United Bankshares Inc. in Charleston, W.Va., has averaged about one acquisition a year for the last 23 years, but some observers are wondering whether its latest deal may be its last.
The $7.6 billion-asset United last week closed its purchase of Premier Community Bankshares in Winchester, Va., adding nearly $1 billion of assets in the robust northern Virginia market. Roughly half of United's assets are now in Virginia, and this makes it highly attractive to deep-pocketed, out-of-state buyers, said Avi Barak, an analyst at Sandler O'Neill & Partners LP.
"There is no shortage of the larger buyers who would be interested in their franchise," he said.
Another sign pointing to the possibility of a sale is that Richard Adams, United's longtime chief executive officer, is approaching retirement age.
Mr. Adams, 60, has headed the company since 1975. In an interview, he said that he is not yet ready to retire, but he did not rule out a sale.
"We have a lot of insider ownership, our management team think and act like owners, and we would certainly consider any bona fide offer," said Mr. Adams, who also is the company's chairman. (United's employees and directors own roughly 20% of the company's stock.)
Recent consolidation in the Washington market — including PNC Financial Services Group Inc.'s March purchase of Mercantile Bankshares Corp. in Baltimore — has also increased United's value as a potential target, analysts said, a fact that is not lost on Mr. Adams.
"We're the second-largest independent banking company in the metro D.C. market," he said. "If you want entry into that market, it's either Chevy Chase [Bank in McLean, Va.] or United, if you're talking about … a franchise that's $4 billion or above."
PNC, of Pittsburgh, has made no secret of its desire to bulk up in Virginia. Mr. Barak said that PNC, SunTrust Banks Inc., BB&T Corp, could be possible suitors.
United, which has dual headquarters in Washington and Charleston, traces it roots to 1839, when a branch of the Northwestern Bank of Virginia was opened in Parkersburg, then part of Virginia. After West Virginia seceded from Virginia in 1863, the Northwestern Bank of Virginia branch became Parkersburg National Bank.
Mr. Adams joined Parkersburg in 1972 along with a group of key executives who remain at the bank today. Three years later, he succeeded his father as president of the bank, which at the time had $100 million of assets.
In 1984, when West Virginia changed its state law prohibiting bank expansion, Mr. Adams created a holding company called United Bankshares. The company began buying banks in West Virginia and eventually changed its bank's name to United.
In 1990, after accumulating a 10% market share in West Virginia, United entered Virginia with the purchase of Bank First of McLean, Va. Since then United has completed 13 deals, and six of its last eight targets were headquartered in Virginia or the Washington area.
United's two banking subsidiaries are roughly equal in size. Its West Virginia bank has $3.7 billion of assets, 51 branches in its home state, and three in Ohio. It is the largest bank headquartered in the state, with more than 10% of the deposit market share.
Meanwhile, with the July 16 closing of its deal for Premier, United's Virginia bank has $3.8 billion of assets and 58 branches in Virginia, Maryland, and the District of Columbia.
Though its 2006 earnings fell 11%, to $90 million, United has been a consistently profitable company, with impressive performance ratios.
At March 31, its return on assets was 1.45%, compared with a peer average of 1.28%, and its 15.16% return on equity was significantly higher than the 11.44% peer average. At the same time United's efficiency ratio of 47.10% was substantially better than the peer group's average of 56.70%.
"It's one of the most efficient smaller-cap banks that we cover," said David Stumpf, an analyst at A.G. Edwards & Sons Inc.
David Darst, an analyst at First Horizon National Corp.'s FTN Midwest Research, said that though potential acquirers might place a lower valuation on United's West Virginia component, both subsidiaries are essential to the company's success.
The West Virginia bank "provides a strong funding base for them to theoretically loan those deposits out to the Virginia market," he said.
Mr. Barak said that the West Virginia market, though less exciting than the Washington area, supplies an additional benefit: economic stability.
"Right now, especially where we are in the credit cycle, you have concerns about the real estate 'bust,' " Mr. Barak said. "Well, the West Virginia market never really had the boom, so you don't really have to be concerned about that."
Mr. Adams and other key executives are three to five years away from retirement, Mr. Darst said. "I think as they reach their own retirement ages they will weigh their options," he said.
For his part, Mr. Adams said the company remains focused on integrating the most recent acquisitions. For "right now, I don't anticipate that we'll be announcing any other acquisitions," he said. "But we will continue to focus on expanding our franchise in the nation's capital" area.
Analysts said that United is under no pressure to do a deal, but Mr. Stumpf called Mr. Adams "a realist."
He and United's board, Mr. Stumpf said, "will pull whatever lever is necessary over time to generate that shareholder value, whether it's to continue to grow and operate and do deals or whether it is [to] link up with a larger partner at a premium."
