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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 September 30, 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

1,042,600 Shares Outstanding

as of September 30, 2005



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Transitional Small Business Disclosure Format:    Yes ̈No  x



Indicate by check mark whether the registrant is a shell company as

defined
in Rule 12b-2 of the Exchange Act. ̈Yes    x  No



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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 September 30, |           | Nine Months Ended September 30, |     
|                                                                                               |  | 2005                             |           |                                 | 2004 |   | 2005      |  |   | 2004      |  
|Interest income:                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Interest and fees on loans                                                                     |  | $                                | 2,614,918 |                                 |      | $ | 1,972,091 |  | $ | 7,029,314 |   |  | $ | 5,482,566 |  
|Interest on investment securities                                                              |  |                                  | 210,504   |                                 |      |   | 87,863    |  |   | 519,588   |   |  |   | 242,774   |  
|Interest on federal funds sold                                                                 |  |                                  | 52,896    |                                 |      |   | 49,491    |  |   | 256,324   |   |  |   | 110,630   |  
|Interest on interest-bearing deposits                                                          |  |                                  | 8,139     |                                 |      |   | 8,262     |  |   | 120,088   |   |  |   | 18,030    |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Total interest income                                                                          |  |                                  | 2,886,457 |                                 |      |   | 2,117,707 |  |   | 7,925,314 |   |  |   | 5,854,000 |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Interest expense:                                                                              |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Interest on deposits                                                                           |  |                                  | 684,747   |                                 |      |   | 425,942   |  |   | 1,901,666 |   |  |   | 1,206,262 |  
|Interest on short-term borrowings                                                              |  |                                  | 26,177    |                                 |      |   | 8,604     |  |   | 44,118    |   |  |   | 26,208    |  
|Interest on long-term debt                                                                     |  |                                  | 101,260   |                                 |      |   | 35,145    |  |   | 324,538   |   |  |   | 122,714   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Total interest expense                                                                         |  |                                  | 812,184   |                                 |      |   | 469,691   |  |   | 2,270,322 |   |  |   | 1,355,184 |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Net interest income                                                                            |  |                                  | 2,074,273 |                                 |      |   | 1,648,016 |  |   | 5,654,992 |   |  |   | 4,498,816 |  
|                                                                                               |  |                                  |           |                                
|Provision for loan losses                                                                      |  |                                  | 116,913   |                                 |      |   | 116,174   |  |   | 316,837   |   |  |   | 284,313   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Net interest income after provision for loan losses                                            |  |                                  | 1,957,360 |                                 |      |   | 1,531,842 |  |   | 5,338,155 |   |  |   | 4,214,503 |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Noninterest income:                                                                            |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Loan servicing and other fees                                                                  |  |                                  | 130,707   |                                 |      |   | 13,500    |  |   | 310,420   |   |  |   | 73,137    |  
|Other income                                                                                   |  |                                  | 137,711   |                                 |      |   | 171,110   |  |   | 368,960   |   |  |   | 513,455   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Total noninterest income                                                                       |  |                                  | 268,418   |                                 |      |   | 184,610   |  |   | 679,380   |   |  |   | 586,592   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Noninterest expense:                                                                           |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Salaries                                                                                       |  |                                  | 816,849   |                                 |      |   | 667,242   |  |   | 2,326,908 |   |  |   | 1,829,086 |  
|Employee benefits                                                                              |  |                                  | 120,326   |                                 |      |   | 109,892   |  |   | 365,785   |   |  |   | 320,132   |  
|Occupancy                                                                                      |  |                                  | 222,512   |                                 |      |   | 207,525   |  |   | 644,015   |   |  |   | 606,784   |  
|Furniture and equipment                                                                        |  |                                  | 75,095    |                                 |      |   | 75,895    |  |   | 244,690   |   |  |   | 226,763   |  
|Data processing                                                                                |  |                                  | 62,324    |                                 |      |   | 59,895    |  |   | 182,556   |   |  |   | 171,623   |  
|Other insurance                                                                                |  |                                  | 11,771    |                                 |      |   | 13,727    |  |   | 36,108    |   |  |   | 34,807    |  
|Legal                                                                                          |  |                                  | 7,528     |                                 |      |   | 7,341     |  |   | 17,921    |   |  |   | 20,865    |  
|Accounting                                                                                     |  |                                  | 30,644    |                                 |      |   | 18,651    |  |   | 102,753   |   |  |   | 55,953    |  
|FDIC / FICO bond insurance                                                                     |  |                                  | 5,061     |                                 |      |   | 4,748     |  |   | 15,349    |   |  |   | 13,656    |  
|Other expense                                                                                  |  |                                  | 222,722   |                                 |      |   | 174,262   |  |   | 628,017   |   |  |   | 549,855   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Total noninterest expense                                                                      |  |                                  | 1,574,832 |                                 |      |   | 1,339,178 |  |   | 4,564,102 |   |  |   | 3,829,524 |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Income before income taxes                                                                     |  |                                  | 650,946   |                                 |      |   | 377,274   |  |   | 1,453,433 |   |  |   | 971,571   |  
|                                                                                               |  |                                  |           |                                
|Provision for income taxes                                                                     |  |                                  | 221,321   |                                 |      |   | 128,273   |  |   | 494,167   |   |  |   | 322,526   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Net income                                                                                     |  | $                                | 429,625   |                                 |      | $ | 249,001   |  | $ | 959,266   |   |  | $ | 649,045   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Net income per common share:                                                                   |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Basic                                                                                          |  | $                                | 0.41      |                                 |      | $ | 0.24      |  | $ | 0.92      |   |  | $ | 0.62      |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Diluted                                                                                        |  | $                                | 0.38      |                                 |      | $ | 0.22      |  | $ | 0.85      |   |  | $ | 0.58      |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Comprehensive Income                                                                           |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Net income                                                                                     |  | $                                | 429,625   |                                 |      | $ | 249,001   |  | $ | 959,266   |   |  | $ | 649,045   |  
|Other comprehensive income, net of tax Unrealized gain (loss) on available-for-sale securities |  |                                  | (45,109   | )                               |      |   | 38,656    |  |   | (65,880   | ) |  |   | (5,386    | )
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  
|Comprehensive income                                                                           |  | $                                | 384,516   |                                 |      | $ | 287,657   |  | $ | 893,386   |   |  | $ | 643,659   |  
|                                                                                               |  |                                  |           |                                 |      |   |           |  |   |           |   |  |   |           |  



2



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES



Consolidated Balance Sheets



|                                                                                                                 |  |                    |             |   |                   |   |             |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                 |  | (Unaudited)        |             |   | (Audited)         |  
|                                                                                                                 |  | September 30, 2005 |             |   | December 31, 2004 |  
|ASSETS                                                                                                           |  |                    |             |   |                   |   |             |  
|Cash and due from banks                                                                                          |  | $                  | 7,072,775   |   |                   | $ | 5,377,787   |  
|Interest-bearing deposits in other banks                                                                         |  |                    | 183,975     |   |                   |   | 2,006,161   |  
|Federal funds sold                                                                                               |  |                    | 900,000     |   |                   |   | 6,625,000   |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Total cash and cash equivalents                                                                                  |  |                    | 8,156,750   |   |                   |   | 14,008,948  |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Securities available-for-sale                                                                                    |  |                    | 23,696,851  |   |                   |   | 25,987,380  |  
|Securities held-to-maturity (fair value of $2,956,121 at September 30, 2005 and $2,962,848 at December 31, 2004) |  |                    | 2,998,913   |   |                   |   | 2,998,667   |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Total securities                                                                                                 |  |                    | 26,695,764  |   |                   |   | 28,986,047  |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Loans, net of unearned income of $331,112 in 2005; $320,014 in 2004                                              |  |                    | 151,352,193 |   |                   |   | 128,851,646 |  
|Less: Allowance for loan losses                                                                                  |  |                    | (2,264,993  | ) |                   |   | (1,914,616  | )
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Net loans                                                                                                        |  |                    | 149,087,200 |   |                   |   | 126,937,030 |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Land                                                                                                             |  |                    | 818,910     |   |                   |   | 818,910     |  
|Premises and equipment, net                                                                                      |  |                    | 1,432,208   |   |                   |   | 1,529,433   |  
|Deferred income taxes                                                                                            |  |                    | 916,889     |   |                   |   | 809,625     |  
|Other assets                                                                                                     |  |                    | 1,754,351   |   |                   |   | 1,224,749   |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Total assets                                                                                                     |  | $                  | 188,862,072 |   |                   | $ | 174,314,742 |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                             |  |                    |             |   |                   |   |             |  
|LIABILITIES                                                                                                      |  |                    |             |   |                   |   |             |  
|Deposits:                                                                                                        |  |                    |             |   |                   |   |             |  
|Demand                                                                                                           |  | $                  | 49,192,408  |   |                   | $ | 44,799,016  |  
|Savings and NOW                                                                                                  |  |                    | 44,351,754  |   |                   |   | 37,476,465  |  
|Money market                                                                                                     |  |                    | 24,716,786  |   |                   |   | 25,539,882  |  
|Time:                                                                                                            |  |                    |             |   |                   |   |             |  
|Under $100,000                                                                                                   |  |                    | 23,415,963  |   |                   |   | 20,557,642  |  
|$100,000 and over                                                                                                |  |                    | 21,055,829  |   |                   |   | 22,840,161  |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Total deposits                                                                                                   |  |                    | 162,732,740 |   |                   |   | 151,213,166 |  
|Short-term borrowings                                                                                            |  |                    | 3,500,000   |   |                   |   | 1,000,000   |  
|Trust preferred capital notes                                                                                    |  |                    | 5,155,000   |   |                   |   | 5,155,000   |  
|Long-term debt                                                                                                   |  |                    | 1,754,448   |   |                   |   | 2,765,867   |  
|Accounts payable and accrued expenses                                                                            |  |                    | 1,236,461   |   |                   |   | 618,876     |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Total liabilities                                                                                                |  |                    | 174,378,649 |   |                   |   | 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 1,042,600 shares in 2005 and 1,041,080 in 2004   |  |                    | 1,042,600   |   |                   |   | 1,041,080   |  
|Surplus                                                                                                          |  |                    | 16,277,510  |   |                   |   | 16,250,826  |  
|Accumulated deficit                                                                                              |  |                    | (2,718,005  | ) |                   |   | (3,677,271  | )
|Accumulated other comprehensive loss                                                                             |  |                    | (118,682    | ) |                   |   | (52,802     | )
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Total stockholders equity                                                                                       |  |                    | 14,483,423  |   |                   |   | 13,561,833  |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  
|Total liabilities and stockholders equity                                                                       |  | $                  | 188,862,072 |   |                   | $ | 174,314,742 |  
|                                                                                                                 |  |                    |             |   |                   |   |             |  



3



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                             |  |                    |             |         |                    |   |             |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------ | ----------- | ------- | ------------------ | - | ----------- | -
|                                                                                                             |  | Nine Months Ended  |            
|                                                                                                             |  | September 30, 2005 |             |         | September 30, 2004 |  
|Cash flows from operating activities:                                                                        |  |                    |             |         |                    |   |             |  
|Net Income                                                                                                   |  | $                  | 959,266     |         |                    | $ | 649,045     |  
|Adjustment to reconcile net income to net cash provided by operating activities:                             |  |                    |             |         |                    |   |             |  
|Depreciation and amortization                                                                                |  |                    | 194,290     |         |                    |   | 174,836     |  
|Provision for loan losses                                                                                    |  |                    | 316,837     |         |                    |   | 284,313     |  
|Amortization of investment security discount                                                                 |  |                    | 42,823      |         |                    |   | 61,656      |  
|Amortization of loan fees and discounts, net                                                                 |  |                    | 26,520      |         |                    |   | 64,511      |  
|Net gain on sale of securities                                                                               |  |                    |            |         |                    |   | (22,770     | )
|Net gain on sale of fixed assets                                                                             |  |                    | (5,124      | )       |                    |   |            |  
|(Increase) decrease in other assets                                                                          |  |                    | (636,866    | )       |                    |   | 7,170       |  
|Increase in other liabilities                                                                                |  |                    | 617,585     |         |                    |   | 64,529      |  
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Net cash provided by operating activities                                                                    |  |                    | 1,515,331   |         |                    |   | 1,283,290   |  
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Cash flows from investing activities:                                                                        |  |                    |             |         |                    |   |             |  
|Loan originations, net of collections - nonbank subsidiaries 253,308                                         |  |                    |             | (15,793 | )                 
|Loan originations, net of collections                                                                        |  |                    | (22,746,835 | )       |                    |   | (25,632,807 | )
|Purchases of securities available-for-sale                                                                   |  |                    | (31,847,519 | )       |                    |   | (29,974,524 | )
|Purchases of securities held-for-maturity                                                                    |  |                    |            |         |                    |   | (750,000    | )
|Purchases of premises and equipment                                                                          |  |                    | (112,941    | )       |                    |   | (301,399    | )
|Proceeds received from sale of securities available-for-sale                                                 |  |                    |            |         |                    |   | 522,280     |  
|Proceeds received from maturity of securities available-for-sale                                             |  |                    | 34,029,099  |         |                    |   | 27,784,263  |  
|Proceeds received from maturity of securities held-to-maturity                                               |  |                    |            |         |                    |   | 3,282,184   |  
|Proceeds received from sale of fixed assets                                                                  |  |                    | 21,000      |         |                    |   |            |  
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Net cash provided by (used in) investing activities                                                          |  |                    | (20,403,888 | )       |                    |   | (25,085,796 | )
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Cash flow from financing activities:                                                                         |  |                    |             |         |                    |   |             |  
|Net increase in demand deposits, savings accounts, NOW accounts and money market accounts                    |  |                    | 10,445,585  |         |                    |   | 26,231,445  |  
|Certificates of deposit sold (matured), net                                                                  |  |                    | 1,073,989   |         |                    |   | 1,513,693   |  
|Net change in short-term borrowings                                                                          |  |                    | 2,500,000   |         |                    |   | 3,711       |  
|Net payments on long-term debt                                                                               |  |                    | (1,011,419  | )       |                    |   | (1,014,272  | )
|Proceeds from issuance of common stock                                                                       |  |                    | 28,204      |         |                    |   | 11,367      |  
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Net cash provided by financing activities                                                                    |  |                    | 13,036,359  |         |                    |   | 26,745,944  |  
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Net increase in cash and cash equivalents                                                                    |  |                    | (5,852,198  | )       |                    |   | 2,943,438   |  
|Cash and cash equivalents at beginning of the period                                                         |  |                    | 14,008,948  |         |                    |   | 10,508,752  |  
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Cash and cash equivalents at end of the period                                                               |  | $                  | 8,156,750   |         |                    | $ | 13,452,190  |  
|                                                                                                             |  |                    |             |         |                    |   |             |  
|Supplemental disclosures of cash flow information:                                                           |  |                    |             |         |                    |   |             |  
|Cash paid during the period for:                                                                             |  |                    |             |         |                    |   |             |  
|Interest on deposits and other borrowings                                                                    |  | $                  | 2,252,500   |         |                    | $ | 1,348,153   |  
|Income taxes                                                                                                 |  |                    |            |         |                    |   | 179,000     |  
|Noncash items:                                                                                               |  |                    |             |         |                    |   |             |  
|Effect on stockholders equity of an unrealized gain (loss) on debt and equity securities available-for-sale |  | $                  | (65,880     | )       |                    | $ | (5,386      | )



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 (SEC) 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 nine months ended September 30, 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.
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
December 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R), Share Based Payment (SFAS No. 123R), a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS
No. 123R supersedes Accounting Principles Bulletin (APB) Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair values. In April 2005, the effective date was amended by the SEC for calendar year companies until the beginning of 2006. The Company currently accounts for share-based
compensation using APB No. 25s intrinsic value method and, accordingly, recognizes no compensation cost for employee stock options. The Company is in the process of determining which transitional method it will elect upon the adoption of
SFAS No. 123R.



The Company presents the pro forma
disclosures required by 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.



|                                                                                                                    |  |                    |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                    |  | (Unaudited)        |         |   | (Unaudited)       |  
|                                                                                                                    |  | Three Months Ended |         |   | Nine Months Ended |  
|September 30,                                                                                                       |  | 2005               |         |   | 2004              |   |         | 2005 |  |   | 2004    |  
|Net income, as reported                                                                                             |  | $                  | 429,625 |   |                   | $ | 249,001 |      |  | $ | 959,266 |   |  | $ | 649,045 |  
|                                                                                                                    |  |                    |         |  
|Deduct: total stock-based employee compensation expense determined based on fair value method of awards, net of tax |  |                    |        |   |                   |   |        |      |  |   | (54,845 | ) |  |   | (24,939 | )
|                                                                                                                    |  |                    |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Pro forma net income                                                                                                |  | $                  | 429,625 |   |                   | $ | 249,001 |      |  | $ | 904,421 |   |  | $ | 624,106 |  
|                                                                                                                    |  |                    |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Basic earnings per share:                                                                                           |  |                    |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|As reported                                                                                                         |  | $                  | 0.41    |   |                   | $ | 0.24    |      |  | $ | 0.92    |   |  | $ | 0.62    |  
|Pro forma                                                                                                           |  | $                  | 0.41    |   |                   | $ | 0.24    |      |  | $ | 0.87    |   |  | $ | 0.60    |  
|                                                                                                                    |  |                    |         |  
|Diluted earnings per share:                                                                                         |  |                    |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|As reported                                                                                                         |  | $                  | 0.38    |   |                   | $ | 0.22    |      |  | $ | 0.85    |   |  | $ | 0.58    |  
|Pro forma                                                                                                           |  | $                  | 0.38    |   |                   | $ | 0.22    |      |  | $ | 0.80    |   |  | $ | 0.56    |  
|                                                                                                                    |  |                    |         |  
|Assumptions                                                                                                         |  |                    |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Risk-free interest rate                                                                                             |  |                    | 3.80    | % |                   |   | 3.33    | %    |  |   | 3.80    | % |  |   | 3.33    | %
|Dividend yield                                                                                                      |  |                    |        |   |                   |   |        |      |  |   |        |   |  |   |        |  
|Volatility factor                                                                                                   |  |                    | 10.00   | % |                   |   | 10.00   | %    |  |   | 10.00   | % |  |   | 10.00   | %
|Weighted average expected life (years)                                                                              |  |                    | 6.2     |   |                   |   | 7.0     |      |  |   | 6.2     |   |  |   | 7.0     |  



5



---

|Note 3 - | Basic earnings per share (EPS) exclude 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.
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                            |  |                    |           |                   |   |           |  |      |           |  |   |          
|------------------------------------------- |  | ------------------ | --------- | ----------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                            |  | (Unaudited)        |           | (Unaudited)      
|                                            |  | Three Months Ended |           | Nine Months Ended
|September 30,                               |  | 2005               |           | 2004              |   | 2005      |  | 2004
|Basic earnings per common share:            |  |                    |           |                   |   |           |  |      |           |  |   |          
|Net income available to common stockholders |  | $                  | 429,625   |                   | $ | 249,001   |  | $    | 959,266   |  | $ | 649,045  
|Weighted average common shares outstanding  |  |                    | 1,042,165 |                   |   | 1,039,182 |  |      | 1,041,696 |  |   | 1,038,820
|                                            |  |                    |           |                   |   |           |  |      |           |  |   |          
|Basic earnings per common share             |  | $                  | 0.41      |                   | $ | 0.24      |  | $    | 0.92      |  | $ | 0.62     
|                                            |  |                    |           |                   |   |           |  |      |           |  |   |          
|Diluted earnings per common share:          |  |                    |           |                   |   |           |  |      |           |  |   |          
|Net income available to common stockholders |  | $                  | 429,625   |                   | $ | 249,001   |  | $    | 959,266   |  | $ | 649,045  
|Weighted average common shares outstanding  |  |                    | 1,042,165 |                   |   | 1,039,182 |  |      | 1,041,696 |  |   | 1,038,820
|Common share equivalents for stock options  |  |                    | 83,723    |                   |   | 77,716    |  |      | 83,723    |  |   | 77,716   
|                                            |  |                    |           |                   |   |           |  |      |           |  |   |          
|                                            |  |                    | 1,125,888 |                   |   | 1,116,898 |  |      | 1,125,419 |  |   | 1,116,536
|                                            |  |                    |           |                   |   |           |  |      |           |  |   |          
|Diluted earnings per common share           |  | $                  | 0.38      |                   | $ | 0.22      |  | $    | 0.85      |  | $ | 0.58     
|                                            |  |                    |           |                   |   |           |  |      |           |  |   |          



|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.
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



6



---

A. Results of Operations for the Three and Nine Months Ended September 30, 2005 as Compared to the Three and
Nine Months Ended September 30, 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 $959,266 for the nine-month period ended September 30, 2005. This compares with net income of $649,045 for the same period of 2004. Basic earnings per
share were $.92 for the nine months ended September 30, 2005, compared to $.62 for the same nine months of 2004. UFBC reported net income of $429,625 for the three-month period ended September 30, 2005. This compares with net income of
$249,001 for the same period of 2004. Basic earnings per share were $.41 for the three months ended September 30, 2005, compared to $.24 for the same three months of 2004.



During the third quarter of 2005, the Bank entered into an agreement to lease space for its operations department and for a
fifth branch office at 45975 Nokes Boulevard, Suite 130, Sterling, Virginia 20166. The branch office is expected to open in December 2005.



Net Interest Income



For the nine-month period ended September 30, 2005, net interest income increased $1,156,176, or 25.7%, from $4,498,816 at September 30, 2004 to
$5,654,992 at September 30, 2005 (Consolidated Statements of Income and Comprehensive Income). The increase was primarily attributable to an increased volume of earning assets. Average total earning assets increased $37,427,986, or
26.4%, from $141,892,938 at September 30, 2004 to $179,320,924 at September 30, 2005 (Consolidated Average Balancestable). Contributing $1,546,748 to 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 Incometable).



As shown in the Analysis of the Changes in the Components of Net Interest Incometable, net interest income was impacted by both rate and volume.
The rising rate environment increased total interest income on earning assets by $667,838 during the first nine months of 2005 when compared to 2004. The increased volume of earning assets contributed $1,403,476 to earnings when comparing the nine
month periods ended September 30, 2005 and 2004 (Analysis of the Changes in the Components of Net Interest Incometable). The combined effect of the rate and volume variances resulted in an increase of $2,071,314 in total interest income
(or earning assets) from $5,854,000 at September 30, 2004 to $7,925,314 at September 30, 2005.



Total interest expense increased $915,138, or 67.5%, from $1,355,184 at September 30, 2004 to $2,270,322 at September 30, 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 comparable impact when comparing the September 30, 2004 and 2005 periods. During the first nine months of 2004, compared to the first nine months of 2005, total interest expense increased $508,670 due to volume,
while rates increased total interest expense by $406,468. Average total interest-bearing liabilities increased $27,409,558, or 28.6%, from $95,953,330 at September 30, 2004 to $123,362,888 at September 30, 2005 (Consolidated Average
Balancestable). Trust preferred capital notes, issued on December 30, 2004, contributed to the increased volume of interest-bearing liabilities. Expense on the trust preferred notes is included in interest on long-term debt and primarily
accounts for the three and nine month increases when comparing the three and nine month periods ended September 30, 2005 and 2004. Interest on federal funds purchased during the third quarter of 2005 accounts for the increase in short-term
borrowing expense for the three months ended September 30, 2005.



7



---

UNITED FINANCIAL BANKING COMPANIES, INC.

CONSOLIDATED AVERAGE BALANCES/NET INTEREST ANALYSIS/

YIELDS AND RATES



|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|------------------------------------------ |  | ------------------------- | ----------- | - | ------------------ | - | ---------- |  | ---- | ------------------ |  | - | ----------- | - | ---------- | - | --------- |  | ---- | -
|                                           |  | For the Nine Months Ended |            
|                                           |  | September 30, 2005        |             |   | September 30, 2004 |  
|                                           |  | AverageBalance (1)        |             |   | Interest           |   | Yield/Rate |  |      | AverageBalance (1) |  |   | Interest    |   | Yield/Rate |  
|ASSETS                                     |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Earning assets:                            |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Loans:                                     |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Commercial                                 |  | $                         | 99,132,920  |   |                    | $ | 4,969,085  |  | 6.70 | %                  |  | $ | 83,091,528  |   |            | $ | 4,084,338 |  | 6.55 | %
|Real estate construction                   |  |                           | 23,122,511  |   |                    |   | 1,304,350  |  | 7.54 | %                  |  |   | 15,429,867  |   |            |   | 784,025   |  | 6.77 | %
|Real estate mortgage                       |  |                           | 7,449,650   |   |                    |   | 377,730    |  | 6.78 | %                  |  |   | 7,865,021   |   |            |   | 382,395   |  | 6.48 | %
|Installment                                |  |                           | 8,271,320   |   |                    |   | 378,149    |  | 6.11 | %                  |  |   | 5,545,290   |   |            |   | 231,808   |  | 5.57 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total loans                                |  |                           | 137,976,401 |   |                    |   | 7,029,314  |  | 6.81 | %                  |  |   | 111,931,706 |   |            |   | 5,482,566 |  | 6.52 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits                  |  |                           | 6,376,930   |   |                    |   | 120,088    |  | 2.52 | %                  |  |   | 2,226,976   |   |            |   | 18,030    |  | 1.08 | %
|Federal funds sold                         |  |                           | 12,248,333  |   |                    |   | 256,324    |  | 2.80 | %                  |  |   | 13,404,117  |   |            |   | 110,630   |  | 1.10 | %
|Investment securities (2)                  |  |                           | 22,719,260  |   |                    |   | 519,588    |  | 3.06 | %                  |  |   | 14,330,139  |   |            |   | 242,774   |  | 2.26 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total earning assets                       |  |                           | 179,320,924 |   |                    | $ | 7,925,314  |  | 5.91 | %                  |  |   | 141,892,938 |   |            | $ | 5,854,000 |  | 5.50 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Noninterest-earning assets:                |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Cash and due from banks                    |  |                           | 5,690,063   |   |                    |   |            |  |      |                    |  |   | 5,383,290   |   |            |   |           |  |      |  
|Other assets                               |  |                           | 4,218,736   |   |                    |   |            |  |      |                    |  |   | 3,503,759   |   |            |   |           |  |      |  
|Allowance for loan losses                  |  |                           | (2,077,446  | ) |                    |   |            |  |      |                    |  |   | (1,634,773  | ) |            |   |           |  |      |  
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total assets                               |  | $                         | 187,152,277 |   |                    |   |            |  |      |                    |  | $ | 149,145,214 |   |            |   |           |  |      |  
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing liabilities:              |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits:                 |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Savings and NOW accounts                   |  | $                         | 47,492,766  |   |                    | $ | 689,477    |  | 1.94 | %                  |  | $ | 40,259,072  |   |            | $ | 458,599   |  | 1.52 | %
|Money market accounts                      |  |                           | 23,812,176  |   |                    |   | 229,194    |  | 1.29 | %                  |  |   | 20,610,116  |   |            |   | 139,871   |  | 0.90 | %
|Time:                                      |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Under $100,000                             |  |                           | 21,280,737  |   |                    |   | 488,566    |  | 3.07 | %                  |  |   | 17,538,213  |   |            |   | 354,594   |  | 2.69 | %
|$100,000 and over                          |  |                           | 21,746,478  |   |                    |   | 494,429    |  | 3.04 | %                  |  |   | 13,142,000  |   |            |   | 253,198   |  | 2.57 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing deposits            |  |                           | 114,332,157 |   |                    |   | 1,901,666  |  | 2.22 | %                  |  |   | 91,549,401  |   |            |   | 1,206,262 |  | 1.76 | %
|                                           |  |                           |             |   |                    |  
|Short-term borrowings                      |  |                           | 1,505,519   |   |                    |   | 44,118     |  | 3.92 | %                  |  |   | 1,030,182   |   |            |   | 26,208    |  | 3.39 | %
|Long-term debt                             |  |                           | 7,525,212   |   |                    |   | 324,538    |  | 5.77 | %                  |  |   | 3,373,747   |   |            |   | 122,714   |  | 4.85 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing liabilities         |  |                           | 123,362,888 |   |                    | $ | 2,270,322  |  | 2.46 | %                  |  |   | 95,953,330  |   |            | $ | 1,355,184 |  | 1.88 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Non interest-bearing liabilities:          |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Demand deposits                            |  |                           | 48,965,098  |   |                    |   |            |  |      |                    |  |   | 39,869,143  |   |            |   |           |  |      |  
|Other liabilities                          |  |                           | 965,944     |   |                    |   |            |  |      |                    |  |   | 662,237     |   |            |   |           |  |      |  
|Stockholders equity                       |  |                           | 13,858,347  |   |                    |   |            |  |      |                    |  |   | 12,660,504  |   |            |   |           |  |      |  
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total liabilities and stockholders equity |  | $                         | 187,152,277 |   |                    |   |            |  |      |                    |  | $ | 149,145,214 |   |            |   |           |  |      |  
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest income                        |  |                           |             |   |                    | $ | 5,654,992  |  |      |                    |  |   |             |   |            | $ | 4,498,816 |  |      |  
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest margin (3)                    |  |                           |             |   |                    |   |            |  | 4.22 | %                  |  |   |             |   |            |   |           |  | 4.22 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest spread (4)                    |  |                           |             |   |                    |   |            |  | 3.45 | %                  |  |   |             |   |            |   |           |  | 3.61 | %
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Fees included in loan income               |  |                           |             |   |                    | $ | 288,310    |  |      |                    |  |   |             |   |            | $ | 264,640   |  |      |  
|                                           |  |                           |             |   |                    |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  

---

|(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. Average yields on securities for 2005 include a tax equivalent adjustment, using a 34% rate.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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



---

Despite the increasing rate environment during the past year, the September 2005 net interest margin
remained the same compared to the 2004 net interest margin. The unchanged net interest margin is attributable to interest expense on the trust preferred notes that accounted for 17 basis points of the 58 basis points change in the cost for total
interest-bearing liabilities between September 2005 and 2004. The competitive deposit market in Northern Virginia also significantly contributed to the increased cost of total interest-bearing liabilities.



The Banks deposit mix contributed to mitigating interest expense and
managing 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 $9,095,955, or 22.8%, from $39,869,143 at
September 30, 2004 to $48,965,098 at September 30, 2005. Additionally, the average balance of lower costing accounts, (savings, NOW and money market), increased $10,435,754, or 17.1%, from September 30, 2004 to September 30,
2005.



Analysis of the Changes in the Components of Net
Interest Income



|                                    |  |                         |           |   |                |        |         |   |  |   |           |  
|----------------------------------- |  | ----------------------- | --------- | - | -------------- | ------ | ------- | - |  | - | --------- | -
|For Nine Months Ended September 30, |  | 2005 Compared to 2004   |          
|                                    |  | TotalIncrease(Decrease) |           |   | Change Due To: |       
|                                    |  |                         | Rate      |   |                | Volume |        
|Interest income:                    |  |                         |           |   |                |        |         |   |  |   |           |  
|Loans:                              |  |                         |           |   |                |        |         |   |  |   |           |  
|Commercial                          |  | $                       | 764,636   |   |                | $      | (47,062 | ) |  | $ | 811,698   |  
|Real estate - construction          |  |                         | 520,325   |   |                |        | 129,445 |   |  |   | 390,880   |  
|Real estate - mortgage              |  |                         | (4,665    | ) |                |        | 15,530  |   |  |   | (20,195   | )
|Installment                         |  |                         | 266,452   |   |                |        | 211,542 |   |  |   | 54,910    |  
|                                    |  |                         |           |   |                |        |         |   |  |   |           |  
|Total loans                         |  |                         | 1,546,748 |   |                |        | 309,455 |   |  |   | 1,237,293 |  
|                                    |  |                         |          
|Interest-bearing deposits           |  |                         | 102,058   |   |                |        | 68,459  |   |  |   | 33,599    |  
|Federal funds sold                  |  |                         | 145,694   |   |                |        | 155,233 |   |  |   | (9,539    | )
|Investment securities               |  |                         | 276,814   |   |                |        | 134,690 |   |  |   | 142,124   |  
|                                    |  |                         |           |   |                |        |         |   |  |   |           |  
|Total interest income               |  |                         | 2,071,314 |   |                |        | 667,837 |   |  |   | 1,403,477 |  
|                                    |  |                         |           |   |                |        |         |   |  |   |           |  
|Interest expense:                   |  |                         |           |   |                |        |         |   |  |   |           |  
|Savings and NOW accounts            |  |                         | 230,878   |   |                |        | 148,478 |   |  |   | 82,400    |  
|Money markets accounts              |  |                         | 89,323    |   |                |        | 67,592  |   |  |   | 21,731    |  
|Time:                               |  |                         |           |   |                |        |         |   |  |   |           |  
|Under $100,000                      |  |                         | 133,972   |   |                |        | 58,304  |   |  |   | 75,668    |  
|$100,000 and over                   |  |                         | 241,231   |   |                |        | 75,454  |   |  |   | 165,777   |  
|Short-term borrowings               |  |                         | 17,910    |   |                |        | 5,817   |   |  |   | 12,093    |  
|Long-term debt                      |  |                         | 201,824   |   |                |        | 50,822  |   |  |   | 151,002   |  
|                                    |  |                         |           |   |                |        |         |   |  |   |           |  
|Total interest expense              |  |                         | 915,138   |   |                |        | 406,467 |   |  |   | 508,671   |  
|                                    |  |                         |           |   |                |        |         |   |  |   |           |  
|Net interest income                 |  | $                       | 1,156,176 |   |                | $      | 261,370 |   |  | $ | 894,806   |  
|                                    |  |                         |           |   |                |        |         |   |  |   |           |  



9



---

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.



Provision for loan loss expense increased $32,524 from 2004 to 2005 when comparing the nine months ended September 30,
from $284,313 for the nine months ended September 30, 2004 to $316,837 for the nine months ended September 30, 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 increased $83,808, or 45.4%, during the three months, and $92,788, or 15.8%, during the nine months, ended September 30, 2005 compared to September 30, 2004. Total noninterest income was impacted by increases in loan related fees
and decreases in other income. Loan servicing and other fees increased $117,207, or 868.2%, during the three months and $237,283, or 324.4%, during the nine months ended September 30, 2005, compared to September 30, 2004. Mortgage broker
fee income primarily accounted for the increase. Other income declined $33,399, or 19.5%, during the three months, and decreased $144,495, or 28.1%, during the nine months, ended September 30, 2005 compared to September 30, 2004. The
decline was attributable to less fee income generated from deposit accounts.



Noninterest Expense



Total noninterest
expense increased $734,578, or 19.2%, during the nine months ended September 30, 2005, compared to the nine months ended September 30, 2004. The increase was primarily attributable to additional staffing to enhance asset growth and
business expansion. Salaries and employee benefits increased $543,475, or 25.3%, during the nine months ended September 30, 2005, compared to the nine months ended September 30, 2004. Growth and expansion expenses such as occupancy and
furniture and equipment also contributed to the increase. Occupancy and furniture and equipment expense increased $55,158, or 6.6%, during the first nine months of 2005 compared to the first nine months of 2004. Of note, accounting expense increased
46,800, or 83.6%, from September 2004 to September 2005, due to expense associated with complying with the Sarbanes-Oxley Act. The factors that impacted the nine month variances also impacted the three month variances.



Income Taxes



The provision for income taxes increased $171,641, or 53.2%, from $322,526 at September 30, 2004 to $494,167 at
September 30, 2005. Income tax expense was accrued at the effective statutory rate of 34.0%, adjusted for certain permanent differences that vary between periods. The increase when comparing the nine months ended September 30 was
attributable to earnings.



10



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B. Financial Condition as of September 30, 2005



Assets



Total assets increased $14,547,330, or 8.4%, during the first nine months of 2005. The increase was primarily attributable
to an increased volume of deposits that were invested in loans and securities. At December 31, 2004, the balance of available-for-sale investment securities included an overnight government security of $15,000,000 purchased for tax purposes.
The average balance of investment securities totaled $22,719,260 for the nine month period ended September 30, 2005, and $14,330,139 for the year ended December 31, 2004.



Loans



Loans, net of unearned income, increased $22,500,547, or 17.5%, from $128,851,646 at December 31, 2004 to $151,352,193 at September 30, 2005. The growth was
primarily funded by deposits.



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 either 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 September 30, 2005 and December 31, 2004, the allowance for loan losses was $2,264,993, or 1.5%, and $1,914,616, or 1.5%, respectively, of total loans. Impaired and non-accrual loans, at
September 30, 2005, totaled $-0- and at December 31, 2004, totaled $37,202. There were no charge-offs during the nine months ended September 30, 2005 and 2004. Recoveries totaled $33,495 during the nine months ended September 30,
2005 and $25,413 during same period of 2004.



11



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Premises and Equipment



Net premises and equipment decreased $97,225, or 6.4%, during the nine
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 September 30, 2005.



Deposits



During the first nine 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 $10,445,585, or 9.7%, from $107,815,363 at December 31, 2004 to $118,260,948 at September 30, 2005. The changes since December 31, 2004 were as follows: demand deposits (noninterest-bearing) - increased $4,393,392,
or 9.8%; savings and NOW deposits - increased $6,875,289, or 18.4%; and money market deposits - decreased $823,096, or 3.2%.



Other Liabilities and Equity



Short-term borrowings and long-term debt consist of $2,000,000 of outstanding advances from the Federal Home Loan Bank of Atlanta (FHLBA), $2,500,000 of
overnight borrowing and $754,448 from a financial institution. The FHLBA advances have been used to fund certain lending programs. The $754,448 was used to partially fund the purchase of the Reston branch. Stockholders equity increased
$921,590, or 6.8%, during the nine months ended September 30, 2005, when compared to the year ended December 31, 2004. During the first nine 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 prior capital offerings, including trust preferred, and reimbursements from allocated expenses will
provide sufficient cash flow for UFBCs continuing operational needs.



Consolidated average liquid assets were 23.0% of average total assets at September 30, 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, municipal 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.



12



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At September 30, 2005, the Banks investment portfolio consisted of the following:



|                           |  |                    |            |                  |   |          
|-------------------------- |  | ------------------ | ---------- | ---------------- | - | ---------
|                           |  | Available-for-Sale |            | Held-to-Maturity
|U.S. government agency     |  | $                  | 18,658,078 |                  | $ | 2,998,913
|U.S. Treasury              |  |                    | 2,623,995  |                  |   |         
|Mortgage-backed securities |  |                    | 492,997    |                  |   |         
|Municipal securities       |  |                    | 263,425    |                  |   |         
|Mutual funds               |  |                    | 612,607    |                  |   |         
|Corporate debt securities  |  |                    | 503,299    |                  |   |         
|Equity                     |  |                    | 542,450    |                  |   |         
|                           |  |                    |            |                  |   |          
|Total                      |  | $                  | 23,696,851 |                  | $ | 2,998,913
|                           |  |                    |            |                  |   |          



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 September 30, 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 September 30, 2005:                |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 20,621,180 |  | 13.66 | %                                     |  | 12,078,730 |                                 | 8.00  | % |  | 15,098,413 |  | N/A   |  
|The Business Bank                        |  | 18,035,272 |  | 12.09 | %                                     |  | 11,938,916 |                                 | 8.00  | % |  | 14,923,645 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 18,305,576 |  | 12.12 | %                                     |  | 6,039,365  |                                 | 4.00  | % |  | 9,059,048  |  | N/A   |  
|The Business Bank                        |  | 16,164,927 |  | 10.83 | %                                     |  | 5,969,458  |                                 | 4.00  | % |  | 8,954,187  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 18,305,576 |  | 9.66  | %                                     |  | 7,580,360  |                                 | 4.00  | % |  | 9,475,450  |  | N/A   |  
|The Business Bank                        |  | 16,164,927 |  | 8.56  | %                                     |  | 7,557,710  |                                 | 4.00  | % |  | 9,447,138  |  | 5.00  | %
|                                         |  |            |  |       |                                       | 
|As of September 30, 2004:                |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 14,383,608 |  | 11.20 | %                                     |  | 10,270,408 |                                 | 8.00  | % |  | 12,838,010 |  | N/A   |  
|The Business Bank                        |  | 12,963,331 |  | 10.27 | %                                     |  | 10,099,588 |                                 | 8.00  | % |  | 12,624,485 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 12,776,130 |  | 9.95  | %                                     |  | 5,135,204  |                                 | 4.00  | % |  | 7,702,806  |  | N/A   |  
|The Business Bank                        |  | 11,382,253 |  | 9.02  | %                                     |  | 5,049,794  |                                 | 4.00  | % |  | 7,574,691  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 12,776,130 |  | 8.08  | %                                     |  | 6,326,770  |                                 | 4.00  | % |  | 7,908,462  |  | N/A   |  
|The Business Bank                        |  | 11,382,253 |  | 7.42  | %                                     |  | 6,133,062  |                                 | 4.00  | % |  | 7,666,327  |  | 5.00  | %



13



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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 effective. 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 nine months ended September 30, 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 September 30, 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



None.



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



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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: November 14, 2005 |  |  |  | By:                                      |  | /s/ HAROLD C. RAUNER   
|                        |  |  |  |                                          |  | Harold C. Rauner       
|                        |  |  |  |                                          |  | President and CEO      
|                        |  |  | 
|Date: November 14, 2005 |  |  |  | By:                                      |  | /s/ LISA M. PORTER     
|                        |  |  |  |                                          |  | Lisa M. Porter         
|                        |  |  |  |                                          |  | Chief Financial Officer



15