##### 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, 2009
 Commission file number 000-25917
 UNITED BANCORPORATION OF ALABAMA, INC.
  Delaware
    
    63-0833573(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 200 East Nashville Avenue, Atmore, Alabama
    
    36502(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 þ o
 o 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 Operations
and Comprehensive Loss
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    22Item 4. Controls and Procedures
    
    
    34PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    35Item 6. Exhibits
    
    
    35EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 United Bancorporation of Alabama, Inc.
and Subsidiary


Consolidated Balance Sheets
 September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)AssetsCash and due from banks
    
    $
    18,880,834
    
    
    $
    35,148,646Interest bearing deposits in banks
    
    
    18,239,582
    
    
    
    91,773,852Federal funds sold
    
    
    10,000,000
    
    
    
    16,600,000Cash and cash equivalents
    
    
    47,120,416
    
    
    
    143,522,498Securities available for sale (amortized cost of $71,737,776
and $84,725,733 respectively)
    
    
    73,148,560
    
    
    
    85,526,712Securities held to maturity (market values of $22,115,977
and $6,596,039 respectively)
    
    
    21,938,005
    
    
    
    6,550,000Loans
    
    
    290,993,469
    
    
    
    279,779,877Less: Allowance for loan losses
    
    
    5,425,934
    
    
    
    3,591,558Net loans
    
    
    285,567,535
    
    
    
    276,188,319Premises and equipment, net
    
    
    17,908,795
    
    
    
    18,856,327Interest receivable
    
    
    2,922,682
    
    
    
    3,253,604Intangible assets
    
    
    934,763
    
    
    
    934,763Other assets
    
    
    17,142,461
    
    
    
    15,212,784Total assets
    
    
    466,683,217
    
    
    
    550,045,007Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    
    119,517,816
    
    
    
    172,291,464Interest bearing
    
    
    291,181,990
    
    
    
    318,864,162Total deposits
    
    
    410,699,806
    
    
    
    491,155,626Securities sold under agreements to repurchase
    
    
    0
    
    
    
    1,861,237Advances from Federal Home Loan Bank of Atlanta
    
    
    1,470,050
    
    
    
    1,609,900Treasury, tax, and loan account
    
    
    947,383
    
    
    
    495,572Interest payable
    
    
    726,416
    
    
    
    912,570Accrued expenses and other liabilities
    
    
    1,790,186
    
    
    
    1,577,461Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    425,943,841
    
    
    
    507,922,366Stockholders equityPreferred stock of $.01 par value. Authorized 250,000 shares;
10,300 shares, net of discount
    
    
    9,999,251
    
    
    
    9,953,381Class A common stock, $0.01 par value.
Authorized 5,000,000 shares; issued and outstanding,
2,388,992 and 2,388,125 shares, respectively
    
    
    23,890
    
    
    
    23,881Class B common stock, $0.01 par value.
Authorized 250,000 shares; no shares issued or outstanding
    
    
    0
    
    
    
    0Additional paid in capital
    
    
    6,611,511
    
    
    
    6,429,869Unearned stock based compensation
    
    
    (74,141
    )
    
    
    (87,446
    )Accumulated other comprehensive income net of tax
    
    
    846,467
    
    
    
    480,584Retained earnings
    
    
    24,388,315
    
    
    
    26,572,18841,795,293
    
    
    
    43,372,457Less: 131,678 and 155,855 treasury shares, at cost, respectively
    
    
    1,055,917
    
    
    
    1,249,816Total stockholders equity
    
    
    40,739,376
    
    
    
    42,122,641Total liabilities and stockholders equity
    
    $
    466,683,217
    
    
    $
    550,045,007
 See Notes to Consolidated Financial Statements
 3




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##### Table of Contents



United Bancorporation of Alabama, Inc.
And Subsidiary


Consolidated Statements of Operations and Comprehensive Loss
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Interest and fees on loans
    
    $
    4,264,037
    
    
    $
    5,207,737
    
    
    $
    12,677,927
    
    
    $
    15,088,408Interest on investment securities:Taxable
    
    
    539,386
    
    
    
    771,681
    
    
    
    1,790,193
    
    
    
    2,476,620Nontaxable
    
    
    299,750
    
    
    
    333,840
    
    
    
    935,223
    
    
    
    1,029,517Total investment income
    
    
    839,136
    
    
    
    1,105,521
    
    
    
    2,725,416
    
    
    
    3,506,137Other interest income
    
    
    50,970
    
    
    
    83,169
    
    
    
    217,881
    
    
    
    484,905Total interest income
    
    
    5,154,143
    
    
    
    6,396,427
    
    
    
    15,621,224
    
    
    
    19,079,450Interest expense:Interest on deposits
    
    
    1,648,308
    
    
    
    2,276,454
    
    
    
    5,308,732
    
    
    
    7,245,415Interest on other borrowed funds
    
    
    82,100
    
    
    
    341,195
    
    
    
    285,150
    
    
    
    1,293,213Total interest expense
    
    
    1,730,408
    
    
    
    2,617,649
    
    
    
    5,593,882
    
    
    
    8,538,628Net interest income
    
    
    3,423,735
    
    
    
    3,778,778
    
    
    
    10,027,342
    
    
    
    10,540,822Provision for loan losses
    
    
    1,900,000
    
    
    
    750,000
    
    
    
    4,500,000
    
    
    
    1,490,000Net interest income after
provision for loan losses
    
    
    1,523,735
    
    
    
    3,028,778
    
    
    
    5,527,342
    
    
    
    9,050,822Noninterest income:Service charge on deposits
    
    
    920,166
    
    
    
    885,734
    
    
    
    2,636,443
    
    
    
    2,541,477Investment securities gains (losses), net
    
    
    3,250
    
    
    
    (238
    )
    
    
    175,316
    
    
    
    (177
    )Mortgage loan and related fees
    
    
    39,315
    
    
    
    31,653
    
    
    
    116,600
    
    
    
    150,524Other
    
    
    220,167
    
    
    
    212,722
    
    
    
    619,978
    
    
    
    686,322Total noninterest income
    
    
    1,182,898
    
    
    
    1,129,871
    
    
    
    3,548,337
    
    
    
    3,378,146Noninterest expense:Salaries and benefits
    
    
    2,108,779
    
    
    
    2,186,778
    
    
    
    6,468,604
    
    
    
    6,411,926Net occupancy expense
    
    
    624,273
    
    
    
    725,162
    
    
    
    1,801,185
    
    
    
    1,850,400Other
    
    
    1,241,381
    
    
    
    1,322,475
    
    
    
    3,693,702
    
    
    
    3,771,948Total noninterest expense
    
    
    3,974,433
    
    
    
    4,234,415
    
    
    
    11,963,491
    
    
    
    12,034,274Earnings (losses) before income tax benefits
    
    
    (1,267,800
    )
    
    
    (75,766
    )
    
    
    (2,887,812
    )
    
    
    394,694Income tax benefits
    
    
    (588,412
    )
    
    
    (166,192
    )
    
    
    (1,413,600
    )
    
    
    (240,273
    )Net earnings (losses)
    
    
    (679,388
    )
    
    
    90,426
    
    
    
    (1,474,212
    )
    
    
    634,967Preferred stock dividends
    
    
    128,750
    
    
    
    
    
    
    
    331,890
    
    
    
    Accretion on preferred stock discount
    
    
    15,510
    
    
    
    
    
    
    
    45,870
    
    
    
    Net earnings (losses) available to common shareholders
    
    $
    (823,648
    )
    
    $
    90,426
    
    
    $
    (1,851,972
    )
    
    $
    634,967Basic earnings (losses) per share
    
    
    ($0.37
    )
    
    $
    0.04
    
    
    
    ($0.83
    )
    
    $
    0.28Diluted earnings (losses) per share
    
    
    ($0.37
    )
    
    $
    0.04
    
    
    
    ($0.83
    )
    
    $
    0.28Basic weighted average shares outstanding
    
    
    2,253,942
    
    
    
    2,252,698
    
    
    
    2,240,982
    
    
    
    2,251,078Diluted weighted average shares outstanding
    
    
    2,253,942
    
    
    
    2,259,767
    
    
    
    2,240,982
    
    
    
    2,258,147Cash dividend per share
    
    $
    
    
    
    $
    0.08
    
    
    $
    
    
    
    $
    0.23Statement of Comprehensive Income (Loss)Net earnings (losses)
    
    $
    (679,388
    )
    
    $
    90,426
    
    
    $
    (1,474,212
    )
    
    $
    634,967Other comprehensive income (loss), net of tax:Unrealized holding gains (losses) arising during
the period
    
    
    962,744
    
    
    
    (157,301
    )
    
    
    471,073
    
    
    
    (299,010
    )Reclassification adjustment for (gains) losses
included in net earnings (losses)
    
    
    (1,950
    )
    
    
    143
    
    
    
    (105,190
    )
    
    
    106Comprehensive income (loss)
    
    $
    281,406
    
    
    $
    (66,732
    )
    
    $
    (1,108,329
    )
    
    $
    336,063
 See Notes to Consolidated Financial Statements
 4




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##### Table of Contents



United Bancorporation of Alabama, Inc.
And Subsidiary


Consolidated Statements of Cash Flows
 (Unaudited)
 Nine Months EndedSeptember 302009
    
    
    2008Cash flows from operating activitiesNet earnings (losses)
    
    $
    (1,474,212
    )
    
    $
    634,967Adjustments to reconcile net earnings (losses) to net
cash provided by operating activitiesProvision for loan losses
    
    
    4,500,000
    
    
    
    1,490,000Depreciation of premises and equipment
    
    
    987,806
    
    
    
    992,540Net amortization (accretion) of premuim / discount
on investment securities available for sale
    
    
    98,221
    
    
    
    (796,266
    )Net amortization of premium on investment securities held to maturity
    
    
    164,338
    
    
    
    (Gain) loss on sales of investment securities available for sale, net
    
    
    (175,316
    )
    
    
    177(Gain) loss on sale of other real estate
    
    
    (34,432
    )
    
    
    1,045Writedown of other real estate
    
    
    4,500
    
    
    
    85,000Stock-based compensation
    
    
    24,694
    
    
    
    21,307(Gain) loss on disposal of equipment
    
    
    9,790
    
    
    
    (14,316
    )Decrease in interest receivable
    
    
    330,922
    
    
    
    628,298(Increase) decrease in other assets
    
    
    (3,225,259
    )
    
    
    243,236Decrease in interest payable
    
    
    (186,154
    )
    
    
    (238,592
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    382,961
    
    
    
    (25,055
    )Net cash provided by operating activities
    
    
    1,407,859
    
    
    
    3,022,341Cash flows from investing activitiesProceeds from maturities, calls, and principal
repayments of investment securities available for sale
    
    
    37,218,049
    
    
    
    1,032,513,350Proceeds from maturities, calls, and principal
repayments of investment securities held to maturity
    
    
    7,050,000
    
    
    
    Proceeds from sales of investment securities available for sale
    
    
    14,258,707
    
    
    
    12,492,231Purchases of investment securities available for sale
    
    
    (35,187,842
    )
    
    
    (1,043,937,077
    )Purchases of investment securities held to maturity
    
    
    (22,602,343
    )
    
    
    (1,050,000
    )Net increase in loans
    
    
    (16,264,417
    )
    
    
    (33,970,557
    )Purchases of premises and equipment, net
    
    
    (58,064
    )
    
    
    (2,779,715
    )Proceeds from sale of premises and equipment
    
    
    8,000
    
    
    
    23,600Proceeds from sale of other real estate
    
    
    242,932
    
    
    
    113,279Net cash used in investing activities
    
    
    (15,334,978
    )
    
    
    (36,594,889
    )Cash flows from financing activitiesNet decrease in deposits
    
    
    (80,455,820
    )
    
    
    (12,808,906
    )Net increase (decrease) in securities sold under
agreements to repurchase
    
    
    (1,861,237
    )
    
    
    20,562,196Cash dividends  preferred stock
    
    
    (331,890
    )
    
    
    Cash dividends  common stock
    
    
    (173,046
    )
    
    
    (506,328
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    9,986Proceeds from sale of common stock
    
    
    5,130
    
    
    
    6,732Purchase of treasury stock
    
    
    
    
    
    
    (63,019
    )Proceeds from sale of treasury stock
    
    
    29,938
    
    
    
    93,515Repayments of advances from FHLB Atlanta
    
    
    (139,850
    )
    
    
    (139,850
    )Increase (decrease) in other borrowed funds
    
    
    451,811
    
    
    
    (444,540
    )Net cash provided by (used in) financing activities
    
    
    (82,474,964
    )
    
    
    6,709,786Net decrease in cash and cash equivalents
    
    
    (96,402,082
    )
    
    
    (26,862,762
    )Cash and cash equivalents, beginning of period
    
    
    143,522,498
    
    
    
    54,119,315Cash and cash equivalents, end of period
    
    $
    47,120,416
    
    
    $
    27,256,553Supplemental disclosuresCash paid during the period for:Interest
    
    $
    5,780,036
    
    
    $
    8,777,220Income taxes
    
    
    55,984
    
    
    
    83,171Noncash transactionsTransfer of loans to other real estate
through foreclosure
    
    $
    2,385,201
    
    
    $
    4,610,674
 See Notes to Consolidated Financial Statements
 5




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6




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008Diluted earnings (losses) per share
    
    $
    (0.37
    )
    
    $
    0.04
    
    
    $
    (0.83
    )
    
    $
    0.28Weighted average common
shares outstanding
    
    
    2,253,942
    
    
    
    2,252,698
    
    
    
    2,240,982
    
    
    
    2,251,078Effect of the assumed exercise of
stock options based on the
treasury stock method using
average market price
    
    
    
    
    
    
    7,069
    
    
    
    
    
    
    
    7,069Total weighted average common
shares and potential common
stock outstanding
    
    
    2,253,942
    
    
    
    2,259,767
    
    
    
    2,240,982
    
    
    
    2,258,147
 7




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##### Table of Contents



Available for Sale
  Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueSeptember 30, 2009U.S. Treasury securities
    
    $
    3,027,602
    
    
    $
    5,211
    
    
    $
    
    
    
    $
    3,032,813U.S. government
sponsored agencies
    
    
    39,075,340
    
    
    
    648,672
    
    
    
    (5,588
    )
    
    
    39,718,424State and political subdivisions
    
    
    29,624,681
    
    
    
    931,514
    
    
    
    (161,748
    )
    
    
    30,394,447Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    (7,277
    )
    
    
    2,876$
    71,737,776
    
    
    $
    1,585,397
    
    
    $
    (174,613
    )
    
    $
    73,148,560December 31, 2008U.S. government
sponsored agencies
    
    $
    38,977,901
    
    
    $
    574,397
    
    
    $
    
    
    
    $
    39,552,298State and political subdivisions
    
    
    33,040,244
    
    
    
    511,299
    
    
    
    (428,646
    )
    
    
    33,122,897Mortgage-backed securities
    
    
    12,707,588
    
    
    
    193,462
    
    
    
    (49,533
    )
    
    
    12,851,517Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    84,725,733
    
    
    $
    1,279,158
    
    
    $
    (478,179
    )
    
    $
    85,526,712
  Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008Gross gains realized
    
    $
    3,250
    
    
    $
    
    
    
    $
    192,603
    
    
    $
    3,761Gross losses realized
    
    
    
    
    
    
    (238
    )
    
    
    (17,287
    )
    
    
    (3,938
    )Net gain (loss) realized
    
    $
    3,250
    
    
    $
    (238
    )
    
    $
    175,316
    
    
    $
    (177
    )
 8




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##### Table of Contents



September 30, 2009
 Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesU.S. government
sponsored agencies
    
    $
    4,063,355
    
    
    $
    (5,588
    )
    
    $
    
    
    
    $
    
    
    
    $
    4,063,355
    
    
    $
    (5,588
    )State and political subdivisions
    
    
    267,705
    
    
    
    (10,540
    )
    
    
    2,056,266
    
    
    
    (151,208
    )
    
    
    2,323,971
    
    
    
    (161,748
    )Equity securities
    
    
    2,876
    
    
    
    (7,277
    )
    
    
    
    
    
    
    
    
    
    
    2,876
    
    
    
    (7,277
    )$
    4,333,936
    
    
    $
    (23,405
    )
    
    $
    2,056,266
    
    
    $
    (151,208
    )
    
    $
    6,390,202
    
    
    $
    (174,613
    )
 December 31, 2008
 Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesU.S. government sponsored agencies &
mortgage-backed securities
    
    $
    2,453,105
    
    
    $
    (27,224
    )
    
    $
    1,191,568
    
    
    $
    (22,309
    )
    
    $
    3,644,673
    
    
    $
    (49,533
    )State and political subdivisions
    
    
    7,843,035
    
    
    
    (387,848
    )
    
    
    1,218,280
    
    
    
    (40,798
    )
    
    
    9,061,315
    
    
    
    (428,646
    )$
    10,296,140
    
    
    $
    (415,072
    )
    
    $
    2,409,848
    
    
    $
    (63,107
    )
    
    $
    12,705,988
    
    
    $
    (478,179
    )
   9




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##### Table of Contents



Within 1
    
    
    1 to 5
    
    
    5 to 10
    
    
    Over 10Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalAmortized CostU.S. Treasury securities
    
    $
    
    
    
    $
    3,027,602
    
    
    $
    
    
    
    $
    
    
    
    $
    3,027,602U.S. government
sponsored agencies
    
    
    
    
    
    
    25,775,727
    
    
    
    13,299,613
    
    
    
    
    
    
    
    39,075,340State and political subdivisions
    
    
    1,094,954
    
    
    
    6,833,511
    
    
    
    11,891,456
    
    
    
    9,804,760
    
    
    
    29,624,681Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,153Total
    
    $
    1,105,107
    
    
    $
    35,636,840
    
    
    $
    25,191,069
    
    
    $
    9,804,760
    
    
    $
    71,737,776Fair ValueU.S. Treasury securities
    
    $
    
    
    
    $
    3,032,813
    
    
    $
    
    
    
    $
    
    
    
    $
    3,032,813U.S. government
sponsored agencies
    
    
    
    
    
    
    26,120,869
    
    
    
    13,597,555
    
    
    
    
    
    
    
    39,718,424State and political subdivisions
    
    
    1,100,825
    
    
    
    7,040,858
    
    
    
    12,247,502
    
    
    
    10,005,262
    
    
    
    30,394,447Equity securities
    
    
    2,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,876Total
    
    $
    1,103,701
    
    
    $
    36,194,540
    
    
    $
    25,845,057
    
    
    $
    10,005,262
    
    
    $
    73,148,560Total Average Yield
    
    
    3.93
    %
    
    
    3.06
    %
    
    
    3.92
    %
    
    
    4.15
    %
    
    
    3.53
    %
 10




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##### Table of Contents



Held to Maturity
  Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueSeptember 30, 2009U.S. government
sponsored agencies
    
    $
    21,438,005
    
    
    $
    202,967
    
    
    $
    (24,995
    )
    
    $
    21,615,977Other domestic debt securities
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000$
    21,938,005
    
    
    $
    202,967
    
    
    $
    (24,995
    )
    
    $
    22,115,977December 31, 2008U.S. government
sponsored agencies
    
    $
    6,050,000
    
    
    $
    46,539
    
    
    $
    (500
    )
    
    $
    6,096,039Other domestic debt securities
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000$
    6,550,000
    
    
    $
    46,539
    
    
    $
    (500
    )
    
    $
    6,596,039
   September 30, 2009
 Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesDescription of SecuritiesU.S. government
sponsored agencies
    
    $
    2,975,616
    
    
    $
    (24,995
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,975,616
    
    
    $
    (24,995
    )Other domestic debt
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total temporarily impaired
securities
    
    $
    2,975,616
    
    
    $
    (24,995
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,975,616
    
    
    $
    (24,995
    )
 11




---



##### Table of Contents



December 31, 2008
 Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesDescription of SecuritiesU.S. government
sponsored agencies
    
    $
    999,500
    
    
    $
    (500
    )
    
    $
    
    
    
    $
    
    
    
    $
    999,500
    
    
    $
    (500
    )Other domestic debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total temporarily impaired
securities
    
    $
    999,500
    
    
    $
    (500
    )
    
    $
    
    
    
    $
    
    
    
    $
    999,500
    
    
    $
    (500
    )
   Within 1
    
    
    1 to 5
    
    
    5 to 10
    
    
    Over 10Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalAmortized CostU.S. government
sponsored agencies
    
    $
    
    
    
    $
    6,026,974
    
    
    $
    15,411,031
    
    
    $
    
    
    
    $
    21,438,005State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other domestic debt securities
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000Total
    
    $
    
    
    
    $
    6,526,974
    
    
    $
    15,411,031
    
    
    $
    
    
    
    $
    21,938,005Fair ValueU.S. government
sponsored agencies
    
    $
    
    
    
    $
    6,124,417
    
    
    $
    15,491,560
    
    
    $
    
    
    
    $
    21,615,977State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other domestic debt securities
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000Total
    
    $
    
    
    
    $
    6,624,417
    
    
    $
    15,491,560
    
    
    $
    
    
    
    $
    22,115,977Total Average Yield
    
    
    0.00
    %
    
    
    3.15
    %
    
    
    3.71
    %
    
    
    0.00
    %
    
    
    3.54
    %
 12




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##### Table of Contents



September 302009
    
    
    2008Balance at beginning of year
    
    
    3,592
    
    
    
    3,982Provision charged to expense
    
    
    4,500
    
    
    
    1,490Loans charged off
    
    
    (2,708
    )
    
    
    (2,361
    )Recoveries
    
    
    42
    
    
    
    40Balance at end of period
    
    
    5,426
    
    
    
    3,151
      13




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##### Table of Contents



Stock Options
 1998 Stock Option Plan
  WeightedWeighted
    
    
    averageaverage
    
    
    remainingShares under
    
    
    exercise price
    
    
    contractualoption
    
    
    per share
    
    
    lifeOptions outstanding, beginning of period
    
    
    38,806
    
    
    
    15.36Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    38,806
    
    
    
    15.36
    
    
    
    2.3Exercisable, end of period
    
    
    38,406
    
    
    
    15.33
    
    
    
    2.2
  2009
    
    2008Aggregate intrinsic value
of outstanding options
    
    $
    
    
    
    $
    48,461Aggregate intrinsic value
of exercisable options
    
    $
    
    
    
    $
    48,461
  2007 Equity Incentive Plan
  WeightedWeighted
    
    
    averageaverage
    
    
    remainingShares under
    
    
    exercise price
    
    
    contractualoption
    
    
    per share
    
    
    lifeOptions outstanding, beginning of period
    
    
    
    
    
    
    Granted
    
    
    4,000
    
    
    
    14.85Surrendered
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    4,000
    
    
    
    14.85
    
    
    
    9.7Exercisable, end of period
    
    
    800
    
    
    
    14.85
    
    
    
    9.7
 14




---



##### Table of Contents



2009
    
    2008Weighted-average expected life (in years)
    
    
    10
    
    
    N/AExpected Volatility
    
    
    20.00
    %
    
    N/ARisk-free interest rate
    
    
    3.86
    %
    
    N/AExpected dividend yield
    
    
    2.02
    %
    
    N/AWeighted-average fair value of
options granted during the period
    
    $
    3.88
    
    
    N/A
 Restricted Stock
  Restricted
    
    
    Weightedstock
    
    
    averageactivity
    
    
    fair valueShares under grant at beginning of period
    
    
    9,580
    
    
    
    17.34Granted
    
    
    442
    
    
    
    14.85Surrendered
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Shares under grant at end of period
    
    
    10,022
    
    
    
    17.20
   15




---



##### Table of Contents




    
    Level 1 Valuations for assets and liabilities traded in active exchange markets,
such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal
agency securities and federal agency mortgage-backed securities, which are traded by
dealers or brokers in active markets. Valuations are obtained from readily available
pricing sources for market transactions involving identical assets or liabilities.
    
    Level 2 Valuations for assets and liabilities traded in less active dealer or
broker markets. Valuations are obtained from third party pricing services for identical
or similar assets or liabilities.
    
    Level 3 Valuations for assets and liabilities that are derived from other
valuation methodologies, including option pricing models, discounted cash flow models and
similar techniques, and not based on market exchange, dealer, or broker traded
transactions. Level 3 valuations incorporate certain assumptions and projections in
determining the fair value assigned to such assets or liabilities.
 Assets Measured at Fair Value on a Recurring Basis
  16




---



##### Table of Contents



Available-for-Sale Securities
  Fair Value Measurements at September 30, 2009 UsingQuoted Prices
    
    Significant Other
    
    SignificantAssets/Liabilities
    
    in Active Markets for
    
    Observable
    
    UnobservableMeasured at
    
    Identical Assets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    Level (2)
    
    (Level 3)AFS Securities
    
    $
    73,148,560
    
    
    $
    4,030,963
    
    
    $
    69,117,597
    
    
    $
 Assets Measured at Fair Value on a Non-recurring Basis
  Impaired Loans
  Foreclosed Assets (Other Real Estate)
  17




---



##### Table of Contents



Carrying Value at September 30, 2009
    
    Nine Months EndedSeptember 30, 2009Total gainsTotal
    
    Level 1
    
    Level 2
    

Level 3
    
    (losses)Impaired loans (1)
    
    $
    17,465,119
    
    
    $
    
    
    
    $
    1,607,890
    
    
    $
    15,857,229
    
    
    $
    (4,349,171
    )Foreclosed assets
    
    
    7,695,702
    
    
    
    
    
    
    
    7,695,702
    
    
    
    
    
    
    
    29,932
 
 (1)
    
    Losses related to loans were recognized as either charge-offs or specific allocations of the
allowance for loan loss Fair Value of Financial Instruments
   (a)
    
    Cash and Short-term InvestmentsFair value approximates the carrying value of such assets.
 18




---



##### Table of Contents



(b)
    
    Investment Securities and Other SecuritiesThe fair value of investment securities is based on quoted market prices. The fair
value of other securities, which includes Federal Home Loan Bank stock and other
correspondent stocks, approximates their carrying value.(c)
    
    LoansThe fair value of loans is calculated using discounted cash flows and excludes
leasefinancing arrangements. The discount rates used to determine the present value of
the loan portfolio are estimated market discount rates that reflect the credit and
interest rate risk inherent in the loan portfolio. The estimated maturities are based on
the Corporations historical experience with repayments adjusted to estimate the effect
of current market conditions.(d)
    
    Bank Owned Life InsuranceThe fair value of bank owned life insurance approximates its carrying value.(e)
    
    DepositsThe fair value of deposits with no stated maturity, such as noninterest bearing demand
deposits, NOW accounts, savings and money market deposit accounts, approximates the
carrying value. Certificates of deposit have been valued using discounted cash flows.
The discount rates used are based on estimated market rates for deposits of similar
remaining maturities.The fair value estimates in the table below do not include the benefit that results from
the lowcost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.(f)
    
    Securities Sold Under Agreements to RepurchaseDue to their shortterm nature, the fair value of securities sold under agreements to
repurchase approximates their carrying value.(g)
    
    FHLB, Other Borrowed Funds and Subordinated DebtThe fair value of the Corporations other borrowed funds and subordinated debt
approximates the carrying value of such liabilities. The fair value of FHLB advances
have been valued using discounted cash flows. The discount rates used are based on
estimated market rates for borrowings of similar remaining maturities.(h)
    
    Accrued InterestThe fair value of accrued interest receivable and payable approximates their carrying
value.(i)
    
    Commitments to Extend Credit and Standby Letters of CreditThere is no market for the commitment to extend credit and standby letters of credit and
they were issued without explicit cost. Therefore, it is not practical to establish
their fair value.
 19




---



##### Table of Contents



September 30, 2009
    
    December 31, 2008Carrying
    
    Estimated
    
    Carrying
    
    Estimatedamount
    
    fair value
    
    amount
    
    fair value(Dollars in Thousands)Financial assets:Cash and shortterm
investments
    
    $
    47,120
    
    
    $
    47,120
    
    
    $
    143,522
    
    
    $
    143,546Investment securities
    
    
    95,087
    
    
    
    95,265
    
    
    
    92,077
    
    
    
    92,123Loans, net of the
allowance for loan losses
    
    
    285,568
    
    
    
    287,487
    
    
    
    276,188
    
    
    
    275,720Bank owned life insurance
    
    
    2,700
    
    
    
    2,700
    
    
    
    2,601
    
    
    
    2,601Accrued interest receivable
    
    
    2,923
    
    
    
    2,923
    
    
    
    3,254
    
    
    
    3,254Financial liabilities:Deposits
    
    
    410,700
    
    
    
    415,581
    
    
    
    491,156
    
    
    
    492,531Securities sold under
agreements to repurchase
    
    
    
    
    
    
    
    
    
    
    1,861
    
    
    
    1,861Other borrowed funds
    
    
    947
    
    
    
    947
    
    
    
    496
    
    
    
    496FHLB advances
    
    
    1,470
    
    
    
    1,672
    
    
    
    1,610
    
    
    
    2,206Subordinated Debt
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310Accrued interest payable
    
    
    726
    
    
    
    726
    
    
    
    913
    
    
    
    913
    20




---



##### Table of Contents



FASB Accounting
Standards Codification
   21




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
  Critical Accounting Estimates
   Intangible Assets
  22




---



##### Table of Contents



Results of Operations
  Nine Months Ended September 30, 2009 and 2008, Compared
 Summary
   23




---



##### Table of Contents



Net Interest Income
    Provision for Loan Losses
 Allowance for Loan
Losses
 Noninterest Income
  24




---



##### Table of Contents



Noninterest Expense
      Income Taxes
  25




---



##### Table of Contents



Three Months Ended September 30, 2009 and 2008, Compared
 Summary
  Net Interest Income
    Provision for Loan Losses
  26




---



##### Table of Contents



Allowance for Loan Losses
 Noninterest Income
  Noninterest Expense
  Income Taxes
  Financial Condition and Liquidity
  Cash and Cash Equivalents
  27




---



##### Table of Contents



Investment Securities  Available for Sale
  Investment Securities  Held to Maturity
  Loans
  Allowance for Loan Losses
   28




---



##### Table of Contents



As of the nine months ended
 September 30,2009
    
    
    2008Impaired loans with a valuation allowance
    
    $
    16,830,865
    
    
    $
    9,024,056Impaired loans without a valuation allowance
    
    
    3,852,298
    
    
    
    1,665,591Total impaired loans
    
    $
    20,683,163
    
    
    $
    10,689,647Valuation allowance related to impaired loans
    
    $
    3,218,044
    
    
    $
    722,275Total nonaccrual loans
    
    
    18,612,640
    
    
    
    6,488,722Total loans past due ninety days or more and still accruing
    
    
    36,102
    
    
    
    28,435Troubled debt restructured loans
    
    
    2,164,521
    
    
    
    1,634,033
 29




---



##### Table of Contents



Non-performing Assets
 September 30,
    
    
    December 31,2009
    
    
    2008Description
 
    (Dollars in Thousands)A
    
    Loans accounted for on a nonaccrual basis
    
    $
    18,613
    
    
    $
    14,700B
    
    Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    
    36
    
    
    
    28C
    
    Loans, the terms of which have
been renegotiated to provide
a reduction or deferral of interest
or principal because of a
deterioration in the financial
position of the borrower.
    
    
    2,165
    
    
    
    1,106D
    
    Other non-performing assets
    
    
    7,696
    
    
    
    5,524Total
    
    $
    28,510
    
    
    $
    21,358
 Premises and Equipment
  Intangible Assets
  Florida Charter
 30




---



##### Table of Contents



Internet Domain Address www.unitedbank.com
  Deposits
  Repurchase Agreements
  Liquidity
  31




---



##### Table of Contents



Capital Adequacy
     32




---



##### Table of Contents



WellSeptember 30,
    
    Capitalized2009
    
    TreatmentUnited Bancorporation of Alabama, Inc.Total risk-based capital
    
    
    16.21
    %
    
    
    N/ATier 1 risk-based capital
    
    
    14.51
    
    
    
    N/ALeverage Ratio
    
    
    9.69
    
    
    
    N/AUnited BankTotal risk-based capital
    
    
    15.59
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    14.33
    
    
    
    6.00Leverage ratio
    
    
    9.81
    
    
    
    5.00
  Off Balance Sheet items
   September 30,2009Commitments to extend credit
    
    $
    36,653,000Standby letters of credit
    
    
    1,611,000
 33




---



##### Table of Contents



Item 4. Controls and Procedures
   34




---



##### Table of Contents



(a)
    
    Exhibits.
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Principal Financial Officer pursuant to 18
U.S.C. Section 1350, adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
 35




---



##### Table of Contents



Date: November 12, 2009
    UNITED BANCORPORATION OF ALABAMA, INC./s/ Robert R. Jones, IIIRobert R. Jones, IIIPresident and CEO /s/ Allen O. Jones, Jr.Allen O. Jones, Jr.Senior Vice President and CFO 36




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of Chief Financial 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
 37