SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1994
Commission File Number: 0-13322
United Bankshares, Inc.
-----------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0641179
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 United Center
500 Virginia Street, East
Charleston, West Virginia 25301
------------------------- -----
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number,
including Area Code: (304) 424-8761
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class-- Common Stock,$2.50 Par Value; 11,954,496 shares outstanding
as of July 31, 1994.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements
- - ------------------------------------------------------------------
Consolidated Balance Sheets (Unaudited)
June 30, 1994 and December 31, 1993 ........................6
Consolidated Statements of Income (Unaudited) for the
Three Months and Six Months Ended June 30, 1994 and 1993....7
Consolidated Statement of Changes in Shareholders'
Equity (Unaudited) for the Six Months Ended
June 30, 1994 ..............................................8
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 1994 and 1993 ............9
Notes to Consolidated Financial Statements ................10
Information required by Item 303 of Regulation S-K..............16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings...........................Not Applicable
- - -------------------------
Item 2. Changes in Securities.......................Not Applicable
- - -----------------------------
Item 3. Defaults Upon Senior Securities ............Not Applicable
- - ---------------------------------------
2
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS--Continued
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held on May 16,
1994.
(b) Not applicable because: i) proxies for the meeting were
solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934; ii) there was no solicitation in
opposition to the nominees as listed in the proxy
statement; iii) all of such nominees were elected.
- - ------------------------------------------------------------------
Item 5. Other Information .........................Not Applicable
- - ------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- - ------------------------------------------------------------------
(a) Exhibits required by Item 601 of
Regulation S-K ...........................Not Applicable
(b) Reports on Form 8-K ......................Not Applicable
(c) Exhibit 11 - Computation of Earnings Per Share.......27
3
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 BANKSHARES, INC.
-----------------------
(Registrant)
Date August 12, 1994 /s/ Richard M. Adams
------------------- ---------------------------
Richard M. Adams, Chairman of
the Board and Chief Executive
Officer
Date August 12, 1994 /s/ Steven E. Wilson
------------------- ---------------------------
Steven E. Wilson, Executive
Vice President, Treasurer and
Chief Financial Officer
4
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
The June 30, 1994 and December 31, 1993, consolidated balance sheets of United
Bankshares, Inc. and Subsidiaries, and the related consolidated statements of
income for the three months and six months ended June 30, 1994 and 1993, and the
related consolidated statement of changes in shareholders' equity for the six
months ended June 30, 1994, and the related condensed consolidated statements of
cash flows for the six months ended June 30, 1994 and 1993, and the notes to
consolidated financial statements appear on the following pages.
5
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
June 30 December 31
1994 1993
-------------- --------------
ASSETS
Cash and due from banks $ 76,394,000 $ 60,750,000
Federal funds sold 2,375,000
Interest-bearing deposits with other banks 100,000 100,000
-------------- --------------
Total cash and cash equivalents 78,869,000 60,850,000
Securities available for sale (at market) 142,528,000
Investment securities (market value--$243,532,000 at
June 30, 1994, and $438,223,000 at December 31, 1993) 248,678,000 430,427,000
Loans
Commercial, financial, and agricultural 199,437,000 218,559,000
Real Estate:
Single family residential 489,241,000 442,855,000
Commercial 287,474,000 267,936,000
Construction 15,981,000 12,687,000
Other 15,290,000 15,331,000
Installment 231,630,000 229,847,000
-------------- --------------
1,239,053,000 1,187,215,000
Less: Unearned income (5,845,000) (6,428,000)
Allowance for loan losses (19,424,000) (19,015,000)
-------------- --------------
Net loans 1,213,784,000 1,161,772,000
Bank premises and equipment 31,883,000 31,113,000
Interest receivable 10,266,000 10,542,000
Other assets 24,032,000 25,480,000
-------------- --------------
TOTAL ASSETS $1,750,040,000 $1,720,184,000
============== ==============
LIABILITIES
Domestic deposits
Noninterest-bearing $ 242,260,000 $ 229,131,000
Interest-bearing 1,199,007,000 1,201,398,000
-------------- --------------
TOTAL DEPOSITS 1,441,267,000 1,430,529,000
Short-term borrowings
Federal funds purchased 2,284,000 5,339,000
Securities sold under agreements to repurchase 68,266,000 67,271,000
Federal Home Loan Bank borrowings 48,123,000 32,203,000
Accrued expenses and other liabilities 13,058,000 13,870,000
-------------- --------------
TOTAL LIABILITIES 1,572,998,000 1,549,212,000
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value;
Authorized--20,000,000 shares; issued and outstanding--
11,954,496 at June 30, 1994, and at December 31, 1993,
including 11,420 and 27,720 shares in treasury at June 30, 1994,
and at December 31, 1993, respectively 29,886,000 29,886,000
Surplus 32,525,000 32,616,000
Retained earnings 115,129,000 109,020,000
Net unrealized loss on securities available for sale (271,000)
Treasury stock (227,000) (550,000)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 177,042,000 170,972,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,750,040,000 $1,720,184,000
============== ==============
See notes to consolidated financial statements.
6
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
INTEREST INCOME
Interest and fees on loans $23,885,000 $22,278,000 $46,635,000 $45,093,000
Interest on federal funds sold 52,000 311,000 117,000 610,000
Interest and dividends on securities:
Taxable 4,690,000 5,003,000 9,485,000 9,671,000
Exempt from federal taxes 874,000 1,050,000 1,766,000 2,253,000
Other interest income 29,000 25,000 60,000 56,000
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 29,530,000 28,667,000 58,063,000 57,683,000
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 9,420,000 10,281,000 18,852,000 20,825,000
Interest on short-term borrowings 555,000 512,000 1,070,000 1,056,000
Interest on long-term borrowings 561,000 440,000 998,000 868,000
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 10,536,000 11,233,000 20,920,000 22,749,000
----------- ----------- ----------- -----------
NET INTEREST INCOME 18,994,000 17,434,000 37,143,000 34,934,000
PROVISION FOR POSSIBLE LOAN LOSSES 468,000 922,000 918,000 3,042,000
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 18,526,000 16,512,000 36,225,000 31,892,000
----------- ----------- ----------- -----------
OTHER INCOME
Trust department income 712,000 755,000 1,535,000 1,438,000
Other charges, commissions, and fees 2,083,000 2,445,000 4,157,000 4,346,000
Other income 134,000 109,000 350,000 365,000
Investment securities gains 45,000 332,000 152,000 474,000
----------- ----------- ----------- -----------
TOTAL OTHER INCOME 2,974,000 3,641,000 6,194,000 6,623,000
----------- ----------- ----------- -----------
OTHER EXPENSES
Salaries and employee benefits 5,527,000 5,529,000 11,118,000 11,270,000
Net occupancy expense 1,230,000 1,149,000 2,338,000 2,299,000
Other expense 5,131,000 5,380,000 10,099,000 11,188,000
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSES 11,888,000 12,058,000 23,555,000 24,757,000
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 9,612,000 8,095,000 18,864,000 13,758,000
INCOME TAXES 3,402,000 2,512,000 6,560,000 4,277,000
----------- ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 6,210,000 5,583,000 12,304,000 9,481,000
CUMULATIVE EFFECT AS OF JANUARY 1, 1993 OF CHANGE
IN METHOD OF ACCOUNTING FOR INCOME TAXES 1,329,000
----------- ----------- ----------- -----------
NET INCOME $6,210,000 $5,583,000 $12,304,000 $10,810,000
=========== =========== =========== ===========
Earnings per common share:
Income before cumulative effect of accounting change $0.52 $0.47 $1.03 $0.80
Cumulative effect of accounting change $0.11
Net income $0.52 $0.47 $1.03 $0.91
Average outstanding shares 11,941,533 11,921,598 11,935,703 11,922,800
See notes to consolidated financial statements.
7
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Six Months Ended June 30, 1994
----------------------------------------------------------------------------------------------------
Common Stock Net Unrealized
----------------------- Gain/(Loss) on Total
Par Retained Securities Available Treasury Shareholders'
Shares Value Surplus Earnings for Sale Stock Equity
---------- ----------- ----------- ------------ ------------------- --------- -------------
Balance at January 1, 1994 11,954,496 $29,886,000 $32,616,000 $109,020,000 $ 0 ($550,000) $170,972,000
Change in method of
accounting for securities 1,284,000 1,284,000
Net income 12,304,000 12,304,000
Cash dividends ($.52 per
share) (6,195,000) (6,195,000)
Net change in unrealized
gain/(loss) on securities
available for sale (1,555,000) (1,555,000)
Common stock options
exercised (91,000) 323,000 232,000
---------- ----------- ----------- ------------ ------------------- --------- -------------
Balance at June 30, 1994 11,954,496 $29,886,000 $32,525,000 $115,129,000 ($271,000) ($227,000) $177,042,000
========== =========== =========== ============ =================== ========= =============
See notes to consolidated financial statements
8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Six Months Ended
June 30
----------------------------
1994 1993
------------ -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 15,926,000 $ 17,944,000
INVESTING ACTIVITIES
Proceeds from sales of securities 10,444,000 19,749,000
Proceeds from maturities and calls of securities 70,600,000 95,347,000
Purchase of securities (42,565,000) (176,283,000)
Net purchase of bank premises and equipment (2,091,000) (713,000)
Changes in:
Loans (52,930,000) (3,287,000)
------------ -------------
NET CASH (USED) BY INVESTING ACTIVITIES (16,542,000) (65,187,000)
------------ -------------
FINANCING ACTIVITIES
Cash dividends paid (6,195,000) (5,253,000)
Net issuance (acquisition) of treasury stock 232,000 (243,000)
Issuance of common stock 120,000
Proceeds from long-term borrowings 15,920,000 11,896,000
Changes in:
Deposits 10,738,000 1,583,000
Federal funds purchased and securities
sold under agreements to repurchase (2,060,000) (3,697,000)
------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,635,000 4,406,000
------------ -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,019,000 (42,837,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 60,850,000 129,473,000
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 78,869,000 $ 86,636,000
============ =============
See notes to consolidated financial statements.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
1. GENERAL
The accompanying unaudited consolidated interim financial statements of United
Bankshares, Inc. and Subsidiaries ("United") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, the financial information does not contain all of the information
and footnotes required by generally accepted accounting principles. The
financial statements presented in this report have not been audited. The
accounting and reporting policies followed in the presentation of these
financial statements are consistent with those applied in the preparation of the
1993 annual report of United Bankshares, Inc. on Form 10-K. In the opinion of
management, adjustments necessary for a fair presentation of financial position
and results of operations for the interim periods have been made. Such
adjustments are of a normal and recurring nature.
Effective January 1, 1994, United adopted the Financial Accounting Standards
Board, ("FASB"), Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," (SFAS No. 115") which was effective for fiscal years
beginning after December 15, 1993. Under the new rules, debt securities that
United has both the positive intent and ability to hold to maturity are carried
at amortized cost. Debt securities that United does not have the positive
intent and ability to hold to maturity and all marketable equity securities are
classified as available-for-sale and carried at fair value. Unrealized holding
gains and losses on securities classified as available-for-sale are carried as a
separate component of shareholders' equity. In accordance with SFAS No. 115,
prior period financial statements have not been restated for the change in
accounting principle. At June 30, 1994, the cumulative unrealized net loss on
available-for-sale securities resulted in a decrease of $271,000 to
shareholders' equity.
The Financial Accounting Standards Board has issued SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan." The requirements of SFAS No. 114 are
effective for fiscal years beginning after December 15, 1994. SFAS No. 114
requires that impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or fair value of the
collateral if the loan is collateral dependent. United has not yet completed
the complex analysis required to estimate the impact of these new rules and does
not expect to implement the new rules prior to the first quarter 1995 effective
date.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
2. BASIS OF PRESENTATION
The accompanying consolidated interim financial statements include the accounts
of United and its wholly-owned subsidiaries, UBC Holding Company, Inc. and its
wholly-owned subsidiary, United National Bank ("UNB"), United National Bank-
South ("UNB-S"), UBF Holding Company, Inc. and its wholly-owned subsidiary, Bank
First, N.A., and United Venture Fund, Inc. ("UVF"). All significant
intercompany accounts and transactions have been eliminated.
Certain amounts in the prior year's financial statements have been reclassified
to conform with the 1994 presentation. The reclassifications had no effect on
net income.
3. SECURITIES
The following is a summary of the amortized cost of investment securities
held to maturity at June 30, 1994, and all securities at December 31, 1993:
June 30 December 31
1994 1993
------------- -----------
(in thousands)
United States Treasury securities
and obligations of other United
States Government agencies and
corporations $ 81,273 $220,805
Obligations of state and political
subdivisions 53,566 55,209
Mortgage-backed securities 105,707 131,322
Marketable equity securities 2,182
Other 8,132 20,909
-------- --------
$248,678 $430,427
======== ========
The book and market value of securities available-for-sale at June 30, 1994 are
as follows:
Book Market
Value Value
-------- --------
(in thousands)
Under 1 year $ 71,723 $ 72,031
1-5 years 61,919 61,378
6-10 years 1,040 1,044
Over 10 years 8,263 8,075
-------- --------
Total $142,945 $142,528
======== ========
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
3. SECURITIES (continued)
The following is a summary of the amortized cost, unrealized gains and losses
and market value of securities available for sale at June 30, 1994:
June 30
1994
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ---------- ---------- ------------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $132,879,000 $464,000 $1,269,000 $132,074,000
State and political
subdivisions
Mortgage-backed
securities
Marketable equity
securities 1,536,000 381,000 1,917,000
Other 8,530,000 7,000 8,537,000
------------ -------- ---------- ------------
Total $142,945,000 $852,000 $1,269,000 $142,528,000
============ ======== ========== ============
4. NONPERFORMING LOANS
Nonperforming loans were as follows:
June 30 December 31
1994 1993
------- -----------
(in thousands)
Loans past due 90 days or more
and still accruing interest $ 1,679 $ 2,476
Troubled debt restructurings 2,513 2,453
Nonaccrual loans 7,077 8,588
------- -------
$11,269 $13,517
======= =======
For purposes of the above disclosure, the following definition has
been established by management:
Troubled Debt Restructurings--Loans for which original terms
have been modified in response to financial difficulties of
the borrower. Each of these loans is contractually current
based on the revised terms and management expects each to
return to accruing status in 1994.
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The adequacy of the allowance for possible loan losses is based on management's
evaluation of the relative risks inherent in the loan portfolio. A progression
of the allowance for possible loan losses for the periods presented is
summarized as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
(In thousands)
1994 1993 1994 1993
------- ------- ------- -------
Balance at beginning of
period $19,286 $17,879 $19,015 $15,952
Provision charged to
expense 468 922 918 3,042
------- ------- ------- -------
19,754 18,801 19,933 18,994
Loans charged-off (506) (785) (854) (1,182)
Less recoveries 176 299 345 503
------- ------- ------- -------
Net Charge-offs (330) (486) (509) (679)
------- ------- ------- -------
Balance at end of
period $19,424 $18,315 $19,424 $18,315
======= ======= ======= =======
6. COMMITMENTS AND CONTINGENT LIABILITIES
There are outstanding commitments which include, among other things,
commitments to extend credit and letters of credit undertaken in the normal
course of business. Outstanding standby letters of credit amounted to
approximately $20,197,000 and $21,030,000 at June 30, 1994, and December
31, 1993, respectively.
United and its subsidiaries are currently involved, in the normal course of
business, in various legal proceedings. Management is vigorously pursuing
all of its legal and factual defenses and, after consultation with legal
counsel, believes that all such litigation will be resolved without
material effect on financial position or results of operations.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
7. EARNING ASSETS AND INTEREST-BEARING LIABILITIES
The following table shows the daily average balance of major categories of
assets and liabilities for each of the three month periods ended June 30,
1994, and June 30, 1993, with the interest rate earned or paid on such
amount.
Three Months Ended Three Months Ended
June 30 June 30
1994 1993
------------------------------- -------------------------------
(Dollars in Average Avg. Average Avg.
Thousands) Balance Interest Rate Balance Interest Rate
---------- -------- ----- ---------- -------- -----
ASSETS
Earning assets:
Federal funds sold and securities
purchased under agreements to
resell and other short-term
investments $ 5,982 $ 52 3.49% $ 42,309 $ 311 2.95%
Investment Securities:
Taxable 348,041 4,719 5.42% 362,210 5,028 5.55%
Tax-exempt (1) 52,391 1,345 10.27% 61,004 1,615 10.59%
---------- -------- ----- ---------- -------- -----
Total Securities 400,432 6,064 6.06% 423,214 6,643 6.28%
Loans, net of unearned
income (1) (2) 1,216,428 24,178 7.97% 1,106,555 22,735 8.24%
Allowance for possible loan
losses (19,343) (18,241)
---------- ----------
Net loans 1,197,085 8.10% 1,088,314 8.38%
---------- -------- ----- ---------- -------- -----
Total earning assets 1,603,499 $30,293 7.57% 1,553,837 $29,689 7.66%
-------- ----- -------- -----
Other assets 137,599 127,907
---------- ----------
TOTAL ASSETS $1,741,098 $1,681,744
========== ==========
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits $1,199,917 $ 9,420 3.15% $1,187,232 $10,281 3.47%
Federal funds purchased,
repurchase agreements and
other short-term borrowings 76,244 562 2.96% 73,990 487 2.64%
FHLB advances 43,439 554 5.12% 29,870 465 6.24%
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing Funds 1,319,600 10,536 3.20% 1,291,092 11,233 3.49%
-------- --------
Demand deposits 228,243 209,888
Accrued expenses and other
liabilities 15,592 15,052
---------- ----------
TOTAL LIABILITIES 1,563,435 1,516,032
Shareholders' Equity 177,663 165,712
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,741,098 $1,681,744
========== ==========
NET INTEREST INCOME $19,757 $18,456
======== ========
INTEREST SPREAD 4.37% 4.17%
NET INTEREST MARGIN 4.94% 4.76%
(1) The interest income and the yields on nontaxable loans and
investment securities are presented on a tax-equivalent basis
using the statutory federal income tax rate of 35%.
(2) Nonaccruing loans are included in the daily average loan amounts
outstanding.
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
7. EARNING ASSETS AND INTEREST-BEARING LIABILITIES
The following table shows the daily average balance of major categories of
assets and liabilities for each of the six month periods ended June 30,
1994, and June 30, 1993, with the interest rate earned or paid on such
amount.
Six Months Ended Six Months Ended
June 30 June 30
1994 1993
------------------------------- -------------------------------
(Dollars in Average Avg. Average Avg.
Thousands) Balance Interest Rate Balance Interest Rate
---------- -------- ----- ---------- -------- -----
ASSETS
Earning assets:
Federal funds sold and securities
purchased under agreements to
resell and other short-term
investments $ 6,788 $ 117 3.48% $ 41,611 $ 610 2.96%
Investment Securities:
Taxable 354,663 9,545 5.38% 344,827 9,727 5.64%
Tax-exempt (1) 52,646 2,716 10.32% 62,672 3,466 11.06%
---------- -------- ----- ---------- -------- -----
Total Securities 407,309 12,261 6.02% 407,499 13,193 6.48%
Loans, net of unearned
income (1) (2) 1,204,504 47,231 7.91% 1,116,917 45,855 8.28%
Allowance for possible loan
losses (19,256) (17,323)
---------- ----------
Net loans 1,185,248 8.04% 1,099,594 8.41%
---------- -------- ----- ---------- -------- -----
Total earning assets 1,599,345 $59,609 7.50% 1,548,704 $59,658 7.75%
-------- ----- -------- -----
Other assets 136,683 125,824
---------- ----------
TOTAL ASSETS $1,736,028 $1,674,528
========== ==========
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits $1,200,287 $18,852 3.17% $1,183,464 $20,825 3.55%
Federal funds purchased,
repurchase agreements and
other short-term borrowings 77,019 1,084 2.84% 73,557 1,056 2.90%
FHLB advances 39,786 984 4.99% 28,963 868 6.04%
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing Funds 1,317,092 20,920 3.20% 1,285,984 22,749 3.57%
-------- --------
Demand deposits 227,392 207,994
Accrued expenses and other
liabilities 15,447 15,394
---------- ----------
TOTAL LIABILITIES 1,559,931 1,509,372
Shareholders' Equity 176,097 165,156
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,736,028 $1,674,528
========== ==========
NET INTEREST INCOME $38,689 $36,909
======== ========
INTEREST SPREAD 4.30% 4.19%
NET INTEREST MARGIN 4.87% 4.79%
(1) The interest income and the yields on nontaxable loans and
investment securities are presented on a tax-equivalent basis
using the statutory federal income tax rate of 35%.
(2) Nonaccruing loans are included in the daily average loan amounts
outstanding.
15
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
United Bankshares, Inc. ("United") is a multi-bank holding company. United's
wholly-owned banking subsidiaries include UBC Holding Company, Inc. and its
wholly-owned subsidiary, United National Bank ("UNB"), United National
Bank-South ("UNB-S") and UBF Holding Company, Inc. with its wholly-owned banking
subsidiary, Bank First, N.A.("Bank First"). United also owns all of the stock
of United Venture Fund, Inc. ("UVF"). UVF is a West Virginia Capital Company
formed to make loans and equity investments in qualified companies under the
West Virginia Capital Company Act and to promote economic welfare and
development in the State of West Virginia.
United is a registered bank holding company subject to the supervision of and
examination by the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended. Its present business is the operation of its wholly-owned
subsidiaries.
The following discussion and analysis presents the significant changes in
financial condition and the results of operations of United and its subsidiaries
for the periods indicated below. This discussion and analysis should be read in
conjunction with the unaudited financial statements and accompanying notes
thereto which are included elsewhere in this document. All references to United
in this discussion and analysis are considered to refer to United and its
wholly-owned subsidiaries, unless otherwise indicated.
EARNINGS SUMMARY
Net income for the second quarter of 1994 was a record $6.21 million or $.52 per
share compared to $5.58 million or $.47 per share for the second quarter of
1993. This represents a 11.23% increase in net income and a 10.64% increase in
earnings per share. Net income per share for the first half of 1994 was $1.03,
or a 13.19% increase over $.91 for the first six months of 1993. Net income for
the first half of 1994 was a record $12.3 million, which is a 13.82% increase
over the $10.8 million earned in the same period of 1993. United's annualized
return on average assets of 1.42% and return on average shareholders' equity of
14.09% both compare very favorably with regional and national peer groups.
16
United has strong core earnings with a net interest margin of 4.87% for the
first six months of 1994. Net interest income increased 6.32% and remained
strong and showed improvement for the first half of 1994 as compared to the same
period for 1993 while the provision for possible loan losses decreased in the
first half of 1994 when compared to the first half of 1993. However, it was
comparable to the provision made for the last half of 1993. Noninterest income
decreased 18.32% and 6.48% for the second quarter and first half of 1994,
respectively, when compared to the second quarter and first six months of 1993.
This overall decrease in noninterest income is primarily attributed to a
significant decrease in gains on security transactions and a decrease in fee
income from decreased activity in customer accounts for which a fee is charged.
However, noninterest income, excluding security gains, was only down 11.48% for
the quarter and 1.74% for the first six months of 1994 when compared to the same
periods of 1993. Noninterest expenses decreased 1.41% for the second quarter
and 4.86% for the first half of 1994, as management's cost containment efforts
have been successful in controlling noninterest expenses. Income taxes were
higher for the second quarter and first half of 1994 than for the same periods
of 1993, with effective tax rates of 35.4% and 34.8% for the second quarter and
first half of 1994, respectively, as compared to 31.0% for both the second
quarter and first six months of 1993.
The following discussion explains in more detail the results of operations and
changes in financial condition by major category.
NET INTEREST INCOME
Net interest income strengthened and improved in the second quarter and first
six months of 1994, when compared to the same periods of 1993. Net interest
income before the provision for possible loan losses increased $1,560,000 or
8.95% and $2,209,000 or 6.32% for the second quarter and first six months of
1994 as compared to the second quarter and first six months of 1993,
respectively. The increase is largely due to the strong loan growth lead by
mortgage loans and the decline in the cost of funds. United's tax-equivalent net
interest margin rose from 4.76% in the second quarter of 1993 to 4.94% in the
second quarter of 1994. Additionally, there was an increase from the first half
of 1993 in which the margin improved from 4.79% to 4.87% in the same period of
1994. Additionally, the tax-equivalent net interest margin showed an
improvement over that achieved for the year ended December 31, 1993 of 4.75%.
The combination of an improved net interest spread with increased loan volumes
and smaller increases in interest-bearing deposits as compared to the year ended
December 31, 1993, and the first half of 1993 have helped United maintain a
strong interest margin.
17
PROVISION FOR POSSIBLE LOAN LOSSES
In order to maintain a balance in the allowance for possible loan losses which
is sufficient to absorb potential loan losses, a charge to expense is made.
This charge is known as the provision for possible loan losses. For the
quarters ended June 30, 1994 and 1993, the provision for possible loan losses
was $468,000 and $922,000, respectively, while the first six months total
provisions were $918,000 for 1994 as compared to $3,042,000 for 1993. The
allowance for possible loan losses as a percentage of loans, net of unearned
income, held at 1.6% at June 30, 1994, as compared to December 31, 1993, and
June 30, 1993. In addition, the "coverage ratio" of both nonperforming loans
and nonperforming assets improved. (See the discussion below.)
United's continued improvement in credit quality is evidenced by the low level
of charge-offs in the second quarter of 1994. Net charge-offs during the second
quarter of 1994 and 1993 were $330,000 and $486,000, respectively. Net
charge-offs during the first six months of 1994 and 1993 were $509,000 and
$679,000, respectively. Note 5 to the accompanying unaudited consolidated
financial statements provides a progression of the allowance for possible loan
losses. Loans, net of unearned income, increased $31,969,000 during the second
quarter of 1994 and have increased $52,421,000 since year end 1993. Even with
strong loan growth in the first six months of 1994, management only slightly
increased the allowance for loan losses primarily due to: (i) the continued
improvement of credit quality; (ii) the increased coverage ratio of both
nonperforming loans and nonperforming assets; and (iii) the building of the
allowance as a percentage of loans closer to national peer group levels.
Nonperforming loans and troubled debt restructurings were $11,269,000 at June
30, 1994 and $13,517,000 at year-end 1993. Nonperforming loans and troubled
debt restructurings, as a percentage of loans, net of unearned income, declined
from 1.14% to 0.91% when comparing these two respective periods. The
components of nonperforming loans include nonaccrual loans and loans which are
contractually past due 90 days or more as to interest or principal, but have not
been put on a nonaccrual basis. Loans past due 90 days or more decreased
$797,000 or 32.19% during the first six months of 1994; while troubled debt
restructurings decreased $60,000 or 2.45% since year-end 1993. Additionally,
nonaccrual loans decreased $1,511,000 or 17.59% and other real estate owned
decreased by over $300,000, which resulted in an overall decrease in
nonperforming assets.
As of June 30, 1994, the ratio of the allowance for loan losses to nonperforming
loans rose to 172.4% as compared to 140.7% as of December 31, 1993.
Accordingly, management believes that the allowance for loan losses of
$19,424,000 as of June 30, 1994, is adequate to provide for potential losses on
existing loans based on information currently available.
18
United evaluates the adequacy of the allowance for possible loan losses on a
quarterly basis. The provision for loan losses charged to operations is based
on management's evaluation of individual credits, the past loan loss experience,
and other factors which, in management's judgment, deserve recognition in
estimating possible loan losses. Such other factors considered by management,
among other things, include growth and composition of the loan portfolio, known
deterioration in certain classes of loans or collateral, trends in
delinquencies, and current economic conditions. United's loan administration
policies are focused upon the risk characteristics of the loan portfolio, both
in terms of loan approval and credit quality.
OTHER INCOME
Other income consists of all revenues which are not included in interest and fee
income related to earning assets. Total other income, including gains on
securities transactions, was $2,974,000 in the second quarter of 1994, or an
18.3% decrease as compared to $3,641,000 in the second quarter of 1993. Total
other income, including gains on securities transactions, for the first six
months of 1994 was $6,194,000 as compared to $6,623,000 for the first six months
of 1993 which represents a 6.5% decrease. This overall decrease in noninterest
income is primarily attributed to a decrease of $322,000 or 67.9% in gains on
security transactions and a decrease of $189,000 or 4.4% in fee income from
decreased activity in customer accounts for which a fee is charged.
Management's emphasis on improving noninterest income continues.
As evidenced by the Unaudited Condensed Consolidated Statement of Cash Flows
included elsewhere herein, the volume of securities sold was insignificant in
both periods. The $152,000 of gains on sales reported in the six month period
ended June 30, 1994 relates almost entirely to marketable equity securities
which were reclassified to available-for-sale at January 1, 1994.
OTHER EXPENSES
Other expenses include all items of expense other than interest expense, the
provision for possible loan losses, and income taxes. Even with the added
expenses of a purchase accounting acquisition included in the first six months
of 1994 but not in the first half of 1993, total other expenses decreased.
Other expenses decreased $170,000 or 1.41% to $11,888,000 for the second quarter
of 1994 as compared to $12,058,000 for the second quarter of 1993. Other
expenses were $23,555,000 for the first six months of 1994, this is a 4.86%
decrease from the $24,757,000 recorded for the first six months of 1993. These
decreases for the second quarter and first six months of 1994 resulted from a
combination of management's cost control efforts and certain nonrecurring
expenses being incurred in the first six months of 1993, but not in the first
six months of 1994.
19
Total salaries and benefits were unchanged for the second quarter and decreased
$152,000 or 1.35% for the first half of 1994 when compared to the same periods
of 1993. In addition, net occupancy expense increased $81,000 or 7.05% when
compared to the second quarter of 1993, and $39,000 or 1.70% as compared to the
first six months of 1993.
Other expenses decreased $249,000 or 4.63% for the second quarter and $1,089,000
or 9.73% for the first half of 1994 as compared to the same periods of 1993.
The decrease in other expenses relates primarily to nonrecurring expenses which
included certain merger expenses for the two acquisitions consummated by United
during 1993. A lower provision to the other real estate owned reserve was also
a factor contributing to the decrease in other expenses when comparing the
second quarter and the first half of 1994 to the same periods of 1993.
Various bank affiliates provide certain health care and life insurance benefits
for retired employees. The cost of retiree health care and life insurance
benefits is recognized as expense when paid. The Company does not anticipate
providing post-retirement benefits to its currently active employees after
retirement except on a fully contributory basis. Accordingly, post-retirement
benefits are immaterial with annual costs which approximate $50,000.
The Financial Accounting Standards Board has issued Statement No. 112, (SFAS No.
112), "Employers' Accounting for Postemployment Benefits," which is effective
for fiscal years beginning after December 15, 1993. The provisions of SFAS No.
112 require employers to recognize the obligation to provide postemployment
benefits to former employees if the obligation is attributable to the employees'
services previously rendered, the employees' rights to those benefits vest or
accumulate, the payment of the benefit is probable, and the amount can be
reasonably estimated. United recognizes the cost of postemployment benefits as
expense when paid. United's analysis indicates that accounting for such costs
when paid does not produce results materially different from the method of
recognizing such costs as prescribed by SFAS No. 112.
INCOME TAXES
Income tax expense for the three months ended June 30, 1994 and 1993 was
$3,402,000 and $2,512,000, respectively. Income tax expense for the first half
of 1994 was $6,560,000 as compared to $4,277,000 for 1993. These increases of
35.43% for the quarter and 53.38% for the first half are the result of increased
pre-tax income, decreased tax-exempt income and increased statutory federal tax
rates. United's effective tax rate was significantly higher at 35.4% for the
second quarter of 1994 when compared to 31.03% for the second quarter of 1993.
The effective tax rate for the first six months of 1994 was 34.78% as compared
to 31.09% for the first six months of 1993.
20
INTEREST RATE SENSITIVITY
Interest sensitive assets and liabilities are defined as those assets or
liabilities that mature or are repriced within a designated timeframe. The
principal function of asset and liability management is to maintain an
appropriate relationship between those assets and liabilities that are sensitive
to changing market interest rates. This relationship has become very important,
given the volatility in interest rates over the last several years, due to the
potential impact on earnings. United closely monitors the sensitivity of its
assets and liabilities on an on-going basis and projects the effect of various
interest rate changes on its net interest margin.
The difference between rate sensitive assets and rate sensitive liabilities for
specified periods of time is known as the "gap".
A primary objective of Asset/Liability Management is controlling interest rate
risk. At United, interest rate risk is managed to minimize the impact of
fluctuating interest rates on earnings. As shown in the interest rate
sensitivity gap table on pages 22 and 23 of this report, United was liability
sensitive (excess of liabilities over assets) in the one year horizon. United,
however, has not experienced the kind of earnings volatility indicated from the
cumulative gap. This is because a significant portion of United's retail
deposit base does not reprice on a contractual basis. Management has estimated,
based upon historical analyses, that savings deposits are less sensitive to
interest rate changes than are other forms of deposits. The GAP table presented
herein has been adapted to show the estimated differences in interest rate
sensitivity which result when the retail deposit base is assumed to reprice in a
manner consistent with historical trends. (See Management Adjustments in the
GAP table.) Using these estimates, United was asset sensitive in the one year
horizon in the amount of $105,288,000 or a 6.47% ratio of the cumulative gap to
related earning assets. The primary method of measuring the sensitivity of
earnings to changing market interest rates is to simulate expected cash flows
using varying assumed interest rates while also adjusting the timing and
magnitude of non-contractual deposit repricing to more accurately reflect
anticipated pricing behavior.
These simulations include adjustments for the lag in prime loan repricing and
the spread and volume elasticity of interest-bearing deposit accounts, regular
savings and money market deposit accounts. To aid in interest rate management,
United's lead bank, UNB, is a member of the Federal Home Loan Bank of Pittsburgh
(FHLB). The use of FHLB advances provides United with a low cost means to match
maturities of earning assets and interest-bearing funds to achieve a desired
interest rate spread over the life of the earning assets.
21
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Interest Rate Sensitivity Gap
(In Thousands)
June 30, 1994
-----------------------------------------------------------------------------------
Days
--------------------------------- Total 1-5 Over 5
0-90 91-180 181-365 One Year Years Years Total
--------- --------- --------- ---------- --------- --------- ----------
ASSETS
Interest-Earning Assets:
- - ------------------------
Federal funds sold and securities
purchased under agreements to
resell and other short-term
investments $ 2,375 $ 100 $ 2,475 $ 2,475
Investment and Marketable
Equity Securities:
Taxable 19,470 $ 32,323 49,222 101,015 $ 157,753 $ 78,872 337,640
Tax-exempt 2,635 1,755 4,489 8,879 25,156 19,531 53,566
Loans, net of unearned
income 503,675 70,900 136,595 711,170 377,926 144,112 1,233,208
--------- --------- --------- ---------- --------- --------- ----------
Total Interest-Earning Assets $ 528,155 $ 104,978 $ 190,406 $ 823,539 $ 560,835 $ 242,515 $1,626,889
========= ========= ========= ========== ========= ========= ==========
LIABILITIES
Interest-Bearing Funds:
- - -----------------------
Savings and NOW accounts $ 679,355 $ 679,355 $ 679,355
Time deposits of $100,000 & over 28,320 $ 13,914 $ 12,736 54,970 $ 17,049 72,019
Other time deposits 139,364 101,594 79,411 320,369 126,258 $ 1,006 447,633
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 70,392 70,392 70,392
FHLB advances 32,980 72 15,071 48,123 48,123
--------- --------- --------- ---------- --------- --------- ----------
Total Interest-Bearing Funds $ 950,411 $ 115,580 $ 107,218 $1,173,209 $ 143,307 $ 1,006 $1,317,522
========= ========= ========= ========== ========= ========= ==========
Interest Sensitivity Gap ($422,256) ($ 10,602) $ 83,188 ($ 349,670) $ 417,528 $ 241,509 $ 309,367
========= ========= ========= ========== ========= ========= ==========
Cumulative Gap ($422,256) ($432,858) ($349,670) ($ 349,670) $ 67,858 $ 309,367 $ 309,367
========= ========= ========= ========== ========= ========= ==========
Cumulative Gap as a Percentage
of Total Earning Assets -25.95% -26.61% -21.49% -21.49% 4.17% 19.02% 19.02%
Management Adjustments 631,198 (42,080) (84,160) 504,958 (504,958) 0
Off-Balance Sheet Activities (50,000) (50,000) (50,000)
--------- --------- --------- ---------- --------- --------- ----------
Cumulative Management Adjusted
Gap and Off-Balance Sheet Activities $ 158,942 $ 106,260 $ 105,288 $ 105,288 $ 17,858 $ 259,367 $ 259,367
========= ========= ========= ========== ========= ========= ==========
Cumulative Management Adjusted Gap
and Off-Balance Sheet Activities as a
Percentage of Earning Assets 9.77% 6.53% 6.47% 6.47% 1.10% 15.94% 15.94%
22
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Interest Rate Sensitivity Gap
(In Thousands)
December 31, 1993
-----------------------------------------------------------------------------------
Days
--------------------------------- Total 1-5 Over 5
0-90 91-180 181-365 One Year Years Years Total
--------- --------- --------- ---------- --------- --------- ----------
ASSETS
Interest-Earning Assets:
- - ------------------------
Federal funds sold and securities
purchased under agreements to
resell and other short-term
investments $ 100 $ 100 $ 100
Investment and Marketable
Equity Securities:
Taxable 64,573 $ 30,302 $ 51,343 146,218 $ 190,354 $ 38,548 375,120
Tax-exempt 3,514 2,083 4,469 10,066 27,987 17,155 55,208
Loans, net of unearned
income 493,448 82,423 132,494 708,365 362,188 101,680 1,172,233
--------- --------- --------- ---------- --------- --------- ----------
Total Interest-Earning Assets $ 561,635 $ 114,808 $ 188,306 $ 864,749 $ 580,529 $ 157,383 $1,602,661
========= ========= ========= ========== ========= ========= ==========
LIABILITIES
Interest-Bearing Funds:
- - -----------------------
Savings and NOW accounts $ 670,000 $ 670,000 $ 670,000
Time deposits of $100,000 & over 31,493 $ 19,795 $ 17,062 68,350 $ 4,610 72,960
Other time deposits 142,942 112,131 95,957 351,030 106,805 $ 603 458,438
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 72,610 72,610 72,610
FHLB advances 11,900 80 5,152 17,132 15,071 32,203
--------- --------- --------- ---------- --------- --------- ----------
Total Interest-Bearing Funds $ 928,945 $ 132,006 $ 118,171 $1,179,122 $ 126,486 $ 603 $1,306,211
========= ========= ========= ========== ========= ========= ==========
Interest Sensitivity Gap ($367,310) ($ 17,198) $ 70,135 ($ 314,373) $ 454,043 $ 156,780 $ 296,450
========= ========= ========= ========== ========= ========= ==========
Cumulative Gap ($367,310) ($384,508) ($314,373) ($ 314,373) $ 139,670 $ 296,450 $ 296,450
========= ========= ========= ========== ========= ========= ==========
Cumulative Gap as a Percentage
of Total Earning Assets -22.92% -23.99% -19.62% -19.62% 8.71% 18.50% 18.50%
Management Adjustments 616,828 (41,121) (82,244) 493,463 (493,463) 0
Off-Balance Sheet Activities
--------- --------- --------- ---------- --------- --------- ----------
Cumulative Management Adjusted
Gap and Off-Balance Sheet Activities $ 249,518 $ 191,199 $ 179,090 $ 179,090 $ 139,670 $ 296,450 $ 296,450
========= ========= ========= ========== ========= ========= ==========
Cumulative Management Adjusted Gap
and Off-Balance Sheet Activities as a
Percentage of Earning Assets 15.57% 11.93% 11.17% 11.17% 8.71% 18.50% 18.50%
23
Additionally, United has begun using certain off-balance-sheet instruments known
as interest rate swaps, to further aid in interest rate risk management. The
use of interest rate swaps is a cost effective means of synthetically altering
the repricing structure of balance sheet items. At June 30, 1994, the total
notional amount of interest rate swaps in effect was $50 million. The current
maturity of the swap portfolio is two years and seven months. During the second
quarter of 1994, interest rate swaps contributed $58,000 to net interest income,
and $159,000 for the first six months of 1994. United did not have interest
rate swaps during 1993.
LIQUIDITY AND CAPITAL RESOURCES
United maintains, in the opinion of management, liquidity which is sufficient to
satisfy its depositors' requirements and the credit needs of its customers.
Like all banks, United depends upon its ability to renew maturing deposits and
other liabilities on a daily basis and to acquire new funds in a variety of
markets. A significant source of funds available to United are "core
deposits." Core deposits include certain demand deposits, statement and
special savings and NOW accounts. These deposits are relatively stable and
they are the lowest cost source of funds available to United. Short-term
borrowings have also been a significant source of funds. These include
federal funds purchased and securities sold under agreements to repurchase.
Repurchase agreements represent funds which are obtained as the result of a
competitive bidding process.
Liquid assets are cash and those items readily convertible to cash. All banks
must maintain sufficient balances of cash and near-cash items to meet the
day-to-day demands of customers. Other than cash and due from banks, the
available-for-sale securities portfolio and maturing loans and investments are
the primary sources of liquidity.
The goal of liquidity management is to ensure the ability to access funding
which enables United to efficiently satisfy the cash flow requirements of
depositors and borrowers and meet United's cash needs. Liquidity is managed by
monitoring funds availability from a number of primary sources. Substantial
funding is available from cash and cash equivalents, unused short-term
borrowings and a geographically dispersed network of subsidiary banks providing
access to a diversified and substantial retail deposit market.
Short-term needs can be met through a wide array of sources such as
correspondent and downstream correspondent federal funds and utilization of
Federal Home Loan Bank advances.
24
Other sources of liquidity available to United to provide long-term as well as
short-term funding alternatives, in addition to FHLB advances, are long-term
certificates of deposit, lines of credit, and borrowings secured by bank
premises or stock of United's subsidiaries. United has no intention at this
time to utilize any long-term funding sources other than FHLB advances and
long-term certificate of deposits.
For the six months ended June 30, 1994, United generated $15,926,000 of cash
from operations, which is indicative of solid earnings performance. During the
same period, net cash of $16,542,000 was used by investing activities which was
primarily due to increased lending activity. Additional sources of cash
and cash equivalents during the first six months were provided by financing
activities totaling $18,635,000, which were largely comprised of increases in
FHLB advances and deposits. The net effect of this activity is an increase in
cash and cash equivalents of $18,019,000 for the first six months of 1994.
United anticipates no difficulty in meeting its ability to service its
obligations over the next 12 months and has no material commitments for capital
expenditures. There are no known trends, demands, commitments, or events that
will result in or that are reasonably likely to result in United's liquidity
increasing or decreasing in any material way. United also has significant lines
of credit available to it.
The asset and liability committee monitors liquidity to ascertain that a strong
liquidity position is maintained. In addition, variable rate loans are a
priority. These policies should help to protect net interest income against
fluctuations in interest rates. No changes are anticipated in the policies of
United's asset and liability committee.
Total shareholders' equity increased to $177,042,000 which is an increase of
3.55% from December 31, 1993. United's equity to assets ratio was 10.12% at June
30, 1994 and 9.94% at December 31, 1993. Capital and reserves to total assets
increased from 11.04% at December 31, 1993, to 11.23% at June 30, 1994.
The second quarter dividend was $.26 per common share and dividends totaled $.52
per common share for the six month period ended June 30, 1994. These represent
an increase of 13.04% over both the second quarter and the first six months of
1993. Total cash dividends paid were $3,100,000 for the second quarter and
$6,196,000 for the first six months of 1994, an increase of 22.10% and 22.04%
over the comparable periods in 1993.
25
United's risk-based capital ratios of 15.73% at June 30, 1994, and 15.28% at
December 31, 1993, are both considerably in excess of the current requirement of
8.00%. Total risk-based capital at June 30, 1994 and December 31, 1993 of
$179,953,000 and $172,648,000, respectively, exceeded the regulatory minimum
requirement by $88,446,000 and $82,240,000, respectively. United's Tier I
capital ratios are comparable to its total risk-based capital ratios and are
well above regulatory minimum requirements.
As a bank holding company, United is permitted by Regulation Y of the Federal
Reserve Board, under certain circumstances, to purchase up to 10% of its common
stock as treasury stock without obtaining prior approval of the Federal Reserve
Board. Total treasury shares as of June 30, 1994, amounted to 11,420 shares at
a cost of $227,000. It is management's intention to purchase treasury stock
whenever it is beneficial to United based on such factors as cash dividends,
timing and stock availability.
26