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United Bankshares issues second quarter, first half report

CHARLESTON — United Bankshares has reported earnings for the second quarter and the first half of 2020. Earnings for the second quarter of 2020 were $52.7 million as compared to earnings of $67.2 million for the second quarter of 2019. Earnings for the first half of 2020 were $92.9 million as compared to earnings of $130.8 million for the first half of 2019.

The lower amount of net income in 2020 was driven primarily by significant merger-related expenses from the Carolina Financial Corp. acquisition and a higher provision for loan losses resulting from an adverse future macroeconomic forecast as a result of the coronavirus pandemic under the new Current Expected Credit Loss accounting standard. The higher amount of provision expense resulting from COVID-19 is an industry-wide issue affecting bank earnings nationwide.

Diluted earnings per share were 44 cents and 84 cents for the second quarter and first half of 2020, respectively, as compared to diluted earnings per share of 66 cents and $1.28 for the second quarter and first half of 2019, respectively.

Second quarter of 2020 results produced an annualized return on average assets of 0.87 percent, an annualized return on average equity of 5.40 percent and an annualized return on average tangible equity of 9.58 percent, respectively. For the first half of 2020, United’s annualized return on average assets was 0.85 percent while the annualized return on average equity was 5.16 percent and the annualized return on average tangible equity was 9.28 percent. United’s annualized returns on average assets, average equity and average tangible equity were 1.38 percent, 8.12 percent and 14.90 percent, respectively, for the second quarter of 2019 while the annualized returns on average assets, average equity and average tangible equity were 1.36 percent, 8.00 percent and 14.78 percent, respectively, for the first half of 2019.

“During the second quarter of 2020, we successfully completed the acquisition of Carolina Financial Corporation, headquartered in Charleston, South Carolina, which broadens our footprint in the Southeast,” stated Richard M. Adams, United’s Chairman of the Board and Chief Executive Officer. “Core earnings for the second quarter of 2020 continued to be good despite the current economic environment and significant merger expenses related to the acquisition of Carolina Financial. In addition, United has continued its focus on meeting our customers’ needs during the COVID-19 pandemic by suspending residential property foreclosures, offering fee waivers, providing payment deferrals, and processing over 8,000 loans totaling approximately $1.3 billion under the government Paycheck Protection Program.”

On May 1, United completed its acquisition of Carolina Financial. The results of operations for Carolina Financial are included in the consolidated results of operations from the date of acquisition. As a result of the acquisition, the second quarter and first half of 2020 were impacted by two months of increased levels of average balances, income, and expense as compared to the second quarter and first half of 2019. In addition, the second quarter and first half of 2020 included $46.4 million and $48.0 million, respectively, of merger-related expenses from the acquisition.

Net interest income for the second quarter of 2020 was $170.6 million, which was an increase of $20.0 million or 13 percent from the second quarter of 2019.

Tax-equivalent net interest income, which adjusts for the tax-favored status of income from certain loans and investments, for the second quarter of 2020 was $171.6 million, an increase of $20.0 million or 13 percent from the second quarter of 2019 due mainly to an increase in average earning assets from the Carolina Financial acquisition.

Average earning assets for the second quarter of 2020 increased $4.5 billion or 26 percent from the second quarter of 2019 due mainly to a $3.4 billion or 24 percent increase in average net loans.

Partially offsetting the increases to tax-equivalent net interest income for the second quarter of 2020 was a decrease of 97 basis points in the average yield on earning assets as compared to the second quarter of 2019 due to the decline in market interest rates and the low yield on Paycheck Protection Program loans. In addition, loan accretion on acquired loans was $9.5 million and $14.5 million for the second quarter of 2020 and 2019, respectively, a decline of $5.0 million.

Net interest income for the first six months of 2020 was $312.1 million, which was an increase of $17.4 million or 6 percent from the first six months of 2019. Tax-equivalent net interest income for the first six months of 2020 was $313.9 million, an increase of $17.2 million or 6 percent from the first six months of 2019. This increase in tax-equivalent net interest income was primarily attributable to an increase in average earning assets from the Carolina Financial acquisition.

Average short-term investments and average investment securities increased $376.8 million or 50 percent and $204.8 million or 8 percent, respectively. In addition, the average cost of funds for the first half of 2020 decreased 55 basis points due primarily to a decline in interest rates from the first half of 2019.

On a linked-quarter basis, net interest income for the second quarter of 2020 increased $29.1 million or 21 percent from the first quarter of 2020. United’s tax-equivalent net interest income for the second quarter of 2020 increased $29.3 million or 21 percent from the first quarter of 2020 due mainly to an increase in average earning assets from the Carolina Financial acquisition.

Average earning assets increased $4.4 billion or 25 percent for the linked-quarter. Average net loans increased $3.2 billion or 23 percent while average investment securities increased $287.6 million or 11 percent.

United completed its acquisition of Carolina Financial during the second quarter of 2020. The acquisition of Carolina Financial expands United’s footprint in the Southeast region. At consummation, Carolina Financial had assets of approximately $5 billion, portfolio loans of $3.3 billion, and deposits of $3.9 billion. The aggregate purchase price was approximately $817.9 million. The number of shares issued in the transaction was 28.0 million. The preliminary purchase price has been allocated to the identifiable tangible and intangible assets resulting in preliminary additions to goodwill, trade name intangibles and core deposit intangibles of $316.8 million, $1.4 million and $3 million, respectively.

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