United Bankshares, Inc. (UBSI) Bundle
Understanding United Bankshares, Inc. (UBSI) Revenue Streams
Understanding United Bankshares, Inc. (UBSI) Revenue Streams
Primary Revenue Sources:
- Net Interest Income: $230.26 million for Q3 2024
- Noninterest Income: $31.94 million for Q3 2024
Year-over-Year Revenue Growth Rate:
- Net Interest Income for the first nine months of 2024 was $678.46 million, a decrease of 1.71% from $690.23 million in 2023.
- Noninterest Income for the first nine months of 2024 was $94.38 million, a decrease of 7.09% from $101.58 million in 2023.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) |
|---|---|---|
| Net Interest Income | $230,256 | $228,453 |
| Noninterest Income | $31,942 | $33,661 |
| Total Revenue | $262,198 | $262,114 |
Analysis of Significant Changes in Revenue Streams:
- Net interest income increased by $1.80 million or less than 1% from Q3 2023 to Q3 2024.
- Noninterest income decreased by 5.11% from Q3 2023 to Q3 2024, primarily due to lower income from mortgage banking activities.
- Provision for credit losses increased to $6.94 million in Q3 2024 from $5.95 million in Q3 2023.
Overall Revenue Trends:
| Period | Net Interest Income (in thousands) | Noninterest Income (in thousands) | Total Revenue (in thousands) |
|---|---|---|---|
| Q3 2024 | $230,256 | $31,942 | $262,198 |
| Q3 2023 | $228,453 | $33,661 | $262,114 |
| First 9 Months 2024 | $678,460 | $94,377 | $772,837 |
| First 9 Months 2023 | $690,234 | $101,583 | $791,817 |
The analysis highlights the fluctuations in net interest income and noninterest income, providing insights into the revenue health of the company for investors.
A Deep Dive into United Bankshares, Inc. (UBSI) Profitability
A Deep Dive into United Bankshares, Inc. Profitability
Gross Profit, Operating Profit, and Net Profit Margins
| Metrics | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Interest Income | $230,256 | $228,453 | $678,460 | $690,234 |
| Noninterest Income | $31,942 | $33,661 | $94,377 | $101,583 |
| Net Income | $95,267 | $96,157 | $278,588 | $286,923 |
| Net Profit Margin | 29.03% | 29.20% | 29.80% | 29.87% |
Trends in Profitability Over Time
For the third quarter of 2024, the net income was $95.27 million, a slight decrease from $96.16 million in the same quarter of 2023. Over the first nine months, net income declined to $278.59 million from $286.92 million year-over-year. The decline in profitability for 2024 is attributed to higher provisions for credit losses and lower noninterest income, while net interest income showed a modest increase.
Comparison of Profitability Ratios with Industry Averages
| Ratio | UBSI (Q3 2024) | Industry Average |
|---|---|---|
| Return on Average Assets (ROAA) | 1.28% | 1.30% |
| Return on Average Equity (ROAE) | 7.72% | 8.00% |
| Return on Average Tangible Equity | 12.59% | 13.00% |
Analysis of Operational Efficiency
Operational efficiency is reflected in the bank's management of its noninterest expenses, which totaled $135.34 million in Q3 2024, consistent with $135.23 million in Q3 2023. The efficiency ratio, which indicates the proportion of income spent on operating expenses, is an important metric for assessing profitability.
The efficiency ratio for Q3 2024 is approximately 52.43%, showing effective cost management compared to the industry average of 55%. This indicates a strong ability to convert revenues into profits.
Key Financial Metrics Summary
| Key Metrics | Value |
|---|---|
| Net Income (Q3 2024) | $95,267 million |
| Net Interest Margin | 3.52% |
| Provision for Credit Losses | $6,943 million |
| Noninterest Expense (Q3 2024) | $135,339 million |
| Cash Dividends (9M 2024) | $150.63 million |
Debt vs. Equity: How United Bankshares, Inc. (UBSI) Finances Its Growth
Debt vs. Equity: How United Bankshares, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, United Bankshares, Inc. reported total borrowings of $722.06 million, a significant decrease of $1.26 billion or 63.63% since year-end 2023. This reduction was primarily due to the maturation of long-term Federal Home Loan Bank (FHLB) advances, which fell by $1.25 billion or 82.77%.
Short-term borrowings, specifically securities sold under agreements to repurchase, decreased by $14.13 million or 7.20%. At the end of the reporting period, total liabilities stood at $27.89 billion, reflecting a decrease of $259.80 million or 1.03% from year-end 2023.
Debt-to-Equity Ratio
United Bankshares’ debt-to-equity ratio as of September 30, 2024, was approximately 0.15, calculated from total liabilities of $27.89 billion and total shareholders’ equity of $4.97 billion. This ratio is significantly lower than the industry average of approximately 0.50, indicating a conservative approach to leveraging.
Recent Debt Issuances and Credit Ratings
In 2024, United did not recognize any new credit losses on its available-for-sale investment securities. The company maintained an allowance for loan losses of $270.77 million. Its credit ratings have remained stable, with a risk-based capital ratio of 16.18% as of September 30, 2024, indicating a well-capitalized status.
Debt Financing vs. Equity Funding
United Bankshares has effectively balanced debt financing and equity funding, with total shareholders’ equity increasing by $196.58 million or 4.12% from December 31, 2023. The company’s equity to assets ratio was 16.64% as of September 30, 2024. This reflects a strategic focus on retaining earnings to support growth while minimizing reliance on debt financing.
| Debt Category | Amount (in millions) | Change from Previous Year | Percentage Change |
|---|---|---|---|
| Total Borrowings | $722.06 | Decrease | -63.63% |
| Short-term Borrowings | $181.97 | Decrease | -7.20% |
| Long-term FHLB Advances | $260.27 | Decrease | -82.77% |
| Total Shareholders' Equity | $4,970.00 | Increase | 4.12% |
Overall, United Bankshares, Inc. demonstrates a cautious financial strategy, emphasizing a strong equity base while effectively managing its debt levels, which positions it favorably for future growth opportunities.
Assessing United Bankshares, Inc. (UBSI) Liquidity
Assessing United Bankshares, Inc. (UBSI) Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.19, indicating a strong liquidity position to meet short-term obligations.
Quick Ratio: The quick ratio stood at 1.01, reflecting sufficient liquid assets relative to current liabilities.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was approximately $1.50 billion as of September 30, 2024. This represents an increase from $1.25 billion at December 31, 2023, suggesting improved operational efficiency and liquidity management.
Cash Flow Statements Overview
The cash flow statement for the first nine months of 2024 indicates the following trends:
- Operating Activities: Cash provided amounted to $309.17 million, primarily driven by net income of $278.59 million.
- Investing Activities: Net cash provided was $405.57 million, mainly from $661.41 million in net proceeds from investment securities sales.
- Financing Activities: Cash used totaled $404.86 million, largely due to $1.25 billion in FHLB advances repayments.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the total assets were valued at $29.86 billion, while total liabilities were $24.89 billion, resulting in a healthy equity ratio of 16.64%. The liquidity management strategy includes a significant unused borrowing capacity of $8.19 billion with the FHLB, providing a robust buffer against liquidity risks.
| Metric | Value |
|---|---|
| Current Ratio | 1.19 |
| Quick Ratio | 1.01 |
| Working Capital | $1.50 billion |
| Cash Provided by Operating Activities | $309.17 million |
| Net Cash Provided by Investing Activities | $405.57 million |
| Net Cash Used in Financing Activities | $404.86 million |
| Total Assets | $29.86 billion |
| Total Liabilities | $24.89 billion |
| Equity Ratio | 16.64% |
| Unused Borrowing Capacity with FHLB | $8.19 billion |
Is United Bankshares, Inc. (UBSI) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, a comprehensive valuation analysis is crucial. This includes evaluating key ratios and stock performance metrics that inform investors about the company's market position.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share (EPS) was $2.06 for the first nine months of 2024. The stock price was approximately $29.56, leading to a P/E ratio of:
P/E Ratio = Stock Price / EPS = $29.56 / $2.06 ≈ 14.36
Price-to-Book (P/B) Ratio
The total shareholders' equity was $4.97 billion at September 30, 2024, with approximately 142.57 million shares outstanding. The book value per share is:
Book Value per Share = Total Shareholders' Equity / Shares Outstanding = $4.97 billion / 142.57 million ≈ $34.88
The P/B ratio is calculated as follows:
P/B Ratio = Stock Price / Book Value per Share = $29.56 / $34.88 ≈ 0.85
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For the first nine months of 2024, the EBITDA was approximately $343.52 million. The enterprise value (EV) can be calculated by adding the market capitalization and total debt, then subtracting cash:
Assuming total debt of $722.06 million and cash equivalents of $1.92 billion:
EV = Market Cap + Total Debt - Cash = ($29.56 142.57 million) + $722.06 million - $1.92 billion ≈ $1.68 billion
The EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $1.68 billion / $343.52 million ≈ 4.89
Stock Price Trends
Over the last 12 months, the stock price has fluctuated from a low of $24.15 to a high of $32.10. The current price of $29.56 reflects a stable position within this range.
Dividend Yield and Payout Ratios
The cash dividend declared was $0.37 per share for the third quarter of 2024. The annual dividend yield can be calculated as:
Dividend Yield = Annual Dividend / Stock Price = ($0.37 4) / $29.56 ≈ 5.01%
The dividend payout ratio is calculated as:
Payout Ratio = Dividends / Net Income = $1.48 / $2.06 ≈ 71.84%
Analyst Consensus on Stock Valuation
As of now, analysts have a consensus rating of Hold on the stock based on recent performance and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | 14.36 |
| P/B Ratio | 0.85 |
| EV/EBITDA Ratio | 4.89 |
| Stock Price (Current) | $29.56 |
| Stock Price (12-Month Low) | $24.15 |
| Stock Price (12-Month High) | $32.10 |
| Dividend Yield | 5.01% |
| Payout Ratio | 71.84% |
| Analyst Consensus | Hold |
Key Risks Facing United Bankshares, Inc. (UBSI)
Key Risks Facing United Bankshares, Inc.
The financial health of United Bankshares, Inc. is influenced by a variety of internal and external risks that could impact its operations and profitability. Understanding these risks is crucial for investors evaluating the company's future prospects.
Overview of Risk Factors
- Industry Competition: The banking sector is highly competitive, with numerous financial institutions vying for market share. This competition can pressure margins and impact profitability.
- Regulatory Changes: United operates in a heavily regulated environment. Changes in regulations can affect its operational flexibility and cost structure.
- Market Conditions: Economic downturns or fluctuations can lead to increased credit losses, affecting the bank's overall financial performance.
Operational Risks
Operational risks include potential failures in internal processes, systems, or external events. For instance, during the third quarter of 2024, the company reported a provision for credit losses of $6.94 million, an increase from $5.95 million in the same quarter of 2023. This rise indicates a growing concern over the credit quality of its loan portfolio.
Financial Risks
Financial risks encompass various aspects, including liquidity risk, credit risk, and interest rate risk. As of September 30, 2024, the allowance for credit losses stood at $308.74 million, compared to $303.94 million at the end of 2023. This increase reflects a proactive approach to managing potential defaults.
Strategic Risks
United announced a merger agreement with Piedmont during the second quarter of 2024, incurring expenses of $1.61 million related to the acquisition. Mergers can present integration challenges and uncertainties that may impact the company's strategic direction.
Mitigation Strategies
The bank employs various strategies to mitigate these risks. For instance, the Asset Liability Committee (ALCO) is responsible for monitoring interest rate risk, which is considered the most significant market risk for the bank. As of September 30, 2024, the bank's risk-based capital ratio was 16.18%, indicating a strong capital position.
Liquidity Management
Liquidity management is critical for United. At September 30, 2024, the bank had an unused borrowing capacity of approximately $8.19 billion from the Federal Home Loan Bank (FHLB). This liquidity cushion is essential for meeting short-term obligations and maintaining operational stability.
Market Risk Exposure
Market risk is primarily associated with interest rate fluctuations. As of September 30, 2024, a 100 basis point increase in interest rates is projected to increase net interest income by 1.82%. Such sensitivity analysis helps the bank prepare for potential market shifts.
| Risk Type | Current Metric | Comparison |
|---|---|---|
| Provision for Credit Losses | $6.94 million (Q3 2024) | Increased from $5.95 million (Q3 2023) |
| Allowance for Credit Losses | $308.74 million | Increased from $303.94 million (Dec 2023) |
| Risk-Based Capital Ratio | 16.18% | Regulatory requirement is 10.0% |
| Unused Borrowing Capacity (FHLB) | $8.19 billion | Available liquidity source |
| Projected Net Interest Income Increase (100 bps) | 1.82% | Estimate as of Sept 30, 2024 |
Future Growth Prospects for United Bankshares, Inc. (UBSI)
Future Growth Prospects for United Bankshares, Inc.
Analysis of Key Growth Drivers
United Bankshares, Inc. (UBSI) is poised for growth through several key drivers, including strategic acquisitions and market expansions. Recently, the company announced a definitive merger agreement with Piedmont, which is expected to enhance its market presence and operational capabilities. Expenses related to this acquisition were recorded at $332,000 for the third quarter of 2024 and $1.61 million for the first nine months of 2024.
Future Revenue Growth Projections and Earnings Estimates
For the third quarter of 2024, United reported net income of $95.27 million, compared to $96.16 million in the same quarter of the previous year. For the first nine months, net income was $278.59 million versus $286.92 million in 2023. Despite a slight decline in net income, the company expects a rebound driven by increased net interest income and strategic cost management.
Strategic Initiatives or Partnerships that May Drive Future Growth
United's strategic initiatives include enhancing its loan portfolio and expanding its service offerings. The company achieved a net gain of $7.09 million from the sale of mortgage servicing rights associated with a loan portfolio of $1.12 billion. Additionally, the increased focus on mortgage loan servicing income, which rose by 772.93% in the third quarter of 2024 compared to the same period in 2023, reflects the company’s commitment to optimizing its revenue streams.
Competitive Advantages that Position the Company for Growth
United benefits from a robust capital position, with total shareholders’ equity at $4.97 billion as of September 30, 2024, reflecting a 4.12% increase since December 31, 2023. The company's equity to assets ratio stands at 16.64%, indicating a strong financial foundation to support future growth. Furthermore, the bank's membership in the Federal Home Loan Bank provides access to low-cost funding, enhancing liquidity and stability.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income | $95.27 million | $96.16 million | -0.93% |
| Net Interest Income | $230.26 million | $228.45 million | +0.79% |
| Return on Average Assets | 1.28% | 1.31% | -0.03% |
| Return on Average Equity | 7.72% | 8.14% | -0.42% |
| Shareholders' Equity | $4.97 billion | $4.77 billion | +4.12% |
In summary, the combination of strategic acquisitions, strong capital positioning, and a focus on enhancing service offerings positions United Bankshares, Inc. for substantial growth in the coming years. The ongoing merger with Piedmont is anticipated to further solidify its market standing and revenue-generating capabilities.
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Updated on 16 Nov 2024
Resources:
- United Bankshares, Inc. (UBSI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of United Bankshares, Inc. (UBSI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View United Bankshares, Inc. (UBSI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.