-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N7CrABCZC2l/LuWOHpEHhQnIntgvDciW4L7vTcGxAFkjxuUL+u9lEEg1MwgNgX2p PODPetcxLiib7clchEg/0g== 0000950128-98-000791.txt : 19980515 0000950128-98-000791.hdr.sgml : 19980515 ACCESSION NUMBER: 0000950128-98-000791 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED BANKSHARES INC/WV CENTRAL INDEX KEY: 0000729986 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 550641179 STATE OF INCORPORATION: WV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-86947 FILM NUMBER: 98619603 BUSINESS ADDRESS: STREET 1: 300 UNITED CTR STREET 2: 500 VIRGINIA ST E CITY: CHARLESTON STATE: WV ZIP: 25301 BUSINESS PHONE: 3044248761 MAIL ADDRESS: STREET 1: 300 UNITED CT STREET 2: 500 VIRGINIA SUITE CITY: CHARLESTON STATE: WV ZIP: 25301 10-Q 1 UNITED BANKSHARES, INC. 1 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, 1998 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; 39,056,717 shares outstanding as of April 30, 1998. 1 2 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, 1998 and December 31, 1997 .........................6 Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 1998 and 1997 ...................7 Consolidated Statement of Changes in Shareholders' Equity (Unaudited) for the Three Months Ended March 31, 1998 ........8 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 1998 and 1997 ...........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...................17 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 3 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 Exhibit 11 - Computation of Earnings Per Share.......26 Exhibit 27 - Financial Data Schedule.................27 (b) Reports on Form 8-K On April 16, 1998, United Bankshares, Inc. filed a Form 8-K that updated certain financial information in connection with the April 2, 1998, consummation of the merger with George Mason Bankshares, Inc. 3 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED BANKSHARES, INC. ----------------------- (Registrant) Date May 14, 1998 /s/ RICHARD M. ADAMS --------------------- ----------------------------- Richard M. Adams, Chairman of the Board and Chief Executive Officer Date May 14, 1998 /s/ STEVEN E. WILSON --------------------- ----------------------------- Steven E. Wilson, Executive Vice President, Treasurer and Chief Financial Officer 4 5 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) The March 31, 1998 and December 31, 1997, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries, and the related consolidated statements of income for the three months ended March 31, 1998 and 1997, and the related consolidated statement of changes in shareholders' equity for the three months ended March 31, 1998, and the related condensed consolidated statements of cash flows for the three months ended March 31, 1998 and 1997, and the notes to consolidated financial statements appear on the following pages. 5 6 CONSOLIDATED BALANCE SHEETS(UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except par value) March 31 December 31 1998 1997 ----------- ----------- ASSETS Cash and due from banks $ 81,129 $ 80,447 Interest-bearing deposits with other banks 154 8,725 Federal funds sold 1,000 ----------- ----------- Total cash and cash equivalents 81,283 90,172 Securities available for sale at estimated fair value (amortized cost-$262,844 at March 31, 1998 and $265,439 at December 31, 1997) 269,152 273,868 Securities held to maturity(estimated fair value -$169,819 at March 31, 1998 and $181,185 at December 31, 1997) 167,695 179,294 Loans Commercial, financial, and agricultural 357,182 368,654 Real estate: Single family residential 902,380 929,490 Commercial 405,470 392,818 Construction 97,919 93,918 Other 41,729 43,406 Installment 233,489 232,191 Loans held for sale at estimated fair value 142,733 7,008 ----------- ----------- 2,187,767 2,067,485 Less: Unearned income (6,865) (6,998) ----------- ----------- Loans, net of unearned income 2,180,902 2,060,487 Less: Allowance for loan losses (25,537) (24,786) ----------- ----------- Net loans 2,155,365 2,035,701 Bank premises and equipment 39,443 39,490 Interest receivable 18,777 16,040 Other assets 49,776 65,225 ----------- ----------- TOTAL ASSETS $ 2,781,491 $ 2,699,790 =========== =========== LIABILITIES Domestic deposits: Noninterest-bearing $ 294,624 $ 317,930 Interest-bearing 1,815,828 1,788,117 ----------- ----------- TOTAL DEPOSITS 2,110,452 2,106,047 Short-term borrowings: Federal funds purchased 34,788 20,961 Securities sold under agreements to repurchase 120,943 109,909 Federal Home Loan Bank borrowings 188,785 142,695 Accrued expenses and other liabilities 41,805 40,740 ----------- ----------- TOTAL LIABILITIES 2,496,773 2,420,352 SHAREHOLDERS' EQUITY Common stock, $2.50 par value; Authorized -41,000,000 shares; issued - 30,590,260 at March 31, 1998 and December 31, 1997, including 559,616 and 622,744 shares in treasury at March 31, 1998 and December 31, 1997, respectively 76,476 76,476 Surplus 40,922 41,014 Retained earnings 171,607 165,896 Accumulated other comprehensive income 4,100 5,479 Treasury stock (8,387) (9,427) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 284,718 279,438 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,781,491 $ 2,699,790 =========== ===========
See notes to consolidated unaudited financial statements. 6 7 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data) Three Months Ended March 31 -------------------------------- 1998 1997 ----------- ----------- INTEREST INCOME Interest and fees on loans $45,249 $38,917 Interest on federal funds sold and other short term investments 36 63 Interest and dividends on securities: Taxable 6,747 4,788 Exempt from federal taxes 472 532 ------- ------- TOTAL INTEREST INCOME 52,504 44,300 ------- ------- INTEREST EXPENSE Interest on deposits 20,296 16,952 Interest on short-term borrowings 1,538 885 Interest on Federal Home Loan Bank borrowings 1,958 1,321 ------- ------- TOTAL INTEREST EXPENSE 23,792 19,158 ------- ------- NET INTEREST INCOME 28,712 25,142 PROVISION FOR LOAN LOSSES 2,050 600 ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 26,662 24,542 ------- ------- OTHER INCOME Trust department income 1,009 853 Other charges, commissions, and fees 3,380 2,886 Income from mortgage banking operations 479 294 Other income 152 49 Investment securities gains 2,487 ------- ------- TOTAL OTHER INCOME 7,507 4,082 ------- ------- OTHER EXPENSES Salaries and employee benefits 7,573 6,551 Net occupancy expense 1,975 1,432 Other expense 7,754 5,644 ------- ------- TOTAL OTHER EXPENSES 17,302 13,627 ------- ------- INCOME BEFORE INCOME TAXES 16,867 14,997 INCOME TAXES 5,905 4,949 ------- ------- NET INCOME $10,962 $10,048 ======= ======= Earnings per common share Basic $ 0.37 $ 0.33 ======= ======= Diluted $ 0.36 $ 0.33 ======= ======= Dividends per share $ 0.18 $ 0.16 ======= ======= Average outstanding shares Basic 30,013,828 30,070,908 Diluted 30,433,050 30,325,380
See notes to consolidated unaudited financial statements. 7 8 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, 1998 --------------------------------------------------------------------------------------------------- COMMON STOCK ACCUMULATED --------------------- OTHER TOTAL PAR RETAINED COMPREHENSIVE TREASURY SHAREHOLDERS' SHARES VALUE SURPLUS EARNINGS INCOME STOCK EQUITY ---------- -------- ------- -------- ------- ------ -------- BALANCE AT JANUARY 1, 1998 30,590,260 $76,476 $41,014 $165,896 $5,479 ($9,427) $279,438 NET INCOME 10,962 10,962 OTHER COMPREHENSIVE INCOME, NET OF TAX: CHANGE IN NET UNREALIZED GAIN ON AVAILABLE FOR SALE SECURITIES, NET OF RECLASSIFICATION ADJUSTMENT (1,379) (1,379) CASH DIVIDENDS ($.18 PER SHARE) (5,251) (5,251) SALE OF TREASURY STOCK (37,376 SHARES) 654 654 COMMON STOCK OPTIONS EXERCISED (25,752 SHARES) (92) 386 294 ---------- ------- ------- -------- --------- --------- ------------ BALANCE AT MARCH 31, 1998 30,590,260 $76,476 $40,922 $171,607 $ 4,100 ($8,387) $284,718 ========== ======= ======= ======== ========= ========= ============ DISCLOSURE OF RECLASSIFICATION AMOUNT: UNREALIZED HOLDING GAINS ON AVAILABLE FOR SALE SECURITIES ARISING DURING THE PERIOD $ 238 LESS: RECLASSIFICATION ADJUSTMENT FOR GAINS REALIZED IN NET INCOME 1,617 --------- CHANGE IN NET UNREALIZED GAIN ON AVAILABLE FOR SALE SECURITIES, NET OF TAX $(1,379) =========
See notes to consolidated unaudited financial statements 8 9 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS) THREE MONTHS ENDED MARCH 31 ------------------------ 1998 1997 --------- -------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $(112,022) $ 12,431 INVESTING ACTIVITIES PROCEEDS FROM MATURITIES AND CALLS OF SECURITIES HELD TO MATURITY 22,354 7,781 PROCEEDS FROM MATURITIES AND CALLS OF SECURITIES AVAILABLE FOR SALE 44,981 45,795 PURCHASES OF SECURITIES AVAILABLE FOR SALE (39,968) (50,248) PURCHASES OF SECURITIES HELD TO MATURITY (10,735) (10,000) NET PURCHASE OF BANK PREMISES AND EQUIPMENT (1,212) (979) NET CHANGE IN LOANS 16,404 361 --------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 31,824 (7,290) --------- --------- FINANCING ACTIVITIES CASH DIVIDENDS PAID (4,930) (4,850) ACQUISITION OF TREASURY STOCK (3,551) PROCEEDS FROM EXERCISE OF STOCK OPTIONS 294 81 PROCEEDS FROM SALES OF TREASURY STOCK 654 PROCEEDS FROM FEDERAL HOME LOAN BANK ADVANCES 46,123 150,055 REPAYMENT OF FEDERAL HOME LOAN BANK ADVANCES (33) (204,018) CHANGES IN: DEPOSITS 4,340 52,472 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 24,861 5,201 --------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 71,309 (4,610) --------- -------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,889) 531 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 90,172 89,520 --------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 81,283 $ 90,051 ========= ========
SEE NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS. 9 10 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 1997 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 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, which had been delayed until after December 31, 1997, by FASB Statement No. 127, (SFAS No. 127), "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125, an amendment of FASB Statement No. 125." 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 adoption of the additional provisions of SFAS No. 125, as amended by SFAS No. 127, resulted in no material impact on United's financial condition or results of operations. 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 companies to report and display comprehensive income and its components. United has reviewed the components of comprehensive income as outlined by SFAS No. 130 and has disclosed the required information in these financial statements and notes thereto. 10 11 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. United is currently reviewing its methodology used for determining operating segment results. In February 1998, the FASB issued Statement No. 132, "Employers' Disclosures about Pension and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88 and 106." This statement revises employers' disclosures about pension and other postretirement benefit plans, but does not change the measurement or recognition of those plans. It standardizes the disclosure requirements to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis and eliminates certain disclosures that are no longer as useful as they were when Statements No. 87, 88 and 106 were issued. This Statement is effective for fiscal years beginning after December 15, 1997. These disclosure requirements will have no material impact on United's financial position or results of operations. The new rules do not have a material effect on United's financial position and results of operations. 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. ACQUISITIONS On April 2, 1998, United consummated its merger with George Mason Bankshares, Inc., Fairfax, Virginia ("George Mason") in a common stock exchange accounted for under the pooling of interests method of accounting. United exchanged 1.70 shares of United common stock for each of the 5,277,301 common shares of George Mason or approximately 8,971,412 shares, unadjusted for cash paid in lieu of fractional shares. As of the date of acquisition, George Mason reported total assets of $1,023,467,000, total net loans of $600,490,000, deposits of $839,562,000 and shareholders' equity of $78,925,000. George Mason amounts are not reflected in the accompanying financial statements. United has entered into an agreement with Fed One Bancorp, Inc., Wheeling, West Virginia ("Fed One") to exchange 1.50 shares of United 11 12 common stock for each of the 2,373,181 common shares of Fed One. The transaction will be accounted for using the pooling of interests method of accounting. It is anticipated that the proposed merger will be consummated early during the fourth quarter of 1998. The following represents unaudited selected pro forma financial information regarding the effects of the transactions as though United, George Mason and Fed One had been combined for all periods presented:
United United, and George (In thousands, except per share data) George Mason and George Mason Fed Fed One United Mason Combined One Combined -------- ------- -------- ------- -------- For the Three Months Ended March 31, 1998: Net interest income $ 28,712 $ 8,474 $ 37,186 $ 2,838 $ 40,024 Net income 10,962 2,784 13,746 675 14,421 Earnings per common share: Basic $0.37 $0.53 $0.35 $0.30 $0.34 Diluted $0.36 $0.51 $0.35 $0.28 $0.33 For the Three Months Ended March 31, 1997: Net interest income $ 25,142 $ 7,354 $ 32,496 $ 2,950 $ 35,446 Net income 10,048 1,816 11,864 821 12,685 Earnings per common share: Basic $0.33 $0.36 $0.31 $0.36 $0.30 Diluted $0.33 $0.35 $0.30 $0.34 $0.30 For the Year Ended December 31, 1997: Net interest income $105,753 $31,945 $137,698 $11,632 $149,330 Net income 40,939 8,080 49,019 3,242 52,261 Earnings per common share: Basic $1.37 $1.58 $1.27 $1.43 $1.24 Diluted $1.35 $1.54 $1.25 $1.36 $1.22
4. INVESTMENT SECURITIES The amortized cost and estimated fair values of securities available for sale are summarized as follows:
March 31, 1998 ----------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value -------- ------ ------ -------- U.S. Treasury securities and obligations of U.S. Government corporations and agencies $143,667 $ 489 $194 $143,962 Mortgage-backed securities 96,902 1,441 17 98,326 Marketable equity securities 6,978 4,693 40 11,631 Other 15,297 64 15,233 -------- ------ ---- -------- Total $262,844 $6,623 $315 $269,152 ======== ======= ===== ========
12 13
December 31, 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 $142,688 $ 500 $239 $142,949 Mortgage-backed securities 102,955 1,527 20 104,462 Marketable equity securities 4,300 6,741 11,041 Other 15,496 80 15,416 -------- ------ ---- -------- Total $265,439 $8,768 $339 $273,868 ======== ====== ==== ========
The cumulative net unrealized holding gain on available for sale securities resulted in an increase to shareholders' equity of $4,100 and $5,479, net of deferred income taxes at March 31, 1998 and December 31, 1997, respectively. The amortized cost and estimated fair value of securities available for sale at March 31, 1998 and December 31, 1997, by contractual maturity are as follows:
March 31, 1998 December 31, 1997 -------------------------- ------------------------- Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value -------- -------- -------- ------- Due in one year or less $ 36,962 $ 36,971 $ 36,604 $37,043 Due after one year through five years 97,245 97,540 86,721 87,031 Due after five years through ten years 10,830 10,858 20,861 20,868 Due after ten years 110,829 112,152 116,953 117,885 Marketable equity securities 6,978 11,631 4,300 11,041 -------- -------- -------- -------- Total $262,844 $269,152 $265,439 $273,868 ======== ======== ======== ========
The preceding table includes $98,326 and $104,462 of mortgage-backed securities at March 31, 1998 and December 31, 1997, respectively, with an amortized cost of $96,902 and $102,955 at March 31, 1998 and December 31, 1997, respectively. Maturities of mortgage-backed securities are based upon the estimated average life. The amortized cost and estimated fair values of securities held to maturity are summarized as follows:
March 31, 1998 ---------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value -------- ------- -------- ------ U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 90,956 $1,778 $ 17 $ 92,717 State and political subdivisions 34,971 1,242 39 36,174 Mortgage-backed securities 32,335 263 129 32,469 Other 9,433 974 8,459 -------- ------ ------ -------- Total $167,695 $3,283 $1,159 $169,819 ======== ====== ====== ========
13 14
December 31, 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 $ 97,847 $ 551 $ 22 $ 98,376 State and political subdivisions 32,650 1,323 8 33,965 Mortgage-backed securities 41,874 154 107 41,921 Other 6,923 6,923 -------- -------- -------- -------- Total $179,294 $ 2,028 $ 137 $181,185 ======== ======== ======== ========
The amortized cost and estimated fair value of securities held to maturity at March 31, 1998, and December 31, 1997, 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, 1998 December 31, 1997 --------------------------- --------------------------- Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value -------- -------- -------- -------- Due in one year or less $ 4,479 $ 4,535 $ 18,825 $ 18,887 Due after one year through five years 55,036 55,761 52,448 53,033 Due after five years through ten years 76,655 78,582 78,794 79,399 Due after ten years 31,525 30,941 29,227 29,866 -------- -------- -------- -------- Total $167,695 $169,819 $179,294 $181,185 ======== ======== ======== ========
Maturities of the mortgage-backed securities are based upon the estimated average life. There were no sales of held to maturity securities. The amortized cost of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $267,275 and $277,098 at March 31, 1998 and December 31, 1997, respectively. 5. NONPERFORMING LOANS Nonperforming loans are summarized as follows: March 31 December 31 1998 1997 ------- ------- Loans past due 90 days or more and still accruing interest $ 8,783 $11,342 Nonaccrual loans 6,655 4,156 ------- ------- Total nonperforming loans $15,438 $15,498 ======= ======= 14 15 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 March 31 -------------------- 1998 1997 ------- ------- Balance at beginning of period $24,786 $22,283 Provision charged to expense 2,050 600 ------- ------- 26,836 22,883 Loans charged-off (1,397) (684) Less recoveries 98 83 ------- ------- Net Charge-offs (1,299) (601) ------- ------- Balance at end of period $25,537 $22,282 ======= ======= The average recorded investment in impaired loans during the quarter ended March 31, 1998 and for the year ended December 31, 1997 was approximately $12,445 and $11,482, respectively. For the quarters ended March 31, 1998 and 1997, United recognized interest income on the impaired loans of approximately $140 and $117, respectively, substantially all of which was recognized using the accrual method of income recognition. At March 31, 1998, the recorded investment in loans that are considered to be impaired under SFAS No. 114 was $12,289 (of which $6,655 were on a nonaccrual basis). Included in this amount is $5,386 of impaired loans for which the related allowance for loan losses is $1,246 and $6,903 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 $355 and $270 for the quarters ended March 31, 1998 and 1997, 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. 15 16 8. EARNING ASSETS AND INTEREST-BEARING LIABILITIES The following table shows the daily average balance of major categories of assets and liabilities for each of the three month periods ended March 31, 1998, and March 31, 1997, with the interest rate earned or paid on such amount.
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31 MARCH 31 1998 1997 -------------------------------- ------------------------------ (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 $ 3,221 $ 36 4.45% $ 4,599 $ 63 5.59% INVESTMENT SECURITIES: TAXABLE 412,353 6,747 6.55% 293,110 4,788 6.53% TAX-EXEMPT (1) 32,786 727 8.87% 35,112 819 9.33% ---------- ------- ----- ---------- ------- ----- TOTAL SECURITIES 445,139 7,474 6.72% 328,222 5,607 6.83% LOANS, NET OF UNEARNED INCOME (1) (2) 2,084,573 45,817 8.87% 1,849,828 39,239 8.55% ALLOWANCE FOR LOAN LOSSES (24,785) (22,272) ---------- ---------- NET LOANS 2,059,788 8.98% 1,827,556 8.66% ---------- ------- ------ ---------- ------- ------ TOTAL EARNING ASSETS 2,508,148 $53,327 8.57% 2,160,377 $44,909 8.37% ------- ------ ------- ------ OTHER ASSETS 172,546 139,446 ---------- ---------- TOTAL ASSETS $2,680,694 $2,299,823 ========== ========== LIABILITIES INTEREST-BEARING FUNDS: INTEREST-BEARING DEPOSITS $1,803,118 $20,296 4.56% $1,591,906 $16,952 4.32% FEDERAL FUNDS PURCHASED, REPURCHASE AGREEMENTS AND OTHER SHORT-TERM BORROWING 133,682 1,538 4.67% 83,074 885 4.32% FHLB ADVANCES 138,644 1,958 5.73% 93,311 1,321 5.74% ---------- ------- ----- ---------- ------- ----- TOTAL INTEREST-BEARING FUNDS 2,075,444 23,792 4.65% 1,768,291 19,158 4.39% ------- ----- ------- ----- DEMAND DEPOSITS 282,833 240,090 ACCRUED EXPENSES AND OTHER LIABILITIES 37,447 29,866 ---------- ---------- TOTAL LIABILITIES 2,395,724 2,038,247 SHAREHOLDERS' EQUITY 284,970 261,576 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,680,694 $2,299,823 ========== ========== NET INTEREST INCOME $29,535 $25,751 ======= ======= INTEREST SPREAD 3.92% 3.98% NET INTEREST MARGIN 4.72% 4.78%
(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. 16 17 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 1998 was $10.96 million or $0.36 per share compared to $10.05 million or $0.33 per share for the first quarter of 1997. This represents a 9.05% increase in net income and a 9.09% increase in earnings per share. United's annualized return on average assets was 1.66% and return on average shareholders' equity was 15.60% as compared to 1.77% and 15.58% for 1997, respectively. United has strong core earnings driven by a net interest margin of 4.72% for the first three months of 1998. Net interest income increased $3.57 million or 14.20% for the first three months of 1998 as compared to the same period for 1997. The provision for loan losses increased $1.45 million or 241.67% when comparing the first three months of 1998 to the first three months of 1997. Noninterest income, including income from mortgage banking operations, but excluding investment securities gains, increased 22.98% for the first three months of 1998 when compared to the first three months of 1997. Noninterest expenses increased $3.68 million or 26.97% for the first three months compared to the same period in 1997. Income taxes were higher for the first three months than for the same period of 1997 due to higher earnings before taxes. Total assets were $2.78 billion at March 31, 1998, an $81.70 million or 3.03% increase from year-end, and up $446.17 million or 19.11% from one year ago. In terms of asset composition since year-end 1997, the March 31, 1998 balance sheet reflects a $8.89 million decrease in cash and cash equivalents and a $16.32 million decrease in investment securities as those funds were used to fund strong loan growth of $107.98 million or 5.24% for the quarter. All other categories of assets were moderately flat compared to year-end 1997. Total deposits were flat compared to year-end with an increase of $4.41 million, but reflected a $23.31 million shift from noninterest-bearing to interest-bearing for the quarter. United's total borrowed funds increased $70.95 million or 25.94% as short-term borrowings increased $24.86 million and FHLB borrowings increased $46.09 million as United utilized the increased borrowings to fund loan growth. Accrued expenses and other liabilities reflect a $1.07 million or 2.61% increase since year-end 1997 primarily as a result of increased accrued interest payable due to the higher volume of interest-bearing deposits and borrowed funds at slightly higher interest rates for the first quarter of 1998. Shareholders' equity reflected an increase of $5.28 million or 1.89% as compared to December 31, 1997 as United continues to maintain an appropriate balance between capital adequacy and returns to 17 18 shareholders. At March 31, 1998, 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 $3.57 million or 14.20% in the first quarter of 1998, when compared to the same period of 1997. The increase was primarily attributable to United's third quarter 1997 purchase acquisition of Patriot. The net interest margin continues to drive United's core profitability and momentum. A $348 million increase in average earning assets versus a $307 million increase in average interest-bearing liabilities for the first quarter of 1998 when compared to the first quarter of 1997 contributed to the continued strong net interest margin. Additionally, the yield on those average earning assets increased by 20 basis points while the increase in the cost of funds was 26 basis points higher when compared to the first quarter of 1997. United's tax-equivalent net interest margin was 4.72% for the first quarter of 1998, 6 basis points lower than the first three months of 1997. The slightly lower net interest margin from one year ago was primarily the result of a combination of higher average interest-bearing funds at increased costs when comparing the two periods. PROVISION FOR LOAN LOSSES For the quarter ended March 31, 1998 and 1997, the provision for loan losses was $2.05 million and $600 thousand, respectively. Charge-offs exceeded recoveries by $1.3 million and $601 thousand, respectively, during the first quarter of 1998 and 1997. United increased the provision for loan losses to cover net charge-offs and strong loan growth as loans, net of unearned income, increased by $120.4 million or 5.84% as compared to year-end 1997. The allowance for loan losses as a percentage of loans, net of unearned income, approximated 1.17% at March 31, 1998 and 1.20% at December 31, 1997. Note 6 to the accompanying unaudited consolidated financial statements provides a progression of the allowance for loan losses. Credit quality is another major factor in United's profitability. United's continued excellent credit quality is evidenced by the low level of nonperforming assets at the end of the first quarter of 1998. Nonperforming loans of $15.4 million remained nearly constant at March 31, 1998 when compared to nonperforming loans of $15.5 million at year-end 1997. Nonperforming loans, as a percentage of loans, net of unearned income, decreased slightly from 0.75% to 0.71% when comparing these two respective periods. The components of nonperforming loans include nonaccrual loans and loans which are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis. Loans past due 90 days or more decreased $2.60 million or 22.56% during the first quarter of 1998 and nonaccrual loans increased $2.50 million or 60.13% since year-end 1997. Total nonperforming assets of $18.12 million, including OREO of $2.69 million at March 31, 1998, represented 0.65% of total assets at the end of the first quarter. 18 19 As of March 31, 1998, the ratio of the allowance for loan losses to nonperforming loans was 165.4% as compared to 159.9% as of December 31, 1997. Accordingly, management believes that the allowance for loan losses of $25.5 million as of March 31, 1998, 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 $3.43 million or 83.90% for the first quarter of 1998 when compared to the first quarter of 1997. Excluding income from mortgage banking operations and investment securities gains, noninterest income increased $753 thousand or 19.88% for the first quarter primarily due to a combination of United's third quarter 1997 purchase acquisition of Patriot 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 a $2.49 million recognized gain on an available for sale equity security exchanged in an unaffiliated merger transaction consummated at the end of the first quarter of 1998. Other items of noninterest income responsible for the overall increase were in the areas of income from mortgage banking operations, return check charges, bankcard income and trust department commissions. 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 increased $3.68 million or 26.97% for the first quarter ending March 31, 1998 as compared to the same periods in 1997 primarily due to United's third quarter 1997 purchase acquisition of Patriot. Total salaries and benefits increased by 15.60% or $1.02 million for the first quarter of 1998, when compared to the same period of 1997. 19 20 Net occupancy expense for the first quarter of 1998 increased by $543 thousand or 37.92% when compared to the first quarter of 1997. The overall change in net occupancy expense for the first quarter of 1998 is primarily due to increases in all areas of occupancy expense due to the previously mentioned purchase transaction. Other expense increased $2.11 million or 37.38% for the first quarter of 1998, as compared to the same period of 1997. This overall increase was primarily due to increases in all areas of other noninterest expense due to the previously mentioned purchase transaction and merger expenses associated with United's April 2, 1998, consummation of the George Mason transaction. 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. 20 21 As shown in the interest rate sensitivity gap table in this section, United was liability sensitive (excess of liabilities over 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 $110,399,000 or 4.22% of the cumulative gap to related earning assets. 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 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 twelve month horizon given an immediate and sustained increase or decrease in interest rates. The current limits approved by the Board of Directors are plus or minus 10% for each 100 basis point increase or decrease in interest rates. The following table shows United's estimated earnings sensitivity profile after management's adjustments as of March 31, 1998: Change in Interest Rates Percentage Change in (basis points) Net Interest Income -------------- ------------------- +200 1.94% -200 -2.70% Given an immediate, sustained 200 basis point upward shock to the yield curve used in the simulation model, it is estimated net interest income for United would increase by 1.94% over one year. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 2.70% over one year. All of these estimated changes in net interest income are within the policy guidelines established by the Board of Directors. 21 22 The following table shows the interest rate sensitivity GAP as of March 31, 1998: 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 $ 154 $ 154 $ 154 Investment and Marketable Equity Securities: Taxable 21,808 $ 6,287 $ 13,930 42,025 $ 134,439 $216,412 401,876 Tax-exempt 4,895 4,895 9,894 20,182 34,971 Loans, net of unearned income 780,956 159,842 297,124 1,237,922 613,414 329,566 2,180,902 ---------- --------- --------- ----------- --------- -------- ---------- Total Interest-Earning Assets $ 802,918 $ 171,024 $ 311,054 $ 1,284,996 $ 766,747 $566,160 $2,617,903 ========== ========= ========= =========== ========= ======== ========== LIABILITIES Interest-Bearing Funds: Savings and NOW accounts $ 743,892 $ 743,892 $ 743,892 Time deposits of $100,000 & over 48,049 $ 23,230 $ 63,591 134,870 $ 63,698 $ 611 199,179 Other time deposits 171,682 174,270 208,674 554,626 316,188 1,943 872,757 Federal funds purchased, repurchase agreements and other short-term borrowing 155,731 155,731 155,731 FHLB advances 155,000 155,000 33,785 188,785 ---------- --------- --------- ----------- --------- -------- ---------- Total Interest-Bearing Funds $1,274,354 $ 197,500 $ 272,265 $ 1,744,119 $ 413,671 $ 2,554 $2,160,344 ========== ========= ========= =========== ========= ======== ========== Interest Sensitivity Gap $ (471,436) $ (26,476) $ 38,789 $ (459,123) $ 353,076 $563,606 $ 457,559 ========== ========= ========= =========== ========= ======== ========== Cumulative Gap $ (471,436) $ 497,912 $(459,123) $ (459,123) $(106,047) $457,559 $ 457,559 ========== ========= ========= =========== ========= ======== ========== Cumulative Gap as a Percentage of Total Earning Assets -18.01% -19.02% -17.54% -17.54% -4.05% 17.48% 17.48% Management Adjustments 711,903 (47,484) (94,897) 569,522 (569,522) 0 ---------- --------- --------- ----------- --------- -------- ---------- Off-Balance Sheet Activities Cumulative Management Adjusted Gap and Off-Balance Sheet Activities $ 240,467 $ 166,507 $ 110,399 $ 110,399 $(106,047) $457,559 $ 457,559 ========== ========= ========= =========== ========= ======== ========== Cumulative Management Adjusted Gap and Off-Balance Sheet Activities as a Percentage of Total Earning Assets 9.19% 6.36% 4.22% 4.22% -4.05% 17.48% 17.48%
22 23 LIQUIDITY AND CAPITAL RESOURCES United maintains, in the opinion of management, liquidity which is sufficient to satisfy its depositors' requirements and the credit needs of its customers. Like all banks, United depends upon its ability to renew maturing deposits and other liabilities on a daily basis and to acquire new funds in a variety of markets. A significant source of funds available to United are "core deposits." Core deposits include certain demand deposits, statement and special savings and NOW accounts. These deposits are relatively stable and they are the lowest cost source of funds available to United. Short-term borrowings have also been a significant source of funds. These include federal funds purchased and securities sold under agreements to repurchase. Repurchase agreements represent funds which are 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. For the three months ended March 31, 1998, United utilized $112.02 million of cash for operations primarily as a result of acquiring approximately $117 million of mortgage loans held for sale in the secondary market. During the same period, net cash of $31.82 million was generated from investing activities which was primarily due to $16.63 million of excess net proceeds from calls and maturities of investment securities over purchases of investment securities and $16.40 of net repayments from portfolio loans. During the first three months of 1998, net cash of $71.31 million was generated by financing activities, primarily due to additional borrowings of approximately $71 million that consisted of $46.12 million of new FHLB advances and $24.86 23 24 million in increased short-term borrowings from federal funds purchased and securities sold under agreements to repurchase. These sources of funds were partially offset by payment of $4.93 million in cash dividends. The net effect of this activity was a decrease in cash and cash equivalents of $8.89 million for the first three months of 1998. 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. CAPITAL Total shareholders' equity increased $5.28 million to $284.72 million, which is an increase of 1.89% from December 31, 1997. United's equity to assets ratio was 10.24% at March 31, 1998, as compared to 10.35% at December 31, 1997. Capital and reserves to total assets was 11.15% at March 31, 1998, as compared to 11.27% at December 31, 1997. Cash dividends of $0.18 per common share for the first quarter of 1998 represent an increase of 12.50% over the $0.16 paid for first quarter of 1997. Total cash dividends were approximately $5.25 million for the first quarter of 1998, an increase of 5.76% over the comparable period of 1997. 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 10.63% at March 31, 1998 and 11.38% at March 31, 1997. United's risk-based capital ratios of 13.64% at March 31, 1998 and 13.46% at December 31, 1997, are both significantly higher than the minimum regulatory requirements. United's Tier I capital and leverage ratios of 12.39% and 9.26%, respectively, at March 31, 1998, are also well above regulatory minimum requirements. YEAR 2000 ISSUE The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of a company's hardware, date-driven automated equipment or computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This faulty recognition could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. 24 25 United has initiated formal communications with all of its significant suppliers and customers to determine the extent to which United's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 Issues. United's total Year 2000 project costs and estimates to complete include the estimated costs and time associated with the impact of third party Year 2000 Issues based on presently available information. However, there can be no guarantee that the systems and applications of other companies on which United's systems rely will be timely converted or that a failure to convert by another company, or a conversion that is incompatible with United's systems and applications, would not have a material adverse effect on United. United will utilize both internal and external resources to reprogram, or replace, and test the Year 2000 modifications. United anticipates completing the Year 2000 project within one year but not later than December 31, 1998, which is prior to any anticipated impact on United's operating systems. The total cost of the Year 2000 project is estimated at $2.0 million and is being funded through cash flows, which will be expensed as incurred over the next two years. The Year 2000 costs are not expected to have a material adverse effect on United's results of operations or cash flows. To date United has incurred and expensed approximately $250,000 related to the assessment of, and preliminary efforts in connection with, the Year 2000 project and the development of a Year 2000 plan of operation. The costs of the Year 2000 project and the date on which United believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third party vendor modification plans and other factors. There can be no guarantee, however, that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of trained programming personnel, the ability to locate and correct all relevant computer coding, and similar uncertainties. 25 EX-11 2 UNITED BANKSHARES, INC. 1 Exhibit 11 Statement Re: Computation of Earnings Per Share UNITED BANKSHARES, INC. AND SUBSIDIARIES For the Quarter Ended March 31 -------------------------------- 1998 1997 ----------- ----------- BASIC: - ------ Average Number of Common Shares 30,013,828 30,070,908 Net Income $10,962,000 $10,048,000 Preferred Dividends -- -- ----------- ----------- Available to Common Shares $10,962,000 $10,048,000 =========== =========== Basic Earnings Per Common Share: $0.37 $0.33 =========== =========== DILUTED: - -------- Average Number of Common Shares 30,013,828 30,070,908 Average Number of Common Share Equivalents 419,222 254,472 ----------- ----------- Average Shares and Share Equivalents Outstanding 30,433,050 30,325,380 =========== =========== Net Income $10,962,000 $10,048,000 Preferred Dividends -- -- ----------- ----------- Available to Common Shares $10,962,000 $10,048,000 =========== =========== Diluted Earnings Per Common Share $0.36 $0.33 =========== =========== 26 EX-27.1 3 UNITED BANKSHARES, INC.
9 3-MOS DEC-31-1998 MAR-31-1998 81,129,000 154,000 0 0 269,152,000 167,695,000 169,819,000 2,180,902,000 25,537,000 2,781,491,000 2,110,452,000 155,731,000 41,805,000 188,785,000 0 0 76,476,000 208,242,000 2,781,491,000 45,249,000 7,219,000 36,000 52,504,000 20,296,000 23,792,000 28,712,000 2,050,000 2,487,000 17,302,000 16,867,000 10,962,000 0 0 10,962,000 0.37 0.36 4.72 6,655,000 8,783,000 0 0 24,786,000 1,397,000 98,000 25,537,000 8,775,000 0 16,762,000
EX-27.2 4 UNITED BANKSHARES, INC.
9 3-MOS DEC-31-1997 MAR-31-1997 74,737,000 314,000 15,000,000 0 165,290,000 172,950,000 174,668,000 1,846,463,000 22,282,000 2,335,319,000 1,879,969,000 80,783,000 36,301,000 78,668,000 0 0 38,238,000 221,360,000 2,335,319,000 38,917,000 5,325,000 55,000 44,292,000 16,952,000 19,150,000 25,142,000 600,000 0 13,627,000 14,997,000 14,997,000 0 0 10,048,000 0.33 0.33 4.78 5,848,000 6,141,000 0 0 22,283,000 684,000 83,000 22,282,000 8,138,000 0 14,144,000
EX-27.3 5 UNITED BANKSHARES, INC.
9 6-MOS DEC-31-1997 JUN-30-1997 86,805,000 358,000 0 0 201,902,000 181,872,000 184,082,000 1,840,686,000 22,249,000 2,372,783,000 1,870,495,000 114,646,000 32,957,000 90,249,000 0 0 38,238,000 226,198,000 2,379,783,000 78,533,000 10,994,000 118,000 89,645,000 34,824,000 39,106,000 50,539,000 1,150,000 0 27,169,000 30,504,000 30,504,000 0 0 20,168,000 0.67 0.67 4.77 5,939,000 6,394,000 0 0 22,283,000 1,456,000 272,000 22,249,000 7,827,000 0 14,422,000
EX-27.4 6 UNITED BANKSHARES, INC.
9 9-MOS DEC-31-1997 SEP-30-1997 80,712,000 50,000 0 0 273,440,000 175,914,000 179,082,000 1,954,573,000 24,941,000 2,581,025,000 2,017,597,000 140,846,000 41,206,000 108,889,000 0 0 38,238,000 234,249,000 2,581,025,000 119,799,000 18,521,000 150,000 138,470,000 54,122,000 61,059,000 77,411,000 2,150,000 0 43,432,000 46,297,000 30,513,000 0 0 30,513,000 1.02 1.01 4.75 6,187,000 12,155,000 0 0 22,283,000 2,599,000 412,000 24,941,000 9,436,000 0 15,505,000
EX-27.5 7 UNITED BANKSHARES, INC.
9 3-MOS DEC-31-1996 MAR-31-1996 74,392,000 0 0 0 204,922,000 107,064,000 107,627,000 1,358,650,000 20,126,000 1,798,455,000 1,480,276,000 87,729,000 26,436,000 0 0 0 30,391,000 173,623,000 1,798,455,000 30,173,000 4,508,000 71,000 34,752,000 12,416,000 13,866,000 20,886,000 450,000 0 12,258,000 11,444,000 11,444,000 0 0 7,504,000 0.27 0.27 5.21 4,196,000 4,208,000 0 0 20,017,000 499,000 158,000 20,126,000 8,460,000 0 11,666,000
EX-27.6 8 UNITED BANKSHARES, INC.
9 6-MOS DEC-31-1996 JUN-30-1996 73,137,000 0 0 0 179,013,000 173,938,000 172,774,000 1,790,536,000 22,723,000 2,275,897,000 1,763,734,000 105,954,000 34,541,000 124,589,000 0 0 38,238,000 209,507,000 2,275,897,000 74,008,000 9,416,000 291,000 83,715,000 31,543,000 35,133,000 48,582,000 1,560,000 (48,000) 33,004,000 19,327,000 19,327,000 0 0 9,353,000 0.31 0.31 4.92 5,122,000 6,856,000 0 0 22,545,000 1,781,000 399,000 22,723,000 8,878,000 0 13,845,000
EX-27.7 9 UNITED BANKSHARES, INC.
9 9-MOS DEC-31-1996 SEP-30-1996 94,701,000 0 0 0 170,435,000 174,925,000 174,658,000 1,801,483,000 22,705,000 2,299,270,000 1,772,585,000 98,505,000 32,687,000 140,584,000 0 0 38,238,000 216,671,000 2,299,270,000 112,852,000 15,128,000 344,000 128,324,000 47,464,000 53,998,000 74,326,000 2,160,000 (98,000) 49,544,000 32,486,000 32,486,000 0 0 20,576,000 0.68 0.68 4.89 4,691,000 5,310,000 0 0 22,545,000 2,476,000 476,000 22,705,000 9,064,000 0 13,641,000
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