10-Q: United Bankshares Reports Third Quarter 2024 Results, Announces Merger with Piedmont Bancorp

United Bankshares reports a slight decrease in net income for the third quarter of 2024 compared to the same period last year, while also announcing a merger with Piedmont Bancorp.

Summary

• United Bankshares reported a net income of $95.27 million for the third quarter of 2024, slightly down from $96.16 million in the same quarter of 2023.
• The company's net interest income was $230.26 million, relatively flat compared to $228.45 million in the third quarter of 2023.
• Total assets decreased slightly to $29.86 billion, while total deposits increased to $23.83 billion.
• The company's provision for credit losses increased to $6.94 million in the third quarter of 2024 from $5.95 million in the third quarter of 2023.
• Noninterest income decreased to $31.94 million, and noninterest expense was $135.34 million.
• United announced a merger agreement with Piedmont Bancorp, expected to close late in the fourth quarter of 2024 or early in the first quarter of 2025.
• The company sold its remaining mortgage servicing rights (MSRs) during the third quarter of 2024, resulting in a net gain of $7.09 million.
• Diluted earnings per share were $0.70 for the third quarter of 2024, compared to $0.71 for the third quarter of 2023.
• For the first nine months of 2024, net income was $278.59 million, down from $286.92 million in the same period of 2023.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with some positive aspects like the merger and stable net interest income, but also negative aspects like decreased net income and increased credit loss provisions. The overall sentiment is neutral to slightly negative.

Positives

• United's net interest income remained relatively stable compared to the same period last year.
• The company successfully sold its remaining mortgage servicing rights, generating a net gain of $7.09 million.
• United's capital position remains strong, with a risk-based capital ratio of 16.18%.
• The company's average equity to average asset ratio was 16.64% for the third quarter of 2024.
• United's annualized return on average tangible equity was 12.59% for the third quarter of 2024.

Negatives

• Net income for the third quarter of 2024 was slightly lower than the same period last year.
• Noninterest income decreased by 5.11% in the third quarter of 2024 compared to the third quarter of 2023.
• The provision for credit losses increased to $6.94 million in the third quarter of 2024.
• Net charge-offs were $3.60 million for the third quarter of 2024, compared to $1.78 million for the same quarter in 2023.
• Mortgage banking income decreased due to lower loan sales volume.

Risks

• The company faces risks related to changes in interest rates, which could impact net interest income.
• There is a risk of credit losses, as evidenced by the increased provision for credit losses.
• The company is exposed to market risk, particularly in its investment securities portfolio.
• The merger with Piedmont Bancorp is subject to regulatory approvals and other closing conditions.
• The company is involved in various legal proceedings, which could have a material impact on its financial statements.

Future Outlook

The company expects the merger with Piedmont Bancorp to close late in the fourth quarter of 2024 or early in the first quarter of 2025. United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures.

Management Comments

• Management believes that the allowance for credit losses of $308.74 million at September 30, 2024 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available.
• Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on Uniteds financial statements.

Industry Context

The report reflects the ongoing challenges in the banking sector, including interest rate fluctuations and credit risk management. The merger with Piedmont Bancorp is a strategic move to expand market presence and potentially enhance profitability.

Comparison to Industry Standards

• United's net interest margin of 3.52% for the third quarter of 2024 is within the range of many regional banks, but slightly lower than the 3.54% reported in the same period last year.
• The company's return on average tangible equity of 12.59% for the third quarter of 2024 is a solid performance compared to many regional banks, but lower than the 13.71% reported in the same period last year.
• The increase in the provision for credit losses to $6.94 million in the third quarter of 2024 reflects a trend seen across the industry as banks prepare for potential economic downturns.
• The sale of mortgage servicing rights is a strategic move to reduce exposure to interest rate risk, which is a common practice among banks with significant mortgage operations.
• The merger with Piedmont Bancorp is a strategic move to expand market presence, similar to other regional bank mergers seen in the industry.

Legal Proceedings

• United and its subsidiaries are currently involved in various legal proceedings in the normal course of business.
• Management believes that all such litigation will be resolved with no material effect on Uniteds financial statements.

Related Party Transactions

• Uniteds subsidiary bank has made loans to the directors and officers of United and its subsidiaries, and to their affiliates. The aggregate dollar amount of these loans was $22,876 and $68,460 at September 30, 2024 and December 31, 2023, respectively.

Stakeholder Impact

• Shareholders may be concerned about the slight decrease in net income and the increased provision for credit losses.
• Employees may be affected by the ongoing consolidation of mortgage delivery channels.
• Customers may experience changes in service as a result of the merger with Piedmont Bancorp.
• Creditors may be impacted by the changes in the company's financial condition and risk profile.

Next Steps

• The company will focus on completing the merger with Piedmont Bancorp.
• Management will continue to monitor and manage interest rate risk and credit risk.
• The company will continue to evaluate areas where noninterest income can be enhanced.

Key Dates

Keywords

merger, acquisitions, banking, financial results, net interest income, mortgage servicing rights, credit losses, capital, deposits, loans