content: SECURITIES AND EXCHANGE COMMISSION
                                  Washington, D.C.
                                      FORM 10-Q
  
  (Mark One)
  
           _X_      QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE
                    SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
                    SEPTEMBER 30, 1999 OR
  
           ___      TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
                    ______________ TO _____________
  
                               UNITED BANCSHARES, INC.
  --------------------------------------------------------------------------------
               (Exact name of registrant as specified in its charter)
  
                                       0-25976
  --------------------------------------------------------------------------------
                                   SEC File Number
  
       Pennsylvania                                        23-2802415
  --------------------------------------------------------------------------------
  (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                       Identification No.)
  
  300 North Third Street, Philadelphia, PA                   19106
  --------------------------------------------------------------------------------
  (Address of principal executive office)                  (Zip Code)
  
                                   (215) 829-2265
  --------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         N/A
  --------------------------------------------------------------------------------
                (Former name, former address and former fiscal year,
                           if changed since last report)
  
  Indicate by check mark whether  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  twelve  months (or such shorter  period that the  registrant  was
  required  to filed  such  reports),  and (2) has  been  subject  to such  filing
  requirements for the past 90 day. Yes _X_ No____
  
  Applicable  only to  issuers  involved  in  bankruptcy  proceedings  during  the
  preceding five years:
  
  Indicate  by check mark  whether  the  registrant  has filed all  documents  and
  reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
  Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
  confirmed by a court. Yes _____ No _____
  
  <PAGE>
  Applicable only to corporate issuers:
  
           Indicate  the  number of  shares  outstanding  of each of the  issuer's
  classes of common stock as of the latest practicable date.
  
           Registrant  has two  classes of capital  stock  authorized  - 2,000,000
  shares  of $.01 par  value  common  stock,  of which as of  November  15,  1999,
  1,023,753  shares were issued and outstanding and 500,000  authorized  shares of
  Series  Preferred  Stock.  The Board of  Directors  of United  Bancshares,  Inc.
  designated  one series of the Series  Preferred  Stock (the  "Series A Preferred
  Stock") of which 132,999  shares were  outstanding  as of November 15, 1999. The
  Board of Directors designated a subclass of the common stock, designated Class B
  Common  Stock,  by filing of Articles of Amendment on September 30, 1998. Of the
  2,000,000 shares of Common Stock authorized,  250,000 have been designated Class
  B Common Stock. As of November 15, 1999,  196,666 shares of Class B Common Stock
  were issued and outstanding.
  
  
  
  <PAGE>
  
                           PART I - FINANCIAL INFORMATION
  
  ITEM 1.  FINANCIAL STATEMENTS.
  
                               UNITED BANCSHARES, INC.
                             CONSOLIDATED BALANCE SHEET
                                     (UNAUDITED)
  
  <TABLE>
  <CAPTION>
                                                                                September 30,      December 31,
                                                                                    1999                1998
                                                                              ---------------------------------
  <S>                                                                         <C>                  <C>
  Assets
  Cash and due from banks                                                        8,411,092            3,675,010
  Interest bearing deposits with banks                                             361,473              350,024
  Federal funds sold                                                            12,545,000           12,318,000
                                                                              ---------------------------------
  Cash & cash equivalents                                                       21,317,565           16,343,034
  
  Investment securities:
       Held-to-maturity, at amortized cost                                      46,879,269            8,049,875
       Available-for-sale, at market value                                      11,319,961           35,146,148
  
  Loans , net of unearned discount                                              63,974,071           57,950,133
  Less: allowance for loan losses                                                 (769,072)            (679,557)
                                                                              ---------------------------------
  Net loans                                                                     63,204,999           57,270,576
  
  Bank premises & equipment, net                                                 3,732,584            1,565,131
  Accrued interest receivable                                                    1,337,282            1,749,623
  Other real estate owned                                                          145,780              262,368
  Prepaid expenses and other assets                                              4,149,543            1,595,925
                                                                              ---------------------------------
  Total Assets                                                                 152,086,983          121,982,681
                                                                              =================================
  
  Liabilities & Shareholders' Equity
  Demand deposits, non-interest bearing                                         31,153,766           19,999,226
  Demand deposits, interest bearing                                             33,972,430           29,114,484
  Savings deposits                                                              36,772,892           23,393,986
  Time deposits, $100,000 and over                                              10,635,613           13,942,008
  Time deposits                                                                 25,607,380           22,614,098
                                                                              ---------------------------------
                                                                               138,142,082          109,063,802
  Long-term debt                                                                         0               11,191
  Securities sold to repurchase                                                          0            1,557,755
  Obligations under Capital Leases                                               1,483,000
  Accrued interest payable                                                         568,746              598,352
  Accrued expenses and other liabilities                                         1,794,806            1,847,665
                                                                              ---------------------------------
  Total Liabilities                                                            141,988,634          113,078,365
  
  Shareholders' equity:
    Preferred Stock, Series A, non-cum., 6%, $.01 par value,                         1,432                1,330
     500,000 shrs auth., 143,150 and 132,999 issued and outstanding at
  September 30, 1999 and December 31, 1998, respectively Common stock,
     $.01 par value; 2,000,000 shares authorized; 998,753 and 913,490
     shares issued and outstanding at September 30, 1999 and                         9,988                9,134
     December 31, 1998, repectively
   Additional-paid-in-capital                                                   13,810,470           12,286,233
   Accumulated deficit                                                          (3,646,735)          (3,428,169)
   Net unrealized gain on available-for-sale securities                            (76,804)              35,788
                                                                              ---------------------------------
  Total  Shareholders' Equity                                                   10,098,350            8,904,316
                                                                              ---------------------------------
  Total Liabilities & Shareholders' Equity                                     152,086,983          121,982,681
                                                                              =================================
  </TABLE>
  
                                         1
  <PAGE>
                               UNITED BANCSHARES, INC.
                        CONSOLIDATED STATEMENT OF OPERATIONS
                                     (UNAUDITED)
  
  
  <TABLE>
  <CAPTION>
                                                      Quarter ended    Quarter ended  Nine months ended  Nine months ended
                                                      September 30,     September 30,    September 30,    September 30,
                                                          1999             1998             1999              1998
                                                      --------------------------------------------------------------
  <S>                                                  <C>              <C>              <C>              <C>
  Interest Income:
       Interest and fees on loans                      $1,289,534       $1,521,678       $4,223,275       $4,767,193
       Interest on investment securities                 $389,654         $330,314       $1,097,294         $880,211
       Interest on Federal Funds sold                    $202,996         $198,239         $425,968         $517,641
       Interest on time deposits with other banks          $7,915           $3,550          $17,249          $14,781
                                                      --------------------------------------------------------------
  Total interest income                                $1,890,099       $2,053,781       $5,763,786       $6,179,826
  
  Interest Expense:
       Interest on time deposits                         $423,268         $458,646       $1,252,443       $1,439,216
       Interest on demand deposits                       $195,743         $156,819         $464,563         $461,595
       Interest on savings deposits                       $34,246         $103,562         $231,596         $329,806
       Interest on borrowed funds                              $0          $21,397          $19,093          $53,688
                                                      --------------------------------------------------------------
  Total interest expense                                 $653,257         $740,424       $1,967,695       $2,284,305
  
  Net interest income                                  $1,236,842       $1,313,357       $3,796,091       $3,895,521
  
  Provision for loan losses                               $75,000         $320,000         $215,000         $385,500
                                                      --------------------------------------------------------------
  Net interest income less provision for
       loan losses                                     $1,161,842         $993,357       $3,581,091       $3,510,021
                                                      --------------------------------------------------------------
  
  Noninterest income:
      Gain on sale of loans                                    $0           $4,674          $43,857          $34,362
      Customer service fees                              $477,016         $379,294       $1,303,113       $1,015,664
      Gain on sale of investments                              $0               $0               $0           $1,201
      Other income                                        $36,407          $32,771          $98,931         $100,457
                                                      --------------------------------------------------------------
  Total noninterest income                               $513,423         $416,739       $1,445,900       $1,151,684
  
  Non-interest expense
       Salaries, wages, and employee benefits            $704,096         $605,791       $2,017,568       $1,849,174
      Occupancy and equipment                            $391,766         $334,929       $1,011,287         $937,804
      Office operations and supplies                     $161,248         $157,062         $422,566         $392,284
      Marketing and public relations                      $65,399          $70,292         $179,325         $156,232
      Professional services                               $90,681          $68,942         $233,889         $190,127
      Data processing                                    $383,749         $219,347         $612,893         $664,312
      Other noninterest expense                          $328,757         $267,970         $767,432         $741,850
                                                      --------------------------------------------------------------
  Total non-interest expense                           $3,580,990       $1,724,333       $5,244,960       $4,931,783
                                                      --------------------------------------------------------------
  
       Net income (loss)                                ($228,485)       ($314,237)       ($217,969)       ($270,078)
                                                      ==============================================================
  
       Earnings per share-basic                            ($0.23)          ($0.38)          ($0.22)          ($0.33)
       Earnings  per share-diluted                         ($0.23)          ($0.38)          ($0.22)          ($0.33)
                                                      --------------------------------------------------------------
  Weighted average number of shares                       986,244          825,345          986,244          825,345
                                                      ==============================================================
  </TABLE>
                                         2
  <PAGE>
                               United Bancshares, Inc.
                              Statements of Cash Flows
                                     (Unaudited)
  
  <TABLE>
  <CAPTION>
                                                                                      Nine months ended   Nine months ended
                                                                                        September 30,        September 30,
                                                                                             1999               1998
                                                                                        -------------------------------
  <S>                                                                                   <C>                  <C>
  Cash flows from operating activities
  Net income (loss)                                                                         ($217,969)           44,159
  Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
                Provision for loan losses                                                     140,000            65,500
                (Gain) loss on sale of loans                                                   43,857            29,688
                Depreciation and amortization                                                 398,487           301,356
                Realized investment securities (gains) losses                                       0             1,201
                Proceeds from sale of student loans                                         3,059,985         2,022,500
                Increase (decrease) in accrued interest receivable and other assets        (4,105,468)         (401,719)
                Increase (decrease) in accrued interest payable and other liabilites          294,481           278,226
                                                                                        -------------------------------
  Net cash provided by operating activities                                                  (168,659)        2,340,911
  
  Cash flows from investing activities
  Purchase of investments-Available-for-Sale                                               (6,027,846)       (9,752,787)
  Purchase of investments-Held-to-Maturity                                                 28,452,729        (3,000,000)
  Proceeds from maturity & principal reductions of investments-Available-for-Sale                             9,015,655
  Proceeds from maturity & principal reductions of investments-Held-to-Maturity                               4,527,847
  Proceeds from sale of investment securities-Available-for-Sale                                    0         3,425,663
  Purchase of automobile loans                                                            (21,982,333)                0
  Net (increase) decrease in loans                                                         10,076,233        (3,425,663)
  Purchase of premises and equipment                                                         (289,161)         (157,668)
                                                                                        -------------------------------
  Net cash provided by (used in) investing activities                                      10,229,622          (814,713)
  
  Cash flows from financing activities
  Net increase (decrease) in deposits                                                      (8,357,740)        7,838,486
  Repayments on long term debt                                                                (11,191)          (16,657)
  Reverse repurchase agreement                                                             (1,557,755)        1,217,073
  Net proceeds from issuance of common stock                                                  234,168            64,620
  Net proceeds from issuance of preferred stock                                             1,000,000           482,518
                                                                                        -------------------------------
  Net cash provided by (used in) financing activities                                      (8,692,518)        9,586,640
  
  Increase (decrease) in cash and cash equivalents                                          1,368,446        11,112,838
  
  Cash and cash equivalents at beginning of period                                         16,343,034        12,759,697
  
  Cash and cash equivalents at end of period                                         0     17,711,480        23,872,535
                                                                                        ===============================
  
  Supplemental disclosures of cash flow information
  Cash paid during the period for interest                                                    906,211           991,159
                                                                                        ===============================
  </TABLE>
  
                                         3
  <PAGE>
  
  Item 2. Management's  Discussion and Analysis of Financial Condition and Results
  of Operations.
  
  
  In April 1993, the shareholders of United Bank of Philadelphia  (the Bank) voted
  in favor of the formation of a bank holding  company,  United  Bancshares,  Inc.
  (the  Company).  Accordingly,  in October 1994 the Company became a bank holding
  company in  conjunction  with the issuance of its common  shares in exchange for
  the common shares of the Bank. Since 1994, the financial statements are prepared
  on a consolidated basis to include the accounts of the Company and the Bank.
     The purpose of this  discussion is to focus on  information  about the Bank's
  financial  condition and results of operations  which is not otherwise  apparent
  from the  consolidated  financial  statements  included in this  annual  report.
  Reference  should be made to those  statements  and the selected  financial data
  presented  elsewhere  in  this  report  for an  understanding  of the  following
  discussion and analysis.
  
  Selected Financial Data
  
  The  following  table sets  forth  selected  financial  data for the each of the
  following periods:
  
  <TABLE>
  <CAPTION>
  (Thousands of dollars,                        Quarter ended         Quarter ended
  except per share data)                      September 30, 1999    September 30, 1998
  <S>                                                 <C>                   <C>
  Net interest income                                 $1,237                $1,313
  Provision for loan losses                              75                   320
  Noninterest income                                   1,011                 993
  Noninterest expense                                  3,581                1,724
  Net income (loss)                                   $(228)                $(314)
  
  Earnings per share                                  ($.22)                ($.38)
  
  Balance sheet totals:                         September 30, 1999    December 31, 1998
  Total assets                                       $152,086              $121,983
  Loans, net                                          $63,205              $57,270
  Investment securities                               $58,199              $43,196
  Deposits                                           $138,430              $109,064
  Shareholders' equity                                $10,098               $8,904
  
  Ratios
  Return on assets                                    (.19)%                 .01%
  Return on equity                                    (2.22)%                .14%
  Equity to assets ratio                               8.44%                6.40%
  </TABLE>
  
  
  Financial Condition
  
  Sources and Uses of Funds
     The Bank's  financial  condition  can be  evaluated in terms of trends in its
  sources and uses of funds.  The comparison of average  balances in the following
  table indicates how the Bank has managed these elements. Average funding sources
  increased  approximately  $5.9  million,  or 6.17%,  during the  quarter  ending
  September 30, 1999.  Average funding uses increased $2.5 million,  or 2.43%, for
  the same quarter.
  
                                         4
  <PAGE>
  Sources and Uses of Funds Trends
  <TABLE>
  <CAPTION>
  <S>                                   <C>                 <C>                  <C>                   <C>
                                  September 30, 1999                                                June 30,1999
                                        Average        Increase (Decrease)                             Average
                                        Balance              Amount                  %                 Balance
  Funding uses:
       Loans                            $66,308             ($7,806)              (10.53%)             $74,114
       Investment securities
          Held-to-maturity               17,656                7566                74.99%               10,090
          Available-for-sale              7,528                (294)               (3.76%)               7,822
       Federal funds sold                12,010               2,992                33.18%                9,018
                                       --------              ------                                    -------
           Total  uses                 $103,502             ($2,458)                                  $101,044
                                       ========              ======                                    =======
  Funding sources:
       Demand deposits
            Noninterest-bearing         $24,725              $5,211                26.70%              $19,514
            Interest-bearing             21,981               1,614                 7.92%               20,367
       Savings deposits                  22,371               1,180                 5.57%               21,191
       Time deposits                     33,232              (2,055)               (5.82%)              35,287
       Other borrowed funds                   1                  (0)                   0%                    1
                                       --------              ------                                    -------
            Total sources              $102,310              $5,950                                    $96,360
                                       ========              ======                                    =======
  </TABLE>
  
  Loans
  Average loans decreased  approximately $8 million, or 10.53%, during the quarter
  ended  September 30, 1999.  This decrease was primarily due to repayments in the
  $21 million  automobile loan portfolio  purchased in February 1999.  Paydowns in
  this portfolio are averaging $1 million per month.  In addition,  prepayments in
  the mortgage loan  portfolio  continue as consumers  rush to refinance  existing
  loans or sell existing homes to purchase new homes in  anticipation  of interest
  rate hikes.  Strategies  continue to be reviewed to  originate  and/or  purchase
  loans to minimize the impact of portfolio paydowns.
  
  The following  table shows the  composition of the Bank's loan portfolio by type
  loan.
  (Thousands of Dollars)
                                             September   December
                                             30, 1999    31, 1998
  Commercial and industrial                  $ 13,302     $13,643
  Commercial real estate                        1,277       1,518
  Consumer loans                               22,059      11,423
  Residential mortgages                        27,336      31,365
                                              -------     -------
              Total Loans                     $63,974     $57,950
                                              =======     =======
  
  
  Residential  mortgage  loans at  September  30, 1999  continue  to comprise  the
  greatest  percentage of total loans  representing  approximately  42.7% of total
  loans However,  these loans as a percentage of the total  portfolio  continue to
  decline as  mortgage  loan  balances  decrease  as a result of  refinancing  and
  paydowns. In addition, majority of the new residential mortgage loans originated
  are sold at closing due to the current low  interest  rate  environment  and the
  interest rate risk associated with holding these loans.
  
  In conjunction with a strategic alliance with another financial institution, the
  Bank purchased a $21 million  automobile loan portfolio in February 1999.  These
  were seasoned loans with a 2-3 year average life.
  
  Allowance for Loan Losses
  
  The allowance for loan losses reflects management's continuing evaluation of the
  loan portfolio,  assessment of economic conditions, the diversification and size
  of the portfolio,  adequacy of collateral, past and anticipated loss experience,
  and the amount and quality of nonperforming  loans. The following Table presents
  an analysis of the allowance for loan losses.
  
  
                                         5
  <PAGE>
                        ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
                                    Nine Months ended
                                   September 30, 1999
    (Dollars in thousands)
  Balance at January 1, 1999           $   680
                                        ------
  Charge-offs:
      Commercial and industrial            (12)
      Commercial real estate               -
      Residential mortgages                -
      Consumer loans                      (212)
                                        ------
                                          (224)
  Recoveries                                99
                                        ------
  Net charge-offs                         (125)
  Additions charged to operations          215
                                           -
                                        ------
  Balance at September 30, 1999           $770
                                        ======
  Ratio of net charge-offs to average
      loans outstanding                   0.02%
                                        ======
  
  The amount  charged to operations  and the related  balance in the allowance for
  loan losses are based upon the  periodic  evaluations  of the loan  portfolio by
  management.  These  evaluations  consider  several factors,  including,  but not
  limited to, general economic conditions, loan portfolio composition,  prior loan
  loss experience, and management's estimate of future potential losses.
  
  
  
  The  allowance  for loan losses as a percentage of total loans was 1.20% and 42%
  of classified  loans at September  30, 1999.  In evaluating  the adequacy of the
  allowance for loan losses, only the net exposure  (un-guaranteed portion) should
  be  considered.  Because  of the loan  portfolio  composition  which  includes a
  significant   level  of   residential   mortgage   loans  and   Small   Business
  Administration  (SBA) guaranteed loans,  risk in the portfolio is minimized.  In
  addition, the Bank has an excellent collection record. During the quarter ending
  September  30, 1999,  net  charge-offs  as a percentage  of average  total loans
  represented .02%.
  
  
  Nonperforming  and nonaccrual Loans
     The Bank generally  determines a loan to be "nonperforming"  when interest or
  principal is past due 90 days or more. If it otherwise appears doubtful that the
  loan will be repaid,  management  may  consider  the loan to be  "nonperforming"
  before the lapse of 90 days.  The policy of the Bank is to charge-off  unsecured
  loans after 90 days past due. Interest on "nonperforming" loans ceases to accrue
  except for loans that are well  collateralized and in the process of collection.
  When a loan is placed on non-accrual,  previously accrued and unpaid interest is
  generally  reversed  out of income  unless  adequate  collateral  from  which to
  collect the  principal of and interest on the loan appears to be  available.  At
  September  30, 1999,  non-accrual  loans were $1.6  million--approximately  $322
  thousand were residential mortgage loans; approximately $600 thousand related to
  one community development loan in the Bank's commercial loan portfolio; and, the
  remainder  consisted  primarily  of loans  with SBA  guarantees.  Management  is
  working  closely  with  the  community   development  loan  borrower  to  ensure
  completion of the project while minimizing losses, if any, to the Bank. There is
  no known  information about possible credit problems other than those classified
  as  nonaccrual  that causes  management to be uncertain as to the ability of any
  borrower to comply with present loan terms.
    The Bank grants  commercial,  residential,  and  consumer  loans to  customers
  primarily located in Philadelphia County,  Pennsylvania and surrounding counties
  in the Delaware  Valley.  From time to time, the Bank purchases loans from other
  financial  institutions.  These  loans are  generally  located in the  Northeast
  
  
                                         6
  <PAGE>
  corridor  of the  United  States.  Although  the  Bank  has a  diversified  loan
  portfolio,  its debtors'  ability to honor their  contracts is influenced by the
  region's economy.
     At  September  30,  1999,  approximately  32% of the Bank's  commercial  loan
  portfolio  was  concentrated  in loans  made to  religious  organizations.  From
  inception, the Bank has received support in the form of investments and deposits
  and has developed strong relationships with the Philadelphia  region's religious
  community.  Loans made to these  organizations  were primarily for expansion and
  repair of church  facilities.  At September  30, 1999,  none of these loans were
  nonperforming.
  
  Investment Securities and other short-term investments
  Investment  securities,  including  Federal Funds Sold,  increased on average by
  $10.3  million,  or 38.1%,  during the quarter  ended  September  30, 1999.  The
  increase  is due the growth in average  deposit  levels  repayments  in the loan
  portfolio.  Longer-term  investment  strategies  to achieve  higher  yields were
  implemented in September 1999.
  
  The  Bank's  investment   portfolio   primarily   consists  of   mortgage-backed
  pass-through   agency   securities,   U.S.   Treasury   securities,   and  other
  government-sponsored  agency  securities.  The Bank does not invest in high-risk
  securities or complex structured notes. The average duration of the portfolio is
  4.32 years.
  
  Deposits
  
  On September 24, 1999,  the Bank  purchased four branches with total deposits of
  $31  million  at a premium  of $2.1  million,  or 7%.  The bulk of the  acquired
  deposits  are  "core"--primarily  checking  and savings  accounts.  The Bank has
  consolidated  2 of the acquired  branches into its existing  branch  network and
  will consolidate another within the next six months.
  
  Non-interest  bearing demand deposits increased on average by approximately $5.2
  million, or 26.7%, during the quarter ended September 30, 1999. The increase was
  primarily due to significant new account  relationships  with local corporations
  and the purchase of deposits from First Union in September 1999.
  
  Interest  bearing demand  deposits  increased on average by  approximately  $1.6
  million, or 7.92%, during the quarter ended September 30, 1999. The increase was
  primarily  an increase in the level of sweep  deposit  balances--balances  swept
  from a noninterest-bearing checking account to an interest-bearing (NOW) account
  overnight.
  
  Other Borrowed Funds
  The level of other  borrowed  funds is  dependent  on many items such as capital
  adequacy, loan growth, deposit growth and interest rates paid on these funds. At
  September 30, 1999, the Bank did not have any borrowed funds.
  
  Commitments and Lines of Credit
  The Bank 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  commitments  to extend  credit  and  letters of
  credit,  which are conditional  commitments  issued by the Bank to guarantee the
  performance of an obligation of a customer to a third party.  Both  arrangements
  have credit risk  essentially the same as that involved in extending  loans, and
  are subject to the Bank's normal  credit  policies.  Collateral  may be obtained
  based on management's  assessment of the customer. The Bank's exposure to credit
  loss  in the  event  of  nonperformance  by the  other  party  to the  financial
  instruments is represented by the contractual amount of those instruments.
  
                                         7
  <PAGE>
  The Bank's financial instrument commitments at September 30, 1999 are summarized
  below:
  
  Commitments to extend credit                $6,401
  Outstanding letter of credit                $259
  
  Commitments  to extend  credit are  agreements  to lend to a customer as long as
  there is no violation of any condition  established in the contract.  Since many
  of the  commitments  are expected to expire  without being drawn upon, the total
  commitment  amounts  do not  necessarily  represent  future  cash  requirements.
  Commitments  generally have fixed expiration dates or other termination  clauses
  and may require payment of a fee.
  
  
  Liquidity and Interest Rate Sensitivity Management
  
  The primary  functions  of  asset/liability  management  are to assure  adequate
  liquidity and maintain  appropriate balance between  interest-sensitive  earning
  assets and  interest-bearing  liabilities.  Liquidity  management  involves  the
  ability to meet cash flow requirements of customers who may be either depositors
  wanting to withdraw funds or borrowers  needing  assurance that sufficient funds
  will  be  available  to meet  their  credit  needs.  Interest  rate  sensitivity
  management  seeks to avoid  fluctuating  net  interest  margins  and to  enhance
  consistent  growth of net interest income through  periods of changing  interest
  rate.
     The Bank is required to maintain  minimum  levels of liquid assets as defined
  by FRB regulations. This requirement is evaluated in relation to the composition
  and  stability  of  deposits;  the degree and trend of reliance  on  short-term,
  volatile sources of funds,  including any undue reliance on particular  segments
  of the money market or brokered deposits; any difficulty in obtaining funds; and
  the   liquidity   provided  by  securities   and  other  assets.   In  addition,
  consideration is given to the nature, volume and anticipated use of commitments;
  the adequacy of liquidity  and funding  policies and  practices,  including  the
  provision  for  alternate  sources  of  funds;  and  the  nature  and  trend  of
  off-balance-sheet  activities. As of September 30, 1999, management believes the
  Bank's liquidity is satisfactory and in compliance with the FRB regulations
     The Bank's principal sources of asset liquidity include investment securities
  consisting principally of U.S. Government and agency issues,  particularly those
  of shorter maturities, and mortgage-backed securities with monthly repayments of
  principal  and  interest.  Securities  maturing in one year or less  amounted to
  $26.8  million  at  September  30,  1999,  representing  39% of  the  investment
  portfolio. These securities primarily consisted of US Government Agency Discount
  Notes with relatively  short  maturities.  Other types of assets such as federal
  funds sold, as well as maturing loans,  are sources of liquidity.  Approximately
  $6.1 million in loans are scheduled to mature within one year.
     The Bank's overall liquidity has been enhanced by a significant level of core
  deposits  which  management  has  determined are less sensitive to interest rate
  movements.  The Bank has avoided reliance on large denomination time deposits as
  well as brokered deposits
     The  following is a summary of the  remaining  maturities of time deposits of
  $100,000 or more outstanding at September 30, 1999:
  
                                                        (Thousands of dollars)
  3 months or less                                               $3,979
  Over 3 through 12 months                                        7,530
  Over 1 through five years                                         801
  Over five years                                                   126
                                                                -------
       Total                                                    $12,436
                                                                =======
  
                                         8
  <PAGE>
  Capital Resources
  Total  shareholders'  equity  increased  approximately  $19 thousand  during the
  quarter ended September 30, 1999 as a result of the purchase of $300,000 Class B
  Common Stock by First Union,  N.A. in conjunction and  simultaneous  with United
  Bank's  purchase of  deposits/branches  from First Union on September  24, 1999.
  This capital  infusion was offset by a $228  thousand  loss incurred by the Bank
  during the quarter. As of September 30, 1999, the Bank has an outstanding equity
  investment  commitment  totaling  $3 million  from the U.S.  Treasury  Community
  Development  Financial  Institution  Fund  which is  expected  to be  funded  by
  December 31, 1999.
  
     The Federal Reserve Bank's ("FRB")  standards for measuring  capital adequacy
  for U.S.  Banking  organizations  requires that banks maintain  capital based on
  "risk-adjusted" assets so that categories of assets with potentially higher risk
  will  require more  capital  backing  than assets with lower risk.  In addition,
  banks are required to maintain  capital to support,  on a  risk-adjusted  basis,
  certain off-balance-sheet activities such as loan commitments. The FRB standards
  classify  capital  into two  tiers,  referred  to as Tier 1 and  Tier 2.  Tier 1
  consists of common shareholders' equity, non-cumulative and cumulative perpetual
  preferred stock, and minority  interests less goodwill.  Tier 2 capital consists
  of allowance for loan losses,  hybrid  capital  instruments,  term  subordinated
  debt,  and  intermediate-term  preferred  stock.  Banks are  required  to meet a
  minimum ratio of 8% of qualifying capital to risk-adjusted  total assets with at
  least 4% Tier 1 capital and a Tier I Leverage ratio of at least 6%. Capital that
  qualifies as Tier 2 capital is limited to 100% of Tier 1 capital.
    As indicated  in the table below,  the Bank's  risk-based  capital  ratios are
  above the minimum  requirements.  Management  continues the objective of raising
  additional capital by offering  additional stock (preferred and common) for sale
  to the public as well as  increasing  the rate of internal  capital  growth as a
  means of maintaining the required  capital  ratios.  The Company and the Bank do
  not anticipate paying dividends in the near future.
  
                                            September 30,     December 31,
                                                 1999             1998
  Tier 1 Capital                               $7,946            $8,823
  Tier 2 Capital                                  769               679
                                               ------            ------
      Total Qualifying Capital                 $8,715            $9,502
                                               ======            ======
  Risk Adjusted  Total Assets  (including
       off- balance sheet exposures)          $66,733           $54,373
  Tier 1 Risk-Based Capital Ratio              11.47%            16.23%
  Tier 2 Risk-Based Capital Ratio              12.63%            17.48%
  Leverage Ratio                                7.21%            7.62%
  
  
  
  
  
  Results of Operations
  
  
  Summary
  The Bank had a net loss of  approximately  $228 thousand ($.23 per common share)
  for the quarter ended September 30, 1999 compared to a net loss of $314 thousand
  ($.38 per  common  share)  for the same  quarter  in 1998.  The  improvement  is
  primarily related to a lower provision for loan losses in 1999 compared to 1998.
  
                                         9
  <PAGE>
  Net Interest Income
  Net interest income is an effective  measure of how well management has balanced
  the Bank's interest rate sensitive assets and liabilities.  Net interest income,
  the  difference  between (a)  interest and fees on interest  earning  assets and
  interest paid on interest-bearing liabilities, is a significant component of the
  earnings of the Bank.  Changes in net  interest  income  result  primarily  from
  increases or decreases in the average balances of interest  earning assets,  the
  availability of particular  sources of funds and changes in prevailing  interest
  rates.
  
  Net  interest  income  decreased  $76  thousand,  or 6%, for the  quarter  ended
  September 30, 1999 compared to 1998. The decrease was primarily  attributable to
  lower average loan balances compared to 1998---$66  million vs. $71 million.  In
  addition,  because the Bank purchased loans instead of originating  them,  there
  were less loan origination fees.
  
  Provision for Loan Losses
  The Bank adopted  Statement of Financial  Accounting  Standard ("SFAS") No. 114,
  "Accounting  by  Creditors  for  Impairment  of  a  Loan,"  and  SFAS  No.  118,
  "Accounting  by Creditors  for  Impairment  of a  Loan--Income  Recognition  and
  Disclosures,"  effective January 1, 1995. As a result of applying the new rules,
  certain impaired loans are reported at the present value of expected future cash
  flows  using the loan's  initial  effective  interest  rate,  or as a  practical
  expedient,  at the loan's  observable  market  price or at the fair value of the
  collateral if the loan is collateral dependent.  The adoption of these standards
  did not have a material  impact on the Bank's  financial  position or results of
  operations.
    The  provision  is based on  management's  estimate  of the  amount  needed to
  maintain an adequate  allowance  for loan losses.  This estimate is based on the
  review of the loan  portfolio,  the level of net credit  losses,  past loan loss
  experience,  the general economic outlook and other factors management feels are
  appropriate.
    The provision for loan losses charged against  earnings for the quarter ending
  September  30,  1999 was $75  thousand  compared to $320  thousand  for the same
  quarter in 1998. The provision in 1998 was due to a specific  provision made for
  one community  development  loan in the  commercial  loan portfolio of the Bank.
  This  loan,  which  has a total  exposure  of $700  thousand,  is  currently  in
  nonaccrual status and carries a 50% reserve.  Management is working closely with
  the borrower to ensure completion of the development to minimize losses, if any,
  on this loan.
  
  Noninterest Income
  The amount of the Bank's noninterest income generally reflects the volume of the
  transactional  and other accounts handled by the Bank and includes such fees and
  charges as low balance account charge,  overdrafts,  account analysis, and other
  customer  service fees.  Customer  service fees increased $98 thousand,  or 26%,
  during the quarter primarily  attributable to growth in ATM surcharge fees---the
  Bank increased its fees for non-customers  from $1.00 to $1.50 in April 1999 and
  continues to install new ATM machines  throughout the region. In addition,  fees
  on deposits  increased  as a result of an increase  the level of demand  deposit
  accounts which result in more overdraft fees,  activity  service charges and low
  balance fees.
  
  Noninterest expense
  Salaries and benefits  increased $98 thousand,  or 16%, during the quarter ended
  September 30, 1999 compared to 1998. This increase is primarily  attributable to
  annual  raises for  employees  as well as filling  unfilled  staff  positions in
  preparation  for the  acquisition  of  deposits/branches  from  First  Union  on
  September 24, 1999.
  
                                         10
  <PAGE>
  Data  processing  expenses  increase $164 thousand,  or 75%,  during the quarter
  ended   September  30,  1999  compared  to  1998.  This  increase  is  primarily
  attributable  to the  purchase of $21 million in  automobile  loans from another
  financial  institution  in February 1999 for which there is a 1% servicing  fee.
  Data processing  expenses are a result of the management decision of the Bank to
  out  source  data  processing  to third  party  processors  the bulk of its data
  processing.  Such expenses are  reflective  of the high level of accounts  being
  serviced for which the Bank is charged a per account  charge by  processors.  In
  addition,  the Bank  uses  outside  loan  servicing  companies  to  service  its
  mortgage,  credit  card,  installment  and  student  loan  portfolios.  The Bank
  continues  to study  methods by which it may reduce its data  processing  costs,
  including but not limited to a consolidation of servicers,  in-house  processing
  versus out-sourcing,  and the possible re-negotiation of existing contracts with
  servicers.
  
  Occupancy expense increased  approximately $56 thousand,  or $57 thousand,  as a
  result a lease  the  Bank  entered  into in July  1999 to  house  its  corporate
  headquarters  including its  executive  offices and other  non-branch  operating
  departments.  The Bank currently leases 25,000 square feet at an average cost of
  $14.14 per foot. It has entered into  subleases with other  affiliated  entities
  for  approximately  4,000 square feet. In accordance  with Financial  Accounting
  Standards  Board  Statement  13, this lease has been  accounted for as a capital
  lease in the amount of $1,483,000  as the present value of future  minimum lease
  payments exceeds 90% of the fair market value of the building.
  
  Professional  Services  increased  approximately  $21 thousand,  or 32%, for the
  quarter ended  September  30, 1999 compared to 1998.  This increase is primarily
  attributable  to consulting fees related to the Year 2000  Remediation  Plan and
  Customer Awareness seminars.  In addition, in August 1999, the Bank entered into
  a contract with a computer  consulting firm to provide on site management of the
  Bank's  computer  systems,  build  appropriate   infra-structure,   and  provide
  leadership in technology planning.
  
   All other  expenses  are  reflective  of the general  cost to do  business  and
  compete in the  current  regulatory  environment  and  maintenance  of  adequate
  insurance coverage.
  
  Regulatory Matters
  
  At September 30, 1999, the Bank is operating under a Supervisory Letter from its
  primary regulator. The Supervisory Letter, among other things, prevents the Bank
  and the Company from  declaring or paying  dividends  without the prior  written
  approval of its  regulators  and prohibits the Bank and the Company from issuing
  debt.
  
  
  
  Year 2000
  
  The Year 2000 problem is the result of computer programs being written using two
  digits  rather than four to define the  applicable  year.  Any of the  Company's
  programs or that of its vendor that have  time-sensitive  software may recognize
  the date  using  "00" as the year 1900  rather  than the Year  2000.  This could
  result in major system  failure or  miscalculations.  The "Year 2000"  potential
  problems  create  risk  for the  Company  from  unforeseen  problems  in its own
  computer system and from third parties such as other financial institutions, the
  federal  government,  federal agencies,  vendors and customers.  Failures of the
  Company's or third party's  computer systems could have a material effect on the
  Company's  abilities to conduct business,  especially to process and account for
  the transfer of funds electronically
  
                                         11
  <PAGE>
  
  Like  many  financial  institutions,  the  Company  relies  upon  computers  for
  conducting its daily  operations.  Failure to resolve Year 2000 issues  presents
  the following  risks to the Company:  (1) the Bank could lose customers to other
  financial  institutions,  resulting  in loss  revenue,  if the Bank is unable to
  properly account for customer transactions;  (2) governmental agencies,  such as
  the Federal Home Loan Bank, and correspondent institutions could fail to provide
  funds to the Bank which could materially  impair the Bank's liquidity and affect
  the Bank's  ability to fund loans and  deposit  withdrawals;  (3) concern on the
  part of  depositors  that Year 2000 issues could impair  access to their deposit
  account balances could result in the Bank experiencing deposit outflows prior to
  December 31, 1999;  and (4) the bank could incur  increased  personnel  costs if
  additional staff is required to perform functions that inoperative systems would
  have  otherwise  performed.  Management  believes  that  it is not  possible  to
  estimate the  potential  lost revenue due to the Year 2000 issue,  as the extent
  and longevity of any potential problem cannot be predicted.
  
  The Company has conducted a comprehensive  review of its computer systems,  both
  internal  and  outsourced  processing,  to identify  the  systems  that could be
  affected by the "Year  2000" issue and has  developed a Year 2000 Plan to modify
  or replace the affected systems and test them for Year 2000 readiness.  To date,
  the Company has taken the following actions to mitigate the potential effects of
  the Year 2000 issue:
  
  o    The Bank  has  upgraded  all  applicable  computer  systems  (hardware  and
       software)  to be Year 2000  ready.  Management  has  completed  testing all
       systems to ensure Year 2000 Compliance.
  
  o    The Board of  Directors  has  adopted a Year 2000 Plan that  Management  is
       currently  implementing.  The Plan  address the overall  status of the Year
       2000 Project,  details of the Company's contingency plan, describes mission
       critical  systems and non-mission  critical  systems,  identifies all third
       party vendors and applicable testing strategies and test dates. The Company
       has written a Year 2000 Business  Resumption Plan that contains all mission
       critical systems and services. This Plan was completed in June 30, 1999.
  
  o    The Company has established a Year 2000 Committee  consisting of members of
       senior  management  which currently  meets to discuss  progress on the Year
       2000 Plan, and
  
  o    A Year 2000 budget has been developed  which  estimates the cost associated
       with Year 2000 readiness.  Current  estimates of the cost to be incurred to
       prepare for the Year 2000 range from do not exceed $200,000. In conjunction
       with Year 2000  preparation,  the Bank plans to make most hardware upgrades
       as a normal part of replacement of equipment--thereby minimizing cost. Cost
       estimates  include  primarily  personnel and consulting  time to ensure all
       business   components/processes   have  been   considered  and  tested  for
       compliance.
  
  o    The Bank holds customer awareness seminars and has contacted its major loan
       and  deposit  customers  to advise  them to review  their own  systems  for
       possible  Year 2000  problems.  In  determining  credit  risk for  existing
       customers as well as in making credit  decisions for major  borrowers,  the
       Bank considers the impact of the Year 2000 issues.
  
  
  
                                         12
  <PAGE>
  Income (Loss) Per Share
  
  During  1997,  the Company  adopted the  provisions  of  Statement  of Financial
  Accounting  Standards  (SFAS)  No.  128,  "Earnings  Per  Share."  SFAS No.  128
  eliminates  primary and fully  diluted  earnings  per share  (EPS) and  requires
  presentation of basic and diluted EPS in conjunction  with the disclosure of the
  methodology  used in  computing  such EPS.  Basic EPS  excludes  dilution and is
  computed by dividing  income  available to common  shareholders  by the weighted
  average  common  shares  outstanding  during the period.  Diluted EPS takes into
  account the potential dilution that could occur if securities or other contracts
  to issue common stock were  exercised  and converted  into common  stock.  Prior
  period EPS  calculations  have been restated to reflect the adoption of SFAS No.
  128.
  
  Reporting Comprehensive Income
  
  In January 1998, the Bank adopted SFAS No. 130, Reporting  Comprehensive Income.
  This standard establishes new standards for reporting  comprehensive income that
  includes  net income as well as certain  other  items that result in a change to
  equity during the period.  These financial  statements have been reclassified to
  reflect the provisions of SFAS No. 130.
  
  Disclosures about Segments of an Enterprise and Related Information
  
  In June 1997,  the FASB issued SFAS No. 131,  which is effective for all periods
  beginning after December 15, 1998. SFAS No. 131,  "Disclosures About Segments of
  an  Enterprise  and  Related   Information,"   requires  that  public   business
  enterprises report certain information about operating segments in complete sets
  of financial  statements of the enterprise and in condensed financial statements
  of interim periods issued to shareholders. It also requires that public business
  enterprises  report certain  information about their products and services,  the
  geographic area in which they operate and their major customers.  Management has
  determined that the Bank operates in one segment, namely community banking.
  
  
  
  Item 3.  Quantitative and Qualitative Disclosures About Market Risk
  
  Interest rate sensitivity varies with different types of interest-earning assets
  and interest-bearing liabilities.  Overnight federal funds on which rates change
  daily  and loans  which are tied to prime or other  short  term  indices  differ
  considerably  from  long-term   investment   securities  and  fixed-rate  loans.
  Similarly,  time deposits are much more interest sensitive than passbook savings
  accounts.  The shorter-term interest rate sensitivities are key to measuring the
  interest  sensitivity  gap,  or  excess  earning  assets  over  interest-bearing
  liabilities.  Management of interest  sensitivity  involves  matching  repricing
  dates of interest-earning  assets with interest-bearing  liabilities in a manner
  designed to optimize net interest income within the limits imposed by regulatory
  authorities, liquidity determinations and capital considerations.
  
   At September  30,  1999,  a liability  sensitive  position is  maintained  on a
  cumulative  basis  through 1 year of 3.66%  that is  within  the  Bank's  policy
  guidelines of +/- 15% on a cumulative  1-year basis. The current gap position is
  primarily due to the high  concentration  of fixed rate mortgage  loans the Bank
  has in its loan portfolio but is somewhat  mitigated by the Bank's high level of
  core deposits which have been placed in longer repricing  intervals.  Generally,
  because of the Bank's negative gap position in shorter time frames, the Bank can
  anticipate that increases in market rates will have a negative impact on the net
  interest income, while decreases will have the opposite effect.
  
                                         13
  <PAGE>
  
  While using the interest sensitivity gap analysis is a useful management tool as
  it considers  the quantity of assets and  liabilities  subject to repricing in a
  given time  period,  it does not consider  the  relative  sensitivity  to market
  interest rate changes that are characteristic of various interest rate-sensitive
  assets and  liabilities.  Consequently,  even  though the Bank  currently  has a
  negative  gap  position  because  of  unequal  sensitivity  of these  assets and
  liabilities,  management  believes  this  position  will not  materially  impact
  earnings in a changing rate environment.  For example, changes in the prime rate
  on variable  commercial  loans may not result in an equal  change in the rate of
  money market deposits or short-term  certificates of deposit. A simulation model
  is  therefore  used to estimate the impact of various  changes,  both upward and
  downward,  in market interest rates and volumes of assets and liabilities on the
  Bank's net income.  This model  produces an interest rate  exposure  report that
  forecasts  changes in the market  value of portfolio  equity  under  alternative
  interest rate  environments.  The market value of portfolio equity is defined as
  the  present  value  of  the  Company's   existing   assets,   liabilities   and
  off-balance-sheet  instruments.  The  calculated  estimates of changes in market
  value of portfolio value at September 30, 1999 are as follows:
  
  
                                                       Market value of
                    Changes in rate                    portfolio equity
                                                   (Dollars in thousands)
                  +400 basis points                          $532
                  +300 basis points                         1,815
                  +200 basis points                         4,490
                  +100 basis points                         7,186
                  Flat rate                                 9,908
                  -100 basis points                        12,580
                  -200 basis points                        14,541
                  -300 basis points                        17,136
                  -400 basis points                        19,538
  
     The  assumptions  used  in  evaluating  the  vulnerability  of the  Company's
  earnings  and  capital to changes in  interest  rates are based on  management's
  consideration  of past  experience,  current  position  and  anticipated  future
  economic  conditions.  The  interest  sensitivity  of the  Company's  assets and
  liabilities, as well as the estimated effect of changes in interest rates on the
  market  value  of  portfolio  equity,  could  vary  substantially  if  different
  assumptions are used or actual experience  differs from the assumptions on which
  the calculations were based.
     The Bank's Board of  Directors  and  management  consider all of the relevant
  factors and conditions in the  asset/liability  planning process.  Interest-rate
  exposure is not  considered  to be  significant  and is within the Bank's policy
  limits at September 30, 1999. However, if significant interest rate risk arises,
  the Board of Directors and  management  may take (but are not limited to) one or
  all of the following steps to reposition the balance sheet as appropriate:
       1.   Limit jumbo  certificates  of deposit  (CDs) and  movement  into money
            market deposit  accounts and short-term CDs through  pricing and other
            marketing strategies.
       2.   Purchase  quality  loan  participations   with  appropriate   interest
            rate/gap match for the Bank's balance sheet.
       3.   Restructure the Bank's investment portfolio.
  
                                         14
  <PAGE>
  
  The  Board  of  Directors  has  determined   that  active   supervision  of  the
  interest-rate  spread  between  yield on earnings  assets and cost of funds will
  decrease the Bank's vulnerability to interest-rate cycles.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
                                         15
  <PAGE>
                             PART II - OTHER INFORMATION
  
  Item 1. Legal Proceedings.
  
  
           A writ of summons  was filed by  Monument  Financial  Group,  Inc.  and
  Ronald Hatfield, respectively, an accountholder and its principal (collectively,
  the  "Plaintiffs") to commence an action against the Bank in the Court of Common
  Pleas, Philadelphia County on June 29,1999.  Subsequently, a complaint was filed
  by the  Plaintiffs.  The suit involves the processing of transactions in alleged
  non-compliance  with the  deposit  contract  by  permitting  the  processing  of
  transactions with only one signature (the "Primary  Claim").  This action by the
  Bank allegedly  resulted in a loss to the Plaintiffs.  The Bank has conducted in
  depth  investigation  into the circumstances  arising in the Primary Claim. As a
  result of this investigation,  the Bank has determined that the deposit contract
  was  modified by the  depositor.  The  depositor  repeatedly  affirmed,  both by
  telephone,  and in person,  that transactions  should be permitted with a single
  signature. This modification creates a firm defense to the Primary Claim.
  
           Even if the  deposit  contract  was not  modified,  the  amount  of the
  Primary  Claim  must be  reduced  by the  aggregate  amount of the  transactions
  utilized for valid business purposes of the Plaintiff. The Bank's investigations
  indicate that the proceeds of a substantial number of the transactions processed
  with one signature  were utilized to pay expenses of Monument  Financial  Group,
  thus reducing any damage amount
  
           Based upon the  forgoing,  the Bank believes that it will not be liable
  for the Primary Claim.  In addition,  the Bank has insurance  which, it has been
  informed by the carrier  representative,  will cover any loss resulting from the
  Primary Claim, including costs of defense, in excess of a $50,000 deductible.
  
  The complaint also seeks damages for lost business opportunity, punitive damages
  for  alleged   consequential  losses  to  potential  business  ventures  of  the
  Plaintiffs, and related claims (collectively,  the "Ancillary Claims"). Based on
  general  legal  principles  and the  foregoing  facts,  the Bank and its counsel
  believe the Ancillary  Claims are frivolous and without merit.  The Bank and its
  counsel have reviewed the Bank's  comprehensive  general liability  coverage and
  have  indicated  that any damages  resulting  from the Ancillary  Claims will be
  wholly-covered by this insurance.
  
           No other  material  claims have been  instituted  or  threatened  by or
  against  Registrant  or its  affiliates  other  than in the  ordinary  course of
  business.
  
  Item 2.
  
           Working Capital Restrictions on Payment of Dividends.
  
           The holders of the Common Stock are  entitled to such  dividends as may
  be declared by the Board of Directors  out of funds legally  available  therefor
  under the laws of the  Commonwealth  of  Pennsylvania.  Under  the  Pennsylvania
  Banking Code of 1965,  funds available for cash dividend  payments by a bank are
  restricted to accumulated net earnings and if the surplus of a Bank is less than
  
  
                                         16
  <PAGE>
  the amount of its capital the Registrant  shall,  until surplus is equal to such
  amount,  transfer to surplus an amount which is at least 10% of the net earnings
  of the  Registrant  for the period  since the end of the last fiscal year or any
  shorter period since the declaration of a dividend.  If the surplus of a bank is
  less than 50% of the amount of its capital,  no dividend may be declared or paid
  by  the  bank  without  prior  approval  of  the  Secretary  of  Banking  of the
  Commonwealth of Pennsylvania.
  
           Under the Federal Reserve Act, if a bank has sustained  losses up to or
  exceeding its undivided profits, no dividend shall be paid, and no dividends can
  ever be paid in an amount  greater  than such bank's net profits less losses and
  bad debts.  Cash dividends must be approved by the Federal  Reserve Board if the
  total of all cash dividends  declared by a bank in any calendar year,  including
  the proposed cash dividend,  exceeds the total of the  Registrant's  net profits
  for that year plus its retained net profits from the preceding  two years,  less
  any required  transfers to surplus or to a fund for the  retirement of preferred
  stock.  Under the Federal  Reserve  Act, the Board has the power to prohibit the
  payment of cash  dividends by a bank if it determines  that such a payment would
  be an unsafe or unsound banking practice.
  
           The Federal Deposit  Insurance act generally  prohibits all payments of
  dividends a bank which is in default of any  assessment  to the Federal  Deposit
  Insurance Corporation.
  
           Recent Sales of Securities
  
                    Registrant  has sold 5,000  shares of its Class B Common Stock
  (non-voting)  to an individual  investor at a purchase price of $12.00 per share
  pursuant to an exemption from registration contained in Section 4(6) of the Act.
  
                    Registrant also sold 25,000 shares of its Class B Common Stock
  (non-voting) to First Union  Corporation at a purchase price of $12.00 per share
  pursuant to an exemption from registration contained in Section 4(6) of the Act.
  
  Item 3.  Defaults Upon Senior Securities.
  
           (a) There has been no  material  default in the  payment of  principal,
  interest,  a sinking or purchase fund installment,  or any material default with
  respect to any  indebtedness  of the  Registrant  exceeding  five percent of the
  total assets of the Registrant.
  
           (b) There have been no material arrearage or delinquencies as discussed
  in Item 3(a).  Registrant has declared and issued a Series A Preferred Stock. No
  obligations pursuant to those securities have become due.
  
  Item 4.  Submission of Matters to a Vote of Security Holders.
  
           No matters were submitted to a vote of security holders.
  
  
  
                                         17
  <PAGE>
  Item 5.  Other Information.
  
           Related Party Transactions
  
                    Beginning  July 1, 1999,  the Bank  commenced a ten year lease
  (the "Lease") of a  headquarters  and operations  facility  located at 300 North
  Third  Street,  Philadelphia,  Pennsylvania  (the  "Facility).  The owner of the
  Facility  is ECC  Properties,  LLC, a  Pennsylvania  Limited  Liability  Company
  controlled by Emma C. Chappell,  Chairman, President and CEO of the Bank and the
  Registrant.
  
                    The Facility  comprises  approximately  25,000 square feet and
  houses the Bank's executive offices,  operations,  finance,  human resources and
  corporate  services  departments.  The Bank has leased the entire facility for a
  base rent of $12.75 per square foot,  plus electric and  cleaning.  The Bank has
  sublet the space that it is not currently  using,  consisting  of  approximately
  4,000 square feet, for a term of five years.
  
  Item 6. Exhibits and Reports on Form 8-K.
  
           (a) A list  of the  exhibits  submitted  with  this  Form  10-Q  are as
               follows:
  
                    Copy of the Registrant's Call Report for the Period
                    ending September 30, 1999. [Filed with Schedule SE]
  
                    Lease between United Bank of Philadelphia  and ECC Properties,
                    LLC [Filed with Schedule SE]
  
  
  Signatures
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
                                              UNITED BANCSHARES, INC.
  
  
  
  
  Date: November 18, 1999                     /s/ Emma C. Chappell
                                              ---------------------------------
                                              Emma C. Chappell
                                              Chairman, President & CEO
  
  
                                              /s/ Brenda Hudson-Nelson
                                              ---------------------------------
                                              Brenda Hudson-Nelson
                                              Controller
  
  
  
  
                                         18
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metadata_filer: {"company-data": {"conformed-name": "UNITED BANCSHARES INC /PA", "cik": "0000944792", "assigned-sic": "6022", "irs-number": "232802415", "state-of-incorporation": "PA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-25976", "film-number": "99761428"}, "business-address": {"street1": "714 MARKET ST", "city": "PHILADELPHIA", "state": "PA", "zip": "19106", "phone": "2158292265"}, "mail-address": {"street1": "2300 PACKARD BLDG", "street2": "111 S 15TH ST", "city": "PHILADELPHIA", "state": "PA", "zip": "19102"}}
text: SECURITIES AND EXCHANGE COMMISSION
                                  Washington, D.C.
                                      FORM 10-Q
  
  (Mark One)
  
           _X_      QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE
                    SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
                    SEPTEMBER 30, 1999 OR
  
           ___      TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
                    ______________ TO _____________
  
                               UNITED BANCSHARES, INC.
  --------------------------------------------------------------------------------
               (Exact name of registrant as specified in its charter)
  
                                       0-25976
  --------------------------------------------------------------------------------
                                   SEC File Number
  
       Pennsylvania                                        23-2802415
  --------------------------------------------------------------------------------
  (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                       Identification No.)
  
  300 North Third Street, Philadelphia, PA                   19106
  --------------------------------------------------------------------------------
  (Address of principal executive office)                  (Zip Code)
  
                                   (215) 829-2265
  --------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         N/A
  --------------------------------------------------------------------------------
                (Former name, former address and former fiscal year,
                           if changed since last report)
  
  Indicate by check mark whether  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  twelve  months (or such shorter  period that the  registrant  was
  required  to filed  such  reports),  and (2) has  been  subject  to such  filing
  requirements for the past 90 day. Yes _X_ No____
  
  Applicable  only to  issuers  involved  in  bankruptcy  proceedings  during  the
  preceding five years:
  
  Indicate  by check mark  whether  the  registrant  has filed all  documents  and
  reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
  Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
  confirmed by a court. Yes _____ No _____
  Applicable only to corporate issuers:
  
           Indicate  the  number of  shares  outstanding  of each of the  issuer's
  classes of common stock as of the latest practicable date.
  
           Registrant  has two  classes of capital  stock  authorized  - 2,000,000
  shares  of $.01 par  value  common  stock,  of which as of  November  15,  1999,
  1,023,753  shares were issued and outstanding and 500,000  authorized  shares of
  Series  Preferred  Stock.  The Board of  Directors  of United  Bancshares,  Inc.
  designated  one series of the Series  Preferred  Stock (the  "Series A Preferred
  Stock") of which 132,999  shares were  outstanding  as of November 15, 1999. The
  Board of Directors designated a subclass of the common stock, designated Class B
  Common  Stock,  by filing of Articles of Amendment on September 30, 1998. Of the
  2,000,000 shares of Common Stock authorized,  250,000 have been designated Class
  B Common Stock. As of November 15, 1999,  196,666 shares of Class B Common Stock
  were issued and outstanding.
  PART I - FINANCIAL INFORMATION
  
  ITEM 1.  FINANCIAL STATEMENTS.
  
                               UNITED BANCSHARES, INC.
                             CONSOLIDATED BALANCE SHEET
                                     (UNAUDITED)
  September 30,      December 31,
                                                                                    1999                1998
                                                                              ---------------------------------
  Assets
  Cash and due from banks                                                        8,411,092            3,675,010
  Interest bearing deposits with banks                                             361,473              350,024
  Federal funds sold                                                            12,545,000           12,318,000
                                                                              ---------------------------------
  Cash & cash equivalents                                                       21,317,565           16,343,034
  
  Investment securities:
       Held-to-maturity, at amortized cost                                      46,879,269            8,049,875
       Available-for-sale, at market value                                      11,319,961           35,146,148
  
  Loans , net of unearned discount                                              63,974,071           57,950,133
  Less: allowance for loan losses                                                 (769,072)            (679,557)
                                                                              ---------------------------------
  Net loans                                                                     63,204,999           57,270,576
  
  Bank premises & equipment, net                                                 3,732,584            1,565,131
  Accrued interest receivable                                                    1,337,282            1,749,623
  Other real estate owned                                                          145,780              262,368
  Prepaid expenses and other assets                                              4,149,543            1,595,925
                                                                              ---------------------------------
  Total Assets                                                                 152,086,983          121,982,681
                                                                              =================================
  
  Liabilities & Shareholders' Equity
  Demand deposits, non-interest bearing                                         31,153,766           19,999,226
  Demand deposits, interest bearing                                             33,972,430           29,114,484
  Savings deposits                                                              36,772,892           23,393,986
  Time deposits, $100,000 and over                                              10,635,613           13,942,008
  Time deposits                                                                 25,607,380           22,614,098
                                                                              ---------------------------------
                                                                               138,142,082          109,063,802
  Long-term debt                                                                         0               11,191
  Securities sold to repurchase                                                          0            1,557,755
  Obligations under Capital Leases                                               1,483,000
  Accrued interest payable                                                         568,746              598,352
  Accrued expenses and other liabilities                                         1,794,806            1,847,665
                                                                              ---------------------------------
  Total Liabilities                                                            141,988,634          113,078,365
  
  Shareholders' equity:
    Preferred Stock, Series A, non-cum., 6%, $.01 par value,                         1,432                1,330
     500,000 shrs auth., 143,150 and 132,999 issued and outstanding at
  September 30, 1999 and December 31, 1998, respectively Common stock,
     $.01 par value; 2,000,000 shares authorized; 998,753 and 913,490
     shares issued and outstanding at September 30, 1999 and                         9,988                9,134
     December 31, 1998, repectively
   Additional-paid-in-capital                                                   13,810,470           12,286,233
   Accumulated deficit                                                          (3,646,735)          (3,428,169)
   Net unrealized gain on available-for-sale securities                            (76,804)              35,788
                                                                              ---------------------------------
  Total  Shareholders' Equity                                                   10,098,350            8,904,316
                                                                              ---------------------------------
  Total Liabilities & Shareholders' Equity                                     152,086,983          121,982,681
                                                                              =================================
  1
  UNITED BANCSHARES, INC.
                        CONSOLIDATED STATEMENT OF OPERATIONS
                                     (UNAUDITED)
  Quarter ended    Quarter ended  Nine months ended  Nine months ended
                                                      September 30,     September 30,    September 30,    September 30,
                                                          1999             1998             1999              1998
                                                      --------------------------------------------------------------
  Interest Income:
       Interest and fees on loans                      $1,289,534       $1,521,678       $4,223,275       $4,767,193
       Interest on investment securities                 $389,654         $330,314       $1,097,294         $880,211
       Interest on Federal Funds sold                    $202,996         $198,239         $425,968         $517,641
       Interest on time deposits with other banks          $7,915           $3,550          $17,249          $14,781
                                                      --------------------------------------------------------------
  Total interest income                                $1,890,099       $2,053,781       $5,763,786       $6,179,826
  
  Interest Expense:
       Interest on time deposits                         $423,268         $458,646       $1,252,443       $1,439,216
       Interest on demand deposits                       $195,743         $156,819         $464,563         $461,595
       Interest on savings deposits                       $34,246         $103,562         $231,596         $329,806
       Interest on borrowed funds                              $0          $21,397          $19,093          $53,688
                                                      --------------------------------------------------------------
  Total interest expense                                 $653,257         $740,424       $1,967,695       $2,284,305
  
  Net interest income                                  $1,236,842       $1,313,357       $3,796,091       $3,895,521
  
  Provision for loan losses                               $75,000         $320,000         $215,000         $385,500
                                                      --------------------------------------------------------------
  Net interest income less provision for
       loan losses                                     $1,161,842         $993,357       $3,581,091       $3,510,021
                                                      --------------------------------------------------------------
  
  Noninterest income:
      Gain on sale of loans                                    $0           $4,674          $43,857          $34,362
      Customer service fees                              $477,016         $379,294       $1,303,113       $1,015,664
      Gain on sale of investments                              $0               $0               $0           $1,201
      Other income                                        $36,407          $32,771          $98,931         $100,457
                                                      --------------------------------------------------------------
  Total noninterest income                               $513,423         $416,739       $1,445,900       $1,151,684
  
  Non-interest expense
       Salaries, wages, and employee benefits            $704,096         $605,791       $2,017,568       $1,849,174
      Occupancy and equipment                            $391,766         $334,929       $1,011,287         $937,804
      Office operations and supplies                     $161,248         $157,062         $422,566         $392,284
      Marketing and public relations                      $65,399          $70,292         $179,325         $156,232
      Professional services                               $90,681          $68,942         $233,889         $190,127
      Data processing                                    $383,749         $219,347         $612,893         $664,312
      Other noninterest expense                          $328,757         $267,970         $767,432         $741,850
                                                      --------------------------------------------------------------
  Total non-interest expense                           $3,580,990       $1,724,333       $5,244,960       $4,931,783
                                                      --------------------------------------------------------------
  
       Net income (loss)                                ($228,485)       ($314,237)       ($217,969)       ($270,078)
                                                      ==============================================================
  
       Earnings per share-basic                            ($0.23)          ($0.38)          ($0.22)          ($0.33)
       Earnings  per share-diluted                         ($0.23)          ($0.38)          ($0.22)          ($0.33)
                                                      --------------------------------------------------------------
  Weighted average number of shares                       986,244          825,345          986,244          825,345
                                                      ==============================================================
  2
  United Bancshares, Inc.
                              Statements of Cash Flows
                                     (Unaudited)
  Nine months ended   Nine months ended
                                                                                        September 30,        September 30,
                                                                                             1999               1998
                                                                                        -------------------------------
  Cash flows from operating activities
  Net income (loss)                                                                         ($217,969)           44,159
  Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
                Provision for loan losses                                                     140,000            65,500
                (Gain) loss on sale of loans                                                   43,857            29,688
                Depreciation and amortization                                                 398,487           301,356
                Realized investment securities (gains) losses                                       0             1,201
                Proceeds from sale of student loans                                         3,059,985         2,022,500
                Increase (decrease) in accrued interest receivable and other assets        (4,105,468)         (401,719)
                Increase (decrease) in accrued interest payable and other liabilites          294,481           278,226
                                                                                        -------------------------------
  Net cash provided by operating activities                                                  (168,659)        2,340,911
  
  Cash flows from investing activities
  Purchase of investments-Available-for-Sale                                               (6,027,846)       (9,752,787)
  Purchase of investments-Held-to-Maturity                                                 28,452,729        (3,000,000)
  Proceeds from maturity & principal reductions of investments-Available-for-Sale                             9,015,655
  Proceeds from maturity & principal reductions of investments-Held-to-Maturity                               4,527,847
  Proceeds from sale of investment securities-Available-for-Sale                                    0         3,425,663
  Purchase of automobile loans                                                            (21,982,333)                0
  Net (increase) decrease in loans                                                         10,076,233        (3,425,663)
  Purchase of premises and equipment                                                         (289,161)         (157,668)
                                                                                        -------------------------------
  Net cash provided by (used in) investing activities                                      10,229,622          (814,713)
  
  Cash flows from financing activities
  Net increase (decrease) in deposits                                                      (8,357,740)        7,838,486
  Repayments on long term debt                                                                (11,191)          (16,657)
  Reverse repurchase agreement                                                             (1,557,755)        1,217,073
  Net proceeds from issuance of common stock                                                  234,168            64,620
  Net proceeds from issuance of preferred stock                                             1,000,000           482,518
                                                                                        -------------------------------
  Net cash provided by (used in) financing activities                                      (8,692,518)        9,586,640
  
  Increase (decrease) in cash and cash equivalents                                          1,368,446        11,112,838
  
  Cash and cash equivalents at beginning of period                                         16,343,034        12,759,697
  
  Cash and cash equivalents at end of period                                         0     17,711,480        23,872,535
                                                                                        ===============================
  
  Supplemental disclosures of cash flow information
  Cash paid during the period for interest                                                    906,211           991,159
                                                                                        ===============================
  3
  Item 2. Management's  Discussion and Analysis of Financial Condition and Results
  of Operations.
  
  In April 1993, the shareholders of United Bank of Philadelphia  (the Bank) voted
  in favor of the formation of a bank holding  company,  United  Bancshares,  Inc.
  (the  Company).  Accordingly,  in October 1994 the Company became a bank holding
  company in  conjunction  with the issuance of its common  shares in exchange for
  the common shares of the Bank. Since 1994, the financial statements are prepared
  on a consolidated basis to include the accounts of the Company and the Bank.
     The purpose of this  discussion is to focus on  information  about the Bank's
  financial  condition and results of operations  which is not otherwise  apparent
  from the  consolidated  financial  statements  included in this  annual  report.
  Reference  should be made to those  statements  and the selected  financial data
  presented  elsewhere  in  this  report  for an  understanding  of the  following
  discussion and analysis.
  
  Selected Financial Data
  
  The  following  table sets  forth  selected  financial  data for the each of the
  following periods:
  (Thousands of dollars,                        Quarter ended         Quarter ended
  except per share data)                      September 30, 1999    September 30, 1998
  Net interest income                                 $1,237                $1,313
  Provision for loan losses                              75                   320
  Noninterest income                                   1,011                 993
  Noninterest expense                                  3,581                1,724
  Net income (loss)                                   $(228)                $(314)
  
  Earnings per share                                  ($.22)                ($.38)
  
  Balance sheet totals:                         September 30, 1999    December 31, 1998
  Total assets                                       $152,086              $121,983
  Loans, net                                          $63,205              $57,270
  Investment securities                               $58,199              $43,196
  Deposits                                           $138,430              $109,064
  Shareholders' equity                                $10,098               $8,904
  
  Ratios
  Return on assets                                    (.19)%                 .01%
  Return on equity                                    (2.22)%                .14%
  Equity to assets ratio                               8.44%                6.40%
  Financial Condition
  
  Sources and Uses of Funds
     The Bank's  financial  condition  can be  evaluated in terms of trends in its
  sources and uses of funds.  The comparison of average  balances in the following
  table indicates how the Bank has managed these elements. Average funding sources
  increased  approximately  $5.9  million,  or 6.17%,  during the  quarter  ending
  September 30, 1999.  Average funding uses increased $2.5 million,  or 2.43%, for
  the same quarter.
  
                                         4
  Sources and Uses of Funds Trends
  September 30, 1999                                                June 30,1999
                                        Average        Increase (Decrease)                             Average
                                        Balance              Amount                  %                 Balance
  Funding uses:
       Loans                            $66,308             ($7,806)              (10.53%)             $74,114
       Investment securities
          Held-to-maturity               17,656                7566                74.99%               10,090
          Available-for-sale              7,528                (294)               (3.76%)               7,822
       Federal funds sold                12,010               2,992                33.18%                9,018
                                       --------              ------                                    -------
           Total  uses                 $103,502             ($2,458)                                  $101,044
                                       ========              ======                                    =======
  Funding sources:
       Demand deposits
            Noninterest-bearing         $24,725              $5,211                26.70%              $19,514
            Interest-bearing             21,981               1,614                 7.92%               20,367
       Savings deposits                  22,371               1,180                 5.57%               21,191
       Time deposits                     33,232              (2,055)               (5.82%)              35,287
       Other borrowed funds                   1                  (0)                   0%                    1
                                       --------              ------                                    -------
            Total sources              $102,310              $5,950                                    $96,360
                                       ========              ======                                    =======
  Loans
  Average loans decreased  approximately $8 million, or 10.53%, during the quarter
  ended  September 30, 1999.  This decrease was primarily due to repayments in the
  $21 million  automobile loan portfolio  purchased in February 1999.  Paydowns in
  this portfolio are averaging $1 million per month.  In addition,  prepayments in
  the mortgage loan  portfolio  continue as consumers  rush to refinance  existing
  loans or sell existing homes to purchase new homes in  anticipation  of interest
  rate hikes.  Strategies  continue to be reviewed to  originate  and/or  purchase
  loans to minimize the impact of portfolio paydowns.
  
  The following  table shows the  composition of the Bank's loan portfolio by type
  loan.
  (Thousands of Dollars)
                                             September   December
                                             30, 1999    31, 1998
  Commercial and industrial                  $ 13,302     $13,643
  Commercial real estate                        1,277       1,518
  Consumer loans                               22,059      11,423
  Residential mortgages                        27,336      31,365
                                              -------     -------
              Total Loans                     $63,974     $57,950
                                              =======     =======
  
  Residential  mortgage  loans at  September  30, 1999  continue  to comprise  the
  greatest  percentage of total loans  representing  approximately  42.7% of total
  loans However,  these loans as a percentage of the total  portfolio  continue to
  decline as  mortgage  loan  balances  decrease  as a result of  refinancing  and
  paydowns. In addition, majority of the new residential mortgage loans originated
  are sold at closing due to the current low  interest  rate  environment  and the
  interest rate risk associated with holding these loans.
  
  In conjunction with a strategic alliance with another financial institution, the
  Bank purchased a $21 million  automobile loan portfolio in February 1999.  These
  were seasoned loans with a 2-3 year average life.
  
  Allowance for Loan Losses
  
  The allowance for loan losses reflects management's continuing evaluation of the
  loan portfolio,  assessment of economic conditions, the diversification and size
  of the portfolio,  adequacy of collateral, past and anticipated loss experience,
  and the amount and quality of nonperforming  loans. The following Table presents
  an analysis of the allowance for loan losses.
  
                                         5
  ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
                                    Nine Months ended
                                   September 30, 1999
    (Dollars in thousands)
  Balance at January 1, 1999           $   680
                                        ------
  Charge-offs:
      Commercial and industrial            (12)
      Commercial real estate               -
      Residential mortgages                -
      Consumer loans                      (212)
                                        ------
                                          (224)
  Recoveries                                99
                                        ------
  Net charge-offs                         (125)
  Additions charged to operations          215
                                           -
                                        ------
  Balance at September 30, 1999           $770
                                        ======
  Ratio of net charge-offs to average
      loans outstanding                   0.02%
                                        ======
  
  The amount  charged to operations  and the related  balance in the allowance for
  loan losses are based upon the  periodic  evaluations  of the loan  portfolio by
  management.  These  evaluations  consider  several factors,  including,  but not
  limited to, general economic conditions, loan portfolio composition,  prior loan
  loss experience, and management's estimate of future potential losses.
  
  The  allowance  for loan losses as a percentage of total loans was 1.20% and 42%
  of classified  loans at September  30, 1999.  In evaluating  the adequacy of the
  allowance for loan losses, only the net exposure  (un-guaranteed portion) should
  be  considered.  Because  of the loan  portfolio  composition  which  includes a
  significant   level  of   residential   mortgage   loans  and   Small   Business
  Administration  (SBA) guaranteed loans,  risk in the portfolio is minimized.  In
  addition, the Bank has an excellent collection record. During the quarter ending
  September  30, 1999,  net  charge-offs  as a percentage  of average  total loans
  represented .02%.
  
  Nonperforming  and nonaccrual Loans
     The Bank generally  determines a loan to be "nonperforming"  when interest or
  principal is past due 90 days or more. If it otherwise appears doubtful that the
  loan will be repaid,  management  may  consider  the loan to be  "nonperforming"
  before the lapse of 90 days.  The policy of the Bank is to charge-off  unsecured
  loans after 90 days past due. Interest on "nonperforming" loans ceases to accrue
  except for loans that are well  collateralized and in the process of collection.
  When a loan is placed on non-accrual,  previously accrued and unpaid interest is
  generally  reversed  out of income  unless  adequate  collateral  from  which to
  collect the  principal of and interest on the loan appears to be  available.  At
  September  30, 1999,  non-accrual  loans were $1.6  million--approximately  $322
  thousand were residential mortgage loans; approximately $600 thousand related to
  one community development loan in the Bank's commercial loan portfolio; and, the
  remainder  consisted  primarily  of loans  with SBA  guarantees.  Management  is
  working  closely  with  the  community   development  loan  borrower  to  ensure
  completion of the project while minimizing losses, if any, to the Bank. There is
  no known  information about possible credit problems other than those classified
  as  nonaccrual  that causes  management to be uncertain as to the ability of any
  borrower to comply with present loan terms.
    The Bank grants  commercial,  residential,  and  consumer  loans to  customers
  primarily located in Philadelphia County,  Pennsylvania and surrounding counties
  in the Delaware  Valley.  From time to time, the Bank purchases loans from other
  financial  institutions.  These  loans are  generally  located in the  Northeast
  
                                         6
  corridor  of the  United  States.  Although  the  Bank  has a  diversified  loan
  portfolio,  its debtors'  ability to honor their  contracts is influenced by the
  region's economy.
     At  September  30,  1999,  approximately  32% of the Bank's  commercial  loan
  portfolio  was  concentrated  in loans  made to  religious  organizations.  From
  inception, the Bank has received support in the form of investments and deposits
  and has developed strong relationships with the Philadelphia  region's religious
  community.  Loans made to these  organizations  were primarily for expansion and
  repair of church  facilities.  At September  30, 1999,  none of these loans were
  nonperforming.
  
  Investment Securities and other short-term investments
  Investment  securities,  including  Federal Funds Sold,  increased on average by
  $10.3  million,  or 38.1%,  during the quarter  ended  September  30, 1999.  The
  increase  is due the growth in average  deposit  levels  repayments  in the loan
  portfolio.  Longer-term  investment  strategies  to achieve  higher  yields were
  implemented in September 1999.
  
  The  Bank's  investment   portfolio   primarily   consists  of   mortgage-backed
  pass-through   agency   securities,   U.S.   Treasury   securities,   and  other
  government-sponsored  agency  securities.  The Bank does not invest in high-risk
  securities or complex structured notes. The average duration of the portfolio is
  4.32 years.
  
  Deposits
  
  On September 24, 1999,  the Bank  purchased four branches with total deposits of
  $31  million  at a premium  of $2.1  million,  or 7%.  The bulk of the  acquired
  deposits  are  "core"--primarily  checking  and savings  accounts.  The Bank has
  consolidated  2 of the acquired  branches into its existing  branch  network and
  will consolidate another within the next six months.
  
  Non-interest  bearing demand deposits increased on average by approximately $5.2
  million, or 26.7%, during the quarter ended September 30, 1999. The increase was
  primarily due to significant new account  relationships  with local corporations
  and the purchase of deposits from First Union in September 1999.
  
  Interest  bearing demand  deposits  increased on average by  approximately  $1.6
  million, or 7.92%, during the quarter ended September 30, 1999. The increase was
  primarily  an increase in the level of sweep  deposit  balances--balances  swept
  from a noninterest-bearing checking account to an interest-bearing (NOW) account
  overnight.
  
  Other Borrowed Funds
  The level of other  borrowed  funds is  dependent  on many items such as capital
  adequacy, loan growth, deposit growth and interest rates paid on these funds. At
  September 30, 1999, the Bank did not have any borrowed funds.
  
  Commitments and Lines of Credit
  The Bank 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  commitments  to extend  credit  and  letters of
  credit,  which are conditional  commitments  issued by the Bank to guarantee the
  performance of an obligation of a customer to a third party.  Both  arrangements
  have credit risk  essentially the same as that involved in extending  loans, and
  are subject to the Bank's normal  credit  policies.  Collateral  may be obtained
  based on management's  assessment of the customer. The Bank's exposure to credit
  loss  in the  event  of  nonperformance  by the  other  party  to the  financial
  instruments is represented by the contractual amount of those instruments.
  
                                         7
  The Bank's financial instrument commitments at September 30, 1999 are summarized
  below:
  
  Commitments to extend credit                $6,401
  Outstanding letter of credit                $259
  
  Commitments  to extend  credit are  agreements  to lend to a customer as long as
  there is no violation of any condition  established in the contract.  Since many
  of the  commitments  are expected to expire  without being drawn upon, the total
  commitment  amounts  do not  necessarily  represent  future  cash  requirements.
  Commitments  generally have fixed expiration dates or other termination  clauses
  and may require payment of a fee.
  
  Liquidity and Interest Rate Sensitivity Management
  
  The primary  functions  of  asset/liability  management  are to assure  adequate
  liquidity and maintain  appropriate balance between  interest-sensitive  earning
  assets and  interest-bearing  liabilities.  Liquidity  management  involves  the
  ability to meet cash flow requirements of customers who may be either depositors
  wanting to withdraw funds or borrowers  needing  assurance that sufficient funds
  will  be  available  to meet  their  credit  needs.  Interest  rate  sensitivity
  management  seeks to avoid  fluctuating  net  interest  margins  and to  enhance
  consistent  growth of net interest income through  periods of changing  interest
  rate.
     The Bank is required to maintain  minimum  levels of liquid assets as defined
  by FRB regulations. This requirement is evaluated in relation to the composition
  and  stability  of  deposits;  the degree and trend of reliance  on  short-term,
  volatile sources of funds,  including any undue reliance on particular  segments
  of the money market or brokered deposits; any difficulty in obtaining funds; and
  the   liquidity   provided  by  securities   and  other  assets.   In  addition,
  consideration is given to the nature, volume and anticipated use of commitments;
  the adequacy of liquidity  and funding  policies and  practices,  including  the
  provision  for  alternate  sources  of  funds;  and  the  nature  and  trend  of
  off-balance-sheet  activities. As of September 30, 1999, management believes the
  Bank's liquidity is satisfactory and in compliance with the FRB regulations
     The Bank's principal sources of asset liquidity include investment securities
  consisting principally of U.S. Government and agency issues,  particularly those
  of shorter maturities, and mortgage-backed securities with monthly repayments of
  principal  and  interest.  Securities  maturing in one year or less  amounted to
  $26.8  million  at  September  30,  1999,  representing  39% of  the  investment
  portfolio. These securities primarily consisted of US Government Agency Discount
  Notes with relatively  short  maturities.  Other types of assets such as federal
  funds sold, as well as maturing loans,  are sources of liquidity.  Approximately
  $6.1 million in loans are scheduled to mature within one year.
     The Bank's overall liquidity has been enhanced by a significant level of core
  deposits  which  management  has  determined are less sensitive to interest rate
  movements.  The Bank has avoided reliance on large denomination time deposits as
  well as brokered deposits
     The  following is a summary of the  remaining  maturities of time deposits of
  $100,000 or more outstanding at September 30, 1999:
  
                                                        (Thousands of dollars)
  3 months or less                                               $3,979
  Over 3 through 12 months                                        7,530
  Over 1 through five years                                         801
  Over five years                                                   126
                                                                -------
       Total                                                    $12,436
                                                                =======
  
                                         8
  Capital Resources
  Total  shareholders'  equity  increased  approximately  $19 thousand  during the
  quarter ended September 30, 1999 as a result of the purchase of $300,000 Class B
  Common Stock by First Union,  N.A. in conjunction and  simultaneous  with United
  Bank's  purchase of  deposits/branches  from First Union on September  24, 1999.
  This capital  infusion was offset by a $228  thousand  loss incurred by the Bank
  during the quarter. As of September 30, 1999, the Bank has an outstanding equity
  investment  commitment  totaling  $3 million  from the U.S.  Treasury  Community
  Development  Financial  Institution  Fund  which is  expected  to be  funded  by
  December 31, 1999.
  
     The Federal Reserve Bank's ("FRB")  standards for measuring  capital adequacy
  for U.S.  Banking  organizations  requires that banks maintain  capital based on
  "risk-adjusted" assets so that categories of assets with potentially higher risk
  will  require more  capital  backing  than assets with lower risk.  In addition,
  banks are required to maintain  capital to support,  on a  risk-adjusted  basis,
  certain off-balance-sheet activities such as loan commitments. The FRB standards
  classify  capital  into two  tiers,  referred  to as Tier 1 and  Tier 2.  Tier 1
  consists of common shareholders' equity, non-cumulative and cumulative perpetual
  preferred stock, and minority  interests less goodwill.  Tier 2 capital consists
  of allowance for loan losses,  hybrid  capital  instruments,  term  subordinated
  debt,  and  intermediate-term  preferred  stock.  Banks are  required  to meet a
  minimum ratio of 8% of qualifying capital to risk-adjusted  total assets with at
  least 4% Tier 1 capital and a Tier I Leverage ratio of at least 6%. Capital that
  qualifies as Tier 2 capital is limited to 100% of Tier 1 capital.
    As indicated  in the table below,  the Bank's  risk-based  capital  ratios are
  above the minimum  requirements.  Management  continues the objective of raising
  additional capital by offering  additional stock (preferred and common) for sale
  to the public as well as  increasing  the rate of internal  capital  growth as a
  means of maintaining the required  capital  ratios.  The Company and the Bank do
  not anticipate paying dividends in the near future.
  
                                            September 30,     December 31,
                                                 1999             1998
  Tier 1 Capital                               $7,946            $8,823
  Tier 2 Capital                                  769               679
                                               ------            ------
      Total Qualifying Capital                 $8,715            $9,502
                                               ======            ======
  Risk Adjusted  Total Assets  (including
       off- balance sheet exposures)          $66,733           $54,373
  Tier 1 Risk-Based Capital Ratio              11.47%            16.23%
  Tier 2 Risk-Based Capital Ratio              12.63%            17.48%
  Leverage Ratio                                7.21%            7.62%
  
  Results of Operations
  
  Summary
  The Bank had a net loss of  approximately  $228 thousand ($.23 per common share)
  for the quarter ended September 30, 1999 compared to a net loss of $314 thousand
  ($.38 per  common  share)  for the same  quarter  in 1998.  The  improvement  is
  primarily related to a lower provision for loan losses in 1999 compared to 1998.
  
                                         9
  Net Interest Income
  Net interest income is an effective  measure of how well management has balanced
  the Bank's interest rate sensitive assets and liabilities.  Net interest income,
  the  difference  between (a)  interest and fees on interest  earning  assets and
  interest paid on interest-bearing liabilities, is a significant component of the
  earnings of the Bank.  Changes in net  interest  income  result  primarily  from
  increases or decreases in the average balances of interest  earning assets,  the
  availability of particular  sources of funds and changes in prevailing  interest
  rates.
  
  Net  interest  income  decreased  $76  thousand,  or 6%, for the  quarter  ended
  September 30, 1999 compared to 1998. The decrease was primarily  attributable to
  lower average loan balances compared to 1998---$66  million vs. $71 million.  In
  addition,  because the Bank purchased loans instead of originating  them,  there
  were less loan origination fees.
  
  Provision for Loan Losses
  The Bank adopted  Statement of Financial  Accounting  Standard ("SFAS") No. 114,
  "Accounting  by  Creditors  for  Impairment  of  a  Loan,"  and  SFAS  No.  118,
  "Accounting  by Creditors  for  Impairment  of a  Loan--Income  Recognition  and
  Disclosures,"  effective January 1, 1995. As a result of applying the new rules,
  certain impaired loans are reported at the present value of expected future cash
  flows  using the loan's  initial  effective  interest  rate,  or as a  practical
  expedient,  at the loan's  observable  market  price or at the fair value of the
  collateral if the loan is collateral dependent.  The adoption of these standards
  did not have a material  impact on the Bank's  financial  position or results of
  operations.
    The  provision  is based on  management's  estimate  of the  amount  needed to
  maintain an adequate  allowance  for loan losses.  This estimate is based on the
  review of the loan  portfolio,  the level of net credit  losses,  past loan loss
  experience,  the general economic outlook and other factors management feels are
  appropriate.
    The provision for loan losses charged against  earnings for the quarter ending
  September  30,  1999 was $75  thousand  compared to $320  thousand  for the same
  quarter in 1998. The provision in 1998 was due to a specific  provision made for
  one community  development  loan in the  commercial  loan portfolio of the Bank.
  This  loan,  which  has a total  exposure  of $700  thousand,  is  currently  in
  nonaccrual status and carries a 50% reserve.  Management is working closely with
  the borrower to ensure completion of the development to minimize losses, if any,
  on this loan.
  
  Noninterest Income
  The amount of the Bank's noninterest income generally reflects the volume of the
  transactional  and other accounts handled by the Bank and includes such fees and
  charges as low balance account charge,  overdrafts,  account analysis, and other
  customer  service fees.  Customer  service fees increased $98 thousand,  or 26%,
  during the quarter primarily  attributable to growth in ATM surcharge fees---the
  Bank increased its fees for non-customers  from $1.00 to $1.50 in April 1999 and
  continues to install new ATM machines  throughout the region. In addition,  fees
  on deposits  increased  as a result of an increase  the level of demand  deposit
  accounts which result in more overdraft fees,  activity  service charges and low
  balance fees.
  
  Noninterest expense
  Salaries and benefits  increased $98 thousand,  or 16%, during the quarter ended
  September 30, 1999 compared to 1998. This increase is primarily  attributable to
  annual  raises for  employees  as well as filling  unfilled  staff  positions in
  preparation  for the  acquisition  of  deposits/branches  from  First  Union  on
  September 24, 1999.
  
                                         10
  Data  processing  expenses  increase $164 thousand,  or 75%,  during the quarter
  ended   September  30,  1999  compared  to  1998.  This  increase  is  primarily
  attributable  to the  purchase of $21 million in  automobile  loans from another
  financial  institution  in February 1999 for which there is a 1% servicing  fee.
  Data processing  expenses are a result of the management decision of the Bank to
  out  source  data  processing  to third  party  processors  the bulk of its data
  processing.  Such expenses are  reflective  of the high level of accounts  being
  serviced for which the Bank is charged a per account  charge by  processors.  In
  addition,  the Bank  uses  outside  loan  servicing  companies  to  service  its
  mortgage,  credit  card,  installment  and  student  loan  portfolios.  The Bank
  continues  to study  methods by which it may reduce its data  processing  costs,
  including but not limited to a consolidation of servicers,  in-house  processing
  versus out-sourcing,  and the possible re-negotiation of existing contracts with
  servicers.
  
  Occupancy expense increased  approximately $56 thousand,  or $57 thousand,  as a
  result a lease  the  Bank  entered  into in July  1999 to  house  its  corporate
  headquarters  including its  executive  offices and other  non-branch  operating
  departments.  The Bank currently leases 25,000 square feet at an average cost of
  $14.14 per foot. It has entered into  subleases with other  affiliated  entities
  for  approximately  4,000 square feet. In accordance  with Financial  Accounting
  Standards  Board  Statement  13, this lease has been  accounted for as a capital
  lease in the amount of $1,483,000  as the present value of future  minimum lease
  payments exceeds 90% of the fair market value of the building.
  
  Professional  Services  increased  approximately  $21 thousand,  or 32%, for the
  quarter ended  September  30, 1999 compared to 1998.  This increase is primarily
  attributable  to consulting fees related to the Year 2000  Remediation  Plan and
  Customer Awareness seminars.  In addition, in August 1999, the Bank entered into
  a contract with a computer  consulting firm to provide on site management of the
  Bank's  computer  systems,  build  appropriate   infra-structure,   and  provide
  leadership in technology planning.
  
   All other  expenses  are  reflective  of the general  cost to do  business  and
  compete in the  current  regulatory  environment  and  maintenance  of  adequate
  insurance coverage.
  
  Regulatory Matters
  
  At September 30, 1999, the Bank is operating under a Supervisory Letter from its
  primary regulator. The Supervisory Letter, among other things, prevents the Bank
  and the Company from  declaring or paying  dividends  without the prior  written
  approval of its  regulators  and prohibits the Bank and the Company from issuing
  debt.
  
  Year 2000
  
  The Year 2000 problem is the result of computer programs being written using two
  digits  rather than four to define the  applicable  year.  Any of the  Company's
  programs or that of its vendor that have  time-sensitive  software may recognize
  the date  using  "00" as the year 1900  rather  than the Year  2000.  This could
  result in major system  failure or  miscalculations.  The "Year 2000"  potential
  problems  create  risk  for the  Company  from  unforeseen  problems  in its own
  computer system and from third parties such as other financial institutions, the
  federal  government,  federal agencies,  vendors and customers.  Failures of the
  Company's or third party's  computer systems could have a material effect on the
  Company's  abilities to conduct business,  especially to process and account for
  the transfer of funds electronically
  
                                         11
  Like  many  financial  institutions,  the  Company  relies  upon  computers  for
  conducting its daily  operations.  Failure to resolve Year 2000 issues  presents
  the following  risks to the Company:  (1) the Bank could lose customers to other
  financial  institutions,  resulting  in loss  revenue,  if the Bank is unable to
  properly account for customer transactions;  (2) governmental agencies,  such as
  the Federal Home Loan Bank, and correspondent institutions could fail to provide
  funds to the Bank which could materially  impair the Bank's liquidity and affect
  the Bank's  ability to fund loans and  deposit  withdrawals;  (3) concern on the
  part of  depositors  that Year 2000 issues could impair  access to their deposit
  account balances could result in the Bank experiencing deposit outflows prior to
  December 31, 1999;  and (4) the bank could incur  increased  personnel  costs if
  additional staff is required to perform functions that inoperative systems would
  have  otherwise  performed.  Management  believes  that  it is not  possible  to
  estimate the  potential  lost revenue due to the Year 2000 issue,  as the extent
  and longevity of any potential problem cannot be predicted.
  
  The Company has conducted a comprehensive  review of its computer systems,  both
  internal  and  outsourced  processing,  to identify  the  systems  that could be
  affected by the "Year  2000" issue and has  developed a Year 2000 Plan to modify
  or replace the affected systems and test them for Year 2000 readiness.  To date,
  the Company has taken the following actions to mitigate the potential effects of
  the Year 2000 issue:
  
  o    The Bank  has  upgraded  all  applicable  computer  systems  (hardware  and
       software)  to be Year 2000  ready.  Management  has  completed  testing all
       systems to ensure Year 2000 Compliance.
  
  o    The Board of  Directors  has  adopted a Year 2000 Plan that  Management  is
       currently  implementing.  The Plan  address the overall  status of the Year
       2000 Project,  details of the Company's contingency plan, describes mission
       critical  systems and non-mission  critical  systems,  identifies all third
       party vendors and applicable testing strategies and test dates. The Company
       has written a Year 2000 Business  Resumption Plan that contains all mission
       critical systems and services. This Plan was completed in June 30, 1999.
  
  o    The Company has established a Year 2000 Committee  consisting of members of
       senior  management  which currently  meets to discuss  progress on the Year
       2000 Plan, and
  
  o    A Year 2000 budget has been developed  which  estimates the cost associated
       with Year 2000 readiness.  Current  estimates of the cost to be incurred to
       prepare for the Year 2000 range from do not exceed $200,000. In conjunction
       with Year 2000  preparation,  the Bank plans to make most hardware upgrades
       as a normal part of replacement of equipment--thereby minimizing cost. Cost
       estimates  include  primarily  personnel and consulting  time to ensure all
       business   components/processes   have  been   considered  and  tested  for
       compliance.
  
  o    The Bank holds customer awareness seminars and has contacted its major loan
       and  deposit  customers  to advise  them to review  their own  systems  for
       possible  Year 2000  problems.  In  determining  credit  risk for  existing
       customers as well as in making credit  decisions for major  borrowers,  the
       Bank considers the impact of the Year 2000 issues.
  
                                         12
  Income (Loss) Per Share
  
  During  1997,  the Company  adopted the  provisions  of  Statement  of Financial
  Accounting  Standards  (SFAS)  No.  128,  "Earnings  Per  Share."  SFAS No.  128
  eliminates  primary and fully  diluted  earnings  per share  (EPS) and  requires
  presentation of basic and diluted EPS in conjunction  with the disclosure of the
  methodology  used in  computing  such EPS.  Basic EPS  excludes  dilution and is
  computed by dividing  income  available to common  shareholders  by the weighted
  average  common  shares  outstanding  during the period.  Diluted EPS takes into
  account the potential dilution that could occur if securities or other contracts
  to issue common stock were  exercised  and converted  into common  stock.  Prior
  period EPS  calculations  have been restated to reflect the adoption of SFAS No.
  128.
  
  Reporting Comprehensive Income
  
  In January 1998, the Bank adopted SFAS No. 130, Reporting  Comprehensive Income.
  This standard establishes new standards for reporting  comprehensive income that
  includes  net income as well as certain  other  items that result in a change to
  equity during the period.  These financial  statements have been reclassified to
  reflect the provisions of SFAS No. 130.
  
  Disclosures about Segments of an Enterprise and Related Information
  
  In June 1997,  the FASB issued SFAS No. 131,  which is effective for all periods
  beginning after December 15, 1998. SFAS No. 131,  "Disclosures About Segments of
  an  Enterprise  and  Related   Information,"   requires  that  public   business
  enterprises report certain information about operating segments in complete sets
  of financial  statements of the enterprise and in condensed financial statements
  of interim periods issued to shareholders. It also requires that public business
  enterprises  report certain  information about their products and services,  the
  geographic area in which they operate and their major customers.  Management has
  determined that the Bank operates in one segment, namely community banking.
  
  Item 3.  Quantitative and Qualitative Disclosures About Market Risk
  
  Interest rate sensitivity varies with different types of interest-earning assets
  and interest-bearing liabilities.  Overnight federal funds on which rates change
  daily  and loans  which are tied to prime or other  short  term  indices  differ
  considerably  from  long-term   investment   securities  and  fixed-rate  loans.
  Similarly,  time deposits are much more interest sensitive than passbook savings
  accounts.  The shorter-term interest rate sensitivities are key to measuring the
  interest  sensitivity  gap,  or  excess  earning  assets  over  interest-bearing
  liabilities.  Management of interest  sensitivity  involves  matching  repricing
  dates of interest-earning  assets with interest-bearing  liabilities in a manner
  designed to optimize net interest income within the limits imposed by regulatory
  authorities, liquidity determinations and capital considerations.
  
   At September  30,  1999,  a liability  sensitive  position is  maintained  on a
  cumulative  basis  through 1 year of 3.66%  that is  within  the  Bank's  policy
  guidelines of +/- 15% on a cumulative  1-year basis. The current gap position is
  primarily due to the high  concentration  of fixed rate mortgage  loans the Bank
  has in its loan portfolio but is somewhat  mitigated by the Bank's high level of
  core deposits which have been placed in longer repricing  intervals.  Generally,
  because of the Bank's negative gap position in shorter time frames, the Bank can
  anticipate that increases in market rates will have a negative impact on the net
  interest income, while decreases will have the opposite effect.
  
                                         13
  While using the interest sensitivity gap analysis is a useful management tool as
  it considers  the quantity of assets and  liabilities  subject to repricing in a
  given time  period,  it does not consider  the  relative  sensitivity  to market
  interest rate changes that are characteristic of various interest rate-sensitive
  assets and  liabilities.  Consequently,  even  though the Bank  currently  has a
  negative  gap  position  because  of  unequal  sensitivity  of these  assets and
  liabilities,  management  believes  this  position  will not  materially  impact
  earnings in a changing rate environment.  For example, changes in the prime rate
  on variable  commercial  loans may not result in an equal  change in the rate of
  money market deposits or short-term  certificates of deposit. A simulation model
  is  therefore  used to estimate the impact of various  changes,  both upward and
  downward,  in market interest rates and volumes of assets and liabilities on the
  Bank's net income.  This model  produces an interest rate  exposure  report that
  forecasts  changes in the market  value of portfolio  equity  under  alternative
  interest rate  environments.  The market value of portfolio equity is defined as
  the  present  value  of  the  Company's   existing   assets,   liabilities   and
  off-balance-sheet  instruments.  The  calculated  estimates of changes in market
  value of portfolio value at September 30, 1999 are as follows:
  
                                                       Market value of
                    Changes in rate                    portfolio equity
                                                   (Dollars in thousands)
                  +400 basis points                          $532
                  +300 basis points                         1,815
                  +200 basis points                         4,490
                  +100 basis points                         7,186
                  Flat rate                                 9,908
                  -100 basis points                        12,580
                  -200 basis points                        14,541
                  -300 basis points                        17,136
                  -400 basis points                        19,538
  
     The  assumptions  used  in  evaluating  the  vulnerability  of the  Company's
  earnings  and  capital to changes in  interest  rates are based on  management's
  consideration  of past  experience,  current  position  and  anticipated  future
  economic  conditions.  The  interest  sensitivity  of the  Company's  assets and
  liabilities, as well as the estimated effect of changes in interest rates on the
  market  value  of  portfolio  equity,  could  vary  substantially  if  different
  assumptions are used or actual experience  differs from the assumptions on which
  the calculations were based.
     The Bank's Board of  Directors  and  management  consider all of the relevant
  factors and conditions in the  asset/liability  planning process.  Interest-rate
  exposure is not  considered  to be  significant  and is within the Bank's policy
  limits at September 30, 1999. However, if significant interest rate risk arises,
  the Board of Directors and  management  may take (but are not limited to) one or
  all of the following steps to reposition the balance sheet as appropriate:
       1.   Limit jumbo  certificates  of deposit  (CDs) and  movement  into money
            market deposit  accounts and short-term CDs through  pricing and other
            marketing strategies.
       2.   Purchase  quality  loan  participations   with  appropriate   interest
            rate/gap match for the Bank's balance sheet.
       3.   Restructure the Bank's investment portfolio.
  
                                         14
  The  Board  of  Directors  has  determined   that  active   supervision  of  the
  interest-rate  spread  between  yield on earnings  assets and cost of funds will
  decrease the Bank's vulnerability to interest-rate cycles.
  
                                         15
  PART II - OTHER INFORMATION
  
  Item 1. Legal Proceedings.
  
           A writ of summons  was filed by  Monument  Financial  Group,  Inc.  and
  Ronald Hatfield, respectively, an accountholder and its principal (collectively,
  the  "Plaintiffs") to commence an action against the Bank in the Court of Common
  Pleas, Philadelphia County on June 29,1999.  Subsequently, a complaint was filed
  by the  Plaintiffs.  The suit involves the processing of transactions in alleged
  non-compliance  with the  deposit  contract  by  permitting  the  processing  of
  transactions with only one signature (the "Primary  Claim").  This action by the
  Bank allegedly  resulted in a loss to the Plaintiffs.  The Bank has conducted in
  depth  investigation  into the circumstances  arising in the Primary Claim. As a
  result of this investigation,  the Bank has determined that the deposit contract
  was  modified by the  depositor.  The  depositor  repeatedly  affirmed,  both by
  telephone,  and in person,  that transactions  should be permitted with a single
  signature. This modification creates a firm defense to the Primary Claim.
  
           Even if the  deposit  contract  was not  modified,  the  amount  of the
  Primary  Claim  must be  reduced  by the  aggregate  amount of the  transactions
  utilized for valid business purposes of the Plaintiff. The Bank's investigations
  indicate that the proceeds of a substantial number of the transactions processed
  with one signature  were utilized to pay expenses of Monument  Financial  Group,
  thus reducing any damage amount
  
           Based upon the  forgoing,  the Bank believes that it will not be liable
  for the Primary Claim.  In addition,  the Bank has insurance  which, it has been
  informed by the carrier  representative,  will cover any loss resulting from the
  Primary Claim, including costs of defense, in excess of a $50,000 deductible.
  
  The complaint also seeks damages for lost business opportunity, punitive damages
  for  alleged   consequential  losses  to  potential  business  ventures  of  the
  Plaintiffs, and related claims (collectively,  the "Ancillary Claims"). Based on
  general  legal  principles  and the  foregoing  facts,  the Bank and its counsel
  believe the Ancillary  Claims are frivolous and without merit.  The Bank and its
  counsel have reviewed the Bank's  comprehensive  general liability  coverage and
  have  indicated  that any damages  resulting  from the Ancillary  Claims will be
  wholly-covered by this insurance.
  
           No other  material  claims have been  instituted  or  threatened  by or
  against  Registrant  or its  affiliates  other  than in the  ordinary  course of
  business.
  
  Item 2.
  
           Working Capital Restrictions on Payment of Dividends.
  
           The holders of the Common Stock are  entitled to such  dividends as may
  be declared by the Board of Directors  out of funds legally  available  therefor
  under the laws of the  Commonwealth  of  Pennsylvania.  Under  the  Pennsylvania
  Banking Code of 1965,  funds available for cash dividend  payments by a bank are
  restricted to accumulated net earnings and if the surplus of a Bank is less than
  
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  the amount of its capital the Registrant  shall,  until surplus is equal to such
  amount,  transfer to surplus an amount which is at least 10% of the net earnings
  of the  Registrant  for the period  since the end of the last fiscal year or any
  shorter period since the declaration of a dividend.  If the surplus of a bank is
  less than 50% of the amount of its capital,  no dividend may be declared or paid
  by  the  bank  without  prior  approval  of  the  Secretary  of  Banking  of the
  Commonwealth of Pennsylvania.
  
           Under the Federal Reserve Act, if a bank has sustained  losses up to or
  exceeding its undivided profits, no dividend shall be paid, and no dividends can
  ever be paid in an amount  greater  than such bank's net profits less losses and
  bad debts.  Cash dividends must be approved by the Federal  Reserve Board if the
  total of all cash dividends  declared by a bank in any calendar year,  including
  the proposed cash dividend,  exceeds the total of the  Registrant's  net profits
  for that year plus its retained net profits from the preceding  two years,  less
  any required  transfers to surplus or to a fund for the  retirement of preferred
  stock.  Under the Federal  Reserve  Act, the Board has the power to prohibit the
  payment of cash  dividends by a bank if it determines  that such a payment would
  be an unsafe or unsound banking practice.
  
           The Federal Deposit  Insurance act generally  prohibits all payments of
  dividends a bank which is in default of any  assessment  to the Federal  Deposit
  Insurance Corporation.
  
           Recent Sales of Securities
  
                    Registrant  has sold 5,000  shares of its Class B Common Stock
  (non-voting)  to an individual  investor at a purchase price of $12.00 per share
  pursuant to an exemption from registration contained in Section 4(6) of the Act.
  
                    Registrant also sold 25,000 shares of its Class B Common Stock
  (non-voting) to First Union  Corporation at a purchase price of $12.00 per share
  pursuant to an exemption from registration contained in Section 4(6) of the Act.
  
  Item 3.  Defaults Upon Senior Securities.
  
           (a) There has been no  material  default in the  payment of  principal,
  interest,  a sinking or purchase fund installment,  or any material default with
  respect to any  indebtedness  of the  Registrant  exceeding  five percent of the
  total assets of the Registrant.
  
           (b) There have been no material arrearage or delinquencies as discussed
  in Item 3(a).  Registrant has declared and issued a Series A Preferred Stock. No
  obligations pursuant to those securities have become due.
  
  Item 4.  Submission of Matters to a Vote of Security Holders.
  
           No matters were submitted to a vote of security holders.
  
                                         17
  Item 5.  Other Information.
  
           Related Party Transactions
  
                    Beginning  July 1, 1999,  the Bank  commenced a ten year lease
  (the "Lease") of a  headquarters  and operations  facility  located at 300 North
  Third  Street,  Philadelphia,  Pennsylvania  (the  "Facility).  The owner of the
  Facility  is ECC  Properties,  LLC, a  Pennsylvania  Limited  Liability  Company
  controlled by Emma C. Chappell,  Chairman, President and CEO of the Bank and the
  Registrant.
  
                    The Facility  comprises  approximately  25,000 square feet and
  houses the Bank's executive offices,  operations,  finance,  human resources and
  corporate  services  departments.  The Bank has leased the entire facility for a
  base rent of $12.75 per square foot,  plus electric and  cleaning.  The Bank has
  sublet the space that it is not currently  using,  consisting  of  approximately
  4,000 square feet, for a term of five years.
  
  Item 6. Exhibits and Reports on Form 8-K.
  
           (a) A list  of the  exhibits  submitted  with  this  Form  10-Q  are as
               follows:
  
                    Copy of the Registrant's Call Report for the Period
                    ending September 30, 1999. [Filed with Schedule SE]
  
                    Lease between United Bank of Philadelphia  and ECC Properties,
                    LLC [Filed with Schedule SE]
  
  Signatures
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
                                              UNITED BANCSHARES, INC.
  
  Date: November 18, 1999                     /s/ Emma C. Chappell
                                              ---------------------------------
                                              Emma C. Chappell
                                              Chairman, President & CEO
  
                                              /s/ Brenda Hudson-Nelson
                                              ---------------------------------
                                              Brenda Hudson-Nelson
                                              Controller
  
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