10-K

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) Yes [X] No [ ]

The aggregate market value of United Bankshares, Inc. common stock, representing all of its voting stock that was held by non-affiliates on June 28, 2003, was approximately $1,058,343,795.

As of February 27, 2004, United Bankshares, Inc. had 43,698,235 shares of common stock outstanding with a par value of $2.50.

Definitive Proxy Statement dated April 8, 2004 for the 2004 Annual Shareholders’ Meeting to be held on May 17, 2004, portions of which are incorporated by reference in Part III of this Form 10-K.

As of the date of filing this Annual report, neither the annual shareholders’ report for the year ended December 31, 2003, nor the proxy statement for the annual United shareholders’ meeting had been mailed to shareholders.

United Bankshares, Inc. (United) is a West Virginia corporation registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended. United was incorporated on March 26, 1982, organized on September 9, 1982, and began conducting business on May 1, 1984 with the acquisition of three wholly-owned subsidiaries. Since its formation in 1982, United has acquired twenty-six banking institutions. At December 31, 2003, United has two banking subsidiaries (the Banking Subsidiaries) “doing business” under the name of United Bank, one operating under the laws of West Virginia and the other operating under the laws of Virginia. United also owns nonbank subsidiaries which engage in mortgage banking and other community banking services, such as asset management, investment banking, financial planning, and brokerage services.

As of December 31, 2003, United and its subsidiaries had approximately 1,585 full-time equivalent employees and officers. None of these employees are represented by a collective bargaining unit and management considers employee relations to be excellent.

United’s web site address is “www.ubsi-wv.com”. United makes available free of charge on its web site the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments thereto, as soon as reasonably practicable after United files such reports with the Securities and Exchange Commission (SEC). The reference to United’s web site does not constitute incorporation by reference of the information contained in the web site and should not be considered part of this document.

As a bank holding company registered under the Bank Holding Company Act of 1956, as amended, United’s present business is community and mortgage banking. As of December 31, 2003, United’s consolidated assets approximated $6.4 billion and total shareholders’ equity approximated $615 million.

United is permitted to acquire other banks and bank holding companies, as well as thrift institutions. United is also permitted to engage in certain non-banking activities which are closely related to banking under the provisions of the Bank Holding Company Act and the Federal Reserve Board’s Regulation Y. Management continues to consider such opportunities as they arise, and in this regard, management from time to time makes inquiries, proposals, offers or expressions of interest as to potential opportunities, although no agreements or understandings to acquire other banks or bank holding companies or nonbanking subsidiaries or to engage in other nonbanking activities, other than those identified herein, presently exist.

United, through its subsidiaries, engages primarily in community banking and mortgage banking and additionally offers most types of business permitted by law and regulation. Included among the banking services offered are the acceptance of deposits in checking, savings, time and money market accounts; the making and servicing of personal, commercial, floor plan and student loans; and the making of construction and real estate loans. Also offered are individual

retirement accounts, safe deposit boxes, wire transfers and other standard banking products and services. As a part of their lending function, the Banking Subsidiaries offer credit card services including accounts issued under the name of certain correspondent banks.

The Banking Subsidiaries each maintain a trust department which acts as trustee under wills, trusts and pension and profit sharing plans, as executor and administrator of estates, and as guardian for estates of minors and incompetents, and in addition performs a variety of investment and security services. Trust services are available to customers of affiliate banks. United Bank (WV) provides services to its correspondent banks such as check clearing, safekeeping and the buying and selling of federal funds.

United Brokerage Services, Inc., a wholly-owned subsidiary of United Bank (WV), is a fully-disclosed broker/dealer and a registered Investment Advisor with the National Association of Securities Dealers, Inc., the Securities and Exchange Commission, and a member of the Securities Investor Protection Corporation. United Brokerage Services, Inc. offers a wide range of investment products as well as comprehensive financial planning and asset management services to the general public.

United Bank (WV) is a member of a network of automated teller machines known as the STAR ATM network while United Bank (VA) participates in the MOST network. Through STAR and MOST, the Banking Subsidiaries are participants in a network known as Cirrus, which provides banking on a nationwide basis.

United through its Banking Subsidiaries offers an Internet banking service, Smart Touch Online Banking, which allows customers to perform various transactions using a computer from any location as long as they have access to the Internet and a secure browser. Specifically, customers can check personal account balances, receive information about transactions within their accounts, make transfers between accounts, stop payment on a check, and reorder checks. Customers may also pay bills online and can make payments to virtually any business or individual. Customers can set up recurring fixed payments, set up one-time future payments or setup a one-time immediate payment. Customers can also set up their own merchants, view and modify that merchant list, view pending transactions and view their bill payment history with approximately three (3) months of history.

United also offers an automated telephone banking system, Telebanc, which allows customers to access their personal account(s) or business account(s) information from a touch-tone telephone.

United’s loan portfolio, net of unearned income, increased $522.9 million to $4.10 billion in 2003. The loan portfolio is comprised of commercial, real estate and consumer loans including credit card and home equity loans. Commercial and commercial real estate loans increased $161.6 million or 23.1% and $70.0 million or 7.5%, respectively. Consumer loans increased $30.8 million or 8.2% and residential real estate loans increased $178.5 million or 13.7%. Real estate construction loans increased $54.7 million or 32.0% for the year of 2003.

As of December 31, 2003, approximately $400.1 million or 9.8% of United’s loan portfolio were real estate loans that met the regulatory definition of a high loan-to-value loan. A high loan-to-value real estate loan is defined as any loan, line of credit, or combination of credits secured by liens on or interests in real estate that equals or exceeds a certain percentage of the real estate’s appraised value, unless the loan has other appropriate credit support. The certain percentage varies depending on the loan type and collateral. Appropriate credit support may include mortgage insurance, readily marketable collateral, or other acceptable collateral that reduces the loan-to-value ratio below the certain percentage.

The commercial loan portfolio consists of loans to corporate borrowers primarily in small to mid-size industrial and commercial companies, as well as automobile dealers, service, retail and wholesale merchants. Collateral securing these

loans includes equipment, machinery, inventory, receivables, vehicles and commercial real estate. Commercial loans are considered to contain a higher level of risk than other loan types although care is taken to minimize these risks. Numerous risk factors impact this portfolio including industry specific risks such as economy, new technology, labor rates and cyclicality, as well as customer specific factors, such as cash flow, financial structure, operating controls and asset quality. United diversifies risk within this portfolio by closely monitoring industry concentrations and portfolios to ensure that it does not exceed established lending guidelines. Diversification is intended to limit the risk of loss from any single unexpected economic event or trend. Underwriting standards require a comprehensive credit analysis and independent evaluation of virtually all larger balance commercial loans by the loan committee prior to approval.

Commercial real estate loans consist of commercial mortgages, which generally are secured by nonresidential and multi-family residential properties. Also included in this portfolio are loans that are secured by owner-occupied real estate, but made for purposes other than the construction or purchase of real estate. Commercial real estate loans carry many of the same customers and industry risks as the commercial loan portfolio. Real estate mortgage loans to consumers are secured primarily by a first lien deed of trust. These loans are traditional one-to-four family residential mortgages. The loans generally do not exceed an 80% loan to value ratio at the loan origination date and most are at a variable rate of interest. These loans are considered to be of normal risk.

Consumer loans are secured by automobiles, boats, recreational vehicles, and other personal property. Personal loans, home equity loans, student loans and unsecured credit card receivables are also included as consumer loans. United monitors the risk associated with these types of loans by monitoring such factors as portfolio growth, lending policies and economic conditions. Underwriting standards are continually evaluated and modified based upon these factors.

United’s loan underwriting guidelines and standards are updated periodically and are presented for approval by the respective Boards of Directors of each of its subsidiary banks. The purpose of the standards and guidelines is to grant loans on a sound and collectible basis; to invest available funds in a safe, profitable manner; to serve the legitimate credit needs of the communities of United’s primary market area; and ensure that all loan applicants receive fair and equal treatment in the lending process. It is the intent of the underwriting guidelines and standards to: minimize loan losses by carefully investigating the credit history of each applicant, verify the source of repayment and the ability of the applicant to repay, collateralize those loans in which collateral is deemed to be required, exercise care in the documentation of the application, review, approval, and origination process, and administer a comprehensive loan collection program. The above guidelines are adhered to and subject to the experience, background and personal judgment of the loan officer assigned to the loan application. A loan officer may grant, with justification, a loan with variances from the underwriting guidelines and standards. However, the loan officer may not exceed his or her respective lending authority without obtaining the prior, proper approval from a superior, a regional supervisor, or the Loan Committee, whichever is deemed appropriate for the nature of the variance.

United generally originates loans within the primary market area of its banking subsidiaries. United may from time to time make loans to borrowers and/or on properties outside of its primary market area as an accommodation to its customers. Processing of all loans except those originated by George Mason Mortgage, LLC is centralized in the Charleston, West Virginia office. As of December 31, 2003, the balance of mortgage loans being serviced by United for others was insignificant.

United Bank (WV) and George Mason Mortgage, LLC (GMMC), a wholly-owned subsidiary of United Bank (VA), are engaged in the operation of a general mortgage and agency business, including the origination and acquisition of residential real estate loans for resale and generally the activities commonly conducted by a mortgage banking company. These loans are for single-family, owner-occupied residences with either adjustable or fixed rate terms, with a variety of maturities tailored to effectively serve its markets.

GMMC primarily originates permanent residential mortgage loans in the northern Virginia market while United Bank (WV)’s originations are predominately in its West Virginia markets. Mortgage loan originations are generally intended to be sold in the secondary market on a best efforts basis.

During 2003, United originated $4.3 billion of real estate loans for sale in the secondary market and sold $4.7 billion of loans designated as held for sale in the secondary market. Gains on the sales of these loans during 2003 were $25.6 million.

The principal sources of revenue from United’s mortgage banking business are: (i) loan origination fees; (ii) gains or losses from the sale of loans, if any; (iii) interest earned on mortgage loans during the period that they are held by United pending sale; and (iv) loan servicing fees.

United’s investment policy stresses the management of the investment securities portfolio, which includes both securities held to maturity and securities available for sale, to maximize return over the long-term in a manner that is consistent with good banking practices and relative safety of principal. United currently does not engage in trading account activity. The Asset/Liability Committee of United is responsible for the coordination and evaluation of the investment portfolio.

Sources of funds for investment activities include “core deposits”. Core deposits include certain demand deposits, statement and special savings and NOW accounts. These deposits are relatively stable and they are the lowest cost source of funds available to United. Short-term borrowings have also been a significant source of funds. These include federal funds purchased, securities sold under agreements to repurchase and FHLB borrowings. Repurchase agreements represent funds that are generally obtained as the result of a competitive bidding process.

United’s investment portfolio is comprised of a significant amount of mortgage-backed securities. Additionally United has a substantial amount of U.S. Treasury securities and obligations of U.S. Agencies and Corporations. Obligations of States and Political Subdivisions are comprised of municipal securities with an average quality of not less than an “A” rating.

United recognized net gains of $1.8 million and net losses of $6.3 million for the years of 2003 and 2002, respectively, from security transactions. Included in the security transactions’ totals for 2002 are recognized impairment charges of $7.0 million related to other-than-temporary declines in the fair value of retained interests in securitized assets. United incurred only minimal impairment charges during 2003. The impairment charges were due to declines in the estimated fair value of the retained interests as a result of increases in the level of prepayment and default activity during the time periods.

United faces a high degree of competition in all of the markets it serves. These markets may generally be defined as Wood, Kanawha, Monongalia, Jackson, Cabell, Brooke, Hancock, Ohio, Marshall, Gilmer, Harrison, Lewis, Webster, Boone, Logan, Nicholas, Fayette, Jefferson and Raleigh Counties in West Virginia; Lawrence, Belmont, Jefferson and Washington Counties in Ohio; Montgomery County in Maryland and Arlington, Alexandria, Loudoun, Prince William and Fairfax

Counties in Virginia, located adjacent to the Washington, D.C. area, which is in close proximity to Jefferson and Berkeley Counties in West Virginia’s eastern panhandle. United competes in Ohio markets because of the close proximity to the Ohio border of certain subsidiary offices. Included in United’s West Virginia markets are the five largest West Virginia Metropolitan Statistical Areas (MSA): the Parkersburg MSA, the Charleston MSA, the Huntington MSA, the Wheeling MSA and the Weirton MSA. United’s Virginia markets include the Maryland, northern Virginia and Washington, D.C. Metropolitan area. United considers the above counties and MSA’s to be the primary market area for the business of its banking subsidiaries.

With prior regulatory approval, West Virginia and Virginia banks are permitted unlimited branch banking throughout the state. In addition, interstate acquisitions of and by West Virginia and Virginia banks and bank holding companies are permissible on a reciprocal basis, as well as reciprocal interstate acquisitions by thrift institutions. These conditions serve to intensify competition within United’s market.

As of December 31, 2003, there were 66 bank holding companies operating in the State of West Virginia registered with the Federal Reserve System and the West Virginia Board of Banking and Financial Institutions and 91 bank holding companies operating in the Commonwealth of Virginia registered with the Federal Reserve System and the Virginia Corporation Commission. These holding companies are headquartered in various states and control banks throughout West Virginia and Virginia, which compete for business as well as for the acquisition of additional banks.

As of December 2003, West Virginia’s unemployment rate was 5.1% while the national rate was 5.4%. West Virginia maintained an unemployment rate lower than the national rate eight months out of twelve during 2003. Population outflows that have constrained faster economic growth in West Virginia may be moderating. In 2002, the U.S. Census Bureau estimated that the state’s population increased marginally. While substantially less than the national average, the increase was a substantial improvement over the six prior years, which the state’s population base shrank.

United’s northern Virginia subsidiary banking offices are located in markets that reflect very low unemployment rate levels and increased wage levels over a year ago. According to information available from the Virginia Employment Commission, Virginia’s unemployment rate as of December 2003 was 3.3%. The 3.3% December 2003 unemployment rate was the lowest in thirty-one months and was below both the Virginia December 2002 jobless rate of 3.5% and the U.S. December 2003 unemployment level of 5.4%. The Northern Virginia metropolitan area’s unemployment rate was at 2.0%, continuing to have the lowest among Virginia’s eight metropolitan areas, as of December 2003.

United, as a bank holding company, is subject to the restrictions of the Bank Holding Company Act of 1956, as amended, and is registered pursuant to its provisions. As such, United is subject to the reporting requirements of and examination by the Board of Governors of the Federal Reserve System (“Board of Governors”).

The Bank Holding Company Act prohibits the acquisition by a bank holding company of direct or indirect ownership of more than five percent of the voting shares of any bank within the United States without prior approval of the Board of Governors. With certain exceptions, a bank holding company also is prohibited from acquiring direct or indirect ownership or control of more than five percent of the voting shares of any company which is not a bank, and from engaging directly or indirectly in business unrelated to the business of banking, or managing or controlling banks.

The Board of Governors of the Federal Reserve System, in its Regulation Y, permits bank holding companies to engage in non-banking activities closely related to banking or managing or controlling banks. Approval of the Board of Governors is necessary to engage in these activities or to make acquisitions of corporations engaging in these activities. In addition, on a case-by-case basis, the Board of Governors may approve other non-banking activities.

On July 30, 2002, the President of the United States signed into law the Sarbanes-Oxley Act of 2002 (Act), a broad accounting, auditing, disclosure and corporate governance reform law. The legislation was passed in an effort to increase corporate responsibility by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws and to allow stockholders to more easily and efficiently monitor the performance of companies and directors. All necessary policies and procedures established by the Act have been fully implemented by United.

As a bank holding company doing business in West Virginia, United is also subject to regulation and examination by the West Virginia Board of Banking and Financial Institutions (the “West Virginia Banking Board”) and must submit annual reports to the department. Further, any acquisition application that United must submit to the Board of Governors must also be submitted to the West Virginia Banking Board for approval.

United is also registered under and is subject to the requirements of the Securities Exchange Act of 1934, as amended.

The Banking Subsidiaries, as state member banks, are subject to supervision, examination and regulation by the Federal Reserve System, and as such, are subject to applicable provisions of the Federal Reserve Act and regulations issued thereunder. Each bank is subject to regulation by their state banking authority.

The deposits of United’s Banking Subsidiaries are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the extent provided by law. Accordingly, these banks are also subject to regulation by the FDIC.

United is headquartered in the United Center at 500 Virginia Street, East, Charleston, West Virginia. United’s executive offices are located in Parkersburg, West Virginia at Fifth and Avery Streets. United operates ninety-one full service offices — fifty-two offices located throughout West Virginia, thirty-six offices throughout the Northern Virginia, Maryland and Washington, D.C. areas and three in Ohio. United owns all its West Virginia facilities except for two in the Wheeling area, three in the Charleston area, two in the Beckley area and one each in Parkersburg, Charles Town and Clarksburg, all of which are leased under operating leases. United leases all of its facilities under operating lease agreements in the Northern Virginia, Maryland and Washington, D.C. areas except for four offices, one each in Fairfax, Alexandria, and Vienna, Virginia and one in Bethesda, Maryland which are owned facilities. In Ohio, United leases two of its three facilities, one each in Bellaire and St. Clairsville.

In the normal course of business, United and its subsidiaries are currently involved in various legal proceedings. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

Item 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

As of December 31, 2003, 100,000,000 shares of common stock, par value $2.50 per share, were authorized for United, of which 44,320,832 were issued, including 631,232 shares held as treasury shares. The outstanding shares are held by approximately 6,276 shareholders of record, as well as 5,826 shareholders in street name as of February 27, 2004. The unissued portion of United’ s authorized common stock (subject to registration approval by the SEC) and the treasury shares are available for issuance as the Board of Directors determines advisable. United offers its shareholders the opportunity to invest dividends in shares of United stock through its dividend reinvestment plan. United has also established stock option plans and a stock bonus plan as incentive for certain eligible officers. In addition to the above incentive plans, United is occasionally involved in certain mergers in which additional shares could be issued and recognizes that additional shares could be issued for other appropriate purposes.

At the May 2003 Board of Directors meeting, a stock repurchase plan was approved whereby United could buy up to 1,650,000 shares of its common stock in the open market. During 2003, 408,435 shares were repurchased under the plan approved in 2003. In addition, 848,700 shares were acquired during 2003 under the previous stock repurchase plan.

The Board of Directors believes that the availability of authorized but unissued common stock of United is of considerable value if opportunities should arise for the acquisition of other businesses through the issuance of United’s stock. Shareholders do not have preemptive rights, which allows United to issue additional authorized shares without first offering them to current shareholders.

United has only one class of stock and all voting rights are vested in the holders of United’s stock. On all matters subject to a vote of shareholders, the shareholders of United will be entitled to one vote for each share of common stock owned. Shareholders of United have cumulative voting rights with regard to election of directors. At the present time, no senior securities of United are outstanding, nor does the Board of Directors presently contemplate issuing senior securities.

There are no preemptive or conversion rights or, redemption or sinking fund provisions with respect to United’s stock. All of the issued and outstanding shares of United’s stock are fully paid and non-assessable.

The shareholders of United are entitled to receive dividends when and as declared by its Board of Directors. Dividends have been paid quarterly. Dividends were $1.00 per share in 2003, $0.95 per share in 2002 and $0.91 per share in 2001. Dividends are paid from funds legally available, therefore the payment of dividends is subject to the restrictions set forth in the West Virginia Corporation Act. See “Market and Stock Prices of United” for quarterly dividend information.

Payment of dividends by United is dependent upon payment of dividends to it by its Banking Subsidiaries. Payment of dividends by United’s state member Banking Subsidiaries is regulated by the Federal Reserve System and generally, the prior approval of the Federal Reserve Board (FRB) is required if the total dividends declared by a state member bank in any calendar year exceeds its net profits, as defined, for that year combined with its retained net profits for the preceding two years. Additionally, prior approval of the FRB is required when a state member bank has deficit retained earnings but has sufficient current year’s net income, as defined, plus the retained net profits of the two preceding years. The FRB may prohibit dividends if it deems the payment to be an unsafe or unsound banking practice. The FRB has issued guidelines for dividend payments by state member banks emphasizing that proper dividend size depends on the bank’s earnings and capital. See Note Q — Notes to Consolidated Financial Statements.

United Bankshares, Inc. stock is traded over the counter on the National Association of Securities Dealers Automated Quotations System, National Market (NASDAQ) under the trading symbol UBSI.

The high and low prices listed below are based upon information available to United’s management from NASDAQ listings. No attempt has been made by United’s management to ascertain the prices for every sale of its stock during the periods indicated. However, based on the information available, United’s management believes that the prices fairly represent the amounts at which United’s stock was traded during the periods reflected.

The following table presents the dividends and high and low prices of United’s common stock during the periods set forth below:

(1) On February 24, 2004, United declared a dividend of $0.25 per share, payable April 1, 2004, to shareholders of record as of March 12, 2004.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations appears on pages 19 through 37 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Quantitative and Qualitative Disclosures About Market Risk is presented on pages 31 through 34 under the caption “Quantitative and Qualitative Disclosures About Market Risk” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Information regarding Financial Statements and Supplementary Data appears on pages 39 through 76 under the caption “Consolidated Balance Sheets”, “Consolidated Statements of Income”, “Consolidated Statements of Shareholders Equity”, “Consolidated Statements of Cash Flows”, and “Notes to Consolidated Financial Statements”.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

As of December 31, 2003, an evaluation was performed under the supervision and with the participation of United’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of United’s disclosure controls and procedures. Based on that evaluation, United’s management, including the CEO and CFO, concluded that United’s disclosure controls and procedures as of December 31, 2003 were effective in ensuring that information required to be disclosed in the Annual Report on Form 10-K was recorded, processed, summarized and reported within the time period required by the Securities and Exchange Commission’s rules and forms. There have been no significant changes in United’s internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2003.

Information regarding directors and executive officers of the registrant is incorporated by reference from United’s definitive proxy statement for the 2004 Annual Meeting of Shareholders under the captions of "Directors Whose Terms Expire in 2004 and Nominees for Directors'' and "Governance of the Company.''

United has adopted a code of ethics for its Chief Executive Officer, Chief Financial Officer, Controller and persons performing similar functions of the registrant in accordance with Section 406 of the Sarbanes-Oxley Act of 2002. A copy of the code of ethics is posted on United’s web site at www.ubsi-wv.com.

Information related to the registrant’s audit committee and its financial expert in accordance with Section 407 of the Sarbanes-Oxley Act of 2002 is incorporated by reference from United’s definitive proxy statement for the 2004 Annual Meeting of Shareholders under the captions "Governance of the Company'' and "Audit Committee and Independent Auditors.''

Information regarding executive compensation is incorporated by reference from United’s definitive proxy statement for the 2004 Annual Meeting of Shareholders under the caption of "Executive Compensation.''

Information regarding security ownership of certain beneficial owners and management is incorporated by reference from United’s definitive proxy statement for the 2004 Annual Meeting of Shareholders under the captions of "Directors Whose Terms Expire in 2004 and Nominees for Directors'' and "Common Stock Ownership of Certain Beneficial Owners and Management.''

Information regarding certain relationships and related transactions is incorporated by reference from United’s definitive proxy statement for the 2004 Annual Meeting of Shareholders under the caption of "Governance of the Company.''

Information regarding approval of audit and non-audit services by the audit committee as well as fees paid to auditors is incorporated by reference from United’s definitive proxy statement for the 2004 Annual Meeting of Shareholders under the caption "Audit Committee and Independent Auditors.''

United is not filing separate financial statement schedules because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements or notes thereto.

	(3)		Exhibits Required by Item 601

			Listing of Exhibits - See the Exhibits’ Index on page 15 of this Form 10-K.

			On November 26, 2003, United Bankshares, Inc. filed a Current Report under Items 5 and 7 to declare a fourth quarter dividend and announce plans to prepay certain long-term debt.

			On January 21, 2004, United Bankshares, Inc. filed a Current Report under Items 7 and 12 to report the results of operations for the fourth quarter and year of 2003.

(d) Consolidated Financial Statement Schedules — All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or pertain to items as to which the required disclosures have been made elsewhere in the financial statements and notes thereto, and therefore have been omitted.

All reports filed electronically by United with the Securities and Exchange Commission (SEC), including the annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, as well as any amendments to those reports, are accessible at no cost on United’s web site at ubsi-wv.com. These filings are also accessible on the SEC’s web site at www.sec.gov.

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

(b) Incorporated into this filing by reference to Exhibit 10 of the 1985 Form 10-K for Intermountain Bankshares, Inc., File No. 0-12356.

(c) Incorporated into this filing by reference to Exhibits to the 1989 10-K for United Bankshares, Inc., File No. 0-13322.

(d) Incorporated into this filing by reference to Exhibits to the 1990 10-K for United Bankshares, Inc., File No. 0-13322.

(e) Incorporated into this filing by reference to Exhibits to the 1991 10-K for United Bankshares, Inc., File No. 0-13322.

(f) Incorporated into this filing by reference to Exhibits to the 1993 10-K for United Bankshares, Inc., File No. 0-13322.

(g) Incorporated into this filing by reference to Exhibits to the 2000 10-K for United Bankshares, Inc., File No. 0-13322.

(h) Incorporated into this filing by reference to Exhibits to the 2001 10-K for United Bankshares, Inc., File No. 0-13322.

(i) Incorporated into this filing by reference to Part II of Form S-4 Registration Statement of United Bankshares, Inc., Registration
No. 33-106890 filed July 9, 2003.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Congress passed the Private Securities Litigation Act of 1995 to encourage corporations to provide investors with information about the company’s anticipated future financial performance, goals, and strategies. The act provides a safe haven for such disclosure; in other words, protection from unwarranted litigation if actual results are not the same as management expectations.

United desires to provide its shareholders with sound information about past performance and future trends. Consequently, any forward-looking statements contained in this report, in a report incorporated by reference to this report, or made by management of United in this report, in any other reports and filings, in press releases and in oral statements, involve numerous assumptions, risks and uncertainties. Actual results could differ materially from those contained in or implied by United’s statements for a variety of factors including, but not limited to: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature and extent of governmental actions and reforms; and rapidly changing technology and evolving banking industry standards.

The following discussion and analysis presents the significant changes in financial condition and the results of operations of United and its subsidiaries for the periods indicated below. This discussion and the consolidated financial statements and the notes to consolidated financial statements include the accounts of United Bankshares, Inc. and its wholly-owned subsidiaries, unless otherwise indicated.

United operates two main business segments: community banking and mortgage banking. These business segments are based on United’s current management structure and are identified by the products and services offered. The community banking segment offers customers traditional banking products and services, including loan and deposit products, and wealth management services which includes investment banking, financial planning, trust and brokerage services. The mortgage banking segment includes the origination and sale of mortgage loans in the secondary market. United also maintains a general corporate segment that includes the parent company and other administrative areas.

This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes thereto, which are included elsewhere in this document.

The accounting and reporting policies of United conform with accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management is required to make estimates, assumptions and judgements that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgements are based on information available as of the date of the financial statements. Actual results could differ from these estimates. These policies, along with the disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses and the valuation of retained interests in securitized financial assets to be the accounting areas that require the most subjective or complex judgements, and as such could be most subject to revision as new information becomes available. The most significant accounting policies followed by United are presented in Note A, Notes to Consolidated Financial Statements.

The allowance for loan losses represents management’s estimate of the probable credit losses inherent in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because management’s

evaluation of the adequacy of the allowance for loan losses is inherently subjective and requires significant estimates, including the amounts and timing of estimated future cash flows, estimated losses on pools of loans based on historical loss experience, and consideration of current economic trends, all of which are susceptible to constant and significant change. In determining the components of the allowance for loan losses, management considers the risk arising in part from, but not limited to, charge-off and delinquency trends, current economic and business conditions, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors. The methodology used to determine the allowance for loan losses is described in Note A, Notes to Consolidated Financial Statements. A discussion of the factors leading to changes in the amount of the allowance for loan losses is included in the Provision for Loan Losses section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Retained interests in securitized financial assets are recorded at their estimated fair values in securities available for sale. Since quoted market prices are generally not available for retained interests, United relies on discounted cash flow modeling techniques to estimate fair values based on the present value of future expected cash flows using management’s best estimates of key assumptions — credit losses, prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved. Because the values of the assets are sensitive to changes in these key assumptions, the valuation of retained interests is considered a critical accounting estimate. A discussion of the accounting for these securitized financial assets as well as sensitivity analyses showing how these assets’ value change due to adverse changes in key assumptions is presented in Note A and Note D Notes to Consolidated Financial Statements.

United uses derivative instruments as part of its risk management activities to protect the value of certain assets and liabilities against adverse price or interest rate movements. All derivative instruments are carried at fair value on the balance sheet. The valuation of these derivative instruments is considered critical because carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are provided by third party sources. Because the majority of the derivative instruments are used to protect the value of other assets and liabilities on the balance sheet, changes in the value of the derivative instruments are typically offset by changes in the value of the assets and liabilities being hedged, although income statement volatility can occur if the derivative instruments are not effective in hedging changes in the value of those assets and liabilities.

During 2003, United entered into an interest rate swap agreement. Interest rate swaps obligate two parties to exchange one or more payments generally calculated with reference to a fixed or variable rate of interest applied to the notional amount. Under the swap agreement, United receives payment streams at a fixed rate of interest while paying a variable rate of interest. United entered into the interest rate swap in an effort to offset a portion of the cost on a long-term fixed rate FHLB advance. Under the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, the interest rate swap is considered a fair value hedge. The swap qualifies for the shortcut method of accounting treatment because the critical terms of the FHLB advance and the fixed rate payments to be received on the swap coincide and thus are effective in offsetting changes in the fair value of the FHLB advance over its remaining term. The fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability. Adjustments to the fair value of the swap are recorded as a corresponding adjustment within FHLB advances on the balance sheet with no impact to earnings. A discussion of the use of the interest rate swap is included in Note N of the Consolidated Financial Statements and the Interest Rate Risk section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Any material effect on the financial statements related to these critical accounting areas is further discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

United’s total assets as of December 31, 2003 were $6.38 billion, an increase of $587.0 million or 10.13% from year end 2002. United’s available for sale securities portfolio increased $244.32 million or 23.90% from December 31, 2002 as purchases of available for sale securities amounted to approximately $1.53 billion while approximately $1.39 billion of available for sale securities were sold, matured or called for the year of 2003. Securities held to maturity decreased $19.20 million or 7.30% as compared to year end 2002. Approximately $25.17 million of held to maturity securities matured or were called while only $875 thousand of held to maturity securities were purchased. Total portfolio loans increased $519.81 million or 14.74% primarily as a result of the acquisition of Sequoia Bancshares, Inc. (Sequoia) on October 10, 2003. Loans held for sale decreased $401.53 million or 68.91% due to the decrease in origination volume in the fourth quarter of 2003. Cash and cash equivalents increased $79.58 million, goodwill increased $79.24 million as a result of consummation of the Sequoia acquisition, and all remaining categories of assets increased $85.06 million, principally due to purchases of bank-owned life insurance.

Total deposits at December 31, 2003 increased $281.52 million or 7.22% since year end 2002 primarily as a result of the acquisition of Sequoia. In terms of composition, interest-bearing deposits increased $83.24 million while noninterest-bearing deposits increased $198.28 million from December 31, 2002. United’s total borrowed funds increased $237.99 million for the year of 2003. Short-term borrowings increased $88.39 million or 15.41% as United utilized these borrowings to take advantage of low short-term interest rates. Long-term FHLB borrowings increased $88.51 million or 13.02%. Other long-term borrowing increased $61.09 million from year end 2002 as United issued $47 million and acquired $14.09 million of trust preferred securities from the consummation of the Sequoia merger during the fourth quarter of 2003. In January 2003, FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). United determined that the provisions of FIN 46 required de-consolidation of subsidiary trusts which issued guaranteed preferred beneficial interests in subordinated debentures. The debentures are included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.”

Shareholders’ equity increased $73.65 million or 13.60% from December 31, 2002 translating into a book value per share of $14.08 compared to $12.88 as of December 31, 2002. The increase in shareholders’ equity was due mainly to the acquisition of Sequoia which added approximately $77.48 million to equity and to net retained earnings in excess of dividends for the year of $36.77 million. During 2003, United repurchased a total of 1,257,135 shares of treasury stock for $37.36 million. Of the total shares repurchased, 848,700 shares were repurchased to complete a plan announced by United in February of 2002. At the May 2003 Board Meeting, a new repurchase plan was approved whereby United could buy up to 1,650,000 shares of its common stock in the open market. During 2003, 408,435 shares were repurchased under the plan approved in 2003. United continues to balance capital adequacy and the return to shareholders. At December 31, 2003, United’s regulatory capital ratios, including those of its bank subsidiaries, exceeded the levels established for well-capitalized institutions.

For the year ended December 31, 2003, net income decreased 11.43% to $78.77 million from $88.94 million for the year ended December 31, 2002. These results include significant charges to prepay certain Federal Home Loan Bank (FHLB) long-term advances incurred during the fourth quarter of 2003 in light of the low interest rate environment and significant liquidity arising from the mortgage banking subsidiary’s reduced originations. Prepayment penalties of $16.69 million are included in noninterest expense as a result of prepaying $156.5 million of FHLB advances with a weighted average interest rate of 6.18%. On a diluted per share basis, net income of $1.85 for 2003 decreased 10.41% from $2.06 in 2002, principally due to the aforementioned prepayment penalties.

The 2003 results represented a return on average shareholders’ equity of 13.86% and a return on average assets of 1.36%. Although these returns are much lower due to the expense associated with the prepayment penalties than have been achieved in the past, United continues to be one of the nation’s best-performing regional banking companies.

Net interest income decreased $13.56 million or 6.56% for the year of 2003 when compared to 2002. Noninterest income increased $29.84 million or 40.61% for 2003 when compared to 2002 while noninterest expense increased $32.55 million or 22.58% over the same time period.

The effective tax rate was approximately 30.0% and 30.7% for the years ended December 31, 2003 and 2002, respectively, as compared to 32.6% for 2001.

The following discussion explains in more detail the results of operations by major category.

Net interest income represents the primary component of United’s earnings. It is the difference between interest income from earning assets and interest expense incurred to fund these assets. Net interest income is impacted by changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as changes in market interest rates. Such changes, and their impact on net interest income in 2003, are summarized below.

Tax-equivalent net interest income of $203.41 million for the year 2003 decreased $14.49 million or 6.65% from $217.90 million for the year of 2002. United’s tax-equivalent net interest margin was 3.77% for the year of 2003 and 4.15% for 2002. As was the case with many financial institutions, United’s net interest margin contracted in 2003 as assets repriced at historically low levels with little flexibility for a corresponding decrease in rates paid on its interest-bearing liabilities. However, with the prepayment of higher cost FHLB advances and the likely rise in interest rates as the economy begins to recover, United is well positioned for net interest margin growth in future quarters.

Total tax-equivalent interest income of $307.57 million decreased $42.89 million or 13.94% for the year 2003 as a result of a lower yield on average interest-earning assets. Overall, the yield on average interest-earning assets decreased 97 basis points from 6.68% in 2002 to 5.71% in 2003 which resulted in a $50.22 million decrease in interest income. Average earning assets increased $141.46 million or 2.69% primarily due to an increase in the volume of interest-earning assets in the community banking segment resulting from the Sequoia acquisition. This increase in average interest-earning assets resulted in an $8.15 million increase in interest income which was not enough to offset the decrease in interest income due to the change in rates. The yield on average loans, net of unearned income, decreased 86 basis points from 6.88% in the year 2002 to 6.02% in the year 2003 while the yield on average securities was 4.83% for the year 2003, down 117 basis points from 6.00% for 2002. These changes in yields resulted in a $50.10 million decrease in interest income in 2003 from 2002.

Total interest expense of $104.15 million decreased $28.41 million or 21.43% in 2003 compared to 2002. This decrease was attributed primarily to a decrease in funding costs and lower deposit interest expense. Overall, the average cost of funds decreased 68 basis points from 3.03% in 2002 to 2.35% in 2003. The average cost of interest-bearing deposits decreased 80 basis points from 2.52% in 2002 to 1.72% in 2003. The average cost of short-term and long-term borrowings decreased 64 basis points and 44 basis points, respectively, from 1.96% and 6.18% in 2002 to 1.32% and 5.74% in 2003, respectively. These changes in rates resulted in a $31.77 million decline in interest expense in 2003 from 2002. United’s average interest-bearing deposits decreased $31.80 million while average short-term borrowings increased $33.64 million and average FHLB and other long-term borrowings increased $60.46 million. These changes in the average balances resulted in a $3.60 million increase in interest expense in 2003 from 2002.

The following table shows the daily average balance of major categories of assets and liabilities for each of the three years ended December 31, 2003, 2002 and 2001 with the interest and rate earned or paid on such amount.

[Continued from above table, first column(s) repeated]


					Year Ended
					December 31, 2001

					Average					Avg.
					Balance			Interest		Rate

ASSETS
Earning Assets:
	Federal funds sold, securities repurchased under agreements to resell & other short-term investments				$	15,637		$	674		4.31	%
	Investment Securities:
		Taxable				1,187,212			77,390		6.52	%
		Tax-exempt (1) (2)				193,758			14,856		7.67	%

				Total Securities		1,380,970			92,246		6.68	%
	Loans, net of unearned income (1) (2) (3)					3,421,881			279,330		8.16	%
	Allowance for loan losses					(41,790	)

	Net loans					3,380,091					8.26	%

Total earning assets						4,776,698		$	372,250		7.79	%

Other assets						264,498

				TOTAL ASSETS	$	5,041,196

LIABILITIES
Interest-Bearing Funds:
	Interest-bearing deposits				$	2,911,237		$	117,605		4.04	%
	Federal funds purchased, repurchase agreements & other short-term borrowings					410,531			14,188		3.46	%
	FHLB advances & other long-term borrowings					696,346			43,714		6.28	%

Total Interest-Bearing Funds						4,018,114			175,507		4.37	%

Noninterest-bearing deposits						495,681
Accrued expenses and other liabilities						70,568

				TOTAL LIABILITIES		4,584,363
SHAREHOLDERS’ EQUITY						456,833

			TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	5,041,196

NET INTEREST INCOME								$	196,743

INTEREST SPREAD											3.42	%
NET INTEREST MARGIN											4.12	%

(1)		The interest income and the yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 35%.

(2)		The interest income and the yields on state nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory state income tax rate of 9%

(3)		Nonaccruing loans are included in the daily average loan amounts outstanding.

The following table sets forth a summary for the periods indicated of the changes in interest earned and interest paid detailing the amounts attributable to (i) changes in volume (change in the average volume times the prior year’s average rate), (ii) changes in rate (change in the average rate times the prior year’s average volume), and (iii) changes in rate/volume (change in the average volume times the change in average rate).

(1)		Yields and interest income on federally tax exempt loans and investment securities are computed on a fully tax-equivalent basis using the statutory federal income tax rate of 35%.

(2)		Yields and interest income on state tax exempt loans and investment securities are computed on a fully tax-equivalent basis using the statutory state income tax rate of 9%.

(3)		Nonaccruing loans are included in the daily average loan amounts outstanding.

United’s credit quality continues to be sound despite a weak economy. Nonperforming loans were $18.58 million or 0.45% of loans, net of unearned income, at December 31, 2003 compared to $15.35 million or 0.43% of loans, net of unearned income at December 31, 2002. The components of nonperforming loans include nonaccrual loans and loans that are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis. During 2003, nonaccrual loans increased $633 thousand or 9.18% while loans past due 90 days or more increased $2.59 million or 30.62%. This increase in loans past due 90 days or more was due mainly to two large commercial loans being 90 days or more delinquent at December 31, 2003. The increase in nonaccrual loans and loans past due 90 days or more was considered in the analysis of the December 31, 2003 allowance for loan losses. Total nonperforming assets of $21.78 million, including OREO of $3.20 million at December 31, 2003, represented 0.34% of total assets at the end of 2003 as compared to 0.34% at the end of 2002.

Nonperforming assets include loans and securities on which no interest is currently being accrued, principal or interest has been in default for a period of 90 days or more and, in the case of loans, for which the terms have been modified due to a deterioration in the financial position of the borrower. Management is not aware of any other significant loans or securities, groups of loans or securities, or segments of the loan or investment portfolio not included below or disclosed elsewhere herein where there are serious doubts as to the ability of the borrowers or issuers to comply with the present repayment terms of the debt. The following table summarizes nonperforming assets for the indicated periods.

Loans and securities are designated as impaired when, in the opinion of management, the collection of principal and interest in accordance with the loan contract is doubtful. At December 31, 2003, impaired loans were $21.07 million, an increase of $11.05 million or 110.28% from the $10.02 million in impaired loans at December 31, 2002. In addition to the two previously mentioned large commercial credits that were classified as 90 days or more delinquent, the change in impaired loans from year end 2002 included several smaller commercial loans that were considered impaired in accordance with FASB Statement No. 114 (SFAS No. 114), “Accounting by Creditors for Impairment of a Loan”. For further details, along with a discussion of concentrations of credit risk, see Note E to the Consolidated Financial Statements.

At December 31, 2003, the allowance for loan losses was $50.43 million, compared to $47.39 million at December 31, 2002. As a percentage of loans, net of unearned income, the allowance for loan losses was 1.23% and 1.33% at December 31, 2003 and 2002, respectively. The ratio of the allowance for loan losses to nonperforming loans was 271.5% and 308.7% at December 31, 2003 and 2002, respectively.

For the years ended December 31, 2003 and 2002, the provision for loan losses was $7.48 million and $7.94 million, respectively. Net charge-offs were $8.29 million for the year of 2003 as compared to net charge-offs of $7.96 million for the year of 2002.

The following table summarizes United’s loan loss experience for each of the five years ended December 31:

United evaluates the adequacy of the allowance for loan losses on a quarterly basis and its loan administration policies are focused upon the risk characteristics of the loan portfolio. United’s process for evaluating the allowance is a formal company-wide process that focuses on early identification of potential problem credits and procedural discipline in managing and accounting for those credits. This process determines the appropriate level of the allowance for loan losses, allocation among loan types, and the resulting provision for loan losses.

Allocations are made for specific commercial loans based upon management’s estimate of the borrowers’ ability to repay and other factors impacting collectibility. Other commercial loans not specifically reviewed on an individual basis are evaluated based on historical loss percentages applied to loan pools that have been segregated by risk. Allocations for loans other than commercial loans are made based upon historical loss experience adjusted for current conditions. The unallocated portion of the allowance for loan losses reflects estimated probable inherent but undetected losses within the portfolio due to

uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet fully manifested themselves in loss allocation factors. In addition, a portion of the unallocated allowance accounts for the inherent imprecision in its allowance for loan losses analysis. Over the past several years, United has grown through acquisition, and accordingly, expanded the geographic area in which it operates. As a result, historical loss experience data used to establish allocation estimates might not precisely correspond to the current portfolio in these other geographic areas.

United has continued to refine its methodology in determining the allowance for loan losses, which has resulted in higher allocated components of the allowance in more recent years. These refinements involve the adjustment of historical loss data utilized in the evaluation of impairment on pools of loans. These improvements are judged by management to continually improve the accuracy of the estimates of impairment included in the allocated allowance. Differences between actual loan loss experience and estimates are reviewed on a quarterly basis and adjustments are made to those estimates.

United’s formal company-wide process at December 31, 2003 produced increased allocations within three of the four loan categories. The components of the allowance allocated to commercial loans increased $4.26 million, as a result of changes in loans acquired in the Sequoia acquisition, economic conditions, and specific allocations of large loans. The consumer loan pool allocation increased $725 thousand as a result of growth in the consumer loan portfolio and as a result of changes in loans acquired in the Sequoia acquisition. The real estate construction loan pool allocation increased $549 thousand also primarily due to changes in historical and qualitative loss factors. The components of the allowance allocated to real estate loans decreased $3.90 million as loan charge-offs continued to decline resulting in a decrease to the associated historical loss percentages.

The following table presents the allocation of United’s allowance for loan losses for each of the five years ended December 31:

The increase in the unallocated allowance in 2003 relative to the unallocated allowance in 2002 reflects continued uncertainty surrounding near term economic conditions and the sustained effects of a weak economy over the past two years. Additionally, as a result of the acquisitions of Century and Sequoia, historical loss experience data used in the allowance allocation estimates may not correspond exactly to the characteristics of the current portfolio.

Management believes that the allowance for loan losses of $50.43 million at December 31, 2003 is adequate to provide for probable losses on existing loans based on information currently available.

Management is not aware of any potential problem loans, trends or uncertainties that it reasonably expects will materially impact future operating results, liquidity, or capital resources which have not been disclosed. Additionally, management has disclosed all known material credits that cause management to have serious doubts as to the ability of such borrowers to comply with the loan repayment schedules.

Noninterest income has been, and will continue to be, an important element of United’s profitability. Accordingly, management continues to evaluate areas where noninterest income can be enhanced. Other income consists of all revenues that are not included in interest and fee income related to earning assets. Overall, noninterest income, including net gains and losses from securities transactions, increased $29.84 million or 40.61% for 2003 when compared to 2002. Noninterest income, excluding securities gains and losses, increased $21.74 million or 27.26% for the year of 2003 when compared to the year of 2002. These results were achieved primarily due to a combination of increased revenues from the mortgage banking, wealth management and deposit services areas.

Income from mortgage banking operations increased $15.76 million or 43.62% from the previous year. Mortgage loan origination activity increased 38% or $1.2 billion for the year of 2003 as compared to the same period in 2002 due to continued low interest rates. The higher level of originations during 2003 resulted in increased loan sales in the secondary market of 62% or $4.7 billion compared to 2002. Due to increases in long-term interest rates, mortgage banking revenues appear to have peaked. Though originations increased in 2003, the origination volume began to decline in the fourth quarter of 2003. Although mortgage origination and sales activity will likely decline in 2004, United also expects to see a corresponding decline in mortgage banking expenses.

Service charges, commissions and fees from customer accounts increased $3.13 million or 9.79% from 2002. This income includes charges and fees related to various banking services provided by United. The largest component within this category is fees from deposit services, which increased $2.03 million or 8.67% for the year of 2003 as compared to the year of 2002.

Trust income and brokerage commissions increased $495 thousand or 5.57% due to an increased volume of trust and brokerage business. United continues its efforts to broaden the scope and activity of its trust and brokerage service areas, especially in the northern Virginia market, to provide additional sources of fee income that complement United’s traditional banking products and services. The northern Virginia market provides a large number of potential customers with high per capita incomes.

During 2003, United incurred a net gain on securities activity of $1.83 million as compared to a net loss of $6.27 million during 2002. The loss on security transactions in 2002 included recognized impairment charges of $7.0 million for the year of 2002 due to other-than-temporary declines in the fair value of retained interests in securitized assets. The decline in the value of these available for sale securities in 2002 was the result of an increase in the level of prepayment and default activity during the time periods, which negatively affected the valuation of those securities to varying degrees during the respective periods. United incurred only minimal impairment charges during 2003.

All other noninterest income increased $2.35 million for the year of 2003 compared to the year of 2002 due mainly to income from bank-owned life insurance policies (BOLI). United added approximately $80 million of BOLI during 2003.

Other expense includes all items of expense other than interest expense, the provision for loan losses and income tax expense. Noninterest expense increased $32.55 million or 22.58% for the year ended December 31, 2003 as compared to the year ended 2002. The increases in noninterest expense from the previous year end were primarily due to the prepayment penalties of $16.69 million associated with the prepayment of $156.5 million of FHLB advances, and increases in salaries and employee benefits as a result of record originations in the mortgage banking segment where compensation and incentives for its personnel are tied to activity levels.

Total salaries and benefits increased $13.30 million or 16.63% for the year of 2003 compared to the year of 2002. Salaries’ expense for 2003 was $77.17 million or 16.65% above the 2002 level resulting from record originations in the mortgage banking segment where compensation and incentives for its personnel are tied to activity levels. Benefits’ expense also

increased due to $2.38 million of additional pension and insurance expense in 2003. At December 31, 2003 and 2002, United employed 1,585 and 1,460 full-time equivalent employees, respectively.

Net occupancy expense in 2003 increased from 2002 levels by $47 thousand or less than 1%. The higher net occupancy expense for 2003 was due to building and rental costs from the additional branch locations added by the Sequoia acquisition, included in United’s results for the last three months of 2003.

Remaining other expense increased $2.51 million or 4.91% in 2003 compared to 2002 due mainly to the higher level of general operating expenses from the Sequoia acquisition.

United’s efficiency ratio increased in 2003 from traditionally low levels mainly as a result of a compressing net interest margin, significant charges due the prepayment of FHLB advances, and increased expenses of the mortgage banking operations. The efficiency ratio was 57.05% for the year of 2003 compared to 47.59% for 2002. The efficiency ratio of 57.05% for 2003 still compares favorably to an average efficiency ratio of 58.81% for peer group banking companies with an asset size of $5 to $10 billion.

For the year ended December 31, 2003, income taxes were $33.76 million, compared to $39.40 million for 2002. For the years ended December 31, 2003 and 2002, United’s effective tax rates were 30.0% and 30.7%, respectively.

The first three quarters of 2003 showed large increases in earnings in comparison to each of the same three quarters of 2002. On a per diluted share basis, first quarter 2003 earnings were $0.53 per share, compared to $0.50 in 2002, second quarter 2003 earnings were $0.54 per share, compared to $0.51 in 2002 and third quarter 2003 earnings were $0.55, compared to $0.52 per share in 2002.

Fourth quarter 2003 earnings were $0.24 per diluted share, compared to $0.53 per diluted share in 2002, which represented a decrease of 54.72%. Net income for the fourth quarter of 2003 was $10.47 million compared to $22.55 million earned in the fourth quarter of 2002, which represented a decrease of 53.56%. These results included significant charges of $16.69 million to prepay certain long-term debt, previously mentioned in this report.

Noninterest income for the fourth quarter of 2003 increased $1.74 million or 8.06% from the fourth quarter of 2002 due mainly to increased income from bank-owned life insurance policies. Income from mortgage-banking operations decreased $1.51 million or 13.30% for the fourth quarter of 2003 as compared to the fourth quarter of 2002. Mortgage loan originations decreased by 38% for the fourth quarter of 2003 when compared to the same period of 2002 due to a higher interest rate environment.

Tax-equivalent net interest income for the fourth quarter of 2003 was $53.05 million, which was relatively flat from the fourth quarter of 2002. The net interest margin for the fourth quarter of 2003 was 3.76%, which was a twenty basis point contraction from the previous year’s fourth quarter net interest margin of 3.96%. However, the interest spread between interest-earning assets and interest-bearing liabilities remained stable at 3.41%.

Noninterest expense increased $18.72 million or 48.54% during the three-month period ended December 31, 2003 as compared to the same three-month period last year. Noninterest expense totaled $57.30 million for the fourth quarter of 2003 compared with $38.57 million for the fourth quarter of 2002. The noninterest expense increase for the fourth quarter of 2003 over last year’s fourth quarter was primarily due to the previously mentioned prepayment penalties of $16.69 million resulting from prepaying approximately $156.5 million of FHLB advances.

Additional quarterly financial data for 2003 and 2002 may be found in Note T to the Consolidated Financial Statements.

United’s income statements generally reflect the effects of inflation. Since interest rates, loan demand and deposit levels are impacted by inflation, the resulting changes in the interest-sensitive assets and liabilities are included in net interest income. Similarly, operating expenses such as salaries, rents and maintenance include changing prices resulting from inflation. One item that would not reflect inflationary changes is depreciation expense. Subsequent to the acquisition of depreciable assets, inflation causes price levels to rise; therefore, historically presented dollar values do not reflect this inflationary condition. With inflation levels at relatively low levels and monetary and fiscal policies being implemented to keep the inflation rate increases within an acceptable range, management expects the impact of inflation would continue to be minimal in the near future.

Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements

United has various financial obligations, including contractual obligations and commitments, that may require future cash payments.

The table below presents, by payment date, significant known contractual obligations to third parties as of December 31, 2003:

	(1)		Excludes interest.

	(2)		Includes interest on both fixed and variable rate obligations. The interest associated with variable rate obligations is based upon interest rates in effect at December 31, 2003. The interest to be paid on variable rate obligations is affected by changes in market interest rates, which materially affect the contractual obligation amounts to be paid.

	(3)		Excludes carrying value adjustments such as unamortized premiums or discounts.

United also enters into derivative contracts, mainly to protect against adverse interest rate movements on the value of certain assets or liabilities, under which it is required to either pay cash to or receive cash from counterparties depending on changes in interest rates. These derivative contracts consist of an interest rate swap with a notional amount of $100.0 million and commitments with investors (best efforts commitments) on loans originated for sale in United’s mortgage banking operations with a notional amount of $265.4 million. Derivative contracts are carried at fair value and not notional value on the consolidated balance sheet. Because the derivative contracts recorded on the balance sheet at December 31, 2003 do not represent the amounts that may ultimately be paid under these contracts, they are excluded from the preceding table. Further discussion of derivative instruments is included in Note N to the Consolidated Financial Statements.

United is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The following tables detail the amounts of significant commitments and letters of credit as of December 31, 2003:

Commitments generally have fixed expiration dates or other termination clauses, generally within one year, and may require the payment of a fee. Further discussion of commitments is included in Note M to the Consolidated Financial Statements.

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 conditions, 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 United’s net interest income as a result of changes in interest rates. Achieving consistency in United’s earnings is largely dependent on the effective management of interest rate risk.

Management of interest rate risk focuses on maintaining consistent growth in net interest income within Board-approved policy limits. United’s Asset/Liability Management Committee (ALCO), which includes senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk to maintain an acceptable level of change to net interest income as a result of changes in interest rates. Policy established for interest rate risk is stated in terms of the change in net interest income over a one-year and two-year horizon given an immediate and sustained increase or decrease in interest rates. The current limits approved by the Board of Directors are structured on a staged basis with each stage requiring specific actions.

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. Rate scenarios could involve parallel or nonparallel shifts in the yield curve, depending on historical, current, and expected conditions, as well as the need to capture any material effects of explicit or embedded options. 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’s 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 managing interest rate risk is to maintain an appropriate relationship between 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.” Earnings-simulation analysis captures not only the potential of these interest sensitive assets and liabilities to mature or reprice, but also the probability that they will do so. Moreover, earnings-simulation analysis attends to the relative sensitivities of these balance sheet items and projects their behavior over an extended period of time. United closely monitors the sensitivity of its assets and liabilities on an ongoing basis and projects the effect of various interest rate changes on its net interest margin.

The following table shows United’s estimated earnings sensitivity profile as of December 31, 2003 and December 31, 2002:

Given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, it is estimated that net interest income for United would increase by 3.00% over one year as of December 31, 2003, as compared to an increase of 8.45% as of December 31, 2001. A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 1.60% over one year as of December 31, 2003, as compared to a decrease of 6.14% as of December 31, 2002. All of these estimated changes in net interest income are within the policy guidelines established by the Board of Directors.

To further aid in interest rate management, United’s subsidiary banks are members of the Federal Home Loan Bank (FHLB). The use of FHLB advances provides United with a low risk means of matching maturities of earning assets and interest-bearing funds to achieve a desired interest rate spread over the life of the earning assets. In addition, United uses credit with large regional banks, and trust preferred securities to provide funding.

In July of 2003, United entered into a $100 million notional amount interest rate swap agreement. Interest rate swaps obligate two parties to exchange one or more payments generally calculated with reference to a fixed or variable rate of interest applied to the notional amount. United entered into the interest rate swap in an effort to offset a portion of the cost on a long-term fixed rate FHLB advance. The fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability. At December 31, 2003, the fair value of the swap resulted in a $3.85 million liability. Adjustments to the fair value of the swap are recorded as a corresponding adjustment within FHLB advances on the balance sheet. The impact on earnings is the exchange of the fixed rate interest for variable rate LIBOR based interest. See Note N of the Consolidated Financial Statements for a further discussion of the interest rate swap.

In the opinion of management, United maintains liquidity that 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 as well as advances from the FHLB. Repurchase agreements represent funds that are generally 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

The goal of liquidity management is to ensure the ability to access funding that enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United’s cash needs. Liquidity is managed by monitoring funds’ availability from a number of primary sources. Substantial funding is available from cash and cash equivalents, unused short-term borrowings, and a geographically dispersed network of branches 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 FHLB 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, borrowings secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities. United’s subsidiary trusts issued $45 million of trust preferred securities during the fourth quarter of 2003, and inherited trust preferred securities from the Sequoia acquisition of $10 million. United has no intention at this time of utilizing any long-term funding sources other than FHLB advances and long-term certificates of deposit. See Notes H and I, Notes to Consolidated Financial Statements.

Cash flows provided by operations in 2003 was $492.45 million as compared to cash used in operations during 2002 of $96.83 million. The difference in cash flows between two years was primarily the result of approximately $423.98 million of excess proceeds of loan sales over loan originations in 2003 compared to $195.83 million of excess originations of mortgage loans over proceeds from the sale of loans in 2002. In 2003, investing activities used cash of $359.33 million as compared to 2002 in which net cash of $61.07 million was provided by investing activities. Cash used by investing activities in 2003 was primarily due to $117.13 million of excess net purchases of investment securities over net proceeds from sales, maturities and calls of investment securities. In 2002, cash provided by investing activities was primarily due to $147.90 million of excess net proceeds from sales, calls and maturities of investment securities over purchases of investment securities. For the year of 2003, net cash of $53.54 million was used in financing activities primarily due to a net decline in deposits of approximately $104.63 million, payment of $41.63 million in cash dividends and $37.36 million for acquisitions of United shares under the stock repurchase programs. Cash provided by financing activities in 2003 included net advances of $89.24 million from FHLB borrowings, net proceeds of $44.12 from debt related to trust preferred securities and a net increase in short-term borrowings of $6.63 million. For the year of 2002, net cash of $53.53 million was provided by financing activities, primarily due to a $115.55 million growth in deposits and net proceeds of $19.41 million from debt related to the issuance of trust preferred securities. Uses of cash for financing activities in 2002 included the net repayment of approximately $55.79 million of FHLB borrowings, payment of $39.75 million in cash dividends and $36.90 million for acquisitions of United shares under the stock repurchase programs. The net effect of this activity was an increase in cash and cash equivalents of $79.58 million and $17.77 million increase in cash and cash equivalents for the year of 2003 and 2002, respectively. See the Consolidated Statement of Cash Flows in the Consolidated Financial Statements.

United anticipates no problems in its ability to service its obligations over the next 12 months. 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. See Notes I and J, Notes to Consolidated Financial Statements.

The Asset and Liability Committee monitors liquidity to ascertain that a liquidity position within certain prescribed parameters is maintained. No changes are anticipated in the policies of United’s Asset and Liability Committee.

Total shareholders’ equity increased $73.65 million or 13.60% to $615.19 million from $541.54 million at December 31, 2002. Since December 31, 2002, United has experienced a decrease of $6.55 million, net of deferred income taxes, in the estimated fair value of its available for sale investment portfolio. During the fourth quarter of 2003, United consummated the Sequoia acquisition and as a result, shareholders’ equity increased by approximately $77.48 million. United’s equity to assets ratio was 9.65% at December 31, 2003, as compared to 9.35% at December 31, 2002. The primary capital ratio, capital and

reserves to total assets and reserves, was 10.35% at December 31, 2003, as compared to 10.09% at December 31, 2002.

During the fourth quarter of 2003, United’s Board of Directors declared a cash dividend of $0.25 per share. Dividends per share of $1.00 for 2003 represented a 5% increase over the $0.95 per share paid for 2002. United declared approximately $42.03 million in dividends to common shareholders in 2003 compared with $40.39 million in 2002. The year 2003 was the thirtieth consecutive year of dividend increases to United shareholders.

United also seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings. United has historically generated attractive returns on shareholders’ equity. United’s average equity to average asset ratio was 9.78% in 2003 and 9.51% in 2002. United’s risk-based capital ratio was 11.61% in 2003 and 11.76% in 2002, which are both significantly higher than the minimum regulatory requirements. United’s Tier 1 capital and leverage ratios of 10.36% and 8.44%, respectively, at December 31, 2003, are also well above regulatory minimums to be classified as a “well-capitalized” institution, which allows United to have special regulatory consideration in various areas. See Note Q, Notes to Consolidated Financial Statements.

The following table shows selected consolidated operating and capital ratios for each of the last three years ended December 31:

United’s total assets as of December 31, 2002 were $5.79 billion, an increase of $160.2 million or 2.85% from year end 2001. United’s available for sale securities portfolio decreased $124.97 million or 10.89% from December 31, 2001 as approximately $652.68 million of available for sale securities were sold, matured or called, while purchases of available for sale securities amounted to approximately $524.95 million for the year of 2002. Securities held to maturity decreased $18.26 million or 6.49% as compared to year end 2001. Approximately $19.29 million of held to maturity securities matured or were called while only $6.70 thousand of held to maturity securities were purchased. Total loans, including loans held for sale, increased $284.92 million or 7.36%. Of the total increase in loans, loans held for sale increased $214.09 million and portfolio loans increased $70.83 million. Cash and cash equivalents increased $17.77 million while all other assets were relatively flat for 2002.

Total deposits at December 31, 2002 increased $113.06 million or 2.98% since year-end 2001. In terms of composition, interest-bearing deposits increased $27.61 million while noninterest-bearing deposits increased $85.44 million from December 31, 2001. United’s total borrowed funds were relatively flat, increasing only $9.74 million for the year of 2002. Short-term borrowings increased $46.42 million or 8.81% as United increased these borrowings to take advantage of lower short-term interest rates. Long-term FHLB borrowings decreased $56.74 million or 7.70%. Other long-term borrowing increased $20.06 million from year end 2001 as United issued $20 million of trust preferred securities during the fourth quarter of 2002. Accrued expenses and other liabilities increased $2.44 million or 3.75% since year end 2001.

Shareholders’ equity increased $35.01 million or 6.91% from December 31, 2001 translating into a book value per share of $12.88. The increase in shareholders’ equity was due mainly to net retained earnings in excess of dividends for the year of $48.55 million which more than offset an increase in the purchase of treasury stock of $36.90 million. During 2002, 375,700 shares were repurchased to complete a plan announced by United in May of 2000 to repurchase up to 1.675 million shares of its common stock on the open market. On February 28, 2002, United announced a new plan to repurchase up to 1.72 million

shares of its common stock, of which 871,300 shares have been repurchased since its implementation. United continues to balance capital adequacy and the return to shareholders. At December 31, 2002, United’s regulatory capital ratios, including those of its bank subsidiaries, exceeded the levels established for well-capitalized institutions.

For the year ended December 31, 2002, net income increased 11.18% to $88.94 million from $79.99 million for the year ended December 31, 2001. On a diluted per share basis, net income of $2.06 for 2002 increased 8.42% from $1.90 in 2001.

The 2002 results represented a return on average shareholders’ equity of 16.73% and a return on average assets of 1.59%. These key financial performance indicators compare favorably with regional peer grouping information provided by Keefe, Bruyette, & Woods, of 15.54% and 1.37%, respectively. United continued to be one of the nation’s best-performing regional banking companies.

Net interest income grew $21.82 million or 11.79% for the year of 2002 when compared to 2001. Noninterest income increased $11.27 million or 18.12% for 2002 when compared to 2001 while noninterest expense increased $28.39 million or 24.52% over the same time period.

The effective tax rate was 30.70% for the year ended December 31, 2002 as compared to 32.63% for 2001.

The following discussion explains in more detail the results of operations by major category.

Tax-equivalent net interest income of $217.90 million for the year 2002 increased $21.15 million or 10.75% from $196.74 million for the year of 2001. The main reason for the increase from the previous year was due to an increase in average earning assets of $472.83 million. The increased average earning assets for 2002 was primarily due to increases in the volume of interest-earning assets and interest-bearing liabilities in the community banking segment resulting from the Century Bancshares acquisition consummated in December of 2001 and increases in average loans held for sale within the mortgage banking segment. United’s tax-equivalent net interest margin was 4.15% for the year of 2002 and 4.12% for 2001. As in the case with many financial institutions, management anticipates that the net interest margin will continue to contract in the coming months as United’s assets reprice at historically low levels with little flexibility for a corresponding decrease in rates paid on its interest-bearing liabilities.

Total interest income of $339.48 million decreased 5.86% for the year 2002 as a result of a lower yield on average interest-earning assets. Overall, the yield on average interest-earning assets decreased 111 basis points from 7.79% in 2001 to 6.68% in 2002. The yield on average loans, net of unearned income, decreased 128 basis points to 6.88% in the year 2002 from 8.16% in 2001. The yield on average securities was 6.00% for the year 2002 down 68 basis points from 6.68% for 2001.

Total interest expense decreased $42.95 million or 24.47% in 2002 compared to 2001. This decrease was attributed primarily to a decrease in funding costs. During 2002, United utilized lower cost deposits and short-term wholesale funding sources to support asset growth rather than long-term, higher cost FHLB advances. The average cost of funds decreased from 4.37% in 2001 to 3.03% in 2002. United’s average interest-bearing deposits increased $243.30 million and average short-term borrowings increased $112.87 million while average FHLB and other long-term borrowings decreased $5.34 million.

For the years ended December 31, 2002 and 2001, the provision for loan losses was $7.94 million and $12.83 million,

respectively. Net charge-offs were $7.96 million for the year of 2002 as compared to net charge-offs of $10.63 million for the year of 2001. The decreases in provision and net charge-offs for the year were based upon management’s ongoing evaluation of the adequacy of the allowance for loan losses and were primarily attributed to lower losses on junior-lien mortgage loans. The balance of junior-lien mortgage loans declined from $240.20 million at December 31, 2001 to $179.09 million at December 31, 2002. Net charge-offs of junior-lien mortgage loans were $3.27 million for the year of 2002 as compared to $5.54 million for the year of 2001.

At December 31, 2002, the allowance for loan losses was $47.39 million, compared to $47.41 million at December 31, 2001. As a percentage of loans, net of unearned income, the allowance for loan losses was 1.33% and 1.35% at December 31, 2002 and 2001, respectively. Nonperforming loans were $15.35 million or 0.43% of loans, net of unearned income, at December 31, 2002 compared to $17.59 million or 0.50% of loans, net of unearned income at December 31, 2001.The ratio of the allowance for loan losses to nonperforming loans was 308.7% and 269.5% at December 31, 2002 and 2001, respectively.

Other income consists of all revenues that are not included in interest and fee income related to earning assets. Noninterest income, excluding securities gains and losses, increased $17.02 million or 27.14% for the year of 2002 when compared to the year of 2001. These results were achieved primarily due to a combination of increased revenues from the mortgage banking, wealth management and deposit services areas.

Income from mortgage banking operations increased $9.62 million or 36.29% from the previous year. Mortgage loan origination activity increased 35.76% or $824 million for the year of 2002 as compared to the same period in 2001 due to continued low interest rates. The higher level of originations during 2002 resulted in increased loan sales in the secondary market of 34.35% or $778 million compared to 2001.

Service charges, commissions and fees from customer accounts increased $5.39 million or 20.23% from 2001. This income includes charges and fees related to various banking services provided by United. The largest component within this category is fees from deposit services, which increased $4.34 million or 25.37% for the year of 2002 as compared to the year of 2001.

Trust income and brokerage commissions increased $679 thousand or 8.27% due to an increased volume of trust and brokerage business

During 2002, United incurred a net loss on securities activity of $6.27 million as compared to a net loss of $518 thousand during 2001. Included within these security transactions’ totals for 2002 and 2001 are recognized charges of $7.0 million and $1.2 million, respectively, related to an other-than-temporary decline in the fair value of retained interests in securitized assets for the years ended December 31, 2002 and 2001. The decline in the value of these available for sale securities was the result of an increase in the level of prepayment and default activity during the time periods, which negatively affected the valuation of those securities.

Overall, noninterest income, including net losses from securities transactions, increased $11.27 million or 18.12% for 2002 when compared to 2001.

Other expense includes all items of expense other than interest expense, the provision for loan losses and income tax expense. Noninterest expense increased $28.39 million or 24.52% for the year ended December 31, 2002 as compared to the year ended 2001.

Total salaries and benefits increased $18.89 million or 30.91% for the year of 2002 compared to the year of 2001. Salaries’ expense for 2002 was $13.16 million or 24.23% above the 2001 level resulting from record originations in the mortgage banking segment where compensation and incentives for personnel are tied to activity levels. Benefits’ expense also increased due to $5.64 million of additional pension and insurance expense in 2002. At December 31, 2002 and 2001, United employed 1,460 and 1,361 full-time equivalent employees, respectively.

Net occupancy expense in 2002 increased from 2001 levels by $2.53 million or 24.07%. The higher net occupancy expense for 2002 was due to building and rental costs from the additional branch locations added by the Century acquisition, which was only included in United’s results for one month of 2001.

Remaining other expense increased $6.96 million or 15.78% in 2002 compared to 2001 due mainly to the higher level of general operating expenses from the Century acquisition. In addition, United has an outstanding letter of credit securing a commercial development bond. All interest payments on the bond are current and the bonds do not mature until 2014. However, based on a current analysis completed in the third quarter of 2002 and an estimated appraised value of the underlying collateral updated in the third quarter of 2002, United recorded an expense of $1.0 million as a probable loss on the expected fulfillment of its obligation under the letter of credit. Other expenses for 2001 included a gain of $1.24 million from a divestiture of a branch office and the sale of other bank premises during the first quarter of that year.

For the year of 2002, United’s efficiency ratio was 47.6%, which was well below the 57.0% reported by United’s national peer group banking companies.

For the year ended December 31, 2002, income taxes were $39.40 million, compared to $38.74 million for 2001. For the years ended December 31, 2002 and 2001, United’s effective tax rates were 30.70% and 32.63%, respectively. The decrease was primarily the result of not amortizing non-deductible goodwill in 2002.

We have audited the accompanying consolidated balance sheets of United Bankshares, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Bankshares, Inc. and subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
UNITED BANKSHARES, INC. AND SUBSIDIARIES

[Continued from above table, first column(s) repeated]


		Accumulated
		Other						Total
		Comprehensive			Treasury			Shareholders’
(Dollars in thousands, except per share data)		Income (Loss)			Stock			Equity

Balance at January 1, 2001		($	4,964	)	($	36,334	)	$	430,870
Comprehensive income, net of tax:
	Net income								79,991
	Unrealized gain on securities of $8,543 net of reclassification adjustment for losses included in net income of $337		8,880						8,880
	Amortization of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio		435						435

Total comprehensive income, net of tax									89,306
Acquisition of Century Bancshares, Inc. (1,981,423 shares)						46,468			48,742
Purchase of treasury stock (1,080,000 shares)						(27,059	)		(27,059	)
Common dividends declared ($0.91 per share)									(38,096	)
Common stock options exercised (259,817 shares)						5,950			2,766

Balance at December 31, 2001			4,351			(10,975	)		506,529
Comprehensive income, net of tax:
	Net income								88,933
	Unrealized gain on securities of $4,084 net of reclassification adjustment for losses included in net income of $4,073		8,157						8,157
	Amortization of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio		552						552

Total comprehensive income, net of tax									97,642
Purchase of treasury stock (1,247,000 shares)						(36,899	)		(36,899	)
Fair value of vested stock options exchanged in the acquisition of Century Bancshares, Inc.									10,283
Common dividends declared ($0.95 per share)									(40,388	)
Common stock options exercised (341,503 shares)						9,417			4,372

Balance at December 31, 2002			13,060			(38,457	)		541,539

Comprehensive income, net of tax:
	Net income								78,765
	Unrealized losses on securities of $8,235 net of reclassification adjustment for gains included in net income of $1,189		(7,044	)					(7,044	)
	Amortization of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio		496						496

Total comprehensive income, net of tax									72,217
Acquisition of Sequoia Bancshares, Inc. (2,639,062 shares)						49,072			77,480
Purchase of treasury stock (1,257,135 shares)						(37,361	)		(37,361	)
Common dividends declared ($1.00 per share)									(42,028	)
Common stock options exercised (274,191 shares)						8,172			3,344

Balance at December 31, 2003		$	6,512		($	18,574	)	$	615,191

CONSOLIDATED STATEMENTS OF CASH FLOWS
UNITED BANKSHARES, INC. AND SUBSIDIARIES

Nature of Operations: United Bankshares, Inc. is a multi-bank holding company headquartered in Charleston, West Virginia. United’s principal business activities are community banking and mortgage banking. The principal markets of United Bankshares, Inc. and subsidiaries (United) are Parkersburg, Charleston, Huntington, Morgantown and Wheeling, West Virginia and Arlington, Fairfax, Loudoun and Prince William counties, Virginia. United’s mortgage banking activities are conducted primarily through its wholly owned subsidiary, George Mason Mortgage, LLC.

Operating Segments: United operates in the community banking and mortgage banking businesses. Business results are based upon United’s management accounting practices and are provided to the chief operating decision maker for determination of resource allocation and performance.

Basis of Presentation: The consolidated financial statements and the notes to consolidated financial statements include the accounts of United Bankshares, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

In January 2003, FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). In accordance with FIN 46, business enterprises that represent the primary beneficiary of another entity by retaining a controlling interest in that entity’s assets, liabilities, and result of operations must consolidate that entity in its financial statements. Prior to the issuance of FIN 46, consolidation generally occurred when an enterprise controlled another entity through voting trusts. United determined that the provisions of FIN 46 required de-consolidation of subsidiary trusts which issued guaranteed preferred beneficial interests in subordinated debentures (Trust Preferred Securities). Prior to the adoption of FIN 46, United consolidated the trust and the balance sheet included the guaranteed beneficial interest in the subordinated debentures of the trusts. At the adoption of FIN 46 on December 31, 2003, the trusts were de-consolidated and the junior subordinated debentures of United owned by the subsidiary trusts were recorded. Application of FIN 46 to its investment in subsidiary trusts did not materially impact the financial statements of United.

Certain prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on net income or shareholders’ equity.

Cash Flow Information: United considers cash and due from banks, interest-bearing deposits with other banks and federal funds sold as cash and cash equivalents.

Securities: Management determines the appropriate classification of securities at the time of purchase. Debt securities that United has the positive intent and the ability to hold to maturity are carried at amortized cost. Securities to be held for indefinite periods of time and all marketable equity securities are classified as available for sale and carried at estimated fair value. Unrealized holding gains and losses on securities classified as available for sale are carried as a separate component of Accumulated Other Comprehensive Income (Loss), net of deferred income taxes.

Gains or losses on sales of securities recognized by the specific identification method and other-than-temporary impairment

charges are reported in securities gains and losses in the statements of income.

Securities Purchased Under Resale Agreements and Securities Sold Under Agreements to Repurchase: Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally accounted for as collateralized financial transactions. They are recorded at the amounts at which the securities were acquired or sold plus accrued interest. Securities, generally U.S. government and federal agency securities, pledged as collateral under these financing arrangements cannot be repledged or sold, unless replaced, by the secured party. The fair value of the collateral either received from or provided to a third party is continually monitored and additional collateral is obtained or is requested to be returned to United as deemed appropriate.

Loans: Loans are reported at the principal amount outstanding, net of unearned income. Interest on loans is accrued and credited to operations using methods that produce a level yield on individual principal amounts outstanding. Loan origination and commitment fees and related direct loan origination costs are deferred and amortized as an adjustment of loan yield over the estimated life of the related loan. The accrual of interest income on commercial and most consumer loans generally is discontinued when a loan becomes 90 to 120 days past due as to principal or interest. When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and interest accrued in prior years is charged to the allowance for loan losses. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral exceeds the principal balance and accrued interest, and the loan is in the process of collection.

Consistent with United’s existing method of income recognition for loans, interest on impaired loans, except those classified as nonaccrual, is recognized as income using the accrual method. United’s method of income recognition for impaired loans that are classified as nonaccrual is to recognize interest income on the cash basis or apply the cash receipt to principal when the ultimate collectibility of principal is in doubt.

Loans Held for Sale: Loans held for sale consist of one-to-four family residential loans originated for sale in the secondary market and carried at the lower of cost or fair value determined on an aggregate basis. Gains and losses on sales of loans held for sale are included in mortgage banking income.

The principal sources of revenue from United’s mortgage banking business are: (i) loan origination fees; (ii) gains or losses from the sale of loans; and (iii) interest earned on mortgage loans during the period that they are held by United pending sale.

Allowance for Loan Losses: The allowance for loan losses is management’s estimate of the probable credit losses inherent in the loan portfolio. Management’s evaluation of the adequacy of the allowance for loan losses and the appropriate provision for loan losses is based upon a quarterly evaluation of the portfolio. This evaluation is inherently subjective and requires significant estimates, including the amounts and timing of estimated future cash flows, estimated losses on pools of loans based on historical loss experience, and consideration of current economic trends, all of which are susceptible to constant and significant change. The amounts allocated to specific credits and loan pools grouped by similar risk characteristics are reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances. In determining the components of the allowance for loan losses, management considers the risk arising in part from, but not limited to, charge-off and delinquency trends, current economic and business conditions, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors. Loans deemed to be uncollectible are charged against the allowance for loan losses, while recoveries of previously charged-off amounts are credited to the allowance for loan losses.

In determining the adequacy of the allowance for loan losses, management makes allocations to specific commercial loans classified by management as to risk. Management determines the loan’s risk by considering the borrowers’ ability to repay, the collateral securing the credit and other borrower-specific factors that may impact collectibility. For impaired loans, specific allocations are based on the present value of expected future cash flows using the loan’s effective interest rate, or as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent. Other commercial loans not specifically reviewed on an individual basis are evaluated based on loan pools, which are grouped

by similar risk characteristics using management’s internal risk ratings. Allocations for these commercial loan pools are determined based upon historical loss experience adjusted for current conditions and risk factors. Allocations for loans, other than commercial loans, are developed by applying historical loss experience adjusted for current conditions and risk factors to loan pools grouped by similar risk characteristics. While allocations are made to specific loans and pools of loans, the allowance is available for all loan losses. Management believes that the allowance for loan losses is adequate to provide for probable losses on existing loans based on information currently available.

Asset Securitization: As further discussed in Note D, United previously sold residential mortgage loans in a securitization transaction and retained an interest-only strip, and lower-rated subordinated classes of asset-backed securities, all of which are retained interests in the securitized assets. These retained interests in securitized assets are recorded at their estimated fair values in securities available for sale. Since quoted market prices are generally not available for retained interests, United estimates fair values based on the present value of future expected cash flows using management’s best estimates of key assumptions — credit losses, prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved.

United recognizes the excess of all cash flows attributable to the beneficial interests retained using the effective yield method. On a quarterly basis, United reviews its securitized assets for impairment. If the fair value of the beneficial interest has declined below its carrying value, then an impairment analysis is performed. If there has been an adverse change in the estimated cash flows from the previous cash flows projected, then the condition for an other-than-temporary impairment has been met and the beneficial interest is written down to the estimated fair value.

Bank Premises and Equipment: Bank premises and equipment are stated at cost, less allowances for depreciation and amortization. The provision for depreciation is computed principally by the straight-line method over the estimated useful lives of the respective assets.

Other Real Estate Owned: At December 31, 2003 and 2002, other real estate owned (OREO) included in Other Assets in the Consolidated Balance Sheets was $3,203,000 and $4,267,000, respectively. OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Any adjustment to the fair value at the date of transfer is charged against the allowance for loan losses. Any subsequent valuation adjustments as well as any costs relating to operating, holding or disposing of the property are recorded in other expense in the period incurred.

Income Taxes: Deferred income taxes (included in other assets) are provided for temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements at the statutory tax rate.

Intangible Assets: Intangible assets relating to the estimated value of the deposit base of the acquired institutions are being amortized on an accelerated basis over a one to seven year period. Management reviews intangible assets on a periodic basis and evaluates changes in facts and circumstances that may indicate impairment in the carrying value.

All business combinations initiated after June 30, 2001 have been accounted for under the purchase method of accounting. Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually. Intangible assets with definite useful lives (such as core deposit intangibles) are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment at least annually. In accordance with SFAS No. 142, United will continue to amortize finite-lived assets capitalized on its balance sheet in the form of core deposit intangibles. United incurred amortization expense of $2,070,000, $1,846,000 and $3,284,000 in 2003, 2002, and 2001, respectively, related to all intangible assets. Effective January 1, 2002, United discontinued the amortization of certain intangibles. Total goodwill of $169,655,000 and $90,416,000 as of December 31, 2003 and 2002, respectively, is comprised of goodwill recorded in United’s community banking segment.

Derivative Financial Instruments: United accounts for its derivative financial instruments in accordance with FASB Statement No. 133 (SFAS No. 133), “Accounting for Derivative Instruments and Hedging Activities”, as amended.

During 2003, United entered into an interest rate swap agreement. Interest rate swaps obligate two parties to exchange one or more payments generally calculated with reference to a fixed or variable rate of interest applied to the notional amount. Under the swap agreement, United will receive payment streams at a fixed rate of interest while paying a variable rate of interest. United entered into the interest rate swap in an effort to offset a portion of the cost on a long-term fixed rate FHLB advance. Under the provisions of SFAS No. 133, the interest rate swap is considered a fair value hedge, whereby, a fair value hedge is used to hedge changes in the fair value of assets and liabilities due to changes in interest rates or other factors. The swap qualifies for the shortcut method of accounting treatment because the critical terms of the FHLB advance and the fixed rate payments to be received on the swap coincide and thus are effective in offsetting changes in the fair value of the FHLB advance over its remaining term. The fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability. Adjustments to the fair value of the swap are recorded as a corresponding adjustment within FHLB advances on the balance sheet. The impact on earnings is the exchange of the fixed rate interest for variable rate London Interbank Offering Rate (LIBOR) based interest.

United is required to recognize its commitments with borrowers (interest rate lock commitments) and investors (best efforts commitments) on loans originated for sale in its mortgage banking operations. These commitments are entered into with the borrower and investor to manage the inherent interest rate and pricing risk associated with selling loans in the secondary market. These derivatives are accounted for by recognizing the fair value of the contracts and commitments on the balance sheet as either a freestanding asset or liability. The interest rate lock commitments generally terminate once the loan is funded, the lock period expires or the borrower decides not to enter into the loan. The best efforts commitments generally terminate once the loan is sold, the commitment period expires or the borrower decides not to enter into the loan.

On December 11, 2003, the SEC staff announced its intention to release a Staff Accounting Bulletin that would require all registrants to account for mortgage loan interest rate lock commitments related to loans held for sale as written options, effective no later than for commitments entered into after March 31, 2004. United enters into such commitments with customers in connection with residential mortgage loan applications. At December 31, 2003, the notional value and fair value of these commitments was $93.05 million and $221.6 thousand, respectively. This guidance, if issued, would require United to recognize a liability on its balance sheet equal to the fair value of the commitment at the time the loan commitment is issued. As a result, this guidance would delay the recognition of any revenue related to these commitments until such time as the loan is sold; however, it would have no effect on the ultimate amount of revenue or cash flows recognized over time. United is currently assessing the impact of this pending guidance on its results of operations and financial position. In the quarter of adoption, there would likely be a one-time negative impact to mortgage banking revenue yet to be determined.

Stock Options: United has stock option plans for certain employees that are accounted for under the intrinsic value method. Because the exercise price at the date of the grant is equal to the market value of the stock, no compensation expense is recognized.

The following pro forma disclosures present United’s net income and diluted earnings per share, determined as if United had recognized compensation expense for its employee stock options based on the estimated fair value the option at the date of grant amortized over the vesting period of the option:

The estimated fair value of the options at the date of grant was $5.32, $5.03 and $5.54 for the options granted during 2003, 2002 and 2001, respectively. The fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2003, 2002 and 2001, respectively: risk-free interest rates of 3.90%, 3.63% and 4.86%; dividend yields of 3.48%, 3.55%, and 3.43%; volatility factors of the expected market price of United’s common stock of 0.209, 0.213 and 0.217; and a weighted-average expected option life of 7 years.

Treasury Stock: United records common stock purchased for treasury at cost. At the date of subsequent reissuance, the treasury stock account is reduced by the cost of such stock using the weighted-average cost method.

Trust Assets and Income: Assets held in a fiduciary or agency capacity for customers are not included in the balance sheets since such items are not assets of the company. Trust income is reported on a cash basis. Reporting such income on an accrual basis would not materially affect United’s consolidated financial position or its results of operations as reported herein.

Earnings Per Common Share: Basic earnings per common share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding for the respective period. For diluted earnings per common share, the weighted-average number of shares of common stock outstanding for the respective period is increased by the number of shares of common stock that would be issued assuming the exercise of common stock options. The dilutive effect of stock options approximated 544,388 shares in 2003, 575,367 shares in 2002 and 567,615 shares in 2001. There are no other common stock equivalents.

Other Recent Accounting Pronouncements: In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (FIN 45). FIN 45 significantly changed the accounting for, and disclosure of, guarantees. Guarantees meeting the characteristics described in FIN 45, which are not included in a long list of exceptions, are required to be initially recorded at fair value. FIN 45 also requires a guarantor to make significant disclosures for virtually all guarantees even if the likelihood of the guarantor’s having to make payments under the guarantee is remote. In general, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying asset, liability, or an equity security of the guaranteed party such as financial standby letter of credits. FIN 45’s disclosure requirements were effective for United as of December 31, 2002, while the recognition and measurement provisions were applied to guarantees issued or modified after December 31, 2002. The adoption of this standard had no impact on the financial position or results of operations of United.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). SFAS 150 modified the accounting for certain financial instruments with characteristics of both liabilities and equity. The adoption of this standard had no impact on the financial position or results of operations of United as United’s Trust Preferred Securities were previously classified as liabilities within the balance sheets and recorded as interest expense within the statements of income.

At the close of business on October 10, 2003, United acquired 100% of the outstanding common stock of Sequoia Bancshares, Inc. (Sequoia) of Bethesda, Maryland. The results of operations of Sequoia, which are not significant, have been included in the consolidated results of operations from the date of acquisition. The acquisition of Sequoia expands United’s presence in the rapidly growing and economically attractive Northern Virginia, Washington, D.C. and suburban Maryland market. At consummation, Sequoia had assets of approximately $516 million, loans of $362 million, deposits of $384 million and shareholders’ equity of $22 million. The transaction was accounted for under the purchase method of accounting.

The aggregate purchase price was approximately $109.0 million, including $25.0 million of cash, common stock valued at $75.7 million, and vested stock options exchanged valued at $8.3 million. The number of shares issued in the transaction were 2,639,062, which were valued based on the average market price of United’s common shares over the period including the two days before and after the terms of the acquisition were agreed to and announced. The value of the vested stock options was determined using the Black-Scholes option pricing model based upon 389,606 options exchanged. The following weighted average assumptions were used to determine the value of the options exchanged: risk-free interest rate of 1.64%, expected dividend yield of 3.51%, volatility factor of the expected market price of United’s common stock of 0.211 and a weighted expected option life of 2.5 years. The preliminary purchase price has been allocated to the identifiable tangible and intangible assets resulting in additions to goodwill of approximately $80.7 million and $5.7 million, respectively.

The amortized cost and estimated fair values of securities available for sale are summarized as follows:

As permitted, upon adopting SFAS No. 133 on January 1, 2001, debt securities with an amortized cost of $71,293,000 and an estimated fair value of $71,668,000 were transferred into the available for sale category from the held to maturity category.

The amortized cost and estimated fair value of securities available for sale at December 31, 2003 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Maturities of mortgage-backed securities with an amortized cost of $954,567,000 and an estimated fair value of $962,980,000 at December 31, 2003 are included below based upon an estimated average life.

Gross realized gains and losses from sales of securities available for sale were $2,195,000 and $225,000; $880,000 and $180,000; and $2,382,000 and $1,605,000, respectively, in 2003, 2002 and 2001.

Provided on the following page is a summary of securities available-for-sale which were in an unrealized loss position at December 31, 2003. Securities in a continuous unrealized loss position for twelve months or more consisted primarily of corporate trust preferred issuances. Management does not believe any individual unrealized loss as of December 31, 2003 represents other than temporary impairment. The unrealized losses on the mortgage- backed securities relate primarily to securities issued by FNMA and FHLMC. United has the ability and intent to hold these securities until such time as the value recovers or the securities mature. Further, United believes the value is attributable to changes in market interest rates and not credit quality of the issuer.

The amortized cost and estimated fair values of securities held to maturity are summarized as follows:

The amortized cost and estimated fair value of debt securities held to maturity at December 31, 2003 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Maturities of mortgage-backed securities with an amortized cost of $1,056,000 and an estimated fair value of $1,124,000 at December 31, 2003 are included below based upon an estimated average life.

The carrying value of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $1,068,142,000 and $952,070,000 at December 31, 2003 and 2002, respectively.

The following is a summary of the amortized cost of held to maturity securities at December 31:

The following is a summary of the amortized cost of available for sale securities at December 31:

The fair value of mortgage-backed securities is affected by changes in interest rates and prepayment risk. When interest rates decline, prepayment speeds generally accelerate due to homeowners refinancing their mortgages at lower interest rates. This may result in the proceeds being reinvested at lower interest rates. Rising interest rates may decrease the assumed prepayment speed. Slower prepayment speeds may extend the maturity of the security beyond its estimated maturity. Therefore, investors may not be able to invest at current higher market rates due to the extended expected maturity of the security. United had net unrealized gains of $8,481,000 and $23,665,000 on all mortgage-backed securities at December 31, 2003 and 2002, respectively.

The following table sets forth the maturities of all securities (based on amortized cost) at December 31, 2003, and the weighted-average yields of such securities (calculated on the basis of the cost and the effective yields weighted for the scheduled maturity of each security).

	(1)		Tax-equivalent adjustments (using a 35% federal rate) have been made in calculating yields on obligations of states and political subdivisions.

	(2)		Includes marketable equity securities available for sale.

There are no securities with a single issuer the book value of which in the aggregate exceeds 10% of total shareholders’ equity.

During 1999, United sold residential mortgage loans in a securitization transaction. In that securitization, United retained subordinated interests that represent United’s right to future cash flows arising after the investors in the securitization trust have received the return for which they contracted. United does not receive annual servicing fees from this securitization because the loans are serviced by an independent third party. The investors and the securitization trust have no recourse to United’s other assets for failure of debtors to pay when due; however, United’s retained interests are subordinate to investors’ interests. The value of the retained interests is subject to credit, prepayment, and interest rate risks on the underlying financial assets. At the date of securitization, key economic assumptions used in measuring the fair value of the retained interests were as follows: a weighted-average life of 5.3 years, expected cumulative credit losses of 15%, and discount rates of 8% to 18%.

For the years ended December 31, 2003, 2002 and 2001, United received cash of $15,146,000, $8,385,000 and $10,926,000, respectively, on the retained interest in the securitization.

Key economic assumptions used in measuring the fair value of the retained interests were as follows:

Key economic assumptions and the sensitivity of the current fair value of residual cash flows to immediate 10% and 20% adverse changes in those assumptions are as follows:

These sensitivities are hypothetical and should be used with caution. As indicated above, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in the fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the retained interests is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another factor (for example, increases in market interest rates may result in lower prepayments) that might magnify or counteract the sensitivities.

The following table presents quantitative information about delinquencies, net credit losses, and components of the underlying securitized financial assets:

The following is a summary of loans outstanding as a percent of total loans at December 31:

United has commercial loans, including real estate and owner-occupied, income-producing real estate and land development loans, of approximately $1,861,371,000 and $1,629,806,000 as of December 31, 2003 and 2002, respectively. The loans are primarily secured by real estate located in West Virginia, Southeastern Ohio, and Virginia. The loans were originated by United’s subsidiary banks using underwriting standards as set forth by management. United’s loan administration policies are focused on the risk characteristics of the loan portfolio, including commercial real estate loans, in terms of loan approval and credit quality. It is the opinion of management that these loans do not pose any unusual risks and that adequate consideration has been given to the above loans in establishing the allowance for loan losses.

The following table shows the maturity of commercial, financial, and agricultural loans and real estate construction outstanding as of December 31, 2003:

At December 31, 2003, commercial, financial and agricultural loans by maturity and interest rate are as follows:

There were no real estate construction loans with maturities greater than one year.

United’s subsidiary banks have made loans, in the normal course of business, to the directors and officers of United and its subsidiaries, and to their associates. Such related party loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and did not involve more than normal risk of collectibility. The aggregate dollar amount of these loans was $128,690,000 and $135,043,000 at December 31, 2003 and 2002, respectively. During 2003, $391,204,000 of new loans were made and repayments totaled $397,557,000.

The higher provision and charge-offs in 2001 relates to losses from certain junior-lien mortgages reclassified from available for sale securities to portfolio loans in October 2000.

Nonperforming loans include nonaccrual loans and loans that are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis. At December 31, 2003 and 2002, nonperforming loans were as follows:

At December 31, 2003, the recorded investment in loans that were considered to be impaired was $21,070,000 (of which $7,523,000 was on a nonaccrual basis). Included in this amount were $7,899,000 of impaired loans for which the related allowance for loan losses was $1,596,000, and $13,171,000 of impaired loans that did not have an allowance for credit losses. At December 31, 2002, the recorded investment in loans that were considered to be impaired was $10,023,000 (of which $6,890,000 was on a nonaccrual basis). Included in this amount were $3,427,000 of impaired loans for which the related allowance for loan losses was $845,000, and $6,596,000 of impaired loans that did not have an allowance for credit losses.

The average recorded investment in impaired loans during the years ended December 31, 2003, 2002 and 2001 was approximately $16,676,000, $10,935,000 and $12,654,000, respectively.

The amount of interest income that would have been recorded on impaired loans, which are on nonaccrual, under the original terms was $1,209,000, $618,000 and $723,000 for the years ended December 31, 2003, 2002 and 2001, respectively. For the years ended December 31, 2003, 2002 and 2001, United recognized interest income on those impaired loans of approximately $745,000, $393,000 and $373,000, respectively, substantially all of which was recognized using the accrual method of income recognition.

Depreciation expense was $7,230,000, $6,400,000, and $5,972,000 for years ending December 31, 2003, 2002 and 2001, respectively, while amortization expense was $103,000, $101,000, and $100,000 for the same time periods.

United and certain banking subsidiaries have entered into various noncancelable-operating leases. These noncancelable operating leases are subject to renewal options under various terms and some leases provide for periodic rate adjustments based on cost-of-living index changes. Rent expense for noncancelable operating leases approximated $6,759,000, $6,041,000 and $4,813,000 for the years ended December 31, 2003, 2002 and 2001, respectively. United Bank (WV) leases two of its offices from companies that are beneficially owned by United directors. Rent expense incurred on these facilities was $95,000, $95,100, and $57,000 for the years ended December 31, 2003, 2002, and 2001, respectively.

Future minimum payments, by year and in the aggregate, under noncancelable operating leases with initial or remaining terms of one year or more, for years subsequent to December 31, 2003, consisted of the following:

The following is a summary of intangible assets subject to amortization and those not subject to amortization:

At December 31, 2003 and 2002, goodwill totaled $169,655,000 and $90,416,000, respectively. During 2003, United acquired Sequoia and continued to adjust goodwill due to the exercise of non-qualified stock option related to the Century Bancshares, Inc. (Century) acquisition consummated in 2001. These net effect of these transactions added $79,239,000 to goodwill. During 2002, in addition to adjustments to goodwill for the exercise of non-qualified stock option related to the Century acquisition, United adjusted the purchase price allocated to the Century acquisition for the fair value of vested stock options exchanged. The net effect to goodwill of these adjustments was an increase of $9,568,000.

The following table sets forth the anticipated amortization expense for intangible assets for the years subsequent to 2003:

The following table conforms prior period amounts to the current year presentation for amortization expense recognized in those periods related to certain intangible assets that are no longer amortized:

Interest paid on deposits approximated $56,457,000, $82,606,000 and $121,523,000 in 2003, 2002 and 2001, respectively.

United’s subsidiary banks have received deposits, in the normal course of business, from the directors and officers of United and its subsidiaries, and their associates. Such related party deposits were accepted on substantially the same terms, including interest rates and maturities, as those prevailing at the time for comparable transactions with unrelated persons. The aggregate dollar amount of these deposits was $60,021,000 and $69,281,000 at December 31, 2003 and 2002, respectively.

The average daily amount of deposits and rates paid on such deposits is summarized for the years ended December 31:

Maturities of time certificates of deposit of $100,000 or more outstanding at December 31, 2003 are summarized as follows:

At December 31, 2003 and 2002, short-term borrowings and the related weighted-average interest rates were as follows:

Federal funds purchased and securities sold under agreements to repurchase have been a significant source of funds for the company. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $193,500,000. These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions.

The following table shows the distribution of United’s federal funds purchased and securities sold under agreements to repurchase and the weighted-average interest rates thereon at the end of each of the last three years. Also provided are the maximum amount of borrowings and the average amounts of borrowings as well as weighted-average interest rates for the last three years.

At December 31, 2003, repurchase agreements include $438,970,000 in overnight accounts. The remaining balance principally consists of agreements having maturities less than 1 year. The rates offered on these funds vary according to movements in the federal funds and short-term investment market rates.

United, through the parent company, has available funds of $40,000,000 to provide for general liquidity needs under a one-year renewable collateralized line of credit. The line of credit carries a LIBOR-based indexed floating rate of interest. At December 31, 2003, United had an outstanding balance under the line of credit of $17,000,000.

United Bank (VA) participates in the Treasury Investment Program, which is essentially the U.S. Treasury’s savings account for companies depositing employment and other tax payments. The bank holds onto the funds in an open-ended, interest-bearing note until the Treasury withdraws or “calls” the funds. A maximum note balance is established and that amount must be collateralized at all times. All tax deposits or portions of the tax deposits up to the maximum balance are generally available as a source of short-term investment funding. As of December 31, 2003, United Bank (VA) had reached its maximum balance and thus no additional funding is available until the Treasury withdraws or “calls” all or a portion of the funds.

Interest paid on short-term borrowings approximated $6,324,000, $10,217,000 and $14,361,000 in 2003, 2002 and 2001, respectively.

NOTE J—LONG-TERM BORROWINGS

United’s subsidiary banks are members of the Federal Home Loan Bank (FHLB). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a similar amount of single-family residential mortgage loans. At December 31, 2003, United had an unused borrowing amount of approximately $664,382,000 available. However, without the delivery of additional collateral, United has approximately $62,959,000 available for advances from the FHLB at prevailing interest rates.

Advances may be called by the FHLB or redeemed by United based on predefined factors and penalties. During the fourth quarter of 2003, United prepaid certain FHLB long-term advances in light of the low interest rate environment and significant liquidity arising from its mortgage banking subsidiary’s reduced originations. Prepayment penalties of approximately $16.7 million were included in noninterest expense for the year of 2003 as a result of prepaying approximately $156.5 million of FHLB advances with a weighted-average interest rate of 6.18%.

At December 31, 2003 and 2002, FHLB advances and the related weighted-average interest rates were as follows:

2003

2002

Weighted-

Average

Contractual

Effective

Contractual

Effective

(Dollars in thousands)

Amount

Rate

Amount

Rate

FHLB advances

768,220

4.58

3.96

679,712

6.33

The weighted-average effective rate considers the effect of the interest rate swap entered into during 2003 to manage interest rate risk on its long-term debt. The swap is used to hedge the fair value of a certain portion of the FHLB fixed rate debt by converting the debt to a variable rate. The swap is based on the one-month LIBOR. Additional information is provided in Note N.

At December 31, 2003, the scheduled maturities of FHLB advances are as follows:


Year	Amount
(In thousands)
2004	$	263,741
2005		25,000
2006		2,050
2007
2008 and thereafter		477,429

Total	$	768,220

United has a total of seven statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (Capital Securities) with the proceeds invested in junior subordinated debt securities (Debentures) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. The Debentures are included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.” The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities.

Under the provisions of the subordinated debt, United has the right to defer payment of interest on the subordinated debt at any time, or from time to time, for periods not exceeding five years. If interest payments on the subordinated debt are deferred, the dividends on the Capital Securities are also deferred. Interest on the subordinated debt is cumulative.

NOTE J—LONG-TERM BORROWINGS– continued

During the fourth quarter of 2003, United participated in two additional trust preferred securities in transactions totaling $45.0 million. United Trust III participated in a $20.0 million Capital Securities offering of a third party and received net cash proceeds of $19.61 million after considering the third party’s placement fee. The proceeds were invested in junior subordinated debts of United paying interest quarterly at a floating rate equal to 3-month LIBOR plus 285 basis points. Under the terms of the transactions, the Capital Securities will have a maturity of 30 years, and are redeemable after five years with certain exceptions. United Trust IV participated in a $25.0 million Capital Securities offering of a third party and received net cash proceeds of $24.51 million after considering the third party’s placement fee. The proceeds were invested in an equivalent amount of floating rate junior subordinated debts of United paying interest quarterly at a floating rate equal to 3-month LIBOR plus 285 basis points. Under the terms of the transactions, the Capital Securities will have a maturity of 30 years and are redeemable after five years with certain exceptions. United will use the proceeds from the Capital Securities offerings to repurchase outstanding shares of its common stock and to fund future growth. For regulatory purposes, the $45.0 million total of Capital Securities for the two trusts qualifies as Tier I capital in accordance with current regulatory reporting requirements.

As part of the acquisition of Sequoia, United assumed all the obligations of Sequoia and its subsidiaries. One such subsidiary, Sequoia Trust I is a statutory business trust formed during the first quarter of 2000. Sequoia Trust I issued $7.0 million of Capital Securities to a third party at a fixed rate of 10.18%. This trust pays interest semiannually. Under the terms of the agreement, the maturity date is 30 years and is redeemable after five years with certain exceptions. Sequoia Trust II is a statutory business trust also formed during the first quarter of 2000. Sequoia Trust II issued $3.0 million of Capital Securities to a third party at a floating rate of interest equal to LIBOR plus 375 basis points with the rate not to exceed 11.0%. These securities are due December 8, 2031; however, they may be redeemed under certain circumstances after December 8, 2006.

The Trust Preferred Securities currently qualify as Tier 1 capital of United for regulatory purposes. The banking regulatory agencies have not issued any guidance, which would change the regulatory capital treatment for the Trust Preferred Securities based on the adoption of FIN 46.

At December 31, 2003 and 2002, the Debentures and their related weighted-average interest rates were as follows:


	2003					2002
			Weighted-					Weighted-
			Average					Average
(Dollars in thousands)	Amount		Rate			Amount		Rate
Century Trust	$	8,848		10.88	%	$	8,861		10.88	%
Sequoia Trust I		11,000		10.18	%
Sequoia Trust II		3,093		5.65	%
United Statutory Trust I		10,310		4.49	%		10,000		4.66	%
United Statutory Trust II		10,310		4.64	%		10,000		4.76	%
United Statutory Trust III		20,619		3.97	%
United Statutory Trust IV		25,774		3.99	%

Total	$	89,954				$	28,861

Interest paid on long-term borrowings approximated $44,520,000, $42,861,000 and $43,455,000 in 2003, 2002 and 2001, respectively.

NOTE K—INCOME TAXES

The income tax provisions included in the consolidated statements of income are summarized as follows:


	Year Ended December 31
(In thousands)	2003		2002			2001
Current expense:
Federal	$	31,784	$	42,665		$	40,585
State		253		1,520			1,412
Deferred expense (benefit):
Federal and State		1,718		(4,785	)		(3,258	)

Income taxes	$	33,755	$	39,400		$	38,739

The following is a reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to income before income taxes:


	Year Ended December 31
	2003						2002						2001
(Dollars in thousands)	Amount			%			Amount			%			Amount			%
Tax on income before taxes at statutory federal rate	$	39,375			35.0	%	$	44,917			35.0	%	$	41,556			35.0	%
Plus: State income taxes net of federal tax benefits		164			0.1			988			0.8			917			0.8

		39,539			35.1			45,905			35.8			42,473			35.8
Increase (decrease) resulting from:
Tax-exempt interest income		(3,576	)		(3.2	)		(3,653	)		(2.8	)		(3,465	)		(2.9	)
Intangible amortization														742			0.6
Other items-net		(2,208	)		(1.9	)		(2,852	)		(2.3	)		(1,011	)		(0.9	)

Income taxes	$	33,755			30.0	%	$	39,400			30.7	%	$	38,739			32.6	%

Federal income tax expense applicable to securities transactions in 2003 approximated $641,000. Federal income tax benefit applicable to securities transactions in 2002, and 2001 approximated $2,193,000 and $181,000, respectively. Income taxes paid approximated $37,700,000, $40,446,000 and $31,576,000 in 2003, 2002 and 2001, respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

NOTE K—INCOME TAXES – continued

Significant components of United’s deferred tax assets and liabilities (included in other assets) at December 31, 2003 and 2002 are as follows:


(In thousands)	2003		2002
Deferred tax assets:
Allowance for loan losses	$	17,121	$	16,261
Accrued benefits payable		3,154		2,271
Other accrued liabilities		3,186		4,183
Net operating loss carryforward		2,596		1,202
Other		2,931		2,329

Total deferred tax assets		28,988		26,246

Deferred tax liabilities:
Premises and equipment		1,285		1,992
Purchase accounting intangibles		2,566		638
Deferred mortgage points		2,673		2,544
Securities available for sale		3,597		6,997
Other		2,979		1,699

Total deferred tax liabilities		13,100		13,870

Net deferred tax assets	$	15,888	$	12,376

NOTE L—EMPLOYEE BENEFIT PLANS

United has a defined benefit retirement plan covering substantially all employees. Pension benefits are based on years of service and the average of the employee’s highest five consecutive plan years of basic compensation paid during the ten plan years preceding the date of determination. United’s funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. The associated benefits accumulated by these employees in their previous plan were assumed by United’s benefit plan.

Net periodic pension cost included the following components:


	Year Ended December 31,
(In thousands)	2003			2002			2001
Service cost	$	1,931		$	1,730		$	1,426
Interest cost		2,659			2,585			2,179
Expected return on plan assets		(3,212	)		(3,795	)		(4,420	)
Amortization of transition asset		(213	)		(307	)		(131	)
Recognized net actuarial loss (gain)		905						(1,045	)
Amortization of prior service cost		10			63			63

Net periodic pension cost (benefit)	$	2,080		$	276			($1,928	)

Weighted-Average Assumptions:
Discount rate		6.25	%		7.00	%		7.75	%
Expected return on assets		9.00	%		9.50	%		9.75	%
Rate of compensation increase		3.25	%		4.00	%		5.00	%

NOTE L—EMPLOYEE BENEFIT PLANS – continued

A reconciliation of the changes in benefit obligation and plan assets for the defined benefit retirement plan is as follows:


	December 31,
(In thousands)	2003			2002
Change in Projected Benefit Obligation
Projected Benefit Obligation at the Beginning of the Year	$	38,548		$	32,588
Service Cost		1,931			1,730
Interest Cost		2,659			2,585
Actuarial Loss		4,031			1,440
Benefits Paid		(1,149	)		(1,122	)
Change in Plan Provisions					14
Acquisition					1,313

Projected Benefit at the End of the Year		46,020			38,548
Accumulated Benefit Obligation at the End of the Year		38,350			31,094
Change in Plan Assets
Fair Value of Plan Assets at the Beginning of the Year	$	34,384		$	36,574
Actual Return on Plan Assets		5,482			(3,959	)
Benefits Paid		(1,149	)		(1,122	)
Employer Contributions		3,600
Acquisition					2,891

Fair value of plan assets at end of year	$	42,317		$	34,384

Net Amount Recognized
Funded Status	$	(3,704	)	$	(4,164	)
Unrecognized Transition Asset		(1,227	)		(1,441	)
Unrecognized Prior Service Cost		12			23
Unrecognized Net Loss		12,859			12,002

Net Amount Recognized	$	7,940		$	6,420

Weighted-Average Assumptions at the End of the Year
Discount Rate		6.25	%		7.00	%
Rate of Compensation Increase		3.25	%		4.00	%

The plan’s measurement date is September 30. Asset allocation for the defined benefit pension plan as of the measurement date, by asset category, is as follows:


							Percentage of
							Plan Assets at
	Target Allocation			Allowable Allocation			September 30,
Plan Assets	2004			Range			2003			2002
Equity Securities		70	%		50-80	%		65	%		62	%
Debt Securities		25	%		20-40	%		29	%		29	%
Other		5	%		3-10	%		6	%		9	%

Total								100	%		100	%

Equity securities include United stock in the amounts of $3,170,000 (7%) and $3,070,000 (9%) at September 30, 2003 and 2002, respectively.

The policy, as established by the Pension Committee, is to invest assets based upon the target allocations stated above. The assets will be reallocated periodically to meet the above target allocations. The investment policy is reviewed at least annually, subject to the approval of the Pension Committee, to determine if the policy should be changed. Prohibited

NOTE L—EMPLOYEE BENEFIT PLANS – continued

investments include, but are not limited to, futures contracts, private placements, uncovered options, real estate, the use of margin, short sales, derivatives for speculative purposes, and other investments that are speculative in nature. In order to achieve a prudent level of portfolio diversification, the securities of any one company are not to exceed 10% of the total plan assets, and no more than the 15% of total plan assets are to be invested in any one industry (other than securities of U.S. Government or Agencies). Additionally, no more than 15% of the plan assets are to be invested in foreign securities, both equity and fixed. The expected long-term rate of return for the plan’s total assets is based on the expected return of each of the above categories, weighted based on the median of the target allocation for each class.

The United Savings and Stock Investment Plan (the Plan) is a deferred compensation plan under Section 401(k) of the Internal Revenue Code. Each employee of United, who completes ninety (90) days of qualified service, is eligible to participate in the Plan. Each participant may contribute from 1% to 100% of compensation to his/her account, subject to Internal Revenue Service maximum deferral limits. After one year of eligible service, United matches 100% of the first 2% of salary deferred and 25% of the second 2% of salary deferred with United stock. Vesting is 100% for employee deferrals and the company match at the time the employee makes his/her deferral. United’s expense relating to the Plan approximated $1,127,000, $803,000 and $733,000 in 2003, 2002 and 2001, respectively.

The assets of United’s defined benefit plan and 401(k) Plan each include investments in United common stock. At December 31, 2003, the combined plan assets included 764,005 shares of United common stock with an approximate fair value of $23,829,000. Dividends paid on United common stock held by the plans approximated $749,000 and $671,000 for the years ended December 31, 2003 and 2002, respectively.

United has certain other supplemental deferred compensation plans covering various key employees. Periodic charges are made to operations so that the liability due each employee is fully recorded as of the date of their retirement. Amounts charged to expense have not been significant in any year.

United has various incentive stock option plans for key employees that provide for the granting of stock options of up to 4,400,000 shares of common stock. At December 31, 2003, United had available 1,119,292 shares of common stock available for future grants to key employees. Under the provisions of the plans, the option price per share shall not be less than the fair market value of United’s common stock on the date of grant. Accordingly, no compensation expense is recognized for these options. The maximum term for options granted under the plans is ten (10) years.

Options granted under the plans vest in accordance with the following schedule:


Years from		Permissible Exercise
Grant of Option		Until Expiration of Option
1		50% of Option Shares
2		75% of Option Shares
3		100% of Option Shares

NOTE L-EMPLOYEE BENEFIT PLANS – continued

The following table summarizes information about stock options outstanding at December 31, 2003:


			Options Outstanding			Options Exercisable
			Weighted-
			Average	Weighted-				Weighted-
			Remaining	Average				Average
Range of	Number		Contractual	Exercise		Number		Exercise
Exercise Prices	Outstanding		Life	Price		Exercisable		Price
$3.55 to $5.33		149,371	4.0 years	$	3.86		149,371	$	3.86
$5.69 to $8.54		163,563	6.2 years	$	6.26		163,563	$	6.26
$9.45 to $14.18		352,521	4.8 years	$	11.19		352,521	$	11.19
$14.83 to $22.25		492,957	4.4 years	$	18.31		492,957	$	18.31
$25.63 to $30.71		1,141,371	8.0 years	$	28.36		610,701	$	27.22

Total		2,299,783	6.5 years	$	20.38		1,769,113	$	17.60

The following is a summary of activity of United’s Incentive Stock Option Plans:


	Stock		Range of
	Options		Exercise Prices
Outstanding at January 1, 2001		1,513,691	$	27.00	$	2.98
Granted		259,200		27.12
Exercised		259,817		27.00		9.62
Assumed in acquisition of subsidiary		512,973		19.48		4.26
Forfeited		73,764		27.00		22.00
Outstanding at December 31, 2001		1,952,283		27.12		2.98
Granted		294,958		29.37
Exercised		341,503		27.12		4.26
Forfeited		25,319		27.12		19.19
Outstanding at December 31, 2002		1,880,419		29.37		4.26
Granted		333,650		30.20
Exercised		274,191		29.37		3.55
Assumed in acquisition of subsidiary		389,606		8.53		3.55
Forfeited		29,701		29.37		19.19

Outstanding at December 31, 2003		2,299,783	$	30.71	$	3.55

Exercisable at:
December 31, 2001		1,507,076	$	27.00	$	4.26
December 31, 2002		1,406,676	$	27.12	$	4.26
December 31, 2003		1,769,114	$	29.37	$	3.55

NOTE M—COMMITMENTS AND CONTINGENT LIABILITIES

United is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to alter its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby letters of credit, and interest rate swap agreements. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements.

United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total

NOTE M—COMMITMENTS AND CONTINGENT LIABILITIES– continued

commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation of the counterparty. United had approximately $2,076,840,000 and $1,285,533,000 of loan commitments outstanding as of December 31, 2003 and 2002, respectively, substantially all of which expire within one year. At December 31, 2003 and 2002, United had commitments to originate $93,051,000 and $249,979,000, respectively, of mortgage loans to sell in the secondary market.

Commercial and standby letters of credit are agreements used by United’s customers as a means of improving their credit standing in their dealings with others. Under these agreements, United guarantees certain financial commitments of its customers. A commercial letter of credit is issued specifically to facilitate trade or commerce. Typically, under the terms of a commercial letter of credit, a commitment is drawn upon when the underlying transaction is consummated as intended between the customer and a third party. United has issued commercial letters of credit of $4,286,000 and $3,171,000 as of December 31, 2003 and 2002, respectively. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of $110,957,000 and $95,923,000 as of December 31, 2003 and 2002, respectively.

NOTE N-DERIVATIVE FINANCIAL INSTRUMENTS

In July of 2003, United entered into a $100 million notional amount interest rate swap agreement. Under the swap agreement, United will receive payment streams at a fixed rate of 6.43% while paying a variable rate of one-month LIBOR plus 3.5% on the $100 million for a term of seven years. United entered into the interest rate swap in an effort to offset a portion of the cost on a long-term fixed rate FHLB advance. However, the FHLB, at its discretion, can convert the fixed interest rate on the advance to a variable rate of three-month LIBOR plus 0.1%. If this conversion occurs, under the swap agreement, United would then receive variable payment streams equivalent to three-month LIBOR plus 0.1% and pay a variable rate of three-month LIBOR plus 3.5% over the remaining term. Under the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, the interest rate swap is considered a fair value hedge. The swap qualifies for the shortcut method of accounting treatment because the critical terms of the FHLB advance and the fixed rate payments to be received on the swap coincide and thus are effective in offsetting changes in the fair value of the FHLB advance over its remaining term. The fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability. At December 31, 2003, the fair value of the swap resulted in a $3.85 million liability. Adjustments to the fair value of the swap are recorded as a corresponding adjustment within FHLB advances on the balance sheet. The impact on earnings is the exchange of the fixed rate interest for variable rate LIBOR based interest.

United is required to recognize its commitments with borrowers (interest rate lock commitments) and investors (best efforts commitments) on loans originated for sale in its mortgage banking operations. These commitments are entered into with the borrower and investor to manage the inherent interest rate and pricing risk associated with selling loans in the secondary market. These derivatives are accounted for by recognizing the fair value of the contracts and commitments on the balance sheet as either a freestanding asset or liability. The fair values of the interest rate lock commitments were $222 thousand and $1.26 million at December 31, 2003 and December 31, 2002, respectively. The fair values of the best efforts commitments were $408 thousand and $3.32 million at December 31, 2003 and December 31, 2002, respectively. The interest rate lock commitments generally terminate once the loan is funded, the lock period expires or the borrower decides not to enter into the loan. The best efforts commitments generally terminate once the loan is sold, the commitment period expires or the borrower decides not to enter into the loan.

NOTE P - UNITED BANKSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION

Condensed Balance Sheets


	December 31
(In thousands)	2003		2002
Assets
Cash and due from banks	$	23,439	$	15,700
Securities available for sale		15,924		9,742
Securities held to maturity		6,499		6,551
Loans		3,047		4,417
Investment in subsidiaries:
Bank subsidiaries		669,332		557,363
Nonbank subsidiaries		4,296		2,884
Other assets		1,968		1,361

Total Assets	$	724,505	$	598,018

Liabilities and Shareholders’ Equity
Line of credit from banking subsidiary			$	16,000
Short-term notes payable	$	17,000
Junior subordinated debentures of subsidiary trusts		67,013		20,620
Accrued expenses and other liabilities		25,301		19,859
Shareholders’ equity (including other accumulated comprehensive income of $6,512 and $13,060 at December 31, 2003 and 2002, respectively)		615,191		541,539

Total Liabilities and Shareholders’ Equity	$	724,505	$	598,018

Condensed Statements of Income


	Year Ended December 31
(In thousands)	2003			2002		2001
Income
Dividends from banking subsidiaries	$	62,052		$	54,001	$	71,000
Net interest income		828			897		1,015
Management fees:
Bank subsidiaries		6,960			6,368		4,019
Nonbank subsidiaries		12			12		12
Other income		407			12		13

Total Income		70,259			61,290		76,059

Expenses
Interest paid to banking subsidiary		882			617		223
Operating expenses		7,460			6,196		5,384

Income Before Income Taxes and Equity in Undistributed Net Income of Subsidiaries		61,917			54,477		70,452
Applicable income tax (benefit) expense		(37	)		151		(178	)

Income Before Equity in Undistributed Net Income of Subsidiaries		61,954			54,326		70,630
Equity in undistributed net income (loss) of subsidiaries:
Bank subsidiaries		16,792			34,607		9,392
Nonbank subsidiaries		19					(31	)

Net Income	$	78,765		$	88,933	$	79,991

NOTE P - UNITED BANKSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION - continued

Condensed Statements of Cash Flows


	Year Ended December 31
(In thousands)	2003			2002			2001
Operating Activities
Net income	$	78,765		$	88,933		$	79,991
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries		(16,811	)		(34,607	)		(9,361	)
Depreciation and net amortization		(2	)		32			12
Net (gain) loss on securities transactions		(407	)		(82	)		48
Net change in other assets and liabilities		4,047			1,273			11,927

Net Cash Provided by Operating Activities		65,592			55,549			82,617

Investing Activities
Net (purchases of) proceeds from securities		(4,620	)		(460	)		302
Net cash paid in acquisition of subsidiary		(24,961	)					(15,102	)
Increases in investment in subsidiaries		(1,393	)		(11,470	)
Repayment on loan balances by customers		1,370			1,283			1,205

Net Cash Used in Investing Activities		(29,604	)		(10,647	)		(13,595	)

Financing Activities
Net advances on line of credit from subsidiary		1,000			8,000			3,000
Net advances from subsidiary trusts		46,393			20,620
Cash dividends paid		(41,625	)		(39,753	)		(36,990	)
Acquisition of treasury stock		(37,361	)		(36,899	)		(27,059	)
Proceeds from exercise of stock options		3,344			4,372			2,766

Net Cash Used in Financing Activities		(28,249	)		(43,660	)		(58,283	)

Increase in Cash and Cash Equivalents		7,739			1,242			10,739
Cash and Cash Equivalents at Beginning of Year		15,700			14,458			3,719

Cash and Cash Equivalents at End of Year	$	23,439		$	15,700		$	14,458

NOTE Q—REGULATORY MATTERS

The subsidiary banks are required to maintain average reserve balances with their respective Federal Reserve Bank. The average amount of those reserve balances maintained and required for the year ended December 31, 2003, was approximately $47,096,000 and $44,557,000, respectively.

The primary source of funds for the dividends paid by United Bankshares, Inc. to its shareholders is dividends received from its subsidiary banks. Dividends paid by United’s subsidiary banks are subject to certain regulatory limitations. Generally, the most restrictive provision requires regulatory approval if dividends declared in any year exceed that year’s net income, as defined, plus the retained net profits of the two preceding years.

During 2004, the retained net profits available for distribution to United Bankshares, Inc. as dividends without regulatory approval, are approximately $30,443,000, plus net income for the interim period through the date of declaration.

Under Federal Reserve regulation, the banking subsidiaries are also limited as to the amount they may loan to affiliates, including the parent company. Loans from the banking subsidiaries to the parent company are limited to 10% of the banking subsidiaries’ capital and surplus, as defined, or $37,006,000 at December 31, 2003, and must be secured by qualifying collateral.

United’s subsidiary banks are subject to various regulatory capital requirements administered by federal banking agencies. Pursuant to capital adequacy guidelines, United’s subsidiary banks must meet specific capital guidelines that involve various quantitative measures of the banks’ assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. United’s subsidiary banks’ capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require United to maintain minimum amounts and ratios of total and Tier I capital, as defined in the regulations, to risk-weighted assets, as defined, and of Tier I capital, as defined, to average assets, as defined. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on United’s financial statements. As of December 31, 2003, United exceeds all capital adequacy requirements to which it is subject.

At December 31, 2003, the most recent notification from its regulators, United and its subsidiary banks were categorized as well-capitalized. To be categorized as well-capitalized, United must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes would impact United’s well-capitalized status.

NOTE Q—REGULATORY MATTERS – continued

United’s and its subsidiary banks’, United Bank (WV) and United Bank (VA), capital amounts (in thousands of dollars) and ratios are presented in the following table.


						For Capital					To Be Well-
	Actual					Adequacy Purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2003:
Total Capital (to Risk- Weighted Assets):
United Bankshares	$	565,289		11.6	%	$	389,374		³8.0	%	$	486,718		³10.0	%
United Bank (WV)		309,959		11.7	%		212,492		³8.0	%		265,615		³10.0	%
United Bank (VA)		243,351		10.9	%		178,192		³8.0	%		222,739		³10.0	%
Tier I Capital (to Risk- Weighted Assets):
United Bankshares		504,426		10.4	%		194,687		³4.0	%		292,031		³6.0	%
United Bank (WV)		280,152		10.6	%		106,246		³4.0	%		159,369		³6.0	%
United Bank (VA)		216,226		9.7	%		89,096		³4.0	%		133,644		³6.0	%
Tier I Capital (to Average Assets):
United Bankshares		504,426		8.4	%		239,122		³4.0	%		298,902		³5.0	%
United Bank (WV)		280,152		8.1	%		138,871		³4.0	%		173,589		³5.0	%
United Bank (VA)		216,226		8.5	%		101,882		³4.0	%		127,353		³5.0	%
As of December 31, 2002:
Total Capital (to Risk- Weighted Assets):
United Bankshares	$	508,145		11.8	%	$	345,752		³8.0	%	$	432,190		³10.0	%
United Bank (WV)		307,544		11.6	%		213,106		³8.0	%		266,382		³10.0	%
United Bank (VA)		193,672		11.1	%		139,155		³8.0	%		173,944		³10.0	%
Tier I Capital (to Risk- Weighted Assets):
United Bankshares		451,750		10.5	%		172,876		³4.0	%		259,314		³6.0	%
United Bank (WV)		278,084		10.4	%		106,553		³4.0	%		159,829		³6.0	%
United Bank (VA)		170,183		9.8	%		69,578		³4.0	%		104,367		³6.0	%
Tier I Capital (to Average Assets):
United Bankshares		451,750		8.0	%		226,875		³4.0	%		283,594		³5.0	%
United Bank (WV)		278,084		8.1	%		137,918		³4.0	%		172,398		³5.0	%
United Bank (VA)		170,183		7.3	%		93,272		³4.0	%		116,590		³5.0	%

United’s mortgage banking entity, George Mason Mortgage, LLC (GMMC), is subject to net worth requirements issued by the U.S. Department of Housing and Urban Development (HUD). Failure to meet minimum capital requirements of HUD can result in certain mandatory and possibly additional discretionary actions that, if undertaken, could have a direct material effect on GMMC’s operations.

The minimum net worth requirement of HUD at December 31, 2003 and December 31, 2002 was $1 million. GMMC’s net worth was $32.9 million at December 31, 2003 and $26.0 million at December 31, 2002, which significantly exceeded the HUD requirements.

NOTE R—FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by United in estimating its fair value disclosures for financial instruments:

Cash and Cash Equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.

Securities: The estimated fair values of securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans: The estimated fair values of variable-rate loans that reprice frequently with no significant change in credit risk are based on carrying values. The fair values of certain mortgage loans (e.g., one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values of other loans (e.g., commercial real estate and rental property mortgage loans, commercial and industrial loans, financial institution loans and agricultural loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar creditworthiness. The estimated fair value of loans held for sale is based upon the market price of similar loans which is not materially different than cost due to the short time duration between origination and sale.

Derivative Financial Instruments: The estimated fair value of derivative financial instruments is based upon the current market price for similar instruments.

Off-Balance Sheet Instruments: Fair values of United’s loan commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The estimated fair values of these commitments approximate their carrying values.

Deposits: The fair values of demand deposits (e.g., interest and noninterest checking, regular savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values of fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings approximate their fair values.

Long-term Borrowings: The fair values of United’s Federal Home Loan Bank borrowings and trust preferred securities are estimated using discounted cash flow analyses, based on United’s current incremental borrowing rates for similar types of borrowing arrangements.

The estimated fair values of United’s financial instruments are summarized below:


	December 31, 2003				December 31, 2002
	Carrying		Fair		Carrying		Fair
(In thousands)	Amount		Value		Amount		Value
Cash and cash equivalents	$	254,941	$	254,941	$	175,363	$	175,363
Securities available for sale		1,266,635		1,266,635		1,022,314		1,022,314
Securities held to maturity		243,975		253,704		263,176		266,993
Loans held for sale		181,186		181,186		582,718		582,718
Loans		4,096,019		4,098,199		3,573,161		3,637,290
Derivative financial assets		221		221		1,255		1,255
Deposits		4,182,372		4,187,911		3,900,848		3,924,066
Short-term borrowings		661,942		662,917		573,549		575,456
Long-term borrowings		858,174		920,746		708,573		781,908
Derivative financial liabilities		4,255		4,255		4,571		4,571

NOTE S—SEGMENT INFORMATION

The following information is based on United’s current management structure and presents results of operations as if the community banking and mortgage banking segments were operated on a stand-alone basis. The results are not necessarily comparable with similar information of other companies.


					General
	Mortgage		Community		Corporate
(In thousands)	Banking		Banking		and Other			Consolidated
2003
Net interest income	$	16,351	$	176,375	$	631		$	193,357
Provision for loan losses				7,475					7,475
Net interest income after provision for loan losses		16,351		168,900		631			185,882
Noninterest income		51,905		50,960		451			103,316
Noninterest expense		47,452		129,554		(328	)		176,678
Income before income taxes		20,804		90,306		1,410			112,520
Income tax expense		5,745		27,592		418			33,755
Net income		15,059		62,714		992			78,765
Average total assets		476,587		5,450,157		(117,613	)		5,809,131

2002
Net interest income	$	12,600	$	192,034	$	2,287		$	206,921
Provision for loan losses				7,937					7,937
Net interest income after provision for loan losses		12,600		184,097		2,287			198,984
Noninterest income		36,142		37,250		87			73,479
Noninterest expense		32,478		111,806		(154	)		144,130
Income before income taxes		16,264		109,541		2,528			128,333
Income tax expense		4,079		34,523		798			39,400
Net income		12,185		75,018		1,730			88,933
Average total assets		333,064		5,322,636		(64,433	)		5,591,267

2001
Net interest income	$	8,005	$	176,274	$	824		$	185,103
Provision for loan losses				12,833					12,833
Net interest income after provision for loan losses		8,005		163,441		824			172,270
Noninterest income		26,518		35,722		(35	)		62,205
Noninterest expense		22,808		91,524		1,413			115,745
Income before income taxes		11,715		107,639		(624	)		118,730
Income tax expense		3,139		35,793		(193	)		38,739
Net income		8,576		71,846		(431	)		79,991
Average total assets		209,701		4,851,227		(19,732	)		5,041,196

General corporate and other includes intercompany eliminations.

NOTE T - QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial data for 2003 and 2002 is summarized below (dollars in thousands, except for per share data):


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
2003
Interest income	$	77,224	$	74,261	$	71,981	$	74,042
Interest expense		29,595		26,567		24,459		23,530
Net interest income		47,629		47,694		47,522		50,512
Provision for loan losses		1,455		2,296		2,222		1,502
Income from mortgage banking operations		11,972		14,267		15,834		9,833
Securities gains (losses), net		866		931		122		(89	)
Other noninterest income		10,757		12,593		12,694		13,536
Noninterest expense		37,565		40,610		41,207		57,296
Income taxes		9,661		9,774		9,823		4,497
Net income (1)		22,543		22,805		22,920		10,497
Per share data:
Average shares outstanding (000s):
Basic		41,891		41,598		41,328		43,428
Diluted		42,355		42,068		41,823		44,178
Net income per share:
Basic	$	0.54	$	0.55	$	0.55	$	0.24
Diluted	$	0.53	$	0.54	$	0.55	$	0.24
Dividends per share	$	0.25	$	0.25	$	0.25	$	0.25


	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2002
Interest income	$	85,238		$	84,738		$	86,413		$	83,089
Interest expense		34,590			33,322			32,677			31,968
Net interest income		50,648			51,416			53,736			51,121
Provision for loan losses		2,227			1,675			1,823			2,212
Income from mortgage banking operations		6,450			7,148			11,203			11,341
Securities losses, net		(304	)		(289	)		(4,368	)		(1,305	)
Other noninterest income		9,791			10,411			11,894			11,507
Noninterest expense		32,030			34,829			38,697			38,574
Income taxes		10,507			9,976			9,592			9,325
Net income (1)		21,821			22,206			22,353			22,553
Per share data:
Average shares outstanding (000s):
Basic		42,899			42,692			42,419			42,156
Diluted		43,549			43,391			43,104			42,670
Net income per share:
Basic	$	0.51		$	0.52		$	0.53		$	0.53
Diluted	$	0.50		$	0.51		$	0.52		$	0.53
Dividends per share	$	0.23		$	0.23		$	0.24		$	0.25

(1) For further information, see the related discussion “Quarterly Results” included in Management’s Discussion and Analysis.


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)


PART I
	Item 1. BUSINESS
	Item 2. PROPERTIES
	Item 3. LEGAL PROCEEDINGS
	Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	Item 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
	Item 6. SELECTED FINANCIAL DATA
	Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
	Item 9a. CONTROLS AND PROCEDURES
PART III
	Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	Item 11. EXECUTIVE COMPENSATION
	Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
Supplemental Executive Retirement Agreement
Computation of Ratios
Subsidiaries of the Registrant
Consent of Indenpendent Auditors
Certification
Certification
Certification
Certification


CROSS-REFERENCE INDEX	Page

Part I
Item 1. BUSINESS		3
Item 2. PROPERTIES		8
Item 3. LEGAL PROCEEDINGS		8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		8
Part II
Item 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED SHAREHOLDER MATTERS		9
Item 6. SELECTED FINANCIAL DATA		10
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		10
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK		10
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		10
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES		11
Item 9a. CONTROLS AND PROCEDURES		11
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		12
Item 11. EXECUTIVE COMPENSATION		12
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		12
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		12
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES		12
Part VI
Item 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K		13


	Dividends			High		Low

2004
First Quarter through February 27, 2004		(1	)	$	31.60	$	29.61
2003
Fourth Quarter	$	0.25		$	31.60	$	28.92
Third Quarter	$	0.25		$	31.61	$	28.37
Second Quarter	$	0.25		$	30.93	$	27.40
First Quarter	$	0.25		$	30.51	$	26.58
2002
Fourth Quarter	$	0.25		$	31.50	$	26.09
Third Quarter	$	0.24		$	31.65	$	24.88
Second Quarter	$	0.23		$	32.25	$	27.18
First Quarter	$	0.23		$	29.97	$	27.56


[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Fiscal Year Ended December 31, 2003
		OR
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Page References

Report of Independent Auditors		38
Consolidated Balance Sheets		39
Consolidated Statements of Income		40
Consolidated Statements of Changes in Shareholders’ Equity		41
Consolidated Statements of Cash Flows		42
Notes to Consolidated Financial Statements		43


Signatures	Title	Date

/s/ Richard M. Adams	Chairman of the Board, Director,	March 10, 2004
	and Chief Executive Officer

/s/ Steven E. Wilson	Chief Financial Officer	March 10, 2004
	Chief Accounting Officer

/s/ J. Paul McNamara	Director	March 10, 2004


/s/ James G. Tardiff	Director	March 10, 2004


/s/ F. T. Graff, Jr.	Director	March 10, 2004


/s/ Theodore J. Georgelas	Director	March 10, 2004


/s/ Harry L. Buch	Director	March 10, 2004


/s/ G. Ogden Nutting	Director	March 10, 2004


/s/ Robert G. Astorg	Director	March 10, 2004


/s/ Russell L. Isaacs	Director	March 10, 2004


/s/ I. N. Smith, Jr.	Director	March 10, 2004


/s/ P. Clinton Winter, Jr.	Director	March 10, 2004


/s/ James W. Word, Jr.	Director	March 10, 2004


/s/ John M. McMahon	Director	March 10, 2004


			Sequential
	S-K Item 601		Page
Description	Table Reference		Number (a)

Articles of Incorporation and Bylaws:		(3)

(a) Bylaws			(d)

(b) Articles of Incorporation			(c)

Investments		(4)	N/A

Voting Trust Agreement		(9)	N/A

Material Contracts		(10)

(a) Employment Agreement with I. N. Smith, Jr.			(b)

(b) Employment Agreement with Richard M. Adams			(h)

(c) Supplemental Retirement Agreement with Richard M. Adams			(h)

(d) Lease on Branch Office in Charleston Town Center, Charleston, West Virginia			(b)

(e) Lease on United Center, Charleston, West Virginia			(e)

(f) Data processing contract with FISERV			(g)

(g) Executive Officer Change of Control Agreements			(f)(i)

(h) Employment Agreement with James G. Tardiff			(i)


			Five Year Summary

			2003			2002			2001			2000			1999

Summary of Operations:
	Total interest income		$	297,508		$	339,478		$	360,610		$	377,847		$	354,665
	Total interest expense			104,151			132,557			175,507			197,766			174,402
	Net interest income			193,357			206,921			185,103			180,081			180,263
	Provision for loan losses			7,475			7,937			12,833			15,745			8,800
	Other income			103,316			73,479			62,205			33,786			51,078
	Other expense			176,678			144,130			115,745			110,422			117,519
	Income taxes			33,755			39,400			38,739			28,724			34,774
	Net income			78,765			88,933			79,991			58,976			70,248
	Cash dividends			42,028			40,388			38,096			35,286			35,367
Per common share:
	Net income:
		Basic		1.87			2.09			1.93			1.41			1.63
		Diluted		1.85			2.06			1.90			1.40			1.61
	Cash dividends			1.00			0.95			0.91			0.84			0.82
	Book value per share			14.08			12.88			11.80			10.32			9.32
Selected Ratios:
	Return on average shareholders’ equity			13.86	%		16.73	%		17.51	%		14.41	%		16.73	%
	Return on average assets			1.36	%		1.59	%		1.59	%		1.19	%		1.44	%
	Dividend payout ratio			53.39	%		45.41	%		47.63	%		59.83	%		50.35	%
Selected Balance Sheet Data:
	Average assets		$	5,791,497		$	5,591,267		$	5,041,196		$	4,936,605		$	4,867,521
	Investment securities			1,510,610			1,285,490			1,428,716			1,245,334			1,472,553
	Loans held for sale			181,186			582,718			368,625			203,831			117,825
	Total loans			4,096,019			3,573,161			3,502,334			3,192,494			3,170,096
	Total assets			6,378,999			5,792,019			5,631,775			4,904,547			5,069,160
	Total deposits			4,182,372			3,900,848			3,787,793			3,391,449			3,260,985
	Long-term borrowings			858,174			708,573			809,977			398,204			343,847
	Total borrowings and other liabilities			1,581,436			1,349,632			1,337,453			1,082,228			1,412,245
	Shareholders’ equity			615,191			541,539			506,529			430,870			395,930


				2003 Compared to 2002												2002 Compared to 2001

				Increase (Decrease) Due to												Increase (Decrease) Due to

										Rate/												Rate/
				Volume			Rate			Volume			Total			Volume			Rate			Volume			Total

Interest income:
	Federal funds sold, securities purchased under agreements to resell and other short-term investments			$	813		($	155	)	($	207	)	$	451		$	814		($	397	)	($	480	)	($	63	)
	Investment securities:
		Taxable			(3,531	)		(16,166	)		809			(18,888	)		1,546			(8,184	)		(163	)		(6,801	)
		Tax exempt (1), (2)			(483	)		(409	)		15			(877	)		(227	)		(1,066	)		16			(1,277	)
	Loans (1),(2),(3)				11,348			(33,491	)		(1,431	)		(23,574	)		35,798			(43,836	)		(5,618	)		(13,656	)

		TOTAL INTEREST INCOME			8,147			(50,221	)		(814	)		(42,888	)		37,931			(53,483	)		(6,245	)		(21,797	)

Interest expense:
	Interest-bearing deposits			($	802	)	($	25,333	)	$	255		($	25,880	)	$	9,829		($	44,180	)	($	3,692	)	($	38,043	)
	Federal funds purchased, repurchase agreements, and other short-term borrowings				660			(3,350	)		(215	)		(2,905	)		3,901			(6,136	)		(1,687	)		(3,922	)
	FHLB advances & other long - term borrowings				3,739			(3,090	)		(270	)		379			(335	)		(655	)		5			(985	)

		TOTAL INTEREST EXPENSE			3,597			(31,773	)		(230	)		(28,406	)		13,395			(50,971	)		(5,374	)		(42,950	)

			NET INTEREST INCOME	$	4,550		($	18,448	)	($	584	)	($	14,482	)	$	24,536		($	2,512	)	($	871	)	$	21,153


			Total Payments Due by Period

(In thousands)			One Year		One to		Three to		Over Five
	Total		or Less		Three Years		Five Years		Years

Deposits without a stated maturity (1)	$	2,595,965	$	2,595,965
Time deposits (2) (3)		1,616,540		1,074,507	$	395,765	$	126,595	$	19,673
Short-term borrowings (2)		883,144		579,275		79,847		79,096		144,926
Long-term borrowings (2) (3)		900,316		305,883		27,050		461,686		105,697
Operating leases		28,264		5,117		8,664		6,700		7,783


(In thousands)			Amount

Commitments to extend credit:
	Revolving open-end secured by 1-4 residential		$	462,977
	Credit card and personal revolving lines			111,238
	Commercial			1,502,625

		Total unused commitments	$	2,076,840

Financial standby letters of credit			$	58,403
Performance standby letters of credit				52,554
Commercial letters of credit				4,286

		Total letters of credit	$	115,243


Change in	Percentage Change in Net Interest Income
Interest Rates
(basis points)	December 31, 2003			December 31, 2002

+100		3.00	%		8.45	%
-100		-1.60	%		-6.14	%


				December 31

(Dollars in thousands, except par value)				2003			2002

Assets
Cash and due from banks				$	217,229		$	162,261
Interest-bearing deposits with other banks					32,280			13,102
Federal funds sold					5,432

Total cash and cash equivalents					254,941			175,363
Securities available for sale at estimated fair value (amortized cost-$1,251,357 at December 31, 2003 and $996,198 at December 31, 2002)					1,266,635			1,022,314
Securities held to maturity (estimated fair value-$253,704 at December 31, 2003 and $266,993 at December 31, 2002)					243,975			263,176
Loans held for sale					181,186			582,718
Loans					4,101,422			3,576,280
	Less: Unearned income				(5,403	)		(3,119	)

Loans net of unearned income					4,096,019			3,573,161
	Less: Allowance for loan losses				(50,432	)		(47,387	)

Net loans					4,045,587			3,525,774
Bank premises and equipment					46,354			48,923
Goodwill					169,655			90,416
Accrued interest receivable					27,098			27,577
Other assets					143,568			55,758

			TOTAL ASSETS	$	6,378,999		$	5,792,019

Liabilities
Domestic deposits:
	Noninterest-bearing			$	937,512		$	739,228
	Interest-bearing				3,244,860			3,161,620

Total deposits					4,182,372			3,900,848
Borrowings:
	Federal funds purchased				90,540			57,153
	Securities sold under agreements to repurchase				549,163			511,300
	Other short-term borrowings				22,239			5,096
	Federal Home Loan Bank borrowings				768,220			679,712
	Other long-term borrowings				89,954			28,861
Accrued expenses and other liabilities					61,320			67,510

			TOTAL LIABILITIES		5,763,808			5,250,480
Shareholders’ Equity
Common stock, $2.50 par value; Authorized-100,000,000 shares; issued-44,320,832 and 43,381,769 at December 31, 2003 and December 31, 2002, including 631,232 and 1,349,801 shares in treasury at December 31, 2003 and December 31, 2002, respectively					110,802			108,454
Surplus					110,592			89,360
Retained earnings					405,859			369,122
Accumulated other comprehensive income					6,512			13,060
Treasury stock, at cost					(18,574	)		(38,457	)

			TOTAL SHAREHOLDERS’ EQUITY		615,191			541,539

		TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	6,378,999		$	5,792,019


			2003			2002			2001			2000			1999

			(Dollars in thousands)
Balance of allowance for possible loan losses at beginning of year			$	47,387		$	47,408		$	40,532		$	39,599		$	39,189
Allowance of purchased company at date of acquisition				3,863						4,673
Loans charged off:
	Commercial, financial and agricultural			2,677			805			2,578			2,482			3,896
	Real estate			3,365			5,192			7,090			10,570			3,290
	Real estate construction									76
	Consumer and other			3,954			3,502			2,615			2,793			2,050

		TOTAL CHARGE-OFFS		9,996			9,499			12,359			15,845			9,236
Recoveries:
	Commercial, financial and agricultural			706			443			681			374			341
	Real estate			601			591			557			226			156
	Real estate construction									1
	Consumer and other			396			507			490			433			349

		TOTAL RECOVERIES		1,703			1,541			1,729			1,033			846

		NET LOANS CHARGED OFF		8,293			7,958			10,630			14,812			8,390
Provision for loan losses				7,475			7,937			12,833			15,745			8,800

		BALANCE OF ALLOWANCE FOR LOAN LOSSES AT END OF YEAR	$	50,432		$	47,387		$	47,408		$	40,532		$	39,599

Loans outstanding at the end of period (gross) (1)			$	4,101,422		$	3,576,280		$	3,505,385		$	3,197,494		$	3,170,096
Average loans outstanding during period (net of unearned income)(1)			$	3,644,296		$	3,536,020		$	3,218,191		$	3,198,090		$	2,975,116
Net charge-offs as a percentage of average loans outstanding				0.23	%		0.23	%		0.33	%		0.46	%		0.28	%
Allowance for loan losses as a percentage of nonperforming loans				271.5	%		308.7	%		269.5	%		315.5	%		190.9	%


		December 31

		2003		2002		2001		2000		1999

		(In thousands)
Commercial, financial and Agricultural		$	28,285	$	24,030	$	22,605	$	12,762	$	14,432
Real estate			6,836		10,732		10,795		12,713		9,861
Real estate construction			2,756		2,207		2,097		1,372		754
Consumer and other			6,697		5,971		4,004		3,533		2,735
Unallocated			5,858		4,447		7,907		10,152		11,817

	Total	$	50,432	$	47,387	$	47,408	$	40,532	$	39,599


	December 31, 2003

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value

U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	32,681	$	158	$	3	$	32,836
State and political subdivisions		70,532		3,008		120		73,420
Mortgage-backed securities		954,567		13,978		5,565		962,980
Marketable equity securities		12,843		1,503		101		14,245
Other		180,734		3,549		1,129		183,154

Total	$	1,251,357	$	22,196	$	6,918	$	1,266,635


	December 31, 2002

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value

U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	29,099	$	94	$	25	$	29,168
State and political subdivisions		64,259		2,084		52		66,291
Mortgage-backed securities		737,829		24,027		518		761,338
Marketable equity securities		8,261		1,246		920		8,587
Other		156,750		2,131		1,951		156,930

Total	$	996,198	$	29,582	$	3,466	$	1,022,314


		Common Stock

				Par					Retained
(Dollars in thousands, except per share data)		Shares		Value		Surplus			Earnings

Balance at January 1, 2001			43,381,769	$	108,454	$	85,032		$	278,682
Comprehensive income, net of tax:
	Net income									79,991
	Unrealized gain on securities of $8,543 net of reclassification adjustment for losses included in net income of $337
	Amortization of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio
Total comprehensive income, net of tax
Acquisition of Century Bancshares, Inc. (1,981,423 shares)							2,274
Purchase of treasury stock (1,080,000 shares)
Common dividends declared ($0.91 per share)										(38,096	)
Common stock options exercised (259,817 shares)							(3,184	)

Balance at December 31, 2001			43,381,769		108,454		84,122			320,577
Comprehensive income, net of tax:
	Net income									88,933
	Unrealized gain on securities of $4,084 net of reclassification adjustment for losses included in net income of $4,073
	Amortization of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio
Total comprehensive income, net of tax
Purchase of treasury stock (1,247,000 shares)
Fair value of vested stock options exchanged in the acquisition of Century Bancshares, Inc.							10,283
Common dividends declared ($0.95 per share)										(40,388	)
Common stock options exercised (341,503 shares)							(5,045	)

Balance at December 31, 2002			43,381,769		108,454		89,360			369,122

Comprehensive income, net of tax:
	Net income									78,765
	Unrealized losses on securities of $8,235 net of reclassification adjustment for gains included in net income of $1,189
	Amortization of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio
Total comprehensive income, net of tax
Acquisition of Sequoia Bancshares, Inc. (2,639,062 shares)			939,063		2,348		26,060
Purchase of treasury stock (1,257,135 shares)
Common dividends declared ($1.00 per share)										(42,028	)
Common stock options exercised (274,191 shares)							(4,828	)

Balance at December 31, 2003			44,320,832	$	110,802	$	110,592		$	405,859


	Less than 12 months					12 months or longer

	Market		Unrealized			Market		Unrealized
(In thousands)	Value		Losses			Value		Losses

Treasuries and agencies	$	8,490	$	(3	)
State and political		4,122		(120	)
Mortgage-backed		457,983		(5,562	)	$	828	$	(3	)
Marketable equity securities							4,810		(101	)
Other		21,679		(487	)		17,754		(642	)

Total	$	492,274	$	(6,172	)	$	23,392	$	(746	)


						After 1 But					After 5 But
	Within 1 Year					Within 5 Years					Within 10 Years					After 10 Years

	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield

	(Dollars in thousands)
U.S. Treasury and other U.S Government agencies and corporations	$	9,019		0.70	%	$	3,996		2.82	%	$	19,666		4.57	%	$	11,978		4.95	%
States and political subdivisions (1)		1,696		11.18	%		18,319		10.91	%		34,538		10.53	%		96,586		9.82	%
Mortgage-backed securities		77		0.40	%		24,599		4.15	%		167,130		3.83	%		764,056		4.36	%
Other (2)		4,998		5.78	%		21,839		5.61	%		18,819		6.74	%		298,016		6.08	%


					Principal Amount of Loans
	Total Principal				60 Days
(In thousands)	Amount of Loans				or More Past Due				Average Balances				Net Credit Losses

	At December 31,								During the Year

Type of Loan	2003		2002		2003		2002		2003		2002		2003		2002

Residential mortgage loans (fixed-rate)	$	41,763	$	68,845	$	865	$	1,436	$	54,965	$	85,809	$	2,931	$	5,112


	Less Than		One To		Greater Than
	One Year		Five Years		Five Years		Total

	(In thousands)
Commercial, financial and agricultural	$	436,978	$	213,892	$	209,043	$	859,913
Real estate construction		225,526						225,526

Total	$	662,504	$	213,892	$	209,043	$	1,085,439


	Less Than		One to		Over
	One Year		Five Years		Five Years		Total

Outstanding with fixed interest rates	$	240,549	$	196,944	$	209,043	$	646,536
Outstanding with adjustable rates		196,429		16,948				213,377

	$	436,978	$	213,892	$	209,043	$	859,913


		As of December 31, 2003

		Gross Carrying		Accumulated			Net Carrying
(In thousands)		Amount		Amortization			Amount

Amortized intangible assets:
	Core deposit intangible assets	$	19,890	($	10,344	)	$	9,546

Goodwill not subject to amortization		$	193,000	($	23,345	)	$	169,655


		As of December 31, 2002

		Gross Carrying		Accumulated			Net Carrying
		Amount		Amortization			Amount

Amortized intangible assets:
	Core deposit intangible assets	$	14,143	($	8,274	)	$	5,869

Goodwill not subject to amortization		$	113,761	($	23,345	)	$	90,416


		For the Year Ended December 31

(Dollars in thousands, except per share)		2003		2002		2001

Reported net income		$	78,765	$	88,933	$	79,991
Add back: Amortization of intangibles							2,483

Adjusted net income		$	78,765	$	88,933	$	82,474

Basic earnings per share:
	Reported net income	$	1.87	$	2.09	$	1.93
	Amortization of intangibles						0.06

Adjusted net income		$	1.87	$	2.09	$	1.99

Diluted earnings per share:
	Reported net income	$	1.85	$	2.06	$	1.90
	Amortization of intangibles						0.06

Adjusted net income		$	1.85	$	2.06	$	1.96


(Dollars In thousands)		Amount

3 months or less		$	164,968
Over 3 through 6 months			70,006
Over 6 through 12 months			89,328
Over 12 months			137,035

	TOTAL	$	461,337


		Federal			Securities Sold
		Funds			Under Agreements
(Dollars in thousands)		Purchased			To Repurchase

At December 31:
	2003	$	90,540		$	549,163
	2002		57,153			511,300
	2001		43,831			477,796
Weighted-average interest rate at year end:
	2003		1.1	%		1.9	%
	2002		1.4	%		1.6	%
	2001		1.7	%		2.0	%
Maximum amount outstanding at any month’s end:
	2003	$	388,375		$	612,849
	2002		117,110			513,607
	2001		43,831			503,887
Average amount outstanding during the year:
	2003	$	49,682		$	520,517
	2002		45,576			480,595
	2001		16,290			390,545
Weighted-average interest rate during the year:
	2003		1.2	%		1.3	%
	2002		1.7	%		2.0	%
	2001		2.9	%		3.5	%