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):
October 26, 2017
United Bankshares, Inc.
(Exact name of registrant as specified in its charter)
West Virginia | No. 0-13322 | 55-0641179 | ||
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
300 United Center
500 Virginia Street, East
Charleston, West Virginia 25301
(Address of Principal Executive Offices)
(304) 424-8800
(Registrants 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
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 October 26, 2017, United Bankshares, Inc. (United) announced its financial results for the third quarter and first nine months of 2017. 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 October 26, 2017, issued by United Bankshares, Inc. | |
99.2 |
Slide presentation of financial information for the third quarter of 2017 |
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: October 26, 2017 | By: | /s/ W. Mark Tatterson | ||||
W. Mark Tatterson, Executive Vice | ||||||
President and Chief Financial Officer |
EXHIBIT 99.1
News Release
For Immediate Release | Contact: W. Mark Tatterson | |
October 26, 2017 | Chief Financial Officer | |
(800) 445-1347 ext. 8716 |
United Bankshares, Inc. Announces Earnings
for the Third Quarter and First Nine Months of 2017
WASHINGTON, D.C. and CHARLESTON, WVUnited Bankshares, Inc. (NASDAQ: UBSI), today reported earnings for the third quarter and the first nine months of 2017. Earnings for the third quarter of 2017 were $56.7 million or $0.54 per diluted share, as compared to earnings of $41.5 million or $0.54 per diluted share for the third quarter of 2016. Earnings for the first nine months of 2017 were $132.6 million or $1.39 per diluted share as compared to earnings of $108.0 million or $1.48 per diluted share for the first nine months of 2016.
Third quarter of 2017 results produced an annualized return on average assets of 1.19% and an annualized return on average equity of 6.89%, respectively. For the first nine months of 2017, Uniteds return on average assets was 1.03% while the return on average equity was 6.22%. Uniteds annualized returns on average assets and average equity were 1.17% and 8.10%, respectively, for the third quarter of 2016 while the returns on average assets and average equity were 1.10% and 7.73%, respectively, for the first nine months of 2016.
We are pleased to announce record earnings of almost $57 million for the third quarter of 2017, stated Richard M. Adams, Uniteds Chairman of the Board and Chief Executive Officer. In addition, our return on average assets of 1.19% for the quarter compares very favorably to Uniteds Federal Reserve peer groups most recently reported return on average assets of 0.96%.
On April 21, 2017, United completed its acquisition of Cardinal Financial Corporation (Cardinal) of Tysons Corner, Virginia. On June 3, 2016, United completed its acquisition of Bank of Georgetown of Washington, D.C. Both the results of operations of Cardinal and Bank of Georgetown are included in the consolidated results of operations from their respective dates of acquisition. As a result of the Cardinal acquisition, the third quarter and first nine months of 2017 were impacted by increased levels of average balances, income, and expense as compared to the third quarter and first nine months of 2016 which were impacted by increased levels of average balances, income, and expense due to the Bank of Georgetown acquisition. In addition, the third quarter and first nine months of 2017 included $532 thousand and $25.0 million, respectively, of merger-related expenses from the Cardinal acquisition. The third quarter and first nine months of 2016 included $924 thousand and $5.6 million, respectively, of merger-related expenses due to the Bank of Georgetown acquisition.
United Bankshares, Inc. Announces
October 26, 2017
Page Two
Net interest income for the third quarter of 2017 was $150.3 million, which was an increase of $39.2 million or 35% from the third quarter of 2016. The $39.2 million increase in net interest income occurred because total interest income increased $48.4 million while total interest expense only increased $9.2 million from the third quarter of 2016. Tax-equivalent net interest income, which adjusts for the tax-favored status of income from certain loans and investments, for the third quarter of 2017 was $152.4 million, an increase of $39.7 million or 35% from the third quarter of 2016 due mainly to an increase in average earning assets from the Cardinal acquisition. Average earning assets for the third quarter of 2017 increased $4.0 billion or 32% from the third quarter of 2016 due mainly to a $3.2 billion or 31% increase in average net loans. Average short-term investments increased $436.7 million or 54% while average investment securities increased $360.3 million or 25%. The third quarter of 2017 average yield on earning assets increased 22 basis points from the third quarter of 2016 due to additional loan accretion of $7.7 million on acquired loans and higher market interest rates. Partially offsetting the increases to tax-equivalent net interest income for the third quarter of 2017 was an increase of 19 basis points in the average cost of funds as compared to the third quarter of 2016 due to the higher market interest rates. The net interest margin of 3.65% for the third quarter of 2017 was an increase of 9 basis points from the net interest margin of 3.56% for the third quarter of 2016.
Net interest income for the first nine months of 2017 was $394.1 million, which was an increase of $82.1 million or 26% from the first nine months of 2016. The $82.1 million increase in net interest income occurred because total interest income increased $102.6 million while total interest expense only increased $20.5 million from the first nine months of 2016. Tax-equivalent net interest income for the first nine months of 2017 was $400.3 million, an increase of $83.7 million or 26% from the first nine months of 2016. This increase in tax-equivalent net interest income was primarily attributable to an increase in average earning assets from the Cardinal acquisition. Average earning assets increased $3.5 billion or 30% from the first nine months of 2016 as average net loans increased $2.5 billion or 26% for the first nine months of 2017. Average investment securities increased $340.9 million or 26%. Partially offsetting the increases to tax-equivalent net interest income for the first nine months of 2017 was an increase of 15 basis points in the average cost of funds as compared to the first nine months of 2016 due to higher market interest rates. In addition, the first nine months of 2017 average yield on earning assets decreased a basis point from the first nine months of 2016 due to the replacement of maturing higher-yielding investment securities with those at a lower current interest rate despite an increase of $11.6 million from accretion on acquired loans. The net interest margin of 3.52% for the first nine months of 2017 was a decrease of 10 basis points from the net interest margin of 3.62% for the first nine months of 2016.
On a linked-quarter basis, net interest income for the third quarter of 2017 increased $14.0 million or 10% from the second quarter of 2017. The $14.0 million increase in net interest income occurred because total interest income increased $16.6 million while total interest expense only increased $2.6 million from the second quarter of 2017. Uniteds tax-equivalent net interest income for the third quarter of 2017 increased $13.6 million or 10% due mainly to increases in the average yield on and the average balance of earning assets. The third quarter of 2017 average yield on earning assets increased 25 basis points from the second quarter of 2017 due to additional loan accretion of $5.5 million on acquired loans. Average earning assets increased $426.5 million or 3% for the linked-quarter due to the Cardinal acquisition. Average net loans increased $492.6 million or 4% while average investment securities increased $40.6 million or 2%. Average short-term investments decreased $106.8 million or 8%. Partially offsetting the increases to tax-equivalent net interest income for the third quarter of 2017 was an increase of 7 basis points in the average cost of funds as compared to the second quarter of 2017 due to higher market interest rates. The net interest margin of 3.65% for the third quarter of 2017 was an increase of 21 basis points from the net interest margin of 3.44% for the second quarter of 2017.
United Bankshares, Inc. Announces
October 26, 2017
Page Three
For the quarters ended September 30, 2017 and 2016, the provision for loan losses was $7.3 million and $7.0 million, respectively, while the provision for the first nine months of 2017 was $21.4 million as compared to $18.7 million for the first nine months of 2016. Net charge-offs were $5.3 million and $19.3 million for the third quarter and first nine months of 2017, respectively, as compared to $6.8 million and $21.8 million for the third quarter and first nine months of 2016, respectively. Annualized net charge-offs as a percentage of average loans were 0.16% and 0.21% for the third quarter and first nine months of 2017, respectively.
Noninterest income for the third quarter of 2017 was $38.2 million, which was an increase of $19.2 million or 101% from the third quarter of 2016. The increase was due mainly to an increase of $19.4 million in income from mortgage banking activities due to increased production and sales of mortgage loans in the secondary market. As part of the Cardinal acquisition, United acquired Cardinals mortgage banking subsidiary, George Mason Mortgage, LLC (George Mason). George Mason is the largest locally headquartered home mortgage lender in the D.C. Metro region with offices located in Virginia, Maryland, North Carolina, South Carolina and the District of Columbia. Partially offsetting this increase was a decrease of $1.1 million in income from bank-owned insurance policies due to death benefits recorded during the third quarter of 2016.
Noninterest income for the first nine months of 2017 was $98.9 million, which was an increase of $45.5 million or 85% from the first nine months of 2016. Once again, the increase was mainly due to increased production and sales of mortgage loans in the secondary market as a result of the acquisition of Cardinal and its mortgage banking subsidiary, George Mason. Income from mortgage banking activities for the first nine months of 2017 increased $41.1 million from the first nine months of 2016. Also, net gains on the sales, calls and redemption of investment securities for the first nine months of 2017 increased $5.0 million from the first nine months of 2016 due mainly to a net gain of $3.8 million on the redemption of an investment security during the first quarter of 2017. Partially offsetting these increases was a decrease of $1.0 million in income from bank-owned insurance policies due to death benefits recorded during the first nine months of 2016.
On a linked-quarter basis, noninterest income for the third quarter of 2017 decreased $2.3 million or 6% from the second quarter of 2017 due mainly to a decline of $2.2 million in income from mortgage banking activities despite increased production and sales of mortgage loans in the secondary market. The decline was due mainly to the impact of Accounting Standards Codification (ASC) 815 Derivatives and Hedging (ASC 815-10-S99-1), formerly Staff Accounting Bulletin (SAB) 109, accounting requirement to record unrealized gains associated with George Masons locked mortgage loan pipeline which creates a timing difference in the recognition of income as the loans are sold. The impact of ASC 815-10-S99-1 resulted in a decline of $4.5 million in income for the third quarter of 2017 versus an increase of $1.0 million in income for the second quarter of 2017.
Noninterest expense for the third quarter of 2017 was $96.7 million, an increase of $33.9 million or 54% from the third quarter of 2016 due mainly to the additional employees and branch offices from the Cardinal acquisition as most major categories of noninterest expense showed increases. In particular, employee compensation increased $20.1 million, employee benefits increased $2.1 million, net occupancy expenses increased $2.4 million, and data processing expense increased $1.7 million. In addition, other real estate owned (OREO) expense increased $1.4 million due to declines in the fair value of OREO properties.
United Bankshares, Inc. Announces
October 26, 2017
Page Four
Noninterest expense for the first nine months of 2017 was $271.6 million, an increase of $85.9 million or 46% from the first nine months of 2016 due mainly to the additional employees and branch offices from the Cardinal acquisition. Employee compensation increased $54.1 million which includes an increase of $12.1 million in merger severance charges. Otherwise, employee compensation increased due to higher employee incentives and commissions expense mainly related to the mortgage banking production of George Mason. Employee benefits increased $6.0 million, net occupancy expenses increased $9.1 million which includes an increase of $4.4 million for the termination of leases and a reduction in value of leasehold improvements for closed offices and data processing expense increased $4.0 million which included a contract termination penalty of $525 thousand. In addition, other merger-related expenses increased $3.0 million.
On a linked-quarter basis, noninterest expense for the third quarter of 2017 decreased $15.5 million or 14% from the second quarter of 2017 generally due to a decline of $22.6 million in merger-related expenses. Partially offsetting this decrease was an increase in OREO expense of $2.2 million due to declines in the fair value of OREO properties.
For the third quarter of 2017, income tax expense was $27.8 million as compared to $18.8 million for the third quarter of 2016. This increase was mainly due to higher earnings and a higher effective tax rate as the result of a reduction in the income tax expense for the third quarter of 2016 due to an increase in Uniteds deferred tax rate. For the first nine months of 2017, income tax expense was $67.4 million as compared to $53.1 million for the first nine months of 2016 due to higher earnings and a higher effective tax rate. On a linked-quarter basis, income tax expense increased $8.5 million due to higher earnings partially offset by a decline in the effective tax rate due to the Cardinal acquisition. Uniteds effective tax rate was approximately 32.9% for the third quarter of 2017, 34.25% for the second quarter of 2017 and 31.2% for the third quarter of 2016. For the first nine months of 2017 and 2016, Uniteds effective tax rate was approximately 33.7% and 33.0%, respectively.
Uniteds asset quality continues to be sound. At September 30, 2017, nonperforming loans were $168.4 million, or 1.28% of loans, net of unearned income as compared to nonperforming loans of $113.3 million, or 1.10% of loans, net of unearned income, at December 31, 2016. As of September 30, 2017, the allowance for loan losses was $74.9 million or 0.57% of loans, net of unearned income, as compared to $72.8 million or 0.70% of loans, net of unearned income, at December 31, 2016. Total nonperforming assets of $195.2 million, including OREO of $26.8 million at September 30, 2017, represented 1.02% of total assets as compared to nonperforming assets of $144.8 million or 1.00% of total assets at December 31, 2016.
United continues to be well-capitalized based upon regulatory guidelines. Uniteds estimated risk-based capital ratio is 14.3% at September 30, 2017 while its estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.0%, 12.0% and 10.1%, respectively. 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%.
United Bankshares, Inc. Announces
October 26, 2017
Page Five
During the third quarter of 2017, Uniteds Board of Directors declared a cash dividend of $0.33 per share. United has increased its dividend to shareholders for 43 consecutive years. United is one of only two major banking companies in the USA to have achieved such a record.
United has consolidated assets of approximately $19.1 billion with 144 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 September 30, 2017 consolidated financial statements on Form 10-Q. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of September 30, 2017 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 Uniteds results of operations or financial position. Presentation of these non-GAAP financial measures is consistent with how Uniteds 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, tangible equity and tangible book value per share. Management believes these non-GAAP financial measures to be helpful in understanding Uniteds 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, Uniteds 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%.
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 Uniteds 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 Uniteds 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.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FINANCIAL SUMMARY
(In Thousands Except for Per Share Data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 2017 |
September 30 2016 |
September 30 2017 |
September 30 2016 |
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EARNINGS SUMMARY: |
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Interest income |
$ | 171,583 | $ | 123,137 | $ | 447,288 | $ | 344,720 | ||||||||
Interest expense |
21,307 | 12,068 | 53,147 | 32,642 | ||||||||||||
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Net interest income |
150,276 | 111,069 | 394,141 | 312,078 | ||||||||||||
Provision for loan losses |
7,279 | 6,988 | 21,429 | 18,690 | ||||||||||||
Noninterest income |
38,229 | 19,021 | 98,881 | 53,380 | ||||||||||||
Noninterest expenses |
96,652 | 62,777 | 271,631 | 185,688 | ||||||||||||
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Income before income taxes |
84,574 | 60,325 | 199,962 | 161,080 | ||||||||||||
Income taxes |
27,836 | 18,846 | 67,356 | 53,103 | ||||||||||||
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Net income |
$ | 56,738 | $ | 41,479 | $ | 132,606 | $ | 107,977 | ||||||||
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PER COMMON SHARE: |
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Net income: |
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Basic |
$ | 0.54 | $ | 0.54 | $ | 1.39 | $ | 1.49 | ||||||||
Diluted |
0.54 | 0.54 | 1.39 | 1.48 | ||||||||||||
Cash dividends |
$ | 0.33 | $ | 0.33 | 0.99 | 0.99 | ||||||||||
Book value |
31.09 | 26.54 | ||||||||||||||
Closing market price |
$ | 37.15 | $ | 37.67 | ||||||||||||
Common shares outstanding: |
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Actual at period end, net of treasury shares |
104,983,126 | 76,439,173 | ||||||||||||||
Weighted average basic |
104,760,153 | 76,218,573 | 95,040,664 | 72,413,246 | ||||||||||||
Weighted average diluted |
105,068,122 | 76,647,773 | 95,450,626 | 72,746,363 | ||||||||||||
FINANCIAL RATIOS: |
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Return on average assets |
1.19 | % | 1.17 | % | 1.03 | % | 1.10 | % | ||||||||
Return on average shareholders equity |
6.89 | % | 8.10 | % | 6.22 | % | 7.73 | % | ||||||||
Average equity to average assets |
17.25 | % | 14.38 | % | 16.58 | % | 14.24 | % | ||||||||
Net interest margin |
3.65 | % | 3.56 | % | 3.52 | % | 3.62 | % | ||||||||
September 30 2017 |
September 30 2016 |
December 31 2016 |
June 30 2017 |
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PERIOD END BALANCES: |
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Assets |
$ | 19,129,978 | $ | 14,344,696 | $ | 14,508,892 | $ | 19,035,600 | ||||||||
Earning assets |
16,751,643 | 12,789,305 | 12,939,508 | 16,657,280 | ||||||||||||
Loans, net of unearned income |
13,140,468 | 10,435,763 | 10,341,137 | 13,392,478 | ||||||||||||
Loans held for sale |
315,031 | 10,957 | 8,445 | 339,403 | ||||||||||||
Investment securities |
1,836,725 | 1,462,566 | 1,403,638 | 1,790,487 | ||||||||||||
Total deposits |
13,875,297 | 10,578,332 | 10,796,867 | 13,971,221 | ||||||||||||
Shareholders equity |
3,263,843 | 2,028,679 | 2,235,747 | 3,237,421 |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(In Thousands Except for Per Share Data)
Consolidated Statements of Income
Three Months Ended | Year to Date | |||||||||||||||||||||||
September 2017 |
September 2016 |
June 2017 |
March 2017 |
September 2017 |
September 2016 |
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Interest & Loan Fees Income (GAAP) |
$ | 171,583 | $ | 123,137 | $ | 154,947 | $ | 120,758 | $ | 447,288 | $ | 344,720 | ||||||||||||
Tax equivalent adjustment |
2,092 | 1,556 | 2,512 | 1,564 | 6,168 | 4,562 | ||||||||||||||||||
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Interest & Fees Income (FTE) (non-GAAP) |
173,675 | 124,693 | 157,459 | 122,322 | 453,456 | 349,282 | ||||||||||||||||||
Interest Expense |
21,307 | 12,068 | 18,702 | 13,138 | 53,147 | 32,642 | ||||||||||||||||||
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Net Interest Income (FTE) (non-GAAP) |
152,368 | 112,625 | 138,757 | 109,184 | 400,309 | 316,640 | ||||||||||||||||||
Provision for Loan Losses |
7,279 | 6,988 | 8,251 | 5,899 | 21,429 | 18,690 | ||||||||||||||||||
Non-Interest Income: |
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Fees from trust & brokerage services |
5,052 | 4,891 | 4,745 | 4,886 | 14,683 | 14,552 | ||||||||||||||||||
Fees from deposit services |
8,744 | 8,306 | 8,528 | 7,706 | 24,978 | 24,669 | ||||||||||||||||||
Bankcard fees and merchant discounts |
1,332 | 1,551 | 1,216 | 884 | 3,432 | 3,754 | ||||||||||||||||||
Other charges, commissions, and fees |
535 | 500 | 521 | 477 | 1,533 | 1,725 | ||||||||||||||||||
Income from bank owned life insurance |
1,403 | 2,541 | 1,258 | 1,217 | 3,878 | 4,913 | ||||||||||||||||||
Mortgage banking income |
20,385 | 982 | 22,537 | 675 | 43,597 | 2,499 | ||||||||||||||||||
Other non-interest revenue |
311 | 249 | 954 | 361 | 1,626 | 1,050 | ||||||||||||||||||
Net other-than-temporary impairment losses |
0 | 0 | (16 | ) | (44 | ) | (60 | ) | (33 | ) | ||||||||||||||
Net gains on sales/calls of investment securities |
467 | 1 | 763 | 3,984 | 5,214 | 251 | ||||||||||||||||||
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Total Non-Interest Income |
38,229 | 19,021 | 40,506 | 20,146 | 98,881 | 53,380 | ||||||||||||||||||
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Non-Interest Expense: |
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Employee compensation |
44,308 | 24,213 | 55,461 | 23,471 | 123,240 | 69,123 | ||||||||||||||||||
Employee benefits |
9,578 | 7,483 | 10,329 | 7,465 | 27,372 | 21,380 | ||||||||||||||||||
Net occupancy |
9,364 | 6,919 | 13,913 | 6,784 | 30,061 | 20,945 | ||||||||||||||||||
Data processing |
5,597 | 3,857 | 5,331 | 4,043 | 14,971 | 11,004 | ||||||||||||||||||
Amortization of intangibles |
2,240 | 1,122 | 2,093 | 1,048 | 5,381 | 2,786 | ||||||||||||||||||
OREO expense |
2,713 | 1,342 | 524 | 1,414 | 4,651 | 4,654 | ||||||||||||||||||
FDIC expense |
1,540 | 2,086 | 1,771 | 1,751 | 5,062 | 6,341 | ||||||||||||||||||
Other expenses |
21,312 | 15,755 | 22,715 | 16,866 | 60,893 | 49,455 | ||||||||||||||||||
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Total Non-Interest Expense |
96,652 | 62,777 | 112,137 | 62,842 | 271,631 | 185,688 | ||||||||||||||||||
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Income Before Income Taxes (FTE) (non-GAAP) |
86,666 | 61,881 | 58,875 | 60,589 | 206,130 | 165,642 | ||||||||||||||||||
Tax equivalent adjustment |
2,092 | 1,556 | 2,512 | 1,564 | 6,168 | 4,562 | ||||||||||||||||||
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Income Before Income Taxes (GAAP) |
84,574 | 60,325 | 56,363 | 59,025 | 199,962 | 161,080 | ||||||||||||||||||
Taxes |
27,836 | 18,846 | 19,304 | 20,216 | 67,356 | 53,103 | ||||||||||||||||||
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Net Income |
$ | 56,738 | $ | 41,479 | $ | 37,059 | $ | 38,809 | $ | 132,606 | $ | 107,977 | ||||||||||||
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|||||||||||||
MEMO: Effective Tax Rate |
32.91 | % | 31.24 | % | 34.25 | % | 34.25 | % | 33.68 | % | 32.97 | % |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(In Thousands Except for Per Share Data)
Consolidated Balance Sheets
September 30 2017 Q-T-D Average |
September 30 2016 Q-T-D Average |
September 30 2017 |
December 31 2016 |
September 30 2016 |
||||||||||||||||
Cash & Cash Equivalents |
$ | 1,443,491 | $ | 985,466 | $ | 1,747,037 | $ | 1,434,527 | $ | 1,118,506 | ||||||||||
Securities Available for Sale |
1,612,335 | 1,280,729 | 1,649,634 | 1,259,214 | 1,311,220 | |||||||||||||||
Held to Maturity Securities |
20,353 | 33,969 | 20,335 | 33,258 | 33,971 | |||||||||||||||
Other Investment Securities |
159,945 | 117,687 | 166,756 | 111,166 | 117,375 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Securities |
1,792,633 | 1,432,385 | 1,836,725 | 1,403,638 | 1,462,566 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Cash and Securities |
3,236,124 | 2,417,851 | 3,583,762 | 2,838,165 | 2,581,072 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans held for sale |
294,971 | 9,862 | 315,031 | 8,445 | 10,957 | |||||||||||||||
Commercial Loans |
10,111,213 | 7,909,779 | 9,943,254 | 7,783,478 | 7,899,253 | |||||||||||||||
Mortgage Loans |
2,488,671 | 1,951,862 | 2,475,092 | 1,938,707 | 1,952,598 | |||||||||||||||
Consumer Loans |
730,798 | 575,140 | 738,508 | 634,534 | 599,811 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross Loans |
13,330,682 | 10,436,781 | 13,156,854 | 10,356,719 | 10,451,662 | |||||||||||||||
Unearned income |
(17,720 | ) | (16,194 | ) | (16,386 | ) | (15,582 | ) | (15,899 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans, net of unearned income |
13,312,962 | 10,420,587 | 13,140,468 | 10,341,137 | 10,435,763 | |||||||||||||||
Allowance for Loan Losses |
(73,031 | ) | (71,493 | ) | (74,926 | ) | (72,771 | ) | (72,657 | ) | ||||||||||
Goodwill |
1,484,488 | 866,477 | 1,487,607 | 863,767 | 867,311 | |||||||||||||||
Other Intangibles |
52,649 | 25,496 | 47,526 | 22,954 | 24,112 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Intangibles |
1,537,137 | 891,973 | 1,535,133 | 886,721 | 891,423 | |||||||||||||||
Other Real Estate Owned |
27,889 | 34,362 | 26,826 | 31,510 | 32,202 | |||||||||||||||
Other Assets |
591,733 | 456,427 | 603,684 | 475,685 | 465,936 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 18,927,785 | $ | 14,159,569 | $ | 19,129,978 | $ | 14,508,892 | $ | 14,344,696 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MEMO: Interest-earning Assets |
$ | 16,574,277 | $ | 12,601,422 | $ | 16,751,643 | $ | 12,939,508 | $ | 12,789,305 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Interest-bearing Deposits |
$ | 9,837,967 | $ | 7,255,184 | $ | 9,741,278 | $ | 7,625,026 | $ | 7,327,877 | ||||||||||
Noninterest-bearing Deposits |
4,036,653 | 3,105,273 | 4,134,019 | 3,171,841 | 3,250,455 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Deposits |
13,874,620 | 10,360,457 | 13,875,297 | 10,796,867 | 10,578,332 | |||||||||||||||
Short-term Borrowings |
325,631 | 519,807 | 492,036 | 209,551 | 467,159 | |||||||||||||||
Long-term Borrowings |
1,364,417 | 1,171,599 | 1,364,246 | 1,172,026 | 1,172,504 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Borrowings |
1,690,048 | 1,691,406 | 1,856,282 | 1,381,577 | 1,639,663 | |||||||||||||||
Other Liabilities |
97,575 | 71,670 | 134,556 | 94,701 | 98,022 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities |
15,662,243 | 12,123,533 | 15,866,135 | 12,273,145 | 12,316,017 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Preferred Equity |
| | | | | |||||||||||||||
Common Equity |
3,265,542 | 2,036,036 | 3,263,843 | 2,235,747 | 2,028,679 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Shareholders Equity |
3,265,542 | 2,036,036 | 3,263,843 | 2,235,747 | 2,028,679 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities & Equity |
$ | 18,927,785 | $ | 14,159,569 | $ | 19,129,978 | $ | 14,508,892 | $ | 14,344,696 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MEMO: Interest-bearing Liabilities |
$ | 11,528,015 | $ | 8,946,590 | $ | 11,597,560 | $ | 9,006,603 | $ | 8,967,540 | ||||||||||
|
|
|
|
|
|
|
|
|
|
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(In Thousands Except for Per Share Data)
Three Months Ended | Year to Date | |||||||||||||||||||||||
September 2017 |
September 2016 |
June 2017 |
March 2017 |
September 2017 |
September 2016 |
|||||||||||||||||||
Quarterly/Year-to-Date Share Data: |
| |||||||||||||||||||||||
Earnings Per Share: |
| |||||||||||||||||||||||
Basic |
$ | 0.54 | $ | 0.54 | $ | 0.37 | $ | 0.48 | $ | 1.39 | $ | 1.49 | ||||||||||||
Diluted |
$ | 0.54 | $ | 0.54 | $ | 0.37 | $ | 0.48 | $ | 1.39 | $ | 1.48 | ||||||||||||
Common Dividend Declared Per Share: |
$ | 0.33 | $ | 0.33 | $ | 0.33 | $ | 0.33 | $ | 0.99 | $ | 0.99 | ||||||||||||
High Common Stock Price |
$ | 40.45 | $ | 39.71 | $ | 42.60 | $ | 47.30 | $ | 47.30 | $ | 40.18 | ||||||||||||
Low Common Stock Price |
$ | 31.70 | $ | 35.91 | $ | 37.45 | $ | 39.45 | $ | 31.70 | $ | 32.22 | ||||||||||||
Average Shares Outstanding (Net of Treasury Stock): |
| |||||||||||||||||||||||
Basic |
104,760,153 | 76,218,573 | 99,197,807 | 80,902,368 | 95,040,664 | 72,413,246 | ||||||||||||||||||
Diluted |
105,068,122 | 76,647,773 | 99,620,045 | 81,306,540 | 95,450,626 | 72,746,363 | ||||||||||||||||||
Memorandum Items: |
||||||||||||||||||||||||
Tax Applicable to Security Sales/Calls |
$ | 173 | $ | 0 | $ | 282 | $ | 1,474 | $ | 1,929 | $ | 91 | ||||||||||||
Common Dividends |
$ | 34,642 | $ | 25,220 | $ | 34,621 | $ | 26,777 | $ | 96,040 | $ | 73,381 | ||||||||||||
Dividend Payout Ratio |
61.06 | % | 60.80 | % | 93.42 | % | 69.00 | % | 72.43 | % | 67.96 | % |
September 2017 |
September 2016 |
June 30 2017 |
March 31 2017 |
|||||||||||||||||||||
EOP Share Data: |
||||||||||||||||||||||||
Book Value Per Share |
$ | 31.09 | $ | 26.54 | $ | 30.85 | $ | 27.76 | ||||||||||||||||
Tangible Book Value Per Share (non-GAAP) (1) |
|
$ | 16.47 | $ | 14.88 | $ | 16.19 | $ | 16.85 | |||||||||||||||
52-week High Common Stock Price |
|
$ | 49.35 | $ | 43.13 | $ | 49.35 | $ | 49.35 | |||||||||||||||
Date |
12/12/16 | 11/09/15 | 12/12/16 | 12/12/16 | ||||||||||||||||||||
52-week Low Common Stock Price |
|
$ | 31.70 | $ | 32.22 | $ | 35.91 | $ | 34.50 | |||||||||||||||
Date |
09/07/17 | 02/11/16 | 07/06/16 | 06/27/16 | ||||||||||||||||||||
EOP Shares Outstanding (Net of Treasury Stock): |
|
104,983,126 | 76,439,173 | 104,946,351 | 81,151,257 | |||||||||||||||||||
Memorandum Items: |
||||||||||||||||||||||||
EOP Employees (full-time equivalent) |
|
2,451 | 1,728 | 2,493 | 1,718 | |||||||||||||||||||
Note: |
||||||||||||||||||||||||
(1) Tangible Book Value Per Share: |
||||||||||||||||||||||||
Total Shareholders Equity (GAAP) |
|
$ | 3,263,843 | $ | 2,028,679 | $ | 3,237,421 | $ | 2,252,859 | |||||||||||||||
Less: Total Intangibles |
|
(1,535,133 | ) | (891,423 | ) | (1,538,640 | ) | (885,674 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Tangible Equity (non-GAAP) |
|
$ | 1,728,710 | $ | 1,137,256 | $ | 1,698,781 | $ | 1,367,185 | |||||||||||||||
÷ EOP Shares Outstanding (Net of Treasury Stock) |
|
104,983,126 | 76,439,173 | 104,946,351 | 81,151,257 | |||||||||||||||||||
Tangible Book Value Per Share (non-GAAP) |
|
$ | 16.47 | $ | 14.88 | $ | 16.19 | $ | 16.85 |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(In Thousands Except for Per Share Data)
Three Months Ended | Year to Date | |||||||||||||||||||||||
September 2017 |
September 2016 |
June 2017 |
March 2017 |
September 2017 |
September 2016 |
|||||||||||||||||||
Selected Yields and Net Interest Margin: |
||||||||||||||||||||||||
Loans |
4.61 | % | 4.35 | % | 4.38 | % | 4.34 | % | 4.46 | % | 4.34 | % | ||||||||||||
Investment Securities |
2.61 | % | 2.87 | % | 2.52 | % | 2.84 | % | 2.64 | % | 2.96 | % | ||||||||||||
Money Market Investments/FFS |
1.55 | % | 0.54 | % | 1.12 | % | 0.87 | % | 1.18 | % | 0.53 | % | ||||||||||||
Average Earning Assets Yield |
4.16 | % | 3.94 | % | 3.91 | % | 3.85 | % | 3.99 | % | 4.00 | % | ||||||||||||
Interest-bearing Deposits |
0.57 | % | 0.42 | % | 0.53 | % | 0.45 | % | 0.52 | % | 0.42 | % | ||||||||||||
Short-term Borrowings |
0.52 | % | 0.42 | % | 0.49 | % | 0.54 | % | 0.52 | % | 0.38 | % | ||||||||||||
Long-term Borrowings |
1.93 | % | 1.29 | % | 1.72 | % | 1.52 | % | 1.74 | % | 1.24 | % | ||||||||||||
Average Liability Costs |
0.73 | % | 0.54 | % | 0.66 | % | 0.59 | % | 0.67 | % | 0.52 | % | ||||||||||||
Net Interest Spread |
3.43 | % | 3.40 | % | 3.25 | % | 3.26 | % | 3.32 | % | 3.48 | % | ||||||||||||
Net Interest Margin |
3.65 | % | 3.56 | % | 3.44 | % | 3.43 | % | 3.52 | % | 3.62 | % | ||||||||||||
Selected Performance Ratios: |
||||||||||||||||||||||||
Return on Average Common Equity |
6.89 | % | 8.10 | % | 4.93 | % | 6.98 | % | 6.22 | % | 7.73 | % | ||||||||||||
Return on Average Assets |
1.19 | % | 1.17 | % | 0.82 | % | 1.09 | % | 1.03 | % | 1.10 | % | ||||||||||||
Efficiency Ratio |
51.27 | % | 48.26 | % | 63.44 | % | 49.19 | % | 55.10 | % | 50.81 | % | ||||||||||||
September 2017 |
September 2016 |
June 2017 |
March 2017 |
December 2016 |
||||||||||||||||||||
Selected Financial Ratios: |
||||||||||||||||||||||||
Loan / Deposit Ratio |
94.70 | % | 98.65 | % | 95.86 | % | 94.09 | % | 95.78 | % | ||||||||||||||
Allowance for Loan Losses/ Loans, Net of Unearned Income |
0.57 | % | 0.70 | % | 0.54 | % | 0.70 | % | 0.70 | % | ||||||||||||||
Allowance for Credit Losses (1)/ Loans, Net of Unearned Income |
0.58 | % | 0.71 | % | 0.55 | % | 0.71 | % | 0.71 | % | ||||||||||||||
Nonaccrual Loans / Loans, Net of Unearned Income |
0.76 | % | 0.74 | % | 0.72 | % | 0.87 | % | 0.81 | % | ||||||||||||||
90-Day Past Due Loans/ Loans, Net of Unearned Income |
0.17 | % | 0.11 | % | 0.06 | % | 0.06 | % | 0.08 | % | ||||||||||||||
Non-performing Loans/ Loans, Net of Unearned Income |
1.28 | % | 1.05 | % | 1.15 | % | 1.17 | % | 1.10 | % | ||||||||||||||
Non-performing Assets/ Total Assets |
1.02 | % | 0.99 | % | 0.96 | % | 1.02 | % | 1.00 | % | ||||||||||||||
Primary Capital Ratio |
17.39 | % | 14.58 | % | 17.32 | % | 15.68 | % | 15.84 | % | ||||||||||||||
Shareholders Equity Ratio |
17.06 | % | 14.14 | % | 17.01 | % | 15.26 | % | 15.41 | % | ||||||||||||||
Price / Book Ratio |
1.19 | x | 1.42 | x | 1.27 | x | 1.52 | x | 1.68 | x | ||||||||||||||
Price / Earnings Ratio |
17.20 | x | 17.40 | x | 26.34 | x | 22.13 | x | 23.24 | x |
Note:
(1) | Includes allowances for loan losses and lending-related commitments. |
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Washington, D.C. and Charleston, WV
Stock Symbol: UBSI
(In Thousands Except for Per Share Data)
Three Months Ended | Year to Date | |||||||||||||||||||||||
Mortgage Banking Data George Mason: |
September 2017 |
June 2017 |
September 2017 |
|||||||||||||||||||||
Applications |
$ | 1,064,000 | $ | 1,367,000 | $ | 2,431,000 | ||||||||||||||||||
Loans originated |
858,625 | 786,318 | 1,644,943 | |||||||||||||||||||||
Loans sold |
$ | 887,711 | $ | 710,097 | $ | 1,597,808 | ||||||||||||||||||
Purchase money % of loans closed |
81 | % | 87 | % | 84 | % | ||||||||||||||||||
Realized gain on sales and fees as a % of loans sold |
2.75 | % | 2.96 | % | 2.84 | % | ||||||||||||||||||
Net interest income |
$ | (36 | ) | $ | 90 | $ | 54 | |||||||||||||||||
Other income |
19,936 | 22,393 | 42,329 | |||||||||||||||||||||
Other expense |
24,036 | 18,708 | 42,744 | |||||||||||||||||||||
Income taxes |
(1,332 | ) | 1,293 | (39 | ) | |||||||||||||||||||
Net income |
$ | (2,804 | ) | $ | 2,482 | $ | (322 | ) | ||||||||||||||||
Period End Mortgage Banking Data George Mason: |
September 2017 |
June 2017 |
||||||||||||||||||||||
Locked pipeline |
$ | 245,986 | $ | 387,710 | ||||||||||||||||||||
Asset Quality Data: |
September 2017 |
September 2016 |
December 2016 |
June 2017 |
March 2017 |
|||||||||||||||||||
EOP Non-Accrual Loans |
$ | 100,016 | $ | 77,040 | $ | 83,525 | $ | 96,679 | $ | 90,596 | ||||||||||||||
EOP 90-Day Past Due Loans |
22,249 | 11,387 | 8,586 | 8,489 | 6,714 | |||||||||||||||||||
EOP Restructured Loans (1) |
46,132 | 21,308 | 21,152 | 49,037 | 24,028 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total EOP Non-performing Loans |
$ | 168,397 | $ | 109,735 | $ | 113,263 | $ | 154,205 | $ | 121,338 | ||||||||||||||
EOP Other Real Estate Owned |
26,826 | 32,202 | 31,510 | 28,157 | 29,902 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total EOP Non-performing Assets |
$ | 195,223 | $ | 141,937 | $ | 144,773 | $ | 182,362 | $ | 151,240 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Three Months Ended | Year to Date | |||||||||||||||||||||||
Allowance for Loan Losses: |
September 2017 |
September 2016 |
June 2017 |
March 2017 |
September 2017 |
September 2016 |
||||||||||||||||||
Beginning Balance |
$ | 72,983 | $ | 72,448 | $ | 72,875 | $ | 72,771 | $ | 72,771 | $ | 75,726 | ||||||||||||
Provision for Loan Losses |
7,279 | 6,988 | 8,251 | 5,899 | 21,429 | 18,690 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
80,262 | 79,436 | 81,126 | 78,670 | 94,200 | 94,416 | |||||||||||||||||||
Gross Charge-offs |
(6,357 | ) | (8,592 | ) | (9,922 | ) | (7,285 | ) | (23,564 | ) | (27,525 | ) | ||||||||||||
Recoveries |
1,021 | 1,813 | 1,779 | 1,490 | 4,290 | 5,766 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net Charge-offs |
(5,336 | ) | (6,779 | ) | (8,143 | ) | (5,795 | ) | (19,274 | ) | (21,759 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending Balance |
74,926 | 72,657 | $ | 72,983 | $ | 72,875 | 74,926 | 72,657 | ||||||||||||||||
Reserve for lending-related commitments |
804 | 1,122 | 738 | 902 | 804 | 1,122 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Allowance for Credit Losses (2) |
$ | 75,730 | $ | 73,779 | $ | 73,721 | $ | 73,777 | $ | 75,730 | $ | 73,779 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Restructured loans with an aggregate balance of $29,717, $10,697, $31,606, $11,522 and $11,106 at September 30, 2017, September 30, 2016, June 30, 2017, March 31, 2017 and December 31, 2016, respectively, were on nonaccrual status, but are not included in EOP Non-Accrual Loans above. |
(2) | Includes allowance for loan losses and reserve for lending-related commitments. |
United Bankshares, Inc. Third Quarter 2017 Earnings Review October 26, 2017 Exhibit 99.2
Forward-Looking Statements This presentation and statements made by United Bankshares, Inc. (“United”) and its management may contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts and often use the words “projects”, “targets”, “intends”, “plans”, “believes,” “expects,” “anticipates” or similar expressions or future or conditional verbs such as “will”, “may”, “might”, “should”, “would” and “could”. These forward-looking statements involve certain risks and uncertainties. You should not place undue reliance on any forward-looking statements, which speak only as of the date made. We assume no obligation to update or revise any forward-looking statements that are made from time to time. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: competitive pressures among depository institutions increase significantly; changes in interest rate environment may adversely affect net interest income; gain on sale margins; loan accretion; prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; general economic conditions, either national or in the states in which United does business, are less favorable than expected; changes in the securities markets; continued diversification of assets and adverse changes to credit quality; any economic slowdown that could adversely affect credit quality and loan originations. The foregoing list of factors is not exhaustive. For discussion of these and other factors that may cause actual results to differ from expectations, look under the caption “Risk Factors” of United’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC. October 2017
3Q17 HIGHLIGHTS Net income of $56.7 million with diluted earnings per share of $0.54 Generated return on average assets of 1.19%, return on average equity of 6.89%, and *return on average tangible equity of 13.02% Quarterly dividend of $0.33 per share equates to a yield of 3.6% based upon recent stock price Strong expense control with an efficiency ratio of 51.3% Asset quality and capital position remain sound *Non GAAP measure. Refer to appendix.
EARNINGS SUMMARY Linked Quarter (LQ) LQ Net Income was up $19.7 million to $56.7 million. EPS increased to $0.54 LQ due primarily to a reduction in merger expenses (down $22.6 million) and an increase in net interest income. Net Interest Income increased $14 million due to higher average earnings assets related to the CFNL merger (up $427 million), higher accretion income (up $5.4 million), and an additional day in the quarter. Non Interest Income decreased $2.3 million LQ due to a decline in mortgage banking revenue. The decrease was partially offset by increases in trust & brokerage revenue, deposit service revenues, and bankcard revenues. Non Interest Expense decreased $15.5 million due to a decline of $22.6 million in merger charges. Partially offsetting the decrease was a $2.2 million increase in OREO expense.
PERFORMANCE RATIOS Strong and consistent profitability and expense control. 2Q17 impacted by $23 million in merger expenses. *Non GAAP measure. Refer to appendix.
NET INTEREST INCOME AND MARGIN Net Interest Margin increased from 3.44% to 3.65% LQ. Increase in Net Interest Margin LQ driven primarily by increased loan accretion from the Cardinal acquisition. Loan accretion associated with acquired loans increased to $12.8 million in 3Q17. Scheduled loan accretion for 4Q17 is $7 million, with scheduled accretion of $24 million and $21 million for FY 2018 and FY 2019, respectively. Interest bearing deposits increased 4 bps LQ due mainly to the inclusion of a full quarter of CFNL deposit balances. $ in millions
LOAN SUMMARY LQ decrease in loans driven by above average loan payoffs. Non Owner Occupied CRE to Total Risk Based Capital was approximately 300% at 3Q17 compared to 322% at 3Q16. CRE portfolio continues to perform exceptionally well and remains diversified among underlying collateral types. $ in thousands 3Q17 % of Total LQ Change Owner Occupied CRE $ 1,365 10.4% $ (30) Non Owner Occupied CRE $ 4,686 35.6% $ (16) Commercial $ 1,758 13.4% $ (109) Residential Real Estate $ 3,051 23.2% $ (28) Construction & Land Dev. $ 1,600 12.2% $ (99) Bankcard $ 14 0.1% $ (0) Consumer $ 684 5.2% $ 28 Total Gross Loans $ 13,157 100.0% $ (254)
DEPOSIT SUMMARY UBSI continues to have a strong core deposit franchise with almost 30% of the deposit base in Demand Deposits. LQ decline in EOP deposits was mainly due to a decline in brokered CD’s. Brokered CD’s (non-reciprocal) decreased $154 million LQ. $ in thousands 3Q17 % of Total LQ Change Demand Deposits $ 4,134 29.8% $ 121 Interest Bearing Checking $ 2,197 15.8% $ (28) Regular Savings $ 1,064 7.7% $ (14) Money Market Accounts $ 3,769 27.2% $ 85 Time Deposits < $100,000 $ 821 5.9% $ (45) Time Deposits > $100,000 $ 1,890 13.6% $ (214) Total Deposits $ 13,875 100.0% $ (96)
CREDIT QUALITY End of Period Balances (000s) 6/30/17 9/30/17 Non Accrual Loans $96,679 $100,016 90-Day Past Due Loans $8,489 $22,249 Restructured Loans $49,037 $46,132 Total Non Performing Loans $154,205 $168,397 Other Real Estate Owned $28,157 $26,826 Total Non Performing Assets $182,362 $195,223 Non Performing Loans / Loans 1.15% 1.28% Non Performing Assets / Total Assets 0.96% 1.02% Credit quality remains solid. LQ increase in 90+ past due loans is related to one loan with no anticipated loss. Expect to see a decrease in NPA’s in 4Q17.
CAPITAL RATIOS & PER SHARE DATA End of Period Ratios / Values 6/30/17 9/30/17 Common Equity Tier 1 Ratio 11.4% 12.0% Tier 1 Capital Ratio 11.4% 12.0% Total Risk Based Capital Ratio 13.6% 14.3% Leverage Ratio 10.4% 10.1% Total Equity to Total Assets 17.0% 17.1% *Tangible Equity to Tangible Assets 9.7% 9.8% Book Value Per Share $30.85 $31.09 *Tangible Book Value Per Share (non GAAP) $16.19 $16.47 Capital ratios remain significantly above regulatory “Well Capitalized” levels and exceed all internal capital targets. Tangible Book Value Per Share grew 1.7% LQ and 6.9% annualized. *Non GAAP measure. Refer to appendix.
GEORGE MASON MORTGAGE GMM gain on sale revenue projected at approximately $88 million for 2018 with income before tax projected at approximately $5 million for 2018. Results could vary significantly from projections depending upon market conditions. GMM (000s) 2Q17 3Q17 Applications $1,367,000 $1,064,000 Loans Originated $786,318 $858,625 Loans Sold $710,097 $887,711 Purchase Money % 87% 81% Realized Gain on Sale Margin 2.96% 2.75% Locked Pipeline (EOP) 387,710 245,986 Total Income $22,483 $19,900 Total Expense $18,708 $24,036 Income Before Tax $3,775 $(4,136) Net Income After Tax $2,482 $(2,804) The impact from ASC 815 (formerly SAB 109) on a pretax basis was $1.0 million in 2Q17 and $(4.5) million in 3Q17.
2017 / 2018 OUTLOOK Loans & Deposits: Expect 4Q17 portfolio loan growth to be soft. Annual loan and deposit growth rate in 2018 expected in the low to mid single digits. Net Interest Margin: Stable core NIM (excluding purchase accounting related loan accretion). Asset Quality: Stable asset quality metrics. Anticipate NPA’s will decline in 4Q17. Tax Rate: 2018 Tax Rate estimated at approximately 34%. The outlook below reflects a continuation of the current economic climate, interest rate environment, and corporate tax rate structure. Our outlook may change if the expectations for these items varies from current expectations.
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Reconciliation of non-GAAP Items October 2017 (dollars in thousands) 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017 (1) Return on Average Tangible Equity (A) Net Income (GAAP) $41,479 $39,106 $38,809 $37,059 $56,738 (B) Number of Days in the Quarter 92 92 90 91 92 Average Total Shareholders' Equity (GAAP) $2,036,036 $2,074,811 $2,256,483 $3,016,789 $3,265,542 Less: Average Total Intangibles (891,973) (890,820) (886,231) (1,309,865) (1,537,137) (C) Average Tangible Equity (non-GAAP) $ 1,144,063 $1,183,991 $1,370,252 $1,706,924 $1,728,405 Formula: [(A) / (B)]*365 (C) Return on Average Tangible Equity (non-GAAP) 14.38% 13.10% 11.49% 8.71% 13.02%
Reconciliation of non-GAAP Items (cont.) October 2017 (dollars in thousands) 6/30/2017 9/30/2017 (2) Tangible Equity to Tangible Assets Total Assets (GAAP) $ 19,035,600 $ 19,129,978 Less: Total Intangibles (GAAP) (1,538,640) (1,535,133) Tangible Assets (non-GAAP) $ 17,496,960 $ 17,594,845 Total Shareholders' Equity (GAAP) $ 3,237,421 $ 3,263,843 Less: Total Intangibles (GAAP) (1,538,640) (1,535,133) Tangible Equity (non-GAAP) $ 1,698,781 $ 1,728,710 Tangible Equity to Tangible Assets (non-GAAP) 9.7% 9.8% (3) Tangible Book Value Per Share: Total Shareholders' Equity (GAAP) $ 3,237,421 $ 3,263,843 Less: Total Intangibles (GAAP) (1,538,640) (1,535,133) Tangible Equity (non-GAAP) $ 1,698,781 $ 1,728,710 ÷ EOP Shares Outstanding (Net of Treasury Stock) 104,946,351 104,983,126 Tangible Book Value Per Share (non-GAAP) $16.19 $16.47
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