##### 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, 2005
 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
  þ o
 o þ
  
   Page 1 of 28




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UNITED BANCORPORATION OF ALABAMA, INC.
 FORM 10-Q
  INDEX
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Earnings
and Comprehensive Income
    
    
    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
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    21PART II  OTHER INFORMATIONItem 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 6. Exhibits
    
    
    22Certification of Chief Executive Officer Pursuant to Section 302Certification of Principal Accounting Officer Pursuant to Section 302Certification of Chief Executive Officer Pursuant to Section 906Certification of Principal Accounting Officer Pursuant to Section 906
  2




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2005
    
    2004Unaudited
    
    AuditedAssets:Cash and due from banks
    
    $
    11,592,561
    
    
    $
    16,446,574Federal funds sold
    
    
    7,897,849
    
    
    
    27,494,426Cash and cash equivalents
    
    
    19,490,410
    
    
    
    43,941,000Securities available for sale (amortized cost of $73,289,134
and $54,502,411 respectively)
    
    
    73,492,421
    
    
    
    55,004,982Loans
    
    
    216,558,575
    
    
    
    199,160,445Allowance for loan losses
    
    
    2,630,861
    
    
    
    2,562,239Net loans
    
    
    213,927,714
    
    
    
    196,598,206Premises and equipment, net
    
    
    7,068,216
    
    
    
    7,192,202Interest receivable and other assets
    
    
    9,939,878
    
    
    
    9,094,834Total assets
    
    $
    323,918,639
    
    
    $
    311,831,224Liabilities and Stockholders Equity:Deposits:Non-interest bearing
    
    $
    59,325,961
    
    
    $
    68,763,895Interest bearing
    
    
    191,127,619
    
    
    
    184,174,772Total deposits
    
    
    250,453,580
    
    
    
    252,938,667Securities sold under agreements to repurchase
    
    
    30,027,976
    
    
    
    18,381,063Other borrowed funds
    
    
    9,963,544
    
    

    
    8,292,612Accrued expenses and other liabilities
    
    
    2,311,974
    
    
    
    1,881,143Note payable to Trust
    
    
    3,997,697
    
    
    
    3,992,645Total liabilities
    
    
    296,754,771
    
    
    
    285,486,130Stockholders equity:Class A
common stock, Authorized 5,000,000
shares of $.01 par value; 2,366,962 and 2,363,762
shares issued respectively
    
    
    23,654
    
    
    
    23,638Class 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
    
    
    5,435,679
    
    
    
    5,444,563Accumulated other comprehensive
income, net of tax
    
    
    121,972
    
    
    
    301,542Retained earnings
    
    
    22,399,878
    
    
    
    21,414,37027,981,183
    
    
    
    27,184,113Less: 145,522 and 148,966 treasury shares, at cost, respectively
    
    
    817,315
    
    
    
    839,019Total stockholders equity
    
    
    27,163,868
    
    
    
    26,345,094Total liabilities and stockholders equity
    
    $
    323,918,639
    
    
    $
    311,831,224
  3




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Three Months Ended
    
    Six Months EndedJune
    
    June2005
    
    2004
    
    2005
    
    2004Interest income:Interest and fees on loans
    
    $
    3,802,191
    
    
    $
    2,902,448
    
    
    $
    7,095,542
    
    
    $
    5,590,990Interest on investment securities available for sale:Taxable
    
    
    480,117
    
    
    
    299,800
    
    
    
    862,789
    
    
    
    602,868Nontaxable
    
    
    261,383
    
    
    
    256,223
    
    
    
    508,193
    
    
    
    507,450Total investment income
    
    
    741,500
    
    
    
    556,023
    
    
    
    1,370,982
    
    
    
    1,110,318Other interest income
    
    
    61,133
    
    
    
    23,647
    
    
    
    219,788
    
    
    
    50,773Total interest income
    
    
    4,604,824
    
    
    
    3,482,118
    
    
    
    8,686,312
    
    
    
    6,752,081Interest expense:Interest on deposits
    
    
    1,056,175
    
    
    
    726,897
    
    
    
    1,969,601
    
    
    
    1,380,538Interest on other borrowed funds
    
    
    158,051
    
    
    
    138,277
    
    
    
    298,963
    
    
    
    283,038Total interest expense
    
    
    1,214,226
    
    
    
    865,174
    
    
    
    2,268,564
    
    
    
    1,663,576Net interest income
    
    
    3,390,598
    
    
    
    2,616,944
    
    
    
    6,417,748
    
    
    
    5,088,505Provision for loan losses
    
    
    195,000
    
    
    
    180,000
    
    
    
    390,000
    
    
    
    360,000Net interest income after
provision for loan losses
    
    
    3,195,598
    
    
    
    2,436,944
    
    
    
    6,027,748
    
    
    
    4,728,505Noninterest income:Service charge on deposits
    
    
    592,719
    
    
    
    586,878
    
    
    
    1,100,687
    
    
    
    1,175,120Commission on credit life
    
    
    22,795
    
    
    
    22,003
    
    
    
    28,946
    
    
    
    35,700Investment securities gains, net
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    3,288Other
    
    
    179,782
    
    
    
    139,142
    
    
    
    366,980
    
    
    
    330,645Total noninterest income
    
    
    795,296
    
    
    
    748,043
    
    
    
    1,496,613
    
    
    
    1,544,753Noninterest expense:Salaries and benefits
    
    
    1,636,155
    
    
    
    1,419,620
    
    
    
    3,166,730
    
    
    
    2,781,416Net occupancy expense
    
    
    489,717
    
    
    
    457,020
    
    
    
    983,093
    
    
    
    915,418Other
    
    
    939,554
    
    
    
    741,902
    
    
    
    1,603,728
    
    
    
    1,371,677Total non-interest expense
    
    
    3,065,426
    
    
    
    2,618,542
    
    
    
    5,753,551
    
    
    
    5,068,511Earnings before income tax expense
    
    
    925,468
    
    
    
    566,445
    
    
    
    1,770,810
    
    
    
    1,204,746Income tax expense
    
    
    295,349
    
    
    
    79,122
    
    
    
    488,427
    
    
    
    256,410Net earnings
    
    $
    630,119
    
    
    $
    487,323
    
    
    $
    1,282,383
    
    
    $
    948,336Basic earnings per share
    
    $
    0.28
    
    
    $
    0.22
    
    
    $
    0.58
    
    
    $
    0.43Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.22
    
    
    $
    0.58
    
    
    $
    0.43Basic weighted average shares outstanding
    
    
    2,219,858
    
    
    
    2,214,779
    
    
    
    2,219,849
    
    
    
    2,214,719Diluted weighted average shares outstanding
    
    
    2,220,527
    
    
    
    2,217,128
    
    
    
    2,220,518
    
    
    
    2,217,068Cash dividend per share
    
    $
    0.15
    
    
    $
    0.15
    
    
    $
    0.15
    
    
    $
    0.15Statement of Comprehensive IncomeNet Income
    
    
    630,119
    
    
    
    487,323
    
    
    $
    1,282,383
    
    
    $
    948,336Other Comprehensive (Loss) Income, net of tax:Unrealized holding gain (loss) arising during the period
    
    
    326,920
    
    
    
    (1,129,997
    )
    
    
    179,570
    
    
    
    (700,988
    )Less: Reclassification adjustment for gains
included in net income
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    1,961Comprehensive (loss) income
    
    $
    957,039
    
    
    $
    (642,686
    )
    
    $
    1,461,953
    
    
    $
    245,387
  4




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2005
    
    2004Operating ActivitiesNet Income
    
    $
    1,282,383
    
    
    

    948,336Adjustments
to Reconcile Net Income to Net Cash Provided by Operating ActivitiesProvision for Loan Losses
    
    
    390,000
    
    
    
    360,000Depreciation on Premises and Equipment
    
    
    464,410
    
    
    
    411,491Amortizaton of Investment Securities Available for Sale
    
    
    99,625
    
    
    
    94,777Gain on Investment Securities Available for Sale
    
    
    
    
    
    
    (3,288
    )Gain on Sale of Other Real Estate
    
    
    (4,118
    )
    
    
    Gain on Disposal of Premises and Equipment
    
    
    
    
    
    
    (4,850
    )Writedown of Other Real Estate
    
    
    103,201
    
    
    
    Increase in Interest Receivable
and Other Assets
    
    
    (944,603
    )
    
    
    (4,880
    )Increase (Decrease) in Accrued Expenses
and Other Liabilities
    
    
    430,831
    
    
    
    (564,190
    )Net Cash Provided by Operating Activities
    
    
    1,821,729
    
    
    
    1,237,396Investing ActivitiesProceeds From Sales of Investment Securities Available for Sale
    
    
    
    
    
    
    1,500,300Proceeds From Maturities of Investment Securities Available
for Sale
    
    
    8,317,094
    
    
    
    4,843,440Purchases of Investment Securities Available for Sale
    
    
    (27,203,399
    )
    
    
    (11,788,315
    )Net Increase in Loans
    
    
    (17,769,508
    )
    
    
    (24,329,385
    )Purchases of Premises and Equipment
    
    
    (340,424
    )
    
    
    (319,521
    )Proceeds From Sales of Premises and Equipment
    
    
    
    
    
    
    21,104Proceeds From Sales of Other Real Estate
    
    
    170,147
    
    
    
    Net Cash Used in Investing Activities
    
    
    (36,826,090
    )
    
    
    (30,072,377
    )Financing ActivitiesNet (Decrease) Increase in Deposits
    
    
    (2,485,087
    )
    
    
    22,596,434Net Increase in securities sold under
agreement to repurchase
    
    
    11,646,913
    
    
    
    2,659,983Cash Dividends
    
    
    (288,579
    )
    
    
    (332,215
    )Net Tranactions on Treasury Stock
    
    
    
    
    
    
    (2,387
    )Proceeds from sale of common stock
    
    
    4,540
    
    
    
    39,581(Increase) Decrease in Other Borrowed Funds
    
    
    1,675,984
    
    
    
    (666,848
    )Net Cash Provided by Financing Activities
    
    
    10,553,771
    
    
    
    24,294,548Decrease in Cash and Cash Equivalents

    
    
    (24,450,590
    )
    
    
    (4,540,433
    )Cash and Cash Equivalents at Beginning of Period
    
    
    43,941,000
    
    
    
    24,447,625Cash and Cash Equivalents at End of Period
    
    $
    19,490,410
    
    
    
    19,907,192Supplemental disclosuresCash paid during the year for:Interest
    
    $
    2,208,837
    
    
    $
    1,672,764Income Taxes
    
    $
    503,000
    
    
    $
    230,000Noncash transactionsTransfer of loans to other real estate through foreclosure
    
    $
    50,000
    
    
    $
    230,001
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6




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Three Months Ended
    
    Six Months EndedJune
    
    June2005
    
    2004
    
    2005
    
    2004Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.22
    
    
    $
    0.58
    
    
    $
    0.43Weighted average common
shares outstanding
    
    
    2,219,858
    
    
    
    2,214,779
    
    
    
    2,219,849
    
    
    
    2,214,719Effect of the assumed exercise of
stock options based on the
treasury stock method using
average market price
    
    
    669
    
    
    
    2,349
    
    
    
    669
    
    
    
    2,349Total weighted average common
shares and potential common
stock outstanding*
    
    
    2,220,527
    
    
    
    2,217,128
    
    
    
    2,220,518
    
    
    
    2,217,068
 
 *
    
    33,584 and 23,888 shares subject to outstanding options for the three and six months ended
June 30, 2005 and 2004, 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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June 302005
    
    2004Balance at beginning of year
    
    
    2,562
    
    
    
    2,117Provision charged to expense
    
    
    390
    
    
    
    360Less Loans charged off
    
    
    352
    
    
    
    188Recoveries
    
    
    31
    
    
    
    49Balance at end of period
    
    
    2,631
    
    
    
    2,338
   Disclosures about Segments of an
Enterprise and Related Information,
  Consolidation of Variable Interest Entities Consolidation of Variable Interest Entities
 8




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Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
    9




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For the three months ended
    
    For the six months endedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Reported net earnings
    
    $
    630,119
    
    
    $
    487,323
    
    
    $
    1,282,383
    
    
    $
    948,336Compensation expense, net of taxes
    
    
    4,119
    
    
    
    3,410
    
    
    
    8,238
    
    
    
    8,271Pro forma net earnings
    
    
    626,000
    
    
    
    483,913
    
    
    
    1,274,145
    
    
    
    940,065Reported basic earnings per share
    
    $
    0.28
    
    
    $
    0.22
    
    
    $
    0.58
    
    
    $
    0.43Pro forma basic earnings per share
    
    $
    0.28
    
    
    $
    0.22
    
    
    $
    0.57
    
    
    $
    0.42Reported diluted earnings per share
    
    $
    0.28
    
    
    $
    0.22
    
    
    $
    0.58
    
    
    $
    0.43Pro forma diluted earnings per share
    
    $
    0.28
    
    
    $
    0.22
    
    
    $
    0.57
    
    
    $
    0.42
 10




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Critical Accounting Estimates
   Results of Operations
  Six Months ended June 30, 2005 and 2004, Compared
 Summary
  Net Interest Income
  11




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Provision for Loan Losses
 Allowance for Loan Losses
 Noninterest Income
  Noninterest Expense
  12




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Income Taxes
  Three Months Ended June 30, 2005 and 2004, Compared
 Summary
  Net Interest Income
    Provision for Loan Losses
 Allowance for Loan Losses
 13




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Noninterest Income
  Noninterest Expense
  Income Taxes
  Financial Condition and Liquidity
  Cash and Cash Equivalents
  14




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Loans
  Allowance for Loan Losses
     15




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Non-performing Assets
  16




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June 30,
    
    December 31,2005
    
    2004Description
    
    (Dollars in Thousands)A
    
    
    Loans accounted for on
a nonaccrual basis
    
    $
    964
    
    
    $
    1,202B
    
    
    Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    $
    4
    
    
    $
    14C
    
    
    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
    
    $
    324
    
    
    $
    351D
    
    
    Other non-performing assets
    
    $
    1,164
    
    
    $
    1,384
 Investment Securities
  Premises and Equipment
  Deposits
 17




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Hurricanes Ivan and Dennis
   Liquidity
  Capital Adequacy
  18




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
     19




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Change in Interest Rates
    
    Market Value Equity
    
    Change in Market
    
    Change in Market(Basis Points)
    
    
    
    
    
    Value Equity
    
    Value Equity %300
    
    
    62,661
    
    
    
    7,699
    
    
    
    25200
    
    
    59,449
    
    
    
    5,789
    
    
    
    19100
    
    
    55,215
    
    
    
    5,113
    
    
    
    100
    
    
    50,102
    
    
    
    
    
    
    
    -100
    
    
    44,151
    
    
    
    (5,951
    )
    
    
    (12
    )-200
    
    
    37,105
    
    
    
    (12,997
    )
    
    
    (26
    )-300
    
    
    29,308
    
    
    
    (20,794
    )
    
    
    (42
    )
   20




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Item 4. Controls and Procedures
   Forward Looking Statements
  21




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(a)
    
    A description of actions taken at the annual meeting of security holders of
United Bancorporation of Alabama, Inc. on May 4, 2005 was reported under Item 4 of the
Corporations Form 10-Q for the quarter ended March 31, 2005, 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 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 2002
   UNITED BANCORPORATION OF ALABAMA, INC.Date: August 13, 2005/s/ Robert R. Jones, IIIRobert R. Jones, IIIPresident and CEO
 22