United Bankshares, Inc. (NASDAQ: UBSI) (“United”), today reported earnings for the second quarter of 2022 of $95.6 million, or $0.71 per diluted share, as compared to earnings of $81.7 million, or $0.60 per diluted share, for the first quarter of 2022. The quarter was highlighted by continued loan growth, net interest margin expansion, and strong credit quality metrics.

Annualized loan growth, excluding Paycheck Protection Program (“PPP”) loans, for the second quarter and first half of 2022 was 15% and 13%, respectively. Second quarter 2022 net interest margin of 3.38% increased 39 basis points from the first quarter of 2022. Non-performing loans as a percentage of loans and leases, net of unearned income was a low 0.37% at June 30, 2022.

Second quarter 2022 results produced annualized returns on average assets, average equity and average tangible equity, a non-GAAP measure, of 1.32%, 8.33% and 14.23%, respectively, compared to annualized returns on average assets, average equity, and average tangible equity of 1.13%, 6.96% and 11.63%, respectively, for the first quarter of 2022.

“During the second quarter, we continued our strong momentum from the beginning of the year and are well positioned for the second half of 2022,” stated Richard M. Adams, Jr., United’s Chief Executive Officer. “We had meaningful net interest margin expansion and continue to experience promising loan growth in our markets. We remain well capitalized with solid asset quality, have sound liquidity levels, and maintain our longstanding commitments to strong risk management practices, credit underwriting discipline and meeting our customers’ needs.”

Second quarter of 2022 compared to the first quarter of 2022

Net interest income for the second quarter of 2022 increased $23.4 million, or 12%, from the first quarter of 2022. Tax-equivalent net interest income, a non-GAAP measure which adjusts for the tax-favored status of income from certain loans and investments, for the second quarter of 2022 also increased $23.4 million, or 12%, from the first quarter of 2022. The increase in net interest income and tax-equivalent net interest income was primarily due to higher interest income on earning assets driven by rising market interest rates and a change in the asset mix to higher earning assets. The interest rate spread of 3.24% for the second quarter of 2022 increased 38 basis points from the first quarter of 2022 due to a 42 basis point increase in the average yield on earning assets partially offset by a 4 basis point increase in the average cost of funds. A decrease in average earning assets of $426.0 million, or 2%, from the first quarter of 2022, driven by a decrease of $1.3 billion in short-term investments, was partially offset by increases in higher yielding average net loans and loans held for sale of $489.9 million and average investment securities of $375.8 million. Acquired loan accretion income increased $1.3 million to $5.4 million for the second quarter of 2022. Net PPP loan fee income decreased $542 thousand to $3.6 million for the second quarter of 2022. The net interest margin of 3.38% for the second quarter of 2022 was an increase of 39 basis points from the net interest margin of 2.99% for the first quarter of 2022.

The provision for credit losses was a net benefit of $1.8 million for the second quarter of 2022 as compared to a net benefit of $3.4 million for the first quarter of 2022. The net benefit in the second quarter reflects continued strong performance trends within the loan portfolio partially offset by loan growth and the impact of reasonable and supportable forecasts of future macroeconomic conditions.

Noninterest income for the second quarter of 2022 decreased $2.4 million, or 5%, from the first quarter of 2022. The decrease in noninterest income was primarily due to a decrease of $6.8 million in income from mortgage banking activities mainly due to lower mortgage loan origination and sale volume driven by the rising rate environment and a lower margin on loans sold in the secondary market. Income from bank-owned life insurance (“BOLI”) increased $1.9 million from the first quarter of 2022 to $4.1 million primarily due to the recognition of death benefits.

Noninterest expense for the second quarter of 2022 increased $2.0 million, or 1%, from the first quarter of 2022. The increase in noninterest expense resulted from higher amounts of certain general operating expenses including an increase in the expense for reserve for unfunded loan commitments of $662 thousand.

For the second quarter of 2022, income tax expense was $23.5 million as compared to $20.1 million for the first quarter of 2022. The increase of $3.4 million was due to higher earnings. United’s effective tax rate was 19.8% for both the second and first quarters of 2022.

Second quarter of 2022 compared to the second quarter of 2021

Earnings for the second quarter of 2022 were $95.6 million, or $0.71 per diluted share, as compared to earnings of $94.8 million, or $0.73 per diluted share, for the second quarter of 2021.

Net interest income for the second quarter of 2022 increased $28.4 million, or 15%, from the second quarter of 2021. Tax-equivalent net interest income, a non-GAAP measure which adjusts for the tax-favored status of income from certain loans and investments, for the second quarter of 2022 also increased $28.4 million, or 15%, from the second quarter of 2021. United completed its acquisition of Community Bankers Trust Corporation (“Community Bankers Trust”) on December 3, 2021. The increase in net interest income and tax-equivalent net interest income was primarily due to the impact of higher average earning assets, driven by the Community Bankers Trust acquisition, the impact of rising market interest rates on earning assets and a change in the asset mix to higher earning assets. These increases were partially offset by lower acquired loan accretion income, lower PPP loan fee income and higher average interest-bearing deposit balances as a result of the Community Bankers Trust acquisition. Average earning assets for the second quarter of 2022 increased $1.7 billion, or 7%, from the second quarter of 2021 due to a $1.6 billion increase in average investment securities and a $1.2 billion increase in average net loans and loans held for sale partially offset by a $1.2 billion decrease in average short-term investments. The interest rate spread for the second quarter of 2022 increased 26 basis points from the second quarter of 2021 to 3.24% due to a 21 basis point increase in the average yield on earning assets and a 5 basis point decrease in the average cost of funds. Average interest-bearing deposits for the second quarter of 2022 increased $917.1 million, or 7%, from the second quarter of 2021; however, the yield on interest-bearing deposits decreased 5 basis points from the second quarter of 2021. Acquired loan accretion income was $5.4 million and $9.7 million for the second quarter of 2022 and 2021, respectively, a decrease of $4.3 million. Net PPP loan fee income was $3.6 million and $9.0 million for the second quarter of 2022 and 2021, respectively, a decrease of $5.4 million. The net interest margin of 3.38% for the second quarter of 2022 was an increase of 24 basis points from the net interest margin of 3.14% for the second quarter of 2021.

The provision for credit losses was a net benefit of $1.8 million for the second quarter of 2022 as compared to a net benefit of $8.9 million for the second quarter of 2021.

Noninterest income for the second quarter of 2022 was $43.6 million, which was a decrease of $19.3 million, or 31%, from the second quarter of 2021. The decrease in noninterest income was driven by a $24.5 million decrease in income from mortgage banking activities mainly due to lower mortgage loan origination and sale volume driven by the rising rate environment and a lower margin on loans sold in the secondary market. BOLI income for the second quarter of 2022 was $4.1 million, an increase of $2.5 million from the second quarter of 2021. Fees from deposit services for the second quarter of 2022 were $10.8 million, an increase of $1.4 million from the second quarter of 2021.

Noninterest expense for the second quarter of 2022 was $141.2 million, an increase of $2.2 million, or 2%, from the second quarter of 2021 primarily due to a $5.0 million increase in the expense for reserve for unfunded loan commitments and a $3.8 million increase in other noninterest expense from higher amounts of certain general operating expenses. These increases in noninterest expense were partially offset by a $5.9 million decrease in employee compensation primarily due to lower employee commissions, incentives and overtime related to mortgage banking production partially offset by additional employees from the Community Bankers Trust acquisition.

For the second quarter of 2022, income tax expense was $23.5 million as compared to $24.5 million for the second quarter of 2021. The decrease of $924 thousand was primarily due to a lower effective tax rate. United’s effective tax rate was 19.8% for the second quarter of 2022 and 20.5% for the second quarter of 2021.

First half of 2022 compared to the first half of 2021

Earnings for the first six months of 2022 were $177.3 million, or $1.30 per diluted share, as compared to earnings of $201.7 million, or $1.56 per diluted share, for the first six months of 2021.

Net interest income for the first six months of 2022 increased $28.9 million, or 8%, from the first six months of 2021. Tax-equivalent net interest income, a non-GAAP measure which adjusts for the tax-favored status of income from certain loans and investments, for the first six months of 2022 increased $29.0 million, or 8%, from the first six months of 2021. The increase in net interest income and tax-equivalent net interest income was primarily due to an increase in average earning assets from the Community Bankers Trust acquisition and organic growth, the impact of rising market interest rates on earning assets and due to lower interest expense on deposits. These increases were partially offset by lower PPP loan fee income and lower acquired loan accretion income. Average earning assets for the first six months of 2022 increased $2.1 billion, or 9%, from the first six months of 2021 due to a $1.6 billion increase in average investment securities and a $763.8 million increase in average net loans and loans held for sale partially offset by a $219.9 million decrease in average short-term investments. The interest rate spread for the first six months of 2022 decreased 1 basis point from the first six months of 2021 due to a 9 basis point decrease in the average yield on earning assets partially offset by an 8 basis point decrease in the average cost of funds. Net PPP loan fee income was $7.7 million and $20.3 million for the first half of 2022 and 2021, respectively, a decrease of $12.6 million. Acquired loan accretion income was $9.5 million and $19.5 million for the first half of 2022 and 2021, respectively, a decrease of $10.0 million. The net interest margin of 3.18% for the first six months of 2022 was a decrease of 4 basis points from the net interest margin of 3.22% for the first six months of 2021.

The provision for credit losses was a net benefit of $5.2 million for the first six months 2022 as compared to a net benefit of $8.7 million for the first six months of 2021.

Noninterest income for the first six months of 2022 was $89.6 million, which was a decrease of $65.8 million, or 42%, from the first six months of 2021. The decrease was driven by a $70.7 million decrease in income from mortgage banking activities mainly due to lower mortgage loan origination and sale volume driven by the rising rate environment and a lower margin on loans sold in the secondary market. BOLI income for the first six months of 2022 was $6.3 million, an increase of $3.3 million from the first six months of 2021. Fees from deposit services for the first six months of 2022 were $21.0 million, an increase of $2.7 million from the first six months of 2021.

Noninterest expense for the first six months of 2022 was $280.3 million, a decrease of $7.6 million, or 3%, from the first six months of 2021 driven by decreases in employee compensation of $15.7 million, employee benefits of $5.0 million, real estate owned (“OREO”) expense of $3.8 million and mortgage loan servicing expense and impairment of $3.4 million partially offset by an increase in the expense for reserve for unfunded loan commitments of $9.5 million. The decrease in employee compensation was due to lower employee commissions, incentives and overtime related to mortgage banking production partially offset by additional employees from the Community Bankers Trust acquisition. Employee benefits decreased primarily due to changes in deferred compensation plans resulting from market fluctuations. The decrease in OREO expense was primarily due to fewer declines in the fair value of OREO properties. The decrease in mortgage loan servicing expense and impairment was due to lower amortization of mortgage servicing rights (“MSR”) and a recovery of the MSR valuation allowance of $883 thousand during the first six months of 2022 as compared to a MSR impairment of $250 thousand during the first six months of 2021.

For the first six months of 2022, income tax expense was $43.6 million as compared to $52.0 million for the first six months of 2021 primarily due to lower earnings and a lower effective tax rate. United’s effective tax rate was 19.8% for the first six months of 2022 and 20.5% for the first six months of 2021.

Credit Quality

United’s asset quality continues to be sound. At June 30, 2022, non-performing loans were $70.3 million, or 0.37% of loans & leases, net of unearned income, down from $90.8 million, or 0.50% of loans & leases, net of unearned income, at December 31, 2021. Total non-performing assets of $84.2 million, including OREO of $13.8 million at June 30, 2022, represented 0.29% of total assets as compared to non-performing assets of $105.6 million, including OREO of $14.8 million, or 0.36% of total assets at December 31, 2021.

As of June 30, 2022, the allowance for loan & lease losses was $213.7 million, or 1.13% of loans & leases, net of unearned income, as compared to $216.0 million, or 1.20% of loans & leases, net of unearned income, at December 31, 2021. Net recoveries were $941 thousand and $2.9 million for the second quarter and first half of 2022, respectively. Net charge-offs were $5.2 million and $9.8 million for the second quarter and first half of 2021, respectively. Annualized net recoveries as a percentage of average loans & leases, net of unearned income were (0.02)% and (0.03)% for the second quarter and first half of 2022, respectively. Annualized net charge-offs as a percentage of average loans & leases, net of unearned income were 0.10% and 0.15% for the for the second quarter and first half of 2021, respectively.

Capital

United continues to be well-capitalized based upon regulatory guidelines. United’s estimated risk-based capital ratio is 14.8% at June 30, 2022, while estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.7%, 12.7% and 10.5%, respectively. The June 30, 2022 ratios reflect United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19 pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.

During the first half of 2022 and 2021, United repurchased, under a previously announced stock repurchase plan, shares of its common stock. During the second quarter of 2022, United repurchased approximately 1.5 million shares of its common stock at an average price per share of $34.47. United did not repurchase any shares of its common stock during the second quarter of 2021. During the first half of 2022, United repurchased approximately 2.3 million shares of its common stock at an average price per share of $34.69. During the first half of 2021, United repurchased approximately 306 thousand shares of its common stock at an average price per share of $32.52.

About United Bankshares, Inc.

As of June 30, 2022, United had consolidated assets of approximately $28.8 billion. United is the parent company of United Bank which comprises nearly 250 offices in Virginia, Maryland, Washington, D.C., North Carolina, South Carolina, Georgia, Pennsylvania, West Virginia, and Ohio. United’s stock is traded on the NASDAQ Global Select Market under the quotation symbol "UBSI".

Cautionary Statements

The Company is required under generally accepted accounting principles to evaluate subsequent events through the filing of its June 30, 2022 consolidated financial statements on Form 10-Q. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of June 30, 2022 and will adjust amounts preliminarily reported, if necessary.

Use of non-GAAP Financial Measures

This press release contains certain financial measures that are not recognized under U.S. generally accepted accounting principles ("GAAP"). Generally, United has presented these “non-GAAP” financial measures because it believes that these measures provide meaningful additional information to assist in the evaluation of United’s results of operations or financial position. Presentation of these non-GAAP financial measures is consistent with how United’s management evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the banking industry.

Specifically, this press release contains certain references to financial measures identified as tax-equivalent (FTE) net interest income, average tangible equity, return on average tangible equity and tangible book value per share. Management believes these non-GAAP financial measures to be helpful in understanding United’s results of operations or financial position.

Net interest income is presented in this press release on a tax-equivalent basis. The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments. Although this is a non-GAAP measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition. The tax-equivalent adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21%.

Tangible equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible equity can thus be considered the most conservative valuation of the company. Tangible equity is also presented on a per common share basis and considering net income, a return on average tangible equity. Management provides these amounts to facilitate the understanding of as well as to assess the quality and composition of United’s capital structure. By removing the effect of intangible assets that result from merger and acquisition activity, the “permanent” items of equity are presented. These measures, along with others, are used by management to analyze capital adequacy and performance.

Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure can be found in the attached financial information tables to this press release. Investors should recognize that United’s presentation of these non-GAAP financial measures might not be comparable to similarly titled measures at other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and United strongly encourages a review of its condensed consolidated financial statements in their entirety.

Forward-Looking Statements

In this report, we have made various statements regarding current expectations or forecasts of future events, which speak only as of the date the statements are made. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are also made from time-to-time in press releases and in oral statements made by the officers of the Company. Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning. Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect. Therefore, undue reliance should not be placed upon these estimates and statements. United cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” The following factors, among others, could cause the actual results of United’s operations to differ materially from its expectations: the uncertainty as to the extent of the duration, scope and impacts of the COVID-19 pandemic, on United, its colleagues, the communities United serves, and the domestic and global economy; uncertainty in U.S. fiscal and monetary policies, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets, interest rate, securities market and monetary supply fluctuations; increasing rates of inflation and slower growth rates; reform of LIBOR; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those involving the Federal Reserve, FDIC, and CFPB; the effect of changes in the level of checking or savings account deposits on United’s funding costs and net interest margin; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; competition; and changes in legislation or regulatory requirements. For more information about factors that could cause actual results to differ materially from United’s expectations, refer to its reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov. Further, any forward-looking statement speaks only as of the date on which it is made, and United undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. You are advised to consult further disclosures United may make on related subjects in our filings with the SEC.