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 March 31, 1996
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; 15,146,184 shares outstanding as of April
30, 1996.
1
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- -----------------------------------------------------------------
Consolidated Balance Sheets (Unaudited)
March 31, 1996 and December 31, 1995 .........................6
Consolidated Statements of Income (Unaudited) for the
Three Months Ended March 31, 1996 and 1995 ...................7
Consolidated Statement of Changes in Shareholders'
Equity (Unaudited) for the Three Months Ended
March 31, 1996 ...............................................8
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 1996 and 1995 ...........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...................20
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
The following matter was submitted to a vote of security holders at a special
meeting of Shareholders of the Registrant held on Thursday, March 28, 1996:
(1) To approve, ratify and confirm the Agreement of Plan of Merger dated August
18, 1995, between Eagle Bancorp, Inc. and United Bankshares, Inc. and the
transaction contemplated. There were 9,043,534 affirmative votes cast, 10,970
negative votes and 123,963 abstaining votes.
_________________________________________________________________
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
Exhibit 27 - Financial Data Schedule.................30
(b) Reports on Form 8-K - On April 12, 1996, United Bankshares, Inc.
consummated the merger with Eagle Bancorp, Inc. in an exchange accounted for
under the pooling of interests method of accounting.
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 May 14, 1996 /s/ Richard M. Adams
--------------------- ---------------------------
Richard M. Adams, Chairman of
the Board and Chief Executive
Officer
Date May 14, 1996 /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 March 31, 1996 and December 31, 1995, consolidated balance sheets of United
Bankshares, Inc. and Subsidiaries, and the related consolidated statements of
income for the three months ended March 31, 1996 and 1995, and the related
consolidated statement of changes in shareholders' equity for the three months
ended March 31, 1996, and the related condensed consolidated statements of cash
flows for the three months ended March 31, 1996 and 1995, and the notes to
consolidated financial statements appear on the following pages.
5
CONSOLIDATED BALANCE SHEETS(UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
March 31 December 31
1996 1995
-------------- ---------------
ASSETS
Cash and due from banks $ 74,392,000 $ 78,909,000
-------------- --------------
Total cash and cash equivalents 74,392,000 78,909,000
Securities available for sale at estimated
fair value (amortized cost-$203,737,000
at March 31, 1996 and $194,696,000 at
December 31, 1995) 204,922,000 196,718,000
Securities held to maturity(estimated fair
value -$107,627,000 at March 31, 1996
and $114,390,000 at December 31, 1995) 107,064,000 112,755,000
Loans
Commercial, financial, and agricultural 211,422,000 218,800,000
Real estate:
Single family residential 575,909,000 570,635,000
Commercial 319,000,000 328,226,000
Construction 21,610,000 21,232,000
Other 13,106,000 14,056,000
Installment 221,602,000 225,077,000
-------------- --------------
1,362,649,000 1,378,026,000
Less: Unearned income (3,999,000) (4,021,000)
-------------- --------------
Loans net of unearned income 1,358,650,000 1,374,005,000
Less: Allowance for loan losses (20,126,000) (20,017,000)
-------------- --------------
Net loans 1,338,524,000 1,353,988,000
Bank premises and equipment 30,479,000 30,575,000
Interest receivable 12,439,000 11,981,000
Other assets 30,635,000 30,517,000
-------------- --------------
TOTAL ASSETS $1,798,455,000 $1,815,443,000
============== ==============
LIABILITIES
Domestic deposits
Noninterest-bearing $ 221,007,000 $ 238,568,000
Interest-bearing 1,259,269,000 1,234,698,000
-------------- --------------
TOTAL DEPOSITS 1,480,276,000 1,473,266,000
Short-term borrowings
Federal funds purchased 27,462,000 26,378,000
Securities sold under agreements to
repurchase 60,267,000 55,789,000
Federal Home Loan Bank borrowings 33,900,000
Accrued expenses and other liabilities 26,436,000 24,888,000
-------------- --------------
TOTAL LIABILITIES 1,594,441,000 1,614,221,000
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value;
Authorized-20,000,000 shares; issued and
outstanding-12,156,530 at March 31, 1996 and
12,156,571 at December 31, 1995, including
150,270 and 140,520 shares in treasury at
March 31, 1996 and December 31, 1995,
respectively 30,391,000 30,391,000
Surplus 37,258,000 37,466,000
Retained earnings 139,480,000 135,580,000
Net unrealized holding gain on securities
available for sale 770,000 1,315,000
Treasury stock (3,885,000) (3,530,000)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 204,014,000 201,222,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,798,455,000 $1,815,443,000
============== ==============
See notes to consolidated financial statements.
6
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Three Months Ended
March 31
------------------------
1996 1995
----------- ----------
INTEREST INCOME
Interest and fees on loans $30,173,000 $27,672,000
Interest on federal funds sold 54,000 237,000
Interest and dividends on securities:
Taxable 3,880,000 4,595,000
Exempt from federal taxes 628,000 837,000
Other interest income 17,000 26,000
----------- -----------
TOTAL INTEREST INCOME 34,752,000 33,367,000
----------- -----------
INTEREST EXPENSE
Interest on deposits 12,416,000 11,123,000
Interest on short-term borrowings 932,000 848,000
Interest on Federal Home Loan Bank borrowings 518,000 970,000
----------- -----------
TOTAL INTEREST EXPENSE 13,866,000 12,941,000
----------- -----------
NET INTEREST INCOME 20,886,000 20,426,000
PROVISION FOR POSSIBLE LOAN LOSSES 450,000 450,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 20,436,000 19,976,000
----------- -----------
OTHER INCOME
Trust department income 795,000 779,000
Other charges, commissions, and fees 2,335,000 2,197,000
Other income 136,000 163,000
----------- -----------
TOTAL OTHER INCOME 3,266,000 3,139,000
----------- -----------
OTHER EXPENSES
Salaries and employee benefits 5,819,000 5,590,000
Net occupancy expense 1,234,000 1,190,000
Other expense 5,205,000 5,856,000
----------- -----------
TOTAL OTHER EXPENSES 12,258,000 12,636,000
----------- -----------
INCOME BEFORE INCOME TAXES 11,444,000 10,479,000
INCOME TAXES 3,940,000 3,582,000
----------- -----------
NET INCOME $ 7,504,000 $ 6,897,000
=========== ===========
Earnings per common share $0.62 $0.58
=========== ===========
Dividends per share $0.30 $0.29
=========== ===========
Average outstanding shares 12,079,072 11,882,415
=========== ===========
See notes to consolidated financial statements.
7
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Three Months Ended March 31, 1996
-----------------------------------------------------------------------------------------------
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, 1996 12,156,571 $30,391,000 $37,466,000 $135,580,000 $1,315,000 ($3,530,000) $201,222,000
Net Income 7,504,000 7,504,000
Cash dividends
($.30 per share) (3,604,000) (3,604,000)
Net change in
unrealized gain
on securities
available for sale (545,000) (545,000)
Purchase of treasury
stock (829,000) (829,000)
Common stock options
exercised (208,000) 474,000 266,000
Fractional shares
adjustment (41)
---------- ----------- ----------- ----------- ---------- ----------- -------------
Balance at
March 31, 1996 12,156,530 $30,391,000 $37,258,000 $139,480,000 $ 770,000 ($3,885,000) $204,014,000
========== =========== =========== ============ ========== =========== =============
See notes to consolidated financial statements
8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Three Months Ended
March 31
---------------------------
1996 1995
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,538,000 $ 11,493,000
INVESTING ACTIVITIES
Proceeds from maturities and calls of
investment securities 5,699,000 4,305,000
Proceeds from maturities and calls of
securities available for sale 33,330,000 16,973,000
Purchases of securities available for sale (42,217,000) (5,011,000)
Net purchase of bank premises and equipment (573,000) (268,000)
Changes in:
Loans 15,144,000 (1,202,000)
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 11,383,000 14,797,000
------------ ------------
FINANCING ACTIVITIES
Cash dividends paid (3,604,000) (3,427,000)
Acquisition of treasury stock (829,000) (573,000)
Proceeds from exercise of stock options 266,000 130,000
Repayment of Federal Home Loan Bank advances (33,900,000) (40,072,000)
Changes in:
Deposits 7,067,000 39,225,000
Federal funds purchased and securities
sold under agreements to repurchase 5,562,000 (2,749,000)
------------ ------------
NET CASH (USED IN) FINANCING ACTIVITIES (25,438,000) (7,466,000)
------------ ------------
(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (4,517,000) 18,824,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 78,909,000 82,763,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 74,392,000 $101,587,000
============ ============
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
1995 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.
In May 1995, the Financial Accounting Standards Board ("FASB"), issued Statement
No. 122, "Accounting for Mortgage Servicing Rights" (SFAS No. 122), an Amendment
to Statement No. 65, "Accounting for Certain Banking Activities." SFAS No. 122
requires financial institutions to recognize as separate assets rights to
service mortgage loans for others, whether those rights were acquired through
purchase or through origination and subsequent sale of loans with servicing
rights retained. Financial institutions are required to allocate the total cost
of the mortgage loans to the mortgage servicing rights and the loans, based on
their relative fair values, if it is practicable to estimate those fair values.
Financial institutions are required to periodically assess capitalized servicing
rights for impairment based on the fair value of those rights. SFAS No. 122 is
to be applied prospectively for years beginning after December 15, 1995, with
earlier application encouraged.
Historically, United has not engaged in significant mortgage banking activities
and does not generally originate or acquire loans for resale. United, in
connection with the merger of Eagle Bancorp, Inc. ("Eagle") with and into United
and the related merger of Eagle's wholly-owned subsidiary, First Empire Federal
Savings and Loan Association ("First Empire") with and into United National
Bank, United's lead bank, is awaiting final regulatory approval to operate
United Mortgage Company, Inc. The business of United Mortgage Company, Inc.
will be the origination and acquisition of residential real estate loans for
resale, the conducting of mortgage loan servicing activities for certain loans,
and generally the activities commonly conducted by a mortgage banking company.
United has not yet completed the complex analysis required to
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
estimate the impact of these new rules and anticipates that it will conform with
the new rules in the second quarter of 1996 in conjunction with the merger of
Eagle and the commencement of operations of United Mortgage Company, Inc.
United anticipates that the adoption of SFAS No. 122 will not have a significant
impact on United's financial condition or results of operations.
In October 1995, the FASB issued Statement No. 123, (SFAS No. 123), "Accounting
for Stock-Based Compensation," which is effective for fiscal years beginning
after December 15, 1995. SFAS No. 123 defines a fair value based method of
accounting for stock-based compensation plans.
Under the fair value method, compensation expense is measured based upon the
estimated value of the award as of the grant date and is recognized over the
service period. SFAS No. 123 provides companies with the option of accounting
for stock-based compensation under APB Opinion No. 25, "Accounting for Stock
Issued to Employees," or applying the provisions of SFAS No. 123. United has
decided to continue to apply the provisions of APB No. 25 to account for stock-
based compensation. The disclosure requirements of SFAS No. 123 require
entities applying APB Opinion No. 25 to provide pro forma disclosures of net
income and earnings per share as if the fair value method of accounting had been
applied. The disclosure requirements of SFAS No. 123 are not applicable to
interim reporting.
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 Bank, and United
Venture Fund, Inc. ("UVF"). United considers all of its principal business
activities to be bank related. All significant intercompany accounts and
transactions have been eliminated in the consolidated financial statements.
3. ACQUISITION
On April 12, 1996, United consummated the merger with Eagle Bancorp, Inc.,
Charleston, West Virginia ("Eagle"), in a common stock exchange accounted for
under the pooling of interests method of accounting. United exchanged 1.15
shares of United common stock for each of the 2,729,377 common shares of Eagle
or 3,138,704 shares. As of the date of acquisition, Eagle reported total assets
of $392,620,000, total net loans of $366,885,000 and deposits of $301,606,000.
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The following represents selected pro forma financial information regarding the
effects of the transaction as though it had occurred at the beginning of the
earliest period presented:
Quarter Ending Quarter Ending Year Ending
March 31, 1996 March 31, 1995 December 31, 1995
--------------- --------------- ------------------
Total interest income $ 42,230,000 $ 40,732,000 $ 165,815,000
Total interest expense 17,682,000 16,684,000 70,167,000
Net interest income 24,548,000 24,048,000 95,648,000
Income before income taxes 12,666,000 12,363,000 50,599,000
Income from continuing
operations 8,088,000 8,165,000 32,817,000
Earnings per common share 0.53 0.54 2.18
Return on average assets 1.47% 1.50% 1.52%
Return on average equity 13.00% 14.26% 13.86%
Net loans 1,702,820,000 1,711,025,000 1,730,457,000
Total assets 2,191,915,000 2,205,292,000 2,210,230,000
Total deposits 1,781,882,000 1,779,083,000 1,773,009,000
Total equity 248,184,000 243,211,000 245,147,000
The data set forth above is not necessarily indicative of the results of
operations or the combined financial position of United that would have resulted
had the merger been consummated at the beginning of the applicable periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined entities.
4. SECURITIES AVAILABLE FOR SALE
The book and estimated fair value of securities available for sale at March 31,
1996, by contractual maturity are as follows:
Estimated
Amortized Fair
Cost Value
------------ ------------
Due in one year or less $103,710,000 $104,063,000
Due after one year through five years 64,477,000 64,777,000
Due after five years through ten years 169,000 171,000
Due after ten years 32,619,000 31,748,000
Marketable equity securities 2,762,000 4,163,000
------------ ------------
Total $203,737,000 $204,922,000
============ ============
The preceding table includes $26,073,000 of mortgage-backed securities at
estimated fair value with an amortized cost of $26,715,000. Maturities of
mortgage-backed securities are based upon the estimated average life.
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
March 31, 1996
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ---------- ---------- ------------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $162,294,000 $ 981,000 $ 345,000 $162,930,000
Mortgage-backed securities 26,715,000 11,000 653,000 26,073,000
Marketable equity
securities 2,762,000 1,401,000 4,163,000
Other 11,966,000 12,000 222,000 11,756,000
------------ ---------- ---------- ------------
Total $203,737,000 $2,405,000 $1,220,000 $204,922,000
============ ========== ========== ============
At March 31, 1996, the cumulative net unrealized holding gain on available for
sale securities resulted in an increase of $770,000 to shareholders' equity.
The book and estimated fair value of securities available for sale at December
31, 1995, by contractual maturity are as follows:
Estimated
Amortized Fair
Cost Value
------------ ------------
Due in one year or less $105,885,000 $106,262,000
Due after one year through five years 52,928,000 53,684,000
Due after five years through ten years 169,000 172,000
Due after ten years 33,052,000 32,779,000
Marketable equity securities 2,662,000 3,821,000
------------ ------------
Total $194,696,000 $196,718,000
============ ============
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
December 31, 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 $150,460,000 $1,438,000 $ 341,000 $151,557,000
Mortgage-backed securities 27,766,000 23,000 54,000 27,735,000
Marketable equity
securities 2,662,000 1,159,000 3,821,000
Other 13,808,000 21,000 224,000 13,605,000
------------ ---------- ------------ ------------
Total $194,696,000 $2,641,000 $ 619,000 $196,718,000
============ ========== ============ ============
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
5. SECURITIES HELD-TO-MATURITY
The amortized cost and estimated fair values of investment securities are
summarized as follows:
March 31, 1996
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ----------- ------------ ------------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 12,126,000 $ $ 209,000 $ 11,917,000
State and political
subdivisions 40,217,000 1,651,000 66,000 41,802,000
Mortgage-backed securities 52,816,000 174,000 987,000 52,003,000
Other 1,905,000 1,905,000
------------ ----------- ------------ ------------
otal $107,064,000 $1,825,000 $ 1,262,000 $107,627,000
============ ========== ============ ============
December 31, 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 $ 12,146,000 $ 13,000 $ 169,000 $ 11,990,000
State and political
subdivisions 43,324,000 2,124,000 33,000 45,415,000
Mortgage-backed securities 55,389,000 316,000 616,000 55,089,000
Other 1,896,000 1,896,000
------------ ---------- ------------ ------------
Total $112,755,000 $2,453,000 $ 818,000 $114,390,000
============ ========== ============ ============
The amortized cost and estimated fair value of debt securities at March 31,
1996, and December 31, 1995, 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.
March 31, 1996 December 31, 1995
-------------------------- --------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
Due in one year or less $ 11,431,000 $ 11,426,000 $ 9,247,000 $ 9,325,000
Due after one year
through five years 48,166,000 48,341,000 54,070,000 54,430,000
Due after five years
through ten years 26,327,000 26,684,000 27,568,000 28,356,000
Due after ten years 21,140,000 21,176,000 21,870,000 22,279,000
------------ ------------ ------------ ------------
Total $107,064,000 $107,627,000 $112,755,000 $114,390,000
============ ============ ============ ============
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The preceding table includes $52,816,000 of mortgage-backed securities with an
estimated fair value of $52,003,000 at March 31, 1996 and mortgage-backed
securities of $55,389,000 with an estimated fair value of 55,089,000 at December
31, 1995. Maturities of the mortgage-backed securities are based upon the
estimated average life. There were no sales of held to maturity securities.
The amortized cost of securities pledged to secure public deposits, securities
sold under agreements to repurchase, and for other purposes as required or
permitted by law, approximated $158,062,000 and $176,855,000 at March 31, 1996
and December 31, 1995, respectively.
6. NONPERFORMING LOANS
Nonperforming loans are summarized as follows:
March 31 December 31
1996 1995
-------- -----------
(in thousands)
Loans past due 90 days or more
and still accruing interest $ 4,208 $ 4,155
Nonaccrual loans 4,196 4,934
------ ------
$ 8,404 $ 9,089
======= =======
7. 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
March 31,
-------------------
1996 1995
-------- --------
(in thousands)
Balance at beginning of
period $20,017 $20,008
Provision charged to expense 450 450
------- -------
20,467 20,458
Loans charged-off (499) (439)
Less recoveries 158 139
------- -------
Net Charge-offs (341) (300)
------- -------
Balance at end of period $20,126 $20,158
======= =======
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 amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures," collectively SFAS 114. As a result
of applying the new rules prescribed by SFAS No. 114, certain loans are being
reported at the present value of their 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. The adoption of SFAS No. 114
did not have a material impact on the allowance for loan losses, the provision
for possible loan losses or the charge-off policy.
Impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the fair value of the
loan's collateral if the loan is deemed "collateral dependent". A valuation
allowance is required to the extent that the measure of the impaired loans is
less than the recorded investment. Impaired loans are specifically reviewed
loans for which it is probable that the creditor will be unable to collect all
amounts due according to the terms of the loan agreement. The specific factors
that influence management's judgement in determining when a loan is impaired
include the classification of the loan as "substandard" or worse, the financial
strength of the borrower, and the net realizable value of the collateral. A
specifically reviewed loan is not impaired during a period of "minimum delay" in
payment, regardless of the amount of shortfall, if the ultimate collectibility
of all amounts due is expected. United defines "minimum delay" as past due less
than 90 days.
SFAS 114 does not apply to smaller balance, larger groups of homogeneous loans
such as consumer installment, bank card and real estate mortgage loans, which
are collectively evaluated for impairment. Impaired loans are therefore
primarily business loans, which include commercial loans and income property.
United applies the measurement methods described above to these business and
commercial loans on a loan-by-loan basis. Smaller balance populations of
business loans, loans with a balance of $100,000 or less, which are not
specifically reviewed in accordance with United's normal credit review
procedures, are also excluded from the application of SFAS 114.
United's charge-off policy for impaired loans is consistent with its policy for
loan charge-offs to the allowance; impaired loans are charged-off when the
impaired loan, or a portion thereof, is considered uncollectible or is
transferred to other real estate owned.
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
SFAS 118 allows a creditor to use existing methods for recognizing interest
income on an impaired loan. Consistent with United's existing method of income
recognition for loans, interest receipts on impaired loans, except those
classified also as nonaccrual, are recognized as interest income using the
accrual method of income recognition. United's method of income recognition for
impaired loans that are classified as nonaccrual is to recognize interest income
on the cash method of income recognition or apply the cash receipt to principal
when the ultimate collectibility of principal is in doubt. The average recorded
investment in impaired loans during the quarter ended March 31, 1996 and for the
year ended December 31, 1995 was approximately $8,319,000 and $9,545,000,
respectively. For the quarter ended March 31, 1996, United recognized interest
income on those impaired loans of approximately $143,000, substantially all of
which was recognized using the accrual method of income recognition.
At March 31, 1996, the recorded investment in loans that are considered to be
impaired under SFAS No. 114 was $8,728,000 (of which $4,133,000 were on a
nonaccrual basis). Included in this amount is $5,209,000 of impaired loans for
which the related allowance for credit losses is $1,277,000 and $3,519,000 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 impact of
adopting SFAS 114, as amended by SFAS 118, was therefore immaterial to the
financial condition and operations of United as of and for the quarter ended
March 31, 1996.
The amount of interest income which would have been recorded under the original
terms for the above loans was $218,000 and $247,000 for the quarter ended March
31, 1996 and 1995, respectively. Amounts recorded as interest income for these
loans totaled $145,000 and $111,000 for the quarter ended march 31, 1996 and
1995, respectively.
United has commercial real estate loans, including owner occupied, income
producing real estate and land development loans, of approximately $319,000,000
and $328,226,000 as of March 31, 1996 and December 31, 1995, respectively. The
loans are primarily secured by real estate located in West Virginia,
Southeastern Ohio, and Virginia. The loans were originated by United's
subsidiary banks using underwriting standards as set forth by management.
United's loan administration policies are focused on the risk characteristics of
the loan portfolio, including commercial real estate loans, in terms of loan
approval and credit quality. It is the opinion of management that these loans
do not pose any unnecessary risks and that adequate consideration has been given
to the above loans in establishing the allowance for loan losses.
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 three month periods ended March 31,
1996, and March 31, 1995, with the interest rate earned or paid on such
amount.
Three Months Ended Three Months Ended
March 31 March 31
1996 1995
--------------------------- ---------------------------
(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 $ 3,874 $ 54 5.64% $ 15,418 $ 237 6.23%
Investment Securities:
Taxable 259,799 3,880 5.97% 302,681 4,621 6.11%
Tax-exempt (1) 41,141 966 9.39% 52,183 1,288 9.87%
---------- ------- ---- ---------- -------- ----
Total Securities 300,940 4,846 6.44% 354,864 5,909 6.66%
Loans, net of unearned
income (1) (2) 1,375,623 30,489 8.91% 1,295,547 27,967 8.75%
Allowance for possible loan
losses (20,095) (20,149)
---------- ----------
Net loans 1,355,528 9.05% 1,275,398 8.89%
---------- ------ ---- ---------- -------- ----
Total earning assets 1,660,342 $35,389 8.57% 1,645,680 $34,113 8.39%
------- ---- -------- ----
Other assets 140,552 135,934
---------- ----------
TOTAL ASSETS $1,800,894 $1,781,614
========== ==========
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits $1,233,636 $12,416 4.05% $1,215,174 $11,123 3.71%
Federal funds purchased,
repurchase agreements and
other short-term borrowings 82,476 932 4.54% 76,139 854 4.55%
FHLB advances 37,398 518 5.57% 62,651 964 6.24%
---------- ------- ---- ---------- -------- ----
Total Interest-Bearing Funds 1,353,510 13,866 4.12% 1,353,964 12,941 3.88%
------- ---- -------- ----
Demand deposits 220,524 224,920
Accrued expenses and other
liabilities 22,329 19,747
---------- ----------
TOTAL LIABILITIES 1,596,363 1,598,631
Shareholders' Equity 204,531 182,983
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,800,894 $1,781,614
========== ==========
NET INTEREST INCOME $21,523 $21,172
======= ========
INTEREST SPREAD 4.45% 4.51%
NET INTEREST MARGIN 5.21% 5.20%
(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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
9. 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
$15,428,000 and $16,533,000 at March 31, 1996 and December 31, 1995,
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.
19
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"), and United Bank. 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 present 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.
The following Earnings Summary is a broad overview of the financial condition
and results of operations and is not intended to replace the more detailed
discussion which is presented under specific headings on the following pages.
EARNINGS SUMMARY
Net income for the first quarter of 1996 was a record $7.50 million or $.62 per
share compared to $6.90 million or $.58 per share for the first quarter of 1995.
This represents a 8.70% increase in net income and a 6.90% increase in earnings
per share. United's annualized return on average assets of 1.66% and return on
average shareholders' equity of 14.88% both compare excellently with regional
and national peer groups.
United has strong core earnings driven by a net interest margin of 5.21% for the
first three months of 1996. Net interest income increased 2.25% and showed
improvement for the first three months of 1996 as compared to the same period
for 1995. The provision for possible loan losses remained level when comparing
the first three months of 1996 to the first three months of 1995 due to good
asset quality and slightly increased charge-offs. Noninterest income
20
increased 4.05% for the first quarter of 1996 when compared to the first three
months of 1995. This overall increase in noninterest income is primarily
attributed to an increase in other customer charges. Noninterest expenses
decreased 2.99% for the first quarter compared to the same period in 1995. This
decrease was due to the FDIC insurance premiums decrease. Management's cost
containment efforts have continued to be successful in controlling core
noninterest expenses. Income taxes were higher for the first quarter than for
the same period of 1995, with an effective tax rate of 34.4% as compared to
34.2% for first quarter of 1995.
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 slightly in the first quarter of 1996, when
compared to the same period of 1995. The net interest margin is the main factor
in United's profitability momentum. Net interest income before the provision
for possible loan losses increased $460,000 or 2.25% the first quarter of 1996
as compared to the first quarter of 1995. The increase is largely due to an
interest recovery of $343,000 on a nonaccrual loan. Excluding the one time
adjustment, net interest income increased slightly due to the repricing of
variable rate loans at higher interest rates. United's tax-equivalent net
interest margin rose from 5.20% in the first quarter of 1995 to 5.21% in the
first quarter of 1996. Additionally, the tax-equivalent net interest margin
showed an improvement over that achieved for the year ended December 31, 1995 of
5.15%. The combination of higher average volumes of loans at slightly higher
rates compared to the first three months of 1995 have helped United generate a
slightly stronger interest margin.
PROVISION FOR POSSIBLE LOAN LOSSES
For both of the quarters ended March 31, 1996 and 1995, the provision for
possible loan losses was $450,000. The allowance for possible loan losses as a
percentage of loans, net of unearned income, held at 1.5% at March 31, 1996, as
compared to December 31, 1995, and March 31, 1995.
Credit quality is another major factor in United's excellent profitability.
United's continued improvement in credit quality is evidenced by the low level
of nonperforming assets at the end of the first quarter of 1996. Charge-offs
exceeded recoveries during the first quarter of 1996 and 1995 and resulted in
net charge-offs of $341,000 and $300,000, respectively. Note 7 to the
accompanying unaudited consolidated financial statements provides a progression
of the allowance for possible loan losses. Loans, net of unearned income,
remained relatively flat compared to year end 1995.
21
Nonperforming loans were $8,404,000 at March 31, 1996 and $9,089,000 at year-end
1995. Nonperforming loans, as a percentage of loans, net of unearned income,
decreased from 0.66% to 0.62% 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 increased
$53,000 or 1.28% during the first quarter of 1996; while nonaccrual loans
decreased $738,000 or 14.96% since year-end 1995. With the decrease in
nonperforming loans, total nonperforming assets represented less than 0.47% of
total assets at the end of the first quarter.
As of March 31, 1996, the ratio of the allowance for loan losses to
nonperforming loans was 239.5% as compared to 220.2% as of December 31, 1995.
Accordingly, management believes that the allowance for loan losses of
$20,126,000 as of March 31, 1996, 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. 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. Noninterest income has been and will continue
to be an important factor for improving United's profitability. Recognizing the
importance, management continues to evaluate areas where noninterest income can
be enhanced. The increase realized in total noninterest income for the first
quarter of 1996, was $127,000 or 4.05%.
The 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 first quarter of 1995 by 2.05%, while other customer charges increased by
$138,000 or 6.28% due to return check charges and bankcard fees.
22
OTHER EXPENSES
Just as management continues to evaluate areas where noninterest income can be
enhanced, it strives to improve the efficiency of its operations and thus reduce
operating costs. Other expenses include all items of expense other than
interest expense, the provision for possible loan losses, and income taxes.
Other expenses decreased $378,000 or 2.99% to $12,258,000 in the first quarter
of 1996 as compared to $12,636,000 for the first quarter of 1995.
Total salaries and benefits increased by 4.10% or $229,000, for the first
quarter of 1996 when compared to the same period of 1995. In addition, net
occupancy expense increased only $44,000 or 3.70% when compared to the first
quarter of 1995.
Other expenses decreased $651,000 or 11.12% for the first quarter of 1996 as
compared to the same period of 1995. The decrease in other expenses for the
quarter related primarily to lower FDIC insurance premiums and professional
fees, which were offset by higher advertising, data processing and operational
charge-offs. The overall decrease in other expenses was a result of certain
nonrecurring merger expenses being incurred in the first quarter of 1995, but
not in the first quarter of 1996. The nonrecurring merger related expenses
incurred in the first quarter of 1995 were in connection with the acquisition of
First Commercial Bank consummated by United in the fourth quarter of 1995.
INCOME TAXES
Income tax expense for the three months ended March 31, 1996 and 1995 was
$3,940,000 and $3,582,000, respectively. This increase of 9.99% for the quarter
was the result of increased pretax income and decreased tax-exempt income.
United's effective tax rate was 34.4% for the first quarter of 1996 compared to
34.2% for the first quarter of 1995.
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".
23
A primary objective of Asset/Liability Management is managing 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 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
$134,502,000 or 8.05% 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 relatively low risk
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, as
of March 31, 1996, United had no FHLB advances.
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 March 31, 1996, the total
notional amount of interest rate swaps in effect was $50 million. The current
maturity of the swap portfolio is ten months. During the first quarter of 1996,
interest rate swaps reduced net interest income by $130,000 as compared to a
decrease of $196,000 for the same period in 1995.
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
24
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.
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 three months ended March 31, 1996, United generated $9,538,000 of cash
from operations, which is indicative of solid earnings performance. During the
same period, net cash of $11,383,000 was provided by investing activities which
was primarily due to the proceeds from loan payoffs. During the first three
months of 1996, financing activities resulted in a use of cash of $25,438,000,
primarily due to the repayment of $33,900,000 of FHLB advances. Slight increases
in deposits and other short-term borrowings partially offset the repayment of
the FHLB advances. The net effect of this activity was a decrease in cash and
cash equivalents of $4,517,000 for the first three months of 1996.
25
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The following table shows the interest rate sensitivity GAP as of March 31,
1996:
Interest Rate Sensitivity Gap
Days
---------------------------------- Total 1-5 Over 5
0 - 90 91 - 180 181 - 365 One Year Years Years Total
--------- --------- ---------- ---------- --------- ------------- ----------
(In Thousands)
ASSETS
Interest-Earning Assets:
Investment and Marketable
Equity Securities:
Taxable $ 64,345 $ 25,055 $ 36,322 $ 125,722 $ 65,842 $ 80,205 $ 271,769
Tax-exempt 3,443 2,515 2,898 8,856 14,237 17,034 40,217
Loans, net of unearned
income 467,766 80,373 142,325 690,464 520,728 147,458 1,258,650
--------- --------- ---------- ---------- --------- -------- ----------
Total Interest-Earning
Assets $ 535,554 $ 107,943 $ 181,545 $ 825,042 $ 600,897 $244,697 $1,670,636
========= ========= ========== ========== ========= ======== ==========
LIABILITIES
Interest-Bearing Funds:
Savings and NOW
accounts $ 600,174 $ 600,174 $ 600,174
Time deposits of
$100,000 & over 47,741 $ 26,252 $ 24,249 92,242 $ 26,806 119,048
Other time deposits 136,437 103,832 120,640 360,909 170,530 $ 8,608 540,047
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 87,729 87,729 87,729
--------- --------- ---------- ---------- --------- -------- ----------
Total Interest-Bearing
Funds $ 866,081 $ 130,084 $ 144,889 $1,141,054 $ 197,336 $ 8,608 $1,346,998
========= ========= ========== ========== ========= ======== ==========
Interest Sensitivity
Gap $(330,527) $ (22,141) $ 36,656 $ (316,012) $ 403,561 $236,089 $ 323,638
========= ========= ========== ========== ========= ======== ==========
Cumulative Gap $(330,527) $(352,668) $ (316,012) $ (316,012) $ 87,549 $323,638 $ 323,638
========= ========= ========== ========== ========= ======== ==========
Cumulative Gap as
a Percentage of Total
Earning Assets -19.78% -21.11% -18.92% -18.92% 5.24% 19.37% 19.37%
Management
Adjustments 563,143 (37,562) (75,067) 450,514 (450,514) 0
Off-Balance
Sheet Activities (50,000) (50,000) 0 0
--------- --------- ---------- ---------- --------- -------- ----------
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities $ 182,616 $ 122,913 $ 134,502 $ 134,502 $ 87,549 $323,638 $ 323,638
========= ========= ========== ========== ========= ======== ==========
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities as a
Percentage of Total
Earning Assets 10.93% 7.36% 8.05% 8.05% 5.24% 19.37% 19.37%
26
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The following table shows the interest rate sensitivity GAP as of December
31, 1995:
Interest Rate Sensitivity Gap
Days
---------------------------------- Total 1-5 Over 5
0 - 90 91 - 180 181 - 365 One Year Years Years Total
--------- --------- ---------- ---------- --------- -------- ------
(In Thousands)
ASSETS
Interest-Earning Assets:
Investment and Marketable
Equity Securities:
Taxable $ 34,328 $ 33,456 $ 54,674 $ 122,458 $ 92,779 $ 51,255 $ 266,492
Tax-exempt 3,462 2,546 2,919 8,927 14,460 19,594 42,981
Loans, net of unearned
income 515,788 76,320 132,531 724,639 461,601 187,766 1,374,006
--------- --------- ---------- ---------- --------- -------- ----------
Total Interest-Earning
Assets $ 553,578 $ 112,322 $ 190,124 $ 856,024 $ 568,840 $258,615 $1,683,479
========= ========= ========== ========== ========= ======== ==========
LIABILITIES
Interest-Bearing Funds:
Savings and NOW
accounts $ 602,098 $ 602,098 $ 602,098
Time deposits of
$100,000 & over 39,910 $ 17,972 $ 17,941 75,823 $ 26,068 101,891
Other time deposits 128,868 91,538 109,222 327,628 193,851 $ 9,230 530,709
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 82,167 82,167 82,167
FHLB advances 33,900 33,900 33,900
--------- --------- ---------- ---------- --------- -------- ----------
Total Interest-Bearing
Funds $ 884,943 $ 109,510 $ 127,163 $1,121,616 $ 219,919 $ 9,230 $1,350,765
========= ========= ========== ========== ========= ======== ==========
Interest Sensitivity
Gap $(331,365) $ 2,812 $ 62,961 $ (265,592) $ 348,921 $249,385 $ 332,714
========= ========= ========== ========== ========= ======== ==========
Cumulative Gap $(331,365) $(328,553) $ (265,592) $ (265,592) $ 83,329 $332,714 $ 332,714
========= ========= ========== ========== ========= ======== ==========
Cumulative Gap as
a Percentage of Total
Earning Assets -19.68% -19.52% -15.78% -15.78% 4.95% 19.76% 19.76%
Management
Adjustments 564,955 (37,664) (75,327) 451,964 (451,964) 0
Off-Balance
Sheet Activities (50,000) (50,000) (50,000) 0
--------- --------- ---------- ---------- --------- -------- ----------
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities $ 183,590 $ 148,738 $ 136,372 $ 136,372 $ 83,329 $332,714 $ 332,714
========= ========= ========== ========== ========= ======== ==========
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities as a
Percentage of Total
Earning Assets 10.91% 8.84% 8.10% 8.10% 4.95% 19.76% 19.76%
27
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.
Total shareholders' equity increased $2,792,000 to $204,014,000, which is an
increase of 1.39% from December 31, 1995. United's equity to assets ratio was
11.34% at March 31, 1996 and 11.08% at December 31, 1995. Capital and reserves
to total assets increased from 12.19% at December 31, 1995, to 12.46% at March
31, 1996.
The first quarter dividend of $.30 per common share represents an increase of
3.4% over the $.29 paid for first quarter of 1995. Total cash dividends paid
were $3,604,000 for the first quarter of 1996, an increase of 5.16% over the
$3,427,000 paid for the first quarter of 1995.
United seeks to maintain a proper relationship between capital and total assets
in order to support growth and sustain earnings. United's average equity to
average asset ratio was 11.36% at March 31, 1996 and 10.27% at March 31, 1995.
United's risk-based capital ratios of 16.47% at March 31, 1996 and 15.91% at
December 31, 1995, are both significantly higher then the minimum regulatory
requirements. United's Tier I capital and leverage ratios of 15.22% and 10.57%,
respectively, at March 31, 1996, are also well above regulatory minimum
requirements.
28