WASHINGTON & CHARLESTON, W.Va.--(BUSINESS WIRE)--United Bankshares, Inc. (NASDAQ: UBSI), today reported record earnings for the first quarter of 2021 of $106.9 million, or $0.83 per diluted share, up significantly from earnings of $40.2 million, or $0.40 per diluted share for the first quarter of 2020. 

First quarter of 2021 results produced annualized returns on average assets, average equity and average tangible equity of 1.64%, 9.97% and 17.20%, respectively, compared to annualized returns on average assets, average equity and average tangible equity of 0.82%, 4.82% and 8.77%, respectively, for the first quarter of 2020.

Record earnings for the first quarter of 2021, as compared to the first quarter of 2020, were primarily due to higher income from mortgage banking activities, driven by an elevated volume of mortgage loan originations and sales in the secondary market, the impact of the Carolina Financial Corporation (“Carolina Financial”) acquisition and a lower provision for credit losses primarily due to better performance trends within the loan portfolio and an improved future macroeconomic forecast under the Current Expected Credit Loss (“CECL”) accounting standard.

“The first quarter of 2021 was another great quarter for United Bankshares, and UBSI continues to be one of the best performing regional banking companies in the nation,” stated Richard M. Adams, United’s Chairman of the Board and Chief Executive Officer. “We earned record net income of $107 million, record diluted earnings per share of $0.83 and delivered an annualized return on average assets of 1.64%. Our credit quality and regulatory ratios remain strong and position us well for continued growth as the economy recovers from the effects of the COVID-19 pandemic.”

The results of operations for Carolina Financial are included in the consolidated results of operations from the date of acquisition, May 1, 2020. As a result of the acquisition, the first quarter of 2021 reflected higher average balances, income, and expense as compared to the first quarter of 2020. The first quarter of 2020 included merger-related expenses of $1.6 million. There were no merger-related expenses incurred in the first quarter of 2021.

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2021 was $191.0 million, which was an increase of $49.4 million or 35% from the first quarter of 2020, primarily due to an increase in average earning assets from the Carolina Financial acquisition and Paycheck Protection Program (“PPP”) loans. 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 first quarter of 2021 increased $49.7 million or 35% from the first quarter of 2020 to $192.0 million. The net interest spread for the first quarter of 2021 increased 30 basis points from the first quarter of 2020 due to a 95 basis point decrease in the average cost of funds partially offset by a 65 basis point decrease in the average yield on earning assets, reflecting the decline in market interest rates. Average earning assets for the first quarter of 2021 increased $6.2 billion or 36% from the first quarter of 2020 due to a $4.1 billion increase in average net loans and loans held for sale, a $1.6 billion increase in average short-term investments and a $572.8 million increase in average investment securities. PPP loan fee income of $11.3 million was recognized in the first quarter of 2021 driven primarily by loan forgiveness. The net interest margin of 3.30% for the first quarter of 2021 was flat from the first quarter of 2020.

On a linked-quarter basis, net interest income for the first quarter of 2021 was relatively flat from the fourth quarter of 2020, decreasing $1.0 million or less than 1%. United’s tax-equivalent net interest income for the first quarter of 2021 was also relatively flat from the fourth quarter of 2020. The net interest spread for the first quarter of 2021 of 3.14% remained flat from the fourth quarter of 2020 due to equal 6 basis point decreases in the average cost of funds and the average yield on earning assets. PPP loan fee income for the first quarter of 2021 increased $4.3 million from the fourth quarter of 2020, driven primarily by higher loan forgiveness. Average earning assets increased approximately $384.6 million or 2% from the fourth quarter of 2020, due mainly to increases in average investment securities of $136.7 million and average short-term investments of $521.6 million partially offset by a decrease in average net loans and loans held for sale of $273.6 million. Loan accretion on acquired loans decreased $1.1 million from the fourth quarter of 2020. The net interest margin of 3.30% for the first quarter of 2021 was a decrease of 3 basis points from the net interest margin of 3.33% for the fourth quarter of 2020.

Credit Quality

United’s asset quality continues to be sound relative to the current economic environment. At March 31, 2021, nonperforming loans were $116.2 million, or 0.67% of loans & leases, net of unearned income, down from $132.2 million, or 0.75% of loans & leases, net of unearned income, at December 31, 2020. Total nonperforming assets of $134.9 million, including OREO of $18.7 million at March 31, 2021, represented 0.50% of total assets as compared to nonperforming assets of $154.8 million, including OREO of $22.6 million or 0.59% of total assets at December 31, 2020.

The provision for credit losses was $143 thousand and $27.1 million for the first quarter of 2021 and 2020, respectively. On a linked-quarter basis, the provision for credit losses for the first quarter of 2021 decreased $16.6 million from $16.8 million for the fourth quarter of 2020. The decrease in the provision in relation to the prior year quarter and in relation to the linked-quarter was primarily driven by the impact of better performance trends within the loan portfolio and improvements in the reasonable and supportable forecasts of future macroeconomic conditions on the estimate of expected credit losses under CECL.

As of March 31, 2021, the allowance for loan losses was $231.6 million or 1.33% of loans & leases, net of unearned income, as compared to $235.8 million or 1.34% of loans & leases, net of unearned income, at December 31, 2020. Net charge-offs were $4.5 million and $6.7 million for the first quarter of 2021 and 2020, respectively. Annualized net charge-offs as a percentage of average loans & leases, net of unearned income were 0.10% for the first quarter of 2021, compared to 0.20% for the first quarter of 2020. Net charge-offs were $6.9 million for the fourth quarter of 2020.

Noninterest Income

Noninterest income for the first quarter of 2021 was $92.6 million, which was an increase of $55.8 million or 152% from the first quarter of 2020. The increase was driven primarily by a $47.8 million increase in income from mortgage banking activities due to an elevated volume of mortgage loan originations and sales in the secondary market as well as the addition of mortgage banking operations from the Carolina Financial acquisition. Noninterest income for the first quarter of 2021 also included $2.4 million in mortgage loan servicing income as a result of the Carolina Financial acquisition and a $2.4 million increase in net gains on investment securities in relation to the first quarter of 2020.

On a linked-quarter basis, noninterest income for the first quarter of 2021 decreased $1.5 million or 2% from the fourth quarter of 2020 primarily due to a decrease of $5.4 million in income from mortgage banking activities. Mortgage loan originations and sales volumes remained strong in the first quarter of 2021, but down from the fourth quarter of 2020. Noninterest income for the first quarter of 2021 included a $2.0 million increase in net gains on investment securities and a $1.2 million increase in fees from brokerage services in relation to the fourth quarter of 2020.

Noninterest Expense

Noninterest expense for the first quarter of 2021 was $148.9 million, an increase of $47.8 million or 47% from the first quarter of 2020. Employee compensation increased $27.9 million from the first quarter of 2020 due to the Carolina Financial acquisition as well as due to higher employee incentives and commissions expense mainly related to higher mortgage banking production. Additionally, noninterest expense increased from the first quarter of 2020 due to increases of $4.7 million in employee benefits, $3.0 million in mortgage loan servicing expense and impairment, $2.7 million in OREO expense, $2.2 million in equipment expense, $1.9 million in net occupancy expense and $4.4 million in other expenses. Within other expenses, the largest driver of the increase was an increase in the amortization of income tax credits of $1.2 million. The increase in OREO expense was due mainly to declines in the fair value of OREO properties while the increases in employee benefits, mortgage loan servicing expense and impairment, equipment expense and net occupancy expense were mainly from the Carolina Financial acquisition.

On a linked-quarter basis, noninterest expense for the first quarter of 2021 decreased $7.2 million or 5% from the fourth quarter of 2020 primarily due to decreases of $4.6 million in employee compensation and $5.1 million in other expenses. Employee compensation declined from the fourth quarter of 2020 primarily due a decline in expenses for salaries (fewer employees), incentives and commissions (lower mortgage banking production) recognized in the first quarter of 2021. Within other expenses, the largest driver of the decrease was a decrease in the expense for the reserve for unfunded commitments of $2.5 million.

Income Tax Expense

For the first quarter of 2021, income tax expense was $27.6 million as compared to $9.9 million for the first quarter of 2020. The increase in the comparative quarter was due to higher earnings and a higher effective tax rate. On a linked-quarter basis, income tax expense increased $6.7 million primarily due to higher earnings and a higher effective tax rate. United’s effective tax rate was 20.5% for the first quarter of 2021, 19.8% for the first quarter of 2020 and 18.4% for the fourth quarter of 2020.

Regulatory Capital

United continues to be well-capitalized based upon regulatory guidelines. United’s estimated risk-based capital ratio is 15.7% at March 31, 2021 while estimated Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.5%, 13.5% and 10.4%, respectively. The March 31, 2021 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%.

About United Bankshares, Inc.

As of March 31, 2021, United had consolidated assets of approximately $27.0 billion. United is the parent company of United Bank, the largest community bank headquartered in the D.C. Metro region. United Bank has 223 offices in West Virginia, Virginia, Ohio, Pennsylvania, Maryland, North Carolina, South Carolina, Georgia, and the nation’s capital. United’s stock is traded on the NASDAQ Global Select Market under the quotation symbol "UBSI".