-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qk9miFY+Bj1Fdx3Wfed7gnblIj4ex//hPdVBt40SCjtECFHKUS1pGPRLdFX85zg1 x7RRa5hJaydG0yfKn9AsLg== 0000950132-94-000147.txt : 19940517 0000950132-94-000147.hdr.sgml : 19940517 ACCESSION NUMBER: 0000950132-94-000147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED BANKSHARES INC/WV CENTRAL INDEX KEY: 0000729986 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 550641179 STATE OF INCORPORATION: WV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13322 FILM NUMBER: 94527607 BUSINESS ADDRESS: STREET 1: 300 UNITED CTR STREET 2: 500 VIRGINIA ST E CITY: CHARLESTON STATE: WV ZIP: 25301 BUSINESS PHONE: 3044248761 MAIL ADDRESS: STREET 1: 300 UNITED CT STREET 2: 500 VIRGINIA SUITE CITY: CHARLESTON STATE: WV ZIP: 25301 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________ FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1994 Commission File Number: 0-13322 United Bankshares, Inc. ----------------------- (Exact name of registrant as specified in its charter) West Virginia 55-0641179 ------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 300 United Center 500 Virginia Street, East Charleston, West Virginia 25301 ------------------------- ----- (Address of Principal Executive Offices) Zip Code Registrant's Telephone Number, including Area Code: (304) 424-8761 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class-- Common Stock,$2.50 Par Value; 11,954,498 shares outstanding as of April 30, 1994. 1 UNITED BANKSHARES, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS Page ---- PART I. FINANCIAL INFORMATION - - ------------------------------ Item 1. Financial Statements - - ----------------------------------------------------------------- Consolidated Balance Sheets (Unaudited) March 31, 1994 and December 31, 1993 ..................... 6 Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 1994 and 1993 ........7 Consolidated Statement of Changes in Shareholders' Equity (Unaudited) for the Three Months Ended March 31, 1994 ............................................8 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 1994 and 1993 ....... 9 Notes to Consolidated Financial Statements ...............10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Information required by Item 303 of Regulation S-K.............15 PART II. OTHER INFORMATION - - --------------------------- Item 1. Legal Proceedings..........................Not Applicable - - ------------------------- Item 2. Changes in Securities......................Not Applicable - - ----------------------------- Item 3. Defaults Upon Senior Securities ...........Not Applicable - - --------------------------------------- 2 UNITED BANKSHARES, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS--Continued Item 4. Submission of Matters to a Vote of Security Holders .................Not Applicable _________________________________________________________________ Item 5. Other Information ........................Not Applicable _________________________________________________________________ Item 6. Exhibits and Reports on Form 8-K _________________________________________________________________ (a) Exhibits required by Item 601 of Regulation S-K ..........................Not Applicable (b) Reports on Form 8-K - On April 11, 1994, a Form 8-K was filed to announce a common stock repurchase program. (c) Exhibit 11 - Computation of Earnings Per Share.......25 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED BANKSHARES, INC. ----------------------- (Registrant) Date May 12, 1994 /s/ Richard M. Adams -------------------- --------------------------- Richard M. Adams, Chairman of the Board and Chief Executive Officer Date May 12, 1994 /s/ Steven E. Wilson -------------------- --------------------------- Steven E. Wilson, Executive Vice President, Treasurer and Chief Financial Officer 4 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) The March 31, 1994 and December 31, 1993, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries, and the related consolidated statements of income for the three months ended March 31, 1994 and 1993, and the related consolidated statement of changes in shareholders' equity for the three months ended March 31, 1994, and the related condensed consolidated statements of cash flows for the three months ended March 31, 1994 and 1993, and the notes to consolidated financial statements appear on the following pages. 5 CONSOLIDATED BALANCE SHEETS (UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES
March 31 December 31 1994 1993 -------------- -------------- ASSETS Cash and due from banks $ 69,721,000 $ 60,750,000 Federal funds sold 24,500,000 Interest-bearing deposits with other banks 100,000 100,000 Securities purchased under agreements to resell 20,000,000 -------------- ------------- Total cash and cash equivalents 114,321,000 60,850,000 Securities available for sale (at market) 162,478,000 Investment securities (market value--$ 245,233,000 at March 31, 1994, and $ 438,223,000 at December 31, 1993) 244,983,000 430,427,000 Loans Commercial, financial, and agricultural 213,174,000 218,559,000 Real Estate: Single family residential 454,576,000 442,855,000 Commercial 281,697,000 267,936,000 Construction 12,826,000 12,687,000 Other 15,274,000 15,331,000 Installment 229,859,000 229,847,000 -------------- -------------- 1,207,406,000 1,187,215,000 Less: Unearned income (6,167,000) (6,428,000) Allowance for loan losses (19,286,000) (19,015,000) -------------- -------------- Net loans 1,181,953,000 1,161,772,000 Bank premises and equipment 32,079,000 31,113,000 Interest receivable 10,487,000 10,542,000 Other assets 25,664,000 25,480,000 -------------- -------------- TOTAL ASSETS $1,771,965,000 $1,720,184,000 ============== ============== LIABILITIES Domestic deposits Noninterest-bearing $ 230,478,000 $ 229,131,000 Interest-bearing 1,204,773,000 1,201,398,000 -------------- -------------- TOTAL DEPOSITS 1,435,251,000 1,430,529,000 Short-term borrowings Federal funds purchased 4,537,000 5,339,000 Securities sold under agreements to repurchase 103,486,000 67,271,000 Long-term borrowings 37,203,000 32,203,000 Accrued expenses and other liabilities 16,920,000 13,870,000 -------------- -------------- TOTAL LIABILITIES 1,597,397,000 1,549,212,000 SHAREHOLDERS' EQUITY Common stock, $2.50 par value; Authorized--20,000,000 shares; issued and outstanding-- 11,954,498 at March 31, 1994, and at December 31, 1993, including 15,170 and 27,720 shares in treasury at March 31, 1994, and at December 31, 1993, respectively 29,886,000 29,886,000 Surplus 32,539,000 32,616,000 Retained earnings 112,019,000 109,020,000 Net unrealized gain on securities available for sale 425,000 Treasury stock (301,000) (550,000) -------------- -------------- TOTAL SHAREHOLDERS' EQUITY 174,568,000 170,972,000 -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,771,965,000 $1,720,184,000 ============== ==============
See notes to consolidated financial statements. 6 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES
Three Months Ended March 31 ------------------------ 1994 1993 ----------- ---------- INTEREST INCOME Interest and fees on loans $22,750,000 $22,815,000 Interest on federal funds sold 65,000 299,000 Interest and dividends on securities: Taxable 4,795,000 4,668,000 Exempt from federal taxes 892,000 1,203,000 Other interest income 31,000 31,000 ----------- ---------- TOTAL INTEREST INCOME 28,533,000 29,016,000 ----------- ---------- INTEREST EXPENSE Interest on deposits 9,432,000 10,544,000 Interest on short-term borrowings 515,000 544,000 Interest on long-term borrowings 437,000 428,000 ----------- ---------- TOTAL INTEREST EXPENSE 10,384,000 11,516,000 ----------- ---------- NET INTEREST INCOME 18,149,000 17,500,000 PROVISION FOR POSSIBLE LOAN LOSSES 450,000 2,120,000 ----------- ---------- NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 17,699,000 15,380,000 ----------- ---------- OTHER INCOME Trust department income 823,000 683,000 Other charges, commissions, and fees 2,074,000 1,901,000 Other income 216,000 256,000 Investment securities gains 107,000 142,000 ----------- ---------- TOTAL OTHER INCOME 3,220,000 2,982,000 ----------- ---------- OTHER EXPENSES Salaries and employee benefits 5,591,000 5,741,000 Net occupancy expense 1,108,000 1,150,000 Other expense 4,968,000 5,808,000 ----------- ---------- TOTAL OTHER EXPENSES 11,667,000 12,699,000 ----------- ---------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 9,252,000 5,663,000 INCOME TAXES 3,158,000 1,765,000 ----------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 6,094,000 3,898,000 CUMULATIVE EFFECT AS OF JANUARY 1, 1993 OF CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES 1,329,000 ----------- ---------- NET INCOME $ 6,094,000 $ 5,227,000 =========== ========== Earnings per common share: Income before cumulative effect of accounting change $0.51 $0.33 Cumulative effect of accounting change $0.11 Net income $0.51 $0.44 Average outstanding shares 11,929,809 11,924,017
See notes to consolidated financial statements. 7 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES
Three Months Ended March 31, 1994 --------------------------------------------------------------------------------------------------- Common Stock Net Unrealized ------------------------ Gain on Total Par Retained Securities Available Treasury Shareholders' Shares Value Surplus Earnings for Sale Stock Equity ---------- ----------- ----------- ------------ -------------------- ---------- ------------ Balance at January 1, 1994 11,954,498 $29,886,000 $32,616,000 $109,020,000 $0 ($550,000) $170,972,000 Change in accounting method for securities 1,284,000 1,284,000 Net income 6,094,000 6,094,000 Cash dividends ($.26 per share) (3,095,000) (3,095,000) Net change in unrealized gain on securities available for sale (859,000) (859,000) Common stock options exercised (77,000) 249,000 172,000 ---------- ----------- ----------- ------------ -------- ---------- ------------ Balance at March 31, 1994 11,954,498 $29,886,000 $32,539,000 $112,019,000 $425,000 ($301,000) $174,568,000 ========== =========== =========== ============ ======== ========= ============
See notes to consolidated financial statements 8 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES
Three Months Ended March 31 -------------------------------- 1994 1993 ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $9,990,000 $ 11,615,000 INVESTING ACTIVITIES Proceeds from sales of securities 238,000 289,000 Proceeds from maturities and calls of securities 40,169,000 60,445,000 Purchase of securities (16,889,000) (82,960,000) Net purchase of bank premises and equipment (1,618,000) (361,000) Changes in: Loans (20,631,000) (7,133,000) ------------- ------------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 1,269,000 (29,720,000) ------------- ------------- FINANCING ACTIVITIES Cash dividends paid (3,095,000) (2,603,000) Repayment of long-term borrowings (68,000) Net issuance (acquisition) of treasury stock 172,000 (169,000) Isuuance of common stock 81,000 Proceeds from long-term borrowings 5,000,000 Changes in: Deposits 4,722,000 (16,423,000) Federal funds purchased and securities sold under agreements to repurchase 35,413,000 24,858,000 ------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 42,212,000 5,676,000 ------------- ------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 53,471,000 (12,429,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 60,850,000 129,473,000 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $114,321,000 $117,044,000 ============= =============
See notes to consolidated financial statements. 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) UNITED BANKSHARES, INC. AND SUBSIDIARIES 1. GENERAL The accompanying unaudited consolidated interim financial statements of United Bankshares, Inc. and Subsidiaries ("United") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial information does not contain all of the information and footnotes required by generally accepted accounting principles. The financial statements presented in this report have not been audited. The accounting and reporting policies followed in the presentation of these financial statements are consistent with those applied in the preparation of the 1993 annual report of United Bankshares, Inc. on Form 10-K. In the opinion of management, adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature. Effective January 1, 1994, United adopted the Financial Accounting Standards Board, ("FASB"), Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities," (SFAS No. 115") which was effective for fiscal years beginning after December 15, 1993. Under the new rules, debt securities that United has both the positive intent and ability to hold to maturity are carried at amortized cost. Debt securities that United does not have the positive intent and ability to hold to maturity and all marketable equity securities are classified as available-for-sale and carried at fair value. Unrealized holding gains and losses on securities classified as available-for-sale are carried as a separate component of shareholders' equity. In accordance with SFAS No. 115, prior period financial statements have not been restated for the change in accounting principle. The cumulative effect of adoption of SFAS No. 115 resulted in an increase of $425,000 to shareholders' equity. The Financial Accounting Standards Board has issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." The requirements of SFAS No. 114 are effective for fiscal years beginning after December 15, 1994. SFAS No. 114 requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or fair value of the collateral if the loan is collateral dependent. United has not yet completed the complex analysis required to estimate the impact of these new rules and does not expect to implement the new rules prior to the first quarter 1995 effective date. 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED UNITED BANKSHARES, INC. AND SUBSIDIARIES 2. BASIS OF PRESENTATION The accompanying consolidated interim financial statements include the accounts of United and its wholly-owned subsidiaries, UBC Holding Company, Inc. and its wholly-owned subsidiary, United National Bank ("UNB"), United National Bank-South ("UNB-S"), UBF Holding Company, Inc. and its wholly-owned subsidiary, Bank First, N.A., and United Venture Fund, Inc. ("UVF"). All significant intercompany accounts and transactions have been eliminated. Certain amounts in the prior year's financial statements have been reclassified to conform with the 1994 presentation. The reclassifications had no effect on net income. 3. SECURITIES The following is a summary of the amortized cost of investment securities held to maturity at March 31, 1994, and all securities at December 31, 1993:
March 31 December 31 1994 1993 -------------- ----------- (in thousands) United States Treasury securities and obligations of other United States Government agencies and corporations $ 71,590 $220,805 Obligations of states and political subdivisions 51,570 55,209 Mortgage-backed securities 111,338 131,322 Marketable equity securities 2,182 Other 10,485 20,909 -------- -------- $244,983 $430,427 ======== ========
The book and market value of securities available for sale at March 31, 1994 are as follows:
Book Market Value Value -------- -------- (in thousands) Under 1 year $ 69,944 $ 70,531 1-5 years 85,727 85,783 6-10 years 1,684 1,729 Over 10 years 4,414 4,435 -------- -------- Total $161,769 $162,478 ======== ========
11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED UNITED BANKSHARES, INC. AND SUBSIDIARIES 3. SECURITIES (continued) The following is a summary of the amortized cost, unrealized gains and losses and market value of securities available for sale at March 31, 1994:
March 31 1994 -------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ------------ ---------- ---------- ------------ U.S. Treasury securities and obligations of U.S. Government corporations and agencies $142,178,000 $ 934,000 $573,000 $142,539,000 State and political subdivisions Mortgage-backed securities 9,409,000 170,000 22,000 9,557,000 Marketable equity securities 2,560,000 334,000 140,000 2,754,000 Other 7,622,000 6,000 7,628,000 ------------ ---------- ---------- ------------ Total $161,769,000 $1,444,000 $735,000 $162,478,000 ============ ========== ========== ============
4. NONPERFORMING LOANS Nonperforming loans were as follows:
March 31 December 31 1994 1993 ------------- ------------ (in thousands) Loans past due 90 days or more and still accruing interest $ 2,627 $ 2,476 Troubled debt restructurings 2,537 2,453 Nonaccrual loans 7,914 8,588 ------------ ---------- $ 13,078 $ 13,517 ============ ==========
For purposes of the above disclosure, the following definition has been established by management: Troubled Debt Restructurings--Loans for which original terms have been modified in response to financial difficulties of the borrower. Each of these loans is contractually current based on the revised terms and management expects each to return to accruing status in 1994. 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED UNITED BANKSHARES, INC. AND SUBSIDIARIES 5. ALLOWANCE FOR POSSIBLE LOAN LOSSES The adequacy of the allowance for possible loan losses is based on management's evaluation of the relative risks inherent in the loan portfolio. A progression of the allowance for possible loan losses for the periods presented is summarized as follows:
Three Months Ended March 31, ----------------- 1994 1993 ------- ------- (in thousands) Balance at beginning of period $19,015 $15,952 Provision charged to expense 450 2,120 ------- ------- 19,465 18,072 Loans charged-off (348) (397) Less recoveries 169 204 ------- ------- Net charge-offs (179) (193) ------- ------- Balance at end of period $19,286 $17,879 ======= =======
6. COMMITMENTS AND CONTINGENT LIABILITIES There are outstanding commitments which include, among other things, commitments to extend credit and letters of credit undertaken in the normal course of business. Outstanding standby letters of credit amounted to approximately $18,893,000 and $21,030,000 at March 31, 1994, and December 31, 1993, respectively. United and its subsidiaries are currently involved, in the normal course of business, in various legal proceedings. Management is vigorously pursuing all of its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved without material effect on financial position or results of operations. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued UNITED BANKSHARES, INC. AND SUBSIDIARIES 7. EARNING ASSETS AND INTEREST-BEARING LIABILITIES The following table shows the daily average balance of major categories of assets and liabilities for each of the three month periods ended March 31, 1994, and March 31, 1993, with the interest rate earned or paid on such amount.
Three Months Ended Three Months Ended March 31 March 31 1994 1993 -------------------------------- -------------------------------- (Dollars in Average Avg. Average Avg. Thousands) Balance Interest Rate Balance Interest Rate ------- -------- ---- ------- -------- ---- ASSETS Earning assets: Federal funds sold and securities purchased under agreements to resell and other short-term investments $ 8,375 $65 3.15% $41,118 $330 3.25% Investment Securities: Taxable 353,498 4,795 5.43% 325,364 4,704 5.78% Tax-exempt (1) 52,765 1,372 10.40% 66,358 1,796 10.83% ---------- ------- ------ ---------- ------- ------ Total Securities 406,263 6,167 6.07% 391,722 6,500 6.64% Loans, net of unearned income (1) (2) 1,192,447 23,053 7.84% 1,127,387 23,146 8.33% Allowance for possible loan losses (19,169) (16,395) ---------- ---------- Net loans 1,173,278 7.97% 1,110,992 8.45% ---------- ------- ------ ---------- ------- ------ Total earning assets 1,587,916 $29,285 7.46% 1,543,832 $29,976 7.85% ------- ------ ------- ------ Other assets 134,265 124,223 ---------- ---------- TOTAL ASSETS $1,722,181 $1,668,055 ========== ========== LIABILITIES Interest-Bearing Funds: Interest-bearing deposits $1,200,662 $9,438 3.19% $1,179,661 $10,544 3.62% Federal funds purchased, repurchase agreements and other short-term borrowings 71,156 516 2.94% 75,209 569 3.07% FHLB advances 36,257 430 4.81% 28,067 403 5.82% ---------- ------- ------ ---------- ------- ------ Total Interest-Bearing Funds 1,308,075 10,384 3.22% 1,282,937 11,516 3.64% ------- ------- Demand deposits 224,270 206,453 Accrued expenses and other liabilities 15,300 16,219 ---------- ---------- TOTAL LIABILITIES 1,547,645 1,505,609 Shareholders' Equity 174,536 162,446 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,722,181 $1,668,055 ========== ========== NET INTEREST INCOME $18,901 $18,460 ======= ======= INTEREST SPREAD 4.24% 4.21% NET INTEREST MARGIN 4.81% 4.83%
(1) The interest income and the yields on nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 35%. (2) Nonaccruing loans are included in the daily average loan amounts outstanding. 14 UNITED BANKSHARES, INC. AND SUBSIDIARIES Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS United Bankshares, Inc. ("United") is a multi-bank holding company. United's wholly-owned banking subsidiaries include UBC Holding Company, Inc. and its wholly-owned subsidiary, United National Bank ("UNB"), United National Bank-South ("UNB-S") and UBF Holding Company, Inc. with its wholly-owned banking subsidiary, Bank First, N.A.("Bank First"). United also owns all of the stock of United Venture Fund, Inc. ("UVF"). UVF is a West Virginia Capital Company formed to make loans and equity investments in qualified companies under the West Virginia Capital Company Act and to promote economic welfare and development in the State of West Virginia. United is a registered bank holding company subject to the supervision of and examination by the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. Its present business is the operation of its wholly-owned subsidiaries. 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 analysis should be read in conjunction with the unaudited financial statements and accompanying notes thereto which are included elsewhere in this document. All references to United in this discussion and analysis are considered to refer to United and its wholly-owned subsidiaries, unless otherwise indicated. EARNINGS SUMMARY Net income for the first quarter of 1994 was a record $6.09 million or $.51 per share compared to $5.23 million or $.44 per share for the first quarter of 1993. This represents a 16.59% increase in net income and a 16.53% increase in earnings per share. United's annualized return on average assets of 1.41% and return on average shareholders' equity of 14.03% both compare very favorably with regional and national peer groups. Earnings for the first quarter of 1993 included certain nonrecurring income and nonrecurring expense items which are not reported in the first quarter of 1994. The nonrecurring income item, which is reported as a cumulative effect of change in accounting of $1,329,000, is the result of United's adoption of SFAS No. 109, "Accounting for Income Taxes," during the first quarter of 1993. The first quarter 1993 nonrecurring expense items were primarily the result of management's conservative review of certain credits which resulted in increases to the other real estate owned reserve and the allowance for loan losses. Additional other nonrecurring expenses were from mergers completed by United during 1993. 15 United has strong core earnings with a net interest margin of 4.81% for the first three months of 1994. Net interest income remained strong for the first quarter of 1994 as compared to the same period for 1993. The provision for possible loan losses decreased in the first quarter of 1994 when compared to the first quarter of 1993, but was comparable to the provision made for the fourth quarter of 1993. Noninterest income increased 7.98% compared to the first quarter of 1993 with a 20.50% increase in trust department income. United's emphasis on improving noninterest income is continuing to show positive results. Noninterest expenses decreased 8.13% for the first quarter of 1994 as compared to the same period for 1993 as the result of nonrecurring expenses included in the first quarter of 1993, but not in the first quarter of 1994. Additionally, management's cost containment efforts have been successful in controlling noninterest expenses. Income taxes were higher for the first quarter of 1994 than for the same period of 1993 with an affective tax rate of 34.1% for 1994 and 31.2% for 1993. The following discussion explains in more detail the results of operations and changes in financial condition by major category. NET INTEREST INCOME Net interest income remained strong in the first three months of 1994, when compared to the same period of 1993. Net interest income before the provision for possible loan losses increased $649,000 or 3.71% for the first quarter of 1994 as compared to the first quarter of 1993. The increase is largely due to the strong loan growth lead by mortgage loans and the decline in the cost of funds. United's tax-equivalent net interest margin dropped from 4.83% in the first three months of 1993 to 4.81% in the first quarter of 1994. However, the tax-equivalent net interest margin showed an improvement over that achieved for the year ended December 31, 1993 of 4.75%. The combination of an improved net interest spread with increased loan volumes and smaller increases in interest- bearing deposits as compared to the year ended December 31, 1993, and the first quarter of 1993, have helped United maintain a strong interest margin. PROVISION FOR POSSIBLE LOAN LOSSES In order to maintain a balance in the allowance for possible loan losses which is sufficient to absorb potential loan losses, a charge to expense is made. This charge is known as the provision for possible loan losses. For the quarters ended March 31, 1994 and 1993, the provision for possible loan losses was $450,000 and $2,120,000, respectively. The allowance for possible loan losses as a percentage of loans, net of unearned income, remained constant at 1.61%, as compared to December 31, 1993, and increased over the 1.60% at March 31, 1993. In addition, the "coverage ratio" of both nonperforming loans and nonperforming assets improved. (See the discussion below.) 16 United's continued improvement in credit quality is evidenced by the low level of charge-offs in the first quarter of 1994. Net charge-offs during the first three months of 1994 and 1993 were $179,000 and $193,000, respectively. Note 5 to the accompanying unaudited consolidated financial statements provides a progression of the allowance for possible loan losses. Loans, net of unearned income, increased $20,452,000 during the first quarter of 1994 from year end 1993. Even with strong loan growth in the first quarter of 1994, management only slightly increased the allowance for loan losses in response to: (i) the continued improvement of credit quality; (ii) the increased coverage ratio of both nonperforming loans and nonperforming assets; and (iii) the building of the allowance as a percentage of loans closer to national peer group levels. Nonperforming loans and troubled debt restructurings were $13,078,000 at March 31, 1994 and $13,517,000 at year-end 1993. Nonperforming loans and troubled debt restructurings declined from 1.14% to 1.09% as a percentage of loans, net of unearned income, when comparing these two respective periods. The components of nonperforming loans include nonaccrual loans and loans which are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis. Loans past due 90 days or more increased $151,000 or 6.10% during the first three months of 1994 while troubled debt restructurings increased $84,000 or 3.42% since year-end 1993. Offsetting these increases were a decrease in nonaccrual loans of $674,000 or 7.85% and a decrease in other real estate owned of almost $350,000, which resulted in an overall decrease in nonperforming assets. As of March 31, 1994, the ratio of the allowance for loan losses to nonperforming loans was 147.5% as compared to 140.7% as of December 31, 1993. Accordingly, management believes that the allowance for loan losses of $19,286,000 as of March 31, 1994, is adequate to provide for potential losses on existing loans based on information currently available. United evaluates the adequacy of the allowance for possible loan losses on a quarterly basis. The provision for loan losses charged to operations is based on management's evaluation of individual credits, the past loan loss experience, and other factors which, in management's judgment, deserve recognition in estimating possible loan losses. Such other factors considered by management, among other things, include growth and composition of the loan portfolio, known deterioration in certain classes of loans or collateral, trends in delinquencies, and current economic conditions. United's loan administration policies are focused upon the risk characteristics of the loan portfolio, both in terms of loan approval and credit quality. 17 OTHER INCOME Other income consists of all revenues which are not included in interest and fee income related to earning assets. Total other income, including gains on securities transactions, was $3,220,000 in the first quarter of 1994 or a 8.0% increase as compared to $2,982,000 in the first quarter of 1993. This overall increase in noninterest income is primarily attributed to an increase of $140,000 or 20.5% in trust department income and an increase of $173,000 or 9.1% in fee income from increased activity in customer accounts for which a fee is charged. Management's emphasis on improving noninterest income is showing positive results. As evidenced by the Unaudited Condensed Consolidated Statement of Cash Flows included elsewhere herein, the volume of securities sold was insignificant in both periods. The $107,000 of gains on sales reported in the period ended March 31, 1994 relate entirely to marketable equity securities which were reclassified to available for sale at January 1, 1994. OTHER EXPENSES Other expenses include all items of expense other than interest expense, the provision for possible loan losses, and income taxes. Other expenses decreased $1,032,000 or 8.13% to $11,667,000 for the first quarter of 1994 as compared to $12,699,000 for the first quarter of 1993. This decrease is a result of certain nonrecurring expenses being incurred in the first quarter of 1993, but not in the first quarter of 1994. Total salaries and benefits decreased $150,000 or 2.6% for the first three months of 1994 while net occupancy expense decreased $42,000 or 3.7% when compared to the first quarter of 1993. Other expenses decreased $840,000 or 14.5% for the quarter as compared to the same period of 1993. The decrease in other expenses relates primarily to nonrecurring expenses which included certain merger expenses for the two acquisitions consummated by United during 1993 and provisions to the other real estate owned reserve. Various bank affiliates provide certain health care and life insurance benefits for retired employees. The cost of retiree health care and life insurance benefits is recognized as expense when paid. The Company does not anticipate providing post-retirement benefits to its currently active employees after retirement except on a fully contributory basis. Accordingly, postretirement benefits are immaterial with annual costs which approximate $50,000. The Financial Accounting Standards Board has issued Statement No. 112, (SFAS No. 112), "Employers' Accounting for Postemployment Benefits," which is effective for fiscal years beginning after December 15, 1993. The provisions of SFAS No. 112 require 18 employers to recognize the obligation to provide postemployment benefits to former employees if the obligation is attributable to the employees' services previously rendered, the employees' rights to those benefits vest or accumulate, the payment of the benefit is probable, and the amount can be reasonably estimated. United recognizes the cost of postemployment benefits as expense when paid. United's analysis indicates that accounting for such costs when paid does not produce results materially different from the method of recognizing such costs as prescribed by SFAS No. 112. INCOME TAXES Income tax expense for the three months ended March 31, 1994 and 1993 was $3,158,000 and $1,765,000, respectively. This increase of 78.9% for the quarter is the result of increased pre-tax income, decreased tax-exempt income and increased statutory federal tax rates. United's effective tax rate was significantly higher at 34.1% for the first quarter of 1994 when compared to 31.2% for the first quarter of 1993. INTEREST RATE SENSITIVITY Interest sensitive assets and liabilities are defined as those assets or liabilities that mature or are repriced within a designated timeframe. The principal function of asset and liability management is to maintain an appropriate relationship between those assets and liabilities that are sensitive to changing market interest rates. This relationship has become very important, given the volatility in interest rates over the last several years, due to the potential impact on earnings. United closely monitors the sensitivity of its assets and liabilities on an on-going basis and projects the effect of various interest rate changes on its net interest margin. The difference between rate sensitive assets and rate sensitive liabilities for specified periods of time is known as the "gap". A primary objective of Asset/Liability Management is controlling interest rate risk. At United, interest rate risk is managed to minimize the impact of fluctuating interest rates on earnings. As shown in the interest rate sensitivity gap table on pages 20 and 21 of this report, United was liability sensitive (excess of liabilities over assets) in the one year horizon. United, however, has not experienced the kind of earnings volatility indicated from the cumulative gap. This is because a significant portion of United's retail deposit base does not reprice on a contractual basis. Management has estimated, based upon historical analyses, that savings deposits are less sensitive to interest rate changes than are other forms of deposits. The GAP table presented herein has been adapted to show the estimated differences in interest rate sensitivity which result when the retail deposit base is assumed to 19 UNITED BANKSHARES, INC. AND SUBSIDIARIES Interest Rate Sensitivity Gap (In Thousands)
March 31, 1994 ----------------------------------------------------------------------------- ASSETS Days ------------------------------- Total 1-5 Over 5 0-90 91-180 181-365 One Year Years Years Total -------- -------- -------- ---------- -------- -------- ---------- Interest-Earning Assets - - ----------------------- Federal funds sold and securities purchased under agreements to resell and other short-term investments $44,500 $ 100 $ 44,600 $ 44,600 Investment and marketable equity securities: Taxable 49,158 $ 11,688 $51,615 112,461 $164,944 $ 78,485 355,890 Tax-exempt 2,070 2,643 3,341 8,054 26,692 16,824 51,570 Loans, net of unearned income 520,499 82,895 156,828 760,222 337,666 103,351 1,201,239 -------- -------- -------- ---------- -------- -------- ---------- Total Interest-Earning Assets $616,227 $ 97,226 $211,884 $ 925,337 $529,302 $198,660 $1,653,299 ======== ======== ======== ========== ======== ======== ========== LIABILITIES Interest-Bearing Funds - - ---------------------- Savings and NOW accounts $675,864 $ 675,864 $ 675,864 Time deposits of S100,000 & over 24,945 $ 15,681 $ 11,788 52,414 $ 17,075 69,489 Other time deposits 153,316 121,915 80,385 355,616 103,569 $ 235 459,420 Federal funds purchased repurchase agreements and other short-term borrowings 107,993 107,993 107,993 FHLB advances 21,980 80 5,143 27,203 10,000 37,203 -------- -------- -------- ---------- -------- -------- ---------- Total Interest-Bearing Funds $984,098 $137,676 $ 97,316 $1,219,090 $130,644 $ 235 $1,349,969 ======== ======== ======== ========== ======== ======== ========== Interest Sensitivity Gap ($367,871) ($40,450) $114,568 ($ 293,753) $398,658 $198,425 $ 303,330 ======== ======== ======== ========== ======== ======== ========== Cumulative Gap ($367,871) ($408,321) ($293,753) ($ 293,753) $104,905 $303,330 $ 303,330 ======== ======== ======== ========== ======== ======== ========== Cumulative Gap as a Percentage of Total Earning Assets -22.25% -24.70% -17.77% -17.77% 6.35% 18.35% 18.35% Management Adjustments 639,300 (42,620) (85,240) 511,440 (511,440) 0 Off-Balance Sheet Activities (50,000) (50,000) (50,000) Cumulative Management Adjusted Gap and Off-Balance Sheet Activities $221,429 $138,359 $167,687 $167,687 $54,905 $253,330 $ 253,330 ======== ======== ======== ========== ======== ======== ========== Cumulative Management Adjusted Gap and Off-Balance Sheet Activities as a Percentage of Earning Assets 13.39% 8.37% 10.14% 10.14% 3.32% 15.32% 15.32%
20 UNITED BANKSHARES, INC. AND SUBSIDIARIES Interest Rate Sensitivity Gap (In Thousands)
December 31, 1993 ----------------------------------------------------------------------------- ASSETS Days ----------------------------- Total 1-5 Over 5 0-90 91-180 181-365 One Year Years Years Total -------- -------- -------- ---------- -------- -------- ---------- Interest-Earning Assets: - - ------------------------ Federal funds sold and securities purchased under agreements to resell and other short-term Investments $ 100 $ 100 $ 100 Investment and Marketable equity securities: Taxable 64,573 $ 30,302 $ 51,343 146,218 $190,354 $ 38,548 375,120 Tax-exempt 3,514 2,083 4,469 10,066 27,987 17,155 55,208 Loans, net of unearned income 493,448 82,423 132,494 708,365 362,188 101,680 1,172,233 -------- -------- -------- ---------- -------- -------- ---------- Total Interest-Earning Assets $561,635 $114,808 $188,306 $ 864,749 $580,529 $157,383 $1,602,661 ======== ======== ======== ========== ======== ======== ========== LIABILITES Interest-Bearing Funds: - - ----------------------- Savings and NOW accounts $670,000 $ 670,000 $ 670,000 Time deposits of $100,000 & over 31,493 $ 19,795 $ 17,062 68,350 $ 4,610 72,960 Other time deposits 142,942 112,131 95,957 351,030 106,805 $ 603 458,438 Federal funds purchased, repurchase agreements and other short-term borrowings 72,610 72,610 72,610 FHLB advances 11,900 80 5,152 17,132 15,071 32,203 -------- -------- -------- ---------- -------- -------- ---------- Total Interest-Bearing Funds $928,945 $132,006 $118,171 $1,179,122 $126,486 $ 603 $1,306,211 ======== ======== ======== ========== ======== ======== ========== Interest Sensitivity Gap ($367,310) ($ 17,198) $ 70,135 ($ 314,373) $454,043 $156,780 $ 296,450 ======== ======== ======== ========== ======== ======== ========== Cumulative Gap ($367,310) ($384,508) ($314,373) ($ 314,373) ($139,670) $296,450 $ 296,450 ======== ======== ======== ========== ======== ======== ========== Cumulative Gap as a Percentage of Total Earning Assets -22.92% -23.99% -19.62% -19.62% 8.71% 18.50% 18.50% Management Adjustments 616,828 (41,121) (82,244) 493,463 (493,463) 0 Off-Balance Sheet Activities Cumulative Management Adjusted Gap and Off-Balance Sheet Activities $249,518 $191,199 $179,090 $179,090 $139,670 $296,450 $ 296,450 ======== ======== ======== ========== ======== ======== ========== Cumulative Management Adjusted Gap and Off-Balance Sheet Activities as a Percentage of Earning Assets 15.57% 11.93% 11.17% 11.17% 8.71% 18.50% 18.50%
21 reprice in a manner consistent with historical trends. (See Management Adjustments in the GAP table.) Using these estimates, United was asset sensitive in the one year horizon in the amount of $167,687,000 or a 10.14% ratio of the cumulative gap to related earning assets. The primary method of measuring the sensitivity of earnings to changing market interest rates is to simulate expected cash flows using varying assumed interest rates while also adjusting the timing and magnitude of non-contractual deposit repricing to more accurately reflect anticipated pricing behavior. These simulations include adjustments for the lag in prime loan repricing and the spread and volume elasticity of interest-bearing deposit accounts, regular savings and money market deposit accounts. To aid in interest rate management, United's lead bank, UNB, is a member of the Federal Home Loan Bank of Pittsburgh (FHLB). The use of FHLB advances provides United with a low cost means to match maturities of earning assets and interest-bearing funds to achieve a desired interest rate spread over the life of the earning assets. Additionally, United has begun using certain off-balance-sheet instruments known as interest rate swaps, to further aid in interest rate risk management. The use of interest rate swaps is a cost effective means of synthetically altering the repricing structure of balance sheet items. At March 31, 1994, the total notional amount of interest rate swaps in effect was $50 million. The current average maturity of the swap portfolio is two years and ten months. During the first quarter of 1994, interest rate swaps contributed $101,000 to net interest income. United did not have interest rate swaps during 1993. LIQUIDITY AND CAPITAL RESOURCES United maintains, in the opinion of management, liquidity which is sufficient to satisfy its depositors' requirements and the credit needs of its customers. Like all banks, United depends upon its ability to renew maturing deposits and other liabilities on a daily basis and to acquire new funds in a variety of markets. A significant source of funds available to United are "core deposits." Core deposits include certain demand deposits, statement and special savings and NOW accounts. These deposits are relatively stable and they are the lowest cost source of funds available to United. Short-term borrowings have also been a significant source of funds. These include federal funds purchased and securities sold under agreements to repurchase. Repurchase agreements represent funds which are obtained as the result of a competitive bidding process. 22 Liquid assets are cash and those items readily convertible to cash. All banks must maintain sufficient balances of cash and near-cash items to meet the day-to-day demands of customers. Other than cash and due from banks, the available-for-sale securities portfolio and maturing loans and investments are the primary sources of liquidity. The goal of liquidity management is to ensure the ability to access funding which enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United's cash needs. Liquidity is managed by monitoring funds availability from a number of primary sources. Substantial funding is available from cash and cash equivalents, unused short-term borrowings and a geographically dispersed network of subsidiary banks providing access to a diversified and substantial retail deposit market. Short-term needs can be met through a wide array of sources such as correspondent and downstream correspondent federal funds and utilization of Federal Home Loan Bank advances. Other sources of liquidity available to United to provide long-term as well as short-term funding alternatives, in addition to FHLB advances, are long-term certificates of deposit, lines of credit, and borrowings secured by bank premises or stock of United's subsidiaries. United has no intention at this time to utilize any long-term funding sources other than FHLB advances and long-term certificate of deposits. For the three months ended March 31, 1994, United generated $9,990,000 of cash from operations, which is indicative of solid earnings performance. During the same period, net cash of $1,269,000 was provided by investing activities such as maturities and calls of securities and other short-term investments in order to fund purchases of securities of $16,782,000 and net loan originations of $20,631,000. Additional sources of cash and cash equivalents during the first quarter were provided by financing activities totaling $42,212,000, which were largely comprised of the increase in federal funds purchased from downstream correspondents and securities sold under agreements to repurchase. The net effect of this activity is an increase in cash and cash equivalents of $53,471,000 for the first quarter of 1994. United anticipates no difficulty in meeting its obligations over the next 12 months and has no material commitments for capital expenditures. There are no known trends, demands, commitments, or events that will result in or that are reasonably likely to result in United's liquidity increasing or decreasing in any material way. United also has significant lines of credit available to it. 23 The asset and liability committee monitors liquidity to ascertain that a strong liquidity position is maintained. In addition, variable rate loans are a priority. These policies should help to protect net interest income against fluctuations in interest rates. No changes are anticipated in the policies of United's asset and liability committee. Total shareholders' equity increased to $174,568,000 which is an increase of 2.1% from December 31, 1993. United's equity to assets ratio was approximately 9.9% at both March 31, 1994 and December 31, 1993. Capital and reserves to total assets equaled approximately 11% at March 31, 1994 and December 31, 1993. The first quarter dividend of $.26 per common share represents an increase of 13.04% over the first quarter of 1993. Total cash dividends paid were $3,095,000 for the first quarter of 1994, an increase of 27.5% over the comparable period in 1993. United's risk-based capital ratio of 15.24% at March 31, 1994, and 15.28% at December 31, 1993, are both considerably in excess of the current requirement of 8.00%. Total risk-based capital at March 31, 1994 and December 31, 1993 of $177,595,000 and $172,648,000, respectively, exceeded the regulatory minimum requirement by $84,368,000 and $82,240,000, respectively. United's Tier I capital ratios are comparable to its total risk-based capital ratios and are well above regulatory minimum requirements. As a bank holding company, United is permitted by Regulation Y of the Federal Reserve Board, under certain circumstances, to purchase up to 10% of its common stock as treasury stock without obtaining prior approval of the Federal Reserve Board. Total treasury shares as of March 31, 1994, amount to 15,170 shares at a cost of $301,000. It is management's intention to purchase treasury stock whenever it is beneficial to United based on such factors as cash dividends, timing and stock availability. In March 1994, United approved a plan to repurchase up to $10 million of its common stock on the open market. The timing, price, and quantity of any such purchases may be made at the discretion of United and the program may be discontinued or suspended at any time. 24 EX-11 2 COMPUTATION OF EARNINGS Exhibit 11 Statement Re: Computation of Earnings Per Share UNITED BANKSHARES, INC. AND SUBSIDIARIES
For the Quarter Ended March 31 ---------------------------------- 1994 1993 ----------- ----------- PRIMARY: - - -------- Average Number of Common Shares 11,929,809 11,894,017 Average Number of Common Share Equivalents 93,454 67,769 ----------- ----------- Average Shares and Share Equivalents Outstanding 12,023,263 11,961,786 =========== =========== Income Before Cumulative Effect of Accounting Change $ 6,094,000 $ 3,898,000 Cumulative Effect of Accounting Change 1,329,000 ----------- ----------- Net Income 6,094,000 5,227,000 Preferred Dividends ----------- ----------- Available to Common Shares $ 6,094,000 $ 5,227,000 =========== =========== Earnings Per Common Share: Income Before Cumulative Effect of Accounting Change $ 0.51 $ 0.33 Cumulative Effect of Accounting Change 0.11 ----------- ----------- Net Income $ 0.51 $ 0.44 =========== =========== FULLY DILUTED: - - -------------- Average Number of Common Shares 11,929,809 11,894,017 Average Number of Common Share Equivalents 94,487 78,088 ----------- ----------- Average Shares and Share Equivalents Outstanding 12,024,296 11,972,105 =========== =========== Income Before Cumulative Effect of $ 6,094,000 $ 3,898,000 Accounting Change Cumulative Effect of Accounting Change 1,329,000 ----------- ----------- Net Income $ 6,094,000 $ 5,227,000 Preferred Dividends ----------- ----------- Available to Common Shares $ 6,094,000 $ 5,227,000 =========== =========== Earnings Per Common Share: Income Before Cumulative Effect of Accounting Change $ 0.51 $ 0.33 Cumulative Effect of Accounting Change 0.11 ----------- ----------- Net Income $ 0.51 $ 0.44 =========== ===========
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