##### 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, 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)
 (251) 446-6000
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



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 Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 4T. Controls and Procedures
    
    
    21PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 6. Exhibits
    
    
    23Certification of CEO Pursuant to Section 302Certification of Interim PAO Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
  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 31,2008
    
    
    2007(Unaudited)AssetsCash and due from banks
    
    $
    14,543,846
    
    
    $
    17,571,893Interest bearing deposits in banks
    
    
    23,755,421
    
    
    
    31,547,422Federal funds sold
    
    
    13,325,000
    
    
    
    5,000,000Cash and cash equivalents
    
    
    51,624,267
    
    
    
    54,119,315Securities available for sale (amortized cost of $123,571,874
and $111,718,759 respectively)
    
    
    124,626,279
    
    
    
    111,945,701Loans
    
    
    283,913,750
    
    
    
    267,137,723Less: Allowance for loan losses
    
    
    3,902,740
    
    
    
    3,981,922Net loans
    
    
    280,011,010
    
    
    
    263,155,801Premises and equipment, net
    
    
    16,896,167
    
    
    
    16,808,578Interest receivable
    
    
    3,431,058
    
    
    
    3,952,077Intangible assets
    
    
    934,763
    
    
    
    934,763Other assets
    
    
    5,730,149
    
    
    
    6,385,725Total assets
    
    
    483,253,693
    
    
    
    457,301,960Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    
    60,330,517
    
    
    
    62,854,927Interest bearing
    
    
    284,409,024
    
    
    
    306,047,638Total deposits
    
    
    344,739,541
    
    
    
    368,902,565Securities sold under agreements to repurchase
    
    
    90,640,088
    
    
    
    41,203,851Advances from Federal Home Loan Bank of Atlanta
    
    
    1,717,250
    
    
    
    1,774,700Treasury, tax, and loan account
    
    
    661,289
    
    
    
    691,668Interest payable
    
    
    1,141,197
    
    
    
    1,161,362Accrued expenses and other liabilities
    
    
    1,447,965
    
    
    
    1,336,424Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    450,657,330
    
    
    
    425,380,570Stockholders equityClass A common stock, $0.01 par value.
Authorized 5,000,000 shares; issued and outstanding,
2,384,171 and 2,383,097 shares in 2008 and 2007, respectively
    
    
    23,842
    
    
    
    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
    
    
    5,955,700
    
    
    
    5,916,367Unearned stock based compensation
    
    
    (48,697
    )
    
    
    (51,403
    )Accumulated other comprehensive income net of tax
    
    
    601,463
    
    
    
    122,105Retained earnings
    
    
    26,844,397
    
    
    
    26,700,50033,376,705
    
    
    
    32,711,400Less: 133,007 and 134,654 treasury shares, at cost, respectively
    
    
    780,342
    
    
    
    790,010Total stockholders equity
    
    
    32,596,363
    
    
    
    31,921,390Total liabilities and stockholders equity
    
    $
    483,253,693
    
    
    $
    457,301,960
 See
Notes to Consolidated Financial Statements
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United Bancorporation of Alabama, Inc.
And Subsidiary
Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
 Three Months EndedMarch 312008
    
    
    2007Interest income:Interest and fees on loans
    
    $
    5,098,263
    
    
    $
    5,157,098Interest on investment securities
available for sale:Taxable
    
    
    937,547
    
    
    
    874,391Nontaxable
    
    
    347,420
    
    
    
    332,602Total investment income
    
    
    1,284,967
    
    
    
    1,206,993Other interest income
    
    
    254,186
    
    
    
    418,938Total interest income
    
    
    6,637,416
    
    
    
    6,783,029Interest expense:Interest on deposits
    
    
    2,605,172
    
    
    
    2,367,817Interest on other borrowed funds
    
    
    611,840
    
    
    
    891,437Total interest expense
    
    
    3,217,012
    
    
    
    3,259,254Net interest income
    
    
    3,420,404
    
    
    
    3,523,775Provision for loan losses
    
    
    240,000
    
    
    
    180,000Net interest income after
provision for loan losses
    
    
    3,180,404
    
    
    
    3,343,775Noninterest income:Service charge on deposits
    
    
    807,467
    
    
    
    653,939Investment securities gains, net
    
    
    2,761
    
    
    
    Mortgage loan and related fees
    
    
    60,631
    
    
    
    56,895Other
    
    
    246,662
    
    
    
    190,263Total noninterest income
    
    
    1,117,521
    
    
    
    901,097Noninterest expense:Salaries and benefits
    
    
    2,157,320
    
    
    
    2,108,325Net occupancy expense
    
    
    684,460
    
    
    
    559,514Other
    
    
    1,156,419
    
    
    
    923,871Total noninterest expense
    
    
    3,998,199
    
    
    
    3,591,710Earnings before income tax expense
(benefits)
    
    
    299,726
    
    
    
    653,162Income tax expense (benefits)
    
    
    (13,008
    )
    
    
    133,673Net earnings
    
    $
    312,734
    
    
    $
    519,489Basic earnings per share
    
    $
    0.14
    
    
    $
    0.23Diluted earnings per share
    
    $
    0.14
    
    
    $
    0.23Basic weighted average shares outstanding
    
    
    2,250,439
    
    
    
    2,235,440Diluted weighted average shares outstanding
    
    
    2,255,514
    
    
    
    2,241,938Cash dividend per share
    
    $
    0.08
    
    
    $
    Statement of Comprehensive IncomeNet earnings
    
    $
    312,734
    
    
    $
    519,489Other comprehensive income, net of tax:Unrealized holding gain arising
during the period
    
    
    477,701
    
    
    
    126,846Reclassification adjustment for gains
included in net income.
    
    
    1,657
    
    
    
    Comprehensive income
    
    $
    792,092
    
    
    $
    646,335
 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 312008
    
    
    2007Cash flows from operating activitiesNet earnings
    
    $
    312,734
    
    
    $
    519,489Adjustments to reconcile net earnings to net
cash provided by operating activitiesProvision for loan losses
    
    
    240,000
    
    
    
    180,000Depreciation of premises and equipment
    
    
    316,366
    
    
    
    242,962Net amortization of premium on investment securities
    
    
    352,368
    
    
    
    73,528Gain on sales or calls of investment securities available for sale, net
    
    
    (2,761
    )
    
    
    Writedown of other real estate
    
    
    85,000
    
    
    
    Stock-based compensation
    
    
    4,531
    
    
    
    1,278Gain on disposal of equipment
    
    
    (4,754
    )
    
    
    (1,036
    )Decrease in interest receivable
    
    
    521,019
    
    
    
    228,412(Increase) decrease in other assets
    
    
    311,004
    
    
    
    (18,359
    )Increase (decrease) in interest payable
    
    
    (20,165
    )
    
    
    53,969Increase (decrease) in accrued expenses and other liabilities
    
    
    111,336
    
    
    
    (59,502
    )Net cash provided by operating activities
    
    
    2,226,678
    
    
    
    1,220,741Cash flows from investing activitiesProceeds from maturities, calls, and principal
repayments of investment securities available for sale
    
    
    374,348,162
    
    
    
    51,008,799Proceeds from sales of investment securities available for sale
    
    
    4,993,583
    
    
    
    Purchases of investment securities available for sale
    
    
    (391,573,000
    )
    
    
    (72,239,038
    )Net (increase) decrease in loans
    
    
    (17,155,209
    )
    
    
    2,701,971Purchases of premises and equipment, net
    
    
    (406,201
    )
    
    
    (635,734
    )Proceeds from sale of premises and equipmet
    
    
    7,000
    
    
    
    13,838Insurance claim received
    
    
    
    
    
    
    1,038,775Net cash used in investing activities
    
    
    (29,785,665
    )
    
    
    (18,111,389
    )Cash fows from financing activitiesNet decrease in deposits
    
    
    (24,163,024
    )
    
    
    (5,805,035
    )Net increase in securities sold under
agreements to repurchase
    
    
    49,436,237
    
    
    
    5,577,038Cash dividends
    
    
    (168,633
    )
    
    
    (334,783
    )Proceeds from exercise of stock options
    
    
    9,986
    
    
    
    Proceeds from sale of common stock
    
    
    6,732
    
    
    
    Proceeds from sale of treasury stock
    
    
    30,470
    
    
    
    70,551Repayments of advances from FHLB Atlanta
    
    
    (57,450
    )
    
    
    (57,450
    )Decrease in other borrowed funds
    
    
    (30,379
    )
    
    
    (684,034
    )Net cash provided by financing activities
    
    
    25,063,939
    
    
    
    (1,233,713
    )Net decrease in cash and cash equivalents
    
    
    (2,495,048
    )
    
    
    (18,124,361
    )Cash and cash equivalents, beginning of period
    
    
    54,119,315
    
    
    
    51,204,246Cash and cash equivalents, end of period
    
    $
    51,624,267
    
    
    $
    33,079,885Supplemental disclosuresCash paid during the period for:Interest
    
    $
    3,237,177
    
    
    $
    3,205,285Income taxes
    
    
    45,095
    
    
    
    38,000Noncash transactionsTransfer of loans to other real estate
through foreclosure
    
    $
    60,000
    
    
    $
    60,000
 See Notes to Consolidated Financial Statements
 5




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6




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Three Months EndedMarch 312008
    
    
    2007Diluted earnings per share
    
    $
    0.14
    
    
    $
    0.23Weighted average common
shares outstanding
    
    
    2,250,439
    
    
    
    2,235,440Effect of the assumed exercise of
stock options based on the
treasury stock method using
average market price
    
    
    5,075
    
    
    
    6,498Total weighted average common
shares and potential common
stock outstanding
    
    
    2,255,514
    
    
    
    2,241,938
 7




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March 312008
    
    2007Balance at beginning of year
    
    
    3,982
    
    
    
    3,012Provision charged to expense
    
    
    240
    
    
    
    180Loans charged off
    
    
    (326
    )
    
    
    (116
    )Recoveries
    
    
    7
    
    
    
    11Balance at end of period
    
    
    3,903
    
    
    
    3,087
   Disclosures about Segments of an
Enterprise and Related Information,
  Share-Based Payment
 8




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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
    
    
    
    3.4Exercisable, end of period
    
    
    50,166
    
    
    
    14.80
    
    
    
    3.1
  2008
    
    2007Aggregate intrinsic value
of outstanding options
    
    $
    219,093
    
    
    $
    167,437Aggregate intrinsic value
of exercisable options
    
    $
    214,493
    
    
    $
    164,137
  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
    
    
    
    9.7Exercisable, end of period
    
    
    400
    
    
    
    18.50
    
    
    
    9.7
 9




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Restricted Stock
  Restricted
    
    Weightedstock
    
    averageactivity
    
    fair valueShares granted at beginning of period
    
    
    5,626
    
    
    
    18.00Granted
    
    
    
    
    
    
    Surrendered
    
    
    Vested
    
    
    (2,620
    )
    
    
    18.00Shares granted at end of period
    
    
    3,006
    
    
    
    18.00
  Fair Value Measurements
  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.
 Assets Measured at Fair Value on a Recurring Basis
  Available-for-Sale Securities
  11




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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




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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
  13




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Results of Operations
  Three Months Ended March 31, 2008 and 2007, Compared
 Summary
  Net Interest Income
  14




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Provision for Loan Losses
 Allowance for Loan Losses
 Noninterest Income
  Noninterest Expense
  15




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Income Taxes
  Financial Condition and Liquidity
  Cash and Cash Equivalents
  Investment Securities
 Deposits
 Loans
  16




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Allowance for Loan Losses
   17




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Non-performing Assets
 March 31,
    
    
    December 31,2008
    
    
    2007Description
    
    (Dollars in Thousands)A
    
    Loans accounted for on
a nonaccrual basis
    
    $
    10,399
    
    
    $
    11,079B
    
    Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    
    17
    
    
    
    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.
    
    
    32
    
    
    
    54D
    
    Other non-performing assets
    
    
    526
    
    
    
    551Total
    
    $
    10,974
    
    
    $
    11,710
 Premises and Equipment
  Intangible Assets
  Florida Charter
 18




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Internet Domain Address www.unitedbank.com
  Deposits
  Repurchase Agreements
 Net Interest Income
 Liquidity
  19




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Capital Adequacy
     WellMarch 31,
    
    Capitalized2008
    
    TreatmentUnited Bancorporation of Alabama, Inc.Total risk-based capital
    
    
    13.51
    %
    
    
    N/ATier 1 risk-based capital
    
    
    12.34
    
    
    
    N/ALeverage Ratio
    
    
    8.73
    
    
    
    N/AUnited BankTotal risk-based capital
    
    
    13.18
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    12.01
    
    
    
    6.00Leverage ratio
    
    
    8.65
    
    
    
    5.00
  20




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Off Balance Sheet items
   March 31,2008Commitments to extend credit
    
    $
    38,580,000Standby letters of credit
    
    
    1,510,564FHLB letters of credit to United Bank
    
    
    20,000,000
 
 Item 4T. Controls and Procedures
    21




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(a)
    
    The Annual Meeting of Stockholders of United Bancorporation of Alabama, Inc.
was held on May 7, 2008.(b)
    
    The following nominees were elected as Directors of the Corporation, to serve
until the 2011 Annual Meeting of Stockholders, by the votes indicated:
 Nominee
    
    For
    
    AgainstRobert R. Jones
    
    
    1,444,596
    
    
    
    12,100Dale M. Ash
    
    
    1,453,225
    
    
    
    3,471
  To Serve Until the AnnualDirector
    
    Meeting of Stockholders in the yearL. Walter Crim
    
    
    2009William J. Justice
    
    
    2009J. Wayne Trawick
    
    
    2009Michael R. Andreoli
    
    
    2010David Swift
    
    
    2010
 22




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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
 23




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UNITED BANCORPORATION OF ALABAMA, INC.Date: May 14, 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 24




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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
 25