##### 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 June 30, 2008
 Commission file number 2-78572
 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)
  Registrants telephone number, including area code)
 þ 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 2,253,207 SharesClass B Common Stock -0- Shares




---



##### 



UNITED BANCORPORATION OF ALABAMA, INC.
 FORM 10-Q
  INDEX
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Earnings
and Comprehensive Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed
Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 4T. Controls and Procedures
    
    
    23PART II   OTHER INFORMATIONItem 1A. Risk Factors
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 6. Exhibits
    
    
    24Certification of CEO Pursuant to Section 302Certification of PAO Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906Statement of Conditon
  2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
United Bancorporation of Alabama, Inc.
and Subsidiary
Consolidated Balance Sheets
 
 Item 1. Financial Statements
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCash and due from banks
    
    $
    16,333,226
    
    
    $
    17,571,893Interest bearing deposits in banks
    
    
    15,415,059
    
    
    
    31,547,422Federal funds sold
    
    
    14,900,000
    
    
    
    5,000,000Cash and cash equivalents
    
    
    46,648,285
    
    
    
    54,119,315Securities available for sale (amortized cost of $125,996,498
and $111,718,759 respectively)
    
    
    125,990,558
    
    
    
    111,945,701Loans
    
    
    288,369,447
    
    
    
    267,137,723Less: Allowance for loan losses
    
    
    2,581,755
    
    
    
    3,981,922Net loans
    
    
    285,787,692
    
    
    
    263,155,801Premises and equipment, net
    
    
    17,747,800
    
    
    
    16,808,578Interest receivable
    
    
    3,244,463
    
    
    
    3,952,077Intangible assets
    
    
    934,763
    
    
    
    934,763Other assets
    
    
    7,786,724
    
    
    
    6,385,725Total assets
    
    
    488,140,285
    
    
    
    457,301,960Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    
    63,176,303
    
    
    
    62,854,927Interest bearing
    
    
    308,166,284
    
    
    
    306,047,638Total deposits
    
    
    371,342,587
    
    
    
    368,902,565Securities sold under agreements to repurchase
    
    
    69,855,003
    
    
    
    41,203,851Advances from Federal Home Loan Bank of Atlanta
    
    
    1,692,300
    
    
    
    1,774,700Treasury, tax, and loan account
    
    
    561,146
    
    
    
    691,668Interest payable
    
    
    1,124,918
    
    
    
    1,161,362Accrued expenses and other liabilities
    
    
    1,040,370
    
    
    
    1,336,424Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    455,926,324
    
    
    
    425,380,570Stockholders equityClass A common stock, $0.01 par value.Authorized 5,000,000 shares; issued and outstanding,
2,384,431 and 2,383,097 shares in 2008 and 2007, respectively
    
    
    23,844
    
    
    
    23,831Class B common stock, $0.01 par value.Authorized 250,000 shares; no shares issued or outstanding
    
    
    0
    
    
    
    0Preferred stock of $.01 par value. Authorized
250,000 shares; no shares issued or outstanding
    
    
    0
    
    
    
    0Additional paid in capital
    
    
    5,981,122
    
    
    
    5,916,367Unearned stock based compensation
    
    
    (48,332
    )
    
    
    (51,403
    )Accumulated other comprehensive income (loss) net of tax
    
    
    (19,641
    )
    
    
    122,105Retained earnings
    
    
    27,076,204
    
    
    
    26,700,50033,013,197
    
    
    
    32,711,400Less: 133,006 and 134,654 treasury shares, at cost, respectively
    
    
    799,236
    
    
    
    790,010Total stockholders equity
    
    
    32,213,961
    
    
    
    31,921,390Total liabilities and stockholders equity
    
    $
    488,140,285
    
    
    $
    457,301,960
 See Notes to Consolidated Financial Statements




---



##### Table of Contents



United Bancorporation of Alabama, Inc.
And Subsidiary
Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302008
    
    
    2007
    
    
    2008
    
    
    2007Interest income:Interest and fees on loans
    
    $
    4,924,042
    
    
    $
    5,415,141
    
    
    $
    10,022,305
    
    
    $
    10,572,239Interest on investment securities available for sale:Taxable
    
    
    767,392
    
    
    
    1,169,864
    
    
    
    1,704,939
    
    
    
    2,044,255Nontaxable
    
    
    348,257
    
    
    
    365,478
    
    
    
    695,677
    
    
    
    698,080Total investment income
    
    
    1,115,649
    
    
    
    1,535,342
    
    
    
    2,400,616
    
    
    
    2,742,335Other interest income
    
    
    147,550
    
    
    
    181,136
    
    
    
    401,736
    
    
    
    600,074Total interest income
    
    
    6,187,241
    
    
    
    7,131,619
    
    
    
    12,824,657
    
    
    
    13,914,648Interest expense:Interest on deposits
    
    
    2,363,789
    
    
    
    2,562,148
    
    
    
    4,968,961
    
    
    
    4,929,965Interest on other borrowed funds
    
    
    340,178
    
    
    
    931,309
    
    
    
    952,018
    
    
    
    1,822,746Total interest expense
    
    
    2,703,967
    
    
    
    3,493,457
    
    
    
    5,920,979
    
    
    
    6,752,711Net interest income
    
    
    3,483,274
    
    
    
    3,638,162
    
    
    
    6,903,678
    
    
    
    7,161,937Provision for loan losses
    
    
    500,000
    
    
    
    210,000
    
    
    
    740,000
    
    
    
    390,000Net interest income after
provision for loan losses
    
    
    2,983,274
    
    
    
    3,428,162
    
    
    
    6,163,678
    
    
    
    6,771,937Noninterest income:Service charge on deposits
    
    
    857,712
    
    
    
    686,363
    
    
    
    1,665,179
    
    
    
    1,340,302Investment securities gains (losses), net
    
    
    (2,700
    )
    
    
    (306
    )
    
    
    61
    
    
    
    (306
    )Mortgage loan and related fees
    
    
    58,240
    
    
    
    57,213
    
    
    
    118,871
    
    
    
    114,108Other
    
    
    226,938
    
    
    
    190,498
    
    
    
    473,600
    
    
    
    380,761Total noninterest income
    
    
    1,140,190
    
    
    
    933,768
    
    
    
    2,257,711
    
    
    
    1,834,865Noninterest expense:Salaries and benefits
    
    
    2,067,828
    
    
    
    2,028,064
    
    
    
    4,225,148
    
    
    
    4,136,389Net occupancy expense
    
    
    699,562
    
    
    
    660,614
    
    
    
    1,384,022
    
    
    
    1,220,128Other
    
    
    1,185,340
    
    
    
    1,244,420
    
    
    
    2,341,759
    
    
    
    2,168,291Total noninterest expense
    
    
    3,952,730
    
    
    
    3,933,098
    
    
    
    7,950,929
    
    
    
    7,524,808Earnings before income tax expense (benefits)
    
    
    170,734
    
    
    
    428,832
    
    
    
    470,460
    
    
    
    1,081,994Income tax expense (benefits)
    
    
    (61,073
    )
    
    
    33,135
    
    
    
    (74,081
    )
    
    
    166,808Net earnings
    
    $
    231,807
    
    
    $
    395,697
    
    
    $
    544,541
    
    
    $
    915,186Basic earnings per share
    
    $
    0.10
    
    
    $
    0.18
    
    
    $
    0.24
    
    
    $
    0.41Diluted earnings per share
    
    $
    0.10
    
    
    $
    0.18
    
    
    $
    0.24
    
    
    $
    0.41Basic weighted average shares outstanding
    
    
    2,251,235
    
    
    
    2,236,664
    
    
    
    2,250,852
    
    
    
    2,236,055Diluted weighted average shares outstanding
    
    
    2,252,091
    
    
    
    2,244,060
    
    
    
    2,251,708
    
    
    
    2,243,451Cash dividend per share
    
    $
    
    
    
    $
    0.15
    
    
    $
    0.08
    
    
    $
    0.15Statement of Comprehensive IncomeNet earnings
    
    $
    231,807
    
    
    $
    395,697
    
    
    $
    544,541
    
    
    $
    915,186Other comprehensive income (loss), net of tax:Unrealized holding losses arising during the period
    
    
    (621,141
    )
    
    
    (899,589
    )
    
    
    (141,783
    )
    
    
    (772,743
    )Reclassification adjustment for gains
included in net earnings.
    
    
    1,620
    
    
    
    184
    
    
    
    (37
    )
    
    
    184Comprehensive income (loss)
    
    $
    (387,714
    )
    
    $
    (503,708
    )
    
    $
    402,721
    
    
    $
    142,627
 See Notes to Consolidated Financial Statements
 4




---



##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
 Six Months EndedJune 302008
    
    
    2007Cash flows from operating activitiesNet earnings
    
    $
    544,541
    
    
    $
    915,186Adjustments to reconcile net earnings to net
cash provided by operating activitiesProvision for loan losses
    
    
    740,000
    
    
    
    390,000Depreciation of premises and equipment
    
    
    649,401
    
    
    
    527,628Net accretion of discount on investment securities
    
    
    (539,165
    )
    
    
    (410,039
    )Gain (loss) on sales of investment securities available for sale, net
    
    
    (61
    )
    
    
    306Loss on sale of other real estate
    
    
    1,045
    
    
    
    Writedown of other real estate
    
    
    85,000
    
    
    
    Stock-based compensation
    
    
    11,400
    
    
    
    2,556Gain on disposal of equipment
    
    
    (4,754
    )
    
    
    (3,435
    )Decrease in interest receivable
    
    
    707,614
    
    
    
    19,602(Increase) decrease in other assets
    
    
    46,234
    
    
    
    (195,955
    )Increase (decrease) in interest payable
    
    
    (36,444
    )
    
    
    46,958Increase (decrease) in accrued expenses and other liabilities
    
    
    (127,421
    )
    
    
    1,619Net cash provided by operating activities
    
    
    2,077,390
    
    
    
    1,294,426Cash flows from investing activitiesProceeds from maturities, calls, and principal
repayments of investment securities available for sale
    
    
    710,398,842
    
    
    
    98,410,177Proceeds from sales of investment securities available for sale
    
    
    4,993,512
    
    
    
    9,969,842Purchases of investment securities available for sale
    
    
    (729,134,228
    )
    
    
    (109,984,970
    )Net increase in loans
    
    
    (24,923,951
    )
    
    
    (9,262,187
    )Purchases of premises and equipment, net
    
    
    (1,590,869
    )
    
    
    (1,462,034
    )Proceeds from sale of premises and equipment
    
    
    7,000
    
    
    
    16,238Insurance claim received
    
    
    
    
    
    
    1,038,775Proceeds from sale of other real estate
    
    
    113,279
    
    
    
    Net cash used in investing activities
    
    
    (40,136,415
    )
    
    
    (11,274,159
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    2,440,022
    
    
    
    (11,387,066
    )Net increase (decrease) in securities sold under
agreements to repurchase
    
    
    28,651,152
    
    
    
    (10,213,327
    )Cash dividends
    
    
    (337,471
    )
    
    
    (334,782
    )Proceeds from exercise of stock options
    
    
    9,986
    
    
    
    Proceeds from sale of common stock
    
    
    6,732
    
    
    
    Purchase of treasury stock
    
    
    (31,388
    )
    
    
    Proceeds from sale of treasury stock
    
    
    61,884
    
    
    
    70,550Repayments of advances from FHLB Atlanta
    
    
    (82,400
    )
    
    
    (82,400
    )Decrease in other borrowed funds
    
    
    (130,522
    )
    
    
    (524,324
    )Net cash provided by (used in) financing activities
    
    
    30,587,995
    
    
    
    (22,471,349
    )Net decrease in cash and cash equivalents
    
    
    (7,471,030
    )
    
    
    (32,451,082
    )Cash and cash equivalents, beginning of period
    
    
    54,119,315
    
    
    
    51,204,246Cash and cash equivalents, end of period
    
    $
    46,648,285
    
    
    $
    18,753,164Supplemental disclosuresCash paid during the period for:Interest
    
    $
    5,957,423
    
    
    $
    6,705,753Income taxes
    
    
    83,161
    
    
    
    86,510Noncash transactionsTransfer of loans to other real estate
through foreclosure
    
    $
    1,552,060
    
    
    $
    205,000
 See Notes to Consolidated Financial Statements




---



##### Table of Contents



6




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302008
    
    
    2007
    
    
    2008
    
    
    2007Diluted earnings per share
    
    $
    0.10
    
    
    $
    0.18
    
    
    $
    0.24
    
    
    $
    0.41Weighted average common shares outstanding
    
    
    2,251,235
    
    
    
    2,236,664
    
    
    
    2,250,852
    
    
    
    2,236,055Effect of the assumed exercise of
stock options based on the
treasury stock method using
average market price
    
    
    856
    
    
    
    7,396
    
    
    
    856
    
    
    
    7,396Total weighted average common
shares and potential common
stock outstanding
    
    
    2,252,091
    
    
    
    2,244,060
    
    
    
    2,251,708
    
    
    
    2,243,451
 7




---



##### Table of Contents



June 302008
    
    
    2007Balance at beginning of year
    
    
    3,982
    
    
    
    3,011Provision charged to expense
    
    
    740
    
    
    
    390Loans charged off
    
    
    (2,159
    )
    
    
    (230
    )Recoveries
    
    
    19
    
    
    
    18Balance at end of period
    
    
    2,582
    
    
    
    3,189
   Disclosures about Segments of an
Enterprise and Related Information,
  Share-Based Payment
 8




---



##### Table of Contents



Stock Options
 1998 Stock Option Plan
  WeightedWeighted
    
    averageaverage
    
    remainingShares under
    
    exercise price
    
    contractualoption
    
    per share
    
    lifeOptions outstanding, beginning of
period
    
    
    53,600
    
    
    
    14.38Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    (634
    )
    
    
    15.75Options outstanding, end of period
    
    
    52,966
    
    
    
    14.36
    
    
    
    3.1Exercisable, end of period
    
    
    50,566
    
    
    
    14.81
    
    
    
    2.8
  2008
    
    2007Aggregate intrinsic value
of outstanding options
    
    
    $58,021
    
    
    
    $318,837Aggregate intrinsic value
of exercisable options
    
    
    $13,229
    
    
    
    $307,637
  2007 Equity Incentive Plan
  WeightedWeighted
    
    averageaverage
    
    remainingShares under
    
    exercise price
    
    contractualoption
    
    per share
    
    lifeOptions outstanding, beginning of period
    
    
    2,000
    
    
    
    18.50Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    2,000
    
    
    
    18.50
    
    
    
    9.5Exercisable, end of period
    
    
    400
    
    
    
    18.50
    
    
    
    9.5
 9




---



##### Table of Contents



Restricted Stock
  Restricted
    
    Weightedstock
    
    averageactivity
    
    fair valueShares granted at beginning of period
    
    
    5,626
    
    
    
    18.00Granted
    
    
    260
    
    
    
    18.00Surrendered
    
    
    Vested
    
    
    (2,620
    )
    
    
    18.00Shares granted at end of period
    
    
    3,266
    
    
    
    18.00
   Fair Value Measurements
  10




---



##### Table of Contents




    
    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.
 Assets Measured at Fair Value on a Recurring Basis
  Available-for-Sale Securities
  11




---



##### Table of Contents



Assets Measured at Fair Value on a Nonrecurring Basis
  Impaired Loans
  Other Real Estate Owned
  The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement No. 115
 12




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
  Critical Accounting Estimates
   Intangible Assets
  13




---



##### Table of Contents



Results of Operations
  Six Months Ended June 30, 2008 and 2007, Compared
 Summary
  Net Interest Income
   14




---



##### Table of Contents



Provision for Loan Losses
 Allowance for Loan Losses
 Noninterest Income
  15




---



##### Table of Contents



Noninterest Expense
  Income Taxes
  Three Months Ended June 30, 2008 and 2007, Compared
 Summary
  Net Interest Income
   16




---



##### Table of Contents



Provision for Loan Losses
 Allowance for Loan Losses
 Noninterest Income
  Noninterest Expense
  Income Taxes
  17




---



##### Table of Contents



Financial Condition and Liquidity
  Cash and Cash Equivalents
  Investment Securities
  Loans
  18




---



##### Table of Contents



Allowance for Loan Losses
   19




---



##### Table of Contents



Non-performing Assets
 June 30,
    
    
    December 31,2008
    
    
    2007Description
    
    (Dollars in Thousands)A Loans accounted for on
a nonaccrual basis
    
    $
    8,168
    
    
    $
    11,079B Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    
    22
    
    
    
    26C Loans, the terms of which have
been renegotiated to provide
a reduction or deferral of interest
or principal because of a
deterioration in the financial
position of the borrower
    
    
    1,411
    
    
    
    54D Other non-performing assets
    
    
    1,904
    
    
    
    551Total
    
    $
    11,505
    
    
    $
    11,710
 Premises and Equipment
  Intangible Assets
  Florida Charter
 20




---



##### Table of Contents



Internet Domain Address www.unitedbank.com
  Deposits
 Net Interest Income
 Repurchase Agreements
 Net
Interest Income
 Liquidity
  21




---



##### Table of Contents



Capital Adequacy
     WellJune 30,
    
    Capitalized2008
    
    TreatmentUnited Bancorporation of Alabama, Inc.Total risk-based capital
    
    
    12.99
    %
    
    
    N/ATier 1 risk-based capital
    
    
    12.23
    
    
    
    N/ALeverage Ratio
    
    
    8.74
    
    
    
    N/AUnited BankTotal risk-based capital
    
    
    12.69
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    11.93
    
    
    
    6.00Leverage ratio
    
    
    8.73
    
    
    
    5.00
  22




---



##### Table of Contents



Off Balance Sheet items
   June 30,2008Commitments to extend credit
    
    $
    44,447,000Standby letters of credit
    
    
    1,134,264FHLB letters of credit to United Bank
    
    
    20,000,000
 
 Item 4T. Controls and Procedures
    23




---



##### Table of Contents



(a)
    
    A description of actions taken at the annual meeting of security holders of
United Bancorporation of Alabama, Inc. on May 7, 2008 was reported under Item 4 of the
Corporations Form 10-Q for the quarter ended March 31, 2008, and is incorporated by
reference herein.
 
  (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 200299.1
    
    Report of United Bank to be mailed August 11, 2008
 24




---



##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.Date: August 12, 2008/s/ Robert R. Jones, IIIRobert R. Jones, IIIPresident and CEO/s/ Allen O. Jones, Jr.Allen O. Jones, Jr.Senior Vice President and CFO 25




---



##### Table of Contents



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 200299.1
    
    

Report
of United Bank to be mailed August 11, 2008