United Bankshares, Inc. Announces Earnings for the Third Quarter and First Nine Months of 2012

United Bankshares, Inc. Announces Earnings for the Third Quarter and First Nine Months of 2012

WASHINGTON & CHARLESTON, W.Va.--(BUSINESS WIRE)-- United Bankshares, Inc. (NAS: UBSI) , today reported earnings for the third quarter and the first nine months of 2012. Earnings for the third quarter of 2012 were $19.3 million or $0.38 per diluted share while earnings for the first nine months of 2012 were $61.4 million or $1.22 per diluted share. Earnings for the third quarter of 2011 were $20.0 million or $0.40 per diluted share while earnings for the first nine months of 2011 were $55.4 million or $1.21 per diluted share.

The results for the third quarter and first nine months of 2012 included an accrual of $3.3 million with respect to a settlement of claims asserted in class actions against United Bank, Inc. of West Virginia. For further details regarding this settlement, please refer to Item 8.01 of the Form 8-K filed with the Securities Exchange Commission on this date. Also included in the results for the third quarter and first nine months of 2012 were noncash, before-tax, other-than-temporary impairment charges of $2.3 million and $5.4 million, respectively, on certain investment securities.


The results for the third quarter and first nine months of 2011 included before-tax, other-than-temporary impairment charges of $7.9 million and $14.1 million, respectively, on certain investment securities. In addition, United completed its acquisition of Centra Financial Holdings, Inc. (Centra) during the third quarter of 2011. As a result, comparisons for the first nine months of 2012 to the same time period in 2011 are impacted by increased levels of average balances, income, and expense due to the acquisition. At consummation, Centra had assets of approximately $1.3 billion, loans of $1.0 billion, deposits of $1.1 billion and shareholders' equity of $131 million.

Third quarter of 2012 results produced a return on average assets of 0.92% and a return on average equity of 7.76%, respectively. For the first nine months of 2012, United's return on average assets was 0.97% while the return on average equity was 8.32%. United's annualized returns on average assets and average equity were 0.95% and 8.26%, respectively, for the third quarter of 2011 while the returns on average assets and average equity was 0.98% and 8.62%, respectively, for the first nine months of 2011.

United's asset quality continues to outperform its peers. United's percentage of nonperforming loans to loans, net of unearned income of 1.53% at September 30, 2012 compares favorably to the most recently reported percentage of 2.93% at June 30, 2012 for United's Federal Reserve peer group. At September 30, 2012, nonperforming loans were $98.4 million, up from nonperforming loans of $79.7 million or 1.28% of loans, net of unearned income, at December 31, 2011. During the third quarter of 2012, loans totaling $20.5 million to two commercial customers were placed on nonaccrual status. The loss potential on these loans has been properly evaluated and allocated within the company's allowance for loan losses. As of September 30, 2012, the allowance for loan losses was $73.7 million or 1.15% of loans, net of unearned income, which was comparable to $73.9 million or 1.18% of loans, net of unearned income, at December 31, 2011. Total nonperforming assets of $148.5 million, including OREO of $50.0 million at September 30, 2012, represented 1.77% of total assets which also compares favorably to the most recently reported percentage of 2.33% at June 30, 2012 for United's Federal Reserve peer group.

United continues to be well-capitalized based upon regulatory guidelines. United's estimated risk-based capital ratio is 13.8% at September 30, 2012 while its Tier I capital and leverage ratios are 12.6% and 10.7%, respectively. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10%, a Tier I capital ratio of 6% and a leverage ratio of 5%.

Tax-equivalent net interest income for the third quarter of 2012 was $71.6 million, a decrease of $951 thousand or 1% from the third quarter of 2011 due mainly to a decrease in the average yield on earning assets. The third quarter of 2012 average yield on earning assets decreased 13 basis points from the third quarter of 2011. In addition, average earning assets decreased $90.5 million or 1% from the third quarter of 2011 as average short-term investments and average investment securities declined $199.5 million and $87.9 million, respectively. Average net loans did increase $197.0 million or 3% for the third quarter of 2012 from the third quarter of 2011 partially offsetting the decreases in average short-term investments and investment securities. Partially offsetting the decreases to tax-equivalent net interest income for the third quarter of 2012 was a decline of 14 basis points in the average cost of funds as compared to the third quarter of 2011. The net interest margin for the third quarter of 2012 was 3.87%, which equaled the net interest margin for the third quarter of 2011.

Tax-equivalent net interest income for the first nine months of 2012 was $212.8 million, an increase of $19.2 million or 10% from the first nine months of 2011. This increase in tax-equivalent net interest income was primarily attributable to an increase in average earning assets from the Centra acquisition. Average earning assets increased $787.6 million or 12% from the first nine months of 2011. Average net loans increased $731.7 million or 13% for the first nine months of 2012. In addition, the average cost of funds declined 23 basis points from the first nine months of 2011. Partially offsetting the increases to tax-equivalent net interest income for the first nine months of 2012 was a decline of 27 basis points in the average yield on earning assets as compared to the first nine months of 2011. The net interest margin for the first nine months of 2012 was 3.80%, which was a decrease of 7 basis points from a net interest margin of 3.87% for the first nine months of 2011.

On a linked-quarter basis, United's tax-equivalent net interest income for the third quarter of 2012 increased $951 thousand or 1% from the second quarter of 2012 due mainly to increases in average net loans and the average yield on earning assets. Average net loans increased $137.2 million or 2%. The third quarter of 2012 average yield on earning assets increased 7 basis points while the average cost of funds decreased 3 basis points from the second quarter of 2012. Overall, average earning assets decreased $165.5 million or 2% during the quarter as average short-term investments and average investment securities decreased $292.1 million and $10.6 million, respectively. The net interest margin of 3.87% for the third quarter of 2012 was an increase of 11 basis points from the net interest margin of 3.76% for the second quarter of 2012.

For the quarters ended September 30, 2012 and 2011, the provision for loan losses was $4.3 million and $3.6 million, respectively, while the provision for the first nine months of 2012 was $11.9 million as compared to $12.9 million for the first nine months of 2011. Net charge-offs were $4.0 million and $3.3 million for the third quarter of 2012 and 2011, respectively, as compared to $12.0 million and $12.4 million for the first nine months of 2012 and 2011. Annualized net charge-offs as a percentage of average loans were 0.25% and 0.26% for the third quarter and first nine months of 2012, respectively. United's most recently reported Federal Reserve peer group's net charge-offs to average loans percentage was 0.65% for the second quarter of 2012.

Noninterest income for the third quarter of 2012 was $16.6 million, which was an increase of $5.7 million from the third quarter of 2011. Included in noninterest income for the third quarter of 2012 were noncash, before-tax, other-than-temporary impairment charges of $2.3 million on certain investment securities as compared to noncash, before-tax other-than-temporary impairment charges of $7.9 million on certain investment securities for the third quarter of 2011. Excluding the results of the noncash, other-than-temporary impairment charges as well as net gains and losses from sales and calls of investment securities, noninterest income for the third quarter of 2012 would have increased $367 thousand or 2% from the third quarter of 2011. This increase for the third quarter of 2012 was due primarily to increases of $890 thousand in income from trust and brokerage services due to increases in volume and the value of assets under management and $614 thousand in mortgage banking income due to increased production and sales of mortgage loans in the secondary market.

Noninterest income for the first nine months of 2012 was $49.5 million, which was an increase of $10.6 million from the first nine months of 2011. Included in noninterest income for the first nine months of 2012 were noncash, before-tax, other-than-temporary impairment charges of $5.4 million on certain investment securities as compared to noncash, before-tax other-than-temporary impairment charges of $14.1 million on certain investment securities for the first nine months of 2011. Excluding the results of the noncash, other-than-temporary impairment charges as well as net gains and losses from sales and calls of investment securities, noninterest income for the first nine months of 2012 would have increased $3.3 million or 6% from the first nine months of 2011. This increase for the first nine months of 2012 was due primarily to increases of $2.1 million in income from trust and brokerage services due to increases in volume and the value of assets under management, $792 thousand in fees from deposit services due to an increase in check card income and $1.1 million in mortgage banking income due to increased production and sales of mortgage loans in the secondary market.

On a linked-quarter basis, noninterest income for the third quarter of 2012 was flat from the second quarter of 2012, increasing $47 thousand. Included in the results for the third quarter of 2012 and second quarter of 2012 were noncash, before-tax, other-than-temporary impairment charges of $2.3 million and $1.7 million, respectively. Excluding the results of the noncash, other-than-temporary impairment charges as well as net gains and losses from sales and calls of investment securities, noninterest income would have increased $692 thousand or 4% on a linked-quarter basis due primarily to increases of $336 thousand in mortgage banking income due to increased sales of mortgage loans in the secondary market and $157 thousand in income from trust and brokerage services due to increases in volume and the value of assets under management.

Noninterest expense for the third quarter of 2012 was $53.9 million, an increase of $5.0 million or 10% from the third quarter of 2011 due mainly to the previously mentioned accrual of $3.3 million for the litigation settlement amount related to overdraft claims against United. In addition, employee benefits increased $910 thousand due to higher pension costs and data processing expense increased $734 thousand due to a conversion to a new servicer.

Noninterest expense for the first nine months of 2012 was $155.4 million, an increase of $21.4 million or 16% from the first nine months of 2011 due partially to the previously mentioned litigation settlement accrual. In addition, employee compensation increased $6.3 million due to additional employees from the Centra merger and employee benefits increased $3.4 million due mainly to an increase in pension costs. The remainder of the increase in noninterest expense from the first nine months of 2011 was due mainly to the additional offices and equipment from the Centra merger.

On a linked-quarter basis, noninterest expense for the third quarter of 2012 increased $2.6 million or 5% from the second quarter of 2012. This increase was due primarily to the litigation settlement accrual as well as an increase of $1.0 million in data processing expense related to the overlap of data processors and the conversion to a new servicer.

During the third quarter of 2012, United's Board of Directors declared a cash dividend of $0.31 per share. United has increased its dividend to shareholders for 38 consecutive years. The annualized 2012 dividend of $1.24 equates to a yield of approximately 5% based on recent UBSI market prices.

United has consolidated assets of approximately $8.4 billion with 123 full service offices in West Virginia, Virginia, Maryland, Ohio, Pennsylvania and Washington, D.C. United Bankshares 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, 2012 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, 2012 and will adjust amounts preliminarily reported, if necessary.

Forward-Looking Statements

This press release contains certain forward-looking statements, including certain plans, expectations, goals and projections, which are subject to numerous assumptions, risks and uncertainties.Actual results could differ materially from those contained in or implied by such statements for a variety of factors including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature and extent of governmental actions and reforms; and rapidly changing technology and evolving banking industry standards.

UNITED BANKSHARES, INC. AND SUBSIDIARIES

FINANCIAL SUMMARY

(In Thousands Except for Per Share Data)

Three Months Ended

Nine Months Ended

September 30

2012

September 30

2011

September 30

2012

September 30

2011

EARNINGS SUMMARY:

Interest income, taxable equivalent (non-GAAP)

$

82,888

$

86,466

$

249,010

$

235,848

Interest expense

11,322

13,949

36,194

42,257

Net interest income, taxable equivalent (non-GAAP)

71,566

72,517

212,816

193,591

Taxable equivalent adjustment

1,552

1,765

4,781

4,855

Net interest income (GAAP)

70,014

70,752

208,035

188,736

Provision for loan losses

4,346

3,637

11,915

12,873

Noninterest income

16,634

10,978

49,547

38,963

Noninterest expenses

53,869

48,873

155,383

134,019

Income taxes

9,099

9,204

28,891

25,454

Net income

$

19,334

$

20,016

$

61,393

$

55,353

PER COMMON SHARE:

Net income:

Basic

$

0.38

$

0.40

$

1.22

$

1.21

Diluted

0.38

0.40

1.22

1.21

Cash dividends

$

0.31

$

0.30

0.93

0.90

Book value

19.66

19.38

Closing market price

$

24.91

$

20.09

Common shares outstanding:

Actual at period end, net of treasury shares

50,275,998

50,205,691

Weighted average- basic

50,276,074

49,628,087

50,262,089

45,656,304

Weighted average- diluted

50,295,162

49,636,382

50,298,998

45,692,106

FINANCIAL RATIOS:

Return on average assets

0.92

%

0.95

%

0.97

%

0.98

%

Return on average shareholders' equity

7.76

%

8.26

%

8.32

%

8.62

%

Average equity to average assets

11.92

%

11.47

%

11.72

%

11.39

%

Net interest margin

3.87

%

3.87

%

3.80

%

3.87

%

September 30

2012

September 30

2011

December 31

2011

June 30

2012

PERIOD END BALANCES:

Assets

$

8,381,378

$

8,577,886

$

8,451,470

$

8,457,009

Earning assets

7,426,785

7,601,292

7,492,400

7,482,684

Loans, net of unearned income

6,422,613

6,253,295

6,230,777

6,308,983

Loans held for sale

12,905

7,378

3,902

9,279

Investment securities

766,713

871,898

824,219

722,854

Total deposits

6,753,924

6,927,975

6,819,010

6,860,441

Shareholders' equity

988,429

972,753

968,844

981,181

UNITED BANKSHARES, INC. AND SUBSIDIARIES

Washington, D.C. and Charleston, WV

Stock Symbol: UBSI

(In Thousands Except for Per Share Data)

Consolidated Statements of Income

Three Months Ended

Year to Date

September

September

June

March

September

September

2012

2011

2012

2012

2012

2011

Interest & Loan Fees Income (GAAP)

$

81,336

$ 84,701

$ 81,105

$

81,788

$

244,229

$

230,993

Tax equivalent adjustment

1,552

1,765

1,560

1,669

4,781

4,855

Interest & Fees Income (FTE) (non-GAAP)

82,888

86,466

82,665

83,457

249,010

235,848

Interest Expense

11,322

13,949

12,050

12,822

36,194

42,257

Net Interest Income (FTE) (non-GAAP)

71,566

72,517

70,615

70,635

212,816

193,591

Provision for Loan Losses

4,346

3,637

3,436

4,133

11,915

12,873

Non-Interest Income:

Fees from trust & brokerage services

4,170

3,280

4,013

3,984

12,167

10,027

Fees from deposit services

10,521

10,462

10,393

10,312

31,226

30,434

Bankcard fees and merchant discounts

866

1,237

738

647

2,251

2,475

Other charges, commissions, and fees

513

455

600

577

1,690

1,290

Income from bank owned life insurance

1,247

1,544

1,255

1,289

3,791

3,947

Mortgage banking income

819

205

483

318

1,620

570

Other non-interest revenue

686

1,272

648

658

1,992

2,722

Net other-than-temporary impairment losses

(2,255

)

(7,922

)

(1,742

)

(1,377

)

(5,374

)

(14,128

)

Net gains on sales/calls of investment

securities

67

445

199

(82

)

184

1,626

Total Non-Interest Income

16,634

10,978

16,587

16,326

49,547

38,963

Non-Interest Expense:

Employee compensation

17,258

16,970

17,965

17,907

53,130

46,855