---



United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



(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, 2003.



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.



|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

1,037,062 Shares Outstanding

as of September 30, 2003



Transitional Small Business Disclosure Format: Yes ̈No x



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Part 1. Financial Information



|Item 1: |  | Financial Statements
|------- |  | --------------------



UNITED FINANCIAL BANKING COMPANIES, INC., AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive
Income / Results of Operations

(Unaudited)



|                                                                                                  |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30,
|------------------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | ------------------------------
|                                                                                                  |  | 2003                            |           |                               
|Interest income:                                                                                  |  |                                 |           |                               
|Interest and fees on loans                                                                        |  | $                               | 1,506,426 |                               
|Interest on investment securities                                                                 |  |                                 | 46,739    |                               
|Interest on federal funds sold                                                                    |  |                                 | 68,564    |                               
|Interest on interest-bearing deposits                                                             |  |                                 | 4,307     |                               
|                                                                                                  |  |                                 |           |                               
|Total interest income                                                                             |  |                                 | 1,626,036 |                               
|                                                                                                  |  |                                 |           |                               
|                                                                                                  |  |                                 |           |                               
|Interest expense:                                                                                 |  |                                 |           |                               
|Interest on deposits                                                                              |  |                                 | 407,321   |                               
|Interest on short-term borrowings                                                                 |  |                                 | 14,903    |                               
|Interest on long-term debt                                                                        |  |                                 | 44,922    |                               
|                                                                                                  |  |                                 |           |                               
|Total interest expense                                                                            |  |                                 | 467,146   |                               
|                                                                                                  |  |                                 |           |                               
|Net interest income                                                                               |  |                                 | 1,158,890 |                               
|                                                                                                  |  |                                 |           |                               
|Provision for loan losses                                                                         |  |                                 |          |                               
|                                                                                                  |  |                                 |           |                               
|Net interest income after provision for loan losses                                               |  |                                 | 1,158,890 |                               
|Noninterest income:                                                                               |  |                                 |           |                               
|Gain (loss) on sale of real estate owned and other earning assets                                 |  |                                 | 31,108    |                               
|Loan servicing and other fees                                                                     |  |                                 | 19,697    |                               
|Other income                                                                                      |  |                                 | 109,345   |                               
|                                                                                                  |  |                                 |           |                               
|Total noninterest income                                                                          |  |                                 | 160,150   |                               
|                                                                                                  |  |                                 |           |                               
|Noninterest expense:                                                                              |  |                                 |           |                               
|Salaries                                                                                          |  |                                 | 426,805   |                               
|Employee benefits                                                                                 |  |                                 | 75,655    |                               
|Occupancy                                                                                         |  |                                 | 135,866   |                               
|Furniture and equipment                                                                           |  |                                 | 52,364    |                               
|Data processing                                                                                   |  |                                 | 52,734    |                               
|Other insurance                                                                                   |  |                                 | 11,155    |                               
|Real estate owned holding expense                                                                 |  |                                 | 24        |                               
|Legal                                                                                             |  |                                 | 5,311     |                               
|FDIC / FICO bond insurance                                                                        |  |                                 | 3,768     |                               
|Other expense                                                                                     |  |                                 | 168,527   |                               
|                                                                                                  |  |                                 |           |                               
|Total noninterest expense                                                                         |  |                                 | 932,209   |                               
|                                                                                                  |  |                                 |           |                               
|Income (loss) before income taxes                                                                 |  |                                 | 386,831   |                               
|Provision (credit) for income taxes                                                               |  |                                 | 131,645   |                               
|                                                                                                  |  |                                 |           |                               
|Net income (loss)                                                                                 |  | $                               | 255,186   |                               
|                                                                                                  |  |                                 |           |                               
|Net income (loss) per common share (Note 3)                                                       |  |                                 |           |                               
|Basic                                                                                             |  | $                               | 0.25      |                               
|                                                                                                  |  |                                 |           |                               
|Diluted                                                                                           |  | $                               | 0.23      |                               
|                                                                                                  |  |                                 |           |                               
|                                                                                                  |  |                                 |           |                               
|Comprehensive Income (Note 4)                                                                     |  |                                 |           |                               
|Net income                                                                                        |  | $                               | 255,186   |                               
|Other comprehensive income, net of tax Unrealized gains (losses) on available-for-sale securities |  |                                 | (18,548   | )                             
|                                                                                                  |  |                                 |           |                               
|Comprehensive income                                                                              |  | $                               | 236,638   |                               
|                                                                                                  |  |                                 |           |                               



2



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UNITED FINANCIAL BANKING COMPANIES, INC., AND SUBSIDIARIES

Consolidated Balance Sheets / Financial Condition



|                                                                                                                      |  | (Unaudited)September 30,2003 |             |   | (Audited)December 31,2002 |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | ------------------------- | -
|Assets                                                                                                                |  |                              |             |   |                           |  
|Cash and due from banks                                                                                               |  | $                            | 4,334,132   |   |                           | $
|Interest-bearing deposits in other banks                                                                              |  |                              | 1,809,197   |   |                           |  
|Federal funds sold                                                                                                    |  |                              | 15,175,000  |   |                           |  
|Investment Securities:                                                                                                |  |                              |             |   |                           |  
|Available-for-sale (AFS)                                                                                              |  |                              | 24,239,880  |   |                           |  
|Held-to-maturity (HTM)                                                                                                |  |                              | 1,558,128   |   |                           |  
|Loans, net of unearned                                                                                                |  |                              |             |   |                           |  
|income of $290,855 and $219,870                                                                                       |  |                              | 86,736,941  |   |                           |  
|Less: Allowance for loan losses                                                                                       |  |                              | (1,515,382  | ) |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Net loans                                                                                                             |  |                              | 85,221,559  |   |                           |  
|Real estate owned held for sale, net                                                                                  |  |                              | 132,406     |   |                           |  
|Premises and equipment, net                                                                                           |  |                              | 2,055,877   |   |                           |  
|Deferred income taxes                                                                                                 |  |                              | 1,114,444   |   |                           |  
|Other assets                                                                                                          |  |                              | 716,867     |   |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Total assets                                                                                                          |  | $                            | 136,357,490 |   |                           | $
|                                                                                                                      |  |                              |             |   |                           |  
|                                                                                                                      |  |                             
|Liabilities and Stockholders Equity                                                                                  |  |                              |             |   |                           |  
|Deposits:                                                                                                             |  |                              |             |   |                           |  
|Demand                                                                                                                |  | $                            | 34,787,154  |   |                           | $
|Savings and NOW                                                                                                       |  |                              | 32,055,027  |   |                           |  
|Money market                                                                                                          |  |                              | 16,204,008  |   |                           |  
|Time deposits:                                                                                                        |  |                              |             |   |                           |  
|Under $100,000                                                                                                        |  |                              | 18,774,126  |   |                           |  
|$100,000 and over                                                                                                     |  |                              | 15,565,647  |   |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Total deposits                                                                                                        |  |                              | 117,385,962 |   |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Escrow payable                                                                                                        |  |                              | 564,568     |   |                           |  
|Other liabilities                                                                                                     |  |                              | 498,390     |   |                           |  
|Short-term borrowings                                                                                                 |  |                              | 2,003,486   |   |                           |  
|Long-term debt                                                                                                        |  |                              | 3,780,155   |   |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Total liabilities                                                                                                     |  |                              | 124,232,561 |   |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Stockholders Equity:                                                                                                 |  |                              |             |   |                           |  
|Preferred stock of no par value, authorized 5,000,000 shares, no shares issued                                        |  |                              |            |   |                           |  
|Common Stock, par value $1; authorized 3,500,000 shares, issued 1,037,062 shares at 9/30/03 and 1,036,999 at
12/31/02 |  |                              | 1,037,062   |   |                           |  
|Capital in excess of par value                                                                                        |  |                              | 16,209,117  |   |                           |  
|Accumulated deficit                                                                                                   |  |                              | (5,117,784  | ) |                           |  
|Accumulated other comprehensive income                                                                                |  |                              | (3,466      | ) |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Total stockholders equity                                                                                            |  |                              | 12,124,929  |   |                           |  
|                                                                                                                      |  |                              |             |   |                           |  
|Total liabilities and stockholders equity                                                                            |  | $                            | 136,357,490 |   |                           | $
|                                                                                                                      |  |                              |             |   |                           |  



3



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                             |  | Nine Months Ended |            
|------------------------------------------------------------------------------------------------------------ |  | ----------------- | -----------
|                                                                                                             |  | September 30,2003 |            
|Cash flows from operating activities:                                                                        |  |                   |            
|Net Income                                                                                                   |  | $                 | 560,197    
|Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities:            |  |                   |            
|Depreciation & amortization                                                                                  |  |                   | 106,725    
|Provision for loan losses                                                                                    |  |                   | 280,000    
|Amortization of investment security discount                                                                 |  |                   | 46,473     
|Amortization of loan fees and discounts, net                                                                 |  |                   | (73,780    
|Net (gain) loss on sale of other real estate owned                                                           |  |                   | (75,107    
|(Increase) decrease in other assets                                                                          |  |                   | 96,948     
|Increase (decrease) in other liabilities                                                                     |  |                   | 578,410    
|                                                                                                             |  |                   |            
|Net cash provided by (used in) operating activities                                                          |  |                   | 1,519,866  
|                                                                                                             |  |                   |            
|                                                                                                             |  |                  
|Cash flows from investing activities:                                                                        |  |                   |            
|Loans originated  non-bank subsidiaries                                                                     |  |                   |           
|Principal collected  non-bank subsidiaries                                                                  |  |                   | 3,034      
|Loan originations, net of collections                                                                        |  |                   | (10,464,972
|Purchases of securities available-for-sale                                                                   |  |                   | (36,740,777
|Purchases of securities held-to-maturity                                                                     |  |                   | (21,689,648
|Investment made in other real estate owned                                                                   |  |                   | (913,978   
|Proceeds received from maturity of securities available-for-sale                                             |  |                   | 27,537,627 
|Proceeds received from maturity of securities held to maturity                                               |  |                   | 21,445,299 
|Proceeds from real estate owned                                                                              |  |                   | 1,079,300  
|Purchases of premises and equipment                                                                          |  |                   | (393,324   
|                                                                                                             |  |                   |            
|Net cash provided by (used in) investing activities                                                          |  |                   | (20,137,439
|                                                                                                             |  |                   |            
|                                                                                                             |  |                  
|Cash flow from financing activities:                                                                         |  |                   |            
|Net increase (decrease) in demand deposits, savings accounts, NOW accounts and money market accounts         |  |                   | 24,116,164 
|Certificates of deposit sold (matured), net                                                                  |  |                   | 1,786,607  
|Net change in short-term borrowings                                                                          |  |                   | (10,009    
|Proceeds from sale of common stock                                                                           |  |                   | 645        
|                                                                                                             |  |                   |            
|Net cash provided by (used in) financing activities                                                          |  |                   | 25,893,407 
|                                                                                                             |  |                   |            
|Net increase (decrease) in cash and cash equivalents                                                         |  |                   | 7,275,834  
|Cash and cash equivalents at beginning of the year                                                           |  |                   | 14,042,495 
|                                                                                                             |  |                   |            
|Cash and cash equivalents at end of the quarter                                                              |  | $                 | 21,318,329 
|                                                                                                             |  |                   |            
|                                                                                                             |  |                  
|Supplemental disclosures of cash flow information:                                                           |  |                   |            
|Cash paid during the years for:                                                                              |  |                   |            
|Interest on deposits and other borrowings                                                                    |  | $                 | 1,444,357  
|Income taxes                                                                                                 |  |                   |           
|                                                                                                             |  |                  
|Non-Cash Items:                                                                                              |  |                   |            
|Effect on stockholders equity of an unrealized gain (loss) on debt and equity securities available-for-sale |  | $                 | (18,791    
|Reclass long-term debt to short-term debt                                                                    |  | $                 | 1,013,495  



4



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Notes to Consolidated Financial Statements



|Note 1 - | The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-QSB and, therefore, do not include all information
and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The interim financial statements have been prepared utilizing the interim basis of reporting and, as such, reflect
all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Note 3 - | On December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128, Earnings per share (SFAS 128), which supersedes Accounting Principles Board
Opinion No. 15. Under SFAS 128, earnings per common share are computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share 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.
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 - | The Company applies Accounting Principles Bulletin (APB) Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations to account for employee stock
compensation plans, and accordingly, does not recognize compensation expense for stock options granted when the option price is greater than or equal to the underlying stock price. The pro forma disclosures required by SFAS 123, Accounting for
Stock-Based Compensation, and as amended by SFAS 148, are presented within this report.
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5



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|                                                    
|----------------------------------------------------
|UNITED FINANCIAL BANKING COMPANIES, INC.            
|CONSOLIDATED AVERAGE BALANCES/NET INTEREST ANALYSIS/
|YIELDS AND RATES                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|ASSETS                                              
|Earning assets:                                     
|Loans:                                              
|Commercial                                          
|Real estate construction                            
|Real estate mortgage                                
|Installment                                         
|                                                    
|Total loans                                         
|                                                    
|Interest-bearing deposits                           
|Federal funds sold                                  
|Investment securities(1)                            
|                                                    
|Total earning assets                                
|                                                    
|Noninterest-earning assets                          
|Cash and due from banks                             
|Other assets                                        
|Allowance for loan losses                           
|                                                    
|Total assets                                        
|                                                    
|LIABILITIES AND STOCKHOLDERS EQUITY                
|Interest-bearing liabilities:                       
|Interest-bearing deposits:                          
|Savings and NOW accounts                            
|Money market accounts                               
|Time:                                               
|Under $100,000                                      
|$100,000 and over                                   
|                                                    
|Total interest-bearing deposits                     
|Short-term borrowings                               
|Long-term debt                                      
|                                                    
|Total interest-bearing liabilities                  
|                                                    
|Non interest-bearing liabilities:                   
|Demand deposits                                     
|Other liabilities                                   
|Stockholders equity                                
|                                                    
|Total liabilities and stockholders equity          
|                                                    
|Net interest income                                 
|                                                    
|Net interest margin(1)                              
|                                                    
|Net interest spread(2)                              
|                                                    
|Fees included in loan income                        
|                                                    
|Taxable equivalent adjustment                       
|                                                    



| | Average balances for the years presented are calculated on a monthly basis. Nonaccruing loans are included in the average loan balance.
| | ---------------------------------------------------------------------------------------------------------------------------------------



|(1) | 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 shareholders equity.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Net interest income divided by total earning assets.
|--- | ----------------------------------------------------



|(3) | Average rate earned on total earning assets less average rate paid for interest-bearing liabilities.
|--- | ----------------------------------------------------------------------------------------------------



6



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



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



|A. | Results of Operations for the Nine Months Ended September 30, 2003 as Compared to the Nine Months Ended September 30, 2002
|-- | --------------------------------------------------------------------------------------------------------------------------



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) which is presented on a consolidated basis. UFBC
reported net income of $560,197 for the nine-month period ended September 30, 2003. This compares with net income of $526,467 for the same period of 2002. Basic earnings per share were $.54 for the first nine months ended September 30, 2003 compared
to $.51 for the first nine months of 2002.



Net Interest Income



For the nine-month period ended September 30, 2003, net
interest income increased $526,843 or 18.6% from $2,827,359 at September 30, 2002 to $3,354,202 at September 30, 2003 (Consolidated Statements of Income and Comprehensive Income table). The numerical change masks the impact of the current
rate environment as shown in the decreased net interest margin. The net interest margin of 3.79% at September 30, 2003 was notably less than the September 30, 2002 net interest margin of 4.63% (Consolidated Average Balancestable). The
decreases in the prime interest rate have significantly contributed to the decline in the net interest margin. However, an increased volume of earning assets and repriced liabilities helped offset the decreased net interest margin and contributed to
the increased net interest income at September 30, 2003. The same factors influenced the net interest income comparison for the second quarters of 2003 and 2002.



As shown in the Rate Volume Variance Table, net interest income was impacted by both rate and volume. The compressed
rate environment suppressed interest income on earning assets by $646,039 during the first nine months of 2003 when compared to 2002. The yield on total earning assets decreased 138 basis points from 6.79% at September 30, 2002 to 5.41% at September
30, 2003 (Consolidated Average Balancestable). However, earnings lost due to rate were offset by the favorable contribution from the increased volume of total earning assets (Rate Volume Variance table). At September 30, 2003, average
total earning assets increased $36,834,562 or 45.1% compared to the first nine months of September 30, 2002 (Consolidated Average Balances table). The increased volume of earning assets contributed $1,359,894 to earnings when comparing the
nine month periods ended September 30, 2003 and 2002 (Rate Volume Variance table). The combined effect of the rate and volume variances resulted in an increase of $646,039 in interest income (or earning assets) from $4,145,087 at September
30, 2002 to $4,791,126 at September 30, 2003.



7



---

Interest expense increased $119,196 or 9.1% from $1,317,728 at September 30, 2002 to $1,436,924 at
September 30, 2003 (Consolidated Statements of Income and Comprehensive Income table). The increase was attributable to an increased volume of interest-bearing deposits and borrowings. The average volume of interest-bearing deposits increased
$23,734,964 or 43.7% during the past year (Consolidated Average Balances table) and short-term borrowings and long-term debt increased $3,233,522 during the same period. Average total interest-bearing liabilities increased $26,968,486 or
47.4% from $56,875,043 at September 30, 2002 to $83,843,529 at September 30, 2003. The volume increase added $607,779 of interest expense during the first nine months of 2003 (Rate Volume Variance table) compared to 2002. The compressed rate
environment favorably impacted interest expense and mitigated its increase due to volume by $488,583 (Rate Volume Variance table).



|TABLE 3 Analysis of
the Changes in the Components of Net Interest Income (tax equivalent basis)
|-----------------------------------------------------------------------------------------------
|                                                                                               
|                                                                                               
|For the Nine Months Ended September 30,                                                        
|                                                                                               
|                                                                                               
|Interest income:                                                                               
|Loans:                                                                                         
|Commercial                                                                                     
|Real estate  construction                                                                     
|Real estate  mortgage                                                                         
|Installment                                                                                    
|                                                                                               
|Total loans                                                                                    
|Interest-bearing deposits                                                                      
|Federal funds sold                                                                             
|Investment securities                                                                          
|                                                                                               
|Total interest income                                                                          
|                                                                                               
|Interest expense:                                                                              
|Savings and NOW accounts                                                                       
|Money markets accounts                                                                         
|Time:                                                                                          
|Under $100,000                                                                                 
|$100,000 and over                                                                              
|Short-term borrowings                                                                          
|Long-term debt                                                                                 
|                                                                                               
|Total interest expense                                                                         
|                                                                                               
|Net interest income                                                                            
|                                                                                               



The cost of
interest-bearing liabilities decreased 81 basis points from 3.10% at September 30, 2002 to 2.29 at September 30, 2003 (Consolidated Average Balancestable). The drop was primarily attributable to the growth and repricing of deposits during
the lower rate environment. The growth of noninterest-bearing or demand deposits also contributed favorably to net interest income. As shown in the Consolidated Average Balances table, average demand deposits increased $10,729,461 or 58.9%
from $18,188,510 at September 30, 2002 to $28,917,971 at September 30, 2003.



8



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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 $126,200 or 82.1% from $153,800 at September 30, 2002 to $280,000 at September 30,
2003. Charge-offs net of recoveries totaled $16,382 during the first nine months of 2003 versus $24,880 during the same period of 2002. Loan growth since September 30, 2002 was a material factor contributing to the variance between the 2003 and 2002
provision for loan loss expense. Average total loans increased $17,636,783 or 27.6% from $64,008,547 at September 30, 2002 to $81,645,330 at September 30, 2003.



Noninterest Income



Total noninterest income increased $78,912 or 21.5% since the nine months ended September 30, 2002 compared to the nine months ended September 30, 2003.
The increase was primarily attributable to income generated by the increased volume of deposits and also explains the $73,328 or 30.7% increase in other income when comparing September 30, 2002 and September 30, 2003.



Noninterest Expense



Total noninterest expense increased $428,449 or 19.1% since the nine months
ended September 30, 2002 compared to the nine months ended September 30, 2003. The increase was primarily attributable to additional staffing for business expansion, most notably the opening of the Vienna, Virginia branch. Salaries and employee
benefits increased $154,739 or 11.7% during the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002. Expansion expenses such as occupancy, furniture and equipment depreciation and data processing also
contributed to the increase. Occupancy, furniture and equipment depreciation and data processing increased $155,472 or 30.9% during the first nine months of 2003 compared to the first nine months of 2002.



Income Taxes



The provision for income taxes increased $17,376 or 6.4% from $271,211 at September 30, 2002 to $288,587 at September 30,
2003. The tax liability was accrued at the historic rate of 34.0%. The Company does not expect to pay taxes for the year ending December 31, 2003 because the tax liability reduces the deferred tax asset shown on the balance sheet.



|B. | Financial Condition as of September 30, 2003
|-- | --------------------------------------------



General



During the first quarter of 2003, the Bank entered into a lease for a branch location in Vienna, Virginia. Operations commenced in September 2003.



9



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Assets



Total assets increased $27,013,223 or 24.7% during the first nine months of 2003. The increase was primarily attributable to an increased volume of
deposits which were invested in loans, federal funds sold, and investment securities. The balance of available-for-sale investment securities is inflated as shown on the balance sheet. For tax purposes, the Bank purchased $15,000,000 of an overnight
government security on September 30, 2003. The average balance of investment securities totaled $8,812,187 for the first nine months of 2003.



Loans



Loans net of unearned income increased $10,519,336 or 13.8% from $76,217,605 at December 31, 2002 to $86,736,941 at September 30, 2003. The increase was funded by
liquidity available in federal funds sold and an increased volume of 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) Statement of Financial Accounting Standards (SFAS) SFAS 5, Accounting for Contingencies, which 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, which requires that losses be accrued based on the differences between the value of the collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.



The allowance for loan losses is maintained at a level, which
in managements judgment, is adequate to absorb credit losses inherent in the existing loan portfolio. The amount of the allowance 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. Allowances for impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values and future cash flows on impaired loans, it is
reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. The allowance is increased by a provision for loan losses,
which is charged to expense and reduced by charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the allowance for loan losses.



At September 30, 2003 and December 31, 2002, the allowance for loan losses was $1,515,382 or 1.7% and $1,251,764 or 1.6%,
respectively, of total loans. Impaired loans, for the nine-month period ended September 30, 2003, totaled $33,900, of which $7,571 was held by BVCI and $26,329 was held by the Bank. This compares to a balance of $54,786 at December 31, 2002, of
which $8,679 was held by BVCI and $46,107 was held by the Bank. Charge-offs net of recoveries totaled $16,382 during the first nine months of 2003 versus $24,880 during the same period of 2002. Of the impaired loans outstanding at September 30, 2003
and December 31, 2002, non-accrual loans totaled $33,900 and $54,786, respectively.



Premises and Equipment



Premises and equipment increased $286,599 or 16.2% during the nine months since December 31, 2001. The increase was due to the opening of the Vienna
branch and moving the operations department from the Tysons location to Vienna.



10



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Deferred Tax Asset



The deferred income tax credits primarily resulted from net operating loss carryforwards. 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 tax asset.



Deposits



During the first nine months of 2003, 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 $24,116,164 or 40.9% from $58,930,025 at December 31, 2002
to $83,046,189 at September 30, 2003. The increases since December 31, 2002 were as follows: demand deposits (noninterest-bearing)$10,809,535 or 45.1%, money market deposits$10,507,703 or 48.8% and savings and NOW deposits - $2,798,926
or 20.9%.



Other Liabilities and Equity



During the second quarter of 2003, $1,000,000 of long-term debt was
reclassified to short-term borrowings due to its maturity status. Debt consists of $5,000,000 of advances from the Federal Home Loan Bank of Atlanta (FHLBA) and $783,641 from a financial institution. The FHLBA advances have been used to match fund
lending. The $783,641 was used to purchase the Reston branch. Stockholders equity increased $542,051 or 4.7% during the nine months ended September 30, 2003 when compared to the year ended December 31, 2002. The first nine months earnings
primarily accounted for the variance in stockholders equity. Stock options to purchase sixty-three shares of common stock were exercised during the third quarter of 2003 and also contributed to increased equity.



Liquidity and Investment



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



Consolidated average liquid assets were 33.0% of average total assets at September 30, 2003 compared to 21.4% at September 30, 2002 (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, mutual funds, mortgage-backed and equity securities. The Bank has strategically grown its securities portfolio to ensure safe levels of liquidity, to enhance the overall credit quality of its asset
base, to generate increased interest income, to balance assets and liabilities and to hedge interest rate risk. The securities portfolio includes both instruments available-for-sale and held-to-maturity. Securities classified as available-for-sale
may be sold in response to changes in market interest rates, changes in prepayment or extension risk, management of the federal tax position, liquidity needs and other asset/liability management issues. Securities classified as held-to-maturity are
intended for investment purposes.



11



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At September 30, 2003, the Banks investment portfolio consisted of the following:



|                           |  | Available-for-Sale |            | Held-to-Maturity
|-------------------------- |  | ------------------ | ---------- | ----------------
|U.S. Government Agency     |  | $                  | 18,274,337 |                 
|U.S. Treasury              |  |                    | 1,009,570  |                 
|Mortgage-backed Securities |  |                    | 2,163,337  |                 
|Mutual Funds               |  |                    | 2,277,683  |                 
|Corporate Debt Securities  |  |                    | 202,203    |                 
|Equity                     |  |                    | 312,750    |                 
|                           |  |                    |            |                 
|Total                      |  | $                  | 24,239,880 |                 
|                           |  |                    |            |                 



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 Company and the bank subsidiary to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. As of September 30, 2003, the Company and the
Bank met the criteria to be well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and the bank subsidiary must maintain Total risk-based, Tier 1 risk-based and Tier 1 average
asset ratios as set forth in the table. There have been no conditions or events since September 30, 2002 that management believes would result in the institution not being adequately capitalized.



|                                         |  | Actual     |  |       | Required for CapitalAdequacy Purposes |  |           | Required To BeWell Capitalized |      
|---------------------------------------- |  | ---------- |  | ----- | ------------------------------------- |  | --------- | ------------------------------ | -----
|                                         |  | Amount     |  | Ratio |                                       |  | Amount    |                                | Ratio
|As of September 30, 2003:                |  |            |  |       |                                       |  |           |                                |      
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |           |                                |      
|Company                                  |  | 12,407,155 |  | 13.89 | %                                     |  | 7,144,169 |                                | 8.00 
|The Business Bank                        |  | 11,078,370 |  | 12.72 | %                                     |  | 6,968,160 |                                | 8.00 
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |           |                                |      
|Company                                  |  | 11,285,951 |  | 12.64 | %                                     |  | 3,572,084 |                                | 4.00 
|The Business Bank                        |  | 9,984,366  |  | 11.46 | %                                     |  | 3,484,080 |                                | 4.00 
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |           |                                |      
|Company                                  |  | 11,285,951 |  | 8.60  | %                                     |  | 5,250,758 |                                | 4.00 
|The Business Bank                        |  | 9,984,366  |  | 7.68  | %                                     |  | 5,200,570 |                                | 4.00 
|As of September 30, 2002:                |  |            |  |       |                                       |  |           |                                |      
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |           |                                |      
|Company                                  |  | 10,781,462 |  | 14.32 | %                                     |  | 6,024,691 |                                | 8.00 
|The Business Bank                        |  | 9,919,936  |  | 13.71 | %                                     |  | 5,788,474 |                                | 8.00 
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |           |                                |      
|Company                                  |  | 9,837,081  |  | 13.06 | %                                     |  | 3,012,345 |                                | 4.00 
|The Business Bank                        |  | 9,012,034  |  | 12.46 | %                                     |  | 2,894,237 |                                | 4.00 
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |           |                                |      
|Company                                  |  | 9,837,081  |  | 10.59 | %                                     |  | 3,716,006 |                                | 4.00 
|The Business Bank                        |  | 9,012,034  |  | 10.16 | %                                     |  | 3,546,484 |                                | 4.00 



12



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Earnings Per Share



The following table is a reconciliation of earnings per common share as computed under SFAS 128.



|                                             |  | Income(Numerator) |         | Shares(Denominator) |           | Per ShareAmount
|-------------------------------------------- |  | ----------------- | ------- | ------------------- | --------- | ---------------
|Basic Earnings Per Share:                    |  |                   |         |                     |           |                
|For the nine months ended September 30, 2003 |  |                   |         |                     |           |                
|Net Income                                   |  | $                 | 560,197 |                     |           |                
|Income available to common stockholders      |  | $                 | 560,197 |                     | 1,037,012 |                
|                                             |  |                   |         |                     |           |                
|For the nine months ended September 30, 2002 |  |                   |         |                     |           |                
|Net Income                                   |  | $                 | 526,467 |                     |           |                
|Income available to common stockholders      |  | $                 | 526,467 |                     | 1,035,706 |                
|                                             |  |                   |         |                     |           |                
|Diluted Earnings Per Share:                  |  |                   |         |                     |           |                
|For the nine months ended September 30, 2003 |  |                   |         |                     |           |                
|Net Income available to common stockholders  |  | $                 | 560,197 |                     | 1,037,012 |                
|Add: Contracts to issue common stock         |  |                   |         |                     |           |                
|Option   expires 01/27/07                   |  |                   |         |                     | 1,091     |                
|Options  expire 12/31/05  01/26/13         |  |                   |         |                     | 65,019    |                
|                                             |  |                   |         |                     |           |                
|Weighted-average diluted shares              |  |                   |         |                     | 66,110    |                
|Diluted earnings per common share:           |  | $                 | 560,197 |                     | 1,103,122 |                
|                                             |  |                   |         |                     |           |                
|For the nine months ended September 30, 2002 |  |                   |         |                     |           |                
|Net Income available to common stockholders  |  | $                 | 526,467 |                     | 1,035,706 |                
|Add: Contracts to issue common stock         |  |                   |         |                     |           |                
|Option   expires 01/27/07                   |  |                   |         |                     | 909       |                
|Options  expire 12/31/05  6/30/08          |  |                   |         |                     | 51,033    |                
|                                             |  |                   |         |                     |           |                
|Weighted-average diluted shares              |  |                   |         |                     | 51,942    |                
|Diluted earnings per common share:           |  | $                 | 526,467 |                     | 1,087,448 |                
|                                             |  |                   |         |                     |           |                



13



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Stock-based Compensation



The Company has elected to continue to account for stock-based compensation under the intrinsic value guidelines of APB
Opinion No. 25. Under the intrinsic value based method, compensation cost is measured as the excess of the market price of the stock underlying the option at the date granted over the exercise price. The Companys policy is to grant options at
market value. Accordingly, no compensation cost has been recognized for its stock options. Pro forma information regarding net income and earnings per share as required by SFAS 123 has been determined as if the Company had accounted for its employee
stock options under the fair-value method. A summary of the assumptions used and pro forma results for 2003 and 2002 is as follows:



|                                                                                                                    |  | Three Months Ended |           |   | Nine Months Ended |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - | ----------------- | -
|                                                                                                                    |  | September 30,2003  |           |   | September 30,2002 |  
|Net income, as reported                                                                                             |  | $                  | 255,186   |   |                   | $
|Deduct: total stock-based employee compensation expense determined based on fair value method of awards, net of
tax |  |                    |          |   |                   |  
|                                                                                                                    |  |                    |           |   |                   |  
|Pro forma net income                                                                                                |  | $                  | 255,186   |   |                   | $
|                                                                                                                    |  |                    |           |   |                   |  
|                                                                                                                    |  |                    |           |  
|Basic earnings per share:                                                                                           |  |                    |           |   |                   |  
|As reported                                                                                                         |  | $                  | 0.25      |   |                   | $
|Pro forma                                                                                                           |  | $                  | 0.25      |   |                   | $
|                                                                                                                    |  |                    |           |  
|Diluted earnings per share:                                                                                         |  |                    |           |   |                   |  
|As reported                                                                                                         |  | $                  | 0.23      |   |                   | $
|Pro forma                                                                                                           |  | $                  | 0.23      |   |                   | $
|                                                                                                                    |  |                    |           |  
|Assumptions                                                                                                         |  |                    |           |   |                   |  
|Risk-free interest rate                                                                                             |  |                    | 3.74      | % |                   |  
|Dividend yield                                                                                                      |  |                    |          |   |                   |  
|Volatility factor                                                                                                   |  |                    | 10.00     | % |                   |  
|Weighted average expected life (years)                                                                              |  |                    | n/a       |   |                   |  
|weighted average shares                                                                                             |  |                    | 1,037,038 |   |                   |  
|diluted weighted average shares                                                                                     |  |                    | 66,110    |   |                   |  
|vested options                                                                                                      |  |                    |          |   |                   |  
|option expense                                                                                                      |  |                    |          |   |                   |  



14



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|ITEM 3: |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------



The Companys management, under the supervision and with the participation of the 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 under the Securities Exchange Act of 1934. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were adequate. There were no changes in the Companys internal control over financial reporting (as defined
in Rule 13a-15 under the Securities Act of 1934) during the quarter ended September 30, 2003 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, 2003 which would have a material adverse effect on the
Companys financial statements.



|ITEM 4: |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- |  | ---------------------------------------------------



|(4) | None.
|--- | -----



|ITEM 6: |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------



Exhibits



31 (a) Certification of Chief Executive Officer

31 (b) Certification of Chief Executive Officer

32 (a) Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

32 (b) Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350



Reports on Form 8-K



None.



15



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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: October 22, 2003 |  |  |  | By:                                     
|                       |  |  |  |                                         
|                       |  |  | 
|Date: October 22, 2003 |  |  |  | By:                                     
|                       |  |  |  |                                         



16