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

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

For the transition period                     

United Bankshares, Inc.

(Exact name of registrant as specified in its charter)

West Virginia		55-0641179
(State or other jurisdiction of 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. Yes þ No o

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 filer þ       Accelerated Filer o       Non-accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No þ

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 shares outstanding as of October 31, 2006.

 

 

UNITED BANKSHARES, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) September 30, 2006 and December 31, 2005			4
Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2006 and 2005			5
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the Nine Months Ended September 30, 2006			6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 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
Item 3. Quantitative and Qualitative Disclosures about Market Risk			46
Item 4. Controls and Procedures			50
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			51
Item 1A. Risk Factors			51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 3. Defaults Upon Senior Securities			52
Item 4. Submission of Matters to a Vote of Security Holders			52
Item 5. Other Information			52
Item 6. Exhibits			52
Signatures			53
Exhibits			54
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

The September 30, 2006 and December 31, 2005, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries (“United” or the “Company”) consolidated statements of income for the three and nine months ended September 30, 2006 and 2005, the related consolidated statement of changes in shareholders’ equity for the nine months ended September 30, 2006, the related condensed consolidated statements of cash flows for the nine months ended September 30, 2006 and 2005, and the notes to consolidated financial statements appear on the following pages.

CONSOLIDATED BALANCE SHEETS

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except par value)		September 30				December 31
		2006				2005
		(Unaudited)				(Note 1)
Assets
Cash and due from banks		$	142,358			$	188,974
Interest-bearing deposits with other banks			12,291				9,836
Federal funds sold			17,887				9,152
Total cash and cash equivalents			172,536				207,962
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
Loans held for sale			3,510				3,324
Loans			4,756,673				4,656,522
Less: Unearned income			(6,469	)			(6,693	)
Loans net of unearned income			4,750,204				4,649,829
Less: Allowance for loan losses			(43,801	)			(44,138	)
Net loans			4,706,403				4,605,691
Bank premises and equipment			38,740				39,626
Goodwill			167,421				167,487
Accrued interest receivable			33,145				32,027
Other assets			183,762				170,409
TOTAL ASSETS		$	6,593,526			$	6,728,492
Liabilities
Deposits:
Noninterest-bearing		$	819,781			$	959,674
Interest-bearing			3,930,774				3,657,778
Total deposits			4,750,555				4,617,452
Borrowings:
Federal funds purchased			62,925				61,370
Securities sold under agreements to repurchase			577,253				525,604
Federal Home Loan Bank borrowings			413,974				723,818
Other short-term borrowings			2,071				4,451
Other long-term borrowings			88,524				88,913
Allowance for lending-related commitments			8,735				8,733
Accrued expenses and other liabilities			54,156				62,946
TOTAL LIABILITIES			5,958,193				6,093,287
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
Surplus			95,253				97,374
Retained earnings			545,760				515,227
Accumulated other comprehensive loss			(10,254	)			(10,551	)
Treasury stock, at cost			(106,228	)			(77,647	)
TOTAL SHAREHOLDERS’ EQUITY			635,333				635,205
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	6,593,526			$	6,728,492

See notes to consolidated unaudited financial statements.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except per share data)		Three Months Ended								Nine Months Ended
		September 30								September 30
		2006				2005				2006				2005
Interest income
Interest and fees on loans		$	84,288			$	70,575			$	242,537			$	199,665
Interest on federal funds sold and other short-term investments			515				232				1,235				578
Interest and dividends on securities:
Taxable			13,934				14,480				43,371				42,139
Tax-exempt			3,698				4,203				11,334				8,563
Total interest income			102,435				89,490				298,477				250,945
Interest expense
Interest on deposits			32,312				19,626				84,807				50,946
Interest on short-term borrowings			7,142				4,656				23,029				12,083
Interest on long-term borrowings			8,052				8,550				25,111				24,810
Total interest expense			47,506				32,832				132,947				87,839
Net interest income			54,929				56,658				165,530				163,106
Provision for credit losses			571				1,945				1,169				3,560
Net interest income after provision for credit losses			54,358				54,713				164,361				159,546
Other income
Fees from trust and brokerage services			3,190				2,813				9,857				8,312
Service charges, commissions, and fees			9,152				8,785				26,777				25,124
Income from bank-owned life insurance			1,181				1,020				3,285				3,443
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	)			—
Other income			248				174				1,437				856
Total other income			6,214				13,036				34,301				39,314
Other expense
Salaries and employee benefits			15,740				15,205				46,789				44,192
Net occupancy expense			3,031				3,113				9,458				9,259
Equipment expense			1,567				1,639				4,599				4,952
Data processing expense			1,477				1,405				4,428				4,273
Prepayment Penalties on FHLB Advances			8,261				—				8,261				—
Other expense			10,138				9,154				31,030				27,158
Total other expense			40,214				30,516				104,565				89,834
Income before income taxes			20,358				37,233				94,097				109,026
Income taxes			6,193				11,784				29,863				34,303
Net income		$	14,165			$	25,449			$	64,234			$	74,723
Earnings per common share:
Basic		$	0.34			$	0.60			$	1.54			$	1.75
Diluted		$	0.34			$	0.59			$	1.53			$	1.73
Dividends per common share		$	0.27			$	0.26			$	0.81			$	0.78
Average outstanding shares:
Basic			41,373,945				42,383,810				41,658,678				42,648,080
Diluted			41,775,111				42,918,552				42,075,862				43,153,673

See notes to consolidated unaudited financial statements.

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

See notes to consolidated unaudited financial statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands)		Nine Months Ended
		September 30
		2006				2005
NET CASH PROVIDED BY OPERATING ACTIVITIES		$	54,453			$	81,090
INVESTING ACTIVITIES
Proceeds from maturities and calls of securities held to maturity			13,672				3,449
Purchases of securities held to maturity			(587	)			(453	)
Proceeds from sales of securities available for sale			144,926				225,268
Proceeds from maturities and calls of securities available for sale			277,647				165,201
Purchases of securities available for sale			(222,645	)			(348,279	)
Net purchases of bank premises and equipment			(2,391	)			(1,979	)
Net change in loans			(103,046	)			(186,795	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			107,576				(143,588	)
FINANCING ACTIVITIES
Cash dividends paid			(33,907	)			(33,409	)
Excess tax benefits from stock-based compensation arrangements			499				—
Acquisition of treasury stock			(36,503	)			(29,868	)
Proceeds from exercise of stock options			5,561				1,985
Distribution of treasury stock for deferred compensation plan			35				—
Repayment of long-term Federal Home Loan Bank borrowings			(252,067	)			(126,732	)
Proceeds from long-term Federal Home Loan Bank borrowings			200,000				150,000
Changes in:
Deposits			133,103				312,169
Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings			(214,176	)			(145,564	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			(197,455	)			128,581
(Decrease) Increase in cash and cash equivalents			(35,426	)			66,083
Cash and cash equivalents at beginning of year			207,962				153,465
Cash and cash equivalents at end of period		$	172,536			$	219,548

See notes to consolidated unaudited financial statements.

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, 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 has been extracted from the audited financial statements included in United’s 2005 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 Annual Report of United on Form 10-K. 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.

New Accounting Standards

In September 2006, the Financial Accounting Standards Board (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 also be required to recognize fluctuations in the funded status in the year in which the changes occur through comprehensive income. These two requirements will be effective for United as of December 31, 2006. This Statement also requires employers to measure the funded status of a plan as of the end of the employers’ fiscal year, with limited exceptions, and will be effective for United for the fiscal year ending December 31, 2008. United is currently evaluating the impact of SFAS 158 on its consolidated financial statements and is not yet in a position to determine the impact of the standard.

In September 2006, the FASB also issued Statement No. 157 (SFAS 157), “Fair Value Measurements” which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS 157 is effective for financial

statements issued for fiscal years beginning after November 15, 2007, with earlier adoption permitted. United does not expect that this standard 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. FIN 48 will apply to fiscal years beginning after December 15, 2006, with earlier adoption permitted. United is currently evaluating the impact of FIN 48 on its consolidated financial statements and is not yet in a position to determine the impact of the standard.

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 is effective for United on January 1, 2007 and is not expected to have a material impact on United’s consolidated financial statements since United does not service loans for others.

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. SFAS 155 is effective for United on January 1, 2007 and is 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 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. See Note 11 for information regarding United’s adoption of SFAS 123R.

2. INVESTMENT SECURITIES

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

		September 30, 2006
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
U.S. Treasury securities and obligations of U.S. Government corporations and agencies		$	7,533				—			$	98			$	7,435
State and political subdivisions			110,282			$	1,983				496				111,769
Mortgage-backed securities			793,793				788				14,433				780,148
Marketable equity securities			6,159				311				99				6,371
Other			166,073				2,488				512				168,049
Total		$	1,083,840			$	5,570			$	15,638			$	1,073,772

		December 31, 2005
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
U.S. Treasury securities and obligations of U.S. Government corporations and agencies		$	11,133				—			$	114			$	11,019
State and political subdivisions			113,537			$	2,054				1,026				114,565
Mortgage-backed securities			968,186				2,233				20,028				950,391
Marketable equity securities			6,914				389				89				7,214
Other			189,443				2,518				529				191,432
Total		$	1,289,213			$	7,194			$	21,786			$	1,274,621

Provided below is a summary of securities available-for-sale which were in an unrealized loss position at September 30, 2006 and December 31, 2005:

		Less than 12 months								12 months or longer
		Market				Unrealized				Market				Unrealized
		Value				Losses				Value				Losses
September 30, 2006
Treasuries and agencies		$	1,963			$	17			$	2,913			$	81
State and political			25,457				270				13,582				226
Mortgage-backed			98,202				943				636,520				13,490
Marketable equity securities			—				—				881				99
Other			15,040				194				17,706				318
Total		$	140,662			$	1,424			$	671,602			$	14,214
December 31, 2005
Treasuries and agencies		$	5,627			$	22			$	2,901			$	92
State and political			43,094				946				2,466				80
Mortgage-backed			397,788				6,622				478,820				13,406
Marketable equity securities			—				—				879				89
Other			17,510				265				18,174				264
Total		$	464,019			$	7,855			$	503,240			$	13,931

Gross unrealized losses on available for sale securities were $15,638 at September 30, 2006. 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 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 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. On April 4, 2006 these securities were sold.

The amortized cost and estimated fair value of securities available for sale at September 30, 2006 and December 31, 2005 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
						Estimated								Estimated
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Due in one year or less		$	3,967			$	3,968			$	7,735			$	7,733
Due after one year through five years			99,865				98,217				81,964				81,498
Due after five years through ten years			231,008				227,842				262,408				257,134
Due after ten years			742,841				737,374				930,192				921,042
Marketable equity securities			6,159				6,371				6,914				7,214
Total		$	1,083,840			$	1,073,772			$	1,289,213			$	1,274,621

The amortized cost and estimated fair values of securities held to maturity are summarized on the following page:

		September 30, 2006
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
U.S. Treasury securities and obligations of U.S. Government corporations and agencies		$	11,709			$	860				—			$	12,569
State and political subdivisions			64,618				1,543				—				66,161
Mortgage-backed securities			255				8				—				263
Other			137,655				2,257			$	1,240				138,672
Total		$	214,237			$	4,668			$	1,240			$	217,665

		December 31, 2005
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
U.S. Treasury securities and obligations of U.S. Government corporations and agencies		$	11,787			$	1,017				—			$	12,804
State and political subdivisions			67,304				1,786			$	1				69,089
Mortgage-backed securities			395				16				—				411
Other			147,859				3,660				1,152				150,367
Total		$	227,345			$	6,479			$	1,153			$	232,671

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2006 and December 31, 2005 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
						Estimated								Estimated
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Due in one year or less		$	1,944			$	1,952			$	13,057			$	13,106
Due after one year through five years			41,878				43,043				39,012				40,552
Due after five years through ten years			24,120				24,908				23,612				24,165
Due after ten years			146,295				147,762				151,664				154,848
Total		$	214,237			$	217,665			$	227,345			$	232,671

The carrying value of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $1,008,929 and $1,007,896 at September 30, 2006 and December 31, 2005, respectively.

3. LOANS

Major classifications of loans are as follows:

		September 30,				December 31,
		2006				2005
Commercial, financial and agricultural		$	894,222			$	934,780
Real estate:
Single-family residential			1,752,964				1,745,824
Commercial			1,155,577				1,126,095
Construction			480,247				347,274
Other			122,445				122,487
Installment			351,218				380,062
Total gross loans		$	4,756,673			$	4,656,522

The table above does not include loans held for sale of $3,510 and $3,324 at September 30, 2006 and December 31, 2005, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market.

United’s subsidiary banks have made loans, in the normal course of business, to the directors and officers of United and its subsidiaries, and to their affiliates. Such related party loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and did not involve more than normal risk of collectibility. The aggregate dollar amount of these loans was $108,069 and $111,365 at September 30, 2006 and December 31, 2005, respectively.

4. ALLOWANCE FOR CREDIT LOSSES

United maintains an allowance for loan losses and an allowance for lending-related commitments such as unfunded loan commitments and letters of credit. The allowance for lending-related commitments of $8,735 and $8,733 at September 30, 2006 and December 31, 2005, respectively, is separately classified on the balance sheet and is included in other liabilities. The combined allowances for loan losses and lending-related commitments are referred to as the allowance for credit losses.

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

credited to the allowance for credit losses. Credit expenses related to the allowance for credit losses and the allowance for lending-related commitments are reported in the provision for credit losses in the income statement.

A progression of the allowance for credit losses, which includes the allowance for credit losses and the allowance for lending-related commitments, for the periods presented is summarized as follows:

		Three Months Ended								Nine Months Ended
		September 30								September 30
		2006				2005				2006				2005
Balance at beginning of period		$	52,895			$	51,633			$	52,871			$	51,353
Provision			571				1,945				1,169				3,560
			53,466				53,578				54,040				54,913
Loans charged-off			(1,168	)			(1,946	)			(2,482	)			(4,523	)
Less: Recoveries			238				363				978				1,605
Net Charge-offs			(930	)			(1,583	)			(1,504	)			(2,918	)
Balance at end of period		$	52,536			$	51,995			$	52,536			$	51,995

5. RISK ELEMENTS

Nonperforming assets include loans on which no interest is currently being accrued, principal or interest has been in default for a period of 90 days or more and for which the terms have been modified due to deterioration in the financial position of the borrower. Loans are designated as nonaccrual when, in the opinion of management, the collection of principal or interest is doubtful. This generally occurs when a loan becomes 90 days past due as to principal or interest unless the loan is both well secured and in the process of collection. When interest accruals are discontinued, unpaid interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for credit losses. Other real estate owned consists of property acquired through foreclosure and is stated at the lower of cost or fair value less estimated selling costs.

Nonperforming assets are summarized as follows:

		September 30,				December 31,
		2006				2005
Nonaccrual loans		$	6,357			$	7,146
Loans past due 90 days or more and still accruing interest			7,272				6,039
Total nonperforming loans			13,629				13,185
Other real estate owned			2,517				2,941
Total nonperforming assets		$	16,146			$	16,126

Loans are designated as impaired when, in the opinion of management, the collection of principal and interest in accordance with the contractual terms of the loan agreement is not probable. At September 30, 2006, the recorded investment in loans that were considered to be impaired was $42,284 (of which $6,357

were on a nonaccrual basis). Included in this amount is $31,706 of impaired loans for which the related allowance for credit losses is $3,274 and $10,578 of impaired loans that do not have an allowance for credit losses due to 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, the recorded investment in loans that were considered to be impaired was $16,553 (of which $7,146 were on a nonaccrual basis). Included in this amount was $5,830 of impaired loans for which the related allowance for credit losses was $1,008, and $10,723 of impaired loans that did not have an allowance for credit losses. The average recorded investment in impaired loans during the nine months ended September 30, 2006 and for the year ended December 31, 2005 was approximately $23,515 and $15,940, respectively. This increase is due to the impairment of three loans totaling $18.75 million to one commercial customer and several residential real estate loans totaling $7.47 million during the third quarter of 2006.

United recognized interest income on impaired loans of approximately $467 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, 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 and $1,041 for the quarter 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

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

		As of September 30, 2006
		Gross Carrying				Accumulated				Net Carrying
		Amount				Amortization				Amount
Amortized intangible assets:
Core deposit intangible assets		$	19,890				($16,816	)		$	3,074
Goodwill not subject to amortization										$	167,421

		As of December 31, 2005
		Gross Carrying				Accumulated				Net Carrying
		Amount				Amortization				Amount
Amortized intangible assets:
Core deposit intangible assets		$	19,890				($15,363	)		$	4,527
Goodwill not subject to amortization										$	167,487

United incurred amortization expense of $459 and $1,453 for the quarter and nine months ended September 30, 2006, respectively, and $560 and $1,757 for the quarter and nine months ended September 30, 2005, respectively, related to intangible assets.

The table presented below sets forth the anticipated amortization expense for intangible assets for each of the next five years:

Year		Amount
2006		$	1,871
2007			1,462
2008			817
2009			303
2010			74

7. 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, federal funds purchased were $62,925 while securities sold under agreements to repurchase were $577,253.

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, 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, United Bank (VA) had an outstanding balance of $2,071 and had additional funding available of $2,929.

8. 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, United had an unused borrowing amount of approximately $1,597,607 available subject to delivery of collateral after certain trigger points.

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

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.

United has a total of seven statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (Capital Securities) with the proceeds invested in junior subordinated debt securities (Debentures) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. At September 30, 2006 and December 31, 2005, the outstanding balances of the Debentures were $88,524 and $88,913 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. 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. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements.

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

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 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 and $1,823,909 of loan commitments outstanding as of September 30, 2006 and December 31, 2005, respectively, the majority 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 and $1,021 as of September 30, 2006 and December 31, 2005, 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 and $139,572 as of September 30, 2006 and December 31, 2005, 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 these letters of credit is immaterial.

10. DERIVATIVE FINANCIAL INSTRUMENTS

United uses derivative instruments to 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 No. 133, “Accounting for Derivative Instruments and Hedging Activities”, 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. 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

swap resulted in a before-tax loss of approximately $7.66 million. United replaced the $200 million of debt with two $100 million advances and associated interest rate swaps which qualify as cash flow hedges.

SFAS No. 133 requires all derivative instruments to be carried at fair value on the balance sheet. SFAS No. 133 provides for special accounting provisions for perfect hedges where the critical terms of the hedged financial instruments (i.e. FHLB advances or fixed commercial loans) and the interest rate payments to be received on the swaps coincide and thus are highly effective in offsetting changes in the fair value of the hedged financial instruments over their remaining term. For a fair value 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 the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge 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’ 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 the fair value and cash flow hedge methods, derivative gains and losses, not effective in hedging the change in fair value or expected cash flows of the hedged item, are recognized immediately in the income statement. At the hedge’s inception and at least quarterly thereafter, an assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in fair values or cash flows of the hedged items. If it is determined a derivative instrument has not been highly effective as a hedge, hedge accounting is discontinued.

The 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

Derivative Instruments
September 30, 2006

		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		$	—			$	—

11. STOCK BASED COMPENSATION

United has stock option plans (the Plans) for certain employees that were accounted for under the intrinsic value method prior to 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 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,

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 will not be restated.

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 2006. In addition, no new options have been granted during the first nine months of 2006. 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, 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, and the changes during the first nine months of 2006 is presented below:

		Nine Months Ended September 30, 2006
										Weighted Average
						Aggregate				Remaining
						Intrinsic				Contractual				Exercise
		Shares				Value				Term (Yrs.)				Price
Outstanding at January 1, 2006			2,115,965											$	27.29
Granted			—												—
Exercised			235,547												24.57
Forfeited or expired			19,596												34.03
Outstanding at September 30, 2006			1,860,822			$	17,977				5.7			$	27.57
Exercisable at September 30, 2006			1,860,822			$	17,977				5.7			$	27.57

In addition to the stock options detailed above, United has outstanding stock options related to a deferred compensation plan assumed in the 1998 merger with George Mason Bankshares, Inc. (GMBS). The stock options granted under this deferred compensation plan were to former directors of GMBS. These options carry no exercise cost, contain no expiration date, and are eligible for dividends. Other than additional options granted through reinvestment of dividends received, United does not issue additional options under this deferred compensation plan. Options outstanding at September 30, 2006 were 21,232. Options granted through the reinvestment of dividends during the first nine months of 2006 were 483. Options exercised during the first nine months of 2006 were 3,045. United records compensation expense for this plan based on the number of options outstanding and United’s quoted market price of its common stock with an equivalent adjustment to the associated liability.

Cash received from options exercised under the Plans for the nine months ended September 30, 2006 and 2005 was $5.56 million and $1.99 million, respectively. During the nine months ended September 30, 2006 and 2005, 235,547 and 101,680 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 months ended September 30, 2006 and 2005. The total intrinsic value of options exercised under the Plans during the nine months ended September 30, 2006 and 2005 was $3.10 million and $1.51 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 thousand from excess tax benefits related to share-based compensation for the nine 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, 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.

12. 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 2006, United contributed to the plan $26.64 million, its maximum allowable contribution by law.

In September 2006, the Financial Accounting Standards Board published Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”, which requires employers to recognize the funded status of a defined benefit post-retirement plan in the statement of financial position and fluctuations in the funded status will have to be recognized in the year in which the changes occur through comprehensive income. There will also be disclosure requirements which will be effective for United as of December 31, 2006. See the New Accounting Standards section within this report for additional information.

13. COMPREHENSIVE INCOME

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

		Three Months Ended								Nine Months Ended
		September 30								September 30
(In thousands)		2006				2005				2006				2005
Net Income		$	14,165			$	25,449			$	64,234			$	74,723
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	)
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) expense			(47	)			(32	)			(1,075	)			311
Accretion on the unrealized loss for securities transferred from the available for sale to the held to maturity investment portfolio			165				189				511				569
Related income tax expense			(58	)			(66	)			(179	)			(199	)
Net effect on other comprehensive income (loss)			9,211				(2,990	)			3,272				(7,711	)
Cash flow hedge derivatives:
Unrealized (loss) gain on cash flow hedge			(2,500	)			1,502				(2,499	)			1,502
Related income tax expense			875				(526	)			874				(526	)
Termination of cash flow hedge			—				—				(2,077	)			—
Related income tax expense			—				—				727				—
Net effect on other comprehensive income			(1,625	)			976				(2,975	)			976
Total change in other comprehensive income			7,586				(2,014	)			297				(6,735	)
Total Comprehensive Income		$	21,751			$	23,435			$	64,531			$	67,988

14. EARNINGS PER SHARE

The reconciliation of the numerator and denominator of basic earnings per share with that of diluted earnings per share is presented as follows:

		Three Months Ended								Nine Months Ended
		September 30								September 30
		2006				2005				2006				2005
Basic
Net Income		$	14,165			$	25,449			$	64,234			$	74,723
Average common shares outstanding			41,373,945				42,383,810				41,658,678				42,648,080
Earnings per basic common share		$	0.34			$	0.60			$	1.54			$	1.75
Diluted
Net Income		$	14,165			$	25,449			$	64,234			$	74,723
Average common shares outstanding			41,373,945				42,383,810				41,658,678				42,648,080
Equivalents from stock options			401,166				534,742				417,184				505,593
Average diluted shares outstanding			41,775,111				42,918,552				42,075,862				43,153,673
Earnings per diluted common share		$	0.34			$	0.59			$	1.53			$	1.73