SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended SEPTEMBER 30, 1997
Commission File Number: 0-13322
UNITED BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 55-0641179
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 UNITED CENTER
500 VIRGINIA STREET, EAST
CHARLESTON, WEST VIRGINIA 25301
------------------------- -----
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number,
including Area Code: (304) 424-8761
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class-- Common Stock, $2.50 Par Value; 14,966,506 shares outstanding as of
OCTOBER 31, 1997.
1
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) September 30, 1997
and December 31, 1996 ....................................................5
Consolidated Statements of Income (Unaudited) for the
Three and Nine Months Ended September 30, 1997 and 1996 ..................6
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited) for the Nine Months Ended September 30, 1997 .................7
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended September 30, 1997 and 1996 ....................8
Notes to Consolidated Financial Statements ...............................9
Information required by Item 303 of Regulation S-K
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................16
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
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
Exhibit 11 - Computation of Earnings Per Share...................23
Exhibit 27 - Financial Data Schedule.............................24
(b) Reports on Form 8-K
On September 11, 1997, United Bankshares, Inc. announced the
signing of a definitive agreement to merge with George Mason
Bankshares, Inc.
On November 7, 1997, United Bankshares, Inc. filed pro forma
financial information in connection with the pending merger of
United Bankshares, Inc. and George Mason Bankshares, Inc.
2
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 November 13, 1997 /s/ Richard M. Adams
--------------------- ---------------------
Richard M. Adams
Chairman of the Board and
Chief Executive Officer
Date November 13, 1997 /s/ Steven E. Wilson
--------------------- ---------------------
Steven E. Wilson
Executive Vice President,
Secretary, Treasurer and Chief
Financial Officer
3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
The September 30, 1997 and December 31, 1996, consolidated balance sheets of
United Bankshares, Inc. and Subsidiaries, and the related consolidated
statements of income for the three and nine months ended September 30, 1997 and
1996, the related consolidated statement of changes in shareholders' equity for
the nine months ended September 30, 1997, the related condensed consolidated
statements of cash flows for the nine months ended September 30, 1997 and 1996,
and the notes to consolidated financial statements appear on the following
pages.
4
CONSOLIDATED BALANCE SHEETS(UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(In thousands, except per share data) September 30 December 31
1997 1996
------------ -----------
ASSETS
Cash and due from banks $ 80,712 $ 86,328
Interest-bearing deposits with other banks 50 195
Federal funds sold 2,997
---------- ----------
Total cash and cash equivalents 80,762 89,520
Securities available for sale at estimated fair
value (amortized cost-$266,521 at September 30,
1997 and $160,161 at December 31, 1996) 273,440 161,629
Securities held to maturity(estimated fair value
-$179,082 at September 30, 1997 and $173,697 at
December 31, 1996) 175,914 170,702
Loans
Commercial, financial, and agricultural 289,005 248,762
Real estate:
Single family residential 913,650 953,000
Commercial 416,780 355,431
Construction 78,136 42,343
Other 22,884 19,748
Installment 236,789 232,004
Loans held for sale at estimated fair value 4,248 1,482
---------- ----------
1,961,492 1,852,770
Less: Unearned income (6,919) (5,165)
---------- ----------
Loans, net of unearned income 1,954,573 1,847,605
Less: Allowance for loan losses (24,941) (22,283)
---------- ----------
Net loans 1,929,632 1,825,322
Bank premises and equipment 40,138 33,550
Interest receivable 17,138 13,508
Other assets 64,001 32,646
---------- ----------
TOTAL ASSETS $2,581,025 $2,326,877
========== ==========
LIABILITIES
Domestic deposits:
Noninterest-bearing $ 269,645 $ 261,048
Interest-bearing 1,747,952 1,566,506
---------- ----------
TOTAL DEPOSITS 2,017,597 1,827,554
Short-term borrowings:
Federal funds purchased 23,292 4,491
Securities sold under agreements to repurchase 117,554 71,091
Federal Home Loan Bank borrowings 108,889 132,631
Accrued expenses and other liabilities 41,206 32,596
---------- ----------
TOTAL LIABILITIES 2,308,538 2,068,363
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value; Authorized -20,000,000 shares; issued -
15,295,130 at September 30, 1997 and December 31, 1996, including
344,418 and 205,495 shares in treasury at September 30, 1997 and
December 31, 1996, respectively 38,238 38,238
Surplus 41,239 41,438
Retained earnings 199,072 183,539
Net unrealized holding gain on securities available
for sale, net of deferred income taxes 4,497 954
Treasury stock (10,559) (5,655)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 272,487 258,514
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,581,025 $2,326,877
========== ==========
See notes to consolidated unaudited financial statements.
5
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(In thousands, except per share data) Three Months Ended Nine Months Ended
September 30 September 30
----------------------- ------------------------
1997 1996 1997 1996
------ ------ ------ ------
INTEREST INCOME
Interest and fees on loans $41,266 $38,844 $119,799 $112,852
Interest on federal funds sold and
other short-term investments 32 53 150 344
Interest and dividends on securities:
Taxable 7,073 5,166 17,040 13,388
Exempt from federal taxes 454 546 1,481 1,740
------- ------- -------- --------
TOTAL INTEREST INCOME 48,825 44,609 138,470 128,324
------- ------- -------- --------
INTEREST EXPENSE
Interest on deposits 19,298 15,921 54,122 47,464
Interest on short-term borrowings 1,535 970 3,549 2,795
Interest on Federal Home Loan
Bank borrowings 1,120 1,974 3,388 3,739
------- ------- -------- --------
TOTAL INTEREST EXPENSE 21,953 18,865 61,059 53,998
------- ------- -------- --------
NET INTEREST INCOME 26,872 25,744 77,411 74,326
PROVISION FOR LOAN LOSSES 1,000 600 2,150 2,160
------- ------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 25,872 25,144 75,261 72,166
------- ------- -------- --------
OTHER INCOME
Trust department income 930 793 2,650 2,367
Other charges, commissions, and fees 3,114 2,898 8,968 8,334
Income (loss) from mortgage banking
operations 1,858 877 2,465 (903)
Loss on sales of securities (50) (98)
Other income 282 37 385 164
------- ------- -------- --------
TOTAL OTHER INCOME 6,184 4,555 14,468 9,864
------- ------- -------- --------
OTHER EXPENSES
Salaries and employee benefits 7,059 7,236 20,088 22,077
Net occupancy expense 1,605 1,440 4,526 4,501
Other expense 7,599 7,864 18,818 22,966
------- ------- -------- --------
TOTAL OTHER EXPENSES 16,263 16,540 43,432 49,544
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 15,793 13,159 46,297 32,486
INCOME TAXES 5,448 1,936 15,784 11,910
------- ------- -------- --------
NET INCOME $10,345 $11,223 $ 30,513 $ 20,576
======= ======= ======== ========
Earnings per common share $0.68 $0.74 $2.01 $1.35
Dividends per share $0.34 $0.31 $1.00 $0.92
Average outstanding shares 15,147,561 15,222,497 15,134,004 15,227,962
See notes to consolidated unaudited financial statements.
6
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
Nine Months Ended September 30, 1997
----------------------------------------------------------------------------------------------------
Net
Unrealized
Holding
Common Stock Gain on
----------------------- Securities Total
Par Retained Available Treasury Shareholders'
Shares Value Surplus Earnings for Sale Stock Equity
---------- --------- ------- -------- ---------- -------- -------------
Balance at
January 1, 1997 15,295,130 $38,238 $41,438 $183,539 $ 954 ($5,655) $258,514
Net income 30,513 30,513
Cash dividends
($1.00 per share) (14,980) (14,980)
Net change in
unrealized gain
on securities
available for sale 3,543 3,543
Purchase of treasury
stock (167,100
shares) (5,754) (5,754)
Sale of treasury
stock (85 shares) 4 4
Common stock options
exercised (199) 846 647
---------- ------- ------- -------- -------- -------- ----------
Balance at
September 30, 1997 15,295,130 $38,238 $41,239 $199,072 $ 4,497 ($10,559) $272,487
========== ======= ======= ======== ======= ======== ==========
See notes to consolidated unaudited financial statements.
7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Nine Months Ended
September 30
------------------------------
1997 1996
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 28,519 $ 55,556
INVESTING ACTIVITIES
Proceeds from maturities and calls of
securities held to maturity 20,006 18,838
Proceeds from sales of securities
available for sale 79,748
Proceeds from maturities and calls of
securities available for sale 114,126 67,619
Purchases of securities available for sale (183,045) (113,944)
Purchases of securities held to maturity (25,119) (78,135)
Net cash paid for acquired subsidiary (28,929)
Net purchase of bank premises and equipment (2,478) (1,543)
Changes in loans 27,764 (98,276)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (77,675) (125,693)
-------- --------
FINANCING ACTIVITIES
Cash dividends paid (14,745) (12,997)
Cash dividends paid by acquired banks (382)
Acquisition of treasury stock (5,754) (829)
Proceeds from exercise of stock options 647 489
Proceeds from Federal Home Loan Bank advances 255,077 264,092
Repayment of Federal Home Loan Bank advances (279,079) (199,005)
Proceeds from sale of treasury stock 4
Acquisition of fractional shares (3)
Changes in:
Deposits 34,201 (1,842)
Federal funds purchased and securities
sold under agreements to repurchase 50,047 16,338
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 40,398 65,861
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (8,758) (4,276)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 89,520 98,977
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 80,762 $ 94,701
========= ========
See notes to consolidated unaudited financial statements.
8
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 1996 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 February 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 128, (SFAS No. 128), "Earnings Per Share," which simplifies the
standards for computing earnings per share previously found in Accounting
Principles Board ("APB") Opinion No. 15, (APB No. 15), "Earnings Per Share," and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic and diluted EPS computation.
United does not expect application of the new rules to produce per share amounts
that are materially different from amounts calculated under current rules. This
statement is effective for financial periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. SFAS No. 128
requires restatement of all prior period EPS data presented.
In June 1996, the FASB issued Statement No. 125, (SFAS No. 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
which supersedes SFAS No. 76, "Extinguishment of Debt." SFAS No. 125 prescribes
the accounting treatment for securitization transactions based on a financial
components approach with an emphasis on physical control, such as the ability to
pledge or exchange the securitized assets, while prior rules emphasize the
economic risks or rewards of ownership of the assets. Additionally, SFAS No. 125
applies to repurchase agreements, securities lending, loan participations, and
other financial component transfers and exchanges. Under the financial
components approach of SFAS No. 125, both the transferor and transferee will
recognize on its balance sheet the assets and liabilities, or components
thereof, that it controls and derecognize from the balance sheet the assets and
liabilities that were surrendered or extinguished in the transfer.
The new rules have not had a material effect on United's financial position and
results of operations. SFAS No. 125 is effective for transactions occurring
after December 31, 1996.
In June 1997, the FASB issued Statement No. 130, (SFAS No. 130), "Reporting
Comprehensive Income." This statement which is effective for years beginning
after December 15, 1997, requires the reporting of comprehensive income and its
components. United is reviewing the components of comprehensive income as
outlined by SFAS No. 130 and plans to disclose the information as required.
9
In June 1997, the FASB issued Statement No. 131, (SFAS No. 131), "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131 provides
guidance for the way public enterprises report information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports. It also requires certain
related disclosures about products and services, geographic areas and major
customers. The segment and other information disclosures are required for years
beginning after December 15, 1997.
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. MERGERS AND ACQUISITIONS
On August 1, 1997, United acquired 100% of the outstanding common stock of First
Patriot Bankshares Corporation, Reston, Virginia ("Patriot") for cash
consideration of approximately $39,220. The transaction is being accounted for
using the purchase method of accounting. The acquisition is not expected to
materially impact United's financial position or results of operations.
At consummation, Patriot had assets of approximately $211 million, loans, net of
unearned income, of $135 million, deposits of $154 million and shareholders'
equity of $11 million, all of which reflected purchase accounting adjustments.
United has entered into an agreement with George Mason Bankshares, Inc.,
Fairfax, Virginia ("George Mason") to exchange 0.85 share of United common stock
for each of the approximate 5,134,000 common shares of George Mason. The
transaction, valued at approximately $215 million at the time of announcement,
will be accounted for using the pooling of interests method of accounting. It is
anticipated that the proposed acquisition will be consummated early in the
second quarter of 1998.
The following represents selected pro forma financial information regarding the
effects of the transaction as though United and George Mason had been combined
during all periods presented:
September 30, December 31,
1997 1996
------------- ------------
Total interest income $ 185,724 $ 226,085
Total interest expense 85,009 99,449
Net interest income 100,715 126,636
Income before income taxes 54,986 57,158
Income from continuing
operations 36,447 37,395
Earnings per common share 1.85 1.90
Return on average assets 1.49% 1.24%
Return on average equity 14.62% 11.83%
Loans, net of unearned income 2,449,685 2,294,201
Total assets 3,550,603 3,199,347
Total deposits 2,777,924 2,521,148
Total equity 343,141 322,858
The data set forth above is not necessarily indicative of the results of
operations or the combined financial position of United that would have resulted
had the merger been consummated at the beginning of the applicable periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined entities.
10
4. INVESTMENT SECURITIES
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
September 30, 1997
---------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $138,655 $ 419 $ 231 $138,843
Mortgage-backed securities 107,622 1,418 192 108,848
Marketable equity securities 4,181 5,612 9,793
Other 16,063 2 109 15,956
--------- ---------- ---------- ---------
Total $266,521 $ 7,451 $ 532 $273,440
========= ========== ========== =========
December 31, 1996
---------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $115,018 $ 443 $ 444 $115,017
Mortgage-backed securities 24,982 92 565 24,509
Marketable equity securities 3,655 2,158 5,813
Other 16,506 7 223 16,290
--------- ---------- ---------- ---------
Total $160,161 $ 2,700 $ 1,232 $161,629
========= ========== ========== =========
The cumulative net unrealized holding gain on available for sale securities
resulted in an increase to shareholders' equity of $4,497 and $954, net of
deferred income taxes at September 30, 1997 and December 31, 1996, respectively.
The amortized cost and estimated fair values of securities held to maturity are
summarized as follows:
September 30, 1997
---------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 92,853 $ 1,976 $ 60 $ 94,769
State and political subdivisions 29,834 1,337 18 31,153
Mortgage-backed securities 46,195 208 275 46,128
Other 7,032 7,032
--------- ---------- ---------- ---------
Total $175,914 $ 3,521 $ 353 $179,082
========= ========== ========== =========
11
December 31, 1996
---------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 77,704 $ 2,131 $ 87 $ 79,748
State and political subdivisions 36,136 1,487 32 37,591
Mortgage-backed securities 54,977 250 754 54,473
Other 1,885 1,885
--------- ---------- ---------- ----------
Total $170,702 $ 3,868 $ 873 $173,697
========= ========== ========== ==========
The amortized cost of securities pledged to secure public deposits, securities
sold under agreements to repurchase, and for other purposes as required or
permitted by law, approximated $280,839 and $204,254 at September 30, 1997 and
December 31, 1996, respectively.
5. NONPERFORMING LOANS
Nonperforming loans are summarized as follows:
September 30 December 31
1997 1996
------------ -----------
Loans past due 90 days or more
and still accruing interest $12,155 $ 5,831
Nonaccrual loans 6,187 4,361
------- -------
Total nonperforming loans $18,342 $10,192
======= =======
6. 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 Nine Months Ended
September 30 September 30
------------------------ -----------------------
1997 1996 1997 1996
------- ------- ------- -------
Balance at beginning of period $22,249 $22,723 $22,283 $22,545
Allowance of purchased subsidiary 2,695 2,695
Provision charged to expense 1,000 600 2,150 2,160
------- ------- ------- -------
25,944 23,323 27,128 24,705
Loans charged-off (1,143) (695) (2,599) (2,476)
Less recoveries 140 77 412 476
------- ------- ------- -------
Net Charge-offs (1,003) (618) (2,187) (2,000)
------- ------- ------- -------
Balance at end of period $24,941 $22,705 $24,941 $22,705
======= ======= ======= =======
The average recorded investment in impaired loans during the quarter ended
September 30, 1997 and for the year ended December 31, 1996 was approximately
$12,156 and $9,442, respectively. For the quarters ended September 30, 1997 and
1996, United recognized interest income on the impaired loans of approximately
$283 and $349, respectively, substantially all of which was recognized using the
accrual method of income recognition.
12
At September 30, 1997, the recorded investment in loans that are considered to
be impaired under SFAS No. 114 was $12,202 (of which $6,187 were on a nonaccrual
basis). Included in this amount is $5,209 of impaired loans for which the
related allowance for loan losses is $1,198 and $6,993 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 which would have been recorded under the original
terms for the above loans was $608 and $514 for the three months ended September
30, 1997 and 1996, respectively, and $1,273 and $1,141 for the nine months ended
September 30, 1997 and 1996, respectively.
7. 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.
13
8. EARNING ASSETS AND INTEREST-BEARING LIABILITIES
The following table shows the daily average balance of major categories
of assets and liabilities for each of the three month periods ended
September 30,1997, and September 30, 1996, with the interest rate
earned or paid on such amount.
Three Months Ended Three Months Ended
September 30 September 30
1997 1996
------------------------------- -----------------------------
(Dollars in Average Avg. Average Avg.
Thousands) Balance Interest Rate Balance Interest Rate
assets
Earning assets:
Federal funds sold and
securities purchased
under agreements to
resell and other short-
term investments $ 1,904 $ 32 6.72% $ 3,731 $ 53 5.65%
Investment securities:
Taxable 403,567 7,073 7.01% 309,680 5,166 6.64%
Tax-exempt (1) 30,331 698 9.14% 37,344 840 9.00%
---------- ------- ------ ---------- ------- ------
Total securities 433,898 7,771 7.16% 347,024 6,006 6.92%
Loans, net of unearned
income (1) (2) 1,907,484 41,584 8.74% 1,820,267 39,135 8.55%
Allowance for loan
losses (23,923) (22,702)
---------- ----------
Net loans 1,883,561 8.85% 1,797,565 8.66%
---------- ------- ------ ---------- ------- ------
Total earning assets 2,319,363 $49,387 8.53% 2,148,328 $45,194 8.38%
------- ------ ------- ------
Other assets 168,863 175,834
---------- ----------
Total assets $2,488,226 $2,324,154
========== ==========
Liabilities
Interest-bearing funds:
Interest-bearing deposits $1,708,652 $19,298 4.53% $1,522,991 $15,921 4.16%
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 132,698 1,535 4.64% 84,972 970 4.54%
FHLB advances 75,119 1,120 5.98% 143,228 1,974 5.48%
---------- ------- ------ ---------- ------- ------
Total interest-bearing funds 1,916,469 21,953 4.59% 1,751,191 18,865 4.29%
------- ------ ------- ------
Demand deposits 267,503 276,997
Accrued expenses and other
liabilities 34,269 42,006
---------- ----------
Total liabilities 2,218,241 2,070,194
Shareholders' equity 269,985 253,960
---------- ----------
Total liabilities and
shareholders' equity $2,488,226 $2,324,154
========== ==========
Net interest income $27,434 $26,329
======= =======
Interest spread 3.94% 4.09%
Net interest margin 4.73% 4.88%
(1) The interest income and the yields on nontaxable loans and
investment securities are presented on a tax-equivalent basis
using the statutory federal income tax rate of 35%.
(2) Nonaccruing loans are included in the daily average loan amounts
outstanding.
14
The following table shows the daily average balance of major categories
of assets and liabilities for each of the nine month periods ended
September 30, 1997, and September 30, 1996, with the interest rate
earned or paid on such amount.
Nine Months Ended Nine Months Ended
September 30 September 30
1997 1996
------------------------------- -----------------------------
(Dollars in Average Avg. Average Avg.
Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
Earning assets:
Federal funds sold and
securities purchased
under agreements to
resell and other short-
term investments $ 3,553 $ 150 5.66% $ 8,796 $ 344 5.22%
Investment securities:
Taxable 335,024 17,040 6.78% 284,133 13,388 6.28%
Tax-exempt (1) 32,643 2,278 9.28% 38,935 2,677 9.17%
---------- -------- ------ ---------- -------- ------
Total securities 367,667 19,318 7.00% 323,068 16,065 6.63%
Loans, net of unearned
Income (1) (2) 1,873,872 120,776 8.61% 1,772,053 113,764 8.58%
Allowance for loan
losses (22,815) (22,709)
---------- ----------
Net loans 1,851,057 8.71% 1,749,344 8.69%
---------- -------- ------ ---------- -------- ------
Total earning assets 2,222,277 $140,244 8.43% 2,081,208 $130,173 8.35%
-------- ------ -------- ------
Other assets 150,784 160,537
---------- ----------
Total assets $2,373,061 $2,241,745
========== ==========
Liabilities
Interest-bearing funds:
Interest-bearing deposits $1,643,595 $54,122 4.40% $1,535,726 $ 47,464 4.13%
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 106,541 3,549 4.45% 84,485 2,795 4.42%
FHLB advances 77,239 3,388 5.86% 91,133 3,739 5.48%
---------- ------- ------ ---------- -------- ------
Total interest-bearing funds 1,827,375 61,059 4.47% 1,711,344 53,998 4.21%
------- ------ -------- ------
Demand deposits 249,530 244,228
Accrued expenses and other
liabilities 31,446 32,710
---------- ----------
Total liabilities 2,108,351 1,988,282
Shareholders' equity 264,710 253,463
---------- ----------
Total liabilities and
shareholders' equity $2,373,061 $2,241,745
========== ==========
Net interest income $79,185 $ 76,175
======= ========
Interest spread 3.96% 4.14%
Net interest margin 4.75% 4.89%
(1) The interest income and the yields on nontaxable loans and
investment securities are presented on a tax-equivalent basis
using the statutory federal income tax rate of 35%.
(2) Nonaccruing loans are included in the daily average loan amounts
outstanding.
15
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
On August 1, 1997, United acquired 100% of the outstanding common stock of First
Patriot Bankshares Corporation, Reston, Virginia ("Patriot") for cash
consideration of approximately $39.22 million. The transaction is being
accounted for using the purchase method of accounting and, accordingly, the
following discussion includes the financial position and results of operations
of Patriot from the effective merger date forward. At the time of consummation,
Patriot had assets of approximately $211 million, securities available for sale
of $37 million, loans, net of unearned income, of $135 million, other assets of
$34 million (including $26 million of goodwill), deposits of $154 million and
other liabilities of $57 million, all of which reflected purchase accounting
adjustments.
Net income for the first nine months of 1997 was $30.51 million or $2.01 per
share compared to $20.58 million or $1.35 per share for the first nine months of
1996. This represents a 48.29% increase in net income and a 48.89% increase in
earnings per share. United's annualized return on average assets was 1.72% and
return on average shareholders' equity was 15.41% for the first nine months of
1997 as compared to 1.23% and 10.85% for the first nine months of 1996,
respectively.
United has strong core earnings driven by a net interest margin of 4.75% for the
first nine months of 1997. Net interest income increased by $3.09 million or
4.15% for the first nine months of 1997 as compared to the same period for 1996.
The provision for loan losses remained stable at $2.15 million when comparing
the first nine months of 1997 to the first nine months of 1996. Noninterest
income, including income from mortgage banking operations, increased $4.60
million or 46.68% for the first nine months of 1997 when compared to the first
nine months of 1996. Noninterest expenses decreased $6.11 million or 12.34% for
the first nine months compared to the same period in 1996. The effective tax
rate for the three months and nine months ended September 30, 1997 approximated
34%.
Total assets were $2.58 billion at September 30, 1997, up $254.15 million or
10.92% compared with year-end 1996, and up 12.25% from September 30, 1996.
Loans, net of unearned income, reflected a $106.97 million increase while
investment securities reflected a $117.02 million increase for the first three
quarters of 1997 as compared with year-end 1996 as a result of United's
securitization of approximately $87 million of fixed rate mortgage loans during
the first nine months of 1997. All other assets increased $41.58 million, of
which approximately $26 million of the increase was due to goodwill associated
with the third quarter acquisition of Patriot, while cash and cash equivalents
declined $8.76 million.
Total deposits grew $190.04 million or 10.40% from year-end due to United's
continued offering of new deposit products introduced in late 1996 and the
acquisition of Patriot during the third quarter. Since December 31, 1996, United
has realized an increase of $181.45 million in interest-bearing deposits that
resulted from a combination of overall deposit growth and a shift of
approximately $23 million from noninterest-bearing to interest-bearing deposits.
United's short-term borrowings increased $65.26 million while its FHLB
borrowings decreased $23.74 million as United utilized the increase in deposits
to pay down the higher cost FHLB borrowings. Accrued expenses and other
liabilities increased $8.61 million or 26.41% since year-end 1996.
16
Shareholders' equity increased $13.97 million or 5.41% as compared with December
31, 1996. United continues to maintain an appropriate balance between capital
adequacy and return to shareholders. At September 30, 1997, United's regulatory
capital ratios, including those of its bank subsidiaries, exceeded the levels
established for well-capitalized institutions.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income increased $1.13 million or 4.38% in the third quarter of
1997 and $3.08 million or 4.15% for the first nine months of 1997, when compared
to the same periods of 1996. The net interest margin continues to drive United's
core profitability and earnings momentum. The increases were primarily
attributable to higher levels of average earning assets of $171 million for the
third quarter of 1997 and $141 million for the first nine months of 1997, when
compared to the third quarter and first nine months of 1996, respectively.
United's tax-equivalent net interest margin was 4.73% and 4.75% for the third
quarter and first nine months of 1997, respectively. For the quarter ended
September 30, 1997, United's net interest margin was 3 basis points lower than
the immediately preceding quarter, and 15 basis points less than the third
quarter of 1996. The lower net interest margin from one year ago was the result
of increased average deposit and wholesale funding balances at higher rates from
increased market rate competition. The higher funding costs were partially
offset by a smaller increase in the yield on the loan portfolio.
PROVISION FOR LOAN LOSSES
For the quarters ended September 30, 1997 and 1996, the provision for loan
losses was $1.00 million and $600 thousand, respectively, while the first nine
months provisions were $2.15 million for 1997 as compared to $2.16 million for
1996. The allowance for loan losses as a percentage of loans, net of unearned
income, approximated 1.28% at September 30, 1997, 1.21% at December 31, 1996,
and 1.26% at September 30, 1996. Charge-offs exceeded recoveries during the
third quarter of 1997 and 1996 and resulted in net charge-offs of $1 million and
$618 thousand, respectively. Charge-offs exceeded recoveries by $2.19 million
for the first nine months of 1997 as compared to net charge-offs of $2.00
million for the first nine months of 1996. Note 6 to the accompanying unaudited
consolidated financial statements provides a progression of the allowance for
loan losses. Loans, net of unearned income, increased by $106.97 million or
5.79% as compared to year-end 1996 as a result of the approximately $135 million
in loans acquired during the third quarter acquisition of First Patriot. The net
increase in loans was offset by loan securitizations that occurred during the
second and third quarters. Approximately $87 million of fixed rate mortgage
loans were subject to a transaction whereby the loans were sold and replaced
with U.S. Government Agency investment securities in the available for sale
category.
United's credit quality deteriorated slightly as evidenced by the level of
nonperforming assets at September 30, 1997, but remained very solid.
Nonperforming loans increased $8.15 million or 79.96% to $18.34 million at
September 30, 1997 compared to $10.19 million at year-end 1996 primarily due to
several individually insignificant commercial and consumer loans being
classified as delinquent during the quarter. These loans are adequately
collateralized and management does not expect any significant losses related to
these loans. Additionally, United acquired approximately $2.5 million of
nonperforming loans from the Patriot transaction during the third quarter.
Subsequent to September 30, 1997, United experienced an improvement in credit
quality as $1.80 million of loans past due 90 days or more became current and
$900 thousand of nonaccrual loans were paid. Nonperforming loans, as a
percentage of loans, net of unearned income, increased from 0.55% to 0.94% when
comparing these two respective periods. The components of nonperforming loans
include nonaccrual loans and
17
loans which are contractually past due 90 days or more as to interest or
principal, but have not been put on a nonaccrual basis. Loans past due 90 days
or more increased $6.32 million or 108.45% during the first nine months of 1997
and nonaccrual loans increased $1.83 million or 41.87% since year-end 1996.
Total nonperforming assets of $20.37 million, including OREO of $2.03 million at
September 30, 1997, represented 0.79% of total assets, which was higher than the
approximately 0.60% at the end of each of the last four previous quarters.
As of September 30, 1997, the ratio of the allowance for loan losses to
nonperforming loans was 136.0% as compared to 218.6% as of December 31, 1996.
Management believes that the allowance for loan losses of $24.94 million as of
September 30, 1997, is adequate to provide for potential losses on existing
loans based on information currently available.
United evaluates the adequacy of the allowance for loan losses on a quarterly
basis. The provision for loan losses charged to operations is based on
management's evaluation of individual credits, the past loan loss experience,
and other factors which, in management's judgment, deserve recognition in
estimating loan losses. Such other factors considered by management, among other
things, included growth and composition of the loan portfolio, known
deterioration in certain classes of loans or collateral, trends in
delinquencies, and current economic conditions. United's loan administration
policies are focused upon the risk characteristics of the loan portfolio, both
in terms of loan approval and credit quality.
OTHER INCOME
Other income consists of all revenues which are not included in interest and fee
income related to earning assets. Noninterest income has been and will continue
to be an important factor for improving United's profitability. Recognizing the
importance, management continues to evaluate areas where noninterest income can
be enhanced. Noninterest income increased $1.63 million or 35.77% for the third
quarter of 1997 when compared to the third quarter of 1996. Additionally, the
$14.47 million of noninterest income for the first nine months of 1997, reflects
an increase of $4.60 million or 46.68% over the first nine months of 1996.
Excluding income from mortgage banking operations and securities losses,
noninterest income increased $598 thousand or 16.04% for the third quarter and
$1.14 million or 10.48% for the first nine months of 1997, primarily due to a
combination of Eagle's (an April 1996 business combination) former offices
conforming to United's higher fee structure and a higher volume of customer
transactions on accounts which are subject to a fee.
The overall increase in noninterest income was primarily due to an increase in
income from mortgage banking operations due a loan securitization of
approximately $41 million during the quarter, with slight increases in the
categories of return check charges, bankcard income and trust department
commissions as a result of increased transactions in those areas.
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 $278
thousand or 1.68% and $6.11 million or 12.34% for the quarter and nine months
ended September 30, 1997, as compared to the same periods in 1996.
Total salaries and benefits decreased by 2.46% or $178 thousand and 9.01% or
$2.0 million for the third quarter and first nine months of 1997 when compared
to the same periods of 1996. The higher salaries and benefits costs for 1996
were attributable to
18
severance and benefit pay of displaced Eagle employees at locations where United
consolidated certain branches.
Net occupancy expense for the third quarter and first nine months of 1997
increased by $165 thousand or 11.46% and $25 thousand or 0.55%, respectively,
when compared to the third quarter and first nine months of 1996. The overall
increase in net occupancy expense for the third quarter and first nine months of
1997 was primarily due to an increase in building rental expense and to higher
depreciation and real property taxes for buildings that the company owns.
Other expenses decreased $266 thousand or 3.38% and $4.15 million or 18.06% for
the third quarter and first nine months of 1997, as compared to the same periods
of 1996. This overall decrease was primarily due to decreases in advertising
costs, merger related legal and accounting fees, FDIC insurance, office supply
expense and data processing fees. Most other major categories of other expense
remained relatively constant for the period.
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. Substantial
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. United has no intention at this
time to utilize any long-term funding sources other than FHLB advances and
long-term certificate of deposits for funding in the normal course of business.
United utilized FHLB advances to fund the August 1, 1997, acquisition of all of
the outstanding common stock of Patriot for approximately $39 million in cash
and
19
anticipates that income from continuing operations will provide a significant
source of funds to repay the borrowing.
For the nine months ended September 30, 1997, United generated $28.52 million of
cash from operations, which is indicative of solid earnings performance. Cash
from operations for the nine months ended September 30, 1997, included, among
other things, approximately $129 million of proceeds from the sale of loans held
for sale. During the same period, net cash of $77.68 million was used in
investing activities which was primarily due to $74.03 million of net purchases
of securities and $28.93 million net cash paid for the acquisition of First
Patriot common stock. These uses of funds in investing activities were partially
offset by $27.76 million in net loan repayments for the period. During the first
nine months of 1997 net cash of $40.40 million was provided by financing
activities, primarily due to a $34.20 million increase in deposits and a $50.05
increase in other short-term borrowings. These sources of funds were partially
offset by the net repayment of approximately $24 million of FHLB advances,
payment of approximately $14.75 million in cash dividends and $5.75 million for
acquisitions of United shares under the stock repurchase program. The net effect
of this activity was a decrease in cash and cash equivalents of $8.76 million
for the first nine months of 1997.
United anticipates no difficulty in meeting its obligations over the next 12
months and has no material commitments for capital expenditures. There are no
known trends, demands, commitments, or events that will result in or that are
reasonably likely to result in United's liquidity increasing or decreasing in
any material way. United also has significant lines of credit available.
The Asset and Liability Committee monitors liquidity to ascertain that a strong
liquidity position is maintained. In addition, variable rate loans are a
priority. These policies help to protect net interest income against
fluctuations in interest rates. No changes are anticipated in the policies of
United's Asset and Liability Committee.
INTEREST RATE SENSITIVITY
United seeks to achieve consistent growth in net interest income and net income
while managing volatility arising from shifts in interest rates. 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
asset and liability 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".
At United, interest rate risk is managed to minimize the impact of fluctuating
interest rates on earnings. At September 30, 1997, the results of United's
internal interest sensitivity analysis indicated that United was liability
sensitive (liabilities reprice more quickly than assets) in the one year
horizon. United, however, has not experienced the kind of repricing pattern
indicated from the cumulative gap because a significant portion of United's
retail deposit base does not reprice on a contractual basis. Management has
estimated, based upon historical analyses, that savings deposits are less
sensitive to interest rate changes than are other forms of deposits. The GAP
table presented herein has been adjusted to show the results of management's
assumption that the retail deposit base is less sensitive to interest rate
changes and reprices 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 $66.7 million or 2.78%
of the cumulative gap to related total earning assets.
20
The following table shows the interest rate sensitivity GAP as of September
30, 1997:
INTEREST RATE SENSITIVITY GAP
DAYS
---------------------------------- TOTAL 1 - 5 OVER 5
0 - 90 91 - 180 181 - 365 ONE YEAR YEARS YEARS TOTAL
---------- ------------ ---------- ---------- ---------- ------------- -------
(IN THOUSANDS)
ASSETS
Interest-Earning Assets:
Federal funds sold and
securities purchased
under agreements to
resell and other short-
term investments $ 50 $ 50 $ 50
Investment and Marketable
Equity Securities:
Taxable 11,660 $ 13,435 $ 16,736 41,831 $129,654 $248,035 419,520
Tax-exempt 1,041 1,380 1,686 4,107 9,646 16,081 29,834
Loans, net of unearned
income 629,970 151,926 282,234 1,064,130 592,537 297,906 1,954,573
---------- --------- --------- ---------- --------- -------- ----------
Total Interest-Earning
Assets $ 642,721 $166,741 $ 300,656 $1,110,118 $731,837 $562,022 $2,403,977
========== ======== ========= ========== ======== ======== ==========
LIABILITIES
Interest-Bearing Funds:
Savings and NOW
accounts $ 728,191 $ 728,191 $ 728,191
Time deposits of
$100,000 & over 44,647 $ 31,633 $ 41,042 117,322 $ 70,642 $ 800 188,764
Other time deposits 205,636 150,002 161,519 517,157 311,675 2,165 830,997
Federal funds purchased,
repurchase agreements
and other short-term
borrowing 140,846 140,846 140,846
FHLB advances 105,022 105,022 260 3,607 108,889
---------- --------- --------- ---------- --------- --------- ----------
Total Interest-Bearing
Funds $1,224,342 $ 181,635 $ 202,561 $1,608,538 $ 382,577 $ 6,572 $1,997,687
========== ========= ========= ========== ========= ========= ==========
Interest Sensitivity Gap $ (581,621) $ (14,894) $ 98,095 $ (498,420) $ 349,260 $555,450 $ 406,290
========== ========= ========== ========== ========= ======== ==========
Cumulative Gap $ (581,621) $(596,515) $ (498,420) $ (498,420) $(149,160) $406,290 $ 406,290
========== ========= ========== ========== ========= ======== ==========
Cumulative Gap as
a Percentage of Total
Earning Assets -24.19% -24.81% -20.73% -20.73% -6.20% 16.90% 16.90%
Management
Adjustments 706,459 (47,121) (94,171) 565,167 (565,167) 0
Off-Balance
Sheet Activities
---------- --------- --------- ---------- --------- --------- ----------
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities $ 124,838 $ 62,823 $ 66,747 $ 66,747 $(149,160) $406,290 $ 406,290
========= ========== ========== ========== ========= ======== ==========
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities as a
Percentage of Total
Earning Assets 5.19% 2.61% 2.78% 2.78% -6.20% 16.90% 16.90%
21
The primary method of measuring the sensitivity of earnings to changing market
interest rates is to simulate expected cash flows using varying assumed interest
rates while also adjusting the timing and magnitude of non-contractual deposit
repricing to more accurately reflect anticipated pricing behavior. These
simulations include adjustments for the lag in prime-linked loan repricing and
the spread and volume elasticity of interest-bearing deposit accounts, regular
savings and money market deposit accounts. To aid in interest rate management,
United's lead bank, UNB, is a member of the Federal Home Loan Bank of Pittsburgh
(FHLB). The use of FHLB advances provides United with a relatively low risk
means to match maturities of earning assets and interest-bearing funds to
achieve a desired interest rate spread over the life of the earning assets. At
September 30, 1997, United had $108.89 million in FHLB advances, which declined
from $132.63 million at December 31, 1996, as United utilized funds available
from lower cost deposits to pay down FHLB borrowings during the first nine
months of 1997.
INCOME TAXES
Income tax expense for the three months ended September 30, 1997 and 1996 was
$5.45 million and $1.96 million, respectively. Income tax expense for the second
quarter and first six months of 1996 included $3.09 million of one-time bad debt
recapture in connection with the Eagle merger, which was offset by decreased
pretax income. However, as a result of legislation passed during the third
quarter of 1996, United was relieved of the $3.09 million of additional income
tax expense recorded in the second quarter of 1996, that related to bad debt
recapture associated with the Eagle Bancorp, Inc. merger. Income tax expense for
the nine months ended September 30, 1997 and 1996 was $15.78 million and $11.91
million, respectively.
CAPITAL
Total shareholders' equity increased $13.97 million to $272.49 million, which is
an increase of 5.41% from December 31, 1996. United's equity to assets ratio was
10.56% at September 30, 1997 and 11.11% at December 31, 1996. Capital and
reserves to total assets was 11.41% at September 30, 1997 and 11.95% at December
31, 1996.
Cash dividends of $0.34 per common share for the third quarter of 1997 and $1.00
for the nine month period ended September 30, 1997, represent increases of 9.68%
and 8.70%, respectively, over the $0.31 paid for third quarter of 1996 and $0.92
paid for the first nine months of 1996. Total cash dividends paid were
approximately $5.09 million for the third quarter of 1997 and $14.98 million for
the first nine months of 1997, an increase of 8.26% and 15.26% over the
comparable periods of 1996.
United seeks to maintain a proper relationship between capital and total assets
to support growth and sustain earnings. United's average equity to average
assets ratio was 11.15% at September 30, 1997 and 11.31% at September 30, 1996.
United's risk-based capital ratios of 14.07% at September 30, 1997 and 16.54% at
December 31, 1996, are both significantly higher than the minimum regulatory
requirements. United's tier I capital and leverage ratios of 12.82% and 9.58%,
respectively, at September 30, 1997, are also well above regulatory minimum
requirements.
22