Item 2. PROPERTIES
The following discussion satisfies the reporting requirements of Items 1 and 2.
DESCRIPTION OF UNITED BANKSHARES, INC.
Organizational History and Subsidiaries - - ---------------------------------------
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 and organized on September 9, 1982. United began conducting business on May 1, 1984 with the acquisition of three wholly-owned subsidiaries. On October 1, 1985, these three subsidiaries were merged and on November 1, 1985, were renamed United National Bank ("UNB").
Since that time UNB has acquired through merger or consolidation the following banks: Heritage Bancorp, Inc. (a holding company); First National Bank of Ripley; Kanawha Banking and Trust Company; Ohio Valley National Bank; Elk National Bank; Montgomery National Bank, the sole subsidiary of Liberty Bancshares Inc., a bank holding company; First Bank of Ceredo, the bank subsidiary of Financial Future Corporation, a bank holding company; CB&T Westover Bank; and the Star City Branch of Community Bank & Trust, N. A.
On September 1, 1993, UBC Holding Company, ("UBC"), a United subsidiary, was formed to effect the Financial Future Corporation transaction. UBC is a second tier holding company with UNB currently being its only subsidiary.
On August 9, 1990, United acquired BankFirst Corporation ("BankFirst"), a one bank holding company based in McLean, Virginia. BankFirst was merged with UBF Holding Company, Inc. ("UBF"), a United subsidiary formed to effect this acquisition. UBF acquired Bank First, N.A. ("Bank First"), the subsidiary of BankFirst.
On October 11, 1995, United formed Commercial Interim Bank, Inc. ("Interim Bank"), a state member bank located in Arlington, Virginia, to facilitate the acquisition of First Commercial Bank of Arlington, Virginia ("FCB"). United then merged Bank First into Interim Bank from its wholly owned subsidiary, UBF. Concurrent with the merger of Bank First into Interim Bank, UBF was merged into United. United acquired FCB on October 31, 1995 and merged it into Interim Bank. United then effected a name change of Interim Bank to First Commercial Bank. On March 18, 1996 First Commercial Bank's name was changed to United Bank.
United National Bank-South ("UNB-S"), was formed on November 1, 1992, as a part of United's acquisition of Summit Holding Corporation and their lead bank, Raleigh County National Bank.
On January 27, 1996, UNB-S was merged into and became a part of UNB. Offices of UNB-S became branch offices of UNB.
In late 1988, United chartered and capitalized United Venture Fund, Inc., a West Virginia corporation which has qualified as a Capital Company under the West Virginia Capital Company Act. This subsidiary makes loans and limited equity investments, consistent with the Bank Holding Company Act, that will result in or contribute to new jobs and/or industry in West Virginia.
Offices - - -------
The headquarters of United are located in United Center at 500 Virginia Street, East, Charleston, West Virginia.
The main office of UNB is located at 514 Market Street, Parkersburg, West Virginia. United's corporate offices and UNB's executive offices are also located in Parkersburg at Fifth and Avery Streets. Currently, all of UNB's offices are located in West Virginia. UNB operates three branches in the Parkersburg area, seven branches in the Charleston area, three branches in the Morgantown area, two branches in Vienna, three branches in the Montgomery area, two branches in Ripley, four branches in the Huntington, area and four branches in the Beckley, area. UNB owns all of these facilities except for two in the Parkersburg area, two in the Charleston area and one in the Beckley area, which are leased under operating leases. UNB also owns and operates six branches throughout West Virginia's northern panhandle. The main facility of UNB's Wheeling office is leased from Ogden Newspapers, Inc. See Part III - ------------ Transactions with Management and Others. UNB also operates five branch facilities in central West Virginia. UNB owns all five of these offices.
United Bank conducts business from an office located at 3801 Wilson Boulevard, Arlington, Virginia with a branch office at 1301 Beverly Road, McLean, Virginia under a lease agreement.
Employees - - ---------
As of December 31, 1995 United and its subsidiaries had approximately 819 full-time equivalent employees and officers. None of these employees is represented by a collective bargaining unit, and management considers employee relations to be excellent.
Business of United - - ------------------
As a bank holding company registered under the Bank Holding Company Act of 1956, as amended, United's present business is the operation of its bank subsidiaries. As of December 31, 1995, United's consolidated assets approximated $1,815,443,000 and total shareholders' equity approximated $201,222,000.
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. With regard to pending acquisitions, United has executed a definitive merger agreement with Eagle Bancorp, Charleston, West Virginia, dated as of August 18,
1995. For further discussion, see Note Q, Notes to Consolidated Financial Statements.
Business of Subsidiary Banks - - ----------------------------
All of United's subsidiary banks are full-service commercial banks and, as such, engage in 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, UNB and United Bank offer credit card services including accounts issued under the name of certain correspondent banks.
UNB also maintain trust departments which act as trustees under wills, trust and pension and profit sharing plans, as executors and administrators of estates, and as guardians for estates of minors and incompetents, and in addition perform a variety of investment and security services. UNB trust services are available to customers of affiliate banks. UNB provides services to its correspondent banks such as check clearing, safekeeping and the buying and selling of federal funds.
UNB is members of a regional network of automated teller machines known as the MAC ATM network while United Bank participates in the MOST network. Through MAC and MOST, all of United's subsidiary banks are participants in a network known as Cirrus which provides banking on a nationwide basis.
Lending Activities - - ------------------
The total loan portfolio of United increased $76,928,000, or 5.93%, to $1,374,005,000, in 1995 and is comprised of commercial, real estate and consumer loans including credit card and home equity loans. Commercial and real estate loans increased $10,309,000 or 4.94% and $74,411,000 or 8.66%, respectively, while consumer loans, net of unearned income, decreased $7,792,000 or 3.40%.
Commercial Loans - - ----------------
The commercial loan portfolio consists of loans to corporate borrowers in the small to mid-size industrial and commercial companies, as well as automobile dealers, service, retail and wholesale merchants. Coal mining companies make up an insignificant portion of loans in the portfolio. 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 review and independent evaluation of virtually all larger balance commercial loans by the loan committee prior to approval with ongoing updates of the loan portfolio.
Real Estate Loans - - -----------------
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 contain normal risk.
Consumer Loans - - --------------
Consumer loans are secured by automobiles, boats, recreational vehicles, and other personal property. Personal loans, home equity, 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. Historically, losses on these types of loans have been minimal.
Underwriting Standards - - ----------------------
United's loan underwriting guidelines and standards are updated periodically and are presented for approval by each of the respective Boards of Directors 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, verifying the source of repayment and the ability of the applicant to repay, collateralizing those loans in which collateral is deemed to be required, exercising care in the documentation of the application, review, approval, and origination process, and administering a comprehensive loan collection program. The above guidelines are adhered to and subject to the experience, background and personal judgement of the loan officer assigned to the loan application. A loan officer may grant and justify
a loan with slight variances from the underwriting guidelines and standards. However, the loan officer may not exceed their 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.
Loan Origination and Processing - - -------------------------------
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 is centralized in the Charleston, West Virginia office. United also has a limited number of loans that are processed for other institutions for which United receives a processing fee. As of December 31, 1995, the balance of mortgage loans being processed by United for other institutions was $30,000.
Secondary Markets - - -----------------
Historically, United has not been in the business of selling or purchasing loans and has not originated loans with the intent to sell them in the secondary market. During 1995, United did not purchase or sell any loans in the secondary market.
Investment Activities - - ---------------------
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 and securities sold under agreements to repurchase. Repurchase agreements represent funds which are generally obtained as the result of a competitive bidding process.
United's investment portfolio remains comprised largely 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.
During 1994, United realized net losses from sales in the securities available for sale portfolio. The sales of these securities occurred as United, in response to the substantial rise in interest
rates during 1994, readjusted the securities available for sale portfolio in order to increase interest income without extending the duration of the portfolio. The proceeds from these sales were reinvested in similar securities yielding a higher rate of return. The net losses from the sales of the securities were fully recovered within the first eight months of 1995 through the repurchase of higher yielding securities. There were no securities sales in 1995.
Additionally, United has used an off-balance-sheet instrument known as an interest rate swap, to further aid in interest rate risk management. The use of the interest rate swap is a cost effective means of synthetically altering the repricing structure of certain balance sheet items. The interest rate swap transaction involves the exchange of a floating interest rate payment based on the one month London inter-bank offered rate (LIBOR) for a fixed rate receipt based on the U. S. three year Treasury note. The net pay and receive amount is calculated on an underlying notional amount without the exchange of the underlying principal amount. The interest rate swap subjects United to market risk associated with changes in interest rates, as well as the risk that the counterparty will fail to perform. Performance risk is considered nominal by virtue of the caliber of the parties involved. Only the interest payments are exchanged, and therefor, cash requirements and exposure to credit risk are significantly less than the notional amount.
The interest rate swap was entered into early in 1994 in response to tactical asset/liability management considerations; specifically, in response to declining market interest rates during 1993 and United's net interest margin being compressed due to the asset sensitivity position of the balance sheet. The interest rate swap was to adjust the asset sensitivity to within United's policy of +10% or -10% of earning assets. The interest rate swap was entered into specifically to hedge prime rate indexed loans and swap a variable rate for a fixed rate.
At December 31, 1995, the total notional amount of the interest rate swap in effect was only $50 million. The current maturity of the swap portfolio is one year and one month. During 1995, the interest rate swap reduced net interest income by $787,000. This impact was offset by higher net interest revenue generated by the on-balance sheet instruments hedged by the interest rate swap and produced a higher rate of return and net interest margin. At December 31, 1995, the estimated unrealized loss on the swap, which may reduce interest income in future periods, approximated $738,000. A key assumption utilized in computing the unrealized loss is that interest rates will remain at the December 31, 1995 level throughout the term of the agreement. United did not have interest rate swaps prior to 1994. For further details, see Interest Rate Sensitivity and the related Interest Rate Sensitivity Gap in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note L to the Consolidated Financial Statements.
Operating Subsidiaries - - ----------------------
UNB is currently in the process of forming two operating subsidiaries, United Brokerage Services, Inc. and United Mortgage Company, Inc. United anticipates that both of these operating subsidiaries of UNB will be chartered and will have obtained all necessary regulatory approvals for operations to begin during the second quarter of 1996.
United Brokerage Services, Inc. will be a fully-disclosed broker/dealer and a registered Investment Advisor registered with the National Association of Securities Dealers, Inc. and the Securities and Exchange Commission and a member of the Securities Investor Protection Corporation. United Brokerage Services, Inc. will offer a wide range of investment products as well as comprehensive financial planning and asset management services to the general public.
United Mortgage Company, Inc. is being formed in connection with the pending merger of Eagle Bancorp, Inc. ("Eagle") with and into United and the related merger of First Empire Federal Savings and Loan Association ("First Empire") with and into UNB. In accordance with the merger agreement, UNB will request regulatory approval to form and operate United Mortgage Company, Inc. The business of United Mortgage Company, Inc. will be the origination and acquisition of residential real estate loans for resale, the conducting of mortgage loan servicing activities for certain loans, and generally the activities commonly conducted by a mortgage banking company.
Competition - - -----------
United faces a high degree of competition in nearly all of the markets it serves. These markets may generally be defined as Wood, Kanawha, Putnam, Monongalia, Jackson, Cabell, Wayne, Hancock, Brooke, Ohio, Marshall, Gilmer, Braxton, Lewis, Webster, Fayette and Raleigh Counties in West Virginia; Lawrence, Belmont, Jefferson and Washington Counties in Ohio; and Arlington and Fairfax Counties in Virginia, located adjacent to the Washington D.C. area, which is in close proximity to 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 markets are the Parkersburg Metropolitan Statistical Area (MSA), the Charleston MSA, the Huntington MSA, the Wheeling MSA and the Weirton MSA. These represent the five largest West Virginia MSA's. United considers the above counties and MSA's to be the primary market area for the business of its banking subsidiaries.
West Virginia banks are permitted unlimited branch banking throughout the state. In addition, interstate acquisitions of and by West Virginia banks and bank holding companies are permissible on a reciprocal basis. West Virginia also allows reciprocal interstate acquisitions by thrift institutions. These conditions serve to intensify competition within United's market.
As of December 31, 1995, there were 14 multi-bank holding companies and 33 one-bank holding companies in the State of West Virginia registered with the Federal Reserve System. United presently ranks fourth among these bank holding companies and second among holding companies headquartered in West Virginia based on both asset and deposit size. These holding companies are headquartered in various West Virginia cities and control banks throughout the state, including banks which compete for business as well as for the acquisition of additional banks.
Economic Characteristics of Primary Market Area - - -----------------------------------------------
Although the market area of the banking subsidiaries encompass a portion of the coal fields located in southern West Virginia, an area of the state which has been economically depressed, the coal related loans in the loan portfolio of the banking subsidiaries constitute less than 2% of United's total loans outstanding. The state of West Virginia has a more diversified economy than it had during the peak periods of coal production. This diversified economy has contributed to the positive trends in the personal income and unemployment rates in recent years as personal income has increased from $14,315 in 1991 to $17,096 in 1994 and the state's overall unemployment rate has declined from 10.5% in 1991 to 7.8% in 1995, according to available information from the West Virginia Bureau of Employment Programs.
Eleven of the 17 counties within United's primary West Virginia market area rank among the state's top twenty counties in terms of personal income and low unemployment rates. United generally serves the stronger economic areas of the state while maintaining a satisfactory CRA rating.
Regulation and Supervision - - --------------------------
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.
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 which 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.
UNB, as national banking associations, is subject to supervision, examination and regulation by the Office of the Comptroller of the Currency. UNB is also a member of the Federal Reserve System, and as such, is subject to applicable provisions of the Federal Reserve Act and regulations issued thereunder.
United Bank, as a Virginia state member bank, is subject to supervision, examination and regulation by the Federal Reserve System, and as such, is subject to applicable provisions of the Federal Reserve Act and regulations issued thereunder. United Bank is subject to regulation by the Virginia Corporation Commission's Bureau of Financial Institutions.
The deposits of United's wholly-owned 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 BANKSHARES, INC. FORM 10-K, PART I
Item 3.

Item 3. Legal Proceedings
Litigation - - ----------
The reader is directed to Note L - Notes to Consolidated Financial Statements.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
UNITED BANKSHARES, INC.
FORM 10-K, PART II
Item 5.

Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
Stock - - -----
As of December 31, 1995, 20,000,000 shares of common stock, par value $2.50 per share, were authorized for United, of which 12,156,571 were issued and outstanding including 140,520 shares held as treasury shares. These shares are held by approximately 4,844 shareholders of record as of December 31, 1995. 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. Additionally, United is presenting an incentive stock option plan to its shareholders for their approval at the 1996 Annual Meeting. See PART III - Succession Management Stock Bonus ------------ Plan and Incentive Stock Option Plans. United offers an employee stock purchase plan for all employees. See PART III - Employee Benefit Plans. While there are ------------ no present plans, understandings, arrangements or agreements, except for the above incentive plans, additional shares could be issued for the purpose of raising capital, in connection with acquisitions of other businesses, or for other appropriate purposes.
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 another business 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.
Dividends - - ---------
The shareholders of United are entitled to receive dividends when and as declared by its Board of Directors. Dividends are paid quarterly. Aggregate dividends were $1.17 per share in 1995, $1.06 per share in 1994 and $.95 per share in 1993. 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 subsidiary banks. The ability of national banks to pay dividends is subject to certain limitations imposed by the national banking laws. Generally, the most restrictive provision requires approval by the Office of the Comptroller of the Currency ("OCC") if dividends declared in any year exceed the year's net income, as defined, plus the retained net profits of the two preceding years. Payment of dividends by United's state member bank 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 both the OCC and the FRB is required when a national bank or 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 OCC and FRB may prohibit dividends if it deems the payment to be an unsafe or unsound banking practice. The OCC has issued guidelines for dividend payments by national banks, emphasizing that proper dividend size depends on the bank's earnings and capital while the FRB has issued similar guidelines pertaining to state member banks. See Note C - Notes to Consolidated Financial Statements.
Market and Stock Prices of United - - ---------------------------------
United Bankshares, Inc. stock is traded over the counter on the National Association of Securities Dealers Automated Quotations System ("NASDAQ") under the trading symbol UBSI.
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 26, 1996, United declared a dividend of $0.30 per share, payable April 1, 1996, to shareholders of record as of March 8, 1996.
The high and low prices listed above 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 indicated.
UNITED BANKSHARES, INC. FORM 10-K, PART II
Item 6.

Item 6. Selected Financial Data
UNITED BANKSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (In thousands except for per share data)
(1) Cash dividends are the amounts declared by United and do not include cash dividends of acquired subsidiaries prior to the dates of consummation.
UNITED BANKSHARES, INC. FORM 10-K, PART II
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
UNITED BANKSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 audited 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.
1995 COMPARED TO 1994
The following Earnings Summary is a broad overview of the financial condition and results of operations and is not intended to replace the more detailed discussion which is presented under specific headings on the following pages.
EARNINGS SUMMARY
For the year ended December 31, 1995, net income increased 12.8% to a record $28,079,000. Net income per share of $2.35 for the year was up 13.0% from $2.08 in 1994. United's return on average assets of 1.58% makes United one of the nation's most profitable regional banking companies. Dividends per share increased 10.4% from $1.06 in 1994 to a record level of $1.17 per share in 1995. This was the twenty-second consecutive year of dividend increases to shareholders. Core earnings, or earnings before taxes, security transactions, cumulative effect of change in accounting principle and the provision for possible loan losses, were strong and increased 11.6% for 1995 compared to 1994. These strong core earnings are indicative of the 5.7% increase in net interest income driven by an increase in average net earning assets with significant growth of 7.3% in average net loans.
Factors contributing to the 1995 earnings increase include an improved net interest margin, partially resulting from a $27,511,000 increase in average earning assets from 1994 and an overall increase in noninterest income which included fewer losses on the sale of securities. The favorable impact of the above items was partly offset by increased occupancy expenses and increased income taxes as a result of the higher level of pre-tax earnings. United is in the process of realigning its interest rate sensitivity for 1996 to a more interest-rate-neutral position. This investment strategy may reduce current earnings, but should enhance United's future earnings momentum.
United's key performance measures, return on average assets and return on average equity, improved significantly from 1994 and remained very strong in comparison to industry standards. United's return on average assets of 1.58% and return on average shareholders' equity of 14.81% both compare excellently with regional peer grouping ratios of 1.17% and
12.56% and national peer group ratios of 1.21% and 13.47%, respectively, according to information provided by Wheat, First Securities, Inc. United is one of the nation's most profitable regional banking companies. United has a strong capital position and is well positioned to take advantage of future growth opportunities.
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 represents the primary component of United's earnings. It is the difference between interest and fee income related to earning assets and interest expense incurred to fund these earning 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 1995, are explained below.
For the years ended December 31, 1995 and 1994, net interest income approximated $81,690,000 and $77,270,000, respectively. On a tax-equivalent basis the net interest margin was strong at 5.15% in 1995 and 4.97% in 1994. Higher average loan volumes of approximately $89 million resulting primarily from an acquisition contributed to the increase in net interest income. At 5.15%, United's net interest margin remains well above peer group averages.
Total interest income of $136,460,000 increased 12.6% in 1995 over 1994 as a result of higher volumes of interest-earning assets. Comparing year-end 1995 to year-end 1994, a moderate decrease occurred in consumer loans of 3.8% while commercial loans and mortgage loans showed increases of 4.9% and 8.7%, respectively.
Total interest expense increased $10,883,000 or 24.8% in 1995. This increase can be attributed primarily to United's competitive pricing of interest-bearing deposits in its markets and continued change in the retail deposit mix as customers shift funds into products offering higher yields. United's average interest-bearing deposits increased by 1.9% in 1995, while its average long-term borrowings decreased 23.5% and average short-term borrowings increased 5.50%. United made greater use of short-term funds as the Federal Reserve held short- term rates steady at approximately 6.0% for nearly half of 1995. The average cost of funds, which increased from 3.30% in 1994 to 4.07% in 1995, reflected the general upward trend in market interest rates during 1995.
Provision for Possible Loan Losses
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 of 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. See Note F to the Consolidated Financial Statements for a discussion of concentrations of credit risk.
Nonperforming loans were $9,089,000 at December 31, 1995 and $6,036,000 at December 31, 1994, an increase of 50.6%. The level of nonperforming assets increased as a result of delinquencies on certain large balance commercial creditors and nonperforming assets purchased in a recent acquisition. 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. United has no significant troubled debt restructurings. Loans past due 90 days or more increased $1,853,000 or 80.5% during 1995; nonaccrual loans increased $1,201,000 or 32.2% since year-end 1994. Much of the increase in nonaccrual loans was the result of the addition of a single large commercial loan to nonaccrual status. United is currently negotiating workout terms with the borrowers and will closely monitor the ongoing status. Nonperforming loans represented 0.50% of total assets at the end of 1995, which is approximately one-half of the national peer levels.
At year-end 1995 and 1994 the allowance for possible loan losses was 1.46% and 1.54% of total loans, net of unearned income, respectively. At December 31, 1995 and 1994, the ratio of the allowance for loan losses to nonperforming loans was 220.2% and 331.5%, respectively.
Management believes that the allowance for loan losses of $20,017,000 as of December 31, 1995, is adequate to provide for potential losses on existing loans based on information currently available.
For the years ended December 31, 1995 and 1994 the provision for loan losses was $2,075,000 and $1,818,000, respectively. The slight increase can be attributed to the higher net charge-offs and the increase in nonperforming loans during 1995. 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 judgement, deserve recognition in estimating possible loan losses. Such other factors considered by management include growth and composition of the loan portfolio, known deterioration in certain classes of loans or collateral, trends in delinquencies, and current economic conditions.
Total net charge-offs were $3,083,000 in 1995 and $825,000 in 1994, which represents 0.23% and 0.07% of average loans for the respective years. United's ratio of net charge-offs to average loans is comparable to its peers' ratio of 0.19% in 1995 and compared very favorably with its peers' ratio of 0.22% in 1994.
Management is not aware of any potential problem loans, trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources which have not been disclosed. Additionally, management has disclosed all known material credits which cause management to have serious doubts as to the ability of such borrowers to comply with the loan repayments. Management is not aware of any current recommendations by regulatory authorities which, if implemented, would have a material effect on liquidity, capital resources or operations.
Effective January 1, 1995, United adopted Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan,"(SFAS No. 114), as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures," collectively SFAS 114. As a result of applying the rules prescribed by SFAS No. 114, certain loans are being reported at the present value of their 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. At the time of adoption of SFAS No. 114, United had approximately $8,000,000 of loans which were considered impaired in accordance with the guidelines prescribed by SFAS No. 114. The adoption of SFAS No. 114 did not have a material impact on the allowance for loan losses, the provision for possible loan losses, the charge-off policy or the comparability of credit risk.
Impaired loans are specifically reviewed loans for which it is probable that the creditor will be unable to collect all amounts due according to the original terms of the loan agreement. The specific factors that influence management's judgement in determining when a loan is impaired include the evaluation that the loan is classified as "substandard" or worse, also the strength of the borrower and the net realizable value of the collateral. A valuation allowance is required to the extent that the measure of the impaired loans is less than the recorded investment. A specifically reviewed loan is not impaired during a period of "minimum delay" in payment, regardless of the amount of shortfall, if the ultimate collectibility of all amounts due is expected. United defines "minimum delay" as past due less than 90 days.
SFAS 114 does not apply to smaller balance, larger groups of homogeneous loans such as consumer installment, bank card and real estate mortgage loans, which are collectively evaluated for impairment. Impaired loans are therefore primarily business loans, which include commercial loans and income property. United applies the measurement methods described above to these loans on a loan- by-loan basis. Smaller balance populations of business loans, loans with a balance of $100,000 or less, which are not specifically reviewed in accordance with United's normal credit review procedures, are also excluded from the application of SFAS 114.
Impaired loans are charged-off when the impaired loan, or a portion thereof, is considered uncollectible or is transferred to other real estate owned.
Consistent with United's existing method of income recognition for loans, interest receipts on impaired loans, except those classified also as nonaccrual, are recognized as interest income using the accrual method of income recognition. United's method of income recognition for impaired loans that are classified as nonaccrual is to recognize interest income on the cash method of income recognition or apply the cash receipt to principal when the ultimate collectibility of principal is in doubt. The average recorded investment in impaired loans during the year ended December 31, 1995 was approximately $9,545,000. For the year ended December 31, 1995, United recognized interest income on those
impaired loans of approximately $412,000, substantially all of which was recognized using the accrual method of income recognition. The amount of interest income which would have been recorded under the original terms for the above loans was $633,000.
At December 31, 1995, the recorded investment in loans that were considered to be impaired under SFAS No. 114 was $8,792,000 (of which $4,934,000 were on a nonaccrual basis). Included in this amount was $4,793,000 of impaired loans for which the related allowance for credit losses was $1,918,000 and $3,999,000 of impaired loans that did not have an allowance for credit losses. The impact of adopting SFAS 114 was immaterial to the financial condition and operations of United as of and for the year ended December 31, 1995, and had no material impact on the comparability of the credit risk as presented herein.
United has commercial real estate loans, including owner occupied, income producing real estate and land development loans, of approximately $328,226,000 and $300,679,000 as of December 31, 1995 and 1994, 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.
Other Income
Noninterest income has been and will continue to be an important factor contributing to United's profitability. Accordingly, management continues to evaluate areas where noninterest income can be enhanced. Other income consists of all revenues which are not included in interest and fee income related to earning assets. In 1995, other income, excluding securities transactions, increased when compared to 1994. The overall increase in noninterest income of $1,394,000 or 12.4% is primarily attributed to the absence of net losses on securities transactions incurred in 1994 and a $541,000 increase in service charges, commissions and fees.
Trust income increased $43,000 or 1.5% in 1995. This was due to repricing of services and an increased volume of trust business.
Service charges, commissions and fees increased by $541,000 or 6.3% in 1995. This income consists of charges and fees related to various banking services provided by United. The increase was primarily due to a combination of increased fees in bankcard accounts and an increased fee structure for sales of checking related products.
Securities transactions resulted in a net loss of $872,000 in 1994. The proceeds from these sales were reinvested in similar securities yielding a higher rate of return. The net losses from the sales of the securities were fully recovered within the first eight months of 1995. There were no securities sales in 1995.
On January 1, 1994, United adopted Statement of Financial Accounting Standards 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. The $872,000 of net securities losses for 1994 relates primarily to debt securities losses of approximately $1,024,000 which were classified as available for sale. For further details, see Note D to the Consolidated Financial Statements.
On November 15, 1995, the FASB staff issued a Special Report, "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities." In accordance with the provision of that Special Report, United chose to reclassify securities from held-to-maturity to available-for-sale. At the date of the transfer the amortized cost of those securities was $103,595,000, and the unrealized gain on those securities was $242,000, which is included in shareholders' equity. This enabled United to take advantage of certain interest rate risk management strategies.
Other Expense
Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations and thus reduce operating costs. United's cost control efforts have been very successful with an efficiency ratio of 50.1%, which is well below the 64.7% reported by peer group averages.
Other expenses include all items of expense other than interest expense, the provision for possible loan losses, and income taxes. In total, other expenses were flat in 1995, and management was successful in controlling costs. The income statement reflects a 0.4% increase in 1995 as compared to 1994.
Salaries and employee benefits expense increased $20,000 or 0.1% in 1995. As of December 31, 1995 and 1994, United employed 819 and 834 full-time equivalent employees, respectively.
Net occupancy expense in 1995 exceeded 1994 levels by $235,000 or 4.8% primarily due to decreased rental income from vacancies and an increase in real property repairs and utilities expense.
Remaining other expenses decreased $50,000 or 0.2% in 1995 compared to 1994. The decrease in other expenses for the year relates primarily to lower data processing fees and FDIC insurance expense as a result of the Federal Deposit Insurance Corporation's decision to lower deposit insurance premiums from $0.23 to $0.04 per $100 in Bank Insurance Fund (BIF) deposits for well capitalized and well managed banks. The premium change resulted in a refund of approximately $910,000 which was received in September 1995. The overall decrease in FDIC insurance premiums for 1995 when compared to 1994 was $1,542,000. United's two banking subsidiaries are assessed at the lowest FDIC insurance premium rate. The decrease in FDIC insurance premiums and data processing fees was offset by higher advertising, postage, bankcard and nonrecurring legal expenses which included certain merger related expenses for the First
Commercial acquisition consummated by United during 1995 and the pending Eagle merger to be consummated during 1996.
Income Taxes
For the year ended December 31, 1995, income taxes approximated $15,271,000 compared to $13,096,000 for 1994. This increase is principally the result of lower levels of tax-exempt income and higher levels of pretax income. United's effective tax rates in these two years were 35.2% and 34.5%, respectively.
At December 31, 1995, gross deferred tax assets totaled approximately $11.6 million. The allowance for loan losses and various accrued liabilities represent the most significant temporary differences. Based on management's evaluation at December 31, 1995, no valuation allowance has been allocated to deferred tax assets.
Fourth Quarter Results
Net income for the fourth quarter of 1995 was $6,953,000, an increase of 13.0% from the $6,156,000 earned in the fourth quarter of 1994. On a per share basis, fourth quarter earnings were $.58 per share in 1995 and $.51 per share in 1994. Net income was higher in 1995 than in 1994 because of the factors previously discussed herein relative to annual results.
Additional quarterly financial data for 1995 and 1994 may be found in Note P to the Consolidated Financial Statements.
The Effect of Inflation
United's income statements generally reflect the effects of inflation. Since interest rates, loan demand, and deposit levels are related to 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 which 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 be minimal in the near future.
Interest Rate Sensitivity
Interest sensitive assets and liabilities are defined as those assets or liabilities that mature or are repriced within a designated time-frame. The principal function of asset and liability management is to maintain an appropriate relationship between those assets and liabilities that are sensitive to changing market interest rates. 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 managing 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 the following page 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 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 $136,372,000 or 8.10% 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 risk means to match maturities of earning assets and interest-bearing funds to achieve a desired interest rate spread over the life of the earning assets.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
The following table shows the interest rate sensitivity GAP as of December 31, 1995:
Interest Rate Sensitivity Gap
Additionally, United is 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. The interest rate swap transaction involves the exchange of a floating rate payment based on the one month London inter-bank offered rate (LIBOR) for a fixed rate receipt based on the U. S. three year treasury note. The net pay and receive amount is calculated on an underlying notional amount without the exchange of the underlying principal amount. The interest rate swap subjects United to market risk associated with changes in interest rates, as well as the risk that the counterparty will fail to perform. Only the interest payments are exchanged, and therefore, cash requirements and exposure to credit risk are significantly less than the notional amount.
At December 31, 1995, the total notional amount of United's interest rate swap was $50 million. The current maturity of the swap portfolio is one year and one month. The interest rate swap reduced net interest
income by $787,000 and $1,000, in 1995 and 1994, respectively. For further details, see Note L to the Consolidated Financial Statements.
Liquidity and Capital Resources
In the opinion of management, United maintains 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 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 securities portfolio and maturing loans 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 of utilizing any long-term funding sources other than FHLB advances and long-term certificates of deposit.
Cash flows from operations in 1995 of $35,666,000 were 3.5% higher than the $34,458,000 in 1994 as a result of approximately $3,200,000 million increase in net income. In 1995, investing activities resulted in a source of cash of $23,280,000 as compared to 1994 in which investing activities resulted in a use of cash of $52,200,000. The primary reason for the decrease in the use of cash for investing activities is that net loan originations decreased by $79,827,000 in 1995 as compared to 1994 while the net excess of proceeds from sales, maturities and calls of securities over security purchases decreased from $67,103,000 in 1994 to
$63,739,000 in 1995 for a decrease of $3,364,000. Financing activities resulted in a use of cash in 1995 of $62,800,000 primarily due to a $50,072,000 decrease in net borrowings from the FHLB of Pittsburgh, payment of $10,273,000 of cash dividends to shareholders and a net decreases in deposits of $12,206,000. These uses of cash for financing activities were partially offset by a net increase of $10,358,000 in other short-term borrowings. 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 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. See Note I, Notes to Consolidated Financial Statements.
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.
United also seeks to maintain a proper relationship between capital and total assets in order to support growth and sustain earnings. United's average equity to average asset ratio was 10.65% in 1995 and 10.16% in 1994. United's risk- based capital ratio was 15.91% in 1995 and 15.52% in 1994 which are both significantly higher than the minimum regulatory requirements. United's Tier 1 capital and leverage ratios of 14.66% and 10.27%, respectively, at December 31, 1995, are also strong relative to its peers and are well above regulatory minimums.
Commitments
The following table indicates the outstanding loan commitments of United in the categories stated:
Past experience has shown that, of the foregoing commitments, approximately 12- 15% can reasonably be expected to be funded within a one year period. For more information, see Note L to the Consolidated Financial Statements.
1994 COMPARED TO 1993
The following Earnings Summary is a broad overview of the financial condition and results of operations and is not intended to replace the more detailed discussion which is presented under specific headings on the following pages.
EARNINGS SUMMARY
For the year ended December 31, 1994, net income increased 14.7% to a record $24,902,000. Net income per share of $2.08 for the year was up 14.3% from $1.82 in 1993. United's return on average assets was 1.42%. Dividends per share increased 11.6% from $.95 in 1993 to $1.06 per share in 1994. Core earnings, or earnings before taxes, security transactions, cumulative effect of change in accounting principle and the provision for possible loan losses, were strong and increased 19.7% for 1994 as compared to 1993. These strong core earnings were indicative of the 8.1% increase in net interest income driven by an increase in average net earning assets with significant growth of 8.6% in average net loans.
Factors contributing to the 1994 earnings increase included an improved net interest margin, partially resulting from a $39,338,000 increase in average earning assets from 1993, a lower loan loss provision due to improved credit quality and increased earnings from 1993 acquisitions. The favorable impact of the above items was partly offset by increased occupancy expenses, decreased fee income from customer accounts for which a fee is charged and losses from the sale of securities.
United's key performance measures, return on average assets and return on average equity, improved significantly from 1993 and remained very strong in comparison to industry standards. United's return on average assets of 1.42% made United one of the nation's most profitable regional banking companies. In the December 31, 1994, Bank Holding Company Performance Report, which is prepared by the Federal Reserve Board's Division of Banking Supervision and Regulation, United was ranked in the 85th percentile of bank holding companies nationwide in terms of return on average assets for the year ended December 31, 1994.
The following discussion explains in more detail the results of operations and changes in financial condition by major category.
Net Interest Income
For the years ended December 31, 1994 and 1993, net interest income approximated $77,270,000 and $71,496,000, respectively. On a tax-equivalent basis the net interest margin was strong at 4.97% in 1994 and 4.75% in 1993. Higher average loan volumes of $98 million contributed to the increase in net interest income. United also experienced modest decreases in its overall cost of funds. At 4.97%, United's net interest margin was well above peer group averages.
Total interest income of $121,157,000 increased 4.0% in 1994 over 1993 as a result of higher volumes of interest-earning assets. Comparing
year-end 1994 to year-end 1993, a moderate decrease in commercial loans of 4.6% and a slight increase in consumer loans of 1.8%, which resulted from lower commercial and consumer demand, were offset by significant mortgage loan growth of 16.4%.
Total interest expense decreased 2.5% in 1994. This decrease was primarily the result of lower rates paid on interest-bearing funds. United's average interest- bearing deposits increased only slightly or 0.5% in 1994, while its average long-term borrowings increased 25.1% as United made greater use of these funds in order to meet the demand for mortgage loan products with matching maturities. The average cost of funds reflected the general downward trend in market interest rates in 1994, falling from 3.44% in 1993 to 3.30% in 1994.
Provision for Possible Loan Losses
United evaluated 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.
Nonperforming loans were $6,036,000 at December 31, 1994 and $13,517,000 at December 31, 1993, a decrease of 55.4%. The level of nonperforming assets declined as a result of the recovering of the regional economy and management's continual monitoring of problem loans. The components of nonperforming loans include nonaccrual loans, loans which are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis and troubled debt restructurings. Loans past due 90 days or more decreased $173,000 or 7.0% during 1994; while troubled debt restructurings decreased $2,453,000 or 100.0% and nonaccrual loans decreased $4,855,000 or 56.5% since year-end 1993. Nonperforming loans continue to decline and represented less than 0.34% of total assets at the end of 1994.
At year-end 1994 and 1993 the allowance for possible loan losses was 1.54% and 1.61% of total loans, net of unearned income, respectively. As of December 31, 1994 and 1993, the ratio of the allowance for loan losses to nonperforming loans was 331.5% and 140.7%, respectively.
For the years ended December 31, 1994 and 1993 the provision for loan losses was $1,818,000 and $4,332,000, respectively. The decrease was attributable to the general improvement in all areas of asset quality and the increased coverage ratio of the allowance for loan losses to nonperforming loans. 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 judgement, deserve recognition in estimating possible loan losses. Such other factors considered by management include growth and composition of the loan portfolio, known deterioration in certain classes of loans or collateral, trends in delinquencies, and current economic conditions.
Total net charge-offs were $825,000 in 1994 and $1,773,000 in 1993, which represents .07% and .16% of average loans for the respective years. United's ratio of net charge-offs to average loans compares very favorably with its peers.
Other Income
Other income consists of all revenues which are not included in interest and fee income related to earning assets. In 1994, other income, excluding securities transactions, was flat when compared to 1993. The overall decrease in noninterest income of $1,451,000 or 11.4% was primarily attributed to the net losses on securities transactions.
Trust income increased $229,000 or 8.7% in 1994. This was due to repricing of services and an increased volume of trust business.
Service charges, commissions and fees decreased by $194,000 or 2.2% in 1994. This income consists of charges and fees related to various banking services provided by United. The decrease was primarily due to a combination of decreased activity in customer accounts and a decline in net account analysis fees.
Securities transactions resulted in a net loss of $872,000 in 1994 and a net gain of $479,000 in 1993. As evidenced by the Statement of Cash Flows, the volume of securities sold increased significantly in 1994. The primary reason for this increased sales activity was to restructure a portion of the investment portfolio to reflect current market rates in response to the rising interest rate environment in order to enhance United's future earnings momentum.
On January 1, 1994, United adopted Statement of Financial Accounting Standards 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. The $872,000 of net securities losses for 1994 relates primarily to debt securities losses of approximately $1,024,000 which were reclassified to available for sale at January 1, 1994.
Other Expense
Other expense includes all items of expense other than interest expense, the provision for possible loan losses, and income taxes. In total, other expenses were flat in 1994, and management was successful in controlling costs. The income statement reflects a 2.0% decrease in 1994 as compared to 1993.
Salaries and employee benefits expense decreased $176,000 or 1.0% in 1994.
Net occupancy expense in 1994 exceeded 1993 levels by $390,000 or 8.7% primarily due to decreased rental income from vacancies and an increase in real property taxes.
The remaining other expense decreased $1,228,000 or 5.4% in 1994 compared to 1993. The decrease in other expenses for the year related primarily to nonrecurring expenses during 1993 which included certain merger expenses for the two acquisitions consummated by United during 1993, a lower provision for other real estate owned and the realization of further economies from recent mergers.
Income Taxes
For the year ended December 31, 1994, income taxes approximated $13,096,000 compared to $9,770,000 for 1993. This increase is principally the result of lower levels of tax-exempt income and higher levels of pretax income. United's effective tax rates in these two years were 34.5% and 32.4%, respectively.
At December 31, 1994, gross deferred tax assets totaled approximately $11.5 million compared to $10.4 million at December 31, 1993. The allowance for loan losses and various accrued liabilities represent the most significant temporary differences. Based on management's evaluation at December 31, 1994 and 1993, no valuation allowance had been allocated to deferred tax assets.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST RATES AND INTEREST DIFFERENTIAL:
The following table shows the daily average balance of major categories of assets and liabilities for each of the three years ended December 31, 1995, 1994 and 1993 with the interest and rate earned or paid on such amount.
(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.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
RATE/VOLUME ANALYSIS
The following table sets forth a summary 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 tax exempt loans and investment securities are computed on a fully tax-equivalent basis using the statutory federal income tax rate of 35%.
(2) Nonaccruing loans are included in the daily average loan amounts outstanding.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
LOAN PORTFOLIO
TYPES OF LOANS
The following is a summary of loans outstanding at December 31:
At December 31, 1995, real estate mortgage loans include $570,635,000 in single family residential real estate loans and $328,226,000 in commercial real estate loans.
The following is a summary of loans outstanding as a percent of total loans at December 31:
REMAINING LOAN MATURITIES
The following table shows the maturity of commercial, financial, and agricultural loans and real estate construction outstanding as of December 31, 1995:
UNITED BANKSHARES, INC. AND SUBSIDIARIES
At December 31, 1995, commercial, financial and agricultural loans maturing within one to five years and in more than five years are interest sensitive as follows:
There were no real estate construction loans with maturities greater than one year.
RISK ELEMENTS
Nonperforming Loans
Nonperforming loans include loans on which no interest is currently being accrued, loans which are past due 90 days or more as to principal or interest payments, and 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, groups of loans, or segments of the loan portfolio not included below where there are serious doubts as to the ability of the borrowers to comply with the present loan repayment terms. The following table summarizes nonperforming loans for the indicated periods.
Loans are designated as nonaccrual when, in the opinion of management, the collection of principal or interest is doubtful. This generally occurs when a loan becomes 90 days past due as to principal or interest unless the loan is both well secured and in the process of collection. When interest accruals are discontinued, unpaid interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for loan losses. See Note F to the consolidated financial statements for additional information regarding nonperforming loans and credit risk concentration.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
INVESTMENT PORTFOLIO
The following is a summary of the amortized cost of investment securities held to maturity at December 31, 1995 and 1994 and all securities at December 31, 1993:
The following is a summary of the amortized cost of available for sale securities at December 31,:
The market 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 assumed prepayment speed. Therefore, investors may not be able to invest at current higher market rates due to the extended expected maturity of the security. United had an unrealized loss of $331,000 on all mortgage-backed securities at December 31, 1995, as compared to a net unrealized loss of $7,805,000 at December 31, 1994. This increase in value from 1994 to 1995 is consistent with the decrease in interest rates during 1995.
The following table sets forth the maturities of all securities at December 31, 1995, 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.
NOTE: There are no securities with a single issuer whose book value in the aggregate exceeds 10% of total shareholders' equity.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
The following table shows the distribution of United's short-term borrowings 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, 1995, repurchase agreements include $53,846,000 in overnight accounts. The remaining balance principally consists of agreements having maturities ranging from 2-90 days. The rates offered on these funds vary according to movements in the federal funds and short-term investment market rates.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
DEPOSITS
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, 1995 are summarized as follows:
RETURN ON EQUITY AND ASSETS
The following table shows selected consolidated operating and capital ratios for each of the last three years ended December 31:
(1) Based on historical results of United before the effects of restatements for pooling of interests business combinations.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes United's loan loss experience for each of the five years ended December 31:
(1) The amount charged to operations and the related balance in the allowance for possible loan losses is based upon periodic evaluations of the loan portfolio by management. These evaluations consider several factors including, but not limited to, general economic conditions, loan portfolio composition, prior loan loss experience and management's estimation of future potential losses.
Quarterly reviews of individual loans as well as the loan portfolio as a whole are made by management and the credit department. Management performs extensive procedures in granting and monitoring loans on a continual basis. Further, management believes that the allowance for possible loan losses is adequate to absorb anticipated losses.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
SUMMARY OF LOAN LOSS EXPERIENCE--Continued
The portion of the allowance for loan losses that is not specifically allocated to individual credits has been apportioned among the separate loan portfolios based on the relative risk of each portfolio.
UNITED BANKSHARES, INC. FORM 10-K, PART II
Item 8.

Item 8. Financial Statements and Supplementary Data
(A) - FINANCIAL STATEMENTS REQUIRED BY REGULATION S-X
YEAR ENDED DECEMBER 31, 1995 UNITED BANKSHARES, INC.
Page
Report of Independent Auditors.............................. 47 Consolidated Balance Sheets................................. 48 Consolidated Statements of Income........................... 49 Consolidated Statements of Changes in Shareholders' Equity.. 50 Consolidated Statements of Cash Flows....................... 51 Notes to Consolidated Financial Statements.................. 52
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Board of Directors and Shareholders United Bankshares, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of United Bankshares, Inc. and subsidiaries as of December 31, 1995 and 1994, 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, 1995. 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 generally accepted auditing standards. 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note J to the consolidated financial statements, United Bankshares, Inc. changed its method of accounting for income taxes effective January 1, 1993.
/s/ Ernst & Young LLP
Charleston, West Virginia February 22, 1996
CONSOLIDATED BALANCE SHEETS UNITED BANKSHARES, INC. AND SUBSIDIARIES
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME UNITED BANKSHARES, INC. AND SUBSIDIARIES
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
UNITED BANKSHARES, INC. AND SUBSIDIARIES
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS UNITED BANKSHARES, INC. AND SUBSIDIARIES
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED BANKSHARES, INC. AND SUBSIDIARIES
December 31, 1995
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
United Bankshares, Inc. is a multi-bank holding company headquartered in Charleston, West Virginia. The principal West Virginia markets of United Bankshares, Inc. and subsidiaries (United) are located in Parkersburg, Charleston, Huntington and Wheeling. United also operates a banking subsidiary in Arlington, Virginia.
The accounting and reporting policies of United conform with generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. A description of the significant accounting policies is presented below.
Basis of Presentation: The consolidated financial statements include the - - ---------------------- accounts of United Bankshares, Inc. and its wholly-owned subsidiaries. United considers all of its principal business activities to be bank related. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.
Certain amounts in the prior year's financial statements have been reclassified to conform with the 1995 presentation. The reclassifications had no effect on net income.
Securities: Management determines the appropriate classification of securities - - ----------- at the time of purchase. Debt securities that management has the intent and United has 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 fair value. Unrealized holding gains and losses on securities classified as available for sale are carried as a separate component of shareholders' equity net of deferred income taxes.
Gains or losses on sales of securities are recognized by the specific identification method and are reported separately in the statements of income.
Loans: Interest on loans is accrued and credited to operations using methods - - ------ that approximate a level yield on 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.
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
The accrual of interest income generally is discontinued when a loan becomes 90 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.
Allowance for Possible Loan Losses: In providing for loan losses, United - - ----------------------------------- considers all significant factors that affect the collectibility of loans including the evaluation of impaired loans under SFAS No. 114. 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 include growth and composition of the loan portfolio, known deterioration in certain classes of loans or collateral, trends in delinquencies, and current economic conditions.
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 Assets: Other real estate owned (OREO), acquired principally through - - ------------- foreclosure on collateral securing loans made by United, is reported at the lower of cost or fair value less costs estimated to sell and is included in other assets. Any write-downs at the date of foreclosure are charged to the allowance for possible loan losses. Expenses incurred in connection with ownership, subsequent declines in estimated net realizable value, and realized gains and losses upon sale of the properties are included in other expenses, or other income, as appropriate.
United maintains an allowance for possible OREO losses. Such allowance is based upon the estimated values of specific properties in consideration of prevailing market conditions.
Income Taxes: Deferred income taxes are provided for temporary differences - - ------------- between the financial reporting and tax bases of assets and liabilities at statutory tax rates.
United and its subsidiaries file consolidated federal and state income tax returns. The subsidiaries provide for income taxes on a separate return basis and remit amounts to the parent company deemed to be currently payable.
Stock-Based Compensation: In October 1995, the Financial Accounting Standards - - ------------------------- Board ("FASB"), issued Statement No. 123, (SFAS No. 123), "Accounting for Stock- Based Compensation," which is effective for fiscal years beginning after December 15, 1995. SFAS No. 123 defines a fair value based method of accounting for stock-based compensation plans.
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Under the fair value method, compensation expense is measured based upon the estimated value of the award as of the grant date and is recognized over the service period. SFAS No. 123 provides companies with the option of accounting for stock-based compensation under APB Opinion No. 25, "Accounting for Stock Issued to Employees," or applying the provisions of SFAS No. 123. United has decided to continue to apply the provisions of APB No. 25 to account for stock- based compensation. The disclosure requirements of SFAS No. 123 require entities applying APB Opinion No. 25 to provide pro forma disclosures of net income and earnings per share as if the fair value method of accounting had been applied. United will provide these disclosures beginning in 1996.
Trust Assets and Income: Assets held in a fiduciary or agency capacity for - - ------------------------ subsidiary bank customers are not included in the balance sheets since such items are not assets of the subsidiary banks. Trust department 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.
Cash Flow Information: For purposes of the statement of cash flows, United - - ---------------------- considers cash and due from banks and federal funds sold as cash and cash equivalents. Interest paid approximated $52,377,000, $43,478,000 and $45,502,000 in 1995, 1994, and 1993, respectively. Income taxes paid approximated $16,769,000, $13,033,000, and $10,363,000 in 1995, 1994, and 1993, respectively. Noncash investing and financing activities were as follows: $103,595,000 of securities were transferred to available for sale from the held to maturity portfolio in 1995; and $6,063,000 of common stock was issued in 1995 in a purchase acquisition.
Interest Rate Swaps: Interest rate swaps are utilized by United to manage - - -------------------- interest rate exposure. Income or expense derived from these instruments is recognized as an adjustment to interest income of the underlying instrument.
Earnings Per Common Share: Earnings per common share is computed based on the - - -------------------------- weighted average number of common and common equivalent shares outstanding during the applicable period. Options granted under United's stock option plans are considered common stock equivalents for the purpose of computing earnings per share.
NOTE B--ACQUISITIONS
On October 31, 1995, United merged its Bank First office into Commercial Interim Bank ("Interim"), and acquired 100% of the common stock of First Commercial Bank("FCB") of Arlington, Virginia, in a combination cash and common stock exchange accounted for using the purchase method of accounting. United exchanged 202,125 shares of its common stock for all 201,100 of FCB's common stock. United then renamed Interim to First Commercial Bank ("First Commercial"). As of the date of acquisition, FCB reported total assets of $76,964,000, total net loans of $41,386,000 and deposits of $50,200,000. The results of operations of FCB, which are not significant, have been included in the consolidated results of operations from the date of acquisition.
NOTE B--ACQUISITIONS - continued
The purchase prices of this acquisition and certain acquisitions made in prior years were allocated to the identifiable tangible and intangible assets acquired based upon their fair values at the acquisition dates. Intangible assets relating to the estimated value of the deposit base of the acquired institutions are being amortized on an accelerated basis over a 7 to 10 year period. The excess of the purchase price over the fair market value of the net assets of the banks acquired (goodwill) is being amortized on a straight-line basis over 15 years. Net intangible assets (deposit base intangibles and goodwill) of approximately $14,998,000 and $10,276,000 at December 31, 1995 and 1994, respectively, are included in other assets. The carrying amount of goodwill is evaluated if facts and circumstances suggest that it may be impaired. If this evaluation indicates that goodwill will not be recoverable, as determined based on the estimated undiscounted cash flows of the entity acquired over the remaining amortization period, the carrying amount of goodwill will be reduced.
NOTE C--REGULATORY RESTRICTIONS
The subsidiary banks are required to maintain average reserve balances with their respective Federal Reserve Bank. The average amount of those reserve balances for the year ended December 31, 1995 was approximately $34,021,000.
The primary source of funds for the dividends paid by United Bankshares, Inc. is dividends received from its subsidiary banks. Dividends paid by United's subsidiary national banks are subject to regulatory limitations imposed primarily by the Comptroller of the Currency. Generally, the most restrictive provision requires approval by the Comptroller of the Currency if dividends declared in any year exceed the year's net income, as defined, plus the retained net profits of the two preceding years. Payment of dividends by United's state member bank is regulated by the Federal Reserve System and generally, the prior approval of the Federal Reserve Board 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. During 1996, the retained net profits available for distribution to United Bankshares, Inc., as dividends without regulatory approval, are approximately $9,814,000, plus net income for the interim periods 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 $19,068,000 at December 31, 1995, and must be secured by qualifying collateral.
NOTE D--SECURITIES AVAILABLE FOR SALE
Effective January 1, 1994, United adopted FASB Statement 115, "Accounting for Certain Investments in Debt and Equity Securities," (SFAS No. 115). The effect of adopting SFAS No. 115 as of January 1, 1994, was to increase shareholders' equity by $1,284,000 for the net unrealized holding gains on securities classified as available for sale which were previously carried at amortized cost.
On November 15, 1995, the FASB staff issued a Special Report, "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities." In accordance with the provision of that Special Report, United chose to reclassify securities from held to maturity to available for sale. At the date of the transfer the amortized cost of those securities was $103,595,000, and the unrealized gain on those securities was $242,000, which is included in shareholders' equity.
The amortized cost and estimated fair value of securities available for sale at December 31, 1995, by contractual maturity are as follows:
The table above includes $27,735,000 of mortgage-backed securities at estimated fair value with an amortized cost of $27,766,000. Maturities of mortgage-backed securities are based upon the estimated average life.
The amortized cost and estimated fair values of securities available for sale are summarized as follows:
NOTE D--SECURITIES AVAILABLE FOR SALE - continued
The amortized cost and estimated fair values of securities available for sale are summarized as follows:
Gross realized gains and losses from sales of securities available for sale in 1994 were $152,000 and $1,024,000, respectively.
NOTE E--SECURITIES HELD TO MATURITY
The amortized cost and estimated fair values of investment securities are summarized as follows:
NOTE E--SECURITIES HELD TO MATURITY - continued
The amortized cost and estimated fair value of debt securities at December 31, 1995 and 1994 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.
The table above includes $55,389,000 of mortgage-backed securities with an estimated fair value of $55,089,000 at December 31, 1995 and mortgage-backed securities of $97,644,000 with an estimated fair value of $89,839,000 at December 31, 1994. Maturities of the mortgage-backed securities are based upon the estimated average life.
Gross realized gains from sales of securities were $496,000 and gross realized losses were $17,000 in 1993. There were no sales of held to maturity securities during 1994 and 1995.
The amortized cost of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $176,855,000 and $176,625,000 at December 31, 1995 and 1994, respectively.
NOTE F--LOANS
Major classifications of loans as of December 31 are as follows:
NOTE F--LOANS - Continued
An analysis of the allowance for possible loan losses follows:
Effective January 1, 1995, United adopted Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan,"(SFAS No. 114), as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures," collectively SFAS 114. As a result of applying the new rules prescribed by SFAS No. 114, certain loans are being reported at the present value of their 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. At the time of adoption of SFAS No. 114, United had approximately $8,000,000 of loans which were considered impaired in accordance with the guidelines prescribed by SFAS No. 114. The adoption of SFAS No. 114 did not have a material impact on the allowance for loan losses, the provision for possible loan losses or the charge-off policy.
SFAS 114 does not apply to smaller balance, larger groups of homogeneous loans such as consumer installment, bank card and real estate mortgage loans, which are collectively evaluated for impairment. Impaired loans are therefore primarily business loans, which include commercial loans and income property. Smaller balance populations of business loans, loans with a balance of $100,000 or less, which are not specifically reviewed in accordance with United's normal credit review procedures, are also excluded from the application of SFAS 114.
Consistent with United's existing method of income recognition for loans, interest receipts on impaired loans, except those classified also as nonaccrual, are recognized as interest income using the accrual method of income recognition. United's method of income recognition for impaired loans that are classified as nonaccrual is to recognize interest income on the cash method of income recognition or apply the cash receipt to principal when the ultimate collectibility of principal is in doubt. The average recorded investment in impaired loans during the year ended December 31, 1995 was approximately $9,545,000. For the year ended December 31, 1995, United recognized interest income on those impaired loans of approximately $412,000, substantially all of which was recognized using the accrual method of income recognition.
NOTE F--LOANS - Continued
At December 31, 1995, the recorded investment in loans that are considered to be impaired under SFAS No. 114 was $8,792,000 (of which $4,934,000 were on a nonaccrual basis). Included in this amount is $4,793,000 of impaired loans for which the related allowance for credit losses is $1,918,000 and $3,999,000 of impaired loans that do not have an allowance for credit losses.
The amount of interest income which would have been recorded under the original terms for the above loans was $1,045,000, $346,000 and $793,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Amounts recorded as interest income for these loans totaled $633,000, $1,000 and $183,000 for 1995, 1994 and 1993, respectively.
United has commercial real estate loans, including owner occupied, income producing real estate and land development loans, of approximately $328,226,000 and $300,679,000 as of December 31, 1995 and 1994, 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.
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 $55,919,000 and $57,310,000 at December 31, 1995 and 1994, respectively. During 1995, $41,582,000 of new loans were made and repayments totaled $39,615,000.
NOTE G--BANK PREMISES AND EQUIPMENT AND LEASES
Bank premises and equipment are summarized as follows:
NOTE G--BANK PREMISES AND EQUIPMENT AND LEASES - continued
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 $1,721,000, $1,746,000 and $1,620,000 for the years ended December 31, 1995, 1994, and 1993, 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, 1995 consisted of the following:
United owns an office tower facility, known as "United Square." United occupies a portion of this building and leases the remainder under agreements expiring principally in 1998. The principal tenant has an option to renew its lease agreement on a year-to-year basis for an additional period of five years beyond the expiration date. United Square, including the portion under such operating lease, is included in bank premises as follows:
Rental income under such operating leases approximated $892,000, $986,000, and $1,341,000 for the years ended December 31, 1995, 1994, and 1993, respectively. As of December 31, 1995, future minimum lease payments receivable under noncancelable operating leases aggregated $1,426,000, of which $728,000 is due in 1996.
NOTE H--DEPOSITS
The book value of deposits consisted of the following:
NOTE I--FEDERAL HOME LOAN BANK BORROWINGS
United's lead subsidiary, United National Bank (UNB), is a member of the Federal Home Loan Bank of Pittsburgh, (the FHLB). As of December 31, 1995, UNB owns 57,525 shares of the FHLB stock at par value. Such stock ownership entitles UNB to its pro rata share of the quarterly dividends declared by the FHLB and provides an additional source of short-term and long-term funding, in the form of collateralized advances. Based upon the shares presently held by UNB, as well as its Qualifying Collateral and Mortgage Assets Ratio, as defined in the Master Agreement with the FHLB (the Agreement), at December 31, 1995, UNB is entitled to receive approximately $405,091,000 in collateralized advances from the FHLB at prevailing interest rates, subject to satisfying the Capital Stock Requirement provisions of the Agreement, as defined.
UNB also has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $36,000,000. These lines of credit, which bear interest at prevailing market rates, permit UNB to borrow funds in the overnight market, and are renewable annually provided that UNB does not experience a material adverse change in its financial position or results of operations.
Approximately $33,900,000 of FHLB advances with an interest rate of 5.65% are scheduled to mature in 1996.
NOTE J--INCOME TAXES
Effective January 1, 1993, United changed its method of accounting for income taxes from the deferred method to the liability method required by FASB Statement No. 109, "Accounting for Income Taxes." The cumulative effect of the change increased net income by $1,329,000 or $0.11 per share.
The income tax provisions included in the consolidated statements of income are summarized as follows:
NOTE J--INCOME TAXES - continued
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:
Federal income tax expense (benefit) applicable to securities transactions approximated ($305,000) and $168,000 in 1994 and 1993, respectively. There were no securities transactions in 1995.
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. Significant components of United's deferred tax assets and liabilities as of December 31, 1995 and 1994 are as follows:
NOTE K--EMPLOYEE BENEFIT PLANS
United has a defined benefit retirement plan covering substantially all employees. The 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 following table sets forth the funded status of United's defined benefit plan and amounts recognized in the respective consolidated balance sheets:
Net periodic pension cost included the following components:
NOTE K--EMPLOYEE BENEFIT PLANS - continued
The changes in unrecognized net gain, actual (return)/loss on plan assets and net amortization and deferral are primarily due to differences in the expected return and the actual return or loss on plan assets and a decrease in the weighted average discount rate from 8.5% in 1994 to 7.5% in 1995.
The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were approximately 7.5% and 4.5% at December 31, 1995 and 8.5% and 4.5% at December 31, 1994. The weighted average expected long-term rate of return on plan assets was 9.0% for the years ended December 31, 1995, 1994 and 1993.
The United Savings and Stock Investment Plan (the Plan) is a deferred compensation plan under Section 401(k) of the Internal Revenue Code. All employees who complete one year of service are eligible to participate in the Plan. Each participant may contribute from 1% to 10% of pre-tax earnings to his/her account which may be invested in any of four investment options chosen by the employee. United matches 100% of the first 2% of salary deferred and 25% of the next 2% of salary deferred with United common stock. Vesting is 100% for employee deferrals and the United match at the time the employee makes his/her deferral. United's expense relating to the Plan approximated $297,000, $336,000 and $280,000 in 1995, 1994, and 1993, respectively.
The assets of United's defined benefit plan and 401(k) Plan each include investments in United common stock. At December 31, 1995, the combined plan assets included 161,999 shares of United common stock with a market value of approximately $4,738,000.
United has certain deferred compensation plans covering various key employees. Periodic charges are made to operations so that the present value of 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.
During 1988, United formed the 1988 Incentive Stock Option Plan for key employees. Stock option grants are awarded at the fair market value of United's common stock on the date of the grant. The options are immediately exercisable and have a maximum duration of 10 years. Options need not be exercised in the order granted. The final 20,000 options under this plan were granted in January 1992 at the then current market price of $13.25.
During 1991, United formed the 1991 Incentive Stock Option Plan for key employees. Five hundred thousand (500,000) shares were allocated to the plan with no more than 100,000 options to be awarded each year. Stock option grants were awarded at the fair market value of United's common stock on the date of the grant. The options may be exercised in accordance with a three year vesting schedule and have a maximum duration of 10 years. Options need not be exercised in the order granted. The final 100,000 options under this plan were granted in November 1995 at the then current market price of $30.00.
NOTE K--EMPLOYEE BENEFIT PLANS - continued
The following is a summary of the 1988 Incentive Stock Option Plan activity:
The following is a summary of the 1991 Incentive Stock Option Plan activity:
United provides postemployment and postretirement benefits for certain employees at subsidiaries acquired in prior years. United accounts for such costs as expense when paid. United's analysis indicates that accounting for such costs when paid does not produce results materially different from those which would result if such costs were accrued during the period of employee service. United does not anticipate providing postemployment or postretirement benefits to its currently active employees after employment or retirement except on a fully contributory basis.
NOTE L--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 represented by the contractual amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
NOTE L--COMMITMENTS AND CONTINGENT LIABILITIES - continued
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the 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 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 $262,836,000 and $244,975,000 of loan commitments outstanding as of December 31, 1995 and 1994, respectively, with substantially all of them expiring within one year.
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. United has issued standby letters of credit of $16,533,000 and $15,022,000 as of December 31, 1995 and 1994, respectively.
Management does not anticipate any material losses as a result of these loan commitments, standby letters of credit and interest rate swap agreements.
In 1994 United entered into an interest rate swap agreement to manage its interest rate exposure. The interest rate swap transaction involves the exchange of a floating rate payment based on the one month London inter-bank offered rate (LIBOR) for a fixed rate receipt based on the U. S. three year treasury note. The net pay and receive amount is calculated on an underlying notional amount without the exchange of the underlying principal amount. The interest rate swap subjects United to market risk associated with changes in interest rates, as well as the risk that the counterparty will fail to perform. Only the interest payments are exchanged, and therefore, cash requirements and exposure to credit risk are significantly less than the notional amount.
The notional amount shown below represents an agreed upon amount on which calculations of amounts to be exchanged are based. It does not represent direct credit exposure. United's credit exposure is limited to the net difference between the calculated pay and receive amounts on the transaction which is netted monthly.
The swap, which matures in 1997, is summarized as follows:
NOTE L--COMMITMENTS AND CONTINGENT LIABILITIES - continued
During 1995 and 1994 the interest rate swap reduced interest income by $787,000 and $1,000, respectively. At December 31, 1995, the estimated unrealized loss on the swap, which may reduce interest income in future periods, approximated $738,000. A key assumption utilized in computing the unrealized loss is that interest rates will remain at the December 31, 1995 level throughout the term of the agreement.
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 its financial position or results of operations.
NOTE M--OTHER INCOME AND EXPENSE
The following items of other income and expense exceeded one percent of total revenue for the periods indicated:
NOTE N--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
NOTE N--FAIR VALUES OF FINANCIAL INSTRUMENTS - continued
characteristics. The fair values of other loans (e.g., commercial real state 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 credit worthiness.
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. The fair value of the interest rate swap agreement is calculated with pricing models using current rate assumptions. A key assumption utilized in computing the estimated fair value of the interest rate swap agreement is that interest rates will remain at the December 31, 1995 level throughout the term of the agreement.
Deposits: The fair values of demand deposits (e.g. interest and non-interest - - --------- 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.
Federal Home Loan Bank Borrowings: The fair values of United's Federal Home - - ---------------------------------- Loan Bank borrowings are estimated using discounted cash flow analyses, based on United's current incremental borrowing rates for similar types of borrowing arrangements. The carrying value of federal Home Loan Bank borrowings approximates their fair value.
The estimated fair values of United's financial instruments are summarized below:
NOTE O - UNITED BANKSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
Condensed Balance Sheets
Condensed Statements of Income
NOTE O - UNITED BANKSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION - CONTINUED
Condensed Statements of Cash Flows
NOTE P - QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for 1995 and 1994 is summarized below (dollars in thousands except for per share data):
NOTE Q--PENDING ACQUISITION (UNAUDITED)
United has entered into an agreement with Eagle Bancorp, Inc., Charleston, West Virginia ("Eagle") to exchange 1.15 shares of United common stock for each of the 2,729,468 common shares of Eagle. The transaction, valued at approximately $95,000,000 based on recent market prices of United's stock, will be accounted for using the pooling of interests method of accounting. It is anticipated that the proposed acquisition will be consummated during the second quarter of 1996.
NOTE Q--PENDING ACQUISITION (UNAUDITED) - continued
The following represents selected pro forma financial information regarding the effects of the transaction as though United and Eagle had been combined during 1995, 1994 and 1993:
The data set forth above is not necessarily indicative of the results of operations or the combined financial position of United that would have resulted had the merger been consummated at the beginning of the applicable periods indicated, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined entities.
UNITED BANKSHARES, INC. FORM 10-K, PART II
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
This item is omitted since it is not applicable.
UNITED BANKSHARES, INC. FORM 10-K, PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 11.

Item 11. EXECUTIVE COMPENSATION
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion satisfies the reporting requirements of Items 10 through 13.
Principal Shareholders of United - - --------------------------------
The following table lists each shareholder of United who is the beneficial owner of more than 5% of United's common stock, the only class of stock outstanding, as of December 31, 1995.
(1) UNB is a wholly-owned subsidiary of United and its Trust Department holds in fiduciary or agency capacity 910,895 shares of United's stock. The voting and investment authority for the shares held by the Trust Department is exercised by UNB's Board of Directors.
Board of Directors - - ------------------
The Bylaws of United provide that its Board of Directors shall consist of not fewer than five nor more than thirty-five persons, as may be determined, from time to time, by resolution adopted by the shareholders or by a majority of the Board of Directors. The twenty-three (23) persons listed below have been elected or appointed to serve as directors of United until the 1996 Annual Meeting of shareholders and until their successors are elected and qualified.
Each director has served continuously to date as a director beginning in the indicated year.
Directors have sole voting and investment authority of directly owned shares. The total of directly owned shares also includes stock options granted to executive officers pursuant to incentive stock option plans. For four of the directors who are executive officers, direct ownership includes options to purchase shares as follows: Richard Adams, 84,714 shares, Douglass H. Adams, 9,066 shares, Thomas A. McPherson, 20,320 shares and I. N. Smith, Jr., 12,506 shares. The options to purchase shares included in the direct ownership of all executive officers as a group total 245,554. For the executive offices held by them, see the section of this document captioned "Executive Officers."
Indirect shares for each individual director include those owned by spouses and immediate family members, shares held in any trust of which a director is a beneficiary, and shares held by a corporation which the director controls. These shares do not include the Trust Shares referred to in a following footnote.
RICHARD M. ADAMS, who is Chairman and Chief Executive Officer of both United and UNB, became a director of United in 1984. Mr. Adams is 49 years old. He owns 235,611 shares of United directly and 91,670 shares indirectly, the total of which represents 2.73 percent of the total outstanding shares of United. Of the 90,861 shares indirectly owned by Mr. Adams, 25,590 shares are in the Stevenson Trust over which he exercises voting power, 35,414 shares are owned by the members of his immediate family and 30,666 shares are held in two family trusts over which he exercises voting power but no investment authority. Messrs. Richard M. Adams and Douglass H. Adams are brothers.
I. N. SMITH, JR., who is President of United, Vice Chairman of UNB, and former President of UNB, became a director in 1986. Mr. Smith is 63 years old. He owns 16,812 shares of United directly and 220,184 shares indirectly, the total of which represents 1.98 percent of the total outstanding shares of United. Of the 220,184 shares indirectly owned beneficially by Mr. Smith, 14,700 shares are owned by members of his immediate family and 4,000 shares are owned by the mother of Mr. Smith over which he has power of attorney. The following shares owned of record by others may be deemed to be owned by Mr. Smith under the rules and regulations of the Securities and Exchange Commission: Kanawha City Company 15,000 shares; Kanawha Company 56,000 shares; Roane Land Company 484 shares; Roxalana Land Company 75,000 shares; and West Virginia Coal Land Company 55,000 shares.
DOUGLASS H. ADAMS, who is Executive Vice-President of United, became a director in 1988. Mr. Adams is 57 years old. He owns 43,438 shares of United directly and 2,551 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United. Messrs. Richard M. Adams and Douglass H. Adams are brothers.
ROBERT G. ASTORG, who is a CPA and Managing Director of IDS Tax and Business Services, a financial consultant and tax service, became director in 1991. Mr. Astorg is 52 years old. He owns 12,313 shares of United directly and 827 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United. Mr. Astorg is a former Partner of Astorg and Altizer, CPAs.
THOMAS J. BLAIR, III, who is President and Chief Executive Officer of Kelley, Gidley, Blair & Wolfe, Inc., former Chairman of the Board of UNB- Central, Heritage and Weston National, became a director in 1988. Mr. Blair is 62 years old. He owns 135,860 shares of United directly and 7,100 shares indirectly, the total of which represents 1.19 percent of the total outstanding shares of United. Mr. Blair is a former president of the McDowell County Water Company.
HARRY L. BUCH, who is an Attorney at Law, and Partner with Bailey, Riley, Buch & Harman, became a director in 1990. Mr. Buch is 65 years old. He owns 6,063 shares of United directly which represents less than one percent of the total outstanding shares of United. Mr. Buch is a former Partner with Gompers, Buch, McCarthy & McLure.
R. TERRY BUTCHER, who is an Attorney at Law, and Partner with Butcher & Butcher, became a director in 1988. Mr. Butcher is 48 years old. He owns 23,500 shares of United directly and 500 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United.
JOHN W. DUDLEY, who is President of J. W. Dudley Sons & Company, a retail business, became a director in 1986. Mr Dudley is 49 years old. He owns 8,703 shares of United directly which represents less than one percent of the total outstanding shares of United.
H. SMOOT FAHLGREN, who is Chairman and former Chief Executive Officer of Fahlgren, Inc., became a director in 1984. Mr. Fahlgren is 65 years old. He owns 135,974 shares of United directly which represents 1.13 percent of the total outstanding shares of United. Mr. Fahlgren is Mr. Graff's father-in-law.
THEODORE J. GEORGELAS, who is Chairman of the Board of First Commercial Bank, and President of Georgelas and Sons, Inc., a commercial real estate development company, became a director in 1990. Mr. Georgelas is 49 years old. He directly owns 49,666 shares of United which represents less than one percent of the total outstanding shares of United.
C. E. GOODWIN, who is an Attorney at Law and Counsel with Goodwin & Goodwin, became a director in 1985. Mr. Goodwin is 85 years old. He owns 15,620 shares of United directly and 1,272 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United.
F.T. GRAFF, JR., who is a practicing attorney and partner of Bowles Rice McDavid Graff and Love, became a director of United in 1984. Mr. Graff is 56 years old. He owns 2,000 shares of United directly and 6,000 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United. The indirectly owned shares are held by a bank in a trustee account for Mr. Graff over which he exercises voting and dispositive power. Mr. Graff is Mr. Fahlgren's son-in-law.
LEONARD A. HARVEY, who is a former Secretary of the West Virginia Department of Commerce, Labor, and Environmental Resources, became a director of United in 1990. Mr. Harvey is 69 years old. He owns 29,659 shares of United directly and 859 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United.
ANDREW J. HOUVOURAS, who is President of A&L Industries, an investment company, became a director of United in 1985. Mr. Houvouras is 76 years old. He owns 439 shares of United directly and 27,745 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United. The indirect shares are owned by a company in which Mr. Houvouras is a partner.
RUSSELL L. ISAACS, who is the owner of Russell L. Isaacs and Company, a consulting firm, became a director of United in 1984. Mr. Isaacs is 63 years old. He owns 20,958 shares of United directly which represents less than one percent of the total outstanding shares of United.
ROBERT P. MCLEAN, who is the President of Stanaford Acres, Inc. and Vice- President of Sigmund-McLean, Inc. became a director of United in 1992. Mr. McLean is 65 years old. He owns 4,633 shares of United directly and 1,399 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United.
THOMAS A. MCPHERSON, who is an Executive Vice President of United and the former President and Chief Executive Officer of UNB-C, became a director of United in 1988. Mr. McPherson is 59 years old. He owns 68,756 shares of United directly which represents less than one percent of the total outstanding shares of United.
G. OGDEN NUTTING, who is the former Chairman of the Board of UNB-N and President of The Ogden Newspapers, Inc., became a director of United in 1986. Mr. Nutting is 60 years old. He owns 326,328 shares of United indirectly which represents 2.72 percent of the total outstanding shares of United. The voting and investment authority for the indirectly owned shares of Mr. Nutting are as follows: he has beneficial ownership, through shared investment or voting authority of 326,328 shares consisting of 20,952 shares held by Mr. Nutting as co-trustee, and 277,376 shares registered in the name of The Ogden Newspapers, Inc. of which Mr. Nutting is President. He is also a settlor and sole beneficiary of a trust which contains 28,000 shares.
WILLIAM C. PITT, III, who is a hotel and resort developer, became a director of United in 1987. Mr. Pitt is 51 years old. He owns 5,000 shares of United directly which represents less than one percent of the total outstanding shares of United.
CHARLES E. STEALEY, who is a private consultant and former Assistant Vice President and Director of Administration of Olsten Corporation, became a director of United in 1986. Mr. Stealey is 55 years old. He owns 30,668 shares of United directly and 48,362 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United. Mr. Stealey's mother holds 7,354 of the indirect shares over which Mr. Stealey has power of attorney and the other 41,008 indirect shares are held in a trustee account for Mr. Stealey over which he exercises voting and investment authority.
WARREN A. THORNHILL, III, who is an Attorney at Law, former Chairman of the Board of Summit Holding Corporation and Raleigh County National Bank and UNBS, became a director of United in 1992. Mr. Thornhill is 67 years old. He owns 131,997 shares of United directly and 92,730 shares indirectly, the total of which represents 1.87 percent of the total shares outstanding of United. Mr. Thornhill's indirectly owned shares are owned by the members of his immediate family.
HAROLD L. WILKES, who is President of Little General Stores, Inc., a convenience store chain, became a director of United in 1993. Mr. Wilkes is 55 years old. He directly owns 1,977 shares of United which represents less than one percent of the total outstanding shares of United.
JAMES W. WORD, JR., who is President of Beckley Loan Company and Vice- President of Beckley Loan and Industrial Corporation became a director of United in 1992. He is 71 years old. He owns 33,680 shares of United directly and 26,337 shares indirectly, the total of which represents less than one percent of the total outstanding shares of United. Mr. Word's indirectly owned shares are owned by the members of his immediate family.
All directors and executive officers of United as a group, 28 persons, own 1,182,119 shares of United directly and 1,771,161 shares indirectly, the total of which represents 24.62 percent of the total shares outstanding for United. Included in indirectly owned shares is 910,895 shares of United common stock held by UNB's Trust Department serving in a fiduciary or agency capacity (the "Trust Shares"). The voting and investment authority for the Trust Shares held by the Trust Department is exercised by UNB's Board of Directors. The members of UNB's Board of Directors who are also directors or executive officers of United are: Richard M. Adams, I. N. Smith, Jr., and Gary L. Ellis.
Effective November 29, 1995, Joseph N. Gompers resigned from the Board of Directors with no disagreements with management. Leonard A. Harvey and Thomas A. McPherson have chosen not to stand for re-election for the 1996 Annual Meeting. It is anticipated that Mr. Harvey will be named Director Emeritus.
Meetings and Committees of the Board of Directors - - -------------------------------------------------
The Board of Directors of United met four times during 1995. The Board reviews management reports and general corporate policy. During the calendar year ended December 31, 1995, each director of United attended more than 75% of the total number of meetings of the Board and Board Committees on which he or she served during the period he or she served as a director, except for Harry L. Buch, John W. Dudley, Joseph N. Gompers and Andrew J. Houvouras.
The Board has three standing committees--the Executive, Audit and Compensation Committees. The Audit Committee met four times in 1995 to review the quarterly reports of internal audit, all reports of external auditors, and all reports of examination by federal and state bank regulatory authorities. This committee consisted of: Robert G. Astorg, Chairman, R. Terry Butcher, C. E. Goodwin and James W. Word, Jr.
The Executive Committee met five times during 1995. The Executive Committee may exercise the power of the Board of Directors between meetings of the full Board of Directors or upon the call of the Chairman, as directed by the Board and consistent with the provisions of West Virginia corporate law and United's articles of incorporation and bylaws. The committee consisted, during 1995, of Richard M. Adams, Chairman, I. N. Smith, Jr., Thomas J. Blair, III, Harry L. Buch, H. Smoot Fahlgren, Theodore J. Georgelas, Leonard A. Harvey, Russell L. Isaacs, G. Ogden Nutting, William C. Pitt, III, Warren A. Thornhill, III and F.T. Graff, Jr., who also serves as secretary for the Executive Committee.
The Compensation Committee met one time during 1995. The Compensation Committee makes recommendations regarding officer compensation and budgetary matters to the Board of Directors. The committee consisted of the same members as served on the Executive Committee except for Messrs. R. Adams and Smith. Mr. Isaacs is chairman of the Compensation Committee.
Compensation Committee Interlocks and Insider Participation - - -----------------------------------------------------------
F.T. Graff, Jr., a member of the Board of Directors of United and the Board's Compensation Committee, is a partner in the law firm of Bowles Rice McDavid Graff & Love in Charleston, West Virginia. Bowles Rice McDavid Graff & Love rendered legal services to United and UNB during 1995 and it is expected that the firm will continue to render services to both in the future. The fees paid to Bowles Rice McDavid Graff & Love represent less than 5% of that firm's revenues for 1995.
Compensation of Directors - - -------------------------
Directors other than executive officers of United receive a retainer of $550 per month without regard to meeting attendance. In addition, each outside director receives a fee of $550 for each United Board Committee attended except for Mr. Isaacs. Mr. Isaacs, as chairman of the Compensation Committee, receives an additional $550 for each committee meeting attended. Mr. Astorg, as chairman of the Audit Committee, receives an additional retainer payment of $550 per month without regard to meeting attendance.
SUMMARY COMPENSATION TABLE
The following table is a summary of certain information concerning the compensation awarded or paid to, or earned by, the Company's chief executive officer and each of the Company's other four most highly compensated executive officers during the last three fiscal years.
(1) All reported amounts indicate annual amounts accrued under the Company's 401(K) Plan.
(2) Included are $9,240 representing the Company's matching contribution to the Company's 401(K) Plan and $26,424 accrued under a supplemental executive retirement plan.
(3) The aggregate value of all perquisites and other personal benefits did not exceed either $50,000 or 10% of the total annual salary and bonus reported for the named executive officers; therefore, no disclosure has been made.
STOCK OPTION GRANTS TABLE
The following table sets forth information concerning individual grants of options to purchase the Company's Common Stock made to the named executives in 1995.
(1) Granted from the 1991 Incentive Stock Option Plan. The option exercise price is the market value of United's stock at the date the option was granted. All options granted under this plan are exercisable in accordance with a three year vesting schedule: 50% after the first year; 75% after the second year and 100% after three years.
STOCK OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth certain information regarding individual exercises of stock options during 1995 by each of the named executives.
Executive Officers - - ------------------
Set forth below are the executive officers of United and relations that exist with affiliates and others for the past five years.
Certain Reports - - ---------------
Section 16(a) of the Securities and Exchange Act of 1934 requires United's directors and executive officers and persons who beneficially own more than ten percent of United's stock (currently, to the best of United's knowledge, there are no such persons) to file initial forms of beneficial ownership (Form 3), statements of changes in beneficial ownership (Form 4) and annual statements of beneficial ownership (Form 5) with the Securities and Exchange Commission ("SEC"). Persons filing such reports are required by SEC regulations to furnish United with copies of all such beneficial ownership statements filed under section 16(a) of the Exchange Act.
Based solely on a review of such reports and representations from United directors and executive officers, United believes that during 1995 all such reports were filed on a timely basis, with one exception: Director Leonard A. Harvey did not file a Form 4 to report the purchase of 2,000 shares of common stock in November 1995. Mr. Harvey reported the transaction on a subsequent Form 4 in January of 1996.
United's contributions to the Pension Plan, a defined benefit plan, are not and cannot be calculated separately for specific participants by the Pension Plan's actuary. No company contributions to the Pension Plan are included in the amounts shown as aggregate or contingent forms of remuneration. See the section captioned, Employee Benefit Plans, on the pages following.
As of December 31, 1995, the persons named in the table above had compiled and credited service under the Pension Plan as follows: R. Adams 27 years; I.N. Smith 36 years; G. Ellis 14 years; T. McPherson 33 years; S. Wilson 24 years.
Executive officers above are eligible to participate in the 401(K) Plan, a defined contribution plan. Discretionary contributions made by the individuals are matched in accordance with provisions of the plan as described under the section entitled Employee Benefit Plans. Discretionary contributions, made from the participant's regular pay, are reflected in Cash Compensation above. United's matching contributions are not reflected in Cash Compensation. Both the individual contributions and matching contributions are tax deferred income.
Officer Employment Contracts - - ----------------------------
Richard M. Adams, Chairman and Chief Executive Officer of United and UNB entered into an employment contract with United effective April 11, 1986. This contract was amended in 1989, again in January and November 1991, April 1992 and again in November 1993. This most recent amendment also served to initiate a new five year term. Under the contract Mr. Adams is required to devote his full-time energies to performing his duties as Chairman and CEO on behalf of United and UNB. The contract provides for a base compensation of $300,000 and additional benefits consistent with the office. This base compensation may be increased but not decreased. If the contract is terminated by Adams for change in control, or for any reason other than mutual consent or criminal misconduct, Mr. Adams, or his family or estate, is entitled to his base salary for the remainder of the contract term.
On July 27, 1990, United also entered into a Supplemental Retirement Plan with Mr. Adams. This plan provides for an annual supplemental retirement benefit upon his reaching age 65 or upon the later termination of his employment with United. The annual benefit will be equal to seventy percent of the average of Mr. Adams' three highest base salaries during his employment with United, reduced by benefits. The plan also provides for reduced benefits for early retirement after age 62 as well as payments to his spouse in the event of his death.
United and UNB entered into an employment agreement with I. N. Smith, Jr., President of United and Vice-Chairman of UNB, on December 17, 1985. The term of the agreement extends until Mr. Smith reaches the age of 75. Until Smith becomes 65, he will be employed full-time by United as an executive officer and will receive an annual salary of no less than $115,000. Upon reaching the age of 65 and until he reaches the age of 75, Mr. Smith shall render such consulting and advisory services as United may request, and shall receive for such services an annual fee of $36,000 from age 65 until he reaches age 70, and $30,000
thereafter. The agreement also contains provisions which address the issues of disability, early retirement and the death of Mr. Smith. All of these events carry reduced payment provisions. In addition, until Mr. Smith reaches age 65, he has agreed to serve as, and United has agreed to use its best efforts to nominate and elect him, a director of United and UNB.
Ohio Valley National Bank, (now a part of UNB as a result of its merger with United) entered into a Salary Contribution Agreement with Douglass H. Adams, Executive Vice President of United, on June 13, 1985. This agreement provides at age 65 for an annual supplemental retirement equal to $30,000 for life or fifteen years certain. This future liability is being funded with life insurance. Provision is made for an early retirement benefit beginning at age 60 at a reduced percentage of the normal benefit. The agreement also provides for payment to beneficiaries in the event of his death.
Change of Control Agreements - - ----------------------------
In March of 1994, United entered into agreements with G. Ellis, S. Wilson, T. McPherson, J. Hayhurst and J. Wilson to encourage those executive officers not to terminate their employment with United because of the possibility that United might be acquired by another entity. The Board of Directors determined that such an arrangement was appropriate, especially in view of the recent entry of large regional bank holding companies into West Virginia. The agreements were not undertaken in the belief that a change of control of United was imminent.
Generally, the agreements provide severance compensation to those officers if their employment should end under certain specified conditions after a change of control of United. Compensation is paid upon any involuntary termination following a change of control unless the officer is terminated for cause. In addition, compensation will be paid after a change of control if the officer voluntarily terminates employment because of a decrease in the total amount of the officer's base salary below the level in effect on the date of consummation of the change of control, without the officer's consent; a material reduction in the importance of the officer's job responsibilities without the officer's consent; geographical relocation of the officer without consent to an office more than fifty (50) miles from the officer's location at the time of a change of control; failure by United to obtain assumption of the contract by its successor or any termination of employment within thirty-six (36) months after consummation of a change of control which is effected for any reason other than good cause.
Under the agreements, a change of control is deemed to occur in the event of a change of ownership of United which must be reported to the Securities and Exchange Commission as a change of control, including but not limited to the acquisition by any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934
(the "Exchange Act")) of direct or indirect "beneficial ownership" (as defined by Rule 13d-3 under the Exchange Act) of twenty-five percent (25%) or more of the combined voting power of United's then outstanding securities, or the failure during any period of two (2) consecutive years of individuals who at the beginning of such period constitute the Board for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds (2/3) of the directors at the beginning of the period.
Under the agreements, severance benefits include: (a) cash payment equal to the officers monthly base salary in effect on either (i) the date of termination; (ii) the date immediately preceding the change of control, whichever is higher, multiplied by the number of full months between the date of termination and the date that is thirty-six (36) months after the date of consummation of the change of control; (b) payment of cash incentive award, if any, under United's Incentive Plan; (c) continuing participation in employee benefit plans and programs such as retirement, disability and medical insurance for a period of thirty-six (36) months following the date of termination.
Succession Management Stock Bonus Plan - - --------------------------------------
In April 1989, the Executive Committee, which at that time also served as the Compensation Committee, approved a management stock bonus plan. The purpose of the plan is to retain certain key "junior" officers. The plan is intended to encourage these individuals to stay with the company and to continue to develop their potential for future management roles. The plan provides for grants of the right to receive up to 500 shares per year, for five years, per officer. The shares granted will be held in trust and the recipients have no ownership rights until the shares are distributed. All granted stock was distributed to the grantees at the beginning of 1994. In certain limited circumstances distribution could have been earlier, such as, in the case of disability or death. Shares have been purchased by United and are held in a trust account for this plan. None of the individuals included in this plan were executive officers of United. No grants have been made since 1990.
Incentive Stock Option Plan - - ---------------------------
In February, 1988, the Board adopted an incentive stock option ("ISO") plan which was approved by United's shareholders at the 1988 annual meeting. The ISO plan was conceived by United's Board in order to retain and motivate key management executives of United. The class of eligible employees is executive officers of United and its subsidiaries owning less than 10% of United's issued and outstanding stock. The Executive Committee of United, in its sole discretion, will award stock options to eligible employees, will determine the conditions for exercise, and will administer the ISO plan generally. One hundred
thousand (100,000) shares were allocated to the plan, with options for no more than 20,000 shares to be awarded each year. The option exercise price was the fair market value of United's stock at the time the option is granted. The last grants under this plan were awarded in 1992. All options granted are vested. Messrs. R. Adams, Smith, S. Wilson, J. Wilson, D. Adams, Sowards and Ellis have exercised options.
In April, 1991, the Board adopted an incentive stock option plan ("1991 Plan") which was approved by United's shareholders at the 1991 annual meeting. The 1991 Plan was intended to attract and retain qualified and motivated management. The class of eligible employees was officers of United and its subsidiaries owning less than 10% of United's issued and outstanding stock. The Executive Committee of United, in its sole discretion, awarded stock options to eligible employees and administered the 1991 Plan generally. Five hundred thousand (500,000) shares were allocated to the plan, with options for no more than 100,000 shares to be awarded each year. The option exercise prices were the fair market value of United's stock at the time the option was granted. The last grants under this plan were awarded in 1995.
In 1995, 100,000 shares were granted as follows: Richard M. Adams-12,714 shares; I. N. Smith, Jr.-3,506 shares; Gary L. Ellis-6,028 shares; Joe L. Wilson-3,506 shares; Steven E. Wilson-6,028 shares; James B. Hayhurst-4,120 shares; Joseph Wm. Sowards-2,366 shares; Douglass H. Adams-2,366 shares and Thomas A. McPherson-4,120 shares. Fifty-two nonexecutive officers received a total of 55,246 shares. These shares were granted at the then current market price of $30.00. The options granted become exercisable in accordance with a three year vesting schedule: 50% year one; 75% year two and 100% year three. Messrs. Ellis, Smith, S. Wilson, D. Adams, McPherson, Sowards and seventeen nonexecutive officers have exercised options.
In August, 1995, the Board adopted an incentive stock option plan ("1996 Plan") which will be presented to United's shareholders at the 1996 annual meeting to be voted on for their approval. The 1996 Plan is intended to attract and retain qualified and motivated management. The class of eligible employees is officers of United and its subsidiaries owning less than 10% of United's issued and outstanding stock. The Executive Committee of United, in its sole discretion, will award stock options to eligible employees and will administer the 1996 Plan generally. Six hundred thousand (600,000) shares will be allocated to the 1996 Plan. Each Plan year, 120,000 options will be considered for award to eligible employees; however, not all of the 120,000 options are required to be awarded in that year. Any ungranted options from the prior year(s) will be added to the current year's options for the Executive Committee's consideration for granting the options. The total number of options that may be granted in any one year, with the exception of the first year whereby 120,000 will be considered for award, is the current year's allocation plus the cumulative total of all ungranted options of all prior years under the 1996 Plan. The option
exercise price of each grant will be the fair market value of United's stock at the time the option is granted. The first grants under the 1996 Plan, subject to shareholder approval, will be awarded in November 1996.
Employee Benefit Plans - - ----------------------
No directors or principal shareholders of United and its subsidiaries, other than those persons who are salaried officers, participate in any type of benefit plan of United.
United's subsidiaries provide, on a substantially non-contributory basis for all full-time employees, life, disability, hospital and dental insurance. Life insurance with value of 250% of base salary is provided to all full-time employees, including executive officers. The premiums paid by the subsidiaries for life insurance on any individual which has a face value greater than $50,000 is properly reported as compensation. These plans do not discriminate, in scope, terms or operation, in favor of the executive officers of United or its subsidiaries and are available generally to all salaried employees of United and its subsidiaries.
Each employee of United, or its participating subsidiaries, who completes one year of eligible service and is 21 years of age is eligible to participate in the Pension Plan. The plan is noncontribu-tory on the part of the employee. Vesting is attained with five years of participation.
Normal retirement benefits under the United Plan are equal to:
1.25% of Average Final Compensation* plus 0.5% of Average Final Compensation in excess of Covered Compensation** multiplied by years of service not to exceed 25.
*Average Final Compensation = The average of the highest five consecutive plan years of basic compensation paid during the ten plan years preceding the date of determination.
**Covered Compensation = The average of the last 35 years of the social security wage base prior to Social Security retirement age.
Each employee of United, or its participating subsidiaries, who completes one year of eligible service is eligible to participate in the United Savings and Stock Investment Plan, a deferred compensation plan under Section 401(k) of the Internal Revenue Code. Each participant may contribute from 1% to 10% of pre-tax earnings to his/her account which may be invested in one to four investment options chosen by the employee. 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 employees may participate in an employee stock purchase plan whereby its employees may purchase shares of United's common stock. Purchases made by employees under this plan are coordinated by the Trust Department of UNB, and involve stock purchased at market price for this purpose.
Transactions with Management and Others - - ---------------------------------------
United's subsidiaries have had, and expect to have in the future, banking transactions with United and with its officers, directors, principal shareholders, or their interests (entities in which they have more than a 10% interest). The transactions were in the ordinary course of business and with respect to loans were made on substantially the same terms, including interest rates, collateral and repayment terms as those prevailing at the time for comparable transactions. United's subsidiary banks are subject to federal statutes and regulations governing loans to officers and directors and extend loans in compliance with such laws and only with the approval of the Board of Directors.
The building utilized by UNB to house its Rosemar Circle Branch in North Parkersburg, West Virginia, is owned by Richard M. Adams, Chairman and Chief Executive Officer of United and UNB, his brother, Douglass H. Adams, Executive Vice President of United and their step-mother, Dorothy D. Adams. The Adams' lease the land from UNB at a nominal annual rental and lease the branch facility they constructed to UNB. The leases were entered into prior to UNB's ownership of the branch facility and were assumed by UNB upon its acquisition of the previous lessee, United Bank. Management believes the lease terms are comparable with lease terms for similar property in the market area.
H. Smoot Fahlgren, a member of the Board of Directors of United, is Chairman of Fahlgren Inc., an advertising agency with its headquarters in Parkersburg, West Virginia. The agency has provided the advertising for United since 1978. United utilizes an aircraft owned by Mr. Fahlgren, a member of United's Board of Directors. During 1995, Mr. Fahlgren received $20,995 in compensation for these services. Payment for the advertising by United to Fahlgren Martin, Inc. was less than 5% of that firm's revenues during the year 1995.
F.T. Graff, Jr., a member of the Board of Directors of United, is a partner in the law firm of Bowles Rice McDavid Graff & Love in Charleston, West Virginia. Bowles Rice McDavid Graff & Love rendered legal services to United and UNB during 1995 and it is expected that the firm will continue to render certain services to both in the future. The fees paid to Bowles Rice McDavid Graff & Love represent less than 5% of that firm's revenues for 1995.
R. Terry Butcher, a member of the Board of Directors of United, is a partner in the law firm of Butcher & Butcher of Glenville, West Virginia. Butcher & Butcher has rendered legal services to UNB, a United affiliate, during 1995 and it is expected that the firm will continue to render legal services in the future. The fees paid to Butcher & Butcher represent less than 5% of the firm's revenues for 1995.
UNB leases its northern region main banking premises from The Ogden Newspapers, Inc. pursuant to a written lease agreement dated August 1, 1979 (the "Lease"). The Ogden Newspapers, Inc. is a shareholder of United, and the voting and investment authority for its shares are beneficially owned by its President, G. Ogden Nutting who is a director of United. The Lease is on terms comparable to market terms for similar rental space in Wheeling, West Virginia. The Lease provides for five (5) successive options to renew and extend the terms of the Lease for five (5) years each. United exercised its option to renew the Lease for five (5) years in 1989 and again in 1994. In addition, during the year 1995 subsidiaries of United advertised, at market rates, in newspapers published by The Ogden Newspaper, Inc. The fees paid in such advertising and the rent paid to The Ogden Newspapers, Inc. represent less than 5% of that firm's revenue for the year 1995.
UNITED BANKSHARES, INC. FORM 10-K, PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
(a) (1) and (2) Financial Statements and Financial Statement schedules . . . . . . . . . . . . . . . . 46
(3) Listing of Exhibits - See the Exhibits' Index . . . . . . . . . . . . . . . . . . . . . . . 94
(b) Reports on Form 8-K filed in the fourth quarter of 1995:
Form 8-K dated November 30, 1995
Item 5. Acquisition of First Commercial Bank.
Form 8-K dated December 13, 1995
Item 5. Director resignation with no disagreements with management.
(c) Exhibits . . . . . . . . . . . . . . . . . . . . . . 99
(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 therefor have been omitted.
UNITED BANKSHARES, INC.
FORM 10-K
INDEX TO EXHIBITS
Item 14.
Footnotes - - ---------
(a) N/A = Not Applicable
(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 Exhibit 10 of the 1986 Form 10-K for United Bankshares, Inc., File No. 0-13322
(d) Incorporated into this filing by reference to Part II of Form S-4 Registration Statement of United Bankshares, Inc., Registration No. 33- 19968 filed February 3, 1988
(e) Incorporated into this filing by reference to Exhibits to the 1988 10-K for United Bankshares, Inc., File No. 0-13322
(f) Incorporated into this filing by reference to Exhibits to the 1989 10-K for United Bankshares, Inc., File No. 0-13322
(g) Incorporated into this filing by reference to Exhibits to the 1990 10-K for United Bankshares, Inc., File No. 0-13322
(h) Incorporated into this filing by reference to Exhibits to the 1991 10-K for United Bankshares, Inc., File No. 0-13322
(i) Incorporated into this filing by reference to Exhibits to the 1992 10-K for United Bankshares, Inc., File No. 0-13322
(j) Incorporated into this filing by reference to Exhibits to the 1993 10-K for United Bankshares, Inc., File No. 0-13322
(k) Incorporated into this filing by reference to Exhibits to the 1994 10-K as amended by Form 10K/A filed February 8, 1996, for United Bankshares, Inc., File No. 0-13322
SIGNATURES
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.
UNITED BANKSHARES, INC. (Registrant)
By /s/ Richard M. Adams -------------------------------- Chairman of the Board
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.
Signatures Title Date
/s/ Richard M. Adams Chairman of the Board, March 22, 1996 - - ------------------------------- Director, Chief Execu- tive Officer
/s/ I. N. Smith President and Director March 22, 1996 - - -------------------------------
/s/ Steven E. Wilson Chief Financial Officer March 22, 1996 - - ------------------------------- Chief Accounting Officer
/s/ Thomas J. Blair, III Director March 22, 1996 - - -------------------------------
/s/ James W. Word, Jr. Director March 22, 1996 - - -------------------------------
/s/ F. T. Graff, Jr. Director March 22, 1996 - - -------------------------------
/s/ H. Smoot Fahlgren Director March 22, 1996 - - -------------------------------
/s/ William C. Pitt, III Director March 22, 1996 - - -------------------------------
/s/ G. Ogden Nutting Director March 22, 1996 - - -------------------------------
/s/ R. Terry Butcher Director March 22, 1996 - - -------------------------------
/s/ Harry L. Buch Director March 22, 1996 - - -------------------------------
/s/ Russell L. Isaacs Director March 22, 1996 - - -------------------------------
/s/ Leonard A. Harvey Director March 22, 1996 - - -------------------------------
/s/ C. E. Goodwin Director March 22, 1996 - - -------------------------------
SIGNATURES (continued)
Signatures Title Date
/s/ Charles E. Stealey Director March 22, 1996 - - -------------------------------
/s/ Warren A. Thornhill, III Director March 22, 1996 - - -------------------------------
/s/ Robert P. McLean Director March 22, 1996 - - -------------------------------
/s/ Robert G. Astorg Director March 22, 1996 - - -------------------------------
/s/ Thomas A. McPherson Director March 22, 1996 - - -------------------------------
/s/ Douglass H. Adams Director March 22, 1996 - - -------------------------------