United Bank ratings affirmed and outlook revised to stable by Moody's

Moody's affirmed United Bank's ratings, including its long-term issuer rating at Baa1, and revised the outlook to stable from negative, reflecting the bank's strong solvency position supported by good capital and profitability, which offsets asset risks. The affirmation also considers the successful integration of Piedmont Bancorp and a TCE/RWA of 14.0% as of December 31, 2024; however, the bank's concentrated commercial real estate loan portfolio, particularly in the Washington D.C. metro area, and lower liquidity compared to peers, remain balancing factors, with an upgrade unlikely in the next 12-18 months.

Analysis

Moody's Ratings has affirmed all ratings for United Bank, a subsidiary of United Bankshares (UBSI), and notably revised the bank's long-term issuer and long-term deposit rating outlooks to stable from negative. This revision reflects United Bank's strong solvency, underpinned by a tangible common equity to risk-weighted assets (TCE/RWA) ratio reported at 14.0% as of December 31, 2024, and an average net income to tangible assets of 1.31% between 2020 and 2024, which Moody's views as offsetting asset risk. The successful completion and initial integration of Piedmont Bancorp, Inc. in the first quarter of 2025 and a consistent record of asset quality further support this assessment. However, significant counterbalancing factors persist, primarily a concentrated commercial real estate (CRE) loan portfolio, amounting to 3.2 times tangible common equity, with a notable focus on the Washington D.C. metro area—a market that has experienced stress for certain property types. Additionally, United Bank's liquidity position is a relative weakness, with liquid banking assets at 19% of tangible banking assets as of December 31, 2024, below that of similarly rated peers. While core deposit funding, with 71% insured or collateralized, currently mitigates funding pressures, Moody's indicates an upgrade is unlikely in the next 12-18 months. A downgrade could be triggered if the holding company’s TCE/RWA falls and is sustained below 12%, profitability weakens, asset quality deteriorates, or liquidity weakens significantly.

Key Decisions for Investors

• Investors should interpret Moody's outlook revision to stable from negative for United Bank (UBSI) as a credit positive, although an upgrade is not anticipated in the near term, reflecting a balanced risk profile.
• Careful monitoring of United Bank's substantial commercial real estate exposure, particularly within the stressed Washington D.C. market, and its comparatively lower liquidity levels relative to peers is crucial, as these factors represent key vulnerabilities.
• Consider the bank's strong capital adequacy (14.0% TCE/RWA as of December 31, 2024) and consistent profitability against its asset concentration and liquidity profile when assessing UBSI's risk-reward proposition, noting that downgrade triggers include a drop in TCE/RWA below 12% or deterioration in profitability or asset quality.