What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-09 · 322 added, 305 removed, 521 unchanged (55% of the section changed)

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pandemic had a severe disruptive impact on the U.S.

and global economy with businesses closing in response to the pandemic.

The economic disruption caused by the virus outbreak caused downturns and increased uncertainty and volatility in financial markets.

Individual state governmental responses to the pandemic included orders closing “non-essential”

businesses temporarily and directing individuals to restrict their movements, observe social distancing and “shelter- in-place.”

These actions, together with responses to the pandemic by businesses and individuals, resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses that led to a loss of revenues and a rapid increase in unemployment, material decreases in oil and gas prices, disrupted global supply chains, changes in consumer behavior because of the potential exposure to the virus, related emergency response legislation and an expectation that Federal Reserve policy will maintain a low interest rate environment for the foreseeable future.

Several legislative measures were enacted to provide relief for those affected and provide stimulus to poor economic conditions.

On March 29, 2020, then President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which authorized approximately $2 trillion in relief to businesses and workers that were affected by events related to COVID-19.

The CARES Act included the Paycheck Protection Program (“PPP”), a nearly $350 billion program designed to aid small- and medium-sized

businesses through federally guaranteed loans distributed through banks.

These loans were intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.

In return for processing and booking these loans, the Small

Business Administration (“SBA”), will pay the lender a processing fee tiered by the size of the loan (5% for loans of not more than $350 thousand;

3% for loans of more than $350 thousand and less than $2 million;

and 1% for loans of at least $2 million).

For the year of 2020, United processed almost 9,000 loans totaling over $1.29 billion under the PPP and recognized $16.26 million of net fee income during the year of 2020 related to the PPP loans.

The PPP loan program was extended and amended through additional legislation during 2020.

The last of which occurred on December 27, 2020 when then President Trump signed into law the 2021 Consolidated Appropriations Act, an approximately $900 billion bill to provide additional COVID-19

relief and among other measures, extended weekly unemployment benefits, provided another round of economic stimulus payments to individuals and families, lengthened temporary suspensions and modifications of several-bank related provisions and provided more aid to small businesses.

Most notably, the 2021 Consolidated Appropriations Act reauthorized and appropriated up to $284.5 billion for the PPP for both first-time and second-time borrowers to receive loan disbursements for a period ending March 31, 2021, expanded the list of eligible PPP expenses and created a simplified loan forgiveness application for loans under $150 thousand.

On March 11, 2021, newly elected President Joe Biden signed into law the $1.9 trillion American Rescue Plan Act of 2021.

The legislation included additional stimulus checks to eligible individuals and an extension of the $300-per-week

supplement to federal unemployment benefits through September 6, 2021.

The legislation also allocates funding to small businesses, state and local governments, and COVID-19

vaccination and testing and tracing efforts.

The legislation also modified the PPP to clarify that the SBA affiliation rules would not apply to certain applicants.

Specifically, 501(c)(3) organizations that employ not more than 500 employees per physical location of the organization would become eligible for the program.

The legislation also provided an additional $7.25 billion for the program.

However, the legislation did not extend the March 31, 2021 application deadline.

and global economy.

As the pandemic is ongoing and dynamic in nature, there are many uncertainties related to COVID-19

including, among other things, the ongoing impact to our customers, employees and vendors;

the impact to the financial services and banking industry;

and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken, or inaction by governmental authorities to contain the outbreak or to mitigate its impact (both economic and health-related).

Refer to our 2020 Form 10-K

and our Form 10-Q

for the quarter ended June 30, 2021 for further information regarding (i) the impact of the COVID-19

pandemic on our operations and our results thereof, as well as the impact on our financial position and (ii) legislative and regulatory actions taken related to the COVID-19

pandemic, particularly as they relate to the banking and financial services industry.

The CARES Act was enacted in March 2020 and, among other provisions, authorized the Small Business Administration (“SBA”) to guarantee loans under the Paycheck Protection Program (“PPP”) for small businesses that meet eligibility requirements in order to keep their workers on the payroll and fund specified operating expenses.

Subsequent legislation extended the authority of the SBA to guaranty loans under the PPP through August 8, 2020.

In December 2020, the Economic Aid to Hard-Hit

Small Businesses, Nonprofits, and Venues Act reauthorized the SBA to guarantee loans under the PPP through March 31, 2021, and the PPP Extension Act of 2021 extended that authorization through June 30, 2021 for applications received by the SBA prior to June 1, 2021.

On March 11, 2021, the American Rescue Plan Act of 2021 (the “ARP Act”) was enacted, implementing a $1.9 trillion package of stimulus and relief proposals.

Among other things, the ARP Act provides (i) additional funding for the PPP program and an expansion of the program for the benefit of certain nonprofits, (ii) funding for the SBA to make targeted grants for restaurants and similar establishments, (iii) direct cash payments of up to $1,400 to individuals, subject to income provisions, (iv) an increase in the maximum annual Child Tax Credit, subject to income limitation provisions, (v) $300 a week in expanded unemployment insurance lasting through September 6, 2021 and makes $10,200 in unemployment benefits tax free for households, subject to income limitation provisions, (vi) tax relief making any student loan forgiveness incurred between December 31, 2020, and January 1, 2026 non-taxable

income, and (vii) funding to support state and local governments;

schools and higher education;

the Centers for Disease Control;

public transit;

rental assistance;

and airline industry workers.

On March 27, 2021, the COVID-19

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These provisions provide financially distressed small businesses and individuals greater access to bankruptcy relief.

On March 30, 2021, President Biden signed into law the PPP Extension Act of 2021.

This bill extended the PPP through June 30, 2021.

For the final 30 days of the program (i.e., from June 1 until June 30), the SBA may only process applications submitted prior to June 1, and it may not accept any new loan applications.

On June 24, 2021, President Biden announced that the three federal agencies that back mortgages – the Department of Housing and Urban Development (HUD), Department of Veterans Affairs (VA), and Department of Agriculture (USDA) – will extend their respective foreclosure moratorium for one, final month, until July 31, 2021.

The Federal Housing Finance Agency (FHFA) also announced that it has extended the foreclosure moratorium for mortgages backed by Fannie Mae and Freddie Mac until July 31, 2021.

President Biden emphasized that this is the final extension.

We are continuing to monitor the potential development of additional legislation and further actions taken by the U.S.

Impact on our Operations.

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United implemented several policies in order to facilitate the continued delivery of essential services while maintaining a high level of safety for our customers as well as our employees.

As of June 30, 2021, United does not anticipate significant challenges to our ability to maintain our systems and controls in light of the measures we have taken regarding the COVID-19

As of September 30, 2021, United does not anticipate significant challenges to our ability to maintain our systems and controls in light of the measures we have taken regarding the COVID-19

The Company does not currently face any material resource constraint through the implementation of our business continuity plans.

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Impact on our Financial Position and Results of Operations.

Although economic conditions have improved in the first six months of 2021, our business continues to be impacted by the COVID-19

In addition, significant uncertainties

related to the COVID-19

Although economic conditions have improved in the first nine months of 2021, our business continues to be impacted by the COVID-19

In addition, significant uncertainties related to the COVID-19

pandemic still exist including, among other things, the ongoing impact to our customers, employees, vendors, counterparties and service providers;

the impact to the financial services and banking industry;

and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken, or inaction by governmental authorities to contain the outbreak or to mitigate its impact.

and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken, or inaction by governmental authorities to contain the COVID-19

outbreak and its variants or to mitigate its impact.

Certain industries continue to be impacted more severely than others, although all businesses have been impacted by the COVID-19

pandemic to some degree during the first half of 2021 as they were in 2020.

pandemic to some degree during the first nine months of 2021 as they were in 2020.

The economic pressures, existing and forecasted, as of end of each quarter during 2020, coupled with the implementation of an expected loss methodology for determining United’s provision for credit losses as required by CECL contributed to an increased provision for credit losses for the year of 2020.

Also, in United’s mortgage banking segment, a market disruption caused by the COVID-19

pandemic resulted in significant losses on mortgage banking derivatives in the first quarter of 2020.

Due to better performance trends within the loan portfolio and the improved reasonable and supportable forecasts

for future macroeconomic scenarios used in the estimated of expected credit losses under the CECL accounting standard, since December 31, 2020, our provision for credit losses significantly decreased for the nine months ended September 30, 2021 resulting in a net benefit of $16.57 million as compared to an expense of $89.81 million for the nine months ended September 30, 2020.

The Company’s fee income has been reduced due to COVID-19.

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affected customers during 2020 to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc.

Should the pandemic and the global response escalate further as outbreaks occur, it is possible that the Company could reduce such fees in future periods;

Should the pandemic and the global response escalate further as outbreaks and variants occur, it is possible that the Company could reduce such fees in future periods;

however, at this time, the Company is unable to project the materiality of such an impact on the results of operations in future periods.

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In such a scenario, interest income in future periods could be negatively impacted.

The Company assessed the collectability of the accrued interest receivables on the loans deferred under the CARES Act as of September 30, 2021.

Based on this assessment, the Company released reserves of $224 thousand for the first nine months of 2021 resulting in the allowance for accrued interest receivables not expected to be collected of $26 thousand as of September 30, 2021 as compared to $250 thousand as of December 31, 2020.

At this time, the Company is unable to project the materiality of such an impact on future deferrals to COVID-19

affected borrowers, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

In addition, the net interest margin continues to be impacted by the decreases in market interest rates and the Company expects that interest rates will remain low as a result of the continuing economic disruption caused by COVID-19.

Capital and liquidity.

As of June 30, 2021, all of our capital ratios, and our subsidiary bank’s capital ratios, were in excess of all regulatory requirements.

As of September 30, 2021, all of our capital ratios, and our subsidiary bank’s capital ratios, were in excess of all regulatory requirements.

While we believe that we have sufficient capital to withstand a second economic recession brought about by COVID-19,

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Depending on the demonstrated need of the client and within the guidance of the CARES Act, the Company is deferring either the full loan payment or the principal component of the loan payment for stated period of time.

As of June 30, 2021, United has 238 eligible loan modifications in deferral under section 4013, “Temporary Relief from Troubled Debt Restructurings,” of the CARES Act on $66,364 of loans outstanding, down from 1,002 eligible loan modifications in deferral on $399,857 of loans outstanding at December 31, 2020.

As of September 30, 2021, United has 146 eligible loan modifications in deferral under section 4013, “Temporary Relief from Troubled Debt Restructurings,” of the CARES Act on $51.93 million of loans outstanding, down from 1,002 eligible loan modifications in deferral on $399.86 million of loans outstanding at December 31, 2020.

In accordance with the CARES Act, these deferrals are not considered troubled debt restructurings.

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The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

As of June 30, 2021, the Company had 7,513 of PPP loans with a balance of approximately $789.53 million.

The Company recognized approximately $9.02 million and $20.33 million in net fees on PPP loans during the second quarter and first six months ended June 30, 2021 as compared to $4.48 million for both the second quarter and first six months ended June 30, 2020.

As of September 30, 2021, the Company had 4,024 of PPP loans with a balance of approximately $411.63 million.

The Company recognized approximately $7.85 million and $28.18 million in net fees on PPP loans during the third quarter and first nine months ended September 30, 2021 as compared to $4.80 million and $9.28 million for the third quarter and first nine months ended September 30, 2020.

Remaining fees due from the SBA will be amortized and recognized over the life of the associated loans.

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United Bank will survive the Essex Bank Merger and continue to exist as a Virginia banking corporation.

Community Bankers Trust had approximately $1.75 billion in assets as of June 30, 2021.

All requisite regulatory approvals for the merger have been received from the Board of Governors of the Federal Reserve System and from the Virginia State Corporation Commission.

The merger is expected to close in the fourth quarter of 2021, subject to satisfaction of customary closing conditions including approval by the shareholders of Community Bankers Trust.

Community Bankers Trust had approximately $1.77 billion in assets as of September 30, 2021.

On May 1, 2020, United acquired 100% of the outstanding common stock of Carolina Financial Corporation (“Carolina Financial”), headquartered in Charleston, South Carolina.

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United Bank survived the CresCom Bank Merger and continues to exist as a Virginia banking corporation.

The acquisition of Carolina

Financial afforded United the opportunity to expand its existing footprint in North Carolina and South Carolina.

The acquisition of Carolina Financial afforded United the opportunity to expand its existing footprint in North Carolina and South Carolina.

The merger resulted in a combined company with more than 200 locations in some of the best banking markets in the United States.

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The results of operations of Carolina Financial are included in the consolidated results of operations from its date of acquisition.

As a result of the Carolina Financial acquisition, the second quarter and first six months of 2021 were impacted by increased levels of average balances, income, and expense as compared to the second quarter and first six months of 2020.

In addition, the second quarter and first six months of 2020 included $46.45 million and $48.01 million, respectively, of merger-related expenses from the Carolina Financial acquisition.

As a result of the Carolina Financial acquisition, the first nine months of 2021 were impacted by increased levels of average balances, income, and expense as compared to the first nine months of 2020.

In addition, the third quarter and first nine months of 2020 included $5.67 million and $53.68 million, respectively, of merger-related expenses from the Carolina Financial acquisition.

TRANSITION FROM THE LONDON INTERBANK OFFERED RATE (“LIBOR”)

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and its wholly-owned subsidiaries, unless otherwise indicated.

Management has evaluated all significant events and transactions that occurred after June 30, 2021, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.

Management has evaluated all significant events and transactions that occurred after September 30, 2021, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.

This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and accompanying notes thereto, which are included elsewhere in this document.

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Actual results could differ from these estimates.

United’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of June 30, 2021 were unchanged from the policies disclosed in United’s Annual Report on Form 10-K

United’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2021 were unchanged from the policies disclosed in United’s Annual Report on Form 10-K

for the year ended December 31, 2020 within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

FINANCIAL CONDITION

United’s total assets as of June 30, 2021 were $27.19 billion, which was an increase of $1.01 billion or 3.84% from December 31, 2020.

United’s total assets as of September 30, 2021 were $27.51 billion, which was an increase of $1.32 billion or 5.05% from December 31, 2020.

This increase was mainly due to an increase of $1.82 billion or 82.59% in cash and cash equivalents, and an increase of $459.88 million or 14.43% in investment securities.

These increases in assets were partially offset by a $847.78 million or 4.82% decrease in portfolio loans and a $225.64 million or 31.38% decrease in loans held for sale.

Total liabilities increased $910.59 million or 4.16% from year-end

Deposits increased $982.23 million or 4.77% which was partially offset by a $64.90 million or 6.45% decrease in borrowings and a $5.72 million or 2.83% decrease in accrued expenses and other liabilities.

Total liabilities increased $1.19 billion or 5.44% from year-end

2020 mainly due to a $1.24 billion or 6.01% increase in deposits.

In addition, accrued expense and other liabilities increased $9.23 million of 4.56% while operating lease liabilities increased $7.31 million or 9.98%.

Partially offsetting these increases in liabilities, was a $69.80 million or 6.93% decrease in borrowings.

Shareholders’ equity increased $133.15 million or 3.10%.

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Cash and Cash Equivalents

Cash and cash equivalents at June 30, 2021 increased $1.47 billion or 66.47% from year-end

Cash and cash equivalents at September 30, 2021 increased $1.82 billion or 82.59% from year-end

In particular, interest-bearing deposits with other banks increased $1.83 billion or 95.88% as United placed more cash in an interest-bearing account with the Federal Reserve.

Cash and cash equivalents increased $9.28 million or 3.12% while federal funds sold increased $102 thousand or 12.39%.

During the first six months of 2021, net cash of $351.96 million and $293.76 million were provided by operating and investing activities, respectively, while net cash of $822.61 million was provided by financing activities.

See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first six months of 2021 and 2020.

Total investment securities at June 30, 2021 increased $325.32 million or 10.21%.

Cash and cash equivalents decreased $7.68 million or 2.58% while federal funds sold increased $104 thousand or 12.64%.

During the first nine months of 2021, net cash of $553.20 million and $249.37 million were provided by operating and investing activities, respectively, while net cash of $1.02 billion was provided by financing activities.

See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first nine months of 2021 and 2020.

Total investment securities at September 30, 2021 increased $459.88 million or 14.43% from December 31, 2020.

Securities available for sale increased $456.63 million or 15.46%.

This change in securities available for sale reflects $399.55 million in sales, maturities and calls of securities, $759.34 million in purchases, and an decrease of $29.37 million in market value.

This change in securities available for sale reflects $566.96 million in sales, maturities and calls of securities, $1.08 billion in purchases, and a decrease of $47.33 million in market value.

The majority of the purchase activity was related to mortgage-backed securities, corporate securities, asset-backed securities and state and political subdivisions securities.

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2020 due to maturities and calls of securities.

Equity securities were $11.51 million at June 30, 2021, an increase of $789 thousand or 7.36% due mainly to net purchases.

Other investment securities were flat, increasing $1.04 million or less than 1% from year-end

Equity securities were $11.98 million at September 30, 2021, an increase of $1.27 million or 11.81% due mainly to net purchases.

Other investment securities increased $2.21 million or 1.00% from year-end

2020 due mainly to an increase in investment tax credits.

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(2) net of allowance for credit losses of $23 thousand.

At June 30, 2021, gross unrealized losses on available for sale securities were $12.71 million.

Securities with the most significant gross unrealized losses at June 30, 2021 consisted primarily of agency residential mortgage-backed securities and agency commercial mortgage-backed securities.

As of June 30, 2021, United’s available for sale mortgage-backed securities had an amortized cost of $1.65 billion, with an estimated fair value of $1.68 billion.

The portfolio consisted primarily of $973.33 million in agency residential mortgage-backed securities with a fair value of $985.00 million, $39.79 million in non-agency

At September 30, 2021, gross unrealized losses on available for sale securities were $19.84 million.

Securities with the most significant gross unrealized losses at September 30, 2021 consisted primarily of agency residential mortgage-backed securities and agency commercial mortgage-backed securities.

As of September 30, 2021, United’s available for sale mortgage-backed securities had an amortized cost of $1.68 billion, with an estimated fair value of $1.70 billion.

The portfolio consisted primarily of $1.03 billion in agency residential mortgage-backed securities with a fair value of $1.03 billion, $38.38 million in non-agency

residential mortgage-backed securities with an estimated fair value of $38.07 million, and $617.65 million in commercial agency mortgage-backed securities with an estimated fair value of $631.05 million.

As of June 30, 2021, United’s available for sale corporate securities had an amortized cost of $965.98 million, with an estimated fair value of $970.72 million.

As of September 30, 2021, United’s available for sale corporate securities had an amortized cost of $1.07 billion, with an estimated fair value of $1.07 billion.

The portfolio consisted of $17.28 million in single issue trust preferred securities with an estimated fair value of $16.48 million.

In addition to the single issue trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $535.42 million and a fair value of $535.01 million and other corporate securities, with an amortized cost of $517.73 million and a fair value of $521.63 million.

United’s available for sale single issue trust preferred securities had a fair value of $17.42 million as of June 30, 2021.

United’s available for sale single issue trust preferred securities had a fair value of $16.48 million as of September 30, 2021.

Of the $16.48 million, $8.29 million or 50.30% were investment grade;

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All single issue trust preferred securities are currently receiving full scheduled principal and interest payments.

During the first six months of 2021, United did not recognize any credit losses on its available for sale investment securities.

Management does not believe that any individual security with an unrealized loss as of June 30, 2021 is impaired.

During the first nine months of 2021, United did not recognize any credit losses on its available for sale investment securities.

Management does not believe that any individual security with an unrealized loss as of September 30, 2021 is impaired.

United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not a deterioration of credit.

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United has the intent and the ability to hold these securities until such time as the value recovers or the securities mature.

As of June 30, 2021, there was no allowance for credit losses related to the Company’s available for sale securities.

As of September 30, 2021, there was no allowance for credit losses related to the Company’s available for sale securities.

However, United acknowledges that any securities in an unrealized loss position may be sold in future periods in response to significant, unanticipated changes in asset/liability management decisions, unanticipated future market movements or business plan changes.

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Loans held for sale decreased $225.64 million or 31.38% from year-end

Loan sales in the secondary market exceeded originations during the first six months of 2021.

Loan originations for the first six months of 2021 were $3.58 billion while loans sales were $3.72 billion.

Loans held for sale were $576.83 million at June 30, 2021 as compared to $718.94 million at year-end

Loan sales in the secondary market exceeded originations during the first nine months of 2021.

Originations of loans for the first nine months of 2021 were $4.94 billion while sales of loans were $5.16 billion.

Loans held for sale were $493.30 million at September 30, 2021 as compared to $718.94 million at year-end

Portfolio Loans

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Since year-end

2020, commercial, financial and agricultural loans decreased $466.13 million or 4.36% as a result of a $396.65 million or 9.78% decrease in commercial loans (not secured by real estate) and a $69.49 million or 1.05% decrease in commercial real estate loans.

2020, commercial, financial and agricultural loans decreased $724.26 million or 6.77% as a result of a $824.95 million or 20.35% decrease in commercial loans (not secured by real estate), which was partially offset by a $100.69 million or 1.52% increase in commercial real estate loans.

Residential real estate loans decreased $385.66 million or 9.89% while consumer loans decreased $24.14 million or 2.00% due to a decrease in indirect automobile financing.

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Other assets increased $78.77 million or 13.48% from year-end

2020 due to a $53.69 million increase in cash surrender life insurance policies as a result of purchases of new policies, totaling $50.00 million, during the second quarter of 2021.

2020 due to a $90.83 million increase in cash surrender life insurance policies as a result of purchases of new policies, totaling $85.00 million, during the first nine months of 2021.

In addition, deferred tax assets increased $3.91 million due to timing differences.

Partially offsetting these increases were decreases of $8.90 million in derivative assets, $4.12 million in other real estate owned properties (“OREO”) due to sales and write downs and $2.93 million in core deposit intangibles due to amortization and $1.45 million in income tax receivables due to timing differences.

Partially offsetting these increases were decreases of $6.53 million in derivative assets, $5.90 million in other real estate owned properties (“OREO”) due to sales and write downs, $4.40 million in core deposit intangibles due to amortization, and $1.78 million in accounts receivables due to timing differences.

Deposits represent United’s primary source of funding.

Total deposits at June 30, 2021 increased $982.23 million or 4.77%.

In terms of composition, noninterest-bearing deposits increased $878.19 million or 11.86% while interest-bearing deposits were relatively flat from December 31, 2020, increasing $104.04 million or less than 1%.

Total deposits at September 30, 2021 increased $1.24 billion or 6.01% from December 31, 2020.

In terms of composition, noninterest-bearing deposits increased $1.08 billion or 14.65% while interest-bearing deposits increased $152.52 million or 1.16%.

Noninterest-bearing deposits consist of demand deposit and noninterest bearing money market (“MMDA”) account balances.

The $878.19 million increase in noninterest-bearing deposits was due mainly to increases in commercial noninterest-bearing deposits of $457.31 million or 11.25%, personal noninterest-bearing deposits of $122.06 million or 11.10% and public noninterest-bearing deposits of $3.02 million or 2.31%.

In addition, sweep activity to noninterest bearing MMDAs increased $280.39 million or 14.18%.

The $1.08 billion increase in noninterest-bearing deposits was due to increases in commercial noninterest-bearing deposits of $2.85 billion or 70.18%, personal noninterest-bearing deposits of $143.28 million or 13.03% and public noninterest-bearing deposits of $46.29 million or 35.44%.

Partially offsetting these increases in noninterest bearing MMDAs was a $1.98 billion decrease in sweep activity.

Interest-bearing deposits consist of interest-bearing checking (“NOW”), regular savings, interest-bearing MMDA, and time deposit account balances.

Interest-bearing MMDAs increased $414.25 million or 5.06% since year-end

In particular, commercial MMDAs increased $204.60 million, public MMDAs increased $101.37 million, and personal MMDAs increased $130.45 million.

Partially offsetting these increases in interest-bearing MMDAs is a decrease of $22.17 million in brokered MMDAs.

NOW accounts increased $12.38 million or 1.55% since year-end

NOW accounts increased $2.73 billion or 341.99% since year-end

2020 while regular savings accounts increased $168.

99 million or 13.16%.

Excluding sweep activity from NOW accounts to interest-bearing MMDAs to reduce United’s reserve requirement at its Federal Reserve Bank, NOW accounts increased $437.17 million or 14.12% mainly due to a $114.78 million increase in personal NOW accounts, a $152.79 million increase in commercial NOW accounts, and a $169.60 million increase in public funds NOW accounts.

Regular savings increased $140.40 million or 10.94% from year-end

2020 mainly due to a $122.35 million increase in personal savings accounts and a $17.29 million increase in commercial savings accounts.

Partially offsetting these increases in interest-bearing deposits is a $2.08 billion or 25.44% decrease in interest-bearing MMDAs.

In particular, personal MMDAs decreased $1.06 billion, commercial MMDAs decreased $407.60 million, and public MMDAs decreased $606.03 million.

These decreases were due to a $2.30 billion decrease in sweep activity from NOW accounts to interest-bearing MMDAs.

The increase of $168.99 million in regular savings was mainly due to a $148.26 million increase in personal savings accounts and a $19.66 million increase in commercial savings accounts.

Time deposits under $100,000 decreased $123.41 million or 12.59% from year-end

This decrease in time deposits under $100,000 was the result of a $73.10 million decrease in fixed Certificates of Deposits (“CDs”) under $100,000 and a $12.55 million decrease in listed CDs under $100,000.

This decrease in time deposits under $100,000 was the result of a $107.28 million decrease in fixed Certificates of Deposits (“CDs”) under $100,000 and a $16.47 million decrease in CDs under $100,000 obtained through the use of deposit listing services.

Since year-end

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Total deposits

Includes time deposits of $250,000 or more of $623,652 and $889,334 at June 30, 2021 and December 31, 2020, respectively.

Total borrowings at June 30, 2021 decreased $64.90 million or 6.45% since year-end

During the first six months of 2021, short-term borrowings decreased $14.56 million or 10.23% due to a decline in short-term securities sold under agreements to repurchase.

Includes time deposits of $250,000 or more of $547,761 and $889,334 at September 30, 2021 and December 31, 2020, respectively.

Total borrowings at September 30, 2021 decreased $69.80 million or 6.93% since year-end

During the first nine months of 2021, short-term borrowings decreased $19.28 million or 13.55% due to a decline in short-term securities sold under agreements to repurchase.

Long-term borrowings decreased $50.52 million or 5.84% from year-end

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Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at June 30, 2021 decreased $5.72 million or 2.83% from year-end

In particular, income tax payable decreased $3.88 million and business franchise taxes decreased $4.33 million both due to timing differences.

In addition, interest payable decreased $2.01 million, accrued employee expenses decreased $6.20 million as a result of $6.13 million decrease in incentives payable and derivative liabilities decreased $6.66 million.

Partially offsetting these decreases was an increase of $18.57 million in accounts payable associated with George Mason due to timing differences and an increase of $6.95 million in accrued loan expenses.

Accrued expenses and other liabilities at September 30, 2021 increased $9.23 million or 4.56% from year-end

In particular, accounts payable associated with George Mason increased $34.65 million due to timing differences and accrued loan expenses increased $6.06 million.

Partially offsetting these increases were decreases of $4.09 million in income taxes payable and $1.93 million in business franchise taxes, both due to timing differences.

In addition, interest payable decreased $2.02 million, accrued employee expenses decreased $8.39 million as a result of a $3.75 million decrease in incentives payable and a $6.09 million decrease in other employee withholdings, and derivative liabilities decreased $9.05 million due to a change in fair value.

Shareholders’ Equity

Shareholders’ equity at June 30, 2021 was $4.39 billion, which was an increase of $96.09 million or 2.24% from year-end

Shareholders’ equity at September 30, 2021was $4.43 billion, which was an increase of $133.15 million or 3.10% from year-end

Retained earnings increased $158.09 million or 13.12% from year-end

Earnings net of dividends for the first six months of 2021 were $111.21 million.

Earnings net of dividends for the first nine months of 2021 were $158.09 million.

Accumulated other comprehensive income decreased $23.61 million or 105.54% from year-end

2 unchanged sentences

The after-tax

accretion of pension costs was $1.74 million for the first six months of 2021.

accretion of pension costs was $2.38 million for the first nine months of 2021.

During the fourth quarter of 2020, United began repurchasing its common stock on the open market under repurchase plans approved by United’s Board of Directors.

United repurchased 306,204 shares in the first six months of 2021 at a cost of $9.96 million or an average price per share of $32.52.

United repurchased 306,204 shares in the first nine months of 2021 at a cost of $9.96 million or an average price per share of $32.52.

RESULTS OF OPERATIONS

Net income for the second quarter of 2021 was $94.84 million or $0.73 per diluted share, as compared to $52.69 million or $0.44 per diluted share for the prior year second quarter.

Net income for the first six months of 2021 was $201.73 million or $1.56 per diluted share compared to $92.87 million or $0.84 per share for the first six months of 2020.

Earnings for the second quarter and first half of 2021, as compared to the second quarter and first half of 2020, were benefited by 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 second quarter and first half of 2020 were also affected by significant merger-related expenses from the Carolina Financial Corporation (“Carolina Financial”) acquisition.

For the second quarter of 2021, United’s annualized return on average assets was 1.41% and return on average shareholders’ equity was 8.69% as compared to 0.87% and 5.40% for the second quarter of 2020.

United’s annualized return on average assets for the first six months of 2021 was 1.52% and return on average shareholders’ equity was 9.32% as compared to 0.85% and 5.16% for the first six months of 2020.

For the second quarter and first half of 2021, United’s annualized return on average tangible equity was 14.95% and 16.06%, respectively, as compared to 9.58% and 9.28% for the second quarter and first half of 2020, respectively.

Net income for the third quarter of 2021 was $92.15 million or $0.71 per diluted share, as compared to $103.78 million or $0.80 per diluted share for the prior year third quarter.

Net income for the first nine months of 2021 was $293.89 million or $2.27 per diluted share compared to $196.65 million or $1.68 per share for the first nine months of 2020.

Earnings for the third quarter and first nine months of 2021, as compared to the third quarter and first nine months of 2020, were benefited by 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.

As a result of the acquisition of Carolina Financial on May 1, 2020, the first nine months of 2021 reflected higher average balances, income, and expense as compared to the first nine months of 2020.

In addition, the third quarter and first nine months of 2020 included merger-related expenses of $5.67 million and $53.68 million, respectively, associated with the acquisition of Carolina Financial compared to $845 thousand and $1.03 million of merger-related expenses incurred in the third quarter and first nine months of 2021, respectively, related to the announced Community Bankers Trust acquisition.

For the third quarter of 2021, United’s annualized return on average assets was 1.33% and return on average shareholders’ equity was 8.23% as compared to 1.56% and 9.68% for the third quarter of 2020.

United’s annualized return on average assets for the first nine months of 2021 was 1.46% and return on average shareholders’ equity was 8.95% as compared to 1.12% and 6.85% for the first nine months of 2020.

For the third quarter and first nine months of 2021, United’s annualized return on average tangible equity was 14.03% and 15.36%, respectively, as compared to 16.94% and 12.19% for the third quarter and first nine months of 2020, respectively.

Three Months Ended

Six Months Ended

Nine Months Ended

(Dollars in thousands)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30,

Return on Average Tangible Equity:

6 unchanged sentences

[(a) / (b)] x 366 or 365/ (c)

Net interest income for the second quarter of 2021 was $186.52 million, which was an increase of $15.92 million, or 9.33%, from the second quarter of 2020.

The increase in net interest income occurred because total interest income increased $1.47 million while total interest expense decreased $14.45 million from the second quarter of 2020.

Net interest income for the first half of 2021 was $377.48 million, an increase of $65.36 million or 20.94% from the first half of 2020.

The increase in net interest income occurred because total interest income increased $26.64 million while total interest expense decreased $38.71 million from the first six months of 2020.

The provision for credit losses was a net reduction in expense of $8.88 million and $8.74 million for the second quarter and first half of 2021, respectively, while the provision for credit losses was an expense of $45.91 million and $73.03 million, respectively, for the second quarter and first half of 2020.

Net interest income for the third quarter of 2021 was $181.58 million, which was a decrease of $4.09 million, or 2.20%, from the third quarter of 2020.

The decrease in net interest income occurred because total interest income decreased $16.19 million while total interest expense decreased $12.10 million from the third quarter of 2020.

Net interest income for the first nine months of 2021 was $559.06 million, an increase of $61.27 million or 12.31% from the first nine months of 2020.

The increase in net interest income occurred because total interest income increased $10.46 million while total interest expense decreased $50.82 million from the first nine months of 2020.

The provision for credit losses was a net benefit of $7.83 million and $16.57 million for the third quarter and first nine months of 2021, respectively, while the provision for credit losses was an expense of $16.78 million and $89.81 million, respectively, for the third quarter and first nine months of 2020.

These decreases in the provision for credit losses were mainly due to the impact of better performance trends within the loan portfolio as well

1 unchanged sentence

In addition, a provision for loan losses of $28.95 million was recorded on purchased non-PCD

loans from Carolina Financial during the second quarter of 2020.

For the second quarter of 2021, noninterest income was $62.85 million, which was a decrease of $25.54 million or 28.90% from the second quarter of 2020 primarily driven by a decrease in income from mortgage banking activities due primarily to the mark-to-market

impact of a declining interest rate lock commitment pipeline.

Noninterest income for the first six months of 2021 was $155.42 million which was an increase of $30.22 million or 24.14% from the first six months of 2020 which was primarily due to increased 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.

For the second quarter of 2021, noninterest expense decreased $10.42 million or 6.98% from the second quarter of 2020 primarily due to a decrease in data processing expense which included a contract termination penalty incurred in the second quarter of 2020 associated with the Carolina Financial acquisition.

For the first six months of 2021, noninterest expense increased $37.37 million or 14.92% from the first six months of 2020 due mainly to the Carolina Financial acquisition as well as due to higher employee incentives and commissions expense mainly related to higher mortgage banking production.

Income taxes for the second quarter of 2021 were $24.46 million as compared to $11.02 million for the second quarter of 2020.

For the first six months of 2021 and 2020 income tax expense was $52.02 million and $20.91 million, respectively.

For the quarters ended June 30, 2021 and 2020, United’s effective tax rate was 20.50% and 17.30%, respectively.

The effective tax rate for the first six months of 2021 and 2020 was 20.50% and 18.38%, respectively.

loans from Carolina Financial during the first nine months of 2020.

For the third quarter of 2021, noninterest income was $68.62 million, which was a decrease of $66.84 million or 49.34% from the third quarter of 2020 primarily driven by a decrease in income from mortgage banking activities due primarily to a lower mortgage loan origination and sale volume and the mark-to-market

impact of a declining locked pipeline.

Noninterest income for the first nine months of 2021 was $224.04 million which was a decrease of $36.62 million or 14.05% from the first nine months of 2020 which was primarily due to decreased income from mortgage banking activities due primarily to the mark-to-market

impact of a declining locked pipeline although originations and sales of mortgage loans in the secondary market increased.

For the third quarter of 2021, noninterest expense decreased $29.32 million or 17.09% from the third quarter of 2020 primarily due to a decrease in employee compensation due to lower employee incentives and commissions related to mortgage banking production as well as a lower employee headcount.

For the first nine months of 2021, noninterest expense increased $8.05 million or 1.91% from the first nine months of 2020 due mainly to the Carolina Financial acquisition as well as due to higher employee incentives and commissions expense mainly related to higher mortgage banking production.

Income taxes for the third quarter of 2021 were $23.60 million as compared to $28.97 million for the third quarter of 2020.

For the first nine months of 2021 and 2020 income tax expense was $75.62 million and $49.88 million, respectively.

For the quarters ended September 30, 2021 and 2020, United’s effective tax rate was 20.39% and 21.82%, respectively.

The effective tax rate for the first nine months of 2021 and 2020 was 20.47% and 20.23%, respectively.

Business Segments

2 unchanged sentences

Community Banking

Net income attributable to the community banking segment for the second quarter of 2021 was $89.77 million compared to net income of $29.78 million for the second quarter of 2020.

Net income attributable to the community banking segment for the first half of 2021 was $172.00 million compared to net income of $71.83 million for the first half of 2020.

The higher net income within the community banking segment was due primarily to the impact of the Carolina Financial acquisition and a lower provision for credit losses.

Net interest income increased $15.70 million to $183.40 million for the second quarter of 2021, compared to $167.70 million for the same period of 2020.

Net interest income increased $62.47 million to $370.60 million for the first half of 2021, compared to $308.12 million for the same period of 2020.

Generally, net interest income for the second quarter and first six months of 2021 increased from the second quarter and first six months of 2020 due to an increase in average earning assets as a result of the Carolina Financial acquisition, PPP loan activity and to a larger decline in the average cost of funds as compared to the average yield on earning assets.

Provision for credit losses was a reduction in expense of $8.88 million for the three months ended June 30, 2021 compared to a provision expense of $45.91 million for the same period of 2020.

Provision for credit losses was a reduction in expense of $8.74 million for the six months ended June 30, 2021 compared to a provision expense of $73.03 million for the same period of 2020.

The decreases for the second quarter and first half of 2021 were due mainly to a provision for credit losses of $28.95 million recorded on purchased non-credit

Net income attributable to the community banking segment for the third quarter of 2021 was $81.88 million compared to net income of $51.29 million for the third quarter of 2020.

Net income attributable to the community banking segment for

the first nine months of 2021 was $253.88 million compared to net income of $123.12 million for the first nine months of 2020.

The higher net income within the community banking segment was due primarily to a lower provision for credit losses.

The first nine months of 2021 was also impacted by the Carolina Financial acquisition.

Net interest income decreased $2.74 million to $179.44 million for the third quarter of 2021, compared to $182.19 million for the same period of 2020.

A decrease in interest income primarily due to a change in the mix of interest earning assets as well as lower accretion on acquired loans was partially offset by lower interest expense on deposits and borrowings reflecting a decline in market interest rates and higher loan fee income from the PPP.

Net interest income increased $59.73 million to $550.04 million for the first nine months of 2021, compared to $490.31 million for the same period of 2020.

Generally, net interest income for the first nine months of 2021 increased from the first nine months of 2020 due to an increase in average earning assets as a result of the Carolina Financial acquisition, PPP loan activity and to a larger decline in the average cost of funds as compared to the average yield on earning assets.

Provision for credit losses was a net benefit of $7.83 million for the three months ended September 30, 2021 compared to a provision expense of $16.78 million for the same period of 2020.

Provision for credit losses was a net benefit of $16.57 million for the nine months ended September 30, 2021 compared to a provision expense of $89.81 million for the same period of 2020.

The decrease for the third quarter of 2021 was due mainly to the better performance trends within the loan portfolio as well

reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard.

The decrease for the first nine months of 2021 was due mainly to a provision for credit losses of $28.95 million recorded on purchased non-credit

deteriorated (“non-PCD”)

loans from Carolina Financial during the second quarter of 2020 and the better performance trends within the loan portfolio as well

loans from Carolina Financial during the second quarter of 2020, the better performance trends within the loan portfolio as well

reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard.

Noninterest income increased $3.77 million for the second quarter of 2021 to $24.07 million as compared to $20.30 million for the second quarter of 2020.

Noninterest income for the first half of 2021 increased $10.59 million to $50.46 million for the first half of 2021 as compared to $39.87 million for the first half of 2020.

The increases in 2021 were due mainly to increased fees from trust services, fees from brokerage services, fees from deposit services, bankcard fees and merchant discounts and other miscellaneous income.

Noninterest expense was $103.43 million for the second quarter of 2021, compared to $106.48 million for the same period of 2020.

The decrease of $3.05 million was mainly due to a decline in data processing expense from the second quarter of 2020, which included a significant contract termination penalty associated with the Carolina Financial acquisition.

Noninterest expense was $213.45 million for the six months ended June 30, 2021, compared to $186.94 million for the same period of 2020.

The increase in noninterest expense for the first six months of 2021 was primarily attributable to the additional employees and branch offices from the Carolina Financial acquisition as most major categories of noninterest expense showed increases.

Noninterest income decreased $1.90 million for the third quarter of 2021 to $24.71 million as compared to $26.62 million for the third quarter of 2020.

The third quarter of 2020 included a $2.23 million gain on the sale of bank premises.

Partially offsetting the decrease in noninterest income were increases in fees from brokerage services, fees from trust services and fees from deposit services.

Noninterest income for the first nine months of 2021 increased $8.69 million to $75.17 million for the first nine months of 2021 as compared to $66.48 million for the first nine months of 2020.

The increase for the first nine months of 2021 was due mainly to increased fees from trust services, fees from brokerage services, fees from deposit services, bankcard fees and merchant discounts and other miscellaneous income.

Noninterest expense was $109.13 million for the third quarter of 2021, compared to $125.68 million for the same period of 2020, a decline of $16.55 million.

The third quarter of 2020 included $10.39 million in prepayment penalties on the early payoff of three long-term FHLB advances.

In addition, expenses for employee compensation, net occupancy, OREO properties and FDIC insurance declined.

Noninterest expense was $322.58 million for the nine months ended September 30, 2021, compared to $312.62 million for the same period of 2020, an increase of $9.96 million.

The increase in noninterest expense for the first nine months of 2021 was primarily attributable to the additional employees and branch offices from the Carolina Financial acquisition as most major categories of noninterest expense showed increases.

Mortgage Banking

The mortgage banking segment reported net income of $4.97 million and $28.00 million for the second quarter and the first half of 2021, respectively, as compared to net income of $31.05 million and $32.16 million for the second quarter and first half of 2020.

Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $39.77 million for the second quarter of 2021 as compared to $71.01 million for the second quarter of 2020.

The decrease of $31.25 million was due mainly to a decline in the fair value of derivatives associated with mortgage loan commitments although sales activity increased.

Noninterest income for the first half of 2021 was $107.27 million as compared to $92.20 million for the first half of 2020.

The increase of $15.07 million for the first half of 2021 was due mainly to increased sales of mortgage loans in the secondary market and the addition of mortgage banking operations from the Carolina Financial acquisition.

Noninterest expense was $36.39 million and $77.57 million for the second quarter and first half of 2021 as compared $35.26 million and $56.02 million for the second quarter and first half of 2020.

The mortgage banking segment reported net income of $12.42 million and $40.42 million for the third quarter and the first nine months of 2021, respectively, as compared to net income of $55.40 million and $87.56 million for the third quarter and first nine months of 2020.

Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $45.02 million for the third quarter of 2021 as compared to $110.90 million for the third quarter of 2020.

The decrease of $65.88 million was due mainly to lower originations and sales of mortgage loans and the mark-to-market

impact of a declining locked pipeline.

Noninterest income for the first nine months of 2021 was $152.30 million as compared to $203.10 million for the first nine months of 2020.

The decrease of $50.81 million for the first nine months of 2021 was due mainly to the mark-to-market

impact of a declining locked pipeline although originations and sales of mortgage loans in the secondary market increased.

Noninterest expense consists mainly of salaries, commissions and benefits of mortgage segment employees.

The increases in 2021 were due mainly to higher employee incentives and commissions related to the increased mortgage banking production as well as the additional expense associated with the mortgage banking employees added from the Carolina Financial acquisition.

Noninterest expense was $31.79 million for the third

quarter of 2021 as compared $43.42 million for the third quarter of 2020.

The decrease of $11.63 million was primarily due to a decrease in employee compensation due to lower employee incentives and commissions related to a decrease in mortgage banking production.

Noninterest expense was $109.36 million for the first nine months of 2021 as compared to $99.44 million for the first nine months of 2020.

The increase of $9.93 million for the first nine months of 2021 was due mainly to higher employee incentives and commissions related to the increased mortgage banking production as well as the additional expense associated with the mortgage banking employees added from the Carolina Financial acquisition.

Consolidated Results of Operations by Major Category

9 unchanged sentences

Income before income taxes

Six Months Ended

Nine Months Ended

(Dollars in thousands)

12 unchanged sentences

Such changes, and their impact on net interest income in 2021 and 2020, are presented below.

Net interest income for the second quarter of 2021 was $186.52 million, which was an increase of $15.92 million or 9.33% from the second quarter of 2020.

The $15.92 million increase in net interest income occurred because total interest income increased $1.47 million while total interest expense decreased $14.45 million from the second quarter of 2020.

Net interest income for the first half of 2021 was $377.48 million, which was an increase of $65.36 million or 20.94% from the first half of 2020.

The $65.36 million increase in net interest income occurred because total interest income increased $26.64 million while total interest expense decreased $38.71 million from the first half of 2020.

On a linked-quarter basis, net interest income for the second quarter of 2021 decreased $4.44 million or 2.33% from the first quarter of 2021.

The $4.44 million decrease in net interest income occurred because total interest income decreased $5.47 million while total interest expense decreased $1.03 million from the first quarter of 2021.

Generally, net interest income for the second quarter and first half of 2021 increased from the second quarter and first half of 2020 due to a larger decline in the cost of average interest-bearing liabilities in comparison to the yield on average

earning assets (“interest rate spread”).

Generally, interest income for the second quarter and first half of 2021 increased from the second quarter and first half of 2020 due to an increase in earning assets, mainly as a result of the Carolina Financial acquisition and PPP loan activity, while interest expense decreased primarily due to a decline in market interest rates which resulted in lower funding costs.

Net interest income for the third quarter of 2021 was $181.58 million, which was a decrease of $4.09 million or 2.20% from the third quarter of 2020.

The $4.09 million decrease in net interest income occurred because total interest income decreased $16.19 million while total interest expense decreased $12.10 million from the third quarter of 2020.

Net interest income for the first nine months of 2021 was $559.06 million, which was an increase of $61.27 million or 12.31% from the first nine months of 2020.

The $61.27 million increase in net interest income occurred because total interest income increased $10.46 million while total interest expense decreased $50.82 million from the first nine months of 2020.

On a linked-quarter basis,

net interest income for the third quarter of 2021 decreased $4.94 million or 2.65% from the second quarter of 2021.

The $4.94 million decrease in net interest income occurred because total interest income decreased $6.11 million while total interest expense decreased $1.17 million from the second quarter of 2021.

Generally, interest income for the third quarter of 2021 decreased from the third quarter of 2020 due to a change in the mix of interest earning assets while interest expense decreased due to lower market interest rates which resulted in lower funding costs.

Interest income for the first nine months of 2021 increased from the first nine months of 2020 due to an increase in earning assets, mainly as a result of the Carolina Financial acquisition and PPP loan activity, while interest expense decreased primarily due to the decline in market interest rates.

For the purpose of this remaining discussion, net interest income is presented on a tax-equivalent

7 unchanged sentences

Tax-equivalent

net interest income for the second quarter of 2021 was $187.59 million, an increase of $15.97 million or 9.31% from the second quarter of 2020.

Average earning assets for the second quarter of 2021 increased $2.31 billion or 10.69% from the second quarter of 2020 due to a $419.95 million or 2.45% increase in average net loans and leases, including loans held for sale, a $1.36 billion or 87.61% increase in average short-term investments and a $537.20 million or 18.33% increase in average investment securities.

The net interest spread for the second quarter of 2021 increased 10 basis points from second quarter of 2020 due to a 43 basis point decrease in the average cost of funds partially offset by a 33 basis point decrease in average yield on earning assets.

Net PPP loan fee income of $9.02 million was recognized in the second quarter of 2021 driven primarily by loan forgiveness by the SBA, as compared to $4.48 million for the second quarter of 2020.

Loan accretion on acquired loans and leases was $9.67 million and $9.55 million for the second quarter of 2021 and 2020, respectively, an increase of $120 thousand.

The net interest margin of 3.14% for the second quarter of 2021 was a decrease of 4 basis points from the net interest margin of 3.18% for the second quarter of 2020.

net interest income for the third quarter of 2021 was $182.64 million, a decrease of $4.07 million or 2.18% from the third quarter of 2020.

The decrease in net interest income and tax-equivalent

net interest income was primarily due to a change in the mix of interest earning assets.

The decrease was partially offset by lower interest expense on deposits and borrowings reflecting a decline in market interest rates and higher loan fee income from the PPP.

The net interest spread for the third quarter of 2021 decreased 10 basis points from the third quarter of 2020 due to a 41 basis point decrease in the average yield on earning assets partially offset by a 31 basis point decrease in the average cost of funds.

Average earning assets for the third quarter of 2021 increased $937.44 million, or 4.00%, from the third quarter of 2020 due to a $1.86 billion increase in average short-term investments and a $563.22 million increase in average investment securities, partially offset by a $1.48 billion decrease in average net loans and loans held for sale mainly driven by a decline in PPP loan balances.

Net PPP loan fee income of $7.85 million was recognized in the third quarter of 2021 driven primarily by loan forgiveness, as compared to $4.80 million for the third quarter of 2020.

Loan accretion on acquired loans was $8.15 million and $11.74 million for the third quarter of 2021 and 2020, respectively, a decrease of $3.59 million.

The net interest margin of 2.98% for the third quarter of 2021 was a decrease of 20 basis points from the net interest margin of 3.18% for the third quarter of 2020.

Tax-equivalent

net interest income for the first six months of 2021 was $379.60 million, an increase of $65.68 million or 20.92% from the first six months of 2020.

This increase in tax-equivalent

net interest income was primarily attributable to an increase in average earning assets from the Carolina Financial acquisition.

Average earning assets increased $4.26 billion or 21.90% from the first six months of 2020 as average net loans and leases, including loans held for sale, increased $2.24 billion or 14.40%.

Average short-term investments and average investment securities increased $1.47 billion or 129.69% and $555.70 million or 19.94%, respectively.

Net PPP loan fee income of $20.33 million was recognized in the first half of 2021 driven primarily by loan forgiveness, as compared to $4.48 million for the first half of 2020.

In addition, the average cost of funds for the first half of 2021 decreased 67 basis points due primarily to a decline in interest rates from the first half of 2020.

Partially offsetting the increases to tax-equivalent

net interest income for the first half of 2021 was a decrease of 47 basis points in the average yield on earning assets as compared to the first half of 2020 due to the decline in market interest rates and the low yield on the PPP loans.

In addition, loan accretion on acquired loans was $19.47 million and $19.10 million for the first half of 2021 and 2020, respectively, an increase of $374 thousand.

The net interest margin of 3.22% for the first half of 2021 was a decrease of 2 basis points from the net interest margin of 3.24% for the first half of 2020.

On a linked-quarter basis, net interest income for the second quarter of 2021 decreased $4.44 million or 2.33% from the first quarter of 2021.

The net interest spread for the second quarter of 2021 of 2.98% decreased 16 basis points from the first quarter of 2021 due to a 19 basis point decrease in the average yield on earning assets partially offset by a 3 basis point decrease in the average cost of funds.

Net PPP loan fee income for the second quarter of 2021 decreased $2.29 million from the first quarter of 2021.

Average earning assets increased $460.32 million, or 1.96%, from the first quarter of 2021 due mainly to increases in average short-term investments of $616.06 million and average investment securities of $252.01 million partially offset by a decrease in average net loans and leases, including loans held for sale of $407.75 million driven primarily by PPP loan forgiveness.

The net interest margin of 3.14% for the second quarter of 2021 was a decrease of 16 basis points from the net interest margin of 3.30% for the first quarter of 2021.

net interest income for the first nine months of 2021 was $562.24 million, an increase of $61.61 million, or 12.31%, from the first nine months of 2020.

The increase in net interest income and tax-equivalent

net interest income was primarily due to an increase in average earning assets from the Carolina Financial acquisition and PPP loans as well as lower interest expense on deposits and borrowings.

Average earning assets for the first nine months of 2021 increased $3.15 billion, or 15.13%, from the first nine months of 2020 due to a $1.60 billion increase in average short-term investments, a $989.33 million increase in average net loans and loans held for sale and a $558.52 million increase in average investment securities.

The net interest spread for the first nine months of 2021 increased 11 basis points from the first nine months of 2020 due to a 54 basis point decrease in the average cost of funds partially offset by a 43 basis point decrease in the average yield on earning assets.

Net PPP loan fee income of $28.18 million was recognized in the first nine months of 2021 driven primarily by loan forgiveness, as compared to $9.28 million for the first nine months of 2020.

Loan accretion on acquired loans was $27.62 million and $30.84 million for the first nine months of 2021 and 2020, respectively, a decrease of $3.22 million.

The net interest margin of 3.14% for the first nine months of 2021 was a decrease of 7 basis points from the net interest margin of 3.21% for the first nine months of 2020.

On a linked-quarter basis, net interest income for the third quarter of 2021 decreased $4.94 million, or 2.65%, from the second quarter of 2021.

Tax-equivalent

net interest income for the third quarter of 2021 decreased $4.95 million, or 2.64%, from the second quarter of 2021.

The net interest spread for the third quarter of 2021 of 2.83% decreased 15 basis points from the second quarter of 2021 due to a 19 basis point decrease in the average yield on earning assets partially offset by a 4 basis point decrease in the average cost of funds.

Average earning assets increased approximately $394.59 million, or 1.65%, from the second quarter of 2021 due to increases in average short-term investments of $919.66 million and average investment securities of $111.56 million partially offset by a decrease in average net loans and loans held for sale of $636.63 million mainly driven by a decline in PPP loan balances.

Net PPP loan fee income for the third quarter of 2021 decreased $1.18 million from the second quarter of 2021 to $7.85 million.

Loan accretion on acquired loans decreased $1.52 million from the second quarter of 2021 to $8.15 million for the third quarter of 2021.

The net interest margin of 2.98% for the third quarter of 2021 was a decrease of 16 basis points from the net interest margin of 3.14% for the second quarter of 2021.

United’s tax-equivalent

1 unchanged sentence

The following table provides the discount/premium and net accretion impact to tax-equivalent

net interest income for the three months ended June 30, 2021, June 30, 2020 and March 31, 2021 and the six months ended June 30, 2021 and June 30, 2020:

net interest income for the three months ended September 30, 2021, September 30, 2020 and June 30, 2021 and the nine months ended September 30, 2021 and September 30, 2020:

Three Months Ended

3 unchanged sentences

Long-term borrowings

Six Months Ended

Nine Months Ended

(Dollars in thousands)

5 unchanged sentences

The following tables reconcile the difference between net interest income and tax-equivalent

net interest income for the three months ended June 30, 2021, June 30, 2020 and March 31, 2021 and the six months ended June 30, 2021 and June 30, 2020.

net interest income for the three months ended September 30, 2021, September 30, 2020 and June 30, 2021 and the nine months ended September 30, 2021 and September 30, 2020.

Three Months Ended

5 unchanged sentences

net interest income

Six Months Ended

Nine Months Ended

(Dollars in thousands)

5 unchanged sentences

The tax-equivalent

adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months and six months ended June 30, 2021 and 2020 and the three months ended March 31, 2021.

adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months and nine months ended September 30, 2021 and 2020 and the three months ended June 30, 2021.

All interest income on loans and investment securities was subject to state income taxes.

The following tables show the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month and six-month

periods ended June 30, 2021 and 2020, respectively, with the interest and rate earned or paid on such amount.

The following tables show the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month and nine-month periods ended September 30, 2021 and 2020, respectively, with the interest and rate earned or paid on such amount.

The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent

basis using the statutory federal income tax rate of 21% for the three-month and six-month

period ended June 30, 2021 and 2020.

basis using the statutory federal income tax rate of 21% for the three-month and nine-month period ended September 30, 2021 and 2020.

Interest income on all loans and investment securities was subject to state income taxes.

Three Months Ended

June 30, 2021

September 30, 2021

Three Months Ended

June 30, 2020

September 30, 2020

(Dollars in thousands)

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SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

NET INTEREST INCOME

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Nonaccruing loans are included in the daily average loan amounts outstanding.

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2020

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

(Dollars in thousands)

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SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

NET INTEREST INCOME

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Provision for Credit Losses

United’s provision for credit losses was a net reduction in expense of $8.88 million and $8.74 million for the second quarter and first half of 2021, respectively, while the provision for credit losses was an expense of $45.91 million and $73.03 million, respectively, for the second quarter and first half of 2020.

United’s provision for credit losses was a net benefit of $7.83 million and $16.57 million for the third quarter and first nine months of 2021, respectively, while the provision for credit losses was an expense of $16.78 million and $89.81 million, respectively, for the third quarter and first nine months of 2020.

United’s provision for credit losses relates to its portfolio of loans and leases, held-to-maturity

securities and interest receivable on loans which are discussed in more detail in the following paragraphs.

For the quarter ended June 30, 2021, the provision for loan and lease losses was a reduction in expense of $8.82 million as compared to provision expense of $45.91 million for the quarter ended June 30, 2020.

The provision for loan and lease losses for the first six months of 2021 was a reduction in expense of $8.52 million as compared to provision expense of $73.02 million for the first six months of 2020.

Net charge-offs were $5.22 million for the second quarter of 2021 as compared to net charge-offs of $4.34 million for the same quarter in 2020.

Net charge-offs for the first six months of 2021 were $9.76 million as compared to $11.03 million for the first six months of 2020.

For the quarter ended September 30, 2021, the provision for loan and lease losses was a net benefit of $7.82 million as compared to provision expense of $16.34 million for the quarter ended September 30, 2020.

The provision for loan and lease losses for the first nine months of 2021 was a net benefit of $16.35 million as compared to provision expense of $89.36 million for the first nine months of 2020.

Net recoveries were $1.17 million for the third quarter of 2021 as compared to net charge-offs of $5.65 million for the same quarter in 2020.

Net charge-offs for the first nine months of 2021 were $8.59 million as compared to $16.68 million for the first nine months of 2020.

The lower amount of provision expense for 2021 compared to 2020 was mainly due to a provision for loan losses of $28.95 million recorded on purchased non-PCD

loans from Carolina Financial during the second quarter of 2020 and better performance trends within the loan portfolio as well

reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses.

On a linked-quarter basis, the provision for loan losses decreased $9.11 million due mainly to better performance trends within the loan portfolio as well

reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses.

Net charge-offs for the second quarter of 2021 increased $679 thousand from the first quarter of 2021.

Annualized net charge-offs as a percentage of average loans and leases, net of unearned income were 0.12% and 0.11% for the second quarter and first half of 2021, respectively, compared to 0.10% and 0.15% for the second quarter and first half of 2020.

Annualized net charge-offs as a percentage of average loans and leases, net of unearned income was 0.10% for the first quarter of 2021.

As of June 30, 2021, nonperforming loans and leases were $102.59 million or 0.61% of loans and leases, net of unearned income as compared to $132.21 million or 0.75% of loans and leases, net of unearned income at December 31, 2020.

loans from Carolina Financial during the second quarter of 2020 and better performance trends within the loan portfolio as well as improved reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses.

On a linked-quarter basis, the provision for loan losses increased $1.05 million.

Net charge-offs for the third quarter of 2021 decreased $6.39 million from the second quarter of 2021.

Annualized net charge-offs as a percentage of average loans and leases, net of unearned income were (0.03%) and 0.07% for the third quarter and first nine months of 2021, respectively, compared to 0.13% and 0.14% for the third quarter and first nine months of 2020.

Annualized net charge-offs as a percentage of average loans and leases, net of unearned income was 0.12% for the second quarter of 2021.

As of September 30, 2021, nonperforming loans and leases were $90.27 million or 0.54% of loans and leases, net of unearned income as compared to $132.21 million or 0.75% of loans and leases, net of unearned income at December 31, 2020.

The components of nonperforming loans and leases include:

1) nonaccrual loans and leases, 2) loans and leases which are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis and 3) loans and leases whose terms have been restructured for economic or legal reasons due to financial difficulties of the borrowers.

Loans and leases past due 90 days or more were $14.14 million at June 30, 2021, an increase of $303 thousand or 2.19% from $13.83 million at year-end

This increase was primarily due to several large commercial relationships that have exceeded their stated maturity dates as of June 30, 2021.

At June 30, 2021, nonaccrual loans and leases were $41.18 million, which was a decrease of $21.54 million or 34.34% from $62.72 million at year-end

This decrease was due to the repayment of three large commercial nonaccrual loans as well as the charge-off

Loans and leases past due 90 days or more were $14.83 million at September 30, 2021, an increase of $995 thousand or 7.19% from $13.83 million at year-end

This increase was primarily due to several large commercial relationships that have exceeded their stated maturity dates as of September 30, 2021.

At September 30, 2021, nonaccrual loans and leases were $37.69 million, which was a decrease of $25.03 million or 39.91% from $62.72 million at year-end

This decrease was due to the repayment of four large commercial nonaccrual loans as well as the charge-off

of three commercial relationships and troubled debt restructuring designations for three large commercial nonaccrual loans.

Restructured loans were $47.27 million at June 30, 2021, a decrease of $8.39 million or 15.07% from $55.66 million at year-end

The decrease was mainly due to the repayment of four large commercial relationships and charge-off

of two commercial restructured loans during the first six months of 2021.

Restructured loans were $37.75 million at September 30, 2021, a decrease of $17.91 million or 32.17% from $55.66 million at year-end

The decrease was mainly due to the repayment of six large commercial relationships and charge-off

of two commercial restructured loans during the first nine months of 2021.

The loss potential on these loans has been properly evaluated and allocated within the Company’s allowance for loan losses.

Nonperforming assets include nonperforming loans and leases and real estate acquired in foreclosure or other settlement of loans (“OREO”).

Total nonperforming assets of $121.06 million, including OREO of $18.47 million at June 30, 2021, represented 0.45% of total assets.

Total nonperforming assets of $106.96 million, including OREO of $16.70 million at September 30, 2021, represented 0.39% of total assets, down from $154.80 million or 0.59% of total assets at December 31, 2020.

United maintains an allowance for loan and lease losses and a reserve for lending-related commitments.

The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses.

At June 30, 2021, the allowance for credit losses was $238.44 million as compared to $255.08 million at December 31, 2020.

At June 30, 2021, the allowance for loan and lease losses was $217.55 million as compared to $235.83 million at December 31, 2020.

At September 30, 2021, the allowance for credit losses was $236.08 million as compared to $255.08 million at December 31, 2020.

At September 30, 2021, the allowance for loan and lease losses was $210.89 million as compared to $235.83 million at December 31, 2020.

The decrease in the allowance for loan and lease losses was due to better trends within the loan portfolio as well

as improved reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses.

As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.29% at June 30, 2021 and 1.34% at December 31, 2020.

The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 212.06% and 178.38% at June 30, 2021 and December 31, 2020, respectively.

As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.26% at September 30, 2021 and 1.34% at December 31, 2020.

The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 233.63% and 178.38% at September 30, 2021 and December 31, 2020, respectively.

The increase in this ratio was due mainly to a larger decline in nonperforming loans and leases than in the allowance for loan and lease losses.

The reserve for lending-related commitments was $25.19 million, an increase of $5.94 million or 30.86% from December 31, 2020.

The increase was due mainly to an increase in loan commitments during the first nine months of 2021 as well as an increase in the utilization rate of the commitments.

United continues to evaluate risks which may impact its loan and lease portfolios.

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pandemic and resulting economic uncertainty given the rapidly changing economic impact, the Company reviewed its loan and lease portfolio segments, assessing the likely impact of COVID-19

on each segment and established relevant qualitative

adjustment factors.

on each segment and established relevant qualitative adjustment factors.

Reserves are initially determined based on losses identified from the PD/LGD and Cohort models which utilize the Company’s historical information.

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If current conditions underlying any qualitative adjustment factor were deemed to be materially different than historical conditions, then an adjustment was made for that factor.

The second quarter of 2021 qualitative adjustments include analyses of the following:

The third quarter of 2021 qualitative adjustments include analyses of the following:

– This includes portfolio trends related to business conditions;

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Assumptions for the economic variables were the following:

The forecast improved in the second quarter of 2021 as compared to the first quarter while maintaining a gradual recovery pace extending into 2023.

Greater risk of loss is probable in the hotel and accommodations portfolio due to weakened economic conditions brought on by the pandemic which resulted in a more negative forecast relative to other portfolios and a longer projected recovery period to extend into late 2023 or 2024.

Consideration was given to the $1.9 trillion American Rescue Plan (effective March 11, 2021) during the forecast selection process as it is likely this stimulus package continues to have a positive impact on the economy.

The real GDP projection decreased from the second quarter of 2021 but increased for 2022 and 2023.

The unemployment rate projection increased slightly from the second quarter of 2021 but was flat for 2022 and 2023.

This indicates a weakening of the economy for the remainder of the year with the rebound continuing in 2022 and 2023.

Greater risk of loss is probable in the hotel and accommodations portfolio due to weakened economic conditions brought on by the pandemic and labor shortages which resulted in a more negative forecast relative to other portfolios and a longer projected recovery period to extend into late 2023 or 2024.

However, we acknowledge the impact of the stimulus has been fading and will likely have no further impact by the end of the year.

Reversion to historical loss data occurs via a straight-line method during the year following the one-year

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The allowance for credit losses includes estimated lifetime losses within the portfolio due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet fully manifested themselves in loss allocation factors.

United’s review of the allowance for loan and lease losses at June 30, 2021 produced decreased allocations in each of the four loan categories as compared to December 31, 2020.

United’s review of the allowance for loan and lease losses at September 30, 2021 produced decreased allocations in each of the four loan categories as compared to December 31, 2020.

The allocation related to the commercial, financial & agricultural loan pool decreased $15.10 million.

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When the selected measure is less than the recorded investment in the loan, an expected credit loss has occurred.

The allowance for loans and leases that were individually assessed was $3.44 million at June 30, 2021 and $7.78 million

at December 31, 2020.

The allowance for loans and leases that were individually assessed was $2.53 million at September 30, 2021 and $7.78 million at December 31, 2020.

In comparison to the prior year-end,

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of previously recognized allocations for probable credit losses on individually assessed loans as well as repayment of individually assessed loans.

Management believes that the allowance for credit losses of $238.44 million at June 30, 2021 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available.

Management believes that the allowance for credit losses of $236.08 million at September 30, 2021 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available.

United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality.

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It is the opinion of management that these commercial loans do not pose any unusual risks and that adequate consideration has been given to these loans in establishing the allowance for credit losses.

The provision for credit losses related to held to maturity securities for the first half of 2021 and 2020 was immaterial.

The allowance for credit losses related to held to maturity securities was $31 thousand as of June 30, 2021 as compared to $23 thousand as of December 31, 2020.

There was no provision for credit losses recorded on available for sale investment securities for the first half of 2021 and 2020 and no allowance for credit losses on available for sale investment securities as of June 30, 2021 and December 30, 2020.

Due to loan interest payment deferrals granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans as of June 30, 2021.

As a result of this assessment, United released reserves of $70 thousand and $221 thousand for the second quarter and first half of 2021.

The allowance for accrued interest receivables not expected to be collected as of June 30, 2021 was $29 thousand as compared to $250 thousand at December 31, 2020.

The provision for credit losses related to held to maturity securities for the first nine months of 2021 and 2020 was immaterial.

The allowance for credit losses related to held to maturity securities was $27 thousand as of September 30, 2021 as compared to $23 thousand as of December 31, 2020.

There was no provision for credit losses recorded on available for sale investment securities for the first nine months of 2021 and 2020 and no allowance for credit losses on available for sale investment securities as of September 30, 2021 and December 30, 2020.

Due to loan interest payment deferrals granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans as of September 30, 2021.

As a result of this assessment, United released reserves of $3 thousand and $224 thousand for the third quarter and first nine months of 2021.

The allowance for accrued interest receivables not expected to be collected as of September 30, 2021 was $26 thousand as compared to $250 thousand at December 31, 2020.

Management is not aware of any potential problem loans or leases, trends or uncertainties, which it reasonably expects, will materially impact future operating results, liquidity, or capital resources which have not been disclosed.

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Recognizing the importance, management continues to evaluate areas where noninterest income can be enhanced.

Noninterest income for the second quarter of 2021 was $62.85 million, a decrease of $25.54 million or 28.90% from the second quarter of 2020.

Noninterest income for the first half of 2021 was $155.42 million, an increase of $30.22 million or 24.14% from the first half of 2020.

Both differences from the second quarter and first half of 2020 were due mainly to changes in income from mortgage banking activities.

Income from mortgage banking activities totaled $36.94 million for the second quarter of 2021 compared to $68.21 million for the same period of 2020, a decline of $31.27 million or 45.84%.

The decrease was due mainly to a decline in the fair value of derivatives associated with a declining interest rate lock commitment pipeline although sales activity increased.

For the three months ended June 30, 2021 and 2020, mortgage loan sales were $1.88 billion and $1.59 billion, respectively.

For the first half of 2021 and 2020, income from mortgage banking activities was $102.34 million and $85.84 million, respectively.

The increase of $16.48 million for the first half of 2021 was due mainly to increased sales of mortgage loans in the secondary market and the addition of mortgage banking operations from the Carolina Financial acquisition.

For the six months ended June 30, 2021 and 2020, mortgage loan sales were $3.72 billion and $2.21 billion, respectively.

Mortgage loan servicing income for the second quarter and first half of 2021 increased $852 thousand and $3.21 million from the second quarter and first half of 2020 due to increased mortgage servicing activity.

Fees from brokerage services for the second quarter and first half of 2021 increased $1.00 million or 37.83% and $2.41 million or 43.29%, respectively, from the second quarter and first half of 2020.

Noninterest income for the third quarter of 2021 was $68.62 million, a decrease of $66.84 million or 49.34% from the third quarter of 2020.

Noninterest income for the first nine months of 2021 was $224.04 million, a decrease of $36.62 million or 14.05% from the first nine months of 2020.

Both differences from the third quarter and first nine months of 2020 were due mainly to declines in income from mortgage banking activities.

In addition, the third quarter of 2020 included a $2.23 million gain on the sale of bank premises.

Income from mortgage banking activities totaled $42.01 million for the third quarter of 2021 compared to $109.46 million for the same period of 2020, a decline of $67.45 million or 61.62%.

The decrease was due mainly to lower sales activity and a decline in the fair value of derivatives associated with a declining pipeline.

For the three months ended September 30, 2021 and 2020, mortgage loan sales were $1.45 billion and $1.95 billion, respectively.

For the first nine months of 2021 and 2020, income from mortgage banking activities was $144.35 million and $195.30 million, respectively.

The decrease of $50.95 million for the first nine months of 2021 was due mainly to the mark-to-market

impact of a declining locked pipeline although originations and sales of mortgage loans in the secondary market increased.

For the nine months ended September 30, 2021 and 2020, mortgage loan sales were $5.16 billion and $4.16 billion, respectively.

Mortgage loan servicing income for the first nine months of 2021 increased $3.29 million from the first nine months of 2020 due to increased mortgage servicing activity as a result of the Carolina Financial acquisition.

Fees from brokerage services for the third quarter and first nine months of 2021 increased $817 thousand or 26.65% and $3.23 million or 37.38%, respectively, from the third quarter and first nine months of 2020.

This increase was due to an increased volume of transactions.

Fees from trust services for the second quarter and first half of 2021 increased $932 thousand or 28.58% and $1.21 million or 17.97%, respectively, from the second quarter and first half of 2020.

Fees from trust services for the third quarter and first nine months of 2021 increased $695 thousand or 19.45% and $1.91 million or 18.48%, respectively, from the third quarter and first nine months of 2020.

This increase was due to an increase in managed assets.

Fees from deposit services for the second quarter and first half of 2021 increased $1.34 million or 16.65% and $2.28 million or 14.24%, respectively, from the second quarter and first half of 2020.

Generally, the increase was due primarily to higher income from overdraft fees, debit card and automated teller machine (“ATM”) fees due to the waiving of fees towards the end of the first quarter and during the second quarter of 2020 as a result of the COVID-19

Fees from bankcard services for the second quarter and first half of 2021 increased $650 thousand or 90.53% and $721 thousand or 42.14%, respectively, from the second quarter and first half of 2020.

Fees from deposit services for the third quarter and first nine months of 2021 increased $568 thousand or 6.09% and $2.85 million or 11.24%, respectively, from the third quarter and first nine months of 2020.

Generally, the increase was due primarily to higher income from overdraft fees and debit card fees.

Fees from bankcard services for the first nine months of 2021 increased $968 thousand or 32.96% from the first nine months of 2020.

This increase was due to an increased volume of transactions.

Income from bank-owned life insurance (“BOLI”) for the first half of 2021 was $3.06 million, a decrease of $618 thousand or 16.80% from the first half of 2020 due to a decrease in death benefits.

For the first half of 2020, United recognized death benefits from BOLI of $1.19 million.

On a linked-quarter basis, noninterest income for the second quarter of 2021 decreased $29.73 million, or 32.11%, from the first quarter of 2021 primarily due to a decrease of $28.45 million in income from mortgage banking activities.

On a linked-quarter basis, noninterest income for the third quarter of 2021 increased $5.78 million, or 9.19%, from the second quarter of 2021 primarily due to an increase of $5.07 million in income from mortgage banking activities due primarily to a higher loan pipeline valuation.

Fees from deposit services for the third quarter of 2021 were $9.89 million, an increase of $492 thousand or 5.24% from the linked quarter due primarily to higher income from overdraft fees.

Other Expenses

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Other expenses include all items of expense other than interest expense, the provision for credit losses, and income taxes.

Noninterest expense decreased $10.42 million or 6.98% for the second quarter of 2021 compared to the same period in 2020.

For the first half of 2021, noninterest expense was $287.88 million, which was an increase of $37.37 million or 14.92% from the first half of 2020.

Employee compensation for the first half of 2021 increased $27.76 million or 24.53% from the first half of 2020.

The increase for the first half of 2021 was due mainly to additional employees from the Carolina Financial acquisition.

The remainder of the increase in employee compensation for first half of 2021 was due mainly to higher employee commissions and incentives expense primarily related to the increased mortgage banking production.

Employee benefits expense for the second quarter of 2021 increased $1.69 million or 13.23% from the second quarter of 2020.

Employee benefits expense for the first half of 2021 increased $6.36 million or 26.97% as compared to the first half of 2020.

The increases for the second quarter and first half of 2021 were primarily due to higher levels of Federal Insurance Contributions Act (“FICA”), health insurance and postretirement expense due mainly to the additional employees from the Carolina Financial acquisition.

The increase in FICA expense was also due to the higher commissions and incentives expense.

Net occupancy expense increased $1.66 million or 8.58% for the first half of 2021 as compared to the same period in 2020.

Noninterest expense decreased $29.32 million or 17.09% for the third quarter of 2021 compared to the same period in 2020.

For the first nine months of 2021, noninterest expense was $430.15 million, which was an increase of $8.05 million or 1.91% from the first nine months of 2020.

Employee compensation for the third quarter of 2021 decreased $17.00 million or 20.12% from the third quarter of 2020.

The decrease was primarily due to lower employee incentives and commissions related mainly to mortgage banking production as well as a lower employee headcount.

Employee compensation for the first nine months of 2021 increased $10.77 million or 5.45% from the first nine months of 2020.

The increase for the first nine months of 2021 was due mainly to additional employees from the Carolina Financial acquisition.

The remainder of the increase in employee compensation for first nine months of 2021 was due mainly to higher employee commissions and incentives expense primarily related to the increased mortgage banking production.

Employee benefits expense for the first nine months of 2021 increased $6.29 million or 17.09% as compared to the first nine months of 2020.

The increase for the first nine months of 2021 was primarily due to higher levels of Federal Insurance Contributions Act (“FICA”), health insurance and postretirement expense due mainly to the additional employees from the Carolina Financial acquisition.

The increase in FICA expense was due to the higher commissions and incentives expense.

Net occupancy expense for the third quarter of 2021 decreased $605 thousand or 5.53% from the third quarter of 2020.

The decrease was due to lower building rental and building maintenance expense.

Net occupancy expense increased $1.06 million or 3.49% for the first nine months of 2021 as compared to the same period in 2020.

The increases were due primarily to increases in building depreciation and maintenance expenses mainly as a result of the offices added in the Carolina Financial acquisition.

OREO expense for the first half of 2021 increased $2.48 million as declines in the fair value of OREO properties increased from the first half of 2020.

Equipment expense increased $826 thousand or 16.51% and $3.03 million or 34.18% for the second quarter and first six months of 2021, respectively, as compared to the same periods in 2020.

OREO expense for the third quarter of 2021 decreased $779 thousand due primarily to a decline in net losses on the sale of OREO properties.

OREO expense for the first nine months of 2021 increased $1.71 million as declines in the fair value of OREO properties increased from the first nine months of 2020.

Equipment expense increased $1.67 million or 29.74% and $4.70 million or 32.46% for the third quarter and first nine months of 2021, respectively, as compared to the same periods in 2020.

The increases were due to higher maintenance costs and depreciation expense primarily due to the Carolina Financial acquisition.

Data processing expense decreased $8.97 million or 56.32% and $7.45 million or 34.76% for the second quarter and first half of 2021, respectively, as compared to the second quarter and first half of 2020.

These decreases were due mainly to a $9.66 million penalty in the second quarter of 2020 to terminate the contract with Carolina Financial’s data processor.

Mortgage loan servicing expense and impairment for the second quarter and first half of 2021 increased $1.09 million and $4.13 million, respectively, from the same time periods in 2020.

The increases were due to an increase in mortgage servicing activity as a result of the acquisition of Carolina Financial and Crescent Mortgage.

In addition, United recorded a $250 thousand temporary impairment charge, net of recoveries on its mortgage servicing rights during the second quarter and first half of 2021 as compared to a temporary impairment charge on its mortgage servicing rights of $710 thousand during the second quarter and first half of 2020.

Other expense for the second quarter of 2021 decreased $3.60 million or 11.86% from the second quarter of 2020.

Included in other expense for the second quarter were merger-related expenses of $5.52 million for the Carolina Financial acquisition as compared to $183 thousand for the announced Community Bankers Trust merger in the second quarter of 2021.

The expense for the reserve for unfunded commitments for the second quarter of 2021 decreased $2.17 million from the same time period in 2020 due to a $1.84 million expense related to the reserve for acquired unfunded commitments from Carolina Financial which was recorded in the second quarter of 2020.

On a linked-quarter basis, noninterest expense for the second quarter of 2021 decreased $9.98 million, or 6.70%, from the first quarter of 2021 primarily due to decreases of $3.86 million in employee compensation and $3.25 million in OREO expense.

Employee compensation declined from the first quarter of 2021 primarily due to a decline in commissions and incentives mainly related to mortgage banking operations while the decline in OREO expense was due mainly to fewer declines in the fair value of OREO properties.

For the second quarter and first half of 2021, income tax expense was $24.46 million and $52.02 million, respectively, as compared to $11.02 million and $20.91 million, respectively, in the second quarter and first half of 2020.

These increases were due to higher earnings and a higher effective tax rate.

On a linked-quarter basis, income tax expense decreased $3.11 million due to lower earnings from the first quarter of 2021.

United’s effective tax rate was 20.50% for the second quarter of 2021, 17.30% for the second quarter of 2020 and 20.50% for the first quarter of 2021.

For the first half of 2021 and 2020, United’s effective tax rate was 20.50% and 18.38%, respectively.

Data processing expense decreased $7.55 million or 26.82% for the first nine months of 2021 as compared to the first nine months of 2020.

The decrease for the first nine months of 2021 was due mainly to a $9.66 million penalty in the second quarter of 2020 to terminate the contract with Carolina Financial’s data processor.

Mortgage loan servicing expense and impairment for the first nine months of 2021 increased $4.08 million from the same time period in 2020.

The increase was due to an increase in mortgage servicing activity as a result of the acquisition of Carolina Financial and Crescent Mortgage.

In addition, United did not record any temporary impairment charge, net of recoveries on its mortgage servicing rights during the first nine months of 2021 as compared to a temporary impairment charge on its mortgage servicing rights of $1.11 million during the first nine months of 2020.

Other expense for the third quarter of 2021 decreased $1.20 million or 3.67% from the third quarter of 2020 due mainly to a decline of $2.00 million in merger-related expenses partially offset by an increase of $601 thousand in automated teller machine (“ATM”) fees.

On a linked-quarter basis, noninterest expense for the third quarter of 2021 increased $3.33 million, or 2.39%, from the second quarter of 2021 primarily due to an increase of $4.68 million in other expense.

Within other expense, the largest drivers of the increase were increases in the expense for the reserve for unfunded commitments of $3.42 million primarily due to an increase in outstanding loan commitments and merger-related expenses of $662 thousand associated with the announced Community Bankers Trust acquisition.

Partially offsetting the increases in other expense were decreases in employee compensation of $1.10 million and employee benefits of $1.34 million, primarily due to lower commissions, and associated FICA taxes, related to mortgage banking production.

For the third quarter of 2021, income tax expense was $23.60 million as compared to $28.97 million for the third quarter of 2020 primarily due to lower earnings and a lower effective tax rate.

For the first nine months of 2021, income tax expense was $75.62 million as compared to $49.88 million for the first nine months of 2020 primarily due to higher earnings.

On a linked-quarter basis, income tax expense decreased $851 thousand primarily due to lower earnings and a slightly lower effective tax rate.

United’s effective tax rate was 20.39% for the third quarter of 2021, 21.82% for the third quarter of 2020 and 20.50% for the second quarter of 2021.

For the first nine months of 2021 and 2020, United’s effective tax rate was 20.47% and 20.23%, respectively.

For further details related to income taxes, see Note 17 of the unaudited Notes to Consolidated Financial Statements contained within this document.

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The goal of liquidity management is to ensure the ability to access funding which enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United’s cash needs.

Liquidity is managed by monitoring

funds’ availability from a number of primary sources.

Liquidity is managed by monitoring funds’ availability from a number of primary sources.

Substantial funding is available from cash and cash equivalents, unused short-term borrowing and a geographically dispersed network of branches providing access to a diversified and substantial retail deposit market.

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In the normal course of business, United through its Asset Liability Committee evaluates these as well as other alternative funding strategies that may be utilized to meet short-term and long-term funding needs.

For the first six months ended June 30, 2021, cash of $351.96 million was provided by operating activities due mainly to net income of $201.73 million.

For the first nine months ended September 30, 2021, cash of $553.20 million was provided by operating activities due mainly to net income of $293.89 million.

In addition, mortgage banking activities added cash of $225.64 million to the net income amount as sales of mortgage loans in the secondary market exceeded originations.

Net cash of $293.76 million was provided by investing activities which was primarily due to net loan repayments of $710.86 million partially offset by $364.82 million of purchases of investment securities over proceeds from sales and the $50.00 million purchase of bank-owned life insurance policies.

During the first half of 2021, net cash of $822.61 million was provided by financing activities due primarily to net growth of $984.73 million in deposits.

These funding activities were partially offset by the net repayment of $50.00 million in long-term FHLB advances, cash dividends paid of $90.72 million, and net repurchases of $11.21 million of United common stock for the first six months of 2021.

The net effect of the cash flow activities was an increase in cash and cash equivalents of $1.47 billion for the first six months of 2021.

Net cash of $249.37 million was provided by investing activities which was primarily due to net loan repayments of $864.28 million partially offset by $524.66 million of purchases of investment securities over proceeds from sales and $85.00 million of purchases of bank-owned life insurance policies.

During the first nine months of 2021, net cash of $1.02 billion was provided by financing activities due primarily to net growth of $1.23 billion in deposits.

These funding activities were partially offset by the net repayment of $50.00 million in long-term FHLB advances, cash dividends paid of $135.99 million, and net repurchases of $11.21 million of United common stock for the first nine months of 2021.

The net effect of the cash flow activities was an increase in cash and cash equivalents of $1.82 billion for the first nine months of 2021.

United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures.

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United is well-capitalized based upon regulatory guidelines.

United’s risk-based capital ratio is 15.93% at June 30, 2021 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.66%, 13.66% and 10.33%, respectively.

The June 30, 2021 ratios reflects 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

United’s risk-based capital ratio is 15.74% at September 30, 2021 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.53%, 13.53% and 10.36%, respectively.

The September 30, 2021 ratios reflects 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%.

Total shareholders’ equity was $4.39 billion at June 30, 2021, which was an increase of $96.09 million or 2.24% from December 31, 2020.

Total shareholders’ equity was $4.43 billion at September 30, 2021, which was an increase of $133.15 million or 3.10% from December 31, 2020.

This increase is primarily due to an increase of $158.09 million in retained earnings (net income less dividends declared).

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Treasury stock increased $11.34 million or 7.13% due to the repurchase of 306,204 shares of United common stock under a stock repurchase plan approved by United’s Board of directors in November of 2019.

United’s equity to assets ratio was 16.16% at June 30, 2021 as compared to 16.41% at December 31, 2020.

The primary capital ratio, capital and reserves to total assets and reserves, was 16.89% at June 30, 2021 as compared to 17.22% at December 31, 2020.

United’s average equity to average asset ratio was 16.21% for the second quarter of 2021 as compared to 16.07% the second quarter of 2020.

United’s average equity to average asset ratio was 16.31% for the first half of 2021 as compared to 16.47% the first half of 2020.

United’s equity to assets ratio was 16.11% at September 30, 2021 as compared to 16.41% at December 31, 2020.

The primary capital ratio, capital and reserves to total assets and reserves, was 16.82% at September 30, 2021 as compared to 17.22% at December 31, 2020.

United’s average equity to average asset ratio was 16.18% for the third quarter of 2021 as compared to 16.14% the third quarter of 2020.

United’s average equity to average asset ratio was 16.27% for the first nine months of 2021 as compared to 16.34% the first nine months of 2020.

All of these financial measurements reflect a financially sound position.

During the second quarter of 2021, United’s Board of Directors declared a cash dividend of $0.35 per share.

Cash dividends were $0.70 per common share for the first six months of 2021.

Total cash dividends declared were $45.27 million for the second quarter of 2021 and $90.52 million for the first six months of 2021 as compared to $45.42 million for the second quarter of 2020 and $81.02 million for the first six months of 2020.

During the third quarter of 2021, United’s Board of Directors declared a cash dividend of $0.35 per share.

Cash dividends were $1.05 per common share for the first nine months of 2021.

Total cash dividends declared were $45.27 million for the third quarter of 2021 and $135.79 million for the first nine months of 2021 as compared to $45.41 million for the third quarter of 2020 and $126.43 million for the first nine months of 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis