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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 June 30, 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

Common Stock $1.00 Par Value

1,087,182 Shares Outstanding

as of June 30, 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 EndedJune 30, |           | Six Months Ended June 30, |     
|                                                                                               |  | 2006                       |           |                           | 2005 |   | 2006      |  |   | 2005      |  
|Interest income:                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Interest and fees on loans                                                                     |  | $                          | 3,025,519 |                           |      | $ | 2,294,249 |  | $ | 5,854,894 |   |  | $ | 4,414,396 |  
|Interest on investment securities                                                              |  |                            | 285,743   |                           |      |   | 171,282   |  |   | 552,004   |   |  |   | 309,084   |  
|Interest on federal funds sold                                                                 |  |                            | 88,430    |                           |      |   | 142,673   |  |   | 155,353   |   |  |   | 203,428   |  
|Interest on interest-bearing deposits                                                          |  |                            | 667       |                           |      |   | 74,358    |  |   | 2,661     |   |  |   | 111,949   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Total interest income                                                                          |  |                            | 3,400,359 |                           |      |   | 2,682,562 |  |   | 6,564,912 |   |  |   | 5,038,857 |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Interest expense:                                                                              |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Interest on deposits                                                                           |  |                            | 1,070,963 |                           |      |   | 665,723   |  |   | 2,026,429 |   |  |   | 1,216,919 |  
|Interest on short-term borrowings                                                              |  |                            | 14,786    |                           |      |   | 8,498     |  |   | 26,391    |   |  |   | 17,941    |  
|Interest on long-term debt                                                                     |  |                            | 95,803    |                           |      |   | 110,870   |  |   | 196,434   |   |  |   | 223,278   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Total interest expense                                                                         |  |                            | 1,181,552 |                           |      |   | 785,091   |  |   | 2,249,254 |   |  |   | 1,458,138 |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Net interest income                                                                            |  |                            | 2,218,807 |                           |      |   | 1,897,471 |  |   | 4,315,658 |   |  |   | 3,580,719 |  
|Provision for loan losses                                                                      |  |                            | 82,640    |                           |      |   | 90,822    |  |   | 175,393   |   |  |   | 199,924   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Net interest income after provision for loan losses                                            |  |                            | 2,136,167 |                           |      |   | 1,806,649 |  |   | 4,140,265 |   |  |   | 3,380,795 |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Noninterest income:                                                                            |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Service charges and other fees on deposits                                                     |  |                            | 74,958    |                           |      |   | 59,494    |  |   | 172,536   |   |  |   | 117,221   |  
|Originations and other fees on loans                                                           |  |                            | 90,732    |                           |      |   | 88,051    |  |   | 174,702   |   |  |   | 175,119   |  
|Gain on sale of loans, net                                                                     |  |                            |          |                           |      |   |          |  |   |          |   |  |   | 4,594     |  
|Other income                                                                                   |  |                            | 69,170    |                           |      |   | 69,436    |  |   | 110,448   |   |  |   | 114,028   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Total noninterest income                                                                       |  |                            | 234,860   |                           |      |   | 216,981   |  |   | 457,686   |   |  |   | 410,962   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Noninterest expense:                                                                           |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Salaries                                                                                       |  |                            | 956,316   |                           |      |   | 772,433   |  |   | 1,851,850 |   |  |   | 1,510,059 |  
|Employee benefits                                                                              |  |                            | 138,078   |                           |      |   | 115,313   |  |   | 289,983   |   |  |   | 245,459   |  
|Occupancy                                                                                      |  |                            | 243,071   |                           |      |   | 208,929   |  |   | 481,224   |   |  |   | 421,503   |  
|Furniture and equipment                                                                        |  |                            | 92,035    |                           |      |   | 81,867    |  |   | 182,744   |   |  |   | 169,595   |  
|Data processing                                                                                |  |                            | 84,618    |                           |      |   | 61,405    |  |   | 145,314   |   |  |   | 120,232   |  
|Other insurance                                                                                |  |                            | 12,260    |                           |      |   | 12,239    |  |   | 25,821    |   |  |   | 24,337    |  
|Legal                                                                                          |  |                            | 4,991     |                           |      |   | 6,514     |  |   | 11,043    |   |  |   | 10,393    |  
|Accounting                                                                                     |  |                            | 16,452    |                           |      |   | 72,109    |  |   | 32,904    |   |  |   | 72,109    |  
|FDIC / FICO bond insurance                                                                     |  |                            | 5,243     |                           |      |   | 5,107     |  |   | 10,349    |   |  |   | 10,288    |  
|Stock compensation                                                                             |  |                            | 19,763    |                           |      |   | 6,156     |  |   | 76,408    |   |  |   | 6,156     |  
|Other expense                                                                                  |  |                            | 255,035   |                           |      |   | 170,209   |  |   | 516,729   |   |  |   | 399,139   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Total noninterest expense                                                                      |  |                            | 1,827,862 |                           |      |   | 1,512,281 |  |   | 3,624,369 |   |  |   | 2,989,270 |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Income before income taxes                                                                     |  |                            | 543,165   |                           |      |   | 511,349   |  |   | 973,582   |   |  |   | 802,487   |  
|Provision for income taxes                                                                     |  |                            | 184,676   |                           |      |   | 173,859   |  |   | 331,018   |   |  |   | 272,846   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Net income                                                                                     |  | $                          | 358,489   |                           |      | $ | 337,490   |  | $ | 642,564   |   |  | $ | 529,641   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Net income per common share:                                                                   |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Basic                                                                                          |  | $                          | 0.33      |                           |      | $ | 0.32      |  | $ | 0.59      |   |  | $ | 0.51      |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Diluted                                                                                        |  | $                          | 0.31      |                           |      | $ | 0.30      |  | $ | 0.56      |   |  | $ | 0.46      |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Comprehensive Income                                                                           |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Net income                                                                                     |  | $                          | 358,489   |                           |      | $ | 337,490   |  | $ | 642,564   |   |  | $ | 529,641   |  
|Other comprehensive income, net of tax Unrealized gain (loss) on available-for-sale securities |  |                            | (62,135   | )                         |      |   | 68,456    |  |   | (79,900   | ) |  |   | (20,771   | )
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  
|Comprehensive income                                                                           |  | $                          | 296,354   |                           |      | $ | 405,946   |  | $ | 562,664   |   |  | $ | 508,870   |  
|                                                                                               |  |                            |           |                           |      |   |           |  |   |           |   |  |   |           |  



2



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets



|                                                                                                               |  |                          |             |   |                           |   |             |  
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ------------------------- | - | ----------- | -
|                                                                                                               |  | (Unaudited)June 30, 2006 |             |   | (Audited)December 31,2005 |  
|ASSETS                                                                                                         |  |                          |             |   |                           |   |             |  
|Cash and due from banks                                                                                        |  | $                        | 6,217,221   |   |                           | $ | 5,128,713   |  
|Interest-bearing deposits in other banks                                                                       |  |                          | 179,045     |   |                           |   | 175,899     |  
|Federal funds sold                                                                                             |  |                          |            |   |                           |   | 8,150,000   |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Total cash and cash equivalents                                                                                |  |                          | 6,396,266   |   |                           |   | 13,454,612  |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Securities available-for-sale                                                                                  |  |                          | 26,653,550  |   |                           |   | 33,314,164  |  
|Securities held-to-maturity (fair value of $2,255,802 at June 30, 2006 and $1,951,112 at December 31, 2005)    |  |                          | 2,297,181   |   |                           |   | 1,999,014   |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Total securities                                                                                               |  |                          | 28,950,731  |   |                           |   | 35,313,178  |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Loans, net of unearned income of $340,989 in 2006; $383,978 in 2005                                            |  |                          | 155,358,101 |   |                           |   | 154,273,100 |  
|Less: Allowance for loan losses                                                                                |  |                          | (2,503,100  | ) |                           |   | (2,327,464  | )
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Net loans                                                                                                      |  |                          | 152,855,001 |   |                           |   | 151,945,636 |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Land                                                                                                           |  |                          | 818,910     |   |                           |   | 818,910     |  
|Premises and equipment, net                                                                                    |  |                          | 1,713,063   |   |                           |   | 1,749,515   |  
|Deferred income taxes                                                                                          |  |                          | 1,043,079   |   |                           |   | 1,001,920   |  
|Other assets                                                                                                   |  |                          | 1,738,725   |   |                           |   | 1,526,922   |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Total assets                                                                                                   |  | $                        | 193,515,775 |   |                           | $ | 205,810,693 |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                           |  |                          |             |   |                           |   |             |  
|                                                                                                               |  |                         
|LIABILITIES                                                                                                    |  |                          |             |   |                           |   |             |  
|Deposits:                                                                                                      |  |                          |             |   |                           |   |             |  
|Demand                                                                                                         |  | $                        | 47,603,532  |   |                           | $ | 51,552,317  |  
|Savings and NOW                                                                                                |  |                          | 40,563,981  |   |                           |   | 55,761,579  |  
|Money market                                                                                                   |  |                          | 21,119,152  |   |                           |   | 22,562,064  |  
|Time:                                                                                                          |  |                          |             |   |                           |   |             |  
|Under $100,000                                                                                                 |  |                          | 27,431,403  |   |                           |   | 25,006,141  |  
|$100,000 and over                                                                                              |  |                          | 32,996,863  |   |                           |   | 26,500,049  |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Total deposits                                                                                                 |  |                          | 169,714,931 |   |                           |   | 181,382,150 |  
|Short-term borrowings                                                                                          |  |                          | 1,742,325   |   |                           |   | 1,000,000   |  
|Trust preferred capital notes                                                                                  |  |                          | 5,155,000   |   |                           |   | 5,155,000   |  
|Long-term debt                                                                                                 |  |                          |            |   |                           |   | 1,750,475   |  
|Accounts payable and accrued expenses                                                                          |  |                          | 1,098,314   |   |                           |   | 1,432,680   |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Total liabilities                                                                                              |  |                          | 177,710,570 |   |                           |   | 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 1,087,182 shares in 2006 and 1,077,682 in 2005 |  |                          | 1,087,182   |   |                           |   | 1,077,682   |  
|Surplus                                                                                                        |  |                          | 16,648,195  |   |                           |   | 16,505,543  |  
|Accumulated deficit                                                                                            |  |                          | (1,669,830  | ) |                           |   | (2,312,395  | )
|Accumulated other comprehensive loss                                                                           |  |                          | (260,342    | ) |                           |   | (180,442    | )
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Total stockholders equity                                                                                     |  |                          | 15,805,205  |   |                           |   | 15,090,388  |  
|                                                                                                               |  |                          |             |   |                           |   |             |  
|Total liabilities and stockholders equity                                                                     |  | $                        | 193,515,775 |   |                           | $ | 205,810,693 |  
|                                                                                                               |  |                          |             |   |                           |   |             |  



3



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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                                         |  |                  |             |   |               |   |             |  
|------------------------------------------------------------------------------------------------------------------------ |  | ---------------- | ----------- | - | ------------- | - | ----------- | -
|                                                                                                                         |  | Six Months Ended |            
|                                                                                                                         |  | June 30, 2006    |             |   | June 30, 2005 |  
|Cash flows from operating activities:                                                                                    |  |                  |             |   |               |   |             |  
|Net Income                                                                                                               |  | $                | 642,564     |   |               | $ | 529,641     |  
|Adjustment to reconcile net income to net cash provided by operating activities:                                         |  |                  |             |   |               |   |             |  
|Depreciation and amortization                                                                                            |  |                  | 157,534     |   |               |   | 130,774     |  
|Provision for loan losses                                                                                                |  |                  | 175,393     |   |               |   | 199,924     |  
|Amortization of investment security discount                                                                             |  |                  | (7,195      | ) |               |   | 27,189      |  
|Amortization of loan fees and discounts, net                                                                             |  |                  | (58,090     | ) |               |   | 17,043      |  
|(Increase) in other assets                                                                                               |  |                  | (264,729    | ) |               |   | (166,032    | )
|Increase (decrease) in other liabilities                                                                                 |  |                  | (334,366    | ) |               |   | 350,241     |  
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Net cash provided by operating activities                                                                                |  |                  | 311,111     |   |               |   | 1,088,780   |  
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Cash flows from investing activities:                                                                                    |  |                  |             |   |               |   |             |  
|Loan originations, net of collections - nonbank subsidiaries                                                             |  |                  | 130,302     |   |               |   | 78,308      |  
|Loan originations, net of collections                                                                                    |  |                  | (1,156,970  | ) |               |   | (12,973,958 | )
|Purchases of securities available-for-sale                                                                               |  |                  | (7,049,931  | ) |               |   | (29,069,015 | )
|Purchases of securities held-to-maturity                                                                                 |  |                  | (298,338    | ) |               |   |            |  
|Purchases of premises and equipment                                                                                      |  |                  | (109,315    | ) |               |   | 21,628,685  |  
|Proceeds received from maturity of securities available-for-sale                                                         |  |                  | 13,638,011  |   |               |   | (73,967     | )
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Net cash provided by (used in) investing activities                                                                      |  |                  | 5,153,759   |   |               |   | (20,409,947 | )
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Cash flow from financing activities:                                                                                     |  |                  |             |   |               |   |             |  
|Net increase (decrease) in demand deposits, savings accounts, NOW accounts and money market accounts                     |  |                  | (20,589,295 | ) |               |   | 23,812,322  |  
|Certificates of deposit sold (matured), net                                                                              |  |                  | 8,922,076   |   |               |   | (1,452,719  | )
|Net change in short-term borrowings                                                                                      |  |                  | (1,000,000  | ) |               |   | (1,000,000  | )
|Net payments on long-term debt                                                                                           |  |                  | (8,150      | ) |               |   | (7,639      | )
|Proceeds from issuance of common stock                                                                                   |  |                  | 152,153     |   |               |   | 19,989      |  
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Net cash provided by financing activities                                                                                |  |                  | (12,523,216 | ) |               |   | 21,371,953  |  
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Net increase (decrease) in cash and cash equivalents                                                                     |  |                  | (7,058,346  | ) |               |   | 2,050,786   |  
|Cash and cash equivalents at beginning of the period                                                                     |  |                  | 13,454,612  |   |               |   | 14,008,948  |  
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Cash and cash equivalents at end of the period                                                                           |  | $                | 6,396,266   |   |               | $ | 16,059,734  |  
|                                                                                                                         |  |                  |             |   |               |   |             |  
|Supplemental disclosures of cash flow information:                                                                       |  |                  |             |   |               |   |             |  
|Cash paid during the period for:                                                                                         |  |                  |             |   |               |   |             |  
|Interest on deposits and other borrowings                                                                                |  | $                | 2,129,380   |   |               | $ | 1,458,138   |  
|Income taxes                                                                                                             |  |                  | 875,000     |   |               |   |            |  
|                                                                                                                         |  |                 
|Noncash items:                                                                                                           |  |                  |             |   |               |   |             |  
|Effect on stockholders equity of an unrealized gain (loss) on debt and equity securities available-for-sale, net of tax |  | $                | (79,900     | ) |               | $ | (20,771     | )



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 six months ended June 30, 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. Pro-forma disclosures for the three and six months ended June 30, 2006 are not presented because stock-based payments were accounted for under SFAS No. 123R
during the periods. As such, stock compensation expense amounted to $19,763 and $76,408 for those respective periods.                                                                                                                                                                                                                                                                                                               



5



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|                                                                                                                    |  |                        |         |                      |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | -------------------- | - | ------- | -
|                                                                                                                    |  | (Unaudited)            |        
|June 30,                                                                                                            |  | Three Months Ended2005 |         | Six Months Ended2005 |  
|Net income, as reported                                                                                             |  | $                      | 337,490 |                      | $ | 529,641 |  
|Deduct: total stock-based employee compensation expense determined based on fair value method of awards, net of tax |  |                        |        |                      |   | (55,397 | )
|                                                                                                                    |  |                        |         |                      |   |         |  
|Pro forma net income                                                                                                |  | $                      | 337,490 |                      | $ | 474,244 |  
|                                                                                                                    |  |                        |         |                      |   |         |  
|Basic earnings per share:                                                                                           |  |                        |         |                      |   |         |  
|As reported                                                                                                         |  | $                      | 0.32    |                      | $ | 0.51    |  
|Pro forma                                                                                                           |  | $                      | 0.32    |                      | $ | 0.46    |  
|                                                                                                                    |  |                       
|Diluted earnings per share:                                                                                         |  |                        |         |                      |   |         |  
|As reported                                                                                                         |  | $                      | 0.30    |                      | $ | 0.46    |  
|Pro forma                                                                                                           |  | $                      | 0.30    |                      | $ | 0.42    |  
|                                                                                                                    |  |                       
|Assumptions                                                                                                         |  |                        |         |                      |   |         |  
|Risk-free interest rate                                                                                             |  |                        | n/a     |                      |   | 3.80    | %
|Dividend yield                                                                                                      |  |                        |        |                      |   |        |  
|Volatility factor                                                                                                   |  |                        | n/a     |                      |   | 10.00   | %
|Weighted average expected life (years)                                                                              |  |                        | n/a     |                      |   | 6.2     |  



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



|                                            |  |                                |           |                              |   |           |  |      |           |  |   |          
|------------------------------------------- |  | ------------------------------ | --------- | ---------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                            |  | (Unaudited) Three Months Ended |           | (Unaudited) Six Months Ended
|June 30,                                    |  | 2006                           |           | 2005                         |   | 2006      |  | 2005
|Basic earnings per common share:            |  |                                |           |                              |   |           |  |      |           |  |   |          
|Net income available to common stockholders |  | $                              | 358,489   |                              | $ | 337,490   |  | $    | 642,564   |  | $ | 529,641  
|Weighted average common shares outstanding  |  |                                | 1,082,568 |                              |   | 1,041,831 |  |      | 1,080,412 |  |   | 1,041,458
|                                            |  |                                |           |                              |   |           |  |      |           |  |   |          
|Basic earnings per common share             |  | $                              | 0.33      |                              | $ | 0.32      |  | $    | 0.59      |  | $ | 0.51     
|                                            |  |                                |           |                              |   |           |  |      |           |  |   |          
|Diluted earnings per common share:          |  |                                |           |                              |   |           |  |      |           |  |   |          
|Net income available to common stockholders |  | $                              | 358,489   |                              | $ | 337,490   |  | $    | 642,564   |  | $ | 529,641  
|Weighted average common shares outstanding  |  |                                | 1,082,568 |                              |   | 1,041,831 |  |      | 1,080,412 |  |   | 1,041,458
|Common share equivalents for stock options  |  |                                | 60,751    |                              |   | 99,741    |  |      | 60,751    |  |   | 99,741   
|                                            |  |                                |           |                              |   |           |  |      |           |  |   |          
|                                            |  |                                | 1,143,319 |                              |   | 1,141,572 |  |      | 1,141,163 |  |   | 1,141,199
|                                            |  |                                |           |                              |   |           |  |      |           |  |   |          
|Diluted earnings per common share           |  | $                              | 0.31      |                              | $ | 0.30      |  | $    | 0.56      |  | $ | 0.46     
|                                            |  |                                |           |                              |   |           |  |      |           |  |   |          



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 4 - |  | Accounting principles generally accepted in the United States of America usually require that recognized revenue, expenses, gains and losses be included in net income. Additionally, certain
changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of
comprehensive income.
|         | 
|Note 5 - |  | Certain reclassifications have been made to the prior year financial statements to conform to the 2006 presentation. These reclassifications had no effect on previously reported net
income.                                                                                                                                                                                                                                                                     





6



---

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

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



|A. | Results of Operations for the Three and Six Months Ended June 30, 2006 as Compared to the Three and Six Months Ended June 30, 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 $624,564 for the six-month period ended June 30, 2006. This compares with net income of $529,641 for the same period of 2005. Basic
earnings per share were $.59 for the six months ended June 30, 2006, compared to $.51 for the same six months of 2005. UFBC reported net income of $358,489 for the three-month period ended June 30, 2006. This compares with net income of
$337,490 for the same period of 2005. Basic earnings per share were $.33 for the three months ended June 30, 2006, compared to $.32 for the same three months of 2005.

Net Interest Income

For the six-month period ended June 30, 2006, net interest income increased $734,939, or 20.5%, from $3,580,719 at June 30, 2005 to $4,315,658 at June 30, 2006 (Consolidated Statements of Income and Comprehensive
Income). The increase was primarily attributable to an increased rate on earning assets. Average total earning assets increased $11,343,044, or 6.4%, from $177,735,588 at June 30, 2005 to $189,078,632 at June 30, 2006 (Consolidated
Average Balancestable). Contributing $1,440,498 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 $949,946 during the first six months of 2006 when compared to 2005. The increased volume of earning assets contributed $576,110 to
earnings when comparing the six-month periods ended June 30, 2006 and 2005. The combined effect of the rate and volume variances resulted in an increase of $1,526,055 in total interest income (or earning assets) from $5,038,857 at June 30,
2005 to $6,564,912 at June 30, 2006. The same factors impacted the variances for the three month periods ended June 30, 2006 and 2005. 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
$791,116, or 54.3%, from $1,458,138 at June 30, 2005 to $2,249,254 at June 30, 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 June 30, 2005 and 2006 periods. During the first six months of 2005, compared to the first six
months of 2006, total interest expense increased $148,254 due to volume, while rates increased total interest expense by $642,862. Average total interest-bearing liabilities increased $10,629,881, or 8.6%, from $123,319,287 at June 30, 2005 to
$133,949,168 at June 30, 2006 (Consolidated Average Balancestable). The same factors explain the variances for the three month periods ended June 30, 2006 and 2005.



7



---

UNITED FINANCIAL BANKING COMPANIES, INC.

CONSOLIDATED AVERAGE BALANCES/NET INTEREST ANALYSIS/

YIELDS AND RATES



|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|------------------------------------------ |  | ------------------------ | ----------- | - | ------------- | - | ---------- |  | ---- | ------------------ |  | - | ----------- | - | ---------- | - | --------- |  | ---- | -
|                                           |  | For the Six Months Ended |            
|                                           |  | June 30, 2006            |             |   | June 30, 2005 |  
|                                           |  | AverageBalance (1)       |             |   | Interest      |   | Yield/Rate |  |      | AverageBalance (1) |  |   | Interest    |   | Yield/Rate |  
|ASSETS                                     |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Earning assets:                            |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Loans:                                     |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Commercial                                 |  | $                        | 113,749,366 |   |               | $ | 4,196,558  |  | 7.44 | %                  |  | $ | 96,251,946  |   |            | $ | 3,125,321 |  | 6.55 | %
|Real estate construction                   |  |                          | 25,068,193  |   |               |   | 1,108,284  |  | 8.92 | %                  |  |   | 21,816,942  |   |            |   | 798,988   |  | 7.39 | %
|Real estate mortgage                       |  |                          | 7,359,258   |   |               |   | 276,870    |  | 7.59 | %                  |  |   | 7,075,656   |   |            |   | 240,792   |  | 6.86 | %
|Installment                                |  |                          | 7,629,295   |   |               |   | 273,179    |  | 7.22 | %                  |  |   | 7,855,170   |   |            |   | 249,295   |  | 6.40 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total loans                                |  |                          | 153,806,112 |   |               |   | 5,854,891  |  | 7.68 | %                  |  |   | 132,999,714 |   |            |   | 4,414,396 |  | 6.69 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits                  |  |                          | 180,834     |   |               |   | 2,661      |  | 2.97 | %                  |  |   | 8,624,856   |   |            |   | 111,949   |  | 2.62 | %
|Federal funds sold                         |  |                          | 7,065,806   |   |               |   | 155,353    |  | 4.43 | %                  |  |   | 15,178,934  |   |            |   | 203,428   |  | 2.70 | %
|Investment securities (2)                  |  |                          | 28,025,880  |   |               |   | 552,004    |  | 3.97 | %                  |  |   | 20,932,084  |   |            |   | 309,084   |  | 2.98 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total earning assets                       |  |                          | 189,078,632 |   |               | $ | 6,564,909  |  | 7.00 | %                  |  |   | 177,735,588 |   |            | $ | 5,038,857 |  | 5.72 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Noninterest-earning assets:                |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Cash and due from banks                    |  |                          | 5,257,732   |   |               |   |            |  |      |                    |  |   | 5,572,283   |   |            |   |           |  |      |  
|Other assets                               |  |                          | 4,707,481   |   |               |   |            |  |      |                    |  |   | 4,249,384   |   |            |   |           |  |      |  
|Allowance for loan losses                  |  |                          | (2,409,911  | ) |               |   |            |  |      |                    |  |   | (2,019,786  | ) |            |   |           |  |      |  
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total assets                               |  | $                        | 196,633,934 |   |               |   |            |  |      |                    |  | $ | 185,537,469 |   |            |   |           |  |      |  
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing liabilities:              |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Interest-bearing deposits:                 |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Savings and NOW accounts                   |  | $                        | 49,118,320  |   |               | $ | 689,225    |  | 2.83 | %                  |  | $ | 47,277,317  |   |            | $ | 426,297   |  | 1.82 | %
|Money market accounts                      |  |                          | 21,885,890  |   |               |   | 262,969    |  | 2.42 | %                  |  |   | 24,003,156  |   |            |   | 153,987   |  | 1.29 | %
|Time:                                      |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Under $100,000                             |  |                          | 25,680,869  |   |               |   | 515,431    |  | 4.05 | %                  |  |   | 21,096,856  |   |            |   | 311,352   |  | 2.98 | %
|$100,000 and over                          |  |                          | 29,391,880  |   |               |   | 558,804    |  | 3.83 | %                  |  |   | 22,109,528  |   |            |   | 325,283   |  | 2.97 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing deposits            |  |                          | 126,076,959 |   |               |   | 2,026,429  |  | 3.24 | %                  |  |   | 114,486,857 |   |            |   | 1,216,919 |  | 2.14 | %
|                                           |  |                          |             |   |               |  
|Short-term borrowings                      |  |                          | 1,206,534   |   |               |   | 26,391     |  | 4.41 | %                  |  |   | 999,945     |   |            |   | 17,941    |  | 3.62 | %
|Long-term debt                             |  |                          | 6,665,675   |   |               |   | 196,434    |  | 5.94 | %                  |  |   | 7,832,485   |   |            |   | 223,278   |  | 5.75 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total interest-bearing liabilities         |  |                          | 133,949,168 |   |               | $ | 2,249,254  |  | 3.39 | %                  |  |   | 123,319,287 |   |            | $ | 1,458,138 |  | 2.38 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Non interest-bearing liabilities:          |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Demand deposits                            |  |                          | 45,820,910  |   |               |   |            |  |      |                    |  |   | 47,709,519  |   |            |   |           |  |      |  
|Other liabilities                          |  |                          | 1,407,384   |   |               |   |            |  |      |                    |  |   | 851,142     |   |            |   |           |  |      |  
|Stockholders equity                       |  |                          | 15,456,472  |   |               |   |            |  |      |                    |  |   | 13,657,521  |   |            |   |           |  |      |  
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Total liabilities and stockholders equity |  | $                        | 196,633,934 |   |               |   |            |  |      |                    |  | $ | 185,537,469 |   |            |   |           |  |      |  
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest income                        |  |                          |             |   |               | $ | 4,315,655  |  |      |                    |  |   |             |   |            | $ | 3,580,719 |  |      |  
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest margin (3)                    |  |                          |             |   |               |   |            |  | 4.60 | %                  |  |   |             |   |            |   |           |  | 4.06 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Net interest spread (4)                    |  |                          |             |   |               |   |            |  | 3.62 | %                  |  |   |             |   |            |   |           |  | 3.33 | %
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  
|Fees included in loan income               |  |                          |             |   |               | $ | 222,041    |  |      |                    |  |   |             |   |            | $ | 181,777   |  |      |  
|                                           |  |                          |             |   |               |   |            |  |      |                    |  |   |             |   |            |   |           |  |      |  

---

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

|(2) | Yields on securities available-for-sale are calculated on the basis of the historical cost of such securities and do not give effect to
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

changes in the fair market value of such securities, which are reflected as a component of stockholders equity.

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

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



8



---

Primarily due to the increasing rate environment during the past year, the net interest margin increased
54 basis points from 4.06% at June 30, 2005 to 4.60% at June 30, 2006. During the first six months of 2006, the increasing rate environment most notably impacted the yield on total earning assets. The yield on total earning assets
increased 128 basis points from 5.72% at June 30, 2005 to 7.00% at June 30, 2006, while the expense on total interest-bearing liabilities increased 101 basis points from 2.38% June 30, 2005 to 3.39% at June 30, 2006. The
change in the Banks deposit mix contributed to the increased interest expense. As shown in the Consolidated Average Balances table, the growth of average certificate of deposits, or higher costing accounts, increased $11,866,365, or
27.5%, from June 30, 2005 to June 30, 2006.



|                                                                 |  |                           |           |        |                |   |         |  |   |          |  
|---------------------------------------------------------------- |  | ------------------------- | --------- | ------ | -------------- | - | ------- |  | - | -------- | -
|Analysis of the Changes in the Components of Net Interest Income | 
|                                                                 |  | 2006 Compared to 2005     |          
|For Six Months Ended June 30,                                    |  | Total Increase (Decrease) |           |        | Change Due To: |  
|                                                                 |  | Rate                      |           | Volume |               
|                                                                 |  |                          
|Interest income:                                                 |  |                           |           |        |                |   |         |  |   |          |  
|Loans:                                                           |  |                           |           |        |                |   |         |  |   |          |  
|Commercial                                                       |  | $                         | 1,071,240 |        |                | $ | 503,096 |  | $ | 568,145  |  
|Real estate - construction                                       |  |                           | 309,296   |        |                |   | 190,228 |  |   | 119,068  |  
|Real estate - mortgage                                           |  |                           | 36,078    |        |                |   | 26,427  |  |   | 9,651    |  
|Installment                                                      |  |                           | 23,884    |        |                |   | 31,052  |  |   | (7,168   | )
|                                                                 |  |                           |           |        |                |   |         |  |   |          |  
|Total loans                                                      |  |                           | 1,440,498 |        |                |   | 750,802 |  |   | 689,696  |  
|Interest-bearing deposits                                        |  |                           | (109,288  | )      |                |   | 314     |  |   | (109,602 | )
|Federal funds sold                                               |  |                           | (48,075   | )      |                |   | 60,657  |  |   | (108,732 | )
|Investment securities                                            |  |                           | 242,920   |        |                |   | 138,173 |  |   | 104,747  |  
|                                                                 |  |                           |           |        |                |   |         |  |   |          |  
|Total interest income                                            |  |                           | 1,526,055 |        |                |   | 949,946 |  |   | 576,110  |  
|                                                                 |  |                           |           |        |                |   |         |  |   |          |  
|Interest expense:                                                |  |                           |           |        |                |   |         |  |   |          |  
|Savings and NOW accounts                                         |  |                           | 262,928   |        |                |   | 246,328 |  |   | 16,600   |  
|Money markets accounts                                           |  |                           | 108,982   |        |                |   | 122,565 |  |   | (13,583  | )
|Time:                                                            |  |                           |           |        |                |   |         |  |   |          |  
|Under $100,000                                                   |  |                           | 204,079   |        |                |   | 136,427 |  |   | 67,652   |  
|$100,000 and over                                                |  |                           | 233,521   |        |                |   | 126,381 |  |   | 107,140  |  
|Short-term borrowings                                            |  |                           | 8,450     |        |                |   | 4,743   |  |   | 3,707    |  
|Long-term debt                                                   |  |                           | (26,844   | )      |                |   | 6,418   |  |   | (33,262  | )
|                                                                 |  |                           |           |        |                |   |         |  |   |          |  
|Total interest expense                                           |  |                           | 791,116   |        |                |   | 642,862 |  |   | 148,254  |  
|                                                                 |  |                           |           |        |                |   |         |  |   |          |  
|Net interest income                                              |  | $                         | 734,939   |        |                | $ | 307,084 |  | $ | 427,855  |  
|                                                                 |  |                           |           |        |                |   |         |  |   |          |  



9



---

Provision for Loan Losses

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

Provision for loan loss expense decreased
$24,531 from $199,924 for the six months ended June 30, 2005 to $175,393 for the six months ended June 30, 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 $46,724, or 11.4%, during the six months ended June 30, 2006 compared to the six months ended June 30, 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 $635,099, or 21.3%, during the six months ended June 30, 2006, compared to the six months ended June 30, 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, Virginia office. The adoption of SFAS No. 123R and the resulting stock compensation expense also contributed to the increase. Salaries and employee
benefits increased $386,315, or 22.0%, during the six months ended June 30, 2006, compared to the six months ended June 30, 2005. Also, primarily due to the opening of the Sterling, Virginia office, occupancy increased $59,721 during the
first six months of 2006, compared to the first six months of 2005. Stock compensation cost accounted for $76,408 of total noninterest expense during the first six months of 2006. The same factors explain the variances for the three month periods
ended June 30, 2006 and 2005.

Income Taxes

The provision for income taxes increased $58,172, or 21.3%, from $272,846 at June 30, 2005 to $331,018 at June 30, 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 six months ended June 30 was attributable to earnings.



10



---

|B. | Financial Condition as of June 30, 2006
|-- | ---------------------------------------

Assets

Total assets decreased $12,267,494, or 6.0%, during the first six 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 $28,025,880 for the six month period ended June 30, 2006, and $23,622,525 for the year ended December 31, 2005.

Loans

Loans, net of
unearned income, increased $1,085,001, or .7%, from $154,273,100 at December 31, 2005 to $155,358,101 at June 30, 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 fair value of the collateral, present value of future cash flows, or values that are observable in the secondary market
and the recorded 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 June 30, 2006 and December 31, 2005, the allowance for loan losses was $2,503,100 and $2,327,464, or 1.6% and 1.5%, respectively, of total
loans. Impaired and non-accrual loans, at June 30, 2006 and at December 31, 2005, totaled $35,888 and $-0-, respectively. There were no charge-offs during the six months ended June 30, 2006 and 2005. Recoveries totaled $525 during the
six months ended June 30, 2006 and $2,104 during same period of 2005.



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Premises and Equipment

Net premises and equipment decreased $36,452, or 2.1%, during the six months since December 31, 2005. The decrease was due to amortization and
depreciation.

Deferred Tax Asset

The deferred income tax asset primarily results from differences between bad debts deductible for income tax purposes and those reflected in the financial statements. Using factors such as the Companys
historical earnings performance, growth potential, the local and national economy and market competition, management determined that it was more likely than not that the Company will utilize the amounts available at June 30, 2006.

Deposits

During the first six months of 2006, management continued to focus on maintaining a deposit mix prominently consisting of core deposits. However, competitive factors have resulted in a decrease in core deposits which consist of demand,
savings, NOW and money market accounts, and are generally less costly, and more stable than certificates of deposits. Core deposits comprised 64.4% of total deposits at June 30, 2006 compared to 71.6% at December 31, 2005. The decrease in
deposits during the first six months of 2006 was due to fluctuations inherent in a deposit portfolio and the competitive market in northern Virginia.

Other Liabilities and Equity

Short-term borrowings consist of $1,000,000 of outstanding
advances from the Federal Home Loan Bank of Atlanta (FHLBA) and $742,325 from a financial institution. The FHLBA advances have been used to fund certain lending programs. The $742,325 was used to partially fund the purchase of the Reston branch.
$1,000,000 from the FHLBA matured during June 2006. The long-term debt became short-term borrowings as both of the outstanding amounts mature in June 2007. These two factors explain the variance between long-term debt and short-term borrowings.
Stockholders equity increased $742,241, or 4.9%, during the six months ended June 30, 2006, when compared to the year ended December 31, 2005. During the first six 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 capital notes, and reimbursements from allocated expenses will provide sufficient cash flow for UFBCs continuing operational
needs.

Consolidated average liquid assets were 17.9% of average total assets at June 30, 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.



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At June 30, 2006, the Banks investment portfolio consisted of the following:



|                           |  |                    |            |                  |   |          
|-------------------------- |  | ------------------ | ---------- | ---------------- | - | ---------
|                           |  | Available-for-Sale |            | Held-to-Maturity
|U.S. government agency     |  | $                  | 22,238,101 |                  | $ | 1,999,189
|U.S. Treasury              |  |                    | 980,113    |                  |   |         
|Mortgage-backed securities |  |                    | 359,168    |                  |   |         
|Municipal securities       |  |                    | 2,045,187  |                  |   | 297,992  
|Money market funds         |  |                    | 1,534      |                  |   |         
|Corporate debt securities  |  |                    | 425,097    |                  |   |         
|Equity                     |  |                    | 604,350    |                  |   |         
|                           |  |                    |            |                  |   |          
|Total                      |  | $                  | 26,653,550 |                  | $ | 2,297,181
|                           |  |                    |            |                  |   |          

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 $500,000,000 or more, it has public debt, or it engages in certain highly leveraged activities. At June 30, 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.



|                                         |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|---------------------------------------- |  | ---------- |  | ----- | ------------------------------------- |  | ---------- | ------------------------------- | ----- | - |  | ---------- |  | ----- | -
|                                         |  | Actual     |  |       | Required for CapitalAdequacy Purposes |  |            | Required To Be Well Capitalized |      
|                                         |  | Amount     |  | Ratio |                                       |  | Amount     |                                 | Ratio |   |  | Amount     |  | Ratio |  
|As of June 30, 2006:                     |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 22,012,009 |  | 14.19 | %                                     |  | 12,406,860 |                                 | 8.00  | % |  | 15,508,575 |  | N/A   |  
|The Business Bank                        |  | 19,403,804 |  | 12.68 | %                                     |  | 12,240,502 |                                 | 8.00  | % |  | 15,300,627 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 20,066,468 |  | 12.94 | %                                     |  | 6,203,430  |                                 | 4.00  | % |  | 9,305,145  |  | N/A   |  
|The Business Bank                        |  | 17,483,974 |  | 11.43 | %                                     |  | 6,120,251  |                                 | 4.00  | % |  | 9,180,376  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 20,066,468 |  | 10.14 | %                                     |  | 7,917,606  |                                 | 4.00  | % |  | 9,897,008  |  | N/A   |  
|The Business Bank                        |  | 17,483,974 |  | 8.97  | %                                     |  | 7,792,824  |                                 | 4.00  | % |  | 9,741,030  |  | 5.00  | %
|                                         |  |            |  |       |                                       | 
|As of June 30, 2005:                     |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Total capital (to risk-weighted assets)  |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 20,157,342 |  | 13.61 | %                                     |  | 11,847,991 |                                 | 8.00  | % |  | 14,809,989 |  | N/A   |  
|The Business Bank                        |  | 17,524,778 |  | 11.93 | %                                     |  | 11,750,374 |                                 | 8.00  | % |  | 14,687,967 |  | 10.00 | %
|Tier 1 capital (to risk-weighted assets) |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 17,736,532 |  | 11.98 | %                                     |  | 5,923,996  |                                 | 4.00  | % |  | 8,885,993  |  | N/A   |  
|The Business Bank                        |  | 15,684,607 |  | 10.68 | %                                     |  | 5,875,187  |                                 | 4.00  | % |  | 8,812,780  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |            |  |       |                                       |  |            |                                 |       |   |  |            |  |       |  
|Company                                  |  | 17,736,532 |  | 9.11  | %                                     |  | 7,791,326  |                                 | 4.00  | % |  | 9,739,158  |  | N/A   |  
|The Business Bank                        |  | 15,684,607 |  | 8.29  | %                                     |  | 7,571,492  |                                 | 4.00  | % |  | 9,464,365  |  | 5.00  | %



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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 six months ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

In the opinion of management, there were no legal matters pending as of June 30, 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.



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

At the United Financial Banking Companies, Inc. Annual Meeting of Shareholders held on May 19, 2006, the shareholders elected William J. McCormick, Jr., Manuel V.
Fernandez and Robert W. Pitts to serve as Class One directors until the 2009 Annual Meeting of Shareholders. The vote was as follows:



|                          |  |         |  |          |  |           
|------------------------- |  | ------- |  | -------- |  | ----------
|Nominee:                  |  | For     |  | Withheld |  | Votes Cast
|Class 1 Director          |  |         |  |          |  |           
|William J. McCormick, Jr. |  | 742,828 |  | 11       |  | 742,839   
|                          |  |         |  |          |  |           
|Manuel V. Fernandez       |  | 742,828 |  | 11       |  | 742,839   
|                          |  |         |  |          |  |           
|Robert W. Pitts           |  | 742,828 |  | 11       |  | 742,839   
|                          |  |         |  |          |  |           

Previously, Mr. Robert E. Carpenter, Sr., Mr. Harold C. Rauner and Mr. Charles S.
Evans were elected by Shareholders to serve as Class Two directors until the 2007 Annual Meeting of Shareholders. Mr. Dennis I. Meyer, Mr. John R. Motz and Mr. Jeffery T. Valcourt were elected by Shareholders to serve
as Class Three directors until the 2008 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 May 19, 2006, the shareholders also voted to Ratify the Appointment of Goodman & Company, as the independent auditors for 2006.



|                               |  |         |  |          |  |           
|------------------------------ |  | ------- |  | -------- |  | ----------
|Proposal:                      |  | For     |  | Withheld |  | Votes Cast
|Ratify Appointment of Auditors |  | 738,828 |  | 4,011    |  | 742,839   
|                               |  |         |  |          |  |           

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



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 21, 2006 |  | By:                                      |  | /s/ HAROLD C. RAUNER   
|                      |  |                                          |  | Harold C. Rauner       
|                      |  |                                          |  | President and CEO      
|                      |  |                                         
|Date: August 21, 2006 |  | By:                                      |  | /s/ LISA M. PORTER     
|                      |  |                                          |  | Lisa M. Porter         
|                      |  |                                          |  | Chief Financial Officer



16