United Bankshares reports record earnings in second quarter

PARKERSBURG — United Bankshares this week reported record earnings for the second quarter and the first half of 2018.

Earnings for the second quarter of 2018 were a record $66.3 million or 63 cents per diluted share as compared to earnings of $37.1 million or 37 cents per diluted share for the second quarter of 2017. Earnings for the first half of 2018 were a record $128 million or $1.22 per diluted share as compared to $75.9 million or 84 cents per diluted share for the first half of 2017.

“Following record net income in the first quarter of 2018, United’s earnings momentum continued,” United Chairman and Chief Executive Officer Richard M. Adams said.

Second quarter of 2018 results produced an annualized return on average assets of 1.42 percent and an annualized return on average equity of 8.11 percent, respectively. For the first half of 2018, United’s return on average assets was 1.39 percent while the return on average equity was 7.88 percent. United’s annualized returns on average assets and average equity were 0.82 percent and 4.93 percent, respectively, for the second quarter of 2017, while the returns on average assets and average equity were 0.94 percent and 5.8 percent, respectively, for the first half of 2017.

On April 21, 2017, United completed its acquisition of Cardinal Financial Corporation of Tysons Corner, Virginia. Results of operations of Cardinal are included in the consolidated results of operations from the date of acquisition. As a result, the second quarter and first half of 2018 were impacted by increased levels of average balances, income and expense as compared to the second quarter and first half of 2017. In addition, the second quarter and first half of 2017 included merger-related expenses of $23.2 million and $24.5 million, respectively, due to the Cardinal acquisition.

Net interest income for the second quarter of 2018 was $149.1 million, an increase of $12.9 million, or 9 percent, from the second quarter of 2017 because total interest income increased $23.1 million while total interest expense only increased $10.2 million from the second quarter of 2017.

Net interest income for the first six months of 2018 was $293.2 million, an increase of $49.3 million, or 20 percent, from the first six months of 2017 because total interest income increased $69.5 million while total interest expense only increased $20.2 million from the first six months of 2017.

On a linked-quarter basis, net interest income for the second quarter of 2018 increased $5.1 million or 4 percent from the first quarter of 2018 because total interest income increased $10.8 million while total interest expense only increased $5.7 million from the first quarter of 2018.

For the quarters ended June 30, 2018 and 2017, the provision for loan losses was $6.2 million and $8.3 million, respectively, while the provision for the first six months of 2018 was $11.4 million as compared to $14.2 million for the first six months of 2017.

Noninterest income for the second quarter of 2018 was $36 million, a decrease of $4.5 million, or 11 percent, from the second quarter of 2017. The decrease was due mainly to a decrease of $3.8 million in income from mortgage banking activities due to decreased production and sales of mortgage loans in the secondary market by United’s mortgage banking subsidiary, George Mason. However, George Mason did originate approximately $305 million of portfolio mortgage loan products during the second quarter of 2018. In addition, net gains and losses on investment securities’ activity declined $802,000.

Noninterest income for the first half of 2018 was $67.2 million, an increase of $6.5 million, or 11 percent, from the first half of 2017 as income from mortgage banking activities for the first half of 2018 increased $10.1 million from the first half of 2017. This increase was mainly due to including the production and sales of mortgage loans in the secondary market by George Mason for a full first six months in 2018 as compared to slightly over two months in 2017. In addition, bank card fees and fees from brokerage services increased $735,000 and $439,000, respectively, due to increased volume. Fees from deposit services increased $416,000 mainly due to higher income from debit card and ATM fees. Partially offsetting these increases was a decline in net gains and losses on investment securities’ activity of $5.2 million for the first half of 2018 from the first half of 2017 due mainly to a net gain of $3.8 million on the redemption of an investment security during the first quarter of 2017.

On a linked-quarter basis, noninterest income for the second quarter of 2018 increased $4.8 million, or 15 percent, from the first quarter of 2018 due mainly to an increase of $4.1 million in income from mortgage banking activities. The increase was due mainly to a change in fair value of $4.2 million on George Mason’s interest rate lock commitments.

Noninterest expense for the second quarter of 2018 was $93.4 million, a decrease of $18.7 million, or 17 percent, from the second quarter of 2017 due mainly to merger-related expenses from the Cardinal acquisition.

Noninterest expense for the first half of 2018 was $183.9 million, an increase of $8.9 million, or 5 percent, from the first half of 2017 due mainly to the additional employees and branch offices from the Cardinal acquisition.

On a linked-quarter basis, noninterest expense for the second quarter of 2018 increased $3 million or 3 percent from the first quarter of 2018 due mainly to an increase of $2.3 million in employee compensation as a result of higher commissions expense related to an increase in production and sales of mortgage loans at George Mason. For the second quarter and first half of 2018, income tax expense was $19.2 million and $37.1 million, respectively, as compared to $19.3 million and $39.5 million, respectively, in the second quarter and first half of 2017. The decreases in 2018 were mainly due to a decline in the effective tax rate as a result of the Tax Cuts and Jobs Act of 2017.

United’s asset quality continues to be sound. As of June 30, nonperforming loans were $150.9 million or 1.12 percent of loans, net of unearned income, compared to nonperforming loans of $168.7 million or 1.3 percent of loans, net of unearned income, as of Dec. 31.

United continues to be well-capitalized based upon regulatory guidelines. United’s estimated risk-based capital ratio is 14.2 percent as of June 30, while its estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12 percent, 12 percent and 10.4 percent, respectively. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10 percent, a Common Equity Tier 1 capital ratio of 6.5 percent, a Tier 1 capital ratio of 8 percent and a leverage ratio of 5 percent.

As of June 30, United had consolidated assets of approximately $19.2 billion, with full service offices in West Virginia, Virginia, Maryland, Ohio, Pennsylvania and Washington, D.C. United Bankshares stock is traded on the NASDAQ Global Select Market under the quotation symbol “UBSI.”

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