<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
United Bankshares, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
United Bankshares, Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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UNITED BANKSHARES, INC.
P. O. BOX 1508
UNITED SQUARE
FIFTH AND AVERY STREETS
PARKERSBURG, WEST VIRGINIA 26102
(304) 424-8800
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its Board of Directors,
the 1995 Annual Meeting of Shareholders of UNITED BANKSHARES, INC. ("United")
will be held at The Blennerhassett Hotel, Fourth and Market Streets,
Parkersburg, West Virginia, on April 24, 1995 at 4:00 p.m., local time, for the
purpose of considering and voting upon the following matters:
1. To elect twenty-four (24) persons to serve as Directors of United. The
nominees selected by the current Board of Directors are listed in the
accompanying Proxy Statement for this Annual Meeting.
2. To act upon any other business which may properly come before this Annual
Meeting or any adjournment or adjournments thereof. The Board of Directors at
present knows of no other business to come before this Annual Meeting.
The close of business on March 10, 1995, has been fixed by the Board of
Directors as the record date for determining shareholders entitled to notice of
and to vote at this Annual Meeting.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
REGARDLESS OF YOUR PLANS TO ATTEND THIS MEETING. IF YOU DO ATTEND, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
TWO INDIVIDUALS, WHO ARE NOT DIRECTORS OF UNITED, HAVE BEEN NAMED IN THE PROXY
TO VOTE THE SHARES REPRESENTED BY PROXY. IF YOU WISH TO CHOOSE SOME OTHER PERSON
TO ACT AS YOUR PROXY, MARK OUT THE PRINTED NAME AND WRITE IN THE NAME OF THE
PERSON YOU SELECT.
By Order of the Board of Directors
Richard M. Adams
Chairman of the Board and
Chief Executive Officer
March 24, 1995
<PAGE>
UNITED BANKSHARES, INC.
P. O. BOX 1508
UNITED SQUARE
FIFTH AND AVERY STREETS
PARKERSBURG, WEST VIRGINIA 26102
(304) 424-8800
PROXY STATEMENT
1995 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD April 24, 1995
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of United Bankshares, Inc. ("United") for its
1995 Annual Meeting of Shareholders (the "1995 Annual Meeting") to be held April
24, 1995.
A proxy for use by the shareholders of United in connection with the 1995
Annual Meeting accompanies this Proxy Statement, which is being mailed to the
shareholders of United on or about March 24, 1995. The proxy will be voted in
accordance with the specifications made thereon by the United shareholder. See
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS. If a shareholder does not
specify how the shareholder's proxy is to be voted, a properly executed proxy
will be voted "FOR" the proposal presented herein, the election of United
directors.
As of the date of mailing of this Proxy Statement, the Board of Directors of
United is not aware of any other business to be acted upon at the 1995 Annual
Meeting, and it is not anticipated that other matters will be brought before
that meeting. However, if any other matters should be brought before the 1995
Annual Meeting, it is intended that, unless otherwise specified on the proxy of
the United shareholder, the persons appointed as proxies may vote thereon
according to their judgment in light of conditions then prevailing and the
recommendations of the Board of Directors of United.
Any shareholder of United has the right to revoke his or her proxy at any time
before it is voted (i) by giving written notice to the Chairman of United, (ii)
by submitting a subsequently dated Proxy or (iii) by appearing at the 1995
Annual Meeting and voting in person.
This proxy solicitation is made by the Board of Directors of United, and the
costs of soliciting proxies will be paid by United. In addition to soliciting
by mail, directors, officers and regular employees of United and its
subsidiaries, who will receive no compensation for their services other than
their regular salaries and fees, may solicit proxies by telephone, telegraph or
personal interview. Brokers, fiduciaries, custodians and other nominees have
been requested to forward solicitation materials to the beneficial owners of
United common stock held in their names and are to be reimbursed for their
reasonable expenses in so doing. In order to facilitate and expedite
distribution of these proxy solicitation materials to brokers, fiduciaries,
custodians, nominee holders and institutional investors, United has retained
Corporate Investor Communications, Inc. of Carlstadt, New Jersey ("CIC").
Pursuant to a retention letter dated January 4, 1995, CIC will contact all
broker and other nominee accounts identified on United's shareholder mailing
list in order to facilitate determination of the number of sets of proxy
materials such accounts require for purposes of forwarding the same to the
beneficial owners. CIC will then assist in the delivery of proxy materials to
these accounts for distribution. CIC will also assist in distribution of proxy
materials to institutional investors. CIC will follow-up with the brokers,
other nominee accounts and institutional investors, requesting return of
proxies. United is not retaining CIC to solicit proxies from registered holders
or from non-objecting beneficial owners. CIC's fee for the above services is
$3,000, plus reasonable disbursements which may include the broker search,
printing, postage, courier charges, filing reports, data transmissions and other
expenses approved by United.
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OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
Only shareholders of record at the close of business on March 10, 1995, are
entitled to notice of and to vote at the 1995 Annual Meeting. On that date,
there were 11,807,683 shares of the common stock of United issued and
outstanding, net of treasury shares, which shares were held by approximately
5,087 shareholders.
Each shareholder is entitled to one vote for each share owned on each matter
brought before the 1995 Annual Meeting. In the election of directors, a
shareholder of United may cast one vote for each share owned for each nominee.
However, every shareholder of United also has the right of cumulative voting, in
person or by proxy, in the election of directors. Cumulative voting gives each
shareholder the right to aggregate all votes which he or she is entitled to cast
in the election of directors and to cast all votes for one candidate or
distribute those votes among as many candidates and in such manner as the
shareholder desires. Assuming the number of directors is twenty-four (24), as
proposed by the current Board of Directors of United, each shareholder of United
has the right to cast twenty-four (24) votes in the election of directors for
each share of the common stock of United the shareholder held on the record
date. IF YOU WISH TO EXERCISE, BY PROXY, YOUR RIGHT TO CUMULATIVE VOTING IN THE
ELECTION OF DIRECTORS, YOU MUST PROVIDE A PROXY SHOWING HOW YOUR VOTES ARE TO BE
DISTRIBUTED AMONG ONE OR MORE CANDIDATES.
Unless contrary instructions are given by a shareholder who signs and returns
a proxy, all votes for the election of directors represented by such proxy will
be divided equally among the twenty-four (24) nominees set forth in this Proxy
Statement. However, if cumulative voting is invoked by one or more shareholders,
the votes represented by other proxies may be cumulated, at the direction of the
persons appointed as proxies with the recommendations of the Board of Directors
of United, in order to elect to the Board of Directors the maximum number of
nominees set forth in this Proxy Statement.
A majority of the outstanding shares of United will constitute a quorum at the
meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence of a quorum for the transaction of business. The
election of each director nominee requires the favorable vote of a plurality of
all votes cast by the holders of common stock at a meeting at which a quorum is
present. Only shares that are voted in favor of a particular nominee will be
counted toward such nominee's achievement of a plurality. Abstentions and
broker non-votes will not be counted toward such nominee's achievement of a
plurality and thus have no effect. A broker non-vote generally occurs when a
broker who holds shares in street name for a customer does not have the
authority to vote on certain matters because its customer has not provided any
voting instructions on the matter.
<PAGE>
TABLE OF CONTENTS
PROPOSALS FOR ANNUAL MEETING...................................................1
INTRODUCTION..............................................................1
ELECTION OF DIRECTORS..........................................................1
Nominees for Board of Directors................................................1
Meetings and Committees of the Board of Directors..............................4
Compensation of Directors......................................................5
Principal Shareholder of United................................................5
Beneficial Ownership of Securities by Executive Officers.......................5
EXECUTIVE COMPENSATION.........................................................6
Board Compensation Committee Report............................................6
Summary Compensation Table.....................................................7
Stock Option Grants Table......................................................8
Stock Option Exercises and Year-End Value Table................................8
Officer Employment Contracts...................................................8
Change of Control Agreements...................................................9
Succession Management Stock Bonus Plan........................................10
Incentive Stock Option Plan...................................................10
Employee Benefit Plans........................................................11
Compensation Committee Interlocks and Insider Participation...................11
Transactions with Management and Others.......................................11
OTHER INFORMATION.............................................................12
PERFORMANCE GRAPHS............................................................14
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS......................................15
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING.................................15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS....................................................16
AUDITED FINANCIAL STATEMENTS
See separate report accompanying this proxy statement
FORM 10-K
A copy of the 1994 Form 10-K Annual Report filed with the Securities and
Exchange Commission pursuant to Section 13 of the Securities Exchange Act of
1934 will be forwarded to shareholders at no charge, upon written request.
Shareholders desiring a copy should direct their request to the Secretary,
United Bankshares, Inc., United Square, Fifth and Avery Streets, Parkersburg,
West Virginia 26102.
Registrar and
Transfer Agent: Independent Auditors:
Mellon Bank, N.A. Ernst & Young LLP
P. O. Box 444 P. O. Box 2906
Pittsburgh, PA 15230 Charleston, WV 25330
<PAGE>
PROPOSALS FOR ANNUAL MEETING
INTRODUCTION
These proxy materials are being supplied in conjunction with the 1995
Annual Meeting of Shareholders of United Bankshares, Inc. ("United"). United is
a West Virginia corporation registered as a bank holding company pursuant to the
Bank Holding Company Act of 1956, as amended. United's wholly-owned banking
subsidiaries include UBC Holding Company, Inc. and its wholly-owned subsidiary,
United National Bank ("UNB"), United National Bank-South ("UNB-S") and UBF
Holding Company, Inc. with its wholly-owned banking subsidiary, Bank First,
N.A. ("Bank First"). United also owns all of the stock of United Venture Fund,
Inc. ("UVF"), a West Virginia Capital Company.
ELECTION OF DIRECTORS
Nominees for 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-four (24) persons listed below have been
elected or appointed to serve as directors of United until the 1995 Annual
Meeting. The individuals identified below are the nominees for election at the
1995 Annual Meeting to serve until the 1996 Annual Meeting or until their
successors are elected and qualified. Each nominee is currently a director and
has served continuously to date as a director beginning in the indicated year.
Beneficial ownership of United's securities by directors as set forth below
is as of February 28, 1995.
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, 79,500, shares Douglass H. Adams,
10,200 shares, Thomas A. McPherson, 16,200 shares, and I. N. Smith, Jr., 14,250
shares. The options to purchase shares included in the direct ownership of all
executive officers as a group total 231,550.
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 discussed herein.
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 48 years old.
He owns 221,795 shares of United directly and 90,003 shares indirectly, the
total of which represents 2.64 percent of the total outstanding shares of
United. Of the 90,003 shares indirectly owned by Mr. Adams, 25,590 shares are in
the Stevenson Trust over which he exercises voting power, 33,747 shares 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 62 years old.
He owns 19,126 shares of United directly and 220,184 shares indirectly, the
total of which represents 2.03 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.
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DOUGLASS H. ADAMS, who is Executive Vice-President of United, became a
director in 1988. Mr. Adams is 56 years old. He owns 44,527 shares of United
directly and 2,514 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 American Express
Tax & Business Service, Inc., a financial consultant and tax service, became
director in 1991. Mr. Astorg is 51 years old. He owns 12,164 shares of United
directly and 796 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
61 years old. He owns 130,725 shares of United directly and 7,100 shares
indirectly, the total of which represents 1.17 percent of the total outstanding
shares of United. Mr. Blair is a former president of the McDowell County Water
Company, which filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code on November 11, 1989. In previous proxy statements it was
disclosed that Mr. Blair was convicted of a series of seven (7) identical
statutory misdemeanors stemming from his company's alleged failure to establish
and maintain adequate and suitable water facilities and failure to perform such
service thereto as shall be reasonable, safe and sufficient for the service and
convenience of the public. Mr. Blair appealed his convictions. On December 14,
1993, the Supreme Court of Appeals of West Virginia set aside, reversed and
annulled the convictions.
HARRY L. BUCH, who is an Attorney at Law, and Partner with Bailey, Riley,
Buch & Harman, became a director in 1990. Mr. Buch is 64 years old. He owns
10,063 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 47 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 48 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 Chief Executive Officer and former Chairman of
Fahlgren, Inc., became a director in 1984. Mr. Fahlgren is 64 years old. He
owns 125,163 shares of United directly which represents 1.06 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 Bank First, N.A.,
and President of Georgelas and Sons, Inc., a commercial real estate development
company, became a director in 1990. Mr. Georgelas is 48 years old. He directly
owns 49,666 shares of United which represents less than one percent of the total
outstanding shares of United.
JOSEPH N. GOMPERS, who is a CPA and Partner with Gompers and Associates,
CPA's, became a director in 1990. Mr. Gompers is 42 years old. He owns 7,947
shares of United directly 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 84 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 55
years old. He owns 2,000 shares of United directly and 9,000 shares indirectly,
the total of which represents less than one percent of the total outstanding
shares of
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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 68 years old. He owns 28,659 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 75 years old.
He owns 424 shares of United directly and 27,054 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 62 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 64 years old. He owns 4,153 shares of United directly and 1,303
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 58 years old. He owns 68,001 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 59 years old. He owns 326,328 shares of United indirectly which
represents 2.76 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 50 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 54 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
Chairman of UNB-S, became a director of United in 1992. Mr. Thornhill is 66
years old. He owns 131,997 shares of United directly and 92,730 shares
indirectly, the total of which represents 1.90 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 54
years old. He directly owns 1,911 shares of United which represents less than
one percent of the total outstanding shares of United.
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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 70 years old. He owns 31,743 shares of United directly and
27,737 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, 29 persons, own
1,151,132 shares of United directly and 1,892,912 shares indirectly, the total
of which represents 25.76 percent of the total shares outstanding for United.
Included in indirectly owned shares are 980,734 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. In
addition, the total indirect shares includes 49,930 shares held by the Trust
Department of UNB-S of which 43,297 shares are held in the nominee name of Big
Clock Investment Company and are voted by UNB-S's Board of Directors. The
members of UNB-S's Board who are also directors or executive officers of United
are Gary L. Ellis, Warren A. Thornhill, III, and Robert P. McLean.
Other nominations may be made only if such nominations are made in
accordance with the procedures set forth in Article II, Section 5 of the
Restated Bylaws of United, which section, in full, is set forth below:
Section 5. Nomination of Directors. Directors shall be nominated by
the Board prior to the giving of notice of any meeting of shareholders
wherein directors are to be elected. Additional nominations of directors
may be made by any shareholder; provided that such nomination or
nominations must be made in writing, signed by the shareholder and received
by the Chairman or President no later than ten (10) days from the date the
notice of the meeting of shareholders was mailed; however, in the event
that notice is mailed less than thirteen (13) days prior to the meeting,
such nomination or nominations must be received no later than three (3)
days prior to any meeting of the shareholders wherein directors are to be
elected.
If any nominee set forth above is unable to serve, which the Board of
Directors has no reason to expect, the persons named in the accompanying proxy
intend to vote for the balance of those nominees set forth above and, if they
deem it advisable, for a substitute nominee named by the Board of Directors of
United.
It is the intention of the persons named in the accompanying proxy, unless
the proxy specifies otherwise (or except under the circumstances involving
cumulative voting in the election of directors described above) to vote "FOR"
the resolution to elect the twenty-four (24) nominees to serve as directors of
United until the 1996 Annual Meeting of shareholders and until their successors
are elected and qualified.
Meetings and Committees of the Board of Directors
The Board of Directors of United met six times during 1994. The Board
reviews management reports and general corporate policy. During the calendar
year ended December 31, 1994, 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 Mr. G.
Ogden Nutting.
The Board has three standing committees--the Executive, Audit, and
Compensation Committees. The Audit Committee met four times in 1994 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 seven times during 1994. 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
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United's articles of incorporation and bylaws. The committee consisted, during
1994, 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 two times during 1994. 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 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 $275 for each United Board Committee attended except
for Mr. Isaacs. Mr. Isaacs, as chairman of the Compensation Committee,
receives $550 for each committee attended. Mr. Astorg, as chairman of the Audit
Committee, receives an additional retainer payment of $275 per month without
regard to committee meeting attendance.
United utilizes an aircraft owned by Mr. Fahlgren, a member of United's
Board of Directors. During 1994, Mr. Fahlgren received $15,672 in compensation
for these services.
Principal Shareholder 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 February 28, 1995.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class
------------------------------------ -------------------- --------------
<S> <C> <C> <C>
(1) United National Bank Trust Department 980,734 8.30%
514 Market Street Parkersburg WV 26101
(764,998 shares or 6.47% are registered under
the nominee name of Cede & Co.)
</TABLE>
(1) UNB is a wholly-owned subsidiary of United and its Trust Department
holds in fiduciary or agency capacity 980,734 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.
Beneficial Ownership of Securities by Executive Officers
The following table sets forth certain information regarding the named
executives beneficial ownership of Common Stock of the Company as of February
28, 1995:
<TABLE>
<CAPTION>
Shares of Common
Stock of the Company
Beneficially Owned
----------------------------------
Title of Class Name of Officer Number (1) Percent of Class
-------------- --------------- ---------- ----------------
<S> <C> <C> <C>
Common Stock Richard M. Adams 311,798 2.64%
Common Stock I.N. Smith, Jr. 239,310 2.03%
Common Stock Gary L. Ellis 34,790 0.29%
Common Stock Steven E. Wilson 37,313 0.32%
Common Stock Thomas A. McPherson 68,001 0.58%
</TABLE>
(1) The amounts shown represent the total shares owned directly by such
named executive officers together with shares which are owned indirectly. The
indirect shares include shares which are issuable upon the exercise of all stock
options currently exercisable and those shares owned by spouses and immediate
family members, shares held in trust in which the executive is a beneficiary,
and shares held by a corporation which the executive controls.
5
<PAGE>
EXECUTIVE COMPENSATION
Board Compensation Committee Report
The Compensation Committee is responsible for administration of United
Bankshares, Inc.'s (United's) Executive Compensation programs. This includes
recommendations related to base salary, short term incentives and long term
stock option incentives for all Executive Officers of the Company.
The Compensation Committee's Executive Compensation policies, developed
based on competitive information, are designed to provide competitive levels of
compensation that integrate pay with United's annual and long term performance
goals and assist in attracting and retaining qualified executives.
Periodically the Committee retains the services of nationally recognized
compensation consulting firms to do an extensive review of the compensation
program for all Executive Officers.
William M. Mercer, Inc. reported to the Committee that the total
compensation plan for Executive Officers was reasonable and competitive in view
of the company's performance and the contribution of those officers to that
performance.
Executive Officers are paid base salaries determined by the value of their
position compared to published survey data, information gathered on competing
banks of similar size and the officer's individual performance level.
The short term Incentive Plan stresses reward for achievement of
performance goals set each year. Each Executive Officer participates in a pool
of funds set aside for this purpose. Participation level is based on a rating
system tied to accomplishment of assigned goals as well as a specific formula
which relates the incentive award to a percentage of salary range midpoint.
Company performance must exceed peer performance to activate compensation
incentives. Peer group performance analysis is a continual process at United.
The United management team should share the same goals as its shareholders.
Toward this end, the long term Incentive Stock Option Plan is designed to
provide an ownership opportunity to key management personnel. Stock ownership
provides an ever important stockholder perspective necessary for successful
management of the company. Awards are based on industry guidelines which relate
base compensation to stock price. Grant calculations are tested for
reasonableness against competitive industry data, keeping in mind cumulative
ownership targets.
Mercer reported that stock option grants to Executive Officers have
generally been conservative over the last five years when compared to general
industry and practices for major regional banking organizations. The most recent
share allocations as a percentage of outstanding shares have been consistent
with competitive practices in the banking industry.
Base pay for Richard Adams, Chief Executive Officer was determined to be
slightly below the median when compared to published compensation surveys from
Wyatt Data Services and Ben S. Cole Financial, Inc. Mr. Adams is awarded a pro-
rata share of the established short term incentive pool based on his performance
rating assigned by the Committee. The Mercer report concluded that total cash
compensation for the position of CEO is appropriate in view of performance
levels attained for companies of similar size. Stock option shares granted to
Mr. Adams were determined to be competitive when compared by Mercer to the grant
practices of a broad spectrum of banking organizations. Adams at age 48 has
served the company for 26 years; 20 of those years he has been responsible for
motivating and building the organization.
United's stock price over the past 20 years of the current administration
has moved from $3.00 per share to a high of $28.50 per share for an average
annualized increase of 43%. The stock chart included herein shows how United's
stock price has performed over a five year time period compared to two index
groups. The chart shows United with significant price growth which out
performed both index groups.
6
<PAGE>
Dividends have also increased over the past 20 years from $.11 cents per
share to $1.06 cents per share or at a 43% average annualized rate. United's
pay for performance compensation program emphasizing written performance
objectives has been a major contributor to our ability to consistently enhance
long-term shareholder value.
No member of the Committee is a former or current officer or employee of
United.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE
------------------------
<S> <C> <C>
Thomas J. Blair, III Warren A. Thornhill, III Harry L. Buch
Russell L. Isaacs H. Smoot Fahlgren G. Ogden Nutting
Theodore J. Georgelas William C. Pitt, III F. T. Graff, Jr.
Leonard A. Harvey
</TABLE>
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.
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
------------------- ------------
Stock All Other
Name and Principal Position Year Salary Bonus Options(#) Compensation (3)
- --------------------------- ----- -------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Adams Chairman of the Board 1994 $290,413 $130,000 14,500 $28,756 (2)
& Chief Executive Officer 1993 257,948 80,000 10,000 25,320
1992 243,340 80,000 17,500 22,319
I. N. Smith, Jr. President 1994 145,109 15,900 3,000 4,052 (1)
1993 145,109 15,000 3,000 4,046
1992 145,109 15,000 5,000 4,045
Gary L. Ellis Executive Vice President 1994 144,672 45,000 5,000 4,749 (1)
1993 137,493 30,000 5,000 3,554
1992 129,711 30,000 8,000 3,112
Steven E. Wilson Executive Vice President 1994 122,542 36,000 5,500 3,794 (1)
Chief Financial Officer 1993 113,540 25,000 4,000 2,783
& Treasurer 1992 107,113 25,000 6,500 2,560
Thomas A. McPherson Executive Vice President 1994 120,000 25,000 4,700 3,482 (1)
1993 120,000 15,000 3,500 3,368
1992 118,943 15,000 3,000 3,358
</TABLE>
(1) All reported amounts indicate annual amounts accrued under the Company's
401(K) Plan.
(2) Included are $5,934 representing the Company's matching contribution to
the Company's 401(K) Plan and $22,822 accrued under a supplemental
executive retirement plan.
(3) The aggregate value of all perquisites and other personal benefits did not
exceed either $50,000 or 10% of the total annual salary and bonus
reported for the named executive officers; therefore, no disclosure has
been made.
7
<PAGE>
STOCK OPTION GRANTS TABLE
The following table sets forth information concerning individual grants of
options to purchase the Company's Common Stock made to the named executives in
1994.
<TABLE>
<CAPTION>
Stock Option Grants in Last Fiscal Year
-----------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
----------------------------------------------------------------- ---------------------------
Number of
Securities % of Total
Underlying Options Granted to Exercise or
Options All Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------------- ---------- ------------------ ----------------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Adams 14,500 (1) 14.50% 23.00 11/28/2004 209,735 531,512
I. N. Smith, Jr. 3,000 (1) 3.00% 23.00 11/28/2004 43,393 109,968
Gary L. Ellis 5,000 (1) 5.00% 23.00 11/28/2004 72,322 183,280
Steven E. Wilson 5,500 (1) 5.50% 23.00 11/28/2004 79,555 201,608
Thomas A. McPherson 4,700 (1) 4.70% 23.00 11/28/2004 67,983 172,283
</TABLE>
(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 1994 by each of the named executives.
<TABLE>
<CAPTION>
Aggregate Stock Option Exercises in Last Fiscal Year and FY-End Stock Option Value
-----------------------------------------------------------------------------------------------
Number of Unexercised Value of Unexercised In-the-
Stock Options's at FY-End (#) Money Stock Options's at FY-End ($)
----------------------------- -----------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized Unexercisable Unexercisable
- ---- ---------------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Richard M. Adams 6,750 $ 92,813 57,500/22,000 $500,625/$25,125
I. N. Smith, Jr. 3,000 $ 36,750 9,000/ 5,250 $ 63,813/$ 6,188
Gary L. Ellis 3,000 $ 34,500 21,250/ 8,750 $171,188/$10,313
Steven E. Wilson 10,000 $119,375 7,500/ 8,500 $ 37,750/$ 9,750
Thomas A. McPherson - - 9,000/ 7,200 $ 65,563/$ 7,888
</TABLE>
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, in 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 Mr. 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.
8
<PAGE>
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 Mr. 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 a director of United and UNB, and United has agreed to
use its best efforts to nominate and elect him.
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 Gary L. Ellis, Steven
E. Wilson, Thomas A. McPherson, James B. Hayhurst, Jr. and Joe L. 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.
9
<PAGE>
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.
The agreements do not effect the right of United to terminate the officer,
or change the salary or benefits of the officer, with or without good cause,
prior to any change of control; provided, however, any termination or change
which takes place after discussions have commenced which result in a change of
control will be presumed to be a violation of the agreement and will entitle the
officer to the benefits under the agreement, absent clear and convincing
evidence to the contrary.
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 was to retain certain key "junior" officers. The plan was intended
to encourage these individuals to stay with the company and to continue to
develop their potential for future management roles. The plan provided for
grants of the right to receive up to 500 shares per year, for five years, per
officer. All granted stock was distributed to the grantees at the beginning of
1994. The shares granted were held in trust and the recipients had no ownership
rights until the shares were distributed. 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, awarded stock options to eligible employees, determined the
conditions for exercise, and administered 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 was granted. The
last grants under this plan were awarded in 1992. All options granted are
vested. Messrs. R. Adams, Smith, S. Wilson, J. Wilson, 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 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 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 price will be
the fair market value of United's stock at the time the option is granted.
In 1994, 100,000 shares were granted as follows: Richard M. Adams-14,500
shares; I. N. Smith, Jr.-3,000 shares; Gary L. Ellis-5,000 shares; Joe L.
Wilson-4,000 shares; Steven E. Wilson-5,500 shares; James B. Hayhurst-4,700
shares; Joseph Wm. Sowards-2,700 shares; Douglass H. Adams-2,700 shares; Thomas
A. McPherson-4,700 shares and David Addison-2,700 shares. Forty-four non-
executive officers received a total of 50,500 shares. These shares were granted
at the then current market price of $23.00. The options granted become
exercisable in accordance with a three year vesting schedule: 50% year one; 75%
year two and 100% year three. Messrs. Addison, Smith, S. Wilson and nine
nonexecutive officers have exercised options.
10
<PAGE>
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 United 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 noncontributory 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, 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 pretax 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
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.
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 1994 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 1994.
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.
11
<PAGE>
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 Chief
Executive Officer of Fahlgren, Inc., an advertising agency with its headquarters
in Parkersburg, West Virginia. The agency has provided the advertising for
United since 1978. During 1994, payment for the advertising by United to
Fahlgren, Inc. was less than 5% of that firm's revenues during the year 1994.
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 1994 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 1994.
UNB leases its Wheeling branch 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. Management believes 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 1994 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 1994.
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 1994 all such
reports were filed on a timely basis, with four exceptions: Director Leonard A.
Harvey did not file a Form 4 to report the purchase of 2,000 shares of common
stock in April 1994; Director Robert P. McLean did not file two Forms 4 to
report the purchase of 50 shares of common stock in February 1994 and 100 shares
of common stock in May 1994; and Directors Harry L. Buch and Joseph N. Gompers,
as co-trustees of United Trust in which they shared voting and dispositive power
of the 300,000 shares of common stock held in the trust, each failed to file one
Form 4 each in February 1994 to report the distribution of the United Trust
shares to the beneficiaries of the trust. Messrs. Harvey, McLean, Buch, and
Gompers each reported the transactions on a Form 5 filed with respect to 1994.
12
<PAGE>
Executive Officers
- ------------------
Set forth below are the executive officers of United and relations that
exist with affiliates and others for the past five years.
<TABLE>
<CAPTION>
Principal Occupation and
Banking Experience During
Name Age Present Position The Last Five Years
---- --- ----------------- ------------------------------
<S> <C> <C> <C>
Richard M. Adams 48 Chairman of the Chairman of the Board and
Board & Chief Chief Executive Officer-
Executive Officer- United; Chairman of the
United; Chairman Board, and Chief
of the Board & Executive Officer-UNB
Chief Executive
Officer - UNB
I.N. Smith, Jr. 62 President-United; President-United (1990
Vice-Chairman - to present); President-
UNB, Director -. UNB (1990 to October
United and UNB 1991); Vice-Chairman-UNB
(November 1991 to present)
Douglass H. Adams 56 Executive Vice- Executive Vice-President,
President - United (1990 to present);
United; Director- President-Vienna Office of
United United National Bank (1990
to present)
Gary L. Ellis 53 Executive Vice- Executive Vice-President-
President- United (1990 to present);
United; Director President-UNB (November
and President - 1991 to present); President
UNB; Director- Charleston Office, UNB
UNB-S (1990 to October 1991);
Executive Vice-President - UNB
(1990 to October 1991)
Chief Operating Officer -
UNB (1990 to October 1991)
James B. Hayhurst 48 Executive Vice- Executive Vice-President
President - -United (1990 to present);
United; Executive Executive Vice-President-
Vice-President- UNB (1990 to present);
UNB President-UNB Parkersburg
Offices (1990 to present)
Thomas A. McPherson 58 Executive Vice- Executive Vice-President-
President - United; United (1990 to present);
Director-United President and CEO - UNB-C
(1990 to December 1992)
Joseph Wm. Sowards 44 Executive Vice- Executive Vice President and
President and Secretary-United (1990 to
Secretary - United; present); Executive Vice-
Executive Vice- President-UNB (1990 to present)
President - UNB
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation and
Banking Experience During
Name Age Present Position The Last Five Years
---- --- ----------------- ------------------------------
<S> <C> <C> <C>
Joe L. Wilson 46 Executive Vice- Executive Vice-President-United
President-United (1990 to present); President-
UNB-N (1990 to December 1992)
Steven E. Wilson 46 Executive Vice- Executive Vice-President and
President, Chief Chief Financial Officer-United
Financial Officer, (1990 to present); Treasurer-
and Treasurer- United (1990 to present);
United; Executive Executive Vice President
Vice-President, and Chief Financial Officer-
Chief Financial UNB (1990 to present)
Officer and
Secretary - UNB
</TABLE>
PERFORMANCE GRAPHS
The following graph compares United's cumulative total shareholder return
on its common stock for the five year period ending December 31, 1994, with the
cumulative total return of the Standard and Poor's Midcap 400 Index and with the
NASDAQ OTC Bank Index. There is no assurance that United's common stock
performance will continue in the future with the same or similar trends as
depicted in the graph. The graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934 except to the extent United specifically incorporates this graph by
reference, and shall not otherwise be filed under such Acts.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG UNITED BANKSHARES, NASDAQ OTC INDEX AND S&P MIDCAP INDEX
<CAPTION>
Measurement period NASDAQ OTC S&P Midcap
(Fiscal year Covered) United Bankshares Index Index
- --------------------- ----------------- ---------- ----------
<S> <C> <C> <C>
Measurement PT -
12/31/89 $100.00 $100.00 $100.00
FYE 12/31/90 $ 88.68 $103.21 $122.10
FYE 12/31/91 $119.32 $154.55 $168.88
FYE 12/31/92 $163.47 $173.52 $184.05
FYE 12/31/93 $229.13 $199.47 $207.81
FYE 12/31/94 $216.38 $188.19 $193.81
</TABLE>
14
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young LLP, Charleston, West Virginia, served as the independent
certified public accountants for United and its subsidiaries during 1994. A
member of the firm will be available to respond to shareholder inquiries at the
annual meeting. The independent auditors for 1995 have not yet been selected.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Presently, the next annual meeting of United shareholders is scheduled for
April 22, 1996. Any shareholder proposals to be presented at that 1996 Annual
Meeting must be received at the principal office of United no later than
December 7, 1995. If the scheduled date for the 1996 Annual Meeting is changed
by more than thirty (30) days, shareholders will be informed of the new meeting
date and the revised date by which shareholder proposals must be received.
By Order of the Board of Directors
RICHARD M. ADAMS
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
15
<PAGE>
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 in United's Annual Report. All references to United
in this discussion and analysis are considered to refer to United and its
wholly-owned subsidiaries, unless otherwise indicated.
1994 COMPARED TO 1993
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 of 1.42% makes United one of the
nation's most profitable regional banking companies. Dividends per share
increased 11.6% from $.95 in 1993 to a record level of $1.06 per share in 1994.
This was the twenty-first 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 19.7% for 1994 compared to 1993.
These strong core earnings are 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 include 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 is in the process of realigning its interest rate
sensitivity for 1995 to a more interest-rate-neutral position. This investment
strategy may reduce current earnings, but will enhance United's future earnings
momentum.
Key performance measures improved significantly from 1993 and remained very
strong in comparison to industry standards. United's return on average assets
of 1.42% makes United 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 1994, are explained below.
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 remains well above peer group averages.
16
<PAGE>
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 can be attributed
primarily to 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 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. See Note F to the Consolidated Financial
Statements for a discussion of concentrations of credit risk.
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, which is less one-half of the national peer levels.
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, the ratio of the allowance for loan losses to nonperforming loans was
331.5% as compared to 140.7% as of December 31, 1993.
Management believes that the allowance for loan losses of $20,008,000 as of
December 31, 1994, is adequate to provide for potential losses on existing loans
based on information currently available.
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 can be attributed 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 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.
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.
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.
The Financial Accounting Standards Board has issued SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures." The requirements
of SFAS No.'s 114 and 118 are effective for fiscal years beginning after
17
<PAGE>
December 15, 1994. SFAS No. 114 requires that impaired loans be measured based
on the present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's observable
market price or fair value of the collateral if the loan is collateral
dependent. SFAS No. 118 clarified creditor reporting of income on an impaired
loan and disclosure requirements. The adoption of SFAS No. 114, which will
occur in the first quarter of 1995, is not expected to have a material effect on
United's allowance for loan losses.
Other Income
Noninterest income has been and will continue to be an important factor for
improving United's profitability. Recognizing this importance, 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 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% is 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. For further details, see Note D to the
Consolidated Financial Statements.
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 53.2%, which is well below that reported by peer group
averages.
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. As
of December 31, 1994 and 1993, United employed 834 and 889 full-time equivalent
employees, respectively.
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.
Other expense decreased $1,228,000 or 5.4% in 1994 compared to 1993. The
decrease in other expenses for the year relates 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.
18
<PAGE>
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, combined
with higher statutory federal tax rates in 1994. 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. The allowance for loan losses and various accrued liabilities
represent the most significant temporary differences. Based on management's
evaluation at December 31, 1994, no valuation allowance has been allocated to
deferred tax assets.
Fourth Quarter Results
Net income for the fourth quarter of 1994 was $6,156,000, an increase of 20.0%
from the $5,130,000 earned in the fourth quarter of 1993. On a per share basis,
fourth quarter earnings were $.51 per share in 1994 and $.43 per share in 1993.
Net income was higher in 1994 than in 1993 because of the factors previously
discussed herein relative to annual results.
Additional quarterly financial data for 1994 and 1993 may be found in Note S 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 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. This relationship has become very important,
given the volatility in interest rates over the last several years, due to the
potential impact on earnings. United closely monitors the sensitivity of its
assets and liabilities on an on-going basis and projects the effect of various
interest rate changes on its net interest margin.
The difference between rate sensitive assets and rate sensitive liabilities for
specified periods of time is known as the "GAP".
A primary objective of Asset/Liability Management is 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 page 20 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 $124,816,000 or 7.53% of the cumulative gap to related
earning assets. The primary method of measuring the
19
<PAGE>
The following table shows the interest rate sensitivity GAP as of December
31, 1994:
<TABLE>
<CAPTION>
Interest Rate Sensitivity Gap
Days
---------------------------------- Total 1 - 5 Over 5
0 - 90 91 - 180 181 - 365 One Year Years Years Total
--------- ---------- --------- ---------- --------- -------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Investment and Marketable
Equity Securities:
Taxable $ 25,472 $ 10,673 $ 45,222 $ 81,367 $ 162,115 $ 64,782 $ 308,264
Tax-exempt 1,440 2,953 5,883 10,276 21,379 20,964 52,619
Loans, net of unearned
income 527,711 81,089 129,862 738,662 409,341 149,074 1,297,077
--------- ---------- --------- ---------- --------- -------- ----------
Total Interest-Earning
Assets $ 554,623 $ 94,715 $ 180,967 $ 830,305 $ 592,835 $234,820 $1,657,960
========= ========== ========= ========== ========= ======== ==========
LIABILITIES
Interest-Bearing Funds:
Savings and NOW
accounts $ 658,187 $ 658,187 $ 658,187
Time deposits of
$100,000 & over 22,654 $ 13,875 $ 11,504 48,033 $ 27,565 75,598
Other time deposits 114,102 91,208 81,641 286,951 169,525 456,476
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 71,809 71,809 71,809
FHLB advances 73,972 10,000 83,972 83,972
--------- ---------- --------- ---------- --------- -------- ----------
Total Interest-Bearing
Funds $ 940,724 $ 115,083 $ 93,145 $1,148,952 $ 197,090 $ 0 $1,346,042
========= ========== ========= ========== ========= ======== ==========
Interest Sensitivity
Gap $(386,101) $ (20,368) $ 87,822 $ (318,647) $ 395,745 $234,820 $ 311,918
========= ========== ========= ========== ========= ======== ==========
Cumulative Gap $(386,101) $ (406,469) $(318,647) $ (318,647) $ 77,098 $311,918 $ 311,918
========= ========== ========= ========== ========= ======== ==========
Cumulative Gap as
a Percentage of Total
Earning Assets -23.29% -24.52% 19.22% - 19.22% 4.65% 18.81% 18.81%
Management
Adjustments 616,828 (41,121) (82,244) 493,463 (493,463) 0
Off-Balance
Sheet Activities (50,000) (50,000) $ 0 (50,000)
--------- ---------- --------- ---------- --------- -------- ----------
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities $ 180,727 $ 119,238 $ 124,816 $ 124,816 $ 27,098 $261,918 $ 261,918
========= ========== ========= ========== ========= ======== ==========
Cumulative Management
Adjusted Gap and
Off-Balance Sheet
Activities as a
Percentage of Total
Earning Assets 10.90% 7.19% 7.53% 7.53% 1.63% 15.80% 15.80%
</TABLE>
20
<PAGE>
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.
Additionally, United has begun using certain off-balance-sheet instruments known
as interest rate swaps, to further aid in interest rate risk management. The
use of interest rate swaps is a cost effective means of synthetically altering
the repricing structure of balance sheet items. 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, 1994, the total notional amount of interest rate swaps in effect
was only $50 million. The current maturity of the swap portfolio is two years
and one month. During 1994, interest rate swaps reduced net interest income by
$1,000. United did not have interest rate swaps during 1993. For further
details, see Note M 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 to utilize any long-term funding sources other than FHLB advances and long-
term certificates of deposit.
Cash flows from operations in 1994 of $34,458,000 were 12.4% higher than the
$30,657,000 in 1993 as a result of a $3.2 million increase in net income. In
1994, investing activities resulted in a use of cash of $52,200,000 as compared
to 1993 in which investing activities resulted in a use of cash of $50,647,000.
The
21
<PAGE>
primary reason for the slight increase in the use of cash for investing
activities is that the $88.3 million increase in net loan originations was
almost entirely offset by a net $85.2 million in excess of proceeds from sales,
maturities and calls of securities over security purchases. Financing
activities resulted in a source of cash in 1994 of $39,655,000 primarily due to
a $47,633,000 increase in net borrowings from the FHLB of Pittsburgh and an
increase in deposits of $4,372,000. 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 J, 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 10.16% in 1994 and 9.78% in 1993. United's risk-based
capital ratio was 15.52% in 1994 and 15.28% in 1993 which are both significantly
higher than the minimum regulatory requirements. United's Tier 1 capital and
leverage ratios of 14.27% and 9.55%, respectively, at December 31, 1994, 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:
<TABLE>
<CAPTION>
December 31
1994
------------
<S> <C>
Lines of credit authorized,
but unused $244,975,000
Letters of Credit 15,022,000
------------
$259,997,000
============
</TABLE>
Past experience has shown that, of the foregoing commitments, approximately 12-
15% would reasonably be expected to be funded within a one year period. For
more information, see Note M to the Consolidated Financial Statements.
1993 COMPARED TO 1992
EARNINGS SUMMARY
For the year ended December 31, 1993, net income increased 32.7% to $21,706,000.
Net income per share of $1.82 for the year was up 19.7% from 1992 levels.
United's return on average assets was 1.27%. Dividends declared per share
increased 11.8% from $.85 in 1992 to $.95 per share in 1993. Earnings before
taxes, security transactions, the cumulative effect of a change in accounting
principle and the provision for possible loan losses were strong and increased
24.4% for 1993 compared to 1992. This reflected a 12.4% improvement in net
interest income driven by a significant increase in average net earning assets.
Noninterest expenses were flat in 1993 as compared to 1992 as management was
effective in its ability to control expenses. Income taxes increased by 36.9%
from 1992, principally because of increased pretax income, decreases in income
from investment securities exempt from federal taxes and higher statutory
federal income tax rates. During 1993 the market price for United stock
increased from $20.00 to $26.50 or 31%.
22
<PAGE>
Earnings for 1993 included certain nonrecurring income and expense items. The
nonrecurring income item, which is reported as a cumulative effect of change in
accounting principle of $1,329,000, is the result of United's adoption of SFAS
No. 109, "Accounting for Income Taxes," during the first quarter of 1993. For
further details, see Note K to the Consolidated Financial Statements. The
nonrecurring expense items were primarily the result of management's
conservative review of certain credits which resulted in additional provisions
being made to the reserve for other real estate owned and the allowance for loan
losses. Additional nonrecurring expenses resulted from the mergers consummated
by United.
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, 1993 and 1992, net interest income approximated
$71,496,000 and $63,605,000, respectively. On a tax-equivalent basis the net
interest margin was strong at 4.75% in 1993 and 4.83% in 1992. Higher average
loan volumes of $143 million contributed to the increase in net interest income.
United also experienced significant decreases in its overall cost of funds. At
4.75%, United's net interest margin remained well above peer group averages.
Total interest income of $116,505,000 increased 2.6% in 1993 over 1992 as a
result of higher volumes of interest-earning assets. Comparing year-end 1993 to
year-end 1992, moderate decreases in commercial and consumer loans of 6.5% and
5.7%, respectively, which resulted from lower commercial and consumer demand,
were offset by significant mortgage loan growth of 15.3%.
Total interest expense decreased 9.8% in 1993. This decrease can be attributed
primarily to lower rates paid on interest-bearing funds. United's average
interest-bearing deposits increased 12.46% in 1993, while its average long-term
borrowings increased 160.88% as United made greater use of these funds in order
to meet the demand for mortgage loan products while matching maturities. The
average cost of funds reflected the general downward trend in market interest
rates in 1993, falling from 4.27% in 1992 to 3.44% in 1993.
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 $13,517,000 at December 31, 1993 and $15,955,000 at
December 31, 1992, a decrease of 15.3%. 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.
At year-end 1993 and 1992 the allowance for possible loan losses was 1.61% and
1.43% of total loans, net of unearned income, respectively. As of December 31,
1993, the ratio of the allowance for loan losses to nonperforming loans was
140.7% as compared to 100.0% as of December 31, 1992.
For the years ended December 31, 1993 and 1992 the provision for loan losses was
$4,332,000 and $4,242,000, respectively. The provision for loan losses charged
to operations was based on management's evaluation of individual credits, the
past loan loss experience, and other factors which, in management's judgment,
deserved recognition in estimating possible loan losses. Such other factors
considered by management included 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 $1,773,000 in 1993 and $5,144,000 in 1992, which
represents .16% and .52% of average loans for the respective years. United's
ratio of net charge-offs to average loans compared very favorably with its
peers.
23
<PAGE>
Other Income
Other income consists of all revenues which are not included in interest and fee
income related to earning assets. In 1993, other income increased by $1,550,000
or 13.94%. The overall increase in noninterest income is primarily attributed
to the October 20, 1992, acquisition of UNB-South and increased activity in
customer accounts for which a fee is charged.
Trust income increased $124,000 or 4.93% in 1993. This was due to repricing of
services and an increased volume of trust business.
Service charges, commissions and fees increased by $1,430,000 or 19.32% in 1993.
This income consisted of charges and fees related to various banking services
provided by United and was primarily due to a restructuring of fees and the
acquisition of UNB-South.
Securities transactions resulted in a net gain of $479,000 in 1993 and a net
gain of $403,000 in 1992. As evidenced by the Statement of Cash Flows in the
Consolidated Financial Statements, the volume of securities sold increased
significantly in 1993. The primary reason for this increased sales activity was
a one-time restructuring of the portfolio of an acquired subsidiary. Included
in the 1993 gains are debt securities gains of approximately $332,000 which were
realized primarily on sales of mortgage-backed security obligations which were
experiencing accelerated prepayments.
Other Expense
Other expense included all items of expense other than interest expense, the
provision for possible loan losses, and income taxes. In total, other expenses
were flat in 1993, and management was successful in controlling costs. The
income statement reflected a 5.7% increase in 1993 as compared to 1992. The
increase was due to certain nonrecurring costs and certain other costs in
connection with the mergers of FFC, Westover and Star City into United during
1993. The October 20, 1992 acquisition of UNB-South also increased reported
expenses for 1993.
Salaries and employee benefits expense increased 6.26% in 1993 due to the
acquisitions of UNB-South, Westover and Star City. As of December 31, 1993 and
1992, United employed 889 and 879 full-time equivalent employees, respectively.
Other expense increased 5.63% in 1993 compared to 1992. This increase was
mainly due to the acquisition of UNB-South, nonrecurring merger expenses and
provisions for estimated losses on other real estate owned.
Income Taxes
For the year ended December 31, 1993, income taxes approximated $9,770,000
compared to $7,136,000 for 1992. This increase is principally the result of
lower levels of tax-exempt income and higher levels of pretax income, combined
with higher statutory federal tax rates in 1993. United's effective tax rates
in these two years were 32.4% and 30.4%, respectively.
Effective January 1, 1993, United prospectively adopted FASB Statement No. 109,
"Accounting for Income Taxes." Under Statement 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial
reporting and the tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Prior to the adoption of Statement 109, income tax expense was determined using
the deferred method. Deferred tax expense was based on items of income and
expense that were reported in different years in the financial statements and
tax returns and was measured at the tax rate in effect in the year the
differences originated.
24
<PAGE>
As permitted by Statement 109, United has elected not to restate the financial
statements of any prior years. The effect of the change on pretax income for the
year ended December 31, 1993 was not material; however, the cumulative effect of
the change increased net income by $1,329,000 or $0.11 per share.
At December 31, 1993, gross deferred tax assets totaled approximately $10.4
million. The allowance for loan losses and various accrued liabilities
represented the most significant temporary differences. Based on management's
evaluation at December 31, 1993, no valuation allowance had been allocated to
deferred tax assets.
25
<PAGE>
UNITED BANKSHARES, INC.
PROXY FOR 1995 ANNUAL SHAREHOLDERS' MEETING
Know all men by these presents that the undersigned shareholder(s) of United
Bankshares, Inc., Charleston, West Virginia does hereby nominate, constitute
and appoint Gary L. Ellis, Steven E. Wilson and , or any one of them,
with full power to act alone as the true and lawful attorneys for the
undersigned with full power of substitution for and in the name, place and
stead of the undersigned to vote all the common stock of United Bankshares,
Inc., standing in the undersigned's name on its books on March 10, 1995, at the
1995 Annual Meeting of Shareholders to be held at The Blennerhassett Hotel,
Fourth and Market Streets, Parkersburg, West Virginia, on April 24, 1995 at
4:00 p.m., local time or any adjournments thereof, with all the powers the
undersigned would possess if personally present as follows:
The undersigned acknowledges receipt of the Notice and Proxy Statement dated
March 24, 1995, and hereby revokes all proxies previously given by the
undersigned for said meeting.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" THE PROPOSITIONS LISTED BELOW
UNLESS OTHERWISE INDICATED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSALS BELOW. IF ANY MATTER SHALL PROPERLY COME BEFORE THE MEETING, OR ANY
ADJOURNMENTS THEREOF, THIS PROXY WILL BE VOTED ON SUCH MATTERS IN ACCORDANCE
WITH THE JUDGEMENT OF THE ABOVE PROXIES, BASED UPON THE CONDITIONS THEN
PREVAILING AND ANY RECOMMENDATION OF THE BOARD OF DIRECTORS.
Unless a different allocation is indicated, the proxies will vote your total
cumulative vote ratably for the directors for whom you are voting unless
directed otherwise by the Board of Directors of United Bankshares, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNITED
BANKSHARES, INC. AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE. ALL JOINT
OWNERS MUST SIGN.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title. If more than one trustee, all should sign.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING TWENTY-FOUR NOMINEES:
1. ELECTION OF DIRECTORS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Richard M. Adams, Douglass H. Adams, Robert G. Astorg, Thomas J. Blair, III,
Harry L. Buch, R. Terry Butcher, John W. Dudley, H. Smoot Fahlgren, Theodore J.
Georgelas, Joseph N. Gompers, C. E. Goodwin, F. T. Graff, Jr., Leonard A.
Harvey, Andrew J. Houvouras, Russell L. Isaacs, Robert P. McLean, Thomas A.
McPherson, G. Ogden Nutting, William C. Pitt, III, I. N. Smith, Jr., Charles E.
Stealey, Warren A. Thornhill, III, Harold L. Wilkes, and James W. Word, Jr. as
directors.
(IF YOU WISH TO WITHHOLD YOUR VOTE FOR ANY OF THE ABOVE NOMINEES, SO INDICATE
BY STRIKING THE NAME OF THE NOMINEE.)
- ------------------------------------------------------------------------------
2. TO TRANSACT OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: , 1995
--------------------------
---------------------------------------
By:
------------------------------------
(Signature or Signatures)
PLEASE SIGN, DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED ENVELOPE.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD
YOUR VOTES"
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
FOLD AND DETACH HERE
ANNUAL MEETING
OF
UNITED BANKSHARES, INC.
MONDAY, APRIL 24, 1995 AT 4:00 P.M.
THE BLENNERHASSETT HOTEL
4TH & MARKET STREETS
PARKERSBURG, WV
<PAGE>
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, DATE AND SIGN THE ABOVE
PROXY CARD AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
