United Bankshares, Inc. Increases Earnings for the Second Quarter and First Half of 2013

United Bankshares, Inc. Increases Earnings for the Second Quarter and First Half of 2013

WASHINGTON & CHARLESTON, W.Va.--(BUSINESS WIRE)-- United Bankshares, Inc. (NASDAQ: UBSI), today reported earnings for the second quarter and the first half of 2013. Earnings for the second quarter of 2013 were $22.2 million or $0.44 per diluted share, an increase from earnings of $21.0 million or $0.42 per diluted share for the second quarter of 2012. Earnings for the first half of 2013 were $43.8 million or $0.87 per diluted share, up from earnings of $42.1 million or $0.84 per diluted share for the first half of 2012.

Second quarter of 2013 results produced a return on average assets of 1.07% and a return on average equity of 8.81%, respectively. For the first half of 2013, United's return on average assets was 1.06% while the return on average equity was 8.76%. United's annualized returns on average assets and average equity were 1.00% and 8.58%, respectively, for the second quarter of 2012 while the returns on average assets and average equity was 1.00% and 8.60%, respectively, for the first half of 2012.


The results for the second quarter and first half of 2013 included noncash, before-tax, other-than-temporary impairment charges of $137 thousand and $971 thousand, respectively, on certain investment securities. The results for the second quarter and first half of 2012 included noncash, before-tax, other-than-temporary impairment charges of $1.7 million and $3.1 million, respectively, on certain investment securities.

United's asset quality continues to outperform its peers. United's percentage of nonperforming loans to loans, net of unearned income of 1.43% at June 30, 2013 compares favorably to the most recently reported percentage of 2.39% at March 31, 2013 for United's Federal Reserve peer group. At June 30, 2013, nonperforming loans were $94.0 million, up slightly from nonperforming loans of $92.8 million or 1.43% of loans, net of unearned income, at December 31, 2012. As of June 30, 2013, the allowance for loan losses was $74.6 million or 1.14% of loans, net of unearned income, which was comparable to $73.9 million or 1.13% of loans, net of unearned income, at December 31, 2012. Total nonperforming assets of $138.4 million, including OREO of $44.4 million at June 30, 2013, represented 1.63% of total assets which also compares favorably to the most recently reported percentage of 1.87% at March 31, 2013 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 June 30, 2013 while its Tier I capital and leverage ratios are 12.6% and 10.9%, 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 second quarter of 2013 was $67.7 million, a decrease of $2.9 million or 4% from the second quarter of 2012 due mainly to a decrease in the average yield on earning assets. The second quarter of 2013 average yield on earning assets decreased 26 basis points from the second quarter of 2012. In addition, average earning assets decreased $104.3 million or 1% from the second quarter of 2012 as average short-term investments declined $383.6 million. Average investment securities and average net loans did increase $10.9 million and $268.4 million, respectively, for the second quarter of 2013 from the second quarter of 2012 to somewhat mitigate the decrease in average short-term investments. Partially offsetting the decreases to tax-equivalent net interest income for the second quarter of 2013 was a decline of 17 basis points in the average cost of funds as compared to the second quarter of 2012. The net interest margin for the second quarter of 2013 was 3.65%, which was a decrease of 11 basis points from a net interest margin of 3.76% for the second quarter of 2012.

Tax-equivalent net interest income for the first half of 2013 was $136.1 million, a decrease of $5.2 million or 4% from the first half of 2012 due mainly to a decrease in the average yield on earning assets. The first half of 2013 average yield on earning assets decreased 23 basis points from the first half of 2012. In addition, average earning assets decreased $121.2 million or 2% from the first half of 2012 as average short-term investments and average investment securities declined $348.1 million and $33.0 million, respectively. Average net loans did increase $259.8 million or 4% for the first half of 2013 from the first half of 2012 to somewhat mitigate the decreases in average short-term investments and investment securities. Partially offsetting the decreases to tax-equivalent net interest income for the first half of 2013 was a decline of 18 basis points in the average cost of funds as compared to the first half of 2012. The net interest margin for the first half of 2013 was 3.70%, which was a decrease of 7 basis points from a net interest margin of 3.77% for the first half of 2012.

On a linked-quarter basis, United's tax-equivalent net interest income for the second quarter of 2013 was flat from the first quarter of 2013, decreasing $634 thousand or less than 1% due mainly to a decrease in the average yield on earning assets. The second quarter of 2013 average yield on earning assets decreased 13 basis points while the average cost of funds only decreased 3 basis points from the first quarter of 2013. Average earning assets were flat, increasing $71.0 million or less than 1% during the quarter. Average net loans were flat for the quarter as well, increasing $27.5 million or less than 1%. Average short-term investments increased $14.5 million or 6% while average investments increased $29.1 million or 4% for the quarter. The net interest margin of 3.65% for the second quarter of 2013 was a decrease of 10 basis points from the net interest margin of 3.75% for the first quarter of 2013.

For the quarters ended June 30, 2013 and 2012, the provision for credit losses was $5.0 million and $3.4 million, respectively, while the provision for the first six months of 2013 was $10.1 million as compared to $7.6 million for the first six months of 2012. Net charge-offs were $4.5 million and $4.0 million for the second quarter of 2013 and 2012, respectively. Net charge-offs were $9.5 million and $8.0 million for the first half of 2013 and 2012, respectively. Annualized net charge-offs as a percentage of average loans was 0.28% and 0.29% for the second quarter and first half of 2013, respectively. United's most recently reported Federal Reserve peer group's net charge-offs to average loans percentage was 0.31% for the first quarter of 2013.

Noninterest income for the second quarter of 2013 was $19.1 million, which was an increase of $2.5 million from the second quarter of 2012. Included in noninterest income for the second quarter of 2013 were noncash, before-tax, other-than-temporary impairment charges of $137 thousand on certain investment securities as compared to noncash, before-tax other-than-temporary impairment charges of $1.7 million on certain investment securities for the second quarter of 2012. 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 second quarter of 2013 increased $758 thousand or 4% from the second quarter of 2012. This increase for the second quarter of 2013 was due primarily to increases of $357 thousand in income from trust and brokerage services due to increases in the value of assets under management and $256 thousand in mortgage banking income due to increased production and sales of mortgage loans in the secondary market. Partially offsetting these increases was a decrease of $185 thousand in fees from deposit services.

Noninterest income for the first half of 2013 was $37.4 million, which was an increase of $4.5 million from the first half of 2012. Included in noninterest income for the first half of 2013 were noncash, before-tax, other-than-temporary impairment charges of $971 thousand on certain investment securities as compared to noncash, before-tax other-than-temporary impairment charges of $3.1 million on certain investment securities for the first half of 2012. 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 half of 2013 increased $2.0 million or 6% from the first half of 2012. This increase for the first half of 2013 was due primarily to increases of $1.0 million in income from bank-owned life insurance policies due to a death benefit, $903 thousand in mortgage banking income due to increased sales of mortgage loans in the secondary market and $332 thousand in income from derivatives not in hedge relationships due to a change in the fair value.

On a linked-quarter basis, noninterest income for the second quarter of 2013 increased $751 thousand from the first quarter of 2013. Included in the results for the second quarter of 2013 and first quarter of 2013 were noncash, before-tax, other-than-temporary impairment charges of $137 thousand and $834 thousand, 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 was flat on a linked-quarter basis, decreasing $154 thousand or less than 1% as a decrease of $1.2 million in income from bank-owned life insurance policies due to a death benefit in the first quarter was mostly offset by increases of $584 thousand and $540 thousand, respectively, in fees from deposit services and income from trust and brokerage services.

Noninterest expense for the second quarter of 2013 was $48.5 million, a decrease of $2.7 million or 5% from the second quarter of 2012. Employee compensation for the second quarter of 2013 declined $1.0 million due to a reduction in employees from the merger of banking subsidiaries in 2012. In addition, equipment expense decreased $702 thousand due to a decline in maintenance costs and net occupancy expense declined $500 thousand due to lower maintenance and rental expense. Also, several general operating expenses declined from the second quarter of 2012 due mainly to the merger of banking subsidiaries.

Noninterest expense for the first half of 2013 was $96.8 million, a decrease of $4.7 million or 5% from the first half of 2012. Employee compensation for the first half of 2013 declined $2.3 million due to the reduction in employees from the merger of banking subsidiaries in 2012. In addition, equipment expense decreased $939 thousand due mainly to a decline in maintenance costs and other real estate owned (OREO)expense decreased $888 thousand as reductions to fair value and losses on sales declined from the first half of 2012. Also, several general operating expenses declined from the first half of 2012, mainly as a result of the merger of banking subsidiaries. Partially offsetting these decreases was an increase of $653 thousand in employee benefits expense due mainly to higher pension costs. Also included in noninterest expense for the first half of 2013 was an increase in merger expenses of $595 thousand.

On a linked-quarter basis, noninterest expense for the second quarter of 2013 was flat from the first quarter of 2013, increasing $298 thousand or less than 1%. This slight increase was due primarily to an increase of $1.1 million in OREO expense due mainly to declines in the fair values of OREO properties. Virtually offsetting this increase were declines of $549 thousand in merger expenses, $370 thousand in net occupancy expense due to lower maintenance costs and $318 thousand in employee benefits expense due to lower unemployment taxes and pension expense.

During the second quarter of 2013, United's Board of Directors declared a cash dividend of $0.31 per share. United has increased its dividend to shareholders for 39 consecutive years. The annualized 2013 dividend of $1.24 equates to a yield of approximately 4.3% based on recent UBSI market prices.

On January 30, 2013, United announced the signing of a definitive merger agreement with Virginia Commerce Bancorp, Inc. ("VCBI") headquartered in Arlington, Virginia. VCBI has twenty-eight (28) banking offices, one residential mortgage origination office and one wealth management office located in the Northern Virginia suburbs of Washington, D.C. United filed with the Securities and Exchange Commission a Form S-4 related to the merger on May 29, 2013 and Amendment No. 1 to the Form S-4 on July 18, 2013. Consummation of the merger is subject to approval of the shareholders of United and VCBI, the receipt of all required regulatory approvals, as well as other customary conditions.

United has consolidated assets of approximately $8.5 billion with 115 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 June 30, 2013 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, 2013 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

Six Months Ended

June 30

2013

June 30

2012

June 30

2013

June 30

2012

EARNINGS SUMMARY:

Interest income, taxable equivalent (non-GAAP)

$

76,994

$

82,665

$

154,843

$

166,122

Interest expense

9,282

12,050

18,785

24,872

Net interest income, taxable equivalent (non-GAAP)

67,712

70,615

136,058

141,250

Taxable equivalent adjustment

1,509

1,560

3,033

3,229

Net interest income (GAAP)

66,203

69,055

133,025

138,021

Provision for loan losses

4,960

3,436

10,147

7,569

Noninterest income

19,099

16,587

37,447

32,913

Noninterest expenses

48,547

51,252

96,796

101,514

Income taxes

9,576

9,905

19,731

19,792

Net income

$

22,219

$

21,049

$

43,798

$

42,059

PER COMMON SHARE:

Net income:

Basic

$

0.44

$

0.42

$

0.87

$

0.84

Diluted

0.44

0.42

0.87

0.84

Cash dividends

$

0.31

$

0.31

0.62

0.62

Book value

19.98

19.52

Closing market price

$

26.45

$

25.88

Common shares outstanding:

Actual at period end, net of treasury shares

50,360,373

50,275,869

Weighted average- basic

50,345,733

50,274,665

50,322,783

50,255,019

Weighted average- diluted

50,402,194

50,308,228

50,382,170

50,299,982

FINANCIAL RATIOS:

Return on average assets

1.07

%

1.00

%

1.06

%

1.00

%

Return on average shareholders' equity

8.81

%

8.58

%

8.76

%

8.60

%

Average equity to average assets

12.10

%

11.64

%

12.10

%

11.62

%

Net interest margin

3.65

%

3.76

%

3.70

%

3.77

%

June 30

2013

June 30

2012

December 31

2012

March 31

2013

PERIOD END BALANCES:

Assets

$

8,480,268

$

8,457,009

$

8,420,013

$

8,313,828

Earning assets

7,555,969

7,482,684

7,459,217

7,373,622

Loans, net of unearned income

6,567,178

6,308,983

6,511,416

6,466,762

Loans held for sale

8,364

9,279

17,762

7,041

Investment securities

813,760

722,854

729,402

750,215

Total deposits

6,577,836

6,860,441

6,752,986

6,682,712

Shareholders' equity

1,006,058

981,181

992,251

1,000,249

UNITED BANKSHARES, INC. AND SUBSIDIARIES

Charleston, WV

Stock Symbol: UBSI

(In Thousands Except for Per Share Data)

Consolidated Statements of Income

Three Months Ended

Six Months Ended

June

June

March

June

June

2013

2012

2013

2013

2012

Interest & Loan Fees Income (GAAP)

$

75,485

$

81,105

$

76,325

$

151,810

$

162,893

Tax equivalent adjustment

1,509

1,560

1,524

3,033

3,229

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

76,994

82,665

77,849

154,843

166,122

Interest Expense

9,282

12,050

9,503

18,785

24,872

Net Interest Income (FTE) (non-GAAP)

67,712

70,615

68,346

136,058

141,250

Provision for Loan Losses

4,960

3,436

5,187

10,147

7,569

Non-Interest Income:

Fees from trust & brokerage services

4,370

4,013

3,830

8,200

7,997

Fees from deposit services

10,208

10,393

9,624

19,832

20,705

Bankcard fees and merchant discounts

899

738

797

1,696

1,385

Other charges, commissions, and fees

626

600

561

1,187

1,177

Income from bank-owned life insurance

1,185

1,255

2,389

3,574

2,544

Mortgage banking income

739

483

965

1,704

801

Other non-interest revenue

861

648

876

1,737

1,306

Net other-than-temporary impairment losses

(137

)

(1,742

)

(834

)

(971

)

(3,119

)

Net gains on sales/calls of investment

securities

348

199

140

488

117

Total Non-Interest Income

19,099

16,587

18,348

37,447

32,913

Non-Interest Expense: