8-K: United Bankshares Inc. Reports Solid Third Quarter Earnings, Merger with Piedmont Bancorp Progresses

United Bankshares, Inc. announced third quarter earnings of $95.3 million, or $0.70 per diluted share, while also progressing with its merger with Piedmont Bancorp.

Summary

• United Bankshares, Inc. reported a net income of $95.3 million for the third quarter of 2024, which translates to $0.70 per diluted share.
• The company's annualized returns on average assets, average equity, and average tangible equity were 1.28%, 7.72%, and 12.59%, respectively.
• Net interest income for the quarter was $230.3 million, a 2% increase from the previous quarter.
• Noninterest income rose by 6% to $31.9 million, driven by mortgage banking activities.
• The company sold its remaining mortgage servicing rights for a gain of $7.1 million.
• Noninterest expense remained relatively flat at $135.3 million.
• The provision for credit losses was $6.9 million for the third quarter of 2024.
• Compared to the third quarter of 2023, earnings decreased slightly from $96.2 million, or $0.71 per diluted share.
• The merger with Piedmont Bancorp is expected to close late in the fourth quarter of 2024 or early in the first quarter of 2025, creating a combined organization with approximately $32 billion in assets.
• The company's estimated risk-based capital ratio is 16.2% at September 30, 2024, with a Common Equity Tier 1 capital ratio of 13.8%.

Sentiment

Score: 7

Explanation: The document presents a positive outlook with solid financial results and progress on the merger, but there are some minor negative aspects such as a slight decrease in earnings compared to the previous year and losses on investment securities. Overall, the sentiment is positive but not overly enthusiastic.

Positives

• The company achieved solid profitability metrics with a return on average tangible equity of 12.59%.
• Net interest income saw a positive increase of 2% compared to the previous quarter.
• Noninterest income increased by 6%, driven by mortgage banking activities.
• The sale of mortgage servicing rights resulted in a gain of $7.1 million.
• The company's net interest margin increased slightly to 3.52%.
• Period-end deposits grew by $762 million, indicating strong customer confidence.
• The company maintains a strong capital position with a risk-based capital ratio of 16.2%.
• Asset quality remains sound with low non-performing assets at 0.22% of total assets.
• The company has a strong deposit market share in West Virginia and other key markets.
• The company has a long history of dividend increases, with 50 consecutive years.

Negatives

• Earnings for the third quarter of 2024 were slightly lower than the third quarter of 2023, decreasing from $96.2 million to $95.3 million.
• Net losses on investment securities were $6.7 million for the third quarter of 2024.
• The provision for credit losses increased to $6.9 million from $5.8 million in the previous quarter.
• Mortgage banking income decreased compared to the same quarter last year due to lower loan origination and sale volume.
• The effective tax rate increased from 16.4% to 20.6% in the third quarter of 2024.

Risks

• The merger with Piedmont Bancorp carries integration risks, including potential difficulties in combining operations and realizing cost savings.
• Changes in interest rates and economic conditions could impact the company's net interest margin and profitability.
• The company faces competitive pressures in the banking industry.
• Regulatory changes and increased scrutiny could affect the company's operations.
• The company's mortgage banking revenue is subject to industry trends and market fluctuations.
• There is a risk of deposit attrition and customer losses following the merger.
• The company is exposed to risks related to credit quality and potential loan losses.
• The company is exposed to risks related to the commercial real estate market, particularly office loans.

Future Outlook

The company expects loan growth to be in the low single digits for the fourth quarter of 2024, investment portfolio balances to increase by approximately $100 million, and deposits to remain relatively flat. Net interest income is expected to be in the range of $908 million to $913 million for 2024, assuming two 25 bps rate cuts in the fourth quarter. Non-interest income is expected to be between $122 million and $126 million, and non-interest expense is expected to be between $547 million and $552 million, excluding merger-related expenses. The effective tax rate is estimated to be approximately 20.5% for the remainder of 2024.

Management Comments

• Richard M. Adams, Jr., United's Chief Executive Officer, stated, 'It was another successful quarter for UBSI, and we continue to perform at a high level.'
• Management noted that profitability metrics stayed strong, growth trends continued upward, and expenses were well-controlled.
• Management also highlighted that asset quality, liquidity, and capital levels remain a source of strength.

Industry Context

This announcement comes amid a period of consolidation in the banking industry, with United's merger with Piedmont Bancorp being a notable example. The company's focus on maintaining strong capital ratios and asset quality aligns with broader industry trends emphasizing stability and risk management. The company's strong deposit market share in key regions also positions it well in a competitive landscape.

Comparison to Industry Standards

• United Bankshares' return on average tangible equity of 12.59% is a strong result compared to many regional banks, although some high-performing banks may achieve higher returns.
• The company's net interest margin of 3.52% is within the typical range for regional banks, but can vary based on asset mix and interest rate environment.
• The efficiency ratio of 51.62% indicates good cost control, which is a key metric for bank performance.
• The non-performing assets to total assets ratio of 0.22% is low, suggesting strong asset quality compared to industry averages.
• United's capital ratios are well above regulatory requirements, indicating a strong financial position.
• Compared to peers such as Truist Financial Corporation (TFC) and PNC Financial Services Group (PNC), United's results show a more conservative approach to risk and a focus on core banking activities.
• While larger national banks like JPMorgan Chase (JPM) and Bank of America (BAC) may have higher overall profitability, United's performance is solid within its regional peer group.

Stakeholder Impact

• Shareholders will benefit from the company's strong profitability and continued dividend payments.
• Employees may experience changes due to the merger with Piedmont Bancorp.
• Customers will have access to a larger network of branches and services after the merger.
• The company's strong financial position provides stability for its suppliers and creditors.

Next Steps

• The company will continue to work towards closing the merger with Piedmont Bancorp.
• The company will focus on managing its balance sheet and maintaining strong capital ratios.
• The company will monitor the economic environment and adjust its strategies as needed.
• The company will continue to evaluate the impact of subsequent events on critical accounting assumptions and estimates made as of September 30, 2024.

Key Dates

Keywords

bank, earnings, merger, financial results, net interest income, noninterest income, mortgage banking, asset quality, capital ratios, deposits, Piedmont Bancorp, credit losses