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United’s Asset/Liability Management Committee (“ALCO”), which includes senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk to maintain an acceptable level of change to net interest income as a result of changes in interest rates.
−Removed: Policy established for interest rate risk is stated in terms of the change in net interest income over a one-year
−Removed: horizon given an immediate and sustained increase or decrease in interest rates.
+Added: Policy established for interest rate risk is stated in terms of the change in net interest income over a one-year and two-year horizon given an immediate and sustained increase or decrease in interest rates.
The current limits approved by the Board of Directors are structured on a staged basis with each stage requiring specific actions.
1 unchanged sentence
One such technique utilizes an earnings simulation model to analyze the sensitivity of net interest income to movements in interest rates.
−Removed: The model is based on actual cash flows and repricing characteristics for on and off-balance
−Removed: sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities.
+Added: The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities.
The model also includes executive management projections for activity levels in product lines offered by United.
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Moreover, earnings-simulation analysis considers the relative sensitivities of these balance sheet items and projects their behavior over an extended period of time.
−Removed: United closely monitors the sensitivity of its assets and liabilities on an on-going
−Removed: basis and projects the effect of various interest rate changes on its net interest margin.
+Added: United closely monitors the sensitivity of its assets and liabilities on an on-going basis and projects the effect of various interest rate changes on its net interest margin.
The following table shows United’s estimated earnings sensitivity profile as of December 31, 2022 and December 31, 2021:
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December 31, 2021
−Removed: At December 31, 2021, given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 2.70% over one year as compared to a decrease of 2.61% at December 31, 2020.
−Removed: A 200 basis point immediate, sustained upward shock in the yield curve would increase net interest income by an estimated 4.61% over one year as of December 31, 2021, as compared to a decrease of 4.32% as of December 31, 2020.
−Removed: A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 0.98% over one year as of December 31, 2021 as compared to an increase of 0.03%, over one year as of December 31, 2020.
−Removed: A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 2.42% over one year as of December 31, 2021 as compared to a decrease of 0.05% over one year as of December 31, 2020.
−Removed: In addition to the one year earnings sensitivity analysis, a two-year
−Removed: analysis is also performed.
+Added: At December 31, 2022, given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to decrease by 3.00% over one year as compared to an increase of 2.70% at December 31, 2021.
+Added: A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 6.83% over one year as of December 31, 2022, as compared to an increase of 4.61% as of December 31, 2021.
+Added: A 100 basis point immediate, sustained downward shock in the yield curve would increase net interest income by an estimated 2.12% over one year as of December 31, 2022 as compared to a decrease of 0.98%, over one year as of December 31, 2021.
+Added: A 200 basis point immediate, sustained downward shock in the yield curve would increase net interest income by an estimated 2.16% over one year as of December 31, 2022 as compared to a decrease of 2.42% over one year as of December 31, 2021.
+Added: In addition to the one year earnings sensitivity analysis, a two-year analysis is also performed.
Compared to the one year analysis, United is projected to show improved performance in year two within the upward rate shock scenarios.
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A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 8.34% in year two as of December 31, 2022.
−Removed: This analysis does not include the potential increased refinancing activities, which should lessen the negative impact on net income from falling rates.
While it is unlikely market rates would immediately move 100 or 200 basis points upward or downward on a sustained basis, this is another tool used by management and the Board of Directors to gauge interest rate risk.
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Like other fixed-income securities, when interest rates rise, the value of mortgage- related securities generally declines.
−Removed: prepayments on underlying mortgages will affect the price and volatility of mortgage-related securities and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase.
+Added: The rate of prepayments on underlying mortgages will affect the price and volatility of mortgage-related securities and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase.
If interest rates rise, United’s holdings of mortgage-related securities may experience reduced returns if the borrowers of the underlying mortgages pay off their mortgages later than anticipated.
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At December 31, 2022, United’s mortgage related securities portfolio had an amortized cost of $2.1 billion, of which approximately $934.1 million or 44% were fixed rate collateralized mortgage obligations (“CMOs”).
−Removed: These fixed rate CMOs consisted primarily of planned amortization class (“PACs”), sequential-pay
−Removed: and accretion directed (“VADMs”) bonds having an average life of approximately 4.4 years and a weighted average yield of 1.76%, under current projected prepayment assumptions.
+Added: These fixed rate CMOs consisted primarily of planned amortization class (“PACs”), sequential-pay and accretion directed (“VADMs”) bonds having an average life of approximately 5.5 years and a weighted average yield of 2.12%, under current projected prepayment assumptions.
These securities are expected to have moderate extension risk in a rising rate environment.
Current models show that an immediate, sustained upward shock of 300 basis points, the average life of these securities would only extend to 6.5 years.
−Removed: The projected price decline of the fixed rate CMO portfolio in rates up 300 basis points would be 15%, or less than the price decline of a 7-year
−Removed: treasury note.
−Removed: By comparison, the price decline of a 30-year
−Removed: 2% coupon mortgage backed security (“MBS”) in rates higher by 300 basis points would be approximately 22.8%.
+Added: The projected price decline of the fixed rate CMO portfolio in rates up 300 basis points would be 15%, or less than the price decline of a 7-year treasury note.
+Added: By comparison, the price decline of a 30-year 5% coupon mortgage backed security (“MBS”) in rates higher by 300 basis points would be approximately 18.9%.
United had approximately $600.6 million in fixed rate Commercial Mortgage Backed Securities (CMBS) with a projected yield of 2.02% and a projected average life of 4.7 years on December 31, 2022.
This portfolio consisted primarily of Freddie Mac Multifamily K securities and Fannie Mae Delegated Underwriting and Servicing (“DUS”) securities with a weighted average maturity (“WAM”) of 8 years.
−Removed: United had approximately $9 million in 15-year
−Removed: mortgage backed securities with a projected yield of 2.71% and a projected average life of 2.9 years as of December 31, 2021.
−Removed: This portfolio consisted of seasoned 15-year
−Removed: mortgage paper with a weighted average loan age (“WALA”) of 9.2 years and a weighted average maturity (“WAM”) of 7.8 years.
−Removed: United had approximately $211.3 million in 20-year
−Removed: mortgage backed securities with a projected yield of 1.51% and a projected average life of 6.2 years on December 31, 2021.
−Removed: This portfolio consisted of seasoned 20-year
−Removed: mortgage paper with a weighted average loan age (“WALA”) of 1.6 years and a weighted average maturity (“WAM”) of 18.3 years.
−Removed: United had approximately $132.4 million in 30-year
−Removed: mortgage backed securities with a projected yield of 2.30% and a projected average life of 5 years on December 31, 2021.
−Removed: This portfolio consisted of seasoned 30-year
−Removed: mortgage paper with a weighted average loan age (“WALA”) of 4.1 years and a weighted average maturity (“WAM”) of 23.4 years.
+Added: United had approximately $27.8 million in 15-year mortgage backed securities with a projected yield of 2.02% and a projected average life of 4.8 years as of December 31, 2022.
+Added: This portfolio consisted of seasoned 15-year mortgage paper with a weighted average loan age (“WALA”) of 3.3 years and a weighted average maturity (“WAM”) of 12 years.
+Added: United had approximately $353.7 million in 20-year mortgage backed securities with a projected yield of 1.82% and a projected average life of 7.1 years on December 31, 2022.
+Added: This portfolio consisted of seasoned 20-year mortgage paper with a weighted average loan age (“WALA”) of 1.8 years and a weighted average maturity (“WAM”) of 18.1 years.
+Added: United had approximately $162.1 million in 30-year mortgage backed securities with a projected yield of 2.46% and a projected average life of 7.8 years on December 31, 2022.
+Added: This portfolio consisted of seasoned 30-year mortgage paper with a weighted average loan age (“WALA”) of 2.7 years and a weighted average maturity (“WAM”) of 24.6 years.
The remaining 2% of the mortgage related securities portfolio on December 31, 2022, included floating rate CMO, CMBS and mortgage backed securities.
1 unchanged sentence
Management of United Bankshares, Inc.
−Removed: (the “Company”) is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f)
−Removed: under the Securities Exchange Act of 1934.
+Added: (the “Company”) is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934.
The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.
8 unchanged sentences
Mark Tatterson
−Removed: Adams, Chairman of the Board and Chief Executive Officer
−Removed: Mark Tatterson, Executive Vice President and Chief Financial Officer
+Added: Chief Executive Officer
+Added: Mark Tatterson
+Added: Executive Vice President and Chief Financial Officer
March 1, 2023
6 unchanged sentences
and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of
−Removed: the Company as of December 31, 2021 and 2020,
−Removed: and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated March 1, 2022 expressed an unqualified opinion thereon.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 1, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
18 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.