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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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(Mark One)

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

For the quarterly period ended March 31, 2006.

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



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Common Stock $1.00 Par Value

1,079,282 Shares Outstanding

as of March 31, 2006



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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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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

(Unaudited)



|                                                        |  |                              |           |   |      |   |           |  
|------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | --------- | -
|                                                        |  | Three Months Ended March 31, |          
|                                                        |  | 2006                         |           |   | 2005 |  
|Interest income:                                        |  |                              |           |   |      |   |           |  
|Interest and fees on loans                              |  | $                            | 2,829,375 |   |      | $ | 2,120,147 |  
|Interest on investment securities                       |  |                              | 266,261   |   |      |   | 137,802   |  
|Interest on federal funds sold                          |  |                              | 66,923    |   |      |   | 60,755    |  
|Interest on interest-bearing deposits                   |  |                              | 1,994     |   |      |   | 37,591    |  
|                                                        |  |                              |           |   |      |   |           |  
|Total interest income                                   |  |                              | 3,164,553 |   |      |   | 2,356,295 |  
|                                                        |  |                              |           |   |      |   |           |  
|Interest expense:                                       |  |                              |           |   |      |   |           |  
|Interest on deposits                                    |  |                              | 955,466   |   |      |   | 551,196   |  
|Interest on short-term borrowings                       |  |                              | 11,605    |   |      |   | 9,443     |  
|Interest on long-term debt                              |  |                              | 100,631   |   |      |   | 112,408   |  
|                                                        |  |                              |           |   |      |   |           |  
|Total interest expense                                  |  |                              | 1,067,702 |   |      |   | 673,047   |  
|                                                        |  |                              |           |   |      |   |           |  
|Net interest income                                     |  |                              | 2,096,851 |   |      |   | 1,683,248 |  
|                                                        |  |                             
|Provision for loan losses                               |  |                              | 92,753    |   |      |   | 109,102   |  
|                                                        |  |                              |           |   |      |   |           |  
|Net interest income after provision for loan losses     |  |                              | 2,004,098 |   |      |   | 1,574,146 |  
|                                                        |  |                              |           |   |      |   |           |  
|Noninterest income:                                     |  |                              |           |   |      |   |           |  
|Service charges and other fees on deposits              |  |                              | 97,578    |   |      |   | 57,277    |  
|Originations and other fees on loans                    |  |                              | 83,970    |   |      |   | 87,518    |  
|Gain on sale loans, net                                 |  |                              |          |   |      |   | 4,594     |  
|Other income                                            |  |                              | 41,278    |   |      |   | 44,592    |  
|                                                        |  |                              |           |   |      |   |           |  
|Total noninterest income                                |  |                              | 222,826   |   |      |   | 193,981   |  
|                                                        |  |                              |           |   |      |   |           |  
|                                                        |  |                             
|Noninterest expense:                                    |  |                              |           |   |      |   |           |  
|Salaries                                                |  |                              | 895,534   |   |      |   | 737,626   |  
|Employee benefits                                       |  |                              | 151,905   |   |      |   | 130,146   |  
|Occupancy                                               |  |                              | 238,153   |   |      |   | 212,574   |  
|Furniture and equipment                                 |  |                              | 90,709    |   |      |   | 87,728    |  
|Data processing                                         |  |                              | 60,696    |   |      |   | 58,827    |  
|Other insurance                                         |  |                              | 13,561    |   |      |   | 12,098    |  
|Legal                                                   |  |                              | 6,052     |   |      |   | 3,879     |  
|Accounting                                              |  |                              | 16,452    |   |      |   | 34,251    |  
|FDIC / FICO bond insurance                              |  |                              | 5,106     |   |      |   | 5,181     |  
|Stock compensation                                      |  |                              | 56,645    |   |      |   |          |  
|Other expense                                           |  |                              | 261,694   |   |      |   | 194,679   |  
|                                                        |  |                              |           |   |      |   |           |  
|Total noninterest expense                               |  |                              | 1,796,507 |   |      |   | 1,476,989 |  
|                                                        |  |                              |           |   |      |   |           |  
|Income before income taxes                              |  |                              | 430,417   |   |      |   | 291,138   |  
|                                                        |  |                             
|Provision for income taxes                              |  |                              | 146,342   |   |      |   | 98,987    |  
|                                                        |  |                              |           |   |      |   |           |  
|Net income                                              |  | $                            | 284,075   |   |      | $ | 192,151   |  
|                                                        |  |                              |           |   |      |   |           |  
|Net income per common share:                            |  |                              |           |   |      |   |           |  
|Basic                                                   |  | $                            | 0.26      |   |      | $ | 0.18      |  
|                                                        |  |                              |           |   |      |   |           |  
|Diluted                                                 |  | $                            | 0.25      |   |      | $ | 0.17      |  
|                                                        |  |                              |           |   |      |   |           |  
|Comprehensive Income                                    |  |                              |           |   |      |   |           |  
|Net income                                              |  | $                            | 284,075   |   |      | $ | 192,151   |  
|Other comprehensive income, net of tax                  |  |                              |           |   |      |   |           |  
|Unrealized gain (loss) on available-for-sale securities |  |                              | (17,765   | ) |      |   | (89,227   | )
|                                                        |  |                              |           |   |      |   |           |  
|Comprehensive income                                    |  | $                            | 266,310   |   |      | $ | 102,924   |  
|                                                        |  |                              |           |   |      |   |           |  



2



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                             |  |                    |             |   |                |   |             |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------ | ----------- | - | -------------- | - | ----------- | -
|                                                                                                             |  | Three Months Ended |            
|                                                                                                             |  | March 31, 2006     |             |   | March 31, 2005 |  
|Cash flows from operating activities:                                                                        |  |                    |             |   |                |   |             |  
|Net Income                                                                                                   |  | $                  | 284,075     |   |                | $ | 192,151     |  
|Adjustment to reconcile net income to net cash provided by operating activities:                             |  |                    |             |   |                |   |             |  
|Depreciation and amortization                                                                                |  |                    | 79,483      |   |                |   | 65,557      |  
|Provision for loan losses                                                                                    |  |                    | 92,753      |   |                |   | 109,102     |  
|Amortization of investment security discount                                                                 |  |                    | (1,834      | ) |                |   | 7,943       |  
|Amortization of loan fees and discounts, net                                                                 |  |                    | (27,581     | ) |                |   | (16,734     | )
|(Increase) in other assets                                                                                   |  |                    | (18,542     | ) |                |   | (194,179    | )
|Increase (decrease) in other liabilities                                                                     |  |                    | (626,354    | ) |                |   | 148,556     |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Net cash provided by operating activities                                                                    |  |                    | (218,000    | ) |                |   | 312,396     |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Cash flows from investing activities:                                                                        |  |                    |             |   |                |   |             |  
|Loan originations, net of collections - nonbank subsidiaries                                                 |  |                    | 126,642     |   |                |   | 41,106      |  
|Loan originations, net of collections                                                                        |  |                    | (868,329    | ) |                |   | (5,166,002  | )
|Purchases of securities available-for-sale                                                                   |  |                    | (4,540,362  | ) |                |   | (13,063,200 | )
|Purchases of premises and equipment                                                                          |  |                    | (87,955     | ) |                |   | (51,616     | )
|Proceeds received from maturity of securities available-for-sale                                             |  |                    | 12,347,264  |   |                |   | 11,435,253  |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Net cash provided by (used in) investing activities                                                          |  |                    | 6,977,260   |   |                |   | (6,804,459  | )
|                                                                                                             |  |                    |             |   |                |   |             |  
|Cash flow from financing activities:                                                                         |  |                    |             |   |                |   |             |  
|Net increase in demand deposits, savings accounts, NOW accounts and money market accounts                    |  |                    | (3,447,311  | ) |                |   | 7,266,712   |  
|Certificates of deposit sold (matured), net                                                                  |  |                    | 1,128,457   |   |                |   | 261,457     |  
|Net payments on long-term debt                                                                               |  |                    | (4,177      | ) |                |   | (3,924      | )
|Proceeds from issuance of common stock                                                                       |  |                    | 68,645      |   |                |   |            |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Net cash provided by financing activities                                                                    |  |                    | (2,254,386  | ) |                |   | 7,524,245   |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Net increase in cash and cash equivalents                                                                    |  |                    | 4,504,874   |   |                |   | 1,032,182   |  
|Cash and cash equivalents at beginning of the period                                                         |  |                    | 13,454,612  |   |                |   | 14,008,948  |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Cash and cash equivalents at end of the period                                                               |  | $                  | 17,959,486  |   |                | $ | 15,041,130  |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Supplemental disclosures of cash flow information:                                                           |  |                    |             |   |                |   |             |  
|Cash paid during the period for:                                                                             |  |                    |             |   |                |   |             |  
|Interest on deposits and other borrowings                                                                    |  | $                  | 1,056,001   |   |                | $ | 656,266     |  
|Income taxes                                                                                                 |  |                    | 725,000     |   |                |   |            |  
|Noncash items:                                                                                               |  |                    |             |   |                |   |             |  
|Effect on stockholders equity of an unrealized gain (loss) on debt and equity securities available-for-sale |  | $                  | (17,765     | ) |                | $ | (89,227     | )
|                                                                                                             |  |                   
|Accumulated other comprehensive loss                                                                         |  |                    | (198,207    | ) |                |   | (180,442    | )
|                                                                                                             |  |                    |             |   |                |   |             |  
|Total stockholders equity                                                                                   |  |                    | 15,425,343  |   |                |   | 15,090,388  |  
|                                                                                                             |  |                    |             |   |                |   |             |  
|Total liabilities and stockholders equity                                                                   |  | $                  | 203,196,263 |   |                | $ | 205,810,693 |  
|                                                                                                             |  |                    |             |   |                |   |             |  



3



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets



|                                                                                                               |  |                            |             |   |                             |   |             |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----------- | - | --------------------------- | - | ----------- | -
|                                                                                                               |  | (Unaudited) March 31, 2006 |             |   | (Audited) December 31, 2005 |  
|ASSETS                                                                                                         |  |                            |             |   |                             |   |             |  
|Cash and due from banks                                                                                        |  | $                          | 5,334,942   |   |                             | $ | 5,128,713   |  
|Interest-bearing deposits in other banks                                                                       |  |                            | 199,544     |   |                             |   | 175,899     |  
|Federal funds sold                                                                                             |  |                            | 12,425,000  |   |                             |   | 8,150,000   |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Total cash and cash equivalents                                                                                |  |                            | 17,959,486  |   |                             |   | 13,454,612  |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Securities available-for-sale                                                                                  |  |                            | 25,491,255  |   |                             |   | 33,314,164  |  
|Securities held-to-maturity (fair value of $1,955,858 at March 31, 2006 and $1,951,112 at December 31, 2005)   |  |                            | 1,999,090   |   |                             |   | 1,999,014   |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Total securities                                                                                               |  |                            | 27,490,345  |   |                             |   | 35,313,178  |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Loans, net of unearned income of $366,239 in 2006; $383,978 in 2005                                            |  |                            | 155,042,086 |   |                             |   | 154,273,100 |  
|Less: Allowance for loan losses                                                                                |  |                            | (2,419,935  | ) |                             |   | (2,327,464  | )
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Net loans                                                                                                      |  |                            | 152,622,151 |   |                             |   | 151,945,636 |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Land                                                                                                           |  |                            | 818,910     |   |                             |   | 818,910     |  
|Premises and equipment, net                                                                                    |  |                            | 1,765,866   |   |                             |   | 1,749,515   |  
|Deferred income taxes                                                                                          |  |                            | 1,011,071   |   |                             |   | 1,001,920   |  
|Other assets                                                                                                   |  |                            | 1,528,434   |   |                             |   | 1,526,922   |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Total assets                                                                                                   |  | $                          | 203,196,263 |   |                             | $ | 205,810,693 |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                           |  |                            |             |   |                             |   |             |  
|LIABILITIES                                                                                                    |  |                            |             |   |                             |   |             |  
|Deposits:                                                                                                      |  |                            |             |   |                             |   |             |  
|Demand                                                                                                         |  | $                          | 49,537,831  |   |                             | $ | 51,552,317  |  
|Savings and NOW                                                                                                |  |                            | 54,003,804  |   |                             |   | 55,761,579  |  
|Money market                                                                                                   |  |                            | 22,887,014  |   |                             |   | 22,562,064  |  
|Time:                                                                                                          |  |                            |             |   |                             |   |             |  
|Under $100,000                                                                                                 |  |                            | 25,368,406  |   |                             |   | 25,006,141  |  
|$100,000 and over                                                                                              |  |                            | 27,266,241  |   |                             |   | 26,500,049  |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Total deposits                                                                                                 |  |                            | 179,063,296 |   |                             |   | 181,382,150 |  
|Short-term borrowings                                                                                          |  |                            | 1,000,000   |   |                             |   | 1,000,000   |  
|Trust preferred capital notes                                                                                  |  |                            | 5,155,000   |   |                             |   | 5,155,000   |  
|Long-term debt                                                                                                 |  |                            | 1,746,298   |   |                             |   | 1,750,475   |  
|Accounts payable and accrued expenses                                                                          |  |                            | 806,326     |   |                             |   | 1,432,680   |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Total liabilities                                                                                              |  |                            | 187,770,920 |   |                             |   | 190,720,305 |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|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 1,079,282 shares in 2006 and 1,077,682 in 2005 |  |                            | 1,079,282   |   |                             |   | 1,077,682   |  
|Surplus                                                                                                        |  |                            | 16,572,588  |   |                             |   | 16,505,543  |  
|Accumulated deficit                                                                                            |  |                            | (2,028,320  | ) |                             |   | (2,312,395  | )
|Accumulated other comprehensive loss                                                                           |  |                            | (198,207    | ) |                             |   | (180,442    | )
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Total stockholders equity                                                                                     |  |                            | 15,425,343  |   |                             |   | 15,090,388  |  
|                                                                                                               |  |                            |             |   |                             |   |             |  
|Total liabilities and stockholders equity                                                                     |  | $                          | 203,196,263 |   |                             | $ | 205,810,693 |  
|                                                                                                               |  |                            |             |   |                             |   |             |  



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, 2005. The results for the three months ended March 31, 2006 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2006.
|         | 
|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 January 1, 2006.                                                                                                                                                                                                                                      
|         | 
|         |  | During 2005, the Company accounted for share-based compensation using APB No. 25s intrinsic value method and, accordingly, recognized no compensation cost for employee stock options.
Effective January 1, 2006, the Company adopted SFAS No. 123R using the modified prospective method and as such, results for prior periods have not been restated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | 
|         |  | 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)             |        
|                                                                                                                    |  | Three Months Ended 2005 |        
|March 31,                                                                                                           |  |                         |         |  
|Net income, as reported                                                                                             |  | $                       | 192,151 |  
|Deduct: total stock-based employee compensation expense determined based on fair value method of awards, net of tax |  |                         | (72,213 | )
|                                                                                                                    |  |                         |         |  
|Pro forma net income                                                                                                |  | $                       | 119,938 |  
|                                                                                                                    |  |                         |         |  
|Basic earnings per share:                                                                                           |  |                         |         |  
|As reported                                                                                                         |  | $                       | 0.18    |  
|Pro forma                                                                                                           |  | $                       | 0.11    |  
|Diluted earnings per share:                                                                                         |  |                         |         |  
|As reported                                                                                                         |  | $                       | 0.17    |  
|Pro forma                                                                                                           |  | $                       | 0.10    |  
|                                                                                                                    | 
|Assumptions                                                                                                         |  |                         |         |  
|Risk-free interest rate                                                                                             |  |                         | 3.94    | %
|Dividend yield                                                                                                      |  |                         |        |  
|Volatility factor                                                                                                   |  |                         | 10.00   | %
|Weighted average expected life (years)                                                                              |  |                         | 8.4     |  



5



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|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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) Three Months Ended
|                                            |  | 2006                           |           | 2005
|March 31,                                   |  |                                |           |      |   |          
|Basic earnings per common share:            |  |                                |           |      |   |          
|Net income available to common stockholders |  | $                              | 284,075   |      | $ | 192,151  
|Weighted average common shares outstanding  |  |                                | 1,078,233 |      |   | 1,041,080
|                                            |  |                                |           |      |   |          
|Basic earnings per common share             |  | $                              | 0.26      |      | $ | 0.18     
|                                            |  |                                |           |      |   |          
|Diluted earnings per common share:          |  |                                |           |      |   |          
|Net income available to common stockholders |  | $                              | 284,075   |      | $ | 192,151  
|                                            |  |                               
|Weighted average common shares outstanding  |  |                                | 1,078,233 |      |   | 1,041,080
|Common share equivalents for stock options  |  |                                | 61,804    |      |   | 78,468   
|                                            |  |                                |           |      |   |          
|                                            |  |                                | 1,140,037 |      |   | 1,119,548
|                                            |  |                                |           |      |   |          
|Diluted earnings per common share           |  | $                              | 0.25      |      | $ | 0.17     
|                                            |  |                                |           |      |   |          



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



6



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|         |  |                                                                                                                                                                                              
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 5 - |  | Certain reclassifications have been made to the prior year financial statements to conform to the 2006 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.



7



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|A. | Results of Operations for the Three and Three Months Ended March 31, 2006 as Compared to the Three and Three Months Ended March 31, 2005
|-- | ----------------------------------------------------------------------------------------------------------------------------------------

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 $284,075 for the three-month period ended March 31, 2006. This compares with net income of $192,151 for the
same period of 2005. Basic earnings per share were $.26 for the three months ended March 31, 2006, compared to $.18 for the same three months of 2005.

Net Interest Income

For the three-month period ended March 31, 2006, net interest income increased $413,603, or 24.6%, from $1,683,248 at March 31, 2005 to $2,096,851 at March 31, 2006 (Consolidated Statements of Income and Comprehensive
Income). The increase was primarily attributable to an increased volume of earning assets. Average total earning assets increased $19,320,101, or 11.6%, from $167,333,823 at March 31, 2005 to $186,653,924 at March 31, 2006
(Consolidated Average Balancestable). Contributing $709,228 to earnings, the increased volume and rate 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 $453,334 during the first three months of 2006 when compared to 2005. The increased volume of earning assets contributed
$354,924 to earnings when comparing the three month periods ended March 31, 2006 and 2005 (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 $808,258 in total interest income (or earning assets) from $2,356,295 at March 31, 2005 to $3,164,553 at March 31, 2006. The decline in interest income from interest-bearing deposits resulted from managements choice of
investments. Interest-bearing deposit balances were invested into investment securities and loans.

Total interest expense increased
$394,655, or 58.6%, from $673,047 at March 31, 2005 to $1,067,702 at March 31, 2006 (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 significantly impacted and increased total interest expense when comparing the March 31, 2005 and 2006 periods. During the first three months of 2005, compared to the first
three months of 2006, total interest expense increased $90,548 due to volume, while rates increased total interest expense by $304,107. Average total interest-bearing liabilities increased $16,615,648, or 14.1%, from $117,540,722 at March 31,
2005 to $134,156,370 at March 31, 2006 (Consolidated Average Balancestable).



8



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UNITED FINANCIAL BANKING COMPANIES, INC.

CONSOLIDATED AVERAGE BALANCES/NET INTEREST ANALYSIS/

YIELDS AND RATES



|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|------------------------------------------ |  | -------------------------- | ----------- | - | -------------- | - | ---------- |  | ---- | ------------------ |  | - | ----------- | - | ---------- | - | --------- |  | ---- | -
|                                           |  | For the Three Months Ended |            
|                                           |  | March 31, 2006             |             |   | March 31, 2005 |  
|                                           |  | AverageBalance (1)         |             |   | Interest       |   | Yield/Rate |  |      | AverageBalance (1) |  |   | Interest    |   | Yield/Rate |  
|ASSETS                                     |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Earning assets:                            |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Loans:                                     |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Commercial                                 |  | $                          | 114,754,530 |   |                | $ | 2,073,500  |  | 7.33 | %                  |  | $ | 92,597,303  |   |            | $ | 1,494,729 |  | 6.56 | %
|Real estate construction                   |  |                            | 23,516,566  |   |                |   | 510,434    |  | 8.80 | %                  |  |   | 22,161,011  |   |            |   | 396,433   |  | 7.27 | %
|Real estate mortgage                       |  |                            | 6,434,866   |   |                |   | 112,774    |  | 7.11 | %                  |  |   | 7,533,876   |   |            |   | 120,493   |  | 6.50 | %
|Installment                                |  |                            | 7,714,431   |   |                |   | 132,667    |  | 6.97 | %                  |  |   | 7,345,477   |   |            |   | 108,492   |  | 6.01 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total loans                                |  |                            | 152,420,393 |   |                |   | 2,829,375  |  | 7.53 | %                  |  |   | 129,637,667 |   |            |   | 2,120,147 |  | 6.65 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits                  |  |                            | 170,582     |   |                |   | 1,994      |  | 4.74 | %                  |  |   | 6,370,602   |   |            |   | 37,591    |  | 2.40 | %
|Federal funds sold                         |  |                            | 5,971,835   |   |                |   | 66,923     |  | 4.54 | %                  |  |   | 10,472,276  |   |            |   | 60,755    |  | 2.36 | %
|Investment securities (2)                  |  |                            | 28,091,114  |   |                |   | 266,261    |  | 3.84 | %                  |  |   | 20,853,278  |   |            |   | 137,802   |  | 2.69 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total earning assets                       |  |                            | 186,653,924 |   |                | $ | 3,164,553  |  | 6.88 | %                  |  |   | 167,333,823 |   |            | $ | 2,356,295 |  | 5.73 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Noninterest-earning assets:                |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Cash and due from banks                    |  |                            | 5,415,262   |   |                |   |            |  |      |                    |  |   | 6,013,585   |   |            |   |           |  |      |  
|Other assets                               |  |                            | 4,628,046   |   |                |   |            |  |      |                    |  |   | 4,041,929   |   |            |   |           |  |      |  
|Allowance for loan losses                  |  |                            | (2,354,468  | ) |                |   |            |  |      |                    |  |   | (1,959,391  | ) |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total assets                               |  | $                          | 194,342,764 |   |                |   |            |  |      |                    |  | $ | 175,429,946 |   |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing liabilities:              |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits:                 |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Savings and NOW accounts                   |  | $                          | 54,314,738  |   |                | $ | 378,240    |  | 2.82 | %                  |  | $ | 39,609,781  |   |            | $ | 162,524   |  | 1.67 | %
|Money market accounts                      |  |                            | 19,402,360  |   |                |   | 93,972     |  | 1.96 | %                  |  |   | 24,759,439  |   |            |   | 70,134    |  | 1.15 | %
|Time:                                      |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Under $100,000                             |  |                            | 25,220,726  |   |                |   | 240,065    |  | 3.86 | %                  |  |   | 21,297,074  |   |            |   | 154,146   |  | 2.94 | %
|$100,000 and over                          |  |                            | 27,237,903  |   |                |   | 243,189    |  | 3.62 | %                  |  |   | 22,957,485  |   |            |   | 164,392   |  | 2.91 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing deposits            |  |                            | 126,175,727 |   |                |   | 955,466    |  | 3.07 | %                  |  |   | 108,623,779 |   |            |   | 551,196   |  | 2.06 | %
|                                           |  |                            |             |   |                |  
|Short-term borrowings                      |  |                            | 1,077,813   |   |                |   | 11,605     |  | 4.37 | %                  |  |   | 1,000,000   |   |            |   | 9,443     |  | 3.84 | %
|Long-term debt                             |  |                            | 6,902,830   |   |                |   | 100,631    |  | 5.91 | %                  |  |   | 7,916,943   |   |            |   | 112,408   |  | 5.77 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing liabilities         |  |                            | 134,156,370 |   |                | $ | 1,067,702  |  | 3.23 | %                  |  |   | 117,540,722 |   |            | $ | 673,047   |  | 2.33 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Non interest-bearing liabilities:          |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Demand deposits                            |  |                            | 43,239,783  |   |                |   |            |  |      |                    |  |   | 43,568,468  |   |            |   |           |  |      |  
|Other liabilities                          |  |                            | 1,677,138   |   |                |   |            |  |      |                    |  |   | 767,432     |   |            |   |           |  |      |  
|Stockholders equity                       |  |                            | 15,269,473  |   |                |   |            |  |      |                    |  |   | 13,553,323  |   |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total liabilities and stockholders equity |  | $                          | 194,342,764 |   |                |   |            |  |      |                    |  | $ | 175,429,945 |   |            |   |           |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest income                        |  |                            |             |   |                | $ | 2,096,851  |  |      |                    |  |   |             |   |            | $ | 1,683,248 |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest margin (3)                    |  |                            |             |   |                |   |            |  | 4.56 | %                  |  |   |             |   |            |   |           |  | 4.09 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest spread (4)                    |  |                            |             |   |                |   |            |  | 3.65 | %                  |  |   |             |   |            |   |           |  | 3.40 | %
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Fees included in loan income               |  |                            |             |   |                | $ | 147,079    |  |      |                    |  |   |             |   |            | $ | 95,206    |  |      |  
|                                           |  |                            |             |   |                |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  

---

|(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 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.
|--- | ----------------------------------------------------------------------------------------------------



9



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Primarily due to the increasing rate environment during the past year, the net interest margin increased
47 basis points from 4.09% at March 31, 2005 to 4.56% at March 31, 2006. During the first three months of 2006, the increasing rate environment most notably impacted the yield on total earning assets. The yield on total earning assets
increased 115 basis points from 5.73% at March 31, 2005 to 6.88% at March 31, 2006, while the yield on total interest-bearing liabilities increased 90 basis points from 2.33% March 31, 2005 to 3.23% at March 31, 2006. The
Banks deposit mix also contributed to the increased net margin by mitigating interest expense. As shown in the

Analysis
of the Changes in the Components of Net Interest Income



|                           |  |                                                        |         |        |                |   |         |  |   |         |  
|-------------------------- |  | ------------------------------------------------------ | ------- | ------ | -------------- | - | ------- |  | - | ------- | -
|                           |  | For Three Months Ended March 31, 2006 Compared to 2005 |        
|                           |  | TotalIncrease (Decrease)                               |         |        | Change Due To: |  
|                           |  | Rate                                                   |         | Volume |               
|Interest income:           |  |                                                        |         |        |                |   |         |  |   |         |  
|Loans:                     |  |                                                        |         |        |                |   |         |  |   |         |  
|Commercial                 |  | $                                                      | 578,771 |        |                | $ | 221,103 |  | $ | 357,668 |  
|Real estate - construction |  |                                                        | 114,001 |        |                |   | 89,752  |  |   | 24,249  |  
|Real estate - mortgage     |  |                                                        | (7,719  | )      |                |   | 9,858   |  |   | (17,577 | )
|Installment                |  |                                                        | 24,175  |        |                |   | 18,726  |  |   | 5,449   |  
|                           |  |                                                        |         |        |                |   |         |  |   |         |  
|Total loans                |  |                                                        | 709,228 |        |                |   | 339,439 |  |   | 369,789 |  
|                           |  |                                                        |        
|Interest-bearing deposits  |  |                                                        | (35,597 | )      |                |   | 987     |  |   | (36,584 | )
|Federal funds sold         |  |                                                        | 6,168   |        |                |   | 32,277  |  |   | (26,109 | )
|Investment securities      |  |                                                        | 128,459 |        |                |   | 80,630  |  |   | 47,829  |  
|                           |  |                                                        |         |        |                |   |         |  |   |         |  
|Total interest income      |  |                                                        | 808,258 |        |                |   | 453,334 |  |   | 354,924 |  
|                           |  |                                                        |         |        |                |   |         |  |   |         |  
|Interest expense:          |  |                                                        |         |        |                |   |         |  |   |         |  
|Savings and NOW accounts   |  |                                                        | 215,716 |        |                |   | 155,380 |  |   | 60,336  |  
|Money markets accounts     |  |                                                        | 23,838  |        |                |   | 39,013  |  |   | (15,175 | )
|Time:                      |  |                                                        |         |        |                |   |         |  |   |         |  
|Under $100,000             |  |                                                        | 85,919  |        |                |   | 57,520  |  |   | 28,399  |  
|$100,000 and over          |  |                                                        | 78,797  |        |                |   | 48,146  |  |   | 30,651  |  
|Short-term borrowings      |  |                                                        | 2,162   |        |                |   | 1,427   |  |   | 735     |  
|Long-term debt             |  |                                                        | (11,777 | )      |                |   | 2,622   |  |   | (14,399 | )
|                           |  |                                                        |         |        |                |   |         |  |   |         |  
|Total interest expense     |  |                                                        | 394,655 |        |                |   | 304,107 |  |   | 90,548  |  
|                           |  |                                                        |         |        |                |   |         |  |   |         |  
|Net interest income        |  | $                                                      | 413,603 |        |                | $ | 149,226 |  | $ | 264,377 |  
|                           |  |                                                        |         |        |                |   |         |  |   |         |  

Consolidated Average Balances table, the growth of average core, or lower costing accounts, (demand,
savings, NOW and money market), increased $9,019,193, or 8.4%, from March 31, 2005 to March 31, 2006.



10



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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 decreased
$16,349 from $109,102 for the three months ended March 31, 2005 to $92,753 for the three months ended March 31, 2006. Timing, general risks inherent in the loan portfolio and growth that impacts various inherent risk factors account for
the variance between the 2006 and 2005 provision for loan loss expense.

Noninterest Income

Total noninterest income increased $28,845, or 14.9%, during the three months ended March 31, 2006 compared to the three months ended March 31,
2005. Increased income from service charges and other fees on deposits accounts explain the increase. As the Bank continues to grow, fees increase due to the volume of deposit accounts.

Noninterest Expense

Total noninterest expense increased $319,518, or 21.6%, during the three months ended March 31, 2006, compared to the three months ended March 31, 2005. The increase was primarily attributable to additional staffing and occupancy
costs to enhance asset growth and business expansion, most notably the opening of the Sterling office. The adoption of SFAS No. 123R and the resulting stock compensation expense also contributed to the increase. Salaries and employee benefits
increased $179,667, or 20.7%, during the three months ended March 31, 2006, compared to the three months ended March 31, 2005. Also, primarily due to the opening of the Sterling office, occupancy increased $25,579 during the first three
months of 2006 compared to the first three months of 2005. Stock compensation cost contributed $56,645 to total noninterest expense during the first three months of 2006.

Income Taxes

The provision for income taxes increased $47,355, or 47.8%, from $98,987 at March 31, 2005 to $146,342 at March 31, 2006. 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 three months ended March 31 was attributable to earnings.



11



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B. Financial Condition as of March 31, 2006

Assets

Total
assets decreased $2,614,430, or 1.3%, during the first three months of 2006. The decrease was primarily attributable to a decreased volume of deposits. At December 31, 2005, the balance of available-for-sale investment securities included an
overnight government security of $7,000,000 purchased for tax purposes. The average balance of investment securities totaled $28,091,114 for the three month period ended March 31, 2006, and $23,622,525 for the year ended December 31, 2005.

Loans

Loans, net of
unearned income, increased $768,986, or .5%, from $154,273,100 at December 31, 2005 to $155,042,086 at March 31, 2006. The growth was primarily funded by the maturity of investment securities.

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 March 31, 2006 and December 31, 2005, the allowance for loan losses was $2,419,935 and $2,327,464, respectively, or 1.5%, of total loans.
Impaired and non-accrual loans, at March 31, 2006 and at December 31, 2005 , totaled $-0-. There were no charge-offs during the three months ended March 31, 2006 and 2005. Recoveries totaled $-0- during the three months ended
March 31, 2006 and $2,104 during same period of 2005.



12



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Premises and Equipment

Net premises and equipment increased $16,351, or .9%, during the three months since December 31, 2005. The increase was primarily due to amortization
of leaseholds at the Sterling office.

Deferred Tax Asset

The deferred income tax asset primarily results from differences between bad debts deductible for income tax purposes and those reflected in the financial
statements. Using factors such as the Companys historical earnings performance, growth potential, the local and national economy and market competition, management determined that it was more likely than not that the Company will utilize the
amounts available at March 31, 2006.

Deposits

During the first three months of 2006, 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 comprised 70.6% of total deposits at March 31, 2006. The decrease in deposits during the first
three months of 2006 was due to fluctuations inherent in a deposit portfolio.

Other Liabilities and Equity

Short-term borrowings and long-term debt consist of two outstanding advances of $1,000,000 each from the Federal Home Loan Bank of Atlanta
(FHLBA) and $746,298 from a financial institution. The FHLBA advances have been used to fund certain lending programs. The $746,298 was used to partially fund the purchase of the Reston branch. Stockholders equity increased $334,955, or 2.2%,
during the three months ended March 31, 2006, when compared to the year ended December 31, 2005. During the first three months of 2006, 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 18.9% of average total assets at March 31, 2006 compared to 22.4% at December 31, 2005 (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.



13



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At March 31, 2006, the Banks investment portfolio consisted of the following:



|                           |  |                    |            |                  |   |          
|-------------------------- |  | ------------------ | ---------- | ---------------- | - | ---------
|                           |  | Available-for-Sale |            | Held-to-Maturity
|U.S. government agency     |  | $                  | 19,982,720 |                  | $ | 1,999,090
|U.S. Treasury              |  |                    | 1,630,651  |                  |   |         
|Mortgage-backed securities |  |                    | 609,227    |                  |   |         
|Municipal securities       |  |                    | 2,074,819  |                  |   |         
|Money market funds         |  |                    | 91,110     |                  |   |         
|Corporate debt securities  |  |                    | 498,378    |                  |   |         
|Equity                     |  |                    | 604,350    |                  |   |         
|                           |  |                    |            |                  |   |          
|Total                      |  | $                  | 25,491,255 |                  | $ | 1,999,090
|                           |  |                    |            |                  |   |          

Capital Requirements

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

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average
assets. The Federal Reserves capital guidelines apply to the Company at such time as it has total assets equal to $150,000,000 or more, it has public debt, or it engages in certain highly leveraged activities. At March 31, 2006, 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, 2005, that management believes would result in the Bank not being well capitalized.



14



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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 three months ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



|                                         |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|---------------------------------------- |  | ---------- |  | ----- | -------------------------------------- |  | ---------- | ------------------------------- | ----- | - |  | ---------- |  | ----- | -
|                                         |  | Actual     |  |       | Required for Capital Adequacy Purposes |  |            | Required To Be Well Capitalized |      
|                                         |  | Amount     |  | Ratio |                                        |  | Amount     |                                 | Ratio |   |  | Amount     |  | Ratio |  
|As of March 31, 2006:                    |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|                                         |  |            |  |       |                                        | 
|Total capital (to risk-weighted assets)  |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 21,647,291 |  | 13.63 | %                                      |  | 12,706,865 |                                 | 8.00  | % |  | 15,883,582 |  | N/A   |  
|The Business Bank                        |  | 19,077,215 |  | 12.16 | %                                      |  | 12,555,919 |                                 | 8.00  | % |  | 15,694,899 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 19,541,923 |  | 12.30 | %                                      |  | 6,353,433  |                                 | 4.00  | % |  | 9,530,149  |  | N/A   |  
|The Business Bank                        |  | 17,109,736 |  | 10.90 | %                                      |  | 6,277,960  |                                 | 4.00  | % |  | 9,416,939  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 19,541,923 |  | 10.11 | %                                      |  | 7,735,028  |                                 | 4.00  | % |  | 9,668,785  |  | N/A   |  
|The Business Bank                        |  | 17,109,736 |  | 8.88  | %                                      |  | 7,706,269  |                                 | 4.00  | % |  | 9,632,836  |  | 5.00  | %
|                                         |  |            |  |       |                                        | 
|As of March 31, 2005:                    |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|                                         |  |            |  |       |                                        | 
|Total capital (to risk-weighted assets)  |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 19,709,259 |  | 14.20 | %                                      |  | 11,100,760 |                                 | 8.00  | % |  | 13,875,950 |  | N/A   |  
|The Business Bank                        |  | 17,049,058 |  | 12.46 | %                                      |  | 10,943,474 |                                 | 8.00  | % |  | 13,679,342 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 17,296,445 |  | 12.47 | %                                      |  | 5,550,380  |                                 | 4.00  | % |  | 8,325,570  |  | N/A   |  
|The Business Bank                        |  | 15,335,273 |  | 11.21 | %                                      |  | 5,471,737  |                                 | 4.00  | % |  | 8,207,605  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                        |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 17,296,445 |  | 9.91  | %                                      |  | 6,983,821  |                                 | 4.00  | % |  | 8,729,776  |  | N/A   |  
|The Business Bank                        |  | 15,335,273 |  | 8.97  | %                                      |  | 6,840,791  |                                 | 4.00  | % |  | 8,550,988  |  | 5.00  | %



15



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PART II. OTHER INFORMATION

ITEM 1  LEGAL PROCEEDINGS

In the opinion of management, there were no legal matters
pending as of March 31, 2006 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



16



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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: May 22, 2006 |  | By:                                      |  | /s/ HAROLD C. RAUNER   
|                   |  |                                          |  | Harold C. Rauner       
|                   |  |                                          |  | President and CEO      
|                   |  |                                         
|Date: May 22, 2006 |  | By:                                      |  | /s/ LISA M. PORTER     
|                   |  |                                          |  | Lisa M. Porter         
|                   |  |                                          |  | Chief Financial Officer



17