##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 Commission file
number 000-25917
 UNITED BANCORPORATION OF ALABAMA, INC.
  Delaware
    
    63-0833573(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 200 East Nashville Avenue, Atmore, Alabama
    
    36502(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller Reporting Company þ o þ
  Class A Common Stock 
Class B Common Stock
    
    2,234,711 Shares
  Shares




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##### 



UNITED BANCORPORATION OF ALABAMA, INC.
 FORM 10-Q
  INDEX
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets
    
    
    3Consolidated Statements of Earnings and Comprehensive Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 4. Controls and Procedures
    
    
    23PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 6. Exhibits
    
    
    25EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 United Bancorporation of Alabama, Inc.
and Subsidiary
Consolidated Balance Sheets
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)AssetsCash and due from banks
    
    $
    14,470,096
    
    
    $
    35,148,646Interest bearing deposits in banks
    
    
    45,836,575
    
    
    
    91,773,852Federal funds sold
    
    
    20,000,000
    
    
    
    16,600,000Cash and cash equivalents
    
    
    80,306,671
    
    
    
    143,522,498Securities available for sale (amortized cost of $76,339,786
and $84,725,733 respectively)
    
    
    76,882,032
    
    
    
    85,526,712Securities held to maturity (market values of $29,311,571
and $6,596,039 respectively)
    
    
    29,088,308
    
    
    
    6,550,000Loans
    
    
    283,383,562
    
    
    
    279,779,877Less: Allowance for loan losses
    
    
    3,913,301
    
    
    
    3,591,558Net loans
    
    
    279,470,261
    
    
    
    276,188,319Premises and equipment, net
    
    
    18,547,109
    
    
    
    18,856,327Interest receivable
    
    
    2,857,426
    
    
    
    3,253,604Intangible assets
    
    
    934,763
    
    
    
    934,763Other assets
    
    
    12,711,753
    
    
    
    15,212,784Total assets
    
    
    500,798,323
    
    
    
    550,045,007Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    
    144,528,785
    
    
    
    172,291,464Interest bearing
    
    
    299,599,366
    
    
    
    318,864,162Total deposits
    
    
    444,128,151
    
    
    
    491,155,626Securities sold under agreements to repurchase
    
    
    
    
    
    
    1,861,237Advances from Federal Home Loan Bank of Atlanta
    
    
    1,552,450
    
    
    
    1,609,900Treasury, tax, and loan account
    
    
    231,388
    
    
    
    495,572Interest payable
    
    
    873,892
    
    
    
    912,570Accrued expenses and other liabilities
    
    
    1,558,917
    
    
    
    1,577,461Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    458,654,798
    
    
    
    507,922,366Stockholders equityPreferred stock of $.01 par value. Authorized 250,000 shares;
10,300 shares, net of discount
    
    
    9,968,452
    
    
    
    9,953,381Class A common stock, $0.01 par value.
Authorized 5,000,000 shares; issued and outstanding,
2,388,550 and 2,388,125 shares in 2009 and 2008, respectively
    
    
    23,886
    
    
    
    23,881Class B common stock, $0.01 par value.
Authorized 250,000 shares; no shares issued or outstanding
    
    
    0
    
    
    
    0Additional paid in capital
    
    
    6,450,676
    
    
    
    6,429,869Unearned stock based compensation
    
    
    (77,974
    )
    
    
    (87,446
    )Accumulated other comprehensive income net of tax
    
    
    320,078
    
    
    
    480,584Retained earnings
    
    
    26,692,055
    
    
    
    26,572,18843,377,173
    
    
    
    43,372,457Less: 153,839 and 155,855 treasury shares, at cost, respectively
    
    
    1,233,648
    
    
    
    1,249,816Total stockholders equity
    
    
    42,143,525
    
    
    
    42,122,641Total liabilities and stockholders equity
    
    $
    500,798,323
    
    
    $
    550,045,007
 See Notes to Consolidated Financial Statements
 3




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United Bancorporation of Alabama, Inc.
And Subsidiary
Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
 Three Months EndedMarch 312009
    
    
    2008Interest income:Interest and fees on loans
    
    $
    4,125,801
    
    
    $
    5,098,263Interest on investment securities available for sale:Taxable
    
    
    649,014
    
    
    
    937,547Nontaxable
    
    
    325,921
    
    
    
    347,420Total investment income
    
    
    974,935
    
    
    
    1,284,967Other interest income
    
    
    104,954
    
    
    
    254,186Total interest income
    
    
    5,205,690
    
    
    
    6,637,416Interest expense:Interest on deposits
    
    
    1,894,249
    
    
    
    2,605,172Interest on other borrowed funds
    
    
    103,654
    
    
    
    611,840Total interest expense
    
    
    1,997,903
    
    
    
    3,217,012Net interest income
    
    
    3,207,787
    
    
    
    3,420,404Provision for loan losses
    
    
    360,000
    
    
    
    240,000Net interest income after provision for loan losses
    
    
    2,847,787
    
    
    
    3,180,404Noninterest income:Service charge on deposits
    
    
    847,093
    
    
    
    807,467Investment securities gains, net
    
    
    
    
    
    
    2,761Mortgage loan and related fees
    
    
    32,468
    
    
    
    60,631Other
    
    
    223,963
    
    
    
    246,662Total noninterest income
    
    
    1,103,524
    
    
    
    1,117,521Noninterest expense:Salaries and benefits
    
    
    2,196,996
    
    
    
    2,157,320Net occupancy expense
    
    
    574,511
    
    
    
    684,460Other
    
    
    1,042,465
    
    
    
    1,156,419Total noninterest expense
    
    
    3,813,972
    
    
    
    3,998,199Earnings before income tax benefits
    
    
    137,339
    
    
    
    299,726Income tax benefits
    
    
    (71,988
    )
    
    
    (13,008
    )Net earnings
    
    
    209,327
    
    
    
    312,734Preferred stock dividends
    
    
    74,389
    
    
    
    Accretion on preferred stock discount
    
    
    15,071
    
    
    
    Net earnings available to common shareholders
    
    $
    119,867
    
    
    $
    312,734Basic earnings per share available to common shareholders
    
    $
    0.05
    
    
    $
    0.14Diluted earnings per share available to common shareholders
    
    $
    0.05
    
    
    $
    0.14Basic weighted average shares outstanding
    
    
    2,233,863
    
    
    
    2,250,439Diluted weighted average shares outstanding
    
    
    2,235,288
    
    
    
    2,255,514Cash dividend per share
    
    $
    
    
    
    $
    0.08Statement of Comprehensive IncomeNet earnings
    
    $
    209,327
    
    
    $
    312,734Other comprehensive income (loss), net of tax:Unrealized holding gain arising during the period
    
    
    (160,506
    )
    
    
    477,701Reclassification adjustment for gains included in net income
    
    
    
    
    
    
    1,657Comprehensive income
    
    $
    48,821
    
    
    $
    792,092
 See Notes to Consolidated Financial Statements
 4




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United Bancorporation of Alabama, Inc.
and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months EndedMarch 312009
    
    
    2008Cash flows from operating activitiesNet earnings
    
    $
    209,327
    
    
    $
    312,734Adjustments to reconcile net earnings to net cash provided by operating activitiesProvision for loan losses
    
    
    360,000
    
    
    
    240,000Depreciation of premises and equipment
    
    
    328,585
    
    
    
    316,366Net accretion (amortization) of premium on investment securities available for sale
    
    
    (13,602
    )
    
    
    352,368Net amortization of premium on investment securities held to maturity
    
    
    (64,035
    )
    
    
    Gain on sales or calls of investment securities available for sale, net
    
    
    
    
    
    
    (2,761
    )Writedown of other real estate
    
    
    
    
    
    
    85,000Stock-based compensation
    
    
    11,384
    
    
    
    4,531Gain on disposal of equipment
    
    
    
    
    
    
    (4,754
    )Decrease in interest receivable
    
    
    396,178
    
    
    
    521,019(Increase) decrease in other assets
    
    
    (144,741
    )
    
    
    311,004Decrease in interest payable
    
    
    (38,678
    )
    
    
    (20,165
    )Increase in accrued expenses and other liabilities
    
    
    148,877
    
    
    
    111,336Net cash provided by operating activities
    
    
    1,193,296
    
    
    
    2,226,678Cash flows from investing activitiesProceeds from maturities, calls, and principal repayments of investment securities available for sale
    
    
    27,366,170
    
    
    
    374,348,162Proceeds from maturities, calls, and principal repayments of investment securities held to maturity
    
    
    522,503
    
    
    
    Proceeds from sales of investment securities available for sale
    
    
    3,242,279
    
    
    
    4,993,583Purchases of investment securities available for sale
    
    
    (18,975,401
    )
    
    
    (391,573,000
    )Purchases of investment securities held to maturity
    
    
    (22,996,776
    )
    
    
    Purchase of correspondent bank stock
    
    
    (466,500
    )
    
    
    Net increase in loans
    
    
    (3,664,942
    )
    
    
    (17,155,209
    )Purchases of premises and equipment, net
    
    
    (19,367
    )
    
    
    (406,201
    )Proceeds from sale of premises and equipmet
    
    
    
    
    
    
    7,000Net cash used in investing activities
    
    
    (14,992,034
    )
    
    
    (29,785,665
    )Cash fows from financing activitiesNet decrease in deposits
    
    
    (47,027,475
    )
    
    
    (24,163,024
    )Net increase (decrease) in securities sold under agreements to repurchase
    
    
    (1,861,237
    )
    
    
    49,436,237Cash dividends  preferred stock
    
    
    (74,389
    )
    
    
    Cash dividends  common stock
    
    
    (167,421
    )
    
    
    (168,633
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    9,986Proceeds from sale of common stock
    
    
    5,130
    
    
    
    6,732Proceeds from sale of treasury stock
    
    
    29,938
    
    
    
    30,470Repayments of advances from FHLB Atlanta
    
    
    (57,450
    )
    
    
    (57,450
    )Decrease in other borrowed funds
    
    
    (264,184
    )
    
    
    (30,379
    )Net cash provided by (used in) financing activities
    
    
    (49,417,088
    )
    
    
    25,063,939Net decrease in cash and cash equivalents
    
    
    (63,215,827
    )
    
    
    (2,495,048
    )Cash and cash equivalents, beginning of period
    
    
    143,522,498
    
    
    
    54,119,315Cash and cash equivalents, end of period
    
    $
    80,306,671
    
    
    $
    51,624,267Supplemental disclosuresCash paid during the period for:Interest
    
    $
    2,036,581
    
    
    $
    3,237,177Income taxes
    
    
    45,920
    
    
    
    45,095Noncash transactionsTransfer of loans to other real estate through foreclosure
    
    $
    23,000
    
    
    $
    60,000
 See Notes to Consolidated Financial Statements
 5




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6




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Three Months EndedMarch 31,2009
    
    
    2008Diluted earnings per share
    
    $
    0.05
    
    
    $
    0.14Weighted average common
shares outstanding
    
    
    2,233,863
    
    
    
    2,250,439Dilutive effect of the assumed
exercise of stock options
    
    
    1,425
    
    
    
    5,075Total weighted average common
shares and potential common
stock outstanding
    
    
    2,235,288
    
    
    
    2,255,514
 7




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March 31,2009
    
    2008Balance at beginning of year
    
    
    3,592
    
    
    
    3,982Provision charged to expense
    
    
    360
    
    
    
    240Loans charged off
    
    
    (53
    )
    
    
    (326
    )Recoveries
    
    
    14
    
    
    
    7Balance at end of period
    
    
    3,913
    
    
    
    3,903
   Disclosures about Segments of an
Enterprise and Related Information,
  Share-Based Payment
 8




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##### Table of Contents



Stock Options
 1998 Stock Option Plan
  WeightedWeighted
    
    averageaverage
    
    remainingShares under
    
    exercise price
    
    contractualoption
    
    per share
    
    lifeOptions outstanding, beginning of period
    
    
    38,806
    
    
    $
    15.36
    
    
    
    3.1Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    38,806
    
    
    
    15.36
    
    
    
    2.8Exercisable, end of period
    
    
    38,006
    
    
    
    15.30
    
    
    
    2.7
  2009
    
    2008Aggregate intrinsic value
of outstanding options
    
    $
    16,157
    
    
    $
    219,093Aggregate intrinsic value
of exercisable options
    
    $
    16,157
    
    
    $
    214,493
  2007 Equity Incentive Plan
  9




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##### Table of Contents



Restricted Stock
  Restricted
    
    Weightedstock
    
    averageactivity
    
    fair valueShares granted at beginning of period
    
    
    9,580
    
    
    
    17.34Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Shares granted at end of period
    
    
    9,580
    
    
    
    17.34
    Fair Value Measurements
 Determining the Fair Value of a Financial
Asset When the Market for that Asset Is Not Active.
 10




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
    
    Level 1 Valuations for assets and liabilities traded in active exchange markets,
such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal
agency securities and federal agency mortgage-backed securities, which are traded by
dealers or brokers in active markets. Valuations are obtained from readily available
pricing sources for market transactions involving identical assets or liabilities.
    
    Level 2 Valuations for assets and liabilities traded in less active dealer or
broker markets. Valuations are obtained from third party pricing services for identical
or similar assets or liabilities.
    
    Level 3 Valuations for assets and liabilities that are derived from other
valuation methodologies, including option pricing models, discounted cash flow models and
similar techniques, and not based on market exchange, dealer, or broker traded
transactions. Level 3 valuations incorporate certain assumptions and projections in
determining the fair value assigned to such assets or liabilities.
 11




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Assets Measured at Fair Value on a Recurring Basis
  Available-for-Sale Securities
  Fair Value Measurements at March 31, 2009 UsingQuoted Prices
    
    Significant Other
    
    SignificantAssets/Liabilities
    
    in Active Markets for
    
    Observable
    
    UnobservableMeasured at
    
    Identical Assets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    Level (2)
    
    (Level 3)AFS Securities
    
    $
    76,882,032
    
    
    $
    
    
    
    $
    76,882,032
    
    
    $
    
 Assets Measured at Fair Value on a Nonrecurring Basis
  Impaired Loans
  12




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Foreclosed Assets(Other Real Estate)
   Three months endedMarch 31, 2009Carrying Value at March 31, 2009
    
    Total gainsTotal
    
    Level 1
    
    Level 2
    

Level 3
    
    (losses)Impaired loans (1)
    
    $
    17,713,047
    
    
    $
    
    
    
    $
    7,053,888
    
    
    $
    10,659,159
    
    
    $
    (451,430
    )Foreclosed assets
    
    
    5,546,501
    
    
    
    

    
    
    
    5,546,501
    
    
    
    
    
    
    
    
 
 (1)
    
    Losses related to loans were recognized as either charge-offs or specific allocations of the allowance for loan losses. The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement No. 115
 13




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
  Critical Accounting Estimates
   Intangible Assets
 14




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Results of Operations
  Three Months Ended March 31, 2009 and 2008, Compared
 Summary
   15




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Net Interest Income
    Provision for Loan Losses
 Allowance for Loan Losses
 Noninterest Income
  16




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Noninterest Expense
  Income Tax Benefits
  Financial Condition and Liquidity
  Cash and Cash Equivalents
  Investment Securities  Available for Sale
  17




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Investment Securities  Held to Maturity
  Loans
  Allowance for Loan Losses
   18




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As of the three months endedMarch 31,2009
    
    
    2008Impaired loans with a valuation allowance
    
    $
    13,839,767
    
    
    $
    9,511,312Impaired loans without a valuation allowance
    
    
    5,379,342
    
    
    
    Total impaired loans
    
    $
    19,219,109
    
    
    $
    9,511,312Valuation allowance related to impaired loans
    
    $
    2,004,794
    
    
    $
    2,159,505Total nonaccrual loans
    
    
    19,345,112
    
    
    
    10,399,244Total loans past due ninety days or more and still accruing
    
    
    30,715
    
    
    
    17,157Troubled debt restructured loans
    
    
    2,439,955
    
    
    
    31,724
 Non-performing Assets
 March 31,
    
    
    December 31,Description
    
    2009
    
    
    2008(Dollars in Thousands)A
    
    Loans accounted for on
a nonaccrual basis
    
    $
    19,345
    
    
    $
    14,700B
    
    Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    
    31
    
    
    
    28C
    
    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.
    
    
    2,440
    
    
    
    1,106D
    
    Other non-performing assets
    
    
    5,547
    
    
    
    5,524Total
    
    $
    27,363
    
    
    $
    21,358
 19




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Premises and Equipment
  Intangible Assets
  Florida Charter
 Internet Domain Address www.unitedbank.com
  Deposits
  Repurchase Agreements
  20




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Liquidity
  Capital Adequacy
    21




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WellMarch 31,
    
    Capitalized2009
    
    TreatmentUnited Bancorporation of Alabama, Inc.Total risk-based capital
    
    
    16.43
    %
    
    
    N/ATier 1 risk-based capital
    
    
    15.25
    
    
    
    N/ALeverage Ratio
    
    
    9.69
    
    
    
    N/AUnited BankTotal risk-based capital
    
    
    16.04
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    14.87
    
    
    
    6.00Leverage ratio
    
    
    9.45
    
    
    
    5.00
  Off Balance Sheet items
   March 31,2009Commitments to extend credit
    
    $
    36,338,000Standby letters of credit
    
    
    1,889,420
 22




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Item 4. Controls and Procedures
   23




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(a)
    
    The Annual Meeting of Stockholders of United Bancorporation of Alabama, Inc.
was held on May 6, 2009.(b)
    
    The following nominees were elected as Directors of the Corporation, to serve
until the 2012 Annual Meeting of Stockholders, by the votes indicated:
 Nominee
    
    For
    
    WithheldL. Walter Crim
    
    
    1,389,604
    
    
    
    3,339Leslie H. Cunningham
    
    
    1,388,839
    
    
    
    4,105William J. Justice
    
    
    1,159,856
    
    
    
    233,088Richard K. Maxwell
    
    
    1,381,865
    
    
    
    11,078
 The Directors of the Corporation whose terms of office continued after the 2009
Annual Meeting are as follows:
 To Serve Until the AnnualDirector
    
    Meeting of Stockholders in the yearMichael R. Andreoli
    
    
    2010David Swift
    
    
    2010Dale M. Ash
    
    
    2011Robert R. Jones, III
    
    
    2011
 (c)
    
    The stockholders for the Corporation approved the advisory (non-binding)
proposal regarding the compensation of executive officers by the following vote:
 For
    
    Against
    
    Abstained
    
    Broker Non Votes950,036
    
    246,595
    
    196,312
    
    - 0 -
 24




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##### Table of Contents



(a)
    
    Exhibits.
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 200232.2
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section
1350, adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
 25




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##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.Date: May 14, 2009/s/ Robert R. Jones, IIIRobert R. Jones, IIIPresident and CEO/s/ Allen O. Jones, Jr.Allen O. Jones, Jr.Senior Vice President and CFO 26




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EXHIBITNUMBER
    
    DESCRIPTION31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of interim principal accounting officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
 27