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, 1995
Commission File Number: 0-13322
United Bankshares, Inc.
-----------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0641179
------------- ----------
(State or other jurisdictio (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; 11,954,453 shares outstanding as of July
31, 1995.
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, 1995 and December 31, 1994 .........................6
Consolidated Statements of Income (Unaudited) for the
Three Months and Six Months Ended June 30, 1995 and 1994 ....7
Consolidated Statement of Changes in Shareholders'
Equity (Unaudited) for the Six Months Ended
June 30, 1995 ...............................................8
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 1995 and 1994 .............9
Notes to Consolidated Financial Statements .................10
Information required by Item 303 of Regulation S-K
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................19
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
Page
----
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held on April 24,
1995.
(b) Not applicable because: i) proxies for the meeting were
solicited pursuant to Regulation 14 under the Securities
and 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
Exhibit 11 - Computation of Earnings Per Share.......29
(b) Reports on Form 8-K - On July 21, 1995, United Bankshares, Inc.
Board of Directors approved a plan to purchase up to a total of
$15 million of the company's common stock on the open market. The
timing, price, and quantity of any such purchases under the plan
will be at the discretion of the company and the plan may be
discontinued, suspended or restarted at any time. All prior plans
have been discontinued.
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 14, 1995 /s/ Richard M. Adams
--------------------- ---------------------------
Richard M. Adams, Chairman of
the Board and Chief Executive
Officer
Date August 14, 1995 /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, 1995 and December 31, 1994, 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, 1995 and 1994, and the
related consolidated statement of changes in shareholders' equity for the six
months ended June 30, 1995, and the related condensed consolidated statements of
cash flows for the six months ended June 30, 1995 and 1994, 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
1995 1994
-------------- ---------------
ASSETS
Cash and due from banks $ 78,725,000 $ 82,763,000
-------------- --------------
Total cash and cash equivalents 78 725,000 82,763,000
-------------- --------------
Securities available for sale(at market) 101,023,000 118,037,000
Investment securities(market value-$231,046,000
at June 30, 1995 and $231,461,000 at
December 31, 1994) 230,297,000 242,846,000
Loans
Commercial, financial, and agricultural 215,425,000 208,491,000
Real estate:
Single family residential 539,464,000 527,434,000
Commercial 302,036,000 300,679,000
Construction 14,088,000 16,919,000
Other 14,378,000 14,706,000
Installment 234,104,000 233,866,000
-------------- --------------
1,319,495,000 1,302,095,000
Less: Unearned income (4,508,000) (5,018,000)
Allowance for loan losses (20,079,000) (20,008,000)
-------------- --------------
Net loans 1,294,908,000 1,277,069,000
-------------- --------------
Bank premises and equipment 30,170,000 30,769,000
Interest receivable 11,353,000 10,943,000
Other assets 23,730,000 25,214,000
-------------- --------------
TOTAL ASSETS $1,770,206,000 $1,787,641,000
============== ==============
LIABILITIES
Domestic deposits
Noninterest-bearing $ 227,776,000 $ 244,591,000
Interest-bearing 1,208,557,000 1,190,261,000
-------------- --------------
TOTAL DEPOSITS 1,436,333,000 1,434,852,000
Short-term borrowings
Federal funds purchased 19,718,000 4,582,000
Securities sold under agreements
to repurchase 73,209,000 67,227,000
Federal Home Loan Bank borrowings 33,900,000 83,972,000
Accrued expenses and other liabilities 19,504,000 17,262,000
-------------- --------------
TOTAL LIABILITIES 1,582,664,000 1,607,895,000
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value;
Authorized-20,000,000 shares; issued and
outstanding-11,954,453 at June 30, 1995 and
December 31, 1994, including 146,020 and
137,520 shares in treasury at June 30, 1995
and December 31, 1994, respectively 29,886,000 29,886,000
Surplus 32,176,000 32,331,000
Retained earnings 128,408,000 121,318,000
Net unrealized holding gain (loss) on
securities available for sale 613,000 (443,000)
Treasury stock (3,541,000) (3,346,000)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 187,542,000 179,746,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,770,206,000 $1,787,641,000
============== ==============
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
------------------------------- ---------------------------------
1995 1994 1995 1994
-------------- -------------- ----------- -----------
INTEREST INCOME
Interest and fees on loans $ 28,539,000 $ 23,885,000 $56,211,000 $46,635,000
Interest on federal funds sold 120,000 52,000 357,000 117,000
Interest and dividends on securities:
Taxable 4,445,000 4,690,000 9,040,000 9,485,000
Exempt from federal taxes 779,000 874,000 1,616,000 1,766,000
Other interest income 28,000 29,000 54,000 60,000
-------------- -------------- ----------- -----------
TOTAL INTEREST INCOME 33,911,000 29,530,000 67,278,000 58,063,000
-------------- -------------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 12,174,000 9,420,000 23,297,000 18,852,000
Interest on short-term borrowings 1,005,000 555,000 1,853,000 1,070,000
Interest on long-term borrowings 556,000 561,000 1,526,000 998,000
-------------- -------------- ----------- -----------
TOTAL INTEREST EXPENSE 13,735,000 10,536,000 26,676,000 20,920,000
-------------- -------------- ----------- -----------
NET INTEREST INCOME 20,176,000 18,994,000 40,602,000 37,143,000
PROVISION FOR POSSIBLE LOAN LOSSES 475,000 468,000 925,000 918,000
-------------- -------------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 19,701,000 18,526,000 39,677,000 36,225,000
-------------- -------------- ----------- -----------
OTHER INCOME
Trust department income 794,000 712,000 1,573,000 1,535,000
Other charges, commissions, and fees 2,287,000 2,083,000 4,484,000 4,157,000
Other income 134,000 134,000 297,000 350,000
Investment securities gains 45,000 152,000
-------------- -------------- ----------- -----------
TOTAL OTHER INCOME 3,215,000 2,974,000 6,354,000 6,194,000
-------------- -------------- ----------- -----------
OTHER EXPENSES
Salaries and employee benefits 5,532,000 5,527,000 11,122,000 11,118,000
Net occupancy expense 1,280,000 1,230,000 2,470,000 2,338,000
Other expense 5,330,000 5,131,000 11,186,000 10,099,000
-------------- -------------- ----------- -----------
TOTAL OTHER EXPENSES 12,142,000 11,888,000 24,778,000 23,555,000
-------------- -------------- ----------- -----------
INCOME BEFORE INCOME TAXES 10,774,000 9,612,000 21,253,000 18,864,000
INCOME TAXES 3,732,000 3,402,000 7,314,000 6,560,000
-------------- -------------- ----------- -----------
NET INCOME $ 7,042,000 $ 6,210,000 $13,939,000 $12,304,000
============== ============== =========== ===========
Earnings per common share $0.59 $0.52 $1.17 $1.03
Dividends per share $0.29 $0.26 $0.58 $0.52
Average outstanding shares 11,805,713 11,941,533 11,807,375 11,935,703
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, 1995
----------------------------------------------------------------------------------------------
Net
Unrealized
Common Stock Gain on
----------------------- Securities Total
Par Retained Available Treasury Shareholders'
Shares Value Surplus Earnings for Sale Stock Equity
---------- ----------- ----------- ------------- ----------- ------------ --------------
Balance at
January 1, 1995 11,954,453 $29,886,000 $32,331,000 $121,318,000 ($443,000) ($3,346,000) $179,746,000
Net Income 13,939,000 13,939,000
Cash dividends
($.58 per share) (6,849,000) (6,849,000)
Net change in
unrealized gain/
(loss) on securities
available for sale 1,056,000 1,056,000
Purchase of treasury
stock (573,000) (573,000)
Common stock options
exercised (155,000) 378,000 223,000
---------- ----------- ----------- ------------ ---------- ----------- ------------
Balance at
June 30, 1995 11,954,453 $29,886,000 $32,176,000 $128,408,000 $ 613,000 ($3,541,000) $187,542,000
========== =========== =========== ============ ========== =========== =============
See notes to consolidated financial statements
8
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Six Months Ended
June 30
---------------------------
1995 1994
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 15,893,000 $ 15,926,000
INVESTING ACTIVITIES
Proceeds from maturities and calls of
investment securities 12,292,000 50,038,000
Purchase of investment securities (40,977,000)
Proceeds from sales of securities
available for sale 10,444,000
Proceeds from maturities and calls of
securities available for sale 28,648,000
Purchases of securities available for sale (9,011,000) (1,588,000)
Net purchase of bank premises and equipment (633,000) (2,091,000)
Changes in:
Loans (16,555,000) (52,930,000)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 14,741,000 (16,542,000)
------------ ------------
FINANCING ACTIVITIES
Cash dividends paid (6,849,000) (6,195,000)
Acquisition of treasury stock (573,000)
Proceeds from exercise of stock options 223,000 232,000
Repayment of long-term borrowings (50,072,000)
Proceeds from long-term borrowings 15,920,000
Changes in:
Deposits 1,481,000 10,738,000
Federal funds purchased and securities
sold under agreements to repurchase 21,118,000 (2,060,000)
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (34,672,000) 18,635,000
------------ ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,038,000) 18,019,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 82,763,000 60,850,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 78,725,000 $ 78,869,000
============ ============
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
1994 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, 1995, United adopted Financial Accounting Standards Board
Statement No. 114, "Accounting by Creditors for Impairment of a Loan, "(SFAS No.
114)" which was amended by Statement No. 118 and is effective for fiscal years
beginning after December 15, 1994. Under the new standard, the 1995 allowance
for credit losses related to loans that are identified for evaluation in
accordance with SFAS No. 114 is based on discounted cash flows using the loan's
initial effective interest rate or the fair value of the collateral for certain
collateral dependent loans. Prior to 1995, the allowance for credit losses
related to these loans was not based on discounted cash flows or the fair value
of the collateral for collateral dependent loans. The adoption of SFAS No. 114
did not have a material impact on the allowance for loan losses.
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.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
3. SECURITIES AVAILABLE FOR SALE
The book and estimated fair value of securities available for sale at June 30,
1995, by contractual maturity are as follows:
Estimated
Book Fair
Value Value
------------ ------------
Due in one year or less $ 51,062,000 $ 51,093,000
Due after one year through five years 37,545,000 38,088,000
Due after five years through ten years 870,000 872,000
Due after ten years 8,320,000 8,106,000
Marketable equity securities 2,283,000 2,864,000
------------ ------------
Total $100,080,000 $101,023,000
============ ============
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
June 30, 1995
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ---------- ---------- -------------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 88,467,000 $ 677,000 $105,000 $ 89,039,000
Marketable equity
securities 2,283,000 637,000 56,000 2,864,000
Other 9,330,000 3,000 213,000 9,120,000
------------ ---------- -------- ------------
Total $100,080,000 $1,317,000 $374,000 $101,023,000
============ ========== ======== ============
At June 30, 1995, the cumulative net increase in the unrealized gains on
securities available for sale increased shareholders' equity by $613,000.
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
3. SECURITIES AVAILABLE FOR SALE - continued
The book and estimated fair value of securities available for sale at December
31, 1994, by contractual maturity are as follows:
Estimated
Book Fair
Value Value
------------ ------------
Due in one year or less $ 57,934,000 $ 57,655,000
Due after one year through five years 45,408,000 44,991,000
Due after five years through ten years 1,040,000 1,043,000
Due after ten years 12,808,000 12,551,000
Marketable equity securities 1,529,000 1,797,000
------------ ------------
Total $118,719,000 $118,037,000
============ ============
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
December 31, 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 $103,292,000 $127,000 $ 774,000 $102,645,000
Marketable equity 1,797,000
securities 1,529,000 293,000 25,000
Other 13,898,000 2,000 305,000 13,595,000
------------ -------- ---------- ------------
Total $118,719,000 $422,000 $1,104,000 $118,037,000
============ ======== ========== ============
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
4. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities are
summarized as follows:
June 30 1995
----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ----------- ----------- ------------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 83,769,000 $ 975,000 $ 865,000 $ 83,879,000
State and political
subdivisions 48,364,000 1,852,000 70,000 50,146,000
Mortgage-backed
securities 91,181,000 276,000 1,438,000 90,019,000
Other 6,983,000 21,000 2,000 7,002,000
------------ ---------- ----------- ------------
Total $230,297,000 $3,124,000 $ 2,375,000 $231,046,000
============ ========== =========== ============
December 31, 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 $ 84,843,000 $ 66,000 $ 3,438,000 $ 81,471,000
State and political
subdivisions 53,297,000 971,000 1,076,000 53,192,000
Mortgage-backed
securities 97,644,000 7,805,000 89,839,000
Other 7,062,000 103,000 6,959,000
------------ ---------- ----------- ------------
Total $242,846,000 $1,037,000 $12,422,000 $231,461,000
============ ========== =========== ============
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
4. INVESTMENT SECURITIES - continued
The amortized cost and estimated fair value of debt securities at June 30, 1995,
and December 31, 1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because the issuers may have
the right to call or prepay obligations with or without call or prepayment
penalties. Maturities of the mortgage-backed securities are based upon the
estimated average life.
June 30, 1995
--------------------------
Estimated
Book Fair
Value Value
------------ ------------
Due in one year or less $ 30,652,000 $ 30,664,000
Due after one year through
five years 115,582,000 116,381,000
Due after five years
through ten years 34,658,000 34,911,000
Due after ten years 49,405,000 49,090,000
------------ ------------
Total $230,297,000 $231,046,000
============ ============
The table above includes $91,181,000 of mortgage-backed securities with an
estimated market value of $90,019,000.
December 31, 1994
----------------------------
Estimated
Book Fair
Value Value
------------- -------------
Due in one year or less $ 11,317,000 $ 11,406,000
Due after one year through
five years 140,685,000 136,281,000
Due after five years
through ten years 36,565,000 33,994,000
Due after ten years 54,279,000 49,780,000
------------ ------------
Total $242,846,000 $231,461,000
============ ============
The table above includes $97,644,000 of mortgage-backed securities with an
estimated market value of $89,839,000.
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
5. NONPERFORMING LOANS
Nonperforming loans are summarized as follows:
June 30 December 31
1995 1994
------- -----------
(in thousands)
Loans past due 90 days or more
and still accruing interest $3,559 $2,303
Troubled debt restructurings - -
Nonaccrual loans 4,627 3,733
------ ------
$8,186 $6,036
====== ======
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. There were no troubled
debt restructured loans at June 30, 1995 or December 31, 1994.
6. 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
-------------------- ----------------
1995 1994 1995 1994
------- ------- ------- -------
(in thousands)
Balance at beginning of
period $20,157 $19,286 $20,008 $19,015
Provision charged to expense 475 468 925 918
------- ------- ------- -------
20,632 19,754 20,933 19,933
Loans charged-off (721) (506) (1,160) (854)
Less recoveries 168 176 306 345
------- ------- ------- -------
Net Charge-offs (553) (330) (854) (509)
------- ------- ------- -------
Balance at end of period $20,079 $19,424 $20,079 $19,424
======= ======= ======= =======
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Effective January 1, 1995, United adopted Financial Accounting Standards Board
Statement No. 114, "Accounting by Creditors for Impairment of a Loan, "(SFAS No.
114). As a result of applying the new rules prescribed by SFAS No. 114, certain
loans are being reported at the present value of expected future cash flows
using the loan's effective interest rate, or as a practical expedient, at the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. At the time of adoption of SFAS No. 114, United had
approximately $8,000,000 of loans which were considered impaired in accordance
with the guidelines prescribed by SFAS No. 114. Under SFAS No. 114, a loan is
considered impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due (contractual
interest and principal) according to the contractual terms of the loan
agreement. The adoption of SFAS No. 114 did not have a material impact on the
allowance for loan losses.
At June 30, 1995, the recorded investment in loans that are considered to be
impaired under SFAS No. 114 was $9,647,000 (of which $4,563,000 were on a
nonaccrual basis). Included in this amount is $5,612,000 of impaired loans for
which the related allowance for credit losses is $2,472,000 and $4,035,000 of
impaired loans that do not have an allowance for credit losses due to
management's estimate that the fair value of the underlying collateral of these
loans is sufficient for full repayment of the loan and interest. The average
recorded investment in impaired loans during the quarter ended June 30, 1995 was
approximately $9,061,000. For the six months ended June 30, 1995, United
recognized interest income on those impaired loans of approximately $318,000,
substantially all of which was recognized using the accrual method of income
recognition.
7. 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
$14,887,000 and $15,022,000 at June 30, 1995 and December 31, 1994,
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.
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
8. 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,
1995, and June 30, 1994, with the interest rate earned or paid on such
amount.
Three Months Ended Three Months Ended
June 30 June 30
1995 1994
------------------------------ ------------------------------
(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 $ 7,951 $ 120 6.10% $ 5,982 $ 52 3.49%
Investment securities:
Taxable 289,242 4,453 6.16% 348,041 4,719 5.42%
Tax-exempt (1) 49,173 1,228 9.99% 52,391 1,345 10.27%
---------- ------- ---- ---------- -------- -----
Total securities 338,415 5,681 6.72% 400,432 6,064 6.06%
---------- ------- ---- ---------- -------- -----
Loans, net of unearned
income (1) (2) 1,311,070 28,857 8.83% 1,216,428 24,178 7.97%
Allowance for possible loan
losses (20,215) (19,343)
---------- ----------
Net loans 1,290,855 8.97% 1,197,085 8.10%
---------- ------- ---- ---------- ------- -----
Total earning assets 1,637,221 $34,658 8.49% 1,603,499 $30,293 7.57%
---------- ---- ---------- -----
Other assets 133,727 137,599
---------- ----------
TOTAL ASSETS $1,770,948 $1,741,098
========== ==========
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits $1,224,812 $12,174 3.99% $1,199,917 $ 9,420 3.15%
Federal funds purchased,
repurchase agreements and
other short-term borrowings 85,152 1,009 4.75% 76,244 562 2.96%
FHLB advances 34,120 552 6.49% 43,439 554 5.12%
---------- ------- ---- ---------- -------- -----
Total interest-bearing funds 1,344,084 13,735 4.10% 1,319,600 10,536 3.20%
------- ---- -------- -----
Demand deposits 218,495 228,243
Accrued expenses and other
liabilities 21,392 15,592
---------- ----------
TOTAL LIABILITIES 1,583,971 1,563,435
Shareholders' equity 186,977 177,663
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,770,948 $1,741,098
========== ==========
NET INTEREST INCOME $20,923 $19,757
======= ========
INTEREST SPREAD 4.39% 4.37%
NET INTEREST MARGIN 5.12% 4.94%
(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.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
8. 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,
1995, and June 30, 1994, with the interest rate earned or paid on such
amount.
Six Months Ended Six Months Ended
June 30 June 30
1995 1994
----------------------------- -------------------------------
(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 $ 11,664 $ 358 6.19% $ 6,788 $ 117 3.48%
Investment securities:
Taxable 295,925 9,074 6.13% 354,663 9,545 5.38%
Tax-exempt (1) 50,669 2,517 9.93% 52,646 2,716 10.32%
---------- ------- ---- ---------- -------- -----
Total securities 346,594 11,591 6.69% 407,309 12,261 6.02%
---------- ------- ---- ---------- -------- -----
Loans, net of unearned
income (1) (2) 1,303,351 56,823 8.79% 1,204,504 47,231 7.91%
Allowance for possible loan
losses (20,182) (19,256)
---------- ----------
Net loans 1,283,169 8.93% 1,185,248 8.04%
---------- ------- ---- ---------- -------- -----
Total earning assets 1,641,427 $68,772 8.44% 1,599,345 $59,609 7.50%
------- ---- -------- -----
Other assets 134,825 136,683
---------- ----------
TOTAL ASSETS $1,776,252 $1,736,028
========== ==========
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits $1,220,019 $23,297 3.85% $1,200,287 $18,852 3.17%
Federal funds purchased,
repurchase agreements and
other short-term borrowings 80,671 1,863 4.66% 77,019 1,084 2.84%
FHLB advances 48,306 1,516 6.33% 39,786 984 4.99%
---------- ------- ---- ---------- -------- -----
Total interest-bearing funds 1,348,996 26,676 3.99% 1,317,092 20,920 3.20%
------- ---- -------- -----
Demand deposits 221,690 227,392
Accrued expenses and other
liabilities 20,586 15,447
---------- ----------
TOTAL LIABILITIES 1,591,272 1,559,931
Shareholders' equity 184,980 176,097
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,776,252 $1,736,028
========== ==========
NET INTEREST INCOME $42,096 $38,689
======= ========
INTEREST SPREAD 4.45% 4.30%
NET INTEREST MARGIN 5.16% 4.87%
(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.
18
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 1995 was a record $7.04 million or $.59 per
share compared to $6.21 million or $.52 per share for the second quarter of
1994. This represents a 13.37% increase in net income and a 13.46% increase in
earnings per share. Net income per share for the first half of 1995 was $1.17,
or a 13.59% increase over $1.03 for the first six months of 1994. Net income for
the first half of 1995 was a record $13.94 million, which is a 13.33% increase
over the $12.30 million earned in the same period of 1994. United's annualized
return on average assets of 1.57% and return on average shareholders' equity of
15.20% are both near the top of its regional and national peer groups.
19
United has strong core earnings driven by a net interest margin of 5.16% for the
first six months of 1995. Net interest income increased 9.31% and remained
strong and showed improvement for the first six months of 1995 as compared to
the same period for 1994. The provision for possible loan losses increased only
slightly when comparing the first six months of 1995 to the first six months of
1994 due to continued excellent asset quality and low charge-offs. Noninterest
income increased 8.10% and 2.58% for the second quarter and first half of 1995,
respectively, when compared to the same periods of 1994. This overall increase
in noninterest income is primarily attributed to an increase in trust
commissions and other charges. Noninterest expenses increased 2.14% and 5.19%
for the second quarter and first half of 1995, respectively. This increase was
due to merger and reengineering expenses. Management's cost containment efforts
have continued to be successful in controlling core noninterest expenses.
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 1995, when compared to the same period of 1994. The net interest
margin is the key factor in United's profitability momentum. Net interest
income before the provision for possible loan losses increased $1,182,000 or
6.22% and $3,459,000 or 9.31% for the second quarter and first six months of
1995 as compared to the second quarter and first six months of 1994,
respectively. The increase is largely due to the repricing of variable rate
loans at higher interest rates. United's tax-equivalent net interest margin
rose from 4.94% in the second quarter of 1994 to 5.12% in the second quarter of
1995. Additionally, the margin increased from 4.87% to 5.16% when comparing the
first half of 1994 to the same period of 1995. The net interest margin showed
an improvement over that achieved for the year ended December 31, 1994 of 4.97%.
The combination of an improved net interest spread and only moderate increases
in rates on interest-bearing deposits compared to the first six months of 1994
have helped United generate a stronger interest margin.
PROVISION FOR POSSIBLE LOAN LOSSES
For the quarters ended June 30, 1995 and 1994, the provision for possible loan
losses was $475,000 and $468,000, respectively, while the first six months total
provisions were $925,000 for 1995 as compared to $918,000 for 1994. The
allowance for possible loan losses as a percentage of loans, net of unearned
income, was at 1.53% at June 30, 1995, as compared to 1.54% at December 31,
1994, and 1.58% at June 30, 1994.
20
Credit quality is another major factor in United's superior profitability.
United's continued improvement in credit quality is evidenced by the low level
of nonperforming assets at the end of the second quarter of 1995. Charge-offs
exceeded recoveries during the second quarter of 1995 resulting in net charge-
offs of $553,000. Net charge-offs during the first six months of 1995 and 1994
were $854,000 and $509,000, respectively. Note 6 to the accompanying unaudited
consolidated financial statements provides a progression of the allowance for
possible loan losses. Loans, net of unearned income, increased $16,649,000
during the second quarter of 1995 and have increased $16,555,000 since year end
1994. In the first six months of 1995, management made only a modest increase to
the allowance for loan losses due to: (i) the continued high credit quality;
(ii) the adequacy of the coverage ratio of nonperforming loans; and (iii) the
allowance as a percentage of loans is at a strong level and closer to national
peer group levels.
Nonperforming loans were $8,186,000 at June 30, 1995 and $6,036,000 at year-end
1994. Nonperforming loans, as a percentage of loans, net of unearned income,
increased from 0.47% to 0.62% respectively. 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 increased $1,256,000 or 54.54% during the
first six months of 1995, while nonaccrual loans increased $894,000 or 23.95%
since year-end 1994. Even with the increase in nonperforming loans, total
nonperforming assets represented less than 0.46% of total assets at June 30,
1995, which approximates only one-half of the national peer levels.
As of June 30, 1995, the ratio of the allowance for loan losses to nonperforming
loans was 245.3% as compared to 331.5% as of December 31, 1994. Accordingly,
management believes that the allowance for loan losses of $20,079,000 as of June
30, 1995, is adequate to provide for potential losses on existing loans based on
information currently available.
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. Other factors considered by management 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.
21
OTHER INCOME
Other income consists of all revenues which are not included in interest and fee
income related to earning assets. Management's emphasis on improving
noninterest income continues. There was a modest increase realized in total
noninterest income for the second quarter and first six months of 1995. 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 slight increase in noninterest income was in the areas of trust income and
fees from customer accounts for which a fee is charged. Trust income increased
from the second quarter and first six months of 1994 by 11.52% and 2.48%
respectively.
OTHER EXPENSES
Other expenses include all items of expense other than interest expense, the
provision for possible loan losses, and income taxes. Other expenses increased
$254,000 or 2.14% to $12,142,000 in the second quarter of 1995 as compared to
$11,888,000 for the second quarter of 1994. Other expenses were $24,778,000 for
the first six months of 1995, which is a 5.19% increase from the $23,555,000
recorded for the first six months of 1994. The increase for the second quarter
and first six months of 1995 resulted primarily from merger expenses related to
the recently announced acquisition of First Commercial Bank, Arlington, Virginia
and expenses related to a reengineering study.
Total salaries and benefits remained virtually identical for the second quarter
and first six months of 1995 when compared to the same periods of 1994. In
addition, net occupancy expense for the second quarter increased by only $50,000
or 4.07% when compared to the second quarter of 1994, the first six months
increased by 132,000 or 5.65% when compared to the first six months of 1994.
This was primarily due to a decrease in rental income on building office space.
Other expenses increased $199,000 or 3.88% for the second quarter of 1995 as
compared to the same period of 1994, and 1,087,000 or 10.76% for the first half
of 1995 when compared to the first six months of 1994. The increase in other
expenses for the second quarter and six month period relates primarily to
nonrecurring merger and reengineering expenses.
22
INCOME TAXES
Income tax expense for the three months ended June 30, 1995 and 1994 was
$3,732,000 and $3,402,000, respectively. Income tax expense for the six months
ended June 30, 1995 and 1994 was $7,314,000 and $6,560,000, respectively. These
increases of 9.70% for the second quarter and 11.49% for the first half are
primarily the results of increased levels of pretax income and decreased tax-
exempt income. United's effective tax rate was 34.6% for the second quarter of
1995 compared to 35.4% for the first quarter of 1994. The effective tax rate
for the first six months of 1995 was 34.4% as compared to 34.8% for the fist six
months of 1994.
INTEREST RATE SENSITIVITY
Interest sensitive assets and liabilities are defined as those assets or
liabilities that mature or reprice 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 managing interest rate
risk. At United, interest rate risk is managed to minimize the negative impact
of fluctuating interest rates on earnings. As shown in the interest rate
sensitivity gap table contained herein, 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
$133,989,000 or 8.14% 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
23
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 relatively low risk means of matching earning assets and interest-bearing
funds to achieve a desired interest rate spread over the life of the earning
assets.
Additionally, United uses 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, 1995, the total
notional amount of United's one interest rate swap in effect was only $50
million with an estimated fair value of $1,461,000. The current maturity of the
swap portfolio is one year and seven months. During the second quarter of 1995,
interest rate swaps reduced net interest income by $206,000 as compared to an
increase of $58,000 for the same period in 1994. For the six month period ended
June 30, 1995, interest rate swaps reduced net interest income by $402,000 as
compared to an increase of $159,000 for the same period in 1994.
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 generally 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.
24
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.
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, 1995, United generated $15,893,000 of cash
from operations, which is indicative of solid earnings performance. During the
same period, net cash of $14,741,000 was provided by investing activities which
was primarily due to the proceeds from maturities and calls of securities not
being reinvested into the investment portfolio. Uses of cash and cash
equivalents during the first six months were used by financing activities
totaling $34,672,000, which were largely comprised of repayments of $50,072,000
of FHLB advances which were offset by increases in Federal funds purchased and
securities sold under agreements to repurchase. The net effect of this activity
was a decrease in cash and cash equivalents of $4,038,000 during the first six
months of 1995.
United anticipates no difficulty in meeting 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.
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 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.
25
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The following table shows the interest rate sensitivity GAP as of June 30,
1995:
INTEREST RATE SENSITIVITY GAP
Days
-------------------------------------
Total 1 - 5 Over 5
0 - 90 91 - 180 181 - 365 One Year Years Years Total
-------- --------- ---------- ---------- ---------- --------- --------
ASSETS (In thousands)
Interest-Earning Assets:
Investment and Marketable
Equity Securities:
Taxable $ 10,335 $ 41,502 $ 30,548 $ 82,385 $ 134,063 $ 66,508 $ 282,956
Tax-exempt 4,767 1,116 5,330 11,213 15,836 21,315 48,364
Loans, net of unearned
income 551,293 69,432 119,138 739,863 443,865 131,259 1,314,987
--------- ---------- --------- ---------- --------- -------- ----------
Total Interest-Earning
Assets $ 566,395 $ 112,050 $ 155,016 $ 833,461 $ 593,764 $219,082 $1,646,307
========= ========== ========= ========== ========= ======== ==========
LIABILITIES
Interest-Bearing Funds:
Savings and NOW
accounts $ 612,909 $ 612,909 $ 612,909
Time deposits of
$100,000 & over 18,507 $ 11,866 $ 23,418 53,791 $ 19,328 73,119
Other time deposits 122,267 86,884 101,044 310,195 212,334 $ 0 522,529
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 92,784 92,784 92,784
FHLB advances and
other long-term
borrowings 34,043 34,043 34,043
--------- ---------- --------- ---------- --------- -------- ----------
Total Interest-Bearing
Funds $ 880,510 $ 98,750 $ 124,462 $1,103,722 $ 231,662 $ 0 $1,335,384
========= ========== ========= ========== ========= ======== ==========
Interest Sensitivity
Gap $(314,115) $ 13,300 $ 30,554 $ (270,261) $ 362,102 $219,082 $ 310,923
========= ========== ========= ========== ========= ======== ==========
Cumulative Gap $(314,115) $ (300,815) $(270,261) $ (270,261) $ 91,841 $310,923 $ 310,923
========= ========== ========= ========== ========= ======== ==========
Cumulative Gap as
a Percentage of Total
Earning Assets -19.08% -18.27% -16.42% -16.42% 5.58% 18.89% 18.89%
Management
Adjustments 567,813 (37,855) (75,708) 454,250 (454,250) 0
Off-Balance
Sheet Activities (50,000) (50,000) 50,000 0
--------- ---------- --------- ---------- --------- -------- ----------
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities $ 203,698 $ 179,143 $ 133,989 $ 133,989 $ 91,841 $310,923 $ 310,923
========= ========== ========= ========== ========= ======== ==========
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities as a
Percentage of Total
Earning Assets 12.37% 10.88% 8.14% 8.14% 5.58% 18.89% 18.89%
26
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The following table shows the interest rate sensitivity GAP as of December
31, 1994:
INTEREST RATE SENSITIVITY GAP
Days
------------------------------------- Total 1 - 5 Over 5
0 - 90 91 - 180 181 - 365 One Year Years Years Total
-------- --------- ---------- ---------- --------- --------- ----------
ASSETS (In Thousands)
Interest-Earning Assets:
Investment and Marketable
Equity Securities:
Taxable $ 25,472 $ 10,673 $ 45,222 $ 81,367 $ 162,115 $ 64,782 $ 308,264
Tax-exempt 1,440 2,953 5,883 10,276 21,379 20,964 52,619
Loans, net of unearned
income 527,711 81,089 129,862 738,662 409,341 149,074 1,297,077
--------- ---------- --------- ---------- --------- -------- ----------
Total Interest-Earning
Assets $ 554,623 $ 94,715 $ 180,967 $ 830,305 $ 592,835 $234,820 $1,657,960
========= ========== ========= ========== ========= ======== ==========
LIABILITIES
Interest-Bearing Funds:
Savings and NOW
accounts $ 658,187 $ 658,187 $ 658,187
Time deposits of
$100,000 & over 22,654 $ 13,875 $ 11,504 48,033 $ 27,565 75,598
Other time deposits 114,102 91,208 81,641 286,951 169,525 456,476
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 71,809 71,809 71,809
FHLB advances and
other long-term
borrowings 73,972 10,000 83,972 83,972
--------- ---------- --------- ---------- --------- -------- ----------
Total Interest-Bearing
Funds $ 940,724 $ 115,083 $ 93,145 $1,148,952 $ 197,090 $1,346,042
========= ========== ========= ========== ========= ======== ==========
Interest Sensitivity
Gap $(386,101) $ (20,368) $ 87,822 $ (318,647) $ 395,745 $234,820 $ 311,918
========= ========== ========= ========== ========= ======== ==========
Cumulative Gap $(386,101) $ (406,469) $(318,647) $ (318,647) $ 77,098 $311,918 $ 311,918
========= ========== ========= ========== ========= ======== ==========
Cumulative Gap as
a Percentage of Total
Earning Assets -23.29% -24.52% 19.22% - 19.22% 4.65% 18.81% 18.81%
Management
Adjustments 616,828 (41,121) (82,244) 493,463 (493,463) 0
Off-Balance
Sheet Activities (50,000) (50,000) 50,000 0
--------- ---------- --------- ---------- --------- -------- ----------
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities $ 180,727 $ 119,238 $ 124,816 $ 124,816 $ 77,098 $311,918 $ 311,918
========= ========== ========= ========== ========= ======== ==========
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities as a
Percentage of Total
Earning Assets 10.90% 7.19% 7.53% 7.53% 4.68% 18.95% 18.95%
27
The dividends of $.29 per common share for the second quarter of 1995 and $.58
per common share for the six month period ended June 30, 1995, represent an
increase of 11.54% and 13.46% over the second quarter and the first six months
of 1994, respectively. Total cash dividends paid were $3,422,000 for the second
quarter and $6,849,000 for the first six months of 1995, an increase of 10.39%
and 10.54% over the comparable periods in 1994.
United's risk-based capital ratios of 15.83% at June 30, 1995 and 15.52% at
December 31, 1994, are both nearly double the current requirement of 8.00%.
Total risk-based capital at June 30, 1995 and December 31, 1994 of $194,863,000
and $184,595,000, respectively, exceeded the regulatory minimum requirement by
$96,375,000 and $89,470,000, 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, 1995, amounted to 146,020 shares at
a cost of $3,541,000. 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. United announced a new repurchase program in
July, 1995.
28