United Bankshares, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with 2021. United is a financial holding company focused on community banking and mortgage banking. It reported $29.49 billion in consolidated assets and $4.52 billion in shareholders’ equity at year-end. Community Bankers Trust, acquired in December 2021, contributed to higher average balances in 2022.
Key financial metrics
| Metric | 2022 | 2021 | Change / context |
|---|---|---|---|
| Interest income | $1,002.0 million | $795.1 million | Up 26.0% |
| Net interest income | $896.4 million | $742.7 million | Up 20.7% |
| Net interest margin | 3.50% | 3.09% | Up 41 basis points |
| Noninterest income | $153.3 million | $278.1 million | Down 44.9%, principally from lower mortgage banking activity |
| Noninterest expense | $555.1 million | $582.0 million | Down 4.6% |
| Provision for credit losses | $18.8 million expense | $24.0 million benefit | Shifted to expense |
| Net income | $379.6 million | $367.7 million | Up 3.2% |
| Diluted earnings per share | $2.80 | $2.83 | Down slightly; average diluted shares increased |
| Return on average assets / equity | 1.31% / 8.25% | 1.35% / 8.30% | Both declined modestly |
| Operating cash flow | $760.8 million | $609.5 million | Cash and cash equivalents fell $2.58 billion |
Balance sheet, liquidity, and capital
- Total assets were $29.49 billion, up less than 1%. Loans, net of unearned income, grew 14.1% to $20.56 billion, including growth in residential real estate (+26.3%) and construction and land development (+45.3%). Real estate and construction represented 46.4% of total loans.
- Deposits declined 4.5% to $22.30 billion. Total borrowings rose 149.2% to $2.36 billion, mainly reflecting higher FHLB advances; year-end FHLB advances were $1.91 billion, with $1.90 billion scheduled to mature in 2023. Management stated liquidity was sufficient and expected to meet obligations over the next 12 months.
- Cash and cash equivalents fell 68.7% to $1.18 billion. Cash flow from investing activities was a $3.45 billion use, largely from loan growth and securities purchases; financing activities provided $105.3 million.
- Shareholders’ equity declined 4.3% to $4.52 billion, mainly because of the $327.8 million decline in accumulated other comprehensive income, driven by lower fair values of available-for-sale securities as rates rose. The portfolio had $470.1 million of gross unrealized losses; management attributed these primarily to market rates, spreads, and liquidity and reported no related credit-loss allowance.
- United reported regulatory capital ratios of 14.37% total risk-based capital, 12.30% CET1 and Tier 1 capital, and 10.79% leverage. United Bank was categorized as well-capitalized.
- The annual dividend rose to $1.44 per share from $1.41. United repurchased 2.26 million shares during 2022 for $78.4 million.
Material changes and quarterly performance
- Rising rates, loan growth, acquisition-related average balances, and a shift toward higher-yielding assets drove net interest income and margin higher. Deposit and borrowing costs also increased.
- Mortgage banking weakened materially: mortgage banking income was $42.7 million versus $171.7 million, and loans sold declined to $2.20 billion from $6.41 billion. The mortgage banking segment recorded a $7.2 million net loss, compared with $43.9 million net income in 2021.
- Community banking segment net income increased to $397.3 million from $327.1 million, reflecting the full-year contribution of Community Bankers Trust, loan growth, and improved margins.
- Fourth-quarter net income was $99.8 million, or $0.74 per diluted share, versus $73.9 million, or $0.56, in the prior-year quarter. Higher net interest income more than offset lower mortgage income and a higher credit-loss provision.
- Credit quality indicators improved: nonperforming loans and leases were $58.6 million, or 0.29% of loans, versus $90.8 million, or 0.50%, a year earlier. Net charge-offs were $101,000. The allowance for loan losses was $234.7 million, or 1.14% of loans.
Outlook, commentary, and risks
- The filing provides no specific earnings, revenue, or margin guidance. Management cited inflation, rising rates, economic uncertainty, and forecast GDP and unemployment trends in setting credit reserves. The 2023 GDP forecast used for the reserve estimate was 0.5%.
- Interest-rate modeling showed estimated one-year net interest income decreases of 3.00% under an immediate, sustained 100-basis-point rate increase and 6.83% under a 200-basis-point increase. Management cautioned that modeled results depend on assumptions and actual outcomes may differ.
- United Bank received an overall CRA rating of “Needs to Improve,” following a Fair Housing Act violation cited in the Washington, D.C. metropolitan area. The rating restricts certain expansion, merger, acquisition, and branch activities pending a higher rating. The Department of Justice concluded its review without taking enforcement action; the next CRA examination began in October 2022 and results were pending.
- Key risks include commercial real estate and construction exposure, deposit competition and funding costs, interest-rate and securities valuation changes, mortgage servicing and repurchase obligations, cyber and third-party service-provider threats, and the transition from LIBOR. The filing reports approximately $3.4 billion of mortgage loans serviced for others.
- A litigation matter with a former commercial customer was settled in the fourth quarter; the related estimated liability was reduced by $3.9 million from the $5.0 million accrual recorded in September. Management said other ordinary-course legal proceedings were not expected to have a material effect on financial position.
- Management and Ernst & Young reported effective internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Track deposit balances, funding costs, and the refinancing or repayment of the $1.90 billion of FHLB advances due in 2023.
- Monitor the pending CRA examination outcome and the duration and practical effect of expansion restrictions.
- Assess whether rapid residential and construction loan growth, commercial real estate concentrations, and reserve assumptions remain appropriate as economic conditions change.
- Review the available-for-sale securities unrealized losses, associated AOCI effects, and management’s ability and intent to hold securities through recovery or maturity.
- Check whether mortgage banking volumes and profitability stabilize, and monitor mortgage servicing, repurchase, and investor claims.
- Compare actual net interest income and deposit repricing with management’s rate-sensitivity scenarios; the filing provides no formal forward earnings guidance.