United Bankshares, Inc. (NASDAQ:UBSI) is a diversified financial holding company providing a wide range of banking and financial services through its wholly-owned subsidiary, United Bank. With a history dating back to 1839, United Bankshares has grown to become one of the largest community banking organizations in the Mid-Atlantic and Southeastern regions, serving customers across West Virginia, Virginia, Maryland, North Carolina, South Carolina, Pennsylvania, and Washington, D.C.
Business Overview
United Bankshares operates as a community bank, offering a full suite of banking products and services to individuals and businesses. The company's core business segments include community banking, mortgage banking, and wealth management. Through its community banking division, United provides traditional banking services such as deposit accounts, commercial and consumer loans, and cash management solutions. The mortgage banking segment originates and sells residential mortgage loans, while the wealth management division offers trust, brokerage, and investment advisory services.
As of March 31, 2024, United Bankshares had total assets of $30.03 billion, total loans of $21.52 billion, and total deposits of $22.92 billion. The company's net income for the full year 2023 was $366.31 million, with annual revenue of $1.50 billion. United Bankshares also generated $408.74 million in annual operating cash flow and $397.05 million in annual free cash flow.
Financials
For the first quarter of 2024, United Bankshares reported net income of $86.81 million, a decrease of 11.7% compared to the first quarter of 2023. This decline was primarily driven by a $11.83 million, or 5.05%, decrease in net interest income, which was partially offset by a $3.32 million, or 2.42%, increase in noninterest expense. The decrease in net interest income was due to higher interest expense, driven by deposit rate repricing and an increase in average interest-bearing deposits, as well as a decrease in loan fees, partially offset by the impact of rising market interest rates on earning assets, organic loan growth, and a decrease in average long-term borrowings.
The company's provision for credit losses was $5.74 million in the first quarter of 2024, down from $6.89 million in the same period of 2023. This decrease was mainly due to a change in qualitative factors and the impact of reasonable and supportable forecasts of future macroeconomic conditions. Noninterest income decreased $532 thousand, or 1.62%, primarily due to a $1.49 million, or 65.33%, decline in mortgage loan servicing income, partially offset by a $1.07 million, or 25.40%, increase in fees from brokerage services.
United Bankshares' annualized return on average assets (ROAA) for the first quarter of 2024 was 1.19%, compared to 1.35% in the first quarter of 2023. The company's annualized return on average shareholders' equity (ROAE) was 7.25% in the first quarter of 2024, down from 8.72% in the same period of the prior year.
Liquidity
United Bankshares maintains a strong liquidity position, with cash and cash equivalents of $1.73 billion as of March 31, 2024, up from $1.60 billion at the end of 2023. The company's loan-to-deposit ratio was 93.9% at the end of the first quarter of 2024, compared to 93.6% at the end of 2023.
In terms of capital, United Bankshares is well-capitalized, with a risk-based capital ratio of 15.55%, a Common Equity Tier 1 capital ratio of 13.22%, a Tier 1 capital ratio of 13.22%, and a leverage ratio of 11.41% as of March 31, 2024. These ratios exceed the regulatory requirements for a well-capitalized financial institution.
Geographic and Segment Diversification
United Bankshares' operations are geographically diversified across the Mid-Atlantic and Southeastern regions, with a presence in West Virginia, Virginia, Maryland, North Carolina, South Carolina, Pennsylvania, and Washington, D.C. This geographic diversification helps to mitigate the company's exposure to regional economic fluctuations.
In terms of business segments, United Bankshares operates in three main areas: community banking, mortgage banking, and wealth management. The community banking segment is the company's largest, accounting for the majority of its revenue and earnings. The mortgage banking and wealth management segments provide additional sources of noninterest income and diversification.
Risks and Challenges
While United Bankshares has demonstrated consistent financial performance, the company faces several risks and challenges, including:
1. Interest rate risk: The company's net interest margin and profitability are sensitive to changes in interest rates, which could impact its ability to maintain its current level of financial performance.
2. Credit risk: As a lender, United Bankshares is exposed to the risk of borrower default, which could lead to increased loan losses and provisions for credit losses.
3. Regulatory environment: The banking industry is heavily regulated, and changes in laws and regulations could impact the company's operations and compliance costs.
4. Competition: United Bankshares operates in a highly competitive industry, facing competition from both traditional banks and nonbank financial institutions, which could pressure the company's market share and profitability.
5. Technological disruption: The rapid pace of technological change in the financial services industry could require significant investments by the company to maintain its competitive position and meet customer expectations.
Outlook
United Bankshares has not provided specific financial guidance for the full year 2024. However, the company has indicated that it remains focused on maintaining its strong credit quality, prudent risk management, and disciplined expense control to drive consistent financial performance. The company's management team is also actively exploring strategic growth opportunities, both organically and through potential acquisitions, to further expand its footprint and diversify its revenue streams.
Conclusion
United Bankshares, Inc. is a well-established community bank with a diversified business model and a strong track record of financial performance. The company's geographic and segment diversification, coupled with its robust liquidity and capital positions, position it well to navigate the challenges facing the banking industry. While the company faces risks related to interest rates, credit quality, and technological disruption, United Bankshares' management team has demonstrated its ability to adapt and deliver consistent results for its shareholders.