---



United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB



(Mark One)



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



For the quarterly period ended June 30, 2003.



Or



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



For the transition period
from to



Commission File No. 0-13395



UNITED FINANCIAL BANKING COMPANIES, INC.



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





8399 Leesburg Pike, Vienna, Virginia 22182

Telephone: (703) 734-0070





Common Stock $1.00 Par Value

1,036,999 Shares Outstanding

as of June 30, 2003







Transitional Small Business Disclosure Format:         Yes    No X



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Part 1    Financial Information



Item 1:    Financial Statements



UNITED FINANCIAL BANKING COMPANIES, INC., AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income / Results of Operations

(Unaudited)



|                                                                                                  |  | Three Months Ended June 30, |           | Six Months Ended June 30,
|------------------------------------------------------------------------------------------------- |  | --------------------------- | --------- | -------------------------
|                                                                                                  |  | 2003                        |           |                          
|Interest income:                                                                                  |  |                             |           |                          
|Interest and fees on loans                                                                        |  | $                           | 1,483,847 |                          
|Interest on investment securities                                                                 |  |                             | 42,905    |                          
|Interest on federal funds sold                                                                    |  |                             | 92,257    |                          
|Interest on interest-bearing deposits                                                             |  |                             | 3,794     |                          
|                                                                                                  |  |                             |           |                          
|Total interest income                                                                             |  |                             | 1,622,803 |                          
|                                                                                                  |  |                             |           |                          
|Interest expense:                                                                                 |  |                             |           |                          
|Interest on deposits                                                                              |  |                             | 443,310   |                          
|Interest on short-term borrowings                                                                 |  |                             | 9,653     |                          
|Interest on long-term debt                                                                        |  |                             | 49,773    |                          
|                                                                                                  |  |                             |           |                          
|Total interest expense                                                                            |  |                             | 502,736   |                          
|                                                                                                  |  |                             |           |                          
|Net interest income                                                                               |  |                             | 1,120,067 |                          
|Provision for loan losses                                                                         |  |                             | 112,000   |                          
|                                                                                                  |  |                             |           |                          
|Net interest income after provision for loan losses                                               |  |                             | 1,008,067 |                          
|Noninterest income:                                                                               |  |                             |           |                          
|Gain (loss) on sale of real estate owned and other earning assets                                 |  |                             | 43,999    |                          
|Loan servicing and other fees                                                                     |  |                             | 22,630    |                          
|Other income                                                                                      |  |                             | 117,346   |                          
|                                                                                                  |  |                             |           |                          
|Total noninterest income                                                                          |  |                             | 183,975   |                          
|                                                                                                  |  |                             |           |                          
|Noninterest expense:                                                                              |  |                             |           |                          
|Salaries                                                                                          |  |                             | 391,928   |                          
|Employee benefits                                                                                 |  |                             | 69,416    |                          
|Occupancy                                                                                         |  |                             | 107,305   |                          
|Furniture and equipment                                                                           |  |                             | 52,363    |                          
|Data processing                                                                                   |  |                             | 46,870    |                          
|Other insurance                                                                                   |  |                             | 9,344     |                          
|Real estate owned holding expense                                                                 |  |                             | 381       |                          
|Legal                                                                                             |  |                             | 16,982    |                          
|FDIC / FICO bond insurance                                                                        |  |                             | 3,548     |                          
|Other expense                                                                                     |  |                             | 167,292   |                          
|                                                                                                  |  |                             |           |                          
|Total noninterest expense                                                                         |  |                             | 865,429   |                          
|                                                                                                  |  |                             |           |                          
|Income (loss) before income taxes                                                                 |  |                             | 326,613   |                          
|Provision (credit) for income taxes                                                               |  |                             | 112,306   |                          
|                                                                                                  |  |                             |           |                          
|Net income (loss)                                                                                 |  | $                           | 214,307   |                          
|                                                                                                  |  |                             |           |                          
|Net income (loss) per common share (Note 3)                                                       |  |                             |           |                          
|Basic                                                                                             |  | $                           | 0.21      |                          
|                                                                                                  |  |                             |           |                          
|Diluted                                                                                           |  | $                           | 0.19      |                          
|                                                                                                  |  |                             |           |                          
|Comprehensive Income (Note 4)                                                                     |  |                             |           |                          
|Net income                                                                                        |  | $                           | 214,307   |                          
|Other comprehensive income, net of tax Unrealized gains (losses) on available-for-sale securities |  |                             | (162      | )                        
|                                                                                                  |  |                             |           |                          
|Comprehensive income                                                                              |  | $                           | 214,145   |                          
|                                                                                                  |  |                             |           |                          



2



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UNITED FINANCIAL BANKING COMPANIES, INC., AND SUBSIDIARIES

Consolidated Balance Sheets / Financial Condition



|                                                                                                                      |  | (Unaudited)   |             |   | (Audited)        |  
|--------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ---------------- | -
|                                                                                                                      |  | June 30, 2003 |             |   | December 31,2002 |  
|Assets                                                                                                                |  |               |             |   |                  |  
|Cash and due from banks                                                                                               |  | $             | 4,656,914   |   |                  | $
|Interest-bearing deposits in other banks                                                                              |  |               | 1,849,856   |   |                  |  
|Federal funds sold                                                                                                    |  |               | 11,425,000  |   |                  |  
|Investment Securities:                                                                                                |  |               |             |   |                  |  
|Available-for-sale (AFS)                                                                                              |  |               | 7,946,049   |   |                  |  
|Held-to-maturity (HTM)                                                                                                |  |               | 21,778,153  |   |                  |  
|Loans, net of unearned                                                                                                |  |               |             |   |                  |  
|income of $225,055 and $219,870                                                                                       |  |               | 82,592,181  |   |                  |  
|Less: Allowance for loan losses                                                                                       |  |               | (1,509,829  | ) |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Net loans                                                                                                             |  |               | 81,082,352  |   |                  |  
|Real estate owned held for sale, net                                                                                  |  |               | 81,621      |   |                  |  
|Premises and equipment, net                                                                                           |  |               | 1,920,602   |   |                  |  
|Deferred income taxes                                                                                                 |  |               | 1,199,132   |   |                  |  
|Other assets                                                                                                          |  |               | 589,902     |   |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Total assets                                                                                                          |  | $             | 132,529,581 |   |                  | $
|                                                                                                                      |  |               |             |   |                  |  
|Liabilities and Stockholders' Equity                                                                                  |  |               |             |   |                  |  
|Deposits:                                                                                                             |  |               |             |   |                  |  
|Demand                                                                                                                |  | $             | 29,831,064  |   |                  | $
|Savings and NOW                                                                                                       |  |               | 26,730,867  |   |                  |  
|Money market                                                                                                          |  |               | 22,014,562  |   |                  |  
|Time deposits:                                                                                                        |  |               |             |   |                  |  
|Under $100,000                                                                                                        |  |               | 19,705,129  |   |                  |  
|$100,000 and over                                                                                                     |  |               | 16,117,624  |   |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Total deposits                                                                                                        |  |               | 114,399,246 |   |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Escrow payable                                                                                                        |  |               | 10,380      |   |                  |  
|Other liabilities                                                                                                     |  |               | 445,371     |   |                  |  
|Short-term borrowings                                                                                                 |  |               | 2,006,783   |   |                  |  
|Long-term debt                                                                                                        |  |               | 3,780,155   |   |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Total liabilities                                                                                                     |  |               | 120,641,935 |   |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Stockholders' Equity:                                                                                                 |  |               |             |   |                  |  
|Preferred stock of no par value, authorized 5,000,000 shares, no shares issued                                        |  |               |            |   |                  |  
|Common Stock, par value $1; authorized 3,500,000 shares, issued 1,036,999 shares at 3/31/03 and 1,036,999 at
12/31/02 |  |               | 1,036,999   |   |                  |  
|Capital in excess of par value                                                                                        |  |               | 16,208,535  |   |                  |  
|Accumulated deficit                                                                                                   |  |               | (5,372,970  | ) |                  |  
|Accumulated other comprehensive income                                                                                |  |               | 15,082      |   |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Total stockholders' equity                                                                                            |  |               | 11,887,646  |   |                  |  
|                                                                                                                      |  |               |             |   |                  |  
|Total liabilities and stockholders' equity                                                                            |  | $             | 132,529,581 |   |                  | $
|                                                                                                                      |  |               |             |   |                  |  



3



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                             |  | Six Months Ended |            
|------------------------------------------------------------------------------------------------------------ |  | ---------------- | -----------
|                                                                                                             |  | June 30, 2003    |            
|Cash flows from operating activities:                                                                        |  |                  |            
|Net Income                                                                                                   |  | $                | 305,011    
|Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities:            |  |                  |            
|Depreciation & amortization                                                                                  |  |                  | 71,097     
|Provision for loan losses                                                                                    |  |                  | 280,000    
|Amortization of investment security discount                                                                 |  |                  | 25,634     
|Amortization of loan fees and discounts, net                                                                 |  |                  | (4,529     
|Net (gain) loss on sale of other real estate owned                                                           |  |                  | (43,999    
|(Increase) decrease in other assets                                                                          |  |                  | 139,225    
|Increase (decrease) in other liabilities                                                                     |  |                  | (28,797    
|                                                                                                             |  |                  |            
|Net cash provided by (used in) operating activities                                                          |  |                  | 743,642    
|                                                                                                             |  |                  |            
|Cash flows from investing activities:                                                                        |  |                  |            
|Loans originatednon-bank subsidiaries                                                                       |  |                  |           
|Principal collectednon-bank subsidiaries                                                                    |  |                  | 2,116      
|Loan originations, net of collections                                                                        |  |                  | (6,394,098 
|Purchases of securities available-for-sale                                                                   |  |                  | (19,958,873
|Purchases of securities held-to-maturity                                                                     |  |                  | (21,689,648
|Investment made in other real estate owned                                                                   |  |                  | (449,973   
|Proceeds received from maturity of securities available-for-sale                                             |  |                  | 27,091,556 
|Proceeds received from maturity of securities held to maturity                                               |  |                  | 1,222,659  
|Proceeds from real estate owned                                                                              |  |                  | 634,972    
|Purchases of premises and equipment                                                                          |  |                  | (222,421   
|                                                                                                             |  |                  |            
|Net cash provided by (used in) investing activities                                                          |  |                  | (19,763,710
|                                                                                                             |  |                  |            
|Cash flow from financing activities:                                                                         |  |                  |            
|Net increase (decrease) in demand deposits, savings accounts, NOW accounts and money market accounts         |  |                  | 19,646,468 
|Certificates of deposit sold (matured), net                                                                  |  |                  | 3,269,587  
|Net change in short-term borrowings                                                                          |  |                  | (6,712     
|Proceeds from sale of common stock                                                                           |  |                  |           
|                                                                                                             |  |                  |            
|Net cash provided by (used in) financing activities                                                          |  |                  | 22,909,343 
|                                                                                                             |  |                  |            
|Net increase (decrease) in cash and cash equivalents                                                         |  |                  | 3,889,275  
|Cash and cash equivalents at beginning of the year                                                           |  |                  | 14,042,495 
|                                                                                                             |  |                  |            
|Cash and cash equivalents at end of the quarter                                                              |  | $                | 17,931,770 
|                                                                                                             |  |                  |            
|Supplemental disclosures of cash flow information:                                                           |  |                  |            
|Cash paid during the years for:                                                                              |  |                  |            
|Interest on deposits and other borrowings                                                                    |  | $                | 964,873    
|Income taxes                                                                                                 |  |                  |           
|Non-Cash Items:                                                                                              |  |                  |            
|Effect on stockholders' equity of an unrealized gain (loss) on debt and equity securities available-for-sale |  | $                | (243       
|Reclass long-term debt to short-term debt                                                                    |  | $                | 1,013,495  



4



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Notes to Consolidated Financial Statements



|Note 1 |  | The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-QSB and, therefore, do not include all information
and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The interim financial statements have been prepared utilizing the interim basis of reporting and, as such, reflect
all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the full
year.
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|Note 2 |  | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.                                                                                                                                                                                                                  
|        | 
|Note 3 |  | On December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128, Earnings per share (SFAS 128), which supersedes Accounting Principles Board
Opinion No. 15. Under SFAS 128, earnings per common share are computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects
the potential dilution, if any, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock.                                                             
|        | 
|Note 4 |  | Accounting principles generally accepted in the United States of America usually require that recognized revenue, expenses, gains and losses be included in net income.
Additionally, certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are
components of comprehensive income.                                                                                                                                                                                                                                 
|        | 
|Note 5 |  | The Company applies Accounting Principles Bulletin (APB) Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations to account for employee
stock compensation plans, and accordingly, does not recognize compensation expense for stock options granted when the option price is greater than or equal to the underlying stock price. The pro forma disclosures required by SFAS 123, Accounting for
Stock-Based Compensation, and as amended by SFAS 148, are presented within this report.                                                                                                                                                                             



5



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UNITED FINANCIAL BANKING COMPANIES, INC.

CONSOLIDATED AVERAGE BALANCES/NET INTEREST ANALYSIS/

YIELDS AND
RATES

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|                                           |  | For the Six Months Ended |            
|------------------------------------------ |  | ------------------------ | -----------
|                                           |  | June 30, 2003            |            
|                                           |  | AverageBalance           |            
|ASSETS                                     |  |                          |            
|Earning assets:                            |  |                          |            
|Loans:                                     |  |                          |            
|Commercial                                 |  | $                        | 59,558,850 
|Real estate construction                   |  |                          | 9,061,988  
|Real estate mortgage                       |  |                          | 5,881,111  
|Installment                                |  |                          | 5,205,178  
|                                           |  |                          |            
|Total loans                                |  |                          | 79,707,127 
|                                           |  |                          |            
|Interest-bearing deposits                  |  |                          | 1,542,994  
|Federal funds sold                         |  |                          | 25,612,966 
|Investment securities (1)                  |  |                          | 8,238,475  
|                                           |  |                          |            
|Total earning assets                       |  |                          | 115,101,562
|                                           |  |                          |            
|Noninterest-earning assets                 |  |                          |            
|Cash and due from banks                    |  |                          | 4,363,449  
|Other assets                               |  |                          | 3,621,311  
|Allowance for loan losses                  |  |                          | (1,396,031 
|                                           |  |                          |            
|Total assets                               |  | $                        | 121,690,291
|                                           |  |                          |            
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                          |            
|Interest-bearing liabilities:              |  |                          |            
|Interest-bearing deposits:                 |  |                          |            
|Savings and NOW accounts                   |  | $                        | 24,675,778 
|Money market accounts                      |  |                          | 15,592,037 
|Time:                                      |  |                          |            
|Under $100,000                             |  |                          | 19,495,048 
|$100,000 and over                          |  |                          | 15,851,558 
|                                           |  |                          |            
|Total interest-bearing deposits            |  |                          | 75,614,421 
|Short-term borrowings                      |  |                          | 1,172,062  
|Long-term debt                             |  |                          | 4,617,691  
|                                           |  |                          |            
|                                           |  |                          |            
|Total interest-bearing liabilities         |  |                          | 81,404,174 
|                                           |  |                          |            
|Non interest-bearing liabilities:          |  |                          |            
|Demand deposits                            |  |                          | 28,056,543 
|Other liabilities                          |  |                          | 519,322    
|Stockholders' equity                       |  |                          | 11,710,252 
|                                           |  |                          |            
|Total liabilities and stockholders' equity |  | $                        | 121,690,291
|                                           |  |                          |            
|Net interest income                        |  |                          |            
|                                           |  |                          |            
|Net interest margin (1)                    |  |                          |            
|                                           |  |                          |            
|Net interest spread (2)                    |  |                          |            
|                                           |  |                          |            
|Fees included in loan income               |  |                          |            
|                                           |  |                          |            
|Taxable equivalent adjustment              |  |                          |            
|                                           |  |                          |            



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



|(1) |  | Yields on securities available-for-sale are calculated on the basis of the historical cost of such securities and do not give effect to changes in the fair market value of such
securities which are reflected as a component of shareholders' equity.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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





6



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

RESULTS OF OPERATIONS



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



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



General



The following discussion provides an overview of the financial condition and results of operations of United Financial
Banking Companies, Inc. (UFBC) and its subsidiaries, The Business Bank (the Bank), Business Venture Capital Incorporated (BVCI) and United Facilities LLC (UFLLC) which is presented on a consolidated basis. UFBC
reported net income of $305,011 for the six-month period ended June 30, 2003. This compares with net income of $309,713 for the same period of 2002. Basic earnings per share were $.29 for the first six months ended June 30, 2003 compared to $.30 for
the first six months of 2002.



Net Interest Income



For the six-month period ended June 30, 2003, net interest income increased
$377,765 or 20.8% from $1,817,547 at June 30, 2002 to $2,195,312 at June 30, 2003 (Consolidated Statements of Income and Comprehensive Income table). The numerical change masks the impact of the current rate environment as shown in the
decreased net interest margin. The net interest margin of 3.85% at June 30, 2003 was notably less than the June 30, 2002 net interest margin of 4.62% (Consolidated Average Balancestable). The decreases in the prime interest rate have
significantly contributed to the decline in the net interest margin. However, an increased volume of earning assets and repriced liabilities helped offset the decreased net interest margin and contributed to the increased net interest income at June
30, 2003. The same factors influenced the net interest income comparison for the second quarters of 2003 and 2002.



As shown in the Rate Volume Variance Table, net interest income was impacted by both rate and volume. The compressed rate environment suppressed
interest income on earning assets by $430,464 during the first six months of 2003 when compared to 2002. The yield on total earning assets decreased 121 basis points from 6.76% at June 30, 2002 to 5.55% at June 30, 2003 (Consolidated Average
Balancestable). However, earnings lost due to rate were offset by the favorable contribution from the increased volume of total earning assets (Rate Volume Variance table). At June 30, 2003, average total earning assets increased
$35,808,091 or 45.2% compared to the first six months of June 30, 2002 (Consolidated Average Balances table). The increased volume of earning assets contributed $937,977 to earnings when comparing the six month periods ended June 30, 2003 and
2002 (Rate Volume Variance table). The combined effect of the rate and volume variances resulted in an increase of $507,513 in interest income (or earning assets) from $2,657,577 at June 30, 2002 to $3,165,090 at June 30, 2003.



7



---

Interest expense increased $129,748 or 15.5% from $840,030 at June 30, 2002 to $969,778 at June 30, 2003
(Consolidated Statements of Income and Comprehensive Income table). The increase was attributable to an increased volume of interest-bearing deposits and borrowings. The average volume of interest-bearing deposits increased $21,751,536 or
40.4% during the past year (Consolidated Average Balances table) and short-term borrowings and long-term debt increased $4,856,910 during the same period. Average total interest-bearing liabilities increased $26,608,446 or 48.6% from
$54,795,728 at June 30, 2002 to $81,404,174 at June 30, 2003. The volume increase added $324,811 of interest expense during the first six months of 2003 (Rate Volume Variance table) compared to 2002. The compressed rate environment
favorably impacted interest expense and mitigated its increase due to volume by $195,063 (Rate Volume Variance table).



Analysis of the Changes in the Components of Net Interest Income (tax equivalent basis)



|For the Six Months Ended June 30, |  | 2003 Compared to 2002  
|--------------------------------- |  | -----------------------
|                                  |  | TotalIncrease(Decrease)
|                                  |  |                        
|Interest income:                  |  |                        
|Loans:                            |  |                        
|Commercial                        |  | 507,488                
|Real estateconstruction          |  | 41,149                 
|Real estatemortgage              |  | (41,051                
|Installment                       |  | (2,932                 
|                                  |  |                        
|Total loans                       |  | 504,654                
|Interest-bearing deposits         |  | 4,396                  
|Federal funds sold                |  | 48,375                 
|Investment securities             |  | (49,912                
|                                  |  |                        
|Total interest income             |  | 507,513                
|                                  |  |                        
|Interest expense:                 |  |                        
|Savings and NOW accounts          |  | 68,394                 
|Money markets accounts            |  | (31,248                
|Time:                             |  |                        
|Under $100,000                    |  | (164                   
|$100,000 and over                 |  | (4,130                 
|Short-term borrowings             |  | (5,071                 
|Long-term debt                    |  | 101,967                
|                                  |  |                        
|Total interest expense            |  | 129,748                
|                                  |  |                        
|Net interest income               |  | 377,765                
|                                  |  |                        



The cost of
interest-bearing liabilities decreased 69 basis points from 3.09% at June 30, 2002 to 2.40 at June 30, 2003 (Consolidated Average Balancestable). The drop was primarily attributable to the growth and repricing of deposits during the lower
rate environment. The growth of noninterest-bearing or demand deposits also contributed favorably to net interest income. As shown in the Consolidated Average Balances table, average demand deposits increased $10,484,842 or 59.7% from
$17,571,701 at June 30, 2002 to $28,056,543 at June 30, 2003.



8



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Provision for Loan Losses



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



Provision for loan loss expense increased $188,600 or 206.6% from $91,400 at June 30, 2002 to $280,000 at June 30, 2003.
Charge-offs net of recoveries totaled $20,458 during the first six months of 2003 versus $24,880 during the same period of 2002. Loan growth since June 30, 2002 was a material factor contributing to the variance between the 2003 and 2002 provision
for loan loss expense. Average total loans increased $19,034,692 or 31.4% from $60,672,435at June 30, 2002 to $79,707,127 at June 30, 2003.



Noninterest Income



Total noninterest income increased $83,071 or 40.8% during the past year since June 2002. The increase was primarily attributable to income generated by
the increased volume of deposits and also explains the $57,015 or 39.2% increase in other income when comparing June 30, 2002 and June 30, 2003.



Noninterest Expense



Total noninterest expense increased $274,361 or 18.7% during the past year since June 2002. The increase was primarily attributable to additional staffing
for business expansion, most notably the opening of the Reston, Virginia branch. Salaries and employee benefits increased $101,696 or 11.7% during the six months ended June 30, 2003 compared to the six months ended June 30, 2002. Expansion expenses
such as occupancy, furniture and equipment depreciation and data processing also contributed to the increase. Occupancy, furniture and equipment depreciation and data processing increased $90,363 or 27.7% during the first six months of 2003 compared
to the first six months of 2002.



Income Taxes



The provision for income taxes increased $2,577 or 1.7% from $154,365 at
June 30, 2002 to $156,942 at June 30, 2003. The tax liability was accrued at the historic rate of 34.0%.



B.    Financial Condition as of June 30, 2003



General



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



9



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Assets



Total assets increased $23,185,314 or 21.2% during the first six months of 2003. The increase was attributable to an increased volume of deposits which
were invested in loans, federal funds sold, and investment securities. The balance of available-for-sale investment securities is inflated as shown on the balance sheet. For tax purposes, the Bank purchased $20,000,000 of an overnight government
security on June 30, 2003. The average balance of investment securities totaled $8,238,475 for the first six months of 2003.



Loans



Loans net of unearned income increased $6,374,576 or 8.4% from $76,217,605 at December 31, 2002 to $82,592,181 at June 30, 2003. The increase was funded
by liquidity available in federal funds sold and an increased volume of deposits.



Allowance for Loan Losses



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



The allowance for loan losses is maintained at a level, which in
managements judgment, is adequate to absorb credit losses inherent in the existing loan portfolio. The 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.



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



10



---

At June 30, 2003 and December 31, 2002, the allowance for loan losses was $1,509,829 or 1.8% and
$1,251,764 or 1.6%, respectively, of total loans. Impaired loans, for the six-month period ended June 30, 2003, totaled $34,583, of which $8,014 was held by BVCI and $26,569 was held by the Bank. This compares to a balance of $54,786 at December 31,
2002, of which $8,679 was held by BVCI and $46,107 was held by the Bank. Charge-offs net of recoveries totaled $20,458 during the first six months of 2003 versus $24,880 during the same period of 2002. Of the impaired loans outstanding at June 30,
2003 and December 31, 2002, non-accrual loans totaled $34,583 and $54,786, respectively.



Deferred Tax Asset



The deferred income tax credits primarily resulted from net operating loss carryforwards. Using factors such as the Companys historical earnings performance, growth potential, the local and national economy and market competition,
management determined that it was more likely than not that the Company will utilize the tax asset.



Deposits



During
the first six months of 2003, management continued to focus on maintaining a deposit mix prominently consisting of core deposits. Core deposits consist of demand, savings, NOW and money market accounts, and are generally less costly and more stable
than certificates of deposits. Core deposits increased $19,646,833 or 33.3% from $58,967,646 at December 31, 2002 to $78,614,295 at June 30, 2003. The increases since December 31, 2002 were as follows: demand deposits
(noninterest-bearing)$5,853,445 or 24.4%, money market deposits$8,609,480 or 64.2% and savings and NOW deposits - $5,183,543 or 24.1%.



Other Liabilities and Equity



During the second quarter of 2003, $1,000,000 of long-term debt was reclassified to short-term borrowings due to its maturity status. The debt consists of
$5,000,000 of advances from the Federal Home Loan Bank of Atlanta (FHLBA) and $786,938 from a financial institution. The FHLBA advances have been used to match fund lending. The $786,938 was used to purchase the Reston branch. Stockholders
equity increased $304,768 or 2.6% during the six months ended June 30, 2003 when compared to the year ended December 31, 2002. The first six months earnings accounted for the variance in stockholders equity.



Liquidity and Investment



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



Consolidated average liquid assets were 30.8% of average total assets at June 30, 2003 compared to 25.9% at June 30, 2002 (Consolidated Average Balances table). The Companys liquidity needs exist primarily in the Bank
subsidiary. To ensure adequate liquidity, the Bank purchases certain traditional assets such as government and other investment securities in addition to maintaining several lines of credit. The Banks securities portfolio is generally
comprised of U.S. Government agency securities, mutual funds, mortgage-backed and equity securities. The Bank has strategically grown its securities portfolio to ensure safe levels of liquidity, to enhance the overall credit quality of its asset
base, to generate increased interest income, to balance assets and liabilities and to hedge interest rate risk. The securities portfolio includes both instruments available-for-sale and held-to-maturity. Securities classified as available-for-sale
may be sold in response to changes in market interest rates, changes in prepayment or extension risk, management of the federal tax position, liquidity needs and other asset/liability management issues. Securities classified as held-to-maturity are
intended for investment purposes.



11



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



|                           |  | Available-for-Sale |           | Held-to-Maturity
|-------------------------- |  | ------------------ | --------- | ----------------
|U.S. Government Agency     |  | $                  | 2,091,074 |                 
|U.S. Treasury              |  |                    | 1,277,929 |                 
|Mortgage-backed Securities |  |                    | 2,248,967 |                 
|Mutual Funds               |  |                    | 2,015,329 |                 
|Equity                     |  |                    | 312,750   |                 
|                           |  |                    |           |                 
|Total                      |  | $                  | 7,946,049 |                 
|                           |  |                    |           |                 



Capital Requirements





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



Quantitative measures established by regulation to ensure capital adequacy require the Company and the bank subsidiary to maintain minimum amounts and
ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. As of June 30, 2003, the Company and the Bank met the criteria to be well capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, the Company and the bank subsidiary must maintain Total risk-based, Tier 1 risk-based and Tier 1 average asset ratios as set forth in the table. There have been no conditions or events since December 31, 2002
that management believes would result in the institution not being adequately capitalized.





|                                         |  | Actual     |  |       | Required for Capital Adequacy Purposes |  |           | Required To Be Well Capitalized |      
|---------------------------------------- |  | ---------- |  | ----- | -------------------------------------- |  | --------- | ------------------------------- | -----
|                                         |  | Amount     |  | Ratio |                                        |  | Amount    |                                 | Ratio
|As of June 30, 2003:                     |  |            |  |       |                                        |  |           |                                 |      
|                                         |  |            |  |       |                                        | 
|Total capital (to risk-weighted assets)  |  |            |  |       |                                        |  |           |                                 |      
|Company                                  |  | 12,137,651 |  | 13.55 | %                                      |  | 7,164,152 |                                 | 8.00 
|The Business Bank                        |  | 10,848,576 |  | 12.41 | %                                      |  | 6,993,273 |                                 | 8.00 
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                        |  |           |                                 |      
|Company                                  |  | 11,013,432 |  | 12.30 | %                                      |  | 3,582,076 |                                 | 4.00 
|The Business Bank                        |  | 9,750,765  |  | 11.15 | %                                      |  | 3,496,636 |                                 | 4.00 
|Tier 1 capital (to average assets)       |  |            |  |       |                                        |  |           |                                 |      
|Company                                  |  | 11,013,432 |  | 8.51  | %                                      |  | 5,178,675 |                                 | 4.00 
|The Business Bank                        |  | 9,750,765  |  | 7.84  | %                                      |  | 4,974,881 |                                 | 4.00 
|                                         |  |            |  |       |                                        | 
|As of June 30, 2002:                     |  |            |  |       |                                        |  |           |                                 |      
|                                         |  |            |  |       |                                        | 
|Total capital (to risk-weighted assets)  |  |            |  |       |                                        |  |           |                                 |      
|Company                                  |  | 10,478,956 |  | 15.31 | %                                      |  | 5,474,388 |                                 | 8.00 
|The Business Bank                        |  | 9,441,205  |  | 14.44 | %                                      |  | 5,231,488 |                                 | 8.00 
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                        |  |           |                                 |      
|Company                                  |  | 9,620,327  |  | 14.06 | %                                      |  | 2,737,194 |                                 | 4.00 
|The Business Bank                        |  | 8,620,086  |  | 13.18 | %                                      |  | 2,615,744 |                                 | 4.00 
|Tier 1 capital (to average assets)       |  |            |  |       |                                        |  |           |                                 |      
|Company                                  |  | 9,620,327  |  | 11.27 | %                                      |  | 3,413,484 |                                 | 4.00 
|The Business Bank                        |  | 8,620,086  |  | 10.48 | %                                      |  | 3,289,911 |                                 | 4.00 





12



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Earnings Per Share



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





|                                            |  | Income (Numerator) |         | Shares (Denominator) |           | Per Share Amount
|------------------------------------------- |  | ------------------ | ------- | -------------------- | --------- | ----------------
|Basic Earnings Per Share:                   |  |                    |         |                      |           |                 
|For the six months ended June 30, 2003      |  |                    |         |                      |           |                 
|Net Income                                  |  | $                  | 305,011 |                      |           |                 
|Income available to common stockholders     |  | $                  | 305,011 |                      | 1,036,999 |                 
|                                            |  |                    |         |                      |           |                 
|For the six months ended June 30, 2002      |  |                    |         |                      |           |                 
|Net Income                                  |  | $                  | 309,713 |                      |           |                 
|Income available to common stockholders     |  | $                  | 309,713 |                      | 1,035,557 |                 
|                                            |  |                    |         |                      |           |                 
|Diluted Earnings Per Share:                 |  |                    |         |                      |           |                 
|For the six months ended June 30, 2003      |  |                    |         |                      |           |                 
|Net Income available to common stockholders |  | $                  | 305,011 |                      | 1,036,999 |                 
|Add: Contracts to issue common stock        |  |                    |         |                      |           |                 
|Option - expires 01/27/07                   |  |                    |         |                      | 1,063     |                 
|Options - expire 12/31/05 - 01/26/13        |  |                    |         |                      | 62,733    |                 
|                                            |  |                    |         |                      |           |                 
|Weighted-average diluted shares             |  |                    |         |                      | 63,796    |                 
|Diluted earnings per common share:          |  | $                  | 305,011 |                      | 1,100,795 |                 
|                                            |  |                    |         |                      |           |                 
|For the six months ended June 30, 2003      |  |                    |         |                      |           |                 
|Net Income available to common stockholders |  | $                  | 309,713 |                      | 1,035,557 |                 
|Add: Contracts to issue common stock        |  |                    |         |                      |           |                 
|Option - expires 01/27/07                   |  |                    |         |                      | 909       |                 
|Options - expire 12/31/05 - 6/30/08         |  |                    |         |                      | 48,418    |                 
|                                            |  |                    |         |                      |           |                 
|Weighted-average diluted shares             |  |                    |         |                      | 49,327    |                 
|Diluted earnings per common share:          |  | $                  | 309,713 |                      | 1,084,884 |                 
|                                            |  |                    |         |                      |           |                 





13



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Stock-based Compensation



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



|                                                                                                                   |  | Three Months Ended |         |   | Six Months Ended |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ---------------- | -
|                                                                                                                   |  | June 30,2003       |         |   | June 30,2002     |  
|Net income, as reported                                                                                            |  | $                  | 214,307 |   |                  | $
|                                                                                                                   |  |                    |         |  
|Deduct: total stock-based employee compensation expense determined based on fair value methodof awards, net of tax |  |                    |        |   |                  |  
|                                                                                                                   |  |                    |         |  
|Pro forma net income                                                                                               |  | $                  | 214,307 |   |                  | $
|                                                                                                                   |  |                    |         |  
|Basic earnings per share:                                                                                          |  |                    |         |   |                  |  
|As reported                                                                                                        |  | $                  | 0.21    |   |                  | $
|Pro forma                                                                                                          |  | $                  | 0.21    |   |                  | $
|                                                                                                                   |  |                    |         |  
|Diluted earnings per share:                                                                                        |  |                    |         |   |                  |  
|As reported                                                                                                        |  | $                  | 0.19    |   |                  | $
|Pro forma                                                                                                          |  | $                  | 0.19    |   |                  | $
|                                                                                                                   |  |                    |         |  
|Assumptions                                                                                                        |  |                    |         |   |                  |  
|Risk-free interest rate                                                                                            |  |                    | 2.84    | % |                  |  
|Dividend yield                                                                                                     |  |                    |        |   |                  |  
|Volatility factor                                                                                                  |  |                    | 10.00   | % |                  |  
|Weighted average expected life (years)                                                                             |  |                    | n/a     |   |                  |  



ITEM
3:    CONTROLS AND PROCEDURES



The
Companys management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated, as of the last day of the period covered by this report, the effectiveness of the design and operation
of the Companys disclosure controls and procedures, as defined in Rule 13a-15 under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures were adequate. There were no changes in the Companys internal control over financial reporting (as defined in Rule 13a-15 under the Securities Act of 1934) during the quarter ended June 30, 2003 that has
materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



14



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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 June 30, 2003 which would have a material
adverse effect on the Companys financial statements.



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



|(4) |  | At the United Financial Banking Companies, Inc. Annual Meeting of Shareholders held on June 6, 2003, the shareholders elected Manuel V. Fernandez, William J. McCormick, Jr. and
Robert W. Pitts to serve as Class One directors until the 2006 Annual Meeting of Shareholders. The vote was as follows:
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Nominees:                 |  | For     |  | Withheld |  | Votes Cast
| |  | ------------------------- |  | ------- |  | -------- |  | ----------
| |  | Class 1 Directors         |  |         |  |          |  |           
| |  | Manuel V. Fernandez       |  | 956,930 |  | 54       |  | 956,984   
| |  | William J. McCormick, Jr. |  | 956,930 |  | 54       |  | 956,984   
| |  | Robert W. Pitts           |  | 956,930 |  | 54       |  | 956,984   



Previously, Mr. Edward
Pechan and Mr. Harold Rauner were elected by Shareholders to serve as Class Two directors until the 2004 Annual Meeting of Shareholders. Mr. Dennis I. Meyer, Mrs. Sharon A. Stakes and Mr. Jeffery T. Valcourt were elected by Shareholders to serve as
Class Three directors until the 2005 Annual Meeting of Shareholders. The three classes of directors constitute the Board of Directors.



At the United Financial Banking Companies, Inc. Annual Meeting of Shareholders held on June 6, 2003, the shareholders also voted to approve the 2003
Directors Stock Plan, the 2003 Executive Stock Plan and Ratified the Appointment of Brown, Dakes, Wannall & Maxfield, P.C. as the independent auditors for 2003.



| |  | Proposal                       |  | For     |  | Withheld |  | Votes Cast
| |  | ------------------------------ |  | ------- |  | -------- |  | ----------
| |  | 2003 Directors Stock Plan      |  | 946,951 |  | 18,870   |  | 965,821   
| |  | 2003 Executive Stock Plan      |  | 946,894 |  | 18,927   |  | 965,821   
| |  | Ratify Appointment of Auditors |  | 956,720 |  | 299      |  | 957,019   



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



Exhibits



31 (a) Certification of Chief Executive Officer

31 (b) Certification of Chief Financial Officer

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

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



Reports on Form 8-K



None.



15



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SIGNATURES



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



|                      |  | UNITED FINANCIAL BANKING COMPANIES, INC.
|--------------------- |  | ----------------------------------------
|                      |  |                                         
|                      |  |                                         
|                      |  |                                         
|Date: August 14, 2003 |  | By:                                     



|                      |  |    
|--------------------- |  | ---
|                      |  |    
|                      |  |    
|                      |  |    
|Date: August 14, 2003 |  | By:



16