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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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(Mark One)

|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | ----------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2005.



Or



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -----------------------------------------------------------------------------------------



For the transition period from  to



Commission File No. 0-13395



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UNITED FINANCIAL BANKING COMPANIES, INC.



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|                       |  |                                           
|---------------------- |  | ------------------------------------------
|A Virginia Corporation |  | IRS Employer Identification No. 54-1201253



8399 Leesburg Pike,
Vienna, Virginia 22182

Telephone: (703) 734-0070



Common Stock $1.00 Par Value

1,041,080 Shares Outstanding

as of March 31, 2005



Transitional Small Business Disclosure
Format:    Yes ̈No  x



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Part 1. Financial Information



Item 1: Financial Statements



UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

(Unaudited)



|                                                        |  |                              |           |   |      |   |          
|------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ---------
|                                                        |  | Three Months Ended March 31,
|                                                        |  | 2005                         |           |   | 2004
|Interest income:                                        |  |                              |           |   |      |   |          
|Interest and fees on loans                              |  | $                            | 2,120,147 |   |      | $ | 1,706,338
|Interest on investment securities                       |  |                              | 137,802   |   |      |   | 91,383   
|Interest on federal funds sold                          |  |                              | 60,755    |   |      |   | 34,322   
|Interest on interest-bearing deposits                   |  |                              | 37,591    |   |      |   | 4,881    
|                                                        |  |                              |           |   |      |   |          
|Total interest income                                   |  |                              | 2,356,295 |   |      |   | 1,836,924
|                                                        |  |                              |           |   |      |   |          
|Interest expense:                                       |  |                              |           |   |      |   |          
|Interest on deposits                                    |  |                              | 551,196   |   |      |   | 395,651  
|Interest on short-term borrowings                       |  |                              | 9,443     |   |      |   | 7,939    
|Interest on long-term debt                              |  |                              | 112,408   |   |      |   | 44,542   
|                                                        |  |                              |           |   |      |   |          
|Total interest expense                                  |  |                              | 673,047   |   |      |   | 448,132  
|                                                        |  |                              |           |   |      |   |          
|Net interest income                                     |  |                              | 1,683,248 |   |      |   | 1,388,792
|                                                        |  |                             
|Provision for loan losses                               |  |                              | 109,102   |   |      |   | 57,657   
|                                                        |  |                              |           |   |      |   |          
|Net interest income after provision for loan losses     |  |                              | 1,574,146 |   |      |   | 1,331,135
|                                                        |  |                              |           |   |      |   |          
|Noninterest income:                                     |  |                              |           |   |      |   |          
|Loan servicing and other fees                           |  |                              | 92,112    |   |      |   | 33,177   
|Other income                                            |  |                              | 101,869   |   |      |   | 173,438  
|                                                        |  |                              |           |   |      |   |          
|Total noninterest income                                |  |                              | 193,981   |   |      |   | 206,615  
|                                                        |  |                              |           |   |      |   |          
|Noninterest expense:                                    |  |                              |           |   |      |   |          
|Salaries                                                |  |                              | 737,626   |   |      |   | 504,266  
|Employee benefits                                       |  |                              | 130,146   |   |      |   | 103,259  
|Occupancy                                               |  |                              | 212,574   |   |      |   | 193,443  
|Furniture and equipment                                 |  |                              | 87,728    |   |      |   | 72,548   
|Data processing                                         |  |                              | 58,827    |   |      |   | 54,512   
|Other insurance                                         |  |                              | 12,098    |   |      |   | 10,143   
|Legal                                                   |  |                              | 3,879     |   |      |   | 6,704    
|FDIC / FICO bond insurance                              |  |                              | 5,181     |   |      |   | 4,317    
|Other expense                                           |  |                              | 228,930   |   |      |   | 219,154  
|                                                        |  |                              |           |   |      |   |          
|Total noninterest expense                               |  |                              | 1,476,989 |   |      |   | 1,168,346
|                                                        |  |                              |           |   |      |   |          
|Income before income taxes                              |  |                              | 291,138   |   |      |   | 369,404  
|                                                        |  |                             
|Provision for income taxes                              |  |                              | 98,987    |   |      |   | 118,469  
|                                                        |  |                              |           |   |      |   |          
|Net income                                              |  | $                            | 192,151   |   |      | $ | 250,935  
|                                                        |  |                              |           |   |      |   |          
|Net income per common share:                            |  |                              |           |   |      |   |          
|Basic                                                   |  | $                            | 0.18      |   |      | $ | 0.24     
|                                                        |  |                              |           |   |      |   |          
|Diluted                                                 |  | $                            | 0.17      |   |      | $ | 0.23     
|                                                        |  |                              |           |   |      |   |          
|Comprehensive Income                                    |  |                              |           |   |      |   |          
|Net income                                              |  | $                            | 192,151   |   |      | $ | 250,935  
|Other comprehensive income, net of tax                  |  |                              |           |   |      |   |          
|Unrealized gain (loss) on available-for-sale securities |  |                              | (89,227   | ) |      |   | 13,753   
|                                                        |  |                              |           |   |      |   |          
|Comprehensive income                                    |  | $                            | 102,924   |   |      | $ | 264,688  
|                                                        |  |                              |           |   |      |   |          



2



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES



Consolidated Balance Sheets



|                                                                                                               |  |                            |             |   |                           |   |             |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ------------------------- | - | ----------- | -
|                                                                                                               |  | (Unaudited) March 31, 2005 |             |   | (Audited)December 31,2004 |  
|ASSETS                                                                                                         |  |                            |             |   |                           |   |             |  
|Cash and due from banks                                                                                        |  | $                          | 6,850,209   |   |                           | $ | 5,377,787   |  
|Interest-bearing deposits in other banks                                                                       |  |                            | 3,940,921   |   |                           |   | 2,006,161   |  
|Federal funds sold                                                                                             |  |                            | 4,250,000   |   |                           |   | 6,625,000   |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Total cash and cash equivalents                                                                                |  |                            | 15,041,130  |   |                           |   | 14,008,948  |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Securities available-for-sale                                                                                  |  |                            | 27,518,085  |   |                           |   | 25,987,380  |  
|Securities held-to-maturity (fair value of $2,934,938 at March 31, 2005 and $2,962,848 at December 31, 2004)   |  |                            | 2,998,739   |   |                           |   | 2,998,667   |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Total securities                                                                                               |  |                            | 30,516,824  |   |                           |   | 28,986,047  |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Loans, net of unearned income of $303,729 in 2005; $320,014 in 2004                                            |  |                            | 133,995,380 |   |                           |   | 128,851,646 |  
|Less: Allowance for loan losses                                                                                |  |                            | (2,025,822  | ) |                           |   | (1,914,616  | )
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Net loans                                                                                                      |  |                            | 131,969,558 |   |                           |   | 126,937,030 |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Land                                                                                                           |  |                            | 818,910     |   |                           |   | 818,910     |  
|Premises and equipment, net                                                                                    |  |                            | 1,515,492   |   |                           |   | 1,529,433   |  
|Deferred income taxes                                                                                          |  |                            | 878,420     |   |                           |   | 809,625     |  
|Other assets                                                                                                   |  |                            | 1,350,133   |   |                           |   | 1,224,749   |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Total assets                                                                                                   |  | $                          | 182,090,467 |   |                           | $ | 174,314,742 |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                           |  |                            |             |   |                           |   |             |  
|LIABILITIES                                                                                                    |  |                            |             |   |                           |   |             |  
|Deposits:                                                                                                      |  |                            |             |   |                           |   |             |  
|Demand                                                                                                         |  | $                          | 46,230,460  |   |                           | $ | 44,799,016  |  
|Savings and NOW                                                                                                |  |                            | 47,125,824  |   |                           |   | 37,476,465  |  
|Money market                                                                                                   |  |                            | 21,725,791  |   |                           |   | 25,539,882  |  
|Time:                                                                                                          |  |                            |             |   |                           |   |             |  
|Under $100,000                                                                                                 |  |                            | 21,417,214  |   |                           |   | 20,557,642  |  
|$100,000 and over                                                                                              |  |                            | 22,242,046  |   |                           |   | 22,840,161  |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Total deposits                                                                                                 |  |                            | 158,741,335 |   |                           |   | 151,213,166 |  
|Short-term borrowings                                                                                          |  |                            | 1,000,000   |   |                           |   | 1,000,000   |  
|Trust preferred capital notes                                                                                  |  |                            | 5,155,000   |   |                           |   | 5,155,000   |  
|Long-term debt                                                                                                 |  |                            | 2,761,943   |   |                           |   | 2,765,867   |  
|Accounts payable and accrued expenses                                                                          |  |                            | 767,432     |   |                           |   | 618,876     |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Total liabilities                                                                                              |  |                            | 168,425,710 |   |                           |   | 160,752,909 |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|STOCKHOLDERS EQUITY                                                                                           |  |                            |             |   |                           |   |             |  
|Preferred stock $-0- par value, authorized 5,000,000 shares, no shares issued                                  |  |                            |            |   |                           |   |            |  
|Common stock, par value $1; authorized 3,500,000 shares, issued 1,041,080 shares in 2005 and 1,041,080 in 2004 |  |                            | 1,041,080   |   |                           |   | 1,041,080   |  
|Surplus                                                                                                        |  |                            | 16,250,826  |   |                           |   | 16,250,826  |  
|Accumulated deficit                                                                                            |  |                            | (3,485,120  | ) |                           |   | (3,677,271  | )
|Accumulated other comprehensive loss                                                                           |  |                            | (142,029    | ) |                           |   | (52,802     | )
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Total stockholders equity                                                                                     |  |                            | 13,664,757  |   |                           |   | 13,561,833  |  
|                                                                                                               |  |                            |             |   |                           |   |             |  
|Total liabilities and stockholders equity                                                                     |  | $                          | 182,090,467 |   |                           | $ | 174,314,742 |  
|                                                                                                               |  |                            |             |   |                           |   |             |  



3



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES



Consolidated Statements of Cash Flows



(Unaudited)



|                                                                                                             |  |                    |             |   |                |   |            |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------ | ----------- | - | -------------- | - | ---------- | -
|                                                                                                             |  | Three Months Ended |            
|                                                                                                             |  | March 31, 2005     |             |   | March 31, 2004 |  
|Cash flows from operating activities:                                                                        |  |                    |             |   |                |   |            |  
|Net Income                                                                                                   |  | $                  | 192,151     |   |                | $ | 250,935    |  
|Adjustment to reconcile net income to net cash provided by operating activities:                             |  |                    |             |   |                |   |            |  
|Depreciation and amortization                                                                                |  |                    | 65,557      |   |                |   | 53,617     |  
|Provision for loan losses                                                                                    |  |                    | 109,102     |   |                |   | 57,657     |  
|Amortization of investment security discount                                                                 |  |                    | 7,943       |   |                |   | 22,953     |  
|Amortization of loan fees and discounts, net                                                                 |  |                    | (16,734     | ) |                |   | 20,177     |  
|Net gain on sale of securities                                                                               |  |                    |            |   |                |   | (22,770    | )
|Increase in other assets                                                                                     |  |                    | (194,179    | ) |                |   | (4,210     | )
|Increase (decrease) in other liabilities                                                                     |  |                    | 148,556     |   |                |   | (24,371    | )
|                                                                                                             |  |                    |             |   |                |   |            |  
|Net cash provided by operating activities                                                                    |  |                    | 312,396     |   |                |   | 353,988    |  
|                                                                                                             |  |                    |             |   |                |   |            |  
|Cash flows from investing activities:                                                                        |  |                    |             |   |                |   |            |  
|Loan originations, net of collections - nonbank subsidiaries                                                 |  |                    | 41,106      |   |                |   | 2,988      |  
|Loan originations, net of collections                                                                        |  |                    | (5,166,002  | ) |                |   | (9,525,394 | )
|Purchases of securities available-for-sale                                                                   |  |                    | (13,063,200 | ) |                |   | (500,000   | )
|Proceeds received from sale of securities available-for-sale                                                 |  |                    |            |   |                |   | 522,280    |  
|Proceeds received from maturity of securities available-for-sale                                             |  |                    | 11,435,253  |   |                |   | 15,549,189 |  
|Proceeds received from maturity of securities held-to-maturity                                               |  |                    |            |   |                |   | 2,011,716  |  
|Purchases of premises and equipment                                                                          |  |                    | (51,616     | ) |                |   | (38,778    | )
|                                                                                                             |  |                    |             |   |                |   |            |  
|Net cash provided by (used in) investing activities                                                          |  |                    | (6,804,459  | ) |                |   | 8,022,001  |  
|                                                                                                             |  |                    |             |   |                |   |            |  
|Cash flow from financing activities:                                                                         |  |                    |             |   |                |   |            |  
|Net increase in demand deposits, savings accounts, NOW accounts and money market accounts                    |  |                    | 7,266,712   |   |                |   | 13,752,746 |  
|Certificates of deposit sold (matured), net                                                                  |  |                    | 261,457     |   |                |   | (2,523,093 | )
|Net payments on long-term debt                                                                               |  |                    | (3,924      | ) |                |   | (3,557     | )
|                                                                                                             |  |                    |             |   |                |   |            |  
|Net cash provided by financing activities                                                                    |  |                    | 7,524,245   |   |                |   | 11,226,096 |  
|                                                                                                             |  |                    |             |   |                |   |            |  
|Net increase in cash and cash equivalents                                                                    |  |                    | 1,032,182   |   |                |   | 19,602,085 |  
|Cash and cash equivalents at beginning of the period                                                         |  |                    | 14,008,948  |   |                |   | 10,508,752 |  
|                                                                                                             |  |                    |             |   |                |   |            |  
|Cash and cash equivalents at end of the period                                                               |  | $                  | 15,041,130  |   |                | $ | 30,110,837 |  
|                                                                                                             |  |                    |             |   |                |   |            |  
|Supplemental disclosures of cash flow information:                                                           |  |                    |             |   |                |   |            |  
|Cash paid during the period for:                                                                             |  |                    |             |   |                |   |            |  
|Interest on deposits and other borrowings                                                                    |  | $                  | 656,266     |   |                | $ | 453,470    |  
|Income taxes                                                                                                 |  |                    |            |   |                |   |           |  
|                                                                                                             |  |                   
|Noncash items:                                                                                               |  |                    |             |   |                |   |            |  
|Effect on stockholders equity of an unrealized gain (loss) on debt and equity securities available-for-sale |  | $                  | (89,227     | ) |                | $ | 13,753     |  





4



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Notes to Consolidated Financial Statements



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1 - |  | The unaudited consolidated interim financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America and the
instructions to Securities and Exchange Commissions Form 10-QSB. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position and results of
operations for the periods presented have been included. The consolidated financial statements should be read in conjunction with the financial statements and notes contained in the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2004. The results for the three months ended March 31, 2005 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2005.
|         | 
|Note 2 - |  | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                               
|         | 
|         |  | The Company applies Accounting Principles Bulletin (APB) Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations to account for employee
stock compensation plans, and accordingly, does not recognize compensation expense for stock options granted when the option price is greater than or equal to the underlying stock price. The Company presents the pro forma disclosures required by
Statement of Financial Accounting Standard (SFAS) 123, Accounting for Stock-Based Compensation and, as amended by SFAS 148, as follows. The fair value of each grant is estimated at the grant date using the Black-Scholes option-pricing
model.                                                                                                                                                                                



|                                                                                                                    |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|March 31,                                                                                                           |  | 2005 |         |   | 2004 |  
|Net income, as reported                                                                                             |  | $    | 192,151 |   |      | $ | 250,935 |  
|                                                                                                                    |  |     
|Deduct: total stock-based employee compensation expense determined based on fair value method of awards, net of tax |  |      | (72,213 | ) |      |   | (66,773 | )
|                                                                                                                    |  |      |         |   |      |   |         |  
|Pro forma net income                                                                                                |  | $    | 119,938 |   |      | $ | 184,162 |  
|                                                                                                                    |  |      |         |   |      |   |         |  
|Basic earnings per share:                                                                                           |  |      |         |   |      |   |         |  
|As reported                                                                                                         |  | $    | 0.18    |   |      | $ | 0.24    |  
|Pro forma                                                                                                           |  | $    | 0.11    |   |      | $ | 0.18    |  
|                                                                                                                    |  |     
|Diluted earnings per share:                                                                                         |  |      |         |   |      |   |         |  
|As reported                                                                                                         |  | $    | 0.17    |   |      | $ | 0.23    |  
|Pro forma                                                                                                           |  | $    | 0.10    |   |      | $ | 0.17    |  
|                                                                                                                    |  |     
|Assumptions                                                                                                         |  |      |         |   |      |   |         |  
|Risk-free interest rate                                                                                             |  |      | 3.94    | % |      |   | 3.33    | %
|Dividend yield                                                                                                      |  |      |        |   |      |   |        |  
|Volatility factor                                                                                                   |  |      | 10.00   | % |      |   | 10.00   | %
|Weighted average expected life (years)                                                                              |  |      | 8.4     |   |      |   | 8.0     |  



5



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|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 3 - |  | Basic earnings per share (EPS) excludes dilution, and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during
the period. Diluted EPS reflects the potential dilution, if any, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock. The following table
is a reconciliation of numerators and denominators used in the EPS calculations.



|                                            |  |                    |           |      |   |          
|------------------------------------------- |  | ------------------ | --------- | ---- | - | ---------
|                                            |  | Three Months Ended
|March 31,                                   |  | 2005               |           | 2004
|Basic earnings per common share:            |  |                    |           |      |   |          
|Net income available to common stockholders |  | $                  | 192,151   |      | $ | 250,935  
|Weighted average common shares outstanding  |  |                    | 1,041,080 |      |   | 1,038,637
|                                            |  |                    |           |      |   |          
|Basic earnings per common share             |  | $                  | 0.18      |      | $ | 0.24     
|                                            |  |                    |           |      |   |          
|Diluted earnings per common share:          |  |                    |           |      |   |          
|Net income available to common stockholders |  | $                  | 192,151   |      | $ | 250,935  
|                                            |  |                   
|Weighted average common shares outstanding  |  |                    | 1,041,080 |      |   | 1,038,637
|Common share equivalents for stock options  |  |                    | 78,468    |      |   | 76,185   
|                                            |  |                    |           |      |   |          
|                                            |  |                    | 1,119,548 |      |   | 1,114,822
|                                            |  |                    |           |      |   |          
|Diluted earnings per common share           |  | $                  | 0.17      |      | $ | 0.23     
|                                            |  |                    |           |      |   |          



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 4 - |  | Accounting principles generally accepted in the United States of America usually require that recognized revenue, expenses, gains and losses be included in net income. Additionally, certain
changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of
comprehensive income.
|         | 
|Note 5 - |  | Certain reclassifications have been made to the prior year financial statements to conform to the 2005 presentation. These reclassifications had no effect on previously reported net
income.                                                                                                                                                                                                                                                                     





6



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ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Forward looking statements. This discussion and other sections of this report
contain forward looking statements, including statements of goals, intentions and expectations as to future trends, plans, or results of Company operations and policies and assumptions regarding general economic conditions. These statements are
based upon current and anticipated economic conditions, nationally and in the Companys market, interest rates and interest rate policy, competitive factors and other conditions which, by their nature, are not conducive to accurate forecast,
and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward looking statements are based, actual future operations and results may differ materially from those indicated
herein.



A. Results of Operations for the Three Months Ended March 31,
2005 as Compared to the Three Months Ended March 31, 2004



General



The following discussion
provides an overview of the financial condition and results of operations of United Financial Banking Companies, Inc. (UFBC) and its subsidiaries, The Business Bank (the Bank), Business Venture Capital Incorporated
(BVCI) and United Facilities LLC (UFLLC), and is presented on a consolidated basis. UFBC reported net income of $192,151 for the three-month period ended March 31, 2005. This compares with net income of $250,935 for the same period of
2004. Basic earnings per share were $.18 for the three months ended March 31, 2005, compared to $.24 for the three months of 2004.



Net Interest Income



For the three-month period ended March 31, 2005, net interest income increased $294,456, or 21.2%, from $1,388,792 at March 31, 2004 to $1,683,248 at
March 31, 2005 (Consolidated Statements of Income and Comprehensive Income). The increase was attributable to an increased volume of earning assets. Average total earning assets increased $30,807,391, or 22.6%, from $136,526,432 at March 31,
2004 to $167,333,823 at March 31, 2005 (Consolidated Average Balancestable). Contributing $433,630 of earnings, the increased volume of the loan portfolio predominately accounted for the rise in net interest income (Analysis of the
Changes in the Components of Net Interest Income table).



As shown in the Analysis of the Changes in the Components of Net Interest Income table, net interest income was impacted by both rate and volume. The rising rate environment increased interest income on earning assets by $57,039
during the first three months of 2005 when compared to 2004. The increased volume of earning assets contributed $462,332 to earnings when comparing the three month periods ended March 31, 2005 and 2004 (Analysis of the Changes in the Components
of Net Interest Income table). The combined effect of the rate and volume variances resulted in an increase of $519,371 in interest income (or earning assets) from $1,836,924 at March 31, 2004 to $2,356,295 at March 31, 2005.



Total interest expense increased $224,915, or 50.2%, from $448,132 at March
31, 2004 to $673,047 at March 31, 2005 (Consolidated Statements of Income and Comprehensive Income). As shown in the Analysis of the Changes in the Components of Net Interest Income table, the rising rate environment during the past
year increased total interest expense; however, the table also shows that volume had a greater impact when comparing the March 31, 2004 and 2005. During the first three months of 2004, compared to the first three months of 2005, total interest
expense increased $148,443 due to volume, while rates increased total interest expense by $76,472. Average total interest-bearing liabilities increased $23,839,066, or 25.4%, from $93,701,656 at March 31, 2004 to $117,540,722 at March 31, 2005
(Consolidated Average Balancestable).



7



---

UNITED FINANCIAL BANKING COMPANIES, INC.

CONSOLIDATED AVERAGE BALANCES/NET INTEREST ANALYSIS/

YIELDS AND RATES



|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|------------------------------------------ |  | -------------------------- | ----------- | - | -------------- | - | ---------- |  | ---- | ------------------ |  | - | ----------- | - | ---------- | - | --------- |  | ---- | -
|                                           |  | For the Three Months Ended |            
|                                           |  | March 31, 2005             |             |   | March 31, 2004 |  
|                                           |  | AverageBalance (1)         |             |   | Interest       |   | Yield/Rate |  |      | AverageBalance (1) |  |   | Interest    |   | Yield/Rate |  
|ASSETS                                     |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Earning assets:                            |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Loans:                                     |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Commercial                                 |  | $                          | 92,597,303  |   |                | $ | 1,494,729  |  | 6.56 | %                  |  | $ | 76,448,232  |   |            | $ | 1,275,550 |  | 6.69 | %
|Real estate construction                   |  |                            | 22,161,011  |   |                |   | 396,433    |  | 7.27 | %                  |  |   | 14,535,686  |   |            |   | 240,288   |  | 6.63 | %
|Real estate mortgage                       |  |                            | 7,533,876   |   |                |   | 120,493    |  | 6.50 | %                  |  |   | 7,657,906   |   |            |   | 122,086   |  | 6.39 | %
|Installment                                |  |                            | 7,345,477   |   |                |   | 108,492    |  | 6.01 | %                  |  |   | 4,630,856   |   |            |   | 68,414    |  | 5.93 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total loans                                |  |                            | 129,637,667 |   |                |   | 2,120,147  |  | 6.65 | %                  |  |   | 103,272,680 |   |            |   | 1,706,338 |  | 6.63 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits                  |  |                            | 6,370,602   |   |                |   | 37,591     |  | 2.40 | %                  |  |   | 2,254,612   |   |            |   | 4,881     |  | 0.87 | %
|Federal funds sold                         |  |                            | 10,472,276  |   |                |   | 60,755     |  | 2.36 | %                  |  |   | 15,399,008  |   |            |   | 34,322    |  | 0.89 | %
|Investment securities (2)                  |  |                            | 20,853,278  |   |                |   | 137,802    |  | 2.69 | %                  |  |   | 15,600,132  |   |            |   | 91,383    |  | 2.35 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total earning assets                       |  |                            | 167,333,823 |   |                | $ | 2,356,295  |  | 5.73 | %                  |  |   | 136,526,432 |   |            | $ | 1,836,924 |  | 5.40 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Noninterest-earning assets                 |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Cash and due from banks                    |  |                            | 6,013,585   |   |                |   |            |  |      |                    |  |   | 4,966,353   |   |            |   |           |  |      |  
|Other assets                               |  |                            | 4,041,929   |   |                |   |            |  |      |                    |  |   | 3,595,841   |   |            |   |           |  |      |  
|Allowance for loan losses                  |  |                            | (1,959,391  | ) |                |   |            |  |      |                    |  |   | (1,535,094  | ) |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total assets                               |  | $                          | 175,429,946 |   |                |   |            |  |      |                    |  | $ | 143,553,532 |   |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing liabilities:              |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits:                 |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Savings and NOW accounts                   |  | $                          | 39,609,781  |   |                | $ | 162,524    |  | 1.67 | %                  |  | $ | 40,109,037  |   |            | $ | 153,107   |  | 1.53 | %
|Money market accounts                      |  |                            | 24,759,439  |   |                |   | 70,134     |  | 1.15 | %                  |  |   | 17,945,224  |   |            |   | 39,187    |  | 0.88 | %
|Time:                                      |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Under $100,000                             |  |                            | 21,297,074  |   |                |   | 154,146    |  | 2.94 | %                  |  |   | 17,709,867  |   |            |   | 121,242   |  | 2.75 | %
|$100,000 and over                          |  |                            | 22,957,485  |   |                |   | 164,392    |  | 2.91 | %                  |  |   | 13,159,645  |   |            |   | 82,115    |  | 2.50 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing deposits            |  |                            | 108,623,779 |   |                |   | 551,196    |  | 2.06 | %                  |  |   | 88,923,773  |   |            |   | 395,651   |  | 1.78 | %
|Short-term borrowings                      |  |                            | 1,000,000   |   |                |   | 9,443      |  | 3.84 | %                  |  |   | 1,055,395   |   |            |   | 7,939     |  | 3.02 | %
|Long-term debt                             |  |                            | 7,916,943   |   |                |   | 112,408    |  | 5.77 | %                  |  |   | 3,722,488   |   |            |   | 44,542    |  | 4.80 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing liabilities         |  |                            | 117,540,722 |   |                | $ | 673,047    |  | 2.33 | %                  |  |   | 93,701,656  |   |            | $ | 448,132   |  | 1.92 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Non interest-bearing liabilities:          |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Demand deposits                            |  |                            | 43,568,468  |   |                |   |            |  |      |                    |  |   | 36,573,440  |   |            |   |           |  |      |  
|Other liabilities                          |  |                            | 767,432     |   |                |   |            |  |      |                    |  |   | 706,942     |   |            |   |           |  |      |  
|Stockholders equity                       |  |                            | 13,553,323  |   |                |   |            |  |      |                    |  |   | 12,571,494  |   |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total liabilities and stockholders equity |  | $                          | 175,429,945 |   |                |   |            |  |      |                    |  | $ | 143,553,532 |   |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest income                        |  |                            |             |   |                | $ | 1,683,248  |  |      |                    |  |   |             |   |            | $ | 1,388,792 |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest margin (3)                    |  |                            |             |   |                |   |            |  | 4.09 | %                  |  |   |             |   |            |   |           |  | 4.08 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest spread (4)                    |  |                            |             |   |                |   |            |  | 3.40 | %                  |  |   |             |   |            |   |           |  | 3.48 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Fees included in loan income               |  |                            |             |   |                | $ | 95,206     |  |      |                    |  |   |             |   |            | $ | 62,268    |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  

---

|(1) | Average balances for the periods presented are calculated on a monthly basis. Nonaccruing loans are included in the average loan balances.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Yields on securities available-for-sale are calculated on the basis of the historical cost of such securities and do not give effect to changes in the fair market value of such
securities, which are reflected as a component of stockholders equity.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net interest income divided by total earning assets.
|--- | ----------------------------------------------------

|(4) | Average rate earned on total earning assets less average rate paid for interest-bearing liabilities.
|--- | ----------------------------------------------------------------------------------------------------



8



---

The Banks deposit mix also contributed to managing interest expense and increasing net interest
income during the comparable period. As shown in the Consolidated Average Balances table, the growth of average noninterest-bearing, or demand deposits, increased $6,995,028, or 19.1%, from $36,573,440 at March 31, 2004 to $43,568,468 at
March 31, 2005. Additionally, the average balance of low cost accounts of savings, NOW and money market increased $6,314,959 from March 31, 2004 to March 31, 2005.



Analysis of the Changes in the Components of Net Interest Income



|                                 |  |                           |         |   |                |        |         |   |  |   |         |  
|-------------------------------- |  | ------------------------- | ------- | - | -------------- | ------ | ------- | - |  | - | ------- | -
|For Three Months Ended March 31, |  | 2005 Compared to 2004     |        
|                                 |  | Total Increase (Decrease) |         |   | Change Due To: |       
|                                 |  |                          
|                                 |  |                           | Rate    |   |                | Volume |        
|Interest income:                 |  |                           |         |   |                |        |         |   |  |   |         |  
|Loans:                           |  |                           |         |   |                |        |         |   |  |   |         |  
|Commercial                       |  | $                         | 219,179 |   |                | $      | (50,271 | ) |  | $ | 269,450 |  
|Real estate - construction       |  |                           | 156,145 |   |                |        | 30,092  |   |  |   | 126,053 |  
|Real estate - mortgage           |  |                           | (1,593  | ) |                |        | 384     |   |  |   | (1,977  | )
|Installment                      |  |                           | 40,078  |   |                |        | (26     | ) |  |   | 40,104  |  
|                                 |  |                           |         |   |                |        |         |   |  |   |         |  
|Total loans                      |  |                           | 413,809 |   |                |        | (19,821 | ) |  |   | 433,630 |  
|                                 |  |                           |        
|Interest-bearing deposits        |  |                           | 32,710  |   |                |        | 23,799  |   |  |   | 8,911   |  
|Federal funds sold               |  |                           | 26,433  |   |                |        | 37,414  |   |  |   | (10,981 | )
|Investment securities            |  |                           | 46,419  |   |                |        | 15,647  |   |  |   | 30,772  |  
|                                 |  |                           |         |   |                |        |         |   |  |   |         |  
|Total interest income            |  |                           | 519,371 |   |                |        | 57,039  |   |  |   | 462,332 |  
|                                 |  |                           |         |   |                |        |         |   |  |   |         |  
|Interest expense:                |  |                           |         |   |                |        |         |   |  |   |         |  
|Savings and NOW accounts         |  |                           | 9,417   |   |                |        | 11,323  |   |  |   | (1,906  | )
|Money markets accounts           |  |                           | 30,947  |   |                |        | 16,067  |   |  |   | 14,880  |  
|Time:                            |  |                           |         |   |                |        |         |   |  |   |         |  
|Under $100,000                   |  |                           | 32,904  |   |                |        | 8,346   |   |  |   | 24,558  |  
|$100,000 and over                |  |                           | 82,277  |   |                |        | 21,139  |   |  |   | 61,138  |  
|Short-term borrowings            |  |                           | 1,504   |   |                |        | 1,921   |   |  |   | (417    | )
|Long-term debt                   |  |                           | 67,866  |   |                |        | 17,677  |   |  |   | 50,189  |  
|                                 |  |                           |         |   |                |        |         |   |  |   |         |  
|Total interest expense           |  |                           | 224,915 |   |                |        | 76,472  |   |  |   | 148,443 |  
|                                 |  |                           |         |   |                |        |         |   |  |   |         |  
|Net interest income              |  | $                         | 294,456 |   |                | $      | (19,433 | ) |  | $ | 313,889 |  
|                                 |  |                           |         |   |                |        |         |   |  |   |         |  



Provision for Loan Losses



The provision for loan losses is based upon
managements estimate of the amount required to maintain an adequate allowance for loan losses reflective of the risks in the loan portfolio. The Company and Bank generate a quarterly analysis of the allowance for loan losses, with the
objective of quantifying portfolio risk into a dollar figure of inherent losses, thereby translating the subjective risk value into an objective number. Emphasis is placed on an annual independent external loan review. The determination of the
allowance for loan losses is based on qualitative factors as well as any specific allowance for impaired loans. Qualitative factors include: levels and trends in delinquencies and non-accruals, trends in volumes and terms of loans, effects of any
changes in lending policies, the experience, ability and depth of management, national and local economic trends and conditions, concentrations of credit, quality of the Companys loan review system and regulatory requirements. The total
allowance required thus changes as each factor is increased or decreased due to its particular circumstance, as the various types and categories of loans change as a percentage of total loans and as specific allowances are required due to an
increase in impaired loans.



9



---

Provision for loan loss expense increased $51,445 from 2004 to 2005 when comparing the three months ended
March 31st, from $57,657 for the three months ended March 31, 2004 to $109,102 for the three months ended March 31, 2005. Timing, general risks inherent in the loan portfolio and growth that impacts various inherent risk factors account for the
variance between the 2005 and 2004 provision for loan loss expense.



Noninterest Income



Total noninterest
income decreased $12,634, or 6.1%, during the three months ended March 31, 2004 compared to the three months ended March 31, 2005. The decrease was attributable to less fee income generated from deposit accounts.



Noninterest Expense



Total noninterest expense increased $308,643, or 26.4%, during the three
months ended March 31, 2004 compared to the three months ended March 31, 2005. The increase was primarily attributable to additional staffing to enhance asset growth and business expansion. Salaries and employee benefits increased $260,248, or
42.8%, during the three months ended March 31, 2005 compared to the three months ended March 31, 2004. Growth and expansion expenses such as occupancy and furniture and equipment also contributed to the increase. Occupancy and furniture and
equipment expense increased $34,111, or 12.9%, during the first three months of 2005 compared to the first three months of 2004.



Income Taxes



The provision for income taxes decreased $19,482, or 16.4%, from $118,469 at March 31, 2004 to $98,987 at March 31, 2005. Income tax expense was accrued
at the effective statutory rate of 34.0%, adjusted for certain permanent differences that vary between periods. The decrease when comparing the three months ended March 31st was attributable to earnings.



B. Financial Condition as of March 31, 2005



General



During the fourth quarter of 2004, the Bank increased its professional staff to promote sound growth. In aggregate, new
staff have over eighty-five years of banking experience. The additional staff contributed to asset growth during 2004 and during the first quarter of 2005; however, until growth absorbs the additional staffing and related expense, overhead may
negatively impact earnings in the first and second quarters of 2005.



Assets



Total assets increased
$7,775,725 or 4.5% during the first three months of 2005. The increase was primarily attributable to an increased volume of deposits that were invested in loans. The balance of available-for-sale investment securities was inflated on the balance
sheet at March 31, 2005 and December 31, 2004. For tax purposes, the Bank purchased an overnight government security of $10,000,000 on March 31, 2005 and $15,000,000 on December 31, 2004. The average balance of investment securities totaled
$20,853,278 for the three month period ended March 31, 2005 and $15,227,165 for the year ended December 31, 2004.



10



---

Loans



Loans, net of unearned income, increased $5,143,734, or 4.0%, from $128,851,646 at December 31, 2004 to $133,995,380 at March 31, 2005. The growth was funded by the
increased volume of deposits during the first three months of 2005.



Allowance for Loan Losses



The allowance for
loan losses is an estimate of the losses that may be sustained in the Companys loan portfolio. The allowance is based on two basic principles of accounting: (i) SFAS 5, Accounting for Contingencies, that requires that losses be
accrued when they are probable of occurring and estimable and (ii) SFAS 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure, that requires that losses be accrued based on the differences between the value of the collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.



A loan is considered impaired when, based on current information and events,
it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Other factors considered by the Board of Directors and management in
determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. The Board of Directors and management determine the significance of each factor and determine
impairment by taking into consideration all of the circumstances surrounding the loan and the borrower, the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price,
or the fair value of the collateral if the loan is collateral dependent.



The allowance for loan losses is maintained at a level, that in the Board of Directors and managements judgment, is adequate to absorb credit losses inherent in the existing loan portfolio. The allowance
for loan losses is based on managements evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions
and other risks inherent in the portfolio. Due to uncertainties associated with economic conditions and the inherent subjectivity of the evaluation process, it is possible that a material change could occur in the allowance for loan losses in the
near term. However, the amount of the possible change cannot be reasonably estimated.



At March 31, 2005 and December 31, 2004, the allowance for loan losses was $2,025,822 or 1.5% and $1,914,616 or 1.5%, respectively, of total loans. Impaired and non-accrual loans, at March 31, 2005 and December 31,
2004, totaled $37,202 and were held by BVCI, a wholly-owned subsidiary. There were no charge-offs and two recoveries totaling $2,104 during the three months ended March 31, 2005 in comparison to no charge-offs nor recoveries during the same period
of 2004.



Premises and Equipment



Premises and equipment, net decreased $13,941 or .9% during the three months
since December 31, 2004. The decrease was due to amortization and depreciation.



Deferred Tax Asset



The deferred income tax
asset primarily results from differences between bad debts deductible for income tax purposes and those reflected in the financial statements. Using factors such as the Companys historical earnings performance, growth potential, the local and
national economy and market competition, management determined that it was more likely than not that the Company will utilize the amounts available at March 31, 2005.



11



---

Deposits



During the first three months of 2005, management continued to focus on maintaining a deposit mix prominently consisting of core deposits. Core deposits
consist of demand, savings, NOW and money market accounts, and are generally less costly and more stable than certificates of deposits. Core deposits increased $7,266,712, or 6.7%, from $107,815,363 at December 31, 2004 to $115,082,075 at March 31,
2005. The changes since December 31, 2004 were as follows: demand deposits (noninterest-bearing) - $1,431,444 or 3.2%, savings and NOW deposits - $9,649,359 or 25.8% and money market deposits- ($3,814,091) or (14.9)%.



Other Liabilities and Equity



Short-term borrowings and long-term debt consists of $3,000,000 of
outstanding advances from the Federal Home Loan Bank of Atlanta (FHLBA) and $761,943 from a financial institution. The FHLBA advances have been used to fund certain lending programs. The $761,943 was used to partially fund the purchase of the Reston
branch. Stockholders equity increased $102,924, or .8%, during the three months ended March 31, 2005, when compared to the year ended December 31, 2004. During the first three months of 2005, earnings primarily accounted for the variance in
stockholders equity.



Liquidity and Investment



UFBCs operational needs have been significantly reduced in recent
years as overhead has been allocated proportionately between the subsidiaries. For the near future, management projects that proceeds received from the past two capital offerings and reimbursements from allocated expenses will provide sufficient
cash flow for UFBCs continuing operational needs.



Consolidated average liquid assets were 22.2% of average total assets at March 31, 2005 compared to 20.5% at December 31, 2004 (Consolidated Average Balances table). The Companys liquidity needs exist primarily in the Bank
subsidiary. To ensure adequate liquidity, the Bank purchases certain traditional assets such as government and other investment securities in addition to maintaining several lines of credit. The Banks securities portfolio is generally
comprised of U.S. Government agency securities, U.S. Treasury notes, mutual funds, mortgage-backed and equity securities. The Bank has strategically grown its securities portfolio to ensure safe levels of liquidity, to enhance the overall credit
quality of its asset base, to generate increased interest income, to balance assets and liabilities and to hedge interest rate risk. The securities portfolio includes both instruments available-for-sale and held-to-maturity. Securities classified as
available-for-sale may be sold in response to changes in market interest rates, changes in prepayment or extension risk, management of the federal tax position, liquidity needs and other asset/liability management issues. Securities classified as
held-to-maturity are intended for investment purposes.



At
March 31, 2005, the Banks investment portfolio consisted of the following:



|                           |  |                    |            |                  |   |          
|-------------------------- |  | ------------------ | ---------- | ---------------- | - | ---------
|                           |  | Available-for-Sale |            | Held-to-Maturity
|U.S. government agency     |  | $                  | 22,723,900 |                  | $ | 2,998,739
|U.S. Treasury              |  |                    | 2,427,897  |                  |   |         
|Mortgage-backed securities |  |                    | 618,715    |                  |   |         
|Mutual funds               |  |                    | 630,933    |                  |   |         
|Corporate debt securities  |  |                    | 574,190    |                  |   |         
|Equity                     |  |                    | 542,450    |                  |   |         
|                           |  |                    |            |                  |   |          
|Total                      |  | $                  | 27,518,085 |                  | $ | 2,998,739
|                           |  |                    |            |                  |   |          





12



---

Capital Requirements



The Company is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Company and bank subsidiary must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated
under regulatory accounting practices. The Company and bank subsidiary are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.



Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and
ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. The Federal Reserves capital guidelines apply to the Company at such time as it has total assets equal to $150,000,000 or more, it has public
debt, or it engages in certain highly leveraged activities. At March 31, 2005, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must maintain Total risk-based, Tier 1 risk-based and Tier 1 average asset ratios as set forth in the table. There are no conditions nor events, since December 31, 2004, that management
believes would result in the Bank not being well capitalized.



|                                         |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|---------------------------------------- |  | ---------- |  | ----- | ------------------------------------- |  | ---------- | ------------------------------- | ----- | - |  | ---------- |  | ----- | -
|                                         |  | Actual     |  |       | Required for CapitalAdequacy Purposes |  |            | Required To Be Well Capitalized |      
|                                         |  | Amount     |  | Ratio |                                       |  | Amount     |                                 | Ratio |   |  | Amount     |  | Ratio |  
|As of March 31, 2005:                    |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|                                         |  |            |  |       |                                       | 
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 19,709,259 |  | 14.20 | %                                     |  | 11,100,760 |                                 | 8.00  | % |  | 13,875,950 |  | N/A   |  
|The Business Bank                        |  | 17,049,058 |  | 12.46 | %                                     |  | 10,943,474 |                                 | 8.00  | % |  | 13,679,342 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 17,296,445 |  | 12.47 | %                                     |  | 5,550,380  |                                 | 4.00  | % |  | 8,325,570  |  | N/A   |  
|The Business Bank                        |  | 15,335,273 |  | 11.21 | %                                     |  | 5,471,737  |                                 | 4.00  | % |  | 8,207,605  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 17,296,445 |  | 9.91  | %                                     |  | 6,983,821  |                                 | 4.00  | % |  | 8,729,776  |  | N/A   |  
|The Business Bank                        |  | 15,335,273 |  | 8.97  | %                                     |  | 6,840,791  |                                 | 4.00  | % |  | 8,550,988  |  | 5.00  | %
|                                         |  |            |  |       |                                       | 
|As of March 31, 2004:                    |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|                                         |  |            |  |       |                                       | 
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 13,593,570 |  | 12.13 | %                                     |  | 8,962,379  |                                 | 8.00  | % |  | 11,202,974 |  | N/A   |  
|The Business Bank                        |  | 11,853,140 |  | 10.77 | %                                     |  | 8,807,746  |                                 | 8.00  | % |  | 11,009,682 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 12,191,060 |  | 10.88 | %                                     |  | 4,481,190  |                                 | 4.00  | % |  | 6,721,785  |  | N/A   |  
|The Business Bank                        |  | 10,476,930 |  | 9.52  | %                                     |  | 4,403,873  |                                 | 4.00  | % |  | 6,605,809  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 12,191,060 |  | 8.52  | %                                     |  | 5,723,214  |                                 | 4.00  | % |  | 7,154,017  |  | N/A   |  
|The Business Bank                        |  | 10,476,930 |  | 7.39  | %                                     |  | 5,671,805  |                                 | 4.00  | % |  | 7,089,757  |  | 5.00  | %



13



---

ITEM 3: CONTROLS AND PROCEDURES



The Companys management, under the supervision and with the participation of the Companys Chief Executive
Officer and Chief Financial Officer, evaluated, as of the last day of the period covered by this report, the effectiveness of the design and operation of the Companys disclosure controls and procedures, as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were adequate. There were no changes in the Companys
internal control over financial reporting (as defined in Rule 13a-15 under the Securities Act of 1934) during the three months ended March 31, 2005 that has materially affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting.



PART II. OTHER
INFORMATION



ITEM 1 - LEGAL PROCEEDINGS



In the opinion of management, there were no legal matters pending as
of March 31, 2005 that would have a material adverse effect on the Companys financial statements.



ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



| | (a) | Sales of Unregistered Securities. None.
| | --- | ---------------------------------------



| | (b) | Use of Proceeds. Not Applicable.
| | --- | --------------------------------



| | (c) | Small Business Issuer Purchases of Securities. None.
| | --- | ----------------------------------------------------



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



No matters were submitted to security holders during the first quarter of the Companys fiscal year.



ITEM 5. OTHER INFORMATION



| | (a) | Information which Should have Been Reported on Form 8-K. None.
| | --- | --------------------------------------------------------------



| | (b) | Material Changes to Procedures for Director Nomination by Shareholders. None.
| | --- | -----------------------------------------------------------------------------



ITEM 6: EXHIBITS



| | (a) | Exhibits
| | --- | --------



|       |  |                                                     
|------ |  | ----------------------------------------------------
|31 (a) |  | Section 302 Certification of President and CEO      
|       | 
|31 (b) |  | Section 302 Certification of Chief Financial Officer
|       | 
|32 (a) |  | Section 906 Certification of President and CEO      
|       | 
|32 (b) |  | Section 906 Certification of Chief Financial Officer



14



---

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.



|                   |  |                                          |  |                        
|------------------ |  | ---------------------------------------- |  | -----------------------
|                   |  | UNITED FINANCIAL BANKING COMPANIES, INC.
|                   |  |                                         
|Date: May 20, 2005 |  | By:                                      |  | /s/ HAROLD C. RAUNER   
|                   |  |                                          |  | Harold C. Rauner       
|                   |  |                                          |  | President and CEO      
|                   |  |                                         
|Date: May 20, 2005 |  | By:                                      |  | /s/ LISA M. PORTER     
|                   |  |                                          |  | Lisa M. Porter         
|                   |  |                                          |  | Chief Financial Officer



15