UBSI

United Bankshares Inc. Q1 2005 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2005 for United Bankshares, Inc. and its subsidiaries. The company operates as a bank holding company with principal executive offices in Charleston, West Virginia. As of April 30, 2005, there were 42,715,523 shares of common stock outstanding. The company sold its mortgage banking subsidiary, Mason Mortgage, in July 2004; results from this subsidiary are reported as discontinued operations.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability: Net income increased 5.34% year-over-year to $24.76 million, driven by higher net interest income and a lower provision for credit losses ($1.11 million vs. $1.36 million in Q1 2004).
• Assets: Total assets decreased 1.94% to $6.31 billion, primarily due to a $120.72 million decline in securities available for sale. Portfolio loans remained relatively flat, decreasing less than 1%.
• Liabilities: Total borrowings decreased 12.46% to $1.26 billion, with significant reductions in Federal Home Loan Bank (FHLB) borrowings and federal funds purchased.
• Noninterest Income: Consolidated noninterest income decreased 35.59% to $12.92 million. This decline is largely attributable to the exclusion of discontinued mortgage banking operations in the current period, which were included in Q1 2004 results.
• Noninterest Expense: Consolidated noninterest expenses decreased 22.79% to $28.74 million, also impacted by the removal of discontinued operations expenses. Continuing operations expenses decreased 2.98%.

Outlook, Risks, and Management Commentary

• Capital Position: The company is categorized as "well capitalized" with a risk-based capital ratio of 11.80% and a Tier 1 capital ratio of 10.60%, both significantly above regulatory minimums.
• Dividends: A cash dividend of $0.26 per share was declared, marking the 32nd consecutive year of dividend increases.
• Stock Repurchases: The company repurchased 245,294 shares during the quarter under a plan approved in August 2004 to repurchase up to 1.775 million shares.
• Interest Rate Risk: Management identifies interest rate risk as the most significant market risk. Simulations indicate that a 100 basis point increase in rates would increase net interest income by 3.06%, while a 100 basis point decrease would reduce it by 3.77%.
• Accounting Changes: The company is preparing for the adoption of SFAS 123R (Share-Based Payment) effective March 31, 2006, which is expected to have an adverse impact on net income due to the recognition of stock option compensation expense.
• Credit Quality: Nonperforming loans decreased to $9.52 million (0.22% of loans). Impaired loans increased to $13.13 million, primarily due to two large commercial credits, but management believes the allowance for credit losses is adequate.

Investor Verification Checklist

• Verify the impact of the discontinued mortgage banking operations on year-over-year noninterest income comparisons.
• Review the composition of the $13.13 million in impaired loans and the specific risk factors associated with the two large commercial credits added in Q1.
• Assess the sensitivity of the investment portfolio to interest rate changes, specifically the unrealized losses of $17.27 million on available-for-sale securities.
• Monitor the upcoming adoption of SFAS 123R and its projected impact on future earnings per share.
• Confirm the sustainability of the 15.71% return on average equity given the reduction in noninterest income from continuing operations.