##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 Commission file number 000-25917
 UNITED BANCORPORATION OF ALABAMA, INC.
  Delaware
    
    63-0833573(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 200 East Nashville Avenue, Atmore, Alabama
    
    36502(Address of principal executive offices)
    
    (Zip Code)
 (251) 446-6000
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller Reporting Company þ o þ
  Class A Common Stock
    
    2,279,669 SharesClass B Common Stock
    
    -0-    Shares




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##### 



UNITED BANCORPORATION OF ALABAMA, INC.
 FORM 10-Q
  INDEX
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Earnings
and Comprehensive Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    22Item 4. Controls and Procedures
    
    
    32PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    33Item 6. Exhibits
    
    
    33EX-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
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)AssetsCash and due from banks
    
    $
    20,725,575
    
    
    $
    13,858,726Interest bearing deposits in banks
    
    
    51,931,748
    
    
    
    40,809,385Federal funds sold
    
    
    0
    
    
    
    0Cash and cash equivalents
    
    
    72,657,323
    
    
    
    54,668,111Securities available for sale (amortized cost of $71,349,641
and $67,627,174 respectively)
    
    
    71,822,559
    
    
    
    68,212,662Securities held to maturity (market values of $10,575,599
and $15,715,993 respectively)
    
    
    10,411,266
    
    
    
    15,659,330Loans
    
    
    281,672,008
    
    
    
    283,346,171Less: Allowance for loan losses
    
    
    7,452,085
    
    
    
    7,435,509Net loans
    
    
    274,219,923
    
    
    
    275,910,662Premises and equipment, net
    
    
    17,320,296
    
    
    
    17,589,236Interest receivable
    
    
    2,301,505
    
    
    
    2,858,122Intangible assets
    
    
    934,763
    
    
    
    934,763Other assets
    
    
    20,772,579
    
    
    
    21,149,520Total assets
    
    
    470,440,214
    
    
    
    456,982,406Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    
    127,196,109
    
    
    
    121,753,295Interest bearing
    
    
    290,729,340
    
    
    
    283,056,954Total deposits
    
    
    417,925,449
    
    
    
    404,810,249Advances from Federal Home Loan Bank of Atlanta
    
    
    1,387,650
    
    
    
    1,445,100Treasury, tax, and loan account
    
    
    865,001
    
    
    
    624,143Interest payable
    
    
    548,250
    
    
    
    620,867Accrued expenses and other liabilities
    
    
    1,673,674
    
    
    
    1,608,243Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    432,710,024
    
    
    
    419,418,602Stockholders equityPreferred stock of $.01 par value. Authorized 250,000 shares;
10,300 shares, net of discount
    
    
    10,030,946
    
    
    
    10,014,985Class A common stock, $0.01 par value. Authorized 5,000,000
shares; issued and outstanding,
2,388,992 and 2,388,992 shares in 2009 and 2008, respectively
    
    
    23,890
    
    
    
    23,890Class B common stock, $0.01 par value. Authorized
250,000 shares; no shares issued or outstanding
    
    
    
    
    
    
    Additional paid in capital
    
    
    6,703,639
    
    
    
    6,544,079Accumulated other comprehensive income net of tax
    
    
    283,747
    
    
    
    351,289Retained earnings
    
    
    21,564,598
    
    
    
    21,685,47838,606,820
    
    
    
    38,619,721Less: 109,323 and 131,678 treasury shares, at cost, respectively
    
    
    876,630
    
    
    
    1,055,917Total stockholders equity
    
    
    37,730,190
    
    
    
    37,563,804Total liabilities and stockholders equity
    
    $
    470,440,214
    
    
    $
    456,982,406
 See Notes to Consolidated Financial Statements
 3




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##### Table of Contents



United Bancorporation of Alabama, Inc.
And Subsidiary
Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
 Three Months EndedMarch 312010
    
    
    2009Interest income:Interest and fees on loans
    
    $
    4,138,769
    
    
    $
    4,125,801Interest on investment securities:Taxable
    
    
    428,665
    
    
    
    649,014Nontaxable
    
    
    258,368
    
    
    
    325,921Total investment income
    
    
    687,033
    
    
    
    974,935Other interest income
    
    
    32,734
    
    
    
    104,954Total interest income
    
    
    4,858,536
    
    
    
    5,205,690Interest expense:Interest on deposits
    
    
    1,305,454
    
    
    
    1,894,249Interest on other borrowed funds
    
    
    68,373
    
    
    
    103,654Total interest expense
    
    
    1,373,827
    
    
    
    1,997,903Net interest income
    
    
    3,484,709
    
    
    
    3,207,787Provision for loan losses
    
    
    438,000
    
    
    
    360,000Net interest income after
provision for loan losses
    
    
    3,046,709
    
    
    
    2,847,787Noninterest income:Service charge on deposits
    
    
    826,017
    
    
    
    847,093Investment securities gains, net
    
    
    159,465
    
    
    
    Mortgage loan and related fees
    
    
    54,965
    
    
    
    32,468Other
    
    
    189,590
    
    
    
    223,963Total noninterest income
    
    
    1,230,037
    
    
    
    1,103,524Noninterest expense:Salaries and benefits
    
    
    2,168,662
    
    
    
    2,196,996Net occupancy expense
    
    
    538,476
    
    
    
    574,511Other
    
    
    1,232,347
    
    
    
    1,042,465Total noninterest expense
    
    
    3,939,485
    
    
    
    3,813,972Earnings before income tax benefits
    
    
    337,261
    
    
    
    137,339Income tax benefits
    
    
    (18,542
    )
    
    
    (71,988
    )Net earnings
    
    
    355,803
    
    
    
    209,327Preferred stock dividends
    
    
    128,750
    
    
    
    74,389Accretion on preferred stock discount
    
    
    15,961
    
    
    
    15,071Net earnings available to common shareholders
    
    $
    211,092
    
    
    $
    119,867Basic earnings per share available to common
shareholders
    
    $
    0.09
    
    
    $
    0.05Diluted earnings per share available to common
shareholders
    
    $
    0.09
    
    
    $
    0.05Basic weighted average shares outstanding
    
    
    2,276,192
    
    
    
    2,233,863Diluted weighted average shares outstanding
    
    
    2,276,192
    
    
    
    2,235,288Cash dividend per share
    
    $
    
    
    
    $
    Statement of Comprehensive IncomeNet earnings
    
    $
    355,803
    
    
    $
    209,327Other comprehensive income (loss), net of tax:Unrealized holding gain arising during the period
    
    
    28,137
    
    
    
    (160,506
    )Reclassification adjustment for gains
included in net income
    
    
    (95,679
    )
    
    
    Comprehensive income
    
    $
    288,261
    
    
    $
    48,821
 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)
 Three Months EndedMarch 312010
    
    
    2009Cash flows from operating activitiesNet earnings
    
    $
    355,803
    
    
    $
    209,327Adjustments to reconcile net earnings to net
cash provided by operating activitiesProvision for loan losses
    
    
    438,000
    
    
    
    360,000Depreciation of premises and equipment
    
    
    290,569
    
    
    
    328,585Net amortization of premium on investment
securities available for sale
    
    
    57,177
    
    
    
    13,602Net amortization of premium on investment securities held to maturity
    
    
    13,064
    
    
    
    64,035Gain on sales or calls of investment securities available for sale, net
    
    
    (159,465
    )
    
    
    Gain on sale of other real estate
    
    
    (23,432
    )
    
    
    Provision for other real estate losses
    
    
    23,636Stock-based compensation
    
    
    6,875
    
    
    
    11,384Decrease in interest receivable
    
    
    556,617
    
    
    
    396,178(Increase) decrease in other assets
    
    
    490,541
    
    
    
    (300,014
    )Decrease in interest payable
    
    
    (72,617
    )
    
    
    (38,678
    )Increase in accrued expenses and other liabilities
    
    
    68,651
    
    
    
    148,877Net cash provided by operating activities
    
    
    2,045,419
    
    
    
    1,193,296Cash flows from investing activitiesProceeds from maturities, calls, and principal
repayments of investment securities available for sale
    
    
    8,251,101
    
    
    
    27,366,170Proceeds from maturities, calls, and principal
repayments of investment securities held to maturity
    
    
    5,235,000
    
    
    
    522,503Proceeds from sales of investment securities available for sale
    
    
    3,991,451
    
    
    
    3,242,279Purchases of investment securities available for sale
    
    
    (15,862,731
    )
    
    
    (18,975,401
    )Purchases of investment securities held to maturity
    
    
    
    
    
    
    (22,996,776
    )Purchases of correspondent bank stock
    
    
    
    
    
    
    (466,500
    )Net (increase) decrease in loans
    
    
    1,033,601
    
    
    
    (3,664,942
    )Purchases of premises and equipment, net
    
    
    (21,629
    )
    
    
    (19,367
    )Proceeds from sale of other real estate
    
    
    150,362
    
    
    
    Net cash provided by (used in) investing activities
    
    
    2,777,155
    
    
    
    (14,992,034
    )Cash fows from financing activitiesNet increase (decrease) in deposits
    
    
    13,115,200
    
    
    
    (47,027,475
    )Net decrease in securities sold under
agreements to repurchase
    
    
    
    
    
    
    (1,861,237
    )Cash dividends  preferred stock
    
    
    (128,750
    )
    
    
    (74,389
    )Cash dividends  common stock
    
    
    (3,220
    )
    
    
    (167,421
    )Proceeds from sale of common stock
    
    
    
    
    
    
    5,130Proceeds from sale of treasury stock
    
    
    
    
    
    
    29,938Repayments of advances from FHLB Atlanta
    
    
    (57,450
    )
    
    
    (57,450
    )Increase (decrease) in other borrowed funds
    
    
    240,858
    
    
    
    (264,184
    )Net cash provided by (used in) financing activities
    
    
    13,166,638
    
    
    
    (49,417,088
    )Net increase (decrease) in cash and cash equivalents
    
    
    17,989,212
    
    
    
    (63,215,826
    )Cash and cash equivalents, beginning of period
    
    
    54,668,111
    
    
    
    143,522,498Cash and cash equivalents, end of period
    
    $
    72,657,323
    
    
    $
    80,306,672Supplemental disclosuresCash paid during the period for:Interest
    
    $
    1,446,444
    
    
    $
    2,036,581Income taxes
    
    
    51,704
    
    
    
    45,920Noncash transactionsTransfer of loans to other real estate
through foreclosure
    
    $
    219,138
    
    
    $
    23,000
 See Notes to Consolidated Financial Statements
 5




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6




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Three Months EndedMarch 31,2010
    
    
    2009Diluted earnings per share
    
    $
    0.09
    
    
    $
    0.05Weighted average common
shares outstanding
    
    
    2,276,192
    
    
    
    2,233,863Dilutive effect of the assumed
exercise of stock options
    
    
    
    
    
    
    1,425Total weighted average common
shares and potential common
stock outstanding
    
    
    2,276,192
    
    
    
    2,235,288
 7




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##### Table of Contents



Available for Sale
  Amortized
    
    
    Grossunrealized
    
    
    Grossunrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueMarch 31, 2010U.S. Treasury securities
    
    $
    12,164,112
    
    
    $
    16,135
    
    
    $
    (15,091
    )
    
    $
    12,165,156U.S. government
sponsored agencies
    
    
    34,984,597
    
    
    
    478,210
    
    
    
    (27,147
    )
    
    
    35,435,660State and political subdivisions
    
    
    24,190,779
    
    
    
    382,286
    
    
    
    (356,322
    )
    
    
    24,216,743Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    (5,153
    )
    
    
    5,000$
    71,349,641
    
    
    $
    876,631
    
    
    $
    (403,713
    )
    
    $
    71,822,559December 31, 2009U.S. Treasury securities
    
    $
    3,024,364
    
    
    $
    3,132
    
    
    $
    (777
    )
    
    
    3,026,719U.S. government
sponsored agencies
    
    
    36,040,571
    
    
    
    444,446
    
    
    
    (16,504
    )
    
    
    36,468,513State and political subdivisions
    
    
    28,552,086
    
    
    
    517,459
    
    
    
    (355,405
    )
    
    
    28,714,140Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    (6,863
    )
    
    
    3,290$
    67,627,174
    
    
    $
    965,037
    
    
    $
    (379,549
    )
    
    $
    68,212,662
  Three Months EndedMarch 312010
    
    
    2009Gross gains realized
    
    $
    159,465
    
    
    $
    Gross losses realized
    
    
    
    
    
    
    Net gain (loss) realized
    
    $
    159,465
    
    
    $
    
 8




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##### Table of Contents



March 31, 2010
 Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesU.S. Treasury securities
    
    $
    6,053,906
    
    
    $
    (15,091
    )
    
    $
    
    
    
    $
    
    
    
    $
    6,053,906
    
    
    $
    (15,091
    )U.S. government sponsored agencies
    
    
    5,608,963
    
    
    
    (27,147
    )
    
    
    
    
    
    
    
    
    
    
    5,608,963
    
    
    
    (27,147
    )State and political subdivisions
    
    
    3,951,053
    
    
    
    (81,972
    )
    
    
    1,959,421
    
    
    
    (274,350
    )
    
    
    5,910,474
    
    
    
    (356,322
    )Equity securities
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    (5,153
    )
    
    
    5,000
    
    
    
    (5,153
    )Total temporarily impaired securities
    
    $
    15,613,922
    
    
    $
    (124,210
    )
    
    $
    1,964,421
    
    
    $
    (279,503
    )
    
    $
    17,578,343
    
    
    $
    (403,713
    )
 December 31, 2009
 Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesU.S. Treasury securities
    
    $
    2,025,312
    
    
    $
    (777
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,025,312
    
    
    $
    (777
    )U.S. government sponsored agencies
    
    
    5,035,326
    
    
    
    (16,504
    )
    
    
    
    
    
    
    
    
    
    
    5,035,326
    
    
    
    (16,504
    )State and political subdivdisions
    
    
    4,412,702
    
    
    
    (75,555
    )
    
    
    2,204,792
    
    
    
    (279,850
    )
    
    
    6,617,494
    
    
    
    (355,405
    )Equity securities
    
    
    3,290
    
    
    
    (6,863
    )
    
    
    
    
    
    
    
    
    
    
    3,290
    
    
    
    (6,863
    )Total temporarily impaired
securities
    
    $
    11,476,630
    
    
    $
    (99,699
    )
    
    $
    2,204,792
    
    
    $
    (279,850
    )
    
    $
    13,681,422
    
    
    $
    (379,549
    )
   9




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Within 1
    
    
    1 to 5
    
    
    5 to 10
    
    
    Over 10Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalAmortized CostU.S. Treasury securities
    
    $
    
    
    
    $
    12,164,112
    
    
    $
    
    
    
    $
    
    
    
    $
    12,164,112U.S. government
sponsored agencies
    
    
    
    
    
    
    24,724,718
    
    
    
    10,259,879
    
    
    
    
    
    
    
    34,984,597State and political subdivisions
    
    
    1,024,924
    
    
    
    5,448,388
    
    
    
    9,454,632
    
    
    
    8,262,835
    
    
    
    24,190,779Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,153Total
    
    $
    1,035,077
    
    
    $
    42,337,218
    
    
    $
    19,714,511
    
    
    $
    8,262,835
    
    
    $
    71,349,641Fair ValueU.S. Treasury securities
    
    $
    
    
    
    $
    12,165,156
    
    
    $
    
    
    
    $
    
    
    
    $
    12,165,156U.S. government
sponsored agencies
    
    
    
    
    
    
    24,950,031
    
    
    
    10,485,629
    
    
    
    
    
    
    
    35,435,660State and political subdivisions
    
    
    1,029,675
    
    
    
    5,601,675
    
    
    
    9,563,424
    
    
    
    8,021,969
    
    
    
    24,216,743Equity securities
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Total
    
    $
    1,034,675
    
    
    $
    42,716,862
    
    
    $
    20,049,053
    
    
    $
    8,021,969
    
    
    $
    71,822,559Total Average Yield
    
    
    3.96
    %
    
    
    2.33
    %
    
    
    3.93
    %
    
    
    4.21
    %
    
    
    3.01
    %
 10




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##### Table of Contents



Held to Maturity
  Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueMarch 31, 2010U.S. government
sponsored agencies
    
    $
    10,411,266
    
    
    $
    164,333
    
    
    $
    
    
    
    $
    10,575,599Other domestic debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,411,266
    
    
    $
    164,333
    
    
    $
    
    
    
    $
    10,575,599December 31, 2009U.S. government
sponsored agencies
    
    $
    15,424,330
    
    
    $
    105,554
    
    
    $
    (48,891
    )
    
    $
    15,480,993Other domestic debt securities
    
    
    235,000
    
    
    
    
    
    
    
    
    
    
    
    235,000$
    15,659,330
    
    
    $
    105,554
    
    
    $
    (48,891
    )
    
    $
    15,715,993
   December 31, 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
    
    $
    2,967,310
    
    
    $
    (48,891
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,967,310
    
    
    $
    (48,891
    )Other domestic debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total temporarily impaired
securities
    
    $
    2,967,310
    
    
    $
    (48,891
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,967,310
    
    
    $
    (48,891
    )
 11




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##### Table of Contents



Within 1
    
    
    1 to 5
    
    
    5 to 10
    
    
    Over 10Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalAmortized CostU.S. government
sponsored agencies
    
    $
    
    
    
    $
    7,382,541
    
    
    $
    3,028,725
    
    
    $
    
    
    
    $
    10,411,266Total
    
    $
    
    
    
    $
    7,382,541
    
    
    $
    3,028,725
    
    
    $
    
    
    
    $
    10,411,266Fair ValueU.S. government
sponsored agencies
    
    $
    
    
    
    $
    7,509,861
    
    
    $
    3,065,738
    
    
    $
    
    
    
    $
    10,575,599Total
    
    $
    
    
    
    $
    7,509,861
    
    
    $
    3,065,738
    
    
    $
    
    
    
    $
    10,575,599Total Average Yield
    
    
    0.00
    %
    
    
    2.66
    %
    
    
    3.49
    %
    
    
    0.00
    %
    
    
    2.90
    %
   March 31,2010
    
    2009Balance at beginning of year
    
    
    7,436
    
    
    
    3,592Provision charged to expense
    
    
    438
    
    
    
    360Loans charged off
    
    
    (474
    )
    
    
    (53
    )Recoveries
    
    
    52
    
    
    
    14Balance at end of period
    
    
    7,452
    
    
    
    3,913
  12




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##### Table of Contents



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
    
    
    30,646
    
    
    $
    16.02
    
    
    
    2.6Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    30,646
    
    
    
    16.02
    
    
    
    2.3Exercisable, end of period
    
    
    30,246
    
    
    
    15.99
    
    
    
    2.3
  2010
    
    2009Aggregate intrinsic value
of outstanding options
    
    $
    
    
    
    $
    16,157Aggregate intrinsic value
of exercisable options
    
    $
    
    
    
    $
    16,157
  2007 Equity Incentive Plan
  Shares under
    
    exercise price
    
    contractualoption
    
    per share
    
    lifeOptions outstanding, beginning of period
    
    
    4,000
    
    
    $
    14.85
    
    
    
    9.4Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    4,000
    
    
    
    14.85
    
    
    
    9.2Exercisable, end of period
    
    
    800
    
    
    
    14.85
    
    
    
    9.2
 14




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##### Table of Contents



Restricted Stock
  Restricted
    
    Weightedstock
    
    averageactivity
    
    fair valueShares granted at beginning of period
    
    
    10,022
    
    
    
    17.20Granted
    
    
    
    
    
    
    Surrendered
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Shares granted at end of period
    
    
    10,022
    
    
    
    17.20
      15




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##### Table of Contents



Fair Value Hierarchy
  Level 1
 Level 2
 Level 3
  Assets Measured at Fair Value on a Recurring Basis
  Available for Sale Securities
  16




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##### Table of Contents



Fair Value Measurements at March 31, 2010 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
    
    $
    71,822,559
    
    
    $
    13,244,965
    
    
    $
    58,577,594
    
    
    $
    
 Fair Value Measurements at March 31, 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
    
    $
    76,882,032
    
    
    $
    
    
    
    $
    76,882,032
    
    
    $
    
 Assets Measured at Fair Value on a Non-recurring Basis
  Impaired Loans
  Other Real Estate (Foreclosed Assets)
   17




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##### Table of Contents



Three months endedMarch 31, 2010Carrying Value at March 31, 2010
    
    TotalTotal
    
    Level 1
    
    Level 2
    
    Level 3
    
    lossesImpaired loans (1)
    
    $
    41,593,920
    
    
    $
    
    
    
    $
    
    
    
    $
    41,593,920
    
    
    $
    (439,493
    )Other real estate
    
    
    7,679,262
    
    
    
    
    
    
    
    
    
    
    
    7,679,262
    
    
    
    (204
    )
 
 (1)
    
    Losses related to loans were recognized as either charge-offs or specific allocations of the allowance for loan losses Three months endedMarch 31, 2009Carrying Value at March 31, 2009
    
    TotalTotal
    
    Level 1
    
    Level 2
    
    Level 3
    
    lossesImpaired loans (1)
    
    $
    17,713,047
    
    
    $
    
    
    
    $
    7,053,888
    
    
    $
    10,659,159
    
    
    $
    (451,430
    )Other real estate
    
    
    5,546,501
    
    
    
    
    
    
    
    5,546,501
    
    
    
    
 
 (1)
    
    Losses relatd to loans were recognized as either charge-offs or specific allocations of the allowance for loan losses. 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.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.(f)
    
    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.(g)
    
    Accrued InterestThe fair value of accrued interest receivable and payable approximates their carrying
value.(h)
    
    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




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##### Table of Contents



The carrying value and estimated fair value of the Corporations financial instruments
at March 31, 2010 and December 31, 2009 are as follows (in thousands):
 March 31, 2010
    
    December 31, 2009Carrying
    
    Estimated
    
    Carrying
    
    Estimatedamount
    
    fair value
    
    amount
    
    fair value(Dollars in Thousands)Financial assets:Cash and shortterm
investments
    
    $
    72,657
    
    
    $
    72,657
    
    
    $
    54,668
    
    
    $
    54,668Investment securities
    
    
    82,234
    
    
    
    82,399
    
    
    
    83,872
    
    
    
    83,929Loans, net of the
allowance for loan
losses
    
    
    274,220
    
    
    
    279,650
    
    
    
    275,911
    
    
    
    276,090Bank owned life insurance
    
    
    2,758
    
    
    
    2,758
    
    
    
    2,729
    
    
    
    2,729Correspondent bank stock
    
    
    1,889
    
    
    
    1,889
    
    
    
    1,889
    
    
    
    1,889Accrued interest receivable
    
    
    2,302
    
    
    
    2,302
    
    
    
    2,858
    
    
    
    2,858Financial liabilities:Deposits
    
    
    417,925
    
    
    
    422,728
    
    
    
    404,810
    
    
    
    405,504Other borrowed funds
    
    
    865
    
    
    
    865
    
    
    
    624
    
    
    
    624FHLB advances
    
    
    1,388
    
    
    
    1,485
    
    
    
    1,445
    
    
    
    1,539Subordinated Debt
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310Accrued interest payable
    
    
    548
    
    
    
    548
    
    
    
    621
    
    
    
    621
   Improving
Disclosures About Fair Value Measurements,
 20




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##### Table of Contents



21




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##### Table of Contents



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




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##### Table of Contents



Results of Operations
  Three Months Ended March 31, 2010 and 2009, Compared
 Summary
  Net Interest Income
   23




---



##### Table of Contents



Provision for Loan Losses
 Allowance for
Loan Losses
 Noninterest Income
  Noninterest Expense
  24




---



##### Table of Contents



Income Tax Benefits
  Financial Condition and Liquidity
   Cash and Cash Equivalents
  Investment Securities  Available for Sale
  25




---



##### Table of Contents



Investment Securities  Held to Maturity
  Loans
  Allowance for Loan Losses
    26




---



##### Table of Contents



As of the three months endedMarch 31,2010
    
    
    2009Impaired loans with a valuation allowance
    
    $
    20,958,915
    
    
    $
    13,839,767Impaired loans without a valuation allowance
    
    
    25,973,791
    
    
    
    5,379,342Total impaired loans
    
    $
    46,932,706
    
    
    $
    19,219,109Valuation allowance related to impaired loans
    
    $
    5,338,786
    
    
    $
    2,004,794Total nonaccrual loans
    
    
    19,605,787
    
    
    
    19,345,112Total loans past due ninety days or more and still accruing
    
    
    1,373,999
    
    
    
    30,715Troubled debt restructured loans
    
    
    1,414,314
    
    
    
    2,439,955
 27




---



##### Table of Contents



Non-performing Assets
 March 31,
    
    
    December 31,Description
    
    2010
    
    
    2009(Dollars in Thousands)A
    
    
    Loans accounted for on
a nonaccrual basis
    
    $
    19,606
    
    
    $
    18,993B
    
    
    Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    
    1,374
    
    
    
    210C
    
    
    Loans, the terms of which have
been renegotiated to provide
a reduction or deferral of interest
or principal because of a
deterioration in the financial
position of the borrower.
    
    
    1,414
    
    
    
    1,657D
    
    
    Other non-performing assets
    
    
    7,679
    
    
    
    7,611Total
    
    $
    30,073
    
    
    $
    28,471
 28




---



##### Table of Contents



Premises and Equipment
  Intangible Assets
  Florida Charter
 Internet Domain Address www.unitedbank.com
  Deposits
  Liquidity
  29




---



##### Table of Contents



Capital Adequacy
     30




---



##### Table of Contents



AdequatelyMarch 31,
    
    Capitalized2010
    
    TreatmentUnited Bancorporation of Alabama, Inc.Total risk-based capital
    
    
    15.88
    %
    
    
    8.0
    %Tier 1 risk-based capital
    
    
    13.49
    
    
    
    4.0Leverage Ratio
    
    
    8.97
    
    
    
    4.0United BankTotal risk-based capital
    
    
    14.59
    %
    
    
    8.0
    %Tier 1 risk-based capital
    
    
    13.32
    
    
    
    4.0Leverage ratio
    
    
    8.95
    
    
    
    4.0
  Off Balance Sheet items
   March 31,2010Commitments to extend credit
    
    $
    34,291,970Standby letters of credit
    
    
    1,151,566
 31




---



##### Table of Contents



Item 4. Controls and Procedures
   32




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##### 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
 33




---



##### Table of Contents



Date: May 13, 2010
    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 34




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of interim principal accounting officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant
to section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant
to section 906 of the
Sarbanes-Oxley Act of 2002
 35