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United Bankshares Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 11, 2009 02:06PM

United Bankshares Inc. (UBSI) filed Quarterly Report for the period ended 2009-03-31. United Bankshares Inc. is a bank holding company whose business is the operation of its bank subsidiaries. All of United's subsidiary banks are full-service commercial banks. Included among the banking services offered are the acceptance of deposits in checking savings time and money market accounts; the making and servicing of personal commercial floor plan and student loans; and the making of construction and real estate loans. Also offered are individual retirement accounts safe deposit boxes wire transfers and other standard banking products and services. United Bankshares Inc. has a market cap of $1.17 billion; its shares were traded at around $27.03 with a P/E ratio of 12.93 and P/S ratio of 2.36. The dividend yield of United Bankshares Inc. stocks is 4.29%. United Bankshares Inc. had an annual average earning growth of 6.6% over the past 10 years. GuruFocus rated United Bankshares Inc. the business predictability rank of 2.5-star.

Highlight of Business Operations:

United’s total assets as of March 31, 2009 were $7.98 billion which was a decline of $117.37 million or 1.45% from December 31, 2008. The decrease was primarily the result of decreases in cash and cash equivalents and investment securities of $30.48 million or 14.27% and $67.04 million or 5.19%, respectively. Portfolio loans were relatively flat, declining $36.56 million or less than 1%. The decrease in total assets is reflected in a corresponding decrease in total liabilities of $137.65 million or 1.87% from year-end 2008. The decrease in total liabilities was due mainly to a reduction of $156.35 million or 9.59% in borrowings. Deposits were relatively flat, increasing $14.73 million less than 1% while accrued expenses and other liabilities increased $3.83 million or 4.54% from year-end 2008. Shareholders’ equity increased $20.27 million or 2.75% from year-end 2008. The following discussion explains in more detail the changes in financial condition by major category.

Cash and cash equivalents at March 31, 2009 declined $30.48 million or 14.27% from year-end 2008. Of this total decrease, cash and due from banks and federal funds sold decreased $36.52 million or 19.13% and $1.20 million or 14.15%, respectively, while interest-bearing deposits with other banks increased $7.24 million. During the first three months of 2009, net cash of $23.90 million and $99.82 million was provided by operating activities and investing activities, respectively. Net cash of $154.20 million was used in financing activities. See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first three months of 2009 and 2008.

Loans held for sale increased $549 thousand or 63.25% as loan originations exceeded loan sales in the secondary market during the first three months of 2009. Portfolio loans, net of unearned income, were relatively flat, decreasing $36.56 million or less than 1% from year-end 2008 due mainly to a decrease in commercial loans (not secured by real estate) of $36.51 million or 2.86%. Single-family residential real estate loans and commercial real estate loans were relatively flat from year-end 2008, declining $14.32 million and $3.05 million, respectively. Both of these decreases were less than 1%. These decreases were partially offset by increases from year-end 2008 in construction loans of $13.38 million or 2.22% and installment loans of $3.38 million or 1.01%.

The decrease in interest-bearing deposits was due mainly to a decline in time deposits under $100,000 of $276.12 million or 14.64%. Most of this decline was due mainly to a shift in Certificate of Deposit Account Registry Service (CDARS) balances to certificate of deposits over $100,000 as a result of the temporary increase in the Federal Deposit Insurance Corporation (FDIC) insurance coverage from $100,000 to $250,000. Interest bearing money market accounts (MMDAs) decreased $34.78 million or 2.58%. Time deposits over $100,000 increased $181.46 million or 17.94%. Regular savings balances increased $20.63 million or 6.40% and interest-bearing checking deposits increased $35.64 million or 20.36%.

2.19% from the prior year’s first three months. The provision for credit losses was $8.03 million for the first three months of 2009 as compared to $2.10 million for the first three months of 2008. Noninterest income was $15.39 million for the first three months of 2009, down $3.22 million or 17.30% when compared to the first three months of 2008. Noninterest expense increased $456 thousand or 1.10% for the three months of 2009 compared to same period in 2008. Income taxes decreased $14.90 million for the first three months of 2009 as compared to the first three months of 2008. During the first quarter of 2009, United recorded a benefit associated with net operating loss carryforwards and a positive adjustment to income tax expense as a result of a recently concluded tax examination. The income tax benefit recorded in the first quarter of 2009 related to these two events was $11.51 million. Excluding the tax expense reduction, income taxes for the first quarter of 2009 would have been $8.34 million or an effective tax rate of 31.51% as compared to 31.35% for the first three months of 2008.

Net interest income for the first three months of 2009 was $60.92 million, a decrease of $1.36 million or 2.19% from the first three months of 2008. The $1.36 million decrease in net interest income occurred because total interest income declined $18.84 million while total interest expense only declined $17.48 million from the first quarter of 2008. On a linked-quarter basis, net interest income for the first quarter of 2009 declined $2.31 million from the fourth quarter of 2008. The $2.31 million decrease in net interest income occurred because total interest income declined $8.48 million while total interest expense only declined $6.17 million from the fourth quarter of 2008. For the purpose of this remaining discussion, net interest income is presented on a tax-equivalent basis to provide a comparison among all types of interest earning assets. The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments. Although this is a non-GAAP measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition.

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