UNITED BANKSHARES INC/WV 10-Q

Item 1. FINANCIAL STATEMENTS (UNAUDITED) The September 30, 2021 and December 31, 2020, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries (“United” or the “Company”), consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2021 and 2020, the related consolidated statement of changes in shareholders’ equity for the three and nine months ended September 30, 2021 and 2020, the related condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020, and the notes to consolidated financial statements appear on the following pages. 3 Table of Contents CONSOLIDATED BALANCE SHEETS UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except par value) September 30 2021 December 31 2020 (Unaudited) (Note 1) Assets Cash and due from banks $ 289,690 $ 297,369 Interest-bearing deposits with other banks 3,742,944 1,910,876 Federal funds sold 927 823 Total cash and cash equivalents 4,033,561 2,209,068 Securities available for sale at estimated fair value (amortized cost-$ 3,372,304 at September 30, 2021 and $ 2,868,346 at December 31, 2020, allowance for credit losses of $ 0 at September 30, 2021 and December 31, 2020) 3,409,984 2,953,359 Securities held to maturity, net of allowance for credit losses of $ 27 at September 30, 2021 and $ 23 at December 31, 2020 (estimated fair value-$ 1,020 at September 30, 2021 and $ 1,235 at December 31, 2020) 993 1,212 Equity securities at estimated fair value 11,984 10,718 Other investment securities 223,104 220,895 Loans held for sale ( measured using the fair value option -$ 493,299 at September 30, 2021 and $ 698,341 at December 31, 2020) 493,299 718,937 Loans and leases 16,771,332 17,622,583 Less: Unearned income ( 27,703 ) ( 31,170 ) Loans and leases, net of unearned income 16,743,629 17,591,413 Less: Allowance for loan and lease losses ( 210,891 ) ( 235,830 ) Net loans and leases 16,532,738 17,355,583 Bank premises and equipment 171,935 175,824 Operating lease right-of-use assets 75,593 69,520 Goodwill 1,810,040 1,796,848 Mortgage servicing rights, net of valuation allowance of $ 1,383 at September 30, 2021 and at December 31, 2020 22,836 20,955 Accrued interest receivable, net of allowance for credit losses of $ 26 at September 30, 2021 and $ 250 at December 31, 2020 58,181 66,832 Other assets 663,269 584,496 TOTAL ASSETS $ 27,507,517 $ 26,184,247 Liabilities Deposits: Noninterest-bearing $ 8,490,191 $ 7,405,260 Interest-bearing 13,332,418 13,179,900 Total deposits 21,822,609 20,585,160 Borrowings: Securities sold under agreements to repurchase 123,018 142,300 Federal Home Loan Bank (“FHLB”) borrowings 532,782 584,532 Other long-term borrowings 281,069 279,837 Reserve for lending-related commitments 25,191 19,250 Operating lease liabilities 80,518 73,213 Accrued expenses and other liabilities 211,564 202,335 TOTAL LIABILITIES 23,076,751 21,886,627 Shareholders’ Equity Preferred stock, $ 1.00 par value; Authorized- 50,000,000 shares, none issued 0 0 Common stock, $ 2.50 par value; Authorized- 200,000,000 shares; issued- 134,167,380 and 133,809,374 at September 30, 2021 and December 31, 2020, respectively, including 4,963,606 and 4,620,867 shares in treasury at September 30, 2021 and December 31, 2020, respectively 335,419 334,523 Surplus 2,903,576 2,894,471 Retained earnings 1,363,488 1,205,395 Accumulated other comprehensive (loss) gain ( 1,239 ) 22,370 Treasury stock, at cost ( 170,478 ) ( 159,139 ) TOTAL SHAREHOLDERS’ EQUITY 4,430,766 4,297,620 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 27,507,517 $ 26,184,247 See notes to consolidated unaudited financial statements. 4 Table of Contents CONSOLIDATED STATEMENTS OF INCOME (Unaudited) UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share data) Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Interest income Interest and fees on loans and leases $ 176,695 $ 192,266 $ 548,109 $ 530,431 Interest on federal funds sold and other short-term investments 2,548 2,060 6,198 7,893 Interest and dividends on securities: Taxable 12,999 14,448 40,371 47,658 Tax-exempt 1,838 1,495 5,245 3,486 Total interest income 194,080 210,269 599,923 589,468 Interest expense Interest on deposits 9,803 17,726 32,800 64,452 Interest on short-term borrowings 167 172 527 826 Interest on long-term borrowings 2,531 6,707 7,540 26,406 Total interest expense 12,501 24,605 40,867 91,684 Net interest income 181,579 185,664 559,056 497,784 Provision for credit losses ( 7,829 ) 16,781 ( 16,565 ) 89,811 Net interest income after provision for credit losses 189,408 168,883 575,621 407,973 Other income Fees from trust services 4,269 3,574 12,225 10,318 Fees from brokerage services 3,883 3,066 11,860 8,633 Fees from deposit services 9,888 9,320 28,180 25,332 Bankcard fees and merchant discounts 1,473 1,226 3,905 2,937 Other service charges, commissions, and fees 703 715 2,237 1,843 Income from bank-owned life insurance 2,556 2,059 5,617 5,738 Income from mortgage banking activities 42,012 109,457 144,350 195,301 Mortgage loan servicing income 2,429 2,345 7,170 3,879 Net gain on the sale of bank premises 0 2,229 0 2,229 Net investment securities gains 82 860 2,715 2,566 Other income 1,329 617 5,784 1,888 Total other income 68,624 135,468 224,043 260,664 Other expense Employee compensation 67,459 84,455 208,428 197,660 Employee benefits 13,132 13,202 43,052 36,767 Net occupancy expense 10,339 10,944 31,381 30,324 Other real estate owned (“OREO”) expense 387 1,166 4,384 2,679 Equipment expense 7,286 5,616 19,160 14,465 Data processing expense 6,612 6,708 20,594 28,140 Mortgage loan servicing expense and impairment 3,253 3,301 10,029 5,949 Bankcard processing expense 422 450 1,300 1,319 FDIC insurance expense 1,920 2,700 5,720 7,882 FHLB prepayment penalties 0 10,385 0 10,385 Other expense 31,466 32,666 86,106 86,530 Total other expense 142,276 171,593 430,154 422,100 Income before income taxes 115,756 132,758 369,510 246,537 Income taxes 23,604 28,974 75,624 49,884 Net income $ 92,152 $ 103,784 $ 293,886 $ 196,653 5 Table of Contents CONSOLIDATED STATEMENTS OF INCOME (Unaudited) – continued UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share data) Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Earnings per common share: Basic $ 0.71 $ 0.80 $ 2.28 $ 1.68 Diluted $ 0.71 $ 0.80 $ 2.27 $ 1.68 Average outstanding shares: Basic 128,762,815 129,373,154 128,716,450 116,876,402 Diluted 128,960,220 129,454,966 128,934,282 116,944,594 See notes to consolidated unaudited financial statements 6 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands) Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Net income $ 92,152 $ 103,784 $ 293,886 $ 196,653 Change in net unrealized (loss) gain on available-for-sale (“AFS”) securities, net of tax ( 13,777 ) 8,180 ( 36,305 ) 53,600 Change in net unrealized gain (loss) on cash flow hedge, net of tax 1,377 678 10,320 ( 594 ) Change in pension plan assets, net of tax 638 988 2,376 3,213 Comprehensive income, net of tax $ 80,390 $ 113,630 $ 270,277 $ 252,872 See notes to consolidated unaudited financial statements 7 Table of Contents CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share data) Nine Months Ended September 30, 2021 Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders’ Equity Shares Par Value Balance at January 1, 2021 133,809,374 $ 334,523 $ 2,894,471 $ 1,205,395 $ 22,370 $ ( 159,139 ) $ 4,297,620 Comprehensive income: Net income 0 0 0 106,898 0 0 106,898 Other comprehensive income, net of tax 0 0 0 0 ( 20,509 ) 0 ( 20,509 ) Total comprehensive income, net of tax 86,389 Stock based compensation expense 0 0 1,688 0 0 0 1,688 Purchase of treasury stock ( 339,229 shares) 0 0 0 0 0 ( 11,210 ) ( 11,210 ) Cash dividends ($ 0.35 per share) 0 0 0 ( 45,254 ) 0 0 ( 45,254 ) Grant of restricted stock ( 180,901 shares) 180,901 452 ( 452 ) 0 0 0 0 Common stock options exercised ( 145,621 shares) 145,621 365 3,100 0 0 0 3,465 Balance at March 31, 2021 134,135,896 335,340 2,898,807 1,267,039 1,861 ( 170,349 ) 4,332,698 Comprehensive income: Net income 0 0 0 94,836 0 0 94,836 Other comprehensive income, net of tax 0 0 0 0 8,662 0 8,662 Total comprehensive income, net of tax 103,498 Stock based compensation expense 0 0 1,892 0 0 0 1,892 Cash dividends ($ 0.35 per share) 0 0 0 ( 45,268 ) 0 0 ( 45,268 ) Stock grant forfeiture ( 1,971 shares) 0 0 73 0 0 ( 73 ) 0 Grant of restricted stock ( 1,443 shares) 1,443 4 ( 4 ) 0 0 0 0 Common stock options exercised ( 28,324 shares) 28,324 70 823 0 0 0 893 Balance at June 30, 2021 134,165,663 335,414 2,901,591 1,316,607 10,523 ( 170,422 ) 4,393,713 Comprehensive income: Net income 0 0 0 92,152 0 0 92,152 Other comprehensive income, net of tax 0 0 0 0 ( 11,762 ) 0 ( 11,762 ) Total comprehensive income, net of tax 80,390 Stock based compensation expense 0 0 1,912 0 0 0 1,912 Cash dividends ($ 0.35 per share) 0 0 0 ( 45,271 ) 0 0 ( 45,271 ) Stock grant forfeiture ( 1,531 shares) 0 0 56 0 0 ( 56 ) 0 Common stock options exercised ( 1,717 shares) 1,717 5 17 0 0 0 22 Balance at September 30, 2021 134,167,380 $ 335,419 $ 2,903,576 $ 1,363,488 $ ( 1,239 ) $ ( 170,478 ) $ 4,430,766 See notes to consolidated unaudited financial statements. 8 Table of Contents CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share data) Nine Months Ended September 30, 2020 Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders’ Equity Shares Par Value Balance at January 1, 2020 105,494,290 $ 263,736 $ 2,140,175 $ 1,132,579 $ ( 34,869 ) $ ( 137,788 ) $ 3,363,833 Cumulative effect of adopting Accounting Standard Update 2016-13 0 0 0 ( 44,331 ) 0 0 ( 44,331 ) Comprehensive income: Net income 0 0 0 40,183 0 0 40,183 Other comprehensive income, net of tax 0 0 0 0 18,698 0 18,698 Total comprehensive income, net of tax 58,881 Stock based compensation expense 0 0 1,253 0 0 0 1,253 Purchase of treasury stock ( 19,314 shares) 0 0 0 0 0 ( 608 ) ( 608 ) Cash dividends ($ 0.35 per share) 0 0 0 ( 35,604 ) 0 0 ( 35,604 ) Grant of restricted stock ( 175,495 shares) 175,495 439 ( 439 ) 0 0 0 0 Forfeiture of restricted stock ( 946 shares) 0 0 35 0 0 ( 35 ) 0 Common stock options exercised ( 14,694 shares) 14,694 36 242 0 0 0 278 Balance at March 31, 2020 105,684,479 264,211 2,141,266 1,092,827 ( 16,171 ) ( 138,431 ) 3,343,702 Comprehensive income: Net income 0 0 0 52,686 0 0 52,686 Other comprehensive income, net of tax 0 0 0 0 27,675 0 27,675 Total comprehensive income, net of tax 80,361 Stock based compensation expense 0 0 1,369 0 0 0 1,369 Acquisition of Carolina Financial Corporation ( 28,031,501 shares) 28,031,501 70,079 747,751 0 0 0 817,830 Purchase of treasury stock ( 6 shares) 0 0 0 0 0 0 0 Cash dividends ($ 0.35 per share) 0 0 0 ( 45,416 ) 0 0 ( 45,416 ) Common stock options exercised ( 300 shares) 300 1 8 0 0 0 9 Balance at June 30, 2020 133,716,280 334,291 2,890,394 1,100,097 11,504 ( 138,431 ) 4,197,855 Comprehensive income: Net income 0 0 0 103,784 0 0 103,784 Other comprehensive income, net of tax 0 0 0 0 9,846 0 9,846 Total comprehensive income, net of tax 113,630 Stock based compensation expense 0 0 1,369 0 0 0 1,369 Distribution of treasury stock for deferred compensation plan ( 29 shares) 0 0 0 0 0 1 1 Purchase of treasury stock ( 6 shares) 0 0 0 0 0 0 0 Cash dividends ($ 0.35 per share) 0 0 0 ( 45,414 ) 0 0 ( 45,414 ) Grant of restricted stock ( 6,930 shares) 6,930 17 ( 17 ) 0 0 0 0 Common stock options exercised ( 0 shares) 0 0 0 0 0 0 0 Balance at September 30, 2020 133,723,210 $ 334,308 $ 2,891,746 $ 1,158,467 $ 21,350 $ ( 138,430 ) $ 4,267,441 9 Table of Contents CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands) Nine Months Ended September 30 2021 2020 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 553,195 $ ( 45,337 ) INVESTING ACTIVITIES Proceeds from maturities and calls of securities held to maturity 215 210 Proceeds from sales of securities available for sale 49,145 192,010 Proceeds from maturities and calls of securities available for sale 519,368 370,889 Purchases of securities available for sale ( 1,081,798 ) ( 278,082 ) Proceeds from sales of equity securities 1,250 1,043 Purchases of equity securities ( 1,808 ) ( 896 ) Proceeds from sales and redemptions of other investment securities 7,961 145,394 Purchases of other investment securities ( 18,992 ) ( 127,950 ) Purchases of bank-owned life insurance policies ( 85,000 ) 0 Redemption of bank-owned life insurance policies 0 1,186 Purchases of bank premises and equipment ( 11,363 ) ( 14,348 ) Proceeds from sales of bank premises and equipment 1,604 4,391 Proceeds from the sales of OREO properties 4,501 9,438 Acquisition of Carolina Financial Corporation, net of cash paid 0 629,107 Net change in loans 864,282 ( 957,029 ) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 249,365 ( 24,637 ) FINANCING ACTIVITIES Cash dividends paid ( 135,988 ) ( 117,290 ) Acquisition of treasury stock ( 11,210 ) ( 608 ) Proceeds from exercise of stock options 4,361 288 Repayment of long-term Federal Home Loan Bank borrowings ( 550,000 ) ( 1,787,000 ) Proceeds from issuance of long-term Federal Home Loan Bank borrowings 500,000 500,000 Distribution of treasury stock for deferred compensation plan 0 1 Changes in: Deposits 1,234,052 2,519,920 Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings ( 19,282 ) ( 226,297 ) NET CASH PROVIDED BY FINANCING ACTIVITIES 1,021,933 889,014 Increase in cash and cash equivalents 1,824,493 819,040 Cash and cash equivalents at beginning of year 2,209,068 837,493 Cash and cash equivalents at end of period $ 4,033,561 $ 1,656,533 Supplemental information Noncash investing activities: Transfers of loans to OREO $ 2,531 $ 22,262 Acquisition of Carolina Financial: Assets acquired, net of cash ( 7,190 ) 4,174,573 Liabilities assumed 6,002 4,302,722 Goodwill 13,192 316,872 See notes to consolidated unaudited financial statements . 10 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) UNITED BANKSHARES, INC. AND SUBSIDIARIES 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated interim financial statements of United Bankshares, Inc. and Subsidiaries (“United” or “the Company”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States (“GAAP”) and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not contain all of the information and footnotes required by accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements presented as of September 30, 2021 and 2020 and for the three-month and nine-month periods then ended have not been audited. The consolidated balance sheet as of December 31, 2020 has been extracted from the audited financial statements included in United’s 2020 Annual Report to Shareholders. The Notes to Consolidated Financial Statements appearing in United’s 2020 Annual Report on Form 10-K, which includes descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. In the opinion of management, any adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature. The accompanying consolidated interim financial statements include the accounts of United and its wholly owned subsidiaries. United operates in two business segments: community banking and mortgage banking. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Information is presented in these notes to the unaudited consolidated interim financial statements with dollars expressed in thousands, except per share or unless otherwise noted. New Accounting Standards In July 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-05, “Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments (Topic 848). This new guidance requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if the lease would have been classified as a sales-type lease or direct financing lease in accordance with the classification criteria in ASC 842-10-25-2 and 25-3, respectively and if the lessor would have recognized a selling loss at lease commencement. When applying the guidance in ASC 842-10-24-3A, the lessor would not derecognize the underlying asset over its useful life. ASU No. 2021-05 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities may elect to adopt the amendments through either a retrospective application to leases that commenced or were modified after the beginning of the period in which ASC 842 was adopted or a prospective application to leases that commence or are modified subsequent to the date the amendments in ASU 2021 -05 are first applied. ASU No. 2021-05 is not expected to have a material impact on the Company’s financial condition or results of operations. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848).” This update refines the scope of ASC Topic 848 and permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by change in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. ASU No. 2021-01 is effective for public business entities upon issuance through December 31, 2022. United is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU No. 2021-01 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments. 11 Table of Contents In August 2020, the FASB issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).” The amendments in the ASU remove certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. The ASU also amends the derivative scope exception guidance for contracts in an entity’s own equity. The amendments remove three settlement conditions that are required for equity contracts to qualify for the derivative scope exception. In addition, the ASU expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments. ASU No. 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities may elect to adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition. ASU No. 2020-06 is not expected to have a material impact on the Company’s financial condition or results of operations. In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides “optional expedients and exceptions for applying generally accepted accounting principles under ASC Topic 848 to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.” ASU No. 2020-04 is effective for public business entities on March 12, 2020 through December 31, 2022. United is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU No. 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments. In January 2020, the FASB issued ASU No. 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The new guidance addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. ASU No. 2020-01 is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU No. 2020-01 was adopted by United on January 1, 2021. The adoption did not have a material impact on the Company’s financial condition or results of operations. In August 2018, the FASB issued ASU No. 2018-14 “Compensation – Retirement Benefits - Defined Benefits – General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” This update amends ASC Topic 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other post retirement plans. The ASU’s changes related to disclosures are part of the FASB’s disclosure framework project, which the FASB launched in 2014 to improve effectiveness of disclosures in notes to financial statements. ASU No. 2018-14 is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU No. 2018-14 was adopted by United on January 1, 2021. The adoption did not have a material impact on the Company’s financial condition or results of operations. 2. MERGERS AND ACQUISITIONS Community Bankers Trust Corporation On June 2, 2021, United entered into an Agreement and Plan of Reorganization (the “Community Bankers Trust Agreement”) with Community Bankers Trust Corporation (“Community Bankers Trust”), a Virginia corporation headquartered in Richmond, Virginia. In accordance with the Community Bankers Trust Agreement, Community Bankers Trust will merge with and into United (the “Community Bankers Trust Merger”). Community Bankers Trust will cease to exist and United shall survive and continue to exist as a West Virginia corporation. United may at any time prior to the effective time of the Community Bankers Trust Merger change the method of effecting the combination with Community Bankers Trust subject to certain conditions contained in the Community Bankers Trust Agreement. 12 Table of Contents The Community Bankers Trust Agreement provides that upon consummation of the Community Bankers Trust Merger, each outstanding share of common stock of Community Bankers Trust will be converted into the right to receive 0.3173 shares of United common stock, par value $ 2.50 per share. Pursuant to the Community Bankers Trust Agreement, at the effective time of the Community Bankers Trust Merger, each outstanding Community Bankers Trust stock option granted under a Community Bankers Trust stock plan, whether vested or unvested as of the date of the Community Bankers Trust Agreement, will vest only as provided pursuant to the terms of such Community Bankers Trust stock plan and convert into an option to acquire United common stock adjusted based on the 0.3173 exchange ratio. Also, at the effective time of the Community Bankers Trust Merger, each restricted stock unit granted under a Community Bankers Trust stock plan that is outstanding immediately prior to the effective time of the Community Bankers Trust Merger will vest only in accordance with the formula and other terms of the Community Bankers Trust stock plan and convert into the right to receive shares of United common stock based on the 0.3173 exchange ratio. At the effective time of the Community Bankers Trust Merger, Essex Bank, a wholly-owned subsidiary of Community Bankers Trust, will merge with and into United Bank, a wholly-owned subsidiary of United (the “Essex Bank Merger”). United Bank will survive the Essex Bank Merger and continue to exist as a Virginia banking corporation. The acquisition of Community Bankers Trust will enhance United’s existing presence in the DC Metro MSA and will take United into new markets including Baltimore, Annapolis, Lynchburg, Richmond, and the Northern Neck of Virginia. It also strategically connects our Mid-Atlantic and Southeast footprints. As of September 30, 2021, Community Bankers Trust had $ 1,771,300 in total assets, $ 1,246,660 in gross loans and $ 1,498,802 in deposits. For the third quarter and first nine months of 2021, United recorded acquisition-related costs for the announced Community Bankers Trust merger of $ 845 and $ 1,027 . 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. United has filed an amended Form S-4 with the Securities and Exchange Commission regarding the proposed merger with Community Bankers Trust. 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. Carolina Financial Corporation On May 1, 2020 (“Acquisition Date”), United acquired 100 % of the outstanding shares of Carolina Financial Corporation (“Carolina Financial”), a Delaware corporation headquartered in Charleston, South Carolina. Carolina Financial was merged with and into United (the “Carolina Financial Merger”), pursuant to the terms of the Agreement and Plan of Merger, dated November 17, 2019, by and between United and Carolina Financial (the “Carolina Financial Agreement”). Upon completion of the Carolina Financial Merger, Carolina Financial ceased to exist and United survived and continues to exist as a West Virginia corporation. Under the terms of the Carolina Financial Agreement, each outstanding share of common stock of Carolina Financial was converted into the right to receive 1.13 shares of United common stock, par value $ 2.50 per share. Also pursuant to the Carolina Financial Agreement, as of the effective time of the Carolina Financial Merger, each outstanding Carolina Financial stock option, whether vested or unvested as of the date of the Carolina Financial Merger, at such option holder’s election, (i) vested and converted into an option to acquire United common stock adjusted based on the 1.13 exchange ratio, or (ii) was entitled to receive cash consideration equal to the difference between (a) the option’s exercise price and (b) $ 28.99 , representing the volume weighted average trading price of the Carolina Financial common stock on NASDAQ for the twenty full trading days ending on the second trading day immediately preceding the closing date (the “CFC Closing Price”) multiplied by the number of shares of Carolina Financial common stock subject to such stock option. Also, at the effective time of the Carolina Financial Merger, each restricted stock grant, restricted stock unit grant or any other award of a share of Carolina Financial common stock subject to vesting, repurchase or other lapse restriction under a Carolina Financial stock plan (other than a stock option) (each, a “Stock Award”) that was outstanding immediately prior to the effective time of the Carolina Financial Merger, vested in accordance with the terms of the Carolina Financial stock plan and at the election of the holder (i) converted into the right to receive shares of United common stock based on the 1.13 exchange ratio or (ii) converted into cash in an amount equal to the CFC Closing Price multiplied by the shares of Carolina Financial common stock subject to the Stock Award. 13 Table of Contents Immediately following the Carolina Financial Merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank, a wholly-owned subsidiary of United (the “CresCom Bank Merger”). United Bank survived the CresCom Bank Merger and continues to exist as a Virginia banking corporation. CresCom Bank owned and operated Crescent Mortgage Company (“Crescent”), which is based in Atlanta, Georgia. As a result of the CresCom Bank Merger, Crescent is now a wholly-owned subsidiary of United Bank. For the third quarter and first nine months of 2021, United did not record any acquisition-related costs associated with the Carolina Financial Merger as compared to acquisition-related costs of $ 5,673 and $ 53,682 for the third quarter and first nine months of 2020. The Carolina Financial Merger was accounted for under the acquisition method of accounting. The results of operations of Carolina Financial are included in the consolidated results of operations from the Acquisition Date. The acquisition of Carolina Financial affords United the opportunity to expand its existing footprint in North Carolina and South Carolina. As of the Acquisition Date, Carolina Financial had $ 5,004,990 in total assets, $ 3,292,635 in loans and leases, net of unearned income and $ 3,873,183 in deposits. The aggregate purchase price was $ 817,877 , including common stock valued at $ 815,997 , stock options assumed valued at $ 1,833 , and cash paid for fractional shares of $ 47 . The number of shares issued in the transaction was 28,031,501 , which were valued based on the closing market price of $ 29.11 for United’s common shares on May 1, 2020. The purchase price has been allocated to the identifiable tangible and intangible assets resulting in additions to goodwill, core deposit intangibles and the Crescent trade name intangible of $ 332,026 , $ 3,408 , and $ 196 , respectively. The goodwill recognized results from the expected synergies and potential earnings from the combination of United and Carolina Financial. The core deposit intangible is being amortized on an accelerated basis over ten years. The Crescent trade name provides a source of market recognition to attract potential clients and retain existing relationships. United believes the Crescent trade name provides a competitive advantage and is likely going to be used into perpetuity and thus will not be subject to amortization, but rather be evaluated for impairment. Because the consideration paid was greater than the net fair value of the acquired assets and liabilities, the Company recorded goodwill as part of the acquisition. None of the goodwill from the Carolina Financial acquisition is expected to be deductible for tax purposes. United used an independent third party to help determine the fair values of the assets and liabilities acquired from Carolina Financial. As a result of the merger, United recorded fair value discounts of $ 47,425 on the loans and leases acquired, $ 620 on investment securities, $ 272 on OREO, $ 4,831 on trust preferred issuances and $ 135 on subordinated notes, respectively, and premiums of $ 5,908 on buildings acquired, $ 4,357 on land acquired, $ 12,818 on interest-bearing deposits, and $ 468 on long-term FHLB advances, respectively. United also recorded an allowance for credit losses, including a reserve for unfunded commitments, of $ 50,562 on the loans and commitments acquired split between $ 19,797 for purchased credit deteriorated (“PCD”) loans and $ 30,765 for non-PCD loans. The discounts and premium amounts, except for discount on the land and OREO acquired, are being accreted or amortized on an accelerated or straight-line basis, based on the type of asset or liability, over each asset’s or liability’s estimated remaining life at the time of acquisition. At September 30, 2021, the discounts on subordinated debt and trust preferred issuances had an average estimated remaining life of 6.25 years and 15.50 years, respectively, and the premiums on the buildings, and interest-bearing deposits each had an average estimated remaining life of 30.25 years, and 3.85 years, respectively. The estimated fair values of the acquired assets and assumed liabilities, including identifiable intangible assets and goodwill were considered final as of June 30, 2021. Portfolio loans and leases acquired from Carolina Financial were recorded at their fair value at the Acquisition Date based on a discounted cash flow methodology. The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from the perspective of a market participant. Also, acquired portfolio loans and leases were evaluated upon acquisition and classified as either PCD, which indicates that the loan has experienced a more-than-insignificant deterioration in credit quality since origination, or non-PCD. United considered a variety of factors in evaluating the acquired loans and leases for a more-than-insignificant deterioration in credit quality, including but not limited to risk grades, delinquency, nonperforming status, current or previous troubled debt restructurings or bankruptcies, watch list credits and other qualitative factors that indicated a deterioration in credit quality since origination. For PCD loans and leases, an initial allowance is determined based on the same methodology as other portfolio loans and leases. This initial allowance for credit losses is allocated to individual PCD loans and leases and added to the acquisition date fair values to establish the initial amortized cost basis for the PCD loans 14 Table of Contents and leases. The difference between the unpaid principal balance (“UPB”), or par value, of PCD loans and leases and the amortized cost basis is considered to relate to noncredit factors and resulted in a discount of $ 7,212 at Acquisition Date. This discount is being recognized through interest income on a level-yield method over the life of the loans which is estimated to be a weighted-average of 4.6 years. For non-PCD acquired loans and leases, the differences between the initial fair value and the UPB, or par value, are recognized as interest income on a level-yield basis over the lives of the related loans and leases which is estimated to be a weighted-average of 7.3 years. The total fair value mark on the non-PCD loans and leases at the Acquisition Date was $ 40,213 . At the Acquisition Date, an initial allowance for expected credit losses of $ 28,948 was recorded with a corresponding charge to the provision for credit losses in the Consolidated Statements of Income. Subsequent changes in the allowance for credit losses related to PCD and non-PCD loans and leases are recognized in the provision for credit losses. The following table provides a reconciliation of the difference between the purchase price and the par value of portfolio PCD loans and leases acquired from Carolina Financial as of the Acquisition Date: Purchase price of PCD loans and leases at acquisition $ 1,023,531 Allowance for credit losses at acquisition 18,635 Non-credit discount at acquisition 7,212 Par value (UPB) of acquired PCD loans and leases at acquisition $ 1,049,378 The consideration paid for Carolina Financial’s common equity and the amounts of acquired identifiable assets and liabilities assumed as of the Acquisition Date were as follows: Purchase price: Value of common shares issued ( 28,031,501 shares) $ 815,997 Fair value of stock options assumed 1,833 Cash for fractional shares 47 Total purchase price 817,877 Identifiable assets: Cash and cash equivalents 629,154 Investment securities 580,791 Loans held for sale 65,757 Net loans and leases 3,246,940 Premises and equipment 79,127 Operating lease right-of-use asset 9,861 Crescent trade name intangible 196 Core deposit intangible 3,408 Mortgage servicing rights 20,123 Other assets 159,218 Total identifiable assets $ 4,794,575 Identifiable liabilities: Deposits $ 3,884,977 Short-term borrowings 332,000 Long-term borrowings 42,738 Operating lease liability 9,861 Other liabilities 39,148 Total identifiable liabilities 4,308,724 Fair value of net assets acquired including identifiable intangible assets 485,851 Resulting goodwill $ 332,026 The operating results of United include operating results of acquired assets and assumed liabilities subsequent to the Acquisition Date. The operations of United’s North Carolina and South Carolina geographic area, which includes the acquired operations of Carolina Financial and Crescent Mortgage provided $ 152,276 in total revenues (net interest income plus other income), and $ 77,456 in net income for the first nine months of 2021. These amounts are included in United’s consolidated financial statements as of and for the nine months ended September 30, 2021. Carolina Financial’s results of operations prior to the Acquisition Date are not included in United’s consolidated results of operations. 15 Table of Contents 3. INVESTMENT SECURITIES Securities Available for Sale Securities held for indefinite periods of time are classified as available for sale and carried at estimated fair value. The amortized cost, estimated fair values, and allowance for credit losses of securities available for sale are summarized as follows. September 30, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance For Credit Losses Estimated Fair Value U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 12,919 $ 129 $ 3 $ 0 $ 13,045 State and political subdivisions 604,224 18,899 2,436 0 620,687 Residential mortgage-backed securities Agency 1,028,691 14,161 8,838 0 1,034,014 Non-agency 38,383 9 323 0 38,069 Commercial mortgage-backed securities Agency 617,651 18,101 4,704 0 631,048 Asset-backed securities 535,422 814 1,225 0 535,011 Single issue trust preferred securities 17,281 188 987 0 16,482 Other corporate securities 517,733 5,216 1,321 0 521,628 Total $ 3,372,304 $ 57,517 $ 19,837 $ 0 $ 3,409,984 December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance For Credit Losses Estimated Fair Value U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 65,804 $ 543 $ 3 $ 0 $ 66,344 State and political subdivisions 538,082 27,330 252 0 565,160 Residential mortgage-backed securities Agency 905,230 24,134 473 0 928,891 Non-agency 21,639 137 0 0 21,776 Commercial mortgage-backed securities Agency 644,774 31,009 638 0 675,145 Asset-backed securities 297,834 204 3,415 0 294,623 Single issue trust preferred securities 18,230 167 1,370 0 17,027 Other corporate securities 376,753 7,648 8 0 384,393 Total $ 2,868,346 $ 91,172 $ 6,159 $ 0 $ 2,953,359 For the adoption of ASC Topic 326, “Financial Instruments—Credit Losses,” United made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in “Accrued interest receivable” in the consolidated balance sheets. Available-for-sale debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status. Accordingly, United does not currently recognize an allowance for credit loss against accrued interest receivable on available-for-sale debt securities. The table above excludes accrued interest receivable of $ 12,896 and $ 10,663 at September 30, 2021 and December 31, 2020, respectively, that is recorded in “Accrued interest receivable.” 16 Table of Contents The following is a summary of securities available for sale which were in an unrealized loss position at September 30, 2021 and December 31, 2020. Less than 12 months 12 months or longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses September 30, 2021 U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 0 $ 0 $ 231 $ 3 $ 231 $ 3 State and political subdivisions 97,193 1,725 21,887 711 119,080 2,436 Residential mortgage-backed securities Agency 545,634 8,838 0 0 545,634 8,838 Non-agency 36,990 323 0 0 36,990 323 Commercial mortgage-backed securities Agency 113,565 2,874 37,735 1,830 151,300 4,704 Asset-backed securities 376,883 812 83,813 413 460,696 1,225 Single issue trust preferred securities 0 0 13,227 987 13,227 987 Other corporate securities 134,486 1,321 0 0 134,486 1,321 Total $ 1,304,751 $ 15,893 $ 156,893 $ 3,944 $ 1,461,644 $ 19,837 Less than 12 months 12 months or longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2020 U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 297 $ 3 $ 0 $ 0 $ 297 $ 3 State and political subdivisions 30,480 252 0 0 30,480 252 Residential mortgage-backed securities Agency 131,114 467 3,867 6 134,981 473 Non-agency 0 0 0 0 0 0 Commercial mortgage-backed securities Agency 83,395 638 0 0 83,395 638 Asset-backed securities 0 0 266,104 3,415 266,104 3,415 Trust preferred collateralized debt obligations 0 0 0 0 0 0 Single issue trust preferred securities 0 0 13,804 1,370 13,804 1,370 Other corporate securities 8,494 8 0 0 8,494 8 Total $ 253,780 $ 1,368 $ 283,775 $ 4,791 $ 537,555 $ 6,159 The following table shows the proceeds from maturities, sales and calls of available for sale securities and the gross realized gains and losses on sales and calls of those securities that have been included in earnings as a result of any sales and calls. Gains or losses on sales and calls of available for sale securities were recognized by the specific identification method. 17 Table of Contents Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Proceeds from sales and calls $ 167,520 $ 149,193 $ 568,513 $ 562,899 Gross realized gains 125 2,800 1,667 4,618 Gross realized losses ( 17 ) ( 1,939 ) ( 115 ) ( 2,116 ) At September 30, 2021, gross unrealized losses on available for sale securities were $ 19,837 on 181 securities of a total portfolio of 994 available for sale securities. 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. In determining whether or not a security is impaired, management considered the severity of the loss in conjunction with United’s positive intent and the more likely than not ability to hold these securities to recovery of their cost basis or maturity. State and political subdivisions United’s state and political subdivisions portfolio relates to securities issued by various municipalities located throughout the United States. The total amortized cost of available for sale state and political subdivision securities was $ 604,224 at September 30, 2021. As of September 30, 2021, approximately 59 % of the portfolio was supported by the general obligation of the issuing municipality, which allows for the securities to be repaid by any means available to the municipality. The majority of the portfolio was rated AA or higher, and no securities within the portfolio were rated below investment grade as of September 30, 2021. In addition to monitoring the credit ratings of these securities, management also evaluates the financial performance of the underlying issuers on an ongoing basis. Based upon management’s analysis and judgment, it was determined that none of the state and political subdivision securities had credit losses at September 30, 2021. Agency mortgage-backed securities United’s agency mortgage-backed securities portfolio relates to securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae. The total amortized cost of available for sale agency mortgage-backed securities was $ 1,646,342 at September 30, 2021. Of the $ 1,646,342 amount, $ 617,651 was related to agency commercial mortgage-backed securities and $ 1,028,691 was related to agency residential mortgage-backed securities. Each of the agency mortgage-backed securities provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based upon management’s analysis and judgment, it was determined that none of the agency mortgage-backed securities had credit losses at September 30, 2021. Non-agency residential mortgage-backed securities United’s non-agency residential mortgage-backed securities portfolio relates to securities of various private label issuers. The total amortized cost of available for sale non-agency residential mortgage-backed securities was $ 38,383 at September 30, 2021. Of the $ 38,383 , 100 % was rated AAA. Based upon management’s analysis and judgment, it was determined that no ne of the non-agency residential mortgage-backed securities had credit losses at September 30, 2021. Asset-backed securities As of September 30, 2021, United’s asset-backed securities portfolio had a total amortized cost balance of $ 535,422 . The entire portfolio was rated AA+ or better as of September 30, 2021. Approximately 49 % of the portfolio relates to securities that are backed by Federal Family Education Loan Program (“FFELP”) student loan collateral which includes a minimum of a 97 % government repayment guaranty, as well as additional credit support and subordination in excess of the government guaranteed portion. Approximately 47 % of the portfolio relates to collateralized loan obligation securities that are all AAA rated. The remaining 4% of the portfolio relates to various other asset-backed securities that are all AAA rated. 18 Table of Contents Upon reviewing this portfolio for the third quarter of 2021, it was determined that no ne of the asset-backed securities had credit losses. Single issue trust preferred securities The majority of United’s single issue trust preferred portfolio consists of obligations from large cap banks (i.e. banks with market capitalization in excess of $ 10 billion). All single issue trust preferred securities are currently receiving interest payments. The amortized cost of available for sale single issue trust preferred securities as of September 30, 2021 consisted of $ 8,453 in investment grade bonds, $ 3,067 in split rated bonds, and $ 5,761 in unrated bonds. Management reviews each issuer’s current and projected earnings trends, asset quality, capitalization levels, and other key factors. Upon completing the review for the third quarter of 2021, it was determined that none of the single issue trust preferred securities had credit losses. Corporate securities As of September 30, 2021, United’s corporate securities portfolio had a total amortized cost balance of $ 517,733 . The majority of the portfolio consisted of debt issuances of corporations representing a variety of industries, including financial institutions. Of the $ 517,733 total amortized cost balance, 90 % had at least one rating above investment grade, 2 % was below investment grade rated, and 8 % was unrated. For corporate securities, management has evaluated the near-term prospects of the investment in relation to the severity of any unrealized loss. Based upon management’s analysis and judgment, it was determined that none of the corporate securities had credit losses at September 30, 2021. The amortized cost and estimated fair value of securities available for sale at September 30, 2021 and December 31, 2020 by contractual maturity are shown as follows. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties. September 30, 2021 December 31, 2020 Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value Due in one year or less $ 94,138 $ 95,067 $ 150,575 $ 151,651 Due after one year through five years 566,739 580,168 495,922 514,441 Due after five years through ten years 757,597 766,611 688,264 714,416 Due after ten years 1,953,830 1,968,138 1,533,585 1,572,851 Total $ 3,372,304 $ 3,409,984 $ 2,868,346 $ 2,953,359 Equity securities at fair value Equity securities consist mainly of equity securities of financial institutions and mutual funds within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. The fair value of United’s equity securities was $ 11,984 at September 30, 2021 and $ 10,718 at December 31, 2020. Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Net gains recognized during the period on equity securities sold $ 0 $ 2 $ 788 $ 9 Unrealized gains recognized during the period on equity securities still held at period end 2 0 53 114 Unrealized losses recognized during the period on equity securities still held at period end ( 27 ) ( 2 ) ( 132 ) ( 58 ) Net gains recognized during the period $ ( 25 ) $ 0 $ 709 $ 65 19 Table of Contents Other investment securities During the third quarter of 2021, United evaluated all of its cost method investments to determine if certain events or changes in circumstances during the third quarter of 2021 had a significant adverse effect on the fair value of any of its cost method securities. United determined that there was no individual security that experienced an adverse event during the third quarter. There were no other events or changes in circumstances during the third quarter which would have an adverse effect on the fair value of its cost method securities. The carrying value of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $ 1,819,897 and $ 1,942,087 at September 30, 2021 and December 31, 2020, respectively. 4. LOANS AND LEASES Major classes of loans and leases are as follows: September 30, 2021 December 31, 2020 Commercial, financial and agricultural: Owner-occupied commercial real estate $ 1,542,555 $ 1,622,687 Nonowner-occupied commercial real estate 5,198,547 5,017,727 Other commercial 3,229,471 4,054,418 Total commercial, financial & agricultural 9,970,573 10,694,832 Residential real estate 3,514,228 3,899,885 Construction & land development 2,109,149 1,826,349 Consumer: Bankcard 8,178 8,937 Other consumer 1,169,204 1,192,580 Less: Unearned income ( 27,703 ) ( 31,170 ) Total gross loans $ 16,743,629 $ 17,591,413 The table above does not include loans held for sale of $ 493,299 and $ 718,937 at September 30, 2021 and December 31, 2020, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market. United’s subsidiary bank has made loans to the directors and officers of United and its subsidiaries, and to their affiliates. The aggregate dollar amount of these loans was $ 32,882 and $ 35,756 at September 30, 2021 and December 31, 2020, respectively. 5. CREDIT QUALITY Management monitors the credit quality of its loans and leases on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan. United considers a loan to be past due when it is 30 days or more past its contractual payment due date. For all loan classes, past due loans and leases are reviewed on a monthly basis to identify loans and leases for nonaccrual status. Generally, when collection in full of the principal and interest is jeopardized, the loan is placed on nonaccrual status. The accrual of interest income on commercial and most consumer loans generally is discontinued when a loan becomes 90 to 120 days past due as to principal or interest. However, regardless of delinquency status, if a loan is fully secured and in the process of collection and resolution of collection is expected in the near term (generally less than 90 days), then the loan will not be placed on nonaccrual status. When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for credit losses. United’s method of income recognition for loans and leases that are classified as nonaccrual is to recognize interest income on a cash basis or apply the cash receipt to principal when the ultimate collectibility of principal is in doubt. Nonaccrual loans and leases will not normally be returned to accrual status unless all past due principal and interest has been paid and the borrower has evidenced their ability to meet the contractual provisions of the note. Generally, a loan is categorized as a TDR if a concession is granted and there is deterioration in the financial condition of the borrower. The portfolio of TDR loans is monitored monthly. 20 Table of Contents A loan is categorized as a troubled debt restructuring (“TDR”) if a concession is granted and there is deterioration in the financial condition of the borrower. A loan classified as a TDR will generally retain such classification until the loan is paid in full. However, a one-to-four-family residential mortgage TDR loan that yields a market rate and demonstrates the ability to pay under the terms of the restructured note through a sustained period of repayment performance, which is generally one year, is removed from the TDR classification. Interest income on TDRs is accrued at the reduced rate and the loan is returned to performing status once the borrower demonstrates the ability to pay under the terms of the restructured note through a sustained period of repayment performance, which is generally six months. TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans and leases with market terms on one loan and concessionary terms on the other loan, receipts of assets from a debtor in partial or full satisfaction of a loan, the extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement, or the reduction of accrued interest or any other concessionary type of renegotiated debt. Under United’s current loan policy, a loan is not recognized as a TDR until it becomes probable that the loan will be a TDR. In response to the coronavirus (“COVID-19”) pandemic and its economic impact on our customers, United has implemented a short-term modification program that complies with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments from the period beginning March 1, 2020 until the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. As provided for under the CARES Act, these loan modifications are exempt by law from classification as a TDR as defined by GAAP. 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 $ 51,926 of loans outstanding, down significantly from 1,002 eligible loan modifications in deferral on $ 399,857 of loans outstanding at December 31, 2020. As of September 30, 2021, United had TDRs of $ 37,752 as compared to $ 55,657 as of December 31, 2020. Of the $ 37,752 aggregate balance of TDRs at September 30, 2021, $ 24,662 was on nonaccrual and $ 292 was 30-89 days past due. Of the $ 55,657 aggregate balance of TDRs at December 31, 2020, $ 41,185 was on nonaccrual and $ 197 was 30-89 days past due. All these amounts are included in the appropriate categories in the “Age Analysis of Past Due Loans” table on a subsequent page. As of September 30, 2021, there was a commitment to lend additional funds of $ 112 to a debtor owing a receivable whose terms have been modified in a TDR. During the first nine months of 2021, advances totaling $ 13 were made to this debtor under a loan that had been previously modified. No advances were made to this debtor during the third quarter of 2021 under a loan that had been previously modified. The following tables sets forth the balances of TDRs at September 30, 2021 and December 31, 2020 and the reasons for modification: Reason for modification September 30, 2021 December 31, 2020 Interest rate reduction $ 3,164 $ 10,774 Interest rate reduction and change in terms 473 2,346 Forgiveness of principal 194 214 Concession of principal and term 19 22 Transfer of asset 5,407 0 Extended maturity 4,299 4,414 Change in terms 24,196 37,887 Total $ 37,752 $ 55,657 21 Table of Contents The following table sets forth United’s troubled debt restructurings that have been restructured during the three months ended September 30, 2021 and 2020, segregated by class of loans: Troubled Debt Restructurings For the Three Months Ended September 30, 2021 September 30, 2020 Number of Contracts Pre-Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Commercial real estate: Owner-occupied 1 $ 103 $ 103 0 $ 0 $ 0 Nonowner-occupied 0 0 0 0 0 0 Other commercial 0 0 0 1 39 38 Residential real estate 1 473 473 3 381 381 Construction & land development 0 0 0 0 0 0 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 0 0 0 Total 2 $ 576 $ 576 4 $ 420 $ 419 The following table sets forth United’s troubled debt restructurings that have been restructured during the nine months ended September 30, 2021 and 2020, segregated by class of loans: Troubled Debt Restructurings For the Nine Months Ended September 30, 2021 September 30, 2020 Number of Contracts Pre-Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Commercial real estate: Owner-occupied 2 $ 1,043 $ 1,196 21 $ 18,579 $ 17,210 Nonowner-occupied 2 6,349 6,136 6 2,258 2,225 Other commercial 1 181 181 19 3,706 2,873 Residential real estate 1 473 473 22 4,271 3,495 Construction & land development 0 0 0 12 4,607 4,392 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 3 69 21 Total 6 $ 8,046 $ 7,986 83 $ 33,490 $ 30,216 The following table presents troubled debt restructurings, by class of loan, that were restructured during the twelve-month period ended September 30, 2021and had charge-offs during the three months and nine months ended September 30, 2021. The recorded investment amounts presented were as of the September 30, 2021 balance sheet date. Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Number of Contracts Recorded Investment Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial real estate: Owner-occupied 0 $ 0 0 $ 0 Nonowner-occupied 0 0 0 0 Other commercial 0 0 0 0 Residential real estate 0 0 1 0 22 Table of Contents Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Number of Contracts Recorded Investment Number of Contracts Recorded Investment Troubled Debt Restructurings Construction & land development 0 0 2 0 Consumer: Bankcard 0 0 0 0 Other consumer 0 0 0 0 Total 0 $ 0 3 $ 0 The following table presents troubled debt restructurings, by class of loan, that were restructured during the twelve-month period ended September 30, 2020 and had charge-offs during the three and nine months ended September 30, 2020. The recorded investment amounts presented were as of the September 30, 2020 balance sheet date. Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Number of Contracts Recorded Investment Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial real estate: Owner-occupied 0 $ 0 0 $ 0 Nonowner-occupied 0 0 0 0 Other commercial 2 86 2 86 Residential real estate 0 0 0 0 Construction & land development 0 0 1 690 Consumer: Bankcard 0 0 0 0 Other consumer 0 0 0 0 Total 2 $ 86 3 $ 776 The following table sets forth United’s age analysis of its past due loans and leases, segregated by class of loans: Age Analysis of Past Due Loans and Leases As of September 30, 2021 30-89 Days Past Due 90 Days or more Past Due Total Past Due Current & Other Total Financing Receivables 90 Days or More Past Due & Accruing Commercial real estate: Owner-occupied $ 6,648 $ 10,816 $ 17,464 $ 1,525,091 $ 1,542,555 $ 257 Nonowner-occupied 5,028 27,640 32,668 5,165,879 5,198,547 1,826 Other commercial 20,814 11,204 32,018 3,197,453 3,229,471 2,268 Residential real estate 19,835 21,474 41,309 3,472,919 3,514,228 7,886 Construction & land development 823 3,607 4,430 2,104,719 2,109,149 505 Consumer: Bankcard 96 97 193 7,985 8,178 97 Other consumer 14,229 2,340 16,569 1,152,635 1,169,204 1,988 Total $ 67,473 $ 77,178 $ 144,651 $ 16,626,681 $ 16,771,332 $ 14,827 Age Analysis of Past Due Loans and Leases As of December 31, 2020 30-89 Days Past Due 90 Days or more Past Due Total Past Due Current & Other Total Financing Receivables 90 Days or More Past Due & Accruing Commercial real estate: Owner-occupied $ 4,556 $ 28,479 $ 33,035 $ 1,589,652 $ 1,622,687 $ 0 Nonowner-occupied 6,837 29,292 36,129 4,981,598 5,017,727 1,284 Other commercial 13,796 26,274 40,070 4,014,348 4,054,418 1,001 23 Table of Contents Age Analysis of Past Due Loans and Leases As of December 31, 2020 30-89 Days Past Due 90 Days or more Past Due Total Past Due Current & Other Total Financing Receivables 90 Days or More Past Due & Accruing Residential real estate 32,743 24,892 57,635 3,842,250 3,899,885 8,574 Construction & land development 1,919 5,885 7,804 1,818,545 1,826,349 461 Consumer: Bankcard 362 156 518 8,419 8,937 156 Other consumer 14,765 2,757 17,522 1,175,058 1,192,580 2,356 Total $ 74,978 $ 117,735 $ 192,713 $ 17,429,870 $ 17,622,583 $ 13,832 The following table sets forth United’s nonaccrual loans and leases, segregated by class of loans: At September 30, 2021 At December 31, 2020 Nonaccruals With No Related Allowance for Credit Losses 90 Days or More Past Due & Accruing Nonaccruals With No Related Allowance for Credit Losses 90 Days or More Past Due & Accruing Commercial Real Estate: Owner-occupied $ 10,559 $ 10,559 $ 257 $ 28,479 $ 28,479 $ 0 Nonowner-occupied 25,814 22,374 1,826 28,008 16,070 1,284 Other Commercial 8,936 6,349 2,268 25,273 13,149 1,001 Residential Real Estate 13,588 13,588 7,886 16,318 14,769 8,574 Construction 3,102 3,102 505 5,424 4,484 461 Consumer: Bankcard 0 0 97 0 0 156 Other consumer 352 352 1,988 401 401 2,356 Total $ 62,351 $ 56,324 $ 14,827 $ 103,903 $ 77,352 $ 13,832 Interest income recognized on nonaccrual loans was insignificant during the three and nine months ended September 30, 2021 and 2020. For the adoption of ASC Topic 326, United elected the practical expedient to measure expected credit losses on collateral dependent loans and leases based on the difference between the loan’s amortized cost and the collateral’s fair value, adjusted for selling costs. The following table presents the amortized cost basis of collateral-dependent loans and leases in which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty, by class of loans and leases as of September 30, 2021 and December 31, 2020: Collateral Dependent Loans and Leases At September 30, 2021 Residential Property Business Assets Land Commercial Property Other Total Commercial real estate: Owner-occupied $ 0 $ 42 $ 0 $ 10,025 $ 9,975 $ 20,042 Nonowner-occupied 12,045 0 2,061 8,702 21,390 44,198 Other commercial 0 11,695 0 0 770 12,465 Residential real estate 16,858 0 0 0 0 16,858 Construction & land development 0 0 4,966 0 1,064 6,030 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 0 0 0 Total $ 28,903 $ 11,737 $ 7,027 $ 18,727 $ 33,199 $ 99,593 24 Table of Contents Collateral Dependent Loans and Leases At December 31, 2020 Residential Property Business Assets Land Commercial Property Other Total Commercial real estate: Owner-occupied $ 1,480 $ 138 $ 0 $ 18,097 $ 21,737 $ 41,452 Nonowner-occupied 16,400 0 2,898 10,167 18,230 47,695 Other commercial 5,424 20,429 0 258 2,345 28,456 Residential real estate 21,006 229 34 0 803 22,072 Construction & land development 39 0 17,408 0 746 18,193 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 0 1 1 Total $ 44,349 $ 20,796 $ 20,340 $ 28,522 $ 43,862 $ 157,869 United categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt: current financial information, historical payment experience, credit documentation, underlying collateral (if any), public information and current economic trends, among other factors. United uses the following definitions for risk ratings: • Pass • Special Mention • Substandard • Doubtful For United’s loans with a corporate credit exposure, United analyzes loans individually to classify the loans as to credit risk. Review and analysis of criticized (special mention-rated loans in the amount of $1,000 or greater) and classified (substandard-rated and worse in the amount of $500 and greater) loans is completed once per quarter. Review of notes with committed exposure of $2,000 or greater is completed at least annually. For loans with a consumer credit exposure, United internally assigns a grade based upon an individual loan’s delinquency status. United reviews and updates, as necessary, these grades on a quarterly basis. Special mention loans, with a corporate credit exposure, have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or in the Company’s credit position at some future date. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or an ill proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a special mention rating. Nonfinancial reasons for rating a credit exposure special mention include management problems, pending litigation, an ineffective loan agreement or other material structural weakness, and any other significant deviation from prudent lending practices. For loans with a consumer credit exposure, loans that are past due 30 - 89 days are generally considered special mention. A substandard loan with a corporate credit exposure is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt by the borrower. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. They require more intensive supervision by management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some substandard loans, the likelihood of full collection of interest and principal may be in doubt and thus, placed on nonaccrual. For loans with a consumer credit exposure, loans that are 90 days or more past due or that have been placed on nonaccrual are considered substandard. 25 Table of Contents A loan with corporate credit exposure is classified as doubtful if it has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, highly questionable. A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the loan, its classification as loss is deferred. Doubtful borrowers are usually in d e fault, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, there are not any loans with a consumer credit exposure that are classified as doubtful. Usually, they are charged-off prior to such a classification. Based on the most recent analysis performed, the risk category of loans and leases by class of loans is as follows: Commercial Real Estate – Owner-occupied Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of September 30, 2021 2021 2020 2019 2018 2017 Prior Internal Risk Grade: Pass $ 155,334 $ 283,246 $ 148,710 $ 133,675 $ 171,027 $ 575,677 $ 22,067 $ 414 $ 1,490,150 Special Mention 0 0 0 2,144 723 18,660 974 0 22,501 Substandard 0 59 42 0 1,355 27,187 700 248 29,591 Doubtful 0 0 0 0 0 313 0 0 313 Total $ 155,334 $ 283,305 $ 148,752 $ 135,819 $ 173,105 $ 621,837 $ 23,741 $ 662 $ 1,542,555 YTD charge-offs 0 0 0 0 ( 44 ) ( 325 ) 0 0 ( 369 ) YTD recoveries 0 0 0 0 12 695 0 0 707 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ ( 32 ) $ 370 $ 0 $ 0 $ 338 Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of December 31, 2020 2020 2019 2018 2017 2016 Prior Internal Risk Grade: Pass $ 280,779 $ 152,851 $ 162,027 $ 198,610 $ 282,214 $ 443,312 $ 22,303 $ 0 $ 1,542,096 Special Mention 0 1,206 3,772 754 2,013 20,792 0 453 28,990 Substandard 1,935 62 0 1,117 3,788 43,354 864 149 51,269 Doubtful 0 0 0 0 0 332 0 0 332 Total $ 282,714 $ 154,119 $ 165,799 $ 200,481 $ 288,015 $ 507,790 $ 23,167 $ 602 $ 1,622,687 YTD charge-offs 0 0 0 0 0 ( 2,195 ) 0 0 ( 2,195 ) YTD recoveries 0 0 0 0 0 795 0 0 795 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 1,400 ) $ 0 $ 0 $ ( 1,400 ) Commercial Real Estate – Nonowner-occupied Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of September 30, 2021 2021 2020 2019 2018 2017 Prior Internal Risk Grade: Pass $ 924,821 $ 838,776 $ 554,807 $ 477,322 $ 431,061 $ 1,571,022 $ 104,675 $ 2,058 $ 4,904,542 Special Mention 0 0 113,718 0 378 49,693 0 0 163,789 Substandard 0 725 13,610 21,382 1,110 93,389 0 0 130,216 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 924,821 $ 839,501 $ 682,135 $ 498,704 $ 432,549 $ 1,714,104 $ 104,675 $ 2,058 $ 5,198,547 YTD charge-offs 0 0 0 0 0 ( 3,140 ) 0 0 ( 3,140 ) YTD recoveries 0 0 0 0 0 393 0 0 393 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 2,747 ) $ 0 $ 0 $ ( 2,747 ) 26 Table of Contents Term Loans Origination Year Revolving loans amortized cost basis Revolving loans connverted to term loans Total As of December 31, 2020 2020 2019 2018 2017 2016 Prior Internal Risk Grade: Pass $ 929,001 $ 592,109 $ 596,260 $ 481,894 $ 502,417 $ 1,496,135 $ 118,404 $ 2,112 $ 4,718,332 Special Mention 0 105,104 0 391 8,902 78,591 0 0 192,988 Substandard 392 14,620 7,435 1,564 10,824 71,572 0 0 106,407 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 929,393 $ 711,833 $ 603,695 $ 483,849 $ 522,143 $ 1,646,298 $ 118,404 $ 2,112 $ 5,017,727 YTD charge-offs ( 38 ) 0 ( 300 ) 0 ( 3,394 ) ( 2,402 ) 0 0 ( 6,134 ) YTD recoveries 0 0 0 0 0 1,023 0 0 1,023 YTD net charge-offs $ ( 38 ) $ 0 $ ( 300 ) $ 0 $ ( 3,394 ) $ ( 1,379 ) $ 0 $ 0 $ ( 5,111 ) Other commercial Term Loans and leases Origination Year Revolving loans and leases amortized cost basis Revolving loans and leases converted to term loans Total As of September 30, 2021 2021 2020 2019 2018 2017 Prior Internal Risk Grade: Pass $ 838,912 $ 580,174 $ 313,046 $ 103,079 $ 89,668 $ 123,875 $ 950,605 $ 2,139 $ 3,001,498 Special Mention 25 0 31,047 1,161 870 3,374 116,423 67 152,967 Substandard 735 1,003 766 1,191 212 20,059 50,685 245 74,896 Doubtful 0 0 0 0 0 110 0 0 110 Total $ 839,672 $ 581,177 $ 344,859 $ 105,431 $ 90,750 $ 147,418 $ 1,117,713 $ 2,451 $ 3,229,471 YTD charge-offs 0 ( 86 ) ( 32 ) ( 200 ) ( 173 ) ( 2,858 ) ( 40 ) 0 ( 3,389 ) YTD recoveries 0 0 17 78 20 2,488 0 0 2,603 YTD net charge-offs $ 0 $ ( 86 ) $ ( 15 ) $ ( 122 ) $ ( 153 ) $ ( 370 ) $ ( 40 ) $ 0 $ ( 786 ) Term Loans and leases Origination Year Revolving loans and leases amortized cost basis Revolving loans and leases converted to term loan s Total As of December 31, 2020 2020 2019 2018 2017 2016 Prior Internal Risk Grade: Pass $ 1,702,787 $ 370,059 $ 200,588 $ 112,170 $ 119,582 $ 257,638 $ 1,172,699 $ 2,668 $ 3,938,191 Special Mention 333 384 4,754 1,300 138 8,231 40,048 86 55,274 Substandard 1,649 830 2,241 2,606 6,565 30,308 16,222 360 60,781 Doubtful 0 0 0 0 37 135 0 0 172 Total $ 1,704,769 $ 371,273 $ 207,583 $ 116,076 $ 126,322 $ 296,312 $ 1,228,969 $ 3,114 $ 4,054,418 YTD charge-offs 0 0 ( 959 ) ( 23 ) ( 3,525 ) ( 12,843 ) 0 0 ( 17,350 ) YTD recoveries 94 864 18 12 684 2,789 0 0 4,461 YTD net charge-offs $ 94 $ 864 $ ( 941 ) $ ( 11 ) $ ( 2,841 ) $ ( 10,054 ) $ 0 $ 0 $ ( 12,889 ) Residential Real Estate Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loan s Total As of September 30, 2021 2021 2020 2019 2018 2017 Prior Internal Risk Grade: Pass $ 583,623 $ 587,834 $ 426,827 $ 357,744 $ 187,516 $ 951,339 $ 388,470 $ 3,007 $ 3,486,360 Special Mention 0 0 0 0 175 4,333 737 0 5,245 Substandard 473 0 386 176 2,703 18,741 31 113 22,623 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 584,096 $ 587,834 $ 427,213 $ 357,920 $ 190,394 $ 974,413 $ 389,238 $ 3,120 $ 3,514,228 YTD charge-offs 0 0 ( 37 ) ( 38 ) ( 166 ) ( 5,687 ) 0 0 ( 5,928 ) YTD recoveries 0 0 0 0 3 1,997 13 0 2,013 YTD net charge-offs $ 0 $ 0 $ ( 37 ) $ ( 38 ) $ ( 163 ) $ ( 3,690 ) $ 13 $ 0 $ ( 3,915 ) 27 Table of Contents Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of December 31, 2020 2020 2019 2018 2017 2016 Prior Internal Risk Grade: Pass $ 603,714 $ 624,142 $ 640,535 $ 292,700 $ 282,547 $ 975,913 $ 436,728 $ 4,224 $ 3,860,503 Special Mention 0 267 0 192 2,325 6,623 800 0 10,207 Substandard 0 282 440 3,263 3,516 20,967 201 227 28,896 Doubtful 0 0 0 0 0 279 0 0 279 Total $ 603,714 $ 624,691 $ 640,975 $ 296,155 $ 288,388 $ 1,003,782 $ 437,729 $ 4,451 $ 3,899,885 YTD charge-offs 0 0 0 0 ( 1 ) ( 1,759 ) 0 0 ( 1,760 ) YTD recoveries 0 0 0 101 0 961 1 0 1,063 YTD net charge-offs $ 0 $ 0 $ 0 $ 101 $ ( 1 ) $ ( 798 ) $ 1 $ 0 $ ( 697 ) Construction and Land Development Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of September 30, 2021 2021 2020 2019 2018 2017 Prior Internal Risk Grade: Pass $ 525,527 $ 554,346 $ 461,772 $ 233,922 $ 76,435 $ 69,165 $ 175,047 $ 0 $ 2,096,214 Special Mention 0 0 0 2,409 0 1,207 995 0 4,611 Substandard 359 0 278 933 0 6,008 746 0 8,324 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 525,886 $ 554,346 $ 462,050 $ 237,264 $ 76,435 $ 76,380 $ 176,788 $ 0 $ 2,109,149 YTD charge-offs 0 0 0 0 0 ( 383 ) 0 0 ( 383 ) YTD recoveries 0 0 0 0 123 284 0 0 407 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 123 $ ( 99 ) $ 0 $ 0 $ 24 Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of December 31, 2020 2020 2019 2018 2017 2016 Prior Internal Risk Grade: Pass $ 420,977 $ 663,113 $ 304,579 $ 127,377 $ 83,252 $ 53,713 $ 145,431 $ 0 $ 1,798,442 Special Mention 0 0 4,689 557 0 1,420 995 0 7,661 Substandard 0 250 1,535 0 216 17,499 746 0 20,246 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 420,977 $ 663,363 $ 310,803 $ 127,934 $ 83,468 $ 72,632 $ 147,172 $ 0 $ 1,826,349 YTD charge-offs 0 0 0 0 0 ( 2,027 ) 0 0 ( 2,027 ) YTD recoveries 0 0 0 0 0 1,513 0 0 1,513 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 514 ) $ 0 $ 0 $ ( 514 ) Bankcard Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of September 30, 2021 2021 2020 2019 2018 2017 Prior Internal Risk Grade: Pass $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 7,985 $ 0 $ 7,985 Special Mention 0 0 0 0 0 0 96 0 96 Substandard 0 0 0 0 0 0 97 0 97 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,178 $ 0 $ 8,178 YTD charge-offs 0 0 0 0 0 0 ( 153 ) 0 ( 153 ) YTD recoveries 0 0 0 0 0 0 38 0 38 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 115 ) $ 0 $ ( 115 ) 28 Table of Contents Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of December 31, 2020 2020 2019 2018 2017 2016 Prior Internal Risk Grade: Pass $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,419 $ 0 $ 8,419 Special Mention 0 0 0 0 0 0 362 0 362 Substandard 0 0 0 0 0 0 156 0 156 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,937 $ 0 $ 8,937 YTD charge-offs 0 0 0 0 0 0 ( 221 ) 0 ( 221 ) YTD recoveries 0 0 0 0 0 0 52 0 52 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 169 ) $ 0 $ ( 169 ) Other Consumer Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of September 30, 2021 2021 2020 2019 2018 2017 Prior Internal Risk Grade: Pass $ 359,777 $ 337,360 $ 271,110 $ 143,594 $ 38,743 $ 15,543 $ 3,065 $ 0 $ 1,169,192 Special Mention 0 0 0 0 0 6 4 0 10 Substandard 0 2 0 0 0 0 0 0 2 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 359,777 $ 337,362 $ 271,110 $ 143,594 $ 38,743 $ 15,549 $ 3,069 $ 0 $ 1,169,204 YTD charge-offs ( 4 ) ( 549 ) ( 580 ) ( 313 ) ( 102 ) ( 176 ) ( 6 ) 0 ( 1,730 ) YTD recoveries 0 76 44 65 18 132 2 0 337 YTD net charge-offs $ ( 4 ) $ ( 473 ) $ ( 536 ) $ ( 248 ) $ ( 84 ) $ ( 44 ) $ ( 4 ) $ 0 $ ( 1,393 ) Term Loans Origination Year Revolving loans amortized cost basis Revolving loans converted to term loans Total As of December 31, 2020 2020 2019 2018 2017 2016 Prior Internal Risk Grade: Pass $ 419,768 $ 401,958 $ 231,172 $ 74,550 $ 34,435 $ 7,466 $ 6,110 $ 0 $ 1,175,459 Special Mention 0 0 0 0 0 14,763 2 0 14,765 Substandard 3 0 0 0 0 2,352 0 0 2,355 Doubtful 0 0 0 0 0 1 0 0 1 Total $ 419,771 $ 401,958 $ 231,172 $ 74,550 $ 34,435 $ 24,582 $ 6,112 $ 0 $ 1,192,580 YTD charge-offs ( 136 ) ( 1,013 ) ( 1,040 ) ( 393 ) ( 228 ) ( 484 ) ( 2 ) 0 ( 3,296 ) YTD recoveries 3 74 113 30 43 216 0 0 479 YTD net charge-offs $ ( 133 ) $ ( 939 ) $ ( 927 ) $ ( 363 ) $ ( 185 ) $ ( 268 ) $ ( 2 ) $ 0 $ ( 2,817 ) At September 30, 2021 and December 31, 2020, other real estate owned (“OREO”) included in other assets in the Consolidated Balance Sheets was $ 16,696 and $ 22,595 , respectively. OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Any adjustment to the fair value at the date of transfer is charged against the allowance for loan losses. Any subsequent valuation adjustments as well as any costs relating to operating, holding or disposing of the property are recorded in other expense in the period incurred. At September 30, 2021, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $ 17 . There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2020. 6. ALLOWANCE FOR CREDIT LOSSES As of January 1, 2020, United adopted the CECL methodology for measuring credit losses in accordance with ASC Topic 326. Under ASC Topic 326, the allowance for loan losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance 29 Table of Contents is based on the cr e dit losses expected to arise over the life of the asset (contractual term). Assets are charged off when United determines that such financial assets are deemed uncollectible or based on regulatory requirements, whichever is earlier. Charge-offs are recognized as a deduction from the allowance for credit losses. Expected recoveries of amounts previously charged-off, not to exceed the aggregate of the amount previously charged-off, are included in determining the necessary reserve at the balance sheet date. United made a policy election to present the accrued interest receivable balance separately in its consolidated balance sheets from the amortized cost of a loan. Accrued interest receivable, net of an allowance for credit losses, of $ 45,130 and $ 56,143 at September 30, 2021 and December 31, 2020, respectively, related to loans are included separately in “Accrued interest receivable” in the consolidated balance sheets. 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 and leases. As a result of this assessment, United recorded an allowance for credit losses of $ 26 and $ 250 for accrued interest receivables not expected to be collected as of September 30, 2021 and December 31, 2020, respectively. For all classes of loans and leases receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due, unless the loan is well secured and in the process of collection. Interest received on nonaccrual loans and leases, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The following table represents the accrued interest receivable as of September 30, 2021 and December 31, 2020: Accrued Interest Receivable At September 30, 2021 At December 31, 2020 Commercial Real Estate: Owner-occupied $ 3,343 $ 5,001 Nonowner-occupied 13,760 15,989 Other Commercial 9,031 12,320 Residential Real Estate 9,185 12,558 Construction 6,859 7,314 Consumer: Bankcard 0 0 Other consumer 2,978 3,211 $ 45,156 $ 56,393 Less: Allowance for credit losses ( 26 ) ( 250 ) Total $ 45,130 $ 56,143 The following table represents the accrued interest receivables written off by reversing interest income for the three months and nine months ended September 30, 2021 and 2020: Accrued Interest Receivables Written Off by Reversing Interest Income Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Commercial real estate: Owner-occupied $ 17 $ 16 $ 29 $ 116 Nonowner-occupied 59 30 99 75 Other commercial 5 40 14 85 Residential real estate 8 31 57 165 Construction & land development 3 508 3 508 Consumer: Bankcard 0 0 0 0 Other consumer 31 29 137 96 Total $ 123 $ 654 $ 339 $ 1,045 30 Table of Contents United estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values or other relevant factors. A reversion to historical loss data occurs via a straight-line method during the year following the one-year reasonable and supportable forecast period. United pools its loans and leases based on similar risk characteristics in estimating expected credit losses. United has identified the following portfolio segments and measures the allowance for credit losses using the following methods: • Method: Probability of Default/Loss Given Default (PD/LGD) • Commercial Real Estate Owner-Occupied • Commercial Real Estate Nonowner-Occupied • Commercial Other • Method: Cohort • Residential Real Estate • Construction & Land Development • Consumer • Bankcard Risk characteristics of commercial real estate owner-occupied loans and commercial other loans and leases are similar in that they are normally dependent upon the borrower’s internal cash flow from operations to service debt. Commercial real estate nonowner-occupied loans differ in that cash flow to service debt is normally dependent on external income from third parties for use of the real estate such as rents, leases and room rates. Residential real estate loans are dependent upon individual borrowers who are affected by changes in general economic conditions, demand for housing and resulting residential real estate valuation. Construction and land development loans are impacted mainly by demand whether for new residential housing or for retail, industrial, office and other types of commercial construction within a given area. Consumer loan pool risk characteristics are influenced by general, regional and local economic conditions. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, but may also include other non-performing loans or TDRs, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. These individually evaluated loans are removed from their respective pools and typically represent collateral dependent loans. In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a loan expected to be classified as a TDR. Expected credit losses are estimated over the contractual term of the loans and leases, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by United. For past loans and leases acquired through the completion of a transfer, including loans and leases acquired in a business combination, that had evidence of deterioration of credit quality since origination (“PCI”) and accounted for under ASC Topic 310, an entity did not have to reassess whether any loans and leases previously accounted for as PCI meet the definition of purchased credit deteriorated (“PCD”) loans and leases upon adoption of ASC Topic 326. Any changes in the allowance for credit losses for these loans and leases were accounted for as an adjustment to the loan’s amortized cost basis and not as a cumulative-effect adjustment to an entity’s beginning retained earnings. Non-PCI loans and leases are now classified as non-PCD loans and leases with the adoption of ASC Topic 326. In accordance with ASC Topic 326 guidance, United calculated a PCD rate adjustment for all PCD loans and leases at adoption. Such adjustment created a discount balance for any excess amount not deemed to be credit-related between the PCD recorded balance at the adoption date and the contractual principal and interest balances outstanding. 31 Table of Contents At the acquisition date, an initial allowance for expected credit losses is estimated and recorded as credit loss expense. The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans. For allowance for credit losses under ASC Topic 326 calculation purposes, United includes its acquired loans and leases in their relevant pool unless they meet the criteria for specific review. United maintains an allowance for loan losses and a reserve for lending-related commitments such as unfunded loan commitments and letters of credit. The reserve for lending-related commitments of $ 25,191 and $ 19,250 at September 30, 2021 and December 31, 2020, respectively, is separately classified on the balance sheet and is included in other liabilities. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses. As of September 30, 2021, the allowance for credit losses decreased from December 31, 2020 primarily due to better performance trends within the loan portfolio and improved macroeconomic factors surrounding the COVID-19 pandemic considered in the determination of the allowance for loan and lease losses at September 30, 2021. Reserves are initially determined based on losses identified from the PD/LGD and Cohort models which utilize the Company’s historical information. Then any qualitative adjustments are applied to account for the Company’s view of the future. 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 third quarter of 2021 qualitative adjustments include analyses of the following: • Past events – This includes portfolio trends related to business conditions; past due, nonaccrual, and graded loans and leases; and concentrations. • Current conditions – United considered the continued impact of COVID-19 on the economy as well as loan deferrals and modifications made in light of the pandemic when making determinations related to factor adjustments, such as changes in economic and business conditions, collateral values, external factors and past due loans and leases. • Reasonable and supportable forecasts – The forecast is determined on a portfolio-by-portfolio basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables. The reasonable and supportable forecast selection is subjective in nature and requires more judgment compared to the other components of the allowance. Assumptions for the economic variables were the following: • 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. • 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 some positive impact on the economy. 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 reasonable and supportable forecast period. 32 Table of Contents A progression of the allowance for loan losses, by portfolio segment, for the periods indicated is summarized as follows: Allowance for Loan Losses and Carrying Amount of Loans For the Three Months Ended September 30, 2021 Commercial Real Estate Other Commercial Residential Real Estate Construction & Land Development Bankcard Allowance for Estimated Imprecision Total Owner- occupied Nonowner- occupied Other Consumer Allowance for Loan Losses: Beginning balance $ 19,303 $ 42,046 $ 79,881 $ 26,051 $ 35,147 $ 254 $ 14,863 $ 0 $ 217,545 Charge-offs ( 159 ) ( 39 ) ( 765 ) ( 522 ) ( 128 ) ( 47 ) ( 344 ) 0 ( 2,004 ) Recoveries 623 90 774 1,192 359 8 127 0 3,173 Provision ( 4,573 ) ( 3,177 ) 1,539 ( 1,198 ) ( 292 ) 38 ( 160 ) 0 ( 7,823 ) Ending balance $ 15,194 $ 38,920 $ 81,429 $ 25,523 $ 35,086 $ 253 $ 14,486 $ 0 $ 210,891 Allowance for Loan Losses and Carrying Amount of Loans For the Nine Months Ended September 30, 2021 Commercial Real Estate Other Commercial Residential Real Estate Construction & Land Development Bankcard Allowance for Estimated Imprecision Total Owner- occupied Nonowner- occupied Other Consumer Allowance for Loan Losses: Beginning balance $ 23,354 $ 49,150 $ 78,138 $ 29,125 $ 39,077 $ 322 $ 16,664 $ 0 $ 235,830 Charge-offs ( 369 ) ( 3,140 ) ( 3,389 ) ( 5,928 ) ( 383 ) ( 153 ) ( 1,730 ) 0 ( 15,092 ) Recoveries 707 393 2,603 2,013 407 38 337 0 6,498 Provision ( 8,498 ) ( 7,483 ) 4,077 313 ( 4,015 ) 46 ( 785 ) 0 ( 16,345 ) Ending balance $ 15,194 $ 38,920 $ 81,429 $ 25,523 $ 35,086 $ 253 $ 14,486 $ 0 $ 210,891 Allowance for Loan and Lease Losses and Carrying Amount of Loans and Leases For the Year Ended December 31, 2020 Commercial Real Estate Other Commercial Residential Real Estate Construction & Land Development Bankcard Allowance for Estimated Imprecision Total Owner- occupied Nonowner- occupied Other Consumer Allowance for Loan and Lease Losses: Beginning balance $ 5,554 $ 8,524 $ 47,325 $ 8,997 $ 3,353 $ 74 $ 2,933 $ 297 $ 77,057 Impact of the adoption of ASU 2016-13 on January 1, 2020 9,737 9,023 ( 4,829 ) 13,097 14,817 28 10,745 ( 297 ) 52,321 Impact of the adoption of ASU 2016-13 for PCD loans on January 1, 2020 1,843 121 938 174 2,045 0 0 0 5,121 Initial allowance for PCD loans (acquired during the period) 1,955 6,418 7,032 652 2,570 0 8 0 18,635 Charge-offs ( 2,195 ) ( 6,134 ) ( 17,350 ) ( 1,760 ) ( 2,027 ) ( 221 ) ( 3,296 ) 0 ( 32,983 ) Recoveries 795 1,023 4,461 1,063 1,513 52 479 0 9,386 Provision 5,665 30,175 40,561 6,902 16,806 389 5,795 0 106,293 Ending balance $ 23,354 $ 49,150 $ 78,138 $ 29,125 $ 39,077 $ 322 $ 16,664 $ 0 $ 235,830 33 Table of Contents 7. INTANGIBLE ASSETS The following is a summary of intangible assets subject to amortization and those not subject to amortization: September 30, 2021 Community Banking Mortgage Banking Total Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortized intangible assets: Core deposit intangible assets $ 101,767 ($ 80,519 ) $ 0 $ 0 $ 101,767 ($ 80,519 ) Non-amortized intangible assets: George Mason trade name $ 0 $ 1,080 $ 1,080 Crescent trade name 0 196 196 Total $ 0 $ 1,276 $ 1,276 Goodwill not subject to amortization $ 1,804,725 $ 5,315 $ 1,810,040 December 31, 2020 Community Banking Mortgage Banking Total Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortized intangible assets: Core deposit intangible assets $ 101,767 ($ 76,120 ) $ 0 $ 0 $ 101,767 ($ 76,120 ) Non-amortized intangible assets: George Mason trade name $ 0 $ 1,080 $ 1,080 Crescent trade name 0 196 196 Total $ 0 $ 1,276 $ 1,276 Goodwill not subject to amortization $ 1,791,533 $ 5,315 $ 1,796,848 United incurred amortization expense of $ 1,466 and $ 4,399 for the three and nine months ended September 30, 2021 as compared to $ 1,691 and $ 4,914 for the three and nine months ended September 30, 2020, respectively. For the first nine months of 2021, goodwill of $ 13,192 was recorded for the Carolina Financial acquisition due to measurement period adjustments in current and deferred income taxes. The following table provides a reconciliation of goodwill: Community Banking Mortgage Banking Total Goodwill at December 31, 2020 $ 1,791,533 $ 5,315 $ 1,796,848 Goodwill from Carolina Financial acquisition 13,192 0 13,192 Goodwill at September 30, 2021 $ 1,804,725 $ 5,315 $ 1,810,040 34 Table of Contents The following table sets forth the anticipated amortization expense for intangible assets for the years subsequent to 2020:​​​​​​​ Year Amount 2021 $ 5,866 2022 4,983 2023 4,680 2024 3,255 2025 2,942 2026 and thereafter 3,921 8. MORTGAGE SERVICING RIGHTS Mortgage loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The value of mortgage servicing rights (“MSRs”) is included on the Company’s Consolidated Balance Sheets. The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“MSRs”) at fair value, if practicable. For subsequent measurement purposes, the Company measures servicing assets and liabilities based on the lower of cost or market using the amortization method. MSRs are amortized in proportion to, and over the period of, estimated net servicing income. The amortization of the MSRs is analyzed periodically and is adjusted to reflect changes in prepayment rates and other estimates. The Company evaluates potential impairment of MSRs based on the difference between the carrying amount and current estimated fair value of the servicing rights. In determining impairment, the Company aggregates all servicing rights and stratifies them into tranches based on predominant risk characteristics. If impairment exists, a valuation allowance is established for any excess of amortized cost over the current estimated fair value by a charge to income. If the Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income. Service fee income is recorded for fees earned for servicing mortgage loans under servicing agreements with the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”), Government National Mortgage Association (“GNMA”) and certain private investors. The fees are based on a contractual percentage of the outstanding principal balance of the loans serviced and are recorded in noninterest income. Amortization of MSRs and mortgage servicing costs are charged to expense when incurred. The unpaid principal balances of loans serviced for others were approximately $ 3,723,206 at September 30, 2021 and $ 3,587,953 at December 31, 2020. The estimated fair value of the mortgage servicing rights was $ 26,005 and $ 20,955 at September 30, 2021 and December 31, 2020, respectively. The estimated fair value of servicing rights at September 30, 2021 was determined using a net servicing fee of 0.26 %, average discount rates ranging from 10.50 % to 12.00 % with a weighted average discount rate of 10.61 %, average constant prepayment rates (“CPR”) ranging from 11.48 % to 21.71 % with a weighted average prepayment rate of 16.59 %, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.96 %. The estimated fair value of servicing rights at December 31, 2020 was determined using a net servicing fee of 0.26 %, average discount rates ranging from 9.50 % to 14.07 % with a weighted average discount rate of 10.62 %, average CPR ranging from 7.98 % to 18.42 % with a weighted average prepayment rate of 14.60 %, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.88 %. Please refer to Note 14 in these Notes to Consolidated Financial Statements for additional information concerning the fair value of MSRs. As disclosed in Note 2 of these Notes to Consolidated Financial Statements, the Company acquired $ 20,123 of mortgage servicing rights from its acquisition of Carolina Financial Corporation on May 1, 2020. 35 Table of Contents The following presents the activity in mortgage servicing rights, including their valuation allowance for the three and nine months ended September 30, 2021 and 2020: Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 MSRs beginning balance $ 24,173 $ 20,910 $ 22,338 $ 0 Addition from acquisition of subsidiary 0 0 0 20,123 Amount capitalized 2,524 2,500 8,859 4,391 Amount amortized ( 2,478 ) ( 1,887 ) ( 6,978 ) ( 2,991 ) MSRs ending balance $ 24,219 $ 21,523 $ 24,219 $ 21,523 MSRs valuation allowance beginning balance $ ( 1,633 ) $ ( 710 ) $ ( 1,383 ) $ 0 Aggregate additions charged and recoveries credited to operations 250 0 629 0 MSRs impairment 0 ( 400 ) ( 629 ) ( 1,110 ) MSRs valuation allowance ending balance $ ( 1,383 ) $ ( 1,110 ) $ ( 1,383 ) $ ( 1,110 ) MSRs, net of valuation allowance $ 22,836 $ 20,413 $ 22,836 $ 20,413 In determining impairment, the Company aggregates all servicing rights and stratifies them into tranches based on predominant risk characteristics. The estimated amortization expense is based on current information regarding future loan payments and prepayments. Amortization expense could change in future periods based on changes in the volume of prepayments and economic factors. 9. LEASES United determines if an arrangement is a lease at inception. United and certain subsidiaries have entered into various noncancelable-operating leases for branch and loan production offices as well as operating facilities. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Consolidated Balance Sheets. Operating leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. Presently, United does not have any finance leases. United’s operating leases are subject to renewal options under various terms. United’s operating leases have remaining terms of 1 to 11 years, some of which include options to extend leases generally for periods of 5 years. United rents or subleases certain real estate to third parties. Our sublease portfolio consists of operating leases to other organizations for former branch offices. ROU assets represent United’s right to use an underlying asset for the lease term and lease liabilities represent United’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of United’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend the lease when it is reasonably certain that United will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense were as follows: Classification Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Operating lease cost Net occupancy expense $ 5,360 $ 5,704 Sublease income Net occupancy expense ( 291 ) ( 102 ) Net lease cost $ 5,069 $ 5,602 Classification Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Operating lease cost Net occupancy expense $ 16,037 $ 16,665 Sublease income Net occupancy expense ( 946 ) ( 496 ) Net lease cost $ 15,091 $ 16,169 36 Table of Contents Supplemental balance sheet information related to leases was as follows: Classification September 30, 2021 December 31, 2020 Operating lease right-of-use assets Operating lease right-of-use assets $ 75,593 $ 69,520 Operating lease liabilities Operating lease liabilities $ 80,518 $ 73,213 Other information related to leases was as follows: September 30, 2021 Weighted-average remaining lease term: Operating leases 6.5 years Weighted-average discount rate: Operating leases 2.20 % Supplemental cash flow information related to leases was as follows: Three Months Ended September 30, 2021 September 30, 2020 Cash paid for amounts in the measurement of lease liabilities: Operating cash flows from operating leases $ 5,533 $ 5,854 ROU assets obtained in the exchange for lease liabilities 13,606 7,148 Nine Months Ended September 30, 2021 September 30, 2020 Cash paid for amounts in the measurement of lease liabilities: Operating cash flows from operating leases $ 16,560 $ 16,593 ROU assets obtained in the exchange for lease liabilities 19,888 19,480 Maturities of lease liabilities by year and in the aggregate, under operating leases with initial or remaining terms of one year or more, for years subsequent to December 31, 2020, consists of the following as of September 30, 2021 and December 31, 2020: Amount Year As of September 30, 2021 As of December 31, 2020 2021 $ 5,168 $ 20,172 2022 18,395 16,196 2023 15,354 12,723 2024 10,830 8,242 2025 8,026 5,516 Thereafter 28,217 15,330 Total lease payments 85,990 78,179 Less: imputed interest ( 5,472 ) ( 4,966 ) Total $ 80,518 $ 73,213 10. SHORT-TERM BORROWINGS Federal funds purchased and securities sold under agreements to repurchase are a significant source of funds for the Company. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $ 230,000 . These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions. At September 30, 2021, United did no t have any federal funds purchased while total securities sold under agreements to repurchase (“REPOs”) were $ 123,018 . The securities sold under agreements to repurchase were accounted for as collateralized financial transactions. They were recorded at the amounts at which the securities were acquired or sold plus accrued interest. United has a $ 20,000 line of credit with an unrelated financial institution to provide for general liquidity needs. The line is an unsecured, revolving line of credit. The line will be renewable on a 360-day basis and will carry an indexed, floating-rate of interest. The line requires compliance with various financial and nonfinancial covenants. At September 30, 2021, United had no outstanding balance under this line of credit. 37 Table of Contents 11. LONG-TERM BORROWINGS United’s subsidiary bank is a member of the Federal Home Loan Bank (“FHLB”). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a mix of single-family residential mortgage loans, commercial loans and investment securities. At September 30, 2021, United had an unused borrowing amount of approximately $ 7,060,714 available subject to delivery of collateral after certain trigger points. Advances may be called by the FHLB or redeemed by United based on predefined factors and penalties. At September 30, 2021, $ 532,782 of FHLB advances with a weighted-average contractual interest rate of 0.34 % and a weighted-average effective interest rate of 0.55 % are scheduled to mature within the next four years. The scheduled maturities of these FHLB borrowings are as follows: Year Amount 2021 $ 500,000 2022 21,648 2023 0 2024 0 2025 and thereafter 11,134 Total $ 532,782 At September 30, 2021, United had a total of nineteen statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (“Capital Securities”) with the proceeds invested in junior subordinated debt securities (“Debentures”) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. At September 30, 2021 and December 31, 2020, the outstanding balance of the Debentures was $ 271,201 and $ 269,972 , respectively. United also assumed $10,000 in aggregate principal amount of fixed-to-floating rate subordinated notes in the Carolina Financial acquisition. At September 30, 2021 and December 31, 2020, the outstanding balance of the subordinated notes was $ 9,868 and $ 9,865 . The amounts for the Debentures and the subordinated notes are included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.” The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities. Under the provisions of the junior subordinated debt, United has the right to defer payment of interest on the junior subordinated debt at any time, or from time to time, for periods not exceeding five years . If interest payments on the junior subordinated debt are deferred, the dividends on the Capital Securities are also deferred. Interest on the junior subordinated debt is cumulative. In accordance with the fully-phased in “Basel III Capital Rules” as published by United’s primary federal regulator, the Federal Reserve, United is unable to consider the Capital Securities or the subordinated notes as Tier 1 capital, but rather the Capital Securities and subordinated notes are included as a component of United’s Tier 2 capital. United can include the Capital Securities and subordinated notes in its Tier 2 capital on a permanent basis. 12. COMMITMENTS AND CONTINGENT LIABILITIES Lending-related Commitments United is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to alter its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby letters of credit, and interest rate swap agreements. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. 38 Table of Contents United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Collateral may be obtained, if deemed necessary, based on management’s credit evaluation of the counterparty. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily, and historically do not, represent future cash requirements. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation of the counterparty. United had approximately $ 6,964,784 and $ 5,730,876 of loan commitments outstanding as of September 30, 2021 and December 31, 2020, respectively, approximately 43% of which contractually expire within one year . Included in the September 30, 2021 amount are commitments to extend credit of $ 686,233 related to mortgage loan funding commitments of United’s mortgage banking segment and are of a short-term nature. Commercial and standby letters of credit are agreements used by United’s customers as a means of improving their credit standing in their dealings with others. Under these agreements, United guarantees certain financial commitments of its customers. A commercial letter of credit is issued specifically to facilitate trade or commerce. Typically, under the terms of a commercial letter of credit, a commitment is drawn upon when the underlying transaction is consummated as intended between the customer and a third party. United had $ 3,055 and $ 5,092 of commercial letters of credit outstanding as of September 30, 2021 and December 31, 2020, respectively. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of $ 164,061 and $ 134,916 as of September 30, 2021 and December 31, 2020, respectively. In accordance with the Contingencies Topic of the FASB Accounting Standards Codification, United has determined that substantially all of its letters of credit are renewed on an annual basis and the fees associated with these letters of credit are immaterial. Mortgage Repurchase Reserve United’s mortgage banking segment provides for its estimated exposure to repurchase loans previously sold to investors for which borrowers failed to provide full and accurate information on their loan application or for which appraisals have not been acceptable or where the loan was not underwritten in accordance with the loan program specified by the loan investor, and for other exposure to its investors related to loan sales activities. United evaluates the merits of each claim and estimates its reserve based on actual and expected claims received and considers the historical amounts paid to settle such claims. United’s mortgage banking segment had a reserve of $ 1,209 and $ 1,216 as of September 30, 2021 and December 31, 2020, respectively. United has derivative counter-party risk that may arise from the possible inability of United’s mortgage banking segment’s third party investors to meet the terms of their forward sales contracts. United’s mortgage banking segment works with third-party investors that are generally well-capitalized, are investment grade and exhibit strong financial performance to mitigate this risk. United does not expect any third-party investor to fail to meet its obligation. Legal Proceedings United and its subsidiaries are currently involved in various legal proceedings in the normal course of business. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position. Regulatory Matters A variety of consumer products, including mortgage and deposit products, and certain fees and charges related to such products, have come under increased regulatory scrutiny. It is possible that regulatory authorities could bring enforcement actions, including civil money penalties, or take other actions against United in regard to these consumer products. United 39 Table of Contents could also determine of its own accord, or be required by regulators, to refund or otherwise make remediation payments to customers in connection with these products. It is not possible at this time for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss related to such matters. 13. DERIVATIVE FINANCIAL INSTRUMENTS United accounts for its derivative financial instruments in accordance with ASC Topic 815 which requires all derivative instruments to be carried at fair value on the balance sheet. United has designated certain derivative instruments used to manage interest rate risk as hedge relationships with certain assets, liabilities or cash flows being hedged. Certain derivatives used for interest rate risk management are not designated in a hedge relationship. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. United uses derivative instruments to help aid against adverse price changes or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives may consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. United also executes derivative instruments with its commercial banking customers to facilitate its risk management strategies. During the second quarter of 2020, United entered into a new interest rate swap derivative designated as a cash flow hedge. The notional amount of the cash flow hedge derivative totaled $ 250,000 . The derivative is intended to hedge the changes in cash flows associated with floating rate FHLB borrowings. United is required to pay-fixed 0.59 % and receive-variable 1-month LIBOR with monthly resets. The tenor of the interest rate swap derivative is 10 years with an expiration date in June 2030. During the third quarter of 2020, United entered into an additional interest rate swap derivative designated as a cash flow hedge. The notional amount of the cash flow hedge derivative totaled $ 250,000 . The derivative is intended to hedge the changes in cash flows associated with floating rate FHLB borrowings. United is required to pay-fixed 0.19 % and receive-variable 1-month LIBOR with monthly resets. The tenor of the interest rate swap derivative is 4 years with an expiration date in August 2024. As of September 30, 2021, United has determined that no forecasted transactions related to its cash flow hedges resulted in gains or losses pertaining to cash flow hedge reclassification from AOCI to income because the forecasted transactions became probable of not occurring. United estimates that $ 1,384 will be reclassified from AOCI as an increase to interest expense over the next 12-months following September 30, 2021 related to the cash flow hedges. As of September 30, 2021, the maximum length of time over which forecasted transactions are hedged is nine years. At inception of a hedge relationship, United formally documents the hedged item, the particular risk management objective, the nature of the risk being hedged, the derivative being used, how effectiveness of the hedge will be assessed and how the ineffectiveness of the hedge will be measured. United also assesses hedge effectiveness at inception and on an ongoing basis using regression analysis. Hedge ineffectiveness is measured by using the change in fair value method. The change in fair value method compares the change in the fair value of the hedging derivative to the change in the fair value of the hedged exposure, attributable to changes in the benchmark rate. United through its mortgage banking subsidiaries enters into interest rate lock commitments to finance residential mortgage loans with its customers. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by United. Interest rate risk arises on these commitments and subsequently closed loans if interest rates change between the time of the interest rate lock and the delivery of the loan to the investor. Market risk on interest rate lock commitments and mortgage loans held for sale is managed using corresponding forward mortgage loan sales contracts. United is a party to these forward mortgage loan sales contracts to sell loans servicing released and short sales of mortgage-backed securities. When the interest rate is locked with the borrower, the rate lock commitment, forward sale agreement, and mortgage-backed security position are undesignated derivatives and marked to fair value through earnings. The fair value of the rate lock derivative includes the servicing premium and the interest spread for the difference between retail and wholesale mortgage rates. Income from mortgage banking activities includes the gain recognized for the period presented and associated elements of fair value. 40 Table of Contents United is subject to the Dodd-Frank Act clearing requirement for eligible derivatives. United has executed and cleared eligible derivatives through the London Clearing House (“LCH”). Variation margin at the LCH is distinguished as settled-to-market and settled daily based on the prior day value, rather than collateralized-to-market. The total notional amount of interest rate swap derivatives cleared through the LCH include $ 500,000 for asset derivatives as of September 30, 2021. The related fair value on a net basis approximate zero . The following tables disclose the derivative instruments’ location on the Company’s Consolidated Balance Sheets and the notional amount and fair value of those instruments at September 30, 2021 and December 31, 2020. Asset Derivatives September 30, 2021 December 31, 2020 Balance Sheet Location Notional Amount Fair Value Balance Sheet Location Notional Amount Fair Value Cash Flow Hedges: Interest rate swap contracts (hedging FHLB borrowings) Other assets $ 500,000 $ 17,833 Other assets $ 500,000 $ 4,378 Total Cash Flow Hedges $ 500,000 $ 17,833 $ 500,000 $ 4,378 Total derivatives designated as hedging instruments $ 500,000 $ 17,833 $ 500,000 $ 4,378 Derivatives not designated as hedging instruments Forward loan sales commitments Other assets $ 34,891 $ 262 Other assets $ 62,418 $ 1,581 TBA mortgage-backed securities Other assets 727,521 4,194 Other assets 0 0 Interest rate lock commitments Other assets 684,170 14,447 Other assets 973,350 38,332 Total derivatives not designated as hedging instruments $ 1,446,582 $ 18,903 $ 1,035,768 $ 39,913 Total asset derivatives $ 1,946,582 $ 36,736 $ 1,535,768 $ 44,291 Liability Derivatives September 30, 2021 December 31, 2020 Balance Sheet Location Notional Amount Fair Value Balance Sheet Location Notional Amount Fair Value Derivatives designated as hedging instruments Fair Value Hedges: Interest rate swap contracts (hedging commercial loans) Other liabilities $ 73,606 $ 3,879 Other liabilities $ 77,011 $ 6,782 Total Fair Value Hedges $ 73,606 $ 3,879 $ 77,011 $ 6,782 Total derivatives designated as hedging instruments $ 73,606 $ 3,879 $ 77,011 $ 6,782 Derivatives not designated as hedging instruments Forward loan sales commitments Other liabilities $ 31,504 $ 222 Other liabilities $ 0 $ 0 Interest rate lock commitments Other liabilities 474,719 130 789,000 6,276 Total derivatives not designated as hedging instruments $ 506,223 $ 352 $ 789,000 $ 6,276 Total liability derivatives $ 579,829 $ 4,231 $ 866,011 $ 13,058 41 Table of Contents The following table represents the carrying a m ount of the hedged assets/(liabilities) and the cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities) that are designated as a fair value accounting relationship as of September 30, 2021 and December 31, 2020. September 30, 2021 Derivatives in Fair Value Hedging Relationships Location in the Statement of Condition Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/ (Liabilities) for which Hedge Accounting has been Discontinued Interest rate swaps Loans, net of unearned income $ 74,368 $ ( 3,879 ) $ 0 December 31, 2020 Derivatives in Fair Value Hedging Relationships Location in the Statement of Condition Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/ (Liabilities) for which Hedge Accounting has been Discontinued Interest rate swaps Loans, net of unearned income $ 77,810 $ ( 6,782 ) $ 0 Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. United’s exposure is limited to the replacement value of the contracts rather than the notional amount of the contract. The Company’s agreements generally contain provisions that limit the unsecured exposure up to an agreed upon threshold. Additionally, the Company attempts to minimize credit risk through certain approval processes established by management. The effect of United’s derivative financial instruments on its unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020 are presented as follows: Three Months Ended Income Statement Location September 30, 2021 September 30, 2020 Derivatives in hedging relationships Cash flow Hedges: Interest rate swap contracts Interest on long-term borrowings $ ( 382 ) $ 0 Fair Value Hedges: Interest rate swap contracts Interest and fees on loans $ ( 447 ) $ ( 409 ) Total derivatives in hedging relationships $ ( 829 ) $ ( 409 ) Derivatives not designated as hedging instruments Forward loan sales commitments Income from Mortgage Banking Activities $ ( 257 ) $ 246 TBA mortgage-backed securities Income from Mortgage Banking Activities 5,766 1,604 Interest rate lock commitments Income from Mortgage Banking Activities ( 1,305 ) 20,915 Total derivatives not designated as hedging instruments $ 4,204 $ 22,765 Total derivatives $ 3,375 $ 22,356 42 Table of Contents Income Statement Location Nine Months Ended September 30, 2021 September 30, 2020 Derivatives in hedging relationships Cash flow Hedges: Interest rate swap contracts Interest on long-term borrowings $ ( 968 ) $ 0 Fair Value Hedges: Interest rate swap contracts Interest and fees on loans $ ( 1,240 ) $ ( 1,129 ) Total derivatives in hedging relationships $ ( 2,208 ) $ ( 1,129 ) Derivatives not designated as hedging instruments Forward loan sales commitments Income from Mortgage Banking Activities $ ( 1,541 ) $ ( 315 ) TBA mortgage-backed securities Income from Mortgage Banking Activities 10,470 ( 167 ) Interest rate lock commitments Income from Mortgage Banking Activities ( 17,292 ) 33,084 Total derivatives not designated as hedging instruments $ ( 8,363 ) $ 32,602 Total derivatives $ ( 10,571 ) $ 31,473 14. FAIR VALUE MEASUREMENTS United determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which also clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect United’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows: Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 - Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. Level 3 - Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. When determining the fair value measurements for assets and liabilities, United looks to active and observable markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are no t traded in active markets, United looks to market observable data for similar assets and liabilities and classifies such items as Level 2. Nevertheless, certain assets and liabilities are no t actively traded in observable markets and United must use alternative valuation techniques using unobservable inputs to determine a fair value and classifies such items as Level 3. For assets and liabilities that are no t actively traded, the fair value measurement is based primarily upon estimates that require significant judgment. Therefore, the results may no t be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there are inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement. In accordance with ASC Topic 820, the following describes the valuation techniques used by United to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements. 43 Table of Contents Securities available for sale and equity securities : Securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (“Level 1”). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Using a market approach valuation methodology, third party vendors compile prices based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, and “To Be Announced” prices (“Level 2”). Management internally reviews the fair values provided by third party vendors on a monthly basis. Management also performs a quarterly price testing analysis at the individual security level which compares the pricing provided by the third party vendors to an independent pricing source’s valuation of the same securities. Variances that are deemed to be material are reviewed by management. Additionally, to further assess the reliability of the information received from third party vendors, management obtains documentation from third party vendors related to the sources, methodologies, and inputs utilized in valuing securities classified as Level 2. Management analyzes this information to ensure the underlying assumptions appear reasonable. Management also obtains an independent service auditor’s report from third party vendors to provide reasonable assurance that appropriate controls are in place over the valuation process. Upon completing its review of the pricing from third party vendors at September 30, 2021, management determined that the prices provided by its third party pricing source were reasonable and in line with management’s expectations for the market values of these securities. Therefore, prices obtained from third party vendors that did not reflect forced liquidation or distressed sales were not adjusted by management at September 30, 2021. Management utilizes a number of factors to determine if a market is inactive, all of which may require a significant level of judgment. Factors that management considers include: a significant widening of the bid-ask spread, a considerable decline in the volume and level of trading activity in the instrument, a significant variance in prices among market participants, and a significant reduction in the level of observable inputs. Any securities available for sale not valued based upon quoted market prices or third party pricing models that consider observable market data are considered Level 3. Currently, United does not have any available-for-sale securities considered as Level 3. Loans held for sale : For residential mortgage loans sold in the mortgage banking segment, the loans closed are recorded at fair value using the fair value option which is measured using valuations from investors for loans with similar characteristics (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated pricing (“Level 3”). The unobservable input for Level 3 valuations is the Company’s historical sales prices. For September 30, 2021, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.10 % to 0.34 % with a weighted average increase of 0.23 %. Derivatives : United utilizes interest rate swaps to hedge exposure to interest rate risk and variability of cash flows associated to changes in the underlying interest rate of the hedged item. These hedging interest rate swaps are classified as either a fair value hedge or a cash flow hedge. United utilizes third-party vendors for derivative valuation purposes. These vendors determine the appropriate fair value based on a net present value calculation of the cash flows related to the interest rate swaps using primarily observable market inputs such as interest rate yield curves (“Level 2”). Valuation adjustments to derivative fair values for liquidity and credit risk are also taken into consideration, as well as the likelihood of default by United and derivative counterparties, the net counterparty exposure and the remaining maturities of the positions. Values obtained from third party vendors are typically not adjusted by management. Management internally reviews the derivative values provided by third party vendors on a quarterly basis. All derivative values are tested for reasonableness by management utilizing a net present value calculation. For a fair value hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge are offset in current period earnings either in interest income or interest expense depending on the nature of the hedged financial instrument. For a cash flow hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to accumulated other comprehensive income within shareholders’ equity, net of tax. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a cash flow hedge are offset to accumulated other comprehensive income, net of tax and reclassified into earnings in the same line associated with the forecasted transaction when the forecasted transaction affects earnings. 44 Table of Contents The Company records its interest rate lock commitments and forward loan sales commitments at fair value determined as the amount that would be required to settle each of these derivative financial instruments at the balance sheet date. In the normal course of business, United’s mortgage banking subsidiaries enter into contractual interest rate lock commitments to extend credit to borrowers with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within the timeframes established by the mortgage companies. All borrowers are evaluated for credit worthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to the investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, United’s mortgage banking subsidiaries enter into either a forward sales contract to sell loans to investors when using best efforts or a TBA mortgage-backed security under mandatory delivery. As TBA mortgage-backed securities are actively traded in an open market, TBA mortgage-backed securities fall into a Level 1 category. The forward sales contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. Under the Company’s best efforts model, the rate lock commitments to borrowers and the forward sales contracts to investors through to the date the loan closes are undesignated derivatives and accordingly, are marked to fair value through earnings. These valuations fall into a Level 2 category. For residential mortgage loans sold in the mortgage banking segment, the interest rate lock commitments are recorded at fair value which is measured using valuations from investors for loans with similar characteristics (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated pricing (“Level 3”). The unobservable input for Level 3 valuations is the Company’s historical sales prices. For September 30, 2021, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.10 % to 0.34 % with a weighted average increase of 0.23 %. For interest rate swap derivatives that are not designated in a hedge relationship, changes in the fair value of the derivatives are recognized in earnings in the same period as the change in the fair value. Unrealized gains and losses due to changes in the fair value of other derivative financial instruments not in hedge relationship are included in noninterest income and noninterest expense, respectively. The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy. Fair Value at September 30, 2021 Using Description Balance as of September 30, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Available for sale debt securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 13,045 $ 0 $ 13,045 $ 0 State and political subdivisions 620,687 0 620,687 0 Residential mortgage-backed securities Agency 1,034,014 0 1,034,014 0 Non-agency 38,069 0 38,069 0 Commercial mortgage-backed securities Agency 631,048 0 631,048 0 Asset-backed securities 535,011 0 535,011 0 Single issue trust preferred securities 16,482 0 16,482 0 Other corporate securities 521,628 5,833 515,795 0 Total available for sale securities 3,409,984 5,833 3,404,151 0 Equity securities: Financial services industry 170 170 0 0 Equity mutual funds (1) 5,948 5,948 0 0 Other equity securities 5,866 5,866 0 0 Total equity securities 11,984 11,984 0 0 45 Table of Contents Fair Value at September 30, 2021 Using Description Balance as of September 30, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Loans held for sale 493,299 0 45,462 447,837 Derivative financial assets: Interest rate swap contracts 17,833 0 17,833 0 Forward sales commitments 262 0 262 0 TBA mortgage-backed securities 4,194 0 1,029 3,165 Interest rate lock commitments 14,447 0 1,522 12,925 Total derivative financial assets 36,736 0 20,646 16,090 Liabilities Derivative financial liabilities: Interest rate swap contracts 3,879 0 3,879 0 Forward sales commitments 222 0 0 222 Interest rate lock commitments 130 0 0 130 Total derivative financial liabilities 4,231 0 3,879 352 (1)   The equity mutual funds are within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries.     Fair Value at December 31, 2020 Using Description Balance as of December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Available for sale debt securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 66,344 $ 0 $ 66,344 $ 0 State and political subdivisions 565,160 0 565,160 0 Residential mortgage-backed securities Agency 928,891 0 928,891 0 Non-agency 21,776 0 21,776 0 Commercial mortgage-backed securities Agency 675,145 0 675,145 0 Asset-backed securities 294,623 0 294,623 0 Single issue trust preferred securities 17,027 0 17,027 0 Other corporate securities 384,393 6,207 378,186 0 Total available for sale securities 2,953,359 6,207 2,947,152 0 Equity securities: Financial services industry 134 134 0 0 Equity mutual funds (1) 4,602 4,602 0 0 Other equity securities 5,982 5,982 0 0 Total equity securities 10,718 10,718 0 0 Loans held for sale 698,341 0 43,608 654,733 Derivative financial assets: Interest rate swap contracts 4,378 0 4,378 0 Forward sales commitments 1,581 0 1,581 0 TBA mortgage-backed securities 0 0 0 0 Interest rate lock commitments 38,332 0 6,321 32,011 Total derivative financial assets 44,291 0 12,280 32,011 46 Table of Contents Fair Value at December 31, 2020 Using Description Balance as of December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities Derivative financial liabilities: Interest rate swap contracts 6,782 0 6,782 0 TBA mortgage-backed securities 6,276 0 6,276 0 Total derivative financial liabilities 13,058 0 13,058 0 (1)   The equity mutual funds are w i thin a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. There were no transfers between Level 1 and Level 2 for financial assets and liabilities measured at fair value on a recurring basis during the nine months ended September 30, 2021 and the year ended December 31, 2020. The following table presents additional information about financial assets and liabilities measured at fair value at September 30, 2021 and December 31, 2020 on a recurring basis and for which United has utilized Level 3 inputs to determine fair value: Loans held for sale September 30, 2021 December 31, 2020 Balance, beginning of period $ 654,733 $ 384,375 Originations 3,978,453 5,699,581 Sales ( 4,300,868 ) ( 5,652,693 ) Total gains or losses during the period recognized in earnings 115,519 223,470 Transfers in and/or out of Level 3 ( 0 ) ( 0 ) Balance, end of period $ 447,837 $ 654,733 The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 0 $ 0 Derivative Financial Assets TBA Securities September 30, 2021 December 31, 2020 Balance, beginning of period $ 0 $ 0 Transfers other 3,165 0 Balance, end of period $ 3,165 $ 0 The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 0 $ 0 Derivative Financial Assets Interest Rate Lock Commitments September 30, 2021 December 31, 2020 Balance, beginning of period $ 32,011 $ 4,518 Transfers other ( 19,086 ) 27,493 Balance, end of period $ 12,925 $ 32,011 The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 0 $ 0 47 Table of Contents Derivative Financial Liabilities Forward Sales Commitments September 30, 2021 December 31, 2020 Balance, beginning of period $ 0 $ 0 Transfers other 222 0 Balance, end of period $ 222 $ 0 The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 0 $ 0 Derivative Financial Liabilities Interest Rate Lock Commitments September 30, 2021 December 31, 2020 Balance, beginning of period $ 0 $ 0 Transfers other 130 0 Balance, end of period $ 130 $ 0 The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 0 $ 0 Fair Value Option As of January 1, 2021, United elected the fair value option for new loans held for sale originated in its community banking segment after that date to mitigate a divergence between accounting losses and economic exposure. Prior to January 1, 2021, United elected the fair value option only for its loans held for sale in its mortgage banking segment. The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected: Description Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Income from mortgage banking activities $ ( 4,577 ) $ 7,807 Description Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Income from mortgage banking activities $ ( 16,353 ) $ 18,278 The following table reflects the difference between the aggregate fair value and the remaining contractual principal outstanding for financial instruments for which the fair value option has been elected: September 30, 2021 December 31, 2020 Description Unpaid Principal Balance Fair Value Fair Value Over/(Under) Unpaid Principal Balance Unpaid Principal Balance Fair Value Fair Value Over/(Under) Unpaid Principal Balance Loans held for sale $ 483,239 $ 493,299 $ 10,060 $ 672,458 $ 698,341 $ 25,883 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain financial assets are measured a t fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. 48 Table of Contents The following describes the valuation techniques used by United to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements. Loans held for sale : Prior to January 1, 2021, loans held for sale within the community banking segment that were delivered on a best efforts basis were carried at the lower of cost or fair value. As previously mentioned, United elected the fair value option for all loans held for sale as of January 1, 2021. Under the lower of cost or fair value accounting method, the fair value of loans held for sale within the community banking segment was based on the price secondary markets offered at the time for similar loans using observable market data which was not materially different than cost due to the short duration between origination and sale (“Level 2”). As such, United recorded any fair value adjustments for these loans held for sale on a nonrecurring basis. Gains and losses on sale of loans were recorded within income from mortgage banking activities on the Consolidated Statements of Income. Individually assessed loans : In the determination of the allowance for loan losses, loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Fair value is measured using a market approach based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an appraisal conducted by an independent, licensed appraiser outside of the Company using comparable property sales (“Level 2”). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (“Level 3”). For individually assessed loans, a specific reserve is established through the allowance for loan losses, if necessary, by estimating the fair value of the underlying collateral on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses expense on the Consolidated Statements of Income. OREO : OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried on the balance sheet at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Fair value is determined by one of two market approach methods depending on whether the property has been vacated and an appraisal can be conducted. If the property has yet to be vacated and thus an appraisal cannot be performed, a Broker’s Price Opinion (i.e. BPO), is obtained. A BPO represents a best estimate valuation performed by a realtor based on knowledge of current property values and a visual examination of the exterior condition of the property. Once the property is subsequently vacated, a formal appraisal is obtained and the recorded asset value appropriately adjusted. On the other hand, if the OREO property has been vacated and an appraisal can be conducted, the fair value of the property is determined based upon the appraisal using a market approach. An authorized independent appraiser conducts appraisals for United. Appraisals for property other than ongoing construction are based on consideration of comparable property sales (“Level 2”). In contrast, valuation of ongoing construction assets requires some degree of professional judgment. In conducting an appraisal for ongoing construction property, the appraiser develops two appraised amounts: an “as is” appraised value and a “completed” value. Based on professional judgment and their knowledge of the particular situation, management determines the appropriate fair value to be utilized for such property (“Level 3”). As a matter of policy, valuations are reviewed at least annually and appraisals are generally updated on a bi-annual basis with values lowered as necessary. Intangible Assets : For United, intangible assets consist primarily of goodwill and core deposit intangibles. Goodwill is tested for impairment at least annually or sooner if indicators of impairment exist. Goodwill impairment would be defined as the difference between the recorded value of goodwill (i.e. book value) and the implied fair value of goodwill. In determining the implied fair value of goodwill for purposes of evaluating goodwill impairment, United determines the fair 49 Table of Contents value of the reporting unit and compares the fair value to its carrying value. United may elect to perform a qualitative analysis to determine whether or not it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount. If United elects to bypass this qualitative analysis, or concludes via qualitative analysis that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, United may use either a market or income quantitative approach, whichever is more practical, to determine the fair value of the reporting unit to compare to its carrying value as step one. If the fair value is greater than the carrying value, then the reporting unit’s goodwill is deemed not to be impaired. If the fair value is less than the carrying value, then a second step is performed which measures the amount of impairment by comparing the carrying amount of the goodwill to its implied fair value. If the implied fair value of the goodwill exceeds the carrying amount, there is no impairment. If the carrying amount exceeds the implied fair value of goodwill, an impairment charge is recorded for the excess. At each reporting date, the Company considers potential indicators of impairment. United performed its annual goodwill impairment test on the Company’s reporting units as of September 30, 2021. The goodwill impairment test did not identify any goodwill impairment. In subsequent periods, economic uncertainty and volatility surrounding COVID-19 and the performance of the Company’s stock as well as possible other impairment indicators could cause us to perform a goodwill impairment test which could result in an impairment charge being recorded for that period if the carrying value of goodwill was found to exceed fair value. Core deposit intangibles relate to the estimated value of the deposit base of acquired institutions. Management reviews core deposit intangible assets on an annual basis, or sooner if indicators of impairment exist, and evaluates changes in facts and circumstances that may indicate impairment in the carrying value. No other fair value measurement of intangible assets was made during the first nine months of 2021 and 2020 other than those intangible assets recorded in the acquisition of Carolina Financial in the second quarter of 2020. Mortgage Servicing Rights ( “ MSRs ” ): A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“mortgage servicing rights”) at fair value, if practicable. For subsequent measurement purposes, the Company measures servicing assets and liabilities based on the lower of cost or market quarterly on a nonrecurring basis. The quarterly determination of fair value of servicing rights is provided by a third party and is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy. The unobservable inputs for Level 3 valuations are market discount rates, anticipated prepayment speeds, projected delinquency rates, and ancillary fee income net of servicing costs. For September 30, 2021, the average range of discount rates was 10.50 % to 12.00 % with a weighted average discount rate of 10.61 %; the average range of constant prepayment rates was 11.48 % to 21.71 % with a weighted average prepayment rate of 16.59 %; the net servicing fee was 0.26 %; and the delinquency rate, including loans on forbearance was 2.96 %. For December 31, 2020, the average range of discount rates was 9.50 % to 14.07 % with a weighted average discount rate of 10.62 %; the average range of constant prepayment rates was 7.98 % to 18.42 % with a weighted average prepayment rate of 14.60 %; the net servicing fee was 0.26 %; and the delinquency rate, including loans on forbearance was 2.88 %. The Company recorded a net of recovery of $ 250 on mortgage servicing rights in the third quarter of 2021. The Company recorded a $ 400 temporary impairment of mortgage servicing rights in the third quarter of 2020. No net impairment on mortgage servicing rights was recorded in the first nine months of 2021. For the first nine months of 2020, the Company recorded a $ 1,110 temporary impairment of mortgage servicing rights. The Company does not hedge the mortgage servicing rights positions and the impact of falling long-term interest rates increased prepayment speed assumptions reducing the value of MSRs asset in 2020. 50 Table of Contents The following table summarizes United’s financial assets that were measured at fair value on a nonrecurring basis during the period: ​​​​​​​ Description Balance as of September 30, 2021 Carrying value at September 30, 2021 YTD Gains (Losses) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Individually assessed loans $ 49,679 $ 0 $ 43,694 $ 5,985 $ ( 65 ) OREO 16,696 0 5,772 10,924 ( 3,489 ) Mortgage servicing rights 26,005 0 0 26,005 ( 629 ) Description Balance as of December 31, 2020 Carrying value at December 31, 2020 YTD Gains (Losses) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Loans held for sale $ 20,596 $ 0 $ 20,596 $ 0 $ ( 197 ) Individually assessed loans 37,498 0 14,467 23,031 1,318 OREO 22,595 0 22,595 0 ( 1,618 ) Mortgage servicing rights 20,955 0 0 20,955 ( 1,383 ) Fair Value of Other Financial Instruments The following methods and assumptions were used by United in estimating its fair value disclosures for other financial instruments: Cash and Cash Equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values. Securities held to maturity and other securities : The estimated fair values of securities held to maturity are based on quoted market prices, where available. If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data. Any securities held to maturity, not valued based upon the methods above, are valued based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks. Other securities consist mainly of shares of Federal Home Loan Bank and Federal Reserve Bank stock that do not have readily determinable fair values and are carried at cost. Loans and leases : The fair values of certain mortgage loans (e.g., one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values of other loans and leases (e.g., commercial real estate and rental property mortgage loans, commercial and industrial loans, financial institution loans and agricultural loans) are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans and leases with similar terms to borrowers of similar creditworthiness, which include adjustments for liquidity concerns. For acquired PCD loans, fair value is assumed to equal United’s carrying value, which represents the present value of expected future principal and interest cash flows, as adjusted for any Allowance for Credit Losses recorded for these loans. Deposits : The fair values of demand deposits (e.g., interest and noninterest checking, regular savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values of fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. 51 Table of Contents Short-term Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and any other short-term borrowings approximate their fair values. Long-term Borrowings: The fair values of United’s Federal Home Loan Bank borrowings and trust preferred securities are estimated using discounted cash flow analyses, based on United’s current incremental borrowing rates for similar types of borrowing arrangements. Summary of Fair Values for All Financial Instruments The estimated fair values of United’s financial instruments are summarized below: Fair Value Measurements Carrying Amount Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2021 Cash and cash equivalents $ 4,033,561 $ 4,033,561 $ 0 $ 4,033,561 $ 0 Securities available for sale 3,409,984 3,409,984 5,833 3,404,151 0 Securities held to maturity 993 1,020 0 0 1,020 Equity securities 11,984 11,984 11,984 0 0 Other securities 223,104 211,949 0 0 211,949 Loans held for sale 493,299 493,299 0 45,462 447,837 Net loans 16,532,738 16,072,885 0 0 16,072,885 Derivative financial assets 36,736 36,736 0 20,646 16,090 Mortgage servicing rights 22,836 26,005 0 0 26,005 Deposits 21,822,609 21,805,200 0 21,805,200 0 Short-term borrowings 123,018 123,018 0 123,018 0 Long-term borrowings 813,851 768,918 0 768,918 0 Derivative financial liabilities 4,231 4,231 0 3,879 352 December 31, 2020 Cash and cash equivalents $ 2,209,068 $ 2,209,068 $ 0 $ 2,209,068 $ 0 Securities available for sale 2,953,359 2,953,359 6,207 2,947,152 0 Securities held to maturity 1,212 1,235 0 215 1,020 Equity securities 10,718 10,718 10,718 0 0 Other securities 220,895 209,850 0 0 209,850 Loans held for sale 718,937 718,937 0 64,204 654,733 Net loans 17,355,583 16,559,797 0 0 16,559,797 Derivative financial assets 44,291 44,291 0 12,280 32,011 Mortgage servicing rights 20,955 20,955 0 0 20,955 Deposits 20,585,160 20,583,607 0 20,583,607 0 Short-term borrowings 142,300 142,300 0 142,300 0 Long-term borrowings 864,369 815,991 0 815,991 0 Derivative financial liabilities 13,058 13,058 0 13,058 0 15. STOCK BASED COMPENSATION On May 12, 2020, United’s shareholders approved the 2020 Long-Term Incentive Plan (“2020 LTI Plan”). The 2020 LTI Plan became effective May 13, 2020. An award granted under the 2020 LTI Plan may consist of any non-qualified stock options or incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance 52 Table of Contents units or other-stock-based award. These awards all relate to the common stock of United. The maximum number of shares of United common stock which may be issued under the 2020 LTI Plan i s 2,300,000 . The 2020 LTI Plan will be administered by a board committee appointed by United’s Board of Directors (the “Board”). Unless otherwise determined by the Board, the Compensation Committee of the Board (the “Committee”) shall administer the 2020 LTI Plan. The maximum number of options and stock appreciation rights, in the aggregate, which may be awarded to any individual key employee during any calendar year is 100,000 . The maximum number of options and stock appreciation rights, in the aggregate, which may be awarded to any non-employee director during any calendar year is 10,000 or, if such Award is payable in cash, the Fair Market Value equivalent thereof. The maximum number of shares of restricted stock or shares subject to a restricted stock units award that may be granted during any calendar year is 225,000 shares to any individual key employee and 10,000 shares to any individual non-employee director. Subject to certain change in control provisions, the 2020 LTI Plan provides that all awards of will vest as the Committee determines in the award agreement, provided that no awards will vest sooner than 1/3 per year over the first three anniversaries of the award. United adopted a clawback policy that applies to named executive officers and other executive officers and permits the Committee to cancel certain awards and to recoup gains realized from previous awards should United be required to prepare an accounting restatement due to materially inaccurate performance metrics. A Form S-8 was filed on May 29, 2020 with the Securities and Exchange Commission to register all the shares which were available for th e 2020 LTI Plan. The 2020 LTI Plan replaces the 2016 LTI Plan. Compensation expense of $ 1,912 and $ 5,492 related to the nonvested awards under United’s Long-Term Incentive Plans was incurred for the third quarter and first nine months of 2021, respectively, as compared to the compensation expense of $ 1,369 and $ 3,991 related to the nonvested awards under United’s Long-Term Incentive Plans incurred for the third quarter and first nine months of 2020, respectively. Compensation expense was included in employee compensation in the unaudited Consolidated Statements of Income. Stock Options United currently has options outstanding from various option plans other than the 2020 LTI Plan (the “Prior Plans”); however, no common shares of United stock are available for grants under the Prior Plans as these plans have expired. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms. The maximum term for options granted under the plans is ten ( 10 ) years. A summary of activity under United’s stock option plans as of September 30, 2021, and the changes during the first nine months of 2021 are presented below: Nine Months Ended September 30, 2021 Weighted Average Shares Aggregate Intrinsic Value Remaining Contractual Term (Yrs.) Exercise Price Outstanding at January 1, 2021 1,904,557 $ 34.14 Granted 49,978 32.51 Exercised ( 175,662 ) 28.49 Forfeited or expired ( 111,757 ) 28.66 Outstanding at September 30, 2021 1,667,116 $ 5,196 5.1 $ 35.05 Exercisable at September 30, 2021 1,312,880 $ 4,520 4.4 $ 34.96 The following table summarizes the status of United’s nonvested stock option awards during the first nine months of 2021: Shares Weighted-Average Grant Date Fair Value Per Share Nonvested at January 1, 2021 544,905 $ 6.93 Granted 49,978 5.65 Vested ( 239,659 ) 7.32 Forfeited or expired ( 988 ) 6.59 Nonvested at September 30, 2021 354,236 $ 6.49 53 Table of Contents During the nine months ended September 30, 2021 and 2020, 175,662 and 14,994 shares, respectively, were issued in connection with stock option exercises. All shares issued in connection with stock option exercises for the nine months ended September 30, 2021 and 2020 were issued from authorized and unissued stock. The total intrinsic value of options exercised under the Plans during the nine months ended September 30, 2021 and 2020 was $ 1,685 and $ 249 respectively. Restricted Stock Under the 2020 LTI Plan, United may award restricted common shares to key employees and non-employee directors. Restricted shares granted to participants will vest no sooner than 1/3 per year over the first three anniversaries of the award. Unless determined by the Committee or the Board and provided in the award agreement, recipients of restricted shares do not pay any consideration to United for the shares, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested. Presently, these nonvested participating securities have an immaterial impact on diluted earnings per share. The following summarizes the changes to United’s nonvested restricted common shares for the period ended September 30, 2021: Shares Weighted-Average Grant Date Fair Value Per Share Nonvested at January 1, 2021 340,976 $ 35.41 Granted 182,344 35.97 Vested ( 131,694 ) 36.73 Forfeited ( 3,502 ) 36.61 Nonvested at September 30, 2021 388,124 $ 35.22 Restricted Stock Units Under the 2020 LTI Plan, United may grant restricted stock units (“RSUs”) to key employees. These awards help align the interests of these employees with the interests of the shareholders of United by providing economic value directly related to the performance of the Company. These RSU grants could be time-vested RSUs, performance-vested RSUs, or a combination of both. Currently, time-vested RSUs vest ratably over three years from the date of grant. Performance-vested RSUs cliff-vest after assessment of the Company’s performance over a period of three years. The number of performance-vested RSUs that vest is determined by two metrics measured relative to peers: Return on Average Tangible Common Equity (“ROATCE”) and Total Shareholder Return (“TSR”). Based on ASC Topic 718, the ROATCE comparison is considered a performance condition while the TSR comparison is considered a market condition. There will be no payout of the performance-vested awards if the threshold performance is not achieved. United communicates the specific threshold, target, and maximum performance-vested RSU awards and performance targets to the applicable key employees at the beginning of a performance period. Dividends are accrued but not paid in respect to the awards until the RSUs vest. The holder does not have the right to vote the shares during the time and performance periods. The value of the time-vested RSUs and the performance-vested, based on the performance condition, RSUs awarded is established as the fair market value of the stock at the time of the grant. The value of the performance-vested, based on the market condition, RSUs awarded is estimated through the use of a Monte Carlo valuation model as of the grant date. The Company recognizes expense on the RSUs in accordance with ASC Topic 718. The following table summarizes the status of United’s nonvested RSUs during the first nine months of 2021: Shares Weighted-Average Grant Date Fair Value Per Share Nonvested at January 1, 2021 0 $ 0.00 Granted 136,896 35.65 Vested 0 0.00 Forfeited or expired 0 0.00 Nonvested at September 30, 2021 136,896 $ 35.65 54 Table of Contents 16. EMPLOYEE BENEFIT PLANS United has a defined benefit retirement plan covering qualified employees hired prior to October 1, 2007. Pension benefits are based on years of service and the average of the employee’s highest five consecutive plan years of basic compensation paid during the ten plan years preceding the date of determination. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. No discretionary contributions were made during the first nine months of 2021. United did make a discretionary contribution of $ 20,000 during the first nine months of 2020. Included in accumulated other comprehensive income at December 31, 2020 are unrecognized actuarial losses of $ 65,426 ($ 50,182 net of tax) that have not yet been recognized in net periodic pension cost. Net periodic pension cost for the three and nine months ended September 30, 2021 and 2020 included the following components: Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Service cost $ 688 $ 722 $ 2,196 $ 2,152 Interest cost 1,121 1,301 3,172 3,874 Expected return on plan assets ( 3,000 ) ( 2,658 ) ( 8,881 ) ( 7,917 ) Recognized net actuarial loss 1,903 1,458 5,064 4,342 Net periodic pension cost $ 712 $ 823 $ 1,551 $ 2,451 Weighted-average assumptions: Discount rate 2.81 % 3.42 % 2.81 % 3.42 % Expected return on assets 6.25 % 6.75 % 6.25 % 6.75 % Rate of compensation increase (prior to age 40) 5.00 % 5.00 % 5.00 % 5.00 % Rate of compensation increase (ages 40-54) 4.00 % 4.00 % 4.00 % 4.00 % Rate of compensation increase (otherwise) 3.50 % 3.50 % 3.50 % 3.50 % 17. INCOME TAXES United records a liability for uncertain income tax positions based on a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken on a tax return, in order for those tax positions to be recognized in the financial statements. As of September 30, 2021 and 2020, the total amount of accrued interest related to uncertain tax positions was $ 748 and $ 931 , respectively. United accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. United is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2018, 2019 and 2020 and certain State Taxing authorities for the years ended December 31, 2018 through 2020. United’s effective tax rate was 20.39 % and 20.47 % for the third quarter and first nine months of 2021 and 21.82 % and 20.23 % for the third quarter and first nine months of 2020. 55 Table of Contents 18. COMPREHENSIVE INCOME The components of total comprehensive income for the thr e e and nine months ended September 30, 2021 and 2020 are as follows: Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Net Income $ 92,152 $ 103,784 $ 293,886 $ 196,653 Available for sale (“AFS”) securities: Change in net unrealized gain on AFS securities arising during the period ( 17,855 ) 11,526 ( 45,782 ) 72,385 Related income tax effect 4,160 ( 2,686 ) 10,667 ( 16,866 ) Net reclassification adjustment for gains included in net income ( 108 ) ( 861 ) ( 1,552 ) ( 2,502 ) Related income tax expense 26 201 362 583 Net effect of AFS securities on other comprehensive income ( 13,777 ) 8,180 ( 36,305 ) 53,600 Cash flow hedge derivatives: Unrealized gain on cash flow hedge before reclassification to interest expense 1,414 884 12,488 ( 775 ) Related income tax effect ( 330 ) ( 206 ) ( 2,910 ) 181 Net reclassification adjustment for losses included in net income 382 0 968 0 Related income tax effect ( 89 ) 0 ( 226 ) 0 Net effect of cash flow hedge derivatives on other comprehensive income 1,377 678 10,320 ( 594 ) Pension plan: Recognized net actuarial loss 1,903 1,458 5,064 4,342 Related income tax benefit ( 1,265 ) ( 470 ) ( 2,688 ) ( 1,129 ) Net effect of change in pension plan asset on other comprehensive income 638 988 2,376 3,213 Total change in other comprehensive income ( 11,762 ) 9,846 ( 23,609 ) 56,219 Total Comprehensive Income $ 80,390 $ 113,630 $ 270,277 $ 252,872 The components of accumulated other comprehensive income for the nine months ended September 30, 2021 are as follows: Changes in Accumulated Other Comprehensive Income (AOCI) by Component (a) For the Nine Months Ended September 30, 2021 Unrealized Gains/Losses on AFS Securities Unrealized Gains/Losses on Cash Flow Hedges Defined Benefit Pension Items Total Balance at January 1, 2021 $ 65,205 $ 3,358 $ ( 46,193 ) $ 22,370 Other comprehensive income before reclassification ( 35,115 ) 9,578 0 ( 25,537 ) Amounts reclassified from accumulated other comprehensive income ( 1,190 ) 742 2,376 1,928 Net current-period other comprehensive income, net of tax ( 36,305 ) 10,320 2,376 ( 23,609 ) Balance at September 30, 2021 $ 28,900 $ 13,678 $ ( 43,817 ) $ ( 1,239 ) (a) All amounts are net-of-tax. 56 Table of Contents Reclassifications out of Accumulated Other Comprehensive Income (AOCI) For the Nine Months Ended September 30, 2021 Details about AOCI Components Amount Reclassified from AOCI Affected Line Item in the Statement Where Net Income is Presented Available for sale (“AFS”) securities: Net reclassification adjustment for gains included in net income $ ( 1,552 ) Net investment securities gains ( 1,552 ) Total before tax Related income tax effect 362 Tax expense ( 1,190 ) Net of tax Cash flow hedge: Net reclassification adjustment for losses included in net income $ 968 Interest expense 968 Total before tax Related income tax effect ( 226 ) Tax expense 742 Net of tax Pension plan: Recognized net actuarial loss 5,064 (a) 5,064 Total before tax Related income tax effect ( 2,688 ) Tax expense 2,376 Net of tax Total reclassifications for the period $ 1,928 (a) This AOCI component is included in the computation of changes in plan assets (see Note 16, Employee Benefit Plans) 19. EARNINGS PER SHARE The reconciliation of the numerator and denominator of basic earnings per share with that of diluted earnings per share is presented as follows: Three Months Ended Nine Months Ended September 30 September 30 2021 2020 2021 2020 Distributed earnings allocated to common stock $ 45,084 $ 45,295 $ 135,237 $ 126,080 Undistributed earnings allocated to common stock 46,803 58,229 157,810 70,064 Net earnings allocated to common shareholders $ 91,887 $ 103,524 $ 293,047 $ 196,144 Average common shares outstanding 128,762,815 129,373,154 128,716,450 116,876,402 Equivalents from stock awards 197,405 81,812 217,832 68,192 Average diluted shares outstanding 128,960,220 129,454,966 128,934,282 116,944,594 Earnings per basic common share $ 0.71 $ 0.80 $ 2.28 $ 1.68 Earnings per diluted common share $ 0.71 $ 0.80 $ 2.27 $ 1.68 Antidilutive stock options outstanding of 1,239,529 and 984,803 for the three months and nine months ended September 30, 2021, respectively, were excluded from the earnings per diluted common share calculation as compared to 2,138,750 and 1,983,557 for the three months and nine months ended September 30, 2020, respectively. 20. VARIABLE INTEREST ENTITIES Variable interest entities (“VIEs”) are entities that either have a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions, through voting rights, right to receive the expected residual returns of the entity, and obligation to absorb the expected losses of the entity). VIEs can be st r uctured as corporations, trusts, partnerships, or other legal entities. United’s business practices include relationships with certain VIEs. For United, the business purpose of these relationships primarily consists of funding activities in the form of issuing trust preferred securities. 57 Table of Contents United currently sponsors nineteen statutory business trusts that were created for the purpose of raising funds that originally qualified for Tier I regulatory capital. As previously discussed, these trusts now are considered Tier II regulatory capital. These trusts, of which several were acquired through bank acquisitions, issued or participated in pools of trust preferred capital securities to third-party investors with the proceeds invested in junior subordinated debt securities of United. The Company, through a small capital contribution, owns 100 % of the voting equity shares of each trust. The assets, liabilities, operations, and cash flows of each trust are solely related to the issuance, administration, and repayment of the preferred equity securities held by third-party investors. United fully and unconditionally guarantees the obligations of each trust and is obligated to redeem the junior subordinated debentures upon maturity. United does not consolidate these trusts as it is not the primary beneficiary of these entities because United’s wholly owned and indirect wholly owned statutory trust subsidiaries do not have a controlling financial interest in the VIEs. A controlling financial interest is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. Information related to United’s statutory trusts is presented in the table below: Description Issuance Date Amount of Capital Securities Issued Stated Interest Rate Maturity Date United Statutory Trust III December 17, 2003 $ 20,000 3-month LIBOR + 2.85% December 17, 2033 United Statutory Trust IV December 19, 2003 $ 25,000 3-month LIBOR + 2.85% January 23, 2034 United Statutory Trust V July 12, 2007 $ 50,000 3-month LIBOR + 1.55% October 1, 2037 United Statutory Trust VI September 20, 2007 $ 30,000 3-month LIBOR + 1.30% December 15, 2037 Premier Statutory Trust II September 25, 2003 $ 6,000 3-month LIBOR + 3.10% October 8, 2033 Premier Statutory Trust III May 16, 2005 $ 8,000 3-month LIBOR + 1.74% June 15, 2035 Premier Statutory Trust IV June 20, 2006 $ 14,000 3-month LIBOR + 1.55% September 23, 2036 Premier Statutory Trust V December 14, 2006 $ 10,000 3-month LIBOR + 1.61% March 1, 2037 Centra Statutory Trust I September 20, 2004 $ 10,000 3-month LIBOR + 2.29% September 20, 2034 Centra Statutory Trust II June 15, 2006 $ 10,000 3-month LIBOR + 1.65% July 7, 2036 Virginia Commerce Trust II December 19, 2002 $ 15,000 6-month LIBOR + 3.30% December 19, 2032 Virginia Commerce Trust III December 20, 2005 $ 25,000 3-month LIBOR + 1.42% February 23, 2036 Cardinal Statutory Trust I July 27, 2004 $ 20,000 3-month LIBOR + 2.40% September 15, 2034 UFBC Capital Trust I December 30, 2004 $ 5,000 3-month LIBOR + 2.10% March 15, 2035 Carolina Financial Capital Trust I December 19, 2002 $ 5,000 Prime + 0.50% December 31, 2032 Carolina Financial Capital Trust II November 5, 2003 $ 10,000 3-month LIBOR + 3.05% January 7, 2034 Greer Capital Trust I October 12, 2004 $ 6,000 3-month LIBOR + 2.20% October 18, 2034 Greer Capital Trust II December 28, 2006 $ 5,000 3-month LIBOR + 1.73% January 30, 2037 First South Preferred Trust I September 26, 2003 $ 10,000 3-month LIBOR + 2.95% September 30, 2033 United, through its banking subsidiary, also makes limited partner equity investments in various low income housing and community development partnerships sponsored by independent third-parties. United invests in these partnerships to either realize tax credits on its consolidated federal income tax return or for purposes of earning a return on its investment. These partnerships are considered VIEs as the limited partners lack a controlling financial interest in the entities through their inability to make decisions that have a significant effect on the operations and success of the partnerships. United’s limited partner interests in these entities is immaterial, however; these partnerships are not consolidated as United is not deemed to be the primary beneficiary. The following table summarizes quantitative information about United’s significant involvement in unconsolidated VIEs: As of September 30, 2021 As of December 31, 2020 Aggregate Assets Aggregate Liabilities Risk Of Loss (1) Aggregate Assets Aggregate Liabilities Risk Of Loss (1) Trust preferred securities $ 295,412 $ 284,632 $ 10,780 $ 295,466 $ 284,788 $ 10,678 (1) Represents investment in VIEs. 58 Table of Contents 21. SEGMENT INFORMATION United operates in two business segments: community banking and mortgage banking. Through its community banking segment, United offers a full range of products and services through various delivery channels. In particular, the community banking segment includes both commercial and consumer lending and provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. In addition, this segment provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit as well as investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning, and investment management. The mortgage banking segment engages primarily in the origination and acquisition of residential mortgages for sale into the secondary market though United’s mortgage banking subsidiaries, George Mason and Crescent. Crescent may retain servicing rights on their mortgage loans sold. At certain times, Crescent may purchase rights to service loans from third parties. These rights are known as mortgage servicing rights and provide the owner with the contractual right to receive a stream of cash flows in exchange for performing specified mortgage servicing functions. The community banking segment provides the mortgage banking segment (George Mason and Crescent) with short-term funds to originate mortgage loans through a warehouse line of credit and charges the m o rtgage banking segment interest based on the 30-day LIBOR rate. These transactions are eliminated in the consolidation process. The Company does not have any operating segments other than those reported. The “Other” category consists of financial information not directly attributable to a specific segment, including interest income from investments and net securities gains or losses of parent companies and their non-banking subsidiaries, interest expense related to subordinated notes of unconsolidated subsidiaries as well as the elimination of non-segment related intercompany transactions such as management fees. The “Other” represents an overhead function rather than an operating segment. Information about the reportable segments and reconciliation of this information to the consolidated financial statements at and for the three and nine months ended September 30, 2021 and 2020 is as follows: At and For the Three Months Ended September 30, 2021 Community Banking Mortgage Banking Other Intersegment Eliminations Consolidated Net interest income $ 179,444 $ 2,367 $ ( 2,072 ) $ 1,840 $ 181,579 Provision for credit losses ( 7,829 ) 0 0 0 ( 7,829 ) Other income 24,711 45,023 815 ( 1,925 ) 68,624 Other expense 109,134 31,787 1,440 ( 85 ) 142,276 Income taxes 20,969 3,179 ( 544 ) 0 23,604 Net income (loss) $ 81,881 $ 12,424 $ ( 2,153 ) $ 0 $ 92,152 Total assets (liabilities) $ 27,129,820 $ 643,171 $ 34,546 $ ( 300,020 ) $ 27,507,517 Average assets (liabilities) 27,089,160 572,450 28,381 ( 252,281 ) 27,437,710 At and For the Three Months Ended September 30, 2020 Community Banking Mortgage Banking Other Intersegment Eliminations Consolidated Net interest income $ 182,187 $ 2,740 $ ( 2,241 ) $ 2,978 $ 185,664 Provision for credit losses 16,781 0 0 0 16,781 Other income 26,615 110,900 33 ( 2,080 ) 135,468 Other expense 125,681 43,417 1,597 898 171,593 Income taxes 15,053 14,823 ( 902 ) 0 28,974 Net income (loss) $ 51,287 $ 55,400 $ ( 2,903 ) $ 0 $ 103,784 Total assets (liabilities) $ 25,620,814 $ 953,531 $ 27,841 $ ( 670,878 ) $ 25,931,308 Average assets (liabilities) 26,148,305 763,170 22,239 ( 518,091 ) 26,415,623 59 Table of Contents At and For the Nine Months Ended September 30, 2021 Community Banking Mortgage Banking Other Intersegment Eliminations Consolidated Net interest income $ 550,041 $ 7,888 $ ( 6,316 ) $ 7,443 $ 559,056 Provision for credit losses ( 16,565 ) 0 0 0 ( 16,565 ) Other income 75,171 152,295 3,468 ( 6,891 ) 224,043 Other expense 322,580 109,361 ( 2,339 ) 552 430,154 Income taxes 65,320 10,399 ( 95 ) 0 75,624 Net income (loss) $ 253,877 $ 40,423 $ ( 414 ) $ 0 $ 293,886 Total assets (liabilities) $ 27,129,820 $ 643,171 $ 34,546 $ ( 300,020 ) $ 27,507,517 Average assets (liabilities) 26,638,303 672,263 26,014 ( 354,693 ) 26,981,887 At and For the Nine Months Ended September 30, 2020 Community Banking Mortgage Banking Other Intersegment Eliminations Consolidated Net interest income $ 490,311 $ 5,935 $ ( 7,487 ) $ 9,025 $ 497,784 Provision for credit losses 89,811 0 0 0 89,811 Other income 66,483 203,103 89 ( 9,011 ) 260,664 Other expense 312,621 99,435 10,030 14 422,100 Income taxes 31,245 22,042 ( 3,403 ) 0 49,884 Net income (loss) $ 123,117 $ 87,561 $ ( 14,025 ) $ 0 $ 196,653 Total assets (liabilities) $ 25,620,814 $ 953,531 $ 27,841 $ ( 670,878 ) $ 25,931,308 Average assets (liabilities) 23,294,069 597,057 4,101 ( 422,920 ) 23,472,307