United Bankshares announces record earnings

PARKERSBURG — United Bankshares has reported earnings for the fourth quarter and year of 2018.

Earnings for the fourth quarter of 2018 were $64 million or 62 cents per diluted share as compared to earnings of $18 million or 17 cents per diluted share for the fourth quarter of 2017. Earnings for 2018 were a record $256.3 million or $2.45 per diluted share as compared to earnings of $150.6 million or $1.54 per diluted share for 2017.

Fourth quarter of 2018 results produced an annualized return on average assets of 1.33 percent and an annualized return on average equity of 7.77 percent, respectively. For 2018, United’s return on average assets was 1.36 percent while the return on average equity was 7.84 percent. United’s annualized returns on average assets and average equity were 0.38 percent and 2.17 percent, respectively, for the fourth quarter of 2017 while the returns on average assets and average equity were 0.85 percent and 5.09 percent, respectively, for 2017.

“The year of 2018 was a banner year for United Bankshares in many ways,” said Richard M. Adams, United chairman of the Board and chief executive officer. “We increased earnings before income taxes to a record $327 million. Our employee community volunteer program was recognized by the American Bankers Association as one of the strongest in the nation. We increased dividends to our shareholders for the 45th consecutive year. This is a record only one other major banking company in the USA has been able to achieve.”

The results for the fourth quarter of 2017 included additional income tax expense of $37.7 million or 36 cents per diluted share related to the estimated impact of the enactment of the Tax Cuts and Jobs Act. The results for 2017 were impacted by 39 cents per diluted share for the additional income tax expense of $37.7 million related to the Tax Act.

On April 21, 2017, United completed its acquisition of Cardinal Financial Corp. of Tysons Corner, Va. The results of operations of Cardinal are included in the consolidated results of operations from the date of acquisition. As a result of the Cardinal acquisition, the year of 2018 was impacted by increased levels of average balances, income, and expense as compared to the year of 2017. Also, United consolidated its banking subsidiaries during the fourth quarter of 2017.

The fourth quarter and year of 2017 included $1.8 million and $26.8 million, respectively, of merger-related expenses from the Cardinal acquisition and consolidation of subsidiaries.

Net interest income for the fourth quarter of 2018 was $146.7 million, which was a decrease of $8.1 million or 5 percent from the fourth quarter of 2017.

The $8.1 million decrease in net interest income occurred because total interest income increased $11 million while total interest expense increased $19.1 million from the fourth quarter of 2017.

Tax-equivalent net interest income, which adjusts for the tax-favored status of income from certain loans and investments, for the fourth quarter of 2018 was $147.8 million, a decrease of $9.4 million or 6 percent from the fourth quarter of 2017 due mainly to an increase of 66 basis points in the average cost of funds as compared to the fourth quarter of 2017 due to higher market interest rates.

Net interest income for the year of 2018 was $588.6 million, which was an increase of $39.6 million or 7 percent from the year of 2017. Tax-equivalent net interest income for the year of 2018 was $593.0 million, an increase of $35.6 million or 6 percent from the year of 2017. This increase in tax-equivalent net interest income was primarily attributable to an increase in average earning assets from the Cardinal acquisition.

Average earning assets increased $1 billion or 6 percent from the year of 2017 as average net loans increased $874.7 million or 7 percent for the year of 2018. Average investment securities increased $590.2 million or 34 percent while short-term investments decreased $461.8 million or 35 percent.

The year of 2018 average yield on earning assets increased 29 basis points from the year of 2017 due to higher market interest rates and additional loan accretion of $2 million on acquired loans.

For the quarters ended Dec. 31, 2018, and 2017, the provision for loan losses was $5.8 million and $7 million, respectively, while the provision for 2018 was $22 million as compared to $28.4 million for the year of 2017.

Noninterest income for the fourth quarter of 2018 was $29.8 million, which was a decrease of $2.9 million or 9 percent from the fourth quarter of 2017. The decrease was due mainly to a decrease of $3.7 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.

On a linked-quarter basis, noninterest income for the fourth quarter of 2018 decreased $1.9 million or 6 percent from the third quarter of 2018. The decrease was due mainly to an increase in net losses on investment securities’ activity of $1.8 million and a decline of $1.7 million in income from mortgage banking activities due to decreased production and sales of mortgage loans in the secondary market due mainly to a typical seasonal slowdown.

Noninterest expense for the year of 2018 was $368.2 million, which was relatively flat from the year of 2017, increasing $770 thousand or less than 1 percent.

On a linked-quarter basis, noninterest expense for the fourth quarter of 2018 decreased $2.3 million or 2 percent from the third quarter of 2018. Employee compensation decreased $2.1 million due mainly to a decrease in commissions and incentives expense for George Mason.

The fourth quarter and year of 2018 include a benefit of $832 thousand related to the New Markets tax credits.

United’s asset quality continues to be sound and improved year-over-year. At Dec. 31, nonperforming loans were $142.8 million, or 1.06 percent of loans, net of unearned income down from nonperforming loans of $168.7 million, or 1.3 percent of loans, net of unearned income, at Dec. 31, 2017. As of Dec. 31, 2018, the allowance for loan losses was $76.7 million or 0.57 percent of loans, net of unearned income, as compared to $76.6 million or 0.59 percent of loans, net of unearned income at December 31, 2017. Total nonperforming assets of $159.7 million, including OREO of $16.9 million at December 31, 2018, represented 0.83 percent of total assets, down from nonperforming assets of $193.1 million or 1.01 percent of total assets at December 31, 2017.

United continues to be well-capitalized based upon regulatory guidelines.

As of Dec. 31, United had consolidated assets of approximately $19.3 billion.

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