##### 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 September 30, 2004 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) 368-2525
(Registrants telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No þ Indicate the number of shares outstanding of each of the issuers classes of
common stock as of November 6, 2004. Class A Common Stock
    
    2,217,330 Shares*Class B Common Stock
    
    -0- Shares
 *Reflects two-for-one stock split effective June 30, 2004.




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UNITED BANCORPORATION OF ALABAMA, INC. FORM 10-Q For the Quarter Ended September 30, 2004 INDEX PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Earnings
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONItem 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    24Certification of CEO Pursuant to Section 302Certification of Principal Accounting Officer Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906Report of United Bank mailed November 9, 2004
  2




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PART I-FINANCIAL INFORMATION
United Bancorporation of Alabama, Inc.
and Subsidiary 
 Item 1. Financial Statements 
 Condensed Consolidated
Balance Sheets
 September
    
    December 31,2004
    
    2003Unaudited
    
    AuditedAssets:Cash and due from banks
    
    $
    11,193,274
    
    
    $
    9,901,225Federal funds sold
    
    
    2,759,721
    
    
    
    14,546,400Cash and cash equivalents
    
    
    13,952,995
    
    
    
    24,447,625Securities available for sale (amortized cost of $53,979,888
and $52,908,801 respectively)
    
    
    54,521,034
    
    
    
    53,666,589Loans
    
    
    198,697,663
    
    
    
    164,147,155Allowance for loan losses
    
    
    2,432,707
    
    
    
    2,116,060Net loans
    
    
    196,264,956
    
    
    
    162,031,095Premises and equipment, net
    
    
    7,311,131
    
    
    
    7,581,389Interest receivable and other assets
    
    
    9,051,592
    
    
    
    7,393,911Total assets
    
    
    281,101,708
    
    
    
    255,120,609Liabilities and Stockholders Equity:Deposits:Non-interest bearing
    
    
    49,566,659
    
    
    
    42,687,610Interest bearing
    
    
    175,250,798
    
    
    
    156,717,972Total deposits
    
    
    224,817,457
    
    
    
    199,405,582Securities sold under agreements to repurchase
    
    
    15,270,522
    
    
    
    13,495,670Other borrowed funds
    
    
    9,030,276
    
    
    
    10,909,975Accrued expenses and other liabilities
    
    
    1,658,956
    
    
    
    2,216,445Note payable to Trust
    
    
    4,124,000
    
    
    
    4,124,000Total liabilities
    
    
    254,901,211
    
    
    
    230,151,672Stockholders equity:Class A common stock. Authorized 5,000,000
shares of $.01 par value; 2,363,762* and 1,181,881
shares issued respectively
    
    
    23,651
    
    
    
    11,819Class B common stock of $.01 par value.
Authorized 250,000 shares;
-0- shares issued and outstanding.
    
    
    0
    
    
    
    0Preferred stock of $.01 par value. Authorized
250,000 shares; -0- shares issued
and outstanding.
    
    
    0
    
    
    
    0Additional Paid in Capital
    
    
    5,444,550
    
    
    
    5,418,175Accumulated other comprehensive
income, net of tax
    
    
    394,702
    
    
    
    454,671Retained earnings
    
    
    21,176,612
    
    
    
    19,925,92627,039,515
    
    
    
    25,810,591Less:
146,432* and 74,483 treasury shares, at cost, respectively
    
    
    839,018
    
    
    
    841,654Total stockholders equity
    
    
    26,200,497
    
    
    
    24,968,937Total liabilities and stockholders equity
    
    $
    281,101,708
    
    
    $
    255,120,609
 * Reflects two-for-one
stock split effective June 30, 2004. 3




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United Bancorporation of Alabama, Inc.
And Subsidiary 
 Condensed Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
 Three Months Ended
    
    Nine Months EndedSeptember
    
    September2004
    
    2003
    
    2004
    
    2003Interest income:Interest and fees on loans
    
    $
    3,093,692
    
    
    $
    2,831,461
    
    
    $
    8,684,682
    
    
    $
    8,419,148Interest on investment securities available for sale:Taxable
    
    
    325,431
    
    
    
    195,871
    
    
    
    928,299
    
    
    
    768,308Nontaxable
    
    
    250,335
    
    
    
    241,953
    
    
    
    757,785
    
    
    
    709,104Total investment income
    
    
    575,766
    
    
    
    437,824
    
    
    
    1,686,084
    
    
    
    1,477,412Other interest income
    
    
    10,745
    
    
    
    29,074
    
    
    
    61,518
    
    
    
    79,949Total interest income
    
    
    3,680,203
    
    
    
    3,298,359
    
    
    
    10,432,284
    
    
    
    9,976,509Interest expense:Interest on deposits
    
    
    763,359
    
    
    
    730,805
    
    
    
    2,143,897
    
    
    
    2,395,707Interest on other borrowed funds
    
    
    146,300
    
    
    
    143,693
    
    
    
    429,338
    
    
    
    449,405Total interest expense
    
    
    909,659
    
    
    
    874,498
    
    
    
    2,573,235
    
    
    
    2,845,112Net interest income
    
    
    2,770,544
    
    
    
    2,423,861
    
    
    
    7,859,049
    
    
    
    7,131,397Provision for loan losses
    
    
    180,000
    
    
    
    186,000
    
    
    
    540,000
    
    
    
    534,704Net interest income after
provision for loan losses
    
    
    2,590,544
    
    
    
    2,237,861
    
    
    
    7,319,049
    
    
    
    6,596,693Noninterest income:Service charge on deposits
    
    
    581,286
    
    
    
    550,920
    
    
    
    1,756,406
    
    
    
    1,544,586Commission on credit life
    
    
    2,713
    
    
    
    14,031
    
    
    
    38,413
    
    
    
    47,606Investment securities gains, net
    
    
    167,610
    
    
    
    71,464
    
    
    
    170,898
    
    
    
    363,672Other
    
    
    124,587
    
    
    
    178,965
    
    
    
    455,232
    
    
    
    606,908Total noninterest income
    
    
    876,196
    
    
    
    815,380
    
    
    
    2,420,949
    
    
    
    2,562,772Noninterest expense:Salaries and benefits
    
    
    1,521,987
    
    
    
    1,343,601
    
    
    
    4,303,403
    
    
    
    3,961,687Net occupancy expense
    
    
    480,365
    
    
    
    424,736
    
    
    
    1,395,783
    
    
    
    1,240,354Other
    
    
    600,417
    
    
    
    574,816
    
    
    
    1,972,095
    
    
    
    1,782,497Total noninterest expense
    
    
    2,602,769
    
    
    
    2,343,153
    
    
    
    7,671,281
    
    
    
    6,984,538Earnings before income tax expense
    
    
    863,971
    
    
    
    710,088
    
    
    
    2,068,716
    
    
    
    2,174,927Income tax expense
    
    
    229,403
    
    
    
    182,995
    
    
    
    485,812
    
    
    
    590,468Net earnings
    
    $
    634,568
    
    
    $
    527,093
    
    
    $
    1,582,904
    
    
    $
    1,584,459Basic
earnings per share
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.71
    
    
    $
    0.73Diluted earnings per share
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.71
    
    
    $
    0.72Basic
weighted average shares outstanding*
    
    
    2,217,330
    
    
    
    2,173,796
    
    
    
    2,215,599
    
    
    
    2,173,730Diluted
weighted average shares outstanding*
    
    
    2,219,679
    
    
    
    2,188,112
    
    
    
    2,217,948
    
    
    
    2,189,078Cash dividend per share*
    
    $
    
    
    
    $
    
    
    
    $
    0.15
    
    
    $
    0.125Statement of Comprehensive IncomeNet Income
    
    
    634,568
    
    
    
    527,093
    
    
    $
    1,582,904
    
    
    $
    1,584,458Other Comprehensive Income, net of tax:Unrealized holding gain arising during the period
    
    
    641,019
    
    
    
    (611,123
    )
    
    
    (59,969
    )
    
    
    (310,411
    )Less: Reclassification adjustment for gains
included in net income.
    
    
    100,566
    
    
    
    42,878
    
    
    
    102,539
    
    
    
    218,203Comprehensive income
    
    $
    1,175,021
    
    
    $
    (126,908
    )
    
    $
    1,420,396
    
    
    $
    1,055,844
 * Reflects two-for-one
stock split effective June 30, 2004. 4




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United Bancorporation of Alabama, Inc.
and Subsidiary 
 Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2004 and
2003(Unaudited)
 2004
    
    2003Operating ActivitiesNet Income
    
    $
    1,582,904
    
    
    
    1,584,458Adjustments to Reconcile Net Income to Net Cash
Provided by Operating ActivitiesProvision for Loan Losses
    
    
    540,000
    
    
    
    534,704Depreciation on Premises and Equipment
    
    
    605,991
    
    
    
    561,884Accretion of Investment Securities Available for Sale
    
    
    128,766
    
    
    
    203,880Gain on Sale of Investment Securities Available for Sale
    
    
    (170,898
    )
    
    
    (363,672
    )Gain on Sale of Other Real Estate
    
    
    (897
    )
    
    
    Gain on
Disposal of Premises and Equipment
    
    
    (4,850
    )
    
    
    (13,400
    )Increase in Interest Receivable
and Other Assets
    
    
    (1,431,783
    )
    
    
    (2,798,253
    )Decrease in Accrued Expenses
and Other Liabilities
    
    
    (517,509
    )
    
    
    (97,585
    )Net Cash Provided (Used) by Operating Activities
    
    
    731,724
    
    
    
    (387,984
    )Investing ActivitiesProceeds From Sales of Investment Securities Available for Sale
    
    
    4,340,737
    
    
    
    8,913,246Proceeds From Maturities of Investment Securities Available
for Sale
    
    
    8,211,599
    
    
    
    14,543,007Purchases of Investment Securities Available for Sale
    
    
    (13,464,598
    )
    
    
    (19,156,035
    )Net Increase in Loans
    
    
    (35,003,862
    )
    
    
    (8,813,630
    )Purchases of Premises and Equipment
    
    
    (335,733
    )
    
    
    (1,516,907
    )Proceeds From Sales of Premises and Equipment
    
    
    4,850
    
    
    
    13,400Proceeds From Sales of Other Real Estate
    
    
    5,000
    
    
    
    Net Cash Used by Investing Activities
    
    
    (36,242,007
    )
    
    
    (6,016,919
    )Financing ActivitiesNet Increase in Deposits
    
    
    25,411,875
    
    
    
    12,150,678Net Increase in securities sold under
agreement to repurchase
    
    
    1,774,852
    
    
    
    8,110,633Cash Dividends
    
    
    (332,219
    )
    
    
    (271,725
    )Net Tranactions on Treasury Stock
    
    
    2,636
    
    
    
    4,712Proceeds from sale of common stock
    
    
    38,207
    
    
    
    Decrease in Other Borrowed Funds
    
    
    (1,879,698
    )
    
    
    (1,986,716
    )Net Cash Provided by Financing Activities
    
    
    25,015,653
    
    
    
    18,007,582Increase (Decrease) in Cash and Cash Equivalents
    
    
    (10,494,630
    )
    
    
    11,602,679Cash and Cash Equivalents at Beginning of Period
    
    
    24,447,625
    
    
    
    9,087,315Cash and Cash Equivalents at End of Period
    
    $
    13,952,995
    
    
    
    20,689,994Supplemental disclosuresCash paid during the year for:Interest
    
    $
    2,607,522
    
    
    $
    3,001,483Income Taxes
    
    $
    370,000
    
    
    $
    563,000Noncash transactionsTransfer of loans to other real estate through foreclosure
    
    $
    230,001
    
    
    $
    920,000
 5




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UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY 
 Notes to Condensed Consolidated Financial Statements NOTE 1  General This report includes interim consolidated financial statements of United
Bancorporation of Alabama, Inc. (the Corporation or the Company) and its
wholly-owned subsidiary, United Bank (the Bank). The interim consolidated
financial statements in this report have not been audited. In the opinion of
management, all adjustments necessary to present fairly the financial position
and the results of operations for the interim periods have been made. All such
adjustments are of a normal recurring nature. The results of operations are
not necessarily indicative of the results of operations for the full year or
any other interim periods. For further information, refer to the consolidated
financial statements and footnotes included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2003. 6




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NOTE 2  Net Earnings per Share Basic net earnings per share were computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the three
and nine-month periods ended September 30, 2004 and 2003. Common stock
outstanding consists of issued shares less treasury stock. Diluted net
earnings per share for the three and nine-month periods ended September 30,
2004 and 2003 were computed by dividing net earnings by the weighted average
number of shares of common stock and the dilutive effects of the shares subject
to options awarded under the Companys Stock Option Plan, based on the treasury
stock method using an average fair market value of the stock during the
respective periods. The earnings per share amounts and average common shares
and potential common stock outstanding have been adjusted to reflect the
two-for-one stock split effected as a 100% stock dividend as of June 30, 2004.
Presented below is a summary of the components used to calculate diluted
earnings per share for the three and nine months ended September 30, 2004 and
2003: 2004
    
    2003
    
    2004
    
    2003Diluted earnings per share
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.71
    
    
    $
    0.72Weighted average common
shares outstanding
    
    
    2,217,330
    
    
    
    2,173,796
    
    
    
    2,215,599
    
    
    
    2,217,948Effect of the assumed exercise of
stock options based on the
treasury stock method using
average market price
    
    
    2,349
    
    
    
    
    
    
    
    2,349
    
    
    
    Total weighted average common
shares and potential common
stock outstanding*
    
    
    2,219,679
    
    
    
    2,173,796
    
    
    
    2,217,948
    
    
    
    2,217,948
 *24,288 and 28,960 shares subject to outstanding options for the three and nine
months ended September 30, 2004 and 2003, respectively, were not included in
the calculation of diluted earnings per share, as the exercise price of these
options was in excess of average market price. 7




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NOTE 3  Allowance for Loan Losses The following table summarizes the activity in the allowance for loan losses
for the nine month periods ended September 30 ($ in thousands): 2004
    
    2003Balance at beginning of year
    
    
    2,117
    
    
    
    2,117Provision charged to expense
    
    
    540
    
    
    
    535Less loans charged off
    
    
    282
    
    
    
    308Recoveries
    
    
    59
    
    
    
    61Balance at end of period
    
    
    2,434
    
    
    
    2,405
 At September 30, 2004 and 2003, the amounts of nonaccrual loans were $1,056,162
and $2,265,047, respectively. NOTE 4  Operating Segments Statement of Financial Accounting Standard 131 (SFAS 131), Disclosures about
Segments of an Enterprise and Related Information,establishes standards for
the disclosure 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 Corporation operates in only one segment  commercial banking. NOTE 5  New Accounting Standards In December 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46 (revised December 2003) (FIN 46R), Consolidation of
Variable Interest Entities, which addresses how a business enterprise should
evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. FIN 46R replaces No. 46,
Consolidation of Variable Interest Entities, which was issued in January 2003.
The Company will be required to apply FIN 46R to all entities subject to this
interpretation no later than the end of the first reporting period that ends
after December 15, 2004. This interpretation must be applied to those entities
that are considered 8




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to be special  purpose entities no later than as of the
end of the first reporting period that ended after December 15, 2003. For any variable interest entities (VIEs) that must be consolidated under FIN
No. 46R that were created before January 1, 2004, the assets, liabilities, and
noncontrolling interests of the VIE initially would be measured at their
carrying amounts with any difference between the net amount added to the
balance sheet and any previously recognized interest being recognized as the
cumulative effect of an accounting change. If determining the carrying amounts
is not practicable, fair value at the date FIN No. 46R first applies may be
used to measure the assets, liabilities and noncontrolling interest of the VIE. The Company has applied FIN No. 46R in accounting for United Bancorp Capital
Trust I (Trust), established on June 27, 2002. Accordingly, the accompanying
balance sheet includes, in other assets, the Companys investment in the Trust
of $124,000 and also includes, in Note payable to Trust, the balance owed the
Trust of $4,124,000. Except as related to the Trust, the application of this
interpretation is not expected to have a material effect on the Companys
consolidated financial statements. In May 2003, the FASB issued FASB Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. This
statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. The provisions of this
statement are effective for financial instruments entered into or modified
after May 31, 2003, and otherwise are effective at the beginning of the first
interim period beginning after June 15, 2003. It is implemented by reporting
the cumulative effect of a change in an accounting principle for financial
instruments created before May 15, 2003 and still existing at the beginning of
the interim period of adoption. The adoption of this new standard did not have
an impact on the consolidated financial position or results of operations of
the Company. In October 2003, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 03-3, which addresses accounting
for differences between contractual cash flows expected to be collected from an
investors initial investment in loans or debt securities (loans) acquired in a
transfer if those differences are attributable, at least in part, to credit
quality. It includes such loans acquired in purchase business combinations and
applies to all nongovernmental entities, including not-for-profit
organizations. This SOP does not apply to loans originated by the entity.
This SOP limits the yield that may be accreted (accretable yield) to the
excess of the investors estimate of undiscounted expected principal, interest,
and other cash flows (cash flows expected at acquisition to be collected) over
the investors initial investment in the loan. This SOP requires that the
excess of contractual cash flows over cash
flows expected to be collected (nonaccretable difference) not be recognized
as an adjustment of yield, loss accrual, or valuation allowance. This SOP
prohibits investors from displaying accretable yield and nonaccretable
difference in the balance sheet. Subsequent increases in cash flows expected
to be collected generally would be recognized prospectively through adjustment 9




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of the loans yield over its remaining life. Decreases in cash flows expected
to be collected would be recognized as impairment. This SOP prohibits
carrying over or creation of valuation allowances in the initial accounting
of all loans acquired in a transfer that are within the scope of this SOP. The
prohibition of the valuation allowance carryover applies to the purchase of an
individual loan, a pool of loans, a group of loans, and loans acquired in a
purchase business combination. This SOP is effective for loans acquired in
fiscal years beginning after December 15, 2004. Management is currently
assessing the potential impact of this SOP to the Consolidated Financial
Statements. In March 2004, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 105, which summarizes the views of the staff
regarding the application of generally accepted accounting principles to loan
commitments accounted for as derivative instruments. The SAB requires that the
fair value measurement of a loan commitment that is accounted for as a
derivative includes only differences between the guaranteed interest rate in
the loan commitment and a market interest rate, excluding any expected future
cash flows related to the customer relationship or loan servicing. This SAB is
effective for loan commitments entered into after March 31, 2004. The Company
adopted SAB 105 on April 1, 2004, and the effect was not material. In November 2003, the Emerging Issues Task Force (EITF) issued issue summary
03-1 (EITF 03-1), The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments.EITF 03-01 addressed an entitys treatment
of the impairment of securities when such impairment is considered other than
temporary. The preliminary summary required disclosures only related to other
than temporary impairment. In March 2004, the EITF continued its discussion and
reached a consensus on the procedures for recognizing an impairment of
securities considered other than temporarily impaired. The guidance in EITF
03-1 was intended to be effective for reporting periods beginning after June
15, 2004. However, in September 2004, the FASB issued FSP EITF 03-1-1, which
deferred the effective date for the measurement and recognition provisions of
EITF 03-1 until further implementation guidance could be established.
Management does not believe the provision of this standard, as currently
written, will have a material impact on consolidated financial position or the results of future operations. 10




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NOTE 6   Stock Based Compensation 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 Standard (SFAS) No. 123 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 three and
nine months ended September 30, 2004 and 2003 would have been impacted as shown
in the following table: For the three months ended
    
    For the nine months endedSeptember 30
    
    September 302004
    
    2003
    
    2004
    
    2003Reported net earnings
    
    $
    634,568
    
    
    $
    527,093
    
    
    $
    1,582,904
    
    
    $
    1,584,459Compensation expense, net of taxes
    
    
    5,020
    
    
    
    6,572
    
    
    
    15,059
    
    
    
    19,715Pro forma net earnings
    
    
    629,548
    
    
    
    520,521
    
    
    
    1,567,845
    
    
    
    1,564,744Reported basic earnings per share*
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.71
    
    
    $
    0.73Pro forma basic earnings per share*
    
    $
    0.28
    
    
    $
    0.24
    
    
    $
    0.71
    
    
    $
    0.72Reported diluted earnings per share*
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.71
    
    
    $
    0.73Pro forma diluted earnings per share*
    
    $
    0.28
    
    
    $
    0.24
    
    
    $
    0.71
    
    
    $
    0.72
 *Reflects two-for-one stock split effective June 30, 2004.   11




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS Critical Accounting Estimates The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make estimates and assumptions. Management believes that
its determination of the allowance for loan losses is a critical accounting
policy and 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 loan losses is regularly evaluated by management and reviewed
by the Board of Directors 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 allowance
for credit losses is established through the provision for loan losses, which
is a charge against earnings. Results of Operations The following financial review is presented to provide an analysis of the
results of operations of United Bancorporation of Alabama, Inc. (the
Corporation) and its principal subsidiary for the three and nine months ended
September 30, 2004, and 2003, compared. This review should be used in
conjunction with the condensed consolidated financial statements included in
the Form 10-Q. Nine Months ended September 30, 2004 and 2003, Compared Summary Net income for the nine months ended September 30, 2004, decreased by $1,555 for
no material change, as compared to the same period in 2003. 12




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##### Table of Contents



Net Interest Income Total interest income increased $455,775, or 4.57%, for the first nine months
of 2004 as compared to the same period in 2003. Average interest-earning
assets were $249,337,898 for the first nine months of 2004, as compared to
$224,071,347 for the same period in 2003, an increase of $25,266,551, or
11.28%. A substantial portion of the increase is due to increases in deposits
by two existing Bank customers. The average rate earned on interest earning
assets in 2004 was 5.33% as compared to 5.73% in 2003, reflecting the
continuing impact of the decrease in rates by the Federal Reserve Board during
previous years. The Federal Reserve Board has raised rates three times since
June of 2004, but the interest earning assets yields have still not risen to
the rates of a year ago. Total interest expense decreased by $271,877, or 9.56%, in 2004, when compared
to the same period in 2003. Average interest bearing liabilities increased to
$199,980,397 in 2004 from $177,572,799 in 2003, an increase of $22,407,598, or
12.62%. The average rate paid fell to 1.72% in 2004 as compared to 2.14% in
2003. This decrease in interest expense can be attributed primarily to higher
interest rates paid in 2003 on slower repricing deposits, compared to lower
rates paid on deposits which have repriced in 2004 at the current lower
interest rates. The Bank expects the cost of deposits to rise over the next
three months, due to the rise in rates caused by the Federal Reserve Board. Net interest margin decreased to 4.21% for the first nine months of 2004 as
compared to 4.26% for the same period in 2003. This decrease is the result of
the interest earning assets repricing faster than the interest bearing
liabilities funding the Banks investment and loan portfolios. Noninterest Income Total noninterest income decreased $141,823 or 5.53% for the first nine months
of 2004. Service charges on deposits increased $211,820, or 13.71%, for the
first nine months of
2004. This increase is primarily due to an increase in
insufficient fund charges on checks, which increased $169,686 or 15.27%. Gains
on sale of investments decreased by $192,774 in 2004, compared to 2003, when
management elected to capture gains on securities given managements assessment
of a high probability that these interest bearing securities would be called at
par in future periods. Management has sold additional investments in the third
quarter of 2004 to help fund loans. Commissions on credit life insurance
decreased $9,193 in 2004, or 19.31%, as compared to 2003. Other income
decreased during the first nine months of 2004 by $151,676 or 24.99%. This
decrease is partially attributed to a decrease of $87,517 in mortgage
origination fees in 2004, and a decrease in gain on the sale of other real
estate owned of $26,672 in 2004. Noninterest Expense Total noninterest expense increased $686,743, or 9.83% during the first nine
months of 2004 as compared to 2003. Salaries and benefits increased $341,716
or 8.63% in the first nine months of 13




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##### Table of Contents



2004 primarily due to the addition of two
new branches in Summerdale, Alabama and Jay, Florida, increased health
insurance cost, and an increase in 401(k) plan contributions. Occupancy
expense increased $155,429 or 12.53% as the Bank continued expansion into new
markets. Other expenses increased $189,598, or 10.64%, during the first nine
months of 2004. This increase is due in part to increases in professional
fees as the Bank implements requirements of the Sarbanes-Oxley Act of 2002, increased expense for supplies, as well as increased marketing expenses
incurred to promote the celebration of the Banks 100th anniversary. Provision for Loan Losses The provision for loan losses totaled $540,000 for the first nine months of
2004 as compared to $534,704 for the same period in 2003. This slight increase
is due to the growth in the loan portfolio. See further discussion under
Allowance for Loan Losses below. Income Taxes Earnings before taxes for the first nine months of 2004 were $2,068,717 as
compared to $2,174,927 for the first nine months of 2003, a decrease of
$106,210, or 4.88%. Income tax expense for the first nine months of 2004
decreased by $104,655, to $485,813 or by 17.72%, when compared to $590,468 the
same period in 2003. The effective tax rate decreased to 23.48% from 27.15%.
This decrease is due to increases in nontaxable income as the Bank reduced its
income tax expense. Three Months Ended September 30, 2004, and 2003, Compared Summary Net income for the three months ended September 30, 2004 increased $107,475, or
20.39%. Net Interest Income Total interest income increased $381,844, or 11.58%, in the third quarter of
2004 as compared to 2003. Average interest-earning assets were $254,687,856
for the third three months of 2004, as compared to $230,403,104 for the same
period in 2003, an increase of $24,284,752, or 10.54%. A substantial portion of
the increase is due to increases in deposits by two existing Bank customers.
The average rate earned during the third quarter of 2004 was 5.53% as compared
to 5.48% in 2003, reflecting the continuing impact of the decrease in rates by
the Federal Reserve Board during previous years. Total interest expense increased by $35,161 or 4.02% in the third quarter of
2004, when compared to the same period in 2003. Average interest bearing
liabilities increased to $205,207,911 in 2004 from $183,568,909 in 2003, an
increase of $21,639,002, or 11.79%. The average rate paid fell to 1.77% in
2004 as compared to 1.91% in 2003. 14




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##### Table of Contents



The net interest margin increased to 4.33% for the third quarter of 2004, as
compared to 4.17% for the same period in 2003. This was due to interest rates
being higher during the third quarter of 2004 than in the third quarter of
2003, because the increase in interest rates by the Federal Reserve Board did
not occur until the end of June 2004. Provision for Loan Losses The provision for loan losses totaled $180,000 for the third quarter of 2004 as
compared to $186,000 for the same period in 2003. The provision reflected both
the growth and improvement in credit quality in the loan portfolio. See further
discussion under Allowance for Loan Losses below. Noninterest Income Total noninterest income increased $60,816 or 7.46% for the third quarter of
2004. Service charges on deposits increased $30,366, or 5.51%, for the third
quarter of 2004 as compared to 2003. This increase is primarily due to an
increase in insufficient fund charges on checks, which increased $15,994.
Gains on sale of investments increased by $96,146 in the third quarter of 2004
as compared to 2003, because management sold investments in the third quarter
of 2004 to help fund loans. Commissions on credit life insurance decreased $11,318, or
80.66% for the third quarter of 2004. Other income decreased during the third
quarter of 2004 by $54,378 or 30.38% as compared to 2003. The majority of this
decrease is from the decrease in mortgage origination fees of $49,797 from the
2003 third quarter compared to the 2004 period. Noninterest Expense Total noninterest expense increased $259,616, or 11.08%, during the third
quarter of 2004 compared to the same quarter of 2003. Salaries and benefits
increased $178,386, or 13.28%, in the third quarter 2004. This increase is
primarily due to the expansion of the bank into new markets. Occupancy expense
increased $55,629, or 13.10%, in the third quarter of 2004, also largely
associated with branch expansion. Other expenses increased $25,601 or 4.45%
during the third quarter of 2004 as compared to 2003, reflecting overall increases in general operating expenses due to the continued expansion. Income Taxes Earnings before taxes for the third quarter of 2004 were $863,971 as compared
to $710,088 in the third quarter of 2003, an increase of $153,883 or 21.67%.
Income tax expense for the third quarter increased $46,408 to $229,403, or by
25.36%, when compared to $182,995 for the same period in
2003. The effective tax rate increased to 26.55% from 25.77%. 15




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##### Table of Contents



Financial Condition and Liquidity Total assets on September 30, 2004 increased $25,981,099 or 10.18% from
December 31, 2003. Average total assets for the first nine months of 2004 were
$280,923,815. The ratio of loans (net of allowance) to deposits plus
repurchase agreements on September 30, 2004 was 81.74% as compared to 76.11% on
December 31, 2003. Cash and Cash Equivalents Federal Funds Sold and interest bearing balances in other banks as of September
30, 2004 decreased to $2,759,721, or by 81.03%, from December 31, 2003. This
decrease is attributed to the increase in loans and the increase in investment
securities available for sale. Loans Net loans increased by $34,233,861 or 21.13% at September 30, 2004, from
December 31, 2003. Agricultural lending and commercial real estate loans
contributed the majority of this loan growth. Agricultural loans are normally
originated in the winter and spring of the year with funding taking place
through the fall. Allowance for Loan Losses The allowance for loan losses is maintained at a level which, in managements
opinion, is appropriate to provide for estimated losses in the portfolio at the
balance sheet date. Factors considered in determining the adequacy of the
allowance include historical loan loss experience, the amount of past due
loans, loans classified from the most recent regulatory examinations and
internal reviews, general economic conditions and the current portfolio mix.
The amount charged to operating expenses is that amount necessary to maintain
the allowance for loan losses at a level indicative of the associated risk, as
determined by management, of the current portfolio. The allowance for loan losses consists of two portions: the classified portion
and the nonclassified portion. The classified portion is based on identified
problem loans and is calculated based on an assessment of credit risk related
to those loans. Specific loss estimate amounts are included in the allowance
based on assigned loan classifications as follows: monitor (5%), substandard
(15%), doubtful (50%), loss (100%) and specific reserves based on identifiable
losses. Any loan categorized loss is charged off in the period in 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 specific 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, non-accrual and
delinquent loans and the general economic environment in the 16




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##### Table of Contents



Corporations
markets. However, unfavorable changes in the factors used by management to
determine the adequacy of the allowance, including increased loan delinquencies
and subsequent charge-offs, or the availability of new information, could
require additional provisions, in excess of normal provisions, to the allowance
for loan losses in future periods. 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 affect 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 allowance for possible loan losses represents 1.22% of gross loans at
September 30, 2004, as compared to 1.29% at year-end 2003. This decrease was
due to a combination of improved credit quality of the loan portfolio,
partially offset by the growth in the agricultural portion of the portfolio. Loans on which the accrual of interest had been discontinued has decreased
to $1,056,162 at September 30, 2004, as compared to $2,265,047 at December 31,
2003. This decrease is due primarily to several unrelated commercial and some
residential property loans either refinancing, paying off or being foreclosed
on. Net charged-off loans for the first nine months of 2004 were $223,000, as
compared to $247,000 for the same period in 2003. Non-performing Assets: The following table sets forth the Corporations
non-performing assets at September 30, 2004 and December 31, 2003. 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 except for credit cards, which continue to
accrue interest after ninety days. The amount of impaired loans determined under SFAS No. 114 and 118 has been
considered in the summary of non-performing assets below. These credits were
considered in determining the adequacy of the allowance for loan losses and are
regularly monitored for changes within a particular industry or general
economic trends, which could cause the borrowers financial difficulties. At
September 30, 2004 the Bank had $689,924 in impaired loans, compared to
$100,318 at December 31, 2003, reflecting an increase in
specific reserves on classified loans. 17




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##### Table of Contents



September 30
    
    December 31,Description
    
    2004
    
    2003(Dollars in Thousands)A
    
    
    Loans accounted for on
a nonaccrual basis
    
    $
    1,056
    
    
    $
    2,265B
    
    
    Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    $
    16
    
    
    $
    15C
    
    
    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.
    
    $
    320
    
    
    $
    229D
    
    
    Other non- performing assets
    
    $
    1,333
    
    
    $
    1,108
 Investment Securities Total investments available for sale have increased $854,445 at September 30,
2004 as compared to December 31, 2003 due to the Bank investing federal funds
into higher yields in the investment portfolio. Premises and Equipment Premises and equipment decreased $270,258 during the first three quarters of
2004, as expenditures for new branches were more than offset by depreciation. Deposits Total deposits increased $25,411,875, or 12.74%, at September 30, 2004 from
December 31, 2003, including $6,879,049 of noninterest bearing deposits.
Interest bearing deposits increased $18,532,826 at September 30, 2004. The
increase in interest bearing deposits is primarily due to
two accounts, one a public entity and the other a private enterprise, which are
existing customers with long-standing relationships with the Bank. 18




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##### Table of Contents



Hurricane Ivan On September 16, 2004 the Florida and Alabama coastal area was hit by Hurricane
Ivan. The Bank experienced varying degrees of damage to ten of its twelve
branches. Two offices had severe damage, but are currently operating. The
corporate office in Atmore, Alabama, which houses the administrative functions
of the Bank and the Corporation, lost its roof, causing the relocation of most
administrative staff. The branch in Monroeville, Alabama also lost its roof,
resulting in extensive water damage that made the building unusable. The Bank
has purchased a modular banking facility which reopened in Monroeville at the
current location and is operating while the existing branch building undergoes
repairs. The Bank has insurance to cover additional expenses and the replacement of the
offices involved, and management currently expects no material financial impact
from the damage to those offices. Management does not currently expect any
material adverse impact to future earnings due to damage to the local economies in the
Banks markets, and at the current time does not expect any increases in loan
loss provisions because of the hurricane. 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 pursue avenues of funding not
typically used, the Banks net interest margin could be impacted negatively.
The Corporations bank subsidiary has an Asset Liability Management Committee,
which has as its primary objective the maintenance of specific funding and
investment strategies to achieve short-term and long-term financial goals. The
Corporations liquidity at September 30, 2004 is considered adequate by
management. See Item 3 below. Capital Adequacy The Corporation has generally relied primarily on internally generated capital
growth to maintain capital adequacy. Total stockholders equity on September
30, 2004, was $26,200,496, an increase of $1,231,559, or 4.93%, from December
31, 2003. This net increase is a combination of current period earnings,
reduced by a decrease in the unrealized gains on securities available for
sale and dividends paid. Primary capital to total assets at September 30, 2004, was 9.32%, as compared
to 9.79% at year-end 2003. Total capital and allowances for loan losses to
total assets at September 30, 2004, was 10.19%, as compared to 10.62% at
December 31, 2003. The Corporations risk based capital was 19




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##### Table of Contents



$31,468,000, or
14.29%, at September 30, 2004, as compared to $30,754,000, or 16.45%, at
year-end 2003. The minimum requirement is 8.00%. Based on managements
projections, internally generated capital and the capital previously raised by
issuance of trust preferred securities should be sufficient to satisfy capital
requirements in the foreseeable future for existing operations, and for some
expansion efforts. Continued growth into new markets may require the
Corporation to further access external funding sources. There can be no
assurance that such funding sources will be available to the Corporation. In December 2003, the Financial Accounting Standards Board issued a revised
interpretation of FIN 46 (see Note 5 above), which required deconsolidation of
subordinated beneficial interests. As a result of FASBs Interpretation,
questions have been raised whether Trust Preferred Securities would still
qualify for treatment as Tier 1 Capital, which comprises substantially all of
the Corporations risk based capital, given the new accounting treatment. In
July of 2003, the Federal Reserve instructed bank holding companies (BHCs) to
continue to include Trust Preferred Securities in Tier 1 Capital for regulatory
capital purposes, until notice is given to the contrary. Management does not
expect the final rules will result in the immediate elimination of existing
Trust Preferred Securities as Tier 1 Capital. On May 6, 2004, the Federal Reserve Board issued its notice of proposed
rulemaking which proposed to make permanent the Federal Reserves treatment of
Trust-preferred securities as Tier 1 capital. Some substantial commentators,
including the Banks primary federal regulator, the FDIC, have opposed this
treatment. In particular, the FDIC has advocated Tier 2 treatment for
BHC-issued trust preferred. The effect of converting the Corporations trust
preferred to Tier 2 would be to reduce the leverage ratio from 10.65% to 9.19%,
and to reduce the Tier 1 risk-based ratio from 13.45% to 11.59%; such a change
would not affect the total risk-based ratio. 
 Item 3. 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,
generally do
not arise in the Banks normal course of business activities to any significant
extent. 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. 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. 20




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##### Table of Contents



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 the market interest rates. The Bank
uses the HNC Asset Liability Model, which takes the current rate structure of
the portfolio and shocks for each rate level and calculates the new market
value equity at each level. The Banks Board of Directors has adopted an
interest rate risk policy, which establishes maximum allowable decreases in net
interest margin in the event of a sudden and sustained increase or decrease in
market interest rates. The following table presents the Banks
projected change in NPV for the various rate shock levels as of
June 30, 2004, the most recent date for which the Corporation
has a completed analysis. Management does not expect the analysis as
of September 30, 2004 to change materially from the June 30,
2004 analysis. All market risk sensitive instruments presented in
this table are held to maturity or available for sale. The Bank has
no trading securities. Change in Interest Rates
    
    
    
    
    
    Change in Market
    
    Change in Market(Basis Points)
    
    Market Value Equity
    
    Value Equity
    
    Value Equity %300
    
    
    
    52,428
    
    
    
    7,699
    
    
    
    17200
    
    
    
    50,518
    
    
    
    5,789
    
    
    
    13100
    
    
    
    47,921
    
    
    
    3,192
    
    
    
    70
    
    
    
    44,729
    
    
    
    
    
    
    
    -100
    
    
    
    48,165
    
    
    
    3,436
    
    
    
    8-200
    
    
    
    44,148
    
    
    
    (581
    )
    
    
    (1
    )-300
    
    
    
    39,735
    
    
    
    (4,994
    )
    
    
    (11
    )
 21




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##### Table of Contents



The preceding table indicates that at June 30, 2004, 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.
The recent growth in variable rate loans has caused the Corporation to become
more asset sensitive over the period of a year, but the net interest margin
remains fairly stable in all interest rate environments tested. 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. 
 Item 4. Controls and Procedures 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 the end of the period covered by
this quarterly 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. The Corporation has engaged consultants to assist the Corporation in its
evaluation of internal controls in anticipation of the upcoming effectiveness
of regulations under Section 404 of the Sarbanes-Oxley Act of 2002. There was
no change in the Corporations internal controls over financial reporting
during the period covered by this quarterly report that has materially
affected, or is reasonably likely to materially affect, the Corporations
internal control over financial reporting. 22




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##### Table of Contents



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 risk, uncertainties, and assumptions including those set forth
herein. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected or projected. These forward-looking statements
speak only as of the date they are made. The Corporation expressly disclaims
any obligations or undertaking to publicly release any updates or revisions to
any forward-looking statement contained herein to reflect any change in the
Corporations expectations with regard to any change in events, conditions or
circumstances on which any such statement is based. 23




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##### Table of Contents



PART II  OTHER INFORMATION 
 Item 5. Other Information. On November 9, 2004, the Corporations wholly-owned subsidiary, United Bank
(the Bank), mailed a report of recent events, including
the effects of
Hurricane Ivan on the Banks market, customers and operations, and Bank
financial results for the quarter ended September 30, 2004, to the
Corporations shareholders. The full text of the report is set forth in
Exhibit 99.1 hereto. The exhibit is furnished under this Item 5
in lieu of its being furnished under cover of and pursuant to the
instructions for Form 8-K. 
 Item 6. Exhibits  (a)
    
    Exhibits.  31.1
    
    Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of principal accounting 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 accounting 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 mailed November 9, 2004 24




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##### Table of Contents



SIGNATURES Pursuant to the requirements 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.Date: November 15, 2004/s/Robert R. Jones, IIIRobert R. Jones, IIIPresident and CEO
 
 INDEX TO EXHIBITS EXHIBITNUMBER
    
    DESCRIPTION31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    Certification of 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 mailed November 9, 2004
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