UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
~~__________________________________~~

FORM 10-Q


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarter Ended~~September 30, 2006~~March 31, 2007


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period

Commission File Number: 0-13322

United Bankshares, Inc.

(Exact name of registrant as specified in its charter)


West Virginia		55-0641179

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		~~(I.R.S. Employer~~ Identification No.)


300 United Center 500 Virginia Street, East
Charleston, West Virginia		25301

(Address of Principal Executive Offices)		Zip Code

Registrant’s Telephone Number, including Area Code:(304) 424-8800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ Accelerated Filero Non-accelerated Filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)Yeso Noþ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class — Common Stock, $2.50 Par Value;~~41,159,193~~40,730,956shares outstanding as of~~October 31, 2006~~April 30, 2007.

CONSOLIDATED BALANCE SHEETS

UNITED BANKSHARES, INC. AND SUBSIDIARIES


							March 31			December 31
							2007			2006
(Dollars in thousands, except par value)	September 30			December 31			(Unaudited)			(Note 1)
	2006			2005
	(Unaudited)			(Note 1)
Assets
Cash and due from banks	$	142,358		$	188,974		$	156,326		$	217,562
Interest-bearing deposits with other banks		12,291			9,836			11,745			22,882
Federal funds sold		17,887			9,152			52,106			18,569

Total cash and cash equivalents		172,536			207,962			220,177			259,013
Securities available for sale at estimated fair value (amortized cost-$1,083,840 at September 30, 2006 and $1,289,213 at December 31, 2005)		1,073,772			1,274,621
Securities held to maturity (estimated fair value-$217,665 at September 30, 2006 and $232,671 at December 31, 2005)		214,237			227,345
Securities available for sale at estimated fair value (amortized cost-$1,004,025 at March 31, 2007 and $1,016,840 at December 31, 2006)								1,000,395			1,010,252
Securities held to maturity (estimated fair value-$207,767 at March 31, 2007 and $215,678 at December 31, 2006)								205,000			212,296
Other investment securities								53,589			52,922
Loans held for sale		3,510			3,324			2,231			2,041
Loans		4,756,673			4,656,522			4,723,104			4,813,708
Less: Unearned income		(6,469	)		(6,693	)		(6,807	)		(6,961	)

Loans net of unearned income		4,750,204			4,649,829			4,716,297			4,806,747
Less: Allowance for loan losses		(43,801	)		(44,138	)		(44,058	)		(43,629	)

Net loans		4,706,403			4,605,691			4,672,239			4,763,118
Bank premises and equipment		38,740			39,626			37,909			38,111
Goodwill		167,421			167,487			167,337			167,421
Accrued interest receivable		33,145			32,027			33,714			34,508
Other assets		183,762			170,409			179,170			177,916

TOTAL ASSETS	$	6,593,526		$	6,728,492		$	6,571,761		$	6,717,598


Liabilities
Deposits:
Noninterest-bearing	$	819,781		$	959,674		$	832,609		$	903,207
Interest-bearing		3,930,774			3,657,778			3,908,963			3,924,985

Total deposits		4,750,555			4,617,452			4,741,572			4,828,192
Borrowings:
Federal funds purchased		62,925			61,370			68,690			97,720
Securities sold under agreements to repurchase		577,253			525,604			510,706			460,858
Federal Home Loan Bank borrowings		413,974			723,818			438,660			533,899
Other short-term borrowings		2,071			4,451			63			3,688
Other long-term borrowings		88,524			88,913			85,172			85,301
Allowance for lending-related commitments		8,735			8,733			8,327			8,742
Accrued expenses and other liabilities		54,156			62,946			79,822			65,106

TOTAL LIABILITIES		5,958,193			6,093,287			5,933,012			6,083,506

Shareholders’ Equity
Common stock, $2.50 par value; Authorized-100,000,000 shares; issued-44,320,832 at September 30, 2006 and December 31, 2005, including 3,072,126 and 2,312,653 shares in treasury at September 30, 2006 and December 31, 2005, respectively		110,802			110,802
Common stock, $2.50 par value; Authorized-100,000,000 shares; issued-44,320,832 at March 31, 2007 and December 31, 2006, including 3,497,664 and 3,261,931 shares in treasury at March 31, 2007 and December 31, 2006, respectively								110,802			110,802
Surplus		95,253			97,374			92,583			93,680
Retained earnings		545,760			515,227			571,912			559,257
Accumulated other comprehensive loss		(10,254	)		(10,551	)		(13,958	)		(15,791	)
Treasury stock, at cost		(106,228	)		(77,647	)		(122,590	)		(113,856	)

TOTAL SHAREHOLDERS’ EQUITY		635,333			635,205			638,749			634,092

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	6,593,526		$	6,728,492		$	6,571,761		$	6,717,598

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES


												Three Months Ended
												March 31
(Dollars in thousands, except per share data)	Three Months Ended						Nine Months Ended					2007		2006
	September 30						September 30
	2006			2005			2006			2005
Interest income
Interest and fees on loans	$	84,288		$	70,575		$	242,537		$	199,665	$	83,312	$	76,562
Interest on federal funds sold and other short-term investments		515			232			1,235			578		505		291
Interest and dividends on securities:
Taxable		13,934			14,480			43,371			42,139		13,430		15,130
Tax-exempt		3,698			4,203			11,334			8,563		3,375		3,598

Total interest income		102,435			89,490			298,477			250,945		100,622		95,581

Interest expense
Interest on deposits		32,312			19,626			84,807			50,946		33,170		24,454
Interest on short-term borrowings		7,142			4,656			23,029			12,083		7,502		7,499
Interest on long-term borrowings		8,052			8,550			25,111			24,810		7,288		8,607

Total interest expense		47,506			32,832			132,947			87,839		47,960		40,560

Net interest income		54,929			56,658			165,530			163,106		52,662		55,021
Provision for credit losses		571			1,945			1,169			3,560		350		250

Net interest income after provision for credit losses		54,358			54,713			164,361			159,546		52,312		54,771

Other income
Fees from trust and brokerage services		3,190			2,813			9,857			8,312		3,546		3,020
Service charges, commissions, and fees		9,152			8,785			26,777			25,124
Fees from deposit services													7,178		6,991
Other service charges, commissions, and fees													1,693		1,670
Income from bank-owned life insurance		1,181			1,020			3,285			3,443		1,459		1,043
Income from mortgage banking operations		236			337			615			690
Security (losses) gains		(134	)		(93	)		(3,071	)		889
Loss on termination of interest rate swaps associated with prepayment of FHLB advances		(7,659	)		—			(4,599	)		—
Income from mortgage banking													161		229
Security gains (losses)													157		(2,838	)
Gain on termination of interest rate swap associated with prepayment of FHLB advance													—		3,060
Other income		248			174			1,437			856		722		487

Total other income		6,214			13,036			34,301			39,314		14,916		13,662

Other expense
Salaries and employee benefits		15,740			15,205			46,789			44,192		14,745		15,098
Net occupancy expense		3,031			3,113			9,458			9,259		3,456		3,313
Equipment expense		1,567			1,639			4,599			4,952		1,451		1,718
Data processing expense		1,477			1,405			4,428			4,273		1,721		1,461
Prepayment Penalties on FHLB Advances		8,261			—			8,261			—
Bankcard processing expense													1,191		1,109
Other expense		10,138			9,154			31,030			27,158		8,931		9,489

Total other expense		40,214			30,516			104,565			89,834		31,495		32,188

Income before income taxes		20,358			37,233			94,097			109,026		35,733		36,245
Income taxes		6,193			11,784			29,863			34,303		11,326		11,635

Net income	$	14,165		$	25,449		$	64,234		$	74,723	$	24,407	$	24,610


Earnings per common share:
Basic	$	0.34		$	0.60		$	1.54		$	1.75	$	0.60	$	0.59

Diluted	$	0.34		$	0.59		$	1.53		$	1.73	$	0.59	$	0.58


Dividends per common share	$	0.27		$	0.26		$	0.81		$	0.78	$	0.28	$	0.27


Average outstanding shares:
Basic		41,373,945			42,383,810			41,658,678			42,648,080		40,946,236		41,923,726
Diluted		41,775,111			42,918,552			42,075,862			43,153,673		41,272,213		42,379,242

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

~~(Dollars in thousands, except per share data)~~

Nine Months Ended September 30, 2006
Accumulated
Common Stock Other Total
Par Retained Comprehensive Treasury Shareholders’
Shares Value Surplus Earnings Income (Loss) Stock Equity
Balance at January 1, 2006 44,320,832 $ 110,802 $ 97,374 $ 515,227 ($10,551 ) ($77,647 ) $ 635,205

Comprehensive income:
Net income — — — 64,234 — — 64,234
Other comprehensive income, net of tax:
Unrealized gain on securities of $944 net of reclassification adjustment for losses included in net income of $1,996 — — — — 2,940 — 2,940
Unrealized loss on cash flow hedge, net of tax of $875 — — — — (1,625 ) — (1,625 )
Termination of cash flow hedge, net of tax of $727 — — — �� — (1,350 ) — (1,350 )
Accretion of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio — — — — 332 — 332

Total comprehensive income 64,531
Purchase of treasury stock (999,266 shares) — — — — — (36,730 ) (36,730 )
Distribution of treasury stock for deferred compensation plan (1,201 shares) — — — — — 35 35
Cash dividends ($0.81 per share) — — — (33,701 ) — — (33,701 )
Common stock options exercised (238,592 shares) — — (2,121 ) — — 8,114 5,993

Balance at September 30, 2006 44,320,832 $ 110,802 $ 95,253 $ 545,760 ($10,254 ) ($106,228 ) $ 635,333


	Three Months Ended March 31, 2007
											Accumulated
	Common Stock										Other						Total
			Par					Retained			Comprehensive			Treasury			Shareholders’
(Dollars in thousands, except per share data)	Shares		Value		Surplus			Earnings			Income (Loss)			Stock			Equity

Balance at January 1, 2007		44,320,832	$	110,802	$	93,680		$	559,257			($15,791	)		($113,856	)	$	634,092
Cumulative effect of adopting FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainity in Income Taxes, an interpretation of FASB Statement No. 109, at January 1, 2007		—		—		—			(300	)		—			—			(300	)
Comprehensive income:
Net income		—		—		—			24,407			—			—			24,407
Other Comprehensive income, net of tax:
Unrealized gain on securities of $1,966 net of reclassification adjustment for gains included in net income of $45		—		—		—			—			1,921			—			1,921
Unrealized loss on cash flow hedge, net of tax of $215		—		—		—			—			(400	)		—			(400	)
Remaining unrealized loss related to the call of securities previously transferred from available for sale to the held to maturity investment portfolio		—		—		—			—			157			—			157
Accretion of the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio prior to their call or maturity		—		—		—			—			92			—			92
Pension plan’s amortization of transition asset, prior service cost, and actuarial loss, net of tax of $40		—		—		—			—			63			—			63

Total comprehensive income																		26,240
Purchase of treasury stock (316,961 shares)		—		—		—			—			—			(11,578	)		(11,578	)
Cash dividends ($0.28 per share)		—		—		—			(11,452	)		—			—			(11,452	)
Common stock options exercised (81,228 shares)		—		—		(1,097	)		—			—			2,844			1,747


Balance at March 31, 2007		44,320,832	$	110,802	$	92,583		$	571,912			($13,958	)		($122,590	)	$	638,749

See notes to consolidated unaudited financial statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES


							Three Months Ended
							March 31
(Dollars in thousands)	Nine Months Ended						2007			2006
	September 30
	2006			2005

NET CASH PROVIDED BY OPERATING ACTIVITIES	$	54,453		$	81,090		$	37,802		$	40,886

INVESTING ACTIVITIES
Proceeds from maturities and calls of securities held to maturity		13,672			3,449			8,019			11,593
Purchases of securities held to maturity		(587	)		(453	)		(288	)		—
Proceeds from sales of securities available for sale		144,926			225,268			563			1,147
Proceeds from maturities and calls of securities available for sale		277,647			165,201			85,015			35,218
Purchases of securities available for sale		(222,645	)		(348,279	)		(73,160	)		(1,379	)
Net purchases of bank premises and equipment		(2,391	)		(1,979	)		(719	)		(716	)
Net change in other investment securities								(667	)		(2,937	)
Net change in loans		(103,046	)		(186,795	)		90,140			(44,142	)


NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		107,576			(143,588	)		108,903			(1,216	)


FINANCING ACTIVITIES
Cash dividends paid		(33,907	)		(33,409	)		(11,517	)		(11,365	)
Excess tax benefits from stock-based compensation arrangements		499			—			343			385
Acquisition of treasury stock		(36,503	)		(29,868	)		(10,909	)		(11,988	)
Proceeds from exercise of stock options		5,561			1,985			1,045			3,867
Distribution of treasury stock for deferred compensation plan		35			—
Proceeds from issuance of long-term Federal Home Loan Bank borrowings								25,000
Repayment of long-term Federal Home Loan Bank borrowings		(252,067	)		(126,732	)		(76	)		(50,871	)
Proceeds from long-term Federal Home Loan Bank borrowings		200,000			150,000
Changes in:
Deposits		133,103			312,169			(86,620	)		85,816
Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings		(214,176	)		(145,564	)		(102,807	)		(68,594	)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(197,455	)		128,581

NET CASH USED IN FINANCING ACTIVITIES								(185,541	)		(52,750	)


(Decrease) Increase in cash and cash equivalents		(35,426	)		66,083
Decrease in cash and cash equivalents								(38,836	)		(13,080	)

Cash and cash equivalents at beginning of year		207,962			153,465			259,013			207,962


Cash and cash equivalents at end of period	$	172,536		$	219,548		$	220,177		$	194,882

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

1. GENERAL

The accompanying unaudited consolidated interim financial statements of United Bankshares, Inc. and Subsidiaries (“United”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not contain all of the information and footnotes required by accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements presented as of ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ and for the three-month ~~and nine-month~~ periods then ended have not been audited. The consolidated balance sheet as of December 31, ~~2005~~2006 has been extracted from the audited financial statements included in United’s ~~2005~~2006 Annual Report to Shareholders. The accounting and reporting policies followed in the presentation of these financial statements are consistent with those applied in the preparation of the ~~2005~~2006 Annual Report of United on Form 10-K. To conform to the 2007 presentation, certain reclassifications have been made to prior period amounts, which had no impact on net income, comprehensive income, or stockholders’ equity. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature.

The accompanying consolidated interim financial statements include the accounts of United and its wholly owned subsidiaries. United considers all of its principal business activities to be bank related. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Dollars are in thousands, except per share and share ~~data.~~data or unless otherwise noted.

New Accounting Standards

In February 2007, the Financial Standards Board (FASB) issued Statement No. 159 (SFAS 159), “The Fair Value Option for Financial Assets and Financial Liabilities” which provides companies with an option to report selected financial assets and liabilities at fair value. With this Standard, the FASB expects to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS 159 also establishes presentation and disclosure requirements designed to facility the comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Statement does not eliminate disclosure requirements included in accounting standards. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier adoption permitted provided that the company also elects to apply the provisions of FASB Statement No. 157, “Fair Value Measurements.” United decided not to early adopt the provisions of SFAS 159.

In September 2006, the ~~Financial Accounting Standards Board (FASB)~~FASB published Statement No. 158 (SFAS 158), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”, an amendment of FASB Statements No. 87, 88, 106, and 132(R). SFAS 158 requires employers to recognize in their statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status. United ~~will~~is also be required to

statements issued for fiscal years beginning after November 15, 2007, with earlier adoption permitted. United ~~does not expect that~~is currently assessing the impact this ~~standard~~statement will have ~~a material impact~~ on its consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation (FIN) No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”, to address the noncomparability in reporting tax assets and liabilities resulting from a lack of specific guidance in FASB Statement No. 109 (SFAS 109), “Accounting for Income Taxes”, on the uncertainty in income taxes recognized in an enterprise’s financial statements. United has adopted FIN 48 ~~will apply to fiscal years beginning after December 15, 2006, with earlier~~as of January 1, 2007, as required. The cumulative effect of adopting FIN 48 was recorded in retained earnings. The adoption ~~permitted. United is currently evaluating the impact~~ of FIN 48 did not have a significant impact on ~~its~~United’s consolidated financial ~~statements and is not yet in a position to determine the impact~~statements. See Note 14 for additional information regarding United’s adoption of ~~the standard.~~FIN 48.

In March 2006, the FASB issued Statement No. 156 (SFAS 156), “Accounting for Servicing of Financial Assets”. SFAS 156 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS 156 permits, but does not require, an entity to choose either the amortization method or the fair value measurement method for measuring each class of separately recognized servicing assets and servicing liabilities. SFAS 156 iswas effective for United on January 1, ~~2007 and is~~2007. The implementation of SFAS 156 did not ~~expected to~~ have a material impact on United’s consolidated financial ~~statements since United does not service loans for others.~~statements.

In February 2006, the FASB issued Statement No. 155 (SFAS 155), “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140”. SFAS 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS 155 amends SFAS No. 140, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to allow a qualifying special-purpose entity (SPE) to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. United adopted SFAS 155 ~~is effective for United~~ on January 1, 2007, ~~and is~~as required. Its implementation did not ~~expected to~~ have a material impact on United’s consolidated financial statements.

On January 1, 2006, United adopted FASB Statement No. 123—revised 2004 (SFAS 123R), ‘‘Share-Based Payment’’ which replaced Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock-Based Compensation’’ and superseded APB Opinion No. 25 (APB 25), ‘‘Accounting for Stock Issued to Employees” and amended FASB Statement No. 95, “Statement of Cash Flows.’’ ~~SFAS 123R requires~~Under this transition method, compensation cost to be recognized beginning in the ~~measurement~~first quarter of 2006 would include: (a) compensation cost for all ~~employee~~ share-based payments granted prior to, ~~employees, including grants~~but not yet vested as of ~~employee~~January 1, 2006, based on the grant-date fair value estimated in accordance with the original provision of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006,

based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Results for prior periods were not restated. Due to modification on December 30, 2005 to accelerate unvested options under United’s existing stock ~~options, using a fair-value based method~~option plans and the ~~recording~~fact that no new options were granted in 2006 and the first three months of ~~such expense in our consolidated statements~~2007, United did not recognize any compensation cost for 2006 and the first three months of ~~income.~~2007. See Note 1112 for additional information regarding United’s adoption of SFAS 123R.

2. MERGERS & ACQUISITIONS

On January 29, 2007, United announced that it had signed an Agreement and Plan of Reorganization (the Agreement) to acquire Premier Community Bankshares, Inc. (Premier), a Virginia corporation headquartered in Winchester, Virginia. Premier is a multi-bank holding company with 26 office locations in the northwestern and central parts of Virginia and the eastern panhandle of West Virginia. As of March 31, 2007, Premier had $915.8 million in total assets, $749.1 in net loans and $742.3 in deposits. Premier operates three wholly owned banking subsidiaries, The Marathon Bank, the Rockingham Heritage Bank and the Premier Bank. Upon completion of the acquisition, it is anticipated that The Marathon Bank and the Rockingham Heritage Bank will be merged with United’s Virginia subsidiary and the Premier Bank will be merged with United’s West Virginia subsidiary. The acquisition of Premier will afford United the opportunity to enter new Virginia markets in the Winchester, Harrisonburg and Charlottesville areas.

Shareholders of Premier will be entitled to receive either 0.93 shares (Exchange Ratio) of United common stock, or cash of $34.00, or a combination thereof, for each outstanding share of Premier common stock owned. The election of United common stock or cash, or a combination of each, will be subject to pro-ration whereby Premier shareholders would receive at least 50% of the consideration in stock and flexibility to receive as much as 65% of the consideration in stock subject to elections and allocation procedures set forth in the Agreement. The total transaction is estimated to have an aggregate consideration of approximately $200.7 million.

Pursuant to the Agreement, at the effective time of the merger, each outstanding option to purchase shares of Premier common stock under any and all plans of Premier shall vest pursuant to the terms thereof and shall be converted into an option to acquire, the number of shares of United common stock equal to the number of shares of Premier common stock subject to the Premier stock option plans, multiplied by the Exchange Ratio.

The merger transaction, expected to close late in the second quarter or early third quarter of 2007, will be accounted for as a purchase pending approval of the shareholders of Premier and the receipt of all required regulatory approvals, as well as other customary conditions. A Form S-4 was filed on April 24, 2007 with the Securities and Exchange Commission to register the maximum number of shares issuable by United upon the consummation of the merger with Premier.

3. INVESTMENT SECURITIES

The amortized cost and estimated fair values of securities available for sale are summarized on the following page:

910

Gross unrealized losses on available for sale securities were ~~$15,638~~$10,318 at ~~September 30, 2006.~~March 31, 2007. Securities in a continuous unrealized loss position for twelve months or more consisted primarily of mortgage-backed securities. The unrealized loss on the mortgage-backed securities portfolio relates primarily to AAA securities issued by FNMA, FHLMC, GNMA, and various other private label issuers. Management does not believe any individual security with an unrealized loss as of ~~September 30, 2006~~March 31, 2007 is other than temporarily impaired. United believes the decline in value is attributable to changes in market interest rates and not the credit quality of the issuers. United has the intent and the ability to hold these securities until such time as the value recovers or the securities mature. However, United acknowledges that any impaired securities may be sold in future periods in response to significant, unanticipated changes in asset/liability management decisions, unanticipated future market movements or business plan changes.

As previously reported, at March 31, 2006, as part of a balance sheet repositioning strategy, management specifically identified approximately $86 million of impaired, low-yielding, fixed rate investment securities for sale. ~~These securities consisted of Collateralized Mortgage Obligations (CMOs) with an average investment yield of approximately 3.5% and an average remaining life of 1.7 years.~~ Since United did not have the positive intent to hold these securities to recovery, United recognized a loss of approximately $2.93 million in the first quarter of 2006 related to these securities. OnThese securities were subsequently sold on April 4, ~~2006 these securities were sold.~~2006.

The amortized cost and estimated fair value of securities available for sale at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties.


	September 30, 2006				December 31, 2005				March 31, 2007				December 31, 2006
			Estimated				Estimated				Estimated				Estimated
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value		Cost		Value

Due in one year or less	$	3,967	$	3,968	$	7,735	$	7,733	$	14,363	$	14,312	$	4,427	$	4,424
Due after one year through five years		99,865		98,217		81,964		81,498		116,162		115,055		106,890		105,431
Due after five years through ten years		231,008		227,842		262,408		257,134		204,676		203,034		214,164		212,051
Due after ten years		742,841		737,374		930,192		921,042		662,579		661,502		685,159		681,750
Marketable equity securities		6,159		6,371		6,914		7,214		6,245		6,492		6,200		6,596

Total	$	1,083,840	$	1,073,772	$	1,289,213	$	1,274,621	$	1,004,025	$	1,000,395	$	1,016,840	$	1,010,252

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

management’s estimate that the fair value of the underlying collateral of these loans is sufficient for full repayment of the loan and interest. At December 31, ~~2005,~~2006, the recorded investment in loans that were considered to be impaired was ~~$16,553~~$21,963 (of which ~~$7,146~~$5,755 were on a nonaccrual basis). Included in this amount ~~was $5,830~~were $15,193 of impaired loans for which the related allowance for credit losses was ~~$1,008,~~$3,000, and ~~$10,723~~$6,770 of impaired loans that did not have an allowance for credit losses. The average recorded investment in impaired loans during the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 and for the year ended December 31, ~~2005~~2006 was approximately ~~$23,515~~$24,049 and ~~$15,940,~~$26,503, respectively. ~~This increase is due to~~

For the ~~impairment of three loans totaling $18.75 million to one commercial customer~~quarters ended March 31, 2007 and ~~several residential real estate loans totaling $7.47 million during the third quarter of 2006.~~

2006, United recognized interest income on impaired loans of approximately ~~$467~~$439 and ~~$1,726 for the quarter and nine months ended September 30, 2006, respectively, and $151 and $346 for the quarter and nine months ended September 30, 2005,~~$219, respectively. Substantially all of the interest income was recognized using the accrual method of income recognition. The amount of interest income that would have been recorded under the original terms for the above loans and nonaccrual loans was ~~$376~~$389 and ~~$1,041~~$364 for the ~~quarter~~quarters ended March 31, 2007 and ~~nine months ended September 30,~~ 2006, ~~respectively, and $282 and $711 for the quarter and nine months ended September 30, 2005,~~ respectively.

~~6. INTANGIBLE ASSETS~~7. GOODWILL AND OTHER INTANGIBLES

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


	As of September 30, 2006							As of March 31, 2007
	Gross Carrying		Accumulated			Net Carrying		Gross Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Amortized intangible assets:
Core deposit intangible assets	$	19,890		($16,816	)	$	3,074	$	19,890		($17,657	)	$	2,233


Goodwill not subject to amortization						$	167,421						$	167,337

7.8. SHORT-TERM BORROWINGS

Federal funds purchased and securities sold under agreements to repurchase are a significant source of funds for the company. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $200,000. These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions. At ~~September 30, 2006,~~March 31, 2007, federal funds purchased were ~~$62,925~~$68,690 while securities sold under agreements to repurchase were ~~$577,253.~~$510,706.

United has available funds of $70,000 with two unrelated financial institutions to provide for general liquidity needs. Both are unsecured revolving lines of credit. One has a one-year renewable term while the other line of credit has a two-year renewable term. Each line of credit carries an indexed floating rate of interest. At ~~September 30, 2006,~~March 31, 2007, United had no outstanding balance under these lines of credit.

United Bank (VA) participates in the Treasury Investment Program, which is essentially the U.S. Treasury’s savings account for companies depositing employment and other tax payments. The bank retains the funds in an open-ended interest-bearing note until the Treasury withdraws or “calls” the funds. A maximum note balance is established and that amount must be collateralized at all times. All tax deposits or a portion of the tax deposits up to the maximum balance are generally available as a source of short-term investment funding. As of ~~September 30, 2006,~~March 31, 2007, United Bank (VA) had an outstanding balance of ~~$2,071~~$63 and had additional funding available of ~~$2,929.~~$4,937.

8.9. LONG-TERM BORROWINGS

United’s subsidiary banks are members of the Federal Home Loan Bank (FHLB). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a mix of single-family residential mortgage loans, commercial loans and investment securities. At ~~September 30, 2006,~~March 31, 2007, United had an unused borrowing amount of approximately ~~$1,597,607~~$1,529,965 available subject to delivery of collateral after certain trigger points.

Advances may be called by the FHLB or redeemed by United based on predefined factors and penalties. During the first quarter of 2006, as part of balance sheet repositioning, United prepaid a $50 million variable interest rate FHLB advance and terminated a fixed interest rate swap associated with the advance. United recognized a $3.06 million before-tax gain on the termination of the swap. No prepayment penalty was incurred in connection with the early repayment of the advance.

In March of 2007, United borrowed $25 million from the FHLB. The borrowing carries a 4.885% fixed-rate of interest and matures in March of 2010.

At ~~September 30, 2006, $413,974~~March 31, 2007, $438,660 of FHLB advances with a weighted-average interest rate of ~~5.25%~~5.23% is scheduled to mature within the next eleven years.

1617

The scheduled maturities of borrowings are as follows:

Year Amount
2006 $ —
2007 —
2008 100,465
2009 —
2010 and thereafter 313,509

Total $ 413,974

During the third quarter of 2006, United prepaid two $100 million convertible FHLB advances and terminated an interest rate swap associated with one of the advances. The prepayment of the FHLB advances resulted in before-tax penalties of approximately $8.26 million. United replaced the $200 million of debt with 5- year and 10-year advances and associated interest rate swaps. United’s management believes that the prepayment of these borrowings and the termination of the interest rate swap will improve United’s future net interest margin and enhance future earnings.


Year	Amount
2007	$	—
2008		100,288
2009		—
2010		125,000
2011 and thereafter		213,372


Total	$	438,660

United has a total of ~~seven~~six statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (Capital Securities) with the proceeds invested in junior subordinated debt securities (Debentures) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. At ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, the outstanding balances of the Debentures were ~~$88,524~~$85,172 and ~~$88,913~~$85,301 respectively, and were included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings”. The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities.

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

The Trust Preferred Securities currently qualify as Tier 1 capital of United for regulatory purposes. In March of 2005, the banking regulatory agencies issued guidance, which did not change the regulatory capital treatment for the Trust Preferred Securities.

9.10. COMMITMENTS AND CONTINGENT LIABILITIES

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

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily, and historically do not, represent future cash requirements. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation of the counterparty. United had approximately ~~$1,804,598~~$1,726,583 and ~~$1,823,909~~$1,734,299 of loan commitments outstanding as of ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, respectively, ~~the majority~~substantially all of which expire within one year.

Commercial and standby letters of credit are agreements used by United’s customers as a means of improving their credit standing in their dealings with others. Under these agreements, United guarantees certain financial commitments of its customers. A commercial letter of credit is issued specifically to facilitate trade or commerce. Typically, under the terms of a commercial letter of credit, a commitment is drawn upon when the underlying transaction is consummated as intended between the customer and a third party. United has issued commercial letters of credit of ~~$725~~$527 and ~~$1,021~~$525 as of ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, respectively. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of ~~$104,954~~$121,228 and ~~$139,572~~$112,367 as of ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, respectively. In accordance with FIN 45, United has determined that substantially all of its letters of credit are renewed on an annual basis and ~~that~~ the ~~fair value of~~fees associated with these letters of credit isare immaterial.

~~10.~~11. DERIVATIVE FINANCIAL INSTRUMENTS

United uses derivative instruments to help aid against adverse prices or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives may consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. United also executes derivative instruments with its commercial banking customers to facilitate its risk management strategies.

~~Under the provisions of SFAS~~United accounts for its derivative financial instruments in accordance with FASB Statement No. 133 (SFAS No. 133), “Accounting for Derivative Instruments and Hedging Activities”, as amended. SFAS No. 133 requires all derivative instruments to be carried at fair value on the balance sheet. United usually designates derivative instruments used to manage interest rate risk as hedge relationships with certain assets, liabilities or cash flows being hedged. Certain derivatives used for interest rate risk management are not designated in a SFAS No. 133 hedge relationship.

Under the provisions of SFAS No. 133, United has both fair value hedges and cash flow hedges as of March 31, 2007. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value ~~hedges under SFAS No.133.~~hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. ~~As of September 30, 2006, United has both fair value hedges and cash flow hedges.~~

During the third quarter of 2006, United prepaid two $100 million convertible FHLB advances and terminated an interest rate swap associated with one of the advances. The termination of the interest rate

are offset in current period earnings. For a cash flow hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to other comprehensive income within ~~stockholders’~~shareholders’ equity, net of tax. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a cash flow hedge are offset to other comprehensive income, net of tax.

~~Under both~~At inception of a hedge relationship, United formally documents the ~~fair value~~hedged item, the particular risk management objective, the nature of the risk being hedged, the derivative being used, how effectiveness of the hedge will be assessed and ~~cash flow~~how the ineffectiveness of the hedge ~~methods, derivative gains~~will be measured. United also assesses hedge effectiveness at inception and ~~losses, not effective in hedging~~on an ongoing basis using regression analysis. Hedge ineffectiveness is measured by using the change in fair value ~~or expected cash flows~~method. The change in fair value method compares the change in the fair value of the hedging derivative to the change in the fair value of the hedged ~~item, are~~exposure, attributable to changes in the benchmark rate. The portion of a hedge that is ineffective is recognized immediately in earnings. Prior to January 1, 2006, United used the ~~income statement. At~~shortcut method for interest rate swaps that met the ~~hedge’s inception and at least quarterly~~criteria as defined under SFAS No. 133. Effective January 1, 2006, United adopted an internal policy of accounting for all new derivative instruments entered thereafter ~~an assessment is performed to determine whether~~whereby the shortcut method would no longer be used.

For derivatives that are not designated in a hedge relationship, changes in the fair ~~values or cash flows~~value of the ~~derivative instruments have been highly effective~~derivatives are recognized in ~~offsetting changes~~earnings in the same period as the change in fair ~~values~~value.

In February 2006, the FASB issued Statement No. 155 (SFAS 155), “Accounting for Certain Hybrid Financial Instrument – an amendment of FASB Statements No. 133 and 140.” SFAS 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS 155 amends SFAS No. 140, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to allow a qualifying special-purpose entity (SPE) to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. United adopted SFAS 155 on January 1, 2007 and did not have a material impact on United’s consolidated financial statements.

During the first quarter of 2006, as part of a balance sheet repositioning strategy, United terminated a fixed interest rate swap designated as a cash ~~flows~~flow hedge associated with the repayment of $50 million variable interest rate FHLB advance that was being hedged. United recognized a $3.06 million before-tax gain on the termination of the ~~hedged items. If it is determined a derivative instrument has not been highly effective as a hedge, hedge accounting is discontinued.~~swap.

The following tables ~~below~~ set forth certain information regarding the interest rate derivatives portfolio used for interest-rate risk management purposes and designated as accounting hedges under SFAS 133 at ~~September 30, 2006:~~

~~Derivative Classifications and Hedging Relationships~~
~~September, 30, 2006~~

Notional Derivative
Amount Asset Liability
Derivatives Designated as Fair Value Hedges:
Hedging Commercial Loans $ 14,311 $ 84 $ 116

Total Derivatives Designated as Fair Value Hedges:
$ 14,311 $ 84 $ 116

Derivatives Designated as Cash Flow Hedges:
Hedging FHLB Borrowings $ 200,000 — $ 2,499

Total Derivatives Designated as Cash Flow Hedges:
$ 200,000 — $ 2,499

Total Derivatives Used in Interest Rate Risk Management and Designated in SFAS 133 Relationships:
$ 214,311 $ 84 $ 2,615

March 31, 2007:

1920

Derivative ~~Instruments~~Classifications and Hedging Relationships
~~September 30, 2006~~March 31, 2007

Notional Average Average Estimated
Amount Receive Rate Pay Rate Fair Value
Fair Value Hedges:

Pay Fixed Swap (Commercial Loans) $ 14,311 6.27 % $ (32 )

Total Derivatives Used in Fair Value Hedges
$ 14,311 $ (32 )

Cash Flow Hedges:

Pay Fixed Swap (FHLB Borrowing) $ 200,000 5.28 % $ (2,499 )

Total Derivatives Used in Cash Flow Hedges
$ 200,000 $ (2,499 )

Total Derivatives Used for Interest Rate Risk Management and Designated in SFAS 133 Relationships
$ 214,311 $ (2,531 )

The derivative portfolio also includes derivative financial instruments not included in hedge relationships. These derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies. Gains and losses on other derivative financial instruments are included in noninterest income and noninterest expense, respectively.

~~A summary of derivative financial instruments not in hedge relationships by type of activity is as follows:~~

Other Derivative Instruments
September 30, 2006
Net Derivative Net Gains
Asset (Liability) (Losses)
Other Derivative Instruments:

Interest Rate Risk Management $ 35 $ —
Customer Risk Management (35 ) —

Total Other Derivative Instruments
$ — $ —


	Notional		Derivative
	Amount		Asset		Liability
Derivatives Designated as Fair Value Hedges:
Hedging Commercial Loans	$	14,250	$	65	$	164


Total Derivatives Designated as Fair Value Hedges:	$	14,250	$	65	$	164


Derivatives Designated as Cash Flow Hedges:
Hedging FHLB Borrowings	$	200,000		—	$	2,952


Total Derivatives Designated as Cash Flow Hedges:	$	200,000		—	$	2,952


Total Derivatives Used in Interest Rate Risk Management and Designated in SFAS 133 Relationships:	$	214,250	$	65	$	3,116

~~11.~~Derivative Instruments
March 31, 2007


	Notional		Average		Average			Estimated
	Amount		Receive Rate		Pay Rate			Fair Value
Fair Value Hedges:
Pay Fixed Swap (Commercial Loans)	$	14,250		—		6.27	%	$	(99	)

Total Derivatives Used in Fair Value Hedges	$	14,250						$	(99	)


Cash Flow Hedges:
Pay Fixed Swap (FHLB Borrowing)	$	200,000		—		5.28	%	$	(2,952	)

Total Derivatives Used in Cash Flow Hedges	$	200,000						$	(2,952	)


Total Derivatives Used for Interest Rate Risk Management and Designated in SFAS 133 Relationships	$	214,250						$	(3,051	)

12. STOCK BASED COMPENSATION

~~United has stock option plans (the Plans) for certain employees that were accounted for under the intrinsic value method prior to~~On January 1, ~~2006. Because the exercise price at the date of the grant was equal to the market value of the stock, no compensation expense was recognized. In December 2004, FASB enacted~~2006, United adopted Statement of Financial Accounting Standards 123R (SFAS 123R). SFAS 123R requires the measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value based method and the recording of such expense in our consolidated statements of income.

~~On January 1, 2006, United adopted SFAS 123R~~ using the modified prospective transition method. Under this transition method, compensation cost to be recognized beginning in the first quarter of 2006 included: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006,

On December 30, 2005, the Executive Committee of the Board of Directors of United approved the accelerated vesting of all unvested stock options granted prior to December 30, 2005 to United employees, including Executive Officers, under the 2001 Stock Option Plan. As a result of the vesting acceleration, options to purchase 547,626 shares of United common stock became exercisable immediately. United recognized a pre-tax expense of approximately $21 thousand in the fourth quarter of 2005 for those accelerated options that were “in-the-money”, that is, the option’s exercise price was less than the market value of United’s stock. Due to the modification to accelerate the unvested options, United did not recognize any compensation cost for the ~~third quarter and first nine months of~~year 2006. In addition, no new options ~~have been~~were granted during 2006 and the first ~~nine months~~quarter of ~~2006.~~2007. Accordingly, the adoption of SFAS 123R had no impact on United’s consolidated statements of income or net income per share.

At its March 20, 2006 regular meeting, United’s Board of Directors approved the adoption of the 2006 Stock Option Plan and directed that the 2006 Stock Option Plan be submitted to United’s shareholders for approval at its Annual Meeting of Shareholders (the 2006 Annual Meeting). At the 2006 Annual Meeting, held on May 15, 2006, United’s shareholders approved the 2006 Stock Option Plan. The 2006 Stock Option Plan thus became effective at the time of the shareholders’ approval. A total of 1,500,000 shares of United’s authorized but unissued common stock are allocated for the 2006 Stock Option Plan. Each plan year, 400,000 options will be available for award to eligible employees; however, not all 400,000 options are required to be awarded in that year. All options granted under the 2006 Stock Option Plan will be non-statutory stock options (NSOs), i.e. options that do not qualify as incentive stock options under Section 422 of the Internal Revenue Code. Subject to certain change in control provisions, recipients of options will be fully vested in and permitted to exercise options granted under the 2006 Stock Option Plan three years from the grant date. As of ~~September 30, 2006,~~March 31, 2007, no shares have been granted under the 2006 Stock Option Plan. Any stock options granted under the 2006 Stock Option Plan in the future will be subject to the provisions of SFAS 123R.

United currently has options outstanding from various option plans other than the 2006 Stock Option Plan (the “Prior Plans”); however, no common shares of United stock are available for grants under the Prior Plans as these plans have expired. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms.

For options granted in 2005, United used a binomial lattice model to value the options granted and determine the pro forma compensation expense presented in the table below. United intends to use this binomial lattice model to value future grants. SFAS 123R defines a lattice model as a model that produces an estimated fair value based on the assumed changes in prices of a financial instrument over successive periods of time. A binomial lattice model assumes at least two price movements are possible in each period of time.

United, as does the FASB, believes the use of a binomial lattice model for option valuation is capable of fully reflecting certain characteristics of employee stock options. The table on the following page reflects the estimated

~~impact the fair value method would have had on United’s net income and net income per share if SFAS 123R had been in effect for the third quarter and nine months ended September 30, 2005.~~

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

Three Months Ended Nine Months Ended
September 30, September 30,
2005 2005
Net Income, as reported $ 25,449 $ 74,723
Less pro forma expense related to options granted, net of tax (299 ) (900 )

Pro forma net income $ 25,150 $ 73,823

Pro forma net income per share:
Basic – as reported $ 0.60 $ 1.75
Basic – pro forma $ 0.59 $ 1.73

Diluted – as reported $ 0.59 $ 1.73
Diluted – pro forma $ 0.59 $ 1.71

A summary of option activity under the Plans as of ~~September 30, 2006,~~March 31, 2007, and the changes during the first ~~nine~~three months of ~~2006~~2007 is presented below:


	Nine Months Ended September 30, 2006								Three Months Ended March 31, 2007
					Weighted Average								Weighted Average
			Aggregate		Remaining						Aggregate		Remaining
			Intrinsic		Contractual		Exercise				Intrinsic		Contractual		Exercise
	Shares		Value		Term (Yrs.)		Price		Shares		Value		Term (Yrs.)		Price
Outstanding at January 1, 2006		2,115,965					$	27.29
Outstanding at January 1, 2007										1,732,200					$	28.00
Granted		—						—		—						—
Exercised		235,547						24.57		81,228						21.11
Forfeited or expired		19,596						34.03		704						3.55

Outstanding at September 30, 2006		1,860,822	$	17,977		5.7	$	27.57
Outstanding at March 31, 2007										1,650,268	$	12,085		5.5	$	28.35


Exercisable at September 30, 2006		1,860,822	$	17,977		5.7	$	27.57
Exercisable at March 31, 2007										1,650,268	$	12,085		5.5	$	28.35

Cash received from options exercised under the Plans for the ~~nine~~three months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ was ~~$5.56~~$1.05 million and ~~$1.99~~$3.87 million, respectively. During the ~~nine~~three months ended ~~September 30,~~March 31, 2007 and 2006, 81,228 and ~~2005, 235,547 and 101,680~~165,289 shares, respectively, were issued in connection with stock option exercises. All shares issued in connection with stock option exercises were issued from available treasury stock for the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 and ~~2005.~~2006. The total intrinsic value of options exercised under the Plans during the ~~nine~~three months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ was ~~$3.10~~$1.22 million and ~~$1.51~~$2.20 million, respectively.

SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under previous standards. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the company cannot estimate what those amounts will be in the future (because they depend on, among other things, the date employees exercise stock options), United recognized cash flows from financing activities of ~~$499~~$343 thousand and $385 thousand from excess tax benefits related to share-based compensation for the ~~nine~~three months ended ~~September 30, 2006. Cash flows of $304 thousand from excess tax benefits related to share-based compensation were reported as operating activities for the nine months ended September 30, 2005.~~

In March of 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107), “Share-Based Payment.” SAB 107 provides guidance regarding the application of SFAS 123R including option valuation methods, the accounting for income tax effects of share-based payment arrangements upon the adoption of SFAS 123R,31, 2007 and the required disclosures within filings made with the SEC related to the accounting for share-based payment transactions. United has also provided SAB 107 required disclosures in its Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) under the subheading of “Other Expenses” contained within this document.2006, respectively.

~~12.~~13. EMPLOYEE BENEFIT PLANS

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

~~Net periodic pension cost included the following components:~~

Three Months Ended Nine Months Ended
(In thousands) September 30 September 30
2006 2005 2006 2005
Service cost $ 540 $ 476 $ 1,602 $ 1,408
Interest cost 818 765 2,427 2,269
Expected return on plan assets (1,197 ) (1,126 ) (3,552 ) (3,342 )
Amortization of transition asset (44 ) (44 ) (131 ) (131 )
Recognized net actuarial loss 233 172 693 510
Amortization of prior service cost 1 1 1 1

Net periodic pension cost $ 351 $ 244 $ 1,040 $ 715

Weighted-Average Assumptions:

Discount rate 6.00 % 6.25 % 6.00 % 6.25 %
Expected return on assets 8.50 % 9.00 % 8.50 % 9.00 %
Rate of compensation increase 3.25 % 3.25 % 3.25 % 3.25 %

~~During the third quarter of~~On December 31, 2006, United ~~contributed to~~adopted the ~~plan $26.64 million, its maximum allowable contribution by law.~~

~~In September 2006, the Financial Accounting Standards Board published~~recognition and disclosure provision of Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”~~, which~~. SFAS 158 requires ~~employers~~United to recognize the funded status of aits defined benefit post-retirement plan in the statement of financial position, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The adjustment to accumulated other comprehensive income at adoption represents the net unrecognized actuarial losses, unrecognized prior service costs, and ~~fluctuations~~unrecognized transition obligation remaining from the initial adoption of SFAS 87, all of which were previously netted against the plan’s funded status in United’s statement of financial positions pursuant to the provisions of SFAS 87. These amounts will be subsequently recognized as net periodic pension cost pursuant to United’s historical accounting policy for amortizing such

amounts. Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic pension cost in the ~~funded status~~same periods will be recognized as a component of other comprehensive income. Those amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in accumulated other comprehensive income at adoption of Statement 158.

The incremental effects of adopting the provision of Statement 158 on United’s statement of financial position at December 31, 2006 are presented in the following table. The adoption of Statement 158 had no effect on United’s consolidated statement of income for the year of 2006 and it will not affect United’s operating results in future periods.


	At December 31, 2006
	Prior to Adopting			Effect of Adopting			As Reported at
	Statement 158			Statement 158			December 31, 2006
Net pension asset		40,165			(13,217	)	$	26,948
Deferred income taxes		8,058			5,206			13,264
Accumulated other comprehensive income		(7,780	)		(8,011	)		(15,791	)

Included in accumulated other comprehensive income at December 31, 2006 are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized transition asset of $701 ($425 net of tax), unrecognized prior service costs of $9 ($6 net of tax) and unrecognized actuarial losses of $13,909 ($8,430 net of tax). The transition asset, prior service cost, and actuarial loss included in accumulated other comprehensive income and expected to be recognized in net periodic pension cost during the fiscal year ~~in which the changes occur through comprehensive income. There will also be disclosure requirements which will be effective for United as of~~ended December 31, ~~2006. See~~2007 is $175 ($105 net of tax), $1 ($1 net of tax), and $593 ($356 net of tax), respectively.

Net periodic pension cost for the ~~New Accounting Standards section within this report for additional information.~~three months ended March 31, 2007 and 2006 included the following components:


	Three Months Ended
	March 31
(In thousands)	2007			2006
Service cost	$	531		$	528
Interest cost		857			800
Expected return on plan assets		(1,778	)		(1,171	)
Amortization of transition asset		(43	)		(43	)
Recognized net actuarial loss		146			228
Amortization of prior service cost		—			—

Net periodic pension (benefit) cost	$	(287	)	$	342


Weighted-Average Assumptions:
Discount rate		6.00	%		6.00	%
Expected return on assets		8.50	%		8.50	%
Rate of compensation increase		3.25	%		3.25	%

~~13.~~14. INCOME TAXES

In July 2006, the FASB issued Interpretation (FIN) No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”, to address concerns regarding comparability in reported tax assets and liabilities resulting from a lack of specific guidance in FASB Statement No. 109 (SFAS 109), “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken on a tax return, in order for those tax positions to be recognized in the financial statements. United has adopted FIN 48 as of January 1, 2007, as required. The cumulative effect of adopting FIN 48 was $300 thousand which was recorded in retained earnings. Also, certain amounts have been reclassified in the statement of financial position in order to comply with the requirements of the statement.

As of March 31, 2007, United has provided a liability for $8.6 million of unrecognized tax benefits related to various federal and state income tax matters. Of this amount, the amount that would impact United’s effective tax rate, if recognized, is $6.2 million. Over the next 12 months, the statute of limitations will close on certain income tax returns filed by an acquired subsidiary. As a result, United expects to recognize approximately $2.0 million in tax benefits, which when recognized will have no impact on United’s tax expense.

United is currently open to audit under the statute of limitations by the Internal Revenue Service and State Taxing authorities for the years ended December 31, 2003 through 2006.

As of January 1, 2007, United accrued $450 thousand of interest related to uncertain tax positions. As of March 31, 2007, the total amount of accrued interest was $468 thousand. United accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.

15. COMPREHENSIVE INCOME

The components of total comprehensive income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ are as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30						March 31
(In thousands)	2006			2005			2006			2005			2007			2006
Net Income	$	14,165		$	25,449		$	64,234		$	74,723		$	24,407		$	24,610
Securities available for sale:
Net change in unrealized gains (losses) on available for sale securities arising during the period		13,872			(4,882	)		1,452			(11,543	)		3,025			(3,960	)
Related income tax effect		(4,855	)		1,709			(508	)		4,040
Net reclassification adjustment for losses (gains) included in net income		134			92			3,071			(889	)
Related income tax benefit														(1,059	)		1,386
Net reclassification adjustment for (gains) losses included in net income														(70	)		2,838
Related income tax (benefit) expense		(47	)		(32	)		(1,075	)		311			25			(993	)
Accretion on the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio		165			189			511			569

Net effect on other comprehensive (loss) income														1,921			(729	)

Securities held to maturity:
Unrealized loss related to the call of securities previously transferred from the available for sale to the held to maturity investment portfolio														241			—
Related income tax expense														(84	)		—
Accretion on the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio prior to call or maturity														142			182
Related income tax expense		(58	)		(66	)		(179	)		(199	)		(50	)		(64	)

Net effect on other comprehensive income (loss)		9,211			(2,990	)		3,272			(7,711	)
Net effect on other comprehensive (loss) income														249			118

Cash flow hedge derivatives:
Unrealized (loss) gain on cash flow hedge		(2,500	)		1,502			(2,499	)		1,502			(615	)		—
Related income tax expense		875			(526	)		874			(526	)
Related income tax expense (benefit)														215			—
Termination of cash flow hedge		—			—			(2,077	)		—			—			(2,077	)
Related income tax expense		—			—			727			—			—			727

Net effect on other comprehensive income														(400	)		(1,350	)

FASB 158 pension plan:
Amortization of transition asset														(43	)		—
Related income tax expense														18			—
Recognized net actuarial loss														146			—
Related income tax benefit														(58	)		—

Net effect on other comprehensive income		(1,625	)		976			(2,975	)		976			63			—

Total change in other comprehensive income		7,586			(2,014	)		297			(6,735	)		1,833			(1,961	)

Total Comprehensive Income	$	21,751		$	23,435		$	64,531		$	67,988		$	26,240		$	22,649

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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

United desires to provide its shareholders with sound information about past performance and future trends. Consequently, any forward-looking statements contained in this report, in a report incorporated by reference to this report, or made by management of United in this report, in any other reports and filings, in press releases and in oral statements, involves numerous assumptions, risks and uncertainties.

Actual results could differ materially from those contained in or implied by United’s statements for a variety of factors including, but not limited to: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature and extent of governmental actions and reforms; and rapidly changing technology and evolving banking industry standards.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

The allowance for credit losses represents management’s estimate of the probable credit losses inherent in the ~~lending portfolio and lending-related commitments. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because management’s~~loan portfolio. Management’s evaluation of the adequacy of the allowance for credit losses and the appropriate provision for credit losses is based on a quarterly evaluation of the portfolio. This evaluation is inherently subjective and requires significant estimates, including the amounts and timing of estimated future cash flows, estimated losses on pools of loans based on historical loss experience, and consideration of current economic trends, all of which are susceptible to constant and significant change. The amounts allocated to specific credits and loan pools grouped by similar risk characteristics are reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances. In determining the components of the allowance for credit losses, management considers the risk arising in part from, but not limited to, charge-off and delinquency trends, current economic and business conditions, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other

factors leading to changes in the amount of the allowance for credit losses is included in the Provision for Credit Losses section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

United’s calculation of income tax provision is complex and requires the use of estimates and judgments in its determination. As part of United’s analysis and implementation of business strategies, consideration is given to tax laws and regulations which may affect the transaction under evaluation. This analysis includes the amount and timing of the realization of income tax liabilities or benefits. United strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense. United is also subject to audit by federal and state authorities. Because the application of tax laws is subject to varying interpretations, results of these audits may produce indicated liabilities which differ from United’s estimates and provisions. United continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances.

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

The following is a broad overview of the financial condition and results of operations and is not intended to replace the more detailed discussion, which is presented under specific headings on the following pages.

FINANCIAL CONDITION

United’s total assets as of ~~September 30, 2006~~March 31, 2007 were ~~$6.59~~$6.57 billion, down ~~$134.97~~$145.84 million or ~~2.01%~~2.17% from year-end ~~2005,~~2006, primarily the result of ~~$35.43 million or 17.03% and $213.96 million or 14.25%~~ declines in portfolio loans, cash and cash equivalents and investment securities ~~respectively. Partially offsetting these decreases were increases in portfolio loans~~ of ~~$100.38~~$90.45 million or ~~2.16%~~1.88%, ~~other assets of $13.35~~$38.84 million or ~~7.84%~~14.99%, and ~~interest receivable of $1.12~~$16.49 million or ~~3.49%.~~1.29%, respectively. The decrease in total assets is reflected in a corresponding decrease in total liabilities of ~~$135.09~~$150.49 million or ~~2.22%~~2.47% from year-end ~~2005.~~2006. The decrease in total liabilities was due mainly to a reduction of ~~$309.84~~$86.62 million or ~~42.81%~~1.79% in ~~Federal Home Loan Bank (FHLB) borrowings~~deposits and ~~an $8.79~~a $78.18 million or ~~13.96%~~6.62% decline in borrowings. Partially offsetting these decreases in deposits and borrowings was an increase in accrued expenses and other ~~liabilities. Partially offsetting these decreases in FHLB borrowings and accrued expenses and other~~ liabilities ~~were increases in deposits~~ of ~~$133.10~~$14.72 million or ~~2.88%, securities sold under agreements to repurchase of $51.65 million or 9.83%, and federal funds purchased of $1.56 million or 2.53%~~22.60%. Shareholders’ equity remained fairly consistent as it increased ~~$128 thousand~~$4.66 million or less than 1% from year-end ~~2005.~~2006. The following discussion explains in more detail the changes in financial condition by major category.

2829

Cash and Cash Equivalents

Cash and cash equivalents decreased ~~$35.43~~$38.84 million or ~~17.03%~~14.99% comparing ~~September 30, 2006~~March 31, 2007 to year-end ~~2005.~~2006. Of this total decrease, cash and due from banks and interest-bearing deposits decreased ~~$46.62~~$61.24 million or ~~24.67%~~28.15% and $11.14 million or 48.67%, respectively, while ~~interest-bearing deposits and~~ federal funds sold increased ~~$2.46 million or 24.96% and $8.74 million or 95.44%, respectively.~~$33.54 million. During the first ~~nine~~three months of ~~2006,~~2007, net cash of ~~$54.45~~$37.80 million and ~~$107.58~~$108.90 million was provided by operating activities and investing activities, respectively. Net cash of ~~$197.46~~$185.54 million was used in financing activities. See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first ~~nine~~three months of ~~2006~~2007 and ~~2005.~~2006.

Securities

Total investment securities at ~~September 30, 2006~~March 31, 2007 decreased ~~$213.96~~$16.49 million or ~~14.25%~~1.29% since year-end ~~2005. The decline in investment securities is a result of management’s decision to use the cash flows to repay borrowings.~~2006. Securities available for sale ~~decreased $200.85~~were relatively flat, decreasing $9.86 million or ~~15.76%~~less than 1%. This change in securities available for sale reflects ~~$425.18~~$85.47 million in sales, maturities and calls of securities, ~~$222.65~~$73.16 million in purchases, and an increase of ~~$4.52~~$2.96 million in market value. Securities held to maturity decreased ~~$13.11~~$7.30 million or ~~5.77%~~3.44% from year-end ~~2005~~2006 due to calls and maturities of securities. Other investment securities increased $667 thousand or 1.26% due to required purchases of FHLB stock. The amortized cost and estimated fair value of investment securities, including types and remaining maturities, is presented in Note 23 to the unaudited Notes to Consolidated Financial Statements.

Loans

Loans held for sale increased ~~$186~~$190 thousand or ~~5.60%~~9.31% as loan originations slightly exceeded loan sales in the secondary market during the first ~~nine~~three months of ~~2006.~~2007. Portfolio loans, net of unearned income, ~~increased $100.38~~decreased $90.45 million or ~~2.16%~~1.88% from year-end ~~2005 largely the result of increased production~~2006 due to decreases in ~~construction loans and commercial real estate loans.~~several loan categories. Since year-end 2005, construction loans increased $132.97 million or 38.29% while commercial real estate loans increased $29.48 million or 2.62%. Single-family residential real estate loans were relatively stable, increasing $7.14 million or less than 1%. These increases were partially offset by decreases in2006, commercial loans (not secured by real estate) ~~of $40.56~~decreased $69.81 million or ~~4.34%~~7.32%, single-family residential real estate loans declined $28.20 million or 1.64%, construction loans decreased $21.36 million or 4.08% and consumer loans ~~of $28.84~~declined $4.97 million or ~~7.59%~~1.42%. These decreases were partially offset by an increase in commercial real estate loans of $30.35 million or 2.65% from year-end ~~2005.~~2006. The table below summarizes the changes in the loan categories since year-end ~~2005:~~2006:


	September 30			December 31									March 31			December 31
(Dollars In thousands)	2006			2005			$ Change			% Change
(Dollars in thousands)													2007			2006			$ Change			% Change
Loans held for sale	$	3,510		$	3,324		$	186			5.60	%	$	2,231		$	2,041		$	190			9.31	%


Commercial, financial, and agricultural	$	894,222		$	934,780		$	(40,558	)		(4.34	%)	$	884,214		$	954,024		$	(69,810	)		(7.32	%)
Real Estate:
Single family residential		1,752,964			1,745,824			7,140			0.41	%		1,692,596			1,720,794			(28,198	)		(1.64	%)
Commercial		1,155,577			1,126,095			29,482			2.62	%		1,176,355			1,146,007			30,348			2.65	%
Construction		480,247			347,274			132,973			38.29	%		501,680			523,042			(21,362	)		(4.08	%)
Other		122,445			122,487			(42	)		(0.03	%)		123,357			119,973			3,384			2.82	%
Consumer		351,218			380,062			(28,844	)		(7.59	%)		344,902			349,868			(4,966	)		(1.42	%)
Less: Unearned income		(6,469	)		(6,693	)		224			(3.35	%)		(6,807	)		(6,961	)		154			(2.21	%)

Total Loans, net of unearned income	$	4,750,204		$	4,649,829		$	100,375			2.16	%	$	4,716,297		$	4,806,747		$	(90,450	)		(1.88	%)

For a further discussion of loans see Note 34 to the unaudited Notes to Consolidated Financial Statements.

Other Assets

Other assets ~~increased $13.35~~were relatively flat, increasing $1.25 million or ~~7.84%~~less than 1% from year-end ~~2005~~2006 due mainly to a ~~$25.60 million increase in prepaid pension as a result of a $26.64 million contribution in September 2006 and a $3.28~~$1.46 million increase in the cash surrender value of ~~cash surrender~~bank-owned life insurance policies. Partially offsetting ~~these increases~~this increase was a ~~decline~~decrease in deferred tax assets of $10.72 million due primarily to a $26.64 million pension contribution and a $4.52 million increase in the market value of available for sale securities since year-end 2005. In addition, derivative assets dropped $2.03 million while core deposit intangibles ~~decreased $1.45 million~~of $408 thousand from year-end ~~2005. The $2.03 million drop in derivative assets related primarily~~2006 due to ~~the termination of an interest rate swap associated with the repayment of a hedged $50 million variable rate FHLB advance in the first quarter of 2006.~~amortization.

Deposits

Total deposits at ~~September 30, 2006 grew $133.10~~March 31, 2007 declined $86.62 million or ~~2.88%~~1.79% since year-end ~~2005.~~2006. In terms of composition, noninterest-bearing deposits decreased ~~$139.89~~$70.60 million or ~~14.58%~~7.82% while interest-bearing deposits ~~increased $273.00~~were relatively flat, decreasing $16.02 million or ~~7.46%~~less than 1% from December 31, ~~2005.~~2006. The decrease in noninterest-bearing deposits was due mainly to ~~an $83.09~~a decrease in official checks of $40.97 million due to a large amount of loan proceeds checks at year-end 2006. Commercial noninterest bearing deposits declined $35.66 million or ~~13.34% drop in commercial noninterest bearing deposits~~6.23% as customers shifted money into interest-bearing products. ~~In addition, consumer noninterest bearing~~

The decrease in interest-bearing deposits ~~declined $51.08 million or 17.13%~~was due mainly to ~~the High Performance Checking (HPC) program that United launched during the first quarter~~a decrease of ~~2006. Most of the checking~~$106.40 million or 7.85% in interest bearing money market accounts ~~offered by United~~(MMDAs). Partially offsetting this decline in ~~its High Performance Checking program are interest-bearing, and customers switched from their traditional non-interest~~interest bearing ~~checking accounts to the new interest-bearing High Performance Checking products.~~

~~The increase in interest-bearing deposits consisted of~~MMDAs was a growth in time deposits under $100,000 of ~~$129.13~~$59.91 million or ~~10.74%,~~4.55% and time deposits over $100,000 of ~~$120.06~~$18.41 million or ~~18.31% and interest-bearing money market accounts of $48.19 million or 3.71%~~2.38%. These increases in time deposits are primarily due to ~~the movement of deposits from noninterest-bearing deposits to interest-bearing products as a result of~~ higher interest ~~rates and were partially offset by decreases of $7.28 million or 4.45% and $17.11 million or 5.05% in interest-bearing checking accounts and regular savings accounts, respectively.~~rates.

The table below summarizes the changes in the deposit categories since year-end ~~2005:~~2006:


	September 30		December 31								March 31		December 31
(Dollars In thousands)	2006		2005		$ Change			% Change			2007		2006		$ Change			% Change
Demand deposits	$	348,641	$	712,729	$	(364,088	)		(51.08	%)	$	379,098	$	429,504	$	(50,407	)		(11.74	%)
Interest-bearing checking		156,440		163,717		(7,277	)		(4.45	%)		163,445		159,628		3,817			2.39	%
Regular savings		321,658		338,763		(17,105	)		(5.05	%)		325,886		317,642		8,244			2.60	%
Money market accounts		1,816,619		1,544,233		272,386			17.64	%		1,702,707		1,829,300		(126,593	)		(6.92	%)
Time deposits under $100,000		1,331,627		1,202,496		129,131			10.74	%		1,377,745		1,317,839		59,906			4.55	%
Time deposits over $100,000		775,570		655,514		120,056			18.31	%		792,691		774,279		18,412			2.38	%

Total deposits	$	4,750,555	$	4,617,452	$	133,103			2.88	%	$	4,741,572	$	4,828,192	$	(86,620	)		(1.79	%)

RESULTS OF OPERATIONS

Overview

~~Third quarter earnings were $14.17 million or $0.34 per diluted share while earnings~~Net income for the first ~~nine~~three months of ~~2006 were $64.23 million or $1.53 per diluted share. These results included significant charges totaling $15.92 million to prepay certain long-term debt. United earned $25.45~~2007 was $24.41 million or $0.59 per diluted share ~~and $74.72~~compared to $24.61 million or ~~$1.73~~$0.58 per share for the ~~third quarter and~~ first ~~nine~~three months of ~~2005, respectively.~~

During the quarter, United prepaid certain Federal Home Loan Bank (FHLB) long-term advances in the amount of $200 million and terminated an interest rate swap associated with one of the advances. The prepayment of the FHLB advances resulted in before-tax penalties of approximately $8.26 million. The termination of the interest rate swap resulted in a before-tax loss of approximately $7.66 million. United’s management believes that the prepayment of these borrowings and the termination of the interest rate swap will improve United’s future net interest margin and enhance future earnings.

2006. United’s annualized return on average assets for the first ~~nine~~three months of ~~2006~~2007 was ~~1.29%~~1.51% and return on average shareholders’ equity was ~~13.38%~~15.44% as compared to ~~1.56%~~1.49% and ~~15.63%~~15.51% for the first ~~nine~~three months of 2005. For the third quarter of 2006, United’s annualized return on average assets was 0.85% while the return on average equity was 8.83% as compared to 1.55% and 15.68%, respectively, for the third quarter of 2005.2006.

Tax-equivalent net interest income for the first ~~nine~~three months of ~~2006~~2007 was ~~$176.94~~$56.67 million, ~~an increase~~a decrease of ~~$4.77~~$2.08 million or ~~2.77%~~3.54% from the prior year’s first ~~nine~~three months. ~~Tax-equivalent net interest income decreased $1.16 million or 1.94% for the third quarter of 2006 as compared to the same period of 2005.~~ The provision for credit losses was ~~$1.17~~$350 thousand for the first three months of 2007 as compared to $250 thousand for the first three months of 2006. Noninterest income was $14.92 million for the first ~~nine~~three months of 2006 as compared to $3.56 million for the first nine months of 2005. For the quarters ended September 30, 2006 and 2005, the provision for credit losses was $571 thousand and $1.95 million, respectively.

~~Noninterest income was $34.30 million for the first nine months of 2006, down $5.01~~2007, up $1.25 million or ~~12.75%~~9.18% when compared to the first ~~nine~~three months of ~~2005. For the third quarter of 2006, noninterest income was $6.21 million, a decrease of $6.82 million~~2006. Noninterest expense decreased $693 thousand or ~~52.33% from the third quarter of 2005. The decrease resulted mainly from a before-tax loss of $7.66 million on the termination of an interest rate swap associated with the~~

prepayment of an FHLB advance during the third quarter of 2006, as previously mentioned. Excluding the loss on the termination of the interest rate swap and losses associated with security transactions, noninterest income2.15% for the ~~first nine months and third quarter of 2006 would have increased $3.55 million or 9.23% and $878 thousand or 6.69%, respectively, from the same periods in 2005.~~

~~Noninterest expense increased $14.73 million or 16.40% for the nine~~three months of ~~2006~~2007 compared to same period in ~~2005. For the third quarter of 2006, noninterest expense increased $9.70 million~~2006. Income taxes declined $309 thousand or 31.78% from the third quarter of 2005. The increase was due primarily to penalties of $8.26 million to prepay $200 million of FHLB advances in the third quarter of 2006. Excluding the prepayment penalties, noninterest expense2.66% for the first ~~nine~~three months ~~and third quarter~~ of ~~2006 would have increased $6.47 million or 7.20% and $1.44 million or 4.71%, respectively, from~~2007 as compared to the ~~same periods last year.~~first three months of 2006. United’s effective tax rate was ~~31.74%~~31.70% and ~~31.46%~~32.10% for the first ~~nine~~three months of ~~2006~~2007 and ~~2005, respectively, and 30.42% and 31.65% for the third quarter of~~ 2006, ~~and 2005,~~ respectively.

Net Interest Income

Tax-equivalent net interest income for the first nine months of 2006 was $176.94 million, an increase of $4.77 million or 2.77% from the prior year’s first nine months as average earning assets increased $222.01 million or 3.78% due to average loan growth of $264.74 million or 5.94%. For the nine months ended September 30, 2006, interest income from United’s asset securitization increased $1.39 million from the same period in 2005. The average yield on earning assets for the first nine months of 2006 increased 88 basis points from the first nine months of 2005 due to higher interest rates. However, as a result of the higher interest rates, the average cost of funds for the first nine months of 2006 increased 107 basis points from the first nine months of 2005. A sustained flat yield curve between short-term and long-term interest rates has resulted in a lesser increase in yields on earning assets while the upward trend in the general market interest rates has resulted in a more significant increase to funding costs. The net interest margin for the first nine months of 2006 was 3.87%, down 4 basis points from a net interest margin of 3.91% during the same period last year.

~~Tax-equivalent net interest income for the third~~ quarter of ~~2006~~2007 was ~~$58.82~~$56.67 million, a decrease of ~~$1.16~~$2.08 million or ~~1.94%~~3.54% from the ~~third~~first quarter of ~~2005.~~2006. The average yield on earning assets increased 8048 basis points due to higher interest ~~rates as~~rates; however, this increase in the average ~~earning~~yield on earnings assets grew $81.66 million or 1.37% as a result of average loan growth of $229.53 million or 5.06% for the third quarter of 2006 as compared to the third quarter of 2005. However, these increases to tax-equivalent net interest income werewas more than offset by a ~~105~~62 basis point increase in United’s cost of funds due to the higher interest ~~rates~~rates. Average earning assets decreased $113.39 million or 1.85% for the ~~third~~first quarter of ~~2006~~2007 as ~~compared to last year’s third quarter. Partially offsetting the~~average net loan growth ~~in average loans was a $161.95~~of $106.01 million or ~~11.06%~~2.31% was more than offset by a $214.28 million or 14.42% decline in average ~~investment~~ securities. In addition, interest income from United’s asset securitization decreased ~~$770~~$237 thousand for the ~~third~~first quarter of ~~2006~~2007 as compared to the ~~third~~first quarter of ~~2005.~~2006. The net interest margin for the ~~third~~first quarter of ~~2006~~2007 was ~~3.87%~~3.79% as compared to ~~4.00%~~3.86% for the ~~third~~first quarter of ~~2005.~~2006.

On a linked-quarter basis, United’s tax-equivalent net interest income for the ~~third~~first quarter of 2007 declined $1.43 million or 2.47% from the fourth quarter of 2006 ~~was relatively stable as it decreased $548 thousand or less than 1% from~~due to two fewer days in the ~~second~~ quarter ~~of 2006. The slight decrease was due primarily to~~and an 188 basis ~~point~~points increase in the average cost of ~~funds due~~funds. The average yield on earning assets increased one basis point which was not enough to ~~higher interest rates, very competitive deposit pricing~~offset the increase in the ~~market, and money switching from noninterest-bearing accounts to interest-bearing accounts as a result~~average cost of ~~the United’s new HPC program.~~funds. Average earning assets were relatively flat for the quarter, declining ~~$57.59~~$14.17 million or less than 1% as average federal funds sold declined $7.07 million or 29.79% and average investment securities ~~declined $54.51~~were flat, declining $4.88 million or ~~4.02%~~less than 1%. ~~Additionally,~~Average net loans were flat, increasing $431 thousand or less than 1% for the quarter. The net interest ~~income~~margin of 3.79% for the first quarter of 2007 was a decrease of 6 basis points from ~~United’s prior asset securitization~~the net interest margin of 3.85% for the fourth quarter of 2006.

~~Tables 1 and 2 below show~~following table shows the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month period ended March 31, 2007 and ~~nine-month periods ended September 30,~~ 2006, ~~and 2005,~~ respectively, with the interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 35%. The interest income and yield on state nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory state income rate of 9%.

~~Table 1~~


Table 1

	Three Months Ended								Three Months Ended									Three Months Ended								Three Months Ended
	September 30, 2006								September 30, 2005									March 31, 2007								March 31, 2006
	Average					Avg.			Average						Avg.			Average					Avg.			Average					Avg.
(Dollars in thousands)	Balance			Interest		Rate			Balance			Interest			Rate			Balance			Interest		Rate			Balance			Interest		Rate

ASSETS
Earning Assets:
Federal funds sold and securities repurchased under agreements to resell and other short-term investments	$	37,862		$	515		5.41	%	$	23,286		$	232			3.94	%	$	36,433		$	505		5.62	%	$	41,562		$	291		2.84	%
Investment Securities:
Taxable		1,074,752			13,934		5.19	%		1,257,562			14,480			4.57	%		1,049,836			13,430		5.12	%		1,247,475			15,130		4.85	%
Tax-exempt (1) (2)		228,185			4,918		8.62	%		207,324			5,376			10.29	%		222,196			4,552		8.19	%		238,834			4,841		8.11	%

Total Securities		1,302,937			18,852		5.79	%		1,464,886			19,856			5.38	%		1,272,032			17,982		5.65	%		1,486,309			19,971		5.37	%
Loans, net of unearned income (1) (2) (3)		4,768,835			86,959		7.25	%		4,539,307			72,727			6.37	%		4,742,343			86,146		7.34	%		4,636,957			79,049		6.89	%
Allowance for loan losses		(44,087	)							(43,589	)								(43,603	)							(44,229	)

Net loans		4,724,748					7.31	%		4,495,718						6.43	%		4,698,740					7.41	%		4,592,728					6.96	%

Total earning assets		6,065,547		$	106,326		6.97	%		5,983,890		$	92,815			6.17	%		6,007,205		$	104,633		7.03	%		6,120,599		$	99,311		6.55	%

Other assets		560,501								544,240									554,125								559,815

TOTAL ASSETS	$	6,626,048							$	6,528,130								$	6,561,330							$	6,680,414


LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits	$	3,897,572		$	32,312		3.29	%	$	3,619,271		$	19,626			2.15	%	$	3,855,911		$	33,170		3.49	%	$	3,695,782		$	24,454		2.68	%
Short-term borrowings		680,201			7,142		4.17	%		720,313			4,656			2.56	%		678,696			7,502		4.48	%		834,310			7,499		3.65	%
Long-term borrowings		497,516			8,052		6.42	%		556,798			8,550			6.09	%		506,497			7,288		5.84	%		544,930			8,607		6.41	%

Total Interest-Bearing Funds		5,075,289			47,506		3.71	%		4,896,382			32,832			2.66	%		5,041,104			47,960		3.86	%		5,075,022			40,560		3.24	%

Noninterest-bearing deposits		852,850								935,972									811,765								900,751
Accrued expenses and other liabilities		61,216								51,700									67,523								61,227

TOTAL LIABILITIES		5,989,355								5,884,054									5,920,392								6,037,000
SHAREHOLDERS’ EQUITY		636,693								644,076									640,938								643,414

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	6,626,048							$	6,528,130								$	6,561,330							$	6,680,414
														��

NET INTEREST INCOME				$	58,820							$	59,983								$	56,673							$	58,751


INTEREST SPREAD							3.26	%								3.51	%							3.17	%							3.31	%

NET INTEREST MARGIN							3.87	%								4.00	%							3.79	%							3.86	%

~~Table 2~~

Nine Months Ended Nine Months Ended
September 30, 2006 September 30, 2005
Average Avg. Average Avg.
(Dollars in thousands) Balance Interest Rate Balance Interest Rate

ASSETS

Earning Assets:
Federal funds sold and securities repurchased under agreements to resell and other short-term investments $ 39,856 $ 1,235 4.14 % $ 27,200 578 2.84 %
Investment Securities:
Taxable 1,147,628 43,371 5.04 % 1,238,934 42,139 4.55 %
Tax-exempt (1) (2) 233,930 15,062 8.59 % 197,391 11,600 7.86 %

Total Securities 1,381,558 58,433 5.64 % 1,436,325 53,739 5.00 %
Loans, net of unearned income (1) (2) (3) 4,725,633 250,216 7.08 % 4,460,890 205,686 6.16 %
Allowance for loan losses (44,153 ) (43,535 )

Net loans 4,681,480 7.14 % 4,417,355 6.22 %

Total earning assets 6,102,894 $ 309,884 6.79 % 5,880,880 $ 260,003 5.91 %

Other assets 558,016 537,061

TOTAL ASSETS $ 6,660,910 $ 6,417,941

LIABILITIES

Interest-Bearing Funds:
Interest-bearing deposits $ 3,792,935 $ 84,807 2.99 % $ 3,512,219 $ 50,946 1.94 %
Short-term borrowings 776,772 23,029 3.96 % 729,004 12,083 2.22 %
Long-term borrowings 512,314 25,111 6.55 % 582,335 24,810 5.70 %

Total Interest-Bearing Funds 5,082,021 132,947 3.50 % 4,823,558 87,839 2.43 %

Non-interest bearing deposits 875,556 902,138
Accrued expenses and other liabilities 61,668 52,980

TOTAL LIABILITIES 6,019,245 5,778,676
SHAREHOLDERS’ EQUITY
641,665 639,265

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 6,660,910 $ 6,417,941

NET INTEREST INCOME
$ 176,937 $ 172,164

INTEREST SPREAD
3.29 % 3.48 %

NET INTEREST MARGIN
3.87 % 3.91 %


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

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

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

Provision for Credit Losses

At ~~September 30, 2006,~~March 31, 2007, nonperforming loans were ~~$13.63~~$11.48 million or ~~0.29%~~0.24% of loans, net of unearned income compared to nonperforming loans of ~~$13.19~~$14.19 million or ~~0.28%~~0.30% of loans, net of unearned income at December 31, ~~2005,~~2006, respectively. The components of nonperforming loans include nonaccrual loans and loans, which are contractually past due 90 days or more as to interest or principal, but have not been put on a

nonaccrual basis. At ~~September 30, 2006,~~March 31, 2007, nonaccrual loans were ~~$6.36~~$6.07 million, ~~a decrease~~an increase of ~~$789~~$313 thousand or ~~11.04%~~5.44% from ~~$7.15~~$5.76 million at year-end ~~2005.~~2006. This ~~decrease~~increase was due mainly ~~due~~ to ~~two customers whose~~the addition of one commercial loan in the amount of $430 thousand being placed on nonaccrual ~~balances have declined by $684 thousand since December~~status as of March 31, ~~2005.~~2007. Loans past due 90 days or more were ~~$7.27~~$5.42 million at ~~September 30, 2006,~~March 31, 2007, a ~~net increase~~decline of ~~$1.23~~$3.02 million or ~~20.42%~~35.77% from ~~$6.04~~$8.43 million since year-end ~~2005.~~2006. The ~~largest addition~~reduction was due to several small commercial loans totaling $2.71 million at December 31, 2006 no longer past due 90 days or more at September 30, 2006, was a commercial loan with a balance of $834 thousand. The loss potential on these loans has been properly evaluated and allocated in the company’s allowance for credit losses analysis process.March 31, 2007. Total nonperforming assets of ~~$16.15~~$15.48 million, including OREO of ~~$2.52~~$3.99 million at ~~September 30, 2006,~~March 31, 2007, represented 0.24% of total assets at the end of the ~~third~~first quarter. For a summary of nonperforming assets, see Note 56 to the unaudited Notes to Consolidated Financial Statements.

At ~~September 30, 2006,~~March 31, 2007, impaired loans were ~~$42.28~~$26.19 million, which was an increase of ~~$25.73~~$4.22 million or 19.24% from the ~~$16.55~~$21.96 million in impaired loans at December 31, ~~2005.~~2006. This increase in impaired loans was due primarily to ~~three loans totaling $18.75 million to one commercial customer. These loans involve~~ the ~~construction~~addition of ~~real estate property and were not considered delinquent at September 30, 2006. The remainder of the increase in impaired loans comes from~~ several residential real estate construction loans totaling ~~$7.47 million that~~approximately $4.35 million. The loans are ~~mostly collateralized.~~collateralized by land, some with partially completed homes. Based on current information and events, United believes it is probable that the borrowers will not be able to repay all amounts due according to the contractual terms of the loan agreements and therefore, specific allowances in the company’s allowance for credit losses have been allocated for all of these loans. For further details regarding impaired loans, see Note 56 to the unaudited Consolidated Financial Statements.

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

United maintains an allowance for loan losses and an allowance for lending-related commitments. The combined allowances for loan losses and lending-related commitments are referred to as the allowance for credit losses. At ~~September 30, 2006,~~March 31, 2007, the allowance for credit losses was ~~$52.54~~$52.39 million as compared to ~~$52.87~~$52.37 million at December 31, ~~2005.~~2006. As a percentage of loans, net of unearned income, the allowance for credit losses was 1.11% at ~~September 30, 2006~~March 31, 2007 and ~~1.14%~~1.09% of loans, net of unearned income at December 31, ~~2005.~~2006. The ratio of the allowance for credit losses to nonperforming loans was ~~385.5%~~456.2% and ~~401.0%~~369.2% at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, respectively.

~~The provision for credit losses for the first nine months of 2006 and 2005 was $1.17 million and $3.56 million, respectively.~~ For the quarters ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005,~~ the provision for credit losses was ~~$571~~$350 thousand and ~~$1.95 million,~~$250 thousand, respectively. Net charge-offs were $336 thousand for the first ~~nine months of 2006 were $1.50 million as compared to $2.92 million for the first nine months of 2005. Net charge-offs were $930 thousand for the third~~ quarter of ~~2006~~2007 as compared to net charge-offs of ~~$1.58 million~~$156 thousand for the same quarter in ~~2005.~~2006. Note 45 to the accompanying unaudited Notes to Consolidated Financial Statements provides a progression of the allowance for credit losses.

3735

~~In determining the adequacy of the allowance~~Allocations are made for ~~credit losses, management makes allocations to~~ specific commercial loans ~~classified by management as to the level~~based upon management’s estimate of ~~risk. Management determines the loan’s risk by considering~~ the borrowers’ ability to repay ~~the collateral securing the credit~~ and other ~~borrower-specific~~ factors ~~that may impact~~impacting collectibility. Specific loss allocations are based on the present value of expected future cash flows using the loan’s effective interest rate, or as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent. Other commercial loans not specifically reviewed on an individual basis are evaluated based on historical loss percentages applied to loan pools ~~which are grouped~~that have been segregated by ~~similar risk characteristics using management’s internal risk ratings.~~risk. Allocations for ~~these~~loans other than commercial ~~loan pools~~loans are ~~determined~~made based upon historical loss experience adjusted for current conditions and risk factors. Allocations for loans, other than commercial loans, are developed by applying historical loss experience adjusted for current conditions and risk factors to loan pools grouped by similar risk characteristics. While allocations are made to specific loans and pools of loans, the allowance is available for all credit losses.conditions. The ~~allowance for imprecision is a relatively small component of the total~~ allowance for credit losses includes estimated probable inherent but undetected losses within the portfolio due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and ~~recognizes~~risk factors that have not yet fully manifested themselves in loss allocation factors. In addition, a portion of the ~~normal variance resulting from~~allowance accounts for the ~~process of estimation. Differences between actual loan~~inherent imprecision in the allowance for credit losses analysis. Over the past several years, United has grown through acquisition, and accordingly, expanded the geographic area in which it operates. As a result, historical loss experience ~~and~~data used to establish allocation estimates ~~are reviewed on a quarterly basis and adjustments are made~~might not precisely correspond to ~~those estimates.~~the current portfolio in these other geographic areas.

United’s formal company-wide process at ~~September 30, 2006~~March 31, 2007 produced ~~increased~~decreased allocations in ~~two~~three of the four loan categories. The components of the allowance allocated to commercial loans ~~increased~~decreased by ~~$1.2 million~~$913 thousand due to the segmentation of the portfolio into two additional loan pools for which special allocations of $1.0 million were established. Other factors included an increase in specific loan allocations of commercial impaired loans of $191 thousand, increases in commercial loan volume of $78 million and the impact of ~~changes in~~lower loan volume, historical loss rates and qualitative factors. The allowance allocated to the real estate construction loan pool also rose during the year by $2.7 million primarily due to specific allocations of $1.5 million related to one troubled construction loan relationship and changes in loan volume, loss rate factors and qualitative adjustments. The allowance allocated to consumerConsumer loans decreased ~~$1.7 million~~$6 thousand as a result of decreases in historical loss rates, loan volume and qualitative ~~factors.~~factors offset somewhat by increased allocations for overdrafts. The components of the allowance allocated to real estate loans decreased by ~~$1.7 million~~$315 thousand due to reductions in high loan to value outstandings, as well as changes in loan volume and qualitative factors. The real estate construction loan pool offset the decreases in other pools. It rose during the quarter by $2.1 million primarily due to adjustments in historical loss ~~rates.~~rates and a new specific allocation of $1.9 million related to one troubled construction loan relationship. The unfunded commitments liability ~~was stable, remaining~~decreased by $415 thousand and stood at ~~$8.7~~$8.3 million.

An allowance is also established for probable credit losses on impaired loans via specific allocations. Nonperforming commercial loans and leases are regularly reviewed to identify impairment. A loan or lease is impaired when, based on current information and events, it is probable that the bank will not be able to collect all amounts contractually due. Measuring impairment of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Impairment is measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate, the loan’s observable market price or the fair value of collateral, if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an impairment has occurred. The allowance for impaired loans was ~~$3.3~~$4.7 million at ~~September 30, 2006~~March 31, 2007 and ~~$1.0~~$3.0 million at December 31, ~~2005.~~2006. Compared to the prior year-end, this element of the allowance increased by ~~$2.3~~$1.7 million primarily due to the aforementioned impairment of a large relationship involving ~~commercial~~ real estate construction ~~loans as well as a $575 thousand special allocation within the mortgage loan pool and changes among various smaller~~ loans.

An allowance is also recognized for imprecision inherent in loan loss migration models and other estimates of loss. There are many factors affecting the allowance for loan losses and allowance for lending-related

31, 2007 by ~~$855~~$431 thousand to ~~$1.4~~$1.2 million. This represents only ~~2.6%~~2.3% of the bank’s total allowance for credit loss and in as much as this variance is within a ~~predetermined~~pre determined narrow parameter, the methodology has confirmed that the Bank’s allowance for credit loss is at an appropriate level.

Management believes that the allowance for credit losses of ~~$52.54~~$52.39 million at ~~September 30, 2006~~March 31, 2007 is adequate to provide for probable losses on existing loans and loan-related commitments based on information currently available.

United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality. The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries. Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate diversification within the portfolio. Most of United’s commercial loans are secured by real estate located in West Virginia, Southeastern Ohio, Virginia and Maryland. It is the opinion of management that these commercial loans do not pose any unusual risks and that adequate consideration has been given to these loans in establishing the allowance for credit losses.

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

Other Income

Other income consists of all revenues, which are not included in interest and fee income related to earning assets. Noninterest income has been and will continue to be an important factor for improving United’s profitability. Recognizing the importance, management continues to evaluate areas where noninterest income can be enhanced. Noninterest income was $34.30 million for the first nine months of 2006, down $5.01 million or 12.75% when compared to the first nine months of 2005. For the third quarter of 2006, noninterest income was $6.21 million, a decrease of $6.82 million or 52.33% from the third quarter of 2005.

~~Included in total noninterest~~Noninterest income for the first ~~nine months~~quarter of ~~2006~~2007 was ~~a $4.60~~$14.92 million, ~~net before-tax loss on~~which was an increase of $1.25 million or 9.18% from the ~~termination~~first quarter of ~~interest rate swaps associated with~~2006.

The rise in noninterest income from the ~~prepayment~~previous year’s first quarter was primarily due to an increase of ~~FHLB advances~~$526 thousand or 17.42% in fees from trust and brokerage services. United continues its efforts to broaden the scope and activity of its trust and brokerage service areas, especially in the ~~first~~northern Virginia market, to provide additional sources of fee income that complement United’s traditional banking products and ~~third quarters~~services. The northern Virginia market provides a relatively large number of 2006. Additionally, United incurred a net loss on securities transactions of $3.07 million in the first nine months of 2006 due mainly to an other than temporary impairment of $2.93 million on approximately $86 million of low-yielding fixed rate investment securities which United sold as part of a balance sheet repositioningpotential customers with high per capita incomes.

Fees from deposit services grew $187 thousand or 2.67% in the first quarter of 2006. United realized a net gain of $889 thousand on securities transactions in the first nine months of 2005. Excluding the results of investment security transactions and interest rate swap terminations, noninterest income for the first nine months of 2006 would have increased $3.55 million or 9.23% from the first nine months of 2005.

For the third quarter of 2006, total noninterest income included a before-tax loss of approximately $7.66 million on the termination of an interest rate swap associated with the prepayment of a FHLB advance. United also realized a net loss on securities transactions of $134 thousand in the third quarter of 2006 as compared to a net loss of $93 thousand on securities transactions in the third quarter of 2005. Excluding the net loss on the termination of the interest rate swap and losses associated with security transactions, noninterest income would have increased $878 thousand or 6.69% for the third quarter of 2006 compared with the same period in the prior year.

Revenue from trust and brokerage services grew $1.55 million or 18.59% for the first nine months of 2006 as compared to the first nine months of 2005. For the third quarter of 2006, revenue from trust and brokerage services grew $377 thousand or 13.40% from the prior year’s third quarter. The increase in revenue from trust and brokerage services was due to a greater volume of business and a larger customer base.

Service charges, commissions and fees from customer accounts increased $1.65 million or 6.58% for the first nine months of 2006 as compared to the first nine months of 2005. For the third quarter of 2006, service charges, commissions and fees from customer accounts increased $367 thousand or 4.18% compared to the third quarter of 2005. The largest component within this category is fees from deposit services which increased $867 thousand or 4.18% and $151 thousand or 2.09% in the first nine months and third quarter of 2006, respectively,2007 from last year’s first ~~nine months~~quarter mainly as a result of ~~third quarter of 2005 due mainly to~~ United’s High Performance Checking ~~program introduced during the first quarter of 2006.~~program. In particular, insufficient funds (NSF) fees increased ~~$1.26 million~~$343 thousand and ~~$219 thousand during the first nine months and third quarter of 2006, respectively while~~ check card fees increased ~~$440 thousand and $168 thousand, respectively.~~$193 thousand. Deposit service charges and account analysis fees declined ~~$577~~$143 thousand and ~~$157~~$104 thousand, respectively, for the first ~~nine months~~quarter of ~~2006~~2007 as compared to the first ~~nine months~~quarter of ~~2005. For~~2006.

Income from bank-owned life insurance increased $416 thousand or 39.88% in the ~~third~~first quarter of 2007 from

the first quarter of 2006 ~~deposit service charges declined $195 thousand while account analysis fees remained fairly stable as it decreased less than 1% compared~~due to ~~the same period~~an increase in the ~~prior year.~~cash surrender value.

Mortgage banking income decreased ~~$75~~$68 thousand or ~~10.87%~~29.69% due to fewer mortgage loan sales in the secondary market during the first ~~nine months~~quarter of ~~2006~~2007 as compared to last year’s first ~~nine months.~~quarter. Mortgage loan sales were ~~$40.90~~$10.49 million in the first ~~nine~~three months of ~~2006~~2007 as compared to ~~$52.14 million~~$12.31million in the first ~~nine~~three months of 2005. For the third quarter of 2006, mortgage loan sales were $18.60 million as compared to $20.40 million in the third quarter of 2005, which resulted in a $101 thousand or 29.97% decrease in mortgage banking income for the third quarter of 2006 when compared with the third quarter of 2005.2006.

~~Income from bank life insurance policies decreased $158 thousand or 4.59% while other~~Other income increased ~~$581~~$235 thousand ~~or 67.87%~~ for the first ~~nine months of 2006 as compared to last year’s income during the same period. Compared to the third~~ quarter of 2005, income from bank life insurance policies and other income increased $161 thousand or 15.78% and $74 thousand or 42.53%, respectively, in the third quarter of 2006. The increase in other income was2007 due mainly ~~due~~to an increase in ~~bankcard fees~~income of $256 thousand from ~~a higher volume~~the outsourcing of ~~transactions.~~official checks processing.

On a linked-quarter basis, noninterest income ~~decreased $8.21 million~~for the first quarter of 2007 increased $184 thousand or ~~56.92%~~1.25% from the ~~second~~fourth quarter of ~~2006~~2006. This increase was primarily due to ~~the before-tax loss of approximately $7.66 million on a termination of an interest rate swap~~

~~associated with the prepayment of a FHLB advance. The remaining decline~~growth in ~~noninterest~~ income ~~of $517 thousand or 3.56% was due mainly to a decrease in revenue~~ from trust and brokerage services of ~~$457~~$455 thousand or ~~12.53% for the quarter. Deposit service fees~~14.72%. Income from bank-owned life insurance increased ~~$149~~$322 thousand or ~~2.07% for~~28.32% due to an increase in the cash surrender value. Partially offsetting these increases was a decrease of $324 thousand in fees from deposit services due to seasonality and a decline of $526 thousand in residual income from prior third ~~quarter of 2006 as compared to the second quarter of 2006 as a result of United’s Higher Performance Checking program.~~party asset securitizations.

Other Expenses

Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations to reduce costs. Other expenses include all items of expense other than interest expense, the provision for loan losses, and income taxes. ~~For~~Noninterest expense for the first ~~nine months~~quarter of ~~2006, noninterest expenses increased $14.73~~2007 was $31.50 million, a decrease of $693 thousand or ~~16.40%~~2.15% from the first ~~nine months of 2005. Noninterest expenses increased $9.70 million or 31.78% for the third~~ quarter of ~~2006 compared to the same period in 2005.~~2006.

The ~~increase~~decrease in noninterest expense for the first ~~nine months and third~~ quarter of ~~2006~~2007 was primarily due to the before-tax penalties of approximately $8.26 million to prepay $200 million of FHLB advances during the third quarter of 2006. Excluding these penalties, noninterest expense would have increased $6.47 milliona $353 thousand or 7.20% and $1.44 million or 4.71% for the first nine months and third quarter of 2006, respectively, compared to the same periods in prior year. For the first nine months of 2006, the balance of the increase in noninterest expense was mainly due to a $2.60 million or 5.88% increase2.34% decrease in salaries and benefits expense as compared to the same period last year. ~~Salaries expense for the first nine months of 2006 increased $1.88 million or 5.31% as a result of the higher base~~The decrease in salaries performance-based commissions, and incentives. Health care and pension costs increased $318 thousand or 9.89% and $104 thousand or 5.88%, respectively, for the first nine months of 2006 as compared to last year’s first nine months. Salaries and benefits expense ~~for the third quarter of 2006 increased $535 thousand or 3.52% from the third quarter of 2005. Salaries expense increased $644 thousand or 5.47% primarily as a result of higher base salaries.~~

~~The remainder of the increases in noninterest expense for the first nine months and third quarter of 2006 from the same time periods last year~~ was due ~~primarily~~ to expenses related to United’s new High Performance Checking program. United incurred marketing and related costs of approximately $2.17 million during the first nine months of 2006 to launch and promote its High Performance Checking program for consumer customers.lower pension expense. During the third quarter of 2006, United ~~incurred additional marketing~~made a significant contribution to its pension plan as allowed by the Pension Protection Act of 2006. This large contribution will result in decreased pension expense for United in the year 2007 as compared to 2006. Pension expense for the first quarter of 2007 decreased $671 thousand from the first quarter of 2006.

The remainder of the decrease in noninterest expense for the first quarter of 2007 from the same time period last year was due primarily to lower expenses related to United’s High Performance Checking program that was launched in the first quarter of 2006. Marketing and related costs of ~~approximately $550 thousand to continue the promotion of the~~United’s High Performance Checking Program. However, the increased spending is having the desired impact of attracting low cost deposits. Largely due to the High Performance Checking initiative, United has opened 30,808 new consumer accounts during the first nine months of 2006 as compared to 18,624 new consumer accountsprogram declined $538 thousand in the first ~~nine months of 2005. United opened 10,179 new consumer accounts during the third~~ quarter of ~~2006 as compared to 6,466 new consumer accounts in~~2007 from the ~~third~~first quarter of ~~2005.~~2006.

Net occupancy expense for the first ~~nine months~~quarter of ~~2006~~2007 increased ~~$199~~$143 thousand or ~~2.15%~~4.32% from the first ~~nine months~~quarter of ~~2005~~2006 and was due mainly to increases in utilities expense and real property taxes. ~~Net occupancy~~Data processing expense increased $260 thousand or 17.80% for the ~~third~~first quarter of ~~2006~~2007 as compared to the first quarter of 2006. The increase was primarily due to additional outsourcing of data processing functions.

Other expenses decreased ~~$82~~$558 thousand or ~~2.63% mainly~~5.88% for the ~~result~~first quarter of ~~a decrease in building maintenance expense.~~2007 as compared to the same period of 2006 due to lower expenses related to United’s High Performance Checking program. As previously mentioned, United’s marketing and related costs related to its High Performance Checking program declined $538 from the first quarter of 2006.

4138

Equipment expense declined $353 thousand or 7.13% and $72 thousand or 4.39% for the first nine months and third quarter of 2006, respectively, as compared to the same periods in 2005. The decrease during the first nine months of 2006 was due mainly to a $198 thousand gain on the sale of an OREO property during the second quarter of 2006 and lower levels of depreciation expense. The decrease in the third quarter of 2006, when compared with the third quarter of 2005, was the result of decreases in depreciation expense and maintenance expense.

Data processing expense increased $155 thousand or 3.63% for the first nine months of 2006 as compared to the first nine months of 2005. For the third quarter of 2006, data processing expense increased $72 thousand or 5.12% as compared to the third quarter of 2005.

Other expenses increased $3.87 million or 14.26% and $984 thousand or 10.75% for the first nine months and third quarter of 2006, respectively, as compared to the same periods of 2005 due primarily to the expenses previously mentioned related to United’s new HPC program. In addition, legal and consulting fees, excluding those related to the HPC program, increased $811 thousand from the same period in the prior year. Bankcard and ATM processing fees increased $706 thousand and $221 thousand, respectively, due to increased transactions for the first nine months of 2006 when compared to the same period last year. For the third quarter of 2006, legal and consulting fees, excluding HPC related costs, increased $206 thousand while bankcard processing fees increased $287 thousand compared to the third quarter of 2005. These increases were partially offset by a $153 thousand decline in loan collection expense. The remaining increase in all other expenses in the first nine months and third quarter of 2006 from last year’s first nine months and third quarter was due mainly to increases in several general operating expenses, none of which were individually significant.

On a linked-quarter basis, noninterest expense ~~for the third quarter of 2006 increased $8.05~~decreased $1.11 million or ~~25.03% from the second quarter of 2006~~3.41%. Salaries and benefits expense declined $797 thousand or 5.13% due mainly to a decrease in pension expense of $902 thousand related to the ~~before-tax penalties~~previously mentioned contribution in 2006. Marketing and related costs of ~~approximately $8.26 million to prepay FHLB advances during~~United’s High Performance Checking program declined $170 thousand from the ~~quarter. Otherwise, noninterest expense for the third~~fourth quarter of ~~2006 would have been relatively flat from the second quarter~~2006. Several other general operating expenses declined as well, none of 2006, decreasing $210 thousand or less than 1%. Decreases in salaries and employee benefits expense of $211 thousand, other expenses of $156 thousand, net occupancy expense of $83 thousand, and data processing expense of $13 thousand were virtually offset by an increase in equipment expense of $253 thousand.which was individually significant.

As previously discussed in Note 1112 of the unaudited Notes to Consolidated Financial Statements contained within this document, United adopted SFAS 123R on January 1, 2006 using the modified prospective transition method. SFAS 123R requires the measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value based method and the recording of such expense in our consolidated statements of income. Under this transition method, compensation cost to be recognized beginning in the first quarter of 2006 included: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Results for prior periods were not restated. Due to a modification on December 30, 2005 to accelerate any unvested options under United’s existing stock option plans and the fact that no new options have been granted during 2006 and the first ~~nine~~three months of ~~2006,~~2007, United did not recognize any compensation cost for the ~~third~~first quarter of 2007 and ~~first nine months of~~ 2006. ~~Prior to January 1,~~

2006, United accounted for its stock option plans under the intrinsic value method. Because the exercise price at the date of the grant was equal to the market value of the stock, no compensation expense was recognized.

~~At the Annual Meeting of Shareholders held on May 15, 2006, the United shareholders approved the~~The 2006 Stock Option Plan ~~and thus, it became effective upon the shareholders’ approval.~~was approved by United’s shareholders on May 15, 2006. No stock options have been granted under the 2006 Stock Option Plan. Any stock options granted under the 2006 Stock Option Plan in the future will be subject to the provisions of SFAS 123R. A Form S-8 was filed on October 25, 2006 with the Securities and Exchange Commission to register all the shares available for the 2006 Stock Option Plan.

Income Taxes

For the first ~~nine months~~quarter of ~~2006 and 2005,~~2007, income taxes were ~~$29.86 million and $34.30 million, respectively. For the third quarter of 2006, income taxes were $6.19~~$11.33 million as compared to ~~$11.78~~$11.64 million for the ~~third~~first quarter of ~~2005. United’s effective tax rates for the first nine months of 2006 and 2005 were 31.74% and 31.46%, respectively.~~2006. For the quarters ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005,~~ United’s effective tax rates were ~~30.42%~~31.70% and ~~31.65%~~32.10%, respectively.

As previously discussed in Note 14 of the unaudited Notes to Consolidated Financial Statements contained within this document, United adopted FIN 48 on January 1, 2007. FIN 48, which clarifies the accounting for uncertainty in tax positions, requires the recognition in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The cumulative effect of adopting FIN 48 was $300 thousand which was recorded in retained earnings. Also, certain amounts have been reclassified in the statement of financial position in order to comply with the requirements of the statement.

the statute of limitations will close on certain income tax returns filed by an acquired subsidiary. As a result, United expects to recognize approximately $2.0 million in tax benefits, which when recognized will have no impact on United’s tax expense.

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

United has various financial obligations, including contractual obligations and commitments, that may require future cash payments. Please refer to United’s Annual Report on Form 10-K for the year ended December 31, ~~2005~~2006 for disclosures with respect to United’s fixed and determinable contractual obligations. There have been no material changes outside the ordinary course of business since year-end ~~2005~~2006 in the specified contractual obligations disclosed in the Annual Report on Form 10-K.

On January 1, 2007, United adopted the provisions of FIN 48. As of March 31, 2007, United recorded a liability for uncertain tax positions, including interest and penalties, of $8.6 million in accordance with FIN 48. This liability represents an estimate of tax positions that United has taken in its tax returns which may ultimately not be sustained upon examination by tax authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this estimated liability is excluded from the contractual obligations table.

United also enters into derivative contracts, mainly to protect against adverse interest rate movements on the value of certain assets or liabilities, under which it is required to either pay cash to or receive cash from counterparties depending on changes in interest rates. Derivative contacts are carried at fair value and not notional value on the consolidated balance sheet. Further discussion of derivative instruments is presented in Note 1011 to the unaudited Notes to Consolidated Financial Statements.

United is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Further discussion of off-balance sheet commitments is included in ~~Note 9~~Note10 to the unaudited Notes to Consolidated Financial Statements.

Liquidity

~~United maintains, in~~In the opinion of management, United maintains liquidity ~~which~~that is sufficient to satisfy ~~United’s cash needs,~~

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. To help attract these lower cost deposits, United introduced its High Performance Checking program during the first quarter of 2006. Management has been very satisfied with the results of the new program, ~~for the first nine months of 2006~~ as the number of new core deposit accounts ~~have~~has increased substantially. Short-term borrowings have also been a significant source of funds. These include federal funds purchased and securities sold under agreements to ~~repurchase.~~repurchase as well as advances from the FHLB. Repurchase agreements represent funds which are obtained as the result of a competitive bidding process.

Liquid assets are cash and those items readily convertible to cash. All banks must maintain sufficient balances of cash and near-cash items to meet the day-to-day demands of customers and United’s cash needs. 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~~funds’ availability from a number of primary sources. ~~Funding~~Substantial funding is available from cash and cash equivalents, unused short-term borrowing and a geographically dispersed network of ~~subsidiary banks~~branches providing access to a diversified and substantial retail deposit market.

Short-term needs can be met through a wide array of outside 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, borrowings that are secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities. In the normal course of business, United through its Asset Liability Committee evaluates these as well as other alternative funding strategies that may be utilized to meet short-term and long-term funding needs.

For the ~~nine~~three months ended ~~September 30, 2006,~~March 31, 2007, cash of ~~$54.45~~$37.80 million was provided by operating activities. Net cash of ~~$107.58~~$108.90 million was provided by investing activities which was primarily due to a decline in loans of $90.14 million and net cash received of ~~$213.01~~$20.15 million for excess net proceeds from sales, calls and maturities of investment securities over ~~purchases which partially offset loan growth of $103.05 million.~~purchases. During the first ~~nine~~three months of ~~2006,~~2007, net cash of ~~$197.46~~$185.54 million was used in financing activities due primarily to a decline in deposits of $86.62 million and the repayment of ~~short-term and long-term~~overnight FHLB borrowings and federal funds purchased in the ~~amount~~amounts of ~~$517.07 million.~~$120 million and $29.03 million, respectively, during the quarter. Other uses of cash for financing activities included payment of ~~$33.91~~$11.52 million and ~~$36.50~~$10.91 million, respectively, for cash dividends and acquisitions of United shares under the stock repurchase program. Cash provided by financing activities included ~~the $200 million in proceeds from issuance of long-term FHLB advances during the third quarter of 2006, growth in deposits of $133.10 million, and~~ an increase in ~~federal funds purchased and~~ securities sold under agreements to repurchase of ~~$1.56~~$49.85 million and ~~$51.65~~proceeds of $25 million ~~respectively.~~from a long-term FHLB borrowing. The net effect of the cash flow activities was a decrease in cash and cash equivalents of ~~$35.43~~$38.84 million for the first ~~nine~~three months of ~~2006.~~2007.

has significant lines of credit available. See Notes 78 and 89 to the accompanying unaudited Notes to Consolidated Financial Statements for more details regarding the amounts available to United under line of credit.

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

Capital Resources

United’s capital position is financially sound. United seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings. United has historically generated attractive returns on shareholders’ equity. Based on regulatory requirements, United and its banking subsidiaries are categorized as “well capitalized” institutions. United’s risk-based capital ratios of ~~11.35%~~11.45% at ~~September 30, 2006~~March 31, 2007 and ~~11.28%~~11.15% at December 31, ~~2005, are~~2006, were both significantly higher than the minimum regulatory requirements. United’s Tier I capital and leverage ratios of ~~10.21%~~10.31% and ~~8.52%~~8.69%, respectively, at ~~September 30, 2006,~~March 31, 2007, are also well above regulatory minimum requirements.

Total shareholders’ equity was ~~$635.33~~$638.75 million, an increase of ~~$128~~$4.66 million thousand or less than 1% from December 31, ~~2005.~~2006. United’s equity to assets ratio was ~~9.64%~~9.72% at ~~September 30, 2006~~March 31, 2007 as compared to 9.44% at December 31, ~~2005.~~2006. The primary capital ratio, capital and reserves to total assets and reserves, was ~~10.35%~~10.43% at ~~September 30, 2006~~March 31, 2007 as compared to ~~10.15%~~10.14% at December 31, ~~2005.~~2006. United’s average equity to average asset ratio was ~~9.61%~~9.77% and ~~9.87%~~9.63% for the quarters ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005, respectively. For the first nine months of 2006 and 2005, the average equity to average assets ratio was 9.63% and 9.96%,~~ respectively. All of these financial measurements reflect a financially sound position.

During the ~~third~~first quarter of ~~2006,~~2007, United’s Board of Directors declared a cash dividend of ~~$0.27~~$0.28 per share. ~~Cash dividends were $0.81 per common share for the first nine months of 2006.~~ Total cash dividends declared were approximately ~~$11.16 million for the third quarter of 2006 and $33.70~~$11.45 million for the first ~~nine months~~quarter of ~~2006,~~2007, an increase of ~~1.35% and 1.45%~~$121 thousand or 1.07% over ~~comparable periods~~the first quarter of ~~2005.~~2006. The year ~~2006~~2007 is expected to be the ~~thirty-third~~thirty-fourth consecutive year of dividend increases to United shareholders.

4542

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The objective of United’s Asset Liability Management function is to maintain consistent growth in net interest income within United’s policy guidelines. This objective is accomplished through the management of balance sheet liquidity and interest rate risk exposures due to changes in economic conditions, interest rate levels and customer preferences.

Interest Rate Risk

Management considers interest rate risk to be United’s most significant market risk. Interest rate risk is the exposure to adverse changes in United’s net interest income as a result of changes in interest rates. United’s earnings are largely dependent on the effective management of interest rate risk.

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

United employs a variety of measurement techniques to identify and manage its exposure to changing interest rates. One such technique utilizes an earnings simulation model to analyze the sensitivity of net interest income to movements in interest rates. The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities. The model also includes executive management projections for activity levels in product lines offered by United. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. Rate scenarios could involve parallel or nonparallel shifts in the yield curve, depending on historical, current, and expected conditions, as well as the need to capture any material effects of explicit or embedded options. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management’s strategies.

Interest sensitive assets and liabilities are defined as those assets or liabilities that mature or are repriced within a designated time frame. The principal function of interest rate risk management is to maintain an appropriate relationship between those assets and liabilities that are sensitive to changing market interest rates. The difference between rate sensitive assets and rate sensitive liabilities for specified periods of time is known as the “GAP.” Earnings-simulation analysis captures not only the potential of these interest sensitive assets and liabilities to mature or reprice but also the probability that they will do so. Moreover, earnings-simulation analysis considers the relative sensitivities of these balance sheet items and projects their behavior over an extended period of time. United closely monitors the sensitivity of its assets and liabilities on an on-going basis and projects the effect of various interest rate changes on its net interest ~~margin.~~

4643

which they contracted. United does not receive annual servicing fees from this securitization because the loans are serviced by an independent third-party. The investors and the securitization trust have no recourse to United’s other assets for failure of debtors to pay when due; however, United’s retained interests are subordinate to investors’ interests. The book value and fair value of the subordinated interest are subject to credit, prepayment, and interest rate risks on the underlying fixed-rate residential mortgage loans in the securitization.

At the date of securitization, key economic assumptions used in measuring the fair value of the subordinated interest were as follows: a weighted average life of 5.3 years, expected cumulative default rate of 15%, and residual cash flows discount rates of 8% to 18%. ~~Key economic assumptions used in measuring the fair value of the subordinated interest at September 30, 2006~~At March 31, 2007 and December 31, ~~2005 were as follows:~~

September 30, December 31,
2006 2005
Weighted average life (in years) — 0.5
Prepayment speed assumption (annual rate) 15.19% - 32.00 % 15.19% - 35.00 %
Cumulative default rate 19.21 % 19.21 %
Residual cash flows discount rate (annual rate) 6.87% - 13.73 % 6.32% - 12.95 %

~~At September 30,~~ 2006, ~~and December 31, 2005,~~ the fair values of the subordinated interest ~~were zero~~ and ~~approximately $1.1 million, respectively, and were carried in~~ the ~~available for sale investment portfolio. The~~ cost of the available for sale securities ~~was zero at September 30, 2006 and December 31, 2005.~~were zero.

At ~~September 30, 2006,~~March 31, 2007, the principal balances of the residential mortgage loans held in the securitization trust were approximately ~~$11.4~~$9.7 million. Principal amounts owed to third party investors and to United in the securitization were approximately ~~$4.3~~$3.7 million and ~~$7.1~~$6.0 million, respectively, at September 30, 2006. United recognizes the excess of all cash flows attributable to the subordinated interest using the effective yield method. Because the amortized cost of United’s subordinated interest was zero at September 30, 2006, the difference between the cash flows associated with these underlying mortgages and amounts owed to third party investors will be recognized into interest income as cash is received by United over the remaining life of the loans.March 31, 2007. The weighted average term to maturity of the underlying mortgages approximated ~~13.1~~12.7 years as of ~~September 30, 2006.~~March 31, 2007. During the ~~three and nine months ended September 30, 2006,~~first quarter of 2007, United received cash of ~~$1.17 million and $3.60 million, respectively,~~$723 thousand from its subordinated interest in the securitization.

The amount of future cash flows from United’s subordinated interest is highly dependent upon future prepayments and defaults. Accordingly, the amount and timing of future cash flows to United is uncertain at this time.

At ~~September 30, 2006,~~March 31, 2007, United’s mortgage related securities portfolio had an amortized cost of ~~$794~~$742 million, of which approximately ~~$705~~$663 million or 89% were fixed rate collateralized mortgage obligations (CMOs). ~~These~~Theses fixed rate CMOs consisted primarily of planned amortization class (PACs) and accretion directed (VADMs) bonds having ~~a weighted~~an average life of approximately ~~2.3~~2.1 years and a weighted average yield of ~~4.32%~~4.41%, under current projected prepayment assumptions. These securities are expected to have very little extension risk in a rising rate environment. Current models show that given an immediate, sustained upward shock of 300 basis points to the yield curve, the average life of these securities would ~~only~~ extend to ~~2.6~~2.4 years. The projected price decline of the fixed rate CMO portfolio in a rates up 300 basis points ~~scenario~~ would be ~~6.5%~~6.1%, less than the price decline of a 3 year treasury note. By comparison, the price decline of a 30-year current coupon mortgage backed security (MBS) in a rates higher by 300 basis points ~~scenario~~ would be approximately ~~18%~~16%.

United had approximately ~~$17~~$15 million in 30-year mortgage backed securities with a projected yield of ~~6.70%~~6.71% and a projected average life of ~~4.2~~4.1 years on ~~September 30, 2006.~~March 31, 2007. These bonds are projected to be good risk/reward securities in stable rates, rates down moderately and rates up moderately due to the high yield and premium book price. However, should rates increase 300 basis points, the average life will extend and these bonds will experience significant price depreciation, but not as significant as current coupon pools.

The remaining 11% of the mortgage related securities portfolio at ~~September 30, 2006, also~~March 31, 2007, included ~~$24 million in~~ adjustable rate securities (ARMs), ~~$16 million in~~ balloon securities, ~~$20 million in~~and 10-year and ~~$10 million in~~ 15-year mortgage backed pass-through securities.

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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

Item 1A. RISK FACTORS

In addition to the other information set forth in this report, please refer to United’s Annual Report on Form 10-K for the year ended December 31, ~~2005~~2006 for disclosures with respect to United’s risk factors which could materially affect United’s business, financial condition or future results. The risks described in the Annual Report on Form 10-K are not the only risks facing United. Additional risks and uncertainties not currently known to United or that United currently deems to be immaterial also may materially adversely affect United’s business, financial condition and/or operating results. There are no material changes from the risk factors disclosed in United’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There have been no United equity securities sold ~~within~~during the ~~last three (3) years~~quarter ended March 31, 2007 that were not registered. The table below includes certain information regarding United’s purchase of its common shares during the quarter ended ~~September 30, 2006:~~March 31, 2007:

Total Number of
Shares
Total Number Purchased as Maximum Number
of Shares Average Part of Publicly of Shares that May
Purchased Price Paid Announced Yet be Purchased
Period (1) (2) per Share Plans (3) Under the Plans (3)
7/01 – 7/31/2006 100,034 $ 35.90 100,000 1,546,700
8/01 – 8/31/2006 115,784 $ 36.52 115,000 1,431,700
9/01 – 9/30/2006 100,039 $ 37.45 100,000 1,331,700

Total 315,857 $ 36.62


					Total Number of		Maximum Number of
	Total Number of				Shares Purchased as		Shares that May Yet
	Shares Purchased		Average Price Paid		Part of Publicly		be Purchased Under
Period	(1) (2)		per Share		Announced Plans (3)		the Plans (3)

1/01 – 1/31/2007		93,535	$	37.46		93,500		947,200
2/01 – 2/28/2007		113,373	$	36.89		95,000		852,200
3/01 – 3/31/2007		110,053	$	35.37		110,000		742,200


Total		316,961	$	36.53		298,500


(1)		Includes shares exchanged in connection with the exercise of stock options under United’s stock option plans. Shares are purchased pursuant to the terms of the applicable stock option plan and not pursuant to a publicly announced stock repurchase plan. For the ~~three months~~quarter ended ~~September 30, 2006, no~~March 31, 2007, the following shares were exchanged by participants in United’s stock option ~~plans.~~plans: February 2007 – 18,307 shares at an average price of $36.56.

5147


(2)		Includes shares purchased in open market transactions by United for a rabbi trust to provide payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. For the three months ended ~~September 30, 2006,~~March 31, 2007, the following shares were purchased for the deferred compensation plan: ~~July 2006~~January 2007 – 3435 shares at an average price of ~~$37.63; August 2006~~$39.99; February 2007 – ~~784~~66 shares at an average price of ~~$36.29;~~$39.12; and ~~September 2006~~March 2007 – 3953 shares at an average price of ~~$38.41.~~$38.10.

(3)		In August of 2004, United’s Board of Directors approved a repurchase plan to repurchase up to 1.775 million shares of United’s common stock on the open market (the 2004 Plan). During the second quarter of 2006, United completed the repurchases under the 2004 Plan. In May of 2006, United’s Board of Directors approved a ~~new~~ repurchase plan to repurchase up to 1.7 million shares of United’s common stock on the open market (the 2006 Plan) ~~effective upon the completion of the 2004 Plan.~~. The timing, price and quantity of purchases under the plan are at the discretion of management and the plan may be discontinued, suspended or restarted at any time depending on the facts and circumstances.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5. OTHER INFORMATION

	(a)		None.

	(b)		No changes were made to the procedures by which security holders may recommend nominees to United’s Board of Directors.

Item 6. EXHIBITS

Exhibits required by Item 601 of Regulation S-K


Exhibit 3.1	Articles of Incorporation (incorporated by reference to Exhibits to the 1989 Form 10-K of United Bankshares, Inc., File No. 0-13322)

Exhibit 3.2	Bylaws (incorporated by reference to Exhibits to the 1990 Form 10-K of United Bankshares, Inc., File No. 0-13322)

Exhibit 31.1	Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer

	Exhibit 31.2	Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer

	Exhibit 32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer

	Exhibit 32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer

5248


	Less than 12 months				12 months or longer				Less than 12 months				12 months or longer
	Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized
	Value		Losses		Value		Losses		Value		Losses		Value		Losses
September 30, 2006
March 31, 2007
Treasuries and agencies	$	1,963	$	17	$	2,913	$	81	$	24,459	$	34	$	3,922	$	66
State and political		25,457		270		13,582		226		2,308		1		28,044		222
Mortgage-backed		98,202		943		636,520		13,490		—		—		647,661		9,171
Marketable equity securities		—		—		881		99		237		9		154		46
Other		15,040		194		17,706		318		11,758		423		20,189		346

Total	$	140,662	$	1,424	$	671,602	$	14,214	$	38,762	$	467	$	699,970	$	9,851


December 31, 2005
December 31, 2006
Treasuries and agencies	$	5,627	$	22	$	2,901	$	92	$	1,978	$	3	$	3,905	$	82
State and political		43,094		946		2,466		80		3,452		22		25,651		179
Mortgage-backed		397,788		6,622		478,820		13,406		35,437		167		663,361		11,729
Marketable equity securities		—		—		879		89		—		—		158		43
Other		17,510		265		18,174		264		—		—		25,637		419

Total	$	464,019	$	7,855	$	503,240	$	13,931	$	40,867	$	192	$	718,712	$	12,452


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30						March 31
	2006			2005			2006			2005			2007			2006
Balance at beginning of period	$	52,895		$	51,633		$	52,871		$	51,353		$	52,371		$	52,871
Provision		571			1,945			1,169			3,560			350			250

		53,466			53,578			54,040			54,913			52,721			53,121
Loans charged-off		(1,168	)		(1,946	)		(2,482	)		(4,523	)		(617	)		(671	)
Less: Recoveries		238			363			978			1,605			281			515

Net Charge-offs		(930	)		(1,583	)		(1,504	)		(2,918	)		(336	)		(156	)

Balance at end of period	$	52,536		$	51,995		$	52,536		$	51,995		$	52,385		$	52,965


	September 30,		December 31,		March 31,		December 31,
	2006		2005		2007		2006
Nonaccrual loans	$	6,357	$	7,146	$	6,068	$	5,755
Loans past due 90 days or more and still accruing interest		7,272		6,039		5,416		8,432

Total nonperforming loans		13,629		13,185		11,484		14,187
Other real estate owned		2,517		2,941		3,991		4,231

Total nonperforming assets	$	16,146	$	16,126	$	15,475	$	18,418


Change in
Interest Rates							Percentage Change in Net Interest Income
(basis points)	Percentage Change in Net Interest Income						March 31, 2007	December 31, 2006
	September 30, 2006			December 31, 2005
+200		3.98	%		2.50	%	3.73%	3.04%
+100		2.05	%		1.47	%	2.08%	1.50%
-100		-1.30	%		-3.56	%	-1.40%	-0.76%
-200		-5.24	%		-9.62	%	-5.54%	-5.11%


	September 30,		December 31,		March 31,			December 31,
	2006		2005		2007			2006
Total principal amount of loans	$	11,388	$	15,747	$	9,705		$	10,382
Principal amount of loans 60 days or more past due		341		541		182			114
Year-to-date average balances		13,691		20,271		10,043			13,000

Year-to- date net credit losses		246		343
Year-to-date net credit (recoveries) losses						(40	)		369


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets (Unaudited) ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006		4

Consolidated Statements of Income (Unaudited) for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~		5

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the ~~Nine~~Three Months Ended ~~September 30, 2006~~March 31, 2007		6

Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~		7

Notes to Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
		28
Item 3. Quantitative and Qualitative Disclosures about Market Risk		46
		43
Item 4. Controls and Procedures		50
		46
PART II. OTHER INFORMATION

Item 1. Legal Proceedings		51
		47
Item 1A. Risk Factors		51
		47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		51
		47
Item 3. Defaults Upon Senior Securities		52
		48
Item 4. Submission of Matters to a Vote of Security Holders		52
		48
Item 5. Other Information		52
		48
Item 6. Exhibits		52
		48
Signatures		53
		49
Exhibits		5450
EX-31.1
EX-31.2
EX-32.1
EX-32.2


	September 30, 2006								March 31, 2007
			Gross		Gross		Estimated				Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value

U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	7,533		—	$	98	$	7,435	$	30,768		—	$	100	$	30,668
State and political subdivisions		110,282	$	1,983		496		111,769		110,242	$	1,983		223		112,002
Mortgage-backed securities		793,793		788		14,433		780,148		741,582		1,040		9,171		733,451
Marketable equity securities		6,159		311		99		6,371		6,245		302		55		6,492
Other		166,073		2,488		512		168,049		115,188		3,363		769		117,782

Total	$	1,083,840	$	5,570	$	15,638	$	1,073,772	$	1,004,025	$	6,688	$	10,318	$	1,000,395


	As of December 31, 2005							As of December 31, 2006
	Gross Carrying		Accumulated			Net Carrying		Gross Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Amortized intangible assets:
Core deposit intangible assets	$	19,890		($15,363	)	$	4,527	$	19,890		($17,250	)	$	2,640


Goodwill not subject to amortization						$	167,487						$	167,421


	Other Derivative Instruments
	September 30, 2006
	Net Derivative			Net Gains
	Asset (Liability)			(Losses)
Other Derivative Instruments:
Interest Rate Risk Management	$	35		$	—
Customer Risk Management		(35	)		—


Total Other Derivative Instruments	$	—		$	—


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

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

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


					Total Number of
					Shares
	Total Number				Purchased as		Maximum Number
	of Shares		Average		Part of Publicly		of Shares that May
	Purchased		Price Paid		Announced		Yet be Purchased
Period	(1) (2)		per Share		Plans (3)		Under the Plans (3)
7/01 – 7/31/2006		100,034	$	35.90		100,000		1,546,700
8/01 – 8/31/2006		115,784	$	36.52		115,000		1,431,700
9/01 – 9/30/2006		100,039	$	37.45		100,000		1,331,700


Total		315,857	$	36.62


			UNITED BANKSHARES, INC.
	(Registrant)		~~(Registrant)~~
Date: May 9, 2007	/s/ Richard M. Adams
				Richard M. Adams,
~~Date: November 7, 2006~~			~~/s/ Richard M. Adams~~ ~~Richard M. Adams,~~ Chairman of the Board and Chief Executive Officer


Date: ~~November 7, 2006~~	May 9, 2007	/s/ Steven E. Wilson
	Steven E. Wilson,
	Executive Vice President, Treasurer, Secretary and Chief Financial Officer