For much of the past 15 years this mountainous state has suffered a sagging economy marked by the collapse of its coal mining industry and some of the highest unemployment levels in the country - peaking at 18% in 1983.

During the same period, however, one of its banks soared.

After forming a holding company in 1984, United Bancshares of Parkersburg launched an acquisition spree that took it from $100 million of assets to $2.2 billion today. In that time, its stock price shot up from $3 to $31, at an average annual increase of 44%.

In the last six years, the company's average annual return to investors has mushroomed to 26%, exceeding the performances of such well-regarded companies as Banc One Corp. and Fifth Third Bancorp of Ohio, and Wachovia Corp. of Winston-Salem, N.C., all of which operate in more vibrant markets nearby.

United's story - achieving steadily improving profits when its home state endured massive layoffs and periods of economic stagnation - provides some lessons on how to prosper in a less-than-buoyant banking environment.

"You do not have the overall growth in the economy here that you have in, say, Florida, where you have a much greater number of people moving into the area," said Richard Adams, 49, United's chief executive for the past 20 years. "Our challenge is to increase revenues without market growth."

Analysts and bank officials said this challenge has been met as a result of two primary factors: the bank's ambitious acquisition strategy and its incessant attention to cost savings. United leads its competitors in both categories, with 20 acquisitions in the past 12 years and an impressive 48.42% efficiency ratio for 1995.

"You look and wonder how do you do well in an environment like that," said David Stumpf, analyst at Wheat First Butcher Singer in Richmond, Va. "The answer is you have to be an aggressive acquirer, and that's clearly been one of their strategies."

If you want to grow in an uncooperative market, the only choice is to buy your growth, analysts said.

Two years after the state eliminated its outdated unit banking laws in 1982, United formed its holding company and started buying small banks - and it hasn't stopped. In every year except for two, it has made at least one acquisition and often two or three.

Its most recent acquisition is $384 million-asset Eagle Bancorp Inc. of Charleston. The deal, which was set to close last Friday, strengthens United's presence in the Charleston market and gives United 10% of the deposits in the state.

With the number of in-state opportunities dwindling, United ventured into Virginia six years ago with an acquisition in the northern Virginia area and bought another last year. Mr. Adams said he expects United to expand further into Virginia in the future.

In addition to bringing market share to United, the Eagle deal also bolsters the bank's mortgage banking business, particularly with its secondary-marketing operation. United officials hope this new business will enhance the company's somewhat anemic fee income - an area United has been trying to improve in recent years.

Perhaps of even greater envy to competitors is United's impressive expense control.

"There's not a lot of room for mistakes in that market," said David Sochol, an analyst with Legg Mason Wood Walker Co. in Baltimore. "Growth will not bail you out. There's no extreme population inflow there to help you."

As a result, United officials run a lean operation, achieving a sparkling efficiency ratio lingering just below 50% in recent quarters. That number is achieved in part by United's comparatively small branch network - just 48, including 10 from Eagle.

A United branch has on average $35.6 million of deposits, about $10 million more than the national average, according to SNL Securities.

The branch network has remained small not only because of the company's attention to minimizing overhead, but because the state did not allow banks to branch until 1982. So West Virginia's tardiness in scrapping its antiquated unit banking laws actually benefited its banks by not giving them the time to build up costly branch networks, which banks in many states are now dismantling.

Still, other banks based in the state aren't sporting the same efficiency ratios as United's. City Holding Co. of Charleston had a 69.19% ratio for 1995, One Valley Bancorp 58.10%, and Wesbanco 55.10%.

Sitting in his 10th-floor office in the tallest building in town, with a panoramic view of the Ohio River, Mr. Adams doesn't really buy into the view that his company has succeeded in spite of the West Virginian economy.

"West Virginia gets a bad rap because in some parts of the state the coal mining industry has had a loss of employment, so the numbers for the state don't look so great because of that pocket," he said. "The popular perception of West Virginia is not the reality."

Instead, the company's surroundings have actually helped the bank, he said. For one, with most big regionals staying out of the state - with the exception of Huntington Bancshares and Banc One in recent years - the competition for deposits has been low, allowing for higher-than-normal deposit rates.

That helped United achieve a net interest margin of 5.08% for 1995, compared with its peer group average of 4.55%, according to SNL Securities. In addition, it has a loan-to-deposit ratio of 93% and has maintained a "satisfactory" CRA rating.

Plus, with the cost of living lower in West Virginia than in its neighbors, wages are generally lower, keeping overhead down.

Finally, though the state's economy hasn't grown much in the past decade, it hasn't shrunk much either. The booms and busts that can kill a bank haven't occurred.

"When a bank gets in trouble is when the markets go up dramatically, and then come down," Mr. Adams said. "We don't have those cyclical problems here."

United's growth has come from outside the state as well, not just from surrounding states such as Virginia, but from foreign countries such as Japan.

Mr. Adams was the only banker on a 13-member West Virginia trade delegation, led by Gov. Gaston Caperton, that went to Japan, Hong Kong, and China a year ago to cultivate business ties for the state.

Gov. Caperton, a former director of United before he took office in 1989, has successfully promoted the importance of foreign investment: nine Japanese companies have set up operations in the state in the past few years, creating as many as 1,400 new jobs, according to the West Virginia Development Office.

United has account relationships with several of them, but Mr. Adams would not specify how many.

"The economy is probably better there than it has been, but it's still not Charlotte or Raleigh where the loan business just walks in the door," said Mr. Stumpf, the analyst. "It's a more challenging environment than most areas of the Southeast, and so you have to do things a bit differently there."

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