,010,712 in 1998,
an increase of $97,452, or 9.64%. Commissions on credit life insurance decreased
$364, or .79%, to $45,878 in 1999, from $46,242 in 1998. Other income decreased
to $290,064 in 1999, from $339,478 in 1998, a decrease of $49,414 or 14.56%.
This decrease is partly attributed to higher interest rates that decrease the
demand for refinancing, therefore, reducing the fee income from third party
mortgages.

Total noninterest income decreased $256,463 or 14.36%, to $1,529,260 in 1998, as
compared to $1,785,723 in 1997.


                                                                              29
<PAGE>   30


Service charge income increased to $1,010,712 in 1998, from $996,164 in 1997, an
increase of $14,548, or 1.46%. Commissions on credit life insurance decreased
$22,462, or 32.69%, to $46,242 in 1998, from $68,704 in 1997. Other income
decreased to $339,478 in 1998, from $749,457 in 1997, a decrease of $409,979 or
54.70%. The increase in other income in 1997 was attributable to a $500,000
settlement the Corporation received from its insurance company. Therefore, other
income actually increased by $90,021 when adjusted for the insurance settlement.

                               NONINTEREST EXPENSE

<TABLE>
<CAPTION>
                              1999         1998         1997
                              ----         ----         ----
<S>                     <C>           <C>          <C>
Salaries and benefits   $3,879,425    3,405,746    3,002,501
Net occupancy            1,003,641      826,067      841,008
Other                    1,926,946    1,857,390    1,959,367

                        ----------   ----------   ----------
         Total          $6,810,012    6,089,203    5,802,876
                        ==========   ==========   ==========
</TABLE>

Total noninterest expense increased $720,809, or 11.84%, to $6,810,012 in 1999,
from $6,089,203 in 1998. Other expense increased to $1,926,946 in 1999, from
$1,857,390 in 1998, an increase of $69,556, or 3.75%. This increase can be
attributed to a new branch in Bay Minette, and the Lillian branch being open a
full year. Salaries and other compensation expense increased $473,679 or 13.91%
to $3,879,425 in 1999 from $3,405,746 for 1998. A substantial portion of this
increase can be attributed to the stock options issued to the Board and a key
employee of the Corporation under the United Bancorporation of Alabama, Inc.
1998 Stock Option Plan.

Income tax expense for 1999 was $625,762 as compared to $687,980 in 1998. Basic
earnings per share in 1999 were $1.88, as compared to a basic earnings per share
of $1.87 in 1998. Diluted earnings per share in 1999 were $1.86 and $1.87 in
1998. Return on average assets for 1999 was .97%, as compared to 1.06% in 1998.
Return on average equity was 11.96% in 1999, as compared to 12.76% in 1998.

<TABLE>
<CAPTION>
                                      LOANS AT DECEMBER 31
                                1999           1998           1997
                                ----           ----           ----
<S>                     <C>              <C>            <C>
Commercial, financial
     and agricultural   $ 76,705,657     63,792,383     51,307,365

Real estate
     -construction         3,585,107      3,212,719      1,319,684
Real estate
     - mortgage           25,322,667     21,025,234     16,178,243
Installment loans to
     individuals          18,082,531     16,594,295     18,432,583

                        ------------   ------------   ------------
                        $123,695,962    104,624,631     87,237,875
                        ============   ============   ============
</TABLE>


Total loans increased to $123,695,962 at December 31, 1999, from $104,624,631 at
year end 1998, an increase of $19,071,331, or 18.23%.


                                                                              30
<PAGE>   31


Commercial, financial and agricultural loans increased to $76,705,657 at year
end 1999, from $63,792,383 at December 31, 1998. Most of the increase can be
attributed to the Baldwin County markets, and more competitive pricing in
present markets. Real Estate construction loans increased by $372,388 or 11.59%
in 1999 to $3,585,107 from $3,212,719 in 1998. The increase in these loans is
related to the increase housing demands brought on by lower interest rates in
1998 and the increase in rates in 1999 has not been enough to slow demand for
homes. Real Estate mortgage loans increased in 1999 by $4,297,433 or 20.44% to
$25,322,667 from $21,025,234 in 1998. Installment loans to individuals increased
to $18,082,531 at December 31, 1999, from $16,594,295 at year end 1998, an
increase of $1,488,236 or 8.97%. The ratio of loans to deposits on December 31,
1999, was 67.51%, as compared to 68.46% in 1998.

Total loans increased to $104,624,631 at December 31, 1998, from $87,237,875 at
year end 1997, an increase of $17,386,756, or 19.93%. Commercial, financial and
agricultural loans increased to $63,792,383 at year end 1998, from $51,307,365
at December 31, 1998. Most of the increase was attributed to the Baldwin County
markets, and more competitive pricing in other markets. The Bank felt the
increase was in an area of the portfolio which is considered subject to less
credit risk and the net charge offs in this portion of the portfolio had
averaged only .15% over the prior four years. Real Estate construction loans
increased by $1,893,035 or 143.45% from $1,319,684 in 1997 to $3,212,719 in
1998. The increase in these loans was related to lower interest rates and more
marketing in the real estate loan area. Real Estate mortgage loans increased in
1998 by $4,846,991 or 29.96% to $21,025,234 from $16,178,243 in 1997. The
average annual net charge off of these types of loans in the prior four years
was .02%. Installment loans to individuals decreased to $16,594,295 at December
31, 1998, from $18,432,583 at year end 1997, a decrease of $1,838,288, or
11.08%. The ratio of loans to deposits on December 31, 1998, was 68.46%, as
compared to 64.49% in 1997.

                                    LIQUIDITY

"Liquidity" refers to the Corporation's ability to meet its cash flow
requirements and to fund its commitments. The Corporation and its subsidiary
actively manage the levels, types and maturities of earning assets in relation
to the sources available to fund current and future needs in an effort to ensure
the availability of adequate funding at all times. The goal of liquidity
management is to ensure the availability of an adequate level of funds to meet
loan demand and the deposit withdrawal needs of the Corporation's customers.

As of December 31, 1999, the Corporation's liquidity was adequate. The
corporation relies primarily on the Bank for its liquidity needs. In addition to
$425,000 in federal funds sold, the balance of the Bank's cash and due from
banks was $10,312,090. The Bank also had $22,220,000 in repurchase agreements.
At December 31, 1999 the loan to deposit ratio was 67.51%. The Bank has
experienced no liquidity problems associated with Year 2000 issues. The
Corporation's bank subsidiary has an Asset Liability Committee which has as its
primary objective the maintenance of specific funding and investment strategies
to achieve short-term and long-term financial goals.


                                                                              31
<PAGE>   32


As revealed in the Consolidated Statement of Cash Flows, the Corporation
generates the majority of its cash flows from financing activities. Financing
activities produced $31,873,635 in cash in 1999, with the majority of this
coming from a net increase in deposits. The investing activities of the
Corporation used $11,162,483 of the cash flows of the Bank. Operations provided
$3,215,037 in cash flows for the year ended December 31, 1999.


                                                                              32
<PAGE>   33


                            INTEREST RATE SENSITIVITY
                       Interest Rate Sensitivity Analysis
                             Year Ended December 31
                                      1999

<TABLE>
<CAPTION>
                                             Three    Three
                                             Months   To Six   Six Months   1 to 5    5 Years
                                            Or Less   Months   to One Year   Years   Or After     Total
                                            -------   -------  -----------  -------  --------    -------
<S>                                         <C>       <C>      <C>          <C>      <C>         <C>
Earning Assets:
Loans, net of unearned
    income                                  $16,759    11,380     12,326     57,034    26,197    123,696
Taxable securities AFS                          500         0      1,503      8,184    21,735     31,922
Tax exempt securities AFS                         0         0         65      1,759     9,217     11,041
Taxable securities HTM                            0         0          0        165     4,970      5,135
Tax exempt securities HTM                         0         0        375      1,644     8,391     10,410
Federal Funds Sold & Securities Purchased
Under agreements to resale                   22,645         0          0          0         0     22,645



                                            -------   -------    -------    -------   -------    -------
Total Interest Earning Assets               $39,904    11,380     14,269     68,786    70,510    204,849
                                            =======   =======    =======    =======   =======    =======
Interest Bearing Liabilities
Demand Deposits                             $     0         0          0          0    52,932     52,938
Savings Deposits                                  0         0          0          0    14,774     14,774
Certificates of Deposit less
    than $100,000                            15,207    23,215     13,083     10,253         0     61,758
Certificates of Deposit
    greater than $100,000                     7,262     7,049      7,969      2,253         0     24,535
Federal Funds Purchased and
    securities sold under
    agreement to repurchase                   8,935         0          0          0         0      8,935
Other Short Term Borrowings                     525         0          0          0         0        525
Federal Home Loan Bank Borrowing              7,500     2,288      9,788

                                            -------   -------    -------    -------   -------    -------

TOTAL Interest Bearing Source               $31,929    30,264     21,052     20,006    69,994    173,245
                                            =======   =======    =======    =======   =======    =======
    Liabilities
Non Interest Bearing Source                       0         0          0          0    29,211     29,211
    of Funds
                                            -------   -------    -------    -------   -------    -------
Interest Sensitivity Gap                      7,975   (18,884)    (6,783)    48,780   (28,693)     2,393
Cumulative Gap                                7,975   (10,909)   (17,692)    31,088     2,393
</TABLE>


                                                                              33
<PAGE>   34


The Corporation's sensitivity to changes in interest rates in conjunction with
the structure of interest rate spreads determines the impact of change in
interest rates on the Corporation's performance. Therefore, interest rate shock
scenarios are performed. See Item 7A.

                                CAPITAL RESOURCES

The Corporation has historically relied primarily on internally generated
capital growth to maintain capital adequacy. The average assets to average
equity ratio during 1999 was 8.07% as compared to 8.33% in 1998. Total
stockholders equity on December 31, 1999 was $17,646,663, an increase of
$1,598,688, or 9.96%, from $16,047,975 at year-end 1998. The Corporation's net
operating profit during 1999, less dividends of $584,112 declared to
stockholders, minus other comprehensive income of $1,093,477,and plus additional
capital of $1,328,501 obtained through the sale of stock in a private placement
offering and upon the exercise of stock options, accounted for this increase.
The Corporation's risk based capital of $20,131,537, or 10.61%, at December 31,
1999, was well above the Corporation's minimum risk based capital requirement of
$15,172,000 or 8.0%. Based on management's projections, internally generated
capital should be sufficient to satisfy capital requirements for existing
operations into the foreseeable future, but any continued growth into new
markets may require the Bank to continue to access external funding sources.

                           FORWARD LOOKING STATEMENTS

When used or incorporated by reference herein, the words "anticipate",
"estimate", "expect", "project", "target", "goal", and similar expressions, are
intended to identify forward-looking statements within the meaning of Section
27A of the Securities Act of 1933. Such forward-looking statements are subject
to certain risks, uncertainties, and assumptions including those set forth
herein. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected or projected. These forward-looking statements
speak only as of the date they are made. The Corporation expressly disclaims any
obligations or undertaking to publicly release any updates or revisions to any
forward-looking statement contained herein to reflect any change in the Bank's
expectations with regard to any change in events, conditions or circumstances on
which any such statement is based.


                                                                              34
<PAGE>   35


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and rates.
The Bank's market risk arises principally from interest rate risk inherent in
its lending, deposit and borrowing activities. Management actively monitors and
manages its interest rate risk exposure. Although the Bank manages other risk,
such as credit quality and liquidity risk, in the normal course of business,
management considers interest rate risk to be its most significant market risk.
Interest rate risk could potentially have the largest material effect on the
Bank's financial condition and results of operations. Other types of market
risks, such as foreign currency exchange rate risk and commodity price risk, do
not arise in the Bank's normal course of business activities.

The Bank's profitability is affected by fluctuations in interest rates.
Management's goal is to maintain a reasonable balance between exposure to
interest rate fluctuations and earnings potential. A sudden and substantial
increase in interest rates may adversely impact the Bank's earnings to the
extent that the interest rates on interest-earning assets and interest-bearing
liabilities do not change at the same speed, to the same extent or on the same
basis.

The Bank's Asset Liability Management Committee ("ALCO") monitors and considers
methods of managing the rate and sensitivity repricing characteristics of the
balance sheet components consistent with maintaining acceptable levels of
changes in the net portfolio value ("NPV") and net interest income. NPV
represents the market values of portfolio equity and is equal to the market
value of assets minus the market value of liabilities, with adjustments made for
off-balance sheet items over a range of assumed changes in market interest
rates. A primary purpose of the Bank's ALCO is to manage interest rate risk to
effectively invest the Bank's capital and to preserve the value created by its
core business operations. As such, certain management monitoring processes are
designed to minimize the impact of sudden and sustained changes in interest
rates on NPV and net interest income.

The Bank's exposure to interest rate risk is reviewed on a quarterly basis by
the Board of Directors and the ALCO. Interest rate risk exposure is measured
using interest rate sensitivity analysis to determine the Bank's change in NPV
in the event of hypothetical changes in interest rates. Further, interest rate
sensitivity gap analysis is used to determine the repricing characteristics of
the Bank's assets and liabilities. The ALCO is charged with the responsibility
to maintain the level of sensitivity of the Bank's net interest margin within
Board approved limits.

Interest rate sensitivity analysis is used to measure the Bank's interest rate
risk by computing estimated changes in NPV of its cash flows from assets,
liabilities, and off-balance sheet items in


                                                                              35
<PAGE>   36


the event of a range of assumed changes in market interest rates. This analysis
assesses the risk of loss in market risk sensitive instruments in the event of a
sudden and sustained 100 - 400 basis points increase or decrease in market
interest rates. The Bank uses the Sendero Model Level II, which takes the
current rate structure of the portfolio and shocks for each rate level and
calculates the new market value equity at each level. The Bank's Board of
Directors has adopted an interest rate risk policy which establishes maximum
allowable decreases in net interest margin in the event of a sudden and
sustained increase or decrease in market interest rates. The following table
presents the Bank's projected change in NPV (fair value assets less fair value
liabilities) for the various rate shock levels as of December 31, 1999. All
market risk sensitive instruments presented in this table are held to maturity
or available for sale. The Bank has no trading securities.

<TABLE>
<CAPTION>
                              CHANGE IN     CHANGE IN
CHANGE IN           MARKET      MARKET        MARKET
INTEREST RATES      VALUE       VALUE         VALUE
(BASIS POINTS)      EQUITY      EQUITY        EQUITY(%)
--------------      ------    ---------     -----------
<S>               <C>          <C>             <C>
      400         $ 9,699.6    (6,053.4)       (38.4)
      300          10,858.5    (4,894.5)       (31.1)
      200          12,355.9    (3,397.2)       (21.6)
      100          14,043.2    (1,709.9)       (10.9)
        0          15,753.0           0            0
     (100)         17,571.8     1,818.8         11.5
     (200)         19,564.6     3,811.6         24.2
     (300)         21,652.6     5,899.6         37.5
     (400)         23,610.2     7,857.2         49.9
</TABLE>

The preceding table indicates that at December 31, 1999, in the event of a
sudden and sustained increase in prevailing market interest rates, the Bank's
NPV would be expected to decrease, and that in the event of a sudden decrease in
prevailing market interest rates, the Bank's NPV would be expected to increase.

Computation of prospective effects of hypothetical interest rate changes
included in these forward-looking statements are subject to certain risks,
uncertainties, and assumptions including relative levels of market interest
rates, loan prepayments and deposit decay rates, and should not be relied upon
as indicative of actual results. Further, the computations do not contemplate
any actions the Bank could undertake in response to changes in interest rates.


                                                                              36
<PAGE>   37


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Corporation's consolidated financial statements as of December 31, 1999 and
1998 and for each of the years in the three-year period ended December 31, 1999
are included in the following pages shown in the index below.


<TABLE>
<CAPTION>
         Index to Financial Statements                                          Page(s)
         -----------------------------                                          -------
<S>                                                                             <C>
         Independent Auditors' Report                                             F1

         Consolidated Balance Sheets as of December 31,
                  1999 and 1998                                                   F2

         Consolidated Statements of Operations for
                  the years ended December 31, 1999, 1998,
                  and 1997                                                        F4

         Consolidated Statements of Stockholders'
                  Equity and Other Comprehensive Income
                  for the years ended December 31,
                  1999, 1998, and 1997                                            F5

         Consolidated Statements of Cash Flows for
                  the years ended December 31, 1999, 1998,
                  and 1997                                                        F6

         Notes to Consolidated Financial
                  Statements - December 31, 1999, 1998,
                  and 1997                                                        F9
</TABLE>


                                                                              37
<PAGE>   38
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
United Bancorporation of Alabama, Inc.:


We have audited the accompanying consolidated financial statements of United
Bancorporation of Alabama, Inc. and subsidiary as listed in Item 8. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of United
Bancorporation of Alabama, Inc. and subsidiary as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.


                                                  /s/ KPMG LLP


Birmingham, Alabama
February 29, 2000




                                      F-1
<PAGE>   39
                UNITED BANCORPORATION OF ALABAMA, INC.
                            AND SUBSIDIARY

                     Consolidated Balance Sheets

                      December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                              1999                   1998
                                                                           ------------           ----------
<S>                                                                        <C>                    <C>
                                  ASSETS

Cash and due from banks (note 2)                                           $ 10,312,090             8,385,901
Federal funds sold and securities purchased under agreements
    to resale                                                                22,645,000               645,000
                                                                           ------------           -----------
         Cash and cash equivalents                                           32,957,090             9,030,901
Investment securities available for sale, at fair value
    (cost of $44,310,451 and $53,735,446, respectively) (note 3)             42,962,734            54,210,192
Investment securities held to maturity (fair value
    of $15,152,215 and $17,375,946 at December 31,
    1999 and 1998, respectively) (note 3)                                    15,545,733            17,045,566
Loans (notes 4 and 6)                                                       123,695,962           104,624,631
Less:    Unearned income                                                         19,448               106,471
         Allowance for loan losses                                            1,676,274             1,428,492
                                                                           ------------           -----------
         Net loans                                                          122,000,240           103,089,668
Premises and equipment, net (note 5)                                          4,979,984             2,894,882
Interest receivable                                                           2,198,957             2,224,442
Other assets                                                                  1,322,506               697,590



                                                                           ------------           -----------
         Total assets                                                      $221,967,244           189,193,241
                                                                           ============           ===========
</TABLE>


                                                                     (Continued)

                                       F-2

<PAGE>   40


<TABLE>
<CAPTION>
                                                                       1999                1998
                                                                   -------------      -------------
<S>                                                                <C>                   <C>
                          LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits (note 7):
    Noninterest bearing                                            $  29,211,226         26,953,055
    Interest bearing                                                 153,997,225        125,873,484
                                                                   -------------      -------------
         Total deposits                                              183,208,451        152,826,539
Securities sold under agreements to repurchase (note 8)                8,935,003         11,810,188
Advances from Federal Home Loan Bank (note 6)                          9,787,762          6,447,356
Treasury, tax and loan account                                           524,741             49,269
Accrued expenses and other liabilities                                 1,864,624          2,011,914
                                                                   -------------      -------------
         Total liabilities                                           204,320,581        173,145,266
Stockholders' equity (notes 10 and 17):
    Class A common stock of $.01 par value
       Authorized 5,000,000 shares; 1,149,281 and 1,096,320
       shares issued in 1999 and 1998, respectively                       11,494              5,482
    Class B common stock of $.01 par value
       Authorized 250,000 shares; no shares
       issued and outstanding                                                 --                 --
    Preferred stock of $.01 par value
       Authorized 250,000 shares; no shares
       issued and outstanding                                                 --                 --
    Surplus                                                            4,804,489          3,476,518
    Retained earnings                                                 14,104,870         12,746,688
    Accumulated other comprehensive income
       net of deferred asset of $539,117 and deferred tax
       liability of $189,899 in 1999 and 1998, respectively             (808,600)           284,877
                                                                   -------------      -------------
                                                                      18,112,253         16,513,565
    Less 63,550 treasury shares at cost                                  465,590            465,590
                                                                   -------------      -------------
         Total stockholders' equity                                   17,646,663         16,047,975
Commitments and contingencies (notes 16 and 17)
                                                                   -------------      -------------
         Total liabilities and stockholders' equity                $ 221,967,244        189,193,241
                                                                   =============      =============
</TABLE>


See accompanying notes to consolidated financial statements

                                      F-3

<PAGE>   41


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                      Consolidated Statements of Operations

                  Years ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
                                                                       1999            1998            1997
                                                                    -----------     -----------     -----------
<S>                                                                 <C>               <C>             <C>
Interest income:
    Interest and fees on loans                                      $11,593,789       9,468,119       8,339,955
    Interest on investment securities:
         Taxable                                                      2,486,621       3,526,707       3,102,931
         Nontaxable                                                   1,022,963         844,053         637,223
                                                                    -----------     -----------     -----------
            Total interest on investment securities                   3,509,584       4,370,760       3,740,154
                                                                    -----------     -----------     -----------
    Other interest income                                               234,819         278,459         243,149
                                                                    -----------     -----------     -----------
            Total interest income                                    15,338,192      14,117,338      12,323,258
                                                                    -----------     -----------     -----------
Interest expense:
    Interest on deposits (note 7)                                     5,903,334       5,927,380       5,011,540
    Interest on other borrowed funds                                  1,031,321         769,216         521,118
                                                                    -----------     -----------     -----------
            Total interest expense                                    6,934,655       6,696,596       5,532,658
                                                                    -----------     -----------     -----------
            Net interest income                                       8,403,537       7,420,742       6,790,600
Provision for loan losses (note 4)                                      496,000         240,000         340,000
                                                                    -----------     -----------     -----------
            Net interest income after provision for loan losses       7,907,537       7,180,742       6,450,600
Noninterest income:
    Service charges on deposits                                       1,108,164       1,010,712         996,164
    Commissions on credit life insurance                                 45,878          46,242          68,704
    Investment securities gains, net (note 3)                            31,907         132,828         (28,602)
    Other (note 18)                                                     290,064         339,478         749,457
                                                                    -----------     -----------     -----------
            Total noninterest income                                  1,476,013       1,529,260       1,785,723
                                                                    -----------     -----------     -----------
Noninterest expense:
    Salaries and benefits (notes 10 and 12)                           3,879,425       3,405,746       3,002,501
    Net occupancy expense                                             1,003,641         826,067         841,008
    Other (note 18)                                                   1,926,946       1,857,390       1,959,367
                                                                    -----------     -----------     -----------
            Total noninterest expense                                 6,810,012       6,089,203       5,802,876
                                                                    -----------     -----------     -----------
            Earnings before income taxes                              2,573,538       2,620,799       2,433,447
Income tax expense (note 9)                                             625,762         687,980         703,888
                                                                    -----------     -----------     -----------
            Net earnings                                            $ 1,947,776       1,932,819       1,729,559
                                                                    ===========     ===========     ===========
Basic earnings per share                                            $      1.88            1.87            1.67
                                                                    ===========     ===========     ===========
Basic weighted average shares outstanding                             1,034,346       1,032,770       1,032,770
                                                                    ===========     ===========     ===========
Diluted earnings per share                                          $      1.86            1.87            1.67
                                                                    ===========     ===========     ===========
Diluted weighted average shares outstanding                           1,046,799       1,032,770       1,032,770
                                                                    ===========     ===========     ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-4

<PAGE>   42


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

        Consolidated Statements of Stockholders' Equity and Comprehensive

              Income Years ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
                                                                                               ACCUMULATED
                                                                                                  OTHER
                                                             COMMON                 RETAINED  COMPREHENSIVE
                                                 SHARES      STOCK       SURPLUS    EARNINGS     INCOME
                                               ---------  -----------   ---------  ---------- -------------
<S>                                            <C>        <C>           <C>        <C>        <C>
Balance December 31, 1996                      1,096,320  $    10,964   3,476,518  10,214,874        26,283
    Net earnings 1997                                 --           --          --   1,729,559            --
    Unrealized change in investment
      securities, net of tax                          --           --          --          --       202,474

    Comprehensive income

    Cash dividends declared ($.55 per share)          --           --          --    (568,023)           --
                                               ---------  -----------   ---------  ----------    ----------
Balance December 31, 1997                      1,096,320       10,964   3,476,518  11,376,410       228,757
    Net earnings 1998                                 --           --          --   1,932,819            --
    Unrealized change in investment
      securities, net of tax                          --           --          --          --        56,120

    Comprehensive income

    Cash dividends declared ($.55 per share)          --           --          --    (568,023)           --
                                               ---------  -----------   ---------  ----------    ----------
Balance December 31, 1998                      1,096,320       10,964   3,476,518  12,741,206       284,877
    Net earnings 1999                                 --           --          --   1,947,776            --
    Unrealized change in investment
      securities, net of tax                          --           --          --          --    (1,093,477)

    Comprehensive income

    Cash dividends declared ($.55 per share)          --           --          --    (584,112)           --
    Difference between fair market value and
      exercise price of stock options vesting
      during the period                               --           --     193,359          --            --
    Exercise of stock options                      5,000           50      79,950          --            --
    Sale of common stock                          47,961          480   1,054,662          --            --
                                               ---------  -----------   ---------  ----------    ----------
Balance December 31, 1999                      1,149,281  $    11,494   4,804,489  14,104,870      (808,600)
                                               =========  ===========   =========  ==========    ==========

<CAPTION>

                                                               TOTAL
                                                TREASURY    STOCKHOLDERS'    COMPREHENSIVE
                                                  STOCK        EQUITY           INCOME
                                                --------    ------------     ------------
<S>                                             <C>         <C>              <C>
Balance December 31, 1996                       (465,590)    13,263,049
    Net earnings 1997                                 --      1,729,559       1,729,559
    Unrealized change in investment
      securities, net of tax                          --        202,474         202,474
                                                                             ----------
    Comprehensive income                                                      1,932,033
                                                                             ==========
    Cash dividends declared ($.55 per share)          --       (568,023)
                                                --------     ----------
Balance December 31, 1997                       (465,590)    14,627,059
    Net earnings 1998                                 --      1,932,819       1,932,819
    Unrealized change in investment
      securities, net of tax                          --         56,120          56,120
                                                                             ----------
    Comprehensive income                                                      1,988,939
                                                                             ==========
    Cash dividends declared ($.55 per share)          --       (568,023)
                                                --------     ----------
Balance December 31, 1998                       (465,590)    16,047,975
    Net earnings 1999                                 --      1,947,776       1,947,776
    Unrealized change in investment
      securities, net of tax                          --     (1,093,477)     (1,093,477)
                                                                             ----------
    Comprehensive income                                                        854,299
                                                                             ==========
    Cash dividends declared ($.55 per share)          --       (584,112)
    Difference between fair market value and
      exercise price of stock options vesting
      during the period                          193,359
    Exercise of stock options                         --         80,000
    Sale of common stock                              --      1,055,142
                                                --------     ----------
Balance December 31, 1999                       (465,590)    17,646,663
                                                ========     ==========
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-5



<PAGE>   43


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
                                                                      1999              1998              1997
                                                                  ------------      ------------      ------------
<S>                                                               <C>               <C>               <C>
Cash flows from operating activities:
    Net earnings                                                  $  1,947,776         1,932,819         1,729,559
    Adjustments to reconcile net earnings to net
        cash provided by operating activities:
         Provision for loan losses                                     496,000           240,000           340,000
         Compensation expense arising from stock
            option awards                                              193,359                --                --
         Depreciation of premises and equipment                        393,352           258,346           285,625
         Net amortization of premium
            on investment securities                                   234,192           281,890           125,554
         Losses (gains) on sales of investment
            securities available for sale, net                         (31,907)         (132,828)           28,602
         Deferred income tax benefit                                  (146,436)          (63,298)         (164,875)
         Losses on disposal of premises and equipment, net                  --                --               727
         Gains on sale of other real estate, net                            --            (2,500)               --
         Decrease (increase) in interest receivable                     25,485          (392,495)         (235,979)
         Decrease (increase) in other assets                          (478,480)         (225,072)          232,753
         Decrease in accrued expenses
            and other liabilities                                      581,696           154,157           289,534
                                                                  ------------      ------------      ------------
              Net cash provided by  operating activities             3,215,037         2,051,019         2,631,500
                                                                  ------------      ------------      ------------
Cash flows from investing activities:
    Net decrease in interest-earning deposits
       in other financial institutions                                      --           100,920             1,628
    Proceeds from maturities, calls, and principal
       repayments of investment securities held to maturity          1,446,418        10,287,052         1,926,827
    Proceeds from sales of investment securities
        held to maturity                                                    --            19,975                --
    Purchases of investment securities held to maturity                     --        (2,500,304)       (4,122,790)
    Proceeds from maturities, calls, and principal
       repayments of investment securities available for sale       12,016,772        30,269,450         4,860,170
    Proceeds from sales of investment
       securities available for sale                                 7,499,649         6,731,529         4,494,206
    Purchases of investment securities available for sale          (10,240,296)      (52,554,305)      (11,460,810)
    Net increase in loans                                          (19,406,572)      (18,001,787)      (12,720,148)
    Purchases of premises and equipment                             (2,505,402)       (1,092,751)         (334,602)
    Proceeds from sales of other real estate                            26,948            40,000            64,500
                                                                  ------------      ------------      ------------
              Net cash used in investing activities                (11,162,483)      (26,700,221)      (17,291,019)
                                                                  ------------      ------------      ------------
</TABLE>


                                                                     (Continued)

                                      F-6

<PAGE>   44



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

          Consolidated Statements of Cash Flows, Continued Years ended

                        December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
                                                                 1999              1998              1997
                                                            ------------      ------------      ------------
<S>                                                         <C>                 <C>               <C>
Cash flows from financing activities:
    Net increase in deposits                                $ 30,381,912        17,544,726        12,206,245
    Net increase (decrease) in securities sold under
       agreements to repurchase                               (2,875,185)        2,838,034         2,217,255
    Cash dividends                                              (584,112)         (568,023)         (516,386)
    Exercise of stock options                                     80,000                --                --
    Proceeds from sale of common stock                         1,055,142                --                --
    Increase in FHLB advances                                  3,340,406         3,717,471         2,729,885
    Increase (decrease) in other borrowed funds                  475,472        (1,027,135)          408,097
                                                            ------------      ------------      ------------
              Net cash provided by financing activities       31,873,635        22,505,073        17,045,096
Net increase (decrease) in cash and  cash equivalents         23,926,189        (2,144,129)        2,385,577
Cash and cash equivalents at beginning of year                 9,030,901        11,175,030         8,789,453
                                                            ------------      ------------      ------------
Cash and cash equivalents at end of year                    $ 32,957,090         9,030,901        11,175,030
                                                            ============      ============      ============
Supplemental disclosures:
    Cash paid during the year for:
       Interest                                             $  6,925,803         6,661,160         5,312,841
                                                            ============      ============      ============
       Income taxes                                         $    746,750           778,516           517,000
                                                            ============      ============      ============
    Noncash transactions:
       Transfer of loans to other real estate
         through foreclosure                                $         --           200,344            54,700
                                                            ============      ============      ============
       Other comprehensive income, net of tax               $ (1,093,477)           56,120           202,474
                                                            ============      ============      ============
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-7


<PAGE>   45

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       (a)    PRINCIPLES OF CONSOLIDATION

              The accompanying consolidated financial statements include the
              financial statements of United Bancorporation of Alabama, Inc.
              (the Corporation) and its wholly owned subsidiary, United Bank
              (the Bank) collectively referred to as the Company. Significant
              intercompany balances and transactions have been eliminated in
              consolidation.

       (b)    BASIS OF PRESENTATION

              The consolidated financial statements have been prepared in
              conformity with generally accepted accounting principles. 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 a time period of less than one year relate
              to the determination of the allowance for loan losses and the
              valuation of real estate acquired in connection with foreclosures
              or in satisfaction of loans. In connection with the determination
              of the allowances for loan losses and real estate owned,
              management obtains independent appraisals for significant
              properties.

              Management believes the allowances for losses on loans and real
              estate owned are adequate. While management uses available
              information to recognize losses on loans and real estate owned,
              future additions to the allowances may be necessary based on
              changes in economic conditions, particularly in Alabama. In
              addition, various regulatory agencies, as an integral part of
              their examination process, periodically review the Company's
              allowances for losses on loans and real estate owned. Such
              agencies may require the Company to recognize additions to the
              allowances based on their judgments about information available to
              them at the time of their examination.

       (c)    CASH EQUIVALENTS

              The Company considers due from banks and federal funds sold to be
              cash equivalents. Federal funds are generally sold for one-day
              periods.


                                                                     (Continued)
                                      F-8

<PAGE>   46

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       (d)    INVESTMENT SECURITIES

              Investment securities are classified in one of three portfolios:
              (i) trading account securities, (ii) held to maturity securities,
              and (iii) securities available for sale. Trading account
              securities are to be stated at fair value. The Company does not
              have trading account securities. Investment securities held to
              maturity are stated at cost adjusted for amortization of premiums
              and accretion of discounts. With regard to investment securities
              held to maturity, management has the intent and ability to hold
              such securities until maturity. Investment securities available
              for sale are to be 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.

              Interest earned on investment securities is included in interest
              income. Net gains and losses on the sale of investment securities
              available for sale, computed on 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 market 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.

       (e)    LOANS

              Interest income on loans is credited to earnings based on the
              principal amount outstanding at the respective rate of interest
              except for certain installment loans for which interest is
              recognized on a method which is not materially different from a
              level-yield basis over the terms of the loans. Interest income on
              other loans is recognized on a level-yield basis.

              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. When a loan is placed on nonaccrual status, all
              interest previously accrued, but not collected, is reversed
              against current period interest income. 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.



                                                                     (Continued)
                                      F-9
<PAGE>   47



              Under the provisions of Statement of Financial Accounting
              Standards ("SFAS") 114 and 118, management considers a loan to be
              impaired when it is probable that the Company 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 to 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 applied
              to 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 impaired 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.

       (f)    ALLOWANCE FOR LOAN LOSSES

              The ultimate collectibility of a substantial portion of the
              Company's loan portfolio and the recovery of real estate owned are
              susceptible to changes in economic and market conditions in the
              geographic area served by the Company 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.

       (g)    PREMISES AND EQUIPMENT

              Premises and equipment are stated at cost less accumulated
              depreciation. Depreciation is computed using both the
              declining-balance method and the straight-line method over the
              estimated useful lives of the assets, which range from three to
              fifty years.


                                                                     (Continued)
                                      F-10

<PAGE>   48

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       (h)    OTHER REAL ESTATE

              Other real estate represents property acquired through foreclosure
              or deeded to the Company in lieu of foreclosure on real estate
              mortgage loans on which borrowers have defaulted. Other real
              estate is carried 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 changes in fair value, up to the value
              established at foreclosure, are recognized as charges or credits
              to noninterest expense with an offset to the allowance for losses
              on other real estate.

       (i)    INCOME TAX EXPENSE

              The Company 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.

              The Company files its federal income tax returns on a consolidated
              basis.

       (j)    STOCK OPTION PLAN

              The Company applies the intrinsic value-based method of accounting
              prescribed by Accounting Principles Board ("APB") Opinion No. 25,
              Accounting for Stock Issued to Employees, and related
              interpretations, in accounting for its fixed plan stock options.
              As such, compensation expense is recorded on the date of grant if
              the current market price of the underlying stock exceeds the
              exercise price.

              SFAS 123, Accounting for Stock Based Compensation, which became
              effective in 1996 and prescribes the recognition of compensation
              expense on the fair value of options on the grant date, allows
              companies to apply APB 25 as long as certain pro forma disclosures
              are made assuming hypothetical fair value method application. See
              note 10 for pro forma disclosures required by SFAS 123.

       (k)    EARNINGS PER SHARE

              Basic and diluted earnings per share are computed on the weighted
              average number of shares outstanding in accordance with SFAS 128,
              Earnings Per Share.


                                                                     (Continued)
                                      F-11
<PAGE>   49

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       (l)    RECENT ACCOUNTING PRONOUNCEMENTS

              In June 1997, the Financial Accounting Standards Board ("FASB")
              issued SFAS 130, Reporting Comprehensive Income. This statement
              establishes standards for reporting and displaying comprehensive
              income and its components in a full set of general purpose
              financial statements. SFAS 130 requires all items that are
              required to be recognized under accounting standards as components
              of comprehensive income be reported in a financial statement that
              is displayed in equal prominence with the other financial
              statements. The term "comprehensive income" is used in the
              statement to describe the total of all components of comprehensive
              income including net income. "Other comprehensive income" refers
              to revenues, expenses, gains, and losses that are included in
              comprehensive income but excluded from earnings under current
              accounting standards.

              "Other comprehensive income" for the Company consists of items
              recorded directly in equity under SFAS 115, Accounting for Certain
              Investments in Debt and Equity Securities.

              In June 1997, the FASB issued SFAS 131, Disclosures about Segments
              of an Enterprise and Related Information. SFAS 131 establishes new
              standards for the disclosures made by public business enterprises
              to report information about operating segments in annual financial
              statements and requires those enterprises to report selected
              information about operating segments in interim financial reports
              issued to shareholders. It also establishes standards for related
              disclosures about products and services, geographic areas, and
              major customers. SFAS 131 is effective for financial statements
              for years beginning after December 15, 1997. The Company operates
              in only one segment - commercial banking.

              In June 1998, the FASB issued SFAS 133, Accounting for Derivative
              Instruments and Hedging Activities, SFAS 133 establishes
              accounting and reporting standards for derivative instruments,
              including certain derivative instruments embedded in other
              contracts, and for hedging activities. It requires that an entity
              recognize all derivatives as either assets or liabilities in the
              statement of financial position and measure those instruments at
              fair value. SFAS 133, as amended, is effective for financial
              statements for the first quarter of fiscal years beginning after
              June 15, 2000. The Company is currently evaluating the impact SFAS
              133 will have on the Company.


(2)    CASH AND DUE FROM BANKS

       The Corporation's subsidiary bank is required by the Federal Reserve Bank
       to maintain daily cash balances. These balances were $3,041,000 and
       $1,226,000 at December 31, 1999 and 1998, respectively.


                                                                     (Continued)
                                      F-12
<PAGE>   50

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(3)    INVESTMENT SECURITIES

       The amortized cost and fair value of investment securities held to
       maturity at December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                    GROSS        GROSS
                                     AMORTIZED    UNREALIZED   UNREALIZED
                                       COST         GAINS        LOSSES     FAIR VALUE
                                    -----------  -----------  -----------  -----------
<S>                                 <C>          <C>          <C>          <C>
1999

U.S. government agencies excluding
     mortgage-backed securities
                                    $ 2,994,337         --        169,712    2,824,625
State and political subdivisions
                                     10,410,355       32,512      224,464   10,218,403
Mortgage-backed securities            2,141,041        5,280       37,134    2,109,187
                                    -----------  -----------  -----------  -----------

                                    $15,545,733       37,792      431,310   15,152,215
                                    ===========  ===========  ===========  ===========


1998

U.S. government agencies excluding
     mortgage-backed securities
                                    $ 2,993,375       21,315       11,160    3,003,530
State and political subdivisions
                                     11,089,445      319,896       33,440   11,375,901
Mortgage-backed securities            2,962,746       33,769         --      2,996,515
                                    -----------  -----------  -----------  -----------

                                    $17,045,566      374,980       44,600   17,375,946
                                    ===========  ===========  ===========  ===========
</TABLE>

                                                                     (Continued)
                                      F-13
<PAGE>   51

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       The amortized cost and fair value of debt securities classified as
       investment securities held to maturity at December 31, 1999 by
       contractual maturity are shown below. Expected maturities may differ from
       contractual maturities because borrowers may have the right to call or
       prepay obligations with or without prepayment penalties.

<TABLE>
<CAPTION>
                                          AMORTIZED
                                            COST       FAIR VALUE
                                         -----------  -----------
<S>                                      <C>              <C>
Investment securities held to maturity:
Due in one year or less                  $   374,860      376,831
Due after one year through five years      1,644,036    1,644,570
Due after five years through ten years     6,722,040    6,489,355
Due after ten years                        4,663,756    4,532,272
                                         -----------  -----------

     Subtotal                             13,404,692   13,043,028

Mortgage-back securities                   2,141,041    2,109,187
                                         -----------  -----------

     Total                               $15,545,733   15,152,215
                                         ===========  ===========
</TABLE>

       There were no sales of investment securities held to maturity during the
       three-year period ended December 31, 1999 except for $19,975 sold in
       1998.


                                                                     (Continued)
                                      F-14
<PAGE>   52


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


The amortized cost and fair value of investment securities available for sale at
December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                             GROSS       GROSS
                                              AMORTIZED   UNREALIZED   UNREALIZED
                                                COST         GAINS       LOSSES     FAIR VALUE
                                             -----------  -----------  -----------  -----------
<S>                                          <C>          <C>          <C>          <C>
1999

        U.S. treasury                        $ 8,591,805          315      130,225    8,461,895
        U.S. government agencies excluding
             mortgage-backed securities
                                               1,503,065         --         32,105    1,470,960
        State and political subdivisions      12,617,221       23,391      661,943   11,978,669
        Mortgage-backed securities            20,434,134       32,352      554,406   19,912,080
        Corporate notes and other              1,164,226         --         25,096    1,139,130
                                             -----------  -----------  -----------  -----------
                                             $44,310,451       56,058    1,403,775   42,962,734
                                             ===========  ===========  ===========  ===========

1998

        U.S. treasury                        $10,617,535      172,795         --     10,790,330
        U.S. government agencies excluding
             mortgage-backed securities        3,753,863       47,522       34,350    3,767,035
        State and political subdivisions       9,668,163      210,462        9,412    9,869,213
        Mortgage-backed securities            27,426,099      130,688       42,878   27,513,909
        Collateralized mortgage obligations
                                                 596,511         --         14,621      581,890
        Corporate notes and other              1,673,275       14,540         --      1,687,815
                                             -----------  -----------  -----------  -----------
                                             $53,735,446      576,007      101,261   54,210,192
                                             ===========  ===========  ===========  ===========
</TABLE>


                                                                     (Continued)
                                      F-15
<PAGE>   53


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       Included in investment securities available for sale at December 31, 1999
       is a U.S. government agency security with a yield based on various
       interest rate indices or which includes various interest rate step-up
       provisions. The amortized cost and net unrealized losses on this security
       at December 31, 1999, were $1,000,000 and $22,010, respectively. The
       weighted average yield of this security at December 31, 1999 was 5.81
       percent. This security matures in November 2003.

       The amortized cost and fair value of debt securities classified as
       investment securities available for sale at December 31, 1999,
       categorized by contractual maturity are shown below. Expected maturities
       may differ from contractual maturities because borrowers may have the
       right to call or prepay obligations with or without prepayment penalties.

<TABLE>
<CAPTION>
                                            AMORTIZED
                                              COST      FAIR VALUE
                                           -----------  -----------
<S>                                        <C>          <C>
Investment securities available for sale:
Due in one year or less                    $ 2,067,609    2,064,812
Due after one year through five years        9,522,897    9,376,937
Due after five years through ten years       2,947,338    2,891,909
Due after ten years                          8,676,873    8,055,396
                                           -----------  -----------

     Subtotal                               23,214,717   22,389,054

Mortgage-backed securities                  20,434,134   19,912,080
FHLB stock                                     661,600      661,600
                                           -----------  -----------

     Total                                 $44,310,451   42,962,734
                                           ===========  ===========
</TABLE>

       Proceeds from sales of investment securities available for sale during
       1999, 1998, and 1997 were $7,499,649, $6,731,529, and $4,494,206,
       respectively. Gross gains of $43,974 and gross losses of $12,067 were
       realized on those sales in 1999. Gross gains of $137,485 and gross losses
       of $4,657 were realized on those sales in 1998. Gross gains of $350 and
       gross losses of $28,952 were realized on those sales in 1997.

       Securities with carrying values of $47,459,218 and $45,618,050 at
       December 31, 1999 and 1998, respectively, were pledged to secure public
       and trust deposits as required by law and for other purposes.


                                                                     (Continued)
                                      F-16
<PAGE>   54


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(4)    LOANS AND ALLOWANCE FOR LOAN LOSSES

       At December 31, 1999 and 1998, the composition of the loan portfolio was
as follows:

<TABLE>
<CAPTION>
                                                   1999          1998
                                               ------------  ------------
<S>                                            <C>             <C>
Commercial, financial and agricultural         $ 76,705,657    63,792,383
Real estate - construction                        3,585,107     3,212,719
Real estate - 1-4 family residential mortgage    25,322,667    21,025,234
Installment loans to individuals                 18,082,531    16,594,295
                                               ------------  ------------

     Total                                     $123,695,962   104,624,631
                                               ============  ============
</TABLE>

       A summary of the transactions in the allowance for loan losses for the
       years ended December 31, 1999, 1998, and 1997 follows:

<TABLE>
<CAPTION>
                                  1999        1998        1997
                               ----------  ----------  ----------
<S>                            <C>         <C>         <C>
Balance at beginning of year   $1,428,492   1,443,135   1,243,457
Provision charged to earnings     496,000     240,000     340,000

Less: Loans charged-off           297,358     305,220     183,593
      Loan recoveries              49,140      50,577      43,271
                               ----------  ----------  ----------

Net charge-offs                   248,218     254,643     140,322
                               ----------  ----------  ----------

Balance at end of year         $1,676,274   1,428,492   1,443,135
                               ==========  ==========  ==========
</TABLE>

       Loans on which the accrual of interest had been discontinued or reduced
       amounted to $673,522 and $420,192 as of December 31, 1999 and 1998,
       respectively. If these loans had been current throughout their terms,
       interest income would have been increased by $36,625, $32,821, and
       $24,475 for 1999, 1998, and 1997, respectively. At December 31, 1999,
       pursuant to the definition within SFAS 114, the Company had an impaired
       loan of $83,979. At December 31, 1998 and 1997, the Company had no
       significant impaired loans.

       The Company had $13,392,804 and $9,769,937 of agriculture-related loans
       at December 31, 1999 and 1998, respectively.


                                                                     (Continued)
                                      F-17
<PAGE>   55


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       During 1999 and 1998, certain executive officers and directors of the
       Corporation and its subsidiary, including their immediate families and
       companies with which they are associated, were loan customers of the
       subsidiary bank. Total loans outstanding to these related parties at
       December 31, 1999 and 1998, amounted to $4,982,244 and $4,319,594,
       respectively. The change from December 31, 1998 to December 31, 1999
       reflects advances amounting to $1,526,534 and payments of $863,885 made
       during the year. 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)    PREMISES AND EQUIPMENT

       At December 31, 1999 and 1998, premises and equipment were as follows:

<TABLE>
<CAPTION>
                                         1999        1998
                                      ----------  ----------
<S>                                   <C>            <C>
Land                                  $  886,629     812,576
Buildings and leasehold improvements   4,257,311   2,606,279
Furniture, fixtures and equipment      2,992,095   2,274,236
Automobiles                              120,945     112,357
                                      ----------  ----------

                                       8,256,980   5,805,448
     Less accumulated depreciation     3,276,996   2,910,566
                                      ----------  ----------

                                      $4,979,984   2,894,882
                                      ==========  ==========
</TABLE>


(6)    BORROWED FUNDS

       The Company was liable to the Federal Home Loan Bank of Atlanta on the
       following advances at December 31, 1999:

<TABLE>
<CAPTION>
                                                INTEREST
MATURITY DATE                                     RATE
-------------                                 ------------
<S>                                           <C>            <C>
April 2003                                        5.52%      $1,000,000
October 2003                                      4.40%       3,000,000
April 2004                                        5.01%       1,500,000
April 2004                                        5.94%       2,000,000
June 2007                                         7.19%         111,995
May 2012                                          7.41%         146,667
July 2017                                         6.93%       1,170,000
August 2017                                       6.84%         193,475
September 2017                                    6.82%         665,625
                                              ------------   ----------
     Total (weighted average rate of 5.47%)$                  9,787,762
                                                             ==========
</TABLE>



                                                                     (Continued)
                                      F-18
<PAGE>   56


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       At December 31, 1999, the advances were collateralized by a blanket
       pledge of first-mortgage residential loans.


(7)    DEPOSITS

       At December 31, 1999 and 1998, deposits were as follows:

<TABLE>
<CAPTION>
                                                        1999          1998
                                                    ------------  ------------
<S>                                                 <C>           <C>
Noninterest bearing accounts                        $ 29,211,226    26,953,055
NOW accounts                                          46,559,634    26,412,431
Money market investment accounts                       6,378,672     4,152,467
Savings account                                       14,773,999    15,741,049
Time deposits:
     Certificates of deposit less than $100,000       61,750,432    55,634,034
     Certificates of deposit greater than $100,000    24,534,488    23,933,503
                                                    ------------  ------------
       Total deposits                               $183,208,451   152,826,539
                                                    ============  ============
</TABLE>

       Interest expense on certificates of deposit greater than $100,000
       amounted to $1,183,108, $1,361,765, and $1,006,548 for the years ended
       December 31, 1999, 1998, and 1997, respectively.


(8)    SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

       The maximum amount of outstanding securities sold under agreements to
       repurchase during 1999 and 1998 was $13,513,712 and $11,810,188,
       respectively. The weighted average borrowing rate at December 31, 1999
       and 1998 was 4.62 percent and 3.88 percent, respectively. The average
       amount of outstanding securities sold under agreements to repurchase
       during 1999 and 1998 was $11,833,159 and $10,467,702, respectively. The
       weighted average borrowing rate during the years ended December 31, 1999
       and 1998 was 4.23 percent and 4.62 percent, respectively. Securities
       underlying these agreements are under the Company's control.



                                                                     (Continued)
                                      F-19
<PAGE>   57

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(9)    INCOME TAXES

       Total income tax expense for the years ended December 31, 1999, 1998, and
       1997 was allocated as follows:

<TABLE>
<CAPTION>
                                                 1999        1998       1997
                                               ---------   ---------  ---------
<S>                                            <C>         <C>        <C>
Income from continuing operations              $ 625,762     687,980    703,888
                                               =========   =========  =========

Stockholders' equity, for other comprehensive
     income                                    $(728,986)     37,363    134,984
                                               =========   =========  =========
</TABLE>

       The components of income tax expense attributable to income from
       continuing operations for the years ended December 31, 1999, 1998, and
       1997 were as follows:

<TABLE>
<CAPTION>
                                   1999        1998        1997
                                 ---------   ---------   ---------
<S>                              <C>         <C>         <C>
Current income tax expense:
     Federal                     $ 711,105     672,671     760,201
     State                          61,093      78,607     108,562
                                 ---------   ---------   ---------

       Total                       772,198     751,278     868,763

Deferred income tax benefit:
     Federal                      (134,478)    (59,805)   (139,111)
     State                         (11,958)     (3,493)    (25,764)
                                 ---------   ---------   ---------

       Total                      (146,436)    (63,298)   (164,875)
                                 ---------   ---------   ---------

       Total income tax expense  $ 625,762     687,980     703,888
                                 =========   =========   =========
</TABLE>



                                                                     (Continued)
                                      F-20
<PAGE>   58

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       Total income tax expense differed from the amount computed by applying
       the statutory federal income tax rate of 34 percent to pretax earnings as
       follows:

<TABLE>
<CAPTION>
                                            1999        1998        1997
                                          ---------   ---------   ---------
<S>                                       <C>         <C>         <C>
Income tax at statutory rate              $ 875,003     891,072     827,372
Increase (decrease) resulting from:
     Tax exempt interest                   (371,959)   (253,304)   (196,347)
     TEFRA disallowance                      67,438        --          --
     Deferred compensation                   11,739        --          --
     State income tax net of federal tax
     benefit                                 32,429      49,575      54,647
     Premium amortization on tax
       exempt investment securities          23,362      19,867      12,462
Other, net                                  (12,250)    (19,230)      5,754
                                          ---------   ---------   ---------

                                          $ 625,762     687,980     703,888
                                          =========   =========   =========
</TABLE>

       The tax effects of temporary differences that give rise to significant
       portions of the deferred tax assets and deferred tax liabilities at
       December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                       1999      1998
                                                                     --------  --------
<S>                                                                  <C>       <C>
Deferred tax assets:
Loans, principally due to the allowance for loan losses              $329,336   238,499
Other real estate, principally due to differences in carrying value
                                                                       58,207    56,372
Accumulated other comprehensive loss                                  539,117      --
Accrued expenses                                                       55,882      --
Charitable contribution carryforward                                     --       2,948
Security writedown                                                      4,399     4,399
Other                                                                      56      --
                                                                     --------  --------

  Total deferred tax assets                                           986,997   302,218
                                                                     --------  --------

Deferred tax liabilities:
Premises and equipment, principally due to difference in
  depreciation                                                        156,782   168,079
Discount accretion                                                     17,220      --
Accumulated other comprehensive income                                   --     189,899
Accrued employee benefits                                              21,996    21,996
Other                                                                    --       6,698
                                                                     --------  --------

  Total deferred tax liabilities                                      195,998   386,672
                                                                     --------  --------

  Net deferred tax asset (liability)                                 $790,999   (84,454)
                                                                     ========  ========
</TABLE>



                                                                     (Continued)
                                      F-21
<PAGE>   59

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       As of December 31, 1999 and 1998, the net deferred income tax asset of
       $790,999 and liability of $84,454 were presented in the balance sheet as
       other assets and accrued expenses and other liabilities, respectively.

       In assessing the realizability of deferred tax assets, management
       considers whether it is more likely than not that some portion or all of
       the deferred tax assets will not be realized. The ultimate realization of
       deferred tax assets is dependent upon the generation of future taxable
       income during the periods in which those temporary differences become
       deductible.

       Management considers the scheduled reversal of deferred tax liabilities,
       projected future taxable income, and tax planning strategies in making
       this assessment. Based upon the level of historical taxable income and
       projection for future taxable income over the periods which the temporary
       differences resulting in the deferred tax assets are deductible,
       management believes it is more likely than not that the Company will
       realize the benefits of these deductible differences.


(10)   STOCK OPTION PLAN

       The United Bancorporation of Alabama, Inc. 1998 Stock Option Plan (the
       "Plan") provides for the grant of options to officers, directors, and
       employees of the Corporation to purchase up to an aggregate of 77,000
       shares of Class A Stock. On May 5, 1999, options for shares totaling
       42,480 were awarded under the Plan. Of the 42,480 shares, 19,440 vested
       immediately and the remaining 23,040 vest over a period of three years
       from the grant date. The changes in outstanding options are as follows:

<TABLE>
<CAPTION>
                                          WEIGHTED
                                          AVERAGE
                                          EXERCISE
                           SHARES UNDER  PRICE PER
                              OPTION       SHARE
                              -------      ------
<S>                        <C>           <C>
Awarded May 5, 1999            42,480      $16.62
Issued                          4,080       30.00
Surrendered                      --          --
Exercised                      (5,000)      16.00
                              -------      ------

Balance at December 31, 1999   41,560      $18.01
                              =======      ======
</TABLE>



                                                                     (Continued)
                                      F-22
<PAGE>   60

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       Stock options outstanding and exercisable on December 31, 1999 were as
follows:

<TABLE>
<CAPTION>
                                                            WEIGHTED AVERAGE
                                                                REMAINING
              EXERCISE PRICE PER       SHARES UNDER        CONTRACTUAL LIFE IN
                    SHARE                 OPTION                  YEARS
             -------------------     -----------------     -------------------
<S>                                  <C>                   <C>
             Outstanding:
                $16.00                    33,400                   9.0
                 22.50                     4,080                   9.0
                 30.00                     4,080                  10.0
             --------------              -------                 -----

             $16.00 - 30.00               41,560                   9.1
             --------------              -------                 -----

             Exercisable:
                $16.00                    18,040                   9.0
                 22.50                     4,080                   9.0
                 30.00                     4,080                  10.0
             --------------              -------                 -----

             $16.00 - 30.00               26,200                   9.1
             ==============              =======                 =====
</TABLE>

       Had compensation expense for the Company's stock options been recognized
       based on the fair value on the grant date under the methodology
       prescribed by SFAS 123, the Company's income from continuing operations
       and earnings per share for the year ended December 31, 1999 would have
       been impacted as shown in the following table (in thousands, except per
       share), no options were granted during the years ended December 31, 1998
       and 1997:

<TABLE>
<CAPTION>
                                        1999
                                      --------
<S>                                   <C>
Reported net earnings                 $1,947.7
Pro forma net earnings                 1,872.8
Reported diluted earnings per share
                                          1.86
Pro forma diluted earnings per share
                                          1.79
</TABLE>



                                                                     (Continued)
                                      F-23
<PAGE>   61

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       The fair value of options granted, which is amortized to expense over the
       option vesting period in determining the pro forma impact, is estimated
       on the date of grant using the Black-Scholes option-pricing model with
       the following weighted average assumptions:

<TABLE>
<CAPTION>
                                           1999
                                          -------
<S>                                       <C>
Expected life of option                    10 yrs
Risk-free interest rate                      5.16%
Expected volatility of Company stock         12.0%
Expected dividend yield of Company stock     2.67%
</TABLE>

       The weighted average fair value of options granted during 1999 is as
follows:

<TABLE>
<CAPTION>
                                           1999
                                         --------
<S>                                      <C>
Fair value of each option granted        $   8.09
Total number of options granted            46,560
Total fair value of all options granted  $376,651
</TABLE>

       In accordance with FAS 123, the weighted average fair value of stock
       options granted is required to be based on a theoretical statistical
       model using the preceding Black-Scholes assumptions. In actuality,
       because the Company's stock options are not traded on any exchange,
       employees can receive no additional value nor derive any additional
       benefit from holding stock options under these plans without an increase
       in market price of the Company's stock. Such an increase in stock price
       would benefit all stockholders commensurately.


(11)   NET INCOME PER SHARE

       Presented below is a summary of the components used to calculate diluted
       earnings per share for the years ended December 31, 1999, 1998, and 1997:

<TABLE>
<CAPTION>
                                                1999        1998        1997
                                             ----------  ----------  ----------
<S>                                          <C>         <C>         <C>
Diluted earnings per share:
    Weighted average common shares
outstanding                                  $1,034,346   1,032,770   1,032,770
    Effect of the assumed exercise of stock
options-based on the treasury stock
method using average market price                12,453        --          --
                                             ----------  ----------  ----------
    Total weighted average common shares
and potential common stock outstanding       $1,046,799   1,032,770   1,032,770
                                             ==========  ==========  ==========
</TABLE>



                                                                     (Continued)
                                      F-24
<PAGE>   62

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(12)   EMPLOYEE BENEFIT PLANS

       The Company adopted a 401(k) Employee Incentive Savings Plan effective
       January 1, 1988. Employees become eligible after completing six months of
       service and attaining age 20.5. They can contribute a minimum of one
       percent up to ten percent of salary to the plan. The Company contributes
       twenty-five cents for each dollar the employee contributes, up to four
       percent of the employee's salary. Total Company contributions to the plan
       during 1999, 1998, and 1997 were $31,428, $35,049, and $28,873,
       respectively.

       The Company 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. Annual profit sharing contributions of
       $98,000, $84,000, and $77,000 were made in 1999, 1998, and 1997,
       respectively.


(13)   FAIR VALUE OF FINANCIAL INSTRUMENTS

       SFAS 107, Disclosures about Fair Value of Financial Instruments, requires
       disclosure of fair value information about financial instruments, whether
       or not recognized on the face of the balance sheet, for which it is
       practicable to estimate that value. The assumptions used in the
       estimation of the fair value of the Company'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 Company's
       financial instruments, but rather a good-faith estimate of the fair value
       of financial instruments held by the Company. SFAS 107 excludes certain
       financial instruments and all non-financial instruments from its
       disclosure requirements.

       The following methods and assumptions were used by the Company in
       estimating the fair value of its financial instruments:

       (a)    CASH, CASH EQUIVALENTS, AND INTEREST EARNING DEPOSITS WITH OTHER
              FINANCIAL INSTITUTIONS

              Fair value equals the carrying value of such assets.

       (b)    INVESTMENT SECURITIES

              The fair value of investment securities is based on quoted market
              prices.



                                                                     (Continued)
                                      F-25
<PAGE>   63

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       (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 Company's historical experience with repayments
              adjusted to estimate the effect of current market conditions. The
              carrying amount of accrued interest approximates its fair value.

       (d)    DEPOSITS

              As required by SFAS 107, the fair value of deposits with no stated
              maturity, such as non-interest bearing demand deposits, NOW
              accounts, savings and money market deposit accounts, is equal to
              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.

       (e)    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.

       (f)    FHLB AND OTHER BORROWED FUNDS

              Due to their short-term nature, the fair value of the Company's
              other borrowed funds equals the carrying value of such
              liabilities. The fair value of FHLB advances is based on current
              borrowing rates.



                                                                     (Continued)
                                      F-26
<PAGE>   64

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       (g)    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.
              Thereby it is not practical to establish their fair value.

              The carrying value and estimated fair value of the Company's
              financial instruments at December 31, 1999 and 1998 are as follows
              (in thousands):

<TABLE>
<CAPTION>
                                   1999               1998
                           ------------------- -------------------
                           CARRYING  ESTIMATED CARRYING  ESTIMATED
                            AMOUNT  FAIR VALUE  AMOUNT  FAIR VALUE
                           -------- ---------- -------- ----------
<S>                        <C>      <C>        <C>      <C>
Financial assets:
  Cash and short-term
     investments           $ 32,957    32,957     9,031     9,031
                           ========  ========  ========  ========

  Investment securities    $ 58,509    58,115    71,256    71,586
                           ========  ========  ========  ========

  Loans, net of unearned
     income and allowance
     for loan losses
                           $122,000   121,850   103,090   104,544
                           ========  ========  ========  ========

  Financial liabilities:
     Deposits              $183,623   182,790   152,827   152,975
                           ========  ========  ========  ========

  Securities sold under
   agreements to
   repurchase              $  8,935     8,935    11,810    11,810
                           ========  ========  ========  ========

  Other borrowed funds     $    525       525        49        49
                           ========  ========  ========  ========

  FHLB advances            $  9,788     9,743     6,447     6,615
                           ========  ========  ========  ========
</TABLE>



                                                                     (Continued)
                                      F-27
<PAGE>   65

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(14)   DIVIDENDS FROM SUBSIDIARY

       Dividends paid by the subsidiary 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 total "risk-weighted"
       assets, as defined by banking regulators. Capital adequacy considerations
       could further limit the availability of dividends from the subsidiary
       bank. At December 31, 1999, the Bank could have declared dividends of
       approximately $4,474,000 without prior approval of regulatory
       authorities. Accordingly, at December 31, 1999, approximately $12,452,000
       of the parents investment in its subsidiary was restricted from transfer
       in the form of a dividends.


(15)   COMPREHENSIVE INCOME

       The following is a summary of the components of other comprehensive
income:

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31
                                                 --------------------------------------
                                                     1999          1998         1997
                                                 -----------   -----------  -----------
<S>                                              <C>           <C>          <C>
Other comprehensive income before tax
    Unrealized holding gains (losses) arising
during the period, net                           $(1,790,555)      226,311      308,856
    Less: reclassification adjustment for gains
(losses) included in net income                       31,907       132,828      (28,602)
                                                 -----------   -----------  -----------

Other comprehensive income, before
    income taxes                                  (1,822,462)       93,483      337,458

Income tax expense (benefit) related to other
    comprehensive income:
    Unrealized holding gains (losses) arising
during the period, net                              (716,222)       92,849      123,535
    Less: reclassification adjustment for gains
(losses) included in net income                       12,763        55,486      (11,449)
                                                 -----------   -----------  -----------

      Total income tax expense (benefit)
related to other comprehensive
income                                              (728,985)       37,363      134,984
                                                 -----------   -----------  -----------

Other comprehensive income (loss), after taxes   $(1,093,477)       56,120      202,474
                                                 ===========   ===========  ===========
</TABLE>



                                                                     (Continued)
                                      F-28
<PAGE>   66

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(16)   LITIGATION

       The Corporation and its subsidiary bank are 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 position, liquidity or operation of the
       Company.


(17)   COMMITMENTS

       The Corporation's subsidiary bank leases certain property and equipment
       for use in its business. These leases have lease terms generally not in
       excess of five years. Future minimum rental payments required under
       operating leases which have initial or remaining noncancelable lease
       terms in excess of one year as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
             YEARS ENDING DECEMBER 31
             ------------------------
<S>                                  <C>
                       2000          $ 50,886
                       2001            50,886
                       2002            50,886
                       2003            50,886
                       2004            46,446
                    Thereafter         56,000
                                     --------

                                     $305,990
                                     ========
</TABLE>

       Rental expense for all operating leases charged to earnings aggregated
       $103,298, $121,275, and $153,135 for the years ended December 31, 1999,
       1998, and 1997, respectively.

       The Company 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, standby letters of credit and financial guarantees. Such
       instruments involve elements of credit risk in excess of the amounts
       recognized in the consolidated financial statements.

       The Company's exposure to credit loss in the event of nonperformance by
       the other party to the financial instrument for commitments to extend
       credit, standby letters of credit, and financial guarantees written is
       represented by the contractual amount of these instruments. The Company
       uses the same credit policies in making conditional obligations as it
       does for on-balance-sheet instruments.



                                                                     (Continued)
                                      F-29
<PAGE>   67

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


       The financial instruments whose contract amounts represent credit risk as
       of December 31, 1999, are as follows:

<TABLE>
<S>                           <C>
Commitments to extend credit  $15,366,632
Standby letters of credit     $ 1,310,000
</TABLE>

       Standby letters of credit are commitments issued by the Company 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 Company 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.


(18)   OTHER NONINTEREST INCOME AND EXPENSE

       Components of other noninterest expense exceeding one percent of the
       total of interest income and other income for any of the years ended
       December 31, 1999, 1998, and 1997, respectively, include the following:


<TABLE>
<CAPTION>
                         1999      1998      1997
                       --------  --------  --------
<S>                    <C>       <C>       <C>
Data processing fees   $252,773   250,632   237,652
Supplies expenses       293,732   288,667   269,447
Miscellaneous expense     4,309    28,471   254,756
</TABLE>

       Miscellaneous expense in 1997 was composed primarily of a $250,000
       contribution to a charitable foundation.

       During 1997, the Company received $500,000 of insurance proceeds in
       settlement of legal fees incurred related to prior litigation which has
       been classified as other noninterest income.



                                                                     (Continued)
                                      F-30
<PAGE>   68

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(19)   REGULATORY MATTERS

       The Company and the subsidiary banks 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 Company's
       financial statements. Under capital adequacy guidelines and the
       regulatory framework of prompt corrective action, the Company and the
       subsidiary banks 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 Company and the
       subsidiary banks 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 Company and the subsidiary banks to maintain minimum
       core capital ("Tier I Capital") of at least four percent of risk-weighted
       assets, minimum total capital ("Total Qualifying Capital") of at least
       eight percent of risk-weighted assets and a minimum leverage ratio of at
       least four percent of average assets. Management believes, as of December
       31, 1999, that the Company and the subsidiary banks meet all capital
       adequacy requirements to which they are subject.

       As of December 31, 1999, the most recent notification from the
       appropriate regulatory agencies categorized the subsidiary banks as "well
       capitalized" under the regulatory framework for prompt corrective action.
       To be categorized as "well capitalized", the subsidiary banks must
       maintain minimum Total Qualifying Capital, Tier I Capital and leverage
       ratios of at least ten percent, six percent, and five percent,
       respectively. 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
       Company and its significant subsidiary banks at December 31, 1999 and
       1998:

<TABLE>
<CAPTION>
                          Total Qualifying Capital      Tier I Capital              Leverage
                             ------------------       ------------------       ------------------
                             Amount       Ratio       Amount       Ratio        Amount      Ratio
                             -------      -----       -------      -----       -------      -----
<S>                          <C>          <C>         <C>          <C>         <C>          <C>
As of December 31, 1999
   Consolidated              $20,132      14.96%       18,455      13.72%       18,455       9.15%
   United Bank                19,323      14.40%       17,646      13.15%       17,646       8.70%

As of December 31, 1998
   Consolidated               17,188      15.07%       15,763      13.82%       15,763       8.67%
   United Bank                16,557      14.85%       15,163      13.60%       15,163       8.28%
</TABLE>



                                                                     (Continued)
                                      F-31
<PAGE>   69

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998, and 1997


(20)   SUBSEQUENT EVENTS

       The Corporation is negotiating a Real Estate Opinion Agreement (the
       "Option Agreement") with Juniper Development, LLC ("Juniper"), an Alabama
       limited liability company owned by the directors of the Corporation and
       the Bank. Juniper has contracted to buy a 22-acre parcel of land located
       on County Road 20 in Foley, Alabama. Under the Option Agreement, the
       Corporation would have the right to select up to 3 acres of the 22-acre
       parcel to be used for a Foley branch of the Bank (the "Bank Site"). If
       the Corporation exercises the option to purchase the Bank Site, the
       purchase price under the Option Agreement would be the lesser of 85
       percent of the appraised value of the land being purchased or $400,000.
       The Corporation has previously investigated other property which might be
       purchased for use for a Foley Bank branch, and anticipates that the
       Corporation's cost to acquire a Foley branch site under the Option
       Agreement would be lower than would be paid for comparable alternate
       sites in a transaction with unaffiliated third parties.


                                                                     (Continued)
                                      F-32
<PAGE>   70

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements



(21)   PARENT COMPANY FINANCIAL INFORMATION

       The condensed financial information for United Bancorporation of Alabama,
       Inc. (Parent Company Only) is presented as follows:

                              (Parent Company Only)
                            Condensed Balance Sheets
                           December 31, 1999 and 1998



<TABLE>
<CAPTION>
                               ASSETS                             1999               1998
                                                              ------------       ------------
<S>                                                           <C>                <C>
Cash                                                          $    426,089             11,795
Dividend receivable from subsidiary bank                              --              519,831
Premises and equipment                                             630,856            556,825
Investment in subsidiary bank                                   16,926,498         15,448,354
                                                              ------------       ------------

         Total assets                                         $ 17,983,443         16,536,805
                                                              ============       ============

                LIABILITIES AND STOCKHOLDERS' EQUITY

Other liabilities                                             $    336,780            488,830
Stockholders' equity:
     Class A common stock of $.01 par value.  Authorized
5,000,000 shares; 1,149,281 and 1,096,320 shares
issued in 1999 and 1998, respectively                               11,494             10,964
     Class B common stock of $.01 par value.  Authorized
       250,000 shares; no shares issued and outstanding               --                 --
     Preferred stock of $.01 par value.  Authorized
       250,000 shares; no shares issued and outstanding               --                 --
Surplus                                                          4,804,489          3,476,518
Retained earnings                                               14,104,870         12,741,206
Accumulated other comprehensive income net of deferred
tax asset of $539,117 and deferred tax liability of
$189,899 in 1999 and 1998, respectively                           (808,600)           284,877
                                                              ------------       ------------

                                                                18,112,253         16,513,565
Less 63,550 treasury shares, at cost                               465,590            465,590
                                                              ------------       ------------

           Total stockholders' equity                           17,646,663         16,047,975
                                                              ------------       ------------

           Total liabilities and stockholders' equity         $ 17,983,443         16,536,805
                                                              ============       ============
</TABLE>


                                                                     (Continued)
                                      F-33
<PAGE>   71

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


                              (Parent Company Only)
                       Condensed Statements of Operations
                  Years ended December 31, 1999, 1998, and 1997


<TABLE>
<CAPTION>
                                                       1999            1998            1997
                                                    ----------      ----------      ----------
<S>                                                 <C>             <C>             <C>
Income:
     Cash dividends from subsidiary                 $  333,393         818,024         600,000
     Other                                              41,967          51,200           9,450

Expense:
     Salaries and benefits                             193,359            --              --
     Other                                              80,846          17,917          34,612
                                                    ----------      ----------      ----------
       Earnings before equity in undistributed
earnings of subsidiary                                 101,155         851,307         574,838
                                                    ----------      ----------      ----------

Equity in undistributed earnings of subsidiary       1,846,621       1,081,512       1,154,721
                                                    ----------      ----------      ----------

       Net earnings                                 $1,947,776       1,932,819       1,729,559
                                                    ==========      ==========      ==========
</TABLE>


                                                                     (Continued)
                                      F-34
<PAGE>   72

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


                              (Parent Company Only)
                       Condensed Statements of Cash Flows
                  Years ended December 31, 1999, 1998, and 1997


<TABLE>
<CAPTION>
                                                                1999              1998              1997
                                                            -----------       -----------       -----------
<S>                                                         <C>               <C>               <C>
Cash flows from operating activities:
     Net earnings                                           $ 1,947,776         1,932,819         1,729,559
     Adjustments to reconcile net earnings to net
cash provided by operating activities:
         Equity in undistributed earnings of
           subsidiary                                        (1,846,621)       (1,081,512)       (1,154,721)
         Compensation expense arising from stock
option awards                                                   193,359              --                --
         Increase (decrease) in other liabilities              (152,050)          171,301             2,673
         Decrease (increase) in receivables                     519,831          (179,831)         (340,000)
                                                            -----------       -----------       -----------

             Net cash provided by operating
                Activities                                      662,295           842,777           237,511
                                                            -----------       -----------       -----------

Cash flows from investing activities:
     Purchases of premises and equipment                        (74,031)         (280,514)             --
     Capital investment in subsidiary                          (725,000)             --                --
                                                            -----------       -----------       -----------

             Net cash used in investing activities             (799,031)         (280,514)             --
                                                            -----------       -----------       -----------

Cash flows from financing activities:
     Cash dividends                                            (584,112)         (568,024)         (516,386)
     Proceeds from private placement                          1,055,142              --                --
     Exercise of stock options                                   80,000              --                --
                                                            -----------       -----------       -----------

             Net cash provided by financial activities          551,030          (568,024)         (516,386)
                                                            -----------       -----------       -----------

Net increase (decrease) in cash                                 414,294            (5,761)         (278,875)

Cash at beginning of year                                        11,795            17,556           296,431
                                                            -----------       -----------       -----------

Cash at end of year                                         $   426,089            11,795            17,556
                                                            ===========       ===========       ===========
</TABLE>



                                                                     (Continued)
                                      F-35


<PAGE>   73


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable


                                                                              38
<PAGE>   74


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is incorporated herein by reference to the
Company's definitive Proxy Statement relating to the Company's 2000 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 1999 pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the
Company's definitive Proxy Statement relating to the Company's 2000 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 1999 pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated herein by reference to the
Company's definitive Proxy Statement relating to the Company's 2000 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 1999 pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference to the
Company's definitive Proxy Statement relating to the Company's 2000 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 1999 pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended.


                                                                              39
<PAGE>   75


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(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 14(c) are identified by an asterisk (*).

     3.1  Restated Certificate of Incorporation of the Registrant (Incorporated
          by reference herein from Exhibit 3a to the Registrant's Annual Report
          on Form 10-K for the fiscal year ended December 31, 1988).

   3.1.1  Certificate of Amendment to Restated Certificate of Incorporation of
          the Registrant. (Incorporated by reference herein from Exhibit 3.1.1
          to Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
          March 31, 1999.)

     3.2  Amended and Restated Bylaws of the Registrant (Incorporated by
          reference herein from Exhibit 3.2 to the Registrant's Annual Report on
          Form 10-K for the fiscal year ended December 31, 1992).

     10.1 Form of Employment Agreement between United Bank and Robert R. Jones,
          III(Incorporated by reference herein from Exhibit 10.1 to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          December 31, 1997.*

     10.2 Supplemental Agreement between United Bank, the Registrant and Robert
          R. Jones III*.

     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.)

     21   Subsidiary of the Registrant.

     27   Financial Data Schedule.


(b)  No reports on Form 8-K were filed during the last quarter of the fiscal
     year ended December 31, 1999.


                                                                              40
<PAGE>   76


                                   SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      UNITED BANCORPORATION OF ALABAMA, INC.
                                      (Registrant)

                                      BY: /s/ Robert R. Jones, III
                                          -------------------------------------
                                          Robert R. Jones, III
                                          President and Chief Executive Officer
                                          March 29, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
SIGNATURES                    CAPACITY IN WHICH SIGNED                DATE

<S>                           <C>                                <C>
/s/ Robert R. Jones, III      President, Chief                   March 29, 2000
-------------------------     Executive Officer, and
    Robert R. Jones, III      Director

/s/ Mitchell D. Staples       Treasurer                          March 29, 2000
-------------------------     (principal financial and
    Mitchell D. Staples       principal accounting
                              officer)

/s/ H. Leon Esneul            Director                           March 29, 2000
-------------------------
    H. Leon Esneul

/s/ David D. Swift            Director                           March 29, 2000
-------------------------
    David D. Swift

/s/ William J. Justice        Director                           March 29, 2000
-------------------------
    William J. Justice

/s/ Bobby W. Sawyer           Director                           March 29, 2000
-------------------------
    Bobby W. Sawyer
</TABLE>


                                                                              41
<PAGE>   77


<TABLE>
<CAPTION>
<S>                           <C>                                <C>
                              Director                           March 29, 2000
-------------------------
    William C. Grissett

/s/ L. Walter Crim            Director                           March 29,  2000
-------------------------
    L. Walter Crim
</TABLE>


                                                                              42
<PAGE>   78
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
  No.                      Description
-------                    -----------
<S>       <C>
     21   Subsidiary of the registrant
          E2

     27   Financial Data Schedule
          (omitted from this conforming copy)
</TABLE>