SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                  For the Fiscal Year Ended December 31, 1999.

                             UNITED BANCSHARES, INC.
                             -----------------------
             (Exact name of registrant as specified in its charter)

                                     0-25976
                           (Registrant's file number)

              PENNSYLVANIA                             23-2802415
     -------------------------------      ------------------------------------
     (State or other jurisdiction of      (I.R.S. Employer Identification No.)
      incorporation or organization)

                 300 NORTH THIRD STREET, PHILADELPHIA, PA 19106
                 ----------------------------------------------
          (Address of principal executive offices, including zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (215) 829-2265

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          COMMON STOCK, $.01 PAR VALUE
                          ----------------------------
                                (Title of Class)

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

                                     YES _X_    NO ___

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ( ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [  ]

     There is no market for the Common Stock. None of the shares of the
Registrant's stock were sold within 60 days of the filing of this Form 10-K. As
of March 30, 2000 the aggregate number of the shares of the Registrant's Common
Stock outstanding was 1,028,793.


                                       1
<PAGE>

     Registrant also has 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 143,150 shares
were outstanding as of March 31, 2000. The Board of Directors designated a
subclass of the common stock, designated Class B Common Stock, by filing of
Articles of Amendment with the Commonwealth of Pennsylvania 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 March 31, 2000, 191,667 shares of Class B
Common Stock were issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The following documents are incorporated by reference as filed with the
Registrant's 1998 Form 10-K:

     1.   Consolidated Balance Sheets at December 31, 1998 and 1997.

     2.   Consolidated Statements of Operations for the years ended December 31,
          1998 and 1997.

     3.   Consolidated Statements of Shareholders' Equity for the years ended
          December 31, 1998 and 1997.

     4.   Consolidated Statements of Cash Flows for the years ended December 31,
          1998 and 1997.

     5.   Articles of Incorporation of the Bank and UBS

     6.   Bylaws of the Bank and UBS

     7.   Voting Trust Agreements

     8.   Long Term Incentive Compensation Plan

     9.   Lease Agreements for the Bank's premises.

     10.  Employment Agreement among Registrant, the Bank and Dr. Emma C.
          Chappell



                                       2
<PAGE>

                                     PART I

ITEM 1    BUSINESS

     UNITED BANCSHARES, INC.

     United Bancshares, Inc. ("Registrant" or "UBS") is a holding company for
United Bank of Philadelphia (the "Bank"). UBS was incorporated under the laws of
the Commonwealth of Pennsylvania on April 8, 1993. The Registrant became the
Bank Holding Company of the Bank, pursuant to the Bank Holding Company Act of
1956, as amended, on October 14, 1994.

     The Bank commenced operations on March 23, 1992. UBS provides banking
services through the Bank. The principal executive offices of UBS and the Bank
are located at 300 North Third Street, Philadelphia, Pennsylvania 19106. The
Registrant's telephone number is (215) 829-2265.

     As of March 31, 2000, UBS and the Bank had a total of 100 employees.

     UNITED BANK OF PHILADELPHIA

     The Bank, an African-American-controlled, state-chartered member bank of
the Federal Reserve System is regulated by both the Federal Reserve Board and
the Commonwealth of Pennsylvania Department of Banking (the "Department"). The
deposits held by the Bank are insured by the Federal Deposit Insurance
Corporation ("FDIC").

     The Bank conducts all its banking activities through its eight offices
located as follows: (i) MARKET STREET BRANCH 714 Market Street, Philadelphia,
PA; (ii) CENTER CITY BRANCH Two Penn Center, Philadelphia, PA; (iii) WEST
PHILADELPHIA BRANCH 37th & Lancaster Avenues, Philadelphia, PA; (iv) UNIVERSITY
CITY BRANCH 40th and Chestnut Streets, Philadelphia, PA; (v) MOUNT AIRY BRANCH
1620 Wadsworth Avenue, Philadelphia, PA; (vi) FRANKFORD BRANCH 4806 Frankford
Avenue, Philadelphia, PA; (vii) WEST GIRARD BRANCH 2836 West Girard Avenue,
Philadelphia, PA; and (viii) PROGRESS PLAZA BRANCH 1015 North Broad Street,
Philadelphia, PA. Through these locations, the Bank offers a broad range of
commercial and consumer banking services. At December 31, 1999, the Bank had
total deposits aggregating approximately $124.8 million and had total net loans
outstanding of approximately $59.4 million. Although the Bank's primary service
area for Community Reinvestment Act purposes is Philadelphia County, it also
services, generally, the Delaware Valley, which consists of



                                       3
<PAGE>



portions of Montgomery, Bucks, Chester, and Delaware Counties in Pennsylvania;
New Castle County in Delaware; and Camden, Burlington, and Gloucester Counties
in New Jersey. The city of Philadelphia is comprised of 353 census tracts and,
based on 1990 census data, 204 or 58% of these are designated as low to
moderate-income tracts while 105 or 30% are characterized both as low to
moderate-income and minority tracts. The Bank's primary service area consists of
a population of 1,577,815, which includes a minority population of 752,309.

     The Bank engages in the commercial banking business, serving the banking
needs of its customers with a particular focus on, and sensitivity to, groups
that have been traditionally under-served, including Blacks, Hispanics and
women. The Bank offers a wide range of deposit products, including checking
accounts, interest-bearing NOW accounts, money market accounts, certificates of
deposit, savings accounts and Individual Retirement Accounts.

     The focus of the Bank's lending activities is on the origination of
commercial, consumer and residential loans. A broad range of credit products are
offered to the businesses and consumers in the Bank's service area, including
commercial loans, mortgage loans, student loans, home improvement loans, auto
loans, personal loans, home equity loans and home equity lines of credit. At
March 31, 2000 the Bank's maximum legal lending limit was approximately $1.2
million per borrower. However, the Bank's internal Loan Policy limits the Bank's
lending to $500,000 per borrower in order to diversify the loan portfolio. The
Bank has established relationships with correspondent banks to participate in
loans that exceed the Bank's internal policies or legal lending limits. The
Board of Directors of the Bank maintains the ability to waive its internal
lending limit upon consideration of a loan. The Board of Directors has exercised
this power with respect to loans and participations on a number of occasions.
However, the Bank maintains no credit that exceeds its legal lending limit.

     The Bank also offers commercial and retail products. In the area of
commercial loans, the Bank has flexibility to develop loan arrangements targeted
at a customer's objectives. Typically, these loans are term loans or revolving
credit arrangements with interest rate, collateral and repayments terms, varying
based upon the type of credit, and various factors used to evaluate risk. The
Bank participates in the government-sponsored Small Business Administration
("SBA") lending program and when the Bank deems it appropriate, obtains SBA
guarantees for up to 90% of the loan amount. This guaranty effectively reduces
the Bank's exposure to loss in its commercial loan portfolio. Commercial loans
are typically made of the basis of cash flow to support repayment with secondary
reliance placed on the underlying collateral.



                                       4

<PAGE>



     The Bank's consumer loan program includes installment loans for home
improvement and the purchase of consumer goods and automobiles, student loans,
home equity and VISA secured and unsecured revolving lines of credit, and
checking overdraft protection. The Bank also offers residential mortgage loans
to its customers. The Bank's concentration in the retail area is in the category
of student loans where it can minimize its risk of non-payment with government
guaranties.

     In addition, the Bank offers safe deposit boxes, travelers' checks, money
orders, direct deposit of payroll and Social Security checks, wire transfers and
access to regional and national automated teller networks as well as
international and trust services through correspondent institutions.

     COMPETITION

     There is substantial competition among financial institutions in the Bank's
service area. The Bank competes with local, regional and national commercial
banks, as well as savings banks and savings and loan associations. Many of these
banks and financial institutions have an amount of capital that allows them to
do more advertising and promotion and to provide a greater range of services to
customers. To date, the Bank has attracted, and believes it will continue to
attract its customers from the deposit base of such existing banks and financial
institutions largely due to the Bank's mission to service groups of people who
have traditionally been under-served and by its devotion to personalized
customer service. The Bank's strategy has been, and will continue to be, to
emphasize personalized services with special sensitivity to the needs of Blacks,
Hispanics and women and to offer competitive rates to borrowers and depositors.

     In order to compete, the Bank relies upon personal contacts by the
officers, directors, advisory board and employees of the Bank to establish and
maintain relationships with Bank customers. The Bank focuses its efforts on the
needs of individuals and small and medium-sized businesses. In the event there
are customers whose loan demands exceed the Bank's lending limit, the Bank will
seek to arrange for such loans on a participation basis with other financial
institutions and intermediaries. The Bank will also assist those customers
requiring other services not offered by the Bank to obtain such services from
its correspondent banks.


                                       5
<PAGE>



     Registrant believes that a portion of the Bank's customer base is derived
from customers who were dissatisfied with the level of service provided at
larger financial institutions. While some of such customers have followed
officers of those institutions who were hired by the Bank, others were attracted
to the Bank by calling programs of its officers and referrals from other
customers. The Bank has sought, in the past, and intends to continue in the
future, to hire customer contact officers who have good relationships with
desirable customers. These personal relationships, provision of a high level of
customer services, and referrals from satisfied customers, form the basis of the
Bank's competitive approach, as opposed to advertising, rate competition or the
development of proprietary banking products, services or programs.

     In the past, the principal competition for deposits and loans have been
other depository institutions. However, now the Bank also competes with other
financial intermediaries such as brokerage houses offering investment vehicles
to the general public. Other entities, both public and private, seeking to raise
capital through the issuance and sale of debt or equity securities are also
competitors with banks and savings and loan associations in the acquisition of
deposits. In order to address the risk of deposit reduction due to investment in
non-bank alternatives, the Bank has established a relationship with American
Express Financial Advisors ("AEFA"). The Bank receives compensation from AEFA
for each securities purchase made through AEFA, thus yielding additional fee
income.


SUPERVISION AND REGULATION

         Holding Company. UBS, as a Pennsylvania business corporation, is
subject to the jurisdiction of the Securities and Exchange Commission (the
"SEC") and of state securities commissions for matters relating to the offering
and sale of its securities. Accordingly, if UBS wishes to issue additional
shares of its Common Stock, in order, for example, to raise capital or to grant
stock options, UBS will have to comply with the registration requirements of the
Securities Act of 1933 as amended, or find an applicable exemption from
registration.

         UBS is subject to the provisions of the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and to supervision by the Federal Reserve
Board. The BHC Act requires UBS to secure the prior approval of the Federal
Reserve Board before it owns or controls, directly or indirectly, more than 5%
of the voting shares of any corporation, including another bank. In addition,
the BHC Act prohibits UBS from acquiring more than 5% of the voting shares of,
or interest in, or all or substantially all of the assets of, any bank located
outside Pennsylvania, unless such an acquisition is specifically authorized by
laws of the state in which such bank is located.


                                       6
<PAGE>

     A bank holding company also is prohibited from engaging in or acquiring
direct or indirect control of more than 5% of the voting shares of any such
company engaged in non-banking activities unless the Federal Reserve Board, by
order or regulation, has found such activities to be closely related to banking
or managing or controlling banks as to be a proper incident thereto. In making
this determination, the Federal Reserve Board considers whether the performance
of these activities by a bank holding company would offer benefits to the public
that outweigh possible adverse effects.

     As a bank holding company, UBS is required to file an annual report with
the Federal Reserve Board and any additional information that the Federal
Reserve Board may require pursuant to the BHC Act. The Federal Reserve Board may
also make examinations of the holding company and any or all of subsidiaries.
Further, under Section 106 of the 1970 amendments to the BHC Act and the Federal
Reserve Board's regulation, a bank holding company and its subsidiaries are
prohibited from engaging in certain tying arrangements in connection with any
extension of credit or provision of credit of any property or services. The so
called "anti-tying" provisions state generally that a bank may not extend
credit, lease, sell property or furnish any service to a customer on the
condition that the customer obtain additional credit or service from the bank,
its bank holding company or any other subsidiary of its bank holding company, or
on the condition that the customer not obtain other credit or services from a
competitor of the bank, its bank holding company or any subsidiary of its bank
holding company.

     Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act and by state banking laws on any
extensions of credit to the bank holding company or any of its subsidiaries, on
investments in the stock or other securities of the bank holding company and on
taking of such stock or securities as collateral for loans to any borrower.

     Under Pennsylvania law, UBS is permitted to control an unlimited number of
banks. However, UBS would be required under the BHC Act to obtain the prior
approval of the Federal Reserve Board before acquiring all or substantially all
of the assets of any bank, or acquiring ownership or control of any voting
shares of any other than the Bank, if, after such acquisition, would control
more than 5% of the voting shares of such bank.

     The Bank. The deposits of Royal Bank of Pennsylvania are insured by the
FDIC. The Bank is subject to supervision, regulation and examination by the
Pennsylvania Department of Banking and by the FDIC. In addition, the Bank is
subject to a variety of local, state and federal laws that affect its operation.


                                       7

<PAGE>

     Under the Pennsylvania Banking Code of 1965, as amended, the ("Code"), the
Registrant has been permitted to control an unlimited number of banks. However,
the Registrant would be required under the Bank Holding Company Act to obtain
the prior approval of the Federal Reserve Board before it could acquire all or
substantially all of the assets of any bank, or acquiring ownership or control
of any voting shares of any bank other than the Bank, if, after such
acquisition, the registrant would own or control more than 5 percent of the
voting shares of such bank. The Bank Holding Company Act has been amended by the
Riegle-Neal Interstate Banking and Branching Act of 1994 which authorizes bank
holding companies subject to certain limitations and restrictions to acquire
banks located in any state.

     In 1995, the Code was amended to harmonize Pennsylvania law with the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 to enable
Pennsylvania institutions to participate fully in interstate banking and to
remove obstacles to the choice by banks from other states engaged in interstate
banking to select Pennsylvania as a head office location. Some of the more
salient features of the amendment are described below.

     A bank holding company located in Pennsylvania, another state, the District
of Columbia or a territory or possession of the United States may control one or
more banks, bank and trust companies, national banks, interstate banks and, with
the prior written approval of the Pennsylvania Department of Banking, may
acquire control of a bank and trust company or a national bank located in
Pennsylvania. A Pennsylvania-chartered institution may maintain branches in any
other state, the District of Columbia, or a territory or possession of the
United States upon the written approval of the Pennsylvania Department of
Banking.

     Finally, a banking institution existing under the laws of another
jurisdiction may establish a branch in Pennsylvania if the laws of the
jurisdiction in which it is located permit a Pennsylvania-chartered institution
or a national bank located in Pennsylvania to establish and maintain a branch in
such jurisdiction on substantially the same terms and conditions.


                                       8

<PAGE>

     In 1995, the Pennsylvania General Assembly enacted the Economic Development
Agency, Fiduciary and Lender Environmental Liability Protection Act which, among
other things, provides protection to lenders from environmental liability and
remediation costs under the environmental laws for releases and contamination
caused by others. A lender who engages in activities involved in the routine
practices of commercial lending, including, but not limited to, the providing of
financial services, holding of security interests, workout practices,
foreclosure or the recovery of funds from the sale of property shall not be
liable under the environmental acts or common law equivalents to the
Pennsylvania Department of Environmental resources or to any other person by
virtue of the fact that the lender engages in such commercial lending practices.
A lender, however, will be liable if it, its employees or agents, directly cause
an immediate release or directly exacerbate a release of regulated substances on
or from the property, or knowingly and willfully compelled the borrower to
commit an action which caused such release or violation of an environmental act.
The Economic Development Agency, Fiduciary and Lender Environmental Liability
Protection Act, however, does not limit federal liability which still exists
under certain circumstances.

     A subsidiary bank of a holding company is subject to certain restrictions
imposed by the Federal Reserve Act, as amended, on any extensions of credit to
the bank holding company or its subsidiaries, on investments in the stock or
other securities of the bank holding company or its subsidiaries, and on taking
such stock or securities as collateral for loans. The Federal Reserve Act, as
amended, and Federal Reserve Board regulations also place certain limitations
and reporting requirements on extensions of credit by a bank to principal
shareholders of its parent holding company, among others, and to related
interests of such principal shareholders. In addition, such legislation and
regulations may affect the terms upon which any person who becomes a principal
shareholder of a holding company may obtain credit from banks with which the
subsidiary bank maintains a correspondent relationship.

     Federal law also prohibits the acquisition of control of a bank holding
company without prior notice to certain federal bank regulators. Control is
defined for this purpose as the power, directly or indirectly, to direct the
management or policies of the bank or bank holding company or to vote 25% or
more of any class of voting securities of the bank holding company.

     From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of the Bank. It cannot be predicted whether any such legislation will
be adopted or how such legislation would affect the business of the Bank. As a
consequence of the extensive regulation of commercial banking activities in the
United States, the Bank's business is particularly susceptible to being affected
by federal legislation and regulations that may increase the costs of doing
business.



                                       9
<PAGE>

     Under the Federal Deposit Insurance Act ("FDIC Act"), the FDIC possesses
the power to prohibit institutions regulated by it (such as the Bank) from
engaging in any activity that would be an unsafe and unsound banking practice or
in violation of applicable law. Moreover, the FDIC Act: (i) empowers the FDIC to
issue cease-and-desist or civil money penalty orders against the Bank or its
executive officers, directors and/or principal shareholders based on violations
of law or unsafe and unsound banking practices; (ii) authorizes the FDIC to
remove executive officers who have participated in such violations or unsound
practices; (iii) restricts lending by the Bank to its executive officers,
directors, principal shareholders or related interests thereof; (iv) restricts
management personnel of a bank from serving as directors or in other management
positions with certain depository institutions whose assets exceed a specified
amount or which have an office within a specified geographic area. Additionally,
the FDIC Act provides that no person may acquire control of the Bank unless the
FDIC has been given 60-days prior written notice and within that time has not
disapproved the acquisition or extended the period for disapproval. In April
1995, regulators revised the Community Reinvestment Act ("CRA") with an emphasis
on performance over process and documentation. Under the revised rules, the
five-point rating scale is still utilized by examiners to assign a numerical
score for a bank's performance in each of three areas: lending, service and
investment.

     Under the CRA, the FDIC is required to: (i) assess the records of all
financial institutions regulated by it to determine if these institutions are
meeting the credit needs of the community (including low-and moderate-income
neighborhoods) which they serve, and (ii) take this record into account in its
evaluation of any application made by any such institutions for, among other
things, approval of a branch or other deposit facility, office relocation, a
merger or an acquisition of bank shares. The CRA also requires the federal
banking agencies to make public disclosures of their evaluation of each bank's
record of meeting the credit needs of its entire community, including low-and
moderate-income neighborhoods. This evaluation will include a descriptive rate
("outstanding," "satisfactory," "needs to improve" or "substantial
noncompliance") and a statement describing the basis for the rating. After its
most recent examination of the Bank under CRA, the FDIC gave the Bank a CRA
rating of satisfactory.

     Under the Bank Secrecy Act ("BSA"), banks and other financial institutions
are required to report to the Internal Revenue Service currency transactions of
more than $10,000 or multiple transactions in any one day of which the Bank is
aware that exceed $10,000 in the aggregate or other lesser amounts. Civil and
criminal penalties are provided under the BSA for failure to file a required
report, for failure to supply information required by the BSA or for filing a
false or fraudulent report.



                                       10
<PAGE>

     RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994. The
Bank believes that further merger activity within Pennsylvania is likely to
occur in the future, resulting in increased concentration levels in banking
markets within Pennsylvania and other significant changes in the competitive
environment. The Riegle-Neal allows adequately capitalized and managed bank
holding companies to acquire banks in any state starting one year after
enactment (September 29, 1995). Another provision of the Riegle-Neal Act allows
interstate merger transactions beginning June 1, 1997. States are permitted,
however, to pass legislation providing for either earlier approval of mergers
with out-of-state banks, or "opting-out" of interstate mergers entirely. Through
interstate merger transactions, banks will be able to acquire branches of
out-of-state banks by converting their offices into branches of the resulting
bank. The Riegle-Neal Act provides that it will be the exclusive means for bank
holding companies to obtain interstate branches. Under the Riegle-Neal Act,
banks may establish and operate a "de novo branch" in any State that "opts-in"
to de novo branching. Foreign banks are allowed to operate branches, either de
novo or by merger. These branches can operate to the same extent that the
establishment and operation of such branches would be permitted if the foreign
bank were a national bank or state bank. All these changes are expected to
intensify competition in local, regional and national banking markets. The
Pennsylvania Banking Code has been amended to enable Pennsylvania institutions
to participate fully in interstate banking (see discussion above).

FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991

     GENERAL. The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDIC Improvement Act") includes several provisions that have a direct impact
on the Bank. The most significant of these provisions are discussed below.

     The FDIC is required to conduct periodic full-scope, on-site examinations
of the Bank. In order to minimize losses to the deposit insurance funds, the
FDIC Improvement Act establishes a format to more monitor FDIC-insured
institutions and to enable prompt corrective action by the appropriate federal
supervisory agency if an institution begins to experience any difficulty. The
FDIC Improvement Act establishes five "capital" categories. They are: (1) well
capitalized, (2) adequately capitalized, (3)undercapitalized, (4) significantly
undercapitalized, and (5) critically undercapitalized. The overall goal of these
new capital measures is to impose more scrutiny and operational restrictions on
banks as they descend the capital categories from well capitalized to critically
undercapitalized.



                                       11
<PAGE>

     Under Current regulations, a "well-capitalized" institution would be one
that has at least a 10% total risk-based capital ratio, a 6% Tier 1 risk-based
capital ratio, a 5% Tier 1 Leverage Ratio, and is not subject to any written
order or final directive by the FDIC to meet and maintain a specific capital
level. The Bank is presently categorized as a "well-capitalized" institution.

     An "adequately capitalized" institution would be one that meets the
required minimum capital levels, but does not meet the definition of a
"well-capitalized" institution. The existing capital rules generally require
banks to maintain a Tier 1 Leverage Ratio of at least 4% and an 8% total
risk-based capital ratio. Since the risk-based capital requirement to be in the
form of Tier 1 capital, this also will mean that a bank would need to maintain
at least 4% Tier 1 risk-based capital ratio. An institution must meet each of
the required minimum capital levels in order to be deemed "adequately
capitalized." The most recent notification dated February 10, 2000, from the
Federal Reserve Bank categorized the Bank as "adequately capitalized" under the
regulatory framework for prompt and corrective action.

     An "undercapitalized" institution is one that fails to meet one or more of
the required minimum capital levels for an "adequately capitalized" institution.
Under the FDIC Improvement Act, an "undercapitalized" institution must file a
capital restoration plan and is automatically subject to restrictions on
dividends, management fees and asset growth. In addition, the institution is
prohibited from making acquisitions, opening new branches or engaging in new
lines of business without the prior approval of its primary federal regulator. A
number of other restrictions may be imposed.

     A "critically undercapitalized" institution is one that has a tangible
equity (Tier 1 capital) ratio of 2% or less. In addition to the same
restrictions and prohibitions that apply to "undercapitalized" and
"significantly undercapitalized" institutions, any institution that becomes
"critically undercapitalized" is prohibited from taking the following actions
without the prior written approval of its primary federal supervisory agency:
engaging in any material transactions other than in the usual course of
business; extending credit for highly leveraged transactions; amending its
charter or bylaws; making any material changes in accounting methods; engaging
in certain transactions with affiliates; paying excessive compensation or
bonuses; and paying interest on liabilities exceeding the prevailing rates in
the institution's market area. In addition, a "critically undercapitalized"
institution is prohibited from paying interest or principal on its subordinated
debt and is subject to being placed in conservatorship or receivership if its
tangible equity capital level is not increased within certain mandated time
frames.

     Management cannot anticipate what changes Congress may enact, or, if
enacted, their impact on UBS's financial position and reported results of
operation. As a consequence of the extensive regulation of commercial banking
activities in the United States, UBS's business is particularly susceptible to
being affected by federal and state legislation and regulations that may
increase the costs of doing business.


                                       12
<PAGE>

Regulatory Actions.

     In February 2000, as a result of a regulatory examination completed in
December 1999, the Bank entered into a Written Agreement with its primary
regulators with regard to, among other things, achievement of agreed-upon
capital levels, implementation of a viable earnings/strategic plan, adequate
funding of the allowance for loan losses, the completion of a management review
and succession plan, and improvement in internal controls. See, Item 7.,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

     Beginning in 1996, the Bank has operated under a Supervisory Letter from
its primary regulator. The Supervisory Letter prevents the Bank and the Company
from declaring or paying dividends without the prior written approval of its
regulators and prohibits the Bank and Company from issuing long-term debt.




                                       13
<PAGE>


ITEM 2 -   PROPERTIES

CORPORATE HEADQUARTERS

     In August, 1999 the Bank moved its corporate headquarters from the branch
facility at 714 Market Street to 300 North Third Street, Philadelphia,
Pennsylvania. It occupies this location pursuant to the terms of a 10 year lease
from ECC Properties, LLC ("ECC Properties"). ECC Properties is a single member
limited liability company owned by Emma C. Chappell, Chairman, President and CEO
of the Bank. The facility consists of 25,000 square feet including executive
offices, operations, finance, human resource, security and loss prevention
functions. The entire facility is leased by the Bank. The Bank sublets
approximately 2500 square feet to Philadelphia United Community Development
Corporation and approximately 1400 square feet to Tucci & Tannenbaum, P.C.

     The aggregate rental for the facility is $26,927 per month.

MARKET STREET BRANCH

     The Bank's Market Street Branch is located on the first floor of a
multi-tenant retail and commercial office building at 714 Market Street,
Philadelphia, PA 19106. The Bank occupies approximately 5,700 square feet of
space pursuant to a lease which expires on February 28, 2002. The lease has
renewal options for two five-year periods and is subject to escalation clauses.
The first floor contains a banking lobby, the vault and customer service area,
as well as the Bank's loan department. The aggregate monthly rent for this
location is $9,069.

MT. AIRY BRANCH

     The Bank operates a branch at 1620 Wadsworth Avenue, in the Mt. Airy
section of Philadelphia. This facility, comprising a retail banking lobby,
teller area, offices, vault and storage space is currently leased at a monthly
rental of $3,375.

CENTER CITY BRANCH

     The Bank operates a branch location at Two Penn Center, 15th Street and JFK
Boulevard, Philadelphia, PA. The Bank leases approximately 4,769 square feet at
its Two Penn Center location. The space includes lobby, teller area, customer
service area, primary lending area and administrative offices, as well as a
vault. The aggregate monthly rent for this location is $13,115.


                                       14
<PAGE>

FRANKFORD BRANCH

     In 1995, the Bank purchased a branch facility at 4806 Frankford Avenue. The
main floor of the facility houses teller and customer service areas. The
remainder of the facility is utilized as storage.

WEST GIRARD BRANCH

     The Bank leases a facility located at 2836 West Girard Avenue. The facility
is comprised of a teller area, customer service area, lobby, vault and
administrative offices. The aggregate monthly rental for the facility is $1,375.
A copy of this lease is submitted as an exhibit hereto.

WEST PHILADELPHIA BRANCH

     On July 22, 1996, the Bank acquired a branch location at 3750 Lancaster
Avenue from PNC Bank. The facility is comprised of approximately 3,000 square
feet. The main floor houses teller and customer service areas, a drive-up teller
facility and automated teller machine. The basement provides storage for the
facility. The aggregate monthly rental is approximately $2,625 exclusive of
taxes, insurance, utilities and janitorial service.

UNIVERSITY CITY BRANCH

     The Bank leases a branch facility located at 40th and Chestnut Streets, in
the University City Section of West Philadelphia from First Union National Bank
("First Union"). This facility was acquired from First Union in September, 1999.
According t the terms of the approval of the acquisition of this facility by the
Federal Reserve Board and Pennsylvania Department of Banking, the facility could
remain open no longer than 6 months after the acquisition, and would then be
merged with the Bank's West Philadelphia Branch.

     This branch comprises a banking lobby, teller and customer service areas, a
vault and basement. The aggregate monthly rental for this facility is $4,570. A
copy of this lease is submitted as an exhibit hereto.

PROGRESS PLAZA BRANCH

     The Bank leases a branch facility located at 1015 North Broad Street,
Philadelphia, PA. The facility comprises a teller and customer service area,
lobby and vault. The aggregate monthly rental for this facility is $3,656 per
month. A copy of this lease is submitted as an exhibit hereto.

                                       15
<PAGE>

ITEM 3 - LEGAL PROCEEDINGS

     Other than the following, no material claims have been instituted or
threatened by or against UBS or its affiliates other than in the normal course
of business.

     MONUMENT FINANCIAL GROUP. 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.

     The complaint was withdrawn without prejudice, ending the suit. However,
there is no guaranty that the suit, or some form of the Primary Claim or
Ancillary Claim, will not be re-filed by the Plaintiffs at a later date.

      NEXGEN SOLUTIONS, INC. In 1999 the Bank entered into a four year contract
with Nexgen Solutions, Inc. ("Nexgen"). Pursuant to the terms of the contract,
Nexgen agreed to provide all information technology services that the Bank would
require at a pre-determined discount to Nexgen's regular fees. In 2000, for lack
of performance and other reasons, the Bank terminated the contract. Nexgen has
threatened legal action for the termination. In lieu of legal action, Nexgen has
requested a payment of approximately $75 thousand. The Registrant believes that
substantial defenses exist, including the failure to provide adequate support
and service, justifying the termination of the contract. Therefore, the
Registrant believes that the Bank may not be liable for the $75 thousand
requested.


                                       16
<PAGE>


ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     Not Applicable. No matters were submitted to a vote of Registrant's
security holders since the Registrant's last periodic filing.


                                     PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK.

     COMMON STOCK

     As of March 31, 2000 there were 3,182 shareholders of record of UBS's
Common Stock.

     The Common Stock is not traded on any national exchange or otherwise traded
in any recognizable market. Prior to December 31, 1993, the Bank conducted a
limited offering (the "Offering") pursuant to a registration exemption provided
in Section 3(a)(2) of the Securities Exchange Act of 1933 (the "Act"). The
price-per-share during the Offering was $12.00. Prior to the Offering, the Bank
conducted an initial offering of the Common Stock (the "Initial Offering") at
$10.00 per share pursuant to the same registration exemption.

     Beginning April 24, 1995, Registrant commenced a private offering solely to
existing stockholders of 250,000 shares of its common stock and 750,000 warrants
to purchase a share of the common stock. 18,465 shares and 55,395 warrants have
been sold pursuant to this offering. Each unit, consisting of one share of
common stock and three warrants to purchase one share of common stock in each of
three subsequent years (total 3 shares), were issued at $12.00 per unit. The
warrant exercise price was $8.00 per share for the 1996 Warrant was $9.00 per
share for the 1997 Warrant, and was $10.00 per share for the 1998 Warrant. The
units were offered pursuant to an exemption from registration contained in
section 4(2) and 3(a)(5) of the Act. No underwriters were used and no
commissions were paid as a result of this offering. The offering closed on
December 31, 1995. In December 1995, the Registrant sold 41,666 shares of
Registrant's common stock in an offering exempt from registration pursuant to
section 4(2) of the Act at a purchase price of $12.00 per share. This sale was
accomplished pursuant to a commitment to purchase these securities issued in
December 1994.

     Beginning May 10, 1996, Registrant commenced a private offering solely to
existing stockholders of 250,000 shares of its common stock. 6,934 shares were
sold pursuant to this offering. The stock was offered pursuant to an exemption
from registration contained in 4(2) and


                                       17


<PAGE>

3(a)(5) of the Act. During 1996, the Registrant received, $55,536 and issued
6,942 shares as a result of warrant exercises by shareholders to purchase common
stock at a price of $8.00 per share. Beginning May 19, 1997, Registrant
commenced an offering solely to existing stockholders of 250,000 shares of its
common stock, initially on a pro-rata basis. 3,550 shares were sold pursuant to
this offering. The stock was offered pursuant to an exemption contained in 4(2)
and 3(a)(5) of the Act. During 1997, the Registrant received $34,710 and issued
3,856 shares as a result of exercise of the 1997 warrants at $9.00 per share.
During 1998, Registrant received $14,922 as a result of the exercise of the 1998
Warrants at $10.00 per share and sold 6,492 shares of common stock as a result
to its offering solely to stockholders of record. This offering was exempt
pursuant to an exemption from registration contained in sections 4(2) and
3(a)(5) of the Act. As of March 31, 1999, there were no warrants outstanding to
purchase common stock of the Bank.

     CLASS B COMMON STOCK

     On September 30, 1998, the Registrant filed Articles of Amendment to its
Articles of Incorporation with the Secretary of State of the Commonwealth of
Pennsylvania. The filing amended the Articles of Incorporation of the Registrant
to designate a sub-class of ist Common Stock as Class B Common Stock. Pursuant
to the terms of the amendment, holders of the Class B Common Stock have all
rights of Common Stockholders, with the exception of voting rights.

     Effective October 9, 1998, the Registrant sold 83,333 shares of its Class B
Common Stock to First Union Corporation ("First Union") for a purchase price of
$12 per share. The sale was exempt from registration requirements pursuant to
section 4(2) of the Act.

     Effective February 8, 1999, the Registrant sold 83,333 shares of its Class
B Common Stock to First Union for a purchase price of $12 per share. The sale
was exempt from registration requirements pursuant to section 4(2) of the Act.

     Effective September 23, 1999, Registrant sold 25, 000 shares of its Class B
Common Stock to First Union Corporation at a purchase price of $12 per share.
The sale was exempt from registration pursuant to section 4(2) of the Act.

     Effective December, 1999, the Registrant sold 5,000 shares of its Class B
Common Stock to an individual for a purchase price of $12 per share. The sale
was exempt from registration pursuant to section 4(2) of the Act.

     SERIES A PREFERRED STOCK

     Registrant has engaged in the sale of Series A Preferred Stock which has
the characteristics identified in the UBS Articles of Incorporation incorporated
by reference as an Exhibit hereto pursuant to an exemption from registration
contained in Section 4(2) of the Securities Act.


                                       18
<PAGE>

     DIVIDENDS

     Registrant has not, during the three most recent fiscal periods declared or
paid any cash or stock dividends. The Pennsylvania Banking Code of 1965, as
amended, provides that cash dividends may be declared and paid only from
accumulated net earnings and that, prior to the declaration of any dividend, if
the surplus of a bank is less than the amount of its capital, the bank shall,
until surplus is equal to such amount, transfer to surplus an amount which is at
least ten percent of the net earnings of the bank 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 the prior
approval of the Pennsylvania Department of Banking.

     Under the Federal Reserve Act, if a bank has sustained losses equal to or
exceeding its undivided profits then on hand, 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 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 Bank'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. As a result of this regulation, the
Bank, and therefore the Registrant, will most likely be unable to pay any
dividends while an accumulated deficit exists. The Registrant does not
anticipate that dividends will be paid for the forseeable future.

     The Federal Deposit Insurance Act generally prohibits all payments of
dividends by a bank which is in default of any assessment to the FDIC.

                                       19
<PAGE>

ITEM 6 - SELECTED FINANCIAL DATA


                            SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                              --------------------------------------------------------------------
                                                   1999         1998            1997           1996           1995
                                              --------------------------------------------------------------------
                                                                (Dollars in thousands, except per share data)

<S>                                            <C>             <C>             <C>           <C>           <C>
Net interest income                            $  5,264        $  5,241        $  4,744      $  4,259      $  4,012
Provision for loan losses                         1,007             351              97            85            78
Noninterest income                                2,226           1,816           1,517         1,118           741
Noninterest expense                               7,714           6,696           5,983         6,123         5,454
Net income (loss)                                (1,230)             10             181          (832)         (779)
Net income (loss) per share - basic               (1.24)           0.01            0.22         (1.03)        (1.04)
Balance sheet totals:
    Total assets                               $137,249        $121,983        $108,914      $ 96,769      $ 92,635
    Net loans                                    59,444          57,271          73,694        69,097        61,696
    Investment securities                        51,433          43,196          18,253        14,460        16,739
    Deposits                                    124,766         109,063          99,427        88,761        84,228
    Shareholders' equity                          9,027           8,904           7,059         6,759         7,470
    Ratios:
      Equity to assets                             8.08%           6.40%           6.61%        7.45 %        7.36 %
      Return on assets                            (1.03)%          0.01%           0.18%       (0.89)%       (0.87)%
      Return on equity                           (12.71)%          0.14%           2.69%      (12.02)%      (11.83)%
</TABLE>



                                       20

<PAGE>



ITEM 7 - MANAGEMENT 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. 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. This
discussion and analysis should be read in conjunction with the financial
statements presented elsewhere in this report.


                              RESULTS OF OPERATIONS
SUMMARY

     The Company recorded a net loss of $1,230,000 for 1999 ($1.24 per share)
compared to net income of $10,000 ($0.01 per share) for 1998 and net income of
$181,000 ($0.22 per share) in 1997. The decline in earnings during 1999 is
primarily attributable to a significant increase in the provision for loan
losses. A more detailed explanation for each component of earnings is included
in the sections below.

    Management continues to face the challenge of increasing the level of
earning assets to generate additional income to cover the high operating costs
associated with the Bank's mission of serving the under-served communities in
the Philadelphia region. During 1999, the Bank acquired branches in close
proximity to its existing branches in an effort to increase its earning assets
without significantly increasing its operating costs. Consequently,
average-earning assets increased approximately $9.1 million, or 8.76%, The
result was an increase of $23,000 in net interest income from 1998 to 1999.



                                       21
<PAGE>


     The allowance for loan losses as a percentage of total loans increased from
1.17% in 1998 to 2.57% in 1999. This increase is primarily attributable to a
specific provision of approximately $668,000 for one commercial loan.


   TABLE 1 - AVERAGE BALANCES, RATES, AND INTEREST INCOME AND EXPENSE SUMMARY

<TABLE>
<CAPTION>

                                                                            DECEMBER 31,
                                         -----------------------------------------------------------------------------------------
                                                      1999                           1998                         1997
                                         ------------------------------   ---------------------------   --------------------------
                                         AVERAGE                YIELD/    AVERAGE             YIELD/    AVERAGE             YIELD/
                                         BALANCE    INTEREST     RATE     BALANCE  INTEREST    RATE     BALANCE   INTEREST   RATE
                                         ------------------------------   ---------------------------   --------------------------
                                                                            (Dollars in thousands)
<S>                                        <C>       <C>       <C>        <C>       <C>      <C>      <C>       <C>         <C>
Assets:
Interest-earning assets:
    Loans                                  68,526    5,589     8.16%      71,338    6,270    8.79%    $ 68,887  $  5,913    8.58%
    Investment securities
        held-to-maturity                   21,692    1,226     5.65       11,436      746    6.52       10,222       659    6.45
    Investment securities
        available-for-sale                  9,275      612     6.60        8,392      557    6.63        6,252       434    6.94
    Federal funds sold                     13,753      681     4.95       12,959      688    5.31        9,187       483    5.26
                                           ------      ---     ----       ------      ---    ----      -------    ------  ------
Total interest-earning assets             113,246    8,108     7.16      104,125    8,261    7.93       94,548     7,489    7.92

Noninterest-earning assets:
    Cash and due from banks                 2,835                          4,646                         4,271
    Premises and equipment, net             1,880                          1,760                         1,846
    Other assets                            3,366                          3,576                         1,564
    Less allowance for loan losses         (1,567)                          (565)                         (468)
                                          -------                        -------                      --------
            Total                         119,760                        113,542                      $101,761
                                          =======                        =======                      ========
Liabilities and shareholders' equity:

Interest-bearing liabilities:
    Demand deposits                        19,892      569     2.86%      22,622      620    2.74%    $ 14,812       379    2.56%
    Savings deposits                       26,744      440     1.65       23,283      428    1.84       23,277       459    1.97
    Time deposits                          35,020    1,695     4.84       37,365     1899    5.08       37,627     1,852    4.92
    Other borrowed funds                    1,246      140    11.24        1,521       73    4.85        1,262        55    4.36
                                          -------    -----    -----      -------                      --------    ------   -----
            Total interest-bearing
                liabilities                82,902    2,844     3.43       84,791    3,020    3.56       76,978     2,745    3.57

Noninterest-bearing liabilities:
    Demand deposits                        24,019                         19,740                        15,905
    Other                                   3,177                          1,747                         2,153
Shareholders' equity                        9,662                          7,264                         6,725
                                          -------                        -------                      --------
            Total                         119,760                        113,542                      $101,761
                                          =======                        =======                      ========

Net interest earnings                              $ 5,264                         $5,241                         $  4,744

Net yield on interest-earning assets                           4.65%                         5.03%                          5.01%

</TABLE>


For purposes of computing the average balance, loans are not reduced for
nonperforming loans.


                                      22
<PAGE>

                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


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 (b) interest paid on interest-bearing liabilities, is a significant
component of the Bank's earnings. 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 for 1999 totaled $5.3 million, an increase of $23,000,
or .45%, compared to 1998. Net interest income in 1998 totaled $5.2 million, an
increase of $497,000, or 10.5%, compared to 1997.

        TABLE 2 - RATE-VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME

<TABLE>
<CAPTION>


                                                1999 COMPARED TO 1998                    1998 COMPARED TO 1997
                                        -------------------------------------    -------------------------------------
                                              INCREASE (DECREASE) DUE TO               INCREASE (DECREASE) DUE TO
                                        -------------------------------------    -------------------------------------
                                        VOLUME          RATE           NET        VOLUME          RATE           NET
                                        -------------------------------------    -------------------------------------
                                                                  (Dollars in thousands)
<S>                                     <C>            <C>            <C>          <C>            <C>           <C>
Interest earned on:
    Loans                               $(245)         $(436)         $(681)       $ 221          $ 136         $ 357
    Investment securities
       held-to-maturity                   569            (89)           480           81              6            87
    Investment securities
       available-for-sale                  37             18             55          175            (52)          123
    Federal funds sold                     26            (33)            (7)         203              2           205
                                        -----          -----          -----        -----          -----         -----
           Total interest-earning
               assets                     387           (540)          (153)         680             92           772
                                        -----          -----          -----        -----          -----         -----

Interest paid on:
    Demand deposits                       (67)            16            (51)         218             23           241
    Savings deposits                       58            (46)            12            2            (33)          (31)
    Time deposits                        (120)           (84)          (204)          (9)            56            47
    Other borrowed funds                   56             11             65            9              9            18
                                        -----          -----          -----        -----          -----         -----
           Total interest-bearing
               liabilities                (73)          (103)          (176)         220             55           275
                                        -----          -----          -----        -----          -----         -----
           Net interest income           $460          $(437)           $23        $ 460           $ 37         $ 497
                                         ====          =====            ===        =====           ====         =====
</TABLE>

Changes in interest income or expense not arising solely as a result of volume
or rate variances are allocated to rate variances due to the interest
sensitivity of consolidated assets and liabilities.

     In 1999, there was an increase in net interest income of $460,000 due to
changes in volume but a decrease of $437,000 due to changes in rate. In 1998,
there was an increase in net interest income of $460,000 due to changes in
volume and an increase of $37,000 due to changes in rate.



                                       23
<PAGE>


                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


    Average earning assets increased from $104.1 million in 1998 to $113.2
million in 1999 and from $94.5 million in 1997 to $104.1 million in 1998. This
growth in earning assets is primarily attributed to an increase in average
noninterest-bearing demand deposit balances and savings deposits. On September
24, 1999, the Bank acquired $31.5 million in deposits from First Union
Corporation. The acquired deposits primarily consisted of core noninterest
checking deposits and savings deposits. In addition, in December 1997, the Bank
implemented a new deposit transfer ("sweep") product for its nonprofit and
municipal customers which provides for the overnight transfer of available funds
from a noninterest-bearing account to an interest-bearing account. In April
1998, new "Prestige" checking products were developed. These products offer
premiums such as life insurance, discount shopping, premium certificate of
deposit rates, etc. While benefiting customers, these products also serve as a
means of generating low cost funds for the Bank as well as a source of service
charge income from monthly membership, low balance and overdraft fees.

     The net interest margin of the Bank was 5.03% in 1998 and 5.01% 1997 but
declined to 4.65% in 1999. While the prime rate increased 75 basis points during
1999, the Bank did not experience a similar increase in yield on its loan
portfolio. This is because much of the Bank's loan portfolio is fixed rate in
nature and not related to prime. In addition, during 1999, the average loan
balance declined from $71.3 million to $68.5 million. This decline was related
to significant paydowns/payoffs in the purchased automobile loan portfolio of
the Bank. Funds were placed in alternative investment products that have lower
yields.

    During 1999, the average federal funds yield was 4.95% compared to 5.31% in
1998 and 5.26% in 1997. During 1999, the average investment in federal funds
increased by $794,000 because of an increased level of deposits in the "sweep"
checking account product of the Bank which represent high balance short-term
deposits. In addition, during 1999, the Bank continued to experience high levels
of payoffs/paydowns in its loan portfolio. Funds were temporarily placed in
federal funds sold until other loans were originated or investments purchased.

    The yield on the investment portfolio decreased 63 basis points to 5.94% in
1999 compared to 6.57% in 1998 and 6.63% in 1997. The declining yield is due to
call options in certain higher yielding Government Agency securities that were
exercised during 1998. The Bank was not able to place the proceeds from these
premature maturities into securities with comparable yields due to a lower rate
environment.

     The cost of interest-bearing liabilities declined to 3.43% in 1999 compared
to 3.56% in 1998 and 3.57% in 1997. Consistent with market conditions, during
the last quarter of 1998 and the first quarter of 1999, the Bank reduced the
rates it pays on many of its interest bearing products by as much as 25 basis
points.

PROVISION FOR LOAN LOSSES

    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 and allowance for loan losses charged against earnings in 1999
was $1,007,003 compared to $350,500 in 1998 and $97,500 in 1997. The increase in
1999 was primarily related to one community development construction project for
which there was a specific provision allocated of $668,000. There was an
increase of $100,000 in specific provisions in the consumer loan portfolio as a
result of increased levels of delinquencies. Although a number of these loans
are home equity loans and secured by real estate, the extent of collectibility
is not known. In addition, during 1999, the Bank revised its policy to increase
its allowance for uncertainties in loans classified as "Satisfactory".
Management believes the level of the allowance for loan losses was adequate as
of December 31, 1999.

                                       24

<PAGE>

                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


NONINTEREST INCOME

     Noninterest income increased $410,000 in 1999 compared to 1998. The
increase was primarily related to a $217,000 increase in ATM fees as a result of
an increase in the surcharge on non-customer use of ATMs from $1.00 to $1.50 and
growth in the ATM network from 28 to 31. In addition, continued growth in the
number of demand deposit accounts to which activity charges apply resulted in a
$323,000 increase in demand deposit-related fee income--including overdraft
fees, low balance fees, and activity charges.

     Noninterest income increased $300,000 in 1998 compared to 1997. The
increase was primarily related to an increased level of fees on deposits as a
result of the elimination of the Bank's "free checking" product and the
introduction of a new premium checking product--"Prestige checking". This new
product offers premiums such as discount shopping, bonus certificate of deposit
rates, insurance, etc. to customers but also has a minimum balance and monthly
membership fee requirements. In addition, the Bank's ATM fees increased $142,000
during 1998 as a result of increased volume at its machines as well as growth in
the ATM network from 26 to 28 machines. Finally, the Bank sold approximately
$13.2 million in loans during 1998 for a gain of $202,000.

NONINTEREST EXPENSE

Noninterest expense increased $1 million, or 15.2%, in 1999 to $7.7 million
compared to $6.7 million in 1998 and $6 million in 1997.

     Salaries and benefits increased $407,000, or 15.9%, in 1999 compared to an
increase of $158,000, or 7%, in 1998. In addition to normal salary adjustments,
the increase during 1999 was the result of an increase in the number of branches
from 6 to 8 after the First Union acquisition, as there was an increase in
staffing levels to fill open positions to handle increased work volumes due to
growth in the Bank's deposit levels during the year. In addition, during 1997
the chief executive officer's employment contract was amended to provide her
with a defined contribution retirement plan, which resulted in a $48,000 expense
for both 1998 and 1997 and $52,000 in 1999. During 1998, the chief executive
officer received incentive compensation totaling approximately $28,000.

    Occupancy and equipment expense increased approximately $162,000, or 12.7%,
during 1999 compared to an increase of $260,000, or 26%, during 1998. The
increase during 1999 was attributable to annual escalations in lease payments,
new and increased maintenance cost to service the Bank's growing ATM network,
and new branches acquired from First Union in September 1999. In conjunction
with its acquisition of deposits from First Union, the Bank assumed the leases
of 4 branches, 2 of which were in close proximity to its existing branches. Due
to more favorable characteristics of these branches (i.e. visibility,
drive-through, ATM's, etc.), the Bank relocated its branch operations to the
acquired facilities. These facilities have higher rental rates. In addition, in
July 1999, the Bank leased a 25,000 square foot building to house its corporate
headquarters.

     Office operations and supplies expense increased by $189,000, or 36%, in
1999. This increase was primarily a result of the acquisition of branches from
First Union and the relocation of the corporate headquarters. In addition, the
growth in the ATM network resulted in an increase in ATM-related supplies (i.e.
ribbons, paper receipts, etc.).

    Data processing expenses decreased by $5,000, or .6%, during 1999 compared
to an increase of $25,000, or 3%, in 1998. The bulk of the Bank's data
processing is outsourced to third-party processors. These expenses are
reflective of the high level of low-balance accounts being serviced for which
the Bank is charged a per-account charge by processors. Although there has been
some progress, 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 outsourcing, and the possible
re-negotiation of existing contracts with servicers.

    Marketing and public relations expense increased by $83,000, or 37.5%, in
1999 compared to an increase of $49,000, or 28%, in 1998. The increase in 1999
was primarily related to additional media advertising the Bank incurred relative
to its Year 2000 Preparedness as well as other product-specific advertisements.
In addition, the Bank had in place for the entire year (versus 8 months in
1998), its new "Prestige checking" product for which the Bank pays an outside
vendor to provide premiums (i.e. life insurance, discount shopping, etc.).


                                      25
<PAGE>

                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED

    Professional Services increased $161,000, or 69%, in 1999. This increase is
primarily related to fees the Bank paid to consultants to assist in preparing
contingency plans for the Year 2000. In addition, during 1999, the Bank
contracted with consultants to assist with computer and management information
sytstems projects as well as the preparation of its strategic plan.

    Federal deposit insurance premiums were $105,000 in 1999 compared to $82,000
in 1998 and $66,000 in 1997. FDIC insurance premiums are applied to all
financial institutions based on a risk-based premium assessment system. Under
this system, bank strength is based on three factors: 1) asset quality, 2)
capital strength, and 3) management. Premium assessments are then assigned based
on the institution's overall rating, with the stronger institutions paying lower
rates. The Banks assessment was based on 1.29 basis points for BIF(Bank
Insurance Fund)-assessable deposits and 6.28 basis points for SAIF(Savings
Insurance Fund)-assessable deposits. The increase during 1999, is a result of
increased deposit levels.

    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.



                                       26
<PAGE>


                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


                               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 Table 3
indicates how the Bank has managed these elements. Average funding uses
increased approximately $9.1 million, or 8.76%, in 1999 compared to $9.6
million, or 10.1%, in 1998.

                   TABLE 3 - SOURCES AND USES OF FUNDS TRENDS

<TABLE>
<CAPTION>

                                                1999                                   1998                    1997
                                 ---------------------------------      ----------------------------------    -------
                                               INCREASE                               INCREASE
                                 AVERAGE      (DECREASE)                AVERAGE      (DECREASE)               AVERAGE
                                 BALANCE        AMOUNT     PERCENT      BALANCE        AMOUNT      PERCENT    BALANCE
                                 -------        ------     -------      -------        ------      -------    -------
                                                                 (Dollars in thousands)
<S>                                <C>         <C>          <C>        <C>             <C>          <C>      <C>
Funding uses:
    Loans                         $ 68,526     $(2,812)     (3.94)%    $ 71,338       $ 2,451       3.56%      $68,887
    Investment securities:
       Held-to-maturity             21,692      10,256      89.68        11,436         1,214      11.88        10,222
       Available-for-sale            9,275         883      10.52         8,392         2,140      34.23         6,252
    Federal funds sold              13,753         794       6.13        12,959         3,772      41.06         9,187
                                  --------      ------                 --------       -------                  -------
       Total uses                 $113,246       9,121                 $104,125       $ 9,577                  $94,548
                                  ========      ======                 ========       =======                  =======

Funding sources:
    Demand deposits:
       Noninterest-bearing          24,019      $4,279      21.68%     $ 19,740       $ 3,835      24.11%      $15,905
       Interest-bearing             19,892      (2,730)    (12.07)       22,622         7,810      52.73        14,812
    Savings deposits                26,744       3,461      14.86        23,283             6       0.03        23,277
    Time deposits                   35,020      (2,345)     (6.28)       37,365          (262)     (0.70)       37,627
    Other borrowed funds             1,246        (275)    (18.08)        1,521           259      20.52         1,262
                                  --------      ------                 --------       -------                  -------
       Total sources              $106,921      $2,390                 $104,531       $11,648                  $92,883
                                  ========      ======                 ========       =======                  =======

</TABLE>

INVESTMENT SECURITIES AND OTHER SHORT-TERM INVESTMENTS

    The Bank's investment portfolio is classified as either held-to-maturity or
available-for-sale. Investments classified as held-to-maturity are carried at
amortized cost and are those securities the Bank has both the intent and ability
to hold to maturity. Investments classified as available-for-sale are those
investments the Bank intends to hold for an indefinite amount of time, but not
necessarily to maturity, and are carried at fair value, with the unrealized
holding gains and losses reported as a component of shareholders' equity on the
balance sheet.

    Average investment securities and federal funds sold, in the aggregate,
increased by $11.9 million, or 36.2%, in 1999 compared to an increase of $7.1
million, or 27.8%, in 1998. The increase during 1999 is a result of the
acquisition of deposits from First Union in September 1999. These deposits were
acquired without corresponding loans and were therefore placed in US Government
Agency and mortgage-backed securities to maximize the yield. In addition, the
Bank invested the funds from paydowns/payoffs in the loan portfolios in similar
securities. The Bank's strategy is to use the paydowns from its mortgage-backed
securities to fund new loan originations.


                                       27
<PAGE>

                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


    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.

     As reflected in Table 4, the assumed average maturity of the investment
portfolio was 5.08 years at year-end 1999. Approximately 43.4% of the portfolio
consist of mortgage-backed pass-through securities that have longer-term
contractual maturities but are sometimes paid off/down before maturity or have
repricing characteristics that occur before final maturity. The Bank has
attempted to minimize the repayment risk (risk of very fast or very slow
repayment) associated with these types of securities by investing primarily in a
number of seasoned mortgage pools for which there is a repayment history. This
history better enables the Bank to project the repayment speeds of these pools.
In addition, the Bank has minimized the interest rate risk associated with these
mortgage-backed securities by investing in a variety of pools, many of which
have variable rates with indices that track closely with the current interest
rate environment.

                   TABLE 4 - ANALYSIS OF INVESTMENT SECURITIES

<TABLE>
<CAPTION>

                                      WITHIN              AFTER ONE BUT           AFTER FIVE BUT           AFTER
                                     ONE YEAR           WITHIN FIVE YEARS        WITHIN TEN YEARS        TEN YEARS
                                ------------------     ------------------       -----------------     ----------------
                                 AMOUNT     YIELD      AMOUNT       YIELD       AMOUNT      YIELD     AMOUNT     YIELD      TOTAL
                                 ------     -----      ------       -----       ------      -----     ------     -----      -----

                                                                 (Dollars in thousands)
<S>                              <C>         <C>      <C>           <C>         <C>         <C>        <C>                 <C>
Other government securities      $    --       --     $ 12,698      6.50%       $15,906     6.83%       $  --               28,604
Mutual funds                          94     5.60                                                          --                   94
Other investments                                                                   406     6.00           --                  406
Mortgage-backed securities                                                                                                  22,329
                                 -------              --------                  -------                ------             --------
        Total securities         $    94              $ 12,698                  $16,312                 $  --             $ 51,433
                                 =======              ========                  =======                ======             ========

Average maturity                                                                                                        5.08 years

</TABLE>

The above table sets forth the maturities of investment securities at December
31, 1999 and the weighted average yields of such securities (calculated on the
basis of the cost and effective yields weighted for the scheduled maturity of
each security).

LOANS

    Average loans decreased approximately $2.8 million, or 3.94%, in 1999
compared to an increase of $2.5 million, or 3.56%, in 1998. Although, the Bank
purchased a $22 million portfolio of seasoned automobile loans from NationsBank
in February 1999, close to 50% of this portfolio had paid down by year-end. In
addition, mortgage loans continue to decline as a result of payoffs/paydowns and
refinancings due to the low mortgage rate environment without a high volume of
new originations to replace them.

    The Bank's policy is to make its loans and commitments in the market area it
serves. However, from time-to-time, the Bank has purchased a significant portion
of its loan portfolio to adequately match its level of deposits and to improve
the net interest margin. The Bank continues to originate loans and has a
pipeline of loans located within the Philadelphia region.


                                     28
<PAGE>


                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED

<TABLE>
<CAPTION>

               TABLE 5 - LOANS OUTSTANDING, NET OF UNEARNED INCOME

                                                                      DECEMBER 31,
                                   --------------------------------------------------------------------------------
                                      1999              1998              1997              1996             1995
                                      ----              ----              ----              ----             ----
                                                                  (Dollars in thousands)

<S>                                 <C>               <C>               <C>               <C>               <C>
Commercial and industrial           $13,664           $13,643           $12,095           $10,107           $ 8,021
Commercial real estate                1,288             1,518             1,515               649               627
Consumer loans                       19,822            11,424            22,611            17,340            16,254
Residential mortgages                26,237            31,365            35,962            36,622            37,271
Loans held-for-sale                    --                --               1,979             4,906              --
                                    -------           -------           -------           -------           -------
    Total loans                     $61,011           $57,950           $74,162           $69,624           $62,173
                                    =======           =======           =======           =======           =======

</TABLE>

               TABLE 6 - LOAN MATURITIES AND INTEREST SENSITIVITY


<TABLE>
<CAPTION>
                                                        WITHIN         AFTER ONE BUT           AFTER
                                                       ONE YEAR      WITHIN FIVE YEARS       TEN YEARS         TOTAL
                                                       --------      -----------------       ---------         -----
                                                                         (Dollars in thousands)
<S>                                                     <C>                 <C>               <C>             <C>
Commercial and industrial                               $ 5,957             $ 4,288           $ 3,419         $13,664
Commercial real estate                                      750                   -               538           1,288
Consumer loans                                            1,455              15,431             2,916          19,822
Residential mortgages                                     2,309               5,537            18,481          26,237
                                                        -------             -------           -------         -------
       Total loans                                      $10,471             $25,256           $25,354         $61,011
                                                        =======             =======           =======         =======
Loans maturing after one year with:
    Fixed interest rates                                $43,152
                                                        =======
    Variable interest rates                             $ 7,140
                                                        =======

</TABLE>

NONPERFORMING LOANS

    Table 7 reflects the Bank's nonperforming loans for the last five years. 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 Bank's policy 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 nonaccrual, 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.



                                       29

<PAGE>


                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


<TABLE>
<CAPTION>

                                             TABLE 7 - NONPERFORMING LOANS

                                       1999             1998             1997             1996            1995
                                       ----             ----             ----             ----            ----
                                                           (Dollars in thousands)

<S>                                   <C>              <C>              <C>              <C>             <C>
Nonaccrual loans                      $2,027           $1,720           $1,179           $ 800           $ 949
Interest income included in
    net income for the year               67               37               14               6              23
Interest income that would
    have been recorded
    under original terms                 113              189              112              45              37
Loans past due 90 days and
    still accruing                        53              125              306             408              10

</TABLE>

     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. Although the Bank has a diversified loan portfolio, its
debtors' ability to honor their contracts is influenced by the region's economy.

     At December 31, 1999, approximately 28% of the commercial loan portfolio of
the Bank 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 December 31, 1999, none of these loans was
nonperforming.

     During 1999, nonaccrual loans increased to $2 million, up from $1.7 million
at December 31, 1998. This increase is primarily attributable to one community
development construction project that accounts for $754,000 of the total
nonaccrual loans. At December 31, 1999, approximately $411,000 of the total
nonaccrual loans was residential mortgages. The underlying real estate
collateral associated with these loans minimizes the risk of loss.

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. Table 8 presents
the allocation of loan losses by major category for the past five years. The
specific allocations in any particular category may prove to be excessive or
inadequate and consequently may be reallocated in the future to reflect
then-current conditions.



                                      30
<PAGE>


                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


               TABLE 8 - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>

                                   1999                        1998                       1997                      1996
                           ------------------------     ----------------------    -----------------------    ----------------------
                                         PERCENT                     PERCENT                    PERCENT                  PERCENT
                                         OF LOANS                    OF LOANS                   OF LOANS                 OF LOANS
                                         IN EACH                     IN EACH                     IN EACH                 IN EACH
                                       CATEGORY TO                 CATEGORY TO                CATEGORY TO              CATEGORY TO
                           AMOUNT      TOTAL LOANS      AMOUNT     TOTAL LOANS     AMOUNT     TOTAL LOANS    AMOUNT    TOTAL LOANS
                           ------      -----------      ------     -----------     ------     -----------    ------    -----------
                                                         (Dollars in thousands)
<S>                         <C>            <C>          <C>           <C>          <C>            <C>        <C>           <C>
Commercial and
    Industrial              $  263         22.40%       $  272        23.55%       $  144         16.31%     $  222        14.52%
Commercial real estate         877          2.11           132         2.62            13          2.04          13         0.93
Residential mortgages          144         43.00            55        19.71           180         48.49         245        52.60
Consumer loans                 283         32.49           188        54.12            97         33.16          44        31.95
Unallocated                                                 32           --            34            --           4           --
                            ------        ------        ------       ------        ------        ------      ------       ------
                            $1,567        100.00%       $  679       100.00%       $  468        100.00%     $  528       100.00%
                            ======        ======        ======       ======        ======        ======      ======       ======
</TABLE>


    Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions may be necessary based on changes in economic conditions. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize additions to the allowance based on their
judgments of information available to them at the time of the examination.




                                       31
<PAGE>


                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


                 TABLE 9 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES


<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                         -------------------------------------------------------------------
                                           1999           1998           1997           1996           1995
                                           ----           ----           ----           ----           ----
                                                                (Dollars in thousands)

<S>                                      <C>            <C>            <C>            <C>            <C>
Balance at January 1                     $   679        $   468        $   528        $   476        $   726
                                         -------        -------        -------        -------        -------
Charge-offs:
    Commercial and industrial                (25)          --              (66)           (17)          (195)
    Commercial real estate                  --             --             --             --             --
    Residential mortgages                    (47)          --               (9)          --             --
    Consumer loans                          (315)          (180)          (160)           (25)            (5)
                                         -------        -------        -------        -------        -------
                                            (387)          (180)          (235)           (42)          (200)

Recoveries - consumer loans                  268             41             78              9              6
                                         -------        -------        -------        -------        -------
Net charge-offs                             (119)          (139)          (157)           (33)          (194)

Provisions charged to operations           1,007            350             97             85             78
Allowance previously allocated to
    sold loans                              --             --             --             --             (134)
                                         -------        -------        -------        -------        -------
Balance at December 31                   $ 1,567        $   679        $   468        $   528        $   476
                                         =======        =======        =======        =======        =======
Ratio of net charge-offs to average
    loans outstanding                       0.17%          0.19%          0.23%          0.05%          0.34%
                                         =======        =======        =======        =======        =======

</TABLE>

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.

DEPOSITS

     Average deposits grew approximately $2.7 million, or 2.6%, in 1999 compared
to growth of $11.4 million, or 12.4%, in 1998. The increase is primarily related
to the acquisition of $31.5 million in deposits from First Union Corporation in
September 1999. These deposits included primarily core deposits consisting of
checking and savings accounts.

     The Bank introduced "sweep" deposit accounts in late 1997 as a vehicle to
attract larger deposits by sweeping funds out of noninterest-bearing demand
deposit accounts and investing them overnight in interest-bearing deposit
accounts. At December 31, 1999, there were $7 million in such accounts compared
to $10 million in 1998.


                                       32
<PAGE>

                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED



                  TABLE 10 - AVERAGE DEPOSITS BY CLASS AND RATE

<TABLE>
<CAPTION>

                                      1999                        1998                        1997
                             ----------------------      ----------------------      --------------------
                              AMOUNT         RATE         AMOUNT        RATE          AMOUNT        RATE
                              ------         ----         ------        ----          ------        ----
                                                         (Dollars in thousands)
<S>                           <C>            <C>          <C>            <C>          <C>            <C>
Noninterest-bearing
    demand deposits          $24,019           --%       $19,740           --%       $15,905           --%
Interest-bearing demand
    deposits                  19,892         2.86         22,622         2.74         14,812         2.56
Savings deposits              26,744         1.65         23,283         1.84         23,277         1.97
Time deposits                 35,020         4.84         37,365         5.08         37,627         4.92

</TABLE>

OTHER BORROWED FUNDS

    The average balance for other borrowed funds decreased $275,000, or 18.08%,
in 1999 compared to an increase of $259,000, or 20.52%, in 1998. The decrease in
1999 was due to the March 31, 1999 maturity of a $1.5 million reverse repurchase
agreement the Bank entered into in 1998. This decline was offset by a $1.5
million capital lease obligation related to the Bank's lease of a building for
its corporate offices in July 1999. Generally, the level of other borrowed funds
is dependent on many items such as loan growth, deposit growth, customer
collateral/security requirements and interest rates paid for these funds.

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 enhance
consistent growth of net interest income through periods of changing interest
rates.

    The Bank is required to maintain minimum levels of liquid assets as defined
by Federal Reserve Board (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 December 31, 1999, management believes
the Bank's liquidity is satisfactory and in compliance with 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. There are no securities maturing
in one year or less. However, other types of assets such as federal funds sold,
as well as maturing loans, are sources of liquidity. Approximately $10.5 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. Table 11 provides a breakdown of the
maturity of deposits of $100,000 or more.



                                       33
<PAGE>
                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


               TABLE 11 - MATURITY OF DEPOSITS OF $100,000 OR MORE

                             (Dollars in thousands)

                    3 months or less                  $ 7,472
                    Over 3 through 6 months             4,632
                    Over 6 months through 1 year           --
                    Over 1 through five years             402
                    Over five years                       128
                                                      -------
                               Total                  $12,634
                                                      =======

    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 that 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 interest-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. Table 12 sets
forth the earliest repricing distribution of the Bank's interest-earning assets
and interest-bearing liabilities at December 31, 1999, the Bank's interest rate
sensitivity gap ratio (i.e. excess of interest rate-sensitive assets over
interest rate-sensitive liabilities, divided by total assets) and the Bank's
cumulative interest rate sensitivity gap ratio. For purposes of the table,
except for savings deposits, an asset or liability is considered rate-sensitive
within a specified period when it matures or could be repriced within such
period or repriced within such period in accordance with its contractual terms.
At December 31, 1999, an asset sensitive position is maintained on a cumulative
basis through one year of 6.66%. This level is within the Bank's policy
guidelines of +/-15% on a cumulative one-year basis. The current gap position is
relatively evenly matched as a result of the number of loans either repricing or
maturing in 12 months closely matching certificate of deposit maturities.
Interest rate risk is minimized by the Bank's high level of core deposits that
have been placed in longer repricing intervals. Generally, because of the Bank's
positive gap position in shorter time frames, the Bank can anticipate that
decreases in market rates will have a negative impact on the net interest
income, while increases will have the opposite effect.

    For purposes of the gap analysis, such deposits (savings, MMA, NOW) which do
not have definitive maturity dates and do not readily react to changes in
interest rates have been placed in longer repricing intervals versus immediate
repricing time frames, making the analysis more reflective of the Bank's
historical experience.



                                       34

<PAGE>

                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


                    TABLE 12 - INTEREST SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>

                                                                  INTEREST RATE SENSITIVITY GAPS
                                                                      AS OF DECEMBER 31, 1999

                                                                        OVER
                                                        OVER           1 YEAR          OVER
                                       3 MONTHS      3 THROUGH 12      THROUGH       3 THROUGH       OVER FIVE
                                        OR LESS        MONTHS          3 YEARS        5 YEARS          YEARS        CUMULATIVE
                                        -------        ------          -------        -------          -----        ----------
                                                                        (Dollars in thousands)
<S>                                     <C>             <C>           <C>              <C>            <C>            <C>
Interest-sensitive assets:
    Interest-bearing deposits
      with banks                        $     92        $    91       $     183        $              $              $     366
    Investment securities:                 3,003          2,440           5,168          25,676         15,146          51,433
    Federal funds sold                     7,158                                                                         7,158
    Loans                                 14,545          5,180           9,062          10,770         19,887          59,444
                                       ---------        -------        --------        --------       --------       ---------
      Total interest-sensitive
          assets                          24,798          7,711          14,413          36,446         35,033       $ 118,401
                                       ---------      ---------       ---------       ---------       --------       =========
      Cumulative totals                   24,798         32,509          46,922          83,368        118,401
                                       ---------        -------        --------        --------       --------
Interest-sensitive liabilities:
    Interest checking accounts              --            3,828           1,688           3,220      $  20,384          29,120
    Savings accounts                        --               --           3,027           3,027          27,288         33,342
    Certificates less than 100,000         6,788          3,473           6,791           6,412             --          23,464
    Certificates of $100,000
      or more                              7,524          1,565           3,036             509             --          12,634
    Other Borrowed Funds                   1,445                                             --             --           1,445
                                       ---------        -------        --------        --------       --------       ---------
      Total interest-sensitive
          liabilities                  $  15,757          8,866          14,542          13,168         47,672       $ 100,005
                                       ---------      ---------       ---------       ---------      ---------       =========
      Cumulative totals                $  15,757      $  24,623       $  39,165       $  52,333      $ 100,005
                                       =========      =========       =========       =========      =========
Interest sensitivity gap               $   9,041      ($  1,155)      ($    129)      $  23,278      ($ 12,639)
                                       =========      =========       =========       =========      =========
Cumulative gap                         $   9,041      $   7,886       $   7,757       $  31,035      $  18,396
                                       =========      =========       =========       =========      =========
Cumulative gap/total earning
    Assets                                 7.64%          6.66%           6.55%          26.21%         15.54%
                                         =======         ======         =======         =======        =======
Interest-sensitive assets to
    interest-sensitive liabilities       157.38%         86.97%          99.11%         276.78%         73.49%
                                         =======         ======         =======         =======        =======

</TABLE>

Core deposits such as checking and savings deposits have been placed in
repricing intervals based on historical trends and management's estimates.


    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
positive 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


                                       35
<PAGE>
                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


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
net income of the Bank. The calculated estimates of net income or "earnings" at
risk at December 31, 1999 are as follows:

                                                                PERCENT OF
      CHANGES IN RATE              NET INTEREST INCOME            CHANGE
      ---------------              -------------------            ------
                                  (Dollars in thousands)

      +200 basis points                    6,019                  (3.7)%
      +100 basis points                    6,209                  (0.7)
      Flat rate                            6,252                    --
      -100 basis points                    6,322                   1.1
      -200 basis points                    6,372                   1.9

A simulation model is also used to estimate the impact of various changes, both
upward and downward, in market interest rates and volumes of assets and
liabilities on the economic value of the Bank. This model produces an interest
rate exposure report that measures the long-term rate risks in the balance sheet
by valuing the Bank's assets and liabilities at market. It simulates what amount
would be left over if the Bank liquidated its assets and liabilities. This is
otherwise known as "economic value" of the capital of the Bank. The calculated
estimates of economic value at risk at December 31, 1999 are as follows:

                                                               PERCENT OF
       CHANGES IN RATE                 NET EQUITY                CHANGE
       ---------------                 ----------                ------
                                  (Dollars in thousands)
       +200 basis points                19,439                    (6.8)%
       +100 basis points                20,751                    (0.5)
       Flat rate                        20,863                      --
       -100 basis points                20,287                    (2.8)
       -200 basis points                19,757                    (5.3)

    The assumptions used in evaluating the vulnerability of the Company's
earnings and equity 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
earnings and 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 significant and is within the policy limits of the Bank at
December 31, 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 and movement into money market
          deposit accounts and short-term certificates of deposit 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.

    The Board of Directors has determined that active supervision of the
interest rate spread between yield on earning assets and cost of funds will
decrease the Bank's vulnerability to interest rate cycles.


                                       36
<PAGE>
                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


CAPITAL RESOURCES

    Total shareholders' equity increased $123 thousand in 1999 compared to an
increase of approximately $1.9 million in 1998. The increase in 1999 is a result
of the sale of common stock ($1.4 million) and the sale of preferred stock
($203,000). However, the net loss of $1.2 million resulted in an increase in the
accumulated deficit

     The FRB standards for measuring capital adequacy for U.S. Banking
organizations require 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, noncumulative and cumulative perpetual
preferred stock, and minority interests less goodwill and/or intangible assets).
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 Table 13, the Company'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. However, the Bank's growth,
continued losses and the additional provisions to the allowance for loans losses
may have an adverse effect on its capital ratios The Company and the Bank do not
anticipate paying dividends in the near future.


<TABLE>
<CAPTION>

                            TABLE 13 - CAPITAL RATIOS

                                                         1999               1998             1997
                                                         ----               ----             ----
                                                                   (Dollars in thousands)

<S>                                                       <C>             <C>               <C>
Total Capital                                          $  9,223           $  8,823          $  6,891
Less:
    Intangible Assets                                    (2,429)              --                --
                                                       --------           --------          --------
Tier 1 capital                                            6,794              8,823             6,891
Tier 2 capital                                              770                679               468
                                                       --------           --------          --------
    Total qualifying capital                           $  7,564           $  9,502          $  7,359
                                                       ========           ========          ========
Risk-adjusted total assets (including off-
    balance-sheet exposures)                           $ 60,795           $ 54,373          $ 51,868
                                                       ========           ========          ========
Tier 1 risk-based capital ratio                           11.18%             16.23%            13.29%
Total (Tier I and II) risk-based capital ratio            12.44%             17.48%            14.19%
Tier 1 leverage ratio                                      5.08%              7.67%             6.59%
</TABLE>


REGULATORY MATTERS

In February 2000, as a result of a regulatory examination completed in December
1999, the Bank entered into a Written Agreement with its primary regulators with
regard to, among other things, achievement of agreed-upon capital levels,
implementation of a viable earnings/strategic plan, adequate funding of the
allowance for loan losses, the completion of a management review and succession
plan, and improvement in internal controls. Management has begun to address all
matters outlined in the Agreement and expects to be in full compliance with its
terms and conditions within the required timelines. As part of this Agreement,
the Bank is required to achieve a Tier 1 leverage ratio of 6.50% by June 30,
2000 and at all times thereafter during the term of this Agreement, maintain its
Tier 1 leverage ratio at a level of no less than 7%. Failure to comply could
result in additional regulatory supervision and/or actions.


                                      37
<PAGE>
                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


     The most recent notification dated February 10, 2000, from the Federal
Reserve Bank categorized the Bank as "adequately" under the regulatory framework
for prompt and corrective action. To be categorized as "well capitalized," the
Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1
leverage ratios as set forth in the table below. The Bank's growth, continued
losses and the additional provisions to the allowance for loans losses may have
an adverse effect on its capital ratios.

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY

     In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activity. Subsequent
to this statement, SFAS No 137 was issued, which amended the effective date of
SFAS No. 133 to be all fiscal years beginning after June 15, 2000. Based on the
Company's minimal use of derivatives at the current time, management does not
anticipate the adoption of SFAS No. 133 will have a significant impact on
earnings or financial position of the Company. However, the impact from adopting
SFAS No. 133 will depend on the nature and purpose of the derivative instruments
in use by the Company at that time.

CAUTIONARY STATEMENT

    Certain statements contained herein are not based on historical fact and are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements, which are based upon
various assumptions (some of which are beyond the control of the Bank and the
Company), may be identified by reference to a future period, or periods, or by
the use of forward-looking terminology such as "may," "will," "believe,"
"expect," "estimate," "anticipate," "continue," or similar terms or variations
on those terms, or the negative of those terms. Actual results could differ
materially from those set forth in forward-looking statements. Factors that
could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, economic growth;
governmental monetary policy, including interest rate policies of the FRB;
sources and costs of funds; levels of interest rates; inflation rates; market
capital spending; technological change; the state of the securities and capital
markets; acquisition; consumer spending and savings; expense levels; tax,
securities, and banking laws; and prospective legislation.



                                       38
<PAGE>

                     United Bancshares, Inc. and Subsidiary

                  MANAGEMENT DISCUSSION AND ANALYSIS--CONTINUED


YEAR 2000

The Bank was successfully prepared for the Year 2000 potential problems that
could have resulted from computer programs being written using two digits rather
than four to define the applicable year. This could have resulted in major
system failures or miscalculations. The Company completed 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. Where necessary,
software and hardware were replaced/remediated. As a result, there were no
reportable events or exceptions related to the Year 2000. However, while not
expected, there can be no assurance that the Company will not experience any
problems in the future. If any problems were to occur in the future, the Company
will follow its contingency plan.


                                       39
<PAGE>


ITEM 8 - FINANCIAL STATEMENTS

     See Consolidated Financial Statements attached hereto as Exhibits.



ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.


                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     (a)  DIRECTORS OF THE REGISTRANT.

<TABLE>
<CAPTION>


                     PRINCIPAL OCCUPATION AND          YEAR FIRST              TERM
NAME           AGE   OTHER DIRECTORSHIPS             BECAME DIRECTOR        WILL EXPIRE
----           ---   -------------------             ---------------        -----------

<S>            <C>                                       <C>                   <C>
James F.
 Bodine        78    Retired as Managing                 1993                  2002
                     Partner, Urban Affairs
                     Partnership
                     Phila., PA.

S. Amos
 Brackeen      81    Founder and Pastor,                 1993                  2003
                     Philippian Baptist
                     Church of Phila., PA.

Emma C.
 Chappell      59    Chairman of                         1993                  2003
                     the Board, President and CEO
                     of Registrant and United Bank
                     of Philadelphia

Kemel G.
 Dawkins       76    President, Kemrodco                 1993                  2001
                     Development and
                     Construction Company, Inc.,
                     President, Kem-Her
                     Construction Company
                     Inc., Phila., PA.







                                       40


<PAGE>



L. Armstead
 Edwards       57   Treasurer,                           1993                  2000
                    United Bancshares, Inc.
                    Owner and President,
                    P.A.Z., Inc.,
                    Philadelphia., PA

Marionette     55    Partner,                            1996                  2000
Y. Frazier           John Frazier, Inc.
                     Philadelphia, PA

William C.
 Green         75    Co-founder, Ivy Leaf                1993                  2002
                     Middle School,
                     Philadelphia, PA

Angela M.
 Huggins       60    President and CEO                   1993                  2001
                     RMS Technologies
                     Inc. Foundation

William B.
 Moore         57    Secretary,                          1993                  2003
                     United Bancshares, Inc.
                     Pastor, Tenth Memorial
                     Baptist Church,
                     Philadelphia, PA

Ernest L.
 Wright        71    Founder, President and              1993                  2000
                     CEO of Ernest L. Wright
                     Construction Company
                     Phila., PA









                                       41


</TABLE>

<PAGE>



      (b) EXECUTIVE OFFICERS OF REGISTRANT.


NAME                             AGE       OFFICE
----                             ---       ------

Emma C. Chappell (1)             59        Chairman, President and Chief
                                           Executive Officer

James F. Bodine                  78        Vice Chairman

Reverend William B. Moore        57        Secretary

L. Armstead Edwards              57        Treasurer

     (1) Dr. Chappell is the only Executive Officer of the Registrant
compensated for her services as such. Dr. Chappell serves as Chairman, President
and Chief Executive Officer of the Bank pursuant to a written employment
agreement entered into September 13, 1993 and amended as of January 1, 1994 by
and among Dr. Chappell, the Bank and United Bancshares, Inc. This employment
agreement provides for an employment term ending December 31, 2000 and further
provides that Dr. Chappell will receive a guaranteed annual base salary of
$150,000. A copy of this employment agreement was filed with Registrant's 1998
Form 10-K and is incorporated herein by reference. The employment agreement was
amended effective January 1, 1997 to revise the defined benefit nature of the
retirement benefit identified in the contract to a defined contribution
retirement obligation.

     (c) FAMILY RELATIONSHIPS.

     There are no family relationships between any director, executive officer
or person nominated or chosen by the Bank to become a director or executive
officer.

     (d) OTHER

     There have been no events under any bankruptcy act, no criminal proceedings
and no judgments or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.









                                       42



<PAGE>



ITEM 11 - EXECUTIVE COMPENSATION.


                        COMPENSATION TABLE

<TABLE>
<CAPTION>
NAME OF
INDIVIDUAL OR
NUMBER            CAPACITIES IN
IN GROUP          WHICH SERVED
--------          ------------

                                       1999 SALARY     1999 BONUS      1999 OPTIONS      SERP
                                       -----------     ----------      ------------      ----

<S>           <C>                       <C>             <C>              <C>            <C>
Emma C.       Chairman, President       $174,500        $11,183          $     0        $51,840
Chappell      Chief Executive Officer

                                       1998 SALARY     1998 BONUS      1998 OPTIONS      SERP
                                       -----------     ----------      ------------      ----

                                        $165,000        $18,000          $29,694(1)     $48,000


                                       1997 SALARY     1997 BONUS                        SERP
                                       -----------     ----------                        ----

                                        $162,000        $0                              $48,000

</TABLE>


     (1) These options to purchase the Registrant's Common Stock at $8.54 per
share were issued in December 1998 to replace options that expired in 1998. The
options have a five year term.

     Directors of the Bank are compensated for each meeting attended in the
amount of three hundred dollars fifty ($350) per Board meeting attended and one
hundred fifty dollars ($150) for each committee meeting attended. Directors who
are also salaried officers of the Bank receive no remuneration for their
services as Directors. During the year ended December 31, 1999, the Bank paid
Directors' fees to its "non-interested" Directors totaling $31,550. UBS has paid
no director fees since its inception.

     Dr. Emma C. Chappell, Chairman of the Board and Chief Executive Officer of
the Bank and Registrant since its formation, receives a minimum annual salary of
$150,000. A copy of the employment agreement entered into among Dr. Chappell,
the Bank and UBS is incorporated herein by reference.







                                       43
<PAGE>



     One hundred thousand shares of the Bank's Common Stock are subject to a
Long Term Incentive Compensation Plan (the "Plan") under which options to
purchase the Bank's Common Stock may be granted to key employees of a price not
less than the fair market value thereof at the date of the grant ("Options"),
and Common Stock may be awarded as Restricted Stock, subject for a period of
time to substantial risk of forfeiture and restrictions on disposition as
determined by the Compensation Committee as of the date of the grant
("Restricted Stock"). Pursuant to the Plan, options are granted in tandem with
Stock Appreciation Rights allowing the holder of an Option to surrender the
Option and receive an amount equal to the appreciation in market value of a
fixed number of shares of Common Stock from the date of the grant of the Option
("SARs"). SARs may be payable in Common Stock or cash or a combination of both.
The Plan also allows the Compensation Committee to grant Performance Shares,
which are contingent rights to receive, when certain performance criteria have
been attained, amounts of Common Stock and cash determined by the Compensation
Committee for such an award. Such rights are subject to forfeiture or reduction
if performance goals specified are not met during the performance period. No
such options, restricted stock or SARs were granted for 1999 performance.

     No deferred compensation, incentive compensation or any further
compensation pursuant to any plan has been paid by the Bank, or will be paid by
the Bank based on services rendered to the Bank to the date of this filing.

     At its annual meeting held May 6, 1994, the shareholders of the Registrant
approved the establishment of an Employee Stock Ownership Plan ("ESOP"). The
ESOP has not been formally activated by the Registrant. No purchases have been
made pursuant to the ESOP.












                                       44
<PAGE>



ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

   SHAREHOLDERS OWNING IN EXCESS OF FIVE PERCENT OF REGISTRANT'S COMMON STOCK

                                 AMOUNT OF UBS             PERCENTAGE
SHAREHOLDERS                  BENEFICIAL OWNERSHIP        COMMON STOCK
------------                  --------------------        ------------

First Union Corporation            241,666                 23.49%
Broad and Chestnut Streets                                 (50,000 or 4.86% are
Philadelphia, PA  19101                                    voting shares)

Philadelphia Municipal             71,667                   6.97%
Retirement System
2000 Two Penn Center
Philadelphia, PA  19102


                       DIRECTORS AND OFFICERS OF THE BANK

                            SHARES OF REGISTRANT'S COMMON STOCK

NAME                     BENEFICIALLY OWNED            PERCENTAGE
----                     ------------------            ----------
James F. Bodine                    10,833                   1.19%
S. Amos Brackeen                    5,000                    .56%
Emma C. Chappell(1)                 7,000                    .77%
Kemel G. Dawkins                    8,333                    .91%
L. Armstead Edwards                10,833                   1.19%
Marionette Y. Frazier               9,350                   1.02%
William C. Green (2)               13,833                   1.51%
Angela M. Huggins                   4,200                    .46%
William B. Moore                    1,000                    .11%
Ernest L. Wright                    5,000                    .55%
                                   ------                   -----
     TOTAL                         75,382                   8.27%
                                   ======                   =====

     (1) Dr. Chappell also acts as Trustee of a voting trust agreement pursuant
to which Fahnstock, Inc deposited 5,209 shares of Common Stock of UBS with Dr.
Chappell as Trustee, to be voted by Dr. Chappell pursuant to the terms of the
Voting Trust. The term of the Voting Trust is ten years.

     Dr. Chappell acts as Trustee of a voting trust agreement pursuant to which
NationsBank Corporation deposited 33,500 shares of Common Stock of UBS with Dr.
Chappell as Trustee, to be voted by Dr. Chappell pursuant to the terms of the
Voting Trust. The term of the Voting Trust is ten years.

     Dr. Chappell also owns options to purchase up to 29,694 shares of the
common stock of UBS at a purchase price of $8.54 per share . This option was
awarded in December, 1998 and remains in effect for a term of five years from
that date.

     (2) Owned jointly with Liller B. Green, his wife.



                                       45

<PAGE>


ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                           UNITED BANK OF PHILADELPHIA

     United Bank of Philadelphia ("UBP") is a Pennsylvania bank subsidiary of
Registrant. The Directors of UBP are as follows:


                             PRINCIPAL OCCUPATION            YEAR FIRST
NAME               AGE       OTHER DIRECTORSHIPS           BECAME DIRECTOR
----               ---       -------------------           ---------------
James F.
 Bodine ...       78          Retired as Managing                 1992
                              Partner, Urban Affairs
                              Partnership
                              Phila., PA.
S. Amos
 Brackeen ...     81          Founder and Pastor,                 1992
                              Philippian Baptist
                              Church of Phila., PA.

Emma C.
 Chappell ...     59          Founder, Chairman of                1992
                              the Board, President
                              and CEO of the
                              Bank and Registrant.
                              of Philadelphia & Vicinity.
Kemel G.
 Dawkins ...      76          President, Kemrodco                 1992
                              Development and
                              Construction Company, Inc.,
                              President, Kem-Her
                              Construction Company
                              Inc., Phila., PA.

L. Armstead
 Edwards ...      57          Owner and President,                1992
                              P.A.Z., Inc.,
                              Philadelphia., PA

Marionette Y.     55          Partner                             1996
 Frazier ...                  John Frazier, Inc.
                              Philadelphia, PA

William C.
 Green ....       75          Co-Founder, Ivy Leaf                1992
                              Middle School,
                              Philadelphia, PA
Angela M.
 Huggins ...      60          President and CEO                   1992
                              RMS Technologies, Inc. Foundation
                              Moorestown, NJ

William B.
 Moore ...        57          Pastor, Tenth Memorial              1992
                              Baptist Church,
                              Philadelphia, PA
Ernest L.
 Wright ...       71          Founder, President and              1992
                              CEO of Ernest L. Wright
                              Construction Company,
                              Phila., PA

     Each of these officers and directors are officers and directors of the
Registrant.

                               PHILADELPHIA UNITED

     Dr. Chappell, Chairman, President and CEO of the Bank and Registrant also
serves as Chairman of Philadelphia United Community Development Corporation
("Philadelphia United"). Her daughter, Tracey Carter serves as President of
Philadelphia United. The Bank subleases office space to Philadelphia United. A
copy of this lease is submitted as an exhibit hereto.

                             300 NORTH THIRD STREET

     The Bank leases its corporate headquarters facility from ECC Properties,
LLC. ECC Properties, LLC is owned by Dr. Chappell. For a detailed discussion of
this transaciton, see "Item 2 - Properties".

                                       46

<PAGE>

                                     PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K

Leases for office space and branch locations

a. 1. FINANCIAL STATEMENTS: December 31, 1999

     Report of Independent Auditors, April 10, 2000

     Consolidated Balance Sheets at December 31, 1999 and 1998.

     Consolidated Statements of Operations for the years ended December 31,
     1999, 1998 and 1997.

     Consolidated Statements of Shareholders' Equity for the years ended
     December 31, 1999, 1998 and 1997.

     Consolidated Statements of Cash Flows for the years ended December 31,
     1999, 1998 and 1997.

     Notes to Consolidated Financial Statements.

2.   Financial Statement Schedules

     Financial Statement Schedules are omitted because the required information
     is either not applicable, not required or is shown in the respective
     financial statements or in the notes thereto.

3.   The following exhibits are filed herewith or incorporated
     by reference as a part of this Annual Report.

     3(i) Articles of Incorporation (Incorporated by reference to Registrant's
          1997 Form 10-K).

     3(ii) Bylaws (Incorporated by reference to Registrant's 1997 Form 10-K).

     9.l  Voting Trust Agreement with NationsBank (Incorporated by reference to
          Registrant's 1997 Form 10-K).

     9.2  Voting Trust Agreement with Fahnstock (Incorporated by reference to
          Registrant's 1997 Form 10-K).

     10.1 Lease Agreements between the Bank and various landlords.

     10.2 Lease Agreement between ECC Properties, LLC and the Bank

     10.3 Lease Agreement between the Bank and Philadelphia United Community
          Development Corporation.

     10.4 Written Agreement by and among United Bancshares, Inc., United
          Bank of Philadelphia and Federal Reserve Bank of Philadelphia

     11.  Statement of Computation of Earnings Per Share. Included at Item 8
          hereof.

     12.  Statement of Computation of Ratios. Included at Item 8 hereof.

     23.  Consent of Independent Accountants.

     27.  Financial Data Schedule.

     (b) Report on 8-K filed February 25, 2000 incorporated by reference.

     (c) The exhibits required to be filed by this item are listed under Item
14(a)3 above.

     (d) Not applicable.


                                       47




<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                        By: /s/  Emma C. Chappell
                                        -----------------------------
                                        Emma C. Chappell, Chairman,
 Date: April 14, 2000                   President & CEO




-----------------------------
James F. Bodine

-----------------------------
S. Amos Brackeen

-----------------------------
Emma C. Chappell

-----------------------------
Kemel G. Dawkins

-----------------------------
L. Armstead Edwards

-----------------------------
Marionette Y. Frazier

-----------------------------
William C. Green

-----------------------------
Angela M. Huggins

-----------------------------
William B. Moore

-----------------------------
Ernest L. Wright


                                       48

<PAGE>




                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                       OF
                     UNITED BANCSHARES, INC. AND SUBSIDIARY



     Report of Independent Auditors, April 10, 2000              50

     Consolidated Balance Sheets at December 31, 1999 and 1998   51

     Consolidated Statements of Operations
       for the years ended December 31, 1999, 1998 and 1997      52

     Consolidated Statements of Shareholders' Equity
       for the years ended December 31, 1999, 1998 and 1997      53

     Consolidated Statements of Cash Flows
       for the years ended December 31, 1999, 1998 and 1997      54

     Notes to Consolidated Financial Statements                  55












                                       49



<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Shareholders and Board of Directors
United Bancshares, Inc. and subsidiary


      We have audited the accompanying consolidated balance sheets of United
Bancshares, Inc. and Subsidiary as of December 31, 1999 and 1998, and the
related consolidated statements of operations, changes in shareholders' equity
and comprehensive income, and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     As discussed in Note 16 to the financial statements, the Bank entered
into a Written Agreement with the Federal Reserve Bank of Philadelphia and
the Pennsylvania Department of Banking dated February 10, 2000. Management's
plans in regard to this matter are described in Note 16.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of United
Bancshares, Inc. and Subsidiary as of December 31, 1999 and 1998, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.



                                                          /s/ Grant Thornton LLP

Philadelphia, Pennsylvania
April 10, 2000



                                       50
<PAGE>


                     United Bancshares, Inc. and Subsidiary

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                   DECEMBER 31,
                                                      ----------------------------------
                                                          1999                1998
                                                          ----                ----
                  ASSETS

<S>                                                   <C>                <C>
Cash and due from banks                               $  9,396,669       $  3,675,010
Interest-bearing deposits with banks                       365,547            350,024
Federal funds sold                                       7,158,000         12,318,000
                                                      ------------       ------------
          Cash and cash equivalents                     16,920,216         16,343,034
Investment securities:
   Available-for-sale, at market value                  19,129,535          8,049,875
   Held-to-maturity, at amortized cost
     (market value of $31,470,822 and
     $35,203,274 in 1999 and 1998, respectively)        32,303,774         35,146,148
Loans, net of unearned discount of
   $225,302 and $301,540 in 1999 and
   1998, respectively                                   61,010,995         57,950,133
Less allowance for loan losses                          (1,566,642)          (679,557)
                                                      ------------       ------------
          Net loans                                     59,444,353         57,270,576
Bank premises and equipment, net                         3,825,321          1,565,131
Accrued interest receivable                              1,221,679          1,749,623
Foreclosed real estate                                     397,641            262,368
Core deposit intangible                                  2,428,524               --
Prepaid expenses and other assets                        1,578,036          1,595,926
                                                      ------------       ------------
                                                      $137,249,079       $121,982,681
                                                      ============       ============


          LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Demand deposits, noninterest-bearing               $ 26,206,218       $ 19,999,226
   Demand deposits, interest-bearing                    29,119,779         29,114,084
   Savings deposits                                     33,342,400         23,393,986
   Time deposits, $100,000 and over                     12,633,964         13,942,008
   Time deposits                                        23,464,035         22,614,098
                                                      ------------       ------------
                                                       124,766,396        109,063,402

   Long-term debt                                             --               11,191
   Securities sold to repurchase                              --            1,557,755
   Obligations under capital leases                      1,444,607               --
   Accrued interest payable                                600,546            598,352
   Accrued expenses and other liabilities                1,410,215          1,847,665
                                                      ------------       ------------
          Total liabilities                            128,221,764        113,078,365
                                                      ------------       ------------
Shareholders' equity:
   Series A preferred stock, noncumulative, 6%,
     $0.01 par value, 500,000
     shares authorized; 143,150 and 132,999
     issued and outstanding
     in 1999 and 1998                                        1,432              1,330
   Common stock, $0.01 par value;
     2,000,000 shares authorized; 1,028,753 and
     913,490 issued and outstanding in
     1999 and 1998, respectively                            10,288              9,134
   Additional paid-in-capital                           13,870,169         12,286,233
   Accumulated deficit                                  (4,658,391)        (3,428,169)
   Accumulated other comprehensive income (loss)          (196,183)            35,788
                                                      ------------       ------------
          Total shareholders' equity                     9,027,315          8,904,316
                                                      ------------       ------------
                                                      $137,249,079       $121,982,681
                                                      ============       ============

</TABLE>


        The accompanying notes are an integral part of these statements.



                                      51
<PAGE>



                     United Bancshares, Inc. and Subsidiary

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                  YEAR ENDED DECEMBER 31,
                                                   -----------------------------------------------
                                                       1999               1998            1997
                                                       ----               ----            ----
<S>                                                <C>               <C>              <C>
Interest income:
   Interest and fees on loans                      $ 5,589,589       $ 6,270,323      $ 5,912,901
   Interest on investment securities                 1,812,983         1,275,542        1,067,762
   Interest on federal funds sold                      680,715           688,285          482,856
   Interest on time deposits with other banks           24,834            26,329           25,333
                                                   -----------       -----------      -----------
         Total interest income                       8,108,121         8,260,479        7,488,852
                                                   -----------       -----------      -----------
Interest expense:
   Interest on time deposits                         1,695,078         1,898,967        1,852,080
   Interest on demand deposits                         568,903           619,921          379,397
   Interest on savings deposits                        440,002           427,682          459,035
   Interest on borrowed funds                          140,075            73,265           54,841
                                                   -----------       -----------      -----------
         Total interest expense                      2,844,058         3,019,835        2,745,353
                                                   -----------       -----------      -----------
         Net interest income                         5,264,063         5,240,644        4,743,499

Provision for loan losses                            1,007,003           350,500           97,500
                                                   -----------       -----------      -----------
         Net interest income after
          provision for loan losses                  4,257,060         4,890,144        4,645,999
                                                   -----------       -----------      -----------
Noninterest income:
   Gain on sale of loans                                43,856           201,664          187,471
   Customer service fees                             2,031,245         1,457,508        1,181,082
   Gain on sale of investments                            --               1,201             --
   Other income                                        151,303           155,663          148,867
                                                   -----------       -----------      -----------
         Total noninterest income                    2,226,404         1,816,036        1,517,420
                                                   -----------       -----------      -----------
Noninterest expense:
   Salaries, wages, and employee benefits            2,962,500         2,555,774        2,397,861
   Occupancy and equipment                           1,437,775         1,275,902        1,015,419
   Office operations and supplies                      715,207           525,771          522,525
   Marketing and public relations                      304,537           221,348          172,326
   Professional services                               393,607           232,793          274,999
   Data processing                                     863,208           868,665          844,009
   Deposit insurance assessments                       104,991            82,389           66,274
   Other operating                                     931,861           933,605          689,416
                                                   -----------       -----------      -----------
         Total noninterest expense                   7,713,686         6,696,247        5,982,829
                                                   -----------       -----------      -----------
         Net income (loss)                         $(1,230,222)      $     9,933      $   180,590
                                                   ===========       ===========      ===========
Net income (loss) per common share -
  basic and diluted                                $     (1.24)      $      0.01      $      0.22
                                                   ===========       ===========      ===========
Weighted average number of common shares               995,699           845,902          818,240
                                                   ===========       ===========      ===========


</TABLE>

        The accompanying notes are an integral part of these statements.


                                       52

<PAGE>



                     United Bancshares, Inc. and Subsidiary


            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME

                  Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>


                               SERIES A                                                       ACCUMULATED     TOTAL
                           PREFERRED STOCK        COMMON STOCK      ADDITIONAL                  OTHER         SHARE-
                           ---------------        ------------       PAID-IN    ACCUMULATED  COMPREHENSIVE   HOLDERS'  COMPREHENSIVE
                           SHARES   AMOUNT     SHARES     AMOUNT     CAPITAL     DEFICIT     INCOME (LOSS)    EQUITY   INCOME (LOSS)
                           ------   ------     ------     ------     -------     -------     -------------    ------   -------------
<S>                       <C>       <C>      <C>          <C>      <C>          <C>           <C>          <C>          <C>
Balance at
 January 1, 1997           93,150     $932     816,355     $8,163  $10,348,989  $(3,618,692)    $19,276    $6,758,668
Proceeds from
  issuance of
  common stock                 --       --       7,340         73       76,637           --                    76,710
Unrealized gains
  on investment
  securities                   --       --          --         --           --           --      42,887        42,887    $   42,887
Net income                     --       --          --         --           --      180,590          --       180,590       180,590
                          --------  ------   ---------    -------  -----------   ----------    ---------   ----------   ------------
Balance at
 December 31, 1997         93,150      932     823,695      8,236   10,425,626   (3,438,102)     62,163     7,058,855       223,477
                                                                                                                        ============

Proceeds from issuance
 of preferred stock        39,849      398          --         --      796,582           --          --       796,980
Proceeds from issuance
  of common stock                                89,795       898    1,064,025                              1,064,923
Unrealized losses on
  investment securities        --       --          --         --           --           --     (26,375)      (26,375)      (26,375)
Net income                     --       --          --         --           --        9,933          --         9,933         9,933
                          --------  ------   ---------    -------  -----------   ----------    ---------   ----------   ------------
BALANCE AT
 DECEMBER 31, 1998        132,999    1,330     913,490      9,134   12,286,233   (3,428,169)     35,788     8,904,316       (16,442)
                                                                                                                        ============

PROCEEDS FROM
  ISSUANCE OF
  PREFERRED STOCK          10,151      102                             202,918                                203,020
PROCEEDS FROM
  ISSUANCE OF
  COMMON STOCK                                 115,263      1,154    1,381,018                              1,382,172
UNREALIZED LOSSES
  ON INVESTMENT
  SECURITIES                                                                                   (231,971)     (231,971)     (231,971)
NET LOSS                       --       --          --         --           --   (1,230,222)               (1,230,222)   (1,230,222)
                          --------  ------   ---------    -------  -----------   ----------    ---------   ----------   ------------
BALANCE AT
 DECEMBER 31, 1999        143,150   $1,432   1,028,753    $10,288  $13,870,169  ($4,658,391)   $(196,183)  $9,027,315   $(1,462,193)
                          =======   ======   =========    =======  ===========  ===========    =========   ==========   ===========

</TABLE>



         The accompanying notes are an integral part of this statement.

                                       53
<PAGE>

                     United Bancshares, Inc. and Subsidiary

                      CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                      ------------------------------------------
                                                          1999            1998              1997
                                                          ----            ----              ----
<S>                                                  <C>              <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                 $ (1,230,222)    $      9,933     $    180,590
    Adjustments to reconcile net
      income (loss) to net cash
      provided by (used in)
      operating activities:
     Provision for loan losses                          1,007,003          350,500           97,500
     Gain on sale of loans                                (43,856)        (201,664)        (187,471)
     Depreciation and amortization                        677,452          584,744          542,193
     (Increase) decrease in accrued
       interest receivable
       and other assets                                   410,561       (1,345,070)        (244,534)
     (Decrease) increase in accrued
       interest payable
       and other liabilities                             (435,256)       1,402,386         (131,570)
                                                     ------------     ------------     ------------
          Net cash provided by (used in)
            operating activities                          385,682          800,828          256,708
                                                     ------------     ------------     ------------
Cash flows from investing activities:
   Purchase of available-for-sale investments         (14,688,776)     (11,708,818)      (3,738,899)
   Purchase of held-to-maturity investments           (48,678,917)     (33,748,996)      (6,094,788)
   Proceeds from maturity and principal
     reductions of available-for-sale investments       3,377,145       11,057,565        1,856,565
   Proceeds from maturity and principal
     reductions of held-to-maturity investments        51,501,203        9,429,511        4,185,109
   Net proceeds from branch acquisitions               27,694,690             --               --
   Proceeds from sale of student loans                  2,975,360       12,846,705        9,677,111
   Net decrease (increase) in loans                    15,870,049        8,276,373       (4,512,352)
   Purchase of residential mortgage loans                    --               --         (1,623,782)
   Purchase of automobile loans                       (21,982,333)      (4,848,864)      (8,047,769)
   Purchase of premises and equipment                  (1,429,324)        (203,413)        (495,501)
                                                     ------------     ------------     ------------
          Net cash (used in) provided by
           investing activities                        14,639,097       (8,899,937)      (8,794,306)
                                                     ------------     ------------     ------------
Cash flows from financing activities:
   Net increase (decrease) in deposits                (14,463,843)       9,636,339       10,666,092
   Repayments on long-term debt                           (11,191)         (32,497)         (30,873)
   Securities sold to repurchase                       (1,557,755)         216,702        1,341,053
   Net proceeds from issuance of
     common stock                                       1,382,172        1,064,922           76,710
   Net proceeds from issuance of
     preferred stock                                      203,020          796,980             --
                                                     ------------     ------------     ------------
          Net cash provided by (used in)
           financing activities                       (14,447,597)      11,682,446       12,052,982
                                                     ------------     ------------     ------------
          Net increase (decrease) in cash
           and cash equivalents                           577,182        3,583,338        3,515,384
Cash and cash equivalents at
 beginning of year                                     16,343,034       12,759,696        9,244,312
                                                     ------------     ------------     ------------
Cash and cash equivalents at
 end of year                                         $ 16,920,216     $ 16,343,034     $ 12,759,696
                                                     ============     ============     ============
Supplemental disclosure of
 cash flow information:
   Cash paid during the year for interest            $  2,780,355     $  2,960,086     $  2,726,349
                                                     ============     ============     ============

</TABLE>


        The accompanying notes are an integral part of these statements.

                                       54

<PAGE>



                     United Bancshares, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1999 and 1998


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of United
Bancshares, Inc. (the Company) and its wholly owned subsidiary, United Bank of
Philadelphia (the Bank). All significant intercompany transactions and balances
have been eliminated.

     STATEMENT OF CASH FLOWS

     For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, and federal funds sold on an overnight
basis.

     SECURITIES HELD-TO-MATURITY

     Bonds, notes, and debentures for which the Bank has both the positive
intent and ability to hold are classified as held-to-maturity and carried at
cost, adjusted for premiums and discounts that are recognized in interest income
using the interest method over the period to maturity.

     SECURITIES AVAILABLE-FOR-SALE

     Available-for-sale securities consist of bonds, notes and debentures, and
certain equity securities for which the Bank does not have positive intent to
hold to maturity. These securities are carried at fair value.

     Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of shareholders' equity
net of related income tax effects.

     Gains and losses on the sale of available-for-sale securities are
determined by the specific identification method.

     Premiums and discounts are recognized in interest income using the interest
method over the period to maturity.

     LOANS

     The Bank has both the positive intent and ability to hold its loans to
maturity. These loans are stated at the amount of unpaid principal, reduced by
net unearned discount and an allowance for loan losses. Interest income on loans
is recognized as earned based on contractual interest rates applied to daily
principal amounts outstanding and accretion of discount. It is the Bank's policy
to discontinue the accrual of interest income when a default of principal or
interest exists for a period of 90 days except when, in management's judgment,
the collection of principal and interest is reasonably anticipated or adequate
collateral exists. Interest received on nonaccrual loans is either applied
against principal or reported as interest income according to management's
judgment as to collectibility of principal. When interest accruals are
discontinued, interest credited to income is reversed and the loan is classified
as nonperforming.


                                       55

<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     Unearned discount is amortized over the weighted average maturity of the
mortgage loan portfolio.

     Loan origination and commitment fees and certain direct loan origination
costs are deferred, and the net amount is amortized as an adjustment of the
related loan's yield. The Bank is amortizing these amounts over the contractual
life of the loan.

     LOANS HELD-FOR-SALE

     Loans held-for-sale are carried at the aggregate of lower of cost or market
value.

     For purchased loans, the discount remaining after the loan loss allocation
is being amortized over the remaining life of the purchased loans using the
interest method.

     ALLOWANCE FOR LOAN LOSSES

     The Bank adopted Statement of Financial Accounting Standards (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". Under SFAS No. 114, the allowance for loan losses related to
"impaired loans" is based on the discounted cash flows using the impaired loans'
initial effective interest rate as the discount rate, or the fair value of the
collateral for collateral-dependent loans. A loan is impaired when it meets the
criteria to be placed on nonaccrual status. Loans which are evaluated for
impairment pursuant to SFAS No. 114 are assessed on a loan-by-loan basis and
include only commercial nonaccrual loans. Large groups of smaller, homogeneous
loans, such as credit cards, student loans, residential mortgages, and other
student loans, are evaluated collectively for impairment.

     The allowance for loan losses is maintained at a level considered adequate
to provide for potential losses in the loan portfolio. The allowance is
increased by provisions charged to operating expenses and reduced by charge-offs
net of recoveries. Management's determination of the adequacy of the allowance
is based on continuous credit reviews of the loan portfolio, consideration of
the current economic conditions, review of specific problem loans, and other
relevant factors. This evaluation is subjective as it requires material
estimates, including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant change.
However, actual losses on specific loans, which are encompassed in the analysis,
may vary from estimated losses.

     BANK PREMISES AND EQUIPMENT

     Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets. Amortization of leasehold improvements is
computed over the shorter of the related lease term or the useful life of the
assets.

     INCOME TAXES

     The liability method is used in accounting for income taxes. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.


                                       56

<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     INCOME (LOSS) PER SHARE

     During 1997, the Company adopted the provisions of SFAS No. 128, which
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.

     OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

     In the ordinary course of business, the Bank has entered into off-balance
sheet financial instruments consisting of commitments to extend credit and
letters of credit. Such financial instruments are recorded in the financial
statements when they become payable.

     FINANCIAL INSTRUMENTS

     The following methods and assumptions were used by the Bank in estimating
its fair value disclosures for financial instruments:

          Cash and cash equivalents: The carrying amounts reported in the
     balance sheet for cash and cash equivalents approximate those assets' fair
     values.

          Investment securities: Fair values for investment securities are based
     on quoted market prices, where available. If quoted market prices are not
     available, fair values are based on quoted market prices of comparable
     instruments.

     In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activity. Subsequent
to this statement, SFAS No 137 was issued, which amended the effective date of
SFAS No. 133 to be all fiscal years beginning after June 15, 2000. Based on the
Company's minimal use of derivatives at the current time, management does not
anticipate the adoption of SFAS No. 133 will have a significant impact on
earnings or financial position of the Company. However, the impact from adopting
SFAS No. 133 will depend on the nature and purpose of the derivative instruments
in use by the Company at that time.

     Loans held-for-sale: Fair values are estimated using quoted rates based
upon secondary market sources for similar loans.



                                       57
<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     Loans: The fair value of loans was estimated using a discounted cash flow
analysis, which considered estimated prepayments and amortizations. Prepayments
and discount rates were based on current marketplace estimates and pricing.
Residential mortgage loans were discounted at the current effective yield,
including fees, of conventional loans, adjusted for their maturities with a
spread to the Treasury yield curve.

     Deposit liabilities: The fair values disclosed for demand deposits (e.g.
interest and noninterest checking, passbook savings, and certain types of money
market accounts) are equal to the amounts payable on demand at the reporting
date (e.g. their carrying amounts). The carrying amounts for variable-rate,
fixed-term money market accounts and certificates of deposit approximate the
fair values at the reporting date. Fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation. The Treasury
yield curve was utilized for discounting cash flows as it approximates the
average marketplace certificate of deposit rates across the relevant maturity
spectrum.

     Commitments to extend credit: The carrying amounts for commitments to
extend credit approximate fair value as such commitments are not substantially
different from the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of the counterparts.

     FORECLOSED REAL ESTATE

     Real estate properties acquired through, or in lieu of, loan foreclosure
are to be sold and are initially recorded at fair value at the date of
foreclosure, establishing a new cost basis. After foreclosure, valuations are
periodically performed by management, and the real estate is carried at the
lower of carrying amount or fair value less the cost to sell. Revenue and
expenses from operations and changes in valuation allowance are charged to
operations. The historical average holding period for such properties is 24
months.

     MANAGEMENT'S USE OF ESTIMATES

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     SEGMENTS

     On January 1, 1998, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 131, which redefines how operating segments are determined
and requires disclosures of certain financial and descriptive information about
the Bank's operating segments. Management has determined the Bank operates in
one business segment, community banking.

     RECLASSIFICATIONS

     Certain reclassifications have been made to the 1998 financial statements
to conform to the 1999 presentation.



                                       58
<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     ORGANIZATIONAL COSTS

     On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants' Statement of Position (SOP) 98-5, Reporting on Costs of
Start-Up Activities which requires that costs of start-up activities, as
defined, including organizational costs, be expensed as incurred. The adoption
of SOP 98-5 had no material impact on the Company's financial statements.

     COMPREHENSIVE INCOME

     On January 1, 1998, the Company adopted SFAS No. 130, which establishes new
standards for reporting comprehensive income which includes net income as well
as certain other items which result in a change to equity during the period.
These financial statements have been reclassified to reflect the provisions of
SFAS No. 130.

     The income tax effects allocated to comprehensive income (loss) is as
follows for the year ended:

                                                   DECEMBER 31, 1999
                                        --------------------------------------
                                                                      NET OF
                                         BEFORE TAX        TAX         TAX
                                          AMOUNT         BENEFIT      AMOUNT
                                          ------         -------      ------
Unrealized losses on securities
  Unrealized holding losses
   arising during period                $(348,498)     ($116,527)    $(231,971)
  Less reclassification adjustment
   for gains realized in net income          --             --            --
                                        ---------      ---------     ---------
  Other comprehensive loss, net         $(348,498)     ($116,527)    $(231,971)
                                        =========      =========     =========


                                                   DECEMBER 31, 1998
                                        --------------------------------------
                                                                      NET OF
                                         BEFORE TAX        TAX         TAX
                                          AMOUNT         BENEFIT      AMOUNT
                                          ------         -------      ------
Unrealized losses on securities
  Unrealized holding losses
    arising during period                 $(39,462)     ($12,282)    $(27,180)
  Less reclassification adjustment
    for gains realized in net income         1,201           396          805
                                          --------      --------     --------
  Other comprehensive loss, net           $(38,261)     ($11,886)    $(26,375)
                                          ========      ========     ========






                                       59
<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998


                                                   DECEMBER 31, 1997
                                        --------------------------------------
                                                                      NET OF
                                         BEFORE TAX        TAX         TAX
                                          AMOUNT         BENEFIT      AMOUNT
                                          ------         -------      ------
Unrealized gains on securities
  Unrealized holding gains
   arising during period                 $72,284        $29,397       $42,887
  Less reclassification adjustment
   for gains realized in net income         --             --            --
                                         -------        -------       -------
  Other comprehensive income, net        $72,284        $29,397       $42,887
                                         =======        =======       =======



2.  CASH AND DUE FROM BANK BALANCES

     The Bank maintains various deposit accounts of $645,328 with other banks to
meet normal funds transaction requirements and to compensate other banks for
certain correspondent services. The withdrawal or usage restrictions of these
balances did not have a significant impact on the operations of the Bank as of
December 31, 1999.









                                       60
<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



3.  INVESTMENTS

     The amortized cost, gross unrealized holding gains and losses, and
estimated market value of the available-for-sale and held-to-maturity investment
securities by major security type at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                               1999
                                              --------------------------------------------------------------------
                                                                    GROSS             GROSS
                                               AMORTIZED          UNREALIZED        UNREALIZED           MARKET
                                                 COST               GAINS             LOSSES              VALUE
                                                 ----               -----             ------              -----
<S>                                           <C>               <C>                <C>                <C>
AVAILABLE-FOR-SALE:
  OTHER GOVERNMENT SECURITIES                 $ 11,255,096                         $   (207,335)      $ 11,047,761
  MORTGAGE-BACKED SECURITIES                     7,668,672                              (86,940)         7,581,732
                                              ------------      ------------       ------------       ------------
  TOTAL DEBT SECURITIES                         18,923,768              --             (294,275)        18,629,493
  INVESTMENTS IN MUTUAL FUNDS                       94,092              --                 --               94,092
  OTHER INVESTMENTS                                405,950              --                 --              405,950
                                              ------------      ------------       ------------       ------------
                                              $ 19,423,810      $       --         $   (294,275)      $ 19,129,535
                                              ============      ============       ============       ============
HELD-TO-MATURITY:
  OTHER GOVERNMENT SECURITIES                   17,556,702              --             (506,631)        17,050,071
  MORTGAGE-BACKED SECURITIES                    14,747,072              --             (326,321)        14,420,751
                                              ------------      ------------       ------------       ------------
                                              $ 32,303,774      $       --         $   (832,952)      $ 31,470,822
                                              ============      ============       ============       ============

                                                                               1998
                                              --------------------------------------------------------------------
                                                                    GROSS             GROSS
                                               AMORTIZED          UNREALIZED        UNREALIZED           MARKET
                                                 COST               GAINS             LOSSES              VALUE
                                                 ----               -----             ------              -----
Available-for-sale:
  Other Government Securities                $ 2,248,700        $     5,840        $      --          $ 2,254,540
  Mortgage-backed securities                   5,337,225             48,383               --            5,385,608
                                             -----------        -----------        -----------        -----------
  Total debt securities                        7,585,925             54,223               --            7,640,148
  Investments in mutual funds                     89,527               --                 --               89,527
  Other investments                              320,200               --                 --              320,200
                                             -----------        -----------        -----------        -----------
                                             $ 7,995,652        $    54,223        $      --          $ 8,049,875
                                             ===========        ===========        ===========        ===========
Held-to-maturity:
  U.S. Treasury securities                   $ 1,000,141        $     1,109        $      --          $ 1,001,250
  Other Government securities                 31,633,770             50,483               --           31,684,253
  Mortgage-backed securities                   2,512,237              5,534               --            2,517,771
                                             -----------        -----------        -----------        -----------
                                             $35,146,148        $    57,126        $      --          $35,203,274
                                             ===========        ===========        ===========        ===========

</TABLE>

Maturities of investment securities classified as available-for-sale and
held-to-maturity at December 31, 1999 were as follows. Expected maturities may
differ from contractual maturities.


                                       61
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



3.  INVESTMENTS - CONTINUED
                                                    AMORTIZED          MARKET
                                                      COST             VALUE
                                                      ----             -----
AVAILABLE-FOR-SALE:
  DUE AFTER ONE YEAR THRU THREE YEARS             $   250,000      $   247,260
  DUE AFTER THREE YEARS THROUGH FIVE YEARS          5,690,486        5,404,452
  DUE AFTER FIVE YEARS THROUGH FIFTEEN YEARS        5,314,610        5,396,049
  MORTGAGE-BACKED SECURITIES                        7,668,672        7,581,732
                                                  -----------      -----------
  TOTAL DEBT SECURITIES                            18,923,768       18,629,493
  INVESTMENTS IN MUTUAL FUNDS                          94,092           94,092
  OTHER INVESTMENTS                                   405,950          405,950
                                                  -----------      -----------
                                                  $19,423,810      $19,129,535
                                                  ===========      ===========
HELD-TO-MATURITY:
  DUE AFTER ONE YEAR THROUGH THREE YEARS            1,250,000        1,230,030
  DUE AFTER THREE YEARS THROUGH FIVE YEARS          5,796,809        5,663,703
  DUE AFTER FIVE YEARS THROUGH FIFTEEN YEARS       10,509,893       10,156,338
  MORTGAGE-BACKED SECURITIES                       14,747,072       14,420,751
                                                  -----------      -----------
                                                  $32,303,774      $31,470,822
                                                  ===========      ===========

     There were no sales of investments during 1999 or 1997. The Bank recorded a
gain on the sale of investments during 1998 of $1,201.

     As of December 31, 1999 and 1998, investment securities with a book value
of $9,964,172 and $11,703,948, respectively, were pledged as collateral to
secure public deposits and for other purposes required or permitted by law.


4.  LOANS AND ALLOWANCE FOR LOAN LOSSES

   The composition of the net loans is as follows:

                                        1999                1998
                                        ----                ----
Commercial and industrial           $ 13,664,212       $ 13,643,535
Commercial real estate                 1,288,232          1,517,979
Residential mortgages                 26,236,947         31,364,864
Consumer loans                        19,821,604         11,423,755
                                    ------------       ------------
    Total loans                       61,010,995         57,950,133
Less allowance for loan losses        (1,566,642)          (679,557)
                                    ------------       ------------
    Net loans                       $ 59,444,353       $ 57,270,576
                                    ============       ============




                                       62
<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998


4. LOANS AND ALLOWANCE FOR LOAN LOSSES - CONTINUED

     As of December 31, 1999 and 1998, the Bank had loans to certain officers
and directors and their affiliated interests in aggregate dollar amounts of
approximately $1,442,600 and $1,148,000, respectively. During 1999, new loans to
such related parties amounted to $429,000 and repayments amounted to $126,700.
Such transactions are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for other nonrelated party
transactions.

     Nonaccrual loans totaled approximately $2,027,000 and $1,720,000 as of
December 31, 1999 and 1998, respectively.

     At December 31, 1999 and 1998, unamortized deferred fees and costs totaled
$151,645 and $177,847, respectively.

     Loans having a carrying value of $406,400 and $127,800 were transferred to
foreclosed real estate in 1999 and 1998, respectively.

     Changes in the allowance for possible loan losses are as follows:

                                         1999           1998          1997
                                         ----           ----          ----
        Balance, beginning of year    $  679,557     $ 468,806     $ 527,507
        Provision                      1,007,003       350,500        97,500
        Charge-offs                     (387,480)     (180,727)     (234,638)
        Recoveries                       267,562        40,978        78,437
                                      ----------     ---------     ---------
             Balance, end of year     $1,566,642     $ 679,557     $ 468,806
                                      ==========     =========     =========

     At December 31, 1999 and 1998, the recorded investment in loans that were
on a nonaccrual basis and were considered to be impaired under SFAS No. 114 was
$844,300 and $845,500, respectively. At December 31, 1999 and 1998, the related
allowance for loan losses was $674,100 and $183,000, respectively. The average
recorded investment in impaired loans during the years ended December 31, 1999
and 1998 was approximately $844,300 and $526,000, respectively. For the years
ended December 31, 1999, 1998 and 1997, the Bank recognized interest income on
those impaired loans of $9,100, $36,800 and $0, respectively.

     The Bank grants commercial, residential, and consumer loans to customers
primarily located in Philadelphia County, Pennsylvania and surrounding counties
in the Delaware Valley. Although the Bank has a diversified loan portfolio, its
debtors' ability to honor their contracts is influenced by the region's economy.
During 1999, approximately 28% of the Bank's commercial loan portfolio was
concentrated in loans made to religious organizations.



                                       63
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



5.  BANK PREMISES AND EQUIPMENT

   The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:

                                  ESTIMATED
                                  USEFUL LIFE       1999             1998
                                  -----------       ----             ----
Buildings, capital lease and
 leasehold improvements          10-15 years     $ 3,654,194     $ 1,343,898
Furniture and equipment            3-7 years       2,710,371       2,183,743
                                                 -----------     -----------
                                                   6,364,565       3,527,641
Less accumulated depreciation
 and amortization                                 (2,539,244)     (1,962,510)
                                                 -----------     -----------
                                                 $ 3,825,321     $ 1,565,131
                                                 ===========     ===========

     The Bank occupies a building which houses its corporate headquarters under
a non-cancellable capital lease from a related party which expires in the year
2009. This lease is with a company which is owned by an officer of the Bank.
This lease is recorded as a capital lease at December 31, 1999 in the amount of
$1,483,000 with accumulated depreciation of $74,150.

     The Bank leases other facilities and other equipment under non-cancelable
operating lease agreements. The amount of expense for operating leases for the
years ended December 31, 1999, 1998, and 1997 was $367,554, $323,330, and
$288,959.

     Future minimum lease payments under capital and operating leases are as
follows:

                                                 CAPITALIZED        OPERATING
 YEAR ENDING DECEMBER 31,                          LEASES             LEASES
 ------------------------                          ------             ------

2000                                           $   323,125         $   417,566
2001                                               331,250             392,797
2002                                               338,750             296,611
2003                                               346,250             233,502
2004                                               353,750              49,115
Thereafter                                       1,680,000              57,000
                                               -----------         -----------
Total minimum lease payments                   $ 3,373,125         $ 1,446,591
                                                                   ===========
Less amount representing interest               (1,928,518)
                                               -----------

Present value of future minimum rentals        $ 1,444,607
                                               ===========





                                       64
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



6.  DEPOSITS

     The aggregate amount of short-term jumbo certificates of deposit, each with
a minimum denomination of $100,000, was $12,633,964 and $13,942,008 at December
31, 1999 and 1998, respectively.

     At December 31, 1999, the scheduled maturities of certificates of deposit
are as follows (dollars in thousands):

     2000                                                 $29,047
     2001                                                   2,915
     2002                                                   1,589
     2003                                                   1,517
     2004                                                     805
     Thereafter                                               225
                                                          -------
                                                          $36,098
                                                          =======

8.  REVERSE REPURCHASE AGREEMENTS

     The Bank entered into sales of securities under agreements to repurchase
identical securities or reverse repurchase agreements. The amounts advanced to
the Bank under these agreements represent short-term loans and would be
reflected as a payable in the balance sheet. The securities underlying the
agreements are book-entry securities maintained at the Federal Reserve Bank of
Philadelphia. The average balance of reverse purchase agreements entered into
during 1998 was $1.5 million, and the maximum amount outstanding at any
month-end during 1998 was $1.5 million. The repurchase agreement matured on
March 31, 1999.

9. CAPITAL STOCK OFFERINGS

     On September 30, 1998, the Company designated a subclass of its Common
Stock as Class B. Pursuant to the terms of the amendment, holders of the Class B
Common Stock have rights of Common Stockholders, with the exception of voting
rights. On October 9, 1998, the Company sold 83,333 shares of Class B Common
Stock to one shareholder for a purchase price of $12 per share. On February 9,
1999 and September 24, 1999, the Bank sold 83,333 and 25,000 shares of Class B
Stock, respectively, to the same shareholder at $12 per share.

     In April 1997, the Bank began its fifth offering of a maximum 250,000
shares of common stock at a price of $12 per share ($0.01 par value). As of
December 31, 1997, the Bank had received $42,600 and had issued 3,550 shares of
common stock from this offering. This offering was limited to existing
shareholders of record as of April 20, 1997. The offering terminated on December
31, 1997.

     During 1997, the Bank received $34,110 and issued 3,790 shares as a result
of warrants exercised by shareholders to purchase common stock at a price of
$9.00 per share. As of December 31, 1997, 7,733 warrants remained outstanding.

     During 1998, the Bank received $64,922 and issued 6,492 shares as a result
of warrants exercised by shareholders to purchase common stock at a price of
$10.00 per share. As of December 31, 1998, no warrants remained outstanding.


                                       65
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998


9. CAPITAL STOCK OFFERINGS--CONTINUED

     In July 1998, the Company began a limited offering of its Series A
Preferred Stock (noncumulative, 6%. $.01 par value) to Fannie Mae Corporation.
The nonvoting preferred stock was offered at a price of $20 per share, in an
amount for which the aggregate purchase price does not exceed the lesser of (1)
9.99% of the total equity. During 1998, the Company received $796,980 and issued
39,849 shares of preferred stock from this offering. During 1999, the Company
received $203,020 from Fannie Mae and issued 10,151 shares of preferred stock
from this offering.

     Upon the declaration of a common dividend, each of the Series A preferred
shares will be accorded a non-cumulative dividend preference equal to 6% of the
purchase price of the stock per annum prior to the payment of any dividend on
account of any other class or series of the Company. No dividends have been
declared or paid.

10. INCOME TAXES

     The Bank accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes."

     At December 31, 1999, the Bank has net operating loss carryforwards of
approximately $2,500,000 for income tax purposes that begin to expire in 2008.

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. For financial reporting
purposes, a valuation allowance of $1,499,042 and $1,120,565 as of December 31,
1999 and 1998, respectively, has been recognized to offset the deferred tax
assets related to the cumulative temporary differences and the tax loss
carryforwards. Significant components of the Bank's deferred tax assets are as
follows:

<TABLE>
<CAPTION>
                                                                1999                1998
                                                                ----                ----
<S>                                                        <C>                 <C>
Deferred tax assets:
  Provision for loan losses                                $   467,180         $   164,653
  Unrealized losses (gains) on investment securities            98,092             (18,435)
  Depreciation                                                  29,390              42,725
  Net operating loss carryforwards                             880,707             903,192
  Other                                                         23,673              28,430
  Valuation allowance for deferred tax assets               (1,499,042)         (1,120,565)
                                                           -----------         -----------
       Net deferred tax assets                             $      --           $      --
                                                           ===========         ===========

</TABLE>




                                       66
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998


10. INCOME TAXES--CONTINUED

                                          1999            1998          1997
                                          ----            ----          ----
Effective rate reconciliation:
  Tax at statutory rate                $(418,275)     $   3,377      $  61,400
  Nondeductible expenses                  33,742         17,634         11,849
  Increase in valuation allowance        379,094           --             --
  Other                                    6,055
  Utilization of net operating loss         (616)       (21,011)       (73,249)
                                       ---------      ---------      ---------
     Total tax expense                 $    --        $    --        $    --
                                       =========      =========      =========


11. FINANCIAL INSTRUMENT COMMITMENTS

     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.

     Summaries of the Bank's financial instrument commitments are as follows:

                                                  1999                  1998
                                                  ----                  ----
     Commitments to extend credit             $6,140,622           $ 7,269,229
     Outstanding letters of credit               259,000               259,000

     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 and unused
credit card lines. 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.






                                       67
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



12. FAIR VALUES OF FINANCIAL INSTRUMENTS

     Fair value information about financial instruments is required to be
disclosed, whether or not recognized in the balance sheet, where it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using discounted cash flows or
other valuation techniques. Those techniques are significantly affected by
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Certain financial instruments and all
nonfinancial instruments are exempt from disclosure requirements. Accordingly,
the aggregate fair value amounts presented do not represent the underlying value
of the Bank.

<TABLE>
<CAPTION>
                                                       1999                   1998
                                             ---------------------   ---------------------
                                             CARRYING       FAIR      CARRYING      FAIR
                                              AMOUNT        VALUE       AMOUNT      VALUE
                                              ------        -----       ------      -----
                                                         (Dollars in thousands)
<S>                                           <C>         <C>         <C>         <C>
Assets:
  Cash and cash equivalents                   $16,920     $16,920     $16,343     $16,343
  Investment securities                        51,433      50,600      43,196      43,253
  Loans, net of allowance for loan losses      59,444      58,209      57,271      56,577

                                                       1999                   1998
                                             ---------------------   ---------------------
                                             CARRYING       FAIR      CARRYING      FAIR
                                              AMOUNT        VALUE       AMOUNT      VALUE
                                              ------        -----       ------      -----
                                                         (Dollars in thousands)
Liabilities:
  Demand deposits                              55,326      55,326      49,113      49,113
  Savings deposits                             33,342      33,342      23,394      23,394
  Time deposits                                36,098      36,198      36,556      36,352

Off Balance Sheet:
  Commitments to extend credit                  6,141       6,141       7,269       7,269
  Outstanding letters of credit                   259         259         259         259

</TABLE>

13. EMPLOYEE COMPENSATION

     The Bank entered into a five-year employment agreement with its chief
executive officer covering such items as salaries, bonuses, and benefits. The
agreement expires in 2000 and provides for guaranteed minimum annual
compensation of $150,000 over the term of the contract. The contract, entered
into on September 13, 1993 and amended January 1, 1994, also granted the chief
executive officer the option to acquire up to 4% of the Bank's stock as of
December 31, 1993 at $8.54 per share, which was the book value at the date of
grant. The contract, as amended on January 1, 1997, also provides for a minimum
contribution of $58,200 per year to the chief executive officer's retirement
benefit. The Company made no stock-based compensation awards to any employee
during 1999, 1998, and 1997.


                                       68
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



14.  CORE DEPOSIT INTANGIBLE

     On September 24, 1999, the Bank acquired four branches from First Union
Corporation with deposits totaling $31.5 million. The Bank paid a deposit
premium of 7%, or $2,186,500, and incurred approximately $ 351,650 in consulting
and other costs directly related to these branch acquisitions. Subsequent to the
acquisition, the Bank transferred back to First Union one significant deposit
relationship totaling $940,000 and received a $66,000 refund of deposit premium.
The premium and branch acquisition costs are being amortized over 14 years.
Amortization totaled $43,626 for the year ended December 31, 1999.


15. CONDENSED FINANCIAL INFORMATION--PARENT COMPANY ONLY

                            CONDENSED BALANCE SHEETS

                                                             DECEMBER 31,
                                                      -----------------------
                                                         1999          1998
                                                         ----          ----
                                                       (Dollars in thousands)
Assets:
  Due from banks (subsidiary)                         $    289       $    265
  Investment in United Bank of Philadelphia              8,738          8,639
                                                      --------       --------
      Total assets                                    $  9,027       $  8,904
                                                      ========       ========

Shareholders' equity:
  Series A preferred stock                            $      1       $      1
  Common stock                                              10              9
  Additional paid-in-capital                            13,870         12,286
  Accumulated deficit                                   (4,658)        (3,428)
  Net unrealized holding gains (losses)
     on securities available-for-sale                     (196)            36
                                                      --------       --------
      Total shareholders' equity                      $  9,027       $  8,904
                                                      ========       ========

                       CONDENSED STATEMENTS OF OPERATIONS

                                                   YEAR ENDED DECEMBER 31,
                                               -----------------------------
                                                 1999       1998       1997
                                                 ----       ----       ----
                                                   (Dollars in thousands)

Equity in net income (loss) of subsidiary      $(1,230)   $    10    $   181
                                               -------    -------    -------
      Net income (loss)                        $(1,230)   $    10    $   181
                                               =======    =======    =======




                                       69
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



15. CONDENSED FINANCIAL INFORMATION--PARENT COMPANY ONLY--CONTINUED

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                           YEAR ENDED DECEMBER 31,
                                                     ------------------------------------
                                                        1999         1998          1997
                                                        ----         ----          ----
                                                                (Dollars in thousands)
Cash flows from operating activities:
<S>                                                  <C>           <C>           <C>
  Net income (loss)                                  $(1,230)      $    10       $   181
  Equity in net income (loss) of subsidiary            1,230           (10)         (181)
                                                     -------       -------       -------
      Net cash provided by operating activities         --            --            --
                                                     -------       -------       -------
Cash flows from investing activities:
  Investment in subsidiary                            (1,561)       (1,783)          (76)
                                                     -------       -------       -------
      Net cash used in investing activities           (1,561)       (1,783)          (76)
                                                     -------       -------       -------
Cash flows from financing activities:
  Issuance of preferred stock                            203           797          --
  Issuance of common stock                             1,382         1,065            76
                                                     -------       -------       -------
      Net cash provided by financing activities        1,585         1,862            76
                                                     -------       -------       -------
      Net increase in cash and cash equivalents           24            79          --
Cash and cash equivalents at beginning of year           265           186           186
                                                     -------       -------       -------
Cash and cash equivalents at end of year             $   289       $   265       $   186
                                                     =======       =======       =======
</TABLE>


16. REGULATORY MATTERS

     The Bank engages in the commercial banking business, with a particular
focus on serving Blacks, Hispanics and women, and is subject to substantial
competition from financial institutions in the Bank's service area. As a bank
holding company and a banking subsidiary, the Company and the Bank,
respectively, are subject to regulation by the Federal Reserve Board and the
Pennsylvania Department of Banking and are required to maintain capital
requirements established by those regulators. Prompt corrective actions may be
taken by those regulators against banks that do not meet minimum capital
requirements. Prompt corrective actions range from restriction or prohibition of
certain activities to the appointment of a receiver or conservator of an
institution's net assets. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices, the
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.

     Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total Tier 1 capital (as defined in the regulations) to risk-weighted
assets (as defined) for capital adequacy purposes. Management believes, as of
December 31, 1999, that the Bank meets the capital adequacy requirements to
which it is subject.



                                       70
<PAGE>

                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998


16. REGULATORY MATTERS - CONTINUED

     In February 2000, as a result of a regulatory examination completed in
December 1999, the Bank entered into a Written Agreement ("Agreement") with its
primary regulators with regard to, among other things, achievement of
agreed-upon capital levels, implementation of a viable earnings/strategic plan,
adequate funding of the allowance for loan losses, the completion of a
management review and succession plan, and improvement in internal controls. The
current Agreement requires the Bank to increase its capital ratio to 6.5% by
June 30, 2000 and to 7% at all times thereafter. This will require an increase
in capital and/or a reduction in assets. To achieve this capital ratio,
Management has developed plans that include: increasing profitability,
consolidating branches, and soliciting new and additional sources of capital.
Management has begun to address all matters outlined in the Agreement and
expects to be in full compliance with its terms and conditions within the
required timelines. Failure to comply could result in additional regulatory
supervision and/or actions.

     Beginning in 1996, the Bank has operated under a Supervisory Letter from
its primary regulator. The Supervisory Letter prevents the Bank and the Company
from declaring or paying dividends without the prior written approval of its
regulators and prohibits the Bank and Company from issuing long-term debt.

     The most recent notification dated February 10, 2000, from the Federal
Reserve Bank categorized the Bank as "adequately" capitalized under the
regulatory framework for prompt and corrective action. To be categorized as
"well capitalized," the Bank must maintain minimum total risk-based, Tier 1
risk-based, and Tier 1 leverage ratios as set forth in the table below. The
Bank's growth, continued losses and the additional provisions to the allowance
for loans losses may have an adverse effect on its capital ratios.

     The Company's and the Bank's actual capital amounts and ratios are as
follows:


(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                         TO BE WELL
                                                                                                    CAPITALIZED UNDER
                                                                FOR CAPITAL                         PROMPT CORRECTIVE
                                     ACTUAL                  ADEQUACY PURPOSES                      ACTION PROVISIONS
                                -----------------    -----------------------------------    ---------------------------------------
                                 AMOUNT    RATIO     AMOUNT   RATIO                         AMOUNT    RATIO
                                 ------    -----     ------   -----                         ------    -----
<S>                             <C>        <C>      <C>       <C>                           <C>       <C>
AS OF DECEMBER 31, 1999:
  TOTAL CAPITAL TO RISK-
    WEIGHTED ASSETS:
      COMPANY (CONSOLIDATED)    $ 7,564    12.44%   $ 4,864   equal or greater than 8.00%     N/A
      BANK                        7,275    12.07      4,822   equal or greater than 8.00    6,027     equal or greater than 10.00%

  TIER 1 CAPITAL TO RISK-
    WEIGHTED ASSETS:
      COMPANY (CONSOLIDATED)      6,794    11.18      2,431   equal or greater than 4.00      N/A
      BANK                        6,505    10.80      2,409   equal or greater than 4.00    3,614      equal or greater than 6.00%


  TIER 1 CAPITAL TO AVERAGE
    ASSETS:
      COMPANY (CONSOLIDATED)      6,794     5.08      5,350   equal or greater than 4.00      N/A
      BANK                        6,505     4.87      5,343   equal or greater than 4.00    6,679      equal or greater than 5.00%

</TABLE>


                                       71
<PAGE>


                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998


16. REGULATORY MATTERS - CONTINUED


<TABLE>
<CAPTION>
                                                                                                         TO BE WELL
                                                                                                    CAPITALIZED UNDER
                                                                FOR CAPITAL                         PROMPT CORRECTIVE
                                     ACTUAL                  ADEQUACY PURPOSES                      ACTION PROVISIONS
                                -----------------    -----------------------------------    ---------------------------------------
                                 AMOUNT    RATIO     AMOUNT   RATIO                         AMOUNT    RATIO
                                 ------    -----     ------   -----                         ------    -----
<S>                             <C>        <C>      <C>       <C>                           <C>       <C>
As of December 31, 1998:
  Total capital to risk-
   weighted assets:
      Company (consolidated)     $9,502    17.48%    $4,349   equal or greater than 8.00%     N/A
      Bank                        9,236    16.99      4,349   equal or greater than 8.00    5,436   equal or greater than 10.00%

  Tier 1 capital to risk-
   weighted assets:
      Company (consolidated)      8,823    16.23      2,175   equal or greater than 4.00      N/A
      Bank                        8,557    15.74      2,175   equal or greater than 4.00    3,262   equal or greater than 6.00%

  Tier 1 capital to average assets:
    Company (consolidated)        8,823     7.67      4,601   equal or greater than 4.00      N/A
    Bank                          8,557     7.44      4,601   equal or greater than 4.00    5,751   equal or greater than 5.00%

</TABLE>


17.  COMMITMENTS AND CONTINGENCIES

     In the ordinary course of business, the Bank has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements. In addition, the Bank is a
defendant in certain claims and legal actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of these matters is not expected to have a material
adverse effect on the consolidated financial condition of the Company.


18.  EARNINGS PER SHARE COMPUTATION

     In accordance with SFAS No. 128, income (loss) per share is calculated as
follows:

                                              YEAR ENDED DECEMBER 31, 1999
                                      ----------------------------------------
                                          LOSS          SHARES       PER SHARE
                                      (NUMERATOR)    (DENOMINATOR)     AMOUNT
                                      -----------    -------------     ------

NET LOSS                              $(1,230,222)
                                      ===========
BASIC LOSS PER SHARE
  LOSS AVAILABLE TO STOCKHOLDERS      $(1,230,222)      995,699       $(1.24)
                                      ===========      ========       ======


                                              YEAR ENDED DECEMBER 31, 1998
                                      ----------------------------------------
                                          LOSS          SHARES       PER SHARE
                                      (NUMERATOR)    (DENOMINATOR)     AMOUNT
                                      -----------    -------------     ------

Net income                              $ 9,933
                                        =======

Basic EPS
  Income available to stockholders      $ 9,933        845,902        $0.01
                                        =======        =======        =====


                                       72

<PAGE>



                     United Bancshares, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1999 and 1998



18.  EARNINGS PER SHARE COMPUTATION--CONTINUED


                                              YEAR ENDED DECEMBER 31, 1997
                                      ----------------------------------------
                                          LOSS          SHARES       PER SHARE
                                      (NUMERATOR)    (DENOMINATOR)     AMOUNT
                                      -----------    -------------     ------

Net income                               $180,590

Basic income per share
  Income available to stockholders       $180,590       818,240        $0.22
                                         ========       =======        =====
Effect of dilutive securities
  Warrants                                                7,733
                                                        -------
Diluted EPS
Income available to
 common stockholders
  Plus assumed conversions               $180,590       825,973        $0.22
                                         ========       =======        =====




                                       73

<PAGE>

                                 EXHIBIT INDEX

     3(i) Articles of Incorporation (Incorporated by reference to Registrant's
          1997 Form 10-K).

     3(ii) Bylaws (Incorporated by reference to Registrant's 1997 Form 10-K).

     9.l  Voting Trust Agreement with NationsBank (Incorporated by reference to
          Registrant's 1997 Form 10-K).

     9.2  Voting Trust Agreement with Fahnstock (Incorporated by reference to
          Registrant's 1997 Form 10-K).

     10.1 Lease Agreements between the Bank and various landlords.

     10.2 Lease Agreement between ECC Properties, LLC and the Bank

     10.3 Lease Agreement between the Bank and Philadelphia United Community
          Development Corporation.

     10.4 Written Agreement by and among United Bancshares, Inc., United
          Bank of Philadelphia and Federal Reserve Bank of Philadelphia

     11.  Statement of Computation of Earnings Per Share. Included at Item 8
          hereof.

     12.  Statement of Computation of Ratios. Included at Item 8 hereof.

     23.  Consent of Independent Accountants.

     27.  Financial Data Schedule.








                                       74