UBSI filing — read by section

Item 7. Management’s Discussion and Analysis

Item 7.

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

 FORWARD-LOOKING STATEMENTS 

 Congress passed the Private Securities Litigation Act of 1995 to encourage corporations to provide investors with information about the company’s anticipated future financial performance, goals, and strategies. The act provides a safe haven for such disclosure; in other words, protection from unwarranted litigation if actual results are not the same as management expectations. 

 United desires to provide its shareholders with sound information about past performance and future trends. Consequently, any forward-looking statements contained in this report, in a report incorporated by reference to this report, or made by management of United in this report, in any other reports and filings, in press releases and in oral statements, involve numerous assumptions, risks and uncertainties. Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning. Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect, such as statements about the potential impacts of the COVID-19
 pandemic. Therefore, undue reliance should not be placed upon these estimates and statements. United cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” United undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. 
 
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 The discussion in Item 1A, “Risk Factors,” lists some of the factors that could cause United’s actual results to vary materially from those expressed or implied by any forward-looking statements, and such discussion is incorporated into this discussion by reference. 

 CORONAVIRUS (“COVID-19”)
 PANDEMIC 

 During 2020, and to a lesser extent in 2021, the COVID-19
 pandemic had a severe disruptive impact on the U.S. and global economy. As the pandemic is ongoing and dynamic in nature, there are many uncertainties related to COVID-19
 including, among other things, the ongoing impact to our customers, employees and vendors; the impact to the financial services and banking industry; and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken, or inaction by governmental authorities to contain the outbreak or to mitigate its impact (both economic and health-related). Refer to our 2020 Form 10-K
 and our Form 10-Q
 for the quarter ended June 30, 2021 for further information regarding (i) the impact of the COVID-19
 pandemic on our operations and our results thereof, as well as the impact on our financial position and (ii) legislative and regulatory actions taken related to the COVID-19
 pandemic, particularly as they relate to the banking and financial services industry. 
 The CARES Act was enacted in March 2020 and, among other provisions, authorized the Small Business Administration (“SBA”) to guarantee loans under the Paycheck Protection Program (“PPP”) for small businesses that meet eligibility requirements in order to keep their workers on the payroll and fund specified operating expenses. Subsequent legislation extended the authority of the SBA to guaranty loans under the PPP through August 8, 2020. In December 2020, the Economic Aid to Hard-Hit
 Small Businesses, Nonprofits, and Venues Act reauthorized the SBA to guarantee loans under the PPP through March 31, 2021, and the PPP Extension Act of 2021 extended that authorization through June 30, 2021 for applications received by the SBA prior to June 1, 2021. 
 On March 11, 2021, the American Rescue Plan Act of 2021 (the “ARP Act”) was enacted, implementing a $1.9 trillion package of stimulus and relief proposals. Among other things, the ARP Act provides (i) additional funding for the PPP program and an expansion of the program for the benefit of certain nonprofits, (ii) funding for the SBA to make targeted grants for restaurants and similar establishments, (iii) direct cash payments of up to $1,400 to individuals, subject to income provisions, (iv) an increase in the maximum annual Child Tax Credit, subject to income limitation provisions, (v) $300 a week in expanded unemployment insurance lasting through September 6, 2021 and makes $10,200 in unemployment benefits tax free for households, subject to income limitation provisions, (vi) tax relief making any student loan forgiveness incurred between December 31, 2020, and January 1, 2026 non-taxable
 income, and (vii) funding to support state and local governments; K-12
 schools and higher education; the Centers for Disease Control; public transit; rental assistance; child care; and airline industry workers. 
 On March 27, 2021, the COVID-19
 Bankruptcy Relief Extension Act of 2021 was enacted, extending the bankruptcy relief provisions enacted in the CARES Act of 2020 bill until March 27, 2022. These provisions provide financially distressed small businesses and individuals greater access to bankruptcy relief. We are continuing to monitor the potential development of additional legislation and further actions taken by the U.S. government. 
 The above-mentioned significant fiscal stimulus and monetary policy actions of the U.S. government and Federal Reserve have been contributing factors to an inflationary surge during most of 2021. As a result, in December 2021, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would rise to 0.9% by the end of 2022, to 1.6% by the end of 2023 and to 2.1% by the end of 2024. While there can be no such assurance that any increases in the federal funds rate will occur, these projections imply three 25 basis point increases in the federal funds rate in 2022, followed by three in 2023 and two in 2024. 

 Impact on our Operations.

 In the states where United operates, many jurisdictions declared health emergencies due to the COVID-19
 pandemic. The resulting closures of non-essential
 businesses and related economic disruption impacted our operations as well as the operations of our customers. Financial services were identified as a Critical Infrastructure Sector by the Department of Homeland Security. Accordingly, our business remained open. To address the issues arising as a result of COVID-19,
 United implemented several policies in order to facilitate the continued delivery of essential services while maintaining a high level of safety for our customers as well as our employees. 
 
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 As of December 31, 2021, United does not anticipate significant challenges to our ability to maintain our systems and controls in light of the measures we have taken regarding the COVID-19
 pandemic. The Company does not currently face any material resource constraint through the implementation of our business continuity plans. 
 United is currently unable to fully assess or predict the extent of the effects of COVID-19
 on its operations in the future as the ultimate impact will depend on factors that are currently unknown and/or beyond our control. 
 Impact on our Financial Position and Results of Operations.

 Although economic conditions improved in the year of 2021, our business continued to be impacted by the COVID-19
 pandemic. In addition, significant uncertainties related to the COVID-19
 pandemic still exist including, among other things, the ongoing impact to our customers, employees, vendors, counterparties and service providers; the impact to the financial services and banking industry; and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken, or inaction by governmental authorities to contain the COVID-19
 outbreak and its variants or to mitigate its impact. Certain industries continue to be impacted more severely than others, although all businesses were impacted by the COVID-19
 pandemic to some degree during the year of 2021 as they were in 2020. The economic pressures, existing and forecasted, as of end of each quarter during 2020, coupled with the implementation of an expected loss methodology for determining United’s provision for credit losses as required by CECL contributed to an increased provision for credit losses for the year of 2020. Due to better performance trends within the loan portfolio and the improved reasonable and supportable forecasts for future macroeconomic scenarios used in the estimated of expected credit losses under the CECL accounting standard, since December 31, 2020, our provision for credit losses significantly decreased for the year of 2021 resulting in a net benefit of $23.97 million as compared to an expense of $106.56 million for the year of 2020. The sustainability of the economic recovery observed in 2021 remains unclear and significant volatility could continue for a prolonged period as the potential exists for additional variants of COVID-19,
 including the recent Omicron variant, to impede the global economic recovery and exacerbate geographic differences in the spread of, and response to, COVID-19.
 
 The Company’s fee income was reduced due to COVID-19.
 In keeping with guidance from regulators, the Company actively worked with COVID-19
 affected customers during 2020 and 2021 to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. Should the pandemic and the global response escalate further as outbreaks and variants occur, it is possible that the Company could reduce such fees in future periods; however, at this time, the Company is unable to project the materiality of such an impact on the results of operations in future periods. 
 The Company’s interest income has and could continue to be reduced due to COVID-19.
 In keeping with guidance from regulators, the Company continues to work with COVID-19
 affected borrowers to defer their payments, interest, and fees. While interest and fees continue to accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income and fees accrued would be reversed. In such a scenario, interest income in future periods could be negatively impacted. The Company assessed the collectability of the accrued interest receivables on the loans deferred under the CARES Act as of December 31, 2021. Based on this assessment, the Company released reserves of $242 thousand for the year of 2021 resulting in the allowance for accrued interest receivables not expected to be collected of $8 thousand as of December 31, 2021 as compared to $250 thousand as of December 31, 2020. At this time, the Company is unable to project the materiality of such an impact on any possible future deferrals under new guidance related to COVID-19
 affected borrowers, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods. 
 Capital and liquidity.

As of December 31, 2021, all of our capital ratios, and our subsidiary bank’s capital ratios, were in excess of all regulatory requirements. While we believe that we have sufficient capital to withstand a second economic recession brought about by COVID-19,
 our reported and regulatory capital ratios could be adversely impacted by further credit loss expense. We rely on cash on hand as well as dividends from our subsidiary bank to service our debt. If our capital deteriorates such that our subsidiary bank is unable to pay dividends to us for an extended period of time, we may not be able to service our debt. 
 
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 We maintain access to multiple sources of liquidity. Wholesale funding markets have remained open to us. Rates for short-term funding were volatile throughout 2020, but were more stable in 2021. If funding costs become elevated for an extended period of time, it could have an adverse effect on our net interest margin. If an extended recession caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding. 

 For a discussion of the United’s liquidity and capital resources in light of the COVID-19
 pandemic please refer to the sections with the captions of “Liquidity and Capital Resources” included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). 
 Lending operations and accommodations to borrowers. 

In keeping with regulatory guidance to work with borrowers during this unprecedented situation and as outlined in the CARES Act, the Company executed a payment deferral program for its customers that are adversely affected by the pandemic. Depending on the demonstrated need of the client and within the guidance of the CARES Act, the Company deferred either the full loan payment or the principal component of the loan payment for stated period of time. As of December 31, 2021, United has 188 eligible loan modifications in deferral on $18.04 million of loans outstanding under section 4013, “Temporary Relief from Troubled Debt Restructurings,” of the CARES Act, down from 1,002 eligible loan modifications in deferral on $399.86 million of loans outstanding at December 31, 2020. In accordance with the CARES Act, these deferrals are not considered troubled debt restructurings. It is possible that these deferrals could be extended further under any future guidance; however, the volume of these future potential extensions is unknown. It is also possible that in spite of our best efforts to assist our borrowers and achieve full collection of our investment, these deferred loans could result in future charge-offs with additional credit loss expense charged to earnings; however, the amount of any future charge-offs on deferred loans is unknown. 
 With the passage and extensions of the PPP, administered by the SBA, the Company has actively participated in assisting its customers with applications for resources through the program. PPP loans generally have a two-year
 or five-year term and earn interest at 1%. The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of December 31, 2021, the Company had 2,959 of PPP loans with a balance of approximately $302.30 million. The Company recognized approximately $33.22 million in net fees on PPP loans during the year of 2021 as compared to $16.26 million year of 2020. At December 31, 2021, remaining fees due from the SBA of $10.41 million will be amortized and recognized over the life of the associated loans. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to establish an allowance for credit loss through additional credit loss expense charged to earnings. 
 The national public health crisis arising from the COVID-19
 pandemic (and public expectations about it), combined with other factors, including, but not limited to, inflation, labor shortages, supply chain disruption and further oil price volatility, could, despite improvements in 2021, again destabilize the financial markets and geographies in which we operate. The resulting economic pressure on consumers and uncertainty regarding the sustainability of any economic improvements could further impact the creditworthiness of potential and current borrowers. Borrower loan defaults that adversely affect our earnings correlate with deteriorating economic conditions, which, in turn, are likely to impact our borrowers’ creditworthiness and our ability to make loans. See further information related to the risk exposure of our loan portfolio under the caption “Provision for Credit Losses” elsewhere in this discussion. 
 Retail operations. 

The Company has been committed to assisting our customers and communities during the COVID-19
 pandemic. For much of 2020 and the first part of 2021, most branch locations were converted to drive-thru only in order to ensure the health and safety of our customers and team members. We continued to serve our customers that needed emergency branch access for account issues, safe deposit access and similar items by appointment. The Company was able to open and close accounts effectively, through its drive through facility, and our customer service center was successful in managing the volume of incoming calls. We introduced temporary changes to help with the financial hardship caused by COVID-19
 for both our customers and non-customers,
 including waiving select deposit account fees including overdraft fees, ATM fees and excessive withdrawal fees for savings and money market accounts. 
 From mid-May
 to mid-June
 in 2021, we used a phased-in
 approach to reopen our lobbies throughout our footprint. We have returned to full-service at all retail locations throughout our footprint. The customer service centers continue to operate at full capacity with more normalized call volumes. We have continued to offer fee waivers for select deposit accounts to help with the financial hardship caused by the pandemic.
 The Company continues to place the utmost importance on the health and safety of our employees and customers. We also continue to follow the applicable Centers for Disease Control and Prevention (“CDC”) guidance and comply with any local or state mandates. The Company continues to closely monitor the pandemic and COVID-19
 variants and will adjust its retail operations accordingly, as necessary. 
 
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 As the COVID-19
 pandemic continues to be on-going,
 there continues to be uncertainties related to its magnitude, duration and persistent effects. This is particularly the case with the emergence, contagiousness and threat of new and different strains of the virus as well as the availability, acceptance and effectiveness of vaccines. As such, the COVID-19
 pandemic could still, among other things, greatly affect our routine and essential operations due to staff absenteeism, particularly among key personnel; resulting in limited access to or closures of our branch facilities and other physical offices; exacerbate operational, technical or security-related risks arising from a remote workforce; and result in adverse government or regulatory agency orders. Additionally, we are experiencing an increasingly competitive labor market due to an on-going
 labor shortage which has been impacted and could continue to impact or ability to staff open positions and/or retain existing employees and has resulted in and could continue to result in an increase in our staffing costs. The business and operations of our third-party service providers, many of whom perform critical services for our business, could also be significantly impacted by many of these same issues, which in turn could impact us. As a result, we continue to be unable to fully assess or predict the extent of the effects of COVID-19
 on our operations as the ultimate impact will depend on factors that are currently unknown and/or beyond our control. 
 ACQUISITIONS 

 On December 3, 2021, United acquired 100% of the outstanding common stock of Community Bankers Trust Corporation (“Community Bankers Trust”), a Virginia corporation headquartered in Richmond, Virginia. Immediately following the Merger, Essex Bank, a wholly-owned subsidiary of Community Bankers Trust, merged with and into United Bank, a wholly-owned subsidiary of United. United Bank survived the Bank Merger and continues to exist as a Virginia banking corporation. The acquisition of Community Bankers Trust enhanced United’s existing presence in the DC Metro MSA and took United into new markets including Baltimore, Annapolis, Lynchburg, Richmond, and the Northern Neck of Virginia. It also strategically connected our Mid-Atlantic
 and Southeast footprints. The Community Bankers Trust merger was accounted for under the acquisition method of accounting. At consummation, Community Bankers Trust had assets of $1.79 billion, loans and leases, net of unearned income of $1.28 billion and deposits of $1.52 billion. 
 On May 1, 2020, United acquired 100% of the outstanding common stock of Carolina Financial Corporation (“Carolina Financial”), headquartered in Charleston, South Carolina. Immediately following the Merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank, a wholly-owned subsidiary of United (the “Bank Merger)”. United Bank survived the Bank Merger and continues to exist as a Virginia banking corporation. The acquisition of Carolina Financial afforded United the opportunity to expand its existing footprint in North Carolina and South Carolina. The merger resulted in a combined company with more than 200 locations in some of the best banking markets in the United States. CresCom Bank owned and operated Crescent Mortgage Company (“Crescent”), which is based in Atlanta. Crescent is approved to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers. As a result of the merger, Crescent became an indirectly-owned subsidiary of United. The Carolina Financial merger was accounted for under the acquisition method of accounting. At consummation, Carolina Financial had assets of $5.00 billion, loans and leases, net of unearned income of $3.29 billion and deposits of $3.87 billion. 

 The results of operations of Community Bankers Trust and Carolina Financial are included in the consolidated results of operations from their date of acquisition. As a result of the Community Bankers Trust and Carolina Financial acquisitions, the year of 2021 was impacted by increased levels of average balances, income, and expense as compared to the year of 2020. In addition, the year of 2021 included $21.42 million of merger-related expenses from Community Bankers Trust acquisition as compared to $54.24 million of merger-related expenses from the Carolina Financial acquisition in the year of 2020. 

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 TRANSITION FROM THE LONDON INTERBANK OFFERED RATE (LIBOR) 

 In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced its intention to stop persuading or compelling banks to submit the rates used to calculate LIBOR after 2021. ICE Benchmark Administration (the publisher of LIBOR) discontinued publication of the one-week
 and two-month
 U.S. Dollar LIBOR settings on December 31, 2021, and plans to discontinue publication of overnight, one-month,
 three-month, six-month,
 and twelve-month U.S. Dollar LIBOR settings on June 30, 2023. It is assumed that LIBOR will either cease to be provided by any administrator or will no longer be representative of an acceptable market benchmark after these respective dates. Additionally, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have issued joint supervisory guidance encouraging banks to cease entering into any new contracts using LIBOR by December 31, 2021. Accordingly, United has taken steps to ensure that no new contracts using LIBOR will be originated after December 31, 2021. 
 Working groups comprised of various regulators and other industry groups have been formed in the United States and other countries in order to provide guidance on this topic. In particular, the Alternative Reference Rates Committee (“ARRC”) has been formed in the United States by the Federal Reserve Board and the Federal Reserve Bank of New York. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative reference rate for U.S. Dollar LIBOR. The ARRC has also published recommended fall-back language for LIBOR-linked financial instruments, among numerous other areas of guidance. At this time, however, it is unclear to what extent these recommendations will be broadly accepted by industry participants, whether they will continue to evolve, and what other alternatives may be adopted by the broader markets that utilize LIBOR as a reference rate. United has formed a project team comprised of individuals across various lines of business throughout the company to identify risks, monitor market developments, evaluate replacement benchmark alternatives, and manage the company’s transition away from LIBOR. At this time, United intends to prioritize SOFR and Prime as the preferred alternatives to LIBOR; however, these preferred alternatives could change over time based on market developments. 

 United has loans, derivative contracts, borrowings, and other financial instruments that are directly or indirectly dependent on LIBOR. The transition from LIBOR will cause changes to payment calculations for existing contracts that use LIBOR as the reference rate. These changes will create various risks surrounding the financial, operational, compliance and legal aspects associated with changing certain elements of existing contracts. United will also be subject to risks surrounding changes to models and systems that currently use LIBOR reference rates, as well as market and strategic risks that could arise from the use of alternative reference rates. Additionally, United could face reputational risks if this transition is not managed appropriately with its customers. While the full impact of the transition is not yet known, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations. 

 INTRODUCTION 

 The following discussion and analysis presents the more significant changes in financial condition as of December 31, 2021 and 2020 and the results of operations of United and its subsidiaries for each of the years then ended. This discussion and the consolidated financial statements and the notes to Consolidated Financial Statements include the accounts of United Bankshares, Inc. and its wholly-owned subsidiaries, unless otherwise indicated. Management has evaluated all significant events and transactions that occurred after December 31, 2021, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K
 filed with the SEC on March 1, 2021 (the 2020 Form 10-K)
 for a discussion and analysis of the more significant factors that affected periods prior to 2020. 
 This discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes thereto, which are included elsewhere in this document. 

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 USE OF NON-GAAP
 FINANCIAL MEASURES 

 This discussion and analysis contains certain financial measures that are not recognized under GAAP. Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each “non-GAAP”
 financial measure, certain additional information, including a reconciliation of the non-GAAP
 financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP
 financial measure. 
 Generally, United has presented a non-GAAP
 financial measure because it believes that this measure provides meaningful additional information to assist in the evaluation of United’s results of operations or financial position. Presentation of a non-GAAP
 financial measure is consistent with how United’s management evaluates its performance internally and this non-GAAP
 financial measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the banking industry. Specifically, this discussion contains certain references to financial measures identified as tax-equivalent
 (“FTE”) net interest income and return on average tangible equity. Management believes these non-GAAP
 financial measures to be helpful in understanding United’s results of operations or financial position. 
 Net interest income is presented in this discussion on a tax-equivalent
 basis. The tax-equivalent
 basis adjusts for the tax-favored
 status of income from certain loans and investments. Although this is a non-GAAP
 measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt
 sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition. 
 Average tangible equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible equity can thus be considered a more conservative valuation of the company. When considering net income, a return on average tangible equity can be calculated. Management provides a return on average equity to facilitate the understanding of as well as to assess the quality and composition of United’s capital structure. This measure, along with others, is used by management to analyze capital adequacy and performance. 

 However, this non-GAAP
 information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP. Where the non-GAAP
 financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP
 financial measure, can be found within this discussion and analysis. Investors should recognize that United’s presentation of this non-GAAP
 financial measure might not be comparable to a similarly titled measure at other companies. 
 APPLICATION OF CRITICAL ACCOUNTING POLICIES 

 The accounting and reporting policies of United conform with U.S. generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments, which are reviewed with the Audit Committee of the Board of Directors, are based on information available as of the date of the financial statements. Actual results could differ from these estimates. These policies, along with the disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan and lease losses, the calculation of the income tax provision, and the use of fair value measurements to account for certain financial instruments to be the accounting areas that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. The most significant accounting policies followed by United are presented in Note A, Notes to Consolidated Financial Statements. 

 Allowance for Loan and Lease Losses 

 The allowance for loan and lease 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 is based on the credit losses expected to arise over the life of the asset (contractual term). Determining the allowance for loan losses requires management to make estimates of expected credit losses that are highly uncertain and require a high degree of 

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 judgment. At December 31, 2021, the allowance for loan losses was $216.02 million and is subject to periodic adjustment based on management’s assessment of expected credit losses in the loan portfolio. Such adjustment from period to period can have a significant impact on United’s consolidated financial statements. To illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses, a 10% increase in the allowance for loan losses would have required $21.60 million in additional allowance (funded by additional provision for loan losses), which would have negatively impacted the year of 2021 net income by approximately $17.07 million, after-tax
 or $0.13 diluted per common share. Management’s evaluation of the adequacy of the allowance for loan losses and the appropriate provision for loan losses is based upon a quarterly evaluation of the loan portfolio. This evaluation is inherently subjective and requires significant estimates, including estimates related to the amounts and timing of future cash flows, value of collateral, losses on pools of homogeneous loans and leases based on historical loss experience, and consideration of qualitative factors such as current economic trends, all of which are susceptible to constant and significant change. The allowance allocated to specific credits and loan pools grouped by similar risk characteristics is reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances. In determining the components of the allowance for loan losses, management considers the risk arising in part from, but not limited to, qualitative factors which include charge-off
 and delinquency trends, current business conditions and reasonable and supportable economic forecasts, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors. The methodology used to determine the allowance for loan losses is described in Note A, Notes to Consolidated Financial Statements. A discussion of the factors leading to changes in the amount of the allowance for loan losses is included in the Provision for Credit Losses section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). For a discussion of concentrations of credit risk, see Item 1, under the caption of Loan Concentrations in this Form 10-K.
 
 Income Taxes 

 United’s calculation of income tax provision is inherently complex due to the various different tax laws and jurisdictions in which we operate and requires management’s use of estimates and judgments in its determination. The current income tax liability also includes income tax expense related to our uncertain tax positions as required in ASC Topic 740, “Income Taxes.” Changes to the estimated accrued taxes can occur due to changes in tax rates, implementation of new business strategies, resolution of issues with taxing authorities and recently enacted statutory, judicial and regulatory guidance. These changes can be material to the Company’s operating results for any particular reporting period. The analysis of the income tax provision requires the assessments of the relative risks and merits of the appropriate tax treatment of transactions, filing positions, filing methods and taxable income calculations after considering statutes, regulations, judicial precedent and other information. United strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense. United is also subject to audit by federal and state authorities. Because the application of tax laws is subject to varying interpretations, results of these audits may produce indicated liabilities which differ from United’s estimates and provisions. United continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances. The potential impact to United’s operating results for any of the changes cannot be reasonably estimated. See Note O, Notes to Consolidated Financial Statements for information regarding United’s ASC Topic 740 disclosures. 

 Use of Fair Value Measurements 

 United determines the fair value of its financial instruments based on the fair value hierarchy established in ASC Topic 820, whereby the 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 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs in the methodology for determining fair value are observable or unobservable. Observable inputs reflect market-based information obtained from independent sources (Level 1 or Level 2), while unobservable inputs reflect management’s estimate of market data (Level 3). For assets and liabilities that are actively traded and have quoted prices or observable market data, a minimal amount of subjectivity concerning fair value is needed. Prices and values obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management. When quoted prices or observable market data are not available, management’s judgment is necessary to estimate fair value. 

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 At December 31, 2021, approximately 16.02% of total assets, or $4.70 billion, consisted of financial instruments recorded at fair value. Of this total, approximately 88.70% or $4.17 billion of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. Approximately 11.30% or $531.18 million of these financial instruments were valued using unobservable market information or Level 3 measurements. Most of these financial instruments valued using unobservable market information were loans held for sale at our mortgage banking segment. At December 31, 2021, only $3.73 million or less than 1% of total liabilities were recorded at fair value. This entire amount was valued using methodologies involving observable market data. United does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on United’s results of operations, liquidity, or capital resources. See Note W for additional information regarding ASC Topic 820 and its impact on United’s financial statements. 

 Any material effect on the financial statements related to these critical accounting areas is further discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. 

 2021 COMPARED TO 2020 

 United’s total assets as of December 31, 2021 were $29.33 billion, which was an increase of $3.14 billion or 12.01% from December 31, 2020. The acquisition of Community Bankers Trust on December 3, 2021 added $1.80 billion in total assets, including purchase accounting amounts. Portfolio loans and leases increased $432.24 million or 2.46%, cash and cash equivalents increased $1.55 billion or 70.12%, investment securities increased $1.11 billion or 34.82%, goodwill increased $89.65 million or 4.99%, other assets increased $125.13 million or 21.41%, bank premises and equipment increased $21.40 million or 12.17%, and operating lease right-of-use

 assets increased $12.42 million or 17.87%. Partially offsetting these increases was a decrease of $214.52 million or 29.84% in loans held for sale and a $2.56 million or 3.82% decrease in interest receivable. Total liabilities increased $2.72 billion or 12.44% from year-end
 2020. This increase in total liabilities was due mainly to an increase of $2.77 billion or 13.43% in deposits mainly due to organic growth and the Community Bankers Trust acquisition. In addition, operating lease right-of-lease

 liabilities increased $13.49 million or 18.43% mainly due to the Community Bankers Trust acquisition. Partially offsetting these increases was a decrease of $60.43 million or 6.00% in borrowings. Shareholders’ equity increased $421.01 million or 9.80% from year-end
 2020 due primarily to the acquisition of Community Bankers Trust and earnings net of dividends. 
 The following discussion explains in more detail the changes in financial condition by major category. 

 Cash and Cash Equivalents 

 Cash and cash equivalents at December 31, 2021 increased $1.55 billion or 70.12% from year-end
 2020. Community Bankers Trust added $39.44 million upon consummation of the acquisition. Interest-bearing deposits with other banks increased $1.56 billion or 81.82% as United increased its liquidity due to the COVID-19
 pandemic by placing excess cash in an interest-bearing account with the Federal Reserve. Cash and due from banks decreased $14.49 million or 4.87% due to a $40.86 million decrease in cash-in-process
 with the Federal Reserve which was partially offset by a $24.37 million increase in cash. Federal funds increased $104 thousand or 12.64%. During the year of 2021, net cash of $609.54 million and $15.65 million were provided by operating activities and investing activities, respectively, while net cash of $923.91 million was provided by financing activities. Further details related to changes in cash and cash equivalents are presented in the Consolidated Statements of Cash Flows. 
 Securities 

 Total investment securities at December 31, 2021 increased $1.11 billion or 34.82% from year-end
 2020. Community Bankers Trust added $395.25 million in investment securities, including purchase accounting amounts, upon consummation of the acquisition. Securities available for sale increased $1.09 billion or 36.88%. This change in securities available for sale reflects $387.20 million acquired from Community Bankers Trust, $730.35 million in sales, maturities and calls of securities, $1.52 billion in purchases, and a decrease of $73.81 million in market value. Securities held to maturity declined $211 thousand or 17.41% from year-end
 2020 due to maturities and calls of securities. Equity securities were $12.40 million at December 31, 2021, an increase of $1.69 million or 15.73% due mainly to net purchases. Other investment securities increased $18.75 million or 8.49% from year-end
 2020 due to increases of $14.05 million in investment tax credits and $4.63 million in Federal Reserve Bank (“FRB”) stock due to Community Bankers Trust merger. Partially offsetting these increases was a decline of $5.90 million in Federal Home Loan Bank (“FHLB”) stock. 
 
 43 

 Table of Contents 
 The following table summarizes the changes in the available for sale securities since year-end
 2020: 
 
 (Dollars in thousands)

 December 31
2021

 December 31
2020

 $

 Change

 %

 Change

 U.S. Treasury securities and obligations of U.S.

 Government corporations and agencies

 $ 
 81,850 
 
 $ 
 66,344 
 
 $ 
 15,506 
 
 23.37 
 % 

 State and political subdivisions

 847,298 
 
 565,160 
 
 282,138 
 
 49.92 
 % 

 Mortgage-backed securities

 1,828,244 
 
 1,625,812 
 
 202,432 
 
 12.45 
 % 

 Asset-backed securities

 656,572 
 
 294,623 
 
 361,949 
 
 122.85 
 % 

 Single issue trust preferred securities

 16,811 
 
 17,027 
 
 (216 
 ) 
 
 (1.27 
 %) 

 Corporate securities

 611,924 
 
 384,393 
 
 227,531 
 
 59.19 
 % 

 Total available for sale securities, at fair value

 $ 
 4,042,699 
 
 $ 
 2,953,359 
 
 $ 
 1,089,340 
 
 36.88 
 % 

 The following table summarizes the changes in the held to maturity securities since year-end
 2020: 
 
 (Dollars in thousands)

 December 31
2021

 December 31
2020

 $

 Change

 %

 Change

 State and political subdivisions

 $ 
 981 
 (1) 
 
 $ 
 1,192 
 (2) 
 
 $ 
 (211 
 ) 
 
 (17.70 
 %) 

 Other corporate securities

 20 
 
 20 
 
 0 
 
 0.00 
 % 

 Total held to maturity securities, at amortized cost

 $ 
 1,001 
 
 $ 
 1,212 
 
 $ 
 (211 
 ) 
 
 (17.41 
 %) 

 (1) net of allowance for credit losses of $19 thousand. 

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

 At December 31, 2021, gross unrealized losses on available for sale securities were $34.42 million. Securities with the most significant gross unrealized losses at December 31, 2021 consisted primarily of agency residential mortgage-backed securities and agency commercial mortgage-backed securities. 

 As of December 31, 2021, United’s available for sale mortgage-backed securities had an amortized cost of $1.83 billion, with an estimated fair value of $1.83 billion. The portfolio consisted primarily of $1.12 billion in agency residential mortgage-backed securities with a fair value of $1.11 billion, $74.97 million in non-agency
 residential mortgage-backed securities with an estimated fair value of $74.55 million, and $633.80 million in commercial agency mortgage-backed securities with an estimated fair value of $639.93 million. 
 As of December 31, 2021, United’s available for sale corporate securities had an amortized cost of $1.29 billion, with an estimated fair value of $1.29 billion. The portfolio consisted of $17.29 million in single issue trust preferred securities with an estimated fair value of $16.81 million. In addition to the single issue trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $659.83 million and a fair value of $656.57 million and other corporate securities, with an amortized cost of $611.55 million and a fair value of $611.92 million. 

 United’s available for sale single issue trust preferred securities had a fair value of $16.81 million as of December 31, 2021. Of the $16.81 million, $8.29 million or 49.32% were investment grade; $3.22 million or 19.13% were split rated; and $5.30 million or 31.55% were unrated. The two largest exposures accounted for 75.34% of the $16.81 million. These included Truist Bank at $7.36 million and Emigrant Bank at $5.30 million. All single issue trust preferred securities are currently receiving full scheduled principal and interest payments. 

 During 2021, United did not recognize any credit losses on its available for sale investment securities. Management does not believe that any individual security with an unrealized loss as of December 31, 2021 is impaired. United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not a deterioration of credit. Based on a review of each of the securities in the available for sale investment portfolio, management concluded that it was more likely than not that it would be able to realize the cost basis investment and appropriate interest payments on such securities. United has the intent and the ability to hold these securities until such time as the value recovers or the securities mature. As of December 31, 2021, there was no allowance for credit losses related to the Company’s available for sale securities. However, United acknowledges that any securities in an unrealized loss position may be sold in future periods in response to significant, unanticipated changes in asset/liability management decisions, unanticipated future market movements or business plan changes. 

 44 

 Table of Contents 
 Further information regarding the amortized cost and estimated fair value of investment securities, including remaining maturities as well as a more detailed discussion of management’s impairment analysis, is presented in Note C, Notes to Consolidated Financial Statements. 

 Loans held for sale 

 Loans held for sale decreased $214.52 million or 29.84% from year-end
 2020. Loan sales in the secondary market exceeded originations during the year of 2021. Originations of loans for the year of 2021 were $6.19 billion while sales of loans were $6.41 billion. Loans held for sale were $504.42 million at December 31, 2021 as compared to $718.94 million at year-end
 2020. 
 Portfolio Loans 

 Loans and leases, net of unearned income, increased $432.24 million or 2.46% from year-end
 2020 mainly as a result of the Community Bankers Trust acquisition which added $1.30 billion, including purchase accounting amounts, in portfolio loans and leases. Otherwise, portfolio loans and leases, net of unearned income, decreased $882.15 million from year-end
 2020. Since year-end
 2020, commercial, financial and agricultural loans and leases increased $457.99 million or 4.28% as commercial real estate loans increased $1.05 billion or 15.81% while commercial loans and leases (not secured by real estate) decreased $592.06 million or 14.60%. In addition, construction and land development loans increased $187.82 million or 10.28%. Partially offsetting the increases in loans and leases was a decrease of $208.33 million or 5.34% in residential real estate loans. Consumer loans remained flat, decreasing $8.76 million or less than 1% due to a decrease in indirect automobile financing. 
 The following table summarizes the changes in the major loan classes since year-end
 2020: 
 
 (Dollars in thousands)

 December 31
2021

 December 31
2020

 $

 Change

 %
Change

 Loans held for sale

 $ 
 504,416 
 
 $ 
 718,937 
 
 $ 
 (214,521 
 ) 
 
 (29.84 
 %) 

 Commercial, financial, and agricultural:

 Owner-occupied commercial real estate

 $ 
 1,733,176 
 
 $ 
 1,622,687 
 
 $ 
 110,489 
 
 6.81 
 % 

 Nonowner-occupied commercial real estate

 5,957,288 
 
 5,017,727 
 
 939,561 
 
 18.72 
 % 

 Other commercial loans

 3,462,361 
 
 4,054,418 
 
 (592,057 
 ) 
 
 (14.60 
 %) 

 Total commercial, financial, and agricultural

 $ 
 11,152,825 
 
 $ 
 10,694,832 
 
 $ 
 457,993 
 
 4.28 
 % 

 Residential real estate

 3,691,560 
 
 3,899,885 
 
 (208,325 
 ) 
 
 (5.34 
 %) 

 Construction & land development

 2,014,165 
 
 1,826,349 
 
 187,816 
 
 10.28 
 % 

 Consumer:

 Bankcard

 8,913 
 
 8,937 
 
 (24 
 ) 
 
 (0.27 
 %) 

 Other consumer

 1,183,844 
 
 1,192,580 
 
 (8,736 
 ) 
 
 (0.73 
 %) 

 Total gross loans

 $ 
 18,051,307 
 
 $ 
 17,622,583 
 
 $ 
 428,724 
 
 2.43 
 % 

 Less: Unearned income

 (27,659 
 ) 
 
 (31,170 
 ) 
 
 3,511 
 
 (11.26 
 %) 

 Total Loans, net of unearned income

 $ 
 18,023,648 
 
 $ 
 17,591,413 
 
 $ 
 432,235 
 
 2.46 
 % 

 45 

 Table of Contents 
 The following table shows the maturity of loans and leases, outstanding as of December 31, 2021: 

 (In thousands)

 Less Than
One Year

 One To
Five Years

 Five to
Fifteen Years

 Greater than
Fifteen Years

 Total

 Commercial, financial and agricultural:

 Owner-occupied

 $ 
 123,870 
 
 $ 
 697,487 
 
 $ 
 875,471 
 
 $ 
 36,348 
 
 $ 
 1,733,176 
 
 Nonowner-occupied

 807,598 
 
 3,214,142 
 
 1,798,851 
 
 136,697 
 
 5,957,288 
 
 Other commercial

 955,967 
 
 1,850,893 
 
 521,777 
 
 133,724 
 
 3,462,361 
 
 Residential real estate

 170,692 
 
 516,414 
 
 708,830 
 
 2,295,624 
 
 3,691,560 
 
 Construction & land development

 596,597 
 
 1,130,280 
 
 229,718 
 
 57,570 
 
 2,014,165 
 
 Consumer:

 Bankcard

 209 
 
 8,704 
 
 0 
 
 0 
 
 8,913 
 
 Other consumer

 31,290 
 
 632,499 
 
 519,489 
 
 566 
 
 1,183,844 
 
 Total

 $ 
 2,686,223 
 
 $ 
 8,050,419 
 
 $ 
 4,654,136 
 
 $ 
 2,660,529 
 
 $ 
 18,051,307 
 
 At December 31, 2021, for loans and leases due after one year, interest rate information is as follows: 

 (In thousands)

 One To

 Five Years

 Five to
Fifteen Years

 Greater than
Fifteen Years

 Total

 Commercial, financial and agricultural:

 Owner-occupied

 Outstanding with fixed interest rates

 $ 
 549,291 
 
 $ 
 390,432 
 
 $ 
 11,265 
 
 $ 
 950,988 
 
 Outstanding with adjustable interest rates

 148,196 
 
 485,039 
 
 25,083 
 
 658,318 
 
 Total owner-occupied

 697,487 
 
 875,471 
 
 36,348 
 
 1,609,306 
 
 Nonowner-occupied

 Outstanding with fixed interest rates

 $ 
 2,255,557 
 
 $ 
 925,611 
 
 $ 
 6,768 
 
 $ 
 3,187,936 
 
 Outstanding with adjustable interest rates

 958,585 
 
 873,240 
 
 129,929 
 
 1,961,754 
 
 Total non-owner
 occupied
 
 3,214,142 
 
 1,798,851 
 
 136,697 
 
 5,149,690 
 
 Other commercial

 Outstanding with fixed interest rates

 $ 
 1,619,871 
 
 $ 
 323,700 
 
 $ 
 79,786 
 
 $ 
 2,023,357 
 
 Outstanding with adjustable interest rates

 231,022 
 
 198,077 
 
 53,938 
 
 483,037 
 
 Total other commercial

 1,850,893 
 
 521,777 
 
 133,724 
 
 2,506,394 
 
 Residential real estate

 Outstanding with fixed interest rates

 $ 
 322,802 
 
 $ 
 248,501 
 
 $ 
 766,537 
 
 $ 
 1,337,840 
 
 Outstanding with adjustable interest rates

 193,612 
 
 460,329 
 
 1,529,087 
 
 2,183,028 
 
 Total residential real estate

 516,414 
 
 708,830 
 
 2,295,624 
 
 3,520,868 
 
 Construction

 Outstanding with fixed interest rates

 $ 
 443,315 
 
 $ 
 86,702 
 
 $ 
 38,541 
 
 $ 
 568,558 
 
 Outstanding with adjustable interest rates

 686,965 
 
 143,016 
 
 19,029 
 
 849,010 
 
 Total construction

 1,130,280 
 
 229,718 
 
 57,570 
 
 1,417,568 
 
 Consumer:

 Bankcard

 Outstanding with fixed interest rates

 $ 
 956 
 
 $ 
 0 
 
 $ 
 0 
 
 $ 
 956 
 
 Outstanding with adjustable interest rates

 7,748 
 
 0 
 
 0 
 
 7,748 
 
 Total bankcard

 8,704 
 
 0 
 
 0 
 
 8,704 
 
 Other consumer

 Outstanding with fixed interest rates

 $ 
 632,081 
 
 $ 
 519,295 
 
 $ 
 566 
 
 $ 
 1,151,942 
 
 Outstanding with adjustable interest rates

 418 
 
 194 
 
 0 
 
 612 
 
 Total other consumer

 632,499 
 
 519,489 
 
 566 
 
 1,152,554 
 
 Total outstanding with fixed interest rates

 $ 
 5,823,873 
 
 $ 
 2,494,241 
 
 $ 
 903,463 
 
 $ 
 9,221,577 
 
 Total outstanding with adjustable rates

 $ 
 2,226,546 
 
 $ 
 2,159,895 
 
 $ 
 1,757,066 
 
 $ 
 6,143,507 
 
 Total

 $ 
 8,050,419 
 
 $ 
 4,654,136 
 
 $ 
 2,660,529 
 
 $ 
 15,365,084 
 
 46 

 Table of Contents 
 More information relating to loans is presented in Note D, Notes to Consolidated Financial Statements. 

 Other Assets 

 Other assets increased $125.13 million or 21.41% from year-end
 2020. The Community Bankers Trust acquisition added $51.83 million in other assets plus an additional $3.40 million in core deposit intangibles. The cash surrender value of bank-owned life insurance policies increased $122.78 million, of which $31.32 million was acquired from Community Bankers Trust while the remaining increase was due to purchases of new policies, totaling $85.00 million. Deferred tax assets increased $10.59 million due mainly to the deferred taxes recorded on the purchase accounting adjustments in the Community Bankers Trust acquisition. The remainder of the increase in other assets is the result of a $17.23 million net pension asset that was recorded in 2021, previously a liability, due to an increase in the discount rate used in the year-end
 evaluation and an increase in fair value of plan assets during 2021. Partially offsetting these increases were decreases of $7.40 million in income tax receivable, $11.00 million in derivative assets, $7.77 million in other real estate owned properties (”OREO”) due to sales and write downs, and $2.51 million in core deposit intangibles due to amortization. 
 Deposits 

 Deposits represent United’s primary source of funding. Total deposits at December 31, 2021 increased $2.77 billion or 13.43%, mainly as the result of the Community Bankers Trust acquisition. Community Bankers Trust added $1.52 billion in deposits, including purchase accounting amounts. In terms of composition, noninterest-bearing deposits increased $1.58 billion or 21.27% ($350.39 million added from Community Bankers Trust acquisition) while interest-bearing deposits increased $1.19 billion or 9.03% ($1.17 billion added from Community Bankers Trust acquisition) from December 31, 2020. Organically, deposits grew $1.24 billion from year-end
 2020 due to new customers and the economic stimulus, liquidity concerns as well as a volatile stock market as a result of the COVID-19
 pandemic. 
 Noninterest-bearing deposits consist of demand deposit and noninterest bearing money market (“MMDA”) account balances. The $1.58 billion increase in noninterest-bearing deposits was due to increases in commercial noninterest-bearing deposits of $2.97 billion or 73.04%, personal noninterest-bearing deposits of $407.18 million or 37.04% and public noninterest-bearing deposits of $65.86 million or 50.41%. Partially offsetting these increases in noninterest bearing MMDAs was a $1.98 billion decrease in sweep activity. 

 Interest-bearing deposits consist of interest-bearing checking (“NOW”), regular savings, interest-bearing MMDA, and time deposit account balances. NOW accounts increased $2.93 billion or 367.01% since year-end
 2020 while regular savings accounts increased $357.58 million or 27.85%, partially as the result of the Community Bankers Trust merger. Excluding sweep activity from NOW accounts to interest-bearing MMDAs to reduce United’s reserve requirement at its Federal Reserve Bank, NOW accounts increased $637.21 million or 20.57% mainly due to a $363.05 million increase in personal NOW accounts, a $142.26 million increase in commercial NOW accounts, and a $131.90 million increase in public funds NOW accounts. Partially offsetting these increases in interest-bearing deposits is a $1.83 billion or 22.31% decrease in interest-bearing MMDAs. In particular, personal MMDAs decreased $789.76 million, commercial MMDAs decreased $409.01 million, and public MMDAs decreased $602.52 million. These decreases were due to a $2.30 billion decrease in sweep activity from NOW accounts to interest-bearing MMDAs. The increase of $357.58 million in regular savings was mainly due to a $326.72 million increase in personal savings accounts and a $27.51 million increase in commercial savings accounts. 
 Time deposits under $100,000 increased $51.02 million or 5.21% from year-end
 2020. This increase in time deposits under $100,000 was the result of a $79.50 million increase in fixed Certificates of Deposits (“CDs”) under $100,000 as a result of the Community Bankers Trust acquisition. This increase was partially offset by a $30.50 million decrease in CDs under $100,000 obtained through the use of deposit listing services. 
 Since year-end
 2020, time deposits over $100,000 decreased $326.92 million or 16.96% as fixed rate CDs decreased $34.22 million, brokered certificates of deposits decreased $99.64 million, and public funds CDs over $100,000 decreased $121.19 million. In addition, Certificate of Deposit Account Registry Service (“CDARS”) CDs decreased $74.35 million. 
 
 47 

 Table of Contents 
 The table below summarizes the changes by deposit category since year-end
 2020: 
 
 (Dollars in thousands)

 December 31
2021

 December 31
2020

 $

 Change

 %
Change

 Demand deposits

 $ 
 8,980,547 
 
 $ 
 5,428,398 
 
 $ 
 3,552,149 
 
 65.44 
 % 

 Interest-bearing checking

 3,734,355 
 
 799,635 
 
 2,934,720 
 
 367.01 
 % 

 Regular savings

 1,641,404 
 
 1,283,823 
 
 357,581 
 
 27.85 
 % 

 Money market accounts

 6,361,887 
 
 10,165,334 
 
 (3,803,447 
 ) 
 
 (37.42 
 %) 

 Time deposits under $100,000

 1,031,008 
 
 979,988 
 
 51,020 
 
 5.21 
 % 

 Time deposits over $100,000 (1)(2)

 1,601,062 
 
 1,927,982 
 
 (326,920 
 ) 
 
 (16.96 
 %) 

 Total deposits

 $ 
 23,350,263 
 
 $ 
 20,585,160 
 
 $ 
 2,765,103 
 
 13.43 
 % 

 (1) 
 Includes time deposits of $250,000 or more of $640,752 and $889,334 at December 31, 2021 and December 31, 2020, respectively. 

 (2) 
 Includes $375,510 and $645,304 of uninsured time deposits at December 31, 2021 and December 31, 2020, respectively. 

 At December 31, 2021, the scheduled maturities of time deposits are as follows: 

 Year

 Amount

 (In thousands)

 2022

 $ 
 2,093,001 
 
 2023

 337,252 
 
 2024

 112,686 
 
 2025

 59,813 
 
 2026 and thereafter

 29,318 
 
 TOTAL

 $ 
 2,632,070 
 
 Maturities of estimated uninsured time deposits of $100,000 or more outstanding at December 31, 2021 are summarized as follows: 

 (Dollars in thousands)

 3 months
or less

 Over 3
through
6 months

 Over 6
through 12
months

 Over 12
months

 Time deposits in amounts in excess of the FDIC Insurance limit

 $ 
 78,437 
 
 $ 
 145,134 
 
 $ 
 61,767 
 
 $ 
 90,172 
 
 The amounts of uninsured time deposits of $100,000 or more outstanding at December 31, 2021 are based on estimates using the same methodologies and assumptions used for regulatory reporting requirements. 

 The average daily amount of deposits and rates paid on such deposits is summarized for the years ended December 31: 

 2021

 2020

 2019

 Interest

 Interest

 Interest

 Amount

 Expense

 Rate

 Amount

 Expense

 Rate

 Amount

 Expense

 Rate

 (Dollars in thousands)

 Demand deposits

 $ 
 8,281,268 
 
 $ 
 0 
 
 0.00 
 % 
 
 $ 
 6,433,349 
 
 $ 
 0 
 
 0.00 
 % 
 
 $ 
 4,388,664 
 
 $ 
 0 
 
 0.00 
 % 

 NOW and money market deposits

 9,438,738 
 
 23,498 
 
 0.25 
 % 
 
 7,617,049 
 
 40,322 
 
 0.53 
 % 
 
 6,297,715 
 
 88,591 
 
 1.41 
 % 

 Savings deposits

 1,455,305 
 
 2,085 
 
 0.14 
 % 
 
 1,149,201 
 
 2,087 
 
 0.18 
 % 
 
 963,954 
 
 2,501 
 
 0.26 
 % 

 Time deposits

 2,462,044 
 
 16,037 
 
 0.65 
 % 
 
 2,952,944 
 
 36,170 
 
 1.22 
 % 
 
 2,342,969 
 
 44,557 
 
 1.90 
 % 

 TOTAL

 $ 
 21,637,355 
 
 $ 
 41,620 
 
 0.19 
 % 
 
 $ 
 18,152,543 
 
 $ 
 78,579 
 
 0.43 
 % 
 
 $ 
 13,993,302 
 
 $ 
 135,649 
 
 0.97 
 % 

 More information relating to deposits is presented in Note K, Notes to Consolidated Financial Statements. 

 48 

 Table of Contents 
 Borrowings 

 Total borrowings at December 31, 2021 decreased $60.43 million or 6.00% since year-end
 2020. During the year of 2021, short-term borrowings decreased $13.46 million or 9.46% due to a $13.46 million decrease in securities sold under agreements to repurchase. Community Bankers Trust added $6.76 million in short-term borrowings, which were repaid by December 31, 2021. Long-term borrowings decreased $46.98 million or 5.43% from year-end
 2020 due to long-term FHLB advances decreasing $52.33 million as payments exceeded new borrowings while issuances of trust preferred capital securities increased $5.35 million. Including purchase accounting amounts, Community Bankers Trust added $67.79 million in long-term FHLB advances which were repaid prior to year-end
 and $3.71 million in trust preferred capital securities. 
 The table below summarizes the change in the borrowing categories since year-end
 2020: 
 
 December 31

 December 31

 $

 %

 (Dollars in thousands)

 2021

 2020

 Change

 Change

 Short-term securities sold under agreements to repurchase

 $ 
 128,844 
 
 $ 
 142,300 
 
 $ 
 (13,456 
 ) 
 
 (9.46 
 %) 

 Long-term FHLB advances

 532,199 
 
 584,532 
 
 (52,333 
 ) 
 
 (8.95 
 %) 

 Subordinated debt

 9,872 
 
 9,865 
 
 7 
 
 0.07 
 % 

 Issuances of trust preferred capital securities

 275,323 
 
 269,972 
 
 5,351 
 
 1.98 
 % 

 Total borrowings

 $ 
 946,238 
 
 $ 
 1,006,669 
 
 $ 
 (60,431 
 ) 
 
 (6.00 
 %) 

 For a further discussion of borrowings see Notes L and M, Notes to Consolidated Financial Statements. 

 Accrued Expenses and Other Liabilities 

 Accrued expenses and other liabilities at December 31, 2021 decreased $6.71 million or 3.31% from year-end
 2020. In particular, income tax payable decreased $3.55 million due to timing differences and interest payable decreased $2.21 million due to the net repayment of FHLB advances. In addition, derivative liabilities decreased $9.37 million due to a change in fair value and United’s net pension liability decreased $1.75 million due to an increase in the discount rate used in the year-end
 evaluation and an increase in fair value of plan assets during 2021, resulting in a pension asset at year end. Partially offsetting these decreases were increases of $1.08 million in dividends payable, $7.48 million in deferred compensation, $1.25 million in accrued loan expenses, and $4.65 million in other accrued expenses. Community Bankers Trust added $12.81 million of accrued expenses and other liabilities. 
 Shareholders’ Equity 

 Shareholders’ equity at December 31, 2021 was $4.72 billion, which was an increase of $421.01 million or 9.80% from year-end
 2020, mostly as the result of the Community Bankers Trust acquisition and earnings net of dividends. The Community Bankers Trust transaction added approximately $260.28 million in shareholders’ equity as 7,135,771 shares were issued from United’s authorized but unissued shares for the merger at a cost of approximately $252.32 million. 
 Retained earnings increased $185.38 million or 15.38% from year-end
 2020. Earnings net of dividends for the year of 2021 were $185.38 million. 
 Accumulated other comprehensive income decreased $27.26 million or 121.85% from year-end
 2020 due mainly to a decrease of $56.61 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes. The after-tax
 accretion of pension costs was $2.55 million for the year of 2021 while the after-tax
 pension accounting adjustment at year-end
 2021 resulted in an increase of $13.80 million. During the year of 2021, United recognized an upward fair value adjustment of $13.00 million on new cash flow hedges. 
 During the fourth quarter of 2020, United began repurchasing its common stock on the open market under repurchase plans approved by United’s Board of Directors. United repurchased 306,204 shares in 2021 at a cost of $9.96 million or an average share price of $32.52. 

 49 

 Table of Contents 
 RESULTS OF OPERATIONS 

 Overview 

 Net income for the year 2021 was $367.74 million or $2.83 per diluted share, an increase of $78.72 million or 27.23% from $289.02 million or $2.40 per diluted share for the year of 2020. Higher net income for the year 2021 compared to the year of 2020 was primarily due to lower provision of credit losses due to better performance trends within the loan portfolio and an improved future macroeconomic forecast under the Current Expected Credit Loss (“CECL”) accounting standard, as well as the impact from the Community Bankers Trust and Carolina Financial acquisitions. 

 As previously mentioned, United completed its acquisition of Community Bankers Trust on December 3, 2021, and of Carolina Financial on May 1, 2020. The results of operations for both Community Bankers Trust and Carolina Financial are included in the consolidated results of operations from the date of the acquisition. As a result, the year of 2021 reflected higher average balances, income, and expense as compared to the year of 2020. In addition, the year of 2021 included merger-related expenses of $21.42 million related to the Community Bankers Trust acquisition compared to merger-related expenses of $54.24 million associated with the acquisition of Carolina Financial in 2020. 

 United’s return on average assets for the year of 2021 was 1.35% and the return on average shareholders’ equity was 8.30% as compared to 1.20% and 7.30% for the year of 2020. United’s Federal Reserve peer group’s (bank holding companies with total assets over $10 billion) most recently reported annualized average return on assets and annualized average return on equity were 1.34% and 12.52%, respectively, for the first nine months of 2021. For the year of 2021, United’s return on average tangible equity was 14.18%, as compared to 12.90% the year of 2020. 

 Year Ended

 (Dollars in thousands)

 December 31,
2021

 December 31,
2020

 Return on Average Tangible Equity:

 (a) Net Income (GAAP)

 $ 
 367,738 
 
 $ 
 289,023 
 
 Average Total Shareholders’ Equity (GAAP)

 4,430,688 
 
 3,956,969 
 
 Less: Average Total Intangibles

 (1,837,609 
 ) 
 
 (1,716,738 
 ) 

 (b) Average Tangible Equity (non-GAAP)

 $ 
 2,593,079 
 
 $ 
 2,240,231 
 
 Return on Tangible Equity (non-GAAP)
 [(a) / (b)]
 
 14.18 
 % 
 
 12.90 
 % 
 
 Net interest income for the year of 2021 was $742.73 million, an increase of $52.96 million or 7.68% from the prior year. The increase in net interest income occurred because total interest income was flat, decreasing $3.27 million while total interest expense decreased $56.23 million from the year of 2020. 

 The provision for credit losses was a benefit of $23.97 million for the year 2021 as compared to an expense of $106.56 million for the year of 2020. Noninterest income was $278.09 million for the year of 2021 which was a decrease of $76.65 million or 21.61% from the year of 2020. Noninterest expense was $581.94 million which was flat from the year of 2020, increasing $3.73 million or less than 1%. 

 Income taxes for the year of 2021 were $95.12 million as compared to $70.72 million for the year of 2020. United’s effective tax rate was approximately 20.6% and 19.7% for years ended December 31, 2021 and 2020, respectively, as compared to 19.8% for 2019. 

 Business Segments 

 United operates in two business segments: community banking and mortgage banking. 

 Community Banking 

 Net income attributable to the community banking segment for the year of 2021 was $327.08 million compared to net income of $190.34 million for the year of 2020. The higher net income within the community banking segment was due primarily to a lower provision for credit losses and higher net interest income. The full year of 2021 was impacted by the Carolina Financial acquisition as compared to eight months in 2020. In addition, the year of 2021 was impacted by one month of the Community Bankers Trust acquisition. 

 50 

 Table of Contents 
 Net interest income increased $53.40 million to $731.31 million for the year of 2021, compared to $677.91 million for the same period of 2020. Generally, net interest income for the year of 2021 increased from the year of 2020 due to an increase in average earning assets as a result of the Carolina Financial acquisition, PPP loan activity and to a larger decline in the average cost of funds as compared to the average yield on earning assets. 

 Provision for credit losses was a net benefit of $23.97 million for the year of 2021 compared to a provision expense of $106.56 million for the same period of 2020. The decrease for the year of 2021 was due mainly to a provision for credit losses of $28.95 million recorded on purchased non-credit
 deteriorated (“non-PCD”)
 loans from Carolina Financial during the second quarter of 2020 which was partially offset by the provision for credit losses of $12.29 million recorded on non-PCD
 loans from Community Bankers Trust, the better performance trends within the loan portfolio as well 

as improved 

reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard. 
 Noninterest income for the year of 2021 increased $9.88 million to $99.97 million as compared to $90.09 million for the year of 2020. The increase for the year of 2021 was due mainly to increased fees from trust services, fees from brokerage services, fees from deposit services, bankcard fees and merchant discounts and other miscellaneous income. 

 Noninterest expense was $443.46 million for the year ended December 31, 2021, compared to $423.93 million for the same period of 2020. The increase of $19.52 million in noninterest expense was primarily attributable to the additional employees and branch offices from the Community Bankers Trust and the Carolina Financial acquisitions as most major categories of noninterest expense showed increases. 

 Mortgage Banking 

 The mortgage banking segment reported net income of $43.93 million for the year of 2021 as compared to net income of $116.71 million for the year of 2020. Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $183.22 million for the year of 2021 as compared to $276.19 million for the year of 2020. The decrease in 2021 was due mainly to the mark-to-market

 impact of a declining locked pipeline and a lower margin on loans sold in the secondary market. Noninterest expense was $138.51 million for the year of 2021 as compared to $140.63 million the year of 2020. Noninterest expense consists mainly of salaries, commissions and benefits of mortgage segment employees. The decrease in 2021 was due mainly to lower employee incentives, overtime and commissions expense related to decreased mortgage banking production. 
 Consolidated Results of Operations by Major Category 

 The following table sets forth certain consolidated income statement information of United: 

 Year Ended

 (Dollars in thousands)

 2021

 2020

 2019

 Income Statement Summary:

 Interest income

 $ 
 795,117 
 
 $ 
 798,382 
 
 $ 
 762,562 
 
 Interest expense

 52,383 
 
 108,609 
 
 184,640 
 
 Net interest income

 742,734 
 
 689,773 
 
 577,922 
 
 Provision for credit losses

 (23,970 
 ) 
 
 106,562 
 
 21,313 
 
 Other income

 278,092 
 
 354,746 
 
 150,484 
 
 Other expense

 581,943 
 
 578,217 
 
 382,654 
 
 Income before income taxes

 462,853 
 
 359,740 
 
 324,439 
 
 Income taxes

 95,115 
 
 70,717 
 
 64,340 
 
 Net income

 $ 
 367,738 
 
 $ 
 289,023 
 
 $ 
 260,099 
 
 51 

 Table of Contents 
 Net Interest Income 

 Net interest income represents the primary component of United’s earnings. It is the difference between interest income from earning assets and interest expense incurred to fund these assets. Net interest income is impacted by changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as changes in market interest rates. Such changes, and their impact on net interest income in 2021 and 2020, are presented below. 

 Net interest income for the year of 2021 was $742.73 million, which was an increase of $52.96 million or 7.68% from the year of 2020. The $52.96 million increase in net interest income occurred because total interest income was flat, decreasing $3.27 million while total interest expense decreased $56.23 million from the year of 2020. Generally, interest income for the year of 2021 decreased slightly from the year of 2020 due mainly to a decline in the yield on average earning assets, mainly as a result a decline in market interest rates, especially on investment securities, while interest expense decreased primarily also due to the decline in market interest rates which resulted in lower funding costs. For the purpose of this remaining discussion, net interest income is presented on a tax-equivalent
 basis to provide a comparison among all types of interest earning assets. The tax-equivalent
 basis adjusts for the tax-favored
 status of income from certain loans and investments. Although this is a non-GAAP
 measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt
 sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition. 
 Tax-equivalent
 net interest income for the year of 2021 was $746.95 million, an increase of $53.29 million or 7.68% from the year of 2020. The increase in net interest income and tax-equivalent
 net interest income was primarily due to an increase in average earning assets from the Carolina Financial acquisition and PPP loans as well as lower interest expense on deposits and borrowings partially offset by lower acquired loan accretion income. Average earning assets for the year of 2021 increased $2.81 billion or 13.15% from the year of 2020 due to a $523.90 million or 3.09% increase in average net loans and leases, including loans held for sale, a $1.66 billion or 110.61% increase in average short-term investments and a $628.01 million or 21.52% increase in average investment securities. The net interest spread for the year of 2021 decreased 2 basis points from the year of 2020 due to a 45 basis point decrease in the average yield on earning assets partially offset by a 43 basis point decrease in the average cost of funds. Loan accretion on acquired loans and leases was $33.86 million and $41.77 million for the year of 2021 and 2020, respectively, a decrease of $7.91 million. The net interest margin of 3.09% for the year of 2021 was a decrease of 15 basis points from the net interest margin of 3.24% for the year of 2020. 
 United’s tax-equivalent
 net interest income also includes the impact of acquisition accounting fair value adjustments. The following table provides the discount/premium and net accretion impact to tax-equivalent
 net interest income for the year ended December 31, 2021, 2020 and 2019. 
 
 Year Ended

 (Dollars in thousands)

 December 31
2021

 December 31
2020

 December 31
2019

 Loan Accretion

 $ 
 33,857 
 
 $ 
 41,766 
 
 $ 
 38,803 
 
 Certificates of deposit

 4,305 
 
 7,925 
 
 791 
 
 Long-term borrowings

 684 
 
 1,278 
 
 1,074 
 
 Total

 $ 
 38,846 
 
 $ 
 50,969 
 
 $ 
 40,668 
 
 The following table reconciles the difference between net interest income and tax-equivalent
 net interest income for the year ended December 31, 2021, 2020 and 2019. 
 
 Year Ended

 (Dollars in thousands)

 December 31
2021

 December 31
2020

 December 31
2019

 Net interest income (GAAP)

 $ 
 742,734 
 
 $ 
 689,773 
 
 $ 
 577,922 
 
 Tax-equivalent
 adjustment (non-GAAP)
 (1)

 4,218 
 
 3,888 
 
 3,735 
 
 Tax-equivalent
 net interest income (non-GAAP)

 $ 
 746,952 
 
 $ 
 693,661 
 
 $ 
 581,657 
 
 (1) 
 The tax-equivalent
 adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for 2021, 2020, and 2019. All interest income on loans and investment securities was subject to state income taxes. 
 
 52 

 Table of Contents 
 The following table shows the consolidated daily average balance of major categories of assets and liabilities for each of the three years ended December 31, 2021, 2020 and 2019 with the consolidated interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent
 basis using the statutory federal income tax rate of 21% for the years ended December 31, 2021, 2020, and 2019. Interest income on all loans and investment securities was subject to state taxes. 
 
 Year Ended

 December 31, 2021

 Year Ended

 December 31, 2020

 Year Ended

 December 31, 2019

 (Dollars in thousands)

 Average

 Balance

 Interest

 (1)

 Avg.

 Rate

 (1)

 Average

 Balance

 Interest

 (1)

 Avg.

 Rate

 (1)

 Average

 Balance

 Interest

 (1)

 Avg.
Rate

 (1)

 ASSETS

 Earning Assets:

 Federal funds sold, securities repurchased under agreements to resell & other short-term investments

 $ 
 3,162,814 
 
 $ 
 8,734 
 
 0.28 
 % 
 
 $ 
 1,501,771 
 
 $ 
 9,780 
 
 0.65 
 % 
 
 $ 
 733,865 
 
 $ 
 21,338 
 
 2.91 
 % 

 Investment Securities:

 Taxable

 3,193,414 
 
 54,678 
 
 1.71 
 % 
 
 2,700,416 
 
 61,808 
 
 2.29 
 % 
 
 2,485,767 
 
 70,789 
 
 2.85 
 % 

 Tax-exempt

 352,843 
 
 9,129 
 
 2.59 
 % 
 
 217,836 
 
 6,285 
 
 2.89 
 % 
 
 139,277 
 
 4,412 
 
 3.17 
 % 

 Total Securities

 3,546,257 
 
 63,807 
 
 1.80 
 % 
 
 2,918,252 
 
 68,093 
 
 2.33 
 % 
 
 2,625,044 
 
 75,201 
 
 2.86 
 % 

 Loans and leases, net of unearned income (2)

 17,714,288 
 
 726,794 
 
 4.10 
 % 
 
 17,151,291 
 
 724,397 
 
 4.22 
 % 
 
 13,879,662 
 
 669,758 
 
 4.83 
 % 

 Allowance for credit losses

 (225,740 
 ) 
 
 (186,640 
 ) 
 
 (76,731 
 ) 
 
 Net loans and leases

 17,488,548 
 
 4.16 
 % 
 
 16,964,651 
 
 4.27 
 % 
 
 13,802,931 
 
 4.85 
 % 

 Total earning assets

 24,197,619 
 
 $ 
 799,335 
 
 3.30 
 % 
 
 21,384,674 
 
 $ 
 802,270 
 
 3.75 
 % 
 
 17,161,840 
 
 $ 
 766,297 
 
 4.47 
 % 

 Other assets

 3,058,476 
 
 2,752,396 
 
 2,313,628 
 
 TOTAL ASSETS

 $ 
 27,256,095 
 
 $ 
 24,137,070 
 
 $ 
 19,475,468 
 
 LIABILITIES

 Interest-Bearing Funds:

 Interest-bearing deposits

 $ 
 13,356,087 
 
 $ 
 41,620 
 
 0.31 
 % 
 
 $ 
 11,719,194 
 
 $ 
 78,579 
 
 0.67 
 % 
 
 $ 
 9,604,638 
 
 $ 
 135,649 
 
 1.41 
 % 

 Short-term borrowings

 132,489 
 
 693 
 
 0.52 
 % 
 
 145,768 
 
 1,027 
 
 0.70 
 % 
 
 140,483 
 
 2,347 
 
 1.67 
 % 

 Long- term borrowings

 819,440 
 
 10,070 
 
 1.23 
 % 
 
 1,645,783 
 
 29,003 
 
 1.76 
 % 
 
 1,821,504 
 
 46,644 
 
 2.56 
 % 

 Total Interest-Bearing Funds

 14,308,016 
 
 52,383 
 
 0.37 
 % 
 
 13,510,745 
 
 108,609 
 
 0.80 
 % 
 
 11,566,625 
 
 184,640 
 
 1.60 
 % 

 Noninterest-bearing deposits

 8,281,268 
 
 6,433,349 
 
 4,388,664 
 
 Accrued expenses and other liabilities

 236,123 
 
 236,007 
 
 184,104 
 
 TOTAL LIABILITIES

 22,825,407 
 
 20,180,101 
 
 16,139,393 
 
 SHAREHOLDERS’ EQUITY

 4,430,688 
 
 3,956,969 
 
 3,336,075 
 
 TOTAL LIABILITIES AND

 SHAREHOLDERS’ EQUITY

 $ 
 27,256,095 
 
 $ 
 24,137,070 
 
 $ 
 19,475,468 
 
 NET INTEREST INCOME

 $ 
 746,952 
 
 $ 
 693,661 
 
 $ 
 581,657 
 
 INTEREST SPREAD

 2.93 
 % 
 
 2.95 
 % 
 
 2.87 
 % 

 NET INTEREST MARGIN

 3.09 
 % 
 
 3.24 
 % 
 
 3.39 
 % 
 
 (1) 
 The interest income and the yields on federally nontaxable loans and investment securities are presented on a tax-equivalent
 basis using the statutory federal income tax rate of 21% for 2021, 2020 and 2019. 
 
 (2) 
 Nonaccruing loans are included in the daily average loan amounts outstanding. 

 53 

 Table of Contents 
 The following table sets forth a summary for the periods indicated of the changes in consolidated interest earned and interest paid detailing the amounts attributable to (i) changes in volume (change in the average volume times the prior year’s average rate), (ii) changes in rate (change in the average rate times the prior year’s average volume), and (iii) changes in rate/volume (change in the average volume times the change in average rate). 

 2021 Compared to 2020

 2020 Compared to 2019

 Increase (Decrease) Due to

 Increase (Decrease) Due to

 (In thousands)

 Volume

 Rate

 Rate/
Volume

 Total

 Volume

 Rate

 Rate/
Volume

 Total

 Interest income:

 Federal funds sold, securities purchased under agreements to resell and other short-term investments

 $ 
 10,797 
 
 $ 
 (5,557 
 ) 
 
 $ 
 (6,286 
 ) 
 
 $ 
 (1,046 
 ) 
 
 $ 
 22,346 
 
 $ 
 (16,585 
 ) 
 
 $ 
 (17,319 
 ) 
 
 $ 
 (11,558 
 ) 

 Investment securities:

 Taxable

 11,290 
 
 (15,662 
 ) 
 
 (2,758 
 ) 
 
 (7,130 
 ) 
 
 6,117 
 
 (13,920 
 ) 
 
 (1,178 
 ) 
 
 (8,981 
 ) 

 Tax-exempt
 (1)
 
 3,902 
 
 (654 
 ) 
 
 (404 
 ) 
 
 2,844 
 
 2,490 
 
 (390 
 ) 
 
 (227 
 ) 
 
 1,873 
 
 Loans (1),(2)

 22,370 
 
 (18,661 
 ) 
 
 (1,312 
 ) 
 
 2,397 
 
 153,343 
 
 (80,057 
 ) 
 
 (18,647 
 ) 
 
 54,639 
 
 TOTAL INTEREST INCOME

 48,359 
 
 (40,534 
 ) 
 
 (10,760 
 ) 
 
 (2,935 
 ) 
 
 184,296 
 
 (110,952 
 ) 
 
 (37,371 
 ) 
 
 35,973 
 
 Interest expense:

 Interest-bearing deposits

 $ 
 10,967 
 
 $ 
 (42,189 
 ) 
 
 $ 
 (5,737 
 ) 
 
 $ 
 (36,959 
 ) 
 
 $ 
 29,815 
 
 $ 
 (71,074 
 ) 
 
 $ 
 (15,811 
 ) 
 
 $ 
 (57,070 
 ) 

 Short-term borrowings

 (93 
 ) 
 
 (262 
 ) 
 
 21 
 
 (334 
 ) 
 
 88 
 
 (1,306 
 ) 
 
 (102 
 ) 
 
 (1,320 
 ) 

 Long-term borrowings

 (14,544 
 ) 
 
 (8,723 
 ) 
 
 4,334 
 
 (18,933 
 ) 
 
 (4,498 
 ) 
 
 (14,572 
 ) 
 
 1,429 
 
 (17,641 
 ) 

 TOTAL INTEREST EXPENSE

 (3,670 
 ) 
 
 (51,174 
 ) 
 
 (1,381 
 ) 
 
 (56,226 
 ) 
 
 25,405 
 
 (86,952 
 ) 
 
 (14,484 
 ) 
 
 (76,031 
 ) 

 NET INTEREST INCOME

 $ 
 52,029 
 
 $ 
 10,640 
 
 $ 
 (9,378 
 ) 
 
 $ 
 53,291 
 
 $ 
 158,891 
 
 $ 
 (24,000 
 ) 
 
 $ 
 (22,887 
 ) 
 
 $ 
 112,004 
 
 (1) 
 Yields and interest income on federally tax-exempt
 loans and investment securities are computed on a fully tax-equivalent
 basis using the statutory federal income tax rate of 21% for 2021, 2020 and 2019. 
 
 (2) 
 Nonaccruing loans are included in the daily average loan amounts outstanding. 

 Provision for Credit Losses 

 United’s provision for credit losses was a net benefit of $23.97 million for the year of 2021 while the provision for credit losses was an expense of $106.56 million for the year of 2020. United’s provision for credit losses relates to its portfolio of loans and leases, held-to-maturity

 securities and interest receivable on loans which are discussed in more detail in the following paragraphs. 
 The provision for loan and lease losses for the year of 2021 was a net benefit of $23.72 million as compared to provision expense of $106.29 million for the year of 2020. Net charge-offs for the year of 2021 were $8.72 million as compared to $23.60 million for the year of 2020. The year of 2021 included a provision for loan losses of $12.29 million recorded on purchased non-credit
 deteriorated (“non-PCD”)
 loans from Community Bankers Trust. The year of 2020 included a provision for loan losses of $28.95 million recorded on non-PCD
 loans from Carolina Financial. The decrease in the provision in relation to the year of 2020 was primarily driven by improvements in the reasonable and supportable forecasts of future macroeconomic conditions on the estimate of expected credit losses under CECL. The decrease in the provision in relation to the prior year was also due to the impact of better performance trends within the loan portfolio. Net charge-offs as a percentage of average loans and leases were 0.05% and 0.14% for the year of 2021 and 2020, respectively. 
 As of December 31, 2021, nonperforming loans and leases were $90.76 million or 0.50% of loans and leases, net of unearned income as compared to $132.21 million or 0.75% of loans and leases, net of unearned income at December 31, 2020. The components of nonperforming loans and leases include: 1) nonaccrual loans and leases, 2) loans and leases which are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis and 3) loans and leases whose terms have been restructured for economic or legal reasons due to financial difficulties of the borrowers. 

 54 

 Table of Contents 
 Loans and leases past due 90 days or more were $18.88 million at December 31, 2021, an increase of $5.05 million or 36.49% from $13.83 million at year-end
 2020. This increase was primarily due to several large commercial relationships that have exceeded their stated maturity dates as of December 31, 2021. At December 31, 2021, nonaccrual loans and leases were $36.03 million, which was a decrease of $26.69 million or 42.56% from $62.72 million at year-end
 2020. This decrease was due to the repayment of five large commercial nonaccrual loans as well as the charge-off
 of two commercial relationships and troubled debt restructuring designations for three large commercial nonaccrual loans. Restructured loans were $35.86 million at December 31, 2021, a decrease of $19.80 million or 35.58% from $55.66 million at year-end
 2020. The decrease was mainly due to the repayment of six large commercial relationships and charge-off
 of three commercial restructured loans during the year of 2021. The loss potential on these loans has been properly evaluated and allocated within the Company’s allowance for loan losses. 
 Nonperforming assets include nonperforming loans and leases and real estate acquired in foreclosure or other settlement of loans (“OREO”). Total nonperforming assets of $105.59 million, including OREO of $14.82 million at December 31, 2021, represented 0.36% of total assets. 

 United maintains an allowance for loan and lease losses and a reserve for lending-related commitments. The combined allowance for loan and lease losses and reserve for lending-related commitments is considered the allowance for credit losses. At December 31, 2021, the allowance for credit losses was $247.46 million as compared to $255.08 million at December 31, 2020. 

 At December 31, 2021, the allowance for loan and lease losses was $216.02 million as compared to $235.83 million at December 31, 2020. The decrease in the allowance for loan and lease losses was due mainly to improved reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses offset slightly by the allowance amount recorded for Community Bankers Trust acquisition. As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.20% at December 31, 2021 and 1.34% at December 31, 2020. The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 238.00% and 178.38% at December 31, 2021 and December 31, 2020, respectively. The increase in this ratio was due mainly to a larger decline in nonperforming loans and leases than in the allowance for loan and lease losses. 

 The following table summarizes United’s credit loss experience for loan and leases losses, based on loan categories, for the year of 2021 and 2020: 

 (Dollars in thousands)

 2021

 2020

 Commercial, financial and agricultural:

 Owner-occupied

 Loans & leases charged off

 $ 
 414 
 
 $ 
 2,195 
 
 Recoveries

 869 
 
 795 
 
 Net loans & leases (recovered) charged off

 $ 
 (455 
 ) 
 
 $ 
 1,400 
 
 Average gross loans & leases outstanding

 1,612,387 
 
 1,360,791 
 
 Net (recoveries) charge-offs as a percentage of average gross loans & leases outstanding

 (0.03 
 %) 
 
 0.10 
 % 

 Nonowner-occupied

 Loans & leases charged off

 $ 
 3,531 
 
 $ 
 6,134 
 
 Recoveries

 1,907 
 
 1,023 
 
 Net loans & leases charged off

 $ 
 1,624 
 
 $ 
 5,111 
 
 Average gross loans & leases outstanding

 5,045,006 
 
 4,400,468 
 
 Net charge-offs as a percentage of average gross loans & leases outstanding

 0.03 
 % 
 
 0.12 
 % 

 Other Commercial

 Loans & leases charged off

 $ 
 6,182 
 
 $ 
 17,350 
 
 Recoveries

 4,307 
 
 4,461 
 
 Net loans & leases charged off

 $ 
 1,875 
 
 $ 
 12,889 
 
 55 

 Table of Contents 
 
 2021

 2020

 Average gross loans & leases outstanding

 3,777,988 
 
 3,656,586 
 
 Net charge-offs as a percentage of average gross loans & leases outstanding

 0.05 
 % 
 
 0.35 
 % 

 Residential Real Estate

 Loans & leases charged off

 $ 
 6,016 
 
 $ 
 1,760 
 
 Recoveries

 2,400 
 
 1,063 
 
 Net loans & leases charged off

 $ 
 3,616 
 
 $ 
 697 
 
 Average gross loans & leases outstanding

 3,624,157 
 
 4,360,168 
 
 Net charge-offs as a percentage of average gross loans & leases outstanding

 0.10 
 % 
 
 0.02 
 % 

 Construction

 Loans & leases charged off

 $ 
 560 
 
 $ 
 2,027 
 
 Recoveries

 604 
 
 1,513 
 
 Net loans & leases (recovered) charged off

 $ 
 (44 
 ) 
 
 $ 
 514 
 
 Average gross loans & leases outstanding

 1,961,661 
 
 1,622,820 
 
 Net (recoveries) charge-offs as a percentage of average gross loans & leases outstanding

 (0.00 
 %) 
 
 0.03 
 % 

 Consumer:

 Bankcard

 Loans & leases charged off

 $ 
 190 
 
 $ 
 221 
 
 Recoveries

 42 
 
 52 
 
 Net loans & leases charged off

 $ 
 148 
 
 $ 
 169 
 
 Average gross loans & leases outstanding

 8,298 
 
 8,830 
 
 Net charge-offs as a percentage of average gross loans & leases outstanding

 1.78 
 % 
 
 1.91 
 % 

 Other consumer

 Loans & leases charged off

 $ 
 2,404 
 
 $ 
 3,296 
 
 Recoveries

 449 
 
 479 449 
 
 Net loans & leases charged off

 $ 
 1,955 
 
 $ 
 2,817 
 
 Average gross loans & leases outstanding

 1,174,323 
 
 1,196,911 
 
 Net charge-offs as a percentage of average gross loans & leases outstanding

 0.17 
 % 
 
 0.24 
 % 

 Total

 Loans & leases charged off

 $ 
 19,297 
 
 $ 
 32,983 
 
 Recoveries

 10,578 
 
 9,386 
 
 Net loans & leases charged off

 $ 
 8,719 
 
 $ 
 23,597 
 
 Average gross loans & leases outstanding

 17,203,820 
 
 16,606,574 
 
 Net charge-offs as a percentage of average gross loans & leases outstanding

 0.05 
 % 
 
 0.14 
 % 

 Nonaccrual loans & leases

 $ 
 58,449 
 
 $ 
 103,903 
 
 Allowance for loan & lease losses

 216,016 
 
 235,830 
 
 Loans & leases (net of unearned income)

 18,023,648 
 
 17,591,413 
 
 Allowance for loan & lease losses as a percentage of loans (net of unearned income)

 1.20 
 % 
 
 1.34 
 % 

 Nonaccrual loans as a percentage of loans & leases (net of unearned income)

 0.32 
 % 
 
 0.59 
 % 

 Allowance for loan & lease losses as a percentage of nonaccrual loans & leases

 369.58 
 % 
 
 226.97 
 % 
 
 United continues to evaluate risks which may impact its loan and lease portfolios. As a result of the COVID-19
 pandemic and resulting economic uncertainty given the rapidly changing economic impact, the Company reviewed its loan and lease portfolio segments, assessing the likely impact of COVID-19
 on each segment and established relevant qualitative adjustment factors. Reserves are initially determined based on losses identified from the PD/LGD and Cohort models 
 
 56 

 Table of Contents 
 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 year 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: 
 
 Ø
 
 The forecast for real GDP and the unemployment rate improved in 2021, 2022 and 2023 as compared to forecasts and expectations at the end of 2020. 

 Ø
 
 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. 

 Ø
 
 Consideration was given to the $1.9 trillion American Rescue Plan (effective March 11, 2021) during the 2021 forecast selection process as the stimulus package had a positive impact on the economy throughout 2021. 

 Ø
 
 Reversion to historical loss data occurs via a straight-line method during the year following the one-year
 reasonable and supportable forecast period. 
 
 The following is a summary of loans and leases outstanding as a percent of gross loans at December 31: 

 2021

 2020

 Commercial, financial & agricultural

 61.78 
 % 
 
 60.69 
 % 

 Residential real estate

 20.45 
 % 
 
 22.13 
 % 

 Construction & land development

 11.16 
 % 
 
 10.36 
 % 

 Consumer

 6.61 
 % 
 
 6.82 
 % 

 Total

 100.00 
 % 
 
 100.00 
 % 

 United’s review of the allowance for loan and lease losses at December 31, 2021 produced decreased reserves in three of the four loan categories as compared to December 31, 2020. The allowance related to the commercial, financial & agricultural loan pool decreased $15.61 million. The residential real estate reserve decreased $2.72 million. The consumer loan pool decreased $1.80 million. Each of these decreases were primarily due to improved economic conditions and improved expectations within the reasonable and supportable forecast. The real estate construction and development loan pool reserve increased $318 thousand primarily due to increased outstanding balances in the land and land development segment. 

 An allowance is established for estimated lifetime losses for loans that are individually assessed. Nonperforming commercial loans and leases are regularly reviewed to identify expected credit losses. A loan is individually assessed for expected credit losses when the loan does not share similar characteristics with other loans in the portfolio. Measuring expected credit losses of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Expected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate or the fair value of collateral if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an expected credit loss has occurred. The allowance for loans and leases that were individually assessed was $6.53 million at December 31, 2021 and $7.78 million at December 31, 2020. In comparison to the prior year-end,
 this element of the allowance decreased by $1.25 million primarily due to charge-off
 of previously recognized allocations for probable credit losses on individually assessed loans as well as repayment of individually assessed loans. 
 
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 Management believes that the allowance for credit losses of $247.46 million at December 31, 2021 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available. United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality. The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries. Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate diversification within the portfolio. Most of United’s commercial loans are secured by real estate located in West Virginia, southeastern Ohio, Pennsylvania, Virginia, Maryland, North Carolina, South Carolina, and the District of Columbia. It is the opinion of management that these commercial loans do not pose any unusual risks and that adequate consideration has been given to these loans in establishing the allowance for credit losses. 

 The provision for credit losses related to held to maturity securities for the year of 2021 and 2020 was immaterial. The allowance for credit losses related to held to maturity securities was $19 thousand as of December 31, 2021 as compared to $23 thousand as of December 31, 2020. There was no provision for credit losses recorded on available for sale investment securities for the year of 2021 and 2020 and no allowance for credit losses on available for sale investment securities as of December 31, 2021 and 2020. Due to loan interest payment deferrals granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans as of December 31, 2021. As a result of this assessment, United released reserves of $242 thousand for the year of 2021. The allowance for accrued interest receivables not expected to be collected as of December 31, 2021 was $8 thousand as compared to $250 thousand at December 31, 2020. 

 Management is not aware of any potential problem loans or leases, trends or uncertainties, which it reasonably expects, will materially impact future operating results, liquidity, or capital resources which have not been disclosed. Additionally, management has disclosed all known material credits, which cause management to have serious doubts as to the ability of such borrowers to comply with the loan repayment schedules. 

 Other Income 

 Other income consists of all revenues, which are not included in interest and fee income related to earning assets. Noninterest income has been and will continue to be an important factor for improving United’s profitability. Recognizing the importance, management continues to evaluate areas where noninterest income can be enhanced. 

 Noninterest income for the year of 2021 was $278.09 million, which was a decrease of $76.65 million or 21.61% from the year of 2020. The decrease was due to a decline in income from mortgage banking activities. 

 Income from mortgage banking activities totaled $171.69 million for the year of 2021 compared to $266.09 million for the year of 2020. The decrease of $94.40 million or 35.48% for the year of 2021 was due mainly to a decline in the fair value of derivatives associated with a declining pipeline and a lower sales margin. Mortgage loan sales were $6.41 billion in the year of 2021 as compared to $6.26 billion in the year of 2020. Mortgage loans originated for sale were $6.19 billion for the year of 2021 as compared to $6.53 billion for the year of 2020. 

 Mortgage loan servicing income increased $3.39 million for the year of 2021 due to increased mortgage servicing activity as a result of the Carolina Financial acquisition. 

 United recognized a net gain of $2.68 million on investment securities’ activity in 2021 as compared to a net gain of $3.16 million on investment securities activity in 2020. In particular, United recognized net gains of $1.55 million on the sales, calls and redemption of available-for-sale

 securities investment securities, $670 thousand on equity securities and $455 thousand on an equity security without a readily determinable market value for the year of 2021 as compared to a net gains of $2.50 million on the sales, calls and redemption of available-for-sale

 securities investment securities and $578 thousand on equity securities for the year of 2020. In addition, United did not recognize any impairment on investment securities for the year of 2021 and 2020. 
 
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 Fees from trust services for the year of 2021 were $16.55 million, an increase of $2.65 million or 19.05% from the year of 2020 due to an increase in managed assets. 

 Fees from brokerage services for the year of 2021 were $15.56 million, an increase of $3.80 million or 32.33% from the year of 2020 due to increased volume. 

 Fees from deposit services for the year of 2021 were $38.69 million, an increase of $3.86 million or 11.07% from the year of 2020. Debit card income increased $1.76 million, overdraft fees increased $866 thousand and account analysis fees increased $759 thousand. 

 United recognized a net gain of $2.23 million in the year of 2020 on the sale-leaseback of a bank premise. 

 Bankcard fees for the year of 2021 increased $1.42 million or 34.90% from the year of 2020 due to an increase in interchange income from increased volume. 

 Other miscellaneous income increased $5.32 million or 198.43% mainly due to an increase in prepayment fees received on Delegated Underwriting and Servicing (“DUS”) securities. 

 Other Expense 

 Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations to reduce costs. Other expense includes all items of expense other than interest expense, the provision for credit losses and income tax expense. Noninterest expense for the year of 2021 was $581.94 million, which was flat from the year of 2020, increasing $3.73 million or less than 1%. 

 Employee compensation for the year of 2021 increased $5.31 million or 1.93% from the year of 2020. This increase was due mainly to additional employees from the Community Bankers Trust and Carolina Financial acquisitions partially offset by lower commissions, overtime and incentives expenses primarily related to decreased mortgage banking production. 

 Employee benefits expense for the year of 2021 increased $5.00 million or 10.23% as compared to the year of 2020. Federal Insurance Contributions Act (“FICA”) expense for the year of 2021 increased $1.07 million due mainly to the additional employees from the Community Bankers Trust and Carolina Financial acquisitions. In addition, health insurance expense for the year of 2021 increased $4.34 million due to higher premiums and additional employees from the Community Bankers Trust and Carolina Financial acquisitions. For the year of 2021, postretirement expense, which includes expense associated with United’s pension plan, supplemental early retirement plans (“SERPs”) and Savings and Stock Investment Plan (“401K plan”), decreased $942 thousand from the year of 2020. United uses certain valuation methodologies to measure the fair value of the assets within United’s pension plan which are presented in Note P, Notes to Consolidated Financial Statements. The funded status of United’s pension plan is based upon the fair value of the plan assets compared to the projected benefit obligation. The determination of the projected benefit obligation and the associated periodic benefit expense involves significant judgment and estimation of future employee compensation levels, the discount rate and the expected long-term rate of return on plan assets. If United assumes a 1% increase or decrease in the estimation of future employee compensation levels while keeping all other assumptions constant, the benefit cost associated with the pension plan would increase by approximately $901 thousand and decrease by approximately $826 thousand, respectively. If United assumes a 1% increase or decrease in the discount rate while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by approximately $3.13 million and increase by approximately $3.58 million, respectively. If United assumes a 1% increase or decrease in the expected long-term rate of return on plan assets while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by approximately $1.90 million and increase by approximately $1.90 million, respectively. 

 Net occupancy expense increased $731 thousand or 1.77% for the year of 2021 as compared to the prior year. The increase was due mainly to increases of $3.53 million in building maintenance expense and $1.30 million in depreciation due mainly to the offices added in the Community Bankers Trust and Carolina Financial acquisitions partially offset by a decline of $1.11 million in building rental expense due to the closing of certain leased offices. 

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 Equipment expense increased $5.12 million or 24.53% for the year of 2021 as compared to the year of 2020. The increase was due mainly to increases in equipment maintenance of $3.53 million and depreciation of $1.91 million due mainly to the Community Bankers Trust and Carolina Financial acquisitions. 

 Data processing expense decreased $3.97 million or 11.22% for the year of 2021 as compared to the year of 2020. The decrease for year of 2021 was due mainly to a $9.66 million penalty to terminate Carolina Financial’s data processing contract incurred in 2020 as compared to $3.47 million of merger-related termination and conversion expenses associated with the Community Bankers Trust acquisition in 2021. 

 Mortgage loan servicing expense and impairment for the year of 2021 increased $2.82 million from the year of 2020. The increase was due to an increase in mortgage servicing activity as a result of the acquisition of Carolina Financial and Crescent Mortgage. In addition, United recorded a temporary impairment charge, net of recoveries of $500 thousand on its mortgage servicing rights during the year of 2021 as compared to a temporary impairment charge on its mortgage servicing rights of $1.38 million during the year of 2020. 

 During the year of 2021, United incurred penalties of $15 thousand in the year of 2021 to prepay certain long-term FHLB advances assumed in the Community Bankers Trust acquisition. United incurred similar penalties of $10.39 million to prepay three long-term FHLB advances during the year of 2020. 

 Other expense for the year of 2021 increased $1.27 million or 1.06% from the year of 2020. Included in other expense for the year of 2021 were merger-related expenses of $3.01 million for the Community Bankers Trust acquisition as compared to $13.07 million for the Carolina Financial acquisition for the year of 2020. The expense for the reserve for unfunded commitments for the year of 2021 increased $1.69 million from the year of 2020, excluding amounts that are included in the merger-related expenses above. In addition, the amortization of income tax credits, which reduces the effective tax rate, for the year of 2021 increased $2.90 million and expense on automated teller machine (“ATM”) increased $1.22 million. Several other general operating expenses increased as well due mainly to the Community Bankers Trust and Carolina Financial acquisitions. 

 Income Taxes 

 For the year ended December 31, 2021, income taxes were $95.12 million, compared to $70.72 million for 2020, an increase of $24.40 million or 34.50%. The increase was due to higher earnings. United’s effective tax rate was approximately 20.6% and 19.7% for years ended December 31, 2021 and 2020, respectively, as compared to 19.8% for 2019. For further details related to income taxes, see Note O, Notes to Consolidated Financial Statements. 

 Quarterly Results 

 Net income for the first quarter of 2021 was $106.90 million or $0.83 per diluted share as compared to earnings of $40.18 million or $0.40 per diluted share for the first quarter of 2020. Higher net income for the first quarter of 2021 compared to the first quarter of 2020 was primarily due to higher income from mortgage banking activities, driven by an elevated volume of mortgage loan originations and sales in the secondary market, the impact of the Carolina Financial acquisition and a lower provision for credit losses primarily due to better performance trends within the loan portfolio and an improved future macroeconomic forecast under the CECL accounting standard. Net interest income for the first three months of 2021 was $190.96 million, an increase of $49.44 million or 34.94% from net interest income of $141.52 million for the first three months of 2020. The increase of $49.44 million in net interest income occurred because total interest income increased $25.18 million while total interest expense decreased $24.27 million from the first quarter of 2020. The provision for credit losses was $143 thousand for the first three months of 2021 as compared to $27.12 million for the first three months of 2020. This decrease in the provision for credit losses was mainly due to the impact of better performance trends within the loan portfolio as well 

as improved 

reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard. Noninterest income was $92.57 million for the first three months of 2021, an increase of $55.77 million or 151.52% from the first three months of 
 
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 2020 due mainly to increased income from mortgage banking activities due to an elevated volume of mortgage loan originations and sales in the secondary market as well as the addition of mortgage banking operations from the Carolina Financial acquisition. Noninterest expense for the first three months of 2021 increased $47.79 million or 47.26% from the first three months of 2020 due mainly to the Carolina Financial acquisition as well as due to higher employee incentives and commissions expense mainly related to higher mortgage banking production. Income taxes increased $17.68 million or 178.74% for the first three months of 2021 as compared to the first three months of 2020. The effective tax rate was 20.50% and 19.75% for the first quarter of 2021 and 2020, respectively. 

 Net income for the second quarter of 2021 was $94.84 million or $0.73 per diluted share, as compared to $52.69 million or $0.44 per diluted share for the prior year second quarter. Net interest income for the second quarter of 2021 was $186.52 million, which was an increase of $15.92 million, or 9.33%, from the second quarter of 2020. The increase in net interest income occurred because total interest income increased $1.47 million while total interest expense decreased $14.45 million from the second quarter of 2020. The provision for credit losses was a net reduction in expense of $8.88 million for the second quarter of 2021, while the provision for credit losses was an expense of $45.91 million for the second quarter of 2020. This decrease in the provision for credit losses was mainly due to the impact of better performance trends within the loan portfolio as well 

as improved 

reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard. In addition, a provision for loan losses of $28.95 million was recorded on purchased non-PCD
 loans from Carolina Financial during the second quarter of 2020. For the second quarter of 2021, noninterest income was $62.85 million, which was a decrease of $25.54 million or 28.90% from the second quarter of 2020 primarily driven by a decrease in income from mortgage banking activities due primarily to the mark-to-market

 impact of a declining interest rate lock commitment pipeline. For the second quarter of 2021, noninterest expense decreased $10.42 million or 6.98% from the second quarter of 2020 primarily due to a decrease in data processing expense which included a contract termination penalty incurred in the second quarter of 2020 associated with the Carolina Financial acquisition. Income taxes for the second quarter of 2021 were $24.46 million as compared to $11.02 million for the second quarter of 2020. For the quarters ended June 30, 2021 and 2020, United’s effective tax rate was 20.50% and 17.30%, respectively. 
 Net income for the third quarter of 2021 was $92.15 million or $0.71 per diluted share, as compared to $103.78 million or $0.80 per diluted share for the prior year third quarter. Net interest income for the third quarter of 2021 was $181.58 million, which was a decrease of $4.09 million, or 2.20%, from the third quarter of 2020. The decrease in net interest income occurred because total interest income decreased $16.19 million while total interest expense decreased $12.10 million from the third quarter of 2020. The provision for credit losses was a net benefit of $7.83 million for the third quarter of 2021, while the provision for credit losses was an expense of $16.78 million, for the third quarter of 2020. For the third quarter of 2021, noninterest income was $68.62 million, which was a decrease of $66.84 million or 49.34% from the third quarter of 2020 primarily driven by a decrease in income from mortgage banking activities due primarily to a lower mortgage loan origination and sale volume and the mark-to-market

 impact of a declining locked pipeline. For the third quarter of 2021, noninterest expense decreased $29.32 million or 17.09% from the third quarter of 2020 primarily due to a decrease in employee compensation due to lower employee incentives and commissions related to mortgage banking production as well as a lower employee headcount. For the third quarter of 2021, income tax expense was $23.60 million as compared to $28.97 million for the third quarter of 2020 primarily due to lower earnings and a lower effective tax rate. For the quarters ended September 30, 2021 and 2020, United’s effective tax rate was 20.39% and 21.82%, respectively. 
 Net income for the fourth quarter of 2021 was $73.85 million or $0.56 per diluted share as compared to earnings of $92.37 million or $0.71 per diluted share for the fourth quarter of 2020. Net interest income for the fourth quarter of 2021was $183.68 million, which was a decrease of $8.31 million or 4.33% from the fourth quarter of 2020. The $8.31 million decrease in net interest income occurred because total interest income decreased $13.72 million while total interest expense decreased $5.41 million from the fourth quarter of 2020. Tax-equivalent
 net interest income, which adjusts for the tax-favored
 status of income from certain loans and investments, for the fourth quarter of 2021 was $184.71 million, a decrease of $8.32 million or 4.31% from the fourth quarter of 2020. Average earning assets for the fourth quarter of 2021 increased $1.81 billion or 7.84% from the fourth quarter of 2020 due to a $862.00 million or 4.72% increase in average net loans, including loans held for sale, a $1.84 billion or 104.14% increase in average short-term investments and a $833.62 million or 27.07% increase in average investment securities. For the fourth quarter of 2021, the provision for credit losses was a benefit of $7.41 million as compared to an expense of $16.75 million for the fourth quarter of 2020. The decrease in 
 
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 the provision in relation to the prior year quarter was driven by the impact of improvements in the reasonable and supportable forecasts of future macroeconomic conditions on the estimate of expected credit losses under CECL partially offset by a provision for loan losses of $12.29 million recorded on purchased non-credit
 deteriorated (“non-PCD”)
 loans from Community Bankers Trust. Noninterest income for the fourth quarter of 2021 was $54.05 million, which was a decrease of $40.03 million or 42.55% from the fourth quarter of 2020. The lower amount of noninterest income was due mainly to a decline of $43.45 million in income from mortgage banking activities due to a lower volume of mortgage loan originations and sales in the secondary market. Noninterest expense for the fourth quarter of 2021 was $151.79 million, a decrease of $4.33 million or 2.77% from the fourth quarter of 2020. In particular, employee compensation decreased $5.46 million due to lower employee commissions, incentives and overtime related to mortgage banking production partially offset by $2.53 million of merger-related expenses from the Community Bankers Trust acquisition as well as additional employees from the acquisition. OREO expense decreased $2.07 million due to a decrease in net losses on the sale of OREO properties and fewer declines in the fair value of OREO properties. Partially offsetting the decreases in noninterest expense were increases in data processing expense of $3.57 million primarily due to $3.47 million of merger-related expenses associated with the Community Bankers Trust acquisition. Other expense increased $1.70 million driven by an increase in the reserve for unfunded loan commitments of $2.80 million, including $844 thousand related to loan commitments acquired from Community Bankers Trust. 
 Additional quarterly financial data for 2021 and 2020 may be found in Note Z, Notes to Consolidated Financial Statements. 

 The Effect of Inflation 

 United’s income statements generally reflect the effects of inflation. Since interest rates, loan demand and deposit levels are impacted by inflation, the resulting changes in the interest-sensitive assets and liabilities are included in net interest income. Similarly, operating expenses such as salaries, rents and maintenance include changing prices resulting from inflation. One item that would not reflect inflationary changes is depreciation expense. Subsequent to the acquisition of depreciable assets, inflation causes price levels to rise; therefore, historically presented dollar values do not reflect this inflationary condition. While recent economic conditions in the United States have seen improving trends since the onset of the COVID-19
 pandemic, there can be no assurance that this improvement will continue. Economic and inflationary pressure on consumers and uncertainty regarding continuing economic improvement could result in changes in consumer and business spending, borrowing and savings habits. Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations. Management will monitor the impact of inflation as conditions warrant. 
 The Effect of Regulatory Policies and Economic Conditions 

 United’s business and earnings are affected by the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities. The Federal Reserve Board regulates the supply of money in order to influence general economic conditions. Among the instruments of monetary policy available to the Federal Reserve Board are (i) conducting open market operations in United States government obligations, (ii) changing the discount rate on financial institution borrowings, (iii) imposing or changing reserve requirements against financial institution deposits, and (iv) restricting certain borrowings and imposing or changing reserve requirements against certain borrowings by financial institutions and their affiliates. These methods are used in varying degrees and combinations to affect directly the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. 

 United’s business and earnings are also affected by general and local economic conditions. Certain credit markets can experience difficult conditions and volatility. Downturns in the credit market can cause a decline in the value of certain loans and securities, a reduction in liquidity and a tightening of credit. A downturn in the credit market often signals a weakening economy that can cause job losses and thus distress on borrowers and their ability to repay loans. Uncertainties in credit markets and the economy present significant challenges for the financial services industry. 

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 Regulatory policies and economic conditions have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future; however, United cannot accurately predict the nature, timing or extent of any effect such policies or economic conditions may have on its future business and earnings. 

 Liquidity and Capital Resources 

 In the opinion of management, United maintains liquidity that is sufficient to satisfy its depositors’ requirements and the credit needs of its customers. Like all banks, United depends upon its ability to renew maturing deposits and other liabilities on a daily basis and to acquire new funds in a variety of markets. A significant source of funds available to United is “core deposits”. Core deposits include certain demand deposits, statement and special savings and NOW accounts. These deposits are relatively stable, and they are the lowest cost source of funds available to United. Short-term borrowings have also been a significant source of funds. These include federal funds purchased and securities sold under agreements to repurchase as well as advances from the FHLB. Repurchase agreements represent funds which are obtained as the result of a competitive bidding process. 

 Liquid assets are cash and those items readily convertible to cash. All banks must maintain sufficient balances of cash and near-cash items to meet the day-to-day

 demands of customers and United’s cash needs. Other than cash and due from banks, the available for sale securities portfolio and maturing loans are the primary sources of liquidity. 
 The goal of liquidity management is to ensure the ability to access funding which enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United’s cash needs. Liquidity is managed by monitoring funds’ availability from a number of primary sources. Substantial funding is available from cash and cash equivalents, unused short-term borrowing and a geographically dispersed network of branches providing access to a diversified and substantial retail deposit market. 

 Short-term needs can be met through a wide array of outside sources such as correspondent and downstream correspondent federal funds and utilization of Federal Home Loan Bank advances. 

 Other sources of liquidity available to United to provide long-term as well as short-term funding alternatives, in addition to FHLB advances, are long-term certificates of deposit, lines of credit, borrowings that are secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities. In the normal course of business, United through its Asset Liability Committee evaluates these as well as other alternative funding strategies that may be utilized to meet short-term and long-term funding needs. See Notes L and M, Notes to Consolidated Financial Statements. 

 Cash flows provided by operations in 2021 were $609.54 million due mainly to net income of $367.74 million for the year of 2021. In 2020, cash flows provided by operations were $140.45 million due mainly to net income of $289.02 million for the year of 2020. In 2021, net cash of $15.65 million was provided by investing activities which was primarily due to net loan repayments of $882.15 million and net cash of $39.42 million acquired in the Community Bankers Trust merger partially offset by $813.94 million of purchases of investment securities over proceeds from sales of investment securities and the purchase of $85.00 million of bank-owned life insurance policies. In 2020, net cash of $137.59 million was provided by investing activities which was primarily due to net cash of $629.11 million provided in the acquisition of Carolina Financial and $123.00 million of proceeds from sales of investment securities over purchases. Partially offsetting these cash inflows from investing activities was loan growth of $619.98 million, mainly from the PPP loans. During the year of 2021, net cash of $923.91 million was provided by financing activities due primarily to net growth of $1.25 billion in deposits. This source of cash from funding activities was partially offset by net repayment of $40.21 million in short-term borrowings, net repayment of $97.79 million in long-term FHLB advances and cash dividends paid of $181.28 million for year of 2021. During the year of 2020, net cash of $1.09 billion was provided by financing activities due primarily to net growth of $2.86 billion in deposits. This source of cash from funding activities was partially offset by net repayment of $232.35 million in short-term borrowings, net repayment of $1.35 billion in long-term FHLB advances and cash dividends paid of $162.71 million for year of 2020. The net effect of the cash flow activities was an increase in cash and cash equivalents of $1.55 billion for the year of 2021 as compared to an increase in cash and cash equivalents of $1.37 billion for the year of 2020. See the Consolidated Statement of Cash Flows in the Consolidated Financial Statements. 

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 United enters into derivative contracts, mainly to protect against adverse interest rate movements on the value of certain assets or liabilities, under which it is required to either pay cash to or receive cash from counterparties depending on changes in interest rates. Derivative contracts are carried at fair value and not notional value on the consolidated balance sheet and therefore do not represent the amounts that may ultimately be paid under these contracts. Further discussion of derivative instruments is included in Note S, Notes to Consolidated Financial Statements. 

 United is also a party to financial instruments with off-balance-sheet
 risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. 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. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. 
 The following table details the amounts of significant commitments and letters of credit as of December 31, 2021: 

 (In thousands)

 Amount

 Commitments to extend credit:

 Revolving open-end
 secured by 1-4
 residential
 
 $ 
 827,034 
 
 Credit card and personal revolving lines

 167,799 
 
 Commercial

 6,424,509 
 
 Total unused commitments

 $ 
 7,419,342 
 
 Financial standby letters of credit

 $ 
 68,379 
 
 Performance standby letters of credit

 96,364 
 
 Commercial letters of credit

 14,774 
 
 Total letters of credit

 $ 
 179,517 
 
 Commitments generally have fixed expiration dates or other termination clauses, generally within one year, and may require the payment of a fee. Further discussion of commitments is included in Note R, Notes to Consolidated Financial Statements. 

 United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures. There are no known trends, demands, commitments, or events that will result in or that are reasonably likely to result in United’s liquidity increasing or decreasing in any material way. United also has lines of credit available. See Notes L and M to the accompanying unaudited Notes to Consolidated Financial Statements for more details regarding the amounts available to United under lines of credit. 

 The Asset Liability Committee monitors liquidity to ascertain that a liquidity position within certain prescribed parameters is maintained. No changes are anticipated in the policies of United’s Asset Liability Committee. 

 United’s capital position is financially sound. United seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings. United has historically generated attractive returns on shareholders’ equity. United is well-capitalized based upon regulatory guidelines. United’s risk-based capital ratio is 15.43% at December 31, 2021 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.39%, 13.39% and 10.95%, respectively. The December 31, 2021 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19
 pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%. 
 Total shareholders’ equity was $4.72 billion at December 31, 2021, increasing $421.01 million or 9.80% from year-end
 2020 as a result mainly of the Community Bankers Trust acquisition and earnings net of dividends. Common stock increased $18.88 million or 5.64% due to 7,135,771 shares issued in the Community Bankers Trust acquisition. Surplus increased $255.48 million or 8.83% mainly due to the Community Bankers Trust acquisition. Retained earnings increased $185.38 million or 15.38% due to earnings net of dividends for the year. Accumulated other comprehensive income 
 
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 decreased $27.26 million due mainly to an after-tax
 decrease in the fair value of available for sale securities. Treasury stock increased $11.48 million or 7.21% due to the repurchase of 306,204 shares of United common stock under a stock repurchase plan approved by United’s Board of directors in November of 2019. 
 United’s equity to assets ratio was 16.09% at December 31, 2021 as compared to 16.41% at December 31, 2020. The primary capital ratio, capital and reserves to total assets and reserves, was 16.79% at December 31, 2021 as compared to 17.22% at December 31, 2020. United’s average equity to average asset ratio was 16.26% at December 31, 2021 as compared to 16.39% at December 31, 2020. All of these financial measurements reflect a financially sound position. 

 During the fourth quarter of 2021, United’s Board of Directors declared a cash dividend of $0.36 per share. Dividends per share of $1.41 for the year of 2021 represented an increase over the $1.40 per share paid for 2020. Total cash dividends declared to common shareholders were $182.36 million for the year of 2021 as compared to $171.88 million for the year of 2020. The year 2021 was the forty-eighth consecutive year of dividend increases to United shareholders.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
UNITED BANKSHARES INC/WV 10-K

Item 7. Management’s Discussion and Analysis
