8-K
UNITED BANKSHARES INC/WV (UBSI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 30, 2020
United Bankshares, Inc.
(Exact name of registrant as specified in its charter)
| West Virginia | No. 002-86947 | 55-0641179 |
|---|---|---|
| (State or other jurisdiction of<br> <br>incorporation or organization) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
| 300 United Center | ||
| --- | ||
| 500 Virginia Street, East | ||
| Charleston, West Virginia 25301 | ||
| (Address of Principal Executive Offices) |
(304) 424-8800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, par value $2.50 per share | UBSI | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On April 30, 2020 United Bankshares, Inc. (“United”) announced its financial results for the first quarter of 2020. A copy of the press release is attached as Exhibit 99.1 to this report. The press release is being furnished under Item 2.02 of this Form 8-K.
Item 9.01. Financial Statements and Exhibits
(c) The following exhibits are being furnished herewith:
| 99.1 | Press Release, dated April 30, 2020, issued by United Bankshares, Inc. |
|---|---|
| 99.2 | Slide presentation of financial information for the first quarter of 2020 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITED BANKSHARES, INC. | ||
|---|---|---|
| Date: April 30, 2020 | By: | /s/ W. Mark Tatterson |
| W. Mark Tatterson, Executive Vice | ||
| President and Chief Financial Officer |
EX-99.1
EXHIBIT 99.1
News Release
| For Immediate Release | Contact: W. Mark Tatterson |
|---|---|
| April 30, 2020 | Chief Financial Officer |
| (800) 445-1347 ext. 8716 |
United Bankshares, Inc. Announces
Earnings for the First Quarter of 2020
WASHINGTON, D.C. and CHARLESTON, WV— United Bankshares, Inc. (NASDAQ: UBSI) (“United”), today announced its earnings for the first quarter of 2020 and that it has exceeded $20 billion in total assets. Earnings for the first quarter of 2020 were $40.2 million as compared to earnings of $63.6 million for the first quarter of 2019. The lower amount of net income was driven primarily by a higher provision for loan losses resulting from an adverse future macroeconomic forecast as a result of the coronavirus (“COVID-19”) pandemic under the new Current Expected Credit Loss (“CECL”) accounting standard. This was an industry-wide issue that affected bank earnings nationwide. Diluted earnings per share were $0.40 for the first quarter of 2020 and $0.62 for the first quarter of 2019.
“Let me first extend our deepest sympathy to those families who have lost loved ones, and our greatest appreciation to those individuals working on the front lines during this coronavirus pandemic,” stated Richard M. Adams, United’s Chairman and Chief Executive Officer. “While our core earnings results for the first quarter of 2020 were good, given the current environment, we continue to focus on the challenges that people and businesses are facing each day.”
Adams added, “Through this pandemic, our employees have been focused on meeting our customers’ needs as most branches have remained open, with heightened safety procedures and precautions. We’ve enabled many of our employees to work remotely, made additional cash payments to employees whose roles require them to come into the office, and we have taken significant actions to help ensure their safety. For commercial and consumer customers, we’ve suspended residential property foreclosures, offered fee waivers, and provided payment deferrals, among other actions. United has been actively involved as a facilitator of the government Paycheck Protection Program. Our team members have worked nights and weekends to meet deadlines for businesses in need. The bottom line is that we are executing our purpose, which is to make a positive difference in the lives of our employees, our customers, our shareholders, and our communities.”
As of mid-April, United had processed over 3,000 loans totaling over $900 million under the Paycheck Protection Program (“PPP”) prior to all of the available funds for the program being exhausted. Since then, President Trump signed into law the “Paycheck Protection Program and Health Care Enhancement Act” on April 24, 2020 to provide additional funding for the PPP program. The Small Business Administration (“SBA”) resumed accepting PPP loan applications on April 27, 2020 from approved lenders on behalf of any eligible borrower. United has started processing loans under this “second round” of government funding.
United Bankshares, Inc. Announces...
April 30, 2020
Page Two
First quarter of 2020 results produced an annualized return on average assets of 0.82%, an annualized return on average equity of 4.82% and an annualized return on average tangible equity of 8.77%. United’s annualized returns on average assets, average equity and average tangible equity were 1.34%, 7.88% and 14.64%, respectively, for the first quarter of 2019.
Net interest income for the first quarter of 2020 was $141.5 million, which was a decrease of $2.7 million or 2% from the first quarter of 2019. Tax-equivalent net interest income, which adjusts for the tax-favored status of income from certain loans and investments, for the first quarter of 2020 was $142.3 million, a decrease of $2.9 million or 2% from the first quarter of 2019 due mainly to a decrease of 33 basis points in the average yield on earning assets due primarily to a decline in interest rates as compared to the first quarter of 2019, partially offset by an increase of $1.0 million in loan accretion on acquired loans. Loan accretion on acquired loans was $9.5 million and $8.5 million for the first quarter of 2020 and 2019, respectively. Partially offsetting the decrease to tax-equivalent net interest income for the first quarter of 2020 was an increase in average earning assets as compared to the first quarter of 2019. Average earning assets for the first quarter of 2020 increased $372.4 million or 2% from the first quarter of 2019 due mainly to an increase of $302.4 million or 2% in average net loans. In addition, average investment securities for the first quarter of 2020 increased $94.5 million or 4% from the first quarter of 2019. Partially offsetting these increases was a decrease in average short-term investments of $24.4 million or 3%. In addition, the average cost of funds for the first quarter of 2020 decreased 21 basis points from the first quarter of 2019. The net interest margin of 3.30% for the first quarter of 2020 was a decrease of 16 basis points from the net interest margin of 3.46% for the first quarter of 2019.
On a linked-quarter basis, net interest income for the first quarter of 2020 was relatively flat from the fourth quarter of 2019, increasing $235 thousand or less than 1%. United’s tax-equivalent net interest income for the first quarter of 2020 was also relatively flat from the fourth quarter of 2019, increasing $166 thousand or less than 1% due mainly to a decrease of 13 basis points in the average cost of funds and a change in the mix of average earning assets and interest-bearing liabilities. Average earning assets were flat, increasing $130.7 million or less than 1%. Specifically, average short-term investments increased $118.6 million or 20% while average investment securities decreased $41.1 million or 2%. Average net loans were relatively flat for the quarter, increasing $53.2 million or less than 1%. Virtually offsetting the increases was a decline of 7 basis points in the average yield on earning assets. Loan accretion on acquired loans increased $905 thousand. Loan accretion on acquired loans was $9.5 million and $8.6 million for the first quarter of 2020 and fourth quarter of 2019, respectively. The net interest margin of 3.30% for the first quarter of 2020 was relatively stable from the fourth quarter of 2019, increasing one basis point from the net interest margin of 3.29% for the fourth quarter of 2019.
For the quarters ended March 31, 2020 and 2019, the provision for credit losses was $27.1 million and $5.0 million, respectively. This increase was due mainly to the reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses adversely impacted by the COVID-19 pandemic under the new CECL accounting standard adopted by United on January 1, 2020. Net charge-offs were $6.7 million for the first quarter of 2020 as compared to net charge-offs of $4.8 million for the first quarter of 2019. Annualized net charge-offs as a percentage of average loans were 0.20% for the first quarter of 2020. On a linked-quarter basis, the provision for loans losses increased $21.3 million due mainly to the adoption of CECL and the adverse impact of the COVID-19 pandemic while net charge-offs increased $780 thousand from the fourth quarter of 2019.
United Bankshares, Inc. Announces...
April 30, 2020
Page Three
Noninterest income for the first quarter of 2020 was $36.8 million, which was an increase of $5.6 million or 18% from the first quarter of 2019. The increase was due mainly to an increase of $4.0 million in income from mortgage banking activities due to increased production and sales of mortgage loans in the secondary market by United’s mortgage banking subsidiary, George Mason Mortgage, LLC (“George Mason”). Also, income from bank-owned life insurance policies (“BOLI”) increased $561 thousand from the first quarter of 2019 due to the recognition of death benefits of $1.2 million in the first quarter of 2020 as compared to death benefits of $600 thousand for the first quarter of 2019.
On a linked-quarter basis, noninterest income for the first quarter of 2020 decreased $436 thousand or 1% from the fourth quarter of 2019 due mainly to decreases in fees from deposit services and income from BOLI. Fees from deposit services declined $592 thousand from seasonality while income from BOLI decreased $518 thousand due to a decline in death benefits. Mostly offsetting these decreases were increases of $448 thousand in fees from brokerage services due to increased volume and $388 thousand in other income. Income from mortgage banking activities was flat from the fourth quarter of 2019, increasing $84 thousand or less than 1%. On a linked quarter-basis, an increase in net gains on the sale of mortgage loans in the secondary market by George Mason were virtually offset by losses on mortgage loan derivatives due to a market disruption as a result of the COVID-19 pandemic.
Noninterest expense for the first quarter of 2020 was $101.1 million, an increase of $11.7 million or 13% from the first quarter of 2019. In particular, employee compensation increased $5.6 million due mainly to an increase in commissions expense related to the increase in production and sales of mortgage loans at George Mason. In addition, employee benefits expense increased $1.4 million due mainly to higher pension costs, equipment expense increased $530 thousand due to higher maintenance costs, and other expense increased $5.2 million. Within other expense, merger-related expenses associated with the announced Carolina Financial Corporation (“Carolina Financial”) acquisition were $1.6 million, amortization of income tax credits increased $1.3 million which reduces the effective tax rate, and the expense for the reserve for unfunded commitments increased $897 thousand. Partially offsetting the increases to noninterest expense were decreases of $900 thousand in Federal Deposit Insurance Corporation (“FDIC”) insurance expense due to lower premiums and $510 thousand in other real estate owned (“OREO”) expense due to fewer declines in fair value of OREO properties.
On a linked-quarter basis, noninterest expense for the first quarter of 2020 increased $4.2 million or 4% from the fourth quarter of 2019. This increase was due mainly to an increase of $1.7 million in employee benefits expense due to a combination of higher pension, Federal Insurance Contributions Act (FICA) and health care insurance costs. In addition, FDIC expense increased $1.4 million due to a Small Bank Assessment Credit in 2019 and other expense increased $1.3 million. Within other expense, increases of $1.0 million in the expense for the reserve for unfunded commitments, $971 thousand in merger-related expenses from the announced merger with Carolina Financial Corporation and $720 thousand for the amortization of income tax credits were partially offset by a decline in donations of $1.2 million. One million dollars was donated by United to West Virginia University Children’s Medicine in the fourth quarter of 2019. Partially offsetting these increases in noninterest expense was a decrease in OREO expense of $544 thousand due to fewer declines in fair value of OREO properties.
United Bankshares, Inc. Announces...
April 30, 2020
Page Four
For the first quarter of 2020, income tax expense was $9.9 million, a decrease of $7.4 million from the first quarter of 2019 mainly due to a decrease in earnings and a lower effective tax rate. On a linked-quarter basis, income tax expense for the first quarter of 2020 decreased $2.6 million from the fourth quarter of 2019 due to a decline in earnings partially offset by a higher effective tax rate. United’s effective tax rate was approximately 19.8% for the first quarter of 2020 and 21.4% and 16.5% for the first and fourth quarters of 2019, respectively.
United’s asset quality continues to be sound relative to the current economic environment. At March 31, 2020, nonperforming loans were $132.6 million, or 0.96% of loans, net of unearned income, which was very comparable to nonperforming loans of $131.1 million, or 0.96% of loans, net of unearned income, at December 31, 2019. As of March 31, 2020, the allowance for loan losses was $154.9 million or 1.12% of loans, net of unearned income, as compared to $77.1 million or 0.56% of loans, net of unearned income, at December 31, 2019. The increase in the allowance for loan losses was due to the adoption of CECL and the impact of COVID-19 related to the new methodology. Total nonperforming assets of $148.4 million, including OREO of $15.8 million at March 31, 2020, represented 0.73% of total assets as compared to nonperforming assets of $146.6 million or 0.75% at December 31, 2019.
United continues to be well-capitalized based upon regulatory guidelines. United’s estimated risk-based capital ratio is 14.5% at March 31, 2020 while its estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.3%, 12.3% and 10.4%, respectively. The March 31, 2020 ratios reflects 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%.
As of March 31, 2020, United had consolidated assets of approximately $20.4 billion. United is the parent company of United Bank, the largest community bank headquartered in the D.C. Metro region. United Bank, which comprises 138 full-service banking offices and 14 George Mason Mortgage, LLC locations, is located throughout Virginia, West Virginia, Maryland, North Carolina, South Carolina, Ohio, Pennsylvania and Washington, D.C. 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 ofits March 31, 2020 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 estimatesmade as of March 31, 2020 and will adjust amounts preliminarily reported, if necessary.
Use ofnon-GAAP Financial Measures
This press release contains certainfinancial measures that are not recognized under U.S. generally accepted accounting principles (“GAAP”). Generally, United has presented these “non-GAAP” financial measures because itbelieves 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 financialmeasures 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 interestedparties in the evaluation of companies in the banking industry.
United Bankshares, Inc. Announces...
April 30, 2020
Page Five
Specifically, this press release contains certain references to financialmeasures identified as tax-equivalent (FTE) net interest income, tangible equity and tangible book value per share. Management believes these non-GAAP financial measuresto be helpful in understanding United’s results of operations or financial position.
Net interest income ispresented in this press release on a tax-equivalent basis. The tax-equivalent basis adjusts for the tax-favored status of incomefrom 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 bettercomparability 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 common equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible commonequity can thus be considered the most conservative valuation of the company. Tangible common equity is also presented on a per common share basis and considering net income, a return on average tangible equity. Management provides these amounts tofacilitate 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 ofcommon 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 thesenon-GAAP financial measures might not be comparable to similarly titled measures at other companies. These non-GAAP financial measures should not be considered asubstitute 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 speakonly 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 onassumptions and estimates, which although believed to be reasonable, may turn out to be incorrect, such as statements about the potential impacts of the COVID-19 pandemic. Therefore, undue reliance should notbe 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.” Thefollowing factors, among others, could cause the actual results of United’s operations to differ materially from its expectations: the effect of the COVID-19 pandemic, including the negative impacts anddisruptions on United’s colleagues, the communities United serves, and the domestic and global economy, which may have an adverse effect on United’s business; current and future economic and market conditions, including the effects ofdeclines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve Board; the effect of changes in thelevel 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; the successful integration of operations ofCarolina Financial Corporation; 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 filedwith 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, 2019, as filed with the Securitiesand 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.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FINANCIAL SUMMARY
(InThousands Except for Per Share Data)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31<br>2020 | March 31<br>2019 | December 31<br>2019 | |||||||
| EARNINGS SUMMARY: | |||||||||
| Interest income | $ | 180,482 | $ | 189,097 | $ | 183,869 | |||
| Interest expense | 38,964 | 44,929 | 42,586 | ||||||
| Net interest income | 141,518 | 144,168 | 141,283 | ||||||
| Provision for credit losses | 27,119 | 4,996 | 5,867 | ||||||
| Noninterest income | 36,806 | 31,223 | 37,242 | ||||||
| Noninterest expense | 101,133 | 89,425 | 96,900 | ||||||
| Income before income taxes | 50,072 | 80,970 | 75,758 | ||||||
| Income taxes | 9,889 | 17,328 | 12,473 | ||||||
| Net income | $ | 40,183 | $ | 63,642 | $ | 63,285 | |||
| PER COMMON SHARE: | |||||||||
| Net income: | |||||||||
| Basic | $ | 0.40 | $ | 0.62 | $ | 0.62 | |||
| Diluted | 0.40 | 0.62 | 0.62 | ||||||
| Cash dividends | 0.35 | 0.34 | 0.35 | ||||||
| Book value | 32.87 | 32.19 | 33.12 | ||||||
| Closing market price | $ | 23.08 | $ | 36.24 | $ | 38.66 | |||
| Common shares outstanding: | |||||||||
| Actual at period end, net of treasury shares | 101,723,600 | 102,118,029 | 101,553,671 | ||||||
| Weighted average- basic | 101,295,073 | 101,894,786 | 101,250,489 | ||||||
| Weighted average- diluted | 101,399,181 | 102,162,704 | 101,537,640 | ||||||
| FINANCIAL RATIOS: | |||||||||
| Return on average assets | 0.82 | % | 1.34 | % | 1.29 | % | |||
| Return on average shareholders’ equity | 4.82 | % | 7.88 | % | 7.42 | % | |||
| Return on average tangible equity (non-GAAP) ^(1)^ | 8.77 | % | 14.64 | % | 13.38 | % | |||
| Average equity to average assets | 17.10 | % | 17.02 | % | 17.39 | % | |||
| Net interest margin | 3.30 | % | 3.46 | % | 3.29 | % | |||
| March 31<br>2020 | March 31<br>2019 | December 31<br>2019 | |||||||
| PERIOD END BALANCES: | |||||||||
| Assets | $ | 20,370,653 | $ | 19,645,133 | $ | 19,662,324 | |||
| Earning assets | 17,966,159 | 17,305,050 | 17,344,638 | ||||||
| Loans, net of unearned income | 13,855,558 | 13,572,703 | 13,712,129 | ||||||
| Loans held for sale | 503,514 | 245,763 | 387,514 | ||||||
| Investment securities | 2,673,415 | 2,592,590 | 2,669,797 | ||||||
| Total deposits | 14,014,168 | 14,159,397 | 13,852,421 | ||||||
| Shareholders’ equity | 3,343,702 | 3,286,891 | 3,363,833 |
Note: (1) See information under the “Selected Financial Ratios” table for a reconciliation of non-GAAP measure.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(InThousands Except for Per Share Data)
| Consolidated Statements of Income | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | |||||||||
| March2020 | March2019 | December2019 | |||||||
| Interest & Loan Fees Income (GAAP) | $ | 180,482 | $ | 189,097 | $ | 183,869 | |||
| Tax equivalent adjustment | 782 | 993 | 851 | ||||||
| Interest & Fees Income (FTE) (non-GAAP) | 181,264 | 190,090 | 184,720 | ||||||
| Interest Expense | 38,964 | 44,929 | 42,586 | ||||||
| Net Interest Income (FTE) (non-GAAP) | 142,300 | 145,161 | 142,134 | ||||||
| Provision for Credit Losses | 27,119 | 4,996 | 5,867 | ||||||
| Non-Interest Income: | |||||||||
| Fees from trust services | 3,483 | 3,264 | 3,597 | ||||||
| Fees from brokerage services | 2,916 | 2,524 | 2,468 | ||||||
| Fees from deposit services | 7,957 | 8,053 | 8,549 | ||||||
| Bankcard fees and merchant discounts | 993 | 1,156 | 1,154 | ||||||
| Other charges, commissions, and fees | 518 | 521 | 576 | ||||||
| Income from bank owned life insurance | 2,388 | 1,827 | 2,906 | ||||||
| Mortgage banking income | 17,631 | 13,681 | 17,547 | ||||||
| Net gains (losses) on investment securities | 196 | (159 | ) | 109 | |||||
| Other non-interest revenue | 724 | 356 | 336 | ||||||
| Total Non-Interest Income | 36,806 | 31,223 | 37,242 | ||||||
| Non-Interest Expense: | |||||||||
| Employee compensation | 44,541 | 38,949 | 44,399 | ||||||
| Employee benefits | 10,786 | 9,431 | 9,121 | ||||||
| Net occupancy | 9,062 | 8,751 | 8,734 | ||||||
| Data processing | 5,506 | 5,162 | 5,727 | ||||||
| Amortization of intangibles | 1,577 | 1,754 | 1,754 | ||||||
| OREO expense | 906 | 1,416 | 1,450 | ||||||
| Equipment expense | 3,845 | 3,315 | 3,522 | ||||||
| FDIC expense | 2,400 | 3,300 | 1,005 | ||||||
| Other expense | 22,510 | 17,347 | 21,188 | ||||||
| Total Non-Interest Expense | 101,133 | 89,425 | 96,900 | ||||||
| Income Before Income Taxes (FTE)(non-GAAP) | 50,854 | 81,963 | 76,609 | ||||||
| Tax equivalent adjustment | 782 | 993 | 851 | ||||||
| Income Before Income Taxes (GAAP) | 50,072 | 80,970 | 75,758 | ||||||
| Taxes | 9,889 | 17,328 | 12,473 | ||||||
| Net Income | $ | 40,183 | $ | 63,642 | $ | 63,285 | |||
| MEMO: Effective Tax Rate | 19.75 | % | 21.40 | % | 16.46 | % |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(InThousands Except for Per Share Data)
| Consolidated Balance Sheets | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31<br>2020<br>Q-T-D Average | March 31<br>2019<br>Q-T-D Average | March 312020 | December 312019 | |||||||||
| Cash & Cash Equivalents | $ | 899,899 | $ | 925,631 | $ | 1,336,833 | $ | 837,493 | ||||
| Securities Available for Sale | 2,410,653 | 2,346,390 | 2,417,521 | 2,437,296 | ||||||||
| Less: Allowance for credit losses | 0 | 0 | 0 | 0 | ||||||||
| Net available for sale securities | 2,410,653 | 2,346,390 | 2,417,521 | 2,437,296 | ||||||||
| Securities Held to Maturity | 1,238 | 8,638 | 1,236 | 1,446 | ||||||||
| Less: Allowance for credit losses | (4 | ) | 0 | (10 | ) | 0 | ||||||
| Net held to maturity securities | 1,234 | 8,638 | 1,226 | 1,446 | ||||||||
| Equity Securities | 9,004 | 9,839 | 9,013 | 8,894 | ||||||||
| Other Investment Securities | 222,419 | 183,993 | 245,655 | 222,161 | ||||||||
| Total Securities | 2,643,310 | 2,548,860 | 2,673,415 | 2,669,797 | ||||||||
| Total Cash and Securities | 3,543,209 | 3,474,491 | 4,010,248 | 3,507,290 | ||||||||
| Loans Held for Sale | 306,435 | 220,456 | 503,514 | 387,514 | ||||||||
| Commercial Loans | 9,423,190 | 9,465,494 | 9,517,592 | 9,399,170 | ||||||||
| Mortgage Loans | 3,102,307 | 3,006,729 | 3,100,627 | 3,107,721 | ||||||||
| Consumer Loans | 1,240,713 | 1,026,127 | 1,238,064 | 1,206,657 | ||||||||
| Gross Loans | 13,766,210 | 13,498,350 | 13,856,283 | 13,713,548 | ||||||||
| Unearned Income | (624 | ) | (6,528 | ) | (725 | ) | (1,419 | ) | ||||
| Loans, Net of Unearned Income | 13,765,586 | 13,491,822 | 13,855,558 | 13,712,129 | ||||||||
| Allowance for Loan Losses | (134,084 | ) | (76,762 | ) | (154,923 | ) | (77,057 | ) | ||||
| Net Loans | 13,631,502 | 13,415,060 | 13,700,635 | 13,635,072 | ||||||||
| Goodwill | 1,478,014 | 1,478,014 | 1,478,014 | 1,478,014 | ||||||||
| Other Intangibles | 29,258 | 36,154 | 28,354 | 29,931 | ||||||||
| Total Intangibles | 1,507,272 | 1,514,168 | 1,506,368 | 1,507,945 | ||||||||
| Operating Lease<br>Right-of-Use Asset | 57,776 | 64,851 | 57,280 | 57,783 | ||||||||
| Real Estate Owned | 15,564 | 17,617 | 15,849 | 15,515 | ||||||||
| Other Assets | 537,495 | 542,977 | 576,759 | 551,205 | ||||||||
| Total Assets | $ | 19,599,253 | $ | 19,249,620 | $ | 20,370,653 | $ | 19,662,324 | ||||
| MEMO: Earning Assets | $ | 17,295,754 | $ | 16,923,306 | $ | 17,966,159 | $ | 17,344,638 | ||||
| Interest-bearing Deposits | $ | 9,278,782 | $ | 9,694,708 | $ | 9,176,630 | $ | 9,231,059 | ||||
| Noninterest-bearing Deposits | 4,627,044 | 4,221,040 | 4,837,538 | 4,621,362 | ||||||||
| Total Deposits | 13,905,826 | 13,915,748 | 14,014,168 | 13,852,421 | ||||||||
| Short-term Borrowings | 137,427 | 173,597 | 599,561 | 374,654 | ||||||||
| Long-term Borrowings | 2,002,763 | 1,697,423 | 2,087,761 | 1,838,029 | ||||||||
| Total Borrowings | 2,140,190 | 1,871,020 | 2,687,322 | 2,212,683 | ||||||||
| Operating Lease Liability | 61,355 | 68,500 | 60,887 | 61,342 | ||||||||
| Other Liabilities | 141,230 | 117,530 | 264,574 | 172,045 | ||||||||
| Total Liabilities | 16,248,601 | 15,972,798 | 17,026,951 | 16,298,491 | ||||||||
| Preferred Equity | — | — | — | — | ||||||||
| Common Equity | 3,350,652 | 3,276,822 | 3,343,702 | 3,363,833 | ||||||||
| Total Shareholders’ Equity | 3,350,652 | 3,276,822 | 3,343,702 | 3,363,833 | ||||||||
| Total Liabilities & Equity | $ | 19,599,253 | $ | 19,249,620 | $ | 20,370,653 | $ | 19,662,324 | ||||
| MEMO: Interest-bearing Liabilities | $ | 11,418,972 | $ | 11,565,728 | $ | 11,863,952 | $ | 11,443,742 |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(InThousands Except for Per Share Data)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Quarterly Share Data: | March<br>2020 | March<br>2019 | December<br>2019 | ||||||
| Earnings Per Share: | |||||||||
| Basic | $ | 0.40 | $ | 0.62 | $ | 0.62 | |||
| Diluted | $ | 0.40 | $ | 0.62 | $ | 0.62 | |||
| Common Dividend Declared Per Share | $ | 0.35 | $ | 0.34 | $ | 0.35 | |||
| High Common Stock Price | $ | 39.07 | $ | 39.14 | $ | 40.70 | |||
| Low Common Stock Price | $ | 19.67 | $ | 30.67 | $ | 36.09 | |||
| Average Shares Outstanding (Net of Treasury Stock): | |||||||||
| Basic | 101,295,073 | 101,894,786 | 101,250,489 | ||||||
| Diluted | 101,399,181 | 102,162,704 | 101,537,640 | ||||||
| Memorandum Items: | |||||||||
| Common Dividends | $ | 35,604 | $ | 34,759 | $ | 35,543 | |||
| Dividend Payout Ratio | 88.60 | % | 54.62 | % | 56.16 | % | |||
| EOP Share Data: | March<br>2020 | March<br>2019 | December<br>2019 | ||||||
| Book Value Per Share | $ | 32.87 | $ | 32.19 | $ | 33.12 | |||
| Tangible Book Value Per Share ^(1)^ | $ | 18.06 | $ | 17.37 | $ | 18.27 | |||
| 52-week High Common Stock Price | $ | 40.70 | $ | 39.95 | $ | 40.70 | |||
| Date | 11/05/19 | 08/21/18 | 11/05/19 | ||||||
| 52-week Low Common Stock Price | $ | 19.67 | $ | 29.13 | $ | 30.67 | |||
| Date | 03/23/20 | 12/27/18 | 01/02/19 | ||||||
| EOP Shares Outstanding (Net of Treasury Stock): | 101,723,600 | 102,118,029 | 101,553,671 | ||||||
| Memorandum Items: | |||||||||
| EOP Employees (full-time equivalent) | 2,206 | 2,216 | 2,204 | ||||||
| Note: | |||||||||
| (1) Tangible Book Value Per Share: | |||||||||
| Total Shareholders’ Equity (GAAP) | $ | 3,343,702 | $ | 3,286,891 | $ | 3,363,833 | |||
| Less: Total Intangibles | (1,506,368 | ) | (1,513,207 | ) | (1,507,945 | ) | |||
| Tangible Equity (non-GAAP) | $ | 1,837,334 | $ | 1,773,684 | $ | 1,855,888 | |||
| ÷ EOP Shares Outstanding (Net of Treasury Stock) | 101,723,600 | 102,118,029 | 101,553,671 | ||||||
| Tangible Book Value Per Share (non-GAAP) | $ | 18.06 | $ | 17.37 | $ | 18.27 |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(InThousands Except for Per Share Data)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March<br>2020 | March<br>2019 | December2019 | |||||||
| Selected Yields and Net Interest Margin: | |||||||||
| Net Loans | 4.60 | % | 4.91 | % | 4.65 | % | |||
| Investment Securities | 2.70 | % | 2.93 | % | 2.74 | % | |||
| Money Market Investments/FFS | 2.23 | % | 3.20 | % | 2.57 | % | |||
| Average Earning Assets Yield | 4.21 | % | 4.54 | % | 4.28 | % | |||
| Interest-bearing Deposits | 1.19 | % | 1.37 | % | 1.33 | % | |||
| Short-term Borrowings | 1.34 | % | 1.61 | % | 1.52 | % | |||
| Long-term Borrowings | 2.21 | % | 2.77 | % | 2.35 | % | |||
| Average Liability Costs | 1.37 | % | 1.58 | % | 1.50 | % | |||
| Net Interest Spread | 2.84 | % | 2.96 | % | 2.78 | % | |||
| Net Interest Margin | 3.30 | % | 3.46 | % | 3.29 | % | |||
| Selected Financial Ratios: | |||||||||
| Return on Average Common Equity | 4.82 | % | 7.88 | % | 7.42 | % | |||
| Return on Average Assets | 0.82 | % | 1.34 | % | 1.29 | % | |||
| Return on Average Tangible Equity (non-GAAP) ^(1)^ | 8.77 | % | 14.64 | % | 13.38 | % | |||
| Loan / Deposit Ratio | 98.87 | % | 95.86 | % | 98.99 | % | |||
| Allowance for Loan Losses/ Loans, net of unearned income | 1.12 | % | 0.57 | % | 0.56 | % | |||
| Allowance for Credit Losses ^(2)^/ Loans, net<br>of unearned income | 1.17 | % | 0.58 | % | 0.57 | % | |||
| Nonaccrual Loans / Loans, net of unearned income | 0.46 | % | 0.47 | % | 0.46 | % | |||
| 90-Day Past Due Loans/ Loans, net of unearned<br>income | 0.05 | % | 0.11 | % | 0.07 | % | |||
| Non-performing Loans/ Loans, net of unearned<br>income | 0.96 | % | 1.00 | % | 0.96 | % | |||
| Non-performing Assets/ Total Assets | 0.73 | % | 0.78 | % | 0.75 | % | |||
| Primary Capital Ratio | 17.08 | % | 17.06 | % | 17.44 | % | |||
| Shareholders’ Equity Ratio | 16.41 | % | 16.73 | % | 17.11 | % | |||
| Price / Book Ratio | 0.70 | x | 1.13 | x | 1.17 | x | |||
| Price / Earnings Ratio | 14.56 | x | 14.54 | x | 15.14 | x | |||
| Efficiency Ratio | 56.71 | % | 50.99 | % | 54.28 | % | |||
| Notes: | |||||||||
| (1) Return on Average Tangible Equity: | |||||||||
| (a) Net Income (GAAP) | $ | 40,183 | $ | 63,642 | $ | 63,285 | |||
| (b) Number of days | 91 | 90 | 92 | ||||||
| Average Total Shareholders’ Equity (GAAP) | $ | 3,350,652 | $ | 3,276,822 | $ | 3,385,362 | |||
| Less: Average Total Intangibles | (1,507,272 | ) | (1,514,168 | ) | (1,508,851 | ) | |||
| (c) Average Tangible Equity (non-GAAP) | $ | 1,843,380 | $ | 1,762,654 | $ | 1,876,511 | |||
| Return on Tangible Equity (non-GAAP) [(a) / (b)] x 366 or<br>365 / (c) | 8.77 | % | 14.64 | % | 13.38 | % | |||
| (2) | Includes allowances for loan losses and lending-related commitments. | ||||||||
| --- | --- |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(InThousands Except for Per Share Data)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March<br>2020 | March2019 | December2019 | |||||||
| Mortgage Banking Data – George Mason: | |||||||||
| Applications | $ | 2,054,000 | $ | 866,000 | $ | 896,000 | |||
| Loans originated | 904,949 | 454,588 | 777,312 | ||||||
| Loans sold | $ | 793,392 | $ | 457,192 | $ | 800,400 | |||
| Purchase money % of loans closed | 49 | % | 86 | % | 66 | % | |||
| Realized gain on sales and fees as a % of loans sold | 2.82 | % | 2.78 | % | 2.69 | % | |||
| Net interest income | $ | 949 | $ | 55 | $ | 547 | |||
| Other income | 21,190 | 16,106 | 19,946 | ||||||
| Other expense | 20,757 | 14,842 | 18,419 | ||||||
| Income taxes | 273 | 282 | 192 | ||||||
| Net income | $ | 1,109 | $ | 1,037 | $ | 1,882 | |||
| Period End Mortgage Banking Data – George Mason: | March<br>2020 | March2019 | December2019 | ||||||
| Locked pipeline | $ | 739,322 | $ | 223,657 | $ | 143,465 | |||
| Asset Quality Data: | March<br>2020 | March2019 | December2019 | ||||||
| EOP Non-Accrual Loans | $ | 64,036 | $ | 63,402 | $ | 63,209 | |||
| EOP 90-Day Past Due Loans | 7,051 | 15,572 | 9,494 | ||||||
| EOP Restructured Loans ^(1) (2)^ | 61,470 | 56,778 | 58,369 | ||||||
| Total EOP Non-performing Loans | $ | 132,557 | $ | 135,752 | $ | 131,072 | |||
| EOP Other Real Estate & Assets Owned | 15,849 | 17,465 | 15,515 | ||||||
| Total EOP Non-performing Assets | $ | 148,406 | $ | 153,217 | $ | 146,587 | |||
| Three Months Ended | |||||||||
| Allowance for Loan Losses: | March<br>2020 | March2019 | December2019 | ||||||
| Beginning Balance | $ | 77,057 | $ | 76,703 | $ | 77,098 | |||
| Cumulative Effect Adjustment for CECL | 57,442 | 0 | 0 | ||||||
| Provision for Loan Losses^^ | 27,112 | 4,996 | 5,867 | ||||||
| 161,611 | 81,699 | 82,965 | |||||||
| Gross Charge-offs | (8,761 | ) | (6,414 | ) | (9,704 | ) | |||
| Recoveries | 2,073 | 1,601 | 3,796 | ||||||
| Net Charge-offs | (6,688 | ) | (4,813 | ) | (5,908 | ) | |||
| Ending Balance | $ | 154,923 | $ | 76,886 | $ | 77,057 | |||
| Reserve for lending-related commitments | 7,742 | 1,461 | 1,733 | ||||||
| Allowance for Credit Losses ^(3)^ | $ | 162,665 | $ | 78,347 | $ | 78,790 | |||
| Notes: | (1) Restructured loans with an aggregate balance of $51,775, $47,459 and<br>$48,387 at March 31, 2020, March 31, 2019 and December 31, 2019, respectively, were on nonaccrual status, but are not included in “EOP Non-Accrual Loans.” | ||||||||
| --- | --- | ||||||||
| (2) Restructured loans with an aggregate balance of $265 at March 31,<br>2019, respectively, were 90 days or more past due, but are not included in “EOP 90-Day Past Due Loans.” | |||||||||
| (3) Includes allowances for loan losses and lending-related<br>commitments. |
EX-99.2
United Bankshares, Inc. First Quarter 2020 Earnings Review April 30, 2020 Exhibit 99.2
Forward-Looking Statements Forward Looking Statements This presentation and statements made by United Bankshares, Inc. (“United”) and its management contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about (i) the merger (the “Merger”) between Carolina Financial Corporation (“Carolina Financial”) and United; (ii) United’s and Carolina Financial’s plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts; (iii) the effect of the COVID-19 pandemic; and (iv) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” or words of similar meaning generally intended to identify forward-looking statements. These forward-looking statements are based upon the current beliefs and expectations managements of United and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of United. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements because of possible uncertainties. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the businesses of United and Carolina Financial may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; (2) the expected growth opportunities or cost savings from the Merger may not be fully realized or may take longer to realize than expected; (3) deposit attrition, operating costs, customer losses and business disruption following the Merger, including adverse effects on relationships with employees, may be greater than expected; (4) the impact of the COVID-19 pandemic, including the negative impacts and disruptions on United’s customers, the communities it serves and the domestic and global economy; (5) current and future economic and market conditions, including the effects of high unemployment rates, United States fiscal debt, budget and tax matters and any slowdown in global economic growth; (6) legislative or regulatory changes, including changes in accounting standards, that may adversely affect the businesses in which United and Carolina Financial are engaged; (7) the interest rate environment may further compress margins and adversely affect net interest income; (8) results may be adversely affected by continued diversification of assets and adverse changes to credit quality; (9) competition from other financial services companies in United's and Carolina Financial's markets could adversely affect operations; and (10) the economic slowdown could continue to adversely affect credit quality and loan originations. Additional factors, that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed United’s reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available on the SEC's Internet site (http://www.sec.gov). United cautions that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements concerning the proposed merger with Carolina Financial or other matters attributable to United or Carolina Financial or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. United does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
COVID-19 RESPONSE Branches Operating on a drive-up and walk-up basis, or by appointment Employees Majority working remotely - 85% of non-retail staff has remote capabilities Continuing to pay 100% of regular salaries for all employees All standalone locations remain open Paid bonuses to certain employees required to report to work Implemented “A/B” shift schedule to alternate staff each day Continue to see steady branch traffic across the footprint Customers and Communities Supporting customer needs with our balance sheet ~840 commercial loans totaling $1.2 billion ~1,530 consumer loans totaling $115 million Fee waivers ATM and mobile deposit limits raised Going above and beyond to assist clients and community organizations with any needs during this time PPP loan program- over 3,000 applications approved for >$900 million during round 1 1Q20 loan production of ~$820 million (excluding GMM) with portfolio loan growth of $142 million and held for sale loan growth of $116 million Supporting customer needs through deferrals and modifications Suspended new property foreclosures
PAYCHECK PROTECTION PROGRAM (PPP) Round 1: Over 3,000 applications approved and >$900 million funded Continuing to provide support during Round 2 “All hands on deck” approach in order to assist as many customers as possible Average Loan Balance: $298,000 63% of loans < $150,000 Approved to borrow from the Federal Reserve under the Paycheck Protection Program Liquidity Facility (PPPLF), but no borrowings to date PPP Loan Activity PPP Loans by Geography PPP Funding by Industry All PPP data as of mid-April (only includes Round 1)
“SAFE, SOUND, AND SECURE SINCE 1839” Source: Federal Reserve BHCPR. NET CHARGEOFFS/AVERAGE LOANS Outperformed peers during the Great Recession Conservative credit culture and experienced management team remain intact UBSI has increased dividends to shareholders for 46 consecutive years Capital levels remain strong and above peers: CET1 ratio of 12.3% and TE/TA ratio of 9.7% Liquidity buffers sufficient to withstand significant stress: cash, unpledged investments, and secured borrowing capacity = ~20% of total assets at 3/31/20
MERGER UPDATE - CAROLINA FINANCIAL Announced the signing of a definitive merger agreement on November 18, 2019 to acquire 100% of the outstanding shares of Carolina Financial Corp. (CARO) Continues UBSI’s strategic expansion in the Carolinas with a financially compelling acquisition of a high-performing bank CARO closed the acquisition of Carolina Trust BancShares, Inc. (CART) on December 31, 2019 All required regulatory and shareholder approvals have been received Scheduled to close on May 1, 2020 Systems conversions expected Q2 2020 (CART customers) and Q3 2020 (CARO customers) Pro Forma Franchise Footprint Transaction Update UBSI 152 Locations CARO 73 Branches
1Q20 HIGHLIGHTS Reacted swiftly to the COVID-19 pandemic, striving to execute our mission of excellence in service to our employees, our customers, our shareholders, and our communities Achieved Net Income of $40.2 million and Diluted Earnings Per Share of $0.40 Exceeded $20 billion in total assets Expect to close the merger with Carolina Financial Corporation on May 1, 2020 Generated Return on Average Assets of 0.82%, Return on Average Equity of 4.82%, and Return on Average Tangible Equity* of 8.77% Quarterly dividend of $0.35 per share equates to a yield of 4.8% (based upon recent prices) Strong expense control with an efficiency ratio of 56.7% Adopted CECL accounting standard effective 01/01/20 Capital position remains robust *Non GAAP measure. Refer to appendix.
EARNINGS SUMMARY Linked-Quarter (LQ) Net Income was $40.2 million in 1Q20 compared to $63.3 million in 4Q19. Diluted EPS were $0.40 in 1Q20 compared to $0.62 in 4Q19. Net Interest Income was relatively flat, increasing $235 thousand compared to 4Q19 due to various factors. Provision Expense increased $21.3 million mainly due to the adoption of the Current Expected Credit Loss (“CECL”) accounting standard and the impact of the COVID-19 pandemic within the future macroeconomic scenario forecasts. Non-Interest Income decreased $436 thousand due primarily to decreases in fees from deposit services and income from bank-owned life insurance policies. Non-Interest Expense increased $4.2 million due primarily to increases of $1.7 million in employee benefits expense, $1.4 million in FDIC expense, $1.0 million in the reserve for unfunded commitments, and $971 thousand in merger-related expenses. Income Tax Expense declined $2.6 million due to a decline in earnings partially offset by a higher effective tax rate.
PERFORMANCE RATIOS Strong and consistent profitability and expense control. 1Q20 impacted by COVID-19 and CECL ACL build. *Non GAAP measure. Refer to appendix.
NET INTEREST INCOME AND MARGIN Reported Net Interest Margin increased from 3.29% to 3.30% LQ. Linked-quarter Net Interest Margin increase was primarily due to an increase in purchase accounting loan accretion of $905 thousand. 1Q20 Net Interest Income, excluding purchase accounting loan accretion, was down $0.7 million from 4Q19 due mainly to a change in the mix of average earning assets and interest-bearing liabilities. Scheduled loan accretion is estimated at $17 million for the remainder of FY 2020 and $16.7 million for FY 2021 (represents UBSI on a standalone basis not including the impact of the CARO acquisition). $ in millions Well-diversified pricing mix 40% of adjustable loans at floors and 27% within 25 bps of floors
LOAN SUMMARY (excludes Loans Held for Sale) Linked-Quarter loan balances increased $142 million with growth in C&I and Non Owner Occupied CRE loans being offset by declines in Construction loans. Achieved annualized loan growth of 4.2% during 1Q20. Non Owner Occupied CRE to Total Risk Based Capital was 235% at 1Q20. CRE portfolio remains diversified among underlying collateral types. $ in millions
COMMERCIAL LOAN PORTFOLIO DETAILS Diversified portfolio with strong underwriting practices and ongoing monitoring Portfolio Balance ($ MM) % Total Loans % Deferring Retail CRE 1,079 7.8% 15.8% Hotels 368 2.7% 32.8% Healthcare & Senior Living 334 2.4% 8.7% Entertainment & Recreation 177 1.3% 35.4% Energy (Direct & Indirect) 126 0.9% 5.7% Restaurants 100 0.7% 25.5% Retail CRE: Top 20 exposures make up >40% of the total balance. Average LTV is ~57% and majority are anchored by nationally recognized essential businesses Hotels: Top 10 loans make up >50% of total exposure. Average LTV is ~51%. Total commercial deferrals to date: $1.2 billion (~13% of total commercial loans) Commercial deferrals: 58% in DC Metro, 26% in WV, 16% in all other markets Commercial revolving line of credit balances relatively flat compared to 12/31/19. Select Portfolios Data as of 4/27/20 LTVs calculated using current balances with most recently available collateral values.
CONSUMER LOAN PORTFOLIO DETAILS Solid portfolio with product & geographic diversification Consumer deferrals total $115 million, or 2.7% of total consumer loans Portfolio Balance ($ MM) % Total Loans Weighted Average FICO % Deferring Residential Mortgage 2,632 19.0% 753 2.9% Indirect Auto 1,159 8.4% 756 3.2% Home Equity 440 3.2% 741 0.0% Other Consumer 28 0.2% 736 0.5% Deferral data as of 4/27/20. FICO scores based on most recently available system data (mix of scores at origination and more recent updates).
CREDIT QUALITY End of Period Balances (000s) 12/31/19 3/31/20 Non-Accrual Loans $63,209 $64,036 90-Day Past Due Loans $9,494 $7,051 Restructured Loans $58,369 $61,470 Total Non-performing Loans $131,072 $132,557 Other Real Estate Owned $15,515 $15,849 Total Non-performing Assets $146,587 $148,406 Non-performing Loans / Loans 0.96% 0.96% Non-performing Assets / Total Assets 0.75% 0.73% Net Charge-offs / Average Loans 0.17% 0.20% Allowance for Credit Losses (ACL) $78,790 $162,665 ACL / Loans, net of earned income 0.57% 1.17% UBSI adopted CECL effective 01/01/20. CECL Day 1 implementation resulted in a $62.5MM increase in the ACL. 1Q20 provision expense of $27.1 million and expense for reserve for unfunded commitments of $1.0 million were primarily driven by the COVID-19 pandemic. PCD loans that meet the definition of non-accrual are now included in non-performing assets. Prior to the adoption of CECL, acquired PCI loans were excluded from non-performing assets. CECL adoption resulted in an increase of $12.3 million in non-performing assets that were previously not included.
DEPOSIT SUMMARY Strong core deposit base with 35% of deposits in Non Interest Bearing accounts. LQ deposit increase of $162 million driven by growth in Non Interest Bearing accounts, while brokered deposits declined $63 million. Enviable deposit franchise with an attractive mix of both high growth MSA’s and stable, rural markets where United has a dominant market share position. #7 deposit market share position in the Washington D.C. MSA. #2 deposit market share position in the state of West Virginia. $ in millions
CAPITAL RATIOS & PER SHARE DATA End of Period Ratios / Values 12/31/19 3/31/20** Common Equity Tier 1 Ratio 12.5% 12.3% Tier 1 Capital Ratio 12.5% 12.3% Total Risk Based Capital Ratio 14.7% 14.5% Leverage Ratio 10.5% 10.4% Total Equity to Total Assets 17.1% 16.4% *Tangible Equity to Tangible Assets (non GAAP) 10.2% 9.7% Book Value Per Share $33.12 $32.87 *Tangible Book Value Per Share (non GAAP) $18.27 $18.06 Capital ratios remain significantly above regulatory “Well Capitalized” levels and exceed all internal capital targets. No shares of common stock were repurchased during 1Q20 compared to 32,150 shares repurchased during 4Q19. *Non GAAP measure. Refer to appendix. **Regulatory ratios are estimates as of the earnings release date.
GEORGE MASON MORTGAGE George Mason Mortgage is the #1 purchase money lender in the Washington D.C. MSA. GMM reported $1.1 million in net income in 1Q20, compared to $1.9 million in 4Q19. GMM gain on sale revenue and business unit profitability will depend upon future production mix (in-house vs. secondary) and general market conditions. Net impact of ASC 815 was $(3.5) million in 1Q20. GMM (000s) 4Q19 1Q20 Applications $896,000 $2,054,000 Loans Originated $777,312 $904,949 Loans Sold $800,400 $793,392 Purchase Money % 66% 49% *Realized Gain on Sale 2.69% 2.82% Locked Pipeline (EOP) 143,465 739,322 Total Income $20,493 $22,139 Total Expense $18,419 $20,757 Income Before Tax $2,074 $1,382 Net Income After Tax $1,882 $1,109 *Represents realized gain on sales and fees as a % of loans sold. Calculation excludes the change in fair value for locked pipelines, loans held for sale, and derivatives.
2020 OUTLOOK Loans & Deposits: Expect to add ~$3.2 billion in gross loans and ~$3.6 billion in deposits from the CARO acquisition (expected closing May 1, 2020). Anticipate funding ~$900 million in PPP loans during 2Q20 (first round of PPP loans). Net Interest Margin / Net Interest Income: CARO acquisition expected to have positive impact on the net interest margin, partially offset by modest core compression from the current low rate environment. Other Items: Systems conversions related to the CARO merger are expected to occur in 2Q20 (CART customers) and 3Q20 (CARO customers) with estimated merger-related expenses recognized over two quarters. Cost savings will also be phased-in over the two-quarter period. Continue to expect the CARO acquisition to generate mid-to-high single-digit (%) annualized EPS accretion (ex-merger charges / post system conversions). All previous guidance for 2020 has been withdrawn due to the current economic environment. Select guidance is being provided for the second quarter of 2020.
UBSI INVESTMENT THESIS Excellent franchise with long-term growth prospects Current income opportunity with a dividend yield of 4.8% (based upon recent prices) High-performance bank with a low-risk profile Experienced management team with a proven track record of execution High level of insider ownership 46 consecutive years of dividend increases evidences United’s strong profitability, solid asset quality, and sound capital management over a very long period of time Attractive valuation with a current Price-to-Earnings Ratio of 14.8x (based upon median 2020 street consensus estimate of $2.00 per Bloomberg)
THE CHALLENGE TO BE THE BEST NEVER ENDS www.ubsi-inc.com
Reconciliation of non-GAAP Items April 2020 (dollars in thousands) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 (1) Return on Average Tangible Equity (A) Net Income (GAAP) $63,642 $67,207 $65,965 $63,285 $40,183 (B) Number of Days in the Quarter 90 91 92 92 91 Average Total Shareholders' Equity (GAAP) $3,276,822 $3,320,987 $3,359,437 $3,385,362 $3,350,652 Less: Average Total Intangibles (1,514,168) (1,512,400) (1,510,653) (1,508,851) (1,507,272) (C) Average Tangible Equity (non-GAAP) $1,762,654 $1,808,587 $1,848,784 $1,876,511 $1,843,380 Formula: [(A) / (B)]*365 (or 366 for leap year) (C) Return on Average Tangible Equity (non-GAAP) 14.64% 14.90% 14.16% 13.38% 8.77%
Reconciliation of non-GAAP Items (cont.) April 2020 (dollars in thousands) 12/31/2019 3/31/2020 (2) Tangible Equity to Tangible Assets Total Assets (GAAP) $ 19,662,324 $ 20,370,653 Less: Total Intangibles (GAAP) (1,507,945) (1,506,368) Tangible Assets (non-GAAP) $ 18,154,379 $ 18,864,285 Total Shareholders' Equity (GAAP) $ 3,363,833 $ 3,343,702 Less: Total Intangibles (GAAP) (1,507,945) (1,506,368) Tangible Equity (non-GAAP) $ 1,855,888 $ 1,837,334 Tangible Equity to Tangible Assets (non-GAAP) 10.2% 9.7% (3) Tangible Book Value Per Share: Total Shareholders' Equity (GAAP) $ 3,363,833 $ 3,343,702 Less: Total Intangibles (GAAP) (1,507,945) (1,506,368) Tangible Equity (non-GAAP) $ 1,855,888 $ 1,837,334 ÷ EOP Shares Outstanding (Net of Treasury Stock) 101,553,671 101,723,600 Tangible Book Value Per Share (non-GAAP) $18.27 $18.06