425: United Bankshares, Inc. Reports Strong Second Quarter Earnings, Announces Piedmont Bancorp Merger

United Bankshares, Inc. announced solid Q2 2024 earnings with increased profitability and the acquisition of Piedmont Bancorp, Inc., expanding its presence in the Southeast.

Summary

• United Bankshares, Inc. (UBSI) reported earnings of $96.5 million, or $0.71 per diluted share, for the second quarter of 2024.
• The company's annualized returns on average assets, average equity, and average tangible equity were 1.32%, 7.99%, and 13.12%, respectively.
• UBSI announced a definitive merger agreement with Piedmont Bancorp, Inc., expected to close late in the fourth quarter of 2024 or early in the first quarter of 2025.
• The combined organization will have over $32 billion in assets and a network of over 240 locations.
• Net interest income for Q2 2024 increased by $3.2 million, or 1%, from Q1 2024.
• Noninterest income decreased by $2.0 million, or 6%, from Q1 2024, primarily due to a decrease in income from mortgage banking activities.
• Noninterest expense decreased by $6.0 million, or 4%, from Q1 2024.
• The provision for credit losses was $5.8 million for Q2 2024, compared to $5.7 million for Q1 2024.
• At June 30, 2024, non-performing loans were $65.3 million, or 0.30% of loans & leases, net of unearned income.
• United's estimated risk-based capital ratio is 15.8% at June 30, 2024.
• The company did not repurchase any shares of its common stock during 2024 or 2023.
• For 2024, net interest income (non-FTE) is expected to be in the range of $900 million to $915 million, assuming two 25 bps rate cuts.
• Non interest expense, excluding any merger-related expenses, is expected to be in the range of $550 million to $560 million for 2024.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong earnings, improved efficiency, and a strategic acquisition. While there are some challenges, the overall tone is optimistic and indicates a well-managed company.

Positives

• Earnings per share increased to $0.71 in Q2 2024 from $0.64 in Q1 2024.
• Net interest income increased by $3.2 million from the previous quarter, driven by higher loan yields and organic loan growth.
• Noninterest expense decreased by $6.0 million from the previous quarter, driven by decreases in employee benefits and FDIC insurance expense.
• Asset quality remains sound, with non-performing assets at a low 0.23% of total assets.
• Capital ratios remain significantly above regulatory requirements.
• The merger with Piedmont Bancorp is expected to be financially compelling and expand UBSI's presence in the Southeast.
• United has a strong core deposit base with 26% of deposits in non-interest-bearing accounts.

Negatives

• Noninterest income decreased by $2.0 million from the previous quarter, primarily due to a decrease in income from mortgage banking activities.
• Net interest income for the second quarter of 2024 of $225.7 million slightly decreased by $1.7 million, or less than 1%, from the second quarter of 2023.
• Mortgage loan servicing income decreased $9.1 million driven by an $8.1 million gain on the sale of mortgage servicing rights (MSRs) in the second quarter of 2023.

Risks

• The successful integration of Piedmont Bancorp's operations may be challenging.
• Changes in interest rates and economic conditions could impact future performance.
• Competition in the banking industry could affect profitability.
• Legislative or regulatory changes may adversely affect the business.
• The company is exposed to risks related to uncertainty in U.S. fiscal and monetary policy.
• The company is exposed to risks related to volatility and disruptions in global capital and credit markets.

Future Outlook

United expects loan and deposit growth in the low to mid single digits for the remainder of 2024, and net interest income (non-FTE) is expected to be in the range of $900 million to $915 million, assuming two 25 bps rate cuts in 2024. Non interest expense, excluding any merger-related expenses, is expected to be in the range of $550 million to $560 million for 2024.

Management Comments

• UBSI continues to consistently deliver exceptional results, stated Richard M. Adams, Jr., Uniteds Chief Executive Officer.
• In the second quarter we saw increases in profitability, capital, loans, and deposits, as well as decreases in expenses and non-performing assets.
• We anticipate continued success in the second half of the year, and are excited about our recent acquisition announcement of Piedmont Bancorp, Inc. in Atlanta.

Industry Context

The announcement reflects ongoing consolidation trends in the banking industry, with regional banks seeking to expand their footprint and improve efficiency through mergers and acquisitions. UBSI's acquisition of Piedmont Bancorp is consistent with this trend, as it allows UBSI to enter the attractive Atlanta market and enhance its position in the Southeast.

Comparison to Industry Standards

• United Bankshares' return on average tangible equity of 13.12% is competitive with other well-managed regional banks such as Truist Financial Corporation and PNC Financial Services.
• The company's non-performing assets ratio of 0.23% is better than the industry average, indicating sound asset quality compared to peers like Bank of America and Wells Fargo.
• The estimated risk-based capital ratio of 15.8% is strong compared to the regulatory requirement of 10.0%, and is in line with other well-capitalized banks such as US Bancorp.

Stakeholder Impact

• Shareholders will benefit from continued dividend payments and potential stock appreciation.
• Employees may experience changes related to the Piedmont merger integration.
• Customers will have access to a larger network and potentially expanded services.
• The communities served by United Bankshares will benefit from the company's continued presence and investment.

Next Steps

• Complete the merger with Piedmont Bancorp, Inc.
• Continue to monitor and manage asset quality.
• Execute on strategic initiatives to drive loan and deposit growth.
• Manage expenses to maintain efficiency.
• Monitor market conditions and adjust strategies as needed.

Key Dates