United Bankshares, Inc. (NASDAQ: UBSI) (“United”), today reported earnings for the fourth quarter of 2023 of $79.4 million, or $0.59 per diluted share. Fourth quarter of 2023 results produced annualized returns on average assets, average equity and average tangible equity, a non-GAAP measure, of 1.08%, 6.70% and 11.27%, respectively. Earnings for the year of 2023 were $366.3 million, or $2.71 per diluted share, and returns on average assets, average equity and average tangible equity were 1.25%, 7.87% and 13.33%, respectively, for the year of 2023.

The fourth quarter of 2023 included approximately $12.0 million of noninterest expense for the Federal Deposit Insurance Corporation’s (“FDIC”) special assessment levied on banking organizations to recover losses to the Deposit Insurance Fund.

“We closed the year with another excellent quarter,” stated Richard M. Adams, Jr., United’s Chief Executive Officer. “We saw loan growth, deposit growth, margin expansion, and strong asset quality metrics and capital levels. I’m proud of what we accomplished in the quarter and for the full year of 2023.”

Earnings for the third quarter of 2023 were $96.2 million, or $0.71 per diluted share, and annualized returns on average assets, average equity and average tangible equity for the third quarter of 2023 were 1.31%, 8.14% and 13.71%, respectively. Earnings for the fourth quarter of 2022 were $99.8 million, or $0.74 per diluted share, and annualized returns on average assets, average equity and average tangible equity were 1.36%, 8.80% and 15.28%, respectively, for the fourth quarter of 2022. Earnings for the year of 2022 were $379.6 million, or $2.80 per diluted share, and returns on average assets, average equity and average tangible equity were 1.31%, 8.25% and 14.11%, respectively, for the year of 2022.

Fourth quarter of 2023 compared to the third quarter of 2023

Net interest income for the fourth quarter of 2023 increased $1.2 million, or 1%, from the third quarter of 2023. 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 fourth quarter of 2023 also increased $1.2 million, or 1%, from the third quarter of 2023. The increase in net interest income and tax-equivalent net interest income was primarily due to organic loan growth and a higher yield on net loans and loans held for sale partially offset by higher interest expense driven by the impact of deposit rate repricing. Average net loans and loans held for sale increased $313.9 million, or 6% on an annualized basis, from the third quarter of 2023. The yield on average net loans and loans held for sale increased 15 basis points to 6.07% for the fourth quarter of 2023. The yield on average interest-bearing deposits increased 25 basis points to 2.95% for the fourth quarter of 2023. The net interest margin of 3.55% for the fourth quarter of 2023 was an increase of 1 basis point from the net interest margin of 3.54% for the third quarter of 2023.

The provision for credit losses was $6.9 million for the fourth quarter of 2023 as compared to $5.9 million for the third quarter of 2023. The higher amount of provision expense for the fourth quarter of 2023 as compared to the third quarter of 2023 was mainly due to the impact of reasonable and supportable forecasts of future macroeconomic conditions and loan growth.

Noninterest income for the fourth quarter of 2023 was flat from the third quarter of 2023, increasing $14 thousand, or less than 1%. Other noninterest income increased $3.1 million to $5.2 million for the fourth quarter of 2023 driven by a $2.7 million gain from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative. Mostly offsetting the increase in other noninterest income was a $2.8 million decrease in income from mortgage banking activities primarily due to a lower quarter-end valuation of our mortgage derivatives and a lower margin on loans sold.

Noninterest expense for the fourth quarter of 2023 increased $17.1 million, or 13%, from the third quarter of 2023. The increase in noninterest expense was primarily due to the $12.0 million FDIC special assessment and increases of $5.4 million in other noninterest expense and $3.9 million in the expense for the reserve for unfunded loan commitments. These increases in noninterest expense were partially offset by decreases of $3.2 million in employee benefits and $1.2 million in employee compensation. The increase in other noninterest expense was driven by an increase of $2.4 million of tax credit investment amortization, an increase of $1.9 million of expense related to community development lending programs and $1.3 million related to trade name intangible impairments. The decrease in employee benefits was primarily due to lower postretirement benefit costs, lower health insurance costs and lower Federal Insurance Contributions Act (“FICA”) costs. The decrease in employee compensation was primarily due to lower headcount.

Income tax expense was $24.8 million for both the fourth and third quarters of 2023. United’s effective tax rate was 23.8% and 20.5% for the fourth quarter of 2023 and third quarter of 2023, respectively. The higher effective tax rate was primarily driven by the impact of provision to return adjustments in the fourth quarter of 2023.

Fourth quarter of 2023 compared to the fourth quarter of 2022

Earnings for the fourth quarter of 2023 were $79.4 million, or $0.59 per diluted share, as compared to earnings of $99.8 million, or $0.74 per diluted share, for the fourth quarter of 2022.

Net interest income for the fourth quarter of 2023 decreased $19.7 million, or 8%, from the fourth quarter of 2022. Tax-equivalent net interest income for the fourth quarter of 2023 decreased $20.0 million, or 8%, from the fourth quarter of 2022. The decrease in net interest income and tax-equivalent net interest income was primarily due to higher interest expense driven by deposit rate repricing partially offset by the impact of rising market interest rates on earning assets and organic loan growth. The average cost of funds increased 170 basis points from the fourth quarter of 2022 to 3.07% driven by an increase in the yield on average interest-bearing deposits of 179 basis points. The yield on average earning assets increased 91 basis points from the fourth quarter of 2022 to 5.68% driven by increases in the yield on average net loans and loans held for sale of 89 basis points and in the yield on average investment securities of 64 basis points. Average net loans and loans held for sale increased $903.6 million, or 4%, from the fourth quarter of 2022. The net interest margin of 3.55% for the fourth quarter of 2023 was a decrease of 32 basis points from the net interest margin of 3.87% for the fourth quarter of 2022.

The provision for credit losses was $6.9 million for the fourth quarter of 2023 as compared to $16.4 million for the fourth quarter of 2022.

Noninterest income for the fourth quarter of 2023 was $33.7 million, an increase of $2.8 million, or 9%, from the fourth quarter of 2022 driven by an increase of $2.7 million in other noninterest income and smaller increases in most other categories of noninterest income. The increase in other noninterest income was primarily due to the $2.7 million gain from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative during the fourth quarter of 2023. This increase in noninterest income was partially offset by a $1.4 million decrease in mortgage loan servicing income due to lower mortgage servicing rights (“MSRs”) balances after the sale of MSRs during the second quarter of 2023.

Noninterest expense for the fourth quarter of 2023 was $152.3 million, an increase of $14.7 million, or 11% from the fourth quarter of 2022 primarily due to increases of $13.4 million in FDIC insurance expense and $8.6 million in other noninterest expense partially offset by a decrease of $5.6 million in the expense for the reserve for unfunded loan commitments. The increase in FDIC insurance expense was due to the $12.0 million special assessment recognized in the fourth quarter of 2023 and a higher overall assessment rate for the fourth quarter of 2023. Other noninterest expense for the fourth quarter of 2022 was reduced by a $3.9 million partial recovery of a prior period litigation accrual. The remainder of the increase in other noninterest expense was driven by an increase of $2.2 million of tax credit amortization, $1.3 million related to trade name intangible impairments and an increase of $1.0 million of expense related to community development lending programs. The decrease in the expense for the reserve for unfunded loan commitments was driven by a decrease in the outstanding balance of loan commitments.

For the fourth quarter of 2023, income tax expense was $24.8 million as compared to $26.6 million for the fourth quarter of 2022. The decrease of $1.8 million was due to lower earnings partially offset by a higher effective tax rate. United’s effective tax rate was 23.8% and 21.1% for the fourth quarter of 2023 and fourth quarter of 2022, respectively. The higher effective tax rate for the fourth quarter of 2023 was primarily driven by the impact of provision to return adjustments.

Year of 2023 compared to the Year of 2022

Earnings for the year of 2023 were $366.3 million, or $2.71 per diluted share, as compared to earnings of $379.6 million, or $2.80 per diluted share, for the year of 2022.

Net interest income for the year of 2023 increased $23.5 million, or 3%, from the year 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 year of 2023 increased $23.0 million, or 3%, from the year of 2022. 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, organic loan growth 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 income from Paycheck Protection Program (“PPP”) loan fees and lower acquired loan accretion income. The yield on average earning assets increased 150 basis points from the year of 2022 to 5.41% driven by increases in the yield on average net loans and loans held for sale of 131 basis points and in the yield on average investments securities of 110 basis points. Average earning assets for the year of 2023 increased $271.0 million, or 1%, from the year of 2022 due to a $1.5 billion increase in average net loans and loans held for sale partially offset by a $697.0 million decrease in average short-term investments and a $522.5 million decrease in average investment securities. The average cost of funds increased 205 basis points from the year of 2022 to 2.69% driven by an increase in the yield on average interest-bearing deposits of 196 basis points. Net PPP loan fee income decreased $9.2 million from the year of 2022. Acquired loan accretion income was $11.5 million and $18.3 million for the years of 2023 and 2022, respectively, a decrease of $6.8 million. The net interest margin of 3.56% for the year of 2023 was an increase of 6 basis points from the net interest margin of 3.50% for the year of 2022.

The provision for credit losses was $31.2 million for the year of 2023 as compared to $18.8 million for the year of 2022. The higher amount of provision expense for the year of 2023 as compared to the year of 2022 was mainly due to the impact of qualitative adjustments, reasonable and supportable forecasts of future macroeconomic conditions and loan growth.

Noninterest income for the year of 2023 was $135.3 million, which was a decrease of $18.0 million, or 12%, from the year of 2022. Income from mortgage banking activities decreased $16.1 million from the year of 2022 mainly due to lower mortgage loan origination and sale volume and a lower margin on loans sold. Additionally, net losses on investment securities were $7.6 million for the year of 2023 as compared to net gains on investment securities of $776 thousand for the year of 2022 mainly driven by a $7.2 million loss on the sale of available for sale (“AFS”) investment securities in the second quarter of 2023. The decrease in noninterest income was partially offset by a $4.5 million increase in mortgage loan servicing income mainly driven by an $8.1 million gain on sale of MSRs in the second quarter of 2023 partially offset by lower MSR balances after the sale. Other noninterest income increased $3.7 million to $11.1 million for the year of 2023 driven by the aforementioned $2.7 million gain from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative.

Noninterest expense for the year of 2023 was $560.2 million, an increase of $5.1 million, or 1%, from the year of 2022 driven by increases of $18.4 million in FDIC insurance expense and $14.5 million in other noninterest expense partially offset by decreases of $16.2 million in the expense for the reserve for unfunded loan commitments and $11.6 million in employee compensation. The increase in FDIC insurance expense was due to the $12.0 million special assessment recognized in the fourth quarter of 2023 and a higher overall assessment rate for 2023. The increase in other noninterest expense was driven by an increase of $2.6 million of expense related to community development lending programs, an increase of $1.7 million of tax credit investment amortization, $1.3 million related to trade name intangible impairments and by higher amounts of certain general operating expenses. The decrease in employee compensation was primarily due to lower employee commissions and incentives related to mortgage banking production.

For the year of 2023, income tax expense was $97.5 million as compared to $96.2 million for the year of 2022 primarily due to a higher effective tax rate partially offset by lower earnings. United’s effective tax rate was 21.0% and 20.2% for the years of 2023 and 2022, respectively.

Credit Quality

United’s asset quality continues to be sound. At December 31, 2023, non-performing loans were $45.5 million, or 0.21% of loans & leases, net of unearned income. Total non-performing assets were $48.1 million, including OREO of $2.6 million, or 0.16% of total assets at December 31, 2023. At December 31, 2022, non-performing loans were $58.6 million, or 0.29% of loans & leases, net of unearned income. Total non-performing assets were $60.7 million, including OREO of $2.1 million, or 0.21% of total assets at December 31, 2022.

On January 1, 2023, United adopted ASU 2022-02, “Troubled Debt Restructurings and Vintage Disclosures” which eliminated the accounting guidance on troubled debt restructurings and enhanced creditors’ disclosure requirements related to loan refinancings and restructurings for borrowers experiencing financial difficulty. After the adoption of ASU 2022-02, United no longer considers accruing restructured loans that are fewer than 90 days past due as non-performing loans or non-performing assets. December 31, 2022 non-performing loans and non-performing assets included $9.1 million of troubled debt restructurings that were on accruing status and fewer than 90 days past due but classified as non-performing loans and non-performing assets. Restructured loans that are on non-accrual or 90-day past due are included in the respective non-performing loan and non-performing asset categories for periods subsequent to adoption.

As of December 31, 2023, the allowance for loan & lease losses was $259.2 million, or 1.21% of loans & leases, net of unearned income, as compared to $234.7 million, or 1.14% of loans & leases, net of unearned income, at December 31, 2022. Net charge-offs were $2.5 million for the fourth quarter of 2023 compared to $1.2 million for the fourth quarter of 2022. Net charge-offs were $6.7 million for the year of 2023 compared to $101 thousand for the year of 2022. Annualized net charge-offs as a percentage of average loans & leases, net of unearned income were 0.05% and 0.02% for the fourth quarter of 2023 and 2022, respectively. Net charge-offs as a percentage of average loans & leases, net of unearned income were 0.03% and zero for the year of 2023 and 2022, respectively. Net charge-offs were $1.8 million for the third quarter of 2023.

Capital

United continues to be well-capitalized based upon regulatory guidelines. United’s estimated risk-based capital ratio is 15.4% at December 31, 2023, while estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.1%, 13.1% and 11.4%, respectively. The December 31, 2023 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 year of 2022, United repurchased, under a previously announced stock repurchase plan, approximately 2.3 million shares of its common stock at an average price per share of $34.69. United did not repurchase any shares of its common stock during 2023.

About United Bankshares, Inc.

As of December 31, 2023, United had consolidated assets of approximately $29.9 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 December 31, 2023 consolidated financial statements on Form 10-K. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 2023 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; changes in legislation or regulatory requirements; and the impact of natural disasters, extreme weather events, military conflict (including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas, the possible expansion of such conflicts and potential geopolitical consequences), terrorism or other geopolitical events. 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, 2022, 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.