FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 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 Securities registered pursuant to section 12(b) of the Act: None Securities registered pursuant to 12(g) of the Act: Common Stock, $2.50 Par Value ----------------------------- (Title of Class) 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 report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of United Bankshares, Inc. common stock, representing all of its voting stock, that was held by non-affiliates on February 28, 1997 was approximately $382,124,000. As of February 28, 1997, United Bankshares, Inc. had 15,016,035 shares of common stock outstanding with a par value of $2.50. Documents Incorporated By Reference 1. Annual Report to Shareholders for the fiscal year ended December 31, 1996, portions of which are incorporated by reference in Parts I, II and IV of this Form 10-K. 2. Definitive Proxy Statement dated April 11, 1997 for the 1997 Annual Shareholders' Meeting to be held on May 19, 1997, portions of which are incorporated by reference in in Part III of this Form 10-K. Page 1 of 109 pages. Index to Exhibits is on page 32 . ----- ------ UNITED BANKSHARES, INC. FORM 10-K (Continued) As of the date of filing this Annual Report, neither the annual shareholders' report for the year ended December 31, 1996, nor the proxy statement for the annual United shareholders' meeting had been mailed to shareholders. CROSS-REFERENCE INDEX Part I Page - --------- ----- Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 4 Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . 4 Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 15 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . 15 Part II - ------- Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . 16 Item 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . 20 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . 30 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES . . . . . . . . 30 2 UNITED BANKSHARES, INC. FORM 10-K (Continued) CROSS-REFERENCE INDEX - CONTINUED Part III Page - ---------- ---- Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . 31 Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . 31 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 31 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . 31 Part VI - ------- Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . 32 3 UNITED BANKSHARES, INC. FORM 10-K, PART I Item 1. BUSINESS Item 2. PROPERTIES The following discussion satisfies the reporting requirements of Items 1 and 2. 4 DESCRIPTION OF UNITED BANKSHARES, INC. Organizational History and Subsidiaries - --------------------------------------- United Bankshares, Inc. ("United") is a West Virginia corporation registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended. United was incorporated on March 26, 1982 and organized on September 9, 1982. United began conducting business on May 1, 1984 with the acquisition of three wholly-owned subsidiaries. On October 1, 1985, these three subsidiaries were merged and on November 1, 1985, were renamed United National Bank ("UNB"). Since that time UNB has acquired through merger or consolidation the following banks: Heritage Bancorp, Inc. (a holding company); First National Bank of Ripley; Kanawha Banking and Trust Company; Ohio Valley National Bank; Elk National Bank; Montgomery National Bank, the sole subsidiary of Liberty Bancshares Inc., a bank holding company; First Bank of Ceredo, the bank subsidiary of Financial Future Corporation, a bank holding company; CB&T Westover Bank; the Star City Branch of Community Bank & Trust, N. A.; and First Empire Federal Savings & Loan Association, the sole subsidiary of Eagle Bancorp, Inc., a bank holding company. On June 30, 1996 United formed United Mortgage Company, Inc., a wholly-owned subsidiary of UNB, with its wholly-owned subsidiaries United Mortgage Center, Inc. and United Home Lending Services, Inc. The business of United Mortgage Company, Inc. and its subsidiaries is the origination 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. On September 1, 1993, UBC Holding Company, ("UBC"), a United subsidiary, was formed to effect the Financial Future Corporation transaction. UBC is a second tier holding company with UNB currently being its only subsidiary. On August 9, 1990, United acquired BankFirst Corporation ("BankFirst"), a one bank holding company based in McLean, Virginia. BankFirst was merged with UBF Holding Company, Inc. ("UBF"), a United subsidiary formed to effect this acquisition. UBF acquired Bank First, N.A. ("Bank First"), the subsidiary of BankFirst. On October 11, 1995, United formed Commercial Interim Bank, Inc. ("Interim Bank"), a state member bank located in Arlington, Virginia, to facilitate the acquisition of First Commercial Bank of Arlington, Virginia ("FCB"). United then merged Bank First into Interim Bank from its wholly owned subsidiary, UBF. Concurrent with the merger of Bank First into Interim Bank, UBF was merged into United. United acquired FCB on October 31, 1995 and merged it into Interim Bank. United then effected a name change of Interim Bank to First Commercial Bank. On March 18, 1996 First Commercial Bank's name was changed to United Bank. 5 United National Bank-South ("UNB-S"), was formed on November 1, 1992, as a part of United's acquisition of Summit Holding Corporation and its lead bank, Raleigh County National Bank. On January 27, 1996, UNB-S was merged into and became a part of UNB. Offices of UNB-S became branch offices of UNB. In December 1996, United Brokerage Services, Inc., a wholly-owned subsidiary of UNB began operations. United Brokerage Services, Inc. is a fully-disclosed broker/dealer and is a registered Investment Advisor with the National Association of Securities Dealers, Inc. and the Securities and Exchange Commission and a member of the Securities Investor Protection Corporation. United Brokerage Services, Inc. offers a wide range of investment products as well as comprehensive financial planning and asset management services to the general public. In late 1988, United chartered and capitalized United Venture Fund, Inc., a West Virginia corporation which has qualified as a Capital Company under the West Virginia Capital Company Act. This subsidiary makes loans and limited equity investments, consistent with the Bank Holding Company Act, that will result in or contribute to new jobs and/or industry in West Virginia. Offices - ------- The headquarters of United are located in United Center at 500 Virginia Street, East, Charleston, West Virginia. The main office of UNB is located at 514 Market Street, Parkersburg, West Virginia. United's corporate offices and UNB's executive offices are also located in Parkersburg at Fifth and Avery Streets. Currently, all of UNB's offices are located in West Virginia. UNB operates three branches in the Parkersburg area, seven branches in the Charleston area, three branches in the Morgantown area, two branches in Vienna, four branches in the Montgomery area, two branches in Ripley, four branches in the Huntington area, four branches in the Beckley area, five offices in the central region of West Virginia, one office in the Danville area, three offices in the Logan area. UNB owns all of these facilities except for two in the Parkersburg area, three in the Charleston area, two in the Beckley area and one in Summersville, all of which are leased under operating leases. UNB also owns and operates five branches throughout West Virginia's northern panhandle. The main facility of UNB's Wheeling office is leased from Ogden Newspapers, Inc. UNB also operates five branch facilities in central West Virginia. UNB owns all five of these offices. Additionally, UNB operates six loan production offices located in Beckley, Bridgeport, Charleston, Martinsburg, Parkersburg, and Teays Valley, West Virginia. United Bank conducts business from an office located at 3801 Wilson Boulevard, Arlington, Virginia with a branch office at 1301 Beverly Road, McLean, Virginia under a lease agreement. 6 Employees - --------- As of December 31, 1996 United and its subsidiaries had approximately 893 full-time equivalent employees and officers. None of these employees is represented by a collective bargaining unit, and management considers employee relations to be excellent. Business of United - ------------------ As a bank holding company registered under the Bank Holding Company Act of 1956, as amended, United's present business is the operation of its bank subsidiaries. As of December 31, 1996, United's consolidated assets approximated $2,326,877,000 and total shareholders' equity approximated $258,514,000. United is permitted to acquire other banks and bank holding companies, as well as thrift institutions. United is also permitted to engage in certain non- banking activities which are closely related to banking under the provisions of the Bank Holding Company Act and the Federal Reserve Board's Regulation Y. Management continues to consider such opportunities as they arise, and in this regard, management from time to time makes inquiries, proposals, offers or expressions of interest as to potential opportunities; although no agreements or understandings to acquire other banks or bank holding companies or nonbanking subsidiaries or to engage in other nonbanking activities, other than those identified herein, presently exist. Business of Subsidiary Banks - ---------------------------- All of United's subsidiary banks are full-service commercial banks and, as such, engage in most types of business permitted by law and regulation. Included among the banking services offered are the acceptance of deposits in checking, savings, time and money market accounts; the making and servicing of personal, commercial, floor plan and student loans; and the making of construction and real estate loans. Also offered are individual retirement accounts, safe deposit boxes, wire transfers and other standard banking products and services. As a part of their lending function, UNB and United Bank offer credit card services including accounts issued under the name of certain correspondent banks. UNB also maintains a trust department which acts as trustee under wills, trust and pension and profit sharing plans, as executors and administrators of estates, and as guardians for estates of minors and incompetents, and in addition performs a variety of investment and security services. UNB trust services are available to customers of affiliate banks. UNB provides services to its correspondent banks such as check clearing, safekeeping and the buying and selling of federal funds. 7 UNB is member of a regional network of automated teller machines known as the MAC ATM network while United Bank participates in the MOST network. Through MAC and MOST, all of United's subsidiary banks are participants in a network known as Cirrus which provides banking on a nationwide basis. Lending Activities - ------------------ United's total loan portfolio, net of unearned income, increased $114,619,000, or 6.6%, to $1,847,605,000, in 1996 and is comprised of commercial, real estate and consumer loans including credit card and home equity loans. Commercial and real estate loans increased $29,962,000 or 13.7% and $92,307,000 or 7.2%, respectively, while consumer loans, net of unearned income, increased $2,350,000 or 1.1%. Commercial Loans - ---------------- The commercial loan portfolio consists of loans to corporate borrowers in small to mid-size industrial and commercial companies, as well as automobile dealers, service, retail and wholesale merchants. Coal mining companies make up an insignificant portion of loans in the portfolio. Collateral securing these loans includes equipment, machinery, inventory, receivables, vehicles and commercial real estate. Commercial loans are considered to contain a higher level of risk than other loan types although care is taken to minimize these risks. Numerous risk factors impact this portfolio including industry specific risks such as economy, new technology, labor rates and cyclicality, as well as customer specific factors, such as cash flow, financial structure, operating controls and asset quality. United diversifies risk within this portfolio by closely monitoring industry concentrations and portfolios to ensure that it does not exceed established lending guidelines. Diversification is intended to limit the risk of loss from any single unexpected economic event or trend. Underwriting standards require a comprehensive review and independent evaluation of virtually all larger balance commercial loans by the loan committee prior to approval with ongoing updates of the loan portfolio. Real Estate Loans - ----------------- Commercial real estate loans consist of commercial mortgages, which generally are secured by nonresidential and multi-family residential properties. Also included in this portfolio are loans that are secured by owner-occupied real estate, but made for purposes other than the construction or purchase of real estate. Commercial real estate loans carry many of the same customers and industry risks as the commercial loan portfolio. Real estate mortgage loans to consumers are secured primarily by a first lien deed of trust. These loans are traditional one-to-four family residential mortgages. The loans generally do not exceed an 80% loan to value ratio at the loan origination date and most are at a variable rate of interest. These loans are considered to contain normal risk. 8 Consumer Loans - -------------- Consumer loans are secured by automobiles, boats, recreational vehicles, and other personal property. Personal loans, home equity, student loans and unsecured credit card receivables are also included as consumer loans. United monitors the risk associated with these types of loans by monitoring such factors as portfolio growth, lending policies and economic conditions. Underwriting standards are continually evaluated and modified based upon these factors. Underwriting Standards - ---------------------- United's loan underwriting guidelines and standards are updated periodically and are presented for approval by each of the respective Boards of Directors of its subsidiary banks. The purpose of the standards and guidelines is to grant loans on a sound and collectible basis; to invest available funds in a safe, profitable manner; to serve the legitimate credit needs of the communities of United's primary market area; and ensure that all loan applicants receive fair and equal treatment in the lending process. It is the intent of the underwriting guidelines and standards to: minimize loan losses by carefully investigating the credit history of each applicant, verify the source of repayment and the ability of the applicant to repay, collateralize those loans in which collateral is deemed to be required, exercise care in the documentation of the application, review, approval, and origination process, and administer a comprehensive loan collection program. The above guidelines are adhered to and subject to the experience, background and personal judgment of the loan officer assigned to the loan application. A loan officer may grant and justify a loan with slight variances from the underwriting guidelines and standards. However, the loan officer may not exceed their respective lending authority without obtaining the prior, proper approval from a superior, a regional supervisor, or the Loan Committee, whichever is deemed appropriate for the nature of the variance. Loan Origination and Processing - ------------------------------- United generally originates loans within the primary market area of its banking subsidiaries. United may from time to time make loans to borrowers and/or on properties outside of its primary market area as an accommodation to its customers. Processing of all loans is centralized in the Charleston, West Virginia office. United with the formation of United Home Lending Service, Inc. has entered the mortgage banking business. As of December 31, 1996, the balance of mortgage loans being serviced by United for others was $137,057,000. Secondary Markets - ----------------- Historically, United had not been in the business of selling or purchasing loans and had not originated loans with the intent to sell them in the secondary market. During 1996, with the acquisition of 9 Eagle Bancorp, Inc. and the formation of United Mortgage Company, Inc., During 1996, United originated $26,157,000 of real estate loans for sale in the secondary market, designated $38,611,000 of existing real estate loans as held for sale, and sold $63,631,000 of loans designated as held for sale in the secondary market. The principal sources of revenue from United's mortgage banking business are: (i) loan origination fees; (ii) gains or losses from the sale of loans, if any; (iii) interest earned on mortgage loans during the period that they are held by United pending sale; (iv) loan servicing fees; and (v) gain or loss on the close out of the hedge instrument used to offset the risk that changes in interest rate may have on the value of United's mortgage loan inventory. Investment Activities - --------------------- United's investment policy stresses the management of the investment securities portfolio, which includes both securities held to maturity and securities available for sale, to maximize return over the long-term in a manner that is consistent with good banking practices and relative safety of principal. United currently does not engage in trading account activity. The Asset/Liability Committee of United is responsible for the coordination and evaluation of the investment portfolio. Sources of funds for investment activities include "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 and FHLB borrowings. Repurchase agreements represent funds which are generally obtained as the result of a competitive bidding process. United's investment portfolio remains comprised largely of U.S. Treasury securities and obligations of U.S. Agencies and Corporations. Obligations of States and Political Subdivisions are comprised of municipal securities with an average quality of not less than an "A" rating. During 1996, United realized net losses of $98,000 from sales in the securities available for sale portfolio. The sales of these securities occurred as United adjusted the securities available for sale portfolio, including those acquired in the Eagle Bancorp, Inc. merger, in order to increase interest income without extending the duration of the portfolio. The proceeds from these sales were reinvested in similar securities yielding a higher rate of return. There were no securities sales in 1995. Additionally, United has used an off-balance-sheet instrument known as an interest rate swap, to further aid in interest rate risk 10 management. The use of the interest rate swap is a cost effective means of synthetically altering the repricing structure of certain balance sheet items. The interest rate swap transaction involves the exchange of a floating interest rate payment based on the one month London inter-bank offered rate (LIBOR) for a fixed rate receipt based on the U. S. three year Treasury note. The net pay and receive amount is calculated on an underlying notional amount without the exchange of the underlying principal amount. The interest rate swap subjects United to market risk associated with changes in interest rates, as well as the risk that the counterparty will fail to perform. Performance risk is considered nominal by virtue of the caliber of the parties involved. Only the interest payments are exchanged, and therefor, cash requirements and exposure to credit risk are significantly less than the notional amount. The interest rate swap was entered into early in 1994 in response to tactical asset/liability management considerations; specifically, in response to declining market interest rates during 1993 and United's net interest margin being compressed due to the asset sensitivity position of the balance sheet. The interest rate swap was to adjust the asset sensitivity to within United's policy of +10% or -10% of earning assets. The interest rate swap was entered into specifically to hedge prime rate indexed loans and swap a variable rate for a fixed rate. At December 31, 1996, the total notional amount of the interest rate swap in effect was only $50 million. The swap matured in February 1997. During 1996, the interest rate swap reduced net interest income by $526,000. This impact was offset by higher net interest revenue generated by the on-balance sheet instruments hedged by the interest rate swap and produced a higher rate of return and net interest margin. United did not have interest rate swaps prior to 1994. For further details, see Interest Rate Sensitivity and the related Interest Rate Sensitivity Gap in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note J to the Consolidated Financial Statements. Additionally, United enters into hedging transactions to offset the risk that a change in interest rates will result in a decrease in the value of United's current mortgage loan inventory or its commitments to originate mortgage loans (the "pipeline"). The pipeline is analyzed on a loan-by-loan basis to estimate the exposure to loss based on the market price, commitment price and time to expiration. The risk of loss is then matched with the appropriate hedge vehicle. United primarily utilizes forward contracts for the delivery of mortgage-backed securities as hedge vehicles. United's policies generally require that it hedge substantially all of its inventory of conforming and government loans and the maximum portion of its pipeline that may close. The mortgage-backed securities that are to be delivered under these contracts are fixed or adjustable-rate, corresponding with the composition of United's inventory and pipeline. The correlation between the price performance of the hedge vehicles and the inventory being hedged is very high due to the similarity of the asset and the related hedge vehicle. At December 31, 1996, United had open commitments 11 amounting to approximately $6,000,000 to sell mortgage-backed securities with varying settlement dates generally not extending beyond March 1997. As such, United is not exposed to significant risk nor will it derive any significant benefit from changes in interest rates on the price of the mortgage loan inventory, net of gains or losses of associated hedge positions. Operating Subsidiaries - ---------------------- During 1996, UNB chartered two operating subsidiaries, United Brokerage Services, Inc. and United Mortgage Company, Inc. United Brokerage Services, Inc. is a fully-disclosed broker/dealer and a registered Investment Advisor with the National Association of Securities Dealers, Inc. and the Securities and Exchange Commission and a member of the Securities Investor Protection Corporation. United Brokerage Services, Inc. offers a wide range of investment products as well as comprehensive financial planning and asset management services to the general public. United Mortgage Company, Inc. was formed in connection with the merger of Eagle Bancorp, Inc. ("Eagle") with and into United and the related merger of First Empire Federal Savings and Loan Association ("First Empire") with and into UNB. In accordance with the merger agreement, UNB requested and received regulatory approval to form and 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. Competition - ----------- United faces a high degree of competition in nearly all of the markets it serves. These markets may generally be defined as Wood, Kanawha, Monongalia, Jackson, Cabell, Hancock, Ohio, Marshall, Gilmer, Lewis, Webster, Boone, Logan, Nicholas, Fayette and Raleigh Counties in West Virginia; Lawrence, Belmont, Jefferson and Washington Counties in Ohio; and Arlington and Fairfax Counties in Virginia, located adjacent to the Washington D.C. area, which is in close proximity to West Virginia's eastern panhandle. United competes in Ohio markets because of the close proximity to the Ohio border of certain subsidiary offices. Included in United's markets are the Parkersburg Metropolitan Statistical Area (MSA), the Charleston MSA, the Huntington MSA, the Wheeling MSA and the Weirton MSA. These represent the five largest West Virginia MSA's. United considers the above counties and MSA's to be the primary market area for the business of its banking subsidiaries. West Virginia banks are permitted unlimited branch banking throughout the state. In addition, interstate acquisitions of and by West Virginia banks and bank holding companies are permissible on a reciprocal basis. West Virginia also allows reciprocal interstate acquisitions by thrift institutions. These conditions serve to intensify competition within United's market. 12 As of December 31, 1996, there were 14 multi-bank holding companies and 37 one-bank holding companies in the State of West Virginia registered with the Federal Reserve System. United presently ranks fourth among these bank holding companies and second among holding companies headquartered in West Virginia based on both asset and deposit size. These holding companies are headquartered in various West Virginia cities and control banks throughout the state, which compete for business as well as for the acquisition of additional banks. Economic Characteristics of Primary Market Area - ----------------------------------------------- Although the market area of the banking subsidiaries encompass a portion of the coal fields located in southern West Virginia, an area of the state which has been economically depressed, the coal related loans in the loan portfolio of the banking subsidiaries constitute less than 2% of United's total loans outstanding. The state of West Virginia has a more diversified economy than it had during the peak periods of coal production with the chemical manufacturing industry accounting for 19% of the entire manufacturing workforce and 33% of the manufacturing wages, according to West Virginia state records. This diversified economy has contributed to the positive trends in the personal income and unemployment rates in recent years as personal income has increased from $14,315 in 1991 to $18,672 in mid-1996 and the state's overall unemployment rate has declined from 10.5% in 1991 to 6.5% in July 1996 -the lowest unemployment rate in nearly 20 years, according to available information from the West Virginia Bureau of Employment Programs. Eleven of the 16 counties within United's primary West Virginia market area rank among the state's top twenty counties in terms of personal income and low unemployment rates. United generally serves the stronger economic areas of the state while maintaining a satisfactory CRA rating. Regulation and Supervision - -------------------------- United, as a bank holding company, is subject to the restrictions of the Bank Holding Company Act of 1956, as amended, and is registered pursuant to its provisions. As such, United is subject to the reporting requirements of and examination by the Board of Governors of the Federal Reserve System ("Board of Governors"). The Bank Holding Company Act prohibits the acquisition by a bank holding company of direct or indirect ownership of more than five percent of the voting shares of any bank within the United States without prior approval of the Board of Governors. With certain exceptions, a bank holding company also is prohibited from acquiring direct or indirect ownership or control of more than five percent of the voting shares of any company which is not a bank, and from engaging directly or indirectly in business unrelated to the business of banking, or managing or controlling banks. 13 The Board of Governors of the Federal Reserve System, in its Regulation Y, permits bank holding companies to engage in non-banking activities closely related to banking or managing or controlling banks. Approval of the Board of Governors is necessary to engage in these activities or to make acquisitions of corporations engaging in these activities. In addition, on a case by case basis, the Board of Governors may approve other non-banking activities. As a bank holding company doing business in West Virginia, United is also subject to regulation and examination by the West Virginia Board of Banking and Financial Institutions (the "West Virginia Banking Board") and must submit annual reports to the department. Further, any acquisition application which United must submit to the Board of Governors must also be submitted to the West Virginia Banking Board for approval. United is also registered under and is subject to the requirements of the Securities Exchange Act of 1934, as amended. UNB, as national banking associations, is subject to supervision, examination and regulation by the Office of the Comptroller of the Currency. UNB is also a member of the Federal Reserve System, and as such, is subject to applicable provisions of the Federal Reserve Act and regulations issued thereunder. United Bank, as a Virginia state member bank, is subject to supervision, examination and regulation by the Federal Reserve System, and as such, is subject to applicable provisions of the Federal Reserve Act and regulations issued thereunder. United Bank is subject to regulation by the Virginia Corporation Commission's Bureau of Financial Institutions. The deposits of United's wholly-owned banking subsidiaries are insured by the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by law. Accordingly, these banks are also subject to regulation by the FDIC. 14 UNITED BANKSHARES, INC. FORM 10-K, PART I Item 3. Legal Proceedings Litigation - ---------- Information relating to litigation on page 33 of the Annual Report to Shareholders for the year ended December 31, 1996, is incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. 15 UNITED BANKSHARES, INC. FORM 10-K, PART II Item 5. Market for Registrant's Common Stock and Related Shareholder Matters 16 Stock - ----- As of December 31, 1996, 20,000,000 shares of common stock, par value $2.50 per share, were authorized for United, of which 15,295,130 were issued, including 205,495 shares held as treasury shares. The outstanding shares are held by approximately 5,217 shareholders of record as of December 31, 1996. The unissued portion of United's authorized common stock (subject to registration approval by the SEC) and the treasury shares are available for issuance as the Board of Directors determines advisable. United offers its shareholders the opportunity to invest dividends in shares of United stock through its dividend reinvestment plan. United has also established stock option plans and a stock bonus plan as incentive for certain eligible officers. While there are no present plans, understandings, arrangements or agreements, except for the above incentive plans, additional shares could be issued for the purpose of raising capital, in connection with acquisitions of other businesses, or for other appropriate purposes. The Board of Directors believes that the availability of authorized but unissued common stock of United is of considerable value if opportunities should arise for the acquisition of another business through the issuance of United's stock. Shareholders do not have preemptive rights, which allows United to issue additional authorized shares without first offering them to current shareholders. United has only one class of stock and all voting rights are vested in the holders of United's stock. On all matters subject to a vote of shareholders, the shareholders of United will be entitled to one vote for each share of common stock owned. Shareholders of United have cumulative voting rights with regard to election of directors. At the present time, no senior securities of United are outstanding, nor does the Board of Directors presently contemplate issuing senior securities. There are no preemptive or conversion rights or, redemption or sinking fund provisions with respect to United's Stock. All of the issued and outstanding shares of United's stock are fully paid and non-assessable. Dividends - --------- The shareholders of United are entitled to receive dividends when and as declared by its Board of Directors. Dividends are paid quarterly. Dividends were $1.24 per share in 1996, $1.17 per share in 1995 and $1.06 per share in 1994. Dividends are paid from funds legally available; therefore, the payment of dividends is subject to the restrictions set forth in the West Virginia Corporation Act. See "Market and Stock Prices of United" for quarterly dividend information. 17 Payment of Dividends by United is dependent upon payment of dividends to it by its subsidiary banks. The ability of national banks to pay dividends is subject to certain limitations imposed by the national banking laws. Generally, the most restrictive provision requires approval by the Office of the Comptroller of the Currency ("OCC") if dividends declared in any year exceed the year's net income, as defined, plus the retained net profits of the two preceding years. Payment of dividends by United's state member bank is regulated by the Federal Reserve System and generally, the prior approval of the Federal Reserve Board ("FRB") is required if the total dividends declared by a state member bank in any calendar year exceeds its net profits, as defined, for that year combined with its retained net profits for the preceding two years. Additionally, prior approval of both the OCC and the FRB is required when a national bank or state member bank has deficit retained earnings but has sufficient current year's net income, as defined, plus the retained net profits of the two preceding years. The OCC and FRB may prohibit dividends if it deems the payment to be an unsafe or unsound banking practice. The OCC has issued guidelines for dividend payments by national banks, emphasizing that proper dividend size depends on the bank's earnings and capital while the FRB has issued similar guidelines pertaining to state member banks. See Note M - Notes to Consolidated Financial Statements, which is incorporated herein by reference. Market and Stock Prices of United - --------------------------------- United Bankshares, Inc. stock is traded over the counter on the National Association of Securities Dealers Automated Quotations System ("NASDAQ") under the trading symbol UBSI. The following table presents the dividends and high and low prices of United's common stock during the periods set forth below: United Historical Basis ------------------- 1997 Dividends High Low ---- --------- ------ ------ First Quarter through February 28, 1997 (1) $34.50 $32.25 1996 ---- Fourth Quarter $0.32 $33.00 $29.25 Third Quarter $0.31 $30.25 $26.25 Second Quarter $0.31 $29.75 $26.75 First Quarter $0.30 $30.00 $28.50 1995 ---- Fourth Quarter $0.30 $31.00 $29.00 Third Quarter $0.29 $30.50 $26.25 Second Quarter $0.29 $27.75 $25.25 First Quarter $0.29 $26.00 $23.25 (1) On February 27, 1997, United declared a dividend of $0.33 per share, payable April 1, 1997, to shareholders of record as of March 14, 1997. 18 The high and low prices listed above are based upon information available to United's management from NASDAQ listings. No attempt has been made by United's management to ascertain the prices for every sale of its stock during the periods indicated. However, based on the information available, United's management believes that the prices fairly represent the amounts at which United's stock was traded during the periods indicated. 19 UNITED BANKSHARES, INC. FORM 10-K, PART II Item 6. Selected Financial Data Information relating to selected financial data on page 41 of the Annual Report to Shareholders for the year ended December 31, 1996, is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 42 through 54 inclusive, of the Annual Report to Shareholders for the year ended December 31, 1996, is incorporated herein by reference. 20 UNITED BANKSHARES, INC. AND SUBSIDIARIES DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST RATES AND INTEREST DIFFERENTIAL: The following table shows the daily average balance of major categories of assets and liabilities for each of the three years ended December 31, 1996, 1995 and 1994 with the interest and rate earned or paid on such amount. Year Ended Year Ended Year Ended December 31 December 31 December 31 1996 1995 1994 ---------------------------------- ---------------------------------- ------------------------------ (Dollars in Average Avg. Average Avg. Average Avg. Thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate ----------- ---------- --------- ----------- ----------- -------- ---------- --------- -------- ASSETS Earning assets: Federal funds sold and securities purchased under agreements to resell and other short- term investments $ 2,996 $ 157 5.24% $ 18,365 $ 1,107 6.03% $ 15,325 $ 703 4.59% Investment Securities: Taxable 292,339 18,455 6.31% 297,963 18,516 6.21% 354,930 19,397 5.47% Tax exempt (1) 38,282 3,603 9.41% 46,924 4,560 9.72% 52,709 5,429 10.30% ---------- ---------- -------- ---------- ---------- ------- ---------- --------- ------- Total Securities 330,621 22,058 6.67% 344,887 23,076 6.69% 407,639 24,826 6.09% Loans, net of unearned income (1) (2) 1,786,376 152,615 8.54% 1,673,568 144,594 8.64% 1,556,844 125,184 8.04% Allowance for possible loan losses (22,660) (22,685) (21,723) ---------- ---------- ---------- Net Loans 1,763,716 8.65% 1,650,883 8.76% 1,535,121 8.15% ---------- ---------- -------- ----------- ---------- ------- ---------- --------- ------- Total earning assets 2,097,333 174,830 8.34% 2,014,135 168,777 8.38% 1,958,085 150,713 7.70% ---------- ---------- --------- Other assets 166,095 148,625 149,391 -------- ---------- ---------- TOTAL ASSETS $2,263,428 $2,162,760 $2,107,476 ========== ========== ========== LIABILITIES Interest-Bearing Funds: Interest-bearing deposits $1,536,641 $ 63,917 4.16% $1,510,880 $ 62,231 4.12% $1,465,203 $ 49,136 3.35% Federal funds purchased, repurchase agreements and other short-term borrowings 87,015 3,770 4.33% 83,016 3,809 4.59% 78,699 2,571 3.27% FHLB advances 99,184 5,498 5.54% 69,580 4,127 5.93% 78,701 3,965 5.04% ---------- ---------- -------- ---------- ---------- ------- ---------- --------- ------- Total Interest-Bearing Funds 1,722,840 73,185 4.25% 1,663,476 70,167 4.22% 1,622,603 55,672 3.43% ---------- ---------- --------- Demand deposits 251,641 234,455 240,062 Accrued expenses and other liabilities 34,292 28,115 22,524 ---------- ---------- ---------- TOTAL LIABILITIES 2,008,773 1,926,046 1,885,189 Shareholders' Equity 254,655 236,714 222,287 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,263,428 $2,162,760 $2,107,476 ========== ========== ========== NET INTEREST INCOME $ 101,645 $ 98,610 $ 95,041 ========== ========== ========= INTEREST SPREAD 4.09% 4.16% 4.27% NET INTEREST MARGIN 4.85% 4.90% 4.85% (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. 21 UNITED BANKSHARES, INC. AND SUBSIDIARIES RATE/VOLUME ANALYSIS The following table sets forth a summary of the changes in interest earned and interest paid detailing the amounts attributable to (i) changes in volume (change in the average volume times the prior year's average rate), (ii) changes in rate (change in the average rate times the prior year's average volume), and (iii) changes in rate/volume (change in the average volume times the change in average rate). 1996 Compared to 1995 1995 Compared to 1994 ------------------------------------- -------------------------------------- Increase (Decrease) Due to Increase (Decrease) Due to ------------------------------------- -------------------------------------- Rate/ Rate/ Volume Rate Volume Total Volume Rate Volume Total ------- -------- ------ ------- ------- -------- ----- ------- (In thousands) (In thousands) Interest income: Federal funds sold, securities purchased under agreements to resell and other short-term investments ($926) ($ 145) $ 121 ($ 950) $ 139 $ 221 $ 44 $ 404 Investment securities: Taxable (349) 294 (6) (61) (3,113) 2,659 (427) (861) Tax exempt (1) (840) (144) 27 (957) (596) (307) 34 (869) Loans (1),(2) 9,881 (1,741) (119) 8,021 9,440 9,271 699 19,410 ------- -------- ----- ------- ------- -------- ----- ------- TOTAL INTEREST INCOME 7,766 (1,736) 23 6,053 5,870 11,844 350 18,064 ------- -------- ----- ------- ------- -------- ----- ------- Interest expense: Interest-bearing deposits $ 1,061 $ 641 $ 11 $ 1,686 1,532 11,214 350 13,096 Federal funds purchased, repurchase agreements, and other short-term borrowings 183 (212) (10) (39) 141 1,040 56 1,237 FHLB advances 1,756 (270) (115) 1,371 (460) 703 (81) 162 ------- -------- ----- ------- ------- -------- ----- ------- TOTAL INTEREST EXPENSE 3,000 132 (114) 3,018 1,213 12,957 325 14,495 ------- -------- ----- ------- ------- -------- ----- ------- NET INTEREST INCOME $ 4,766 ($1,868) $ 137 $ 3,035 $ 4,657 ($1,113) $ 25 $ 3,569 ======= ======== ===== ======= ======= ======== ===== ======= (1) Yields and interest income on tax exempt loans and investment securities are computed on a fully tax-equivalent basis using the statutory federal income tax rate of 35%. (2) Nonaccruing loans are included in the daily average loan amounts outstanding. 22 UNITED BANKSHARES, INC. AND SUBSIDIARIES LOAN PORTFOLIO TYPES OF LOANS The following is a summary of loans outstanding at December 31: 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- (In thousands) Commercial, financial and agricultural $ 248,762 $ 218,800 $ 208,491 $ 218,559 $ 218,370 Real estate mortgage 1,329,661 1,267,889 1,194,805 1,003,546 887,444 Real estate construction 42,343 21,808 17,523 14,651 16,632 Consumer 232,004 229,457 237,928 233,698 250,527 Less: Unearned interest (5,165) (4,968) (6,472) (7,880) (9,390) ---------- ---------- ---------- ---------- ---------- Total loans 1,847,605 1,732,986 1,652,275 1,462,574 1,363,583 Allowance for possible loan losses (22,283) (22,545) (22,304) (20,975) (17,485) ---------- ---------- ---------- ---------- ---------- TOTAL LOANS, NET $1,825,322 $1,710,441 $1,629,971 $1,441,599 $1,346,098 ========== ========== ========== ========== ========== At December 31, 1996, real estate mortgage loans include $954,482,000 in single family residential real estate loans and $355,431,000 in commercial real estate loans. The following is a summary of loans outstanding as a percent of total loans at December 31: 1996 1995 1994 1993 1992 ------- ------- ------- ------- ------- Commercial, financial and agricultural 13.46% 12.59% 12.57% 14.86% 15.90% Real estate mortgage 71.97% 72.96% 72.03% 68.25% 64.64% Real estate construction 2.29% 1.25% 1.06% 1.00% 1.21% Consumer 12.28% 13.20% 14.34% 15.89% 18.25% ------ ------ ------ ------ ------ TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% ====== ====== ====== ====== ====== REMAINING LOAN MATURITIES The following table shows the maturity of commercial, financial, and agricultural loans and real estate construction outstanding as of December 31, 1996: Less Than One To Greater Than One Year Five Years Five Years Total --------- ---------- ------------ -------- Commercial, financial and agricultural $ 64,403 $92,050 $92,309 $248,762 Real estate construction 42,343 42,343 -------- ------- ------- -------- Total $106,746 $92,050 $92,309 $291,105 ======== ======= ======= ======== 23 UNITED BANKSHARES, INC. AND SUBSIDIARIES At December 31, 1996, commercial, financial and agricultural loans maturing within one to five years and in more than five years are interest sensitive as follows: One to Over Five Years Five Years ---------- ---------- (In thousands) Outstanding with fixed interest rates $53,066 $21,324 Outstanding with adjustable rates 38,984 70,985 ------- ------- $92,050 $92,309 ======= ======= There were no real estate construction loans with maturities greater than one year. RISK ELEMENTS Nonperforming Loans Nonperforming loans include loans on which no interest is currently being accrued, loans which are past due 90 days or more as to principal or interest payments, and loans for which the terms have been modified due to a deterioration in the financial position of the borrower. Management is not aware of any other significant loans, groups of loans, or segments of the loan portfolio not included below where there are serious doubts as to the ability of the borrowers to comply with the present loan repayment terms. The following table summarizes nonperforming loans for the indicated periods. December 31 ------------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------ ------- ------- (In thousands) Nonaccrual loans $ 4,361 $ 6,298 $4,719 $ 9,687 $13,382 Troubled debt restructurings 2,453 1,355 Loans which are contractually past due 90 days or more as to interest or principal, and are still accruing interest 5,831 4,692 2,851 3,080 2,516 ------- ------- ------ ------- ------- TOTAL $10,192 $10,990 $7,570 $15,220 $17,253 ======= ======= ====== ======= ======= Loans are designated as nonaccrual when, in the opinion of management, the collection of principal or interest is doubtful. This generally occurs when a loan becomes 90 days past due as to principal or interest unless the loan is both well secured and in the process of collection. When interest accruals are discontinued, unpaid interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for loan losses. See Note D to the consolidated financial statements for additional information regarding nonperforming loans and credit risk concentration. 24 UNITED BANKSHARES, INC. AND SUBSIDIARIES INVESTMENT PORTFOLIO The following is a summary of the amortized cost of investment securities held to maturity at December 31,: 1996 1995 1994 -------- -------- -------- (In thousands) U.S. Treasury and other U.S. Government agencies and corporations $ 77,704 $ 15,897 $ 87,848 States and political subdivisions 36,136 43,324 53,297 Mortgage-backed securities 54,977 56,416 99,144 Other 1,885 6,252 11,112 -------- -------- -------- TOTAL INVESTMENT SECURITIES $170,702 $121,889 $251,401 ======== ======== ======== The following is a summary of the amortized cost of available for sale securities at December 31,: 1996 1995 1994 -------- -------- -------- (In thousands) U.S. Treasury securities and obligations of U.S. Government agencies and corporations $115,018 $150,460 $103,292 Mortgage-backed securities 24,982 30,036 2,663 Marketable equity securities 3,655 2,662 1,529 Other 16,506 13,808 13,898 -------- -------- -------- TOTAL AVAILABLE-FOR-SALE SECURITIES $160,161 $194,696 $121,382 ======== ======== ======== The fair value of mortgage-backed securities is affected by changes in interest rates and prepayment risk. When interest rates decline, prepayment speeds generally accelerate due to homeowners refinancing their mortgages at lower interest rates. This may result in the proceeds being reinvested at lower interest rates. Rising interest rates may decrease the assumed prepayment speed. Slower prepayment speeds may extend the maturity of the security beyond its assumed prepayment speed. Therefore, investors may not be able to invest at current higher market rates due to the extended expected maturity of the security. United had a net unrealized loss of $977,000 on all mortgage-backed securities at December 31, 1996, as compared to a net unrealized loss of $158,000 at December 31, 1995. This decrease in value from 1995 to 1996 is consistent with the increase in interest rates during 1996. The following table sets forth the maturities of all securities at December 31, 1996, and the weighted average yields of such securities (calculated on the basis of the cost and the effective yields weighted for the scheduled maturity of each security). After 1 But After 5 But Within 1 Year Within 5 Years Within 10 Years After 10 Years --------------- ---------------- ---------------- --------------- Amount Yield Amount Yield Amount Yield Amount Yield ------- ------ -------- ------ -------- ------ ------- ------ (In thousands) U.S. Treasury and other U.S. Government agencies and corporations $29,006 5.64% $135,940 6.27% $68,670 7.53% $38,592 6.66% States and political subdivisions (1) 5,142 9.53% 12,277 9.10% 8,820 9.09% 9,897 9.13% Other 6,830 3.88% 2,726 7.74% 126 6.47% 14,305 6.27% (1) Tax-equivalent adjustments (using a 35% federal rate) have been made in calculating yields on obligations of states and political subdivisions. NOTE: There are no securities with a single issuer whose book value in the aggregate exceeds 10% of total shareholders' equity. 25 UNITED BANKSHARES, INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS The following table shows the distribution of United's short-term borrowings and the weighted average interest rates thereon at the end of each of the last three years. Also provided are the maximum amount of borrowings and the average amounts of borrowings as well as weighted average interest rates for the last three years. Federal Securities Sold Funds Under Agreements Purchased to Repurchase ---------- ----------------- (In thousands) At December 31: 1996 $ 4,491 $ 71,091 1995 26,378 55,789 1994 4,582 67,227 Weighted average interest rate at year end: 1996 6.8% 4.2% 1995 5.9% 4.4% 1994 5.7% 4.1% Maximum amount outstanding at any month's end: 1996 $33,510 $ 79,664 1995 33,941 81,720 1994 25,089 103,486 Average amount outstanding during the year: 1996 $20,685 $ 66,463 1995 12,264 70,752 1994 10,178 68,521 Weighted average interest rate during the year: 1996 5.6% 4.0% 1995 6.0% 4.3% 1994 4.3% 3.1% At December 31, 1996, repurchase agreements include $65,561,000 in overnight accounts. The remaining balance principally consists of agreements having maturities ranging from 2-90 days. The rates offered on these funds vary according to movements in the federal funds and short-term investment market rates. 26 UNITED BANKSHARES, INC. AND SUBSIDIARIES DEPOSITS The average daily amount of deposits and rates paid on such deposits is summarized for the years ended December 31: 1996 1995 1994 ----------------- ---------------- -------------- Amount Rate Amount Rate Amount Rate --------- ---- -------- ---- --------- ---- (In thousands) Noninterest bearing demand deposits $ 251,641 $ 234,455 $ 240,062 Interest bearing demand deposits 127,867 2.50% 268,108 2.33% 285,354 2.43% Savings deposits 581,117 2.69% 464,107 3.16% 537,783 2.99% Time deposits 827,657 5.45% 778,665 5.31% 642,066 4.06% ---------- ---------- ---------- TOTAL $1,788,282 4.16% $1,745,335 4.12% $1,705,265 3.35% ========== ========== ========== Maturities of time certificates of deposit of $100,000 or more outstanding at December 31, 1996 are summarized as follows: (In thousands) 3 months or less $ 41,124 Over 3 through 6 months 30,412 Over 6 through 12 months 32,333 Over 12 months 34,567 -------- TOTAL $138,436 ======== RETURN ON EQUITY AND ASSETS The following table shows selected consolidated operating and capital ratios for each of the last three years ended December 31: 1996 1995 1994 ------ ------ ------ Return on average assets 1.35% 1.52% 1.44% Return on average equity 11.98% 13.86% 13.67% Dividend payout ratio (1) 58.49% 49.21% 50.61% Average equity to average assets ratio 11.25% 10.94% 10.55% (1) Based on historical results of United before the effects of restatements for pooling of interests business combinations. 27 UNITED BANKSHARES, INC. AND SUBSIDIARIES SUMMARY OF LOAN LOSS EXPERIENCE The following table summarizes United's loan loss experience for each of the five years ended December 31: 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- (In thousands) Balance of allowance for possible loan losses at beginning of year $ 22,545 $ 22,304 $ 20,975 $ 17,485 $ 15,114 Allowance of purchased company at date of acquisition 1,017 504 2,784 Loans charged off: Commercial, financial and agricultural 2,207 1,952 708 1,088 3,108 Real estate 230 722 82 711 1,537 Real estate construction Consumer and other 1,087 950 980 1,015 1,304 ---------- ---------- ---------- ---------- ---------- TOTAL CHARGE-OFFS 3,524 3,624 1,770 2,814 5,949 Recoveries: Commercial, financial and agricultural 219 189 577 438 168 Real estate 135 65 13 231 154 Real estate construction Consumer and other 298 274 307 301 406 ---------- ---------- ---------- ---------- ---------- TOTAL RECOVERIES 652 528 897 970 728 NET LOANS CHARGED OFF 2,872 3,096 873 1,844 5,221 Addition to allowance (1) 2,610 2,320 2,202 4,830 4,808 ---------- ---------- ---------- ---------- ---------- BALANCE OF ALLOWANCE FOR POSSIBLE LOAN LOSSES AT END OF YEAR $ 22,283 $ 22,545 $ 22,304 $ 20,975 $ 17,485 ========== ========== ========== ========== ========== Totals loans outstanding at the end of period $1,847,605 $1,732,986 $1,652,275 $1,462,574 $1,363,583 Average loans outstanding during period (net of unearned income) $1,786,376 $1,673,568 $1,556,844 $1,402,609 $1,219,039 Net charge-offs as a percentage of average loans outstanding 0.16% 0.18% 0.06% 0.13% 0.43% Allowance for possible loan losses as a percentage of nonperforming loans 218.6% 205.1% 294.6% 137.8% 101.3% (1) The amount charged to operations and the related balance in the allowance for possible loan losses is based upon periodic evaluations of the loan portfolio by management. These evaluations consider several factors including, but not limited to, general economic conditions, loan portfolio composition, prior loan loss experience and management's estimation of future potential losses. Quarterly reviews of individual loans as well as the loan portfolio as a whole are made by management and the credit department. Management performs extensive procedures in granting and monitoring loans on a continual basis. Further, management believes that the allowance for loan losses is adequate to absorb anticipated losses. 28 UNITED BANKSHARES, INC. AND SUBSIDIARIES SUMMARY OF LOAN LOSS EXPERIENCE--Continued Allocation of allowance for possible loan losses at December 31,: 1996 1995 1994 1993 1992 ------ ------ ------ ------- ------- Commercial, financial and agricultural $7,175 $6,891 $7,526 $ 8,109 $ 6,406 Real estate 667 771 613 476 1,375 Real estate construction Consumer and other 1,072 1,484 1,313 1,733 5,481 ------ ------ ------ ------- ------- Total $8,914 $9,146 $9,452 $10,318 $13,262 ====== ====== ====== ======= ======= The portion of the allowance for loan losses that is not specifically allocated to individual credits has been apportioned among the separate loan portfolios based on the relative risk of each portfolio. % of Allowance per Category To Total Allocated Allowance - ------------------------------ 1996 1995 1994 1993 1992 ------ ------- ------- ------- ------- Commercial, financial and agricultural 80.49% 74.62% 79.62% 78.59% 48.30% Real estate 7.48% 8.66% 6.49% 4.61% 10.37% Real estate construction Consumer and other 12.03% 16.72% 13.89% 16.80% 41.33% ------ ------ ------ ------ ------ Total 100.00% 100.00% 100.00% 100.00% 100.00% ====== ====== ====== ====== ====== 29 UNITED BANKSHARES, INC. FORM 10-K, PART II Item 8. Financial Statements and Supplementary Data (a) -- FINANCIAL STATEMENTS REQUIRED BY REGULATION S-X Information relating to financial statements on pages 11 through 40 inclusive of the Annual Report to Shareholders for the year ended December 31, 1996, is incorporated herein by reference. (b) -- SUPPLEMENTARY FINANCIAL INFORMATION (1) Selected Quarterly Financial Data Information relating to selected quarterly financial data on page 40 of the Annual Report to Shareholders for the year ended December 31, 1996, is incorporated herein by reference. (2) Information on the Effects of Changing Prices Information relating to effects of changing prices on page 47 of the Annual Report to Shareholders for the year ended December 31, 1996, is incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES This item is omitted since it is not applicable. 30 UNITED BANKSHARES, INC. FORM 10-K, PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors and executive officers of the registrant on pges 2 through 7 inclusive, of the Proxy Statement for the 1997 Annual Shareholders' Meeting is incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION Information regarding executive compensation on pages 8 through 11 inclusive, of the Proxy Statement for the 1997 Annual Shareholders' Meeting is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners and management on pages 2 through 6 inclusive, of the Proxy Statement for the 1997 Annual Shareholders' Meeting is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions on pages 2, 3, 6 and 14 of the Proxy Statement for the 1997 Annual Shareholders' Meeting is incorporated herein by reference. The following discussion satisfies the reporting requirements of Items 10 through 13. 31 UNITED BANKSHARES, INC. FORM 10-K, PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of Documents Filed as Part of This Report: (1) Financial Statements The financial statements listed below are incorporated herein by reference from the Annual Report to Shareholders for the year ended December 31, 1996 at Item 8a. Page references are to such Annual report. Financial Statements: Page Reference - --------------------- -------------- Report of Independent Auditors ................................. 11 Consolidated Balance Sheets .................................... 12 Consolidated Statements of Income .............................. 13 Consolidated Statements of Changes in Shareholders' Equity...... 14 Consolidated Statements of Cash Flows........................... 15 Notes to Consolidated Financial Statements...................... 16 (2) Financial Statement Schedules United is not filing separate financial statement schedules because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements or notes thereto. (3) Exhibits Required by item 601 Listing of Exhibits -- See the Exhibits' Index on page 34 of this Form 10-K. (b) Reports on Form 8-K There were no reports filed on Form 8-K for the quarter ended December 31, 1996. (c) Exhibits The exhibits to this Form 10-K begin on page 37. (d) Consolidated Financial Statement Schedules -- All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or pertain to items as to which the required disclosures have been made elsewhere in the financial statements and notes thereto, and therefor have been omitted. 32 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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) By /s/ Richard M. Adams -------------------------------- Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Richard M. Adams Chairman of the Board, March 27, 1997 - ----------------------------- Director, Chief Executive Officer /s/ I. N. Smith President and Director March 27, 1997 - ----------------------------- /s/ Steven E. Wilson March 27, 1997 - ----------------------------- Chief Financial Officer Chief Accounting Officer /s/ William C. Pitt, III Director March 27, 1997 - ----------------------------- /s/ H. Smoot Fahlgren Director March 27, 1997 - ----------------------------- /s/ Russell L. Isaacs Director March 27, 1997 - ----------------------------- /s/ F. T. Graff, Jr. Director March 27, 1997 - ----------------------------- /s/ Warren A. Thornhill, III Director March 27, 1997 - ----------------------------- /s/ H. L. Wilkes Director March 27, 1997 - ----------------------------- /s/ Robert P. McLean Director March 27, 1997 - ----------------------------- /s/ G. Ogden Nutting Director March 27, 1997 - ----------------------------- /s/ Harry L. Buch Director March 27, 1997 - ----------------------------- /s/ Robert G. Astorg Director March 27, 1997 - ----------------------------- /s/ C. E. Goodwin Director March 27, 1997 - ----------------------------- 33 SIGNATURES (continued) Signatures Title Date /s/ P. Clinton Winter, Jr. Director March 27, 1997 - ------------------------------- /s/ Douglass H. Adams Director March 27, 1997 - ------------------------------- /s/ R. Terry Butcher Director March 27, 1997 - ------------------------------- /s/ James W. Word, Jr. Director March 27, 1997 - ------------------------------- 34 UNITED BANKSHARES, INC. FORM 10-K INDEX TO EXHIBITS Item 14. S-K Item 601 Sequential Page Description Table Reference Number (a) - ----------- --------------- --------------- Articles of Incorporation and Bylaws: (3) (a) Bylaws (g) (b) Articles of Incorporation (f) Investments (4) N/A Voting Trust Agreement (9) N/A Material Contracts (10) (a) Employment Agreement with I. N. Smith, Jr. (b) (b) Employment Agreement with Richard M. Adams (e) (c) Lease on Branch Office in Charleston Town Center, Charleston, West Virginia (b) (d) Lease on United Center, Charleston, West Virginia (h) (e) Lease with Polymerland, Inc. on UNB Square (h) (f) Lease and Agreement between Valley Savings and Loan Company (Lessor) and Dorothy Adams, Richard M. Adams and Douglass H. Adams (Lessees) (c) (g) Agreement between Dorothy D. Adams (Lessors) and Valley Savings and Loan Company (Lessees) (c) S-K Item 601 Sequential Page Description Table Reference Number (a) - ----------- --------------- --------------- (h) Employment Contract with Douglass H. Adams (d) (I) Employment Contract with Thomas A. McPherson (d) (j) Data processing contract with FISERV (k) (k) Supplemental Retirement Contract with Richard M. Adams (i) (l) Supplemental Retirement Contract with Douglass H. Adams (i) (m) Executive Officer Change of Control Agreements (j) (n) Data processing contract with ALLTELL 54 Statement Re: Computation of Per Share Earnings (11) 105 Statement Re: Computation of Ratios (12) 106 Annual Report to Security Holders, et al. (13) 78 Letter Re: Change in accounting principles (18) N/A Previously Unfiled Documents (19) N/A Subsidiaries of the Registrant (22) 107 Published Report Regarding Matters Submitted to a Vote of Security Holders (23) N/A Consent of Ernst & Young LLP (23) 108 Power of Attorney (25) N/A Financial Data Schedule (27) 109 Additional Exhibits: (28) N/A Footnotes - --------- (a) N/A = Not Applicable (b) Incorporated into this filing by reference to Exhibit 10 of the 1985 Form 10-K for Intermountain Bankshares, Inc., File No. 0-12356 (c) Incorporated into this filing by reference to Exhibit 10 of the 1986 Form 10-K for United Bankshares, Inc., File No. 0-13322 (d) Incorporated into this filing by reference to Part II of Form S-4 Registration Statement of United Bankshares, Inc., Registration No. 33-19968 filed February 3, 1988 (e) Incorporated into this filing by reference to Exhibits to the 1988 10-K for United Bankshares, Inc., File No. 0-13322 (f) Incorporated into this filing by reference to Exhibits to the 1989 10-K for United Bankshares, Inc., File No. 0-13322 (g) Incorporated into this filing by reference to Exhibits to the 1990 10-K for United Bankshares, Inc., File No. 0-13322 (h) Incorporated into this filing by reference to Exhibits to the 1991 10-K for United Bankshares, Inc., File No. 0-13322 (i) Incorporated into this filing by reference to Exhibits to the 1992 10-K for United Bankshares, Inc., File No. 0-13322 (j) Incorporated into this filing by reference to Exhibits to the 1993 10-K for United Bankshares, Inc., File No. 0-13322 (k) Incorporated into this filing by reference to Exhibits to the 1994 10-K as amended by Form 10K/A filed February 8, 1996, for United Bankshares, Inc., File No. 0-13322