UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2001
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) 424-8800
--------------
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; 41,528,854 shares outstanding as of April
30, 2001.
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, 2001 and December 31, 2000................................................. 6
Consolidated Statements of Income (Unaudited) for the
Three Months Ended March 31, 2001 and 2000........................................... 7
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited) for the Three Months Ended March 31, 2001................................ 8
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2001 and 2000 .................................. 9
Notes to Consolidated Financial Statements .......................................... 10
Information required by Item 303 of Regulation S-K
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations........................................... 19
-----------------------------------
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. Not Applicable
- -------------------------
Item 2. Changes in Securities............................................. Not Applicable
- -----------------------------
Item 3. Defaults Upon Senior Securities .................................. Not Applicable
- ---------------------------------------
2
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS--Continued
Page
----
Item 4. Submission of Matters to a Vote
-------------------------------
of Security Holders............................................................... Not Applicable
-------------------
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
None
(b) Reports on Form 8-K
On April 20, 2001, United Bankshares, Inc. filed a Current Report
under Items 5 and 7 to report the results of operations for the
first quarter of 2001.
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 11, 2001 /s/ Richard M. Adams
----------------------- -----------------------------------
Richard M. Adams, Chairman of
the Board and Chief Executive
Officer
Date May 11, 2001 /s/ Steven E. Wilson
---------------------- -----------------------------------
Steven E. Wilson, Executive
Vice President, Treasurer,
Secretary and Chief Financial
Officer
4
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
The March 31, 2001 and December 31, 2000, consolidated balance sheets of United
Bankshares, Inc. and Subsidiaries, and the related consolidated statements of
income for the three months ended March 31, 2001 and 2000, and the related
consolidated statement of changes in shareholders' equity for the three months
ended March 31, 2001, and the related condensed consolidated statements of cash
flows for the three months ended March 31, 2001 and 2000, and the notes to
consolidated financial statements appear on the following pages.
5
CONSOLIDATED BALANCE SHEETS (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except par value) March 31 December 31
2001 2000
----------------------------------
Assets
Cash and due from banks $ 107,376 $ 142,801
Interest-bearing deposits with other banks 1,325 884
Federal funds sold 46,875 1,125
----------------------------------
Total cash and cash equivalents 155,576 144,810
Securities available for sale at estimated fair value (amortized
cost-$1,001,808 at March 31, 2001 and $865,363 at December 31, 2000) 1,014,729 865,266
Securities held to maturity (estimated fair value-$289,409 at
March 31, 2001 and $378,405 at December 31, 2000) 288,884 380,068
Loans held for sale 239,148 203,831
Loans
Commercial, financial, and agricultural 574,158 564,887
Real estate:
Single family residential 1,314,107 1,352,955
Commercial 701,971 711,054
Construction 185,846 164,505
Other 84,536 84,742
Installment 315,401 319,351
----------------------------------
3,176,019 3,197,494
Less: Unearned income (4,173) (5,000)
----------------------------------
Loans net of unearned income 3,171,846 3,192,494
Less: Allowance for loan losses (41,191) (40,532)
----------------------------------
Net loans 3,130,655 3,151,962
Bank premises and equipment 43,800 44,481
Accrued interest receivable 34,230 36,000
Other assets 77,782 78,129
----------------------------------
TOTAL ASSETS $4,984,804 $4,904,547
==================================
Liabilities
Domestic deposits:
Noninterest-bearing $ 541,626 $ 539,415
Interest-bearing 2,921,075 2,852,034
----------------------------------
Total deposits 3,462,701 3,391,449
Borrowings:
Federal funds purchased 7,450 15,720
Securities sold under agreements to repurchase 329,283 313,349
Federal Home Loan Bank borrowings 681,446 706,512
Other borrowings 1,018 4,647
Accrued expenses and other liabilities 57,822 42,000
----------------------------------
TOTAL LIABILITIES 4,539,720 4,473,677
Shareholders' equity
Common stock, $2.50 par value; Authorized-100,000,000 shares; issued-43,381,769
at March 31, 2001 and December 31, 2000, including 1,794,540 and 1,616,498
shares in treasury at March 31, 2001 and December
31, 2000, respectively 108,454 108,454
Surplus 84,396 85,032
Retained earnings 288,860 278,682
Accumulated other comprehensive income (loss) 3,621 (4,964)
Treasury stock, at cost (40,247) (36,334)
----------------------------------
TOTAL SHAREHOLDERS' EQUITY 445,084 430,870
----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,984,804 $4,904,547
==================================
See notes to consolidated unaudited financial statements.
6
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data) Three Months Ended
March 31
----------------------------------
2001 2000
----------------------------------
Interest income
Interest and fees on loans $ 71,142 $ 69,843
Interest on federal funds sold and other short-term investments 247 112
Interest and dividends on securities:
Taxable 17,981 20,735
Tax-exempt 2,627 2,578
----------------------------------
Total interest income 91,997 93,268
Interest expense
Interest on deposits 33,150 29,046
Interest on short-term borrowings 3,816 3,887
Interest on Federal Home Loan Bank advances 10,811 13,609
----------------------------------
Total interest expense 47,777 46,542
----------------------------------
Net interest income 44,220 46,726
Provision for loan losses 2,499 2,547
----------------------------------
Net interest income after provision for loan losses 41,721 44,179
Other income
Income from mortgage banking operations 5,225 3,383
Service charges, commissions, and fees 6,017 5,093
Trust department income 2,015 1,692
Security gains 142 318
Other income 546 315
----------------------------------
Total other income 13,945 10,801
Other expense
Salaries and employee benefits 14,483 13,739
Net occupancy expense 2,658 3,161
Other expense 9,855 11,243
----------------------------------
Total other expense 26,996 28,143
----------------------------------
Income before income taxes 28,670 26,837
Income taxes 9,318 8,849
----------------------------------
Net income $ 19,352 $ 17,988
==================================
Earnings per common share:
Basic $ 0.46 $ 0.43
==================================
Diluted $ 0.46 $ 0.42
==================================
Dividends per common share $ 0.22 $ 0.21
==================================
Average outstanding shares:
Basic 41,703,350 42,272,860
Diluted 42,020,236 42,657,425
See notes to consolidated unaudited financial statements.
7
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
Three Months Ended March 31, 2001
------------------------------------------------------------------------------------------
Common Stock Accumulated
------------------------- Other Total
Par Retained Comprehensive Treasury Shareholders'
Shares Value Surplus Earnings Income (Loss) Stock Equity
------------------------------------------------------------------------------------------
Balance at January 1, 2001 43,381,769 $ 108,454 $85,032 $278,682 ($4,964) ($36,334) $430,870
Comprehensive income (loss):
Net income - - - 19,352 - - 19,352
Other comprehensive income
(loss), net of tax:
Unrealized gains on
securities of $8,555 net
of reclassification
adjustment for gains included
in net income of $92 - - - - 8,463 - 8,463
Amortization of the unrealized
loss for securities transferred
from the available-for-sale to
the held-to-maturity
investment portfolio - - - - 122 - 122
----------------
Total comprehensive income 27,937
Purchase of treasury stock
(225,000 shares) - - - - - (4,967) (4,967)
Cash dividends ($0.22 per share) - - - (9,174) - - (9,174)
Common stock options exercised
(46,958 shares) - - (636) - - 1,054 418
------------------------------------------------------------------------------------------
Balance at March 31, 2001 43,381,769 $ 108,454 $84,396 $288,860 $3,621 ($40,247) $445,084
==========================================================================================
See notes to consolidated unaudited financial statements
8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands)
Three Months Ended
March 31
---------------------------
2001 2000
---------------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $ (1,869) $ 32,742
INVESTING ACTIVITIES
Proceeds from maturities and calls of investment securities 23,702 5,931
Purchases of investment securities (1,000) (110)
Proceeds from sales of securities available for sale 16,048 72,221
Proceeds from maturities and calls of securities available for sale 49,248 32,077
Purchases of securities available for sale (132,862) (36,023)
Net purchases of bank premises and equipment (610) (595)
Net cash paid in branch divestiture (8,644)
Net change in loans 20,643 (62,787)
---------------------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (33,475) 10,714
FINANCING ACTIVITIES
Cash dividends paid (9,174) (8,964)
Proceeds from exercise of stock options 418 1,133
Acquisition of treasury stock (4,967) (11,139)
Repayment of Federal Home Loan Bank borrowings (25,156) (590,159)
Proceeds from Federal Home Loan Bank borrowings 90 551,390
Changes in:
Deposits 80,864 13,520
Federal funds purchased, securities sold under agreements
to repurchase and other borrowings 4,035 (48,889)
---------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 46,110 (93,108)
---------------------------
Increase (decrease) in cash and cash equivalents 10,766 (49,652)
Cash and cash equivalents at beginning of year 144,810 159,808
---------------------------
Cash and cash equivalents at end of period $155,576 $110,156
===========================
See notes to consolidated unaudited 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 statements do 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 2000 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 June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, (SFAS No. 133), "Accounting for Derivative Instruments and Hedging
Activities" as amended by FASB Statement No. 137, (SFAS No. 137). The provisions
of this statement require that derivative instruments be carried at fair value
on the balance sheet. The statement continues to allow derivative instruments to
be used to hedge various risks and sets forth-specific criteria to determine
when hedge accounting can be used. The statement also provides offsetting
changes in fair value or cash flows of both the derivative and the hedged asset
or liability to be recognized in earnings in the same period; however, any
changes in fair value or cash flow that represent the ineffective portion of a
hedge are required to be recognized in earnings and cannot be deferred. For
derivative instruments not accounted for as hedges, changes in fair value are
required to be recognized in earnings. The provisions of this statement became
effective for United beginning January 1, 2001. The adoption of this standard
did not materially impact the reported financial position or results of
operations of United based on the interpretive guidance issued by the FASB to
date. The FASB continues to issue interpretive guidance, which could require
changes in United's application of this standard in the future.
In September 2000, the FASB issued Statement No. 140 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, a
replacement of FASB Statement No. 125" ("SFAS 140"). It revises the standard for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS's
No. 125's provisions without reconsideration. United adopted the disclosure
provisions related to the securitization of financial assets on December 31,
2000. All transactions entered into after March 31, 2001 will be accounted for
in accordance with this standard. The adoption of this standard did not have a
material impact on the financial position or results of operations of United.
During 2000, the Emerging Issues Task Force ("EITF") released EITF Issue No.
99-20, ("EITF 99-20"), which provides accounting guidance for the recognition of
interest income and impairment on purchased and retained interests in
securitized financial assets. EITF 99-20 requires that the holder of such
instruments recognize the excess of all cash flows attributable to the
beneficial interest using the effective yield method. In addition, EITF 99-20
provides a change in the determination of impairment, whereby, if the fair value
of the beneficial interest has declined below its carrying value, then an
impairment analysis should be
10
performed. If there has been an adverse change in the estimated cash flows from
the previous cash flows projected, then the condition for an other-than-
temporary impairment has been met and the beneficial interest should be written
down to the estimated fair value. EITF 99-20 is effective beginning the second
quarter of 2001. On the date of adoption (i.e. April 1, 2001), beneficial
interests determined to have an other-than-temporary impairment in accordance
with EITF 99-20 would be written down to the estimated fair value, with the
amount of the write-down reported as a cumulative effect of a change in
accounting principle on the Statement of Income. Based on current information,
the adoption of EITF 99-20 is not expected to have a material impact on the
financial position or results of operations of United.
2. BASIS OF PRESENTATION
The accompanying consolidated interim financial statements include the accounts
of United and its wholly-owned subsidiaries. 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. Dollars are in thousands, except per share and share data.
3. INVESTMENT SECURITIES
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
March 31, 2001
---------------------------------------------------------------
Gross Gross Estimated
(In thousands) Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------------------------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 150,619 $ 1,678 $ 307 $ 151,990
State and political subdivisions 53,130 345 386 53,089
Mortgage-backed securities 682,990 14,233 634 696,589
Marketable equity securities 8,551 1,020 1,815 7,756
Other 106,518 166 1,379 105,305
---------------------------------------------------------------
Total $1,001,808 $ 17,442 $4,521 $1,014,729
===============================================================
11
December 31, 2000
---------------------------------------------------------------
(In thousands) Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------------------------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $160,702 $ 519 $1,797 $159,424
State and political subdivisions 52,095 307 575 51,827
Mortgage-backed securities 574,292 4,984 2,666 576,610
Marketable equity securities 8,551 1,107 1,024 8,634
Other 69,723 952 68,771
---------------------------------------------------------------
Total $865,363 $6,917 $7,014 $865,266
===============================================================
The cumulative net unrealized holding loss on available for sale securities
resulted in an increase of $3,621 and a decrease of $4,964 to shareholders'
equity, net of deferred income taxes at March 31, 2001 and December 31, 2000,
respectively.
The amortized cost and estimated fair value of securities available for sale at
March 31, 2001 and December 31, 2000, 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, 2001 December 31, 2000
---------------------------------- ----------------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
---------------------------------- ----------------------------------
Due in one year or less $ 29,197 $ 29,255 $ 20,690 $ 20,661
Due after one year through five years 82,118 83,082 68,436 68,238
Due after five years through ten years 136,881 138,577 146,984 147,021
Due after ten years 745,061 755,181 620,702 620,712
Marketable equity securities 8,551 8,634 8,551 8,634
---------------------------------- ----------------------------------
Total $1,001,808 $1,014,729 $865,363 $865,266
================================== ==================================
The preceding table includes $696,589 and $576,610 of mortgage-backed securities
at March 31, 2001 and December 31, 2000, respectively, with an amortized cost of
$682,990 and $574,292 at March 31, 2001 and December 31, 2000, respectively.
Maturities of mortgage-backed securities are based upon the estimated average
life.
With the adoption of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" as amended by SFAS No. 137, debt securities with an
amortized cost of $71,293 and an estimated fair value of $71,668 were
transferred into the available for sale category from the held to maturity
category.
12
The amortized cost and estimated fair values of securities held to maturity are
summarized as follows:
March 31, 2001
---------------------------------------------------------------
Gross Gross Estimated
(In thousands) Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------------------------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 33,928 $ 207 $ 44 $ 34,091
State and political subdivisions 92,310 2,058 743 93,625
Mortgage-backed securities 5,417 95 5,512
Other 157,229 758 1,806 156,181
---------------------------------------------------------------
Total $288,884 $3,118 $2,593 $289,409
===============================================================
December 31, 2000
---------------------------------------------------------------
(In thousands) Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------------------------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 55,724 $ 225 $ 176 $ 55,773
State and political subdivisions 93,006 1,508 854 93,660
Mortgage-backed securities 70,279 654 285 70,648
Other 161,059 110 2,845 158,324
---------------------------------------------------------------
Total $380,068 $ 2,497 $4,160 $378,405
===============================================================
The amortized cost and estimated fair value of securities held to maturity at
March 31, 2001, and December 31, 2000, by contractual maturity follow. 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, 2001 December 31, 2000
---------------------------------- ----------------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
---------------------------------- ----------------------------------
Due in one year or less $ 2,052 $ 2,469 $ 7,711 $ 7,725
Due after one year through five years 31,733 32,971 47,862 48,563
Due after five years through ten years 74,464 75,564 90,590 90,365
Due after ten years 180,635 178,405 233,905 231,752
---------------------------------- ----------------------------------
Total $288,884 $289,409 $380,068 $378,405
================================== ==================================
The preceding table includes $5,512 and $70,279 of mortgage-backed securities at
estimated fair value at March 31, 2001 and December 31, 2000, respectively, with
an amortized cost of $5,417 and $70,648 at March 31, 2001 and December 31, 2000,
respectively.
13
Maturities of the mortgage-backed securities are based upon the estimated
average life. There were no sales of held to maturity securities.
At March 31, 2000, debt securities with an amortized cost of $146,229 and an
estimated fair value of $138,122 were transferred into the held to maturity
category from the available for sale category. The cumulative unrealized loss of
$8,107 at the date of transfer will be retained in the carrying value of the
held to maturity securities. The cumulative unrealized loss, net of deferred
taxes, of $5,270 will be retained as a separate component of shareholders'
equity. Such amounts will be amortized over the estimated remaining life of the
securities. At March 31, 2001, the cumulative unrealized loss balances, gross
and net of deferred taxes, were $7,353 and $4,779, respectively.
The carrying value of securities pledged to secure public deposits, securities
sold under agreements to repurchase, and for other purposes as required or
permitted by law, approximated $801,273 and $788,899 at March 31, 2001 and
December 31, 2000, respectively.
4. NONPERFORMING LOANS
Nonperforming loans are summarized as follows:
March 31, 2001 December 31, 2000
---------------- -----------------
Loans past due 90 days or more and still accruing interest $4,698 $ 4,717
Nonaccrual loans 7,588 8,131
---------------- -----------------
Total nonperforming loans $12,286 $12,848
================ =================
5. ALLOWANCE FOR LOAN LOSSES
The adequacy of the allowance for loan losses is based on management's
evaluation of the relative risks inherent in the loan portfolio. A progression
of the allowance for loan losses for the periods presented is summarized as
follows:
Three Months Ended
March 31
------------------------------------
2001 2000
----------------- ---------------
Balance at beginning of period $ 40,532 $ 39,599
Provision charged to expense 2,499 2,547
----------------- ---------------
43,031 42,146
Loans charged-off (2,672) (2,859)
Less recoveries 832 203
----------------- ---------------
Net Charge-offs (1,840) (2,656)
----------------- ---------------
Balance at end of period $41,191 $39,490
================= ===============
14
The average recorded investment in impaired loans during the quarter ended March
31, 2001 and for the year ended December 31, 2000 was approximately $11,491 and
$15,557, respectively. For the quarters ended March 31, 2001 and 2000, United
recognized interest income on the impaired loans of approximately $121 and $211,
respectively, substantially all of which was recognized using the accrual method
of income recognition.
At March 31, 2001, the recorded investment in loans that are considered to be
impaired under SFAS No. 114 was $10,497 (of which $7,589 was on a nonaccrual
basis). Included in this amount is $6,077 of impaired loans for which the
related allowance for loan losses is $1,041 and $4,420 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 amount of interest income that would have been recorded under the original
terms for the above loans was $319 and $555 for the quarters ended March 31,
2001 and 2000, respectively.
6. COMMITMENTS AND CONTINGENT LIABILITIES
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.
15
7. LINE OF BUSINESS REPORTING
United's principal business activities are community banking and mortgage
banking. The following information is based on United's current management
structure and presents results of operations as if the community banking and
mortgage banking segments were operated on a stand alone basis. The results are
not necessarily comparable with similar information of other companies.
General
Mortgage Community Corporate
Banking Banking And Other* Consolidated
-------------------------------------------------------------
(In thousands)
March 31, 2001
- --------------
Net interest income $ 1,534 $ 42,573 $ 113 $ 44,220
Provision for loan losses - 2,499 - 2,499
Net interest income after provision for loan losses 1,534 40,074 113 41,721
Noninterest income 5,225 8,707 13 13,945
Noninterest expense 4,739 21,681 576 26,996
Income before income taxes 2,020 27,100 (450) 28,670
Income tax expense 540 8,924 (146) 9,318
Net income 1,480 18,176 (304) 19,352
Average total assets 179,969 4,682,002 (11,785) 4,850,186
March 31, 2000
- --------------
Net interest income $ 1,470 $ 44,910 $ 346 $ 46,726
Provision for loan losses 16 2,531 - 2,547
Net interest income after provision for loan losses 1,454 42,379 346 44,179
Noninterest income 3,430 6,024 1,347 10,801
Noninterest expense 3,178 24,859 106 28,143
Income (loss) before income taxes 1,706 23,544 1,587 26,837
Income tax expense 337 7,989 523 8,849
Net income (loss) 1,369 15,555 1,064 17,988
Average total assets 91,906 4,891,166 (8,320) 4,974,752
* General corporate and other includes intercompany eliminations
8. COMPREHENSIVE INCOME
Comprehensive income consists of two components: (1) net income reported on the
consolidated statements of income and changes in the fair value of available for
sale securities reported as a component of shareholders' equity, net of any
realized after-tax gain or loss on sales or calls of investment securities
included in consolidated net income and (2) the after-tax amortization of the
unrealized loss on debt securities transferred into the held to maturity
category from the available for sale category.
16
The components of total comprehensive income for the three months ended March
31, 2001 and 2000 are as follows:
Three Months Ended
March 31
----------------------------------
2001 2000
---------------- -----------------
Net Income $ 19,352 $ 17,988
Other Comprehensive Income (Loss), Net of Tax:
Unrealized gain (loss) on available-for-sale
securities arising during the period 8,555 (1,004)
Less: Reclassification adjustment for gains
included in net income (92) (207)
Amortization of the unrealized loss for
securities transferred from the
available-for-sale to the held to maturity
investment portfolio 122
---------------- -----------------
Total Comprehensive Income $ 27,937 $ 16,777
================ =================
9. EARNINGS PER SHARE
The reconciliation of the numerator and denominator of basic earnings per share
with that of diluted earnings per share is presented as follows:
Three Months Ended
March 31
-------------------------
(Dollars in thousands, except per share) 2001 2000
----------- -----------
Basic
Net Income $ 19,352 $ 17,988
=========== ===========
Average common shares outstanding 41,703,350 42,272,860
=========== ===========
Earnings per basic common share $ 0.46 $ 0.43
Diluted
Net Income $ 19,352 $ 17,988
=========== ===========
Average common shares outstanding 41,703,350 42,272,860
Equivalents from stock options 316,886 384,565
----------- -----------
Average diluted shares outstanding 42,020,236 42,657,425
=========== ===========
Earnings per diluted common share $ 0.46 $ 0.42
17
10. 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, 2001
and March 31, 2000 with the interest rate earned or paid on such amount.
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
-------------------------------------- ------------------------------------
Average Avg. Average Avg.
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
-------------------------------------- ------------------------------------
ASSETS
Earning Assets:
Federal funds sold and securities
repurchased under agreements to resell and
other short-term investments $ 16,178 $ 247 6.19% $ 6,996 $ 112 6.46%
Investment Securities:
Taxable 1,052,439 17,981 6.93% 1,229,866 20,735 6.78%
Tax-exempt (1) (2) 195,878 3,652 7.56% 201,342 3,607 7.20%
-------------------------------------- ------------------------------------
Total Securities 1,248,317 21,633 7.03% 1,431,208 24,342 6.84%
Loans, net of unearned income (1) (2) (3) 3,359,725 72,985 8.76% 3,288,222 71,689 8.75%
Allowance for loan losses (40,901) (39,609)
-------------- --------------
Net loans 3,318,824 8.87% 3,248,613 8.80%
-------------------------------------- ------------------------------------
Total earning assets 4,583,319 $ 94,865 8.33% 4,686,817 $ 96,143 8.22%
------------------------- -----------------------
Other assets 266,867 287,935
-------------- --------------
TOTAL ASSETS $ 4,850,186 $ 4,974,752
============== ==============
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits $ 2,865,822 $ 33,150 4.69% $ 2,770,075 $ 29,046 4.22%
Federal funds purchased, repurchase
agreements and other short-term
borrowings 319,938 3,816 4.84% 322,221 3,887 4.85%
FHLB advances 686,763 10,811 6.38% 960,393 13,609 5.70%
-------------------------------------- ------------------------------------
Total Interest-Bearing Funds 3,872,523 47,777 5.00% 4,052,689 46,542 4.62%
------------------------- -----------------------
Demand deposits 479,797 462,542
Accrued expenses and other liabilities 58,736 58,664
-------------- --------------
TOTAL LIABILITIES 4,411,056 4,573,895
SHAREHOLDERS' EQUITY 439,130 400,857
-------------- --------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,850,186 $ 4,974,752
============== ==============
NET INTEREST INCOME $ 47,088 $ 49,601
============ ============
INTEREST SPREAD 3.33% 3.60%
NET INTEREST MARGIN 4.10% 4.23%
(1) The interest income and the yields on federally nontaxable loans and
investment securities are presented on a tax-equivalent basis using the
statutory federal income tax rate of 35%.
(2) The interest income and the yields on state nontaxable loans and
investment securities are presented on a tax-equivalent basis using the
statutory state income tax rate of 9%.
(3) Nonaccruing loans are included in the daily average loan amounts
outstanding.
18
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following 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.
OVERVIEW
Net income for the first quarter of 2001 was $19.35 million or $0.46 per share
compared to $17.99 million or $0.42 per share for the first quarter of 2000.
This represents a 7.58% increase in net income and a 9.53% increase in earnings
per share. United's annualized return on average assets was 1.62% and return on
average shareholders' equity was 17.87% for the first quarter of 2001 as
compared to 1.45% and 18.05% for the first quarter of 2000.
The net interest margin was 4.10% for the first three months of 2001.
Tax-equivalent net interest income declined $2.51 million or 5.07% for the first
three months of 2001 as compared to the same period for 2000. The provision for
loan losses remained relatively flat compared to the previous year-to-date.
Noninterest income increased $3.14 million or 29.11% for the first three months
of 2001 when compared to the first three months of 2000. Noninterest expenses
decreased $1.15 million or 4.08% for the first three months of 2001 compared to
the same period in 2000. United's effective tax rate was 32.50% and 32.97% in
2001 and 2000, respectively.
Total assets grew slightly to $4.98 billion at March 31, 2001, an $80.26 million
or 1.64% increase from year end. In terms of asset composition since year end
2000, the March 31, 2001 balance sheet reflects a $10.77 million increase in
cash and cash equivalents and a $58.28 million increase in investment
securities. Overall, loans held for sale increased $35.32 million as loan
originations exceeded sales in the secondary market. Portfolio loans, net of
unearned income declined slightly from December 31, 2000. All other categories
of assets were moderately flat compared to year end 2000.
Interest-bearing deposits increased $69.04 million compared to year end while
noninterest-bearing deposits increased only slightly for the quarter. United's
total borrowed funds decreased $21.03 million or 2.03% as FHLB borrowings
decreased $25.07 million and was partially offset by increased short-term
borrowings of $4.04 million to capitalize on lower short-term interest rates.
Accrued expenses and other liabilities increased $15.82 million or 37.67% since
year end 2000 primarily as a result of a timing difference in the payment of
income taxes.
Shareholders' equity increased $14.21 million or 3.30% as compared to December
31, 2000 as United continued to balance capital adequacy and returns to
shareholders. At March 31, 2001, United's regulatory capital ratios, including
those of its bank subsidiaries, exceeded the levels established for
well-capitalized institutions.
19
RESULTS OF OPERATIONS
NET INTEREST INCOME
For the quarters ended March 31, 2001 and 2000, tax-equivalent net interest
income was $47.09 million and $49.60 million, respectively. These results
represent a decrease of $2.51 million or 5.07% during the first quarter of 2001
when compared to the prior-year quarter. United's tax-equivalent net interest
margin was 4.10% for the first three months of 2001 and 4.23% for the same
period in 2000. The decline in the margin results was due to a 27 basis point
narrowing of the interest spread between earning assets and interest-bearing
funds. The level of both earning assets and interest-bearing liabilities
remained relatively flat for the first quarter of 2001 when compared to the
first quarter of 2000.
PROVISION FOR LOAN LOSSES
United's asset quality continues to be sound. Nonperforming loans were $12.29
million at March 31, 2001 and $12.85 million at December 31, 2000 which
represented 0.25% of total assets at the end of the first three months of 2001,
as compared to 0.26% for United at year end 2000. 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. Nonaccrual loans and loans past due 90 days or more were $7.59
million and $4.70 million, respectively at March 31, 2001 as compared to $8.13
million and $4.72 million, respectively at year end 2000. Total nonperforming
assets of $14.68 million, including OREO of $2.40 million at March 31, 2001,
represented 0.29% of total assets at the end of the first quarter.
At March 31, 2001, impaired loans were $10.50 million, a decrease of $2.01
million or 16.05% from the $12.50 million in impaired loans at December 31,
2000. For further details, see Note 5 to the unaudited consolidated financial
statements.
United evaluates the adequacy of the allowance for loan losses on a quarterly
basis and its loan administration policies are focused upon the risk
characteristics of the loan portfolio. United's process for evaluating the
allowance is a formal company-wide process that focuses on early identification
of potential problem credits and procedural discipline in managing and
accounting for those credits.
Allocations are made for specific commercial loans based upon management's
estimate of the borrowers' ability to repay and other factors impacting
collectibility. Other commercial loans not specifically reviewed on an
individual basis are evaluated based on historical loan percentages applied to
loan pools that have been segregated by risk. Allocations for loans other than
commercial loans are made based upon historical loss experience adjusted for
current conditions. Differences between actual loan loss experience and
estimates are reviewed on a quarterly basis and adjustments are made to those
estimates. United's formal company-wide process at March 31, 2001 produced
increased allocations within two of four loan categories. The components of the
allowance allocated to commercial loans increased $2.2 million, as a result of
changes in historical loss factors. The real estate construction loan pool
allocation increased by $122 thousand as a result of changes in volume. The
consumer loan pool allocation decreased $130 thousand as a result of changes in
volume and historical loss factors for this pool. The components of the
allowance allocated to real estate loans decreased $245 thousand as a result of
changes in volume and historical loss factors.
20
At March 31, 2001 and December 31, 2000, the allowance for loan losses was 1.30%
and 1.27% of period-end loans, net of unearned income, respectively. At March
31, 2001 and December 31, 2000, the ratio of the allowance for loan losses to
nonperforming loans was 335.3% and 315.5%, respectively.
Management believes that the allowance for loan losses of $41.19 million at
March 31, 2001, is adequate to provide for potential losses on existing loans
based on information currently available.
For the quarters ended March 31, 2001 and 2000, the provision for loan losses
was $2.50 million and $2.55 million, respectively. Total net charge-offs were
$1.84 million in the first three months of 2001 and $2.66 million during the
same time period in 2000, which represents 0.05% and 0.08% of average loans for
the respective quarters. The decrease in net charge-offs from the previous year
quarter was primarily attributed to increased recoveries on commercial loans and
fewer charge-offs of junior-lien mortgages. Note 5 to the accompanying unaudited
consolidated financial statements provides a progression of the allowance for
loan losses.
Management is not aware of any potential problem loans, trends or uncertainties
which it reasonably expects will materially impact future operating results,
liquidity, or capital resources which have not been disclosed. Additionally,
management has disclosed all known material credits which cause management to
have serious doubts as to the ability of such borrowers to comply with the loan
repayment schedules.
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. Noninterest income increased $3.14 million or 29.11% for the first
quarter of 2001 when compared to the same period in 2000. Income from mortgage
banking operations increased $1.84 million or 54.45% for the first three months
of 2001 as compared to the same period in 2000 due to increased loan sales in
the secondary market. Sales of mortgage loans were $391.07 million for the first
quarter of 2001 as compared to $218.93 million for the first quarter of 2000, an
increase of 78.63%. Trust fees increased $323 thousand or 19.09% while deposit
services fees increased $924 thousand or 18.14% compared to the first quarter of
2000.
OTHER EXPENSES
Just as management continues to evaluate areas where noninterest income can be
enhanced, it strives to improve the efficiency of its operations to reduce
costs. Other expenses include all items of expense other than interest expense,
the provision for loan losses, and income taxes. Other expenses decreased $1.15
million or 4.08% for the first quarter ended March 31, 2001 as compared to the
same period in 2000.
Total salaries and benefits increased by 5.42% or $744 thousand for the first
quarter of 2001 when compared to the same period of 2000. The increase was due
mainly to higher sales activity in the mortgage banking segment as compensation
and incentives for its personnel are significantly tied to activity levels.
Net occupancy expense for the first quarter of 2001 decreased by $503 thousand
or 15.91% when compared to the first quarter of 2000. The overall change in net
occupancy expense for the first quarter of 2001 was
21
due mainly to decreases in both real property taxes on owned premises and rental
expense on leased offices.
Other expense decreased $1.39 million or 12.35% for the first quarter of 2001
when compared to the previous year quarter. United divested of a branch office
and sold other bank premises during the quarter for a total gain of $1.24
million.
Market Risk
The objective of United's Asset/Liability Management function is to maintain
consistent growth in net interest income within United's policy guidelines. This
objective is accomplished through the management of balance sheet liquidity and
interest rate risk exposures due to changes in economic condition, interest rate
levels and customer preferences.
Management considers interest rate risk to be United's most significant market
risk. Interest rate risk is the exposure to adverse changes in the net interest
income of United as a result of changes in interest rates. Consistency in
United's earnings is largely dependent on the effective management of interest
rate risk.
United employs a variety of measurement techniques to identify and manage its
exposure to changing interest rates. One such technique utilizes an earnings
simulation model to analyze net interest income sensitivity to movements in
interest rates. The model is based on actual cash flows and repricing
characteristics for on and off-balance sheet instruments and incorporates
market-based assumptions regarding the impact of changing interest rates on the
prepayment rate of certain assets and liabilities. The model also includes
executive management projections for activity levels in product lines offered by
United. Assumptions based on the historical behavior of deposit rates and
balances in relation to changes in interest rates are also incorporated into the
model. These assumptions are inherently uncertain and, as a result, the model
cannot precisely measure net interest income or precisely predict the impact of
fluctuations in interest rates on net interest income. Actual results will
differ from simulated results due to timing, magnitude and frequency of interest
rate changes as well as changes in market conditions and management strategies.
Interest sensitive assets and liabilities are defined as those assets or
liabilities that mature or are repriced within a designated time- frame. The
principal function of interest rate risk management is to maintain an
appropriate relationship between those assets and liabilities that are sensitive
to changing market interest rates. The difference between rate sensitive assets
and rate sensitive liabilities for specified periods of time is known as the
"GAP." 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.
As shown in the interest rate sensitivity gap table in this section, United was
liability sensitive (more liabilities repricing than assets) in the one year
horizon. On the surface, this would indicate that rising market interest rates
would reduce United's earnings and declining market interest rates would
increase earnings. 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 United's 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 $194
22
million or 4.07% of the cumulative gap to related earning assets.
To further aid in interest rate management, United's subsidiary banks are
members of the Federal Home Loan Bank (FHLB). The use of FHLB advances provides
United with a low risk means of matching maturities of earning assets and
interest-bearing funds to achieve a desired interest rate spread over the life
of the earning assets.
Interest rate risk management focuses on maintaining consistent growth in net
interest income within Board-approved policy limits. United's Asset/Liability
Management Committee (ALCO), which includes senior management representatives
and reports to the Board of Directors, monitors and manages interest rate risk
to maintain an acceptable level of change to net interest income as a result of
changes in interest rates. Policy established for interest rate risk is stated
in terms of the change in net interest income over a one-year and two-year
horizon given an immediate and sustained increase or decrease in interest rates.
The current limits approved by the Board of Directors are structured on a staged
basis with each stage requiring specific actions.
The following table shows United's estimated earnings sensitivity profile after
management's adjustments as of March 31, 2001 and March 31, 2000:
Change in
Interest Rates Percentage Change in Net Interest Income
--------------------------------------------
(basis points) March 31, 2001 March 31, 2000
-------------- -------------- --------------
+200 -1.65% -3.97%
-200 -4.72% 3.71%
At March 31, 2001, given an immediate, sustained 200 basis point upward shock to
the yield curve used in the simulation model, it was estimated net interest
income for United would decrease by 1.65% over one year as compared to an
decrease of 3.97% at March 31, 2000. A 200 basis point immediate, sustained
downward shock in the yield curve would decrease net interest income by an
estimated 4.72% over one year at March 31, 2001 as compared to a increase of
3.71% at March 31, 2000. All of these estimated changes in net interest income
are and were within the policy guidelines established by the Board of Directors.
23
The following table shows the interest rate sensitivity GAP as of March 31,
2001:
Interest Rate Sensitivity Gap
Days
----------------------------------- Total 1-5 Over 5
0-90 91-180 181-365 One Year Years Years Total
---------------------------------------------------------------------------------------
ASSETS
Interest-Earning Assets:
Federal funds sold and
securities purchased
under agreements to
resell and other
short-term investments $ 48,200 $ 48,200 $ 48,200
Investment and Marketable
Equity Securities
Taxable 102,043 $ 23,415 $ 49,230 174,688 $ 312,729 $ 670,797 1,158,214
Tax-exempt 310 2,398 202 2,910 11,558 130,931 145,399
Loans, net of unearned
income 1,249,070 175,804 325,373 1,750,247 814,777 845,970 3,410,994
---------------------------------------------------------------------------------------
Total Interest-Earning Assets $1,399,623 $ 201,617 $ 374,805 $1,976,045 $1,139,064 $1,647,698 $4,762,807
========== ========== ========== ========== ========== ========== ==========
LIABILITIES
Interest-Bearing Funds:
Savings and NOW accounts $1,200,925 $1,200,925 $1,200,925
Time deposits of
$100,000 & over 81,971 $ 51,923 $ 145,036 278,930 $ 108,403 $ 125 387,458
Other time deposits 279,818 269,314 377,020 926,152 406,279 261 1,332,692
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 272,998 10,000 282,998 54,753 337,751
FHLB advances 20,228 20,228 47,500 613,718 681,446
---------------------------------------------------------------------------------------
Total Interest-Bearing Funds $1,835,712 $ 321,237 $ 552,284 $2,709,233 $ 616,935 $ 614,104 $3,940,272
========== ========== ========== ========== ========== ========== ==========
Interest Sensitivity Gap $ (436,089) $ (119,620) $ (177,479) $ (733,188) $ 522,129 $1,033,594 $ 822,535
========== ========== ========== ========== ========== ========== ==========
Cumulative Gap $ (436,089) $ (555,709) $ (733,188) $ (733,188) $ (211,059) $ 822,535 $ 822,535
========== ========== ========== ========== ========== ========== ==========
Cumulative Gap as a
Percentage of
Total Earning Assets (9.16%) (11.67%) (15.39%) (15.39%) (4.43%) 17.27% 17.27%
Management Adjustments $1,159,080 $ (77,311) $ (154,505) $ 927,264 $ (927,264) $ 0
Off-Balance Sheet Activities
---------------------------------------------------------------------------------------
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities $ 772,991 $ 526,060 $ 194,076 $ 194,076 $ (211,059) $ 822,535 $ 822,535
========== ========== ========== ========== ========== ========== ==========
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities as a
Percentage of Total
Earning Assets 15.18% 11.05% 4.07% 4.07% (4.43%) 17.27% 17.27%
========== ========== ========== ========== ========== ========== ==========
24
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 is "core deposits". Core
deposits include certain demand deposits, statement and special savings and NOW
accounts. These deposits are relatively stable and they are the lowest cost
source of funds available to United. Short-term borrowings have also been a
significant source of funds. These include federal funds purchased and
securities sold under agreements to repurchase. Repurchase agreements represent
funds which are obtained as the result of a competitive bidding process.
Liquid assets are cash and those items readily convertible to cash. All banks
must maintain sufficient balances of cash and near-cash items to meet the
day-to-day demands of customers. Other than cash and due from banks, the
available for sale securities portfolio, loans held for sale 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. Funding is
available from cash and cash equivalents, unused short-term borrowing 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 that are secured by
bank premises or stock of United's subsidiaries. In the normal course of
business, United through ALCO, evaluates these as well as other alternative
funding strategies that may be utilized to meet short-term and long-term funding
needs.
For the three months ended March 31, 2001, cash of $1.87 million was used in
operations by United primarily as a result of $31.89 million of excess
originations over sales of mortgage loans to sell in the secondary market.
During the same period, net cash of $33.48 million was used in investing
activities which was primarily due to $44.86 million of excess purchases of
investment securities over net proceeds from calls and maturities of investment
securities. During the first three months of 2001, net cash of $46.11 million
was provided by financing activities, primarily due to growth in deposits of
$80.86 million, which more than offset net repayment of approximately $25.16
million of FHLB borrowings, payment of $9.17 million in cash dividends and $4.97
million for acquisitions of United shares under the stock repurchase program.
The net effect of this activity was an increase in cash and cash equivalents of
$10.77 million for the first three months of 2001.
United anticipates it can meet 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 lines of credit available.
25
The Asset and Liability Committee monitors liquidity to ascertain that a
liquidity position within certain prescribed parameters 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.
CAPITAL
Total shareholders' equity increased $14.21 million to $445.08 million from
$430.87 million at December 31, 2000. Included in the shareholders' equity
balance at March 31, 2001 is the previously mentioned cumulative unrealized
loss, net of deferred taxes, of $5.27 million for the transfer of debt
securities from the available for sale portfolio into the held to maturity
portfolio. This amount will be amortized over the estimated remaining life of
the securities. Since year end, United has experienced an increase of $8.46
million, net of deferred income taxes, in the fair value of its available for
sale investment portfolio due primarily to decreased market interest rates.
During the quarter, 225,000 shares were repurchased under a plan announced by
United in May of 2000 to repurchase up to 1.675 million shares of its common
stock on the open market. Through March 31, 2001, 444,300 shares have been
repurchased since the plan's implementation. United's equity to assets ratio was
8.93% at March 31, 2001, as compared to 8.79% at December 31, 2000. The primary
capital ratio, capital and reserves to total assets and reserves, was 9.68% at
March 31, 2001, as compared to 9.53% at December 31, 2000.
Cash dividends of $0.22 per common share for the first quarter of 2001 represent
an increase of 5% over the $0.21 paid for first quarter of 2000. Total cash
dividends were approximately $9.17 million for the first quarter of 2001, an
increase of 3.33% over the comparable period of 2000.
United seeks to maintain a proper relationship between capital and total assets
to support growth and sustain earnings. United's average equity to average asset
ratio was 9.05% at March 31, 2000 and 8.06% at March 31, 2000. Based on
regulatory requirements, United and its banking subsidiaries are categorized as
"well capitalized" institutions. United's risk-based capital ratios of 11.74% at
March 31, 2001 and 11.77% at December 31, 2000, are both significantly higher
than the minimum regulatory requirements. United's Tier I capital and leverage
ratios of 10.65% and 8.37%, respectively, at March 31, 2001, are also well above
regulatory minimum requirements.
26