United Bankshares, Inc. (NASDAQ: UBSI) (“United”), today reported record earnings for the year of 2022 of $379.6 million as compared to earnings of $367.7 million for the year of 2021. Earnings per diluted share for the year of 2022 were $2.80 as compared to earnings per diluted share of $2.83 for the year of 2021. Earnings for the fourth quarter of 2022 were $99.8 million, or $0.74 per diluted share, as compared to earnings of $102.6 million, or $0.76 per diluted share, for the third quarter of 2022.

“With strong performance in the fourth quarter, 2022 finishes as one of the best years in our company’s long history,” stated Richard M. Adams, Jr., United’s Chief Executive Officer. “Record earnings, record loan growth, and one of the best Total Shareholder Returns in the industry highlight the year’s results. Looking ahead to 2023, our strong profitability, robust capital, disciplined expense control, and conservative credit culture have us well-positioned for success.”

Year of 2022 results produced returns on average assets, average equity and average tangible equity, a non-GAAP measure, of 1.31%, 8.25% and 14.11%, respectively, compared to returns on average assets, average equity and average tangible equity of 1.35%, 8.30% and 14.18%, respectively, for the year of 2021. For the fourth quarter of 2022, United’s annualized returns on average assets, average equity and average tangible equity were 1.36%, 8.80% and 15.28%, respectively, compared to annualized returns on average assets, average equity and average tangible equity of 1.41%, 8.96% and 15.46%, respectively, for the third quarter of 2022.

The fourth quarter and year of 2022 were highlighted by record net interest income of $249.4 million and $896.4 million, respectively, driven by strong loan growth and net interest margin expansion achieved during the quarter and throughout the year of 2022. Annualized loan growth, excluding Paycheck Protection Program (“PPP”) loans, for the fourth quarter and year of 2022 was 18% and 16%, respectively. Fourth quarter 2022 net interest margin of 3.87% increased 9 basis points from the third quarter of 2022 and 93 basis points from the fourth quarter of 2021.

The provision for credit losses for the fourth quarter of 2022 was $16.4 million, an increase of $8.7 million from the third quarter of 2022, primarily due to loan growth and the impact of reasonable and supportable forecasts of future macroeconomic conditions. The expense for the reserve for unfunded loan commitments for the fourth quarter of 2022 was $6.5 million as compared to a net benefit of $2.9 million for the third quarter of 2022. The change was primarily due to an increase in the outstanding balance of loan commitments. The provision for credit losses was $18.8 million for the year of 2022 as compared to a net benefit of $24.0 million for the year of 2021. Current credit quality metrics remain strong. Net charge-offs remain historically low and the ratio of annualized net charge-offs as a percentage of average loans & leases, net of unearned income was 0.02% for the fourth quarter of 2022. Non-performing loans as a percentage of loans and leases, net of unearned income was a low 0.29% at December 31, 2022.

Fourth quarter of 2022 compared to the third quarter of 2022

Net interest income for the fourth quarter of 2022 increased $8.8 million, or 4%, from the third quarter of 2022. Tax-equivalent net interest income, a non-GAAP measure which adjusts for the tax-favored status of income from certain loans and investments, for the fourth quarter of 2022 also increased $8.8 million, or 4%, from the third quarter of 2022. The increase in net interest income and tax-equivalent net interest income was primarily due to higher interest income on earning assets driven by rising market interest rates, organic loan growth and a change in the asset mix to higher earning assets. This increase in net interest income and tax-equivalent net interest income was partially offset by higher interest expense primarily driven by deposit rate repricing and higher average balances of long-term borrowings. In addition, PPP loan fee income was lower on a linked quarter basis. The interest rate spread for the fourth quarter of 2022 was 3.40%. The average yield on earning assets increased 63 basis points to 4.77% from the third quarter of 2022. An increase in average earning assets of $304.0 million, or 1%, from the third quarter of 2022 was driven by an increase in average net loans and loans held for sale of $689.2 million partially offset by a decrease of $202.9 million in average investment securities and a decrease of $182.3 million in short-term investments. The average cost of funds increased 81 basis points to 1.37% from the third quarter of 2022. The average yield on interest-bearing deposits increased 70 basis points to 1.16% from the third quarter of 2022. Average long-term borrowings increased $633.0 million from the third quarter of 2022. Net PPP loan fee income decreased $1.3 million to $342 thousand for the fourth quarter of 2022. The net interest margin of 3.87% for the fourth quarter of 2022 was an increase of 9 basis points from the net interest margin of 3.78% for the third quarter of 2022.

The provision for credit losses was $16.4 million for the fourth quarter of 2022 as compared to $7.7 million for the third quarter of 2022. The increase in the provision for credit losses was primarily due to loan growth and the impact of reasonable and supportable forecasts of future macroeconomic conditions.

Noninterest income for the fourth quarter of 2022 decreased $1.9 million, or 6%, from the third quarter of 2022. The decrease in noninterest income was primarily due to a decrease of $1.8 million in income from mortgage banking activities. The decrease in income from mortgage banking activities was mainly due to lower mortgage loan origination and sale volume and a lower margin on loans sold in the secondary market.

Noninterest expense for the fourth quarter of 2022 of $137.5 million was flat from the third quarter of 2022, increasing $346 thousand, or less than 1%. An increase in the expense for the reserve for unfunded commitments of $9.4 million was mostly offset primarily by decreases of $5.2 million in other noninterest expense and $2.1 million in employee compensation. The increase in the expense for the reserve for unfunded loan commitments reflects an increase in the outstanding balance of loan commitments at quarter end. The decrease in other noninterest expense was primarily driven by a $3.9 million partial recovery of a third quarter accrual that related to a litigation matter with a former commercial customer which was settled during the fourth quarter as well as lower amounts of certain general operating expenses. Partially offsetting the decrease in other noninterest expense was an increase in charitable contributions of $1.8 million from the third quarter of 2022. The decrease in employee compensation was primarily due to lower employee commissions related to mortgage banking production.

For the fourth quarter of 2022, income tax expense was $26.6 million as compared to $25.9 million for the third quarter of 2022. The increase of $689 thousand was due to a higher effective tax rate partially offset by lower earnings. United’s effective tax rate was 21.1% and 20.2% for the fourth and third quarter of 2022, respectively.

Fourth quarter of 2022 compared to the fourth quarter of 2021

Earnings for the fourth quarter of 2022 were $99.8 million, or $0.74 per diluted share, as compared to earnings of $73.9 million, or $0.56 per diluted share, for the fourth quarter of 2021. United completed its acquisition of Community Bankers Trust Corporation (“Community Bankers Trust”) on December 3, 2021. The fourth quarter of 2021 included merger-related expenses associated with the Community Bankers Trust acquisition of $20.4 million.

Net interest income for the fourth quarter of 2022 increased $65.7 million, or 36%, from the fourth quarter of 2021. Tax-equivalent net interest income for the fourth quarter of 2022 increased $65.8 million, or 36%, from the fourth quarter of 2021. The increase in net interest income and tax-equivalent net interest income was primarily due to the impact of rising market interest rates on earning assets, an increase in average earning assets from the Community Bankers Trust acquisition as well as organic loan growth, and a change in the asset mix to higher earning assets. These increases were partially offset by higher interest expense primarily driven by deposit rate repricing, lower PPP loan fee income and lower acquired loan accretion income. The interest rate spread for the fourth quarter of 2022 increased 55 basis points from the fourth quarter of 2021 to 3.40% due to a 164 basis point increase in the average yield on earning assets partially offset by a 109 basis point increase in the average cost of funds. Average earning assets for the fourth quarter of 2022 increased $806.8 million, or 3%, from the fourth quarter of 2021 due to a $2.7 billion increase in average net loans and loans held for sale and a $971.9 million increase in average investment securities partially offset by a $2.9 billion decrease in average short-term investments. Net PPP loan fee income was $342 thousand and $5.0 million for the fourth quarter of 2022 and 2021, respectively, a decrease of $4.7 million. Acquired loan accretion income was $4.7 million and $6.2 million for the fourth quarter of 2022 and 2021, respectively, a decrease of $1.5 million. The net interest margin of 3.87% for the fourth quarter of 2022 was an increase of 93 basis points from the net interest margin of 2.94% for the fourth quarter of 2021.

The provision for credit losses was $16.4 million for the fourth quarter of 2022 as compared to a net benefit of $7.4 million for the fourth quarter of 2021. The increase in the provision for credit losses was primarily due to loan growth and the impact of reasonable and supportable forecasts of future macroeconomic conditions. Partially offsetting the fourth quarter of 2021 net benefit was a provision for loan losses of $12.3 million recorded on purchased non-credit deteriorated (“non-PCD”) loans from Community Bankers Trust.

Noninterest income for the fourth quarter of 2022 was $30.9 million, which was a decrease of $23.2 million, or 43%, from the fourth quarter of 2021. The decrease in noninterest income was driven by a $22.7 million decrease in income from mortgage banking activities mainly due to lower mortgage loan origination and sale volume and a lower margin on loans sold in the secondary market.

Noninterest expense for the fourth quarter of 2022 was $137.5 million, a decrease of $14.3 million, or 9%, from the fourth quarter of 2021 primarily due to decreases of $14.0 million in employee compensation and $3.4 million in data processing expense partially offset by an increase of $2.1 million in other noninterest expense. The decrease in employee compensation was primarily due to lower employee commissions and incentives related to mortgage banking production and the impact of $2.5 million of merger-related expenses recognized in the fourth quarter of 2021. Data processing expense for the fourth quarter of 2021 included $3.5 million of merger-related expenses associated with the Community Bankers Trust acquisition. The increase in other noninterest expense was primarily driven by an increase in charitable contributions of $1.8 million from the fourth quarter of 2021 and higher amounts of certain general operating expenses offset by a partial recovery of an accrual related to a prior litigation matter with a former commercial customer which was settled during the fourth quarter of 2022.

For the fourth quarter of 2022, income tax expense was $26.6 million as compared to $19.5 million for the fourth quarter of 2021. The increase of $7.1 million was primarily due to higher earnings and a slightly higher effective tax rate. United’s effective tax rate was 21.1% for the fourth quarter of 2022 and 20.9% for the fourth quarter of 2021.

Year of 2022 compared to the year of 2021

Earnings for the year of 2022 were a record $379.6 million as compared to earnings of $367.7 million for the year of 2021. Earnings per diluted share for the year of 2022 were $2.80 as compared to earnings per diluted share of $2.83 for the year of 2021.

Net interest income for the year of 2022 increased $153.7 million, or 21%, from the year of 2021. Tax-equivalent net interest income for the year of 2022 increased $153.9 million, or 21%, from the year of 2021. The increase in net interest income and tax-equivalent net interest income was primarily due to the impact of rising market interest rates on earning assets, an increase in average earning assets from the Community Bankers Trust acquisition as well as organic loan growth and a change in the asset mix to higher earning assets. These increases were partially offset by higher interest expense primarily driven by deposit rate repricing, lower PPP loan fee income and lower acquired loan accretion income. The interest rate spread for the year of 2022 increased 30 basis points from the year of 2021 due to a 61 basis point increase in the average yield on earning assets partially offset by a 31 basis point increase in the average cost of funds. Average earning assets for the year of 2022 increased $1.5 billion, or 6%, from the year of 2021 due to a $1.7 billion increase in average net loans and loans held for sale and a $1.4 billion increase in average investment securities partially offset by a $1.6 billion decrease in average short-term investments. Net PPP loan fee income was $9.6 million and $33.2 million for the year of 2022 and 2021, respectively, a decrease of $23.6 million. Acquired loan accretion income was $18.3 million and $33.9 million for the year of 2022 and 2021, respectively, a decrease of $15.6 million. The net interest margin of 3.50% for the year of 2022 was an increase of 41 basis points from the net interest margin of 3.09% for the year of 2021.

The provision for credit losses was $18.8 million for the year of 2022 as compared to a net benefit of $24.0 million for the year of 2021. The increase in the provision for credit losses was primarily due to loan growth and the impact of reasonable and supportable forecasts of future macroeconomic conditions. Partially offsetting the year of 2021 net benefit was a provision for loan losses of $12.3 million recorded on non-PCD loans from Community Bankers Trust.

Noninterest income for the year of 2022 was $153.3 million, which was a decrease of $124.9 million, or 45%, from the year of 2021. The decrease was driven by a $129.0 million decrease in income from mortgage banking activities mainly due to lower mortgage loan origination and sale volume and a lower margin on loans sold in the secondary market. BOLI income for the year of 2022 was $9.2 million, an increase of $2.3 million from the year of 2021 due to increased death benefits. Fees from deposit services for the year of 2022 were $40.6 million, an increase of $1.9 million from the year of 2021. Partially offsetting fees from deposit services was the impact of implemented changes to United’s overdraft policy during the third quarter of 2022.

Noninterest expense for the year of 2022 was $555.1 million, a decrease of $26.9 million, or 5%, from the year of 2021 driven by decreases in employee compensation of $37.6 million, employee benefits of $7.9 million and mortgage loan servicing expense and impairment of $5.1 million partially offset by an increase in other noninterest expense of $15.4 million. The decrease in employee compensation was due to lower employee commissions, incentives and overtime related to mortgage banking production and the impact of $2.5 million of merger-related expenses incurred in 2021. Employee benefits decreased primarily due to changes in deferred compensation plans resulting from market fluctuations. The decrease in mortgage loan servicing expense and impairment was primarily due to lower amortization of mortgage servicing rights (“MSR”) reflecting slower serviced loan prepayment speeds and lower serviced loan balances. The increase in other noninterest expense mainly resulted from higher amounts of certain general operating expenses primarily related to consulting and legal costs. Additionally, charitable contributions for the year of 2022 increased $1.4 million from the year of 2021.

For the year of 2022, income tax expense was $96.2 million as compared to $95.1 million for the year of 2021 due to higher earnings partially offset by a slightly lower effective tax rate. United’s effective tax rate was 20.2% for the year of 2022 and 20.6% for the year of 2021.

Credit Quality

United’s asset quality continues to be sound. At December 31, 2022, non-performing loans were $58.6 million, or 0.29% of loans & leases, net of unearned income, down from $90.8 million, or 0.50% of loans & leases, net of unearned income, at December 31, 2021. Total non-performing assets of $60.7 million, including other real estate owned (“OREO”) of $2.1 million at December 31, 2022, represented 0.21% of total assets as compared to non-performing assets of $105.6 million, including OREO of $14.8 million, or 0.36% of total assets at December 31, 2021.

As of December 31, 2022, the allowance for loan & lease losses was $234.7 million, or 1.14% of loans & leases, net of unearned income, as compared to $216.0 million, or 1.20% of loans & leases, net of unearned income, at December 31, 2021. Net charge-offs were $1.2 million for the fourth quarter of 2022 compared to net charge-offs of $125 thousand for the fourth quarter of 2021. Net charge-offs were $101 thousand for the year of 2022 compared to net charge-offs of $8.7 million for the year of 2021. Annualized net charge-offs as a percentage of average loans & leases, net of unearned income were 0.02% and 0.003% for the fourth quarter of 2022 and 2021, respectively. Net charge-offs as a percentage of average loans & leases, net of unearned income were zero and 0.05% for the for the year of 2022 and 2021, respectively.

Capital

United continues to be well-capitalized based upon regulatory guidelines. United’s estimated risk-based capital ratio is 14.4% at December 31, 2022, while estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.3%, 12.3% and 10.8%, respectively. The December 31, 2022 ratios reflect United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19 pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.

During the year of 2022 and 2021, United repurchased, under a previously announced stock repurchase plan, shares of its common stock. United did not repurchase any shares of its common stock during the fourth quarter of 2022 or 2021. During the year of 2022, United repurchased approximately 2.3 million shares of its common stock at an average price per share of $34.69. During the year of 2021, United repurchased approximately 306 thousand shares of its common stock at an average price per share of $32.52.

About United Bankshares, Inc.

As of December 31, 2022, United had consolidated assets of approximately $29.5 billion. United is the parent company of United Bank which comprises nearly 250 offices in Virginia, Maryland, Washington, D.C., North Carolina, South Carolina, Georgia, Pennsylvania, West Virginia, and Ohio. United’s stock is traded on the NASDAQ Global Select Market under the quotation symbol "UBSI".

Cautionary Statements

The Company is required under generally accepted accounting principles to evaluate subsequent events through the filing of its December 31, 2022 consolidated financial statements on Form 10-K. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 2022 and will adjust amounts preliminarily reported, if necessary.

Use of non-GAAP Financial Measures

This press release contains certain financial measures that are not recognized under U.S. generally accepted accounting principles ("GAAP"). Generally, United has presented these “non-GAAP” financial measures because it believes that these measures provide meaningful additional information to assist in the evaluation of United’s results of operations or financial position. Presentation of these non-GAAP financial measures is consistent with how United’s management evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the banking industry.

Specifically, this press release contains certain references to financial measures identified as tax-equivalent (FTE) net interest income, average tangible equity, return on average tangible equity and tangible book value per share. Management believes these non-GAAP financial measures to be helpful in understanding United’s results of operations or financial position.

Net interest income is presented in this press release on a tax-equivalent basis. The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments. Although this is a non-GAAP measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition. The tax-equivalent adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21%.

Tangible equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible equity can thus be considered the most conservative valuation of the company. Tangible equity is also presented on a per common share basis and considering net income, a return on average tangible equity. Management provides these amounts to facilitate the understanding of as well as to assess the quality and composition of United’s capital structure. By removing the effect of intangible assets that result from merger and acquisition activity, the “permanent” items of equity are presented. These measures, along with others, are used by management to analyze capital adequacy and performance.

Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure can be found in the attached financial information tables to this press release. Investors should recognize that United’s presentation of these non-GAAP financial measures might not be comparable to similarly titled measures at other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and United strongly encourages a review of its condensed consolidated financial statements in their entirety.

Forward-Looking Statements

In this report, we have made various statements regarding current expectations or forecasts of future events, which speak only as of the date the statements are made. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are also made from time-to-time in press releases and in oral statements made by the officers of the Company. Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning. Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect. Therefore, undue reliance should not be placed upon these estimates and statements. United cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” The following factors, among others, could cause the actual results of United’s operations to differ materially from its expectations: the uncertainty as to the extent of the duration, scope and impacts of the COVID-19 pandemic on United, its colleagues, the communities United serves, and the domestic and global economy; uncertainty in U.S. fiscal and monetary policies, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets, interest rate, securities market and monetary supply fluctuations; increasing rates of inflation and slower growth rates; reform of LIBOR; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those involving the Federal Reserve, FDIC, and CFPB; the effect of changes in the level of checking or savings account deposits on United’s funding costs and net interest margin; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; competition; and changes in legislation or regulatory requirements. For more information about factors that could cause actual results to differ materially from United’s expectations, refer to its reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission and available on its website at www.sec.gov. Further, any forward-looking statement speaks only as of the date on which it is made, and United undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. You are advised to consult further disclosures United may make on related subjects in our filings with the SEC.