Business Context and Reporting Period
Company: United Bankshares, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and nine months ended September 30, 2001
Business Overview: United Bankshares operates primarily through community banking and mortgage banking segments. The company is headquartered in Charleston, West Virginia.
Key Financial Metrics
| Metric | Q3 2001 | Q3 2000 | YTD 9M 2001 | YTD 9M 2000 |
|---|---|---|---|---|
| Net Income | $19.78 million | $18.56 million | $58.92 million | $54.67 million |
| Earnings Per Share (Diluted) | $0.48 | $0.44 | $1.41 | $1.29 |
| Total Assets | $5.17 billion | N/A | N/A | N/A |
| Net Interest Income | $46.58 million | $44.13 million | $137.02 million | $136.29 million |
| Net Interest Margin | 4.14% | 4.04% | 4.14% | 4.13% |
| Provision for Loan Losses | $4.15 million | $4.44 million | $8.79 million | $10.84 million |
| Noninterest Income | $15.76 million | $13.32 million | $44.60 million | $36.59 million |
| Noninterest Expense | $28.88 million | $25.46 million | $85.33 million | $80.71 million |
| Cash Flow from Operations (9M) | $25.89 million | $22.92 million | ||
| Shareholders' Equity | $462.50 million | N/A | N/A | N/A |
Material Changes vs. Prior Period
- Profitability Growth: Net income increased 7.77% year-to-date (YTD) and 6.57% in the third quarter compared to the prior year. Earnings per share (diluted) rose 9.30% YTD.
- Asset Expansion: Total assets grew $261.34 million (5.33%) from year-end 2000 to $5.17 billion. This was driven by a $227.37 million increase in investment securities and a $46.84 million increase in loans held for sale.
- Loan Portfolio: Portfolio loans (net of unearned income) grew $23.96 million. Nonperforming loans increased to $15.15 million from $12.85 million at year-end 2000, primarily due to two large commercial credits, though they remain below September 2000 levels.
- Expense Management: Noninterest expenses increased 5.72% YTD, largely due to a 15.46% rise in salaries and benefits driven by higher mortgage banking activity. Net occupancy expense decreased 11.09% YTD.
- Noninterest Income: Increased 21.89% YTD, fueled by a 51.62% surge in mortgage banking income due to higher origination volumes and a 21.12% increase in trust services income.
Guidance, Outlook, and Risks
- Acquisition: United entered into an agreement on June 14, 2001, to acquire Century Bancshares, Inc. for approximately $67.7 million (stock and cash). The transaction is expected to close in the fourth quarter of 2001, subject to regulatory and shareholder approval.
- Capital Position: The company maintains a "well-capitalized" status. The risk-based capital ratio was 11.91%, significantly above regulatory minimums. Shareholders' equity increased 7.34% from year-end 2000.
- Dividends: The Board declared a quarterly dividend of $0.23 per share, a 10% increase over the prior year's quarter. YTD dividends totaled $0.68 per share.
- Market Risk: Interest rate risk is identified as the most significant market risk. As of September 30, 2001, the company was liability-sensitive in the one-year horizon. A 200 basis point rise in rates is estimated to decrease net interest income by 1.22% over one year.
- Accounting Changes: The company adopted SFAS No. 141 and 142 regarding business combinations and goodwill. Management estimates the elimination of goodwill amortization in 2002 will benefit earnings by approximately $1.7 million after tax.
- Contingencies: The company is involved in various legal proceedings but believes they will not have a material effect on financial position.
Investor Verification Checklist
- Century Bancshares Acquisition: Verify the closing status and regulatory approval of the $67.7 million acquisition of Century Bancshares, Inc.
- Nonperforming Loans: Review the specific details and collateral status of the two large commercial credits that drove the increase in loans past due 90 days or more.
- Security Impairments: Confirm the impact of the $2.40 million impairment charge on available-for-sale securities related to prepayment activity in securitized assets.
- Interest Rate Sensitivity: Assess the company's liability-sensitive gap position and its potential impact on earnings if interest rates rise as projected.
- Stock Repurchase Program: Track the remaining capacity of the 1.675 million share repurchase plan, noting 1.004 million shares have been repurchased to date.