UNITED BANKSHARES INCWV
For the period ended Mar 31, 2025. Filed May 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
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Item 2. RESULTS OF OPERATIONS
Overview
The following table sets forth certain consolidated income statement information of United:
| Three Months Ended | |||
|---|---|---|---|
| (Dollars in thousands) | March2025 | March2024 | December2024 |
| Income Statement Summary: | |||
| Interest income | $403,647 | $369,180 | $376,034 |
| Interest expense | 143,592 | 146,691 | 143,426 |
| Net interest income | 260,055 | 222,489 | 232,608 |
| Provision for credit losses | 29,103 | 5,740 | 6,691 |
| Other income | 29,554 | 32,212 | 29,318 |
| Other expense | 153,573 | 140,742 | 134,176 |
| Income before income taxes | 106,933 | 108,219 | 121,059 |
| Income taxes | 22,627 | 21,405 | 26,651 |
| Net income | $84,306 | $86,814 | $94,408 |
Net income for the first quarter of 2025 was $84.31 million as compared to earnings of $86.81 million for the first quarter of 2024. Diluted earnings per share were $0.59 for the first quarter of 2025 and $0.64 for the first quarter of 2024. On a linked-quarter basis, net income for the fourth quarter of 2024 was $94.41 million or $0.69 per diluted share.
As previously mentioned, United completed its acquisition of Piedmont on January 10, 2025. The financial results of Piedmont are included in United’s results from the acquisition date. As a result of the acquisition, the first quarter of 2025 was impacted for nearly three months of increased levels of average balances, income, and expense as compared to the first quarter of 2024 and the fourth quarter of 2024. In addition, United recorded acquisition-related costs for the Piedmont merger of $30.04 million, including a provision for credit losses of $18.73 million for purchasednon-PCD loans for the first quarter of 2025 and $1.26 million for the fourth quarter of 2024.
United’s annualized return on average assets for the first three months of 2025 was 1.06% and return on average shareholders’ equity was 6.47% as compared to 1.19% and 7.25%, respectively, for the first three months of 2024. On a linked-quarter basis, United’s annualized return on average assets for the fourth quarter of 2024 was 1.25% and return on average shareholders’ equity was 7.48%. For the first three months of 2025, United’s annualized return on average tangible equity, anon-GAAP measure, was 10.61%, as compared to 11.98% for the first three months of 2024. On a linked-quarter basis, United’s annualized return on average tangible equity was 12.03% for the fourth quarter of 2024.
| Three Months Ended | |||
|---|---|---|---|
| March 31,2025 | March 31,2024 | December 31,2024 | |
| Return on Average Tangible Equity: | |||
| (a) Net Income (GAAP) | $84,306 | $86,814 | $94,408 |
| (b) Number of Days | 90 | 91 | 92 |
| Average Total Shareholders’ Equity (GAAP) | $5,283,542 | $4,816,476 | $5,019,069 |
| Less: Average Total Intangibles | (2,060,975) | (1,901,074) | (1,898,335) |
| (c) Average Tangible Equity (non-GAAP) | $3,222,567 | $2,915,402 | $3,120,734 |
| Return on Average Tangible Equity (non-GAAP)\ [(a) / (b)] x 365 or 366 / (c)] | 10.61% | 11.98% | 12.03% |
Net interest income for the first quarter of 2025 increased $37.57 million, or 16.88% from the first quarter of 2024. The increase of $37.57 million in net interest income occurred because total interest income increased $34.47 million while total interest expense decreased $3.10 million from the first quarter of 2024. Net interest income for the first quarter of 2025 increased $27.45 million, or 11.80%, from the fourth quarter of 2024. The increase of $27.45 million in net interest income occurred because total interest income increased $27.61 million while total interest expense increased $166 thousand from the fourth quarter of 2024.
The provision for credit losses was $29.10 million for the first quarter of 2025 as compared to a provision for credit losses of $5.74 million and $6.69 million for the first quarter and fourth quarter of 2024, respectively. The increase in the provision for credit losses was mainly due to the previously mentioned $18.73 million of provision recorded on purchasednon-PCD loans from Piedmont.
For the first quarter of 2025, noninterest income decreased $2.66 million or 8.25% from the first quarter of 2024. The decrease of $2.66 million was primarily due to a decrease in income from mortgage banking activities as a result of lower mortgage loan origination and sale volume.
Noninterest expense for the first quarter of 2025 increased $12.83 million or 9.12% from the first quarter of 2024. The increase of $12.83 million was due mainly to $11.31 million of merger-rated expenses incurred during the first quarter of 2025 from the Piedmont acquisition.
Income taxes increased $1.22 million or 5.71% for the first three months of 2025 as compared to the first three months of 2024 primarily due to a higher effective tax rate partially offset by lower earnings. On a linked-quarter basis, income taxes decreased $4.02 million or 15.10% for the first quarter of 2025 as compared to the fourth quarter of 2024 due mainly to lower earnings and a lower effective tax rate. The effective tax rate was 21.16% and 19.78% for the first quarter of 2025 and 2024, respectively. The effective tax rate was 22.01% for the fourth quarter of 2024.
The following discussion explains in more detail the consolidated results of operations by major category.
Net Interest Income
Net interest income represents the primary component of United’s earnings. It is the difference between interest income from earning assets and interest expense incurred to fund these assets. Net interest income is impacted by changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as changes in market interest rates. Such changes, and their impact on net interest income in 2025 and 2024, are presented below.
Net interest income for the first quarter of 2025 was $260.06 million, which was an increase of $37.57 million or 16.88% from the first quarter of 2024. The $37.57 million increase in net interest income occurred because total interest income increased $34.47 million while total interest expense decreased $3.10 million from the first quarter of 2024. On a linked-quarter basis, net interest income for the first quarter of 2025 increased $27.45 million, or 11.80%, from the fourth quarter of 2024. The $27.45 million increase in net interest income occurred because total interest income increased $27.61 million while total interest expense increased $166 thousand from the fourth quarter of 2024.
For the purpose of this remaining discussion, net interest income is presented on atax-equivalent basis to provide a comparison among all types of interest earning assets. Thetax-equivalent basis adjusts for thetax-favored status of income from certain loans and investments. Although this is anon-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 andtax-exempt sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition.
Tax-equivalent net interest income for the first quarter of 2025 was $260.84 million, an increase of $37.48 million or 16.78% from the first quarter of 2024 due mainly to an increase in average earning assets from the Piedmont acquisition. Average earning assets for the first quarter of 2025 increased $2.48 billion or 9.51% from the first quarter of 2024. The increase in average earning assets was due mainly to a $1.94 billion or 9.14% increase in average net loans and a $1.25 billion or 141.45% increase in average short-term investments, partially offset by a decrease of $709.58 million or 17.94% in average investment securities. Average interest-bearing funds for the first quarter of 2025 increased $1.72 billion or 9.37% from the first quarter of 2024. In particular, average interest-bearing deposits increased $2.70 billion while average long-term borrowings decreased $945.62 million from the first quarter of 2024. In addition, the average cost of funds for the first quarter of 2025 decreased 31 basis points due primarily to a decrease in interest rates from the first quarter of 2024. Most notably, the cost of average interest-bearing deposits and short-term borrowings decreased 25 and 59 basis points, respectively, from the first quarter of 2024. Also, the average yield on earning assets for the first quarter of 2025 increased 3 basis points from the first quarter of 2024 despite a decline in interest rates due mainly to an increase in loan accretion on acquired loans. For the first quarter of 2025, interest income andtax-equivalent net interest income included $5.99 million of acquired loan accretion income as compared to $2.51 million for the first quarter of 2024. The net interest margin of 3.69% for the first quarter of 2025 was an increase of 25 basis points from the net interest margin of 3.44% for the first quarter of 2024.
On a linked-quarter basis, tax-equivalent net interest income for the first quarter of 2025 increased $27.43 million, or 11.75%, from the fourth quarter of 2024. The increase intax-equivalent net interest income was primarily due to an increase in average earning assets from the Piedmont acquisition as well as a decrease in the average cost of funds due to the impact of deposit rate repricing as a result of lower interest rates. Average earning assets for the first quarter of 2025 increased $1.88 million or 7.05% from the fourth quarter of 2024 as average net loans increased $1.75 billion or 8.16% and average short-term investments increased $323.95 million or 17.93% while average investments decreased $192.28 million or 5.59%. The average cost of funds for the first quarter of 2025 decreased 17 basis points. In particular, the cost on average interest-bearing deposits and long-term borrowings decreased 17 and 22 basis points, respectively, for the first quarter of 2025. The yield on average earning assets for the first quarter of 2025 increased 11 basis points from the fourth quarter of 2024 driven by an increase of 13 basis points on the yield on average net loans. Acquired loan accretion income for the first quarter of 2025 was $5.99 million as compared to $1.98 million for the fourth quarter of 2024. The net interest margin of 3.69% for the first quarter of 2025 was an increase of 20 basis points from the net interest margin of 3.49% for the fourth quarter of 2024.
United’stax-equivalent net interest income also includes the impact of acquisition accounting fair value adjustments. The following table provides the discount/premium and net accretion impact totax-equivalent net interest income for the three months ended March 31, 2025, March 31, 2024 and December 31, 2024:
| Three Months Ended | |||
|---|---|---|---|
| March 31 | March 31 | December 31 | |
| (Dollars in thousands) | 2025 | 2024 | 2024 |
| Loan accretion | $5,989 | $2,506 | $1,978 |
| Certificates of deposit | 247 | 171 | 33 |
| Long-term borrowings | (202) | (331) | (329) |
| Total | $6,034 | $2,346 | $1,682 |
The following tables reconcile the difference between net interest income andtax-equivalent net interest income for the three months ended March 31, 2025, March 31, 2024 and December 31, 2024.
| Three Months Ended | |||
|---|---|---|---|
| March 31 | March 31 | December 31 | |
| (Dollars in thousands) | 2025 | 2024 | 2024 |
| Net interest income, GAAP basis | $260,055 | $222,489 | $232,608 |
| Tax-equivalent adjustment (1) | 782 | 872 | 795 |
| Tax-equivalent net interest income | $260,837 | $223,361 | $233,403 |
| (1) | The tax-equivalent adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months ended March 31, 2025 and 2024 and December 31, 2024. All interest income on loans and investment securities was subject to state income taxes. |
The following table shows the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month periods ended March 31, 2025 and 2024, respectively, with the interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on atax-equivalent basis using the statutory federal income tax rate of 21% for the three-month period ended March 31, 2025 and 2024. Interest income on all loans and investment securities was subject to state income taxes.
| Three Months Ended · Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2025 | March 31, 2024 | |||||
| (Dollars in thousands) | AverageBalance | Interest(1) | Avg. Rate(1) | AverageBalance | Interest(1) | Avg. Rate(1) |
| ASSETS | ||||||
| Earning Assets: | ||||||
| Federal funds sold and securities purchased under agreements to resell and other short-term investments | $2,131,157 | $23,726 | 4.51% | $882,656 | $12,303 | 5.61% |
| Investment Securities: | ||||||
| Taxable | 3,048,058 | 26,911 | 3.53% | 3,743,157 | 34,722 | 3.71% |
| Tax-exempt | 197,891 | 1,486 | 3.00% | 212,375 | 1,474 | 2.78% |
| Total Securities | 3,245,949 | 28,397 | 3.50% | 3,955,532 | 36,196 | 3.66% |
| Loans, net of unearned income (2)(3) | 23,499,660 | 352,306 | 6.07% | 21,508,611 | 321,553 | 6.01% |
| Allowance for loan losses | (308,225) | (259,341) | ||||
| Net loans (2)(3) | 23,191,435 | 6.15% | 21,249,270 | 6.08% | ||
| Total earning assets | 28,568,541 | $404,429 | 5.73% | 26,087,458 | $370,052 | 5.70% |
| Other assets | 3,611,699 | 3,344,925 | ||||
| TOTAL ASSETS | $32,180,240 | $29,432,383 | ||||
| LIABILITIES | ||||||
| Interest-Bearing Funds: | ||||||
| Interest-bearing deposits | $19,367,638 | $136,288 | 2.85% | $16,663,765 | $128,377 | 3.10% |
| Short-term borrowings | 167,080 | 1,450 | 3.52% | 203,570 | 2,082 | 4.11% |
| Long-term borrowings | 554,614 | 5,854 | 4.28% | 1,500,237 | 16,232 | 4.35% |
| Total Interest-Bearing Funds | 20,089,332 | 143,592 | 2.90% | 18,367,572 | 146,691 | 3.21% |
| Noninterest-bearing deposits | 6,471,287 | 5,941,866 | ||||
| Accrued expenses and other liabilities | 336,079 | 306,469 | ||||
| TOTAL LIABILITIES | 26,896,698 | 24,615,907 | ||||
| SHAREHOLDERS’ EQUITY | 5,283,542 | 4,816,476 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $32,180,240 | $29,432,383 | ||||
| NET INTEREST INCOME | $260,837 | $223,361 | ||||
| INTEREST SPREAD | 2.83% | 2.49% | ||||
| NET INTEREST MARGIN | 3.69% | 3.44% | ||||
| (1) | The interest income and the yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21%. |
| (2) | Nonaccruing loans are included in the daily average loan amounts outstanding. |
| (3) | Loans held for sale and leases are included in the daily average loan amounts outstanding. |
The following table shows the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month periods ended March 31, 2025 and December 31, 2024, respectively, with the interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on atax-equivalent basis using the statutory federal income tax rate of 21% for the three-month period ended March 31, 2025 and December 31, 2024. Interest income on all loans and investment securities was subject to state income taxes.
| Three Months Ended · Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | |||||
| (Dollars in thousands) | AverageBalance | Interest(1) | Avg. Rate(1) | AverageBalance | Interest(1) | Avg. Rate(1) |
| ASSETS | ||||||
| Earning Assets: | ||||||
| Federal funds sold and securities purchased under agreements to resell and other short-term investments | $2,131,157 | $23,726 | 4.51% | $1,807,207 | $21,876 | 4.82% |
| Investment Securities: | ||||||
| Taxable | 3,048,058 | 26,911 | 3.53% | 3,242,979 | 29,244 | 3.61% |
| Tax-exempt | 197,891 | 1,486 | 3.00% | 195,252 | 1,374 | 2.81% |
| Total Securities | 3,245,949 | 28,397 | 3.50% | 3,438,231 | 30,618 | 3.56% |
| Loans, net of unearned income (2)(3) | 23,499,660 | 352,306 | 6.07% | 21,713,148 | 324,335 | 5.95% |
| Allowance for loan losses | (308,225) | (270,751) | ||||
| Net loans (2)(3) | 23,191,435 | 6.15% | 21,442,397 | 6.02% | ||
| Total earning assets | 28,568,541 | $404,429 | 5.73% | 26,687,835 | $376,829 | 5.62% |
| Other assets | 3,611,699 | 3,324,891 | ||||
| TOTAL ASSETS | $32,180,240 | $30,012,726 | ||||
| LIABILITIES | ||||||
| Interest-Bearing Funds: | ||||||
| Interest-bearing deposits | $19,367,638 | $136,288 | 2.85% | $17,871,685 | $135,690 | 3.02% |
| Short-term borrowings | 167,080 | 1,450 | 3.52% | 180,070 | 1,630 | 3.60% |
| Long-term borrowings | 554,614 | 5,854 | 4.28% | 540,247 | 6,106 | 4.50% |
| Total Interest-Bearing Funds | 20,089,332 | 143,592 | 2.90% | 18,592,002 | 143,426 | 3.07% |
| Noninterest-bearing deposits | 6,471,287 | 6,099,264 | ||||
| Accrued expenses and other liabilities | 336,079 | 302,391 | ||||
| TOTAL LIABILITIES | 26,896,698 | 24,993,657 | ||||
| SHAREHOLDERS’ EQUITY | 5,283,542 | 5,019,069 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $32,180,240 | $30,012,726 | ||||
| NET INTEREST INCOME | $260,837 | $233,403 | ||||
| INTEREST SPREAD | 2.83% | 2.55% | ||||
| NET INTEREST MARGIN | 3.69% | 3.49% | ||||
| (1) | The interest income and the yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21%. |
| (2) | Nonaccruing loans are included in the daily average loan amounts outstanding. |
| (3) | Loans held for sale and leases are included in the daily average loan amounts outstanding. |
Provision for Credit Losses
The provision for credit losses was $29.10 million for the first quarter of 2025 as compared to a provision for credit losses of $5.74 million for the first quarter of 2024. On a linked-quarter basis, the provision for credit losses for the fourth quarter of 2024 was $6.69 million. The provision for credit losses for the first quarter of 2025 included provision expense of $18.73 million recorded for purchasednon-PCD loans from Piedmont. United’s provision for credit losses relates to its portfolio of loans and leases, available-for-sale securities andheld-to-maturity securities are discussed in more detail in the following paragraphs.
For the quarter ended March 31, 2025, the provision for loan and lease losses was $29.10 million as compared to a provision for loan and lease losses of $5.74 million for the quarter ended March 31, 2024. The higher amount of provision expense for the first quarter of 2025 compared to the first quarter of 2024 was mainly due to the previously mentioned provision expense of $18.73 million recorded for purchasednon-PCD loans from Piedmont. Net charge-offs were $8.04 million for the first quarter of 2025 compared to net charge-offs of $2.07 million for the first quarter of 2024. The higher amount of net charge-offs for 2025 as compared to 2024 was primarily due to increased charge-offs within the consumer, commercial real estate nonowner-occupied and other commercial portfolios. On a linked-quarter basis, the provision for loan and lease losses for the fourth quarter of 2024 was $6.69 million. Again, the higher amount of provision expense for the first quarter of 2025 from the fourth quarter of 2024 was due primarily to the provision expense recorded on thenon-PCD loans acquired from Piedmont. Net charge-offs were $5.62 million for the fourth quarter of 2024. Annualized net charge-offs as a percentage of average loans and leases, net of unearned income for the first quarter of 2025 was 0.14% as compared to annualized net charge-offs of 0.04% for the first quarter of 2024 and annualized net charge-offs of 0.10% for the fourth quarter of 2024.
The following table shows a summary of United’s nonperforming assets including nonperforming loans and other real estate owned (“OREO”) at March 31, 2025 and December 31, 2024:
| March 31 | December 31 | |
|---|---|---|
| (In thousands) | 2025 | 2024 |
| Nonaccrual loans | $57,388 | $56,460 |
| Loans past due 90 days or more | 12,387 | 16,940 |
| Total nonperforming loans | $69,775 | $73,400 |
| Other real estate owned | 1,475 | 327 |
| Total nonperforming assets | $71,250 | $73,727 |
United maintains an allowance for loan and lease losses and a reserve for lending-related commitments. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses. At March 31, 2025, the allowance for credit losses was $346.99 million as compared to $306.76 million at December 31, 2024.
At March 31, 2025, the allowance for loan and lease losses was $310.42 million as compared to $271.84 million at December 31, 2024. The increase in the allowance for loan and lease losses was primarily driven by the allowance for loan and lease losses recorded as a result of the Piedmont acquisition. The allowance for loan and lease losses at March 31, 2025 saw the largest increases in the reserves for commercial real estate, both owner and nonowner-occupied, the residential real estate and the real estate construction and development loans segments from year-end 2024 due to increased outstanding loan balances from the Piedmont acquisition, increased allocations for individually evaluated loans that do not share similar portfolio characteristics and increased adjustments resulting from the reasonable and supportable forecast. As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.30% at March 31, 2025 and 1.25% at December 31, 2024. The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 444.89% and 370.36% at March 31, 2025 and December 31, 2024, respectively. The increase in this ratio was due mainly to an increase in the allowance for loan losses as well as a slight decline in nonperforming loans.
United continues to evaluate risks which may impact its loan and lease portfolios. Reserves are initially determined based on losses identified from the PD/LGD and Cohort models which utilize the Company’s historical information. Then, any qualitative adjustments are applied to account for the Company’s view of the future and other factors. If current conditions underlying any qualitative adjustment factor were deemed to be materially different than historical conditions, an adjustment was made for that factor.
The first quarter of 2025 qualitative adjustments include analyses of the following:
| • | Current conditions – United considered the impact of government efficiency efforts and potential tariffs when making determinations related to factor adjustments for the external environment. United also considered the impact of changes in economic and business conditions; collateral values for dependent loans; past due, nonaccrual and adversely classified loans and leases; and concentrations of credit. |
| • | Reasonable and supportable forecasts – The forecast is determined on a portfolio-by-portfolio basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables. The reasonable and supportable forecast selection is subjective in nature and requires more judgment compared to the other components of the allowance. Assumptions for the economic variables were the following: |
| • | The forecast for real GDP adjusted downward in the first quarter, from a projection of 2.10% for 2025 as of mid-December 2024 to 1.70% for 2025 as of mid-March with a projection of 1.80% for 2026. The unemployment rate forecast shifted slightly in the first quarter from a projection of 4.30% for 2025 as of mid-December 2024 to 4.40% for 2025 as of mid-March with a projection of 4.30% for 2026. |
| • | Greater risk of loss in the office portfolio due to continued hybrid and remote work that may be exacerbated by future economic conditions. |
| • | Reversion to historical loss data occurs via a straight-line method during the year following the one-year reasonable and supportable forecast period. |
United’s review of the allowance for loan and lease losses at March 31, 2025 produced increased reserves in each of the four loan categories as compared to December 31, 2024. The allowance related to the commercial, financial & agricultural loan pool, consisting of the owner andnon-owner occupied commercial real estate and other commercial loan segments, increased $21.39 million due to the first quarter acquisition of Piedmont and increased outstanding balances. The residential real estate segment reserve increased $8.63 million due to increased outstanding balances with the acquisition of Piedmont and the annual evaluation of delay periods utilized in the historical loss rate calculation. The real estate construction and development loan segment reserve increased $8.34 million due to increased outstanding balances with the acquisition of Piedmont. The consumer loan segment reserve increased $217 thousand primarily due to an increase in the quarterly maximum loss experience utilized within the reasonable and supportable forecast adjustment.
An allowance is established for estimated lifetime losses for loans that are individually assessed. Nonperforming commercial loans and leases are regularly reviewed to identify expected credit losses. A loan is individually assessed for expected credit losses when the loan does not share similar characteristics with other loans in the portfolio. Measuring expected credit losses of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Expected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate or the fair value of collateral if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an expected credit loss has occurred. The allowance for loans and leases that were individually assessed was $18.44 million at March 31, 2025 and $11.21 million at December 31, 2024. In comparison toyear-end, this element of the allowance increased $7.23 million due to loans individually evaluated from the acquisition of Piedmont requiring allocations as well as a large United-originated office loan with elevated collection concerns due to pending lease maturities and upcoming loan maturity which will necessitate an increase in the loan’s interest rate.
Management believes that the allowance for credit losses of $346.99 million at March 31, 2025 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available. United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality. The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries. Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate diversification within the portfolio. Most of United’s commercial loans are secured by real estate located in United’s footprint. It is the opinion of management that these commercial loans do not pose any unusual risks and that adequate consideration has been given to these loans in establishing the allowance for credit losses.
The provision for credit losses related to held to maturity securities for the first quarter of 2025 and 2024 was immaterial. The allowance for credit losses related to held to maturity securities was $18 thousand as of March 31, 2025 as well as December 31, 2024. There was no provision for credit losses recorded on available for sale investment securities for the first quarter of 2025 and 2024 and no allowance for credit losses on available for sale investment securities as of March 31, 2025 and December 31, 2024.
Management is not aware of any potential problem loans or leases, trends or uncertainties, which it reasonably expects, will materially impact future operating results, liquidity, or capital resources which have not been disclosed. Additionally, management has disclosed all known material credits, which cause management to have serious doubts as to the ability of such borrowers to comply with the loan repayment schedules.
Other Income
Other income consists of all revenues, which are not included in interest and fee income related to earning assets. Noninterest income has been and will continue to be an important factor for improving United’s profitability. Recognizing the importance, management continues to evaluate areas where noninterest income can be enhanced.
Noninterest income for the first quarter of 2025 was $29.55 million, a decrease of $2.66 million or 8.25% from the first quarter of 2024. This decrease was driven by decreases in mortgage banking income and mortgage loan servicing income partially offset by higher income from bank-owned life insurance.
Income from mortgage banking activities totaled $2.48 million for the first quarter of 2025 compared to $5.30 million for the first quarter of 2024. The decrease of $2.82 million or 53.21% for the first quarter of 2025 was mainly due to lower mortgage loan origination and sale volume. Mortgage loan sales were $91.62 million in the first quarter of 2025 as compared to $188.74 million in the first quarter of 2024. Mortgage loans originated for sale were $75.90 million for the first quarter of 2025 as compared to $176.91 million for the first quarter of 2024.
Mortgage loan servicing income for the first quarter of 2025 decreased $789 thousand or 100.00% from the first quarter of 2024. The decrease in mortgage loan servicing income was due to the sale of United’s remaining mortgage servicing portfolio in the second half of 2024.
Income from bank-owned life insurance for the first quarter of 2025 increased $952 thousand or 39.37% from the first quarter of 2024. The increase was primarily due to death proceeds of $461 thousand in the first quarter of 2025 as well as income from the bank-owned life insurance policies added from the Piedmont acquisition and an increase in the cash surrender value.
Net gains on investment securities were $521 thousand for the first quarter of 2025 as compared to net losses on investment securities of $99 thousand for the first quarter of 2024.
On a linked-quarter basis, noninterest income for the first quarter of 2025 was flat from the fourth quarter of 2024, increasing $236 thousand, or less than 1%. Net gains on investment securities were $521 thousand for the first quarter of 2025 as compared to net losses on investment securities of $688 thousand for the fourth quarter of 2024. Fees from brokerage services increased $667 thousand from the fourth quarter of 2024 due to increased volume. Partially offsetting these increases in noninterest income was a decrease in other noninterest income of $1.32 million.
Other Expenses
Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations to reduce costs. Other expenses include all items of expense other than interest expense, the provision for credit losses, and income taxes. Noninterest expense for the first quarter of 2025 was $153.57 million, which was an increase of $12.83 million or 9.12% from the first quarter of 2024. This increase was due mainly to $11.31 million of merger-rated expenses incurred during the first quarter of 2025 from the Piedmont acquisition.
Employee compensation for the first quarter of 2025 increased $1.57 million or 2.65% when compared to the first quarter of 2024. The increase in employee compensation was due primarily due to $1.17 million in merger-related expenses and the additional employees from the Piedmont acquisition.
Employee benefits expense for the first quarter of 2025 decreased $1.38 million or 9.41% from the first quarter of 2024. This decrease was primarily due to a decline in expenses for postretirement benefits partially offset by an increase in health care insurance expense due to a higher amount of claims and the additional employees from the Piedmont acquisition.
Equipment expense for the first quarter of 2025 increased $1.73 million or 25.23% from the first quarter of 2024. This increase was due to higher equipment maintenance and depreciation expense.
Data processing expense for the first quarter of 2025 increased $992 thousand or 13.29% from the first quarter of 2024 due to increased processing from the Piedmont acquisition.
Mortgage servicing and impairment expense decreased $1.02 million or 100.00% due to the sale of the remaining loans serviced by United in 2024.
FDIC expense decreased $1.73 million or 25.23% from the first quarter of 2024 due to an additional assessment accrual of $1.81 million during the first quarter of 2024 resulting from the FDIC’s revised loss estimates to the Deposit Insurance Fund.
Other expense for the first quarter of 2025 increased $12.48 million or 39.06% from the first quarter of 2024. Within other expense, merger-related expenses increased $6.00 million and the expense for the reserve for unfunded commitments increased $3.45 million, which includes $4.06 million for the expense related to the reserve for the acquired unfunded loan commitments from Piedmont. In addition, consulting fees increased $2.73 million and the amortization of core deposit intangibles increased $1.43 million due mainly to the Piedmont acquisition.
On a linked-quarter basis, noninterest expense for the first quarter of 2025 increased $19.40 million or 14.46% from the fourth quarter of 2024. Generally, most general operating expenses for the first quarter of 2025 increased from the fourth quarter of 2024 due primarily to the added employees and branch offices from the Piedmont acquisition in addition to an increase in merger-related expense. In particular, employee compensation expense increased $2.52 million, $1.17 million of which was merger-related expense, net occupancy expense increased $1.53 million, equipment expense increased $1.11 million, data processing expense increased $1.02 million, and other expenses increased $13.12 million. Within other expense, merger-related expenses increased $4.74 million, the expense for the reserve for unfunded commitments increased $4.72 million, $4.06 million of which was for the expense related to the reserve for the acquired unfunded loan commitments from Piedmont, consulting fees increased $2.94 million and amortization expense for core deposit intangibles increased $1.43 million due mainly to the Piedmont acquisition.
Income Taxes
For the first quarter of 2025, income tax expense was $22.63 million as compared to $21.41 million for the first quarter of 2024. The increase of $1.22 million was primarily due to a higher effective tax rate partially offset by lower earnings. On a linked-quarter basis, income tax expense decreased $4.02 million primarily due to lower earnings and a lower effective tax rate. United’s effective tax rate was 21.16% for the first quarter of 2025, 19.78% for the first quarter of 2024 and 22.01% for the fourth quarter of 2024.
Liquidity and Capital Resources
In the opinion of management, United maintains liquidity that is sufficient to satisfy its depositors’ requirements and the credit needs of its customers. Like all banks, United depends upon its ability to renew maturing deposits and other liabilities on a daily basis and to acquire new funds in a variety of markets. A significant source of funds available to United is “core deposits”. Core deposits include certain demand deposits, statement and special savings and NOW accounts. These deposits are relatively stable, and they are the lowest cost source of funds available to United. Short-term borrowings have also been a significant source of funds. These include federal funds purchased and securities sold under agreements to repurchase as well as advances from the FHLB. Repurchase agreements represent funds which are obtained as the result of a competitive bidding process.
Liquid assets are cash and those items readily convertible to cash. All banks must maintain sufficient balances of cash and near-cash items to meet theday-to-day demands of customers and United’s cash needs. Other than cash and due from banks, the available for sale securities portfolio and maturing loans are the primary sources of liquidity.
The goal of liquidity management is to ensure the ability to access funding which enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United’s cash needs. Liquidity is managed by monitoring funds’ availability from a number of primary sources. Substantial funding is available from cash and cash equivalents, unused short-term borrowing and a geographically dispersed network of branches providing access to a diversified and substantial retail deposit market.
Short-term needs can be met through a wide array of outside sources such as correspondent and downstream correspondent federal funds and utilization of Federal Home Loan Bank advances.
Other sources of liquidity available to United to provide long-term as well as short-term funding alternatives, in addition to FHLB advances, are long-term certificates of deposit, lines of credit, borrowings that are secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities. In the normal course of business, United through its Asset Liability Committee evaluates these as well as other alternative funding strategies that may be utilized to meet short-term and long-term funding needs.
During the first quarter of 2025, United increased its interest-bearing deposit balance at the FRB by $271.52 million to $2.24 billion. The change in the balance at the FRB was mostly the result of a $2.40 billion increase in total deposits and $94.26 million of net sales, maturities, and paydowns in the available for sale debt securities portfolio partially offset by a $10.20 million decrease in FHLB advances.
For the three months ended March 31, 2025, cash of $119.98 million was provided by operating activities due mainly to net income of $84.31 million. In addition, proceeds from the sale of mortgage loans in the secondary market exceeded originations by $18.20 million and the provision for loan losses was $29.10 million for the first quarter. Net cash of $18.67 million was used in investing activities which was primarily due to loan growth of $177.79 million partially offset by $83.41 million of net proceeds from sales of investment securities over purchases and $77.48 million in net cash received in the Piedmont acquisition. During the first three months of 2025, net cash of $216.63 million was provided by financing activities due primarily to growth of $297.21 million in deposits partially offset by cash dividends paid of $50.48 million, net acquisition of $20.35 million in treasury stock and the net repayment of $10.00 million in FHLB borrowings during the first quarter. The net effect of the cash flow activities was an increase in cash and cash equivalents of $317.94 million for the first three months of 2025.
At March 31, 2025, United had an unused borrowing amount at the FHLB of approximately $8.14 billion subject to delivery of collateral after certain trigger points, $4.29 billion without the delivery of additional collateral. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $280 million, all of which was available at March 31, 2025. At March 31, 2025, United’s borrowing capacity for the FRB Discount Window was $4.59 billion. United did not have any borrowings from the FRB’s Discount Window during the first quarter of 2025.
United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures. United also has lines of credit available. See Notes 9 and 10 to the accompanying unaudited Notes to Consolidated Financial Statements for more details regarding the amounts available to United under lines of credit.
The Asset Liability Committee monitors liquidity to ascertain that a liquidity position within certain prescribed parameters is maintained. No changes are anticipated in the policies of United’s Asset Liability Committee.
United’s capital position is financially sound. United seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings. United has historically generated attractive returns on shareholders’ equity. United is well-capitalized based upon regulatory guidelines. United’s risk-based capital ratio is 15.69% at March 31, 2025 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.26%, 13.26% and 11.32%, respectively. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.
Total shareholders’ equity was $5.31 billion at March 31, 2025, which was an increase of $321.23 million or 6.43% from December 31, 2024. This increase is primarily due to increases of $19.65 million and $261.29 million to common stock and surplus, respectively, related to the Piedmont acquisition and $30.97 million in retained earnings (net income less dividends declared). During the first quarter of 2025, United repurchased 567,405 shares of its common stock at an average price of $34.93 per share.
United’s equity to assets ratio was 16.21% at March 31, 2025 as compared to 16.63% at December 31, 2024. The primary capital ratio, capital and reserves to total assets and reserves, was 17.09% at March 31, 2025 as compared to 17.47% at December 31, 2024. United’s average equity to average asset ratio was 16.42% for the first quarter of 2025 as compared to 16.36% the first quarter of 2024. All of these financial measurements reflect a financially sound position.
During the first quarter of 2025, United’s Board of Directors declared a cash dividend of $0.37 per share. Total cash dividends declared were $53.34 million for the first quarter of 2025 which was an increase of $3.12 million or 6.22% from dividends declared of $50.21 million for the first quarter of 2024.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.