United Bankshares, Inc. (NASDAQ: UBSI) (“United”), today reported earnings for the third quarter of 2022 of $102.6 million, or $0.76 per diluted share, as compared to earnings of $95.6 million, or $0.71 per diluted share, for the second quarter of 2022. The quarter was highlighted by continued broad-based loan growth, net interest margin expansion and strong credit quality metrics.

Annualized loan growth, excluding Paycheck Protection Program (“PPP”) loans, for the third quarter and first nine months of 2022 was 16% and 15%, respectively. Third quarter 2022 net interest margin of 3.78% increased 40 basis points from the second quarter of 2022. Non-performing loans as a percentage of loans and leases, net of unearned income was a low 0.35% at September 30, 2022.

Third quarter 2022 results produced annualized returns on average assets, average equity and average tangible equity, a non-GAAP measure, of 1.41%, 8.96% and 15.46%, respectively, compared to annualized returns on average assets, average equity and average tangible equity of 1.32%, 8.33% and 14.23%, respectively, for the second quarter of 2022.

“The third quarter of 2022 was another great quarter for UBSI,” stated Richard M. Adams, Jr., United’s Chief Executive Officer. “The company delivered strong results related to loan growth, margin expansion, expense control and asset quality. The vitality of our markets, the strength of our deposit franchise and our conservative and disciplined approach to running our business have served us well in this environment and will provide us opportunities going forward.”

Third quarter of 2022 compared to the second quarter of 2022

Net interest income for the third quarter of 2022 increased $25.7 million, or 12%, from the second 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 third quarter of 2022 also increased $25.7 million, or 12%, from the second 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. This increase in net interest income and tax-equivalent net interest income was partially offset by higher interest expense primarily driven by deposit rate repricing as well as due to lower PPP loan fee income and lower acquired loan accretion. The interest rate spread of 3.52% for the third quarter of 2022 increased 28 basis points from the second quarter of 2022 due to a 56 basis point increase in the average yield on earning assets partially offset by a 28 basis point increase in the average cost of funds. A decrease in average earning assets of $188.1 million, or 1%, from the second quarter of 2022 was driven by a decrease of $818.5 million in short-term investments partially offset by increases in higher yielding average net loans and loans held for sale of $627.6 million. Net PPP loan fee income decreased $1.9 million to $1.6 million for the third quarter of 2022. Acquired loan accretion income decreased $1.3 million to $4.1 million for the third quarter of 2022. The net interest margin of 3.78% for the third quarter of 2022 was an increase of 40 basis points from the net interest margin of 3.38% for the second quarter of 2022.

The provision for credit losses was $7.7 million for the third quarter of 2022 as compared to a net benefit of $1.8 million for the second quarter of 2022. The increase in the provision for credit losses was primarily due to loan growth.

Noninterest income for the third quarter of 2022 decreased $10.9 million, or 25%, from the second quarter of 2022. The decrease in noninterest income was primarily due to decreases of $6.0 million in income from mortgage banking activities, $2.6 million in income from bank-owned life insurance (“BOLI”), $1.4 million in net (losses) gains on investment securities and $761 thousand in fees from deposit services. The decrease in income from mortgage banking activities was 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. The decrease in BOLI income was primarily due to lower death benefits from the second quarter of 2022 and the impact of lower market values of underlying investments in the third quarter of 2022. The decrease in fees from deposit services reflects changes to United’s overdraft policy implemented during the third quarter of 2022.

Noninterest expense for the third quarter of 2022 decreased $4.0 million, or 3%, from the second quarter of 2022. The decrease in noninterest expense was primarily due to decreases of $8.8 million in the expense for the reserve for unfunded loan commitments and $3.0 million in employee compensation partially offset by an increase of $6.1 million in other noninterest expense. The decrease in the reserve for unfunded loan commitments reflects a decrease in the outstanding balance of loan commitments at quarter-end driven by loan fundings. The decrease in employee compensation was primarily due to lower employee commissions related to mortgage banking production. Other noninterest expense for the third quarter of 2022 included an accrual of $5.0 million related to a litigation matter with a former commercial customer.

For the third quarter of 2022, income tax expense was $25.9 million as compared to $23.5 million for the second quarter of 2022. The increase of $2.4 million was due to higher earnings and a higher effective tax rate. United’s effective tax rate was 20.2% and 19.8% for the third and second quarter of 2022, respectively.

Third quarter of 2022 compared to the third quarter of 2021

Earnings for the third quarter of 2022 were $102.6 million, or $0.76 per diluted share, as compared to earnings of $92.2 million, or $0.71 per diluted share, for the third quarter of 2021.

Net interest income for the third quarter of 2022 increased $59.0 million, or 33%, from the third quarter of 2021. Tax-equivalent net interest income for the third quarter of 2022 increased $59.1 million, or 32%, from the third 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 and organic loan growth, 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 higher interest expense primarily driven by deposit rate repricing, lower PPP loan fee income and lower acquired loan accretion income. Average earning assets for the third quarter of 2022 increased $1.1 billion, or 4%, from the third quarter of 2021 due to a $2.5 billion increase in average net loans and loans held for sale and a $1.5 billion increase in average investment securities partially offset by a $2.9 billion decrease in average short-term investments. The interest rate spread for the third quarter of 2022 increased 69 basis points from the third quarter of 2021 to 3.52% due to a 96 basis point increase in the average yield on earning assets partially offset by a 27 basis point increase in the average cost of funds. Net PPP loan fee income was $1.6 million and $7.8 million for the third quarter of 2022 and 2021, respectively, a decrease of $6.2 million. Acquired loan accretion income was $4.1 million and $8.2 million for the third quarter of 2022 and 2021, respectively, a decrease of $4.1 million. The net interest margin of 3.78% for the third quarter of 2022 was an increase of 80 basis points from the net interest margin of 2.98% for the third quarter of 2021.

The provision for credit losses was $7.7 million for the third quarter of 2022 as compared to a net benefit of $7.8 million for the third quarter of 2021. The increase in the provision for credit losses in the third quarter of 2022 was primarily due to loan growth.

Noninterest income for the third quarter of 2022 was $32.7 million, which was a decrease of $35.9 million, or 52%, from the third quarter of 2021. The decrease in noninterest income was driven by a $35.6 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.

Noninterest expense for the third quarter of 2022 was $137.2 million, a decrease of $5.1 million, or 4%, from the third quarter of 2021 primarily due to decreases of $7.8 million in employee compensation and $7.2 million in the expense for the reserve for unfunded loan commitments partially offset by an increase of $8.8 million in other noninterest expense. The decrease in employee compensation was primarily due to lower employee commissions related to mortgage banking production partially offset by additional employees from the Community Bankers Trust acquisition. The increase in other noninterest expense resulted from the previously mentioned litigation accrual in the third quarter of 2022 and higher amounts of certain general operating expenses.

For the third quarter of 2022, income tax expense was $25.9 million as compared to $23.6 million for the third quarter of 2021. The increase of $2.3 million was primarily due to higher earnings partially offset by a slightly lower effective tax rate. United’s effective tax rate was 20.2% for the third quarter of 2022 and 20.4% for the third quarter of 2021.

First nine months of 2022 compared to the first nine months of 2021

Earnings for the first nine months of 2022 were $279.9 million, or $2.06 per diluted share, as compared to earnings of $293.9 million, or $2.27 per diluted share, for the first nine months of 2021.

Net interest income for the first nine months of 2022 increased $88.0 million, or 16%, from the first nine months of 2021. Tax-equivalent net interest income for the first nine months of 2022 increased $88.1 million, or 16%, from the first nine months of 2021. The increase in net interest income and tax-equivalent net interest income was primarily due to the impact of rising market interest rates on earning assets, an increase in average earning assets from the Community Bankers Trust acquisition and organic loan growth and a change in the asset mix to higher earning assets. These increases were partially offset by lower PPP loan fee income, lower acquired loan accretion income and the impact of rising market interest rates on interest-bearing liabilities. Average earning assets for the first nine months of 2022 increased $1.8 billion, or 7%, from the first nine months of 2021 due to a $1.5 billion increase in average investment securities and a $1.3 billion increase in average net loans and loans held for sale partially offset by a $1.1 billion decrease in average short-term investments. The interest rate spread for the first nine months of 2022 increased 22 basis points from the first nine months of 2021 due to a 26 basis point increase in the average yield on earning assets partially offset by a 4 basis point increase in the average cost of funds. Net PPP loan fee income was $9.3 million and $28.2 million for the first nine months of 2022 and 2021, respectively, a decrease of $18.9 million. Acquired loan accretion income was $13.6 million and $27.6 million for the first nine months of 2022 and 2021, respectively, a decrease of $14.0 million. The net interest margin of 3.38% for the first nine months of 2022 was an increase of 24 basis points from the net interest margin of 3.14% for the first nine months of 2021.

The provision for credit losses was $2.5 million for the first nine months of 2022 as compared to a net benefit of $16.6 million for the first nine months of 2021.

Noninterest income for the first nine months of 2022 was $122.4 million, which was a decrease of $101.7 million, or 45%, from the first nine months of 2021. The decrease was driven by a $106.3 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. Fees from deposit services for the first nine months of 2022 were $31.0 million, an increase of $2.9 million from the first nine months of 2021. BOLI income for the first nine months of 2022 was $7.8 million, an increase of $2.2 million from the first nine months of 2021 due to increased death benefits.

Noninterest expense for the first nine months of 2022 was $417.5 million, a decrease of $12.6 million, or 3%, from the first nine months of 2021 driven by decreases in employee compensation of $23.6 million and employee benefits of $7.4 million partially offset by an increase in other noninterest expense of $13.3 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 increase in other noninterest expense resulted from the previously mentioned litigation accrual in the third quarter of 2022 and higher amounts of certain general operating expenses.

For the first nine months of 2022, income tax expense was $69.6 million as compared to $75.6 million for the first nine months of 2021 due to lower earnings and a lower effective tax rate. United’s effective tax rate was 19.9% for the first nine months of 2022 and 20.5% for the first nine months of 2021.

Credit Quality

United’s asset quality continues to be sound. At September 30, 2022, non-performing loans were $69.7 million, or 0.35% 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 $80.4 million, including OREO of $10.8 million at September 30, 2022, represented 0.28% 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 September 30, 2022, the allowance for loan & lease losses was $219.6 million, or 1.11% 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 charge-offs were $1.8 million for the third quarter of 2022 compared to net recoveries of $1.2 million for the third quarter of 2021. Net recoveries were $1.1 million for the first nine months of 2022 compared to net charge-offs of $8.6 million for the first nine months of 2021. Annualized net charge-offs (recoveries) as a percentage of average loans & leases, net of unearned income were 0.04% and (0.03)% for the third quarter of 2022 and 2021, respectively. Annualized net (recoveries) charge-offs as a percentage of average loans & leases, net of unearned income were (0.01)% and 0.07% for the for the first nine months of 2022 and 2021, respectively.

Capital

United continues to be well-capitalized based upon regulatory guidelines. United’s estimated risk-based capital ratio is 14.4% at September 30, 2022, while estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.4%, 12.4% and 10.7%, respectively. The September 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 nine months of 2022 and 2021, United repurchased, under a previously announced stock repurchase plan, shares of its common stock. United did not repurchase any shares of its common stock during the third quarter of 2022 or 2021. During the first nine months 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 nine months 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 September 30, 2022, United had consolidated assets of approximately $29.0 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 September 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 September 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.

Note: (1) See information under the “Selected Financial Ratios” table for a reconciliation of non-GAAP measure.