<PAGE>



                       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, 2002


                     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 No.)
Identification of incorporation
or organization)

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

Registrant's telephone number, including area code:  (251) 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. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes      No  X
                                       ---     ---

Aggregate market value of voting and nonvoting common equity held by non
affiliates as of June 30, 2002 was $29,463,053 computed by

<PAGE>



reference to the price reported to the registrant at which the common equity was
last sold on or prior to 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 20,2003
------------            ---------         ----------------------------
<S>                     <C>               <C>
 Class A...............    $.01                 1,086,898   Shares*
 Class B...............    $.01                         0   Shares
</Table>


*Excludes 74,583 shares held as treasury stock.


<PAGE>


                                     PART I
ITEM 1. BUSINESS

United Bancorporation of Alabama, Inc. (the "Corporation") is a one-bank holding
company, that is a financial 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"), operate primarily 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 nine
full service banking offices located in Atmore, Frisco City, Monroeville,
Flomaton, Foley, Lillian, Bay Minette, Silverhill, and Magnolia Springs Alabama,
a drive up facility in Atmore, and a loan production office in Jay, Florida.

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 Keegan Trust of Memphis, Tennessee. The Bank also offers internet
banking, bill pay and online brokerage services at its web site,
www.ubankal.com. The Bank also owns an insurance agency, United Insurance
Services Inc., which opened and began business in the last half of 2001.

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.


                                       1
<PAGE>


Employees - The Corporation and its subsidiary had approximately 130 full-time
equivalent employees at December 31, 2002. All of the employees are engaged in
the operations of United Bank, its subsidiary, or the Corporation. The
Corporation 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
Corporation is a "Financial Holding Company" (FHC). See discussion of the
Gramm-Leach-Bliley Financial Services Modernization Act below.

         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


                                       2
<PAGE>


lending or otherwise supplying funds to the Corporation. 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
proscribed or otherwise violates 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, primarily 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
prohibits any dividends from being made from surplus without the
Superintendent's prior written approval and the general restriction that
dividends in excess of 90% of United Bank's net earnings (as defined by
statute), may not be declared or paid unless United Bank's surplus is at least
equal to 20% of its capital. United Bank's surplus is significantly in excess of
20% of its capital. 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.


                                       3
<PAGE>


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 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, 2002, 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 primarily 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 an 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 now common. The GLB Act includes significant provisions
regarding the privacy of financial information. These new financial privacy
provisions generally require a financial institution to adopt a privacy policy
regarding its practices for sharing nonpublic personal information and to
disclose such policy to their customers, both at the time the customer
relationship is established and at least annually during the relationship. These
provisions also prohibit


                                       4
<PAGE>


the Company from disclosing nonpublic personal financial information to third
parties unless customers have the opportunity to opt out of the disclosure. The
GLB Act gives the Federal Reserve broad authority to regulate FHCs, but provides
for functional regulation of subsidiary activities by the Securities Exchange
Commission, Federal Trade Commission, state insurance and securities authorities
and similar regulatory agencies.

On October 26, 2001, President Bush signed into law the Uniting and
Strengthening American by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (the "USA Patriot Act"). Among its provisions,
the USA Patriot Act requires each financial institution: (1) to establish an
anti-money laundering program, (ii) to establish due diligence policies,
procedures and controls with respect to its pivate banking accounts and
correspondent banking accounts involving foreign individuals and certain foreign
banks and (iii) to avoid establishing, maintaining, administering, or managing
correspondent accounts in the United States for, or on behalf of, a foreign bank
that does not have a physical presence in any country. In addition, the USA
Patriot Act contains a provision encouraging cooperation among financial
institutions, regulatory authorities and law enforcement authorities with
respect to individuals, entities and organizations engaged in, or reasonably
suspected of engaging in, terrorist acts or money laundering activities. The
federal banking agencies have begun proposing and implementing regulations
interpreting the USA Patriot Act. It is not anticipated that the USA Patriot Act
will have a significant impact on the financial condition or results of
operations of the Corporation.

         In July 2002 the Sarbanes-Oxley Act of 2002 (the "SOA") was enacted.
The SOA establishes many new operational and disclosure requirements, with the
stated goals of, among other things, increasing corporate responsibility and
protecting investors by improving corporate disclosures. The SOA applies
generally to companies that file periodic reports with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange
Act"). As an Exchange Act reporting company, the Corporation is subject to some
SOA provisions. Other SOA requirements apply only to companies which, unlike the
Corporation, have stock traded on a national stock exchange or the NASDAQ.
Because rules implementing the SOA are not fully implemented, all of the effects
of the SOA requirements on the Corporation remain to be determined. It is
likely, however, that the Company's cost will increase, at least in the short
term, as a result of SOA implementation, and the Company is continuing to assess
the financial and other effects of the SOA on its operations.

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,
2002, 2001 and 2000. Averages referred to in the following statistical
information are generally average daily balances.



                       AVERAGE CONSOLIDATED BALANCE SHEETS
                                  December 31,
                               2002, 2001 and 2000

<Table>
<Caption>

                                                                  (Dollars In Thousands)

              Assets                                      2002             2001              2000
              ------                                 ------------      ------------      ------------
<S>                                                  <C>               <C>               <C>
Cash and due from bank                               $      5,520      $      7,916      $      8,244
Interest-bearing deposits with
     other financial institutions                           1,486             3,867               818
Federal funds sold and repurchase
     Agreements                                             2,772             2,122             6,505
Taxable securities available for                           29,024            30,072            36,368
     Sale
Tax-exempt securities available for sale                   19,110            19,233            13,248
Taxable investment securities held to
     Maturity                                                   0                 0             4,900
Tax-exempt investment securities held
     to maturity                                                0                 0            10,006
Loans, net                                                152,869           146,868           131,596
Premises and equipment, net                                 5,913             4,626             4,866
Interest receivable and other assets                        7,826             4,071             3,691
                                                     ------------      ------------      ------------
                        Total assets                 $    224,520           218,775           220,242
                                                     ============      ============      ============
</Table>

                                       5
<PAGE>
<Table>
<Caption>

<S>                                                  <C>                     <C>               <C>
            Liabilities and Stockholders' Equity
Demand deposits - noninterest-bearing                $     33,449            30,425            29,622
Demand deposits - interest-bearing                         28,147            29,069            43,580
Savings deposits                                           16,638            14,917            15,013
Time deposits                                             101,444           102,003            91,937
Other borrowed funds                                       10,269             8,403             8,949
Repurchase agreements                                      10,734            11,628            10,666
Accrued expenses and other liabilities                      1,137             1,959             1,573
                                                     ------------      ------------      ------------
                        Total liabilities                 201,818           198,404           201,340
                                                     ------------      ------------      ------------
            Stockholders' equity:
Common Stock                                                   12                12                12
Additional Paid In Capital                                  5,059             5,008             4,918
Retained earnings                                          17,759            15,409            14,261
Accumulated other comprehensive
  Income net of deferred taxes                                521               396               173
Less shares held in treasury,
            At cost                                          (649)             (454)             (462)
                                                     ------------      ------------      ------------
Total stockholders' equity                                 22,702            20,371            18,902
                                                     ------------      ------------      ------------
Total liabilities and
stockholders' equity                                 $    224,520           218,775           220,242
                                                     ============      ============      ============
</Table>

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/
                  2002                                  Balance         Expense          Paid
                  -----                                ----------     ----------      ----------
<S>                                                    <C>            <C>             <C>
Loans, net(1)                                          $  152,869         11,597            7.59%
Taxable securities available for sale                      29,024          1,417            4.88
Tax exempt sec. available for sale(2)                      19,110          1,535            8.03
Federal funds sold and repurchase                           2,772             47            1.70
Interest-bearing deposits with other                        1,486             35            2.36
Financial institutions
                                                       ----------     ----------      ----------
Total interest-earning assets                          $  205,261         14,631            7.13%
                                                       ==========     ==========      ==========

Savings deposits and demand
  deposits - interest-bearing                          $   44,785            562            1.25%
Time deposits                                             101,444          3,445            3.40
Repurchase agreements                                      10,734             83             .77
Other borrowed funds                                       10,269       4854.722
                                                       ----------     ----------
Total interest-bearing liabilities                     $  167,232          4,575            2.74
                                                       ==========     ==========      ==========
Net interest income/net yield
   on interest-earning assets                                         $   10,169            4.95%
                                                                      ==========      ==========
</Table>

                                       6
<PAGE>

<Table>
<Caption>

                                                                                        Average
                                                                       Interest          Rates
                                                        Average         Income/         Earned/
                  2001                                  Balance         Expense          Paid
                  -----                                ----------     ----------      ----------
<S>                                                    <C>            <C>             <C>
Loans, net(1)                                          $  146,868         13,030            8.87%

Taxable securities available for sale                      30,072          2,003            6.66

Tax exempt sec. available for sale(2)                      19,233           1450            7.53

Federal Funds Sold and repurchase agreements                2,122             99            4.67

Interest bearing deposits with
  other Financial Institutions                              3,867            138            3.56
                                                       ----------     ----------      ----------
Total interest-earning assets                          $  202,162         16,720            8.27%
                                                       ==========     ==========      ==========
Savings deposits and demand
  deposits - interest-bearing                          $   43,986          1,063            2.42%

Time deposits                                             102,003          5,575            5.46

Repurchase agreements                                      11,628            362            3.11

Other borrowed funds                                        8,403            450            5.36
                                                       ----------     ----------
Total interest-bearing liabilities                     $  166,020          7,450            4.49%
                                                       ==========     ==========      ==========
Net interest income/net yield
   on interest-earning assets                                         $    9,270            4.59%
                                                                      ==========      ==========
</Table>


                                       7
<PAGE>


<Table>
<Caption>

                                                                             Average
                                                             Interest         Rates
                                                 Average      Income/         Earned/
                  2000                           Balance      Expense          Paid
                  ----                          ----------   ----------      ----------
<S>                                             <C>          <C>             <C>
Loans, net(1)                                   $131,596       13,004           9.88%
Taxable securities available for sale             36,368        2,387           6.56
Tax exempt sec. available for Sale(2)             13,248          986           7.44
Taxable securities held to maturity                4,900          319           6.51
Tax exempt held to maturity(2)                    10,006          745           7.45
Federal funds sold and repurchase
      agreements                                   6,505          457           7.02
                                                --------     --------       --------
Total interest-earning assets                   $202,623       17,898           8.83%
                                                ========     ========       ========

Savings deposits and demand
  deposits - interest-bearing                   $ 58,593        2,173           3.71%
Time deposits                                     91,937        5,253           5.71
Repurchase agreements                             10,666          587           5.50
Other borrowed funds                               8,949          542           6.05
                                                --------     --------       --------
Total interest-bearing liabilities              $170,145        8,555           5.03%
                                                ========     ========       ========
Net interest income/net yield
   on interest-earning assets                                $  9,343           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 2002, 2001 and
    2000.

                                       8
<PAGE>


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
                                                                      ---------------                          --------------
  2002          2001                                                 2002         2001       Variance        Rate          Volume
--------      -------                                               ------       ------      --------       ------         ------
<S>          <C>         <C>                                       <C>          <C>         <C>            <C>            <C>
$152,869      146,868     Loans (Net)                               11,597       13,030       (1,433)       (1,999)          566
  29,024       30,072     Taxable Securities AFS(1)                  1,417        2,003         (586)         (518)          (68)
  19,110       19,233     Tax Exempt Securities AFS(2)               1,535        1,450           85            94            (9)
                    0     Taxable Securities HTM(3)                                                             **            **
                    0     Tax Exempt HTM(2)                                                       **            **            **
   2,772        2,122     Fed Funds Sold                                47           99          (52)          100            48
   1,486        3,867     Interest Bearing Deposits                     35          138         (103)           36           (67)
 205,261      202,162     Total Interest Earning Assets             14,631       16,720       (2,089)         2559           470

                          Savings and Interest Bearing
  44,785       43,986     Demand Deposits                              562        1,063         (501)         (521)           20
 101,444      102,003     Other Time Deposits                        3,445        5,575       (2,130)        (2100)          (30)
  10,269        8,403     Other Borrowed Funds                         372          450          (78)         (105)           27
  10,734       11,628     Repurchase Agreements                         83          362         (279)         (576)          297
 167,232      166,020     Total Int Bearing Liabilities              4,462        7,450       (2,988)        (3303)          315
</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 2001 and 2000.

(3) Held to Maturity (HTM)

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.


                                       9
<PAGE>


(Dollars in Thousands)
Average Balances

<Table>
<Caption>

                                                                      Interest Income
                                                                           Expense                             Variance As to
                                                                      ---------------                          --------------
  2002          2001                                                 2002         2001       Variance        Rate          Volume
--------      -------                                               ------       ------      --------       ------         ------
<S>           <C>         <C>                                       <C>          <C>         <C>            <C>            <C>
$  146,868    131,596     Loans (Net)                               13,030       13,004          26          (192)            218
    30,072     36,368     Taxable Securities AFS(1)                  2,003        2,387        (384)           37            (421)
    19,233     13,248     Tax Exempt Securities AFS(2)               1,450          986         464            12             452
         0      4,900     Taxable Securities HTM(3)                      0          319        (319)           (0)           (319)
         0     10,006     Tax Exempt HTM(2)                              0          745        (745)           (0)           (745)
     2,122      6,505     Fed Funds Sold                                99          398        (299)          (99)           (200)
     3,867        818     Interest Bearing Deposits                    138           59          79           (12)             91
   202,162    202,623     Total Interest Earning Assets             16,720       17,898      (1,178)         (787)           (391)

                          Savings and Interest Bearing
    43,986     58,593     Demand Deposits                            1,063        2,173      (1,109)         (649)           (460)
   102,003     91,937     Other Time Deposits                        5,575        5,253         322          (213)            535
     8,403      8,949     Other Borrowed Funds                         450          543         (93)          (60)            (33)
    11,628     10,666     Repurchase Agreements                        362          587        (225)         (285)             60
   166,020    170,145     Total Int Bearing Liabilities              7,450        8,555      (1,105)        (1201)            102
</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 2000 and 1999.

(3) Held to Maturity (HTM)


                                       10
<PAGE>

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. With the adoption of FAS 133, Accounting for Derivative Instruments
and Hedging Activities, effective January 1, 2001, the Bank elected to move all
investments held to maturity to available for sale. The Bank's current loan
policy establishes the gross optimal ratio of loans to deposits and repurchase
agreements ratio as being 85%. This ratio as of December 31, 2002 was 85.17%.
Growth in the loan portfolio is driven by general economic conditions and the
availability of loans meeting the Bank's credit quality standards. Management
expects that funding for any growth in the loan portfolio would 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. Management
believes the level of credit and interest rate risks inherent in the securities
portfolio is low.

                     Investment Securities Held to Maturity
                        December 31, 2002, 2001 and 2000

                             (Dollars in Thousands)


<Table>
<Caption>

                                        2002         2001            2000
                                        ----         ----            ----
                                      Amortized    Amortized       Amortized
                                       Cost  %      Cost   %        Cost  %
<S>                                   <C>    <C>   <C>    <C>    <C>     <C>
U.S. Government Agencies              $0     0      $0     0      $2,995   21.4

Mortgage Backed Securities            $0     0      $0     0      $1,683   12.1

State and Municipal                   $0     0      $0     0      $9,297   66.5

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

  Total Amortized Cost                $0     0%     $0     0%     $13,975 100.0%
                                      ========      ========      =======  ======
</Table>


                                       11
<PAGE>


    Maturity Distribution of Investment Securities Held to Maturity

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

                        December 31, 2002, 2001 and 2000
                             (Dollars in Thousands)

<Table>
<Caption>

                                         2002                     2001                   2000
                                        -------                 -------                  -----

                                  Amort  Weighted          Amort  Weighted           Amort  Weighted

                                Cost        Avg Yld       Cost        Avg Yld       Cost        Avg Yld
<S>                            <C>          <C>          <C>          <C>          <C>          <C>
U.S. Government Agencies

      5 - 10 years             $     0            0      $     0            0      $ 2,995         6.51%
                               -------      -------      -------      -------      -------      -------

                               $     0            0      $     0            0      $ 2,995         6.51%
                               =======      =======      =======      =======      =======      =======
State & Municipal(1)
      Within one year          $     0            0      $     0            0      $   450         7.72%

      1 - 5 years              $     0            0            0            0        2,166         7.66%

      5 - 10 years             $     0            0            0            0        3,603         7.50%

      After 10 years           $     0            0            0            0        3,078         8.08%
                               -------      -------      -------      -------      -------      -------
      Total                    $     0            0%     $     0            0%     $ 9,297         7.74%
                               =======      =======      =======      =======      =======      =======

Mortgage Backed
      Securities
      1 - 5 years              $     0            0      $     0            0%     $   124         6.01%

      5 - 10 years             $     0            0            0            0        1,003         6.67

      After 10 years           $     0            0            0            0          556         7.47
                               -------      -------      -------      -------      -------      -------

      Total                    $     0            0%     $     0            0%     $ 1,683         6.89%
                               =======      =======      =======      =======      =======      =======


      Total Yield                                 0%                        0%                     7.37%
                                                                      =======      =======      =======

      Total Amortized Cost     $     0                   $     0                   $13,975
                                                                      =======      =======      =======
</Table>


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


                                       12
<PAGE>


The following table sets forth the amortized cost of the Available for Sale
investment portfolio.

                    Investment Securities Available for Sale
                        December 31, 2002, 2001 and 2000

                             (Dollars in Thousands)

<Table>
<Caption>



                           2002                           2001                           2000
                           ----                           ----                           ----
                         Amortized              %       Amortized               %      Amortized               %
                           Cost                            Cost                          Cost
<S>                     <C>                   <C>      <C>                   <C>      <C>                  <C>
U.S. Treasury           $    1,518            3.1      $    1,506            3.7%     $    6,551           14.2%
U.S. Gov't Agencies          1,500            3.0           2,088            5.1           4,192            9.1
Mortgage Backed Sec         24,879           50.3          18,050           43.8          22,905            9.6
State and Municipal         21,026           42.6          18,532           45.0          12,010           26.0
Other                          491            1.0             992            2.4             503            1.1
                        ----------     ----------      ----------     ----------      ----------     ----------
           Total            49,414          100.0%     $   41,168          100.0%     $   46,161          100.0%
                       ===========     ==========      ==========     ==========      ==========     ==========
</Table>




                                       13
<PAGE>

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, 2002, 2001 and 2000
                             (Dollars in Thousands)

<Table>
<Caption>

                                   2002                            2001                            2000
                                   ----                            ----                            -----
                                Amortized      Weighted          Amortized         Weighted      Amortized        Weighted
                                  Cost         Avg Yld              Cost            Avg Yld         Cost          Avg Yld
<S>                             <C>            <C>              <C>                <C>           <C>              <C>
U.S. Treasury Sec
  Within one year              $       499            5.55%     $     1,007            6.21%     $     2,011            6.03%
  1 - 5 years                        1,019            1.65              499            5.51            4,540            5.95

                               $     1,519            2.92      $     1,506            5.97      $     6,551            5.97
                               ===========     ===========      ===========     ===========      ===========     ===========
U.S. Government Agencies
excluding Mortgage Backed
Securities
  1 - 5 years                  $     1,000            1.91      $     1,000            2.46      $     2,000            6.27
  5 - 10 years                         500            8.00              500            8.00              500            8.00
  After 10 years                         0               0              588            8.00            1,692            7.79

  Total                              1,500            5.34%     $     1,500            5.34%     $     4,192            7.09
                               ===========     ===========      ===========     ===========      ===========     ===========

Mortgage Backed Securities

 Within one year               $         0               0%     $         0               0%     $        92            8.50%
  1 - 5 years                          593            6.38              250            6.50              346            6.39
  5 - 10 years                       6,875            4.59            3,503            6.28            1,430            6.81
  After 10 years                    17,411            5.07           14,297            6.45           22,905            6.79

  Total                        $    24,879            4.97%     $    18,050            6.42%     $    22,905            6.79%
                               ===========     ===========      ===========     ===========      ===========     ===========


State & Municipal(1)
  Less than 1 year             $       310           10.96              175            8.55%     $         0               0%
  1 - 5 years                        2,566            7.83            3,153            7.45              676            7.99
  5 - 10 years                       6,417            7.95            5,441            7.53            2,709            7.74
  After 10 years                    11,733            7.82            9,763            7.64            8,625            7.67

  Total                        $    21,026            7.90      $    18,532            7.58%          12,010            7.70%
                               ===========     ===========      ===========     ===========      ===========     ===========
</Table>

Continued on next page .


                                       14
<PAGE>


Continued from previous page

<Table>
<Caption>

                                   2002                            2001                          2000
                                   ----                            ----                          -----
                               Amortized       Weighted         Amortized         Weighted      Amortized      Weighted
                                 Cost          Avg Yld            Cost            Avg Yld         Cost          Avg Yld
<S>                             <C>            <C>              <C>               <C>           <C>              <C>
Other Sec
1 - 5 years                    $        0               0      $      503            6.22      $      503           6.25
5 - 10 years                          491            5.74             489            5.49               0           0.00
                               ----------      ----------      ----------      ----------      ----------     ----------

Total                          $      491            5.74%     $      992            5.86%     $    1,178           7.11%
                               ==========      ==========      ==========      ==========      ==========     ==========

Total Yield                                          6.25%                           6.86%                          6.94%
                                               ==========                      ==========                     ==========

Total amort                    $   49,414                      $   41,168                      $   46,161
                               ==========                      ==========                      ==========
</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 2002,2001 and 2000.

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 quality 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 41.83% of the portfolio
maturing in one year or less. In addition, 44.21% 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 some of its local community banking
competitors. With offices in ten communities, risks associated with the effects
of major economic disruptions in one community is somewhat mitigated. 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.

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


                                       15
<PAGE>


economic. Shifts in local and regional conditions could have an effect on
individual borrowers; but as previously mentioned, the Bank attempts to spread
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 loan officers
dedicated to this market. Collateral valuation and the experience of the
borrower play heavily into the approval process. This loan category includes
financing 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 are 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 also offers 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 limited.
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, 2002 was approximately
$38,998, an increase of $4,514 from 2001. This continued increase in the average
loan size is due to the shift of loans to commercial real estate, financial,
agricultural, and 1-4 family residential loans from the installment loan portion
of the portfolio.


                                       16
<PAGE>


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

                            LOAN PORTFOLIO MATURITIES

                                December 31, 2002

                             (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                 $   49,426         44,943         17,061        111,430
Real estate - construction                  7,007          1,288              0          8,295
Real estate - mortgage                      4,476         15,849          7,460         27,785
  1-4 Family
Installment loans to
      individuals                           7,043          7,106            777         14,926
                                       ----------     ----------     ----------     ----------

      Total                            $   67,952         69,186         25,298        162,436
                                       ==========     ==========     ==========     ==========
</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                      $   59,906          $    2,098          $   62,004
Real estate - construction                   1,317                   0               1,317
Real estate - mortgage 1-4                  20,346               2,963              23,309
Installment loans to
  individuals                                7,853                   1               7,854
</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 net present value of expected
future cash flows discounted at the note's effective


                                       17
<PAGE>


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. 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, 2002, pursuant to the definition within SFAS 114, the Bank had no
impaired loans.

The following table sets forth the Corporation's non-performing assets at
December 31, 2002, 2001 and 2000. 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
                                                      2002               2001               2000
                                                    ---------          ---------          ---------
                                                    (Dollars in Thousands)
<S>                                                 <C>                <C>                <C>
(A)         Loans accounted for on                  $   1,169          $   2,185          $     386
            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)                         10                 18                 14

(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                                      968                861                 69

(D)         Other non-performing assets                   350                556                158
                                                    ---------          ---------          ---------

                             Total                  $   2,497          $   2,759          $     627
                                                    =========          =========          =========

</Table>

If nonaccrual loans in (A) above had been current throughout their term,
interest income would have been increased by $29,967, $123,443 and $48,630 for
2002, 2001 and 2000, respectively. Of the assets in (D) above, at the end of
2002 and at the end of 2001 $350,000 was other real estate owned (OREO) and
$361,493 was repossessed collateral respectively, and in 2000 $195,033 was OREO
and $35,322 was repossessed collateral.

At December 31, 2002, loans with a total outstanding balance of $6,491,658 were
considered potential problem loans compared to $4,127,658 and $3,014,795 as of
12/31/01 and 12/31/00 respectively. Potential problem loans consist of those
loans for which management is monitoring performance or has concerns as to the
borrower's ability to comply with present loan repayment terms.

There may be additional loans in the Bank'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, 2002. 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>


Loan Concentrations: On December 31, 2002, the Corporation had $30,983,000 of
agriculture-related loans as compared to $19,089,172 and $14,871,440 at the end
of 2001 and 2000, respectively. Agriculture loans accounted for $0, $0 and
$75,106 of nonaccrual loans in 2002, 2001 and 2000, respectively.


                         Summary of Loan Loss Experience

<Table>
<Caption>

                                                2002                2001                 2000
                                             ---------            ---------            ---------
<S>                                          <C>                  <C>                  <C>
Average amount of loans
   outstanding, net                          $ 152,869            $ 146,868            $ 131,596
                                             =========            =========            =========
Allowance for loan
   losses, beginning January 1               $   1,993            $   1,939            $   1,676
                                             ---------            ---------            ---------

Loans charged off:
   Commercial, financial
        and agricultural                          (563)                (176)                 (39)
   Real estate - mortgage                           (7)                 (49)                 (27)
   Installment loans to
        individuals                               (195)                (255)                (186)
                                             ---------            ---------            ---------

   Total charged off                              (765)                (480)                (252)

Recoveries during the period:
   Commercial, financial and
        agricultural                                 5                   20                    6
   Real estate - mortgage                            0                    0                    2
   Installment loans to individuals                 47                   34                   32
                                             ---------            ---------            ---------

        Total recoveries                            52                   54                   40
                                             ---------            ---------            ---------
        Loans charged off,net                     (714)                (426)                (212)

Additions to the allowance
   charged to operations                           837                  480                  475

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

        Total allowance, ending
           December 31                       $   2,117            $   1,993            $   1,939
                                             =========            =========            =========

Ratio of net charge offs during
  the period to average loans
  outstanding                                      .46%                 .29%                 .16%
</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 the provision 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>


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 determined 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%). Any loan categorized loss is charged off in the period which the
loan is so categorized.

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, 2002, 2001 and 2000. The allocation represents an estimate for each
category of loans based upon historical experience and management's judgement.

<Table>
<Caption>

                                                                                                    Loans as a
                                             Allowance                                          percent of total
                             2002              2001              2000               2002               2001               2000
                           --------          --------          --------             -----              -----              -----
<S>                        <C>               <C>               <C>                  <C>                <C>                <C>
Commercial,
Financial &
Agricultural               $  1,560          $  1,312          $  1,198             68.60%              65.8%              61.8%

Real Estate -
Construction               $      0                 0                 0              5.11                4.9                5.6

Real Estate -
Mortgage                        362               363               384             17.11               18.2               19.8

Installment Loans               195               221               249              9.21               11.1               12.8

Lease Financing            $      0                 0                 0                 0                  0                  0

Foreign                    $      0                 0                 0                 0                  0                  0
Unallocated                       0                 0                 0                 0                  0                  0

Total Allowance            $  2,117          $  1,993          $  1,939             100.0%             100.0%             100.0%
                           ========          ========          ========                             ========           ========
</Table>


                                       20
<PAGE>


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

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
officer loan committee and the CEO.


                                       21
<PAGE>


                                    DEPOSITS
                             (Dollars in Thousands)

The following table sets forth the average amount of deposits for the years
2002, 2001 and 2000 by category.

<Table>
<Caption>

                                                                                             Average
                                                Deposits                                     rate paid
                               2002              2001              2000               2002               2001              2000
                             --------          --------          --------           --------           --------           --------
<S>                          <C>               <C>               <C>                <C>                <C>                <C>
Noninterest-bearing
  demand deposits            $ 35,616          $ 30,425          $ 29,622                  0%                 0%                 0%
                             ========          ========          ========           ========           ========           ========

Interest-bearing
  deposits:
    Demand                   $ 28,147          $ 29,069          $ 43,580               1.49%              2.67%              4.16%
    Savings                  $ 16,638            14,917            15,013                .87               1.93               2.48
    Time                     $101,444           102,003            91,937               3.40               5.48               5.71
                             --------          --------          --------           --------           --------           --------

                             $146,229          $145,989          $150,530               2.74%              4.55%              4.95%
                             ========          ========          ========           ========           ========           ========
</Table>

The following shows the amount of time deposits outstanding at December 31,
2002, classified by time remaining until maturity.


<Table>
<Caption>

                                           $100,000 or Greater
                                              Certificates                Other time
      Maturity                                 of deposit                  deposits
<S>                                        <C>                            <C>
Three months or less                           $ 14,253                    $14,730
Three to six months                               3,932                     17,549
Six to twelve months                             12,691                     20,051
Twelve months or more                             5,658                     13,955

                                               --------                    -------
                                               $ 36,534                    $66,285
                                               ========                    =======
</Table>



                                       22
<PAGE>



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>
2002

Securities sold           $   15,503          $   10,753                 .77%          $    8,141                 .32%
under agreements
to repurchase

Other short term
borrowings                $    3,774          $      209                1.80           $    1,259                3.63

2001

Securities sold           $   15,816          $   11,628                3.15%          $    9,069                1.00%
under agreements
to repurchase

Other short term
borrowings                $    9,080          $      668                4.97           $      415                1.40


2000

Securities sold           $   13,228          $   10,666                5.52%          $   10,667                5.72%
under agreements
to repurchase

Other short term
borrowings                $    1,010          $      506                6.52           $      596                5.72
</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, 2002, 2001
and 2000

<Table>
<Caption>

                                             2002               2001             2000
                                          ---------           ---------        --------
<S>                                       <C>                 <C>              <C>
Return on average assets                        .91%               0.95%           0.93%
                                          =========           =========        ========

Return on average equity                       8.96%              10.16%          10.82%
                                          =========           =========        ========

Dividend pay-out ratio                        29.37%              31.80%          29.38%
                                          =========           =========        ========

Ratio of average equity
 to average assets                            10.11%               9.31%           8.58%
                                          =========           =========        ========
</Table>



                                       23
<PAGE>

ITEM 2.  PROPERTIES

The Corporation's bank subsidiary occupies ten offices, which the subsidiary
owns or leases. The offices are located in Escambia County (cities of Atmore and
Flomaton), Monroe County (cities of Monroeville and Frisco City), and Baldwin
County (cities of Foley, Lillian, and Bay Minette, Magnolia Springs and
Silverhill) Alabama, with the principal office located in Atmore, Alabama. The
Bank operates a loan production office in Jay, Florida. The office in Atmore is
a modern, three story, brick building while the Flomaton, Monroeville, Frisco
City and Foley 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 in
2004. The Foley office was purchased by the Corporation in October of 2002. 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 2007. The Corporation also owns 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. The office in Silverhill is
the original post office built in 1902, and is a two story wooden structure
owned by the Bank. The Magnolia Springs office is a two story wooden structure
located on Magnolia River. It is leased from a third party until 2005.

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.


                                       24
<PAGE>


                                     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
    1,161,481 shares are issued and 1,086,898 are outstanding and held by
    approximately 676 shareholders of record, as of March 20, 2003.

(2) 250,000 shares of Class B common stock, $.01 par value per share, none of
    which were issued, as of March 20, 2002.

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 per common share, of $0.55 per common
share in 2002, $0.60 per common share in 2001 and $0.55 per common share in
2000. 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.


                                       25
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

(Amounts in Thousands except per share data)

<Table>
<Caption>
                                     2002            2001            2000            1999             1998
                                 -------------   -------------   -------------   -------------   -------------
<S>                              <C>             <C>             <C>             <C>             <C>
Interest income                  $      14,017          16,221          17,310          15,338          14,117
Interest expense                         4,575           7,451           8,555           6,935           6,697
                                 -------------   -------------   -------------   -------------   -------------
Net interest income                      9,442           8,769           8,755           8,404           7,420
Provision for
   loan losses                             837             480             475             496             240
                                 -------------   -------------   -------------   -------------   -------------
Net interest income after
Provision for
   loan losses                   $       8,605           8,289           8,280           7,908           7,180
                                 =============   =============   =============   =============   =============

Noninterest income               $       2,726           2,304           1,662           1,476           1,529
                                 =============   =============   =============   =============   =============

Noninterest Expense              $       8,693           7,881           7,226           6,810           6,089
                                 =============   =============   =============   =============   =============


Net Earnings                     $       2,035           2,070           2,047           1,947           1,730
                                 =============   =============   =============   =============   =============

Balance sheet data:
Total assets                     $     232,822         219,955         231,487         221,967         189,193
                                 =============   =============   =============   =============   =============

Total loans, net                 $     160,319         147,052         139,595         122,000         103,090
                                 =============   =============   =============   =============   =============

Total deposits                   $     182,565         180,509         191,590         183,208         152,826
                                 =============   =============   =============   =============   =============

Total stockholders'
   equity                        $      23,453          21,846          20,104          17,647          16,048
                                 =============   =============   =============   =============   =============

Per share data:
  Basic earnings per share       $        1.86            1.89            1.87            1.88            1.87
                                 =============   =============   =============   =============   =============

Diluted earnings per share       $        1.81            1.87            1.86            1.86            1.87
                                 =============   =============   =============   =============   =============
Cash dividends per
   Share(1)                      $        0.55            0.60            0.55            0.55            0.55
                                 =============   =============   =============   =============   =============
</Table>


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



                                       26
<PAGE>



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.

                          CRITICAL ACCOUNTING POLICIES

The consolidated financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates and
assumptions (see Note 1 to Consolidated Financial Statements). Management
believes that its determination of the allowance for loan losses involves a
higher degree of judgment and complexity than the Bank's other significant
accounting policies. Further, these estimates can be materially impacted by
changes in market conditions or the actual or perceived financial condition of
the Bank's borrowers, subjecting the Bank to significant volatility of earnings.
The allowance for credit losses is established through a provision for loan
losses, which is a charge against earnings. Provision for loan losses are made
to reserve for estimated probable losses on loans.

The allowance for loan losses is a significant estimate and is regularly
evaluated by management for accuracy by taking into consideration factors such
as changes in the nature and volume of the loan portfolio; trends in actual and
forecasted portfolio credit quality, including delinquency, charge-off and
bankruptcy rates; and current economic conditions that may affect a borrower's
ability to pay. The use of different estimates or assumptions could produce
different provisions for loan losses.

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 (APB 25), and related interpretations, in accounting for its fixed
plan stock options. As such, compensation expense is recorded if the current
market price on the date of grant of the underlying stock exceeds the exercise
price.

Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock
Based Compensation, prescribes the recognition of compensation expense based on
the fair value of options on the grant date and allows companies to apply APB 25
as long as certain pro forma disclosures are made assuming hypothetical fair
value method application.

                              SUMMARY OF OPERATIONS

The Corporation's 2002 net income was $2,034,892, as compared to net income in
2001 of $2,069,570. Average net interest spread increased by 61 basis points
from 3.78% in 2001 to 4.39% in 2002. This increase was caused by the rapid
decline in interest rates in the year 2001, which caused assets to reprice
faster than liabilities. In 2002 the liabilities repriced faster than the
assets, causing the spread to widen, with interest-earning assets decreasing by
114 basis points while interest bearing liabilities decreased by 182 basis
points. Average interest earning assets, which increased from $202,162,000 in
2001 to $205,261,000 in 2002, produced a $672,171 increase in net interest
income in 2002. Non-interest income increased by $421,610

                                       27
<PAGE>
from $2,303,957 in 2001 to $2,725,567 in 2002. The provision for loan losses in
2002 was $837,000 as compared to $480,000 in 2001. The 2002 provision was the
amount established by management to increase the allowance to the appropriate
level. Non-interest expenses for 2002 increased $812,082 from $7,880,754 in 2001
to $8,692,836 in 2002.

The Corporation's 2001 net income was $2,069,570, as compared to a net income in
2000 of $2,046,571. Average net interest spread decreased by 2 basis points from
3.80% in 2000 to 3.78% in 2001. This decrease was caused by the rapid decline in
interest rates in the year 2001. Average interest earning assets, which
decreased from $202,623,000 in 2000 to $202,162,000 in 2001, produced a $14,821
increase in net interest income in 2001. Non-interest income increased by
$641,528 from $1,662,429 in 2000 to $2,303,957 in 2001. The provision for loan
losses in 2001 was $480,000 as compared to $475,000 in 2000. The 2001 provision
was the amount established by management to maintain the allowance at the
appropriate level. Non-interest expenses for 2001 increased $654,576 from
$7,226,178 in 2000 to $7,880,754 in 2001.


                               NET INTEREST INCOME
                             (Dollars in Thousands)

<Table>
<Caption>
                                                    2002           2001           2000
                                                ------------   ------------   ------------
<S>                                             <C>            <C>            <C>
Interest income(1) ..........................   $     14,630         16,715         17,899
Interest expense ............................   $      4,575          7,451          8,555
                                                ------------   ------------   ------------
   Net interest income ......................         10,055          9,264          9,344
Provision for
   loan losses ..............................            837            480            475
                                                ------------   ------------   ------------
Net interest income after
   provision for
   loan losses on a tax equivalent
   basis ....................................          9,218          8,784          8,869
Less:  tax equivalent
   adjustment ...............................            613            494            589

Net interest income after
   provision for
   loan losses ..............................   $      8,605          8,290          8,280
                                                ============   ============   ============
</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 2002, 2001,
     and 2000.

Total interest income (on an FTE basis) decreased to $14,630,000 in 2002, from
$16,715,000 in 2001, a decrease of $2,085,000, or 12.47%. This decrease is a
function of the change in average earning assets and the average interest
bearing liabilities along with falling interest rates. Average loans increased
$6,001,000 while the average rate earned decreased 128 basis points. The average
interest rate (FTE) earned on all earning assets in



                                       28
<PAGE>



2002 decreased to 7.13% from 8.27% in 2001. The interest rate spread increased
from 3.78% in 2001 to 4.39% in 2002, as rates decreased more on interest bearing
liabilities than on interest earning assets. The more stable rate environment in
2002 allowed the slower repricing certificates of deposit to reprice at rates
much lower than they previously were earning. Average taxable investment
securities for 2002 were $29,024,000, as compared to $30,072,000 for 2001, a
decrease of $1,048,000, or 3.48%. The lower rate environment allowed home owners
to refinance and pay off existing mortgages which in turn caused mortgage-backed
securities to prepay faster than in previous years. Also, many bonds were called
as government agencies took advantage of lower rates and refinanced callable
bonds. To partially offset these prepayments the Bank purchased securities with
funds borrowed at a lower rate from the Federal Home Loan Bank. Average
tax-exempt investment securities decreased $123,000, or .63%, to $19,110,000 in
2002 from $19,233,000 in 2001. The average volume of federal funds sold
increased to $2,772,000 in 2002 from $2,122,000 in 2002, a decrease of $650,000
or 30.63%.

Total interest income (on an FTE basis) decreased to $16,715,000 in 2001, from
$17,899,000 in 2000, a decrease of $1,184,000, or 6.61%. This decrease was a
function of the average earning assets decreasing $461,000 and falling interest
rates. Average loans increased $15,272,000 while the average rate earned
decreased 101 basis points. The average interest rate (FTE) earned on all
earning assets in 2001 decreased to 8.27% from 8.83% in 2000. The interest rate
spread decreased from 3.80% in 2000 to 3.78% in 2001, as rates decreased more on
interest earning assets than on interest bearing liabilities. Average taxable
investment securities for 2001 were $30,072,000, as compared to $41,268,000 for
2000, a decrease of $11,196,000,or 27.13%. Average tax-exempt investment
securities decreased $4,021,000,or 17.29%, to $19,233,000 in 2001 from
$23,254,000 in 2000. These changes in investment securities were the result
primarily of the loss of $20,000,000 in public fund deposits in 2000. The
average volume of federal funds sold decreased to $2,122,000 in 2001 from
$6,505,000 in 2000, a decrease of $4,383,000 or 67.38%.

Total interest expense decreased $2,876,326, or 38.60%, to $4,574,716 in 2002,
from $7,451,042 in 2001. This decrease is a function of the decrease in interest
rates offset by a slight increase in the volume of interest bearing
liabilities. The average rate paid on interest-bearing liabilities in 2002 was
2.67% as compared to 4.49% in 2001. Average interest-bearing liabilities
increased to $167,232,000 in 2002, from $166,020,000 in 2001, an increase of
$1,212,000, or 0.73%. Average savings and interest-bearing demand deposits
increased $799,000 or 1.82% to $44,785,000 in 2002. Average time deposits
decreased to $101,444,000 in 2002, from $102,003,000 in 2001, a decrease of
$559,000, or 0.55%. The average rate paid on time deposits decreased to 3.62% in
2002 from 5.46% in 2001. This decrease was caused by the stable rate environment
of 2002, which allowed time deposits to reprice for the whole year at interest
rates much lower than the previous year. The Corporation issued $4,124,000 of
Trust Preferred Stock in June of 2002 at an interest rate of three month Libor
plus 3.65%. The interest expense associated with this issue was $116,518 or an
average rate of 5.65%.

Total interest expense decreased $1,104,423, or 12.91%, to $7,451,042 in 2001,
from $8,555,465 in 2000. This decrease was a function of the decrease in the
volume of interest bearing liabilities and the decrease in interest rates. The
average rate paid on interest-bearing liabilities in 2001 was



                                       29
<PAGE>



2.67% as compared to 5.03% in 2000. Average interest-bearing liabilities
decreased to $166,020,000 in 2001, from $170,145,000 in 2000, a decrease of
$4,125,000, or 2.42%. Average savings and interest-bearing demand deposits
decreased $14,607,000 or 24.93% to $43,986,000 in 2001 because of the loss of
public fund deposits, from $58,593,000 in 2000. Average time deposits increased
to $102,003,000 in 2001, from $91,937,000 in 2000, an increase of $10,066,000,
or 10.95%. The growth in time deposits was fueled by new growth from Baldwin
County branches, and the purchasing of internet time deposits to help fund the
loss of the public funds. The average rate paid on time deposits decreased to
5.46% in 2001 from 5.71% in 2000. This decrease was caused by the rate decreases
of the Federal Reserve Bank in the year 2001.


                            PROVISION FOR LOAN LOSSES

The provision for loan losses is that amount necessary to maintain the allowance
for loan losses at a level appropriate for the associated credit 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, 2002 was $837,000 as compared to $480,000 in 2001,
an increase of $375,000, or 78.13%. The change 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, 2002 represents 1.30% of gross
loans, as compared to 1.34% at December 31, 2001 and 1.37% at December 31, 2002.

While it is the Bank's policy to charge off loans when a loss is considered
probable, there exists the risk of 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 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.

                                    LOAN LOSS

The loan loss provision increased allocation of $248,000 in the commercial,
financial and the agricultural sector of the portfolio is mostly due the growth
experience of approximately $10,000,000 in agricultural loans. Because of
adverse weather some crops were not harvested, therefore some agricultural
production loans were carried over to 2003. The Bank has received payments in
2003 on some of the carried over loans from insurance proceeds. The Bank also
experienced a significant amount of commercial loan charge-offs, which caused
the increase to help maintain the allowance for



                                       30
<PAGE>


this sector. The Bank has also identified problem loans in the commercial sector
that were not made in compliance with lending policies. These loans have been
reserved for in the allowance. There was some reallocation from the installment
loan portfolio, due to the decrease in volume of these loans. Real estate
mortgage allocation was maintained because there was little change in the
quality or volume of this portfolio.


                               NONINTEREST INCOME

<Table>
<Caption>
                                          2002            2001            2000
                                      -------------   -------------   -------------
<S>                                   <C>             <C>             <C>
Service charges on
      deposits                        $   1,941,267   $   1,607,296   $   1,243,544
Commission - credit
      life insurance                         52,368          61,l97          39,940
Investment securities
      Gains,(net)                            76,995         173,214          34,725
Other                                       654,937         462,250         344,220
                                      -------------   -------------   -------------

      Total                           $   2,725,567   $   2,303,957   $   1,662,429
                                      =============   =============   =============
</Table>

Total noninterest income increased $421,610 or 18.30%, to $2,725,567 in 2002, as
compared to $2,303,957 in 2001.

Service charge income increased to $1,941,267 in 2002, from $1,607,296 in 2001,
an increase of $333,971, or 20.78%. This increase was attributable to increases
in the pricing of the services that the Bank offers, and the growth of demand
accounts. The Bank also implemented a new program that allows depositors to
overdraw their checking accounts. When they overdraw the account the Bank pays
the check and charges the customer a nonsufficient fund charge. This fee
increased these charges by $330,010 over the previous year. Commissions on
credit life insurance decreased $8,829, or 14.43%, to $52,368 in 2002, from
$61,197 in 2001. Other income increased to $654,937 in 2002, from $462,250 in
2001, an increase of $192,687 or 41.68%. This increase is attributable to an
increase of $108,253 on mortgage origination fees for third parties and an
increase of $8,561 on safe deposit box fees, increases in commissions on
insurance and brokerage sales of $22,303. The Bank also received $27,680 in
dividends from other sources.

Service charge income increased to $1,607,296 in 2001, from $1,243,544 in 2000,
an increase of $363,752, or 29.25%. This increase was attributable to increases
in the pricing of the services that the Bank offers, and the growth of demand
accounts, when adjusted for the loss of public fund deposits. Commissions on
credit life insurance increased $21,257, or 53.22%, to $61,197 in 2001, from
$39,940 in 2000. Other income increased to $462,250 in 2001, from $344,220 in
2000, an increase of $118,030 or 34.29%. This increase is attributable to an
increase of $66,033 on mortgage origination fees for third parties and an
increase of $113,640 in earnings on bank-owned life insurance offset by a
decrease in brokerage commissions of $67,492.



                                       31
<PAGE>



                               NONINTEREST EXPENSE


<Table>
<Caption>
                                          2002            2001            2000
                                      -------------   -------------   -------------
<S>                                   <C>             <C>             <C>
Salaries and benefits                 $   4,581,132       4,221,498       3,841,509
Net occupancy                             1,605,593       1,414,763       1,258,739
Other                                     2,506,111       2,244,493       2,125,930
                                      -------------   -------------   -------------
            Total                     $   8,692,836       7,880,754       7,226,178
                                      =============   =============   =============
</Table>

Total noninterest expense increased $812,082, or 10.30%, to $8,692,836 in 2002,
from $7,880,754 in 2001. Salaries and other compensation expense increased
$359,634 or 8.51% to $4,581,132 in 2002 from $4,221,498 for 2001. This increase
is due to increases in insurance cost of $49,733, profit sharing of $3,400,
payroll taxes of $ 41,789 and a general increase in salaries including staffing
of new offices. Income tax expense for 2002 was $602,847 as compared to $643,470
in 2001. The effective tax rate in 2002 was 22.85% as compared to 23.72% in
2001. Other expense increased to $2,506,111 in 2002, from $2,244,493 in 2001, an
increase of $261,618, or 11.66%. The increase in other expenses is due partly to
an increase in other real estate owned expenses of $109,907. The Bank also
experienced charge offs of approximately $40,000, due to fraudulent checks, and
increased professional fees of $96,157, largely for recruiters engaged to locate
officer level employees.

Management anticipates that compliance with the Sarbanes-Oxley Act of 2002 will
result in increased expenses in 2003, including increased professional expenses,
but the extent of such increase, if any, has not yet been determined.

Basic earnings per share in 2002 were $1.86, as compared to basic earnings per
share of $1.89 in 2001. Diluted earnings per share in 2002 were $1.81 and $1.87
in 2001. Return on average assets for 2002 was 0.91%, as compared to 0.95% in
2001. Return on average equity was 10.11% in 2002, as compared to 10.16% in
2002.

Total noninterest expense increased $654,576, or 9.06%, to $7,880,754 in 2001,
from $7,226,178 in 2000. Other expense increased to $2,244,493 in 2001, from
$2,125,930 in 2000, an increase of $118,563, or 5.58%. The increase in other
expenses was due partly to an increase in ATM fees of $35,231 as transaction
volume increased. Telephone expenses increased $46,756. Training expense
increased $38,262 due to training related to a completed computer conversion.
Salaries and other compensation expense increased $379,989 or 9.89% to
$4,221,498 in 2001 from $3,841,509 for 2000. This increase was due to the
increase in insurance cost of $45,503, profit sharing of $31,461, payroll taxes
of $ 12,877 and a general increase in salaries along with staffing of new
offices. Income tax expense for 2001 was $643,470 as compared to $669,696 in
2000. The effective tax rate in 2001 was 23.72% as compared to 24.65% in 2000.

Basic earnings per share in 2001 were $1.89, as compared to a basic earnings per
share of $1.87 in 2000. Diluted earnings per share in 2001 were $1.87 and $1.86
in 2000. Return on average assets for 2001 was 0.95%, as compared to 0.93% in
2000. Return on average equity was 10.16% in 2001, as compared to 10.82% in
2000.



                                       32
<PAGE>



                                      LOANS AT DECEMBER 31

<Table>
<Caption>
                                                     2002              2001              2000
                                                ---------------   ---------------   ---------------
<S>                                             <C>               <C>               <C>
Commercial, financial
      and agricultural                          $   111,429,905        97,881,448        87,479,810

Real estate
      -construction                                   8,295,383         7,377,897         7,404,300
Real estate
      - mortgage                                     27,784,873        27,233,771        28,580,500
Installment loans to
      individuals                                    14,926,017        16,552,493        18,072,546
Lease Financing                                               0                 0                 0
Foreign
Government and Official
  Institutions                                                0                 0                 0
Banks and Other financial
  Institutions                                                0                 0                 0
Commercial and industrial                                     0                 0                 0
Other Loans                                                   0                 0                 0
                                                ---------------   ---------------   ---------------

                                                $   162,436,178       149,045,609       141,537,156
                                                ===============   ===============   ===============
</Table>

Total loans increased to $162,436,178 at December 31, 2002, from $149,045,609 at
year end 2001, an increase of $13,390,569, or 8.98%. Commercial, financial and
agricultural loans increased to $111,429,905 at year end 2002, from $97,881,448
at December 31, 2001. Most of the increase can be attributed to agricultural
loans. Real estate construction loans increased by $917,486 or 12.44% in 2002 to
$8,295,383 from $7,377,897 in 2001. The majority of these loans are for 1-4
family homes. Real estate mortgage loans increased in 2002 by $551,102 or 2.02%
to $27,784,873 from $27,233,771 in 2001. Installment loans to individuals
decreased to $14,926,017 at December 31, 2002, when compared to $16,552,493 at
year end 2001. The ratio of loans to deposits and repurchase agreements on
December 31, 2002 was 85.17%, as compared to 82.76% in 2001.

Total loans increased to $149,045,609 at December 31, 2001, from $141,537,156 at
year end 2000, an increase of $7,508,453, or 5.30%. Commercial, financial and
agricultural loans increased to $97,881,448 at year end 2001, from $87,479,810
at December 31, 2000. Most of the increase can be attributed to the new Baldwin
County offices, more competitive pricing in present markets, and a growth in
agricultural loans. Real estate construction loans decreased by $26,403 or 0.36%
in 2001 to $7,377,897 from $7,404,300 in 2000. The majority of these loans are
for 1-4 family and owner-occupied commercial building. Real estate mortgage
loans decreased in 2001 by $1,346,729 or 5.94% to $27,233,771 from $28,850,500
in 2000, primarily due to refinancing. Installment loans to individuals
decreased to $16,552,493 at December 31, 2001, when compared to $18,072,546 at
year end 2000. The ratio of loans to deposits on December 31, 2001, was 82.76%,
as compared to 73.87% in 2000.



                                       33
<PAGE>



                                    LIQUIDITY

One of the Bank's goals is to provide adequate funds to meet changes in loan
demand or any potential increase in the normal level of deposit withdrawals.
This goal is accomplished primarily by generating cash from operating activities
and maintaining sufficient short-term assets. These sources, coupled with a
stable deposit base, allow the Bank to fund earning assets and maintain the
availability of funds. Management believes that the Bank's traditional sources
of maturing loans and investment securities, cash from operating activities and
a strong base of core deposits are adequate to meet the Bank's liquidity needs
for normal operations. To provide additional liquidity, the Bank utilizes
short-term financing through the purchase of federal funds, and maintains a
borrowing relationship with the Federal Home Loan Bank to provide liquidity.
Should the Bank's traditional sources of liquidity be constrained, forcing the
Bank to purse avenues of funding not typically used, the Bank's net interest
margin could be impacted negatively.

As of December 31, 2002, management believes liquidity was adequate. The
corporation relies primarily on the Bank for its liquidity needs. At December
31, 2001 the gross loan to deposit ratio was 85.17%. 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.

As revealed in the Consolidated Statement of Cash Flows, the Corporation
generates the majority of its cash flows from financing activities. Financing
activities provided $10,608,375 in cash in 2002, with the majority of this
coming from advances from the Federal Home Loan Bank of Atlanta. These advances
were used to purchase investments to increase net interest income. The investing
activities of the Corporation used $23,063,267 of the cash flows primarily from
the investment and the increase in the loan portfolio of the Bank. Operations
provided $2,193,395 in cash flows with these funds coming from net income and
depreciation for the year ended December 31, 2002.



                             CONTRACTUAL OBLIGATIONS

<Table>
<Caption>
                                        Less than                                       More than
                                         1 Years        2-3 Years       4-5 Years        5 Years
                                      -------------   -------------   -------------   -------------
<S>                                   <C>             <C>             <C>             <C>
Time Deposits                         $      83,014          14,500           5,150             155

FHLB Advances                                 1,800           2,500           5,060           3,467
Long-term debt
                                                  0               0           4,124               0

Operating Leases                                 95             169              76              67
Letters of Credit                             2,432
Commitments to extend credit                  8,692           2,118             240             254
Credit Card Lines                             2,861

                                      $      98,894   $      19,287   $      14,650   $       3,943
</Table>



                                       34
<PAGE>



                            INTEREST RATE SENSITIVITY
                       Interest Rate Sensitivity Analysis
                             Year Ended December 31
                                      2002
                                 (In Thousands)

<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                        $    28,454         20,959         18,539         69,186        25,298        162,436
Taxable securities AFS                       0          1,501              0          1,610        25,277         28,388
Tax exempt securities AFS                  150              0            160          2,566        18,150        21,0126
Federal Funds Sold & Securities
 Purchased
Under agreements to resale                   0              0              0              0             0              0
Other Earning Assets                         0              0              0              0           832            832


Total Interest Earning Assets      $    28,604         22,460         18,699         73,362        69,557        212,682
                                   ===========    ===========    ===========    ===========   ===========    ===========
Interest Bearing Liabilities
Demand Deposits                    $         0              0              0              0        26,882         26,882
Savings Deposits                             0              0              0              0        16,962         16,962
Certificates of Deposit less
     than $100,000                      14,730         17,549         20,051         13,755           200         66,285
Certificates of Deposit
     greater than $100,000              14,253          3,932         12,691          5,658             0         36,534
Federal Funds Purchased and
     securities sold under
     agreement to repurchase             8,141              0              0              0             0          8,141
Other Short Term Borrowings                289              0              0              0             0            289
Federal Home Loan Bank Borrowing           500              0          1,300          7,560         3,467         12,827
                                   -----------    -----------    -----------    -----------   -----------    -----------
TOTAL Interest Bearing Source      $    37,913         21,481         34,042         26,973        47,511        167,920
                                   ===========    ===========    ===========    ===========   ===========    ===========
     Liabilities
Non Interest Bearing Source
     of Funds                                0              0              0              0        35,939         35,939
                                   -----------    -----------    -----------    -----------   -----------    -----------
Interest Sensitivity Gap                (9,309)           979        (15,343)        46,389       (13,893)         8,823
Cumulative Gap                          (9,309)        (8,330)       (23,673)        22,716         8,823
</Table>



                                       35
<PAGE>




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 Bank's performance. 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 2002 was 10.11% as compared to 9.31% in 2001. Total
stockholders' equity on December 31, 2002 was $23,453,304, an increase of
$1,606,811, or 7.35%, from $21,846,493 at year end 2001. This increase is the
result of the Corporation's net earnings during 2002, less dividends declared to
stockholders of $597,700, plus other comprehensive income of $528,392.
Stockholders equity was also affected by the sale of stock under the Employee
Stock Purchase Plan,the exercise of stock options, and the purchase 12,817
shares at $31.00 per share pursuit to an issuer tender offer. The Corporation's
risk based capital of $28,897,000, or 16.16%, at December 31, 2002, was well
above the Corporation's minimum risk based capital requirement of $12,012,000 or
8.0% of risk weighted assets. The Corporation's risk based capital increased
$4,124,000 due to Trust Preferred issued in June of 2002. Based on management's
projections, internally generated capital should be sufficient to satisfy
capital requirements for existing operations into the foreseeable future;
however, continued growth into new markets may require the Bank 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
elsewhere herein, as well as the possibilities of (i) increases in competitive
pressures in the banking industry, particularly with respect to community banks;
(ii) costs or difficulties, relating to the planned increase in the number of
Bank offices, which are greater than expected based on prior experience; (iii)
general economic conditions, either nationally or regionally, that are less
favorable than expected, resulting in deterioration in loan demand, credit
quality and/or borrower liquidity, among other things; (iv) changes which may
occur in the regulatory environment; and (v) large and/or rapid changes in
interest rates. 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.



                                       36
<PAGE>



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, do not generally 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 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 -
300 basis points increase or decrease in prime rate. The Bank uses the Asset



                                       37
<PAGE>



liability model developed by HNC, an independent third party vendor, which takes
the current rate structure of the portfolio and shocks for each rate level and
calculates the new market value of equity at each rate. 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, 2002. All
market risk sensitive instruments presented in this table are held to maturity
or available for sale. The Bank has no trading securities. (In thousands)


<Table>
<Caption>
        INCREASE (DECREASE)                      CHANGE IN          CHANGE IN
                IN               MARKET            MARKET             MARKET
          INTEREST RATES         VALUE             VALUE              VALUE
          (BASIS POINTS)         EQUITY            EQUITY            EQUITY(%)
        -------------------  ---------------   ---------------    ---------------
<S>                          <C>               <C>                <C>
                      300    $        45,379            10,394                 30
                      200             43,179             8,194                 23
                      100             40,456             5,471                 16
                        0             34,985                 0                  0
                     (100)            33,647            (1,338)                (4)
                     (200)            29,585            (5,400)               (15)
                     (300)            26,512            (8,473)               (24)
</Table>

The preceding table indicates that at December 31, 2002, in the event of a
sudden and sustained increase in prevailing market interest rates, the Bank's
NPV would be expected to increase, and that in the event of a sudden decrease in
prevailing market interest rates, the Bank's NPV would be expected to decrease.

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.
For more information on forward looking statements, see "FORWARD LOOKING
STATEMENTS" above.



                                       38
<PAGE>



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Corporation's consolidated financial statements as of December 31, 2002 and
2001 and for each of the years in the three-year period ended December 31, 2002
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,
                        2002 and 2001                                                             F2

            Consolidated Statements of Operations for
                        the years ended December 31, 2002, 2001,
                        and 2000                                                                  F4

            Consolidated Statements of Stockholders'
                        Equity and Other Comprehensive Income
                        for the years ended December 31,
                        2002, 2001, and 2000                                                      F5

            Consolidated Statements of Cash Flows for
                        the years ended December 31, 2002, 2001,
                        and 2000                                                                  F6

            Notes to Consolidated Financial
                        Statements - December 31, 2002, 2001,
                        and 2000                                                                  F8
</Table>


<PAGE>
           INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated balance sheets of United
Bancorporation of Alabama, Inc. and subsidiary as of December 31, 2002 and 2001,
and the related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2002. 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 auditing standards generally accepted
in the United States of America. 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, 2002 and 2001,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.

/s/ KPMG LLP

Birmingham, Alabama February 21, 2003




                                       F-1
<PAGE>
                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                           Consolidated Balance Sheets
                           December 31, 2002 and 2001

<Table>
<Caption>

                         ASSETS                                              2002                 2001
                                                                          -----------          -----------
<S>                                                                     <C>                    <C>
Cash and due from banks                                                   $  9,087,315           16,704,812
Federal funds sold and securities purchased under agreements
to resell                                                                           --            2,644,000
                                                                          ------------          -----------
     Cash and cash equivalents                                               9,087,315           19,348,812
Investment securities available for sale, at fair value (cost of
   $49,414,161 and $41,167,492 at December 31, 2002 and 2001,
   respectively)                                                            50,742,915           41,615,592
Loans                                                                      162,436,178          149,045,609
Less:
          Allowance for loan losses                                          2,116,811            1,993,245
                                                                          ------------          -----------
               Net loans                                                   160,319,367          147,052,364
Premises and equipment, net                                                  6,311,051            5,901,032
Interest receivable                                                          2,416,841            1,979,310
Other assets                                                                 3,944,940            4,058,422
                                                                          ------------          -----------
                    Total assets                                          $232,822,429          219,955,532
                                                                          ============          ===========
</Table>

                                       F-2
<PAGE>
                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                           Consolidated Balance Sheets
                           December 31, 2002 and 2001


<Table>
<Caption>

               LIABILITIES AND STOCKHOLDERS' EQUITY                              2002                  2001
                                                                              ------------            ----------
<S>                                                                           <C>                      C?
Deposits:
    Noninterest bearing                                                       $ 35,939,396            33,406,633
    Interest bearing                                                           146,625,919           147,102,536
                                                                              ------------            ----------
               Total deposits                                                  182,565,315           180,509,169
Securities sold under agreements to repurchase                                   8,140,506             9,069,292
Advances from Federal Home Loan Bank                                            12,827,338             6,235,327
Treasury, tax, and loan account                                                    288,768               415,728
Accrued expenses and other liabilities                                           1,574,761             1,879,523
Guaranteed preferred beneficial interest in junior subordinate debt
    securities, net of debt issuance costs of $151,563                           3,972,437                    --
                                                                              ------------            ----------
               Total liabilities                                               209,369,125           198,109,039
Stockholders' equity:
    Class A common stock, $0.01 par value
       Authorized 5,000,000 shares; issued and outstanding,
       1,161,481 and 1,159,481 shares in 2002 and 2001, respectively                11,615                11,595
    Class B common stock, $0.01 par value
       Authorized 250,000 shares; no shares issued or outstanding                       --                    --
    Preferred stock, $0.01 par value
      Authorized 250,000 shares; no shares issued or outstanding                        --                    --
    Additional paid in capital                                                   5,092,727             5,056,304
    Retained earnings                                                           18,398,823            16,961,631
    Accumulated other comprehensive income, net of deferred taxes
      of $531,501 and $179,237 in 2002 and 2001, respectively                      797,255               268,863
                                                                              ------------            ----------
                                                                                24,300,420            22,298,393
Less: 74,759 and 62,181 treasury shares at cost in 2002
      and 2001, respectively                                                       847,116               451,900
                                                                              ------------            ----------
               Total stockholders' equity                                       23,453,304            21,846,493
                                                                              ------------            ----------
               Total liabilities and stockholders' equity                     $232,822,429           219,955,532
                                                                              ============           ===========
</Table>

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                      Consolidated Statements of Operations
                  Years ended December 31, 2002, 2001, and 2000

<Table>
<Caption>

                                                         2002                 2001                2000
                                                         ----                 ----                ----
<S>                                                  <S>                   <S>                  <C>
Interest income:
  Interest and fees on loans                         $11,596,575           13,029,747           13,004,220
  Interest on investment securities:
     Taxable                                           1,417,090            1,939,741            2,706,169
     Nontaxable                                          921,270              957,204            1,142,995
                                                     -----------           ----------           ----------
          Total interest on
            investment securities                      2,338,360            2,896,945            3,849,164
                                                     -----------           ----------           ----------
Other interest income                                     81,789              294,187              457,097
                                                     -----------           ----------           ----------
          Total interest income                       14,016,724           16,220,879           17,310,481
                                                     -----------           ----------           ----------
Interest expense:
  Interest on deposits                                 4,007,598            6,638,940            7,425,980
  Interest on other borrowed funds                       567,118              812,102            1,129,485
                                                     -----------           ----------           ----------
     Total interest expense                            4,574,716            7,451,042            8,555,465
                                                     -----------           ----------           ----------
     Net interest income                               9,442,008            8,769,837            8,755,016
Provision for loan losses                                837,000              480,000              475,000
                                                     -----------           ----------           ----------
     Net interest income after
       provision for loan losses                       8,605,008            8,289,837            8,280,016
Noninterest income:
  Service charges on deposits                          1,941,267            1,607,296            1,243,544
  Commissions on credit life insurance                    52,368               61,197               39,940
  Investment securities gains, net                        76,995              173,214               34,725
  Mortgage fee income                                    190,534               82,281               16,248
  Other                                                  464,403              379,969              327,972
                                                     -----------           ----------           ----------
     Total noninterest income                          2,725,567            2,303,957            1,662,429
                                                     -----------           ----------           ----------
Noninterest expense:
  Salaries and benefits                                4,581,132            4,221,498            3,841,509
  Net occupancy expense                                1,605,593            1,414,763            1,258,739
  Other                                                2,506,111            2,244,493            2,125,930
                                                     -----------           ----------           ----------
     Total noninterest expense                         8,692,836            7,880,754            7,226,178
                                                     -----------           ----------           ----------
     Earnings before income taxes                      2,637,739            2,713,040            2,716,267
Income tax expense                                       602,847              643,470              669,696
                                                     -----------           ----------           ----------
     Net earnings                                    $ 2,034,892            2,069,570            2,046,571
                                                     ===========            =========            =========
Basic earnings per share                             $      1.86                 1.89                 1.87
Basic weighted average shares outstanding              1,092,586            1,095,706            1,091,538
Diluted earnings per share                           $      1.81                 1.87                 1.86
Diluted weighted average shares outstanding            1,123,230            1,108,630            1,100,702
</Table>
See accompanying notes to consolidated financial statements.



                                      F-4

<PAGE>
                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY

        Consolidated Statements of Stockholders' Equity and Comprehensive Income
                  Years ended December 31, 2002, 2001, and 2000


<Table>
<Caption>

                                                                              ACCUMULATED
                                                      ADDITIONAL                 OTHER                     TOTAL
                                             COMMON    PAID IN     RETAINED   COMPREHENSIVE   TREASURY  STOCKHOLDERS'  COMPREHENSIVE
                                SHARES       STOCK     CAPITAL     EARNINGS   INCOME (LOSS)    STOCK      EQUITY          INCOME
                               ---------   ---------  ----------  ----------  ------------  ---------  -------------  -------------
<S>                            <C>         <C>        <C>         <C>          <C>          <C>        <C>              <C>
Balance December 31, 1999      1,149,281   $  11,494  4,804,489   14,104,870   (808,600)    (465,590)  17,646,663
 Net earnings                         --          --         --    2,046,571         --           --    2,046,571        2,046,571
 Unrealized change in fair
    value investment
    securities available
    for sale, net                     --          --         --           --    813,466           --      813,466          813,466
                                                                                                                       ------------
       Comprehensive income                                                                                              2,860,037
                                                                                                                       ============
 Cash dividends declared
    ($0.55 per share)                 --          --         --     (601,300)        --           --     (601,300)
 Amortization of difference
    between fair value and
    exercise price of stock
    options                           --          --     45,760           --         --           --       45,760
 Exercise of stock options         5,600          55     89,545           --         --           --       89,600
 Sale of common stock              2,000          20     43,980           --         --           --       44,000
 Sale of 901 shares of
    treasury stock                    --          --     10,703           --         --        9,010       19,713
                               ---------   ---------  ---------   ----------    -------     --------   ----------
Balance December 31, 2000      1,156,881      11,569  4,994,477   15,550,141      4,866     (456,580)  20,104,473
 Net earnings                                                      2,069,570         --           --      069,570         2,069,570
 Unrealized change in fair
    value investment securities
    available for sale, net           --          --         --           --    263,997           --      263,997          263,997
                                                                                                                         ---------
       Comprehensive income                                                                                              2,333,567
                                                                                                                         =========
 Cash dividends declared
    ($0.60 per share)                 --          --         --     (658,080)        --           --     (658,080)
 Amortization of difference
     between fair value
    and exercise price of
    stock options                     --          --     12,480           --         --           --       12,480
 Exercise of stock options         2,600          26     41,574           --         --           --       41,600
 Sale of 468 shares of
    treasury stock                    --          --      7,773           --         --        4,680       12,453
                               ---------   ---------  ---------   ----------    -------     --------   ----------
Balance December 31, 2001      1,159,481      11,595  5,056,304   16,961,631    268,863     (451,900)  21,846,493
 Net earnings                         --          --         --    2,034,892         --           --    2,034,892        2,034,892
 Unrealized change in fair
    value investment
    securities available
    for sale, net                      --          --         --           --    528,392           --      528,392         528,392
                                                                                                                         ----------
       Comprehensive income                                                                                              2,563,284
                                                                                                                         ==========
 Cash dividends declared
    ($0.55 per share)                 --          --         --     (597,700)        --           --     (597,700)
 Exercise of stock options         2,000          20     31,980           --         --           --       32,000
 Purchase of treasury stock           --          --         --           --         --     (397,736)    (397,736)
 Sale of 252 shares of
    treasury stock                    --          --      4,443           --         --        2,520        6,963
                               ---------   ---------  ---------   ----------    -------     --------   ----------
Balance December 31, 2002      1,161,481   $  11,615  5,092,727   18,398,823    797,255     (847,116)  23,453,304
                               =========   =========  =========   ==========    =======     ========   ==========
</Table>

See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>

                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 2002, 2001, and 2000

<Table>
<Caption>
                                                                             2002             2001             2000
                                                                         -------------    -------------    -------------
<S>                                                                      <C>              <C>              <C>
Cash flows from operating activities:
    Net earnings                                                         $   2,034,892        2,069,570        2,046,571
    Adjustments to reconcile net earnings to net
        cash provided by operating activities:
           Provision for loan losses                                           837,000          480,000          475,000
           Compensation expense arising from stock
                option awards                                                       --           12,480           45,760
           Depreciation of premises and equipment                              728,699          610,438          511,545
           Net amortization of premium
                on investment securities                                        27,361           28,742           89,274
           Gains on sales of investment
                securities available for sale, net                             (76,995)        (173,214)         (34,725)
           Deferred income taxes (benefit)                                     (24,386)           6,008          (45,271)
           Decrease (increase) in interest receivable                         (437,531)         599,243         (379,596)
           Increase in other assets                                           (263,008)        (182,263)      (1,853,095)
           Increase (decrease) in accrued expenses
                and other liabilities                                         (632,637)        (937,426)         233,974
                                                                         -------------    -------------    -------------
                    Net cash provided by operating activities                2,193,395        2,513,578        1,089,437
                                                                         -------------    -------------    -------------
Cash flows from investing activities:
    Proceeds from maturities, calls, and principal
        repayments of investment securities held to maturity                        --               --        1,533,328
    Proceeds from maturities, calls, and principal
        repayments of investment securities available for sale              11,749,795       17,477,907        6,813,946
    Proceeds from sales of investment
        securities available for sale                                        1,178,070        9,443,336        4,627,751
    Purchases of investment securities available for sale                  (21,124,901)      (7,808,314)     (13,970,942)
    Net increase in loans                                                  (14,104,003)      (8,009,062)     (18,070,061)
    Purchases of premises and equipment, net                                (1,138,718)      (1,513,129)        (529,902)
    Proceeds from sales of other real estate                                   376,490               --           72,304
                                                                         -------------    -------------    -------------
                    Net cash provided by (used in) investing
                        activities                                         (23,063,267)       9,590,738      (19,523,576)
                                                                         -------------    -------------    -------------
</Table>


                                                                     (Continued)
                                      F-6
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 2002, 2001, and 2000

<Table>
<Caption>
                                                                         2002               2001                2000
                                                                    ---------------    ---------------    ---------------
<S>                                                                 <C>                <C>                <C>
Cash flows from financing activities:
   Net (decrease) increase in deposits                              $     2,056,146        (11,080,510)         8,381,228
   Net (decrease) increase in securities sold under
      agreements to repurchase                                             (928,786)        (1,597,262)         1,731,551
   Cash dividends                                                          (597,700)          (658,080)          (601,300)
   Exercise of stock options                                                 32,000             41,600             89,600
   Proceeds from sale of common stock                                            --                 --             44,000
   Proceeds from sale of treasury stock                                       6,963             12,453             19,713
   Purchase of treasury stock                                              (397,736)                --                 --
   Proceeds from issuance of guaranteed preferred
      beneficial interest in junior subordinate debt
      securities, net debt issuance cost of $151,563                      3,972,437                 --                 --
   Advances from FHLB                                                     8,592,011          2,000,000                 --
   Repayments of advances from FHLB                                      (2,000,000)        (1,653,821)        (3,898,614)
   (Decrease) increase in other borrowed funds                             (126,960)          (180,057)            71,044
                                                                    ---------------    ---------------    ---------------
        Net cash (used in) provided by financing
            activities                                                   10,608,375        (13,115,677)         5,837,222
                                                                    ---------------    ---------------    ---------------
Net decrease in cash and cash equivalents                               (10,261,497)        (1,011,361)       (12,596,917)

Cash and cash equivalents, beginning of year                             19,348,812         20,360,173         32,957,090
                                                                    ---------------    ---------------    ---------------
Cash and cash equivalents, end of year                              $     9,087,315         19,348,812         20,360,173
                                                                    ===============    ===============    ===============
Supplemental disclosures:
   Cash paid during the year for:
        Interest                                                    $     5,082,436          7,843,008          8,003,132
        Income taxes                                                        362,000            864,980            682,305

   Noncash transactions:
        Transfer of loans to other real estate
          through foreclosure                                               638,238             72,000             82,539
        Transfer of securities from held to maturity to
          available for sale                                                     --         13,975,608                 --
</Table>


See accompanying notes to consolidated financial statements.



                                       F-7
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


(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)      CONCENTRATIONS

                  The Company operates primarily in one business segment,
                  commercial banking, in the Southwest Alabama market. As of
                  December 31, 2002 and December 31, 2001, approximately 50% and
                  53%, respectively, of the company's loans were commercial
                  loans. The bank's commercial customers are primarily small to
                  middle market enterprises. The bank specializes in
                  agricultural loans, of which approximately 19% and 13% of the
                  company's total loans consisted of as of December 31, 2002 and
                  December 31, 2001, respectively.

         (c)      BASIS OF PRESENTATION

                  The consolidated financial statements have been prepared in
                  conformity with accounting principles generally accepted in
                  the United States of America. In preparing the financial
                  statements, management is required to make estimates and
                  assumptions that affect the reported amounts of assets and
                  liabilities and the disclosure of contingent assets and
                  liabilities as of the date of the balance sheet and revenues
                  and expenses for the period. Actual results could differ
                  significantly from those estimates.

                  Material estimates that are particularly susceptible to
                  significant change in the near term relate to the
                  determination of the allowance for loan losses. In connection
                  with the determination of the allowance for loan losses,
                  management obtains independent appraisals for significant
                  properties.

                  Management believes the allowance for losses on loans is
                  appropriate. While management uses available information to
                  recognize losses on loans, future additions to the allowance
                  may be necessary based on changes in economic conditions,
                  particularly in Alabama, as substantially all loans are to
                  borrowers within the state. In addition, various regulatory
                  agencies, as an integral part of their examination process,
                  periodically review the Company's allowance for losses on
                  loans. Such agencies may require the Company to recognize
                  additions to the allowance based on their judgments about
                  information available to them at the time of their
                  examination.

         (d)      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>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         (e)      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 stated at fair value.
                  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 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 fair value of any security below amortized
                  cost that is deemed other than temporary is charged to income
                  resulting in the establishment of a new cost basis for the
                  security.

         (f)      LOANS

                  Interest income on loans is credited to earnings based on the
                  principal amount outstanding at the respective rate of
                  interest. Accrual of interest on loans is discontinued when a
                  loan becomes contractually past due by 90 days or more with
                  respect to interest or principal. 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.

                  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 recognized as interest income, to the extent that
                  any interest has not been recognized. Any further cash
                  receipts are recorded as recoveries of any amount previously
                  charged off.



                                                                     (Continued)
                                      F-9
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


                  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.

         (g)      ALLOWANCE FOR LOAN LOSSES

                  The ultimate collectibility of a substantial portion of the
                  Company's loan portfolio is 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.

         (h)      PREMISES AND EQUIPMENT

                  Premises and equipment are stated at cost less accumulated
                  depreciation. Depreciation is computed using both the double
                  declining-balance method and the straight-line method over the
                  estimated useful lives of the assets.

         (i)      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 in other assets at the lower of
                  cost or fair value, adjusted for estimated selling costs.
                  Reductions in the balance of other real estate at the date of
                  foreclosure are charged to the allowance for loan losses.
                  Subsequent 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.

         (j)      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.



                                                                     (Continued)
                                      F-10
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         (k)      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 if
                  the current market price on the date of grant of the
                  underlying stock exceeds the exercise price.

                  Statement of Financial Accounting Standards (SFAS) No. 123,
                  Accounting for Stock Based Compensation, prescribes the
                  recognition of compensation expense based on the fair value of
                  options on the grant date and allows companies to apply APB
                  No. 25 as long as certain pro forma disclosures are made
                  assuming hypothetical fair value method application.

                  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 No. 123, the Company's net
                  earnings and earnings per share for the years ended December
                  31, 2002, 2001, and 2000 would have been impacted as shown in
                  the following table:

<Table>
<Caption>
                                                                  2002              2001               2000
                                                             ---------------   ---------------   ---------------
<S>                                                          <C>               <C>               <C>
                  Reported net earnings                      $     2,034,892         2,069,570         2,046,571
                  Compensation expense, net of taxes                  24,243            11,270            11,271
                  Pro forma net earnings                           2,010,649         2,058,300         2,035,300
                  Reported basic earnings per share                     1.86              1.89              1.87
                  Proforma basic earnings per share                     1.84              1.88              1.86
                  Reported diluted earnings per share                   1.81              1.87              1.86
                  Pro forma diluted earnings per share                  1.79              1.86              1.85
</Table>


                  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>
                                                                      2002             2001              2000
                                                                  -------------    -------------    -------------
<S>                                                               <C>              <C>              <C>
                  Expected life of option                                 5 yrs           10 yrs           10 yrs
                  Risk-free interest rate                                  2.89%            3.50%            4.15%
                  Expected volatility of Company stock                    12.09%           12.00%           12.70%
                  Expected dividend yield of Company stock                 2.24%            2.84%            1.67%
</Table>


                  The weighted average fair value of options granted during
                  2002, 2001, and 2000 is as follows:

<Table>
<Caption>
                                                                 2002            2001             2000
                                                             -------------   -------------   -------------
<S>                                                          <C>             <C>             <C>
                  Fair value of each option granted          $        5.99            5.29            7.54
</Table>



                                                                     (Continued)
                                      F-11
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000



         (l)      EARNINGS PER SHARE

                  Basic and diluted earnings per share are computed on the
                  weighted average number of shares outstanding in accordance
                  with SFAS No. 128, Earnings Per Share.

         (m)      BUSINESS SEGMENTS

                  SFAS No. 131, Disclosures about Segments of an Enterprise and
                  Related Information, establishes 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. The Company operates in only one segment -
                  commercial banking.

         (n)      RECENT ACCOUNTING PRONOUNCEMENTS

                  In July 2001, the FASB issued SFAS No. 141, Business
                  Combinations, and SFAS No. 142, Goodwill and Other Intangible
                  Assets. SFAS No. 141 requires that the purchase method of
                  accounting be used for all business combinations initiated
                  after September 30, 2001. SFAS No. 141 also specifies criteria
                  that intangible assets acquired in a purchase method business
                  combination must meet to be recognized and reported apart from
                  goodwill. SFAS No. 142 will require that goodwill and
                  intangible assets with indefinite useful lives no longer be
                  amortized, but instead be tested for impairment at least
                  annually in accordance with the provisions of SFAS No. 142.
                  SFAS No. 142 will also require that intangible assets with
                  estimable useful lives be amortized over their respective
                  estimated useful lives to their estimated residual values, and
                  reviewed for impairment in accordance with SFAS No. 121,
                  Accounting for the Impairment of Long-Lived Assets and for
                  Long-Lived Assets to be Disposed Of. The Company is required
                  to adopt the provision of SFAS No. 141 effective immediately
                  and SFAS No. 142 effective January 1, 2002. The Company does
                  not currently have any goodwill capitalized on its balance
                  sheet. Accordingly, the adoption of these statements did not
                  have an impact on the consolidated financial statements of the
                  Company.

                  In August 2001, the FASB issued SFAS No. 144, Accounting for
                  the Impairment or Disposal of Long-Lived Assets which
                  supersedes both SFAS No. 121 and the accounting and reporting
                  provisions of APB Opinion No. 30, Reporting and Results of
                  Operations - Reporting the Effects of Disposal of a Segment of
                  a Business, and Extraordinary, Unusual and Infrequent
                  Occurring Events and Transactions (Opinion No. 30), for the
                  disposal of a segment of a business (as previously defined in
                  that Opinion). SFAS No. 144 retains the fundamental provisions
                  in SFAS No. 121 for recognizing and measuring impairment
                  losses on long-lived assets held for use and long-lived assets
                  to be disposed of by sale, while also resolving significant
                  implementation issues associated with SFAS No. 121. For
                  example, SFAS No. 144 provides guidance on how a long-lived
                  asset that is used, as part of a group should be evaluated for
                  impairment, establishes criteria for when a long-lived asset
                  is held for sale, and prescribes the accounting for a
                  long-lived asset that will be disposed of other than by sale.
                  SFAS No. 144 retains the basic provisions of Opinion No. 30 on
                  how to present discontinued operations in the income statement
                  but broadens that presentation to include a component of an
                  entity (rather than a segment of a business). Unlike SFAS No.
                  121, an impairment assessment under SFAS No. 144 will not
                  result in a write-down of goodwill. Rather, goodwill is



                                                                     (Continued)
                                      F-12
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


                  evaluated for impairment under SFAS No. 142, Goodwill and
                  Other Intangible Assets. The adoption of this statement by the
                  Company did not have a material effect on the consolidated
                  financial statements.

                  In October 2002, the FASB issued SFAS 147, which removes
                  certain acquisitions of financial institutions (other than
                  transactions between two or more mutual enterprises) from the
                  scope of SFAS 72, Accounting for Certain Acquisitions of
                  Banking or Thrift Institutions and FASB Interpretation 9,
                  Applying APB Opinions 16 and 17 When a Savings and Loan or a
                  Similar Institution Is Acquired in a Business Combination
                  Accounted for by the Purchase Method. These types of
                  transactions are now accounted for under SFAS 141 and 142. In
                  addition, this Statement amends SFAS 144, Accounting for the
                  Impairment or Disposal of Long-Lived Assets, to include in its
                  scope long-term customer relationship intangible assets of
                  financial institutions. The provisions of this Statement were
                  effective October 1, 2002, with earlier adoption permitted.
                  The adoption of this statement did not have a material impact
                  on its consolidated financial statements.

                  In December 2002, the FASB issued SFAS 148, which provides
                  alternative methods of transition for a voluntary change to
                  the fair value based method of accounting for stock-based
                  compensation. In addition, this Statement amends the
                  disclosure requirements of SFAS 123 to require prominent
                  disclosures in both annual and interim financial statements
                  about the method of accounting for stock-based employee
                  compensation and the effect of the method used on reported
                  results. Finally, this Statement amends APB Opinion 28,
                  Interim Financial Reporting, to require disclosure about those
                  effects in interim financial information. This Statement is
                  effective for fiscal and interim periods ending after December
                  15, 2002. The adoption of this statement did not have a
                  material impact to the Consolidated Financial Statements.

                  In November 2002, the FASB issued FIN 45, which elaborates on
                  the disclosures to be made by a guarantor in its interim and
                  annual financial statements about its obligations under
                  certain guarantees that it has issued. It also clarifies that
                  a guarantor is required to recognize, at the inception of the
                  guarantee, a liability for the fair value of the obligation
                  undertaken in issuing the guarantee. The initial recognition
                  and initial measurement provisions of this Interpretation are
                  applied prospectively to guarantees issued or modified after
                  December 31, 2002. The adoption of these recognition
                  provisions will result in recording liabilities associated
                  with certain guarantees provided by the Company. These
                  currently include standby letters of credit and first-loss
                  guarantees on securitizations. The disclosure requirements of
                  this Interpretation are effective for financial statements of
                  interim or annual periods ending after December 15, 2002. The
                  adoption of the disclosure requirements of this Interpretation
                  did not have a material impact on the consolidated financial
                  statements. Management does not expect this Interpretation to
                  have a material impact to the Consolidated Financial
                  Statements.

                  In January 2003, the FASB issued FIN 46, which clarifies the
                  application of Accounting Research Bulletin (ARB) 51,
                  Consolidated Financial Statements, to certain entities (called
                  variable interest entities) in which equity investors do not
                  have the characteristics of a controlling financial interest
                  or do not have sufficient equity at risk for the entity to
                  finance its activities without additional subordinated
                  financial support from other parties. The disclosure
                  requirements of this Interpretation are effective for all
                  financial statements issued after January 31, 2003. The
                  consolidation



                                                                     (Continued)
                                      F-13
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


                  requirements apply to all variable interest entities created
                  after January 31, 2003. In addition, public companies must
                  apply the consolidation requirements to variable interest
                  entities that existed prior to February 1, 2003 and remain in
                  existence as of the beginning of annual or interim periods
                  beginning after June 15, 2003. The adoption of the disclosure
                  requirements of this Interpretation did not have a material
                  impact on the consolidated financial statements. Management
                  does not expect this Interpretation to have a material impact
                  to the Consolidated Financial Statements.

         (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 $2,110,000 and $1,052,000 at December 31, 2002 and 2001,
                  respectively.

         (3)      INVESTMENT SECURITIES

                  The amortized cost and fair value of investment securities
                  available for sale at December 31, 2002 and 2001 were as
                  follows:

<Table>
<Caption>
                                                                               GROSS           GROSS
                                                             AMORTIZED       UNREALIZED      UNREALIZED          FAIR
                                                               COST            GAINS           LOSSES            VALUE
                                                           -------------   -------------    -------------    -------------
<S>                                                        <C>             <C>              <C>              <C>
                  2002:
                      U.S. Treasury                        $   1,517,846          10,301               --        1,528,147
                      U.S. government agencies,
                         excluding mortgage-backed
                         securities                            1,500,000           5,188           (7,290)       1,497,898
                      State and political subdivisions        21,026,192         754,921          (60,175)      21,720,938
                      Mortgage-backed securities              24,878,984         652,746          (64,361)      25,467,369
                      Corporate notes and other                  491,139          37,424               --          528,563
                                                           -------------   -------------    -------------    -------------
                                                           $  49,414,161       1,460,580         (131,826)      50,742,915
                                                           =============   =============    =============    =============

                  2001:
                      U.S. Treasury                        $   1,506,392          37,828               --        1,544,220
                      U.S. government agencies,
                         excluding mortgage-backed
                         securities                            2,087,767          85,068          (23,220)       2,149,615
                      State and political subdivisions        18,532,023         248,324         (135,173)      18,645,174
                      Mortgage-backed securities              18,049,489         272,639          (38,285)      18,283,843
                      Corporate notes and other                  991,821          16,166          (15,247)         992,740
                                                           -------------   -------------    -------------    -------------
                                                           $  41,167,492         660,025         (211,925)      41,615,592
                                                           =============   =============    =============    =============
</Table>



                                                                     (Continued)
                                      F-14
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


                  The amortized cost and fair value of investment securities
                  available for sale at December 31, 2002, 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         FAIR
                                                                                COST            VALUE
                                                                            -------------   -------------
<S>                                                                         <C>                 <C>
                  Investment securities available for sale:
                       Due in one year or less                              $   1,810,112       1,817,482
                       Due after one year through five years                    3,584,240       3,711,158
                       Due after five years through ten years                   7,407,834       7,744,108
                       Due after ten years                                     11,732,991      12,002,798
                                                                            -------------   -------------
                                  Subtotal                                     24,535,177      25,275,546
                  Mortgage-backed securities                                   24,878,984      25,467,369
                                                                            -------------   -------------
                                  Total                                     $  49,414,161      50,742,915
                                                                            =============   =============
</Table>

                  Gross gains of $78,967 and gross losses of $1,972 were
                  realized on those sales of investment securities available for
                  sale in 2002. Gross gains of $225,376 and gross losses of
                  $52,162 were realized on those sales of investment securities
                  available for sale in 2001. Gross gains of $40,041 and gross
                  losses of $5,316 were realized on those sales of investment
                  securities available for sale in 2000. Securities with
                  carrying values of $31,162,178 and $30,112,910 at December 31,
                  2002 and 2001, respectively, were pledged to secure public and
                  trust deposits as required by law and for other purposes.

         (4)      LOANS AND ALLOWANCE FOR LOAN LOSSES

                  At December 31, 2002 and 2001, the composition of the loan
                  portfolio was as follows:
<Table>
<Caption>
                                                                                     2002            2001
                                                                                 -------------   -------------
<S>                                                                              <C>             <C>
                  Commercial and financial                                       $  80,446,596      78,792,276
                  Agricultural                                                      30,983,309      19,089,172
                  Real estate - construction                                         8,295,383       7,377,897
                  Real estate - 1-4 family residential mortgage                     27,784,873      27,233,771
                  Installment loans to individuals                                  14,926,017      16,552,493
                                                                                 -------------   -------------
                           Total                                                 $ 162,436,178     149,045,609
                                                                                 =============   =============
</Table>

                  At December 31, 2002, the Corporation had $30,983,000 of
                  agriculture related loans as compared to $19,089,172 and
                  414,871,440 in 2001 and 2000, respectively. Agriculture loans
                  accounted for $0, $0, and $75106 of nonaccural loans in 2002,
                  2001, and 2000, respectively.



                                                                     (Continued)
                                      F-15
<PAGE>
                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         A summary of the transactions in the allowance for loan losses for the
         years ended December 31, 2002, 2001, and 2000 follows:

<Table>
<Caption>
                                                   2002             2001              2000
                                               -------------    -------------    -------------
<S>                                            <C>              <C>              <C>
         Balance at beginning of year          $   1,993,245        1,939,307        1,676,274
         Provision charged to earnings               837,000          480,000          475,000
             Less loans charged-off                 (765,505)        (479,901)        (252,430)
             Plus loan recoveries                     52,071           53,839           40,463
                                               -------------    -------------    -------------
                 Net charge-offs                    (713,434)        (426,062)        (211,967)
                                               -------------    -------------    -------------
         Balance at end of year                $   2,116,811        1,993,245        1,939,307
                                               =============    =============    =============
</Table>

         Loans on which the accrual of interest had been discontinued or reduced
         amounted to $1,166,919 and $2,184,316 as of December 31, 2002 and 2001,
         respectively. If these loans had been current throughout their terms,
         interest income would have been increased by $29,967, $123,443, and
         $48,630, for 2002, 2001, and 2000, respectively. At December 31, 2000,
         the Company had impaired loans of $72,811. At December 31, 2002 and
         2001, the Company had no significant impaired loans.

         During 2002 and 2001, 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
         Bank. Total loans outstanding to these related parties at December 31,
         2002 and 2001, amounted to $7,185,629 and $5,874,226, respectively. The
         change from December 31, 2001 to December 31, 2002 reflects advances
         amounting to $2,660,708 and payments of $1,349,305 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, 2002 and 2001, premises and equipment were as follows:

<Table>
<Caption>
                                                                            2002            2001
                                                                        -------------   -------------
<S>                                                                     <C>             <C>
         Land                                                           $   1,698,651       1,072,612
         Buildings and leasehold improvements (depreciated over
             5 to 50 years)                                                 4,756,867       4,433,492
         Furniture, fixtures, and equipment (depreciated over
             3 to 10 years)                                                 4,071,617       3,885,957
         Automobiles (depreciated over 3 years)                               133,475         133,475
                                                                        -------------   -------------
                                                                           10,660,610       9,525,536
         Less accumulated depreciation                                      4,349,559       3,624,504
                                                                        -------------   -------------
                                                                        $   6,311,051       5,901,032
                                                                        =============   =============
</Table>



                                                                     (Continued)
                                      F-16
<PAGE>




                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         Depreciation expense for the year ended December 31, 2002, 2001, and
         2000 was $728,699, $610,438, and $511,545, respectively.

(6)      DEPOSITS

         At December 31, 2002 and 2001, deposits were as follows:

<Table>
<Caption>
                                                                       2002             2001
                                                                   -------------   -------------
<S>                                                                <C>             <C>
         Noninterest bearing accounts                              $  35,939,396      33,406,633
         NOW accounts                                                 18,336,858      19,274,192
         Money market investment accounts                              8,508,315       7,218,784
         Savings account                                              16,961,888      15,016,012
         Time deposits:
             Certificates of deposit less than $100,000               73,507,943      70,864,115
             Certificates of deposit greater than $100,000            29,310,915      34,729,433
                                                                   -------------   -------------
                     Total deposits                                $ 182,565,315     180,509,169
                                                                   =============   =============
</Table>


         At December 31, 2002, 2001, and 2000 interest expense on deposits was
         as follows:

<Table>
<Caption>
                                                              2002           2001            2000
                                                         -------------   -------------   -------------
<S>                                                      <C>             <C>             <C>
         NOW accounts                                    $     308,699         667,566       1,670,355
         Money market investment accounts                      109,583         108,637         131,752
         Savings account                                       143,988         288,203         370,895
         Time deposits:
             Certificates of deposit less than
                 $100,000                                    2,403,927       3,771,353       3,628,686
             Certificates of deposit greater than
                 $100,000                                    1,041,401       1,803,181       1,624,292
                                                         -------------   -------------   -------------
                     Total interest expense on deposits  $   4,007,598       6,638,940       7,425,980
                                                         =============   =============   =============
</Table>

         At December 31, 2002, the contractual maturities of time deposits are
         as follows:

<Table>
<S>                                                    <C>
         Due in one year                               $   83,013,829
         Due in two years                                   9,414,139
         Due in three years                                 5,086,194
         Due in four years                                  1,061,163
         Due in five years                                  4,089,095
         Thereafter                                           154,438
                                                       --------------
                                                       $  102,818,858
                                                       ==============
</Table>



                                                                     (Continued)
                                      F-17
<PAGE>




                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


(7)      SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

         The maximum amount of outstanding securities sold under agreements to
         repurchase during 2002 and 2001 was $15,503,292 and $15,815,554,
         respectively. The weighted average borrowing rate at December 31, 2002
         and 2001 was 0.77% and 1.00%, respectively. The average amount of
         outstanding securities sold under agreements to repurchase during 2002
         and 2001 was $10,753,068 and $11,612,232, respectively. The weighted
         average borrowing rate during the years ended December 31, 2002 and
         2001 was 4.70% and 3.15%, respectively. Securities underlying these
         agreements are under the Company's control.

(8)      BORROWED FUNDS

         The Company was liable to the Federal Home Loan Bank of Atlanta on the
         following advances at December 31, 2002:

<Table>
<Caption>
         MATURITY DATE                                INTEREST RATE
         ---------------                              --------------
<S>                                                   <C>               <C>
         March 2003                                             1.97%   $       500,000
         September 2003                                         1.30%         1,300,000
         March 2004                                             2.35%         1,500,000
         September 2004                                         2.53%         1,000,000
         June 2006                                              7.19%            60,305
         September 2007                                         2.82%         5,000,000
         March 2011                                             4.22%         2,000,000
         May 2012                                               7.41%           111,467
         July 2017                                              6.93%           975,000
         August 2017                                            6.84%           160,775
         July 2020                                              7.54%           219,791
                                                                        ---------------
         Total (weighted average rate of 3.305%)                        $    12,827,338
                                                                        ===============
</Table>

         At December 31, 2002 and 2001, the advances were collateralized by a
         blanket pledge of first-mortgage residential loans in the amount of
         $27,784,873 and $27,233,771, respectively.

(9)      INCOME TAXES

         Total income tax expense (benefit) for the years ended December 31,
         2002, 2001, and 2000 was allocated as follows:

<Table>
<Caption>
                                                       2002          2001          2000
                                                    -----------   -----------   -----------
<S>                                                 <C>               <C>           <C>
         Income from continuing operations          $   602,846       643,470       669,696
         Stockholders' equity, for other
            comprehensive income                    $   352,262       175,994       542,360
</Table>



                                                                     (Continued)
                                      F-18
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000

         The components of income tax expense attributable to income from
         continuing operations for the years ended December 31, 2002, 2001, and
         2000 were as follows:

<Table>
<Caption>
                                                        2002             2001              2000
                                                    -------------    -------------    -------------
<S>                                                 <C>              <C>              <C>
         Current:
             Federal                                $     529,675          580,936          599,579
             State                                         97,557           56,526          115,388
                                                    -------------    -------------    -------------
                 Total                                    627,232          637,462          714,967
                                                    -------------    -------------    -------------
         Deferred:
            Federal                                       (21,395)           7,866          (40,280)
            State                                          (2,991)          (1,858)          (4,991)
                                                    -------------    -------------    -------------
                 Total                                    (24,386)           6,008          (45,271)
                                                    -------------    -------------    -------------
                 Total income tax expense           $     602,846          643,470          669,696
                                                    =============    =============    =============
</Table>


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

<Table>
<Caption>
                                                                   2002            2001             2000
                                                              -------------    -------------    -------------
<S>                                                           <C>              <C>              <C>
         Income tax at statutory rate                         $     896,832          922,434          923,531
         Increase (decrease) resulting from:
            Tax exempt interest                                    (318,970)        (342,371)        (406,384)
            Interest disallowance                                    27,090           46,908           60,867
            Deferred compensation                                     2,380           10,077           12,186
            State income tax net of federal benefit                  62,414           36,081           72,862
            Premium amortization on tax exempt
                investment securities                                 4,352            8,722           21,382
             Cash surrendered value of life insurance               (39,677)         (34,962)              --
         Other, net                                                 (31,575)          (3,419)         (14,748)
                                                              -------------    -------------    -------------
                                                              $     602,846          643,470          669,696
                                                              =============    =============    =============
</Table>



                                                                     (Continued)
                                      F-19
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         The tax effects of temporary differences that give rise to significant
         portions of the deferred tax assets and deferred tax liabilities at
         December 31, 2002 and 2001 are as follows:

<Table>
<Caption>
                                                                                 2002              2001
                                                                             -------------    -------------
<S>                                                                          <C>              <C>
         Deferred tax assets:
              Loans, principally due to the allowance for loan losses        $     492,274          448,241
              Other real estate, principally due to differences in
                 carrying value                                                     81,961           20,925
              Accrued expenses                                                      19,579           31,384
              Security writedown                                                     4,427            4,427
              Other                                                                    179               42
                                                                             -------------    -------------
                         Total deferred tax assets                                 598,420          505,019
                                                                             =============    =============
         Deferred tax liabilities:
              Premises and equipment, principally due to difference in
                 depreciation                                                      231,062          172,860
              Investment securities available for sale                             531,498          179,237
              Discount accretion                                                    51,277           40,468
              Other                                                                    550              546
                                                                             -------------    -------------
                         Total deferred tax liabilities                            814,387          393,111
                                                                             -------------    -------------
                         Net deferred tax asset (liability)                  $    (215,967)         111,908
                                                                             =============    =============
</Table>

         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 scheduled
         reversal of deferred tax liabilities, projected future taxable income,
         and tax planning strategies. 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.



                                                                     (Continued)
                                      F-20
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


(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. The changes in outstanding options are as
         follows:

<Table>
<Caption>
                                                                        WEIGHTED
                                                                        AVERAGE
                                                     SHARES UNDER    EXERCISE PRICE
                                                       OPTION          PER SHARE
                                                    -------------    -------------
<S>                                                 <C>              <C>
         Balance at December 31, 1999                      41,560    $       18.01
         Granted                                            4,080            31.30
         Surrendered                                           --               --
         Exercised                                         (5,600)           16.00
                                                    -------------
         Balance at December 31, 2000                      40,040            19.65
         Granted                                            4,080            32.50
         Surrendered                                           --               --
         Exercised                                         (2,600)           16.00
                                                    -------------
         Balance at December 31, 2001                      41,520            21.14
         Granted                                           22,080            31.50
         Surrendered                                       (5,000)           31.50
         Exercised                                         (2,000)           16.00
                                                    -------------
         Balance at December 31, 2002                      56,600            24.57
                                                    =============
</Table>



                                                                     (Continued)
                                      F-21
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         Stock options outstanding and exercisable on December 31, 2002 and 2001
         were as follows:

<Table>
<Caption>
                                            2002
        ---------------------------------------------------------------------------
                                                                        WEIGHTED
                                                                        AVERAGE
                                                                       REMAINING
                                                   SHARES UNDER       CONTRACTUAL
                 EXERCISE PRICE PER SHARE             OPTION         LIFE IN YEARS
        --------------------------------------    ---------------   ---------------
           Outstanding:
<S>                                               <C>               <C>
        $         16.00                                 23,200               6.0
                  22.50                                  4,080               6.0
                  25.74                                  4,080               7.0
                  31.30                                  4,080               8.0
                  31.50                                 17,080              10.0
                  32.50                                  4,080               9.0
                                                  ---------------
                                                        56,600
                                                  ===============
           Exercisable:

        $         16.00                                23,200               6.0
                  22.50                                 4,080               6.0
                  25.74                                 3,264               7.0
                  31.30                                 2,448               8.0
                  31.50                                 1,016              10.0
                  32.50                                 1,632               9.0
                                                  ---------------
                                                       35,640
                                                  ===============
</Table>



                                                                     (Continued)
                                      F-22
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000

<Table>
<Caption>
                                                          2001
        ----------------------------------------------------------------------------------------------------------
                                                                                                      WEIGHTED
                                                                                                       AVERAGE
                                                                                                      REMAINING
                                                                       SHARES UNDER                  CONTRACTUAL
                EXERCISE PRICE PER SHARE                                 OPTION                      LIFE IN YEARS
        ------------------------------------------------              --------------                 -------------
<S>                                                                   <C>                            <C>
          Outstanding:

        $ 16.00                                                           25,200                            7.0
          22.50                                                            4,080                            7.0
          25.74                                                            4,080                            8.0
          31.30                                                            4,080                            9.0
          32.50                                                            4,080                           10.0
                                                                      --------------
          16.00 - 32.50                                                   41,520                            7.6
                                                                      ==============
          Exercisable:
        $ 16.00                                                           25,200                            7.0
          22.50                                                            3,264                            7.0
          25.74                                                            2,448                            8.0
          31.30                                                            1,632                            9.0
          32.50                                                              816                           10.0
                                                                      --------------
          16.00 - 32.50                                                   33,360                            7.6
                                                                      ==============
</Table>

(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, 2002, 2001,
         and 2000:

<Table>
<Caption>
                                                                  2002            2001            2000
                                                              -------------   -------------   -------------
<S>                                                           <C>             <C>             <C>
         Diluted earnings per share:
           Weighted average common shares
              outstanding                                         1,092,586       1,095,706       1,091,538
           Effect of the assumed exercise of stock
              options-based on the treasury stock
              method using average market price                      30,644          12,924           9,164
                                                              -------------   -------------   -------------
                  Total weighted average
                      common shares and
                      potential common stock
                      outstanding                                 1,123,230       1,108,630       1,100,702
                                                              =============   =============   =============
</Table>



                                                                     (Continued)
                                      F-23
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000



(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 1%
         up to 10% of salary to the plan. The Company contributes twenty-five
         cents for each dollar the employee contributes, up to 4% of the
         employee's salary. Total Company contributions to the plan during 2002,
         2001, and 2000 were $31,189, $28,829, and $24,249, 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 $114,000, $110,600, and $82,000 were made in 2002,
         2001, and 2000, respectively.

(13)     FAIR VALUE OF FINANCIAL INSTRUMENTS

         The assumptions used in estimating 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
         No. 107 excludes certain financial instruments and all nonfinancial
         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 approximates the carrying value of such assets.

         (B)      INVESTMENT SECURITIES

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

         (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

                  The fair value of deposits with no stated maturity, such as
                  non-interest bearing demand deposits, NOW accounts, savings
                  and money market deposit accounts, approximates the carrying
                  value. Certificates of deposit have been valued using
                  discounted cash flows. The discount rates used are based on
                  estimated market rates for deposits of similar remaining
                  maturities.



                                                                     (Continued)
                                      F-24
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         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

         The fair value of the Company's other borrowed funds approximates the
         carrying value of such liabilities. The fair value of FHLB advances is
         based on current borrowing rates.

(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.
         Therefore, 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, 2002 and 2001 are as follows (in
         thousands):

<Table>
<Caption>
                                                       2002                            2001
                                           -----------------------------   -----------------------------
                                             CARRYING       ESTIMATED        CARRYING        ESTIMATED
                                              AMOUNT        FAIR VALUE        AMOUNT         FAIR VALUE
                                           -------------   -------------   -------------   -------------
<S>                                        <C>             <C>             <C>              <C>
         Financial assets:
            Cash and short-term
               investments                 $       9,087           9,087          19,348          19,348
            Investment securities                 50,743          50,743          41,615          41,615
            Loans, net of unearned
              income and allowance
              for loan losses                    160,319         163,681         147,052         151,823
         Financial liabilities:
            Deposits                             182,565         183,805         180,509         181,433
         Securities sold under
            agreements to repurchase               8,141           8,141           9,069           9,069
         Other borrowed funds                        289             289             416             416

         FHLB advances                            12,827          13,486           6,235           6,885
</Table>



                                                                     (Continued)
                                      F-25
<PAGE>


                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


(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, 2002, the Bank
         could have declared dividends of approximately $4,293,593 without prior
         approval of regulatory authorities.

(15)     COMPREHENSIVE INCOME

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

<Table>
<Caption>
                                                                        YEAR ENDED DECEMBER 31
                                                              ---------------------------------------------
                                                                  2002            2001            2000
                                                              -------------   -------------   -------------
<S>                                                           <C>             <C>             <C>
         Other comprehensive income before tax:
             Unrealized holding gains arising
                during the period, net                        $     957,649         613,205       1,390,551
                   Less reclassification adjustment for
                      gains included in net earnings                 76,995         173,214          34,725
                                                              -------------   -------------   -------------
         Other comprehensive income, before
             income taxes                                           880,654         439,991       1,355,826
                                                              -------------   -------------   -------------
         Income tax expense related to
             other comprehensive income:
                Unrealized holding gains arising
                   during the period, net                           383,060         245,280         556,250
                      Less reclassification adjustment
                         for gains included in net
                         income                                      30,798          69,286          13,890
                                                              -------------   -------------   -------------
                           Total income tax expense
                            related to other
                            comprehensive income
                            comprehensive income                    352,262         175,994         542,360
                                                              -------------   -------------   -------------
         Other comprehensive income, after
            taxes                                             $     528,392         263,997         813,466
                                                              =============   =============   =============
</Table>



                                                                     (Continued)
                                      F-26
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


(16)     LITIGATION

         The Company is involved in various legal proceedings arising in
         connection with their business. In the opinion of management, based
         upon consultation with legal counsel, the ultimate resolution of these
         proceedings is not expected to have a material adverse effect upon the
         financial statements of the Company.

(17)     COMMITMENTS

         The Company 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, 2002, are as follows:

<Table>
<S>                                                                             <C>
         Years ending December 31:
             2003                                                               $      95,125
             2004                                                                      89,746
             2005                                                                      78,540
             2006                                                                      44,790
             2007                                                                      30,790
             Thereafter                                                                68,132
                                                                                -------------
                                                                                $     407,123
                                                                                =============
</Table>

         Rental expense for all operating leases charged to earnings aggregated
         $108,463, $105,625, and $92,175 for the years ended December 31, 2002,
         2001, and 2000, 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.

         The financial instruments whose contract amounts represent credit risk
         as of December 31, 2002, are as follows:

<Table>
<S>                                                             <C>
         Commitments to extend credit                           $ 14,205,000
         Standby letters of credit                                 2,431,500
</Table>



                                                                     (Continued)
                                      F-27
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


         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 1% of the total of
         interest income and other income for any of the years ended December
         31, 2002, 2001, and 2000, respectively, include the following:

<Table>
<Caption>
                                          2002           2001            2000
                                     -------------   -------------   -------------
<S>                                  <C>             <C>             <C>
         Data processing fees        $      34,956         247,584         297,320
         Supplies expenses                 272,756         214,006         279,544
</Table>


(19)     REGULATORY MATTERS

         The Corporation and its subsidiary bank are subject to various
         regulatory capital requirements administered by the federal banking
         agencies. Failure to meet minimum capital requirements can initiate
         certain mandatory - and possibly additional discretionary - actions by
         regulators that, if undertaken, could have a direct material effect on
         the Company's financial statements. Under capital adequacy guidelines
         and the regulatory framework of prompt corrective action, the
         Corporation and its subsidiary bank must meet specific capital
         guidelines that involve quantitative measures of each bank's assets,
         liabilities, and certain off-balance-sheet items as calculated under
         regulatory accounting practices. The capital amounts and classification
         of the Corporation and its subsidiary bank are also subject to
         qualitative judgments by the regulators about components, risk
         weightings, and other factors.

         Quantitative measures established by regulation to ensure capital
         adequacy require the Corporation and its subsidiary bank to maintain
         minimum core capital (Tier I Capital) of at least 4% of risk-weighted
         assets, minimum total capital (Total Qualifying Capital) of at least 8%
         of risk-weighted assets and a minimum leverage ratio of at least 4% of
         average assets. Management believes, as of December 31, 2002, that the
         Corporation and its subsidiary bank meet all capital adequacy
         requirements to which they are subject.



                                                                     (Continued)
                                      F-28
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000

         As of December 31, 2002, the most recent notification from the
         appropriate regulatory agencies categorized the subsidiary bank 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 10%, 6%, and 5%, 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 Corporation and its significant subsidiary banks at December 31,
         2002 and 2001:

<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, 2002:
             Consolidated                 $    28,897         16.16%   $    26,781         14.98%   $    26,781         11.75%
             United Bank                       24,640         13.92%        22,523         12.73%        22,523          9.69%

         As of December 31, 2001:
             Consolidated                 $    23,570         14.52%   $    21,577         13.31%   $    21,577          9.88%
             United Bank                       22,564         13.84%        20,571         12.62%        20,571          9.46%
</Table>



                                                                     (Continued)
                                      F-29
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


(20)     PARENT COMPANY FINANCIAL INFORMATION

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

                              (Parent Company Only)
                       Condensed Balance Sheet Information
                           December 31, 2002 and 2001

<Table>
<Caption>
                                                ASSETS                                 2002             2001
                                                                                    -------------   -------------
<S>                                                                                 <C>             <C>
         Cash                                                                       $   2,630,235         175,156
         Dividend receivable from subsidiary bank                                              --         384,055
         Premises and equipment                                                         1,689,351         840,588
         Investment in subsidiaries                                                    23,447,861      20,840,844
                                                                                    -------------   -------------
                 Total assets                                                       $  27,767,447      22,240,643
                                                                                    =============   =============

                                 LIABILITIES AND STOCKHOLDERS' EQUITY

         Other liabilities                                                          $     341,706         394,150
         Guarantee preferred beneficial interest in junior subordinate
            debt securities, net of debt issuance costs of $151,563                     3,972,437              --
                                                                                    -------------   -------------
                         Total liabilities                                              4,314,143         394,150

         Stockholders' equity:
            Class A common stock of $0.01 par value. Authorized
              5,000,000 shares; issued 1,161,481 and 1,159,481 shares
              in 2002 and 2001, respectively                                               11,615          11,595
            Class B common stock of $0.01 par value. Authorized
              250,000 shares; no shares issued                                                 --              --
            Preferred stock of $.01 par value. Authorized 250,000
              shares; no shares issued                                                         --              --
         Additional paid in capital                                                     5,092,727       5,056,304
         Retained earnings                                                             18,398,823      16,961,631
         Accumulated other comprehensive income, net of tax                               797,255         268,863
                                                                                    -------------   -------------
                                                                                       24,300,420      22,298,393
         Less: 74,759 and 62,181 treasury shares at cost in 2002
                 and 2001, respectively                                                   847,116         451,900
                                                                                    -------------   -------------
                         Total stockholders' equity                                    23,453,304      21,846,493
                                                                                    -------------   -------------
                         Total liabilities and stockholders' equity                 $  27,767,447      22,240,643
                                                                                    =============   =============
</Table>



                                                                     (Continued)
                                      F-30
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000


                              (Parent Company Only)
                 Condensed Statements of Operations Information
                  Years ended December 31, 2002, 2001, and 2000

<Table>
<Caption>
                                                                   2002           2001            2000
                                                              -------------   -------------   -------------
<S>                                                           <C>             <C>             <C>
         Income:
                 Cash dividends from subsidiary               $     271,684         659,055         766,000
                 Other                                               40,200          43,550          36,850
         Expense:
                 Salaries and benefits                                   --          12,480          80,760
                 Interest on other borrowed funds                   116,518              --              --
                 Other                                              115,099          90,794         130,413
                                                              -------------   -------------   -------------
                      Earnings before equity in
                        undistributed earnings of
                        subsidiary                                   80,267         599,331         591,677
         Equity in undistributed earnings of subsidiary           1,954,625       1,470,239       1,454,894
                                                              -------------   -------------   -------------
                      Net earnings                            $   2,034,892       2,069,570       2,046,571
                                                              =============   =============   =============
</Table>



                                                                     (Continued)
                                      F-31
<PAGE>



                     UNITED BANCORPORATION OF ALABAMA, INC.
                                 AND SUBSIDIARY
                          Notes to Financial Statements
                        December 31, 2002, 2001, and 2000

                              (Parent Company Only)
                 Condensed Statements of Cash Flows Information
                  Years ended December 31, 2002, 2001, and 2000

<Table>
<Caption>
                                                                       2002             2001             2000
                                                                   -------------    -------------    -------------
<S>                                                                <C>              <C>              <C>
         Cash flows from operating activities:
            Net earnings                                           $   2,034,892        2,069,570        2,046,571
            Adjustments to reconcile net earnings to
              net cash provided by operating
              activities:
            Equity in undistributed earnings of
              subsidiary                                              (1,954,625)      (1,470,239)      (1,454,894)

            Compensation expense arising from
              stock option awards                                             --           12,480           45,760
            Increase (decrease) in other liabilities                     (52,444)          48,636            8,734
            Decrease (increase) in receivables                           384,055           32,195         (328,000)
                                                                   -------------    -------------    -------------
                            Net cash provided by
                                 operating activities                    411,878          692,642          318,171
                                                                   -------------    -------------    -------------
         Cash flows from investing activities:
            Purchases of premises and equipment, net                    (848,763)          (5,416)        (204,316)
            Capital investment in subsidiary                            (124,000)              --               --
                                                                   -------------    -------------    -------------
                            Net cash used in investing
                                 activities                             (972,763)          (5,416)        (204,316)
                                                                   -------------    -------------    -------------
         Cash flows from financing activities:
            Cash dividends                                              (597,700)        (658,080)        (601,300)
            Proceeds from private placement                            3,972,437               --           44,000
            Purchase of treasury stock                                  (397,736)              --               --
            Proceeds from sale of treasury stock                           6,963           12,453           19,713
            Exercise of stock options                                     32,000           41,600           89,600
                                                                   -------------    -------------    -------------
                            Net cash provided by (used in)
                                 financial activities                  3,015,964         (604,027)        (447,987)
                                                                   -------------    -------------    -------------
                            Net increase (decrease)
                                 in cash                               2,455,079           83,199         (334,132)

         Cash, beginning of year                                         175,156           91,957          426,089
                                                                   -------------    -------------    -------------
         Cash, end of year                                         $   2,630,235          175,156           91,957
                                                                   =============    =============    =============
</Table>





                                      F-32
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable


                                    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 2003 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 2002 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 2003 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 2002 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 2002 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 2002 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 2002 Annual
Meeting of Stockholders to be filed not later than 120 days after the year ended
December 31, 2001 pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended.

ITEM 14. Controls and Procedures

     (a). Based on evaluation of the Corporation's disclosure controls and
     procedures (as such term is defined in Rules 13a-4(C) under the Securities
     Exchange Act of 1934, as amended (the "Exchange Act"), as of a date within
     90 days of the filing of this annual report, the principal executive
     officer and the principal financial officer of the Corporation have
     concluded that as of such date the Corporation's disclosure controls and
     procedures were effective to ensure that information the Corporation is
     required to disclose in its filings under the Exchange Act is recorded,
     processed, summarized and reported, within the time periods specified in
     the Securities and Exchange Commission's rules and forms, and to ensure
     that information required to be disclosed by the Corporation in the reports
     that it files under the Exchange Act is accumulated and communicated to the
     Corporation's management, including its principal executive officer and
     principal financial officer, as appropriate to allow timely decisions
     regarding required disclosure.

     (b). There were no significant changes in the Corporation's internal
     controls or in other factors that could significantly affect these controls
     subsequent to the date of the evaluation referred to in (a)above.



<PAGE>



                                     PART IV

ITEM 15. 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 (Incorporated by reference herein from
                  Exhibit 10.2 to the Registrant's Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1998)*.

         10.3     1998 Stock Option Plan of United Bancorporation of Alabama,
                  Inc. (Incorporated by reference herein from Exhibit 3.1.1 to
                  Registrant's Quarterly Report on Form 10-Q for the Quarter
                  Ended March 31, 1999).

         10.4     1999 Employee Stock Purchase Plan of United Bancorporation of
                  Alabama, Inc. (incorporated herein by reference from appendix
                  A to the Registrants definitive proxy statement dated April
                  10, 2000)*.

         21       Subsidiaries of the Registrant.

         99(1)    Certification pursuant to 18 U.S.C. Section 1350.

         99(2)    Certification pursuant to 18 U.S.C. Section 1350.


(b) No reports on Form 8-K were filed during the last quarter of the fiscal year
ended December 31, 2002.



<PAGE>



                                   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 28, 2003

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 28, 2003
-------------------------       Executive Officer, and
     Robert R. Jones, III             Director


/s/  Mitchell D. Staples        Treasurer                      March 28, 2003
-------------------------       (principal financial and
     Mitchell D. Staples        principal accounting
                                officer)

/s/  H. Leon Esneul             Director                       March 28, 2003
-------------------------
     H. Leon Esneul


/s/  David D. Swift             Director                       March 28, 2003
-------------------------
     David D. Swift


/s/  William J. Justice         Director                       March 28, 2003
-------------------------
     William J. Justice


/s/  Dale M. Ash                Director                       March 28, 2003
------------------------
     Dale M. Ash


/s/  William C. Grissett        Director                       March 28, 2003
-------------------------
     William C. Grissett

/s/  L. Walter Crim             Director                       March 28, 2003
-------------------------
     L. Walter Crim
</Table>



<PAGE>



         I, Robert R Jones, III, President and CEO, certify that:

1. I have reviewed this annual report on Form 10-K of United Bancorporation of
Alabama Inc.

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003


/s/ Robert R. Jones, III
------------------------
Robert R. Jones, III
President and CEO



<PAGE>



I, Mitchell D. Staples, principal financial officer, certify that:

1. I have reviewed this annual report on Form 10-K of United Bancoporation of
Alabama, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 28, 2003


/s/Mitchell D. Staples
---------------------------
Mitchell D. Staples
Principal financial officer



<PAGE>



                                INDEX TO EXHIBITS

<Table>
<Caption>
Exhibit                                                                     Page
-------                                                                     ----
<S>                                                                         <C>
         21       Subsidiaries of the registrant                             E2

         99.1     Certification Pursuant to 18 U.S.C. Section 1350           E3

         99.2     Certification Pursuant to 18 U.S.C. Section 1350           E4
</Table>