##### 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, 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(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ
  Class A Common Stock 2,257,314 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 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
    
    
    21Item 4. Controls and Procedures
    
    
    33PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 6. Exhibits
    
    
    34EX-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
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)AssetsCash and due from banks
    
    $
    13,895,305
    
    
    $
    35,148,646Interest bearing deposits in banks
    
    
    82,437,543
    
    
    
    91,773,852Federal funds sold
    
    
    20,000,000
    
    
    
    16,600,000Cash and cash equivalents
    
    
    116,332,848
    
    
    
    143,522,498Securities available for sale (amortized cost of $65,014,366
and $84,725,733 respectively)
    
    
    64,823,828
    
    
    
    85,526,712Securities held to maturity (market values of $27,943,929
and $6,596,039 respectively)
    
    
    28,021,142
    
    
    
    6,550,000Loans
    
    
    287,195,698
    
    
    
    279,779,877Less: Allowance for loan losses
    
    
    4,899,092
    
    
    
    3,591,558Net loans
    
    
    282,296,606
    
    
    
    276,188,319Premises and equipment, net
    
    
    18,227,993
    
    
    
    18,856,327Interest receivable
    
    
    3,003,551
    
    
    
    3,253,604Intangible assets
    
    
    934,763
    
    
    
    934,763Other assets
    
    
    16,135,462
    
    
    
    15,212,784Total assets
    
    
    529,776,193
    
    
    
    550,045,007Liabilities and Stockholders EquityDeposits:Non-interest bearing
    
    
    146,125,851
    
    
    
    172,291,464Interest bearing
    
    
    327,745,763
    
    
    
    318,864,162Total deposits
    
    
    473,871,614
    
    
    
    491,155,626Securities sold under agreements to repurchase
    
    
    0
    
    
    
    1,861,237Advances from Federal Home Loan Bank of Atlanta
    
    
    1,527,500
    
    
    
    1,609,900Treasury, tax, and loan account
    
    
    686,270
    
    
    
    495,572Interest payable
    
    
    803,081
    
    
    
    912,570Accrued expenses and other liabilities
    
    
    1,997,721
    
    
    
    1,577,461Note payable to Trust
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    489,196,186
    
    
    
    507,922,366Stockholders equityPreferred stock of $.01 par value. Authorized 250,000 shares;
10,300 shares, net of discount
    
    
    9,983,741
    
    
    
    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
    
    
    6,458,691
    
    
    
    6,429,869Unearned stock based compensation
    
    
    (79,394
    )
    
    
    (87,446
    )Accumulated other comprehensive income (loss) net of tax
    
    
    (114,327
    )
    
    
    480,584Retained earnings
    
    
    25,541,054
    
    
    
    26,572,18841,813,655
    
    
    
    43,372,457Less: 153,839 and 155,855 treasury shares, at cost, respectively
    
    
    1,233,648
    
    
    
    1,249,816Total stockholders equity
    
    
    40,580,007
    
    
    
    42,122,641Total liabilities and
stockholders equity
    
    $
    529,776,193
    
    
    $
    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
    
    
    Six Months EndedJune 30
    
    
    June 302009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Interest and fees on
loans
    
    $
    4,288,089
    
    
    $
    4,874,837
    
    
    $
    8,413,890
    
    
    $
    9,931,722Interest on investment
securities available
for sale:Taxable
    
    
    601,793
    
    
    
    767,392
    
    
    
    1,250,807
    
    
    
    1,704,939Nontaxable
    
    
    309,552
    
    
    
    348,257
    
    
    
    635,473
    
    
    
    695,677Total investment income
    
    
    911,345
    
    
    
    1,115,649
    
    
    
    1,886,280
    
    
    
    2,400,616Other interest income
    
    
    61,957
    
    
    
    147,550
    
    
    
    166,911
    
    
    
    401,736Total interest
income
    
    
    5,261,391
    
    
    
    6,138,036
    
    
    
    10,467,081
    
    
    
    12,734,074Interest expense:Interest on deposits
    
    
    1,766,175
    
    
    
    2,363,789
    
    
    
    3,660,424
    
    
    
    4,968,961Interest on other
borrowed funds
    
    
    99,396
    
    
    
    340,178
    
    
    
    203,050
    
    
    
    952,018Total interest
expense
    
    
    1,865,571
    
    
    
    2,703,967
    
    
    
    3,863,474
    
    
    
    5,920,979Net interest income
    
    
    3,395,820
    
    
    
    3,434,069
    
    
    
    6,603,607
    
    
    
    6,813,095Provision for loan losses
    
    
    2,240,000
    
    
    
    500,000
    
    
    
    2,600,000
    
    
    
    740,000Net interest income
after
provision for
loan losses
    
    
    1,155,820
    
    
    
    2,934,069
    
    
    
    4,003,607
    
    
    
    6,073,095Noninterest income:Service charge on
deposits
    
    
    869,184
    
    
    
    857,712
    
    
    
    1,716,277
    
    
    
    1,665,179Investment securities
gains (losses), net
    
    
    172,066
    
    
    
    (2,700
    )
    
    
    172,066
    
    
    
    61Mortgage loan and
related fees
    
    
    44,817
    
    
    
    58,240
    
    
    
    77,285
    
    
    
    118,871Other
    
    
    175,848
    
    
    
    226,938
    
    
    
    399,811
    
    
    
    473,600Total noninterest
income
    
    
    1,261,915
    
    
    
    1,140,190
    
    
    
    2,365,439
    
    
    
    2,257,711Noninterest expense:Salaries and benefits
    
    
    2,162,829
    
    
    
    2,067,828
    
    
    
    4,359,825
    
    
    
    4,225,148Net occupancy expense
    
    
    602,401
    
    
    
    601,060
    
    
    
    1,176,912
    
    
    
    1,212,924Other
    
    
    1,409,856
    
    
    
    1,234,637
    
    
    
    2,452,321
    
    
    
    2,422,274Total noninterest
expense
    
    
    4,175,086
    
    
    
    3,903,525
    
    
    
    7,989,058
    
    
    
    7,860,346Earnings (Losses) before
income tax benefits
    
    
    (1,757,351
    )
    
    
    170,734
    
    
    
    (1,620,012
    )
    
    
    470,460Income tax benefits
    
    
    (753,200
    )
    
    
    (61,073
    )
    
    
    (825,188
    )
    
    
    (74,081
    )Net earnings (losses)
    
    
    (1,004,151
    )
    
    
    231,807
    
    
    
    (794,824
    )
    
    
    544,541Preferred stock
dividends
    
    
    128,750
    
    
    
    
    
    
    
    203,139
    
    
    
    Accretion on preferred
stock discount
    
    
    15,289
    
    
    
    
    
    
    
    30,360
    
    
    
    Net earnings (losses)
available to common
shareholders
    
    $
    (1,148,190
    )
    
    $
    231,807
    
    
    $
    (1,028,323
    )
    
    $
    544,541Basic earnings (losses)
per share
    
    $
    (0.51
    )
    
    $
    0.10
    
    
    $
    (0.46
    )
    
    $
    0.24Diluted earnings (losses)
per share
    
    $
    (0.51
    )
    
    $
    0.10
    
    
    $
    (0.46
    )
    
    $
    0.24Basic weighted average
shares outstanding
    
    
    2,234,920
    
    
    
    2,251,235
    
    
    
    2,234,394
    
    
    
    2,250,852Diluted weighted average
shares outstanding
    
    
    2,236,167
    
    
    
    2,252,091
    
    
    
    2,235,641
    
    
    
    2,251,708Cash dividend per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.08Statement of
Comprehensive Income
(Loss)Net earnings (losses)
    
    $
    (1,004,151
    )
    
    $
    231,807
    
    
    $
    (794,824
    )
    
    $
    544,541Other comprehensive
income (loss), net of
tax:Unrealized holding
losses arising
during the period
    
    
    (331,165
    )
    
    
    (621,141
    )
    
    
    (491,671
    )
    
    
    (141,783
    )Reclassification
adjustment for
gains
included
in net
earnings
(losses)
    
    
    (103,240
    )
    
    
    1,620
    
    
    
    (103,240
    )
    
    
    (37
    )Comprehensive Income
(Loss)
    
    $
    (1,438,556
    )
    
    $
    (387,714
    )
    
    $
    (1,389,735
    )
    
    $
    402,721
 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)
 Six Months EndedJune 302009
    
    
    2008Cash flows from operating activitiesNet earnings (losses)
    
    $
    (794,824
    )
    
    $
    544,541Adjustments to reconcile net earnings to net
cash provided by operating activitiesProvision for loan losses
    
    
    2,600,000
    
    
    
    740,000Depreciation of premises and equipment
    
    
    657,379
    
    
    
    649,401Net
amortization (accretion) of premium / discount on investment securities available for sale
    
    
    49,121
    
    
    
    (539,165
    )Net amortization of premium on investment securities held to maturity
    
    
    131,201
    
    
    
    Gain on sales of investment securities available for sale, net
    
    
    (172,066
    )
    
    
    (61
    )(Gain) loss on sale of other real estate
    
    
    (22,418
    )
    
    
    1,045Writedown of other real estate
    
    
    4,500
    
    
    
    85,000Stock-based compensation
    
    
    17,982
    
    
    
    11,400Gain (loss) on disposal of equipment
    
    
    9,790
    
    
    
    (4,754
    )Decrease in interest receivable
    
    
    250,053
    
    
    
    707,614(Increase) decrease in other assets
    
    
    (2,064,872
    )
    
    
    46,234Decrease in interest payable
    
    
    (109,489
    )
    
    
    (36,444
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    584,876
    
    
    
    (127,421
    )Net cash provided by operating activities
    
    
    1,144,043
    
    
    
    2,077,390Cash flows from investing activitiesProceeds from maturities, calls, and principal repayments of investment securities available for sale
    
    
    34,209,798
    
    
    
    710,398,842Proceeds from maturities, calls, and principal repayments of investment securities held to maturity
    
    
    1,000,000
    
    
    
    Proceeds from sales of investment securities available for sale
    
    
    14,258,707
    
    
    
    4,993,512Purchases of investment securities available for sale
    
    
    (25,410,331
    )
    
    
    (729,134,228
    )Purchases of investment securities held to maturity
    
    
    (22,602,343
    )
    
    
    Net increase in loans
    
    
    (10,492,428
    )
    
    
    (24,923,951
    )Purchases of premises and equipment, net
    
    
    (46,835
    )
    
    
    (1,590,869
    )Proceeds from sale of premises and equipment
    
    
    8,000
    
    
    
    7,000Proceeds from sale of other real estate
    
    
    116,997
    
    
    
    113,279Net cash used in investing activities
    
    
    (8,958,435
    )
    
    
    (40,136,415
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    (17,284,012
    )
    
    
    2,440,022Net increase (decrease) in securities sold under
agreements to repurchase
    
    
    (1,861,237
    )
    
    
    28,651,152Cash dividends  preferred stock
    
    
    (203,139
    )
    
    
    Cash dividends  common stock
    
    
    (167,426
    )
    
    
    (337,471
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    9,986Proceeds from sale of common stock
    
    
    5,130
    
    
    
    6,732Purchase of treasury stock
    
    
    
    
    
    
    (31,388
    )Proceeds from sale of treasury stock
    
    
    29,938
    
    
    
    61,884Repayments of advances from FHLB Atlanta
    
    
    (82,400
    )
    
    
    (82,400
    )Increase (decrease) in other borrowed funds
    
    
    190,698
    
    
    
    (130,522
    )Net cash provided by (used in) financing activities
    
    
    (19,375,258
    )
    
    
    30,587,995Net decrease in cash and cash equivalents
    
    
    (27,189,650
    )
    
    
    (7,471,030
    )Cash and cash equivalents, beginning of period
    
    
    143,522,498
    
    
    
    54,119,315Cash and cash equivalents, end of period
    
    $
    116,332,848
    
    
    $
    46,648,285Supplemental disclosuresCash paid during the period for:Interest
    
    $
    3,972,963
    
    
    $
    5,957,423Income taxes
    
    
    52,352
    
    
    
    83,161Noncash transactionsTransfer of loans to other real estate
through foreclosure
    
    $
    1,784,141
    
    
    $
    1,552,060
 See Notes to Consolidated Financial Statements
 5




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6




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Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302009
    
    
    2008
    
    
    2009
    
    
    2008Diluted earnings (losses) per share
    
    $
    (0.51
    )
    
    $
    0.10
    
    
    $
    (0.46
    )
    
    $
    0.24Weighted average common
shares outstanding
    
    
    2,234,920
    
    
    
    2,251,235
    
    
    
    2,234,394
    
    
    
    2,250,852Effect of the assumed exercise of
stock options based on the
treasury stock method using
average market price
    
    
    1,247
    
    
    
    856
    
    
    
    1,247
    
    
    
    856Total weighted average common
shares and potential common
stock outstanding
    
    
    2,236,167
    
    
    
    2,252,091
    
    
    
    2,235,641
    
    
    
    2,251,708
 7




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##### Table of Contents



Available for Sale
  Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueJune 30, 2009U.S. government
sponsored agencies
    
    $
    34,867,979
    
    
    $
    410,555
    
    
    $
    (163,255
    )
    
    $
    35,115,279State and political subdivisions
    
    
    30,136,234
    
    
    
    277,545
    
    
    
    (707,160
    )
    
    
    29,706,619Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    (8,223
    )
    
    
    1,930$
    65,014,366
    
    
    $
    688,100
    
    
    $
    (878,638
    )
    
    $
    64,823,828December 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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross gains realized
    
    $
    189,353
    
    
    $
    1,000
    
    
    $
    189,353
    
    
    $
    3,761Gross losses realized
    
    
    (17,287
    )
    
    
    (3,700
    )
    
    
    (17,287
    )
    
    
    (3,700
    )Net gain (loss) realized
    
    $
    172,066
    
    
    $
    (2,700
    )
    
    $
    172,066
    
    
    $
    61
 8




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##### Table of Contents



June 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 &
mortgage-backed
securities
    
    $
    11,101,766
    
    
    $
    (163,255
    )
    
    $
    
    
    
    $
    
    
    
    $
    11,101,766
    
    
    $
    (163,255
    )State and political
subdivisions
    
    $
    9,900,093
    
    
    $
    (275,962
    )
    
    $
    3,453,563
    
    
    $
    (431,198
    )
    
    
    13,353,656
    
    
    
    (707,160
    )Equity securities
    
    
    1,930
    
    
    
    (8,223
    )
    
    
    
    
    
    
    
    
    
    
    1,930
    
    
    
    (8,223
    )$
    21,003,789
    
    
    $
    (447,440
    )
    
    $
    3,453,563
    
    
    $
    (431,198
    )
    
    $
    24,457,352
    
    
    $
    (878,638
    )
 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
    )
  Within 1
    
    
    1 to 5
    
    
    5 to 10
    
    
    Over 10Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalAmortized CostU.S.
government
sponsored agencies
    
    $
    2,499,399
    
    
    $
    20,053,913
    
    
    $
    12,314,667
    
    
    $
    
    
    
    $
    34,867,979State and political subdivisions
    
    
    1,004,889
    
    
    
    6,405,901
    
    
    
    12,805,916
    
    
    
    9,919,528
    
    
    
    30,136,234Equity securities
    
    
    10,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,153Total
    
    $
    3,514,441
    
    
    $
    26,459,814
    
    
    $
    25,120,583
    
    
    $
    9,919,528
    
    
    $
    65,014,366Fair ValueU.S. government
sponsored agencies
    
    $
    2,506,197
    
    
    $
    20,262,006
    
    
    $
    12,347,076
    
    
    $
    
    
    
    $
    35,115,279State and political subdivisions
    
    
    1,010,089
    
    
    
    6,485,366
    
    
    
    12,741,644
    
    
    
    9,469,520
    
    
    
    29,706,619Equity securities
    
    
    1,930
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,930Total
    
    $
    3,518,216
    
    
    $
    26,747,372
    
    
    $
    25,088,720
    
    
    $
    9,469,520
    
    
    $
    64,823,828Total Average Yield
    
    
    2.11
    %
    
    
    3.53
    %
    
    
    4.00
    %
    
    
    4.09
    %
    
    
    3.72
    %
 9




---



##### Table of Contents



Held to Maturity
  Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueJune 30, 2009U.S. government
sponsored agencies
securities
    
    $
    27,521,142
    
    
    $
    101,554
    
    
    $
    (178,767
    )
    
    $
    27,443,929Other domestic debt securities
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000$
    28,021,142
    
    
    $
    101,554
    
    
    $
    (178,767
    )
    
    $
    27,943,929December 31, 2008U.S. government
sponsored agencies
securities
    
    $
    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
   June 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
    
    $
    14,257,117
    
    
    $
    (178,767
    )
    
    $
    
    
    
    $
    
    
    
    $
    14,257,117
    
    
    $
    (178,767
    )Other domestic debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total temporarily impaired
securities
    
    $
    14,257,117
    
    
    $
    (178,767
    )
    
    $
    
    
    
    $
    
    
    
    $
    14,257,117
    
    
    $
    (178,767
    )
 10




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##### Table of Contents



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
    
    $
    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
    
    $
    
    
    
    $
    8,080,107
    
    
    $
    18,438,229
    
    
    $
    1,002,806
    
    
    $
    27,521,142State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other debt securities
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000Total
    
    $
    
    
    
    $
    8,580,107
    
    
    $
    18,438,229
    
    
    $
    1,002,806
    
    
    $
    28,021,142Fair ValueU.S. government
sponsored agencies
    
    $
    
    
    
    $
    8,115,981
    
    
    $
    18,324,441
    
    
    $
    1,003,507
    
    
    $
    27,443,929State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other debt securities
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000Total
    
    $
    
    
    
    $
    8,615,981
    
    
    $
    18,324,441
    
    
    $
    1,003,507
    
    
    $
    27,943,929Total Average Yield
    
    
    0.00
    %
    
    
    3.09
    %
    
    
    3.43
    %
    
    
    1.15
    %
    
    
    3.24
    %
 11




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##### Table of Contents



June 302009
    
    2008Balance at beginning of year
    
    
    3,592
    
    
    
    3,982Provision charged to expense
    
    
    2,600
    
    
    
    740Loans charged off
    
    
    (1,314
    )
    
    
    (2,159
    )Recoveries
    
    
    21
    
    
    
    19Balance at end of period
    
    
    4,899
    
    
    
    2,582
   Disclosures about Segments of an
Enterprise and Related Information,
  Share-Based Payment
 12




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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
    
    
    
    2.6Exercisable, end of period
    
    
    38,006
    
    
    
    15.30
    
    
    
    2.5
  2009
    
    2008Aggregate intrinsic value
of outstanding options
    
    $
    17,381
    
    
    $
    58,021Aggregate intrinsic value
of exercisable options
    
    $
    17,381
    
    
    $
    13,229
  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
    
    
    
    9.9Exercisable, end of period
    
    
    800
    
    
    
    14.85
    
    
    
    9.9
 13




---



##### Table of Contents



2009
    
    2008Aggregate intrinsic value
of outstanding options
    
    $
    600
    
    
    $
    Aggregate intrinsic value
of exercisable options
    
    $
    120
    
    
    $
    
  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
  stock
    
    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
   14




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##### Table of Contents



Fair Value Measurements
  
    
    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
  15




---



##### Table of Contents



Available-for-Sale Securities
  Fair Value Measurements at June 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
    
    $
    64,823,828
    
    
    $
    1,930
    
    
    $
    64,821,898
    
    
    $
    
 Assets Measured at Fair Value on a Nonrecurring Basis
  Impaired Loans
  Foreclosed Assets (Other Real Estate)
  16




---



##### Table of Contents



Six Months EndedJune 30, 2009Carrying Value at June 30, 2009
    
    Total gainsTotal
    
    Level 1
    
    Level 2
    

Level 3
    
    (losses)Impaired loans (1)
    
    $
    19,200,702
    
    
    $
    
    
    
    $
    6,490,552
    
    
    $
    12,710,150
    
    
    $
    (2,273,902
    )Foreclosed assets
    
    
    7,209,141
    
    
    
    
    
    
    
    7,209,141
    
    
    
    
    
    
    
    (4,500
    )
 
 (1)
    
    Losses related to loans were recognized as either charge-offs or specific
allocations of the allowance for loan loss The Fair Value Option for Financial Assets
and Financial Liabilities, including an amendment of FASB Statement No. 115
 Fair Value of Financial Instruments
  17




---



##### Table of Contents



(a)
    
    Cash and Short-term InvestmentsFair value approximates the carrying value of such assets.(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.
 18




---



##### Table of Contents



The carrying value and estimated fair value of the Corporations financial instruments
at June 30, 2009 and December 31, 2008 are as follows (in thousands):
 June 30, 2009
    
    December 31, 2008Carrying
    
    Estimated
    
    Carrying
    
    Estimatedamount
    
    fair value
    
    amount
    
    fair value(Dollars in Thousands)Financial assets:Cash and
short-term
investments
    
    $
    116,333
    
    
    $
    116,333
    
    
    $
    143,522
    
    
    $
    143,546Investment securities
    
    
    92,845
    
    
    
    92,768
    
    
    
    92,077
    
    
    
    92,123Loans, net of the
allowance for loan
losses
    
    
    282,297
    
    
    
    283,211
    
    
    
    276,188
    
    
    
    275,720Bank owned life insurance
    
    
    2,670
    
    
    
    2,670
    
    
    
    2,601
    
    
    
    2,601Accrued interest receivable
    
    
    3,004
    
    
    
    3,004
    
    
    
    3,254
    
    
    
    3,254Financial liabilities:Deposits
    
    
    473,872
    
    
    
    479,629
    
    
    
    491,156
    
    
    
    492,531Securities sold under
agreements to repurchase
    
    
    
    
    
    
    
    
    
    
    1,861
    
    
    
    1,861Other borrowed funds
    
    
    686
    
    
    
    686
    
    
    
    496
    
    
    
    496FHLB advances
    
    
    1,528
    
    
    
    1,617
    
    
    
    1,610
    
    
    
    2,206Subordinated Debt
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310
    
    
    
    10,310Accrued interest payable
    
    
    803
    
    
    
    803
    
    
    
    913
    
    
    
    913
     19




---



##### Table of Contents



20




---



##### 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
 21




---



##### Table of Contents



Results of Operations
  Six Months Ended June 30, 2009 and 2008, Compared
 Summary
   22




---



##### Table of Contents



Net Interest Income
     Provision for Loan Losses
 Allowance for Loan
Losses
 23




---



##### Table of Contents



Noninterest Income
   Noninterest Expense
      24




---



##### Table of Contents



Income Taxes
  Three Months Ended June 30, 2009 and 2008, Compared
 Summary
  Net Interest Income
    25




---



##### Table of Contents



Provision for Loan Losses
 Allowance for Loan Losses
 Noninterest Income
  Noninterest Expense
  Income Taxes
  Financial Condition and Liquidity
  26




---



##### Table of Contents



Cash and Cash Equivalents
  Investment Securities  Available for Sale
  Investment Securities  Held to Maturity
  Loans
  Allowance for Loan Losses
  27




---



##### Table of Contents



As of the six months endedJune 30,2009
    
    
    2008Impaired loans with a valuation allowance
    
    $
    16,285,462
    
    
    $
    5,406,919Impaired loans without a valuation allowance
    
    
    5,661,240
    
    
    
    5,012,929Total impaired loans
    
    $
    21,946,702
    
    
    $
    10,419,848Valuation allowance related to impaired loans
    
    $
    2,746,000
    
    
    $
    845,513Total nonaccrual loans
    
    
    20,147,173
    
    
    
    8,168,374Total loans past due ninety days or more and still accruing
    
    
    11,442
    
    
    
    22,474Troubled debt restructured loans
    
    
    4,486,732
    
    
    
    1,410,575
 28




---



##### Table of Contents



Non-performing Assets
 June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in Thousands)DescriptionA
    
    Loans accounted for on
a nonaccrual basis
    
    $
    20,147
    
    
    $
    14,700B
    
    Loans which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above)
    
    
    11
    
    
    
    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.
    
    
    4,487
    
    
    
    1,106D
    
    Other non-performing assets
    
    
    7,209
    
    
    
    5,524Total
    
    $
    31,854
    
    
    $
    21,358
 Premises and Equipment
  Intangible Assets
  Florida Charter
 29




---



##### Table of Contents



Internet Domain Address www.unitedbank.com
  Deposits
  Repurchase Agreements
  Liquidity
  30




---



##### Table of Contents



Capital Adequacy
     31




---



##### Table of Contents



WellJune 30,
    
    Capitalized2009
    
    TreatmentUnited Bancorporation of Alabama, Inc.Total risk-based capital
    
    
    17.29
    %
    
    
    N/ATier 1 risk-based capital
    
    
    15.72
    
    
    
    N/ALeverage Ratio
    
    
    9.71
    
    
    
    N/AUnited BankTotal risk-based capital
    
    
    16.53
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    15.27
    
    
    
    6.00Leverage ratio
    
    
    9.70
    
    
    
    5.00
  Off Balance Sheet items
   June 30,2009Commitments to extend credit
    
    $
    44,700,000Standby letters of credit
    
    
    1,876,000
 32




---



##### Table of Contents



Item 4. Controls and Procedures
   33




---



##### Table of Contents



Item 1A.
    
    Risk Factors
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
 (a)
    
    A description of actions taken at the annual meeting of security holders of
United Bancorporation of Alabama, Inc. on May 3, 2009 was reported under Item 4 of the
Corporations Form 10-Q for the quarter ended March 31, 2009, and is incorporated by
reference herein.
 
 Item 6.
    
    Exhibits
 (a)
    
    Exhibits.
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal 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
 34




---



##### Table of Contents



UNITED BANCORPORATION OF ALABAMA, INC.Date: August 13, 2009/s/ Robert R. Jones, III

Robert R. Jones, IIIPresident and CEO/s/ Allen O. Jones, Jr.

Allen O. Jones, Jr.Senior Vice President and CFO
 35




---



##### 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
 36