United Bankshares Inc. Announces Increase in Earnings
United Bankshares, Inc. (NASDAQ: UBSI), today announced earnings for the first quarter of 2015. Earnings for the first quarter of 2015 were $34.6 million or $0.50 per diluted share, an increase from earnings of $30.1 million or $0.48 per diluted share for the first quarter of 2014.
United’s first quarter of 2015 results produced an annualized return on average assets of 1.16% and an annualized return on average equity of 8.38%. These returns compare favorably to the most recently reported average return on assets of 0.96% and average return on equity of 8.14% for the year of 2014 reported by United’s Federal Reserve peer group (bank holding companies with total assets over $10 billion). United’s annualized returns on average assets and average equity were 1.14% and 8.57%, respectively, for the first quarter of 2014.
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 first quarter of 2015 was impacted for an additional month by increased levels of average balances, income, and expense as compared to the first quarter 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. In addition, United sold a former branch building during the first quarter of 2014 which resulted in a before-tax gain of $9.0 million.
Tax-equivalent net interest income for the first quarter of 2015 was $96.3 million, an increase of $9.4 million or 11% from the first quarter 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 $1.3 billion or 14% from the first quarter of 2014. Average net loans increased $978.8 million or 12% for the first quarter of 2015 while average short-term investments and investment securities increased $224.2 million or 77% and $90.8 million or 7%, respectively. In addition, the average cost of funds declined 6 basis points from the first quarter of 2014. Partially offsetting the increases to tax-equivalent net interest income for the first quarter of 2015 was a decline of 15 basis points in the average yield on earning assets as compared to the first quarter of 2014. The net interest margin for the first quarter of 2015 was 3.61%, which was a decrease of 9 basis points from a net interest margin of 3.70% for the first quarter of 2014.
On a linked-quarter basis, United’s tax-equivalent net interest income for the first quarter of 2015 decreased $5.8 million or 6% due mainly to a decrease in the average yield on earning assets. The first quarter of 2015 average yield on earning assets decreased 21 basis points from the fourth quarter of 2014 due primarily to interest income of $3.2 million on the repayment of a large acquired loan in the fourth quarter of 2014. Average earning assets were flat, increasing $25.3 million or less than 1% for the linked-quarter. Average net loans and average investments were also flat while average short-term investments increased $70.2 million or 16%. Partially offsetting the decreases to tax-equivalent net interest income for the first quarter of 2015 was a decrease of 6 basis points in the average cost of funds as compared to the fourth quarter of 2014. The net interest margin of 3.61% for the first quarter of 2015 was a decrease of 16 basis points from the net interest margin of 3.77% for the fourth quarter of 2014.
For the quarters ended March 31, 2015 and 2014, the provision for loan losses was $5.4 million and $4.7 million, respectively. Net charge-offs were $5.3 million for the first quarter of 2015 as compared to $4.5 million for the first quarter of 2014. Annualized net charge-offs as a percentage of average loans were 0.24% for the first quarter of 2015 as compared to 0.30% for United’s Federal Reserve peer group for the year of 2014. On a linked-quarter basis, the provision for loans losses decreased $955 thousand while net charge-offs decreased $1.19 million from the fourth quarter of 2014.
Noninterest income for the first quarter of 2015 was $18.2 million, which was a decrease of $8.2 million from the first quarter of 2014. Included in noninterest income for the first quarter of 2014 was the previously mentioned net gain of $9.0 million on the sale of bank premises. Noninterest income for the first quarter of 2015 included noncash, before-tax, other-than-temporary impairment charges of $34 thousand on certain investment securities as compared to noncash, before-tax other-than-temporary impairment charges of $639 thousand on certain investment securities for the first quarter of 2014. In addition, net gains on sales and calls of investment securities were $46 thousand and $824 thousand for the first quarters 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 first quarter of 2015 increased $953 thousand or 6% from the first quarter of 2014. This increase for the first quarter of 2015 was due primarily to increases of $299 thousand in income from trust and brokerage services due to an increase in volume, $286 thousand in mortgage banking income due to increased production and sales of mortgage loans in the secondary market, and $214 thousand in fees from deposit services due to increased debit card transactions.
On a linked-quarter basis, noninterest income for the first quarter of 2015 decreased $1.2 million from the fourth quarter of 2014. Included in the results for the first quarter of 2015 and fourth quarter of 2014 were noncash, before-tax, other-than-temporary impairment charges of $34 thousand and $704 thousand, respectively. In addition, the results for the first quarter of 2015 and fourth quarter of 2014 included net gains on sales and calls of investment securities of $46 thousand and $1.2 million, respectively. Excluding the noncash, other-than-temporary impairment charges as well as the net gains from sales and calls of investment securities, noninterest income decreased $708 thousand or 4% on a linked-quarter basis. This decrease was mainly due to declines in fees from deposit services of $1.0 million as a result of a decrease in overdraft fees and $419 thousand in fees from bankcard services due to a decline in volume, both due to seasonality. Partially offsetting these decreases was an increase of $459 thousand in income from trust and brokerage services due to an increase in volume.
Noninterest expense for the first quarter of 2015 was $57.7 million, a decrease of $3.4 million or 6% from the first quarter of 2014. Employee compensation decreased $4.7 million due to $3.6 million of merger severance charges included in the first quarter of 2014. In addition, other real estate owned (OREO) expense decreased $1.0 million due to fewer declines in the fair values of OREO properties. Partially offsetting these decreases was an increase of $1.2 million in employee benefits due to an increase in pension expense.
On a linked-quarter basis, noninterest expense for the first quarter of 2015 decreased $6.4 million or 10% from the fourth quarter of 2014. Included in noninterest expense for the first quarter of 2015 was a charge of $1.1 million related to historical tax credits. Noninterest expense for the fourth quarter of 2014 included a prepayment penalty of $2.0 million on an FHLB advance and a donation of $800 thousand to an educational institution. Otherwise on a linked-quarter basis, employee compensation declined $1.8 million primarily due to lower incentives, OREO expense decreased $1.7 million due to fewer declines in the fair values of OREO properties and equipment expense decreased $923 thousand due to a decline in depreciation expense. Partially offsetting these decreases was an increase of $1.9 million in employee benefits due to increases in pension and Federal Insurance Contributions Act (FICA) expense.
For the first quarter of 2015, income tax expense was $15.3 million as compared to $15.9 million and $16.4 million for the first and fourth quarters of 2014, respectively. The decreases were primarily due to the historical tax credits recognized in the first quarter of 2015. United’s effective tax rate was approximately 30.7% for the first quarter of 2015 and 34.5% and 33.0% for the first and fourth quarters of 2014, respectively. The normal effective tax rate for United is 33%.
United’s asset quality continues to be sound. At March 31, 2015, nonperforming loans were $114.4 million, or 1.26% 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 March 31, 2015, the allowance for loan losses was $75.6 million or 0.84% 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 $151.9 million, including OREO of $37.6 million at March 31, 2015, represented 1.25% 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 12.4% at March 31, 2015 while its estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 9.5%, 11.7% and 10.5%, 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%.
During the first quarter of 2015, United’s Board of Directors declared a cash dividend of $0.32 per share. The year of 2014 represented the 41st consecutive year of dividend increases for United shareholders. United is one of only two major banking companies in the USA to have achieved such a record.
United has consolidated assets of approximately $12.1 billion with 130 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”.
