United Bankshares, Inc. Announces Increased Earnings for the Year of 2015

United Bankshares, Inc. (NASDAQ: UBSI), today reported earnings for the fourth quarter and year of 2015. Earnings for the fourth quarter of 2015 were $33.5 million or $0.48 per diluted share as compared to earnings of $33.3 million or $0.48 per diluted share for the fourth quarter of 2014. Earnings for the year of 2015 were $138.0 million or $1.98 per diluted share, an increase from earnings of $129.9 million or $1.92 per diluted share for the year of 2014.

Fourth quarter of 2015 results produced an annualized return on average assets of 1.07% and an annualized return on average equity of 7.68%. For the year of 2015, United’s return on average assets was 1.12% while the return on average equity was 8.10%. United’s annualized returns on average assets and average equity were 1.09% and 7.88%, respectively, for the fourth quarter of 2014 while the returns on average assets and average equity were 1.11% and 8.13%, respectively, for the year of 2014.

“The year of 2015 was another successful year for United Bankshares,” stated Richard M. Adams, United’s Chairman of the Board and Chief Executive Officer. “We increased diluted earnings per share from $1.92 to $1.98 achieving record earnings before income taxes of over $200 million. United’s return on average assets for the year of 2015 was 1.12% compared to our Federal Reserve peer group’s (bank holding companies with total assets over $10 billion) most recently reported return on average assets of 0.94%. We increased dividends to $1.29 per share which represented the 42nd consecutive year of dividend increases to our shareholders. This is a record only one other major banking company in the USA has been able to achieve. Our consistency in increasing dividends to shareholders provides evidence of our long track record of strong financial performance – profitability, solid asset quality, and sound capital position.”

On January 31, 2014, United completed its acquisition of Virginia Commerce Bancorp, Inc. (Virginia Commerce) of Arlington, Virginia. The results of operations of Virginia Commerce are included in the consolidated results of operations from the date of acquisition. As a result, the year of 2015 was impacted for an additional month by increased levels of average balances, income, and expense as compared to the year of 2014 due to the acquisition. At consummation, Virginia Commerce had assets of approximately $2.8 billion, loans of $2.1 billion, and deposits of $2.0 billion.

The results for the fourth quarter and year of 2015 included noncash, before-tax, other-than-temporary impairment charges of $13 thousand and $47 thousand, respectively, on certain investment securities. Included in the results for the fourth quarter and year of 2014 were noncash, before-tax, other-than-temporary impairment charges of $704 thousand and $6.5 million, respectively, on certain investment securities. During the fourth quarter of 2014, in order to lower future expense, United incurred a penalty of $2.0 million to prepay a Federal Home Loan Bank (FHLB) advance with a high interest rate. United sold a former branch building in the first quarter of 2014 which resulted in a before-tax gain of $9.0 million. In addition, the results for the year of 2014 included merger related expenses and charges of $5.3 million.

Tax-equivalent net interest income of $98.8 million for the fourth quarter of 2015 decreased $3.3 million or 3% from the fourth quarter of 2014. The fourth quarter of 2014 included interest income of $3.2 million on the repayment of a large acquired loan. Due in large part to this repayment coupled with payoffs of higher yielding loans with the re-investment of this cash inflow into new loans at lower interest rates, the average yield on earning assets for the fourth quarter of 2015 decreased 27 basis points from the fourth quarter of 2014. Partially offsetting the decreases to tax-equivalent net interest income for the fourth quarter of 2015 was an increase in average earning assets. Average earning assets for the fourth quarter of 2015 increased $281.6 million or 3% from the fourth quarter of 2014. Average net loans and average short-term investments increased $198.1 million or 2% and $173.9 million or 39%, respectively, while average investment securities declined $90.4 million or 7% from the fourth quarter of 2014. In addition, the average cost of funds decreased 5 basis points as compared to the fourth quarter of 2014 due to the repayment of higher costing long-term Federal Home Loan Bank advances. The net interest margin of 3.56% for the fourth quarter of 2015 was a decrease of 21 basis points from the net interest margin of 3.77% for the fourth quarter of 2014.

Tax-equivalent net interest income for the year of 2015 was $390.6 million, an increase of $8.6 million or 2% from the year of 2014. This increase in tax-equivalent net interest income was primarily attributable to an increase in average earning assets from the Virginia Commerce acquisition. Average earning assets increased $608.7 million or 6% from the year of 2014. Average net loans increased $405.7 million or 5% for the year of 2015 while average short-term investments increased $219.2 million or 58%. In addition, the average cost of funds declined 6 basis points from the year of 2014. Partially offsetting the increases to tax-equivalent net interest income for the year of 2015 was a decline of 18 basis points in the average yield on earning assets as compared to the year of 2014. The net interest margin of 3.58% for the year of 2015 was a decrease of 13 basis points from the net interest margin of 3.71% for the year of 2014.

On a linked-quarter basis, United’s tax-equivalent net interest income for the fourth quarter of 2015 was relatively flat, increasing $871 thousand or less than 1% due mainly to an increase of $1.2 million in the accretion of acquired loans and a slight increase in average earning assets. Average earning assets increased $12.3 million or less than 1% from the third quarter of 2015. Average net loans increased $166.4 million or 2% while average short-term investments and average investment securities decreased $133.6 million or 18% and $20.5 million or 2%, respectively. In addition, the yield on average earning assets for the fourth quarter of 2015 increased 3 basis points from the third quarter of 2015 due to the loan accretion. Partially offsetting the increases to tax-equivalent net interest income for the fourth quarter of 2015 was an increase of a basis point in the average cost of funds as compared to the third quarter of 2015. The net interest margin of 3.56% for the fourth quarter of 2015 was an increase of 3 basis points from the net interest margin of 3.53% for the third quarter of 2015.

For the quarters ended December 31, 2015 and 2014, the provision for loan losses was $6.3 million for each quarter while the provision for the year of 2015 was $22.6 million as compared to $21.9 million for the year of 2014. Net charge-offs were $6.1 million and $22.4 million for the fourth quarter and year of 2015, respectively, as compared to $6.5 million and $20.6 million for the same time periods in 2014. Annualized net charge-offs as a percentage of average loans were 0.26% and 0.25% for the fourth quarter and year of 2015, respectively. United’s most recently reported Federal Reserve peer group’s net charge-offs to average loans percentage was 0.26% for the first nine months of 2015. On a linked-quarter basis, the provision for loan losses for the fourth quarter of 2015 increased $1.1 million while net charge-offs increased $1.2 million from the third quarter of 2015.

Noninterest income for the fourth quarter of 2015 was $18.1 million, a decrease of $1.3 million from the fourth quarter of 2014. A noncash, before-tax, other-than-temporary impairment charge of $13 thousand was recognized during the fourth quarter of 2015. Included in noninterest income for the fourth quarter of 2014 were noncash, before-tax, other-than-temporary impairment charges of $704 thousand on certain investment securities. In addition, net gains on sales and calls of investment securities were $42 thousand fourth quarter of 2015 as compared to $1.2 million for the fourth quarter of 2014. Excluding the noncash, other-than-temporary impairment charges as well as the net gains from sales and calls of investment securities, noninterest income for the fourth quarter of 2015 decreased $791 thousand or 4% from the fourth quarter of 2014. The decrease was due to lower fees from deposit services as a result of the Durbin Amendment being effective for United on July 1, 2015. The Durbin Amendment, passed as part of the Dodd-Frank financial reform legislation, limits fees for debit card processing paid by merchants to banking companies with assets in excess of $10 billion. Fees from deposit services for the fourth quarter of 2015 declined $2.1 million from the fourth quarter of 2014 due mainly to lower income on debit card transactions. Partially offsetting this decline were increases of $513 thousand in income from bank-owned life insurance policies due to a death benefit, $265 thousand in fees from bankcard services due to an increase in seasonal volume and $229 thousand in mortgage banking income due to increased loan sales in the secondary market.

Noninterest income for the year of 2015 was $73.6 million, which was a decrease of $7.3 million from the year of 2014. Included in noninterest income for the year of 2014 was the previously mentioned net gain of $9.0 million on the sale of bank premises. Noninterest income for the year of 2015 included noncash, before-tax, other-than-temporary impairment charges of $47 thousand on certain investment securities as compared to noncash, before-tax other-than-temporary impairment charges of $6.5 million on certain investment securities for the year of 2014. In addition, net gains on sales and calls of investment securities were $202 thousand and $3.4 million for the year of 2015 and 2014, respectively. Excluding the net gain on the sale of bank premises, the noncash, other-than-temporary impairment charges as well as the net gains from sales and calls of investment securities, noninterest income for the year of 2015 decreased $1.6 million or 2% from the year of 2014. This decrease for the year of 2015 was due primarily to a decline in fees from deposit services as a result of the Durbin Amendment. Fees from deposit services for the year of 2015 declined $4.4 million from the year of 2014 due mainly to lower income from debit card transactions and overdrafts. Partially offsetting this decrease were increases of $944 thousand in income from trust and brokerage services due to an increase in volume and the value of assets under management, $631 thousand in mortgage banking income due to increased production and sales of mortgage loans in the secondary market and $579 thousand in fees from bankcard services due to an increase in seasonal volume.

On a linked-quarter basis, noninterest income for the fourth quarter of 2015 increased $313 thousand or 2% from the third quarter of 2015. This increase was mainly due to increases of $558 thousand in income from bank-owned life insurance policies due to a death benefit and $255 thousand in fees from bankcard services due to seasonal volume. Partially offsetting these increases, was a decrease of $363 thousand in fees from deposit services as a result of a decrease in overdraft fees.

Noninterest expense for the fourth quarter of 2015 was $58.6 million, a decrease of $5.4 million or 8% from the fourth quarter of 2014 due partially to the previously mentioned prepayment penalty of $2.0 million on an FHLB advance in the fourth quarter last year and a donation of $800 thousand to an educational institution. Otherwise, other real estate owned (OREO) expenses decreased $2.2 million due to fewer declines in the fair value of OREO properties, net occupancy expense decreased $871 thousand due to a decline in real property taxes as well as several decreases in other general operating expenses. None of these decreases in other general operating expenses was individually significant.

Noninterest expense for the year of 2015 was $231.7 million, a decrease of $8.2 million or 3% from the year of 2014. Included in noninterest expense for the year of 2014 was the previously mentioned prepayment penalty of $2.0 million on an FHLB advance. Also included in noninterest expense for the year of 2014 was a donation of $800 thousand to an educational institution. Otherwise, employee compensation decreased $2.7 million from the year of 2014 which included $3.6 million of merger severance charges, other merger expenses decreased $1.2 million, net occupancy declined $1.5 million due mainly to a decrease in real property taxes and other real estate owned (OREO) expense declined $4.1 million due to fewer declines in the fair values of OREO properties. Several other general operating expenses declined as well, none of which was individually significant. Partially offsetting these decreases were increases of $6.6 million in employee benefits due to an increase in pension expense and $802 thousand in Federal Deposit Insurance Corporation (FDIC) insurance expense due to a higher assessment base as a result of the Virginia Commerce acquisition.

On a linked-quarter basis, noninterest expense for the fourth quarter of 2015 increased $934 thousand or 2% from the third quarter of 2015. The increase was due primarily to increases in employee compensation of $1.7 million due to higher employee incentives expense. Partially offsetting this increase was a decrease in several general other operating expenses. Most significant was a decrease of $312 thousand in equipment expense due to less maintenance costs.

For the fourth quarter of 2015, income tax expense was $16.9 million, an increase of $483 thousand or 3% from the fourth quarter of 2014 due to higher earnings. For the year of 2015, income tax expense of $65.5 million was virtually flat from the year of 2014. On a linked-quarter basis, income tax expense increased $647 thousand or 4% due to the release of the income tax reserves in the third quarter of 2015. United’s effective tax rate was approximately 33.5% for the fourth quarter of 2015, 33.0% for the fourth quarter of 2014 and 31.6% for the third quarter of 2015. For the years of 2015 and 2014, United's effective tax rate was 32.2% and 33.4%, respectively. The lower effective tax rate in 2015 was due to the release of the income tax reserves during the third quarter and historical tax credits recognized in the first quarter.

United’s asset quality continues to be sound. At December 31, 2015, nonperforming loans were $126.7 million, or 1.35% of loans, net of unearned income, up from nonperforming loans of $109.0 million or 1.20% of loans, net of unearned income, at December 31, 2014. As of December 31, 2015, the allowance for loan losses was $75.7 million or 0.81% of loans, net of unearned income, as compared to $75.5 million or 0.83% of loans, net of unearned income, at December 31, 2014. Total nonperforming assets of $158.9 million, including OREO of $32.2 million at December 31, 2015, represented 1.26% of total assets.

On January 1, 2015, the new Basel III Capital Rules became effective for United and its banking subsidiaries. United continues to be well-capitalized based upon these new regulatory guidelines. United’s estimated risk-based capital ratio is 12.6% at December 31, 2015 while its estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 9.7%, 11.9% and 10.7%, respectively. The new 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%.

On November 9, 2015, United announced the signing of a definitive merger agreement with Bank of Georgetown, a privately held community bank headquartered in Washington, D.C. Bank of Georgetown has $1.2 billion in assets with 11 branches and 3 business development offices throughout Washington, D.C., Montgomery County, Maryland and Northern Virginia. Bank of Georgetown will merge into United's Virginia chartered bank, United Bank, the largest community bank headquartered in the D.C. Metro region. Consummation of the merger is subject to approval of the shareholders of Bank of Georgetown, the receipt of all required regulatory approvals, as well as other customary conditions.

As of December 31, 2015, United had consolidated assets of approximately $12.6 billion with 129 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 December 31, 2015 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, 2015 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, noninterest income 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, 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 35%.

GAAP total non-interest income results are adjusted for other-than-temporary impairment charges (OTTI) on certain investment securities, net gains or losses on the sale of securities and any infrequent noninterest income items. Management believes noninterest income without OTTI charges, net securities gains or losses and infrequent noninterest income items is more indicative of United’s performance because it isolates income that is primarily customer relationship driven and is more indicative of normalized operations. In addition, these items can fluctuate greatly from quarter to quarter and are difficult to predict.

Tangible common equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible common equity can thus be considered the most conservative valuation of the company. Tangible common equity is also presented on a per common share basis. 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 common equity are presented. These two measures, along with others, are used by management to analyze capital adequacy.

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

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.

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