UNITED BANKSHARES INC/WV 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of United Bankshares, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of United Bankshares, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2022 expressed an unqualified opinion thereon. Adoption of New Accounting Standard As discussed in Notes A and F to the consolidated financial statements, the Company changed its method of accounting for credit losses as of January 1, 2020. As explained below, auditing the company’s allowance for credit losses was a critical audit matter. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. 70 Table of Contents Allowance for Loan Losses Description of the Matter The Company’s loan portfolio totaled $18 billion as of December 31, 2021, and the associated allowance for loan losses (ALL) for the loan portfolio was $216 million. As discussed above and in Notes A and F to the consolidated financial statements, the ALL is an estimate of the expected credit losses on loans at amortized cost to present the net amount expected to be collected as of the balance sheet date. The ALL is based on the credit losses expected to arise over the life of the asset. Management pools its loans based on similar risk characteristics and assigns an appropriate calculation method to estimate the expected credit losses. For loans that do not share risk characteristics, management evaluates the ALL on an individual basis based on the present value of expected future cash flows using the loan’s effective interest rate, or as a practical expedient, the fair value of the collateral if the loan is collateral-dependent. For loans not specifically reviewed on an individual basis, management measures the ALL using a probability of default/loss given default method or cohort method based on portfolio segment. Management also records qualitative adjustments to expected credit losses for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term as well as reasonable and supportable forecast adjustments for changes in macroeconomic and environmental conditions, such as changes in unemployment rates, gross domestic product or other relevant factors, that have not been fully captured in the allowance calculation. Auditing management’s estimate used in determining the ALL for the loan portfolio involved a high degree of subjectivity in evaluating management’s determination of the forecast selection used to derive the reasonable and supportable forecast qualitative adjustment. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s ALL process for the loan portfolio. Controls tested included, among others, those over the risk rating process, the identification of indicators of impairment, management’s review and approval of the calculations used to determine the ALL, including the underlying data and data inputs and outputs of those calculations, and management’s evaluation and review of the qualitative adjustments, including the reasonable and supportable forecast qualitative adjustment. To test the Company’s reasonable and supportable forecast qualitative adjustment for the loan portfolio, we tested the underlying data used in the estimate calculation to determine it was accurate, complete and relevant. Further, we evaluated management’s basis for the adjustment in relation to changes in economic conditions and forecasts. Our procedures included evaluating management’s inputs and assumptions used in determining the qualitative adjustment by comparing the information to internal and external source data including, among others, the economic forecasts utilized by the Company and third-party economic outlook reports. We involved our internal modeling specialists in evaluating the model methodology, performance and governance. In addition, we evaluated the overall ALL amount, inclusive of the qualitative adjustments, and whether the amount appropriately reflects losses expected in the loan portfolios as of the consolidated balance sheet date. For example, we evaluated the Company’s analysis of their historical loss experience and peer losses to the Company’s recorded ALL to test the ALL in totality. We also reviewed subsequent events and transactions and considered whether they corroborate or contradict the Company’s conclusion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1986. Charleston, West Virginia March 1, 2022 71 Table of Contents CONSOLIDATED BALANCE SHEETS UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except par value) December 31 December 31 2021 2020 Assets Cash and due from banks $ 282,878 $ 297,369 Interest-bearing deposits with other banks 3,474,365 1,910,876 Federal funds sold 927 823 Total cash and cash equivalents 3,758,170 2,209,068 Securities available for sale at estimated fair value (amortized cost-$ 4,031,494 at December 31, 2021 and $ 2,868,346 at December 31, 2020, allowance for credit losses of $ 0 at December 31, 2021 and December 31, 2020) 4,042,699 2,953,359 Securities held to maturity, net of allowance for credit losses of $ 19 at December 31, 2021 and $ 23 at December 31, 2020 (estimated fair value-$ 1,020 at December 31, 2021 and $ 1,212 at December 31, 2020) 1,001 1,212 Equity securities at estimated fair value 12,404 10,718 Other investment securities 239,645 220,895 Loans held for sale (measured using fair value option-$ 504,416 at December 31, 2021 and $ 698,341 at December 31, 2020) 504,416 718,937 Loans and leases 18,051,307 17,622,583 Less: Unearned income ( 27,659 ) ( 31,170 ) Loans and leases, net of unearned income 18,023,648 17,591,413 Less: Allowance for loan and lease losses ( 216,016 ) ( 235,830 ) Net loans and leases 17,807,632 17,355,583 Bank premises and equipment 197,220 175,824 Operating lease right-of-use assets 81,942 69,520 Goodwill 1,886,494 1,796,848 Mortgage servicing rights, net of valuation allowance of $ 883 and $ 1,383 at December 31, 2021 and 2020, respectively 23,144 20,955 Accrued interest receivable, net of allowance for credit losses of $ 8 and $ 250 at December 31, 2021 and 2020, respectively 64,512 66,832 Other assets 709,623 584,496 TOTAL ASSETS $ 29,328,902 $ 26,184,247 Liabilities Deposits: Noninterest-bearing $ 8,980,547 $ 7,405,260 Interest-bearing 14,369,716 13,179,900 Total deposits 23,350,263 20,585,160 Borrowings: Securities sold under agreements to repurchase 128,844 142,300 Federal Home Loan Bank (“FHLB”) borrowings 532,199 584,532 Other long-term borrowings 285,195 279,837 Reserve for lending-related commitments 31,442 19,250 Operating lease liabilities 86,703 73,213 Accrued expenses and other liabilities 195,628 202,335 TOTAL LIABILITIES 24,610,274 21,886,627 Shareholders’ Equity Preferred stock, $ 1.00 par value; Authorized- 50,000,000 shares, none issued 0 0 Common stock, $ 2.50 par value; Authorized- 200,000,000 shares; issued- 141,360,266 and 133,809,374 at December 31, 2021 and December 31, 2020, respectively, including 4,967,508 and 4,620,867 shares in treasury at December 31, 2021 and December 31, 2020, respectively 353,402 334,523 Surplus 3,149,955 2,894,471 Retained earnings 1,390,777 1,205,395 Accumulated other comprehensive (loss) gain ( 4,888 ) 22,370 Treasury stock, at cost ( 170,618 ) ( 159,139 ) TOTAL SHAREHOLDERS’ EQUITY 4,718,628 4,297,620 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 29,328,902 $ 26,184,247 See notes to consolidated financial statements 7 2 Table of Contents CONSOLIDATED STATEMENTS OF INCOME UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share data) Year Ended December 31 2021 2020 2019 Interest income Interest and fees on loans and leases $ 724,493 $ 721,829 $ 666,950 Interest on federal funds sold and other short-term investments 8,734 9,780 21,338 Interest and dividends on securities: Taxable 54,678 61,808 70,789 Tax-exempt 7,212 4,965 3,485 Total interest income 795,117 798,382 762,562 Interest expense Interest on deposits 41,620 78,579 135,649 Interest on short-term borrowings 693 1,027 2,347 Interest on long-term borrowings 10,070 29,003 46,644 Total 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 Net interest income after provision for credit losses 766,704 583,211 556,609 Other income Fees from trust services 16,552 13,903 13,873 Fees from brokerage services 15,559 11,758 10,136 Fees from deposit services 38,689 34,833 33,768 Bankcard fees and merchant discounts 5,485 4,066 4,674 Other service charges, commissions, and fees 2,990 2,596 2,241 Income from bank-owned life insurance 6,840 7,217 7,339 Income from mortgage banking activities 171,692 266,094 76,951 Mortgage loan servicing income 9,605 6,213 0 Net gain on the sale of bank premises 0 2,229 0 Net investment securities gains 2,676 3,155 175 Other income 8,004 2,682 1,327 Total other income 278,092 354,746 150,484 Other expense Employee compensation 279,970 274,661 173,962 Employee benefits 53,871 48,870 35,745 Net occupancy expense 42,034 41,303 34,850 Other real estate owned (“OREO”) expense 5,388 5,748 5,336 Equipment expense 25,979 20,861 14,210 Data processing expense 31,446 35,420 22,232 Mortgage loan servicing expense and impairment 12,246 9,431 423 Bankcard processing expense 1,706 1,735 1,877 FDIC insurance expense 8,346 10,132 8,070 FHLB prepayment penalties 15 10,385 5,105 Other expense 120,942 119,671 80,844 Total 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 7 3 Table of Contents CONSOLIDATED STATEMENTS OF INCOME UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share data) Year Ended December 31 2021 2020 2019 Earnings per common share: Basic $ 2.84 $ 2.40 $ 2.55 Diluted $ 2.83 $ 2.40 $ 2.55 Dividends per common share $ 1.41 $ 1.40 $ 1.37 Average outstanding shares: Basic 129,276,452 120,017,247 101,585,599 Diluted 129,512,853 120,090,232 101,852,577 See notes to consolidated financial statements 7 4 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands) Year Ended December 31 2021 2020 2019 Net income $ 367,738 $ 289,023 $ 260,099 Change in net unrealized (loss) gain on available-for-sale (“AFS”) securities, net of tax ( 56,611 ) 57,249 26,245 Change in net unrealized gain on cash flow hedge, net of tax 13,001 3,358 0 Change in defined benefit pension plan, net of tax 16,352 ( 3,368 ) ( 4,145 ) Comprehensive income, net of tax $ 340,480 $ 346,262 $ 282,199 See notes to consolidated financial statements 7 5 Table of Contents CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share data) Accumulated Common Stock Other Total Par Retained Comprehensive Treasury Shareholders’ Shares Value Surplus Earnings (Loss) Income Stock Equity Balance at January 1, 2019 105,239,121 $ 263,098 $ 2,134,462 $ 1,013,037 $ ( 57,019 ) $ ( 101,954 ) $ 3,251,624 Cumulative effect of adopting Accounting Standard Update 2016-02 0 0 0 ( 1,049 ) 0 0 ( 1,049 ) Reclass due to adopting Accounting Standard Update 2017-12 0 0 0 0 50 0 50 Comprehensive income: Net income 0 0 0 260,099 0 0 260,099 Other comprehensive income, net of tax 0 0 0 0 22,100 0 22,100 Total comprehensive income, net of tax 282,199 Stock based compensation expense 0 0 4,914 0 0 0 4,914 Purchase of treasury stock ( 1,020,864 shares) 0 0 0 0 0 ( 35,673 ) ( 35,673 ) Distribution of treasury stock for deferred compensation plan ( 27 shares) 0 0 0 0 0 1 1 Cash dividends ($ 1.37 per share) 0 0 0 ( 139,508 ) 0 0 ( 139,508 ) Grant of restricted stock ( 126,427 shares) 126,427 316 ( 316 ) 0 0 0 0 Forfeiture of restricted stock ( 4,149 shares) 0 0 162 0 0 ( 162 ) 0 Common stock options exercised ( 128,742 shares) 128,742 322 953 0 0 0 1,275 Balance at December 31, 2019 105,494,290 263,736 2,140,175 1,132,579 ( 34,869 ) ( 137,788 ) 3,363,833 Cumulative effect of adopting Accounting Standard Update 2016-13 0 0 0 ( 44,331 ) 0 0 ( 44,331 ) Comprehensive income: Net income 0 0 0 289,023 0 0 289,023 Other comprehensive income, net of tax 0 0 0 0 57,239 0 57,239 Total comprehensive income, net of tax 346,262 Stock based compensation expense 0 0 5,980 0 0 0 5,980 Acquisition of Carolina Financial Corporation ( 28,031,501 shares) 28,031,501 70,079 747,751 0 0 0 817,830 Purchase of treasury stock ( 679,331 shares) 0 0 0 0 0 ( 21,317 ) ( 21,317 ) Distribution of treasury stock for deferred compensation plan ( 29 shares) 0 0 0 0 0 1 1 Cash dividends ($ 1.40 per share) 0 0 0 ( 171,876 ) 0 0 ( 171,876 ) Grant of restricted stock ( 182,847 shares) 182,847 457 ( 457 ) 0 0 0 0 Forfeiture of restricted stock ( 946 shares) 0 0 35 0 0 ( 35 ) 0 Common stock options exercised ( 100,736 shares) 100,736 251 987 0 0 0 1,238 Balance at December 31, 2020 133,809,374 334,523 2,894,471 1,205,395 22,370 ( 159,139 ) 4,297,620 Comprehensive income: Net income 0 0 0 367,738 0 0 367,738 Other comprehensive loss, net of tax 0 0 0 0 ( 27,258 ) 0 ( 27,258 ) Total comprehensive income, net of tax 340,480 Stock based compensation expense 0 0 8,018 0 0 0 8,018 Acquisition of Community Bankers Trust Corporation ( 7,135,771 shares) 7,135,771 17,839 242,440 0 0 0 260,279 Purchase of treasury stock ( 339,241 shares) 0 0 0 0 0 ( 11,211 ) ( 11,211 ) Cash dividends ($ 1.41 per share) 0 0 0 ( 182,356 ) 0 0 ( 182,356 ) Grant of restricted stock ( 182,344 shares) 182,344 456 ( 456 ) 0 0 0 0 Forfeiture of restricted stock ( 7,400 shares) 0 0 268 0 0 ( 268 ) 0 Common stock options exercised ( 232,777 shares) 232,777 584 5,214 0 0 0 5,798 Balance at December 31, 2021 141,360,266 $ 353,402 $ 3,149,955 $ 1,390,777 $ ( 4,888 ) $ ( 170,618 ) $ 4,718,628 See notes to consolidated financial statements 7 6 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands) Year Ended December 31 2021 2020 2019 OPERATING ACTIVITIES Net income $ 367,738 $ 289,023 $ 260,099 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses ( 23,970 ) 106,562 21,313 Amortization and accretion ( 8,672 ) ( 29,900 ) ( 29,771 ) Loss on sales of bank premises, OREO, leases and equipment 460 1,214 294 Write-downs on bank premises, OREO, leases and equipment 5,100 3,803 3,618 Depreciation 16,583 13,464 9.329 (Gain) loss on securities ( 2,676 ) ( 3,155 ) ( 175 ) Loans originated for sale ( 6,190,675 ) ( 6,528,080 ) ( 2,574,434 ) Proceeds from sales of loans 6,566,304 6,521,198 2,513,717 Gain on sales of loans ( 161,108 ) ( 258,784 ) ( 76,951 ) Mortgage repurchase loan losses paid, net of recoveries ( 1,188 ) ( 888 ) 0 Stock-based compensation 8,018 5,980 4,914 Excess tax benefits from stock-based compensation arrangements 303 351 223 Deferred income tax expense (benefit) 3,015 ( 174 ) 14,205 Amortization of tax credit investments 12,718 9,950 4,271 Originations of mortgage servicing rights ( 10,584 ) ( 7,310 ) 0 Impairment of mortgage servicing rights 629 1,383 0 Increase in cash surrender value of bank-owned life insurance policies ( 6,836 ) ( 5,959 ) ( 1,458 ) Contribution to pension plan 0 ( 20,000 ) 0 Amortization of net periodic pension costs 2,073 3,004 3,635 Changes in: Interest receivable 2,562 1,106 2,512 Other assets 42,704 46,267 ( 23,449 ) Accrued expenses and other liabilities ( 12,959 ) ( 8,608 ) 20,073 NET CASH PROVIDED BY OPERATING ACTIVITIES 609,539 140,447 151,965 INVESTING ACTIVITIES Proceeds from maturities and calls of held to maturity securities 215 211 7,000 Proceeds from sales of securities available for sale 52,820 192,085 374,764 Proceeds from maturities and calls of securities available for sale 679,082 515,983 337,793 Purchases of securities available for sale ( 1,522,076 ) ( 596,923 ) ( 771,290 ) Proceeds from sales of equity securities 1,250 1,650 2,011 Purchases of equity securities ( 2,266 ) ( 1,379 ) ( 895 ) Proceeds from sales and redemptions of other investment securities 11,790 148,766 80,270 Purchases of other investment securities ( 34,755 ) ( 137,395 ) ( 129,747 ) Purchases of bank-owned life insurance policies ( 85,000 ) 0 0 Redemption of bank-owned life insurance policies 1,114 5,729 2,829 Purchases of bank premises and equipment ( 15,380 ) ( 19,025 ) ( 11,083 ) Proceeds from sales of bank premises and equipment 1,618 4,354 251 Acquisition of subsidiaries, net of cash paid 39,420 629,107 0 Proceeds from sales of OREO properties 5,675 14,398 10,026 Net change in loans and leases 882,147 ( 619,976 ) ( 285,248 ) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 15,654 137,585 ( 383,319 ) FINANCING ACTIVITIES Cash dividends paid ( 181,277 ) ( 162,713 ) ( 138,939 ) Acquisition of treasury stock ( 11,211 ) ( 21,317 ) ( 35,673 ) Proceeds from exercise of stock options 5,206 1,241 1,272 Distribution of treasury stock for deferred compensation plan 0 1 1 Repayment of long-term Federal Home Loan Bank borrowings ( 597,791 ) ( 1,847,000 ) ( 1,135,000 ) Proceeds from issuance of long-term Federal Home Loan Bank borrowings 500,000 500,000 1,475,000 Changes in: Time deposits ( 275,900 ) 584,175 28,408 Other deposits 1,525,093 2,271,510 ( 169,945 ) Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings ( 40,211 ) ( 232,354 ) 23,327 NET CASH PROVIDED BY FINANCING ACTIVITIES 923,909 1,093,543 48,451 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,549,102 1,371,575 ( 182,903 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,209,068 837,493 1,020,396 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,758,170 $ 2,209,068 $ 837,493 7 7 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS UNITED BANKSHARES, INC. AND SUBSIDIARIES (Dollars in thousands) Year Ended December 31 2021 2020 2019 Supplemental information Cash paid for: Interest on deposits and borrowed funds $ 54,591 $ 115,347 $ 182,549 Income taxes 101,227 65,378 56,459 Noncash investing activities: Transfers of loans to OREO 2,769 28,038 13,185 Transfers of held to maturity debt securities to available for sale debt securities 0 0 11,544 Acquisition of subsidiaries: Assets acquired, net of cash 1,763,843 4,172,611 0 Liabilities assumed 1,619,438 4,302,722 0 Goodwill 76,454 318,834 0 See notes to consolidated financial statements 7 8 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNITED BANKSHARES, INC. AND SUBSIDIARIES December 31, 2021 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations: United Bankshares, Inc. (“United”, the “Company”) is a financial holding company headquartered in Charleston, West Virginia. United considers all of West Virginia to be included in its market area. This area includes the five largest West Virginia Metropolitan Statistical Areas (“MSA”): the Parkersburg MSA, the Charleston MSA, the Huntington MSA, the Morgantown MSA and the Wheeling MSA. United serves the Ohio counties of Lawrence, Belmont, Jefferson and Washington and Fayette county in Pennsylvania primarily because of their close proximity to the Ohio and Pennsylvania borders and United banking offices located in those counties or in nearby West Virginia. United’s Virginia markets include the Maryland, northern Virginia and Washington, D.C. MSA, the Winchester MSA, the Harrisonburg MSA, and the Charlottesville MSA. Through its acquisition of Carolina Financial, United’s market also includes the Coastal, Midlands, and Upstate regions of South Carolina, including the Charleston (Charleston, Dorchester and Berkeley Counties), Myrtle Beach (Horry and Georgetown Counties), Columbia (Richland and Lexington Counties), and the Upstate (Greenville and Spartanburg Counties) areas as well as areas in North Carolina including Wilmington (New Hanover County), Raleigh-Durham (Durham and Wake Counties), Charlotte-Concord-Gastonia (NC and SC) and the southeastern coastal region of North Carolina (Bladen, Brunswick, Columbus, Cumberland, Duplin and Robeson Counties). Through its acquisition of Community Bankers Trust, United added new markets in Baltimore and Annapolis, Maryland and Lynchburg and Richmond, Virginia as well as the Northern Neck of Virginia. United considers all of the above locations to be the primary market areas for the business of its banking and mortgage banking subsidiaries. Operating Segments: United operates in two business segments: community banking and mortgage banking. Through its community banking segment, United offers a full range of banking products and services through various delivery channels. Included among the banking products and services offered are the acceptance of deposits in checking, savings, time and money market accounts; the making and servicing of personal, credit card, commercial, and floor plan loans; and the making of construction and real estate loans. Also offered are trust and brokerage services, safe deposit boxes, and wire transfers. The mortgage banking segment engages primarily in the origination and acquisition of residential mortgages for sale into the secondary market though George Mason Mortgage, LLC (“George Mason”) and Crescent Mortgage Company (“Crescent”), indirectly owned subsidiaries of United. In addition, United through its mortgage banking subsidiary, Crescent, may retain the rights to service a portion of the loans sold in the third-party market, as part of its mortgage banking activities, for which United receives service fee income. In addition, at certain times United may purchase rights to service from third parties. These rights are known as mortgage servicing rights, or MSRs, where the owner of the MSR acts on behalf of the mortgage loan owner and has the contractual right to receive a stream of cash flows in exchange for performing specified mortgage servicing functions. Basis of Presentation: The consolidated financial statements and the notes to consolidated financial statements include the accounts of United and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. United determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”) under U.S. generally accepted accounting principles. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. United consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. As defined in applicable accounting standards, VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. United’s wholly owned and indirect wholly owned statutory trust subsidiaries are VIEs for which United is not the primary beneficiary. Accordingly, its accounts are not included in United’s consolidated financial statements. 79 Table of Contents 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 and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. To conform to the 2021 presentation, certain reclassifications have been made to prior period amounts, which had no impact on net income, comprehensive income or shareholders’ equity. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations have been made. Such adjustments are of a normal and recurring nature. The Company has evaluated events and transactions subsequent to December 31, 2021 through the date these financial statements were issued. Based on definitions and requirements of generally accepted accounting principles for “Subsequent Events,” the Company has not identified any events that would require adjustments to, or disclosure in the financial statements. Cash and Cash Equivalents: United considers cash and due from banks, interest-bearing deposits with other banks and federal funds sold as cash and cash equivalents. Debt securities : The Company accounts for debt securities in two categories: held-to-maturity (“HTM”) and available-for-sale (“AFS”). Premiums and discounts on debt securities are deferred and recognized into income over the contractual life of the asset using the effective interest method. HTM securities are accounted for at amortized cost, but the Company must have both the positive intent and the ability to hold those securities to maturity. There are very limited circumstances under which securities in the HTM category can be sold without jeopardizing the cost basis of accounting for the remainder of the securities in this category. Substantially all of the Company’s HTM debt securities are issued by state and political subdivisions (municipalities). As of December 31, 2021, United considers its HTM debt securities portfolio to be immaterial. AFS securities are accounted for at fair value. Gains and losses realized on the sale of these securities are accounted for based on the specific identification method. Unrealized gains and losses for AFS securities are excluded from earnings and reported net of the related tax effect in the accumulated other comprehensive income component of shareholders’ equity. Allowance for Credit Losses (HTM Debt Securities) : For held-to-maturity debt securities, the Company is required to utilize a current expected credit losses (“CECL”) methodology to estimate expected credit losses. As of December 31, 2021 and 2020, the Company recorded an allowance for credit losses of $ 19 ,000 and $ 23 ,000, respectively, on its HTM debt securities portfolio. Allowance for Credit Losses (AFS Debt Securities) : The impairment model for available-for-sale (“AFS”) debt securities differs from the CECL methodology applied for HTM debt securities because AFS debt securities are measured at fair value rather than amortized cost. Although ASC Topic 326, “Financial Instruments – Credit Losses” replaced the legacy other-than-temporary impairment (“OTTI”) model with a credit loss model, it retained the fundamental nature of the legacy OTTI model. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities where neither of the criteria are met, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited to the amount that the fair value is less than the amortized cost basis. Any remaining discount that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. An entity may no longer consider the length of time fair value has been less than amortized cost. Changes in the allowance for credit losses are recorded as a provision (or release) for credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. As of December 31, 2021, the Company determined that the unrealized loss positions in AFS securities were no t the result of credit losses, and therefore, an allowance for credit losses was not recorded. 8 0 Table of Contents Equity securities: Investments in equity securities with readily determinable fair values (marketable) are measured at fair value, with changes in the fair value recognized in Net investment securities gains in the Consolidated Statements of Income. Other investment securities: Certain security investments such as Federal Reserve Bank stock and Federal Home Loan Bank stock that do not have readily determinable fair values (non-marketable) are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer, also referred to as the measurement alternative. Any adjustments to the carrying value of these investments are recorded in Other income in the Consolidated Statements of Income. Securities Purchased Under Resale Agreements and Securities Sold Under Agreements to Repurchase: Securities purchased under agreements to resell and securities sold under agreements to repurchase are accounted for as collateralized financing transactions. They are recorded at the amounts at which the securities were acquired or sold plus accrued interest. Securities, generally U.S. government and federal agency securities, pledged as collateral under these financing arrangements cannot be repledged or sold, unless replaced, by the secured party. The fair value of the collateral either received from or provided to a third party is continually monitored and additional collateral is obtained or is requested to be returned to United as deemed appropriate. Loans : Loans are reported at the principal amount outstanding, net of unearned income, except loans acquired through transfer (see below). Interest on loans is accrued and credited to operations using methods that produce a level yield on individual principal amounts outstanding. Loan origination and commitment fees and related direct loan origination costs are deferred and amortized as an adjustment of loan yield over the estimated life of the related loan. Loan fees net of costs accreted and included in interest income were $ 92,545,000 , $ 76,064,000 , and $ 39,026,000 , for the years of 2021, 2020 and 2019, respectively. The accrual of interest income on commercial and most consumer loans generally is discontinued when a loan becomes 90 to 120 days past due as to principal or interest. When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and interest accrued in prior years is charged to the allowance for loan losses. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral exceeds the principal balance and accrued interest, and the loan is in the process of collection. A loan is categorized as a troubled debt restructuring (“TDR”) if a concession is granted and there is deterioration in the financial condition of the borrower. A loan classified as a TDR will generally retain such classification until the loan is paid in full. However, a one-to-four-family residential mortgage TDR loan that yields a market rate and demonstrates the ability to pay under the terms of the restructured note through a sustained period of repayment performance, which is generally one year, is removed from the TDR classification. Interest income on TDRs is accrued at the reduced rate and the loan is returned to performing status once the borrower demonstrates the ability to pay under the terms of the restructured note through a sustained period of repayment performance, which is generally six months . TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans and leases with market terms on one loan and concessionary terms on the other loan, receipts of assets from a debtor in partial or full satisfaction of a loan, the extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement, or the reduction of accrued interest or any other concessionary type of renegotiated debt. Under United’s current loan policy, a loan is not recognized as a TDR until it becomes probable that the loan will be a TDR. In response to the coronavirus (“COVID-19”) pandemic and its economic impact on our customers, United implemented a short-term modification program that complied with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allowed for a deferral of payments from the period beginning March 1, 2020 until January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. As provided for under the CARES Act, these loan modifications were exempt by law from classification as a TDR as defined by GAAP. 8 1 Table of Contents Loans Acquired Through Transfer: Acquired loans are recorded at fair value at the date of acquisition based on a discounted cash flow methodology that considers various factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and a discount rate reflecting the Company’s assessment of risk inherent in the cash flow estimates. Certain purchased loans are individually evaluated while certain purchased loans are grouped together according to similar risk characteristics and are treated in the aggregate when applying various valuation techniques. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change. Prior to January 1, 2020, loans acquired in a business combination that had evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that the Company would be unable to collect all contractually required payments receivable were considered purchased credit impaired (“PCI”). PCI loans were individually evaluated and recorded at fair value at the date of acquisition with no initial valuation allowance based on a discounted cash flow methodology that considered various factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and a discount rate reflecting the Company’s assessment of risk inherent in the cash flow estimates. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” was recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” were not recognized on the balance sheet and did not result in any yield adjustments, loss accruals or valuation allowances. Increases in expected cash flows, including prepayments, subsequent to the initial investment were recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows were recognized as impairment. Valuation allowances on PCI loans reflected only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately were not to be received). Subsequent to January 1, 2020, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. All loans and leases considered to be PCI prior to January 1, 2020 were converted to PCD on that date. For loans and leases acquired after the adoption of ASC Topic 326, United will likely take several factors into consideration when determining if loans and leases meet the definition of PCD. ASC Topic 326 lists some, but not all, factors for consideration in the bifurcation of PCD versus non-PCD assets: · Financial assets that are delinquent as of the acquisition date · Financial assets that have been downgraded since origination · Financial assets that have been placed on nonaccrual status For acquired loans not deemed purchased credit deteriorated at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. Loans Held for Sale: Loans held for sale consist of one-to-four family conforming residential real estate loans originated for sale in the secondary market. Loans held for sale within the mortgage banking segment are recorded under the fair value option at a fair value measured using valuations from investors for loans with similar characteristics adjusted for the Company’s actual sales experience versus the investor’s indicated pricing. 8 2 Table of Contents Loans held for sale within the community banking segment are carried at the lower of cost or fair value. The fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale. Gains and losses on sale of loans are recorded within income from mortgage banking activities. Allowance for Loan and Lease Losses: On January 1, 2020, the Company adopted FASB ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), so the allowance calculation is based on the CECL methodology. Prior to January 1, 2020, the calculation was based on the incurred loss methodology. The allowance for loan losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset (contractual term). Assets are charged off when United determines that such financial assets are deemed uncollectible or based on regulatory requirements, whichever is earlier. Charge-offs are recognized as a deduction from the allowance for loan losses. Expected recoveries of amounts previously charged-off, not to exceed the aggregate of the amount previously charged-off, are included in determining the necessary reserve at the balance sheet date. United made a policy election to present the accrued interest receivable balance separately in its consolidated balance sheets from the amortized cost of a loan. United estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term as well as reasonable and supportable forecast adjustments for changes in environmental conditions, such as changes in unemployment rates, property values or other relevant factors. A reversion to historical loss data occurs via a straight-line method during the year following the one-year reasonable and supportable forecast period. United pools its loans and leases based on similar risk characteristics in estimating expected credit losses. United has identified the following portfolio segments and measures the allowance for credit losses using the following methods: · Method: Probability of Default/Loss Given Default (PD/LGD) Ø Commercial Real Estate Owner-Occupied Ø Commercial Real Estate Nonowner-Occupied Ø Commercial Other · Method: Cohort Ø Residential Real Estate Ø Construction & Land Development Ø Consumer Ø Bankcard Risk characteristics of commercial real estate owner-occupied loans and commercial other loans and leases are similar in that they are normally dependent upon the borrower’s internal cash flow from operations to service debt. Commercial real estate nonowner-occupied loans differ in that cash flow to service debt is normally dependent on external income from third parties for use of the real estate such as rents, leases and room rates. Residential real estate loans are dependent upon individual borrowers who are affected by changes in general economic conditions, demand for housing and resulting residential real estate valuation. Construction and land development loans are impacted mainly by demand whether for new residential housing or for retail, industrial, office and other types of commercial construction within a given area. Consumer loan pool risk characteristics are influenced by general, regional and local economic conditions. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral but may also include other non-performing loans or TDRs, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. These individually evaluated loans are removed from their respective pools and typically represent collateral dependent loans. In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a loan expected to be classified as a TDR. 83 Table of Contents Expected credit losses are estimated over the contractual term of the loans and leases, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower, or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by United. For past loans and leases acquired through the completion of a transfer, including loans and leases acquired in a business combination, that had evidence of deterioration of credit quality since origination (“PCI”) and accounted for under ASC Topic 310, an entity did not have to reassess whether any loans and leases previously accounted for as PCI meet the definition of purchased credit deteriorated (“PCD”) loans and leases upon adoption of ASC Topic 326. Any changes in the allowance for credit losses for these loans and leases were accounted for as an adjustment to the loan’s amortized cost basis and not as a cumulative-effect adjustment to an entity’s beginning retained earnings. Non-PCI loans and leases are now classified as non-PCD loans and leases with the adoption of ASC Topic 326. In accordance with ASC Topic 326 guidance, United calculated a PCD rate adjustment for all PCD loans and leases at adoption. Such adjustment created a discount balance for any excess amount not deemed to be credit-related between the PCD recorded balance at the adoption date and the contractual principal and interest balances outstanding. At the acquisition date, an initial allowance for expected credit losses for non-PCD loans is estimated and recorded as credit loss expense. The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans. For allowance for credit losses under ASC Topic 326 calculation purposes, United includes its acquired loans and leases in their relevant pool unless they meet the criteria for specific review. Prior to January 1, 2020, the allowance for loan losses calculation as well as the provision for loan losses was based on the incurred loss methodology. Under the incurred loss model, management estimated the losses on loans and leases when it was “probable” that the Company had already incurred losses based on information available at that time. Once a loss was probable, then the expected value of the estimated loss given default was calculated and incorporated into the allowance. Bank Premises and Equipment: Bank premises and equipment are stated at cost, less allowances for depreciation and amortization. The provision for depreciation is computed principally by the straight-line method over the estimated useful lives of the respective assets. Useful lives range primarily from three to 15 years for furniture, fixtures and equipment and five to 40 years for buildings and improvements. Leasehold improvements are generally amortized over the lesser of the term of the respective leases or the estimated useful lives of the improvements. Other Real Estate Owned : At December 31, 2021 and 2020, other real estate owned (“OREO”) included in other assets in the Consolidated Balance Sheets was $ 14,823 ,000 and $ 22,595 ,000, respectively. OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Any adjustment to the fair value at the date of transfer is charged against the allowance for loan losses. Any subsequent valuation adjustments as well as any costs relating to operating, holding or disposing of the property are recorded in other expense in the period incurred. At December 31, 2021, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $ 13,000 . At December 31, 2020, there was no recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. Intangible Assets: Intangible assets relating to the estimated fair value of the deposit base of the acquired institutions are being amortized on an accelerated basis over a one to ten-year period. Management reviews intangible assets on an annual basis, or sooner if indicators of impairment exist, and evaluates changes in facts and circumstances that may indicate impairment in the carrying value. United incurred amortization expense of $ 5,908,000 , $ 6,605,000 , and $ 7,016,000 , in 2021, 2020, and 2019, respectively, related to all intangible assets. Goodwill is tested for impairment at least annually or sooner if indicators of impairment exist. United may elect to perform a qualitative analysis to determine whether or not it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount. If United elects to bypass this qualitative analysis, or concludes via qualitative analysis that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, United may use either a market or income quantitative approach, whichever is more practical, to determine the fair value of the reporting unit to compare to its 8 4 Table of Contents carrying value. If the estimated fair value of the reporting unit is less than its carrying value, an impairment charge would be recorded for the excess, not to exceed the amount of goodwill allocated to the reporting unit. At each reporting date, the Company considers potential indicators of impairment. United utilized a qualitative approach to test goodwill for impairment as of September 30, 2021. The goodwill impairment test did not identify any indicators of goodwill impairment. As of December 31, 2021, and 2020, total goodwill approximated $ 1,886,494 ,000 and $ 1,796,848 ,000, respectively. Mortgage Servicing Rights, Fees and Costs: The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“MSRs”) at fair value. For subsequent measurement purposes, the Company measures servicing assets and liabilities using the amortization method. MSRs are amortized in proportion to, and over the period of, estimated net servicing income. The amortization of the MSRs is analyzed periodically and is adjusted to reflect changes in prepayment rates and other estimates. The Company evaluates potential impairment of MSRs based on the difference between the carrying amount and current estimated fair value of the servicing rights. In determining impairment, the Company aggregates all servicing rights and stratifies them into tranches based on predominant risk characteristics. If impairment exists, a valuation allowance is established for any excess of amortized cost over the current estimated fair value by a charge to income. If the Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income. Service fee income is recorded for fees earned for servicing mortgage loans under servicing agreements with the Federal national Mortgage Association (“FNMA”), the Federal home loan Mortgage Corporation (“FHLMC”), Government national Mortgage Association (“GNMA”) and certain private investors. The fees are based on a contractual percentage of the outstanding principal balance of the loans serviced and are recorded in noninterest income. Amortization of MSRs and mortgage servicing costs are charged to expense when incurred. Accrued interest receivable : Upon adoption of ASC Topic 326, the Company made the following elections regarding accrued interest receivable (“AIR”): • Presenting accrued interest receivable balances separately from their underlying instruments within the consolidated statements of financial condition. • Excluding accrued interest receivable that is included in the amortized cost of financing receivables from related disclosure requirements. • Continuing our policy to write off accrued interest receivable by reversing interest income in cases where the Company does not reasonably expect to receive payment. • Generally, not measuring an allowance for credit losses for accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. However, due to loan interest payment deferrals on certain loans and leases granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans and leases. As a result of this assessment, United recorded an allowance for credit losses of $ 8 ,000 at December 31,2021 and $ 250 ,000 at December 31, 2020 for accrued interest receivables not expected to be collected. Revenue Recognition : Interest and dividend income, loans fees, fees from trust and brokerage services, deposit services and bankcard fees are recognized and accrued as earned. Descriptions of our revenue-generating activities that are within the scope of ASC Topic 606, which are presented in our Consolidated Statements of Income as components of Other Income are discussed below. There are no significant judgements relating to the amount and timing of revenue recognition for those revenue streams under the scope of ASC Topic 606. Fees from Trust Services Revenue from trust services primarily is comprised of fees earned from the management and administration of trusts and other customer assets. Trust services include custody of assets, investment management, escrow services, and similar fiduciary activities. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. 8 5 Table of Contents Fees from Brokerage Services Revenue from brokerage services are recorded as the income is earned at the time the related service is performed. In return for such services, the Company charges a commission for the sales of various securities products primarily consisting of investment company shares, annuity products, and corporate debt and equity securities, for its selling and administrative efforts. For account supervision, advisory and administrative services, revenue is recognized over a period of time as earned based on customer account balances and activity. Fees from Deposit Services Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, ATM activity fees, debit card fees, and other deposit account related fees. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (ATM or debit card activity). Bankcard Fees and Merchant Discounts Bankcard fees and merchant discounts are primarily comprised of credit card income and merchant services income. Credit card income is primarily comprised of interchange fees earned whenever the Company’s credit cards are processed through card payment networks such as Visa. Merchant services income mainly represents fees charged to merchants to process their credit card transactions. The Company’s performance obligation for bankcard fees and interchange are largely satisfied, and related revenue recognized at the time services are rendered. Payment is typically received immediately or in the following month. Advertising Costs: Advertising costs are generally expensed as incurred and included in Other Expense on the Consolidated Statements of Income. Advertising expense was $ 5,781,000 , $ 5,611,000 , and $ 5,082,000 , for the years of 2021, 2020, and 2019, respectively. Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to business combinations or components of other comprehensive income). Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized. Interest and/or penalties related to income taxes are reported as a component of income tax expense. For uncertain income tax positions, United records a liability based on a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken on a tax return, in order for those tax positions to be recognized in the financial statements. United files a consolidated income tax return with its subsidiaries. Federal income tax expense or benefit has been allocated to subsidiaries on a separate return basis. Derivative Financial Instruments: United accounts for its derivative financial instruments in accordance with ASC Topic 815 which requires all derivative instruments to be carried at fair value on the balance sheet. United has designated certain derivative instruments used to manage interest rate risk as hedge relationships with certain assets, liabilities or cash flows being hedged. Certain derivatives used for interest rate risk management are not designated in a hedge relationship. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For a fair value hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge are offset in current period earnings. For a cash 8 6 Table of Contents flow hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to accumulated other comprehensive income within shareholders’ equity, net of tax. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a cash flow hedge are offset to accumulated other comprehensive income, net of tax and reclassified into earnings in the same line associated with the forecasted transaction when the forecasted transaction affects earnings. Prior to 2019, any ineffective portion of a cash flow hedge was recognized immediately in earnings At inception of a hedge relationship, United formally documents the hedged item, the particular risk management objective, the nature of the risk being hedged, the derivative being used, how effectiveness of the hedge will be assessed and how the ineffectiveness of the hedge will be measured. United also assesses hedge effectiveness at inception and on an ongoing basis using regression analysis. Hedge ineffectiveness is measured by using the change in fair value method. The change in fair value method compares the change in the fair value of the hedging derivative to the change in the fair value of the hedged exposure, attributable to changes in the benchmark rate. United is subject to the Dodd-Frank Act clearing requirement for eligible derivatives. United has executed and cleared eligible derivatives through the London Clearing House (“LCH”). Variation margin at the LCH is distinguished as settled-to-market and settled daily based on the prior day value, rather than collateralized-to-market. United through its mortgage banking subsidiaries enters into interest rate lock commitments to finance residential mortgage loans with its customers. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by United. Interest rate risk arises on these commitments and subsequently closed loans if interest rates change between the time of the interest rate lock and the delivery of the loan to the investor. Market risk on interest rate lock commitments and mortgage loans held for sale is managed using corresponding forward mortgage loan sales contracts. United is a party to these forward mortgage loan sales contracts to sell loans servicing released and short sales of mortgage-backed securities. When the interest rate is locked with the borrower, the rate lock commitment, forward sale agreement, and mortgage-backed security position are undesignated derivatives and marked to fair value through earnings. The fair value of the rate lock derivative includes the servicing premium and the interest spread for the difference between retail and wholesale mortgage rates. Income from mortgage banking activities includes the gain recognized for the period presented and associated elements of fair value. United sells mortgage loans on either a best efforts or mandatory delivery basis. For loans sold on a mandatory delivery basis, United enters into forward mortgage-backed securities (the “residual hedge”) to mitigate the effect of interest rate risk. Both the rate lock commitment under mandatory delivery and the residual hedge are recorded at fair value through earnings and are not designated as accounting hedges. At the closing of the loan, the loan commitment derivative expires and United records a loan held for sale at fair value and continues to mark these assets to market under the election of fair value option. United closes out of the trading mortgage-backed securities assigned within the residual hedge and replaces the securities with a forward sales contract once a price has been accepted by an investor and recorded at fair value. For those loans selected to be sold under best efforts delivery, at the closing of the loan, the rate lock commitment derivative expires and the Company records a loan held for sale at fair value under the election of fair value option and continues to be obligated under the same forward loan sales contract entered into at inception of the rate lock commitment. For derivatives that are not designated in a hedge relationship, changes in the fair value of the derivatives are recognized in earnings in the same period as the change in the fair value. Off-balance-sheet credit exposures : United maintains a reserve for lending-related commitments such as unfunded loan commitments and letters of credit. United estimates expected credit losses over the contractual period in which United is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by United. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Methodology is based on a loss rate approach that starts with the probability of funding based on historical experience. Similar to methodology discussed previously related to the loans and leases receivable portfolio, adjustments are made to the historical losses for current conditions and reasonable and supportable forecast. Adjustments to the reserve for lending-related commitments on off-balance sheet credit exposures is recorded as other expense in the consolidated statements of income. The reserve for lending-related commitments is separately classified on the balance sheet and is included in other liabilities. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses on loans and leases. 8 7 Table of Contents Stock-Based Compensation : Compensation expense related to stock options, restricted stock awards (“RSA”) and restricted stock units (“RSU”) issued to participants is based upon the fair value of the award at the date of grant. The fair value of stock options is estimated at the date of grant using a binomial lattice option pricing model, while the fair value of RSAs is based upon the stock price at the date of grant. RSU grants could be time-vested RSUs, performance-vested RSUs, or a combination of both. The value of the time-vested RSUs and the performance-vested, based on a performance condition, RSUs awarded is established as the fair market value of the stock at the time of the grant. The value of the performance-vested, based on a market condition, RSUs awarded is estimated through the use of a Monte Carlo valuation model as of the grant date. Compensation expense is recognized on a straight-line basis over the vesting period for all stock-based awards and grants. Stock-based compensation expense was $ 8,018 ,000 in 2021, $ 5,980 ,000 in 2020, and $ 4,914 ,000 in 2019. Treasury Stock : United records common stock purchased for treasury at cost. At the date of subsequent reissuance, the treasury stock account is reduced by the cost of such stock using the weighted-average cost method. Trust Assets and Income: Assets held in a fiduciary or agency capacity for customers are not included in the balance sheets since such items are not assets of the company. Trust income is reported on an accrual basis. Earnings Per Common Share: United calculates earnings per common share in accordance with ASC Topic 260, “Earnings Per Share,” which provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. United has determined that its outstanding non-vested restricted stock awards are participating securities. Under the two-class method, basic earnings per common share is computed by dividing net earnings allocated to common stock by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. Antidilutive stock options and restricted stock outstanding of 1,024,612 , 1,926,840 and 857,511 for the years ended December 31, 2021, 2020 and 2019, respectively, were excluded from the earnings per diluted common share calculation. The reconciliation of the numerator and denominator of basic earnings per share with that of diluted earnings per share is presented as follows: Year Ended December 31 (Dollars in thousands, except per share) 2021 2020 2019 Distributed earnings allocated to common stock $ 181,614 $ 171,403 $ 139,167 Undistributed earnings allocated to common stock 185,082 116,879 120,337 Net earnings allocated to common shareholders $ 366,696 $ 288,282 $ 259,504 Average common shares outstanding 129,276,452 120,017,247 101,585,599 Dilutive effect of stock compensation 236,401 72,985 266,978 Average diluted shares outstanding 129,512,853 120,090,232 101,852,577 Earnings per basic common share $ 2.84 $ 2.40 $ 2.55 Earnings per diluted common share $ 2.83 $ 2.40 $ 2.55 Fair Value Measurements : United determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which also clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect United’s market assumptions. 8 8 Table of Contents The three levels of the fair value hierarchy based on these two types of inputs are as follows: Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 - Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. Level 3 - Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. When determining the fair value measurements for assets and liabilities, United looks to active and observable markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are not traded in active markets, United looks to market observable data for similar assets and liabilities and classifies such items as Level 2. Nevertheless, certain assets and liabilities are not actively traded in observable markets and United must use alternative valuation techniques using unobservable inputs to determine a fair value and classifies such items as Level 3. For assets and liabilities that are not actively traded, the fair value measurement is based primarily upon estimates that require significant judgment. Therefore, the results may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there are inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement. Recent Accounting Pronouncements : In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, “Business Combinations (Topic 805): Accounting for contract assets and contract liabilities from contracts with customers”. ASU 2021-08 amends ASC 805 to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an entity acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. As a result of these amendments, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its preacquisition financial statements. ASU No. 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted. ASU No. 2021-08 is not expected to have a material impact on the Company’s financial condition or results of operations. In July 2021, the FASB issued ASU No. 2021-05, “Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments (Topic 848)”. This new guidance requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if the lease would have been classified as a sales-type lease or direct financing lease in accordance with the classification criteria in ASC 842-10-25-2 and 25-3, respectively and if the lessor would have recognized a selling loss at lease commencement. When applying the guidance in ASC 842-10-24-3A, the lessor would not derecognize the underlying asset over its useful life. ASU No. 2021-05 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities may elect to adopt the amendments through either a retrospective application to leases that commenced or were modified after the beginning of the period in which ASC 842 was adopted or a prospective application to leases that commence or are modified subsequent to the date the amendments in ASU 2021-05 are first applied. ASU No. 2021-05 was adopted by United on January 1, 2022. The adoption did not have a material impact on the Company’s financial condition or results of operations In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848).” This update refines the scope of ASC Topic 848 and permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by change in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. ASU No. 2021-01 is effective for public business entities upon 89 Table of Contents issuance through December 31, 2022. United is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU No. 2021-01 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments. In August 2020, the FASB issued No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).” The amendments in the ASU remove certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. The ASU also amends the derivative scope exception guidance for contracts in an entity’s own equity. The amendments remove three settlement conditions that are required for equity contracts to qualify for the derivative scope exception. In addition, the ASU expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments. ASU No. 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities may elect to adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition. ASU No. 2020-06 was adopted by United on January 1, 2022. The adoption did not have a material impact on the Company’s financial condition or results of operations. In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides “optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.” ASU No. 2020-04 is effective for public business entities on March 12, 2020 through December 31, 2022. United is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU No. 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments. In February 2020, FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments.” This update makes narrow-scope changes that are intended to improve the board’s standards for financial instruments accounting, including the credit losses standard issued in 2016, as part of FASB’s ongoing project to improve and clarify its Accounting Standards Codification and avoid unintended application. ASU No. 2020-03 was effective for public business entities upon issuance of this final update in March 2020. ASU No. 2020-03 did not have a material impact on the Company’s financial condition or results of operations. In January 2020, the FASB issued ASU No. 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The new guidance addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. ASU No. 2020-01 is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU No. 2020-01 was adopted by United on January 1, 2021. The adoption did not have a material impact on the Company’s financial condition or results of operations. In November 2019, the FASB issued ASU No. 2019-08, “Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer.” ASU No. 2019-08 requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Topic 718, Compensation—Stock Compensation. As a result, the amount recorded as a reduction in revenue would be measured based on the grant-date fair value of the share-based payment. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. ASU No. 2019-08 was adopted by United on January 1, 2020. The adoption did not have a material impact on the Company’s financial condition or results of operations. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments. The amendments also address partial-term fair valued hedges, fair value hedge basis adjustments. The amendments to the credit losses and hedging standards have the same effective dates as those standards, 9 0 Table of Contents unless an entity has already adopted the standards. The amendments to recognition and measurement guidance are effective for fiscal years beginning after December 15, 2019; early adoption is permitted. ASU No. 2019-04 was adopted by United on January 1, 2020. The adoption did not have a material impact on the Company’s financial condition or results of operations. In August 2018, the FASB issued ASU No. 2018-14, “Compensation – Retirement Benefits—Defined Benefits – General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” This update amends ASC Topic 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other post retirement plans. The ASU’s changes related to disclosures are part of the FASB’s disclosure framework project, which the FASB launched in 2014 to improve effectiveness of disclosures in notes to financial statements. ASU No. 2018-14 is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU No. 2018-14 was adopted by United on January 1, 2021. The adoption did not have a material impact on the Company’s financial condition or results of operations. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This amendment changes the fair value measurement disclosure requirements of ASC Topic 820 and is the result of a broader disclosure project called FASB Concepts Statement, Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements, which was finalized in August 2018. ASU No. 2018-13 is effective for all entities for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2019; early adoption is permitted for any eliminated or modified disclosure upon issuance of this ASU. ASU No. 2018-13 was adopted by United on January 1, 2020 and did not have a material impact on the Company’s financial condition or results of operations. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350).” ASU No. 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 was adopted by United on January 1, 2020. The adoption of ASU 2017-04 did not have a material impact on the Company’s financial condition or results of operations. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses.” ASU No. 2016-13 changes the impairment model for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaces the “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost and requires entities to record allowances for available for sale debt securities rather than reduce the carrying amount under the current other-than-temporary impairment (OTTI) model. ASU No. 2016-13 also simplifies the accounting model for purchased credit-impaired debt securities and loans and leases. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. United engaged a third-party service provider to assist with the implementation of the new accounting standard. ASU No. 2016-13 was adopted by United on January 1, 2020 using a modified retrospective approach. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to United was a net increase to the allowance for credit losses of $ 57,442 ,000 and a decrease to retained earnings of $ 44,331 ,000, with the difference being an adjustment to deferred tax assets. United has elected to phase-in the impact to retained earnings using a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the coronavirus (COVID-19) pandemic, to delay for two years the full impact of ASU No. 2016-13 on regulatory capital, followed by a three-year transition period. The adoption of ASU No. 2016-13 had an insignificant impact on the Company’s held to maturity and available for sale securities portfolios. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. ASU No. 2016-02 includes a lessee accounting model that recognizes two types of leases, finance leases and operating leases, while lessor accounting will remain largely unchanged from the current GAAP. ASU No. 2016-02 requires, amongst other things, that a lessee recognize on the balance sheet a right-of-use asset and a lease liability for leases with terms of more than twelve months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. In July 2018, the FASB issued ASU No. 2018-11 “Leases (Topic 842), Targeted Improvements.” This update creates an additional transition method, and a lessor practical expedient to not separate lease and non-lease components if specified criteria are met. The new transition method allows companies to use the effective date of the new leases standard as the date of initial application transition. Companies that elect this transition 9 1 Table of Contents option will not adjust their comparative period financial information for the effect of ASC Topic 842, nor will they make the new required lease disclosure for periods before the effective date. In addition, these companies will carry forward their ASC Topic 840 disclosures for comparative periods. The practical expedient permits lessors to make an accounting policy election by class of underlying asset to not separate lease and non-lease components if specified criteria are met. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to ASC Topic 842, Leases.” This update includes narrow amendments to clarify how to apply certain aspects of the new leases standard. The amendments address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2018-10 does not make any substantive changes to the core provisions or principals of the new leases standard. United adopted the standard using the modified retrospective transition method on January 1, 2019. The Company has evaluated and has elected the practical expedients, which allows for existing leases to be accounted for consistent with current guidance, with the exception of the balance sheet recognition for lessees. Adoption of the standard resulted in the recognition of additional net lease assets and lease liabilities of $ 67,040,000 and $ 70,692,000 , respectively, as of January 1, 2019. Of the difference between these two amounts, $ 1,049,000 was recorded as an adjustment to retained earnings. NOTE B—MERGERS AND ACQUISITIONS Community Bankers Trust Corporation On December 3, 2021, United completed its acquisition of Community Bankers Trust Corporation (“Community Bankers Trust”). Community Bankers Trust was merged with and into United (the “Merger”), pursuant to the terms of the Agreement and Plan of Reorganization, dated June 2, 2021, by and between United and Community Bankers Trust (the “Agreement”). Under the terms of the Agreement, each outstanding share of common stock of Community Bankers Trust was converted into the right to receive 0.3173 shares of United common stock, par value $ 2.50 per share. Also, pursuant to the Agreement, at the effective time of the Merger, each outstanding Community Bankers Trust stock option granted under a Community Bankers Trust stock plan, whether vested or unvested as of the date of the Merger, vested as provided pursuant to the terms of such Community Bankers Trust stock plan and converted into an option to acquire United common stock adjusted based on the 0.3173 exchange ratio. Also, at the effective time of the Merger, each restricted stock unit granted under a Community Bankers Trust stock plan that was outstanding immediately prior to the effective time of the Merger vested in accordance with the formula and other terms of the Community Bankers Trust stock plan and converted into the right to receive shares of United common stock based on the 0.3173 exchange ratio. 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 (the “Bank Merger”) pursuant to an Agreement and Plan of Merger, dated June 2, 2021. United Bank survived the Bank Merger and continues to exist as a Virginia banking corporation. The Community Bankers Trust Merger was accounted for under the acquisition method of accounting. The results of operations of Community Bankers Trust are included in the consolidated results of operations from the Acquisition Date. The acquisition of Community Bankers Trust will enhance United’s existing presence in the DC Metro MSA and will take United into new markets including Baltimore, Annapolis, Lynchburg, Richmond, and the Northern Neck of Virginia. It also strategically connects our Mid-Atlantic and Southeast footprints. As of the Acquisition Date, Community Bankers Trust had $ 1,788,842 ,000 in total assets, $ 1,282,997 ,000 in loans and leases, net of unearned income and $ 1,517,502 ,000 in deposits. For the year of 2021, United recorded acquisition-related costs for the Community Bankers Trust merger of $ 21,418 ,000 , including a provision for credit losses of $ 12,288 ,000 for non-PCD loans. The aggregate purchase price was approximately $ 260,304 ,000, including common stock valued at $ 252,321,000 , stock options assumed valued at $ 7,958,000 , and cash paid for fractional shares of $ 25 ,000. The number of shares issued in the transaction was 7,135,771 , which were valued based on the closing market price of $ 35.36 for United’s common shares on December 3, 2021. The preliminary purchase price has been allocated to the identifiable tangible and intangible assets resulting in preliminary additions to goodwill, and core deposit intangibles of $ 76,454,000 and $ 3,398,000 , respectively. The goodwill recognized results from the expected synergies and potential earnings from the combination of United and Community Bankers Trust. The core deposit intangible is expected to be amortized on an accelerated basis over ten years. 9 2 Table of Contents Because the consideration paid was greater than the net fair value of the acquired assets and liabilities, the Company recorded goodwill as part of the acquisition. None of the goodwill from the Community Bankers Trust acquisition is expected to be deductible for tax purposes. United used an independent third party to help determine the fair values of the assets and liabilities acquired from Community Bankers Trust. As a result of the merger, United recorded preliminary fair value discounts of $ 8,376,000 on the loans and leases acquired, $ 230,000 on land acquired, $ 50,000 on OREO properties acquired and $ 415,000 on a trust preferred issuance, and premiums of $ 6,766,000 on investment securities acquired, $ 492,000 on buildings acquired, $ 2,741,000 on interest-bearing deposits, and $ 457,000 on long-term FHLB advances, respectively. United also recorded an allowance for credit losses, including a reserve for unfunded commitments, of $ 25,920,000 on the loans and commitments acquired split between $ 12,788,000 for purchased credit deteriorated (“PCD”) loans which is part of the acquisition date fair value, and $ 13,132,000 for non-PCD loans recorded to the provision for credit losses. The discounts and premium amounts, except for discount on the land, OREO and FHLB advances acquired, are being accreted or amortized on an accelerated or straight-line basis, based on the type of asset or liability, over each asset’s or liability’s estimated remaining life at the time of acquisition. The FHLB advances acquired were subsequently repaid prior to year-end. At December 31, 2021, the discount on the trust preferred issuance had an estimated remaining life of 12.25 years and the premiums on the buildings, and interest-bearing deposits each had an average estimated remaining life of 31.25 years, and 5.25 years, respectively. Portfolio loans and leases acquired from Community Bankers Trust were recorded at their fair value at the Acquisition Date based on a discounted cash flow methodology. The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from the perspective of a market participant. Also, acquired portfolio loans and leases were evaluated upon acquisition and classified as either PCD, which indicates that the loan has experienced a more-than-insignificant deterioration in credit quality since origination, or non-PCD. United considered a variety of factors in evaluating the acquired loans and leases for a more-than-insignificant deterioration in credit quality, including but not limited to risk grades, delinquency, nonperforming status, current or previous troubled debt restructurings or bankruptcies, watch list credits and other qualitative factors that indicated a deterioration in credit quality since origination. For PCD loans and leases, an initial allowance is determined based on the same methodology as other portfolio loans and leases. This initial allowance for credit losses is allocated to individual PCD loans and leases and added to the acquisition date fair values to establish the initial amortized cost basis for the PCD loans and leases. The difference between the unpaid principal balance (“UPB”), or par value, of PCD loans and leases and the amortized cost basis is considered to relate to noncredit factors and resulted in a discount of $ 3,561 ,000 at Acquisition Date. This discount will be recognized through interest income on a level-yield method over the life of the loans which is estimated to be a weighted-average of 5.5 years. For non-PCD acquired loans and leases, the differences between the initial fair value and the UPB, or par value, are recognized as interest income on a level-yield basis over the lives of the related loans and leases which is estimated to be a weighted-average of 5.6 years. The total fair value mark on the non-PCD loans and leases at the Acquisition Date was $ 4,815,000 . At the Acquisition Date, an initial allowance for expected credit losses of $ 12,288,000 was recorded with a corresponding charge to the provision for credit losses in the Consolidated Statements of Income. Subsequent changes in the allowance for credit losses related to PCD and non-PCD loans and leases are recognized in the provision for credit losses. The following table provides a reconciliation of the difference between the purchase price and the par value of portfolio PCD loans and leases acquired from Community Bankers Trust as of the Acquisition Date: (Dollars in thousands) Purchase price of PCD loans and leases at acquisition $ 360,638 Allowance for credit losses at acquisition 12,629 Non-credit discount at acquisition 3,561 Par value (UPB) of acquired PCD loans and leases at acquisition $ 376,828 The consideration paid for Community Bankers Trust’s common equity and the preliminary amounts of acquired identifiable assets and liabilities assumed as of the Community Bankers Trust Acquisition Date were as follows: (Dollars in thousands) Purchase price: Value of common shares issued ( 7,135,771 shares) $ 252,321 Fair value of stock options assumed 7,958 Cash for fractional shares 25 Total purchase price 260,304 9 3 Table of Contents Identifiable assets: Cash and cash equivalents 39,445 Investment securities 395,249 Net loans and leases 1,279,384 Premises and equipment 25,857 Operating lease right-of-use asset 8,127 Core deposit intangible 3,398 Other assets 51,828 Total identifiable assets $ 1,803,288 Identifiable liabilities: Deposits $ 1,520,243 Short-term borrowings 26,755 Long-term borrowings 51,500 Operating lease liability 8,127 Other liabilities 12,813 Total identifiable liabilities 1,619,438 Preliminary fair value of net assets acquired including identifiable intangible assets 183,850 Preliminary resulting goodwill $ 76,454 The operating results of United include operating results of acquired assets and assumed liabilities subsequent to the Acquisition Date. The operations of United’s central region of Virginia, which includes most of the acquired operations of Community Bankers Trust provided $ 2,638,000 in total revenues (net interest income plus other income), and $ 1,008,000 in net income for the year of 2021. These amounts are included in United’s consolidated financial statements as of and for the year of 2021. Community Bankers Trust’s results of operations prior to the Acquisition Date are not included in United’s consolidated results of operations. The following table presents certain unaudited pro forma information for the results of operations for the years ended December 31, 2021 and 2020, as if the Community Bankers Trust merger had occurred on January 1, 2021 and 2020, respectively. These results combine the historical results of Community Bankers Trust into United’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of Community Bankers Trust’s provision for credit losses for 2021 and 2020 that may not have been necessary had the acquired loans and leases been recorded at fair value as of the beginning of 2021 and 2020 . Additionally, United expects to achieve operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. Proforma Year Ended December 31 (Dollars in thousands) 2021 2020 Total Revenues (1) $ 1,099,946 $ 1,120,497 Net Income 396,022 319,176 (1) Represents net interest income plus other income Carolina Financial Corporation On May 1, 2020 (“Acquisition Date”), United acquired 100 % of the outstanding shares of Carolina Financial Corporation (“Carolina Financial”), a Delaware corporation headquartered in Charleston, South Carolina. Carolina Financial was merged with and into United (the “Merger”), pursuant to the terms of the Agreement and Plan of Merger, dated November 17, 2019, by and between United and Carolina Financial (the “Merger Agreement”). Upon completion of the Merger, Carolina Financial ceased to exist and United survived and continues to exist as a West Virginia corporation. 9 4 Table of Contents Under the terms of the Merger Agreement, each outstanding share of common stock of Carolina Financial was converted into the right to receive 1.13 shares of United common stock, par value $ 2.50 per share. Also pursuant to the Merger Agreement, as of the effective time of the Merger, each outstanding Carolina Financial stock option, whether vested or unvested as of the date of the Merger, at such option holder’s election, (i) vested and converted into an option to acquire United common stock adjusted based on the 1.13 exchange ratio, or (ii) received cash consideration equal to the difference between (a) the option’s exercise price and (b) $ 28.99 , representing the volume weighted average trading price of the Carolina Financial common stock on NASDAQ for the twenty full trading days ending on the second trading day immediately preceding the closing date (the “CFC Closing Price”) multiplied by the number of shares of Carolina Financial common stock subject to such stock option. Also, at the effective time of the Merger, each restricted stock grant, restricted stock unit grant or any other award of a share of Carolina Financial common stock subject to vesting, repurchase or other lapse restriction under a Carolina Financial stock plan (other than a stock option) (each, a “Stock Award”) that was outstanding immediately prior to the effective time of the Merger, vested in accordance with the terms of the Carolina Financial stock plan and at the election of the holder (i) converted into the right to receive shares of United common stock based on the 1.13 exchange ratio or (ii) converted into cash in an amount equal to the CFC Closing Price multiplied by the shares of Carolina Financial common stock subject to the Stock Award. 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. CresCom Bank owned and operated Crescent Mortgage Company (“Crescent”), which is based in Atlanta, Georgia. As a result of the Bank Merger, Crescent became a wholly-owned subsidiary of United Bank. For the year of 2021, United did not record any acquisition-related costs associated with the Carolina Financial Merger as compared to acquisition-related costs of $ 54,240,000 , including a provision for credit losses of $ 28,948 ,000 for non-PCD loans, for the year of 2020. The Carolina Financial Merger was accounted for under the acquisition method of accounting. The results of operations of Carolina Financial are included in the consolidated results of operations from the Acquisition Date. The acquisition of Carolina Financial provided United the opportunity to expand its existing footprint in North Carolina and South Carolina. Carolina Financial had banking locations in North Carolina and South Carolina. As of the Acquisition Date, Carolina Financial had $ 5,004,990 ,000 in total assets, $ 3,292,635 ,000 in loans and leases, net of unearned income and $ 3,873,183 ,000 in deposits. The aggregate purchase price was approximately $ 817,877 ,000, including common stock valued at $ 815,997 ,000, stock options assumed valued at $ 1,833 ,000, and cash paid for fractional shares of $ 47 ,000. The number of shares issued in the transaction was 28,031,501 , which were valued based on the closing market price of $ 29.11 for United’s common shares on May 1, 2020. The purchase price was allocated to the identifiable tangible and intangible assets resulting in additions to goodwill, core deposit intangibles and the Crescent trade name intangible of $ 332,026 ,000, $ 3,408 ,000 and $ 196 ,000, respectively. The goodwill recognized results from the expected synergies and potential earnings from the combination of United and Carolina Financial. The core deposit intangible is being amortized on an accelerated basis over ten years. The Crescent trade name provides a source of market recognition to attract potential clients and retain existing relationships. United believes the Crescent trade name provides a competitive advantage and is likely going to be used into perpetuity and thus will not be subject to amortization, but rather be evaluated for impairment. Because the consideration paid was greater than the net fair value of the acquired assets and liabilities, the Company recorded goodwill as part of the acquisition. No ne of the goodwill from the Carolina Financial acquisition is expected to be deductible for tax purposes. United used an independent third party to help determine the fair values of the assets and liabilities acquired from Carolina Financial. As a result of the merger, United recorded fair value discounts of $ 47,425 ,000 on the loans and leases acquired, $ 620 ,000 on investment securities, $ 272 ,000 on OREO, $ 4,831 ,000 on trust preferred issuances and $ 135 ,000 on subordinated notes, respectively, and premiums of $ 5,908 ,000 on buildings acquired, $ 4,357 ,000 on land acquired, $ 12,818 ,000 on interest-bearing deposits, and $ 468 ,000 on long-term FHLB advances, respectively. United also recorded an allowance for credit losses, including a reserve for unfunded commitments, of $ 50,562 ,000 on the loans and commitments acquired split between $ 19,797 ,000 for purchased credit deteriorated (“PCD”) loans and $ 30,765 ,000 for non-PCD loans. The discounts and premium amounts, except for discount on the land and OREO acquired, are being accreted or amortized on an accelerated or straight-line basis, based on the type of asset or liability, over each asset’s or liability’s estimated remaining life at the time of acquisition. At December 31, 2021, the discounts on subordinated debt and trust preferred issuances had an average estimated remaining life of 6.00 years and 15.25 years, respectively, and the premiums on the buildings, and interest-bearing deposits each had an average estimated remaining life of 30.00 years, and 3.60 years, respectively. The estimated fair values of the acquired assets and assumed liabilities, including identifiable intangible assets and goodwill were considered final as of June 30, 2021. 9 5 Table of Contents Portfolio loans and leases acquired from Carolina Financial were recorded at their fair value at the Acquisition Date based on a discounted cash flow methodology. The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from the perspective of a market participant. Also, acquired portfolio loans and leases were evaluated upon acquisition and classified as either PCD, which indicates that the loan has experienced a more-than-insignificant deterioration in credit quality since origination, or non-PCD. United considered a variety of factors in evaluating the acquired loans and leases for a more-than-insignificant deterioration in credit quality, including but not limited to risk grades, delinquency, nonperforming status, current or previous troubled debt restructurings or bankruptcies, watch list credits and other qualitative factors that indicated a deterioration in credit quality since origination. For PCD loans and leases, an initial allowance is determined based on the same methodology as other portfolio loans and leases. This initial allowance for credit losses is allocated to individual PCD loans and leases and added to the acquisition date fair values to establish the initial amortized cost basis for the PCD loans and leases. The difference between the unpaid principal balance (“UPB”), or par value, of PCD loans and leases and the amortized cost basis is considered to relate to noncredit factors and resulted in a discount of $ 7,212 ,000 at Acquisition Date. This discount was recognized through interest income on a level-yield method over the life of the loans which is estimated to be a weighted-average of 4.6 years. For non-PCD acquired loans and leases, the differences between the initial fair value and the UPB, or par value, were recognized as interest income on a level-yield basis over the lives of the related loans and leases which was estimated to be a weighted-average of 7.3 years. The total fair value mark on the non-PCD loans and leases at the Acquisition Date was $ 40,213 ,000. At the Acquisition Date, an initial allowance for expected credit losses of $ 28,948 ,000 was recorded with a corresponding charge to the provision for credit losses in the Consolidated Statements of Income. Subsequent changes in the allowance for credit losses related to PCD and non-PCD loans and leases are recognized in the provision for credit losses. The following table provides a reconciliation of the difference between the purchase price and the par value of portfolio PCD loans and leases acquired from Carolina Financial as of the Acquisition Date: (Dollars in thousands) Purchase price of PCD loans and leases at acquisition $ 1,023,531 Allowance for credit losses at acquisition 18,635 Non-credit discount at acquisition 7,212 Par value (UPB) of acquired PCD loans and leases at acquisition $ 1,049,378 The consideration paid for Carolina Financial’s common equity and the amounts of acquired identifiable assets and liabilities assumed as of the Carolina Financial Acquisition Date were as follows: (Dollars in thousands) Purchase price: Value of common shares issued ( 28,031,501 shares) $ 815,997 Fair value of stock options assumed 1,833 Cash for fractional shares 47 Total purchase price 817,877 Identifiable assets: Cash and cash equivalents 629,154 Investment securities 580,791 Loans held for sale 65,757 Net loans and leases 3,246,940 Premises and equipment 79,127 Operating lease right-of-use asset 9,861 Crescent trade name intangible 196 Core deposit intangible 3,408 Mortgage servicing rights 20,123 Other assets 159,218 Total identifiable assets $ 4,794,575 9 6 Table of Contents Identifiable liabilities: Deposits $ 3,884,977 Short-term borrowings 332,000 Long-term borrowings 42,738 Operating lease liability 9,861 Other liabilities 39,148 Total identifiable liabilities 4,308,724 Fair value of net assets acquired including identifiable intangible assets 485,851 Resulting goodwill $ 332,026 The operating results of United include operating results of acquired assets and assumed liabilities subsequent to the Acquisition Date. The operations of United’s North Carolina and South Carolina geographic area, which includes the acquired operations of Carolina Financial and Crescent Mortgage provided $ 198,234 ,000 in total revenues (net interest income plus other income), and $ 100,242 ,000 in net income for the year of 2021. These amounts are included in United’s consolidated financial statements as of and for the year of 2021. Carolina Financial’s results of operations prior to the Acquisition Date are not included in United’s consolidated results of operations. ​​​​​​​ NOTE C—INVESTMENT SECURITIES Securities Available for Sale Securities held for indefinite periods of time are classified as available for sale and carried at estimated fair value. The amortized cost and estimated fair values of securities available for sale are summarized as follows. December 31, 2021 Gross Gross Allowance Estimated (Dollars in thousands) Amortized Unrealized Unrealized For Credit Fair Cost Gains Losses Losses Value U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 82,136 $ 51 $ 337 $ 0 $ 81,850 State and political subdivisions 831,499 19,608 3,809 0 847,298 Residential mortgage-backed securities Agency 1,120,423 9,173 15,822 0 1,113,774 Non-agency 74,965 306 726 0 74,545 Commercial mortgage-backed securities Agency 633,802 12,731 6,608 0 639,925 Asset-backed securities 659,830 49 3,307 0 656,572 Single issue trust preferred securities 17,291 146 626 0 16,811 Other corporate securities 611,548 3,558 3,182 0 611,924 Total $ 4,031,494 $ 45,622 $ 34,417 $ 0 $ 4,042,699 9 7 Table of Contents December 31, 2020 Gross Gross Allowance Estimated (Dollars in thousands) Amortized Unrealized Unrealized For Credit Fair Cost Gains Losses Losses Value U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 65,804 $ 543 $ 3 $ 0 $ 66,344 State and political subdivisions 538,082 27,330 252 0 565,160 Residential mortgage-backed securities Agency 905,230 24,134 473 0 928,891 Non-agency 21,639 137 0 0 21,776 Commercial mortgage-backed securities Agency 644,774 31,009 638 0 675,145 Asset-backed securities 297,834 204 3,415 0 294,623 Single issue trust preferred securities 18,230 167 1,370 0 17,027 Other corporate securities 376,753 7,648 8 0 384,393 Tota l $ 2,868,346 $ 91,172 $ 6,159 $ 0 $ 2,953,359 For the adoption of ASC Topic 326, “Financial Instruments—Credit Losses,” United made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in “Accrued interest receivable” in the consolidated balance sheets. Available-for-sale debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status. Accordingly, United does not currently recognize an allowance for credit loss against accrued interest receivable on available-for-sale debt securities. The table above excludes accrued interest receivable of $ 15,353,000 and $ 10,663,000 at December 31, 2021 and December 31, 2020, respectively, that is recorded in “Accrued interest receivable.” The following is a summary of securities available for sale which were in an unrealized loss position at December 31, 2021 and December 31, 2020. Less than 12 months 12 months or longer Total Fair Unrealized Fair Unrealized Fair Unrealized (Dollars in thousands) Value Losses Value Losses Value Losses December 31, 2021 U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 75,106 $ 334 $ 213 $ 3 $ 75,319 $ 337 State and political subdivisions 223,754 2,872 24,067 937 247,821 3,809 Residential mortgage-backed securities Agency 680,320 13,167 71,392 2,655 751,712 15,822 Non-agency 55,336 726 0 0 55,336 726 Commercial mortgage-backed securities Agency 136,071 2,912 70,543 3,696 206,614 6,608 Asset-backed securities 532,373 2,620 82,222 687 614,595 3,307 Trust preferred collateralized debt obligations 0 0 0 0 0 0 Single issue trust preferred securities 0 0 13,594 626 13,594 626 Other corporate securities 307,912 3,182 0 0 307,912 3,182 Total $ 2,010,872 $ 25,813 $ 262,031 $ 8,604 $ 2,272,903 $ 34,417 9 8 Table of Contents Less than 12 months 12 months or longer Total Fair Unrealized Fair Unrealized Fair Unrealized (Dollars in thousands) Value Losses Value Losses Value Losses December 31, 2020 U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 297 $ 3 $ 0 $ 0 $ 297 $ 3 State and political subdivisions 30,480 252 0 0 30,480 252 Residential mortgage-backed securities Agency 131,114 467 3,867 6 134,981 473 Non-agency 0 0 0 0 0 0 Commercial mortgage-backed securities Agency 83,395 638 0 0 83,395 638 Asset-backed securities 0 0 266,104 3,415 266,104 3,415 Trust preferred collateralized debt obligations 0 0 0 0 0 0 Single issue trust preferred securities 0 0 13,804 1,370 13,804 1,370 Other corporate securities 8,494 8 0 0 8,494 8 Total $ 253,780 $ 1,368 $ 283,775 $ 4,791 $ 537,555 $ 6,159 99 Table of Contents The following table shows the proceeds from maturities, sales and calls of available for sale securities and the gross realized gains and losses on sales and calls of those securities that have been included in earnings as a result of any s a les and calls. Gains or losses on sales and calls of available for sale securities were recognized by the specific identification method. Year Ended (In thousands) 2021 2020 2019 Proceeds from maturities, sales and calls $ 731,902 $ 708,068 $ 712,557 Gross realized gains 1,673 4,618 1,542 Gross realized losses 122 2,116 1,445 At December 31, 2021, gross unrealized losses on available for sale securities were $ 34,417,000 on 562 securities of a total portfolio of 1,489 available for sale securities. 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. In determining whether or not a security is impaired, management considered the severity of the loss in conjunction with United’s positive intent and the more likely than not ability to hold these securities to recovery of their cost basis or maturity. State and political subdivisions United’s state and political subdivisions portfolio relates to securities issued by various municipalities located throughout the United States. The total amortized cost of available for sale state and political subdivision securities was $ 831,499,000 at December 31, 2021. As of December 31, 2021, approximately 53 % of the portfolio was supported by the general obligation of the issuing municipality, which allows for the securities to be repaid by any means available to the municipality. The majority of the portfolio was rated AA or higher, and no securities within the portfolio were rated below investment grade as of December 31, 2021. In addition to monitoring the credit ratings of these securities, management also evaluates the financial performance of the underlying issuers on an ongoing basis. Based upon management’s analysis and judgment, it was determined that none of the state and political subdivision securities had credit losses at December 31, 2021. Agency mortgage-backed securities United’s agency mortgage-backed securities portfolio relates to securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae. The total amortized cost of available for sale agency mortgage-backed securities was $ 1,754,225,000 at December 31, 2021. Of the $ 1,754,225,000 amount, $ 633,802,000 was related to agency commercial mortgage-backed securities and $ 1,120,423,000 was related to agency residential mortgage-backed securities. Each of the agency mortgage-backed securities provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based upon management’s analysis and judgment, it was determined that none of the agency mortgage-backed securities had credit losses at December 31, 2021. Non-agency residential mortgage-backed securities United’s non-agency residential mortgage-backed securities portfolio relates to securities of various private label issuers. The total amortized cost of available for sale non-agency residential mortgage-backed securities was $ 74,965,000 at December 31, 2021. Of the $ 74,965,000 , 100 % was rated AAA. Based upon management’s analysis and judgment, it was determined that no ne of the non-agency residential mortgage-backed securities had credit losses at December 31, 2021. Asset-backed securities As of December 31, 2021, United’s asset-backed securities portfolio had a total amortized cost balance of $ 659,830,000 . The entire portfolio was investment grade rated as of December 31, 2021. Approximately 48 % of the portfolio relates to securities that are backed by Federal Family Education Loan Program (“FFELP”) student loan collateral which includes a minimum of a 97 % government repayment guaranty, as well as additional credit support and subordination in excess of the government guaranteed portion. Approximately 52 % of the portfolio relates to collateralized loan obligation securities that are all AAA rated. Upon reviewing this portfolio as of December 31, 2021, it was determined that no ne of the asset-backed securities had credit losses. 100 Table of Contents Single issue trust preferred securities The majority of United’s single issue trust preferred portfolio consists of obligations from large cap banks (i.e. banks with market capitalization in excess of $ 10 billion). All single issue trust preferred securities are currently receiving interest payments. The amortized cost of available for sale single issue trust preferred securities as of December 31, 2021 consisted of $ 8,456,000 in investment grade bonds, $ 3,070,000 in split rated bonds, and $ 5,765,000 in unrated bonds. Management reviews each issuer’s current and projected earnings trends, asset quality, capitalization levels, and other key factors. Upon completing the review for the fourth quarter of 2021, it was determined that none of the single issue trust preferred securities had credit losses. Corporate securities As of December 31, 2021, United’s Corporate securities portfolio had a total amortized cost balance of $ 611,548,000 . The majority of the portfolio consisted of debt issuances of corporations representing a variety of industries, including financial institutions. Of the $ 611,548,000 , 87 % had at least one rating above investment grade, 2 % was below investment grade rated, and 11 % was unrated. For corporate securities, management has evaluated the near-term prospects of the investment in relation to the severity of any unrealized loss. Based upon management’s analysis and judgment, it was determined that none of the corporate securities had credit losses at December 31, 2021. The amortized cost and estimated fair value of securities available for sale at December 31, 2021 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties. Maturities of mortgage-backed securities with an amortized cost of $ 1,829,190,000 and an estimated fair value of $ 1,828,244,000 at December 31, 2021 are included below based upon contractual maturity. Estimated (In thousands) Amortized Fair Cost Value Due in one year or less $ 126,032 $ 126,564 Due after one year through five years 661,627 670,298 Due after five years through ten years 940,031 941,640 Due after ten years 2,303,804 2,304,197 Total $ 4,031,494 $ 4,042,699 Equity securities at fair value Equity securities consist mainly of equity securities of financial institutions and mutual funds within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. The fair value of United’s equity securities was $ 12,404,000 at December 31, 2021 and $ 10,718,000 at December 31, 2020. Year Ended (In thousands) December 31, 2021 December 31, 2020 Net gains recognized during the period on equity securities sold $ 788 $ 579 Unrealized gains recognized during the period on equity securities still held at period end 69 147 Unrealized losses recognized during the period on equity securities still held at period end ( 187 ) ( 75 ) Net gains recognized during the period $ 670 $ 651 Other investment securities During the fourth quarter of 2021, United evaluated all of its cost method investments to determine if certain events or changes in circumstances during the fourth quarter of 2021 had a significant adverse effect on the fair value of any of its cost method securities. United determined that there was no individual security that experienced an adverse event during the fourth quarter. There were no other events or changes in circumstances during the fourth quarter which would have an adverse effect on the fair value of its cost method securities. 101 Table of Contents The carrying value of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $ 1,871,328 ,000 and $ 1,942,087 ,000 at December 31, 2021 and December 31, 2020, respectively. The fair value of mortgage-backed securities is affected by changes in interest rates and prepayment speeds. When interest rates decline, prepayment speeds generally accelerate due to homeowners refinancing their mortgages at lower interest rates. This may result in the proceeds being reinvested at lower interest rates. Rising interest rates may decrease the assumed prepayment speed. Slower prepayment speeds may extend the maturity of the security beyond its estimated maturity. Therefore, investors may not be able to invest at current higher market rates due to the extended expected maturity of the security. United had a net unrealized loss of $ 946,000 at December 31, 2021 and a net unrealized gain of $ 54,169 ,000 at December 31, 2020 on all mortgage-backed securities. NOTE D—LOANS AND LEASES Major classes of loans and leases are as follows: December 31, (In thousands) 2021 2020 Commercial, financial and agricultural: Owner-occupied commercial real estate $ 1,733,176 $ 1,622,687 Nonowner-occupied commercial real estate 5,957,288 5,017,727 Other commercial 3,462,361 4,054,418 Total commercial, financial & agricultural 11,152,825 10,694,832 Residential real estate 3,691,560 3,899,885 Construction & land development Consumer: 2,014,165 1,826,349 Bankcard 8,913 8,937 Other consumer 1,183,844 1,192,580 Less: Unearned income ( 27,659 ) ( 31,170 ) Total gross loans $ 18,023,648 $ 17,591,413 The table above does not include loans held for sale of $ 504,416 ,000 and $ 718,937 ,000 at December 31, 2021 and December 31, 2020, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market. At December 31, 2021 and 2020, loans-in-process of $ 112,109,000 and $ 57,214,000 and overdrafts from deposit accounts of $ 14,270,000 and $ 42,193,000 , respectively, are included within the appropriate loan classifications above. The outstanding loan balances in the table above also include unamortized loan fees of $ 66,081,000 and $ 91,562,000 at December 31, 2021 and December 31, 2020, respectively. United’s subsidiary bank has made loans, in the normal course of business, to the directors and officers of United and its subsidiaries, and to their associates. The aggregate dollar amount of these loans was $ 32,990,000 and $ 35,756,000 at December 31, 2021 and 2020, respectively. During 2021, $ 3,435,000 of new loans were made and repayments totaled $ 6,201,000 . NOTE E—CREDIT QUALITY Management monitors the credit quality of its loans and leases on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan. United considers a loan to be past due when it is 30 days or more past its contractual payment due date. For all loan classes, past due loans and leases are reviewed on a monthly basis to identify loans and leases for nonaccrual status. Generally, when collection in full of the principal and interest is jeopardized, the loan is placed on nonaccrual status. The accrual of interest income on commercial and most consumer loans generally is discontinued when a loan becomes 90 to 120 days past due as to principal or interest. However, regardless of delinquency status, if a loan is fully secured and in the process of collection and resolution of collection is expected in the near term (generally less than 90 days), then the loan will not be placed on nonaccrual status. When interest accruals are discontinued, unpaid interest recognized in income in 102 Table of Contents the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for credit losses. United’s method of income recognition for loans and leases that are classified as nonaccrual is to recognize interest income on a cash basis or apply the cash receipt to principal when the ultimate collectibility of principal is in doubt. Nonaccrual loans and leases will not normally be returned to accrual status unless all past due principal and interest has been paid and the borrower has evidenced their ability to meet the contractual provisions of the note. Generally, a loan is categorized as a TDR if a concession is granted and there is deterioration in the financial condition of the borrower. The portfolio of TDR loans is monitored monthly. In response to the coronavirus (“COVID-19”) pandemic and its economic impact on our customers, United implemented a short-term modification program that complied with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allowed for a deferral of payments from the period beginning March 1, 2020 until the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. As provided for under the CARES Act, these loan modifications are exempt by law from classification as a TDR as defined by GAAP. As of December 31, 2021, United has 188 eligible loan modifications in deferral under section 4013, “Temporary Relief from Troubled Debt Restructurings,” of the CARES Act on $ 18,039,000 of loans outstanding, down significantly from 1,002 eligible loan modifications in deferral on $ 399,857,000 of loans outstanding at December 31, 2020. As of December 31, 2021, United had TDRs of $ 35,856,000 . Of the $ 35,856,000 aggregate balance of TDRs at December 31, 2021, $ 22,421,000 was on nonaccrual and $ 102,000 was 90 days or more days past due. As of December 31, 2020, United had TDRs of $ 55,657,000 . Of the $ 55,657,000 aggregate balance of TDRs at December 31, 2020, $ 41,185,000 was on nonaccrual and $ 197,000 was 30 - 89 days past due. All these amounts are included in the appropriate categories in the “Age Analysis of Past Due Loans” table on a subsequent page. As of December 31, 2021, there was a commitment to lend additional funds of $ 110,000 to a debtor owing a receivable whose terms have been modified in a TDR. During the year of 2021, advances totaling $ 14,000 were made to this debtor under a loan that had been previously modified. No advances were made to this debtor during the year of 2021 under a loan that had been previously modified. The following tables sets forth the balances of TDRs at December 31, 2021 and December 31, 2020 and the reasons for modification: (In thousands) Reason for modification December 31, 2021 December 31, 2020 Interest rate reduction $ 3,163 $ 10,774 Interest rate reduction and change in terms 1,412 2,346 Forgiveness of principal 0 214 Concession of principal and term 19 22 Extended maturity 4,831 4,414 Transfer of asset 5,407 0 Change in terms 21,024 37,887 Total $ 35,856 $ 55,657 The following table sets forth United’s troubled debt restructurings that have been restructured during the year ended December 31, 2021 and 2020, segregated by class of loans: Troubled Debt Restructurings For the Year Ended December 31, 2021 December 31, 2020 (Dollars in thousands) Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Commercial real estate: Owner-occupied 5 $ 2,155 $ 2,293 21 $ 18,579 $ 16,659 Nonowner-occupied 3 6,362 6,130 7 2,577 2,525 Other commercial 2 328 328 21 3,830 2,858 Residential real estate 9 1,660 1,651 22 4,271 3,284 103 Table of Contents Troubled Debt Restructurings For the Year Ended December 31, 2021 December 31, 2020 (Dollars in thousands) Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Construction & land development 0 0 0 13 4,607 3,760 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 3 69 20 Total 19 $ 10,505 $ 10,402 87 $ 33,933 $ 29,106 The following table sets forth United’s troubled debt restructurings, based on their post-modification outstanding recorded balance, that have been restructured during the year ended December 31, 2021 and 2020, segregated by the reason for modification: Year Ended (In thousands) Reason for modification December 31, 2021 December 31, 2020 Interest rate reduction $ 155 $ 9,560 Interest rate reduction and change in terms 1,412 662 Forgiveness of principal 0 214 Concession of principal and term 0 22 Transfer of asset 5,407 0 Extended maturity 2,754 4,414 Change in terms 674 14,234 Total $ 10,402 $ 29,106 The loans and leases were evaluated individually for allocation within United’s allowance for loan losses. The modifications had an immaterial impact on the financial condition and results of operations for United. The following table presents troubled debt restructurings, by class of loan, that had charge-offs during the year ended December 31, 2021 and 2020. These loans were restructured during the twelve months ended December 31, 2021 and 2020 and subsequently defaulted, resulting in principal charge-offs during the year of 2021 and 2020. The recorded investment amounts presented were as of the December 31, 2021 and 2020 balance sheet dates. Year Ended December 31, 2021 Year Ended December 31, 2020 (In thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial real estate: Owner-occupied 0 $ 0 0 $ 0 Nonowner-occupied 0 0 0 0 Other commercial 0 0 0 0 Residential real estate 1 0 0 0 Construction & land development 2 0 1 690 Consumer: Bankcard 0 0 0 0 Other consumer 0 0 0 0 Total 3 $ 0 1 $ 690 104 Table of Contents The following table sets forth United’s age analysis of its past due loans and leases, segregated by class of loans and leases: Age Analysis of Past Due Loans and Leases As of December 31, 2021 (In thousands) 30-89 Days Past Due 90 Days or more Past Due Total Past Due Current & Other Total Financing Receivables 90 Days or More Past Due & Accruing Commercial real estate: Owner-occupied $ 7,522 $ 13,325 $ 20,847 $ 1,712,329 $ 1,733,176 $ 611 Nonowner-occupied 5,791 18,829 24,620 5,932,668 5,957,288 545 Other commercial 21,444 15,883 37,327 3,425,034 3,462,361 6,569 Residential real estate 19,488 23,495 42,983 3,648,577 3,691,560 8,241 Construction & land development 6,599 3,096 9,695 2,004,470 2,014,165 383 Consumer: Bankcard 100 187 287 8,626 8,913 187 Other consumer 17,264 2,615 19,879 1,163,965 1,183,844 2,445 Total $ 78,208 $ 77,430 $ 155,638 $ 17,895,669 $ 18,051,307 $ 18,981 Age Analysis of Past Due Loans and Leases As of December 31, 2020 (In thousands) 30-89 Days Past Due 90 Days or more Past Due Total Past Due Current & Other Total Financing Receivables 90 Days or More Past Due & Accruing Commercial real estate: Owner-occupied $ 4,556 $ 28,479 $ 33,035 $ 1,589,652 $ 1,622,687 $ 0 Nonowner-occupied 6,837 29,292 36,129 4,981,598 5,017,727 1,284 Other commercial 13,796 26,274 40,070 4,014,348 4,054,418 1,001 Residential real estate 32,743 24,892 57,635 3,842,250 3,899,885 8,574 Construction & land development 1,919 5,885 7,804 1,818,545 1,826,349 461 Consumer: Bankcard 362 156 518 8,419 8,937 156 Other consumer 14,765 2,757 17,522 1,175,058 1,192,580 2,356 Total $ 74,978 $ 117,735 $ 192,713 $ 17,429,870 $ 17,622,583 $ 13,832 The following table sets forth United’s nonaccrual loans and leases, segregated by class of loans and leases: At December 31, 2021 At December 31, 2020 (In thousands) Nonaccruals With No Related Allowance for Credit Losses 90 Days or More Past Due & Accruing Nonaccruals With No Related Allowance for Credit Losses 90 Days or More Past Due & Accruing Commercial Real Estate: Owner-occupied $ 12,714 $ 12,714 $ 611 $ 28,479 $ 28,479 $ 0 Nonowner-occupied 18,284 18,284 545 28,008 16,070 1,284 Other Commercial 9,314 8,261 6,569 25,273 13,149 1,001 Residential Real Estate 15,254 14,298 8,241 16,318 14,769 8,574 Construction 2,713 2,713 383 5,424 4,484 461 Consumer: 0 0 Bankcard 0 0 187 0 0 156 Other consumer 170 170 2,445 401 401 2,356 Total $ 58,449 $ 56,440 $ 18,981 $ 103,903 $ 77,352 $ 13,832 Interest income recognized on nonaccrual loans was insignificant during the year ended December 31, 2021 and 2020. For the adoption of ASC Topic 326, United elected the practical expedient to measure expected credit losses on collateral dependent loans and leases based on the difference between the loan’s amortized cost and the collateral’s fair value, 105 Table of Contents adjusted for selling costs. The following table presents the amortized cost basis of collateral-dependent loans and leases in which repayment is expected to be derived substantially through the operation or sale of the collateral a n d where the borrower is experiencing financial difficulty, by class of loans and leases as of December 31, 2021 and December 31, 2020: Collateral Dependent Loans and Leases At December 31, 2021 (In thousands) Residential Property Business Assets Land Commercial Property Other Total Commercial real estate: Owner-occupied $ 0 $ 38 $ 0 $ 9,775 $ 11,223 $ 21,036 Nonowner-occupied 7,085 0 703 8,665 52,299 68,752 Other commercial 2,093 15,225 0 0 732 18,050 Residential real estate 16,749 0 0 0 0 16,749 Construction & land development 0 0 4,770 0 1,103 5,873 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 0 0 0 Total $ 25,927 $ 15,263 $ 5,473 $ 18,440 $ 65,357 $ 130,460 Collateral Dependent Loans and Leases At December 31, 2020 (In thousands) Residential Property Business Assets Land Commercial Property Other Total Commercial real estate: Owner-occupied $ 1,480 $ 138 $ 0 $ 18,097 $ 21,737 $ 41,452 Nonowner-occupied 16,400 0 2,898 10,167 18,230 47,695 Other commercial 5,424 20,429 0 258 2,345 28,456 Residential real estate 21,006 229 34 0 803 22,072 Construction & land development 39 0 17,408 0 746 18,193 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 0 1 1 Total $ 44,349 $ 20,796 $ 20,340 $ 28,522 $ 43,862 $ 157,869 United categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt: current financial information, historical payment experience, credit documentation, underlying collateral (if any), public information and current economic trends, among other factors. United uses the following definitions for risk ratings: · Pass · Special Mention · Substandard · Doubtful For United’s loans with a corporate credit exposure, United analyzes loans individually to classify the loans as to credit risk. Review and analysis of criticized (special mention-rated loans in the amount of $1,000,000 or greater) and classified (substandard-rated and worse in the amount of $500,000 and greater) loans is completed once per quarter. Review of notes with committed exposure of $2,000,000 or greater is completed at least annually. For loans with a consumer credit exposure, United internally assigns a grade based upon an individual loan’s delinquency status. United reviews and updates, as necessary, these grades on a quarterly basis. Special mention loans, with a corporate credit exposure, have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or in the Company’s credit position at some future date. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or an ill proportioned balance sheet (e.g., increasing inventory without an increase in sales, high 106 Table of Contents leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a special mention rating. Nonfinancial reasons for rating a credit exposure special mention include management problems, pending litigation, an ineffective loan agreement or other material structural weakness, and any other significant deviation from prudent lending practices. For loans with a consumer credit exposure, loans that are past due 30 - 89 days are generally considered special mention. A substandard loan with a corporate credit exposure is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt by the borrower. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. They require more intensive supervision by management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some substandard loans, the likelihood of full collection of interest and principal may be in doubt and thus, placed on nonaccrual. For loans with a consumer credit exposure, loans that are 90 days or more past due or that have been placed on nonaccrual are considered substandard. A loan with corporate credit exposure is classified as doubtful if it has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, highly questionable. A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the loan, its classification as loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, there are not any loans with a consumer credit exposure that are classified as doubtful. Usually, they are charged-off prior to such a classification. Based on the most recent analysis performed, the risk category of loans and leases by class of loans is as follows: Commercial Real Estate – Owner-occupied (In thousands) Term Loans Origination Year Revolving loans Revolving loans As of December 31, 2021 2021 2020 2019 2018 2017 Prior amortized cost basis converted to term loans Total Internal Risk Grade: Pass $ 319,007 $ 310,893 $ 161,075 $ 135,472 $ 168,874 $ 539,640 $ 39,117 $ 401 $ 1,674,479 Special Mention 0 0 51 5,399 712 20,672 959 0 27,793 Substandard 0 55 38 661 1,304 27,458 839 244 30,599 Doubtful 0 0 0 0 0 305 0 0 305 Total $ 319,007 $ 310,948 $ 161,164 $ 141,532 $ 170,890 $ 588,075 $ 40,915 $ 645 $ 1,733,176 YTD charge-offs 0 0 0 0 ( 44 ) ( 370 ) 0 0 ( 414 ) YTD recoveries 0 0 0 0 13 856 0 0 869 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ ( 31 ) $ 486 $ 0 $ 0 $ 455 (In thousands) Term Loans Origination Year Revolving loans Revolving loans As of December 31, 2020 2020 2019 2018 2017 2016 Prior amortized cost basis converted to term loans Total Internal Risk Grade: Pass $ 280,779 $ 152,851 $ 162,027 $ 198,610 $ 282,214 $ 443,312 $ 22,303 $ 0 $ 1,542,096 Special Mention 0 1,206 3,772 754 2,013 20,792 0 453 28,990 Substandard 1,935 62 0 1,117 3,788 43,354 864 149 51,269 Doubtful 0 0 0 0 0 332 0 0 332 Total $ 282,714 $ 154,119 $ 165,799 $ 200,481 $ 288,015 $ 507,790 $ 23,167 $ 602 $ 1,622,687 YTD charge-offs 0 0 0 0 0 ( 2,195 ) 0 0 ( 2,195 ) YTD recoveries 0 0 0 0 0 795 0 0 795 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 1,400 ) $ 0 $ 0 $ ( 1,400 ) 107 Table of Contents Commercial Real Estate – Nonowner-occupied Revolving Term Loans Origination Year Revolving loans loans (In thousands) amortized cost converted to As of December 31, 2021 2021 2020 2019 2018 2017 Prior basis term loans Total Internal Risk Grade: Pass $ 1,558,474 $ 925,508 $ 707,570 $ 460,660 $ 397,003 $ 1,490,548 $ 102,561 $ 2,039 $ 5,644,363 Special Mention 819 2,953 113,655 5,826 372 40,534 2,793 0 166,952 Substandard 0 714 13,042 28,411 1,095 102,711 0 0 145,973 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 1,559,293 $ 929,175 $ 834,267 $ 494,897 $ 398,470 $ 1,633,793 $ 105,354 $ 2,039 $ 5,957,288 YTD charge-offs 0 0 0 0 0 ( 3,531 ) 0 0 ( 3,531 ) YTD recoveries 0 0 0 0 0 1,907 0 0 1,097 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 1,624 ) $ 0 $ 0 $ ( 1,624 ) Revolving Term Loans Origination Year Revolving loans loans (In thousands) amortized cost converted to As of December 31, 2020 2020 2019 2018 2017 2016 Prior basis term loans Total Internal Risk Grade: Pass $ 929,001 $ 592,109 $ 596,260 $ 481,894 $ 502,417 $ 1,496,135 $ 118,404 $ 2,112 $ 4,718,332 Special Mention 0 105,104 0 391 8,902 78,591 0 0 192,988 Substandard 392 14,620 7,435 1,564 10,824 71,572 0 0 106,407 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 929,393 $ 711,833 $ 603,695 $ 483,849 $ 522,143 $ 1,646,298 $ 118,404 $ 2,112 $ 5,017,727 YTD charge-offs ( 38 ) 0 ( 300 ) 0 ( 3,394 ) ( 2,402 ) 0 0 ( 6,134 ) YTD recoveries 0 0 0 0 0 1,023 0 0 1,023 YTD net charge-offs $ ( 38 ) $ 0 $ ( 300 ) $ 0 $ ( 3,394 ) $ ( 1,379 ) $ 0 $ 0 $ ( 5,111 ) Other commercial Revolving loans Revolving Term Loans and leases Origination Year and leases loans and leases (In thousands) amortized cost converted to As of December 31, 2021 2021 2020 2019 2018 2017 Prior basis term loans Total Internal Risk Grade: Pass $ 924,726 $ 557,422 $ 306,945 $ 107,426 $ 87,090 $ 76,032 $ 1,211,865 $ 2,038 $ 3,273,544 Special Mention 1,880 0 31,614 3,012 1,801 3,390 76,987 61 118,745 Substandard 793 11 1,561 4,930 2,146 18,963 41,357 205 69,966 Doubtful 0 0 0 0 0 106 0 0 106 Total $ 927,399 $ 557,433 $ 340,120 $ 115,368 $ 91,037 $ 98,491 $ 1,330,209 $ 2,304 $ 3,462,361 YTD charge-offs 0 ( 87 ) ( 31 ) ( 200 ) ( 174 ) ( 5,650 ) ( 40 ) 0 ( 6,182 ) YTD recoveries 0 3 30 86 34 4,154 0 0 4,307 YTD net charge-offs $ 0 $ ( 84 ) $ ( 1 ) $ ( 114 ) $ ( 140 ) $ ( 1,496 ) $ ( 40 ) $ 0 $ ( 1,875 ) Revolving loans Revolving Term Loans and leases Origination Year and leases loans and leases (In thousands) amortized cost converted to As of December 31, 2020 2020 2019 2018 2017 2016 Prior basis term loans Total Internal Risk Grade: Pass $ 1,702,787 $ 370,059 $ 200,588 $ 112,170 $ 119,582 $ 257,638 $ 1,172,699 $ 2,668 $ 3,938,191 Special Mention 333 384 4,754 1,300 138 8,231 40,048 86 55,274 Substandard 1,649 830 2,241 2,606 6,565 30,308 16,222 360 60,781 Doubtful 0 0 0 0 37 135 0 0 172 Total $ 1,704,769 $ 371,273 $ 207,583 $ 116,076 $ 126,322 $ 296,312 $ 1,228,969 $ 3,114 $ 4,054,418 YTD charge-offs 0 0 ( 959 ) ( 23 ) ( 3,525 ) ( 12,843 ) 0 0 ( 17,350 ) YTD recoveries 94 864 18 12 684 2,789 0 0 4,461 YTD net charge-offs $ 94 $ 864 $ ( 941 ) $ ( 11 ) $ ( 2,841 ) $ ( 10,054 ) $ 0 $ 0 $ ( 12,889 ) 108 Table of Contents Residential Real Estate Revolving Term Loans Origination Year Revolving loans loans (In thousands) amortized cost converted to As of December 31, 2021 2021 2020 2019 2018 2017 Prior basis term loans Total Internal Risk Grade: Pass $ 815,693 $ 568,323 $ 383,250 $ 315,211 $ 178,101 $ 931,730 $ 455,705 $ 2,972 $ 3,650,985 Special Mention 0 0 0 223 91 12,251 2,339 0 14,904 Substandard 464 0 444 617 2,763 19,773 1,497 113 25,671 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 816,157 $ 568,323 $ 383,694 $ 316,051 $ 180,955 $ 963,754 $ 459,541 $ 3,085 $ 3,691,560 YTD charge-offs 0 0 ( 37 ) ( 38 ) ( 167 ) ( 5,774 ) 0 0 ( 6,016 ) YTD recoveries 0 0 0 0 3 2,384 13 0 2,400 YTD net charge-offs $ 0 $ 0 $ ( 37 ) $ ( 38 ) $ ( 164 ) $ ( 3,390 ) $ 13 $ 0 $ ( 3,616 ) Revolving Term Loans Origination Year Revolving loans loans (In thousands) amortized cost converted to As of December 31, 2020 2020 2019 2018 2017 2016 Prior basis term loans Total Internal Risk Grade: Pass $ 603,714 $ 624,142 $ 640,535 $ 292,700 $ 282,547 $ 975,913 $ 436,728 $ 4,224 $ 3,860,503 Special Mention 0 267 0 192 2,325 6,623 800 0 10,207 Substandard 0 282 440 3,263 3,516 20,967 201 227 28,896 Doubtful 0 0 0 0 0 279 0 0 279 Total $ 603,714 $ 624,691 $ 640,975 $ 296,155 $ 288,388 $ 1,003,782 $ 437,729 $ 4,451 $ 3,899,885 YTD charge-offs 0 0 0 0 ( 1 ) ( 1,759 ) 0 0 ( 1,760 ) YTD recoveries 0 0 0 101 0 961 1 0 1,063 YTD net charge-offs $ 0 $ 0 $ 0 $ 101 $ ( 1 ) $ ( 798 ) $ 1 $ 0 $ ( 697 ) Revolving Term Loans Origination Year Revolving loans loans (In thousands) amortized cost converted to As of December 31, 2021 2021 2020 2019 2018 2017 Prior basis term loans Total Internal Risk Grade: Pass $ 767,351 $ 518,291 $ 278,020 $ 152,062 $ 18,371 $ 74,532 $ 192,421 $ 0 $ 2,001,048 Special Mention 0 69 3,261 0 0 1,237 995 0 5,562 Substandard 332 0 280 925 0 5,272 746 0 7,555 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 767,683 $ 518,360 $ 281,561 $ 152,987 $ 18,371 $ 81,041 $ 194,162 $ 0 $ 2,014,165 YTD charge-offs 0 0 0 0 ( 177 ) ( 383 ) 0 0 ( 560 ) YTD recoveries 0 0 0 0 133 471 0 0 604 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ ( 44 ) $ 88 $ 0 $ 0 $ 44 Revolving Term Loans Origination Year Revolving loans loans (In thousands) amortized cost converted to As of December 31, 2020 2020 2019 2018 2017 2016 Prior basis term loans Total Internal Risk Grade: Pass $ 420,977 $ 663,113 $ 304,579 $ 127,377 $ 83,252 $ 53,713 $ 145,431 $ 0 $ 1,798,442 Special Mention 0 0 4,689 557 0 1,420 995 0 7,661 Substandard 0 250 1,535 0 216 17,499 746 0 20,246 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 420,977 $ 663,363 $ 310,803 $ 127,934 $ 83,468 $ 72,632 $ 147,172 $ 0 $ 1,826,349 YTD charge-offs 0 0 0 0 0 ( 2,027 ) 0 0 ( 2,027 ) YTD recoveries 0 0 0 0 0 1,513 0 0 1,513 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 514 ) $ 0 $ 0 $ ( 514 ) 109 Table of Contents Bankcard Revolving Term Loans Origination Year Revolving loans loans (In thousands) amortized cost converted to As of December 31, 2021 2021 2020 2019 2018 2017 Prior basis term loans Total Internal Risk Grade: Pass $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,626 $ 0 $ 8,626 Special Mention 0 0 0 0 0 0 100 0 100 Substandard 0 0 0 0 0 0 187 0 187 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,913 $ 0 $ 8,913 YTD charge-offs 0 0 0 0 0 0 ( 190 ) 0 ( 190 ) YTD recoveries 0 0 0 0 0 0 42 0 42 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 148 ) $ 0 $ ( 148 ) Revolving (In thousands) Term Loans Origination Year Revolving loans amortized cost loans converted to As of December 31, 2020 2020 2019 2018 2017 2016 Prior basis term loans Total Internal Risk Grade: Pass $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,419 $ 0 $ 8,419 Special Mention 0 0 0 0 0 0 362 0 362 Substandard 0 0 0 0 0 0 156 0 156 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,937 $ 0 $ 8,937 YTD charge-offs 0 0 0 0 0 0 ( 221 ) 0 ( 221 ) YTD recoveries 0 0 0 0 0 0 52 0 52 YTD net charge-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 169 ) $ 0 $ ( 169 ) Other Consumer Revolving (In thousands) Term Loans Origination Year Revolving loans amortized cost loans converted to As of December 31, 2021 2021 2020 2019 2018 2017 Prior basis term loans Total Internal Risk Grade: Pass $ 479,933 $ 299,582 $ 237,742 $ 121,924 $ 30,288 $ 10,878 $ 3,475 $ 0 $ 1,183,822 Special Mention 0 0 2 1 0 10 8 0 21 Substandard 0 1 0 0 0 0 0 0 1 Doubtful 0 0 0 0 0 0 0 0 0 Total $ 479,933 $ 299,583 $ 237,744 $ 121,925 $ 30,288 $ 10,888 $ 3,483 $ 0 $ 1,183,844 YTD charge-offs ( 101 ) ( 776 ) ( 709 ) ( 483 ) ( 126 ) ( 203 ) ( 6 ) 0 ( 2,404 ) YTD recoveries 5 86 51 101 18 186 2 0 449 YTD net charge-offs $ ( 96 ) $ ( 690 ) $ ( 658 ) $ ( 382 ) $ ( 108 ) $ ( 17 ) $ ( 4 ) $ 0 $ ( 1,955 ) Revolving (In thousands) Term Loans Origination Year Revolving loans amortized cost loans converted to As of December 31, 2020 2020 2019 2018 2017 2016 Prior basis term loans Total Internal Risk Grade: Pass $ 419,768 $ 401,958 $ 231,172 $ 74,550 $ 34,435 $ 7,466 $ 6,110 $ 0 $ 1,175,459 Special Mention 0 0 0 0 0 14,763 2 0 14,765 Substandard 3 0 0 0 0 2,352 0 0 2,355 Doubtful 0 0 0 0 0 1 0 0 1 Total $ 419,771 $ 401,958 $ 231,172 $ 74,550 $ 34,435 $ 24,582 $ 6,112 $ 0 $ 1,192,580 YTD charge-offs ( 136 ) ( 1,013 ) ( 1,040 ) ( 393 ) ( 228 ) ( 484 ) ( 2 ) 0 ( 3,296 ) YTD recoveries 3 74 113 30 43 216 0 0 479 YTD net charge-offs $ ( 133 ) $ ( 939 ) $ ( 927 ) $ ( 363 ) $ ( 185 ) $ ( 268 ) $ ( 2 ) $ 0 $ ( 2,817 ) NOTE F—ALLOWANCE FOR CREDIT LOSSES United adopted the CECL methodology for measuring credit losses as of January 1, 2020. All disclosures as of and for the year ended December 31, 2021 and 2020 are presented in accordance with ASC 326. The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP. As a result of the applying ASC 326 for the years of 2021 and 2020, there is a lack of comparability in both the allowance for loan losses and provisions for credit losses to the year of 2019. 110 Table of Contents The allowance for loan losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. For a detailed discussion of the CECL methodology used to estimate the allowance for loan losses, see Note A, “Summary of Significant Accounting Policies.” United made a policy election to present the accrued interest receivable balance separately in its consolidated balance sheets from the amortized cost of a loan. Accrued interest receivable was $ 49,029 ,000 (net of an allowance for credit losses of $ 8 ,000) and $ 56,143 ,000 (net of an allowance for credit losses of $ 250 ,000) at December 31, 2021 and December 31, 2020, respectively, related to loans and leases are included separately in “Accrued interest receivable” in the consolidated balance sheets. Due to loan interest payment deferrals granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans and leases. As a result of this assessment, United recorded an allowance for credit losses of $ 8 ,000 and $ 250 ,000 for accrued interest receivables not expected to be collected as of December 31, 2021 and 2020, respectively. For all classes of loans and leases receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due, unless the loan is well secured and in the process of collection. Interest received on nonaccrual loans and leases, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The following table represents the accrued interest receivable as of December 31, 2021 and December 31, 2020: Accrued Interest Receivable (In thousands) At December 31, 2021 At December 31, 2020 Commercial Real Estate: Owner-occupied $ 4,172 $ 5,001 Nonowner-occupied 14,901 15,989 Other Commercial 9,335 12,320 Residential Real Estate 10,347 12,558 Construction 7,411 7,314 Consumer: Bankcard 0 0 Other consumer 2,871 3,211 $ 49,037 $ 56,393 Less: Allowance for credit losses ( 8 ) ( 250 ) Total $ 49,029 $ 56,143 The following table represents the accrued interest receivables written off by reversing interest income for the year ended December 31, 2021 and December 31, 2020: Accrued Interest Receivables Written Off by Reversing Interest Income (In thousands) Year Ended 2021 2020 Commercial Real Estate: Owner-occupied $ 33 $ 163 Nonowner-occupied 114 185 Other Commercial 40 87 Residential Real Estate 419 173 Construction 8 509 Consumer: Bankcard 0 0 Other consumer 176 125 Total $ 790 $ 1,242 United maintains an allowance for loan losses and a reserve for lending-related commitments such as unfunded loan commitments and letters of credit. For a detailed discussion of the methodology used to estimate the reserve for lending-related commitments, see Note A, “Summary of Significant Accounting Policies.” The reserve for lending-related commitments of $ 31,442 ,000 and $ 19,250 ,000 at December 31, 2021 and December 31, 2020, respectively, is separately classified on the balance sheet and is included in other liabilities. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses. 111 Table of Contents For the year of December 31 , 2021 , the allowance for credit losses decreased from December 31 , 2020 due to better performance trends within the loan portfolio and improved macroeconomic factors surrounding the COVID-19 pandemic considered in the determination of the allowance for loan and lease losses at December 31 , 2021 . Reserves are initially determined based on losses identified from the PD/LGD and Cohort models which utilize the Company’s historical information. Then any qualitative adjustments are applied to account for the Company’s view of the future. If current conditions underlying any qualitative adjustment factor were deemed to be materially different than historical conditions, then an adjustment was made for that factor. The 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. A progression of the allowance for loan losses, by portfolio segment, for the periods indicated is summarized as follows: Allowance for Loan and Lease Losses and Carrying Amount of Loans and Leases For the Year Ended December 31, 2021 (In thousands) Commercial Real Estate Other Commercial Residential Real Estate Construction & Land Development Bankcard Allowance for Estimated Imprecision Total Owner- occupied Nonowner- occupied Other Consumer Allowance for Loan and Lease Losses: Beginning balance $ 23,354 $ 49,150 $ 78,138 $ 29,125 $ 39,077 $ 322 $ 16,664 $ 0 $ 235,830 Allowance for PCD loans (acquired during the period) 1,241 4,363 5,009 1,192 823 0 1 0 12,629 Charge-offs ( 414 ) ( 3,531 ) ( 6,182 ) ( 6,016 ) ( 560 ) ( 190 ) ( 2,404 ) 0 ( 19,297 ) Recoveries 869 1,907 4,307 2,400 604 42 449 0 10,578 Provision ( 10,607 ) ( 9,733 ) ( 2,840 ) ( 297 ) ( 549 ) 143 159 0 ( 23,724 ) Ending balance $ 14,443 $ 42,156 $ 78,432 $ 26,404 $ 39,395 $ 317 $ 14,869 $ 0 $ 216,016 112 Table of Contents Allowance for Loan and Lease Losses and Carrying Amount of Loans and Leases For the Year Ended December 31, 2020 (In thousands) Commercial Real Estate Other Commercial Residential Real Estate Construction & Land Development Bankcard Allowance for Estimated Imprecision Total Owner- occupied Nonowner- occupied Other Consumer Allowance for Loan and Lease Losses: Beginning balance $ 5,554 $ 8,524 $ 47,325 $ 8,997 $ 3,353 $ 74 $ 2,933 $ 297 $ 77,057 Impact of the adoption of ASU 2016-13 on January 1, 2020 9,737 9,023 ( 4,829 ) 13,097 14,817 28 10,745 ( 297 ) 52,321 Impact of the adoption of ASU 2016-13 for PCD loans on January 1, 2020 1,843 121 938 174 2,045 0 0 0 5,121 Initial allowance for PCD loans (acquired during the period) 1,955 6,418 7,032 652 2,570 0 8 0 18,635 Charge-offs ( 2,195 ) ( 6,134 ) ( 17,350 ) ( 1,760 ) ( 2,027 ) ( 221 ) ( 3,296 ) 0 ( 32,983 ) Recoveries 795 1,023 4,461 1,063 1,513 52 479 0 9,386 Provision 5,665 30,175 40,561 6,902 16,806 389 5,795 0 106,293 Ending balance $ 23,354 $ 49,150 $ 78,138 $ 29,125 $ 39,077 $ 322 $ 16,664 $ 0 $ 235,830 A progression of the allowance for credit losses, which includes the allowance for loan losses and the reserve for lending-related commitments, for the periods presented is summarized as follows: Year Ended December 31 (In thousands) 2021 2020 2019 Balance of allowance for loan and lease losses at beginning of period $ 235,830 $ 77,057 $ 76,703 Cumulative effect adjustment for CECL 0 57,442 0 235,830 134,499 76,703 Initial allowance for acquired PCD loans 12,629 18,635 0 Gross charge-offs ( 19,297 ) ( 32,983 ) ( 29,110 ) Recoveries 10,578 9,386 8,151 Net charge-offs ( 8,719 ) ( 23,597 ) ( 20,959 ) Provision for loan and lease losses ( 23,724 ) 106,293 21,313 Balance of allowance for loan and lease losses at end of period $ 216,016 $ 235,830 $ 77,057 Reserve for lending-related commitments 31,442 19,250 1,733 Balance of allowance for credit losses at end of period $ 247,458 $ 255,080 $ 78,790 NOTE G--BANK PREMISES AND EQUIPMENT Bank premises and equipment are summarized as follows: December 31 (In thousands) 2021 2020 Land $ 60,551 $ 54,389 Buildings and improvements 194,053 166,926 Leasehold improvements 38,568 39,681 Furniture, fixtures and equipment 105,554 99,277 398,726 360,273 Less allowance for depreciation and amortization ( 201,506 ) ( 184,449 ) Net bank premises and equipment $ 197,220 $ 175,824 113 Table of Contents Depreciation expense was $ 16,583,000 , $ 13,464,000 , and $ 9,329,000 for years ending December 31, 2021, 2020 and 2019, respectively, while amortization expense was $ 331,000 , $ 251,000 and $ 141,000 for the years ended December 31, 2021, 2020 and 2019, respectively. NOTE H--LEASES United determines if an arrangement is a lease at inception. United and certain subsidiaries have entered into various noncancelable-operating leases for branch and loan production offices as well as operating facilities. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Consolidated Balance Sheets. Operating leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. Presently, United does not have any finance leases. United’s operating leases are subject to renewal options under various terms. United’s operating leases have remaining terms of 1 to 16 years, some of which include options to extend leases generally for periods of 5 years. United rents or subleases certain real estate to third parties. Our sublease portfolio generally consists of operating leases to other organizations for former branch offices. ROU assets represent United’s right to use an underlying asset for the lease term and lease liabilities represent United’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of United’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend the lease when it is reasonably certain that United will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense were as follows: Year Ended Year Ended (In thousands) Classification December 31, 2021 December 31, 2020 Operating lease cost Net occupancy expense $ 21,466 $ 22,575 Sublease income Net occupancy expense ( 1,256 ) ( 1,039 ) Net lease cost $ 20,210 $ 21,536 Supplemental balance sheet information related to leases was as follows: (In thousands) Classification December 31, 2021 December 31, 2020 Operating lease right-of-use assets Operating lease right-of-use assets $ 81,942 $ 69,520 Operating lease liabilities Operating lease liabilities $ 86,703 $ 73,213 Other information related to leases was as follows: December 31, 2021 Weighted-average remaining lease term: Operating leases 6.99 years Weighted-average discount rate: Operating leases 2.13 % Supplemental cash flow information related to leases was as follows: Year Ended (In thousands) December 31, 2021 December 31, 2020 Cash paid for amounts in the measurement of lease liabilities: Operating cash flows from operating leases $ 22,153 $ 22,409 ROU assets obtained in the exchange for lease liabilities 22,719 30,864 114 Table of Contents Maturities of lease liabilities by year and in the aggregate, under operating leases with initial or remaining terms of one year or more, for years subsequent to December 31, 2021, consists of the following: Year Amount (Dollars in thousands) 2022 $ 19,490 2023 16,756 2024 12,191 2025 9,371 2026 8,237 Thereafter 27,002 Total lease payments 93,047 Less: imputed interest ( 6,344 ) Total $ 86,703 NOTE I—INTANGIBLE ASSETS The following is a summary of intangible assets subject to amortization and those not subject to amortization: December 31, 2021 Community Banking Mortgage Banking Total (In thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortized intangible assets: Core deposit intangible assets $ 105,165 ($ 82,028 ) $ 0 $ 0 $ 105,165 ($ 82,028 ) Non-amortized intangible assets: George Mason trade name $ 0 $ 1,080 $ 1,080 Crescent trade name 0 196 196 Total $ 0 $ 1,276 $ 1,276 Goodwill not subject to amortization $ 1,881,179 $ 5,315 $ 1,886,494 December 31, 2020 Community Banking Mortgage Banking Total (In thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortized intangible assets: Core deposit intangible assets $ 101,767 ($ 76,120 ) $ 0 $ 0 $ 101,767 ($ 76,120 ) Non-amortized intangible assets: George Mason trade name $ 0 $ 1,080 $ 1,080 Crescent trade name 0 196 196 Total $ 0 $ 1,276 $ 1,276 Goodwill not subject to amortization $ 1,791,533 $ 5,315 $ 1,796,848 115 Table of Contents The following table provides a reconciliation of goodwill: (In thousands) Community Banking Mortgage Banking Total Goodwill at December 31, 2020 $ 1,791,533 $ 5,315 $ 1,796,848 Addition to goodwill from Carolina Financial acquisition 13,192 0 13,192 Preliminary addition to goodwill from Community Bankers Trust acquisition 76,454 0 76,454 Goodwill at December 31, 2021 $ 1,881,179 $ 5,315 $ 1,886,494 For the year of 2021, goodwill of $ 13,192 ,000 was recorded for the Carolina Financial acquisition due to measurement period adjustments in current and deferred income taxes. The following table sets forth the anticipated amortization expense for intangible assets for the years subsequent to 2021: Year Amount (Dollars in thousands) 2022 $ 5,516 2023 5,116 2024 3,639 2025 3,282 2026 2,758 2027 and thereafter 2,826 NOTE J—MORTGAGE SERVICING RIGHTS Mortgage loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The value of mortgage servicing rights (“MSRs”) is included on the Company’s Consolidated Balance Sheets. The unpaid principal balances of loans serviced for others were approximately $ 3,698,998 ,000 and $ 3,587,953 ,000 at December 31, 2021 and 2020, respectively. The estimated fair value of the mortgage servicing rights was $ 27,355 ,000 and $ 20,955 ,000 at December 31, 2021 and December 31, 2020, respectively. The estimated fair value of servicing rights at December 31, 2021 was determined using a net servicing fee of 0.26 %, average discount rates ranging from 10.50 % to 11.71 % with a weighted average discount rate of 10.60 %, average constant prepayment rates (“CPR”) ranging from 12.59 % to 21.20 % with a weighted average prepayment rate of 16.56 %, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.09 %. The estimated fair value of servicing rights at December 31, 2020 was determined using a net servicing fee of 0.26 %, average discount rates ranging from 9.50 % to 14.07 % with a weighted average discount rate of 10.62 %, average constant prepayment rates (“CPR”) ranging from 7.98 % to 18.42 % with a weighted average prepayment rate of 14.60 %, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.88 %. Please refer to Note W in these Notes to Consolidated Financial Statements for additional information concerning the fair value of MSRs. As disclosed in Note B of these Notes to Consolidated Financial Statements, the Company acquired $ 20,123 ,000 of mortgage servicing rights from its acquisition of Carolina Financial Corporation on May 1, 2020. The following presents the activity in mortgage servicing rights, including their valuation allowance for the year ended December 31, 2021 and 2020: 116 Table of Contents (In thousands) Year Ended December 31, 2021 Year Ended December 31, 2020 MSRs beginning balance $ 22,338 $ 0 Addition from acquisition of subsidiary 0 20,123 Amount capitalized 10,584 7,310 Amount amortized ( 8,895 ) ( 5,095 ) MSRs ending balance $ 24,027 $ 22,338 MSRs valuation allowance beginning balance $ ( 1,383 ) $ 0 Aggregate additions charged and recoveries credited to operations 1,129 0 MSRs impairment ( 629 ) ( 1,383 ) MSRs valuation allowance ending balance $ ( 883 ) $ ( 1,383 ) MSRs, net of valuation allowance $ 23,144 $ 20,955 In determining impairment, the Company aggregates all servicing right s and stratifies th em into tranches based on predominant risk characteristics. The estimated amortization expense is based on current information regarding future loan payments and prepayments. Amortization expense could change in future periods based on changes in the volume of prepayments and economic factors. NOTE K--DEPOSITS The book value of deposits consisted of the following: (In thousands) December 31 2021 2020 Demand deposits $ 8,980,547 $ 5,428,398 Interest-bearing checking 3,734,355 799,635 Regular savings 1,641,404 1,283,823 Money market accounts 6,361,887 10,165,334 Time deposits under $100,000 1,031,008 979,988 Time deposits over $100,000 1,601,062 1,927,982 Total deposits $ 23,350,263 $ 20,585,160 Included in time deposits over $100,000 at December 31, 2021 and 2020 were time deposits of $250,000 or more of $ 640,752 ,000 and $ 889,334 ,000, respectively. Interest paid on deposits approximated $ 43,562 ,000, $ 81,080 ,000, and $ 136,360 ,000 in 2021, 2020 and 2019, respectively. United’s subsidiary banks have received deposits, in the normal course of business, from the directors and officers of United and its subsidiaries, and their associates. Such related party deposits were accepted on substantially the same terms, including interest rates and maturities, as those prevailing at the time for comparable transactions with unrelated persons. The aggregate dollar amount of these deposits was $ 25,889 ,000 and $ 15,585 ,000 at December 31, 2021 and 2020, respectively. NOTE L—SHORT-TERM BORROWINGS At December 31, 2021 and 2020, short-term borrowings were as follows: December 31 (In thousands) 2021 2020 Federal funds purchased $ 0 $ 0 Securities sold under agreements to repurchase 128,844 142,300 Total short-term borrowings $ 128,844 $ 142,300 Federal funds purchased and securities sold under agreements to repurchase have been a significant source of funds for the company. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $ 230,000 ,000. These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions. At December 31, 2021, all the repurchase agreements were in overnight accounts. The rates offered on these funds vary according to movements in the federal funds and short-term investment market rates. 117 Table of Contents United has a $ 20,000 ,000 line of credit with an unrelated financial institution to provide for general liquidity needs. The line is an unsecured, revolving line of credit. The line is renewable on a 360 day basis and carries an indexed, floating-rate of interest. The line requires compliance with various financial and nonfinancial covenants. At December 31, 2021, United had no outstanding balance under this credit. Interest paid on short-term borrowings approximated $ 693 ,000, $ 1,027 ,000, and $ 2,359 ,000 in 2021, 2020 and 2019, respectively. 118 Table of Contents NOTE M—LONG-TERM BORROWINGS United’s subsidiary bank is a member of the Federal Home Loan Bank (“FHLB”). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a mix of single-family residential mortgage loans, commercial loans and investment securities. At December 31, 2021, the total carrying value of loans pledged as collateral for FHLB advances approximated $ 4,515,388,000 . United had an unused borrowing amount as of December 31, 2021 of approximately $ 7,142,780,000 available subject to delivery of collateral after certain trigger points. Advances may be called by the FHLB or redeemed by United based on predefined factors and penalties. At December 31, 2021 and 2020, FHLB advances and the related weighted-average interest rates were as follows: 2021 2020 Weighted- Weighted- Weighted- Weighted- Average Average Average Average Contractual Effective Contractual Effective (Dollars in thousands) Amount Rate Rate Amount Rate Rate FHLB advances $ 532,199 0.35 % 0.55 % $ 584,532 0.60 % 0.75 % No overnight funds were included in the $ 532,199 ,000 and $ 584,532 ,000 above at December 31, 2021 and 2020, respectively. The weighted-average effective rate considers the effect of any interest rate swaps designated as fair value hedges outstanding at year-end 2021 and 2020 to manage interest rate risk on its long-term debt. Additional information is provided in Note S, Notes to Consolidated Financial Statements. At December 31, 2021, United had a total of twenty statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (“Capital Securities”) with the proceeds invested in junior subordinated debt securities (“Debentures”) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. United assumed $ 4,124,000 in aggregate principal amount of a LIBOR-indexed floating rate subordinated note in the Community Bankers Trust merger. United also assumed $ 10,000,000 in aggregate principal amount of fixed-to-floating rate subordinated notes in the Carolina Financial acquisition. At December 31, 2021 and 2020, the outstanding balance of the subordinated notes was $ 9,872,000 and $ 9,865,000 . At December 31, 2021 and 2020, the outstanding balance of the Debentures was $ 275,323,000 and $ 269,972,000 , respectively, and was included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.” The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities. Under the provisions of the subordinated debt, United has the right to defer payment of interest on the subordinated debt at any time, or from time to time, for periods not exceeding five years . If interest payments on the subordinated debt are deferred, the dividends on the Capital Securities are also deferred. Interest on the subordinated debt is cumulative. In accordance with the fully-phased in “Basel III Capital Rules” as published by United’s primary federal regulator, the Federal Reserve, United is unable to consider the Capital Securities as Tier 1 capital, but rather the Capital Securities are included as a component of United’s Tier 2 capital. United can include the Capital Securities in its Tier 2 capital on a permanent basis. Information related to United’s statutory trusts is presented in the table below: (Dollars in thousands) Description Issuance Date Amount of Capital Securities Issued Stated Interest Rate Maturity Date United Statutory Trust III December 17, 2003 $ 20,000 3-month LIBOR + 2.85% December 17, 2033 United Statutory Trust IV December 19, 2003 $ 25,000 3-month LIBOR + 2.85% January 23, 2034 United Statutory Trust V July 12, 2007 $ 50,000 3-month LIBOR + 1.55% October 1, 2037 United Statutory Trust VI September 20, 2007 $ 30,000 3-month LIBOR + 1.30% December 15, 2037 Premier Statutory Trust II September 25, 2003 $ 6,000 3-month LIBOR + 3.10% October 8, 2033 119 Table of Contents (Dollars in thousands) Description Issuance Date Amount of Capital Securities Issued Stated Interest Rate Maturity Date Premier Statutory Trust III May 16, 2005 $ 8,000 3-month LIBOR + 1.74% June 15, 2035 Premier Statutory Trust IV June 20, 2006 $ 14,000 3-month LIBOR + 1.55% September 23, 2036 Premier Statutory Trust V December 14, 2006 $ 10,000 3-month LIBOR + 1.61% March 1, 2037 Centra Statutory Trust I September 20, 2004 $ 10,000 3-month LIBOR + 2.29% September 20, 2034 Centra Statutory Trust II June 15, 2006 $ 10,000 3-month LIBOR + 1.65% July 7, 2036 Virginia Commerce Trust II December 19, 2002 $ 15,000 6-month LIBOR + 3.30% December 19, 2032 Virginia Commerce Trust III December 20, 2005 $ 25,000 3-month LIBOR + 1.42% February 23, 2036 Cardinal Statutory Trust I July 27, 2004 $ 20,000 3-month LIBOR + 2.40% September 15, 2034 UFBC Capital Trust I December 30, 2004 $ 5,000 3-month LIBOR + 2.10% March 15, 2035 Carolina Financial Capital Trust I December 19, 2002 $ 5,000 Prime + 0.50% December 31, 2032 Carolina Financial Capital Trust II November 5, 2003 $ 10,000 3-month LIBOR + 3.05% January 7, 2034 Greer Capital Trust I October 12, 2004 $ 6,000 3-month LIBOR + 2.20% October 18, 2034 Greer Capital Trust II December 28, 2006 $ 5,000 3-month LIBOR + 1.73% January 30, 2037 First South Preferred Trust I September 26, 2003 $ 10,000 3-month LIBOR + 2.95% September 30, 2033 BOE Statutory Trust I December 12, 2003 $ 4,000 3-month LIBOR + 3.00% December 12, 2033 At December 31, 2021 and 2020, the Debentures and their related weighted-average interest rates were as follows: 2021 2020 (Dollars in thousands) Amount Weighted- Average Rate Amount Weighted- Average Rate United Statutory Trust III $ 20,619 3.07 % $ 20,619 3.08 % United Statutory Trust IV 25,774 2.98 % 25,774 3.06 % United Statutory Trust V 51,547 1.68 % 51,547 1.78 % United Statutory Trust VI 30,928 1.50 % 30,928 1.52 % Premier Statutory Trust II 6,186 3.22 % 6,186 3.34 % Premier Statutory Trust III 8,248 1.94 % 8,248 1.96 % Premier Statutory Trust IV 14,433 1.77 % 14,433 1.80 % Premier Statutory Trust V 10,310 1.78 % 10,310 1.84 % Centra Statutory Trust I 10,000 2.50 % 10,000 2.53 % Centra Statutory Trust II 10,000 1.77 % 10,000 1.89 % Virginia Commerce Trust II 12,936 3.57 % 12,705 3.57 % Virginia Commerce Trust III 18,320 1.58 % 17,794 1.63 % Cardinal Statutory Trust I 15,620 2.60 % 15,223 2.62 % UFBC Capital Trust I 3,761 2.30 % 3,656 2.32 % Carolina Financial Capital Trust I 5,010 3.75 % 4,998 3.75 % Carolina Financial Capital Trust II 9,420 3.17 % 9,340 3.29 % Greer Capital Trust I 5,167 3.17 % 5,075 2.42 % Greer Capital Trust II 3,983 2.32 % 3,876 1.94 % First South Preferred Trust I 9,348 1.86 % 9,260 3.19 % BOE Statutory Trust I 3,713 3.22 % 0 0.00 % Total $ 275,323 $ 269,972 At December 31, 2021, the scheduled maturities of long-term borrowings were as follows: Year Amount (Dollars in thousands) 2022 $ 519,508 2023 0 2024 0 2025 9,441 2026 8,249 2027 and thereafter 280,196 Total $ 817,394 Interest paid on long-term borrowings approximated $ 10,336,000 , $ 33,240,000 , and $ 43,830,000 in 2021, 2020 and 2019, respectively. 120 Table of Contents NOTE N—OTHER EXPENSE The following details certain items of other expense for the periods indicated: Year Ended December 31 (In thousands) 2021 2020 2019 Legal, consulting & other professional services $ 17,616 $ 16,482 $ 12,360 Franchise & other taxes not on income 12,412 12,122 11,330 Expense for reserve on lending-related commitments 12,034 11,315 344 Automated Teller Machine (ATM) expenses 10,519 9,295 7,336 NOTE O—INCOME TAXES The income tax provisions included in the consolidated statements of income are summarized as follows: Year Ended December 31 (In thousands) 2021 2020 2019 Current expense: Federal $ 76,574 $ 60,508 $ 43,337 State 14,516 10,656 6,798 Deferred expense: Federal 2,742 ( 174 ) 12,522 Tax Act remeasurement 0 0 0 State 1,283 ( 273 ) 1,683 Total income taxes $ 95,115 $ 70,717 $ 64,340 The following is a reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to income before income taxes: Year Ended December 31 (Dollars in thousands) 2021 2020 2019 Amount % Amount % Amount % Tax on income before taxes at statutory federal rate $ 97,199 21.0 % $ 75,546 21.0 % $ 68,132 21.0 % Plus: State income taxes net of federal tax benefits 11,520 2.5 8,202 2.3 6,690 2.1 108,719 23.5 83,748 23.3 74,822 23.1 Increase (decrease) resulting from: Tax-exempt interest income ( 3,303 ) ( 0.7 ) ( 3,011 ) ( 0.8 ) ( 2,813 ) ( 0.9 ) Tax credits ( 11,893 ) ( 2.6 ) ( 9,860 ) ( 2.7 ) ( 5,636 ) ( 1.7 ) Other items-net 1,592 0.4 ( 160 ) ( 0.1 ) ( 2,033 ) ( 0.7 ) Income taxes $ 95,115 20.6 % $ 70,717 19.7 % $ 64,340 19.8 % For years ended 2021, 2020 and 2019, United incurred federal income tax expense of $ 587,000 , $ 663,000 , and $ 54,000 , respectively, applicable to the sales and calls of securities. Income taxes paid approximated $ 101,227 ,000, $ 65,378 ,000, and $ 56,459 ,000 in 2021, 2020 and 2019, respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2021, United had no federal or state net operating loss carryforwards. Taxes not on income, which consists mainly of business franchise taxes, were $ 12,412 ,000, $ 12,122 ,000, and $ 11,330 ,000, for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are recorded in other expense in the Consolidated Statements of Income. 121 Table of Contents Significant components of United’s deferred tax assets and liabilities (included in other assets in the Consolidated Balance Sheets) at December 31, 2021 and 2020 are as follows: (In thousands) 2021 2020 Deferred tax assets: Allowance for credit losses $ 57,659 $ 59,492 Accrued benefits payable 17,204 14,097 Other accrued liabilities 655 655 Pension plan accruals 0 409 Unrealized loss on securities available for sale 0 0 Other real estate owned 1,706 980 Lease liabilities under operating leases 20,202 17,059 Deferred mortgage points 5,413 6,518 Purchase accounting intangibles 0 820 Total deferred tax assets 102,839 100,030 Deferred tax liabilities: Premises and equipment 6,750 5,878 Unrealized gain on securities available for sale 2,890 20,087 Right-of-use assets under operating leases 19,092 16,198 Pension plan accruals 4,497 0 Derivatives 4,970 1,020 Purchase accounting intangibles 6,369 0 Other 957 1,312 Total deferred tax liabilities 45,525 44,495 Net deferred tax assets $ 57,314 $ 55,535 At December 31, 2021 and 2020, United believes that all of the deferred tax amounts shown above are more likely than not to be realized based on an assessment of all available positive and negative evidence and therefore no valuation allowance has been recorded. In accordance with ASC Topic 740, “Income Taxes,” United records a liability for uncertain income tax positions based on a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken on a tax return, in order for those tax positions to be recognized in the financial statements. Below is a reconciliation of the total amounts of unrecognized tax benefits: December 31 (In thousands) 2021 2020 Unrecognized tax benefits at beginning of year $ 2,203 $ 1,568 Increase in unrecognized tax benefits as a result of tax positions taken during the current period 199 1,158 Decreases in the unrecognized tax benefits as a result of a lapse of the applicable statute of limitations ( 735 ) ( 523 ) Unrecognized tax benefits at end of year $ 1,667 $ 2,203 The entire amount of unrecognized tax benefits, if recognized, would impact United’s effective tax rate. Over the next 12 months, the statute of limitations will close on certain income tax returns. However, at this time, United cannot reasonably estimate the amount of tax benefits, if any, it may recognize over the next 12 months. United is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2018, 2019 and 2020 and certain State Taxing authorities for the years ended December 31, 2018 through 2020. As of December 31, 2021, and 2020, the total amount of accrued interest related to uncertain tax positions was $ 727,000 and $ 668,000 , respectively. United accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. No interest or penalties were recognized in the results of operations for the years of 2021, 2020 and 2019. 122 Table of Contents NOTE P—EMPLOYEE BENEFIT PLANS United has a defined benefit retirement plan covering qualified employees. Pension benefits are based on years of service and the average of the employee’s highest five consecutive plan years of basic compensation paid during the ten plan years preceding the date of determination. Contributions by United are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. In September of 2007, after a recommendation by United’s Pension Committee and approval by United’s Board of Directors, the United Bankshares, Inc. Pension Plan (the “Plan”) was amended to change the participation rules. The decision to change the participation rules for the Plan followed current industry trends, as many large and medium size companies have taken similar steps. The amendment provided that employees hired on or after October 1, 2007, will not be eligible to participate in the Plan. However, new employees will continue to be eligible to participate in United’s Savings and Stock Investment 401(k) plan. This change had no impact on current employees hired prior to October 1, 2007 as they will continue to participate in the Plan, with no change in benefit provisions, and will continue to be eligible to participate in United’s Savings and Stock Investment 401(k) Plan. Net periodic pension costs, except for service cost, are recognized in employee benefits on the consolidated statements of income. Service cost is recognized in employee compensation. Net consolidated periodic pension cost included the following components: (Dollars in thousands) Year Ended December 31, 2021 2020 2019 Service cost $ 2,936 $ 2,742 $ 2,173 Interest cost 4,241 5,222 5,931 Expected return on plan assets ( 11,874 ) ( 11,010 ) ( 9,434 ) Recognized net actuarial loss 6,770 6,050 4,965 Net periodic pension cost $ 2,073 $ 3,004 $ 3,635 Weighted-Average Assumptions: Discount rate 2.81 % 3.42 % 4.52 % Expected return on assets 6.25 % 6.75 % 7.00 % Rate of compensation increase (prior to age 40) 5.00 % 5.00 % n/a Rate of compensation increase (ages 40-54) 4.00 % 4.00 % n/a Rate of compensation Increase (prior to age 45) n/a n/a 3.50 % Rate of compensation Increase (otherwise) 3.50 % 3.50 % 3.00 % Amounts related to the Plan recognized as a component of other comprehensive income were as follows: (In thousands) Year Ended December 31, 2021 2020 2019 Net actuarial (gain) loss $( 14,286 ) $ 10,583 $ 10,324 Amortization of: Prior service cost 0 0 0 Actuarial loss ( 6,770 ) ( 6,050 ) ( 4,965 ) Total recognized in other comprehensive income $ ( 21,056 ) $ 4,533 $ 5,359 Included in accumulated other comprehensive income at December 31, 2021 are unrecognized actuarial losses of $ 44,370,000 ($ 34,032,000 net of tax) that have not yet been recognized in net periodic pension cost. The reconciliation of the beginning and ending balances of the projected benefit obligation and the fair value of plan assets for the years ended December 31, 2021 and 2020 and the accumulated benefit obligation at December 31, 2021 and 2020 are as follows: (Dollars in thousands) December 31, 2021 2020 Change in Projected Benefit Obligation Projected Benefit Obligation at the Beginning of the Year $ 194,775 $ 173,777 Service Cost 2,936 2,742 Interest Cost 4,241 5,222 123 Table of Contents (Dollars in thousands) December 31, 2021 2020 Actuarial Loss ( 2,369 ) 18,391 Benefits Paid ( 6,610 ) ( 5,357 ) Projected Benefit at the End of the Year $ 192,973 $ 194,775 Accumulated Benefit Obligation at the End of the Year $ 175,953 $ 176,635 Change in Plan Assets Fair Value of Plan Assets at the Beginning of the Year $ 193,022 $ 159,560 Actual Return on Plan Assets 23,792 18,819 Benefits Paid ( 6,610 ) ( 5,357 ) Employer Contributions 0 20,000 Fair value of plan assets at end of year $ 210,204 $ 193,022 Net Amount Recognized Funded Status $ 17,230 $ ( 1,753 ) Unrecognized Transition Asset 0 0 Unrecognized Prior Service Cost 0 0 Unrecognized Net Loss 44,370 65,426 Net Amount Recognized $ 61,600 $ 63,673 Weighted-Average Assumptions at the End of the Year Discount Rate 3.08 % 2.81 % Rate of compensation Increase (prior to age 40) 5.00 % 5.00 % Rate of compensation Increase (ages 40-54) 4.00 % 4.00 % Rate of compensation Increase (prior to age 45) n/a n/a Rate of compensation Increase (otherwise) 3.50 % 3.50 % Asset allocation for the defined benefit pension plan as of the measurement date , by asset category, is as follows: Plan Assets Target Allocation 2022 Allowable Allocation Range Percentage of Plan Assets at December 31, 2021 December 31, 2020 Equity Securities 60 % 50 - 70 % 65 % 58 % Debt Securities 39 % 20 - 50 % 34 % 37 % Other 1 % 3 - 15 % 1 % 5 % Total 100 % 100 % Equity securities include United common stock in the amounts of $ 3,839,000 ( 3 %) at December 31, 2021 and $ 3,429,000 ( 2 %) at December 31, 2020 . The policy, as established by the Pension Committee, primarily consisting of United’s Executive Management, is to invest assets based upon the target allocations stated above. The assets are reallocated periodically to meet the above target allocations. The investment policy is reviewed at least annually, subject to the approval of the Pension Committee, to determine if the policy should be changed. Prohibited investments include, but are not limited to, futures contracts, private placements, uncovered options, real estate, the use of margin, short sales, derivatives for speculative purposes, and other investments that are speculative in nature. In order to achieve a prudent level of portfolio diversification, the securities of any one company are not to exceed 10 % of the total plan assets, and no more than the 15 % of total plan assets is to be invested in any one industry (other than securities of U.S. Government or Agencies). Additionally, no more than 15 % of the plan assets is to be invested in foreign securities, both equity and fixed. The expected long-term rate of return for the plan’s total assets is based on the expected return of each of the above categories, weighted based on the median of the target allocation for each class. United uses the corridor approach based on 10 % of the greater of the projected benefit obligation and the market-related value of plan assets to amortize actuarial gains and losses. 124 Table of Contents At December 31, 2021 , the benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five years thereafter are as follows: Year Amount (Dollars in thousands) 2022 $ 6,173 2023 7,084 2024 7,476 2025 7,907 2026 8,313 2027 through 2031 46,569 United made a discretionary contribution of $ 20,000,000 during the third quarter of 2020. United did not contribute to the plan in 2021 or in 2019 as no contributions were required by funding regulations or law. For 2022, no contributions to the plan are required by funding regulations or law. However, United may make a discretionary contribution in 2022, the amount of which cannot be reasonably estimated at this time. In accordance with ASC Topic 715 and using the guidance contained in ASC Topic 820, the following is a description of the valuation methodologies used to measure the plan assets at fair value. Cash and Cash Equivalents: These underlying assets are highly liquid U.S. government obligations. The fair value of cash and cash equivalents approximates cost (Level 1). Debt Securities : Securities of the U.S. Government, municipalities, private issuers and corporations are valued at the closing price reported in the active market in which the individual security is traded, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Using a market approach valuation methodology, third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considers observable market data (Level 2). Common and Preferred Stock: These securities are valued at the closing price on the respective stock exchange (Level 1). Mutual Funds: Generally, these securities are valued at the closing price reported in the active market in which the individual mutual fund is traded (Level 1). The following tables present the balances of the pl a n assets, by fair value hierarchy level, as of December 31, 2021 and 2020: Fair Value Measurements at December 31, 2021 Using (In thousands) Description Balance as of December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash and Cash equivalents $ 1,641 $ 1,641 $ 0 $ 0 Fixed Income Mutual Funds: Taxable 72,075 72,075 0 0 Equity Securities: Common stock 34,198 34,198 0 0 Equity Mutual Funds: Global equity 5,407 5,407 0 0 Domestic equity large cap 47,387 47,387 0 0 Domestic equity small cap 30,176 30,176 0 0 International emerging equity 5,435 5,435 0 0 International equity developed 13,885 13,885 0 0 Total $ 210,204 $ 210,204 $ 0 $ 0 125 Table of Contents Fair Value Measurements at December 31, 2020 Using (In thousands) Description Balance as of December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash and Cash equivalents $ 10,285 $ 10,285 $ 0 $ 0 Fixed Income Mutual Funds: Taxable 70,331 70,331 0 0 Equity Securities: Common stock 28,102 28,102 0 0 Equity Mutual Funds: Global equity 4,968 4,968 0 0 Domestic equity large cap 34,186 34,186 0 0 Domestic equity small cap 22,165 22,165 0 0 International emerging equity 8,018 8,018 0 0 International equity developed 14,967 14,967 0 0 Total $ 193,022 $ 193,022 $ 0 $ 0 Common stock investments are diversified amongst various i n dustries with no industry representing more than 5% of the total plan assets. The United Bankshares, Inc. Savings and Stock Investment Plan (the Plan) is a defined contribution plan under Section 401(k) of the Internal Revenue Code. Each employee of United, who completes ninety ( 90 ) days of qualified service, is eligible to participate in the Plan. Each participant may contribute from 1 % to 100 % of compensation to his/her account, subject to Internal Revenue Service maximum deferral limits. United matches 100 % of the first 5 % of salary deferred with United stock. Vesting is 100 % for employee deferrals and the company match at the time the employee makes his/her deferral. United’s expense relating to the Plan approximated $ 7,984,000 , $ 6,531,000 , and $ 4,565,000 in 2021, 2020 and 2019, respectively. The assets of United’s defined benefit plan and 401(k) Plan each include investments in United common stock. At December 31, 2021 and 2020, the combined plan assets included 1,578,389 and 1,437,641 shares, respectively, of United common stock with an approximate fair value of $ 57,264,000 and $ 46,580,000 , respectively. Dividends paid on United common stock held by the plans approximated $ 2,060,000 , $ 1,776,000 , and $ 1,566,000 for the years ended December 31, 2021, 2020, and 2019, respectively. United has certain other supplemental deferred compensation plans covering various key employees. Periodic charges are made to operations so that the liability due each employee is fully recorded as of the date of their retirement. Amounts charged to expense have not been significant in any year. NOTE Q—STOCK BASED COMPENSATION On May 12, 2020, United’s shareholders approved the 2020 Long-Term Incentive Plan (“2020 LTI Plan”). The 2020 LTI Plan became effective May 13, 2020. An award granted under the 2020 LTI Plan may consist of any non-qualified stock options or incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units or other-stock-based award. These awards all relate to the common stock of United. The maximum number of shares of United common stock which may be issued under the 2020 LTI Plan is 2,300,000 . The 2020 LTI Plan will be administered by a board committee appointed by United’s Board of Directors (the “Board”). Unless otherwise determined by the Board, the Compensation Committee of the Board (the “Committee”) shall administer the 2020 LTI Plan. The maximum number of options and stock appreciation rights, in the aggregate, which may be awarded to any individual key employee during any calendar year is 100,000 . The maximum number of options and stock appreciation rights, in the aggregate, which may be awarded to any non-employee director during any calendar year is 10,000 or, if such Award is payable in cash, the Fair Market Value equivalent thereof. The maximum number of shares of restricted stock or shares subject to a restricted stock units award that may be granted during any calendar year is 225,000 shares to any individual key employee and 10,000 shares to any individual non-employee director. Subject to certain change in control provisions, 126 Table of Contents the 2020 LTI Plan provides that all awards of will vest as the Committee determines in the award agreement, provided that no awards will vest sooner than 1/3 per year over the first three anniversaries of the award. United adopted a clawback policy that applies to named executive officers and other executive officers and permits the Committee to cancel certain awards and to recoup gains realized from previous awards should United be required to prepare an accounting restatement due to materially inaccurate performance metrics. A Form S-8 was filed on May 29, 2020 with the Securities and Exchange Commission to register all the shares which were available for the 2020 LTI Plan. The 2020 LTI Plan replaces the 2016 LTI Plan. During the year of 2021, a total of 182,344 of restricted stock, 136,896 of restricted stock units and 49,978 of non-qualified stock options were granted under the 2020 LTI Plan. Compensation expense of $ 8,018,000 , $ 5,980,000 , and $ 4,914,000 related to all share-based grants and awards under United’s Long-Term Incentive Plans was incurred for the years 2021, 2020 and 2019, respectively. Compensation expense was included in employee compensation in the Consolidated Statements of Income. Stock Options United currently has options outstanding from various option plans other than the 2020 LTI Plan (the “Prior Plans”); however, no common shares of United stock are available for grants under the Prior Plans as these plans have expired. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms. The maximum term for options granted under the plans is ten (10) years. The fair value of the options for 2021 was estimated at the date of grant using a binomial lattice option pricing model with the following weighted-average assumptions: risk-free interest rates of 1.33 %; dividend yield of 3.00 %; volatility factors of the expected market price of United’s common stock of 0.2503 ; and a weighted-average expected option life of 8.30 years, respectively. The estimated fair value of the options at the date of grant was $ 5.83 for the options granted during 2021. ASC Topic 718, “Compensation – Stock Compensation” defines a lattice model as a model that produces an estimated fair value based on the assumed changes in prices of a financial instrument over successive periods of time. A binomial lattice model assumes at least two price movements are possible in each period of time. A summary of activity under the United’s stock option plans as of December 31, 2021, and the changes during the year of 2021 are presented below: Year ended December 31, 2021 Weighted Average (Dollars in thousands, except per share amounts) Aggregate Intrinsic Remaining Contractual Exercise Shares Value Term (Yrs.) Price Outstanding at January 1, 2021 1,904,557 $ 34.14 Assumed in Community Bankers Trust merger 582,162 22.06 Granted 49,978 32.51 Exercised ( 232,777 ) 27.59 Forfeited or expired ( 154,803 ) 27.63 Outstanding at December 31, 2021 2,149,117 $ 12,237 5.2 $ 32.01 Exercisable at December 31, 2021 1,754,083 $ 10,988 4.6 $ 31.56 The following table summarizes the status of United’s nonvested awards for the year ended December 31, 2021: Shares Weighted-Average Grant Date Fair Value Per Share Nonvested at January 1, 2021 544,905 $ 6.93 Assumed in Community Bankers Trust merger 84,237 13.67 Granted 49,978 5.83 Vested ( 240,927 ) 7.32 Forfeited or expired ( 43,159 ) 12.82 Nonvested at December 31, 2021 395,034 $ 7.33 As of December 31, 2021, the total unrecognized compensation cost related to nonvested option awards was $ 1,174,000 with a weighted-average expense recognition period of 0.7 years. The total fair value of awards vested during the year ended December 31, 2021, was $ 1,764,000 . 127 Table of Contents Cash received from options exercised under the Plans for the years ended December 31 , 2021 , 2020 and 2019 was $ 5,206,000 , $ 1,241,000 , and $ 1,272,000 , respectively. During 2021 and 2020 , 232,777 and 100,736 shares, respectively, were issued in connection with stock option exercises. All shares issued in connection with stock option exercises for 2021 and 2020 were issued from authorized and unissued stock. The weighted-average grant-date fair value of options granted in the year of 2021 , 2020 and 2019 was $ 5.83 , $ 5.65 , and $ 7.16 , respectively. The total intrinsic value of options exercised under the Plans during the years ended December 31 , 2021 , 2020 , and 2019 was $ 2,337,000 , $ 1,917,000 , and $ 1,932,000 , respectively. ASC Topic 230, “Statement of Cash Flows,” requires the benefits of tax deductions in excess of recognized compensation cost to be reported as an operating cash flow. This requirement reduces net operating cash flows. While the company cannot estimate what those amounts will be in the future (because they depend on, among other things, the date employees exercise stock options), United recognized cash flows used in operating activities of $ 303,000 , $ 351,000 , and $ 223,000 from excess tax benefits related to share-based compensation arrangements for the year of 2021, 2020 and 2019, respectively. Restricted Stock Under the 2020 LTI Plan, United may award restricted common shares to key employees and non-employee directors. Restricted shares granted to participants will vest no sooner than 1/3 per year over the first three anniversaries of the award. Unless determined by the Committee or the Board and provided in the award agreement, recipients of restricted shares do not pay any consideration to United for the shares, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested. Presently, these nonvested participating securities have an immaterial impact on diluted earnings per share. As of December 31, 2021, the total unrecognized compensation cost related to nonvested restricted stock awards was $ 8,015,000 with a weighted-average expense recognition period of 1.0 years. The following summarizes the changes to United’s restricted common shares for the year ended December 31, 2021: Number of Shares Weighted-Average Grant Date Fair Value Per Share Outstanding at January 1, 2021 340,976 $ 35.41 Granted 182,344 35.97 Vested ( 131,949 ) 36.72 Forfeited ( 7,400 ) 36.20 Outstanding at December 31, 2021 383,971 $ 35.21 Restricted Stock Units Under the 2020 LTI Plan, United may grant restricted stock units (“RSUs”) to key employees. These awards help align the interests of these employees with the interests of the shareholders of United by providing economic value directly related to the performance of the Company. These RSU grants could be time-vested RSUs, performance-vested RSUs, or a combination of both. Currently, time-vested RSUs vest ratably over three years from the date of grant. Performance-vested RSUs cliff-vest after assessment of the Company’s performance over a period of three years. The number of performance-vested RSUs that vest is determined by two metrics measured relative to peers: Return on Average Tangible Common Equity (“ROATCE”) and Total Shareholder Return (“TSR”). Based on ASC Topic 718, the ROATCE comparison is considered a performance condition while the TSR comparison is considered a market condition. There will be no payout of the performance-vested awards if the threshold performance is not achieved. United communicates the specific threshold, target, and maximum performance-vested RSU awards and performance targets to the applicable key employees at the beginning of a performance period. Dividends are accrued but not paid in respect to the awards until the RSUs vest. The holder does not have the right to vote the shares during the time and performance periods. The value of the time-vested RSUs and the performance-vested, based on the performance condition, RSUs awarded is established as the fair market value of the stock at the time of the grant. The value of the performance-vested, based on the market condition, RSUs awarded is estimated through the use of a Monte Carlo valuation model as of the grant date. The Company recognizes expense on the RSUs in accordance with ASC Topic 718. 128 Table of Contents The following table summarizes the status of United’s nonvested RSUs during the year ended December 31, 2021: Shares Weighted-Average Grant Date Fair Value Per Share Nonvested at January 1, 2021 0 $ 0.00 Granted 136,896 35.65 Vested 0 0.00 Forfeited or expired 0 0.00 Nonvested at December 31, 2021 136,896 $ 35.65 As of December 31, 2021 , the total unrecognized compensation cost related to nonvested restricted stock units was $ 3,234,000 with a weighted-average expense recognition period of 1.2 years. NOTE R—COMMITMENTS AND CONTINGENT LIABILITIES Lending-related Commitments United is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to alter its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby letters of credit, and interest rate swap agreements. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Collateral may be obtained, if deemed necessary, based on management’s credit evaluation of the counterparty. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily, and historically do not, represent future cash requirements. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation of the counterparty. United had approximately $ 7,419,342,000 and $ 5,730,876,000 of loan commitments outstanding as of December 31, 2021 and December 31, 2020, respectively, approximately 42% of which contractually expire within one year . Included in the December 31, 2021 and December 31, 2020 amounts are commitments to extend credit of $ 571,792,000 and $ 374,003,000 , respectively, related to mortgage loan funding commitments of United’s mortgage banking segment and are of a short-term nature. Commercial and standby letters of credit are agreements used by United’s customers as a means of improving their credit standing in their dealings with others. Under these agreements, United guarantees certain financial commitments of its customers. A commercial letter of credit is issued specifically to facilitate trade or commerce. Typically, under the terms of a commercial letter of credit, a commitment is drawn upon when the underlying transaction is consummated as intended between the customer and a third party. As of December 31, 2021 and December 31, 2020, United had $ 14,774,000 and $ 5,092,000 of commercial letters of credit outstanding. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of $ 164,743,000 and $ 134,916,000 as of December 31, 2021 and December 31, 2020, respectively. In accordance with the Contingencies Topic of the FASB Accounting Standards Codification, United has determined that substantially all of its letters of credit are renewed on an annual basis and the fees associated with these letters of credit are immaterial. Mortgage Repurchase Reserve United’s mortgage banking segment provides for its estimated exposure to repurchase loans previously sold to investors for which borrowers failed to provide full and accurate information on their loan application or for which appraisals have not been acceptable or where the loan was not underwritten in accordance with the loan program specified by the loan investor, and for other exposure to its investors related to loan sales activities. United evaluates the merits of each claim and estimates its reserve based on actual and expected claims received and considers the historical amounts paid to settle such claims. United’s mortgage banking segment has a reserve of $ 1,150,000 and $ 1,216,000 as of December 31, 2021 and 2020, respectively. 129 Table of Contents United has derivative counter-party risk that may arise from the possible inability of United’s mortgage banking segment’s third party investors to meet the terms of their forward sales contracts. United’s mortgage banking segment works with third-party investors that are generally well-capitalized, are investment grade and exhibit strong financial performance to mitigate this risk. United does not expect any third-party investor to fail to meet its obligation. Legal Proceedings United and its subsidiaries are currently involved in various legal proceedings in the normal course of business. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position. Regulatory Matters A variety of consumer products, including mortgage and deposit products, and certain fees and charges related to such products, have come under increased regulatory scrutiny. It is possible that regulatory authorities could bring enforcement actions, including civil money penalties, or take other actions against United in regard to these consumer products. United could also determine of its own accord, or be required by regulators, to refund or otherwise make remediation payments to customers in connection with these products. It is not possible at this time for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss related to such matters. NOTE S—DERIVATIVE FINANCIAL INSTRUMENTS United uses derivative instruments to help aid against adverse price changes or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives may consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. United also executes derivative instruments with its commercial banking customers to facilitate its risk management strategies. During the second quarter of 2020, United entered into a new interest rate swap derivative designated as a cash flow hedge. The notional amount of the cash flow hedge derivative totaled $ 250,000,000 . The derivative is intended to hedge the changes in cash flows associated with floating rate FHLB borrowings. United is required to pay-fixed 0.59 % and receive-variable 1-month LIBOR with monthly resets. The tenor of the interest rate swap derivative is 10 years with an expiration date in June 2030. During the third quarter of 2020, United entered into an additional interest rate swap derivative designated as a cash flow hedge. The notional amount of the cash flow hedge derivative totaled $ 250,000,000 . The derivative is intended to hedge the changes in cash flows associated with floating rate FHLB borrowings. United is required to pay-fixed 0.19 % and receive-variable 1-month LIBOR with monthly resets. The tenor of the interest rate swap derivative is 4 years with an expiration date in August 2024. As of December 31, 2021, United has determined that no forecasted transactions related to its cash flow hedges resulted in gains or losses pertaining to cash flow hedge reclassification from AOCI to income because the forecasted transactions became probable of not occurring. United estimates that $ 163,000 will be reclassified from AOCI as an increase to interest expense over the next 12-months following December 31, 2021 related to the cash flow hedges. As of December 31, 2021, the maximum length of time over which forecasted transactions are hedged is nine years. United is subject to the Dodd-Frank Act clearing requirement for eligible derivatives. United has executed and cleared eligible derivatives through the London Clearing House (“LCH”). Variation margin at the LCH is distinguished as settled-to-market and settled daily based on the prior day value, rather than collateralized-to-market. The total notional amount of interest rate swap derivatives cleared through the LCH include $ 500,000,000 for asset derivatives as of December 31, 2021. The related fair value on a net basis approximate zero . 130 Table of Contents The following tables disclose the derivative instruments’ location on the Company’s Consolidated Balance Sheets and the notional amount and fair value of those instruments at December 31, 2021 and December 31, 2020. Asset Derivatives December 31, 2021 December 31, 2020 (In thousands) Balance Sheet Location Notional Amount Fair Value Balance Sheet Location Notional Amount Fair Value Cash Flow Hedges: Interest rate swap contracts (hedging FHLB borrowings) Other assets $ 500,000 $ 21,328 Other assets $ 500,000 $ 4,378 Total Cash Flow Hedges $ 500,000 $ 21,328 $ 500,000 $ 4,378 Total derivatives designated as hedging instruments $ 500,000 $ 21,328 $ 500,000 $ 4,378 Derivatives not designated as hedging instruments Forward loan sales commitments Other assets $ 33,349 $ 430 Other assets $ 62,418 $ 1,581 TBA mortgage-backed securities Other assets 133,747 127 Other assets 0 0 Interest rate lock commitments Other assets 467,472 10,380 Other assets 973,350 38,332 Total derivatives not designated as hedging instruments $ 634,568 $ 10,937 $ 1,035,768 $ 39,913 Total asset derivatives $ 1,134,568 $ 32,265 $ 1,535,768 $ 44,291 Liability Derivatives December 31, 2021 December 31, 2020 (In thousands) Balance Sheet Location Notional Amount Fair Value Balance Sheet Location Notional Amount Fair Value Derivatives designated as hedging instruments Fair Value Hedges: Interest rate swap contracts (hedging commercial loans) Other liabilities $ 72,447 $ 3,197 Other liabilities $ 77,011 $ 6,782 Total Fair Value Hedges $ 72,447 $ 3,197 $ 77,011 $ 6,782 Total derivatives designated as hedging instruments $ 72,447 $ 3,197 $ 77,011 $ 6,782 Derivatives not designated as hedging instruments Forward loan sales commitments Other liabilities $ 15,005 $ 36 Other liabilities $ 0 $ 0 TBA mortgage-backed securities 550,000 470 0 0 Interest rate lock commitments Other liabilities 24,743 25 789,000 6,276 Total derivatives not designated as hedging instruments $ 589,748 $ 531 $ 789,000 $ 6,276 Total liability derivatives $ 662,195 $ 3,728 $ 866,011 $ 13,058 ​​​​​​​ The following table represents the carrying amount of the hedged assets/(liabilities) and the cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities) that are designated as a fair value accounting relationship as of December 31, 2021 and December 31, 2020. December 31, 2021 (In thousands) Derivatives in Fair Value Hedging Relationships Location in the Statement of Condition Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/ (Liabilities) for which Hedge Accounting has been Discontinued Interest rate swaps Loans and leases, net of unearned income $ 73,232 $ ( 3,197 ) $ 0 131 Table of Contents December 31, 202 0 (In thousands) Derivatives in Fair Value Hedging Relationships Location in the Statement of Condition Carrying Amount of the Hedged Assets/ (Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/ (Liabilities) for which Hedge Accounting has been Discontinued Interest rate swaps Loans and leases, net of unearned income $ 77,810 $ ( 6,782 ) $ 0 Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. United’s exposure is limited to the replacement value of the contracts rather than the notional amount of the contract. The Company’s agreements generally contain provisions that limit the unsecured exposure up to an agreed upon threshold. Additionally, the Company attempts to minimize credit risk through certain approval processes established by management. ​​​​​​​ The effect of United’s derivative financial instruments on its Consolidated Statements of Income for the years ended December 31, 2021 , 2020 and 2019 is presented as follows: Year Ended (In thousands) Income Statement Location December 31, 2021 December 31, 2020 December 31, 2019 Derivatives in hedging relationships Cash Flow Hedges: Interest rate swap contracts Interest on long-term borrowings $ ( 1,354 ) $ ( 578 ) $ 0 Fair Value Hedges: Interest rate swap contracts Interest and fees on loans and leases $ ( 1,744 ) $ ( 1,414 ) $ ( 95 ) Total derivatives in hedging relationships $ ( 3,098 ) $ ( 1,992 ) $ ( 95 ) Derivatives not designated as hedging instruments Forward loan sales commitments Income from Mortgage Banking Activities ( 1,187 ) ( 725 ) 925 TBA mortgage-backed securities Income from Mortgage Banking Activities 5,932 ( 3,825 ) 2,331 Interest rate lock commitments Income from Mortgage Banking Activities ( 22,219 ) 21,299 3,607 Total derivatives not designated as hedging instruments $ ( 17,474 ) $ 16,749 $ 6,863 Total derivatives $ ( 20,572 ) $ 14,757 $ 6,768 For the years ended December 31, 2021, 2020 and 2019, changes in the fair value of any interest rate swaps attributed to hedge ineffectiveness were recorded, but not significant to United’s Consolidated Statements of Income. NOTE T—COMPREHENSIVE INCOME The changes in accumulated other comprehensive income are as follows: For the Years Ended December 31 (In thousands) 2021 2020 2019 Net Income $ 367,738 $ 289,023 $ 260,099 Available for sale (“AFS”) securities: AFS securities with OTTI charges during the period 0 0 ( 641 ) Related income tax effect 0 0 149 132 Table of Contents For the Years Ended December 31 (In thousands) 2021 2020 2019 Less : OTTI charges recognized in net income 0 0 198 Related income tax effect 0 0 ( 46 ) Reclassification of previous noncredit OTTI to credit OTTI 0 0 2,188 Related income tax effect 0 0 ( 510 ) Net unrealized gains on AFS securities with OTTI 0 0 1,338 AFS securities – all other: Change in net unrealized gains (losses) on AFS securities arising during the period ( 72,257 ) 77,142 32,570 Related income tax effect 16,836 ( 17,974 ) ( 7,589 ) Net reclassification adjustment for (gains) losses included in net income ( 1,552 ) ( 2,502 ) ( 97 ) Related income tax effect 362 583 23 ( 56,611 ) 57,249 24,907 Net effect of AFS securities on other comprehensive income ( 56,611 ) 57,249 26,245 Cash flow hedge derivatives: Unrealized gain on cash flow hedge before reclassification to interest expense 15,597 3,800 0 Related income tax effect ( 3,634 ) ( 885 ) 0 Net reclassification adjustment for losses included in net income 1,354 578 0 Related income tax effect ( 316 ) ( 135 ) 0 Net effect of cash flow hedge derivatives on other comprehensive income 13,001 3,358 0 Defined benefit pension plan: Net actuarial loss during the period 14,286 ( 10,583 ) ( 10,324 ) Related income tax expense ( 483 ) 3,263 2,384 Amortization of prior service cost recognized in net income 0 0 0 Related income tax effect 0 0 0 Amortization of net actuarial loss recognized in net income 6,770 6,050 4,965 Related income tax effect ( 4,221 ) ( 2,098 ) ( 1,170 ) Net effect of change in defined benefit pension plan on other comprehensive income 16,352 ( 3,368 ) ( 4,145 ) Total change in other comprehensive income, net of tax ( 27,258 ) 57,239 22,100 Total Comprehensive Income $ 340,480 $ 346,262 $ 282,199 The components of accumulated other comprehensive income for the year ended December 31, 2021 are as follows: Changes in Accumulated Other Comprehensive Income (AOCI) by Component (a) For the Year Ended December 31, 2021 (Dollars in thousands) Unrealized Gains/ Losses on AFS Securities Unrealized Gains/ Losses on Cash Flow Hedges Defined Benefit Pension Items Total Balance at January 1, 2021 $ 65,205 $ 3,358 $ ( 46,193 ) $ 22,370 Other comprehensive income before reclassification ( 55,421 ) 11,963 0 ( 43,458 ) Amounts reclassified from accumulated other comprehensive income ( 1,190 ) 1,038 16,352 16,200 Net current-period other comprehensive income, net of tax ( 56,611 ) 13,001 16,352 ( 27,258 ) Balance at December 31, 2021 $ 8,594 $ 16,359 $ ( 29,841 ) $ ( 4,888 ) (a) All amounts are net-of-tax. 133 Table of Contents Reclassifications out of Accumulated Other Comprehensive Income (AOCI) For the Year Ended December 31, 2021 (In thousands) Details about AOCI Components Amount Reclassified from AOCI Affected Line Item in the Statement Where Net Income is Presented Available for sale (“AFS”) securities: Net reclassification adjustment for gains included in net income $ ( 1,552 ) Net investment securities gains ( 1,552 ) Total before tax Related income tax effect 362 Tax expense ( 1,190 ) Net of tax Cash flow hedge: Net reclassification adjustment for losses included in net income $ 1,354 Interest expense 1,354 Total before tax Related income tax effect ( 316 ) Tax expense 1,038 Net of tax Pension plan: Recognized net actuarial loss 14,286 (a) Amortization of net actuarial loss 6,770 (b) 21,056 Total before tax Related income tax effect ( 4,704 ) Tax expense 16,352 Net of tax Total reclassifications for the period $ 16,200 (a) This AOCI component is included in the computation of changes in plan assets (see Note P, Employee Benefit Plans) (b) This AOCI component is included in the computation of net periodic pension cost (see Note P, Employee Benefit Plans) NOTE U—UNITED BANKSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION Condensed Balance Sheets December 31 (In thousands) 2021 2020 Assets Cash and due from banks $ 262,067 $ 158,147 Securities available for sale 5,758 7,138 Securities held to maturity 20 20 Equity securities 6,593 4,737 Other investment securities 13,055 10,725 Investment in subsidiaries: Bank subsidiaries 4,784,480 4,466,132 Nonbank subsidiaries 33,449 30,287 Goodwill ( 16,715 ) ( 16,397 ) Other assets 19,471 14,591 Total Assets $ 5,108,158 $ 4,675,380 Liabilities and Shareholders’ Equity Subordinated notes $ 9,872 $ 9,865 Junior subordinated debentures of subsidiary trusts 275,323 269,972 Accrued expenses and other liabilities 104,335 97,923 Shareholders’ equity (including other accumulated comprehensive loss of $ 4,888 at December 31, 2021 and other accumulated comprehensive gain of $ 22,370 at December 31, 2020) 4,718,628 4,297,620 Total Liabilities and Shareholders’ Equity $ 5,108,158 $ 4,675,380 134 Table of Contents Condensed Statements of Income Year Ended December 31 (In thousands) 2021 2020 2019 Income Dividends from banking subsidiaries $ 287,500 $ 232,000 $ 249,000 Net interest income 335 202 126 Management fees: Bank subsidiaries 39,678 30,464 27,325 Nonbank subsidiaries 27 27 27 Other income 3,418 556 147 Total Income 330,958 263,249 276,625 Expenses Operating expenses 47,273 53,880 38,569 Income Before Income Taxes and Equity in Undistributed Net Income of Subsidiaries 283,685 209,369 238,056 Applicable income tax benefit ( 779 ) ( 4,196 ) ( 2,123 ) Income Before Equity in Undistributed Net Income of Subsidiaries 284,464 213,565 240,179 Equity in undistributed net income of subsidiaries: Bank subsidiaries 83,507 75,054 19,557 Nonbank subsidiaries ( 233 ) 404 363 Net Income $ 367,738 $ 289,023 $ 260,099 Condensed Statements of Cash Flows Year Ended December 31 (In thousands) 2021 2020 2019 Operating Activities Net income $ 367,738 $ 289,023 $ 260,099 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income of subsidiaries ( 83,274 ) ( 75,458 ) ( 19,920 ) Amortization of net periodic pension costs 203 315 302 Stock-based compensation 8,018 5,980 4,914 Excess tax benefits from stock-based compensation arrangements 303 351 223 Net change in other assets and liabilities 2,519 ( 7 ) 1,770 Net Cash Provided by Operating Activities 295,507 220,204 247,388 Investing Activities Net proceeds from sales of securities 1,449 380 236 Net (purchases of) proceeds from sales of equity securities ( 1,016 ) ( 54 ) 1,116 Net cash paid in acquisition of subsidiary 1,072 ( 47 ) 0 Increase in investment in subsidiaries ( 3,500 ) ( 5,573 ) ( 7,000 ) Change in other investment securities ( 2,310 ) ( 672 ) ( 9,890 ) Net Cash Used in Investing Activities ( 4,305 ) ( 5,966 ) ( 15,538 ) Financing Activities Cash dividends paid ( 181,277 ) ( 162,713 ) ( 138,939 ) Acquisition of treasury stock ( 11,211 ) ( 21,317 ) ( 35,673 ) Proceeds from sale of treasury stock from deferred compensation plan 0 1 1 Proceeds from exercise of stock options 5,206 1,241 1,272 Net Cash Used in Financing Activities ( 187,282 ) ( 182,788 ) ( 173,339 ) Increase in Cash and Cash Equivalents 103,920 31,450 58,511 Cash and Cash Equivalents at Beginning of Year 158,147 126,697 68,186 Cash and Cash Equivalents at End of Year $ 262,067 $ 158,147 $ 126,697 135 Table of Contents NOTE V— REGULATORY MATTERS United Bank is required to maintain average res e rve balances with its Federal Reserve Bank. The average amount of those consolidated reserve balances maintained for the year ended December 31, 2021 were approximately $ 3,119,391,000 . No reserve balance for the year ended December 31, 2021 was required. The average amount of those consolidated reserve balances maintained and required for the year ended December 31, 2020, was approximately $ 1,409,598,000 and $ 71,883,000 , respectively. The primary source of funds for the dividends paid by United to its shareholders is dividends received from United Bank. Dividends paid by United Bank are subject to certain regulatory limitations. Generally, the most restrictive provision requires regulatory approval if dividends declared in any year exceed that year’s net income, as defined, plus the retained net profits of the two preceding years. During 2022, the retained net profits available for distribution to United by United Bank as dividends without regulatory approval, are approximately $ 158,561,000 , plus net income for the interim period through the date of declaration. Under Federal Reserve regulation, United Bank is also limited as to the amount they may loan to affiliates, including the parent company. Loans from United Bank to the parent company are limited to 10 % of the banking subsidiaries’ capital and surplus, as defined, or $ 395,066,000 at December 31, 2021, and must be secured by qualifying collateral. United’s subsidiary banks are subject to various regulatory capital requirements administered by federal banking agencies. Pursuant to capital adequacy guidelines, United’s subsidiary banks must meet specific capital guidelines that involve various quantitative measures of the banks’ assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. United’s subsidiary banks’ capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. As previously mentioned, the new Basel III Capital Rules became effective for United and United Bank on January 1, 2015 (subject to a phase-in period). These new quantitative measures established by regulation to ensure capital adequacy require United and United Bank to maintain minimum amounts and ratios of total, Tier I capital, and common Tier I capital as defined in the regulations, to risk-weighted assets, as defined, and of Tier I capital, as defined, to average assets, as defined. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on United’s financial statements. As of December 31, 2021, United exceeds all capital adequacy requirements to which it is subject. At December 31, 2021, the most recent notification from its regulators, United and United Bank were categorized as well-capitalized. To be categorized as well-capitalized, United must maintain minimum total risk-based, Tier I risk-based, Common Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes would impact United’s well-capitalized status. United’s and United Bank’s capital amounts (in thousands of dollars) and ratios are presented in the following table. (Dollars in thousands) Actual For Capital Adequacy Purposes To Be Well- Capitalized Amount Ratio Amount Ratio Amount Ratio As of December 31, 2021: Total Capital (to Risk- Weighted Assets): United Bankshares $ 3,317,133 15.4 % $ 1,719,342 ≥ 8.0 % $ 2,149,177 ≥ 10.0 % United Bank 3,066,779 14.3 % 1,715,234 ≥ 8.0 % 2,144,042 ≥ 10.0 % Tier I Capital (to Risk- Weighted Assets): United Bankshares $ 2,877,791 13.4 % $ 1,289,506 ≥ 6.0 % $ 1,719,342 ≥ 8.0 % United Bank 2,925,437 13.6 % 1,286,425 ≥ 6.0 % 1,715,234 ≥ 8.0 % Common Tier I Capital (to Risk Weighted Assets): United Bankshares $ 2,877,791 13.4 % $ 967,130 ≥ 4.5 % $ 1,396,965 ≥ 6.5 % United Bank 2,925,437 13.6 % 964,819 ≥ 4.5 % 1,393,627 ≥ 6.5 % 136 Table of Contents (Dollars in thousands) Actual For Capital Adequacy Purposes To Be Well- Capitalized Amount Ratio Amount Ratio Amount Ratio Tier I Capital (to Average Assets): United Bankshares $ 2,877,791 11.0 % $ 1,050,891 ≥ 4.0 % $ 1,313,614 ≥ 5.0 % United Bank 2,925,437 11.2 % 1,049,526 ≥ 4.0 % 1,311,907 ≥ 5.0 % As of December 31, 2020: Total Capital (to Risk- Weighted Assets): United Bankshares $ 2,945,669 15.6 % $ 1,515,403 ≥ 8.0 % $ 1,894,254 ≥ 10.0 % United Bank 2,800,753 14.8 % 1,511,961 ≥ 8.0 % 1,889,951 ≥ 10.0 % Tier I Capital (to Risk- Weighted Assets): United Bankshares $ 2,519,595 13.3 % $ 1,136,552 ≥ 6.0 % $ 1,515,403 ≥ 8.0 % United Bank 2,669,210 14.1 % 1,133,971 ≥ 6.0 % 1,511,961 ≥ 8.0 % Common Tier I Capital (to Risk Weighted Assets): United Bankshares $ 2,519,595 13.3 % $ 852,414 ≥ 4.5 % $ 1,231,265 ≥ 6.5 % United Bank 2,669,210 14.1 % 850,478 ≥ 4.5 % 1,228,468 ≥ 6.5 % Tier I Capital (to Average Assets): United Bankshares $ 2,519,595 10.3 % $ 975,099 ≥ 4.0 % $ 1,218,873 ≥ 5.0 % United Bank 2,669,210 11.0 % 974,912 ≥ 4.0 % 1,218,640 ≥ 5.0 % United’s mortgage banking entities, George Mason and Crescent, are subject to net worth requirements issued by the U.S. Department of Housing and Urban Development (“HUD”). Failure to meet minimum capital requirements of HUD can result in certain mandatory and possibly additional discretionary actions that, if undertaken, could have a direct material effect on George Mason’s and Crescent’s operations. For George Mason and Crescent, the maximum net worth requirement of HUD at December 31, 2021 was $ 2,500,000 . George Mason’s net worth and Crescent’s net worth were $ 161,595,000 and $ 101,615,000 at December 31, 2021, which both exceeded the HUD requirements. NOTE W—FAIR VALUES OF FINANCIAL INSTRUMENTS In accordance with ASC Topic 820, the following describes the valuation techniques used by United to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements. Securities available for sale and equity securities : Securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (“Level 1”). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Using a market approach valuation methodology, third party vendors compile prices based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, and “To Be Announced” prices (“Level 2”). Management internally reviews the fair values provided by third party vendors on a monthly basis. Management also performs a quarterly price testing analysis at the individual security level which compares the pricing provided by the third party vendors to an independent pricing source’s valuation of the same securities. Variances that are deemed to be material are reviewed by management. Additionally, to further assess the reliability of the information received from third party vendors, management obtains documentation from third party vendors related to the sources, methodologies, and inputs utilized in valuing securities classified as Level 2. Management analyzes this information to ensure the underlying assumptions appear reasonable. Management also obtains an independent service auditor’s report from third party vendors to provide reasonable assurance that appropriate controls are in place over the valuation process. Upon completing its review of the pricing from third party vendors at December 31, 2021, management determined that the prices provided by its third party pricing sources were reasonable and in line with management’s expectations for the market values of these securities. Therefore, prices obtained from third party vendors that did not reflect forced liquidation or distressed sales were not adjusted materially by management at December 31, 2021. Management utilizes a number of factors to determine if a market is inactive, all of which may require a significant level of judgment. Factors that 137 Table of Contents management considers include: a significant widening of the bid-ask spread, a considerable decline in the volume and level of trading activity in the instrument, a significant variance in prices among market participants, and a significant reduction in the level of observable inputs. Any securities available for sale not valued based upon quoted market prices or third party pricing models that consider observable market data are considered Level 3. Currently, United does not have any available-for-sale securities considered as Level 3. Loans held for sale : For residential mortgage loans sold in the mortgage banking segment, the loans closed are recorded at fair value using the fair value option which is measured using valuations from investors for loans with similar characteristics as well as considering the probability of the loan closing (i.e. the “pull-through” rate) (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated pricing (“Level 3”). The unobservable input for Level 3 valuations is the Company’s historical sales prices. For December 31, 2021, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.19 % to 0.51 % with a weighted average increase of 0.29 %. Derivatives : United utilizes interest rate swaps to hedge exposure to interest rate risk and variability of cash flows associated to changes in the underlying interest rate of the hedged item. These hedging interest rate swaps are classified as either a fair value hedge or a cash flow hedge. United utilizes third-party vendors for derivative valuation purposes. These vendors determine the appropriate fair value based on a net present value calculation of the cash flows related to the interest rate swaps using primarily observable market inputs such as interest rate yield curves (“Level 2”). Valuation adjustments to derivative fair values for liquidity and credit risk are also taken into consideration, as well as the likelihood of default by United and derivative counterparties, the net counterparty exposure and the remaining maturities of the positions. Values obtained from third party vendors are typically not adjusted by management. Management internally reviews the derivative values provided by third party vendors on a quarterly basis. All derivative values are tested for reasonableness by management utilizing a net present value calculation. For a fair value hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge are offset in current period earnings either in interest income or interest expense depending on the nature of the hedged financial instrument. For a cash flow hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to accumulated other comprehensive income within shareholders’ equity, net of tax. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a cash flow hedge are offset to accumulated other comprehensive income, net of tax and reclassified into earnings in the same line associated with the forecasted transaction when the forecasted transaction affects earnings. The Company records its interest rate lock commitments and forward loan sales commitments at fair value determined as the amount that would be required to settle each of these derivative financial instruments at the balance sheet date. In the normal course of business, United’s mortgage banking subsidiaries enter into contractual interest rate lock commitments to extend credit to borrowers with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within the timeframes established by the mortgage companies. All borrowers are evaluated for credit worthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to the investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, United’s mortgage banking subsidiaries enter into either a forward sales contract to sell loans to investors when using best efforts or a TBA mortgage-backed security under mandatory delivery. Fair values of TBA mortgage-backed securities are measured using valuations from investors for mortgage-backed securities with similar characteristics (“Level 2”). The forward sales contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. Under the Company’s best efforts model, the rate lock commitments to borrowers and the forward sales contracts to investors through to the date the loan closes are undesignated derivatives and accordingly, are marked to fair value through earnings. These valuations fall into a Level 2 category. For residential mortgage loans sold in the mortgage banking segment, the interest rate lock commitments are recorded at fair value which is measured using valuations from investors for loans with similar characteristics (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated pricing (“Level 3”). The unobservable input for Level 3 valuations is the Company’s historical sales prices. For December 31, 2021, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.19 % to 0.51 % with a weighted average increase of 0.29 %. For interest rate swap derivatives that are not designated in a hedge relationship, changes in the fair value of the derivatives are recognized in earnings in the same period as the change in the fair value. Unrealized gains and losses due to changes in the fair value of other derivative financial instruments not in hedge relationship are included in noninterest income and noninterest expense, respectively. 138 Table of Contents The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of December 31 , 2021 and 2020 , segregated by the level of the valuation inputs within the fair value hierarchy: Fair Value at December 31, 2021 Using (In thousands) Description Balance as of December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Available for sale debt securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 81,850 $ 0 $ 81,850 $ 0 State and political subdivisions 847,298 0 847,298 0 Residential mortgage-backed securities Agency 1,113,774 0 1,113,774 0 Non-agency 74,545 0 74,545 0 Commercial mortgage-backed securities Agency 639,925 0 639,925 0 Asset-backed securities 656,572 0 656,572 0 Single issue trust preferred securities 16,811 0 16,811 0 Other corporate securities 611,924 5,758 606,166 0 Total available for sale securities 4,042,699 5,758 4,036,941 0 Equity securities: Financial services industry 187 187 0 0 Equity mutual funds (1) 6,406 6,406 0 0 Other equity securities 5,811 5,811 0 0 Total equity securities 12,404 12,404 0 0 Loans held for sale 504,416 0 40,307 464,109 Derivative financial assets: Interest rate swap contracts 21,328 0 21,328 0 Forward sales commitments 430 0 430 0 TBA mortgage-backed securities 127 0 66 61 Interest rate lock commitments 10,380 0 936 9,444 Total derivative financial assets 32,265 0 22,760 9,505 Liabilities Derivative financial liabilities: Interest rate swap contracts 3,197 0 3,197 0 Forward sales commitments 36 0 0 36 TBA mortgage-backed securities 470 0 0 470 Interest rate lock commitments 25 0 0 25 Total derivative financial liabilities 3,728 0 3,197 531 Fair Value at December 31, 2020 Using (In thousands) Description Balance as of December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Available for sale debt securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 66,344 $ 0 $ 66,344 $ 0 State and political subdivisions 565,160 0 565,160 0 Residential mortgage-backed securities Agency 928,891 0 928,891 0 Non-agency 21,776 0 21,776 0 139 Table of Contents Fair Value at December 31, 202 0 Using (In thousands) Description Balance as of December 31, 202 0 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Commercial mortgage-backed securities Agency 675,145 0 675,145 0 Asset-backed securities 294,623 0 294,623 0 Single issue trust preferred securities 17,027 0 17,027 0 Other corporate securities 384,393 6,207 378,186 0 Total available for sale securities 2,953,359 6,207 2,947,152 0 Equity securities: Financial services industry 134 134 0 0 Equity mutual funds (1) 4,602 4,602 0 0 Other equity securities 5,982 5.982 0 0 Total equity securities 10,718 10,718 0 0 Loans held for sale 698,341 0 43,608 654,733 Derivative financial assets: Interest rate swap contracts 4,378 0 4,378 0 Forward sales commitments 1,581 0 1,581 0 TBA mortgage-backed securities 0 0 0 0 Interest rate lock commitments 38,332 0 6,321 32,011 Total derivative financial assets 44,291 0 12,280 32,011 Liabilities Derivative financial liabilities: Interest rate swap contracts 6,782 0 6,782 0 TBA mortgage-backed securities 6,276 0 6,276 0 Total derivative financial liabilities 13,058 0 13,058 0 (1) The equity mutual funds are within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. There were no transfers between Level 1, Level 2 and Level 3 for financial assets and liabilities measured at fair value on a recurring basis during the year ended December 31, 2021 and 2020. The following tables present additional information about financial assets and liabilities measured at fair value at December 31, 2021 and 2020 on a recurring basis and for which United has utilized Level 3 inputs to determine fair value. The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses related to assets still held at the reporting date are recorded in Income from mortgage banking activities in the Consolidated Statements of Income. Loans held for sale (In thousands) December 31, 2021 December 31, 2020 Balance, beginning of period $ 654,733 $ 384,375 Originations 4,984,363 5,699,581 Sales ( 5,313,758 ) ( 5,652,693 ) Total gains or losses during the period recognized in earnings 138,771 223,470 Balance, end of period $ 464,109 $ 654,733 The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 10,506 $ 25,194 Derivative Financial Assets TBA Securities (In thousands) December 31, 2021 December 31, 2020 Balance, beginning of period $ 0 $ 0 Transfers other 61 0 Balance, end of period $ 61 $ 0 140 Table of Contents The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 61 $ 0 Derivative Financial Assets Interest Rate Lock Commitments (In thousands) December 31, 2021 December 31, 2020 Balance, beginning of period $ 32,011 $ 4,518 Transfers other ( 22,567 ) 27,493 Balance, end of period $ 9,444 $ 32,011 The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 9,444 $ 32,011 Derivative Financial Liabilities Forward Sales Commitments (In thousands) December 31, 2021 December 31, 2020 Balance, beginning of period $ 0 $ 0 Transfers other 36 0 Balance, end of period $ 36 $ 0 The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 36 $ 0 Derivative Financial Liabilities TBA Securities (In thousands) December 31, 2021 December 31, 2020 Balance, beginning of period $ 0 $ 0 Transfers other 470 0 Balance, end of period $ 470 $ 0 The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 470 $ 0 Derivative Financial Liabilities Interest Rate Lock Commitments (In thousands) December 31, 2021 December 31, 2020 Balance, beginning of period $ 0 $ 0 Transfers other 25 0 Balance, end of period $ 25 $ 0 The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 25 $ 0 141 Table of Contents Fair Value Option As of January 1, 2021, United elected the fair value option for new loans held for sale originated in its community banking segment after that date to mitigate a divergence between accounting losses and economic exposure. Prior to January 1, 2021, United elected the fair value option only for its loans held for sale in its mortgage banking segment. The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected: (In thousands) Description Year Ended December 31, 2021 Year Ended December 31, 2020 Income from mortgage banking activities $ ( 15,267 ) $ 14,947 The following table reflects the difference between the aggregate fair value and the remaining contractual principal outstanding for financial instruments for which the fair value option has been elected: December 31, 2021 December 31, 2020 (In thousands) Description Unpaid Principal Balance Fair Value Fair Value Over/ (Under) Unpaid Principal Balance Unpaid Principal Balance Fair Value Fair Value Over/ (Under) Unpaid Principal Balance Loans held for sale $ 493,340 $ 504,416 $ 11,076 $ 672,458 $ 698,341 $ 25,883 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following describes the valuation techniques used by United to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements. Loans held for sale : Loans held for sale within the community banking segment that are delivered on a best efforts basis are carried at the lower of cost or fair value. The fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (“Level 2”). As such, United records any fair value adjustments for these loans held for sale on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale during the year ended December 31, 2021. Gains and losses on sale of loans are recorded within income from mortgage banking activities on the Consolidated Statements of Income. Individually assessed loans : In the determination of the allowance for loan losses, loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Fair value is measured using a market approach based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an appraisal conducted by an independent, licensed appraiser outside of the Company using comparable property sales (“Level 2”). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (“Level 3”). For individually assessed loans, a specific reserve is established through the allowance for loan losses, if necessary, by estimating the fair value of the underlying collateral on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses expense on the Consolidated Statements of Income. 142 Table of Contents OREO : OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried on the balance sheet at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Fair value is determined by one of two market approach methods depending on whether the property has been vacated and an appraisal can be conducted. If the property has yet to be vacated and thus an appraisal cannot be performed, a Brokers Price Opinion (i.e. BPO), is obtained. A BPO represents a best estimate valuation performed by a realtor based on knowledge of current property values and a visual examination of the exterior condition of the property. Once the property is subsequently vacated, a formal appraisal is obtained and the recorded asset value appropriately adjusted. On the other hand, if the OREO property has been vacated and an appraisal can be conducted, the fair value of the property is determined based upon the appraisal using a market approach. An authorized independent appraiser conducts appraisals for United. Appraisals for property other than ongoing construction are based on consideration of comparable property sales (“Level 2”). In contrast, valuation of ongoing construction assets requires some degree of professional judgment. In conducting an appraisal for ongoing construction property, the appraiser develops two appraised amounts: an “as is” appraised value and a “completed” value. Based on professional judgment and their knowledge of the particular situation, management determines the appropriate fair value to be utilized for such property (“Level 3”). As a matter of policy, valuations are reviewed at least annually and appraisals are generally updated on a bi-annual basis with values lowered as necessary. Intangible Assets : For United, intangible assets consist of goodwill and core deposit intangibles. Goodwill is tested for impairment at least annually or sooner if indicators of impairment exist. United may elect to perform a qualitative analysis to determine whether or not it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount. If United elects to bypass this qualitative analysis, or concludes via qualitative analysis that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, United may use either a market or income quantitative approach to determine the fair value of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment charge would be recorded for the difference, not to exceed the amount of goodwill allocated to the reporting unit. At each reporting date, the Company considers potential indicators of impairment. United performed its annual goodwill impairment test on the Company’s reporting units as of September 30, 2021. The goodwill impairment test did not identify any goodwill impairment. In subsequent periods, economic uncertainty and volatility surrounding COVID-19 and the performance of the Company’s stock as well as possible other impairment indicators could cause us to perform a goodwill impairment test which could result in an impairment charge being recorded for that period if the carrying value of goodwill was found to exceed fair value. Core deposit intangibles relate to the estimated value of the deposit base of acquired institutions. Management reviews core deposit intangible assets on an annual basis, or sooner if indicators of impairment exist, and evaluates changes in facts and circumstances that may indicate impairment in the carrying value. Other than those intangible assets recorded in the acquisition of Community Bankers Trust in the fourth quarter of 2021 and Carolina Financial in the second quarter of 2020, no other fair value measurement of intangible assets was made during the year of 2021 and 2020. Mortgage Servicing Rights (“MSRs”): A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“mortgage servicing rights”) at fair value. For subsequent measurement purposes, the Company measures servicing assets and liabilities using the amortization method on a quarterly basis. The quarterly determination of fair value of servicing rights is provided by a third party and is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy. The unobservable inputs for Level 3 valuations are market discount rates, anticipated prepayment speeds, projected delinquency rates, and ancillary fee income net of servicing costs. For the unobservable inputs used in the valuation of mortgage servicing rights at December 31, 2021 and 2020, refer to Note J of these Notes to Consolidated Financial Statements. The Company recorded a net recovery of $ 500,000 on mortgage servicing rights in the year ended December 31, 2021. The Company recorded a $ 1,383,000 temporary impairment of mortgage servicing rights in the year ended December 31, 2020. 143 Table of Contents The Company does not hedge the mortgage servicing rights positions and the impact of falling long-term interest rates increased prepayment speed assumptions reducing the value of MSRs asset. The following table summarizes United’s financial assets that were measured at fair value on a nonrecurring basis during the period: (In thousands) Description Carrying value at December 31, 2021 Balance as of December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) YTD Gains (Losses) Assets Individually assessed loans $ 65,431 $ 0 $ 46,830 $ 18,601 $ ( 601 ) OREO 14,823 0 3,209 11,614 ( 4,020 ) Mortgage servicing rights 27,355 0 0 27,355 ( 629 ) (In thousands) Description Carrying value at December 31, 2020 Balance as of December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) YTD Gains (Losses) Assets Loans held for sale $ 20,596 $ 0 $ 20,596 $ 0 $ ( 197 ) Individually assessed loans 37,498 0 14,467 23,031 1,318 OREO 22,595 0 22,595 0 ( 1,618 ) Mortgage servicing rights 20,955 0 0 20,955 ( 1,383 ) Fair Value of Other Financial Instruments The following methods and assumptions were used by United in estimating its fair value disclosures for other financial instruments: Cash and Cash Equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values. Securities held to maturity and other securities : The estimated fair values of securities held to maturity are based on quoted market prices, where available. If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data. Any securities held to maturity, not valued based upon the methods above, are valued based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks. Other securities consist mainly of shares of Federal Home Loan Bank and Federal Reserve Bank stock that do not have readily determinable fair values and are carried at cost. Loans and leases : The fair values of certain mortgage loans (e.g., one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values of other loans and leases (e.g., commercial real estate and rental property mortgage loans, commercial and industrial loans, financial institution loans and agricultural loans) are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans and leases with similar terms to borrowers of similar creditworthiness, which include adjustments for liquidity concerns. For acquired PCD loans, fair value is assumed to equal United’s carrying value, which represents the present value of expected future principal and interest cash flows, as adjusted for any Allowance for Credit Losses recorded for these loans. 144 Table of Contents Deposits : The fair values of demand deposits (e.g., interest and noninterest checking, regular savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values of fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. Short-term Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and any other short-term borrowings approximate their fair values. Long-term Borrowings: The fair values of United’s Federal Home Loan Bank borrowings and trust preferred securities are estimated using discounted cash flow analyses, based on United’s current incremental borrowing rates for similar types of borrowing arrangements. Summary of Fair Values for All Financial Instruments The estimated fair values of United’s financial instruments are summarized below: Fair Value Measurements (In thousands) Carrying Amount Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2021 Cash and cash equivalents $ 3,758,170 $ 3,758,170 $ 0 $ 3,758,170 $ 0 Securities available for sale 4,042,699 4,042,699 5,758 4,036,941 0 Securities held to maturity 1,001 1,020 0 0 1,020 Equity securities 12,404 12,404 12,404 0 0 Other securities 239,645 227,663 0 0 227,663 Loans held for sale 504,416 504,416 0 40,307 464,109 Net loans 17,807,632 17,119,202 0 0 17,119,202 Derivative financial assets 32,265 32,265 0 22,760 9,505 Mortgage servicing rights 23,144 27,355 0 0 27,355 Deposits 23,350,263 23,334,431 0 23,334,431 0 Short-term borrowings 128,844 128,844 0 128,844 0 Long-term borrowings 817,394 773,291 0 773,291 0 Derivative financial liabilities 3,728 3,728 0 3,197 531 December 31, 2020 Cash and cash equivalents $ 2,209,068 $ 2,209,068 $ 0 $ 2,209,068 $ 0 Securities available for sale 2,953,359 2,953,359 6,207 2,947,152 0 Securities held to maturity 1,212 1,212 0 192 1,020 Equity securities 10,718 10,718 10,718 0 0 Other securities 220,895 209,850 0 0 209,850 Loans held for sale 718,937 718,937 0 64,204 654,733 Net loans 17,355,583 16,559,797 0 0 16,559,797 Derivative financial assets 44,291 44,291 0 12,280 32,011 Mortgage servicing rights 20,955 20,955 0 0 20,955 Deposits 20,585,160 20,583,607 0 20,583,607 0 Short-term borrowings 142,300 142,300 0 142,300 0 Long-term borrowings 864,369 815,991 0 815,991 0 Derivative financial liabilities 13,058 13,058 0 13,058 0 NOTE X—VARIABLE INTEREST ENTITIES Variable interest entities (“VIEs”) are entities that either have a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions, through voting rights, right to receive the expected residual returns of the entity, and obligation to absorb the expected losses of the entity). VIEs can be structured as corporations, trusts, partnerships, or other legal entities. United’s business practices include relationships with certain VIEs. For United, the business purpose of these relationships primarily consists of funding activities in the form of issuing trust preferred securities. 145 Table of Contents United currently sponsors nineteen statutory business trusts that were created for the purpose of raising funds that originally qualified for Tier I regulatory capital. As previously discussed, these trusts now are considered Tier II regulatory capital. These trusts, of which several were acquired through bank acquisitions, issued or participated in pools of trust preferred capital securities to third-party investors with the proceeds invested in junior subordinated debt securities of United. The Company, through a small capital contribution, owns 100 % of the voting equity shares of each trust. The assets, liabilities, operations, and cash flows of each trust are solely related to the issuance, administration, and repayment of the preferred equity securities held by third-party investors. United fully and unconditionally guarantees the obligations of each trust and is obligated to redeem the junior subordinated debentures upon maturity. United does not consolidate these trusts as it is not the primary beneficiary of these entities because United’s wholly owned and indirect wholly owned statutory trust subsidiaries do not have a controlling financial interest in the VIEs. A controlling financial interest is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. United, through its banking subsidiary, also makes limited partner equity investments in various low income housing and community development partnerships sponsored by independent third-parties. United invests in these partnerships to either realize tax credits on its consolidated federal income tax return or for purposes of earning a return on its investment. These partnerships are considered VIEs as the limited partners lack a controlling financial interest in the entities through their inability to make decisions that have a significant effect on the operations and success of the partnerships. United’s limited partner interests in these entities is immaterial, however; these partnerships are not consolidated as United is not deemed to be the primary beneficiary. The following table summarizes quantitative information about United’s significant involvement in unconsolidated VIEs: As of December 31, 2021 As of December 31, 2020 (In thousands) Aggregate Assets Aggregate Liabilities Risk Of Loss (1) Aggregate Assets Aggregate Liabilities Risk Of Loss (1) Trust preferred securities $ 299,531 $ 288,499 $ 11,032 $ 295,466 $ 284,788 $ 10,678 (1)   Represents investment in VIEs.     NOTE Y—SEGMENT INFORMATION United operates in two business segments: community banking and mortgage banking. Through its community banking segment, United offers a full range of products and services through various delivery channels. In particular, the community banking segment includes both commercial and consumer lending and provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. In addition, this segment provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit as well as investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning, and investment management. The mortgage banking segment engages primarily in the origination and acquisition of residential mortgages for sale into the secondary market though United’s mortgage banking subsidiaries, George Mason and Crescent. Crescent may retain servicing rights on their mortgage loans sold. At certain times, Crescent may purchase rights to service loans from third parties. These rights are known as mortgage servicing rights provide the owner with the contractual right to receive a stream of cash flows in exchange for performing specified mortgage servicing functions. The community banking segment provides the mortgage banking segment (George Mason and Crescent) with short-term funds to originate mortgage loans through a warehouse line of credit and charges the mortgage banking segment interest based on the 30-day LIBOR rate. These transactions are eliminated in the consolidation process. 146 Table of Contents The Company does not have any operating segments other than those reported. The “Other” category consists of financial information not directly attributable to a specific segment, including interest income from investments and net securities gains or losses of parent companies and their non-banking subsidiaries, interest expense related to subordinated notes of unconsolidated subsidiaries as well as the elimination of non-segment related intercompany transactions such as management fees. The “Other” represents an overhead function rather than an operating segment. Information about the reportable segments and reconciliation of this information to the consolidated financial statements at and for the years ended December 31, 2021, 2020 and 2019 is as follows: At and For the Year Ended December 31, 2021 (In thousands) Community Banking Mortgage Banking Other Intersegment Eliminations Consolidated Net interest income $ 731,305 $ 10,497 $ ( 8,378 ) $ 9,310 $ 742,734 Provision for credit losses ( 23,970 ) 0 0 0 ( 23,970 ) Other income 99,974 183,216 3,769 ( 8,867 ) 278,092 Other expense 443,457 138,508 ( 465 ) 443 581,943 Income taxes 84,715 11,275 ( 875 ) 0 95,115 Net income (loss) $ 327,077 $ 43,930 $ ( 3,269 ) $ 0 $ 367,738 Total assets (liabilities) $ 29,022,170 $ 691,642 $ 39,182 $ ( 424,092 ) $ 29,328,902 Average assets (liabilities) 26,910,956 659,105 27,445 ( 341,411 ) 27,256,095 At and For the Year Ended December 31, 2020 (In thousands) Community Banking Mortgage Banking Other Intersegment Eliminations Consolidated Net interest income $ 677,907 $ 8,853 $ ( 9,658 ) $ 12,671 $ 689,773 Provision for credit losses 106,562 0 0 0 106,562 Other income 90,092 276,185 730 ( 12,261 ) 354,746 Other expense 423,934 140,628 13,245 410 578,217 Income taxes 47,162 27,698 ( 4,143 ) 0 70,717 Net income (loss) $ 190,341 $ 116,712 $ ( 18,030 ) $ 0 $ 289,023 Total assets (liabilities) $ 25,892,396 $ 870,151 $ 31,623 $ ( 609,923 ) $ 26,184,247 Average assets (liabilities) 23,927,889 651,778 7,283 ( 449,880 ) 24,137,070 At and For the Year Ended December 31, 2019 (In thousands) Community Banking Mortgage Banking Other Intersegment Eliminations Consolidated Net interest income $ 583,547 $ 916 $ ( 12,472 ) $ 5,931 $ 577,922 Provision for credit losses 21,313 0 0 0 21,313 Other income 74,956 83,884 392 ( 8,748 ) 150,484 Other expense 314,710 72,288 ( 1,527 ) ( 2,817 ) 382,654 Income taxes 64,080 2,355 ( 2,095 ) 0 64,340 Net income (loss) $ 258,400 $ 10,157 $ ( 8,458 ) $ 0 $ 260,099 Total assets (liabilities) $ 19,564,036 $ 507,124 $ 17,777 $ ( 426,613 ) $ 19,662,324 Average assets (liabilities) 19,401,397 358,087 8,411 ( 292,427 ) 19,475,468 NOTE Z—QUARTERLY FINANCIAL DATA (UNAUDITED) Quarterly financial data for 2021 and 2020 is summarized below (dollars in thousands, except for per share data): (Dollars in thousands) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2021 Interest income $ 205,657 $ 200,186 $ 194,080 $ 195,194 Interest expense 14,697 13,669 12,501 11,516 Net interest income 190,960 186,517 181,579 183,678 Provision for credit losses 143 ( 8,879 ) ( 7,829 ) ( 7,405 ) Mortgage banking income 65,395 36,943 42,012 27,342 Securities gains (losses), net 2,609 24 82 ( 39 ) Other noninterest income 24,569 25,879 26,530 26,746 Noninterest expense 148,927 138,951 142,276 151,789 147 Table of Contents (Dollars in thousands) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Income taxes 27,565 24,455 23,604 19,491 Net income (1) 106,898 94,836 92,152 73,852 Per share data: Average shares outstanding (000s): Basic 128,636 128,751 128,763 130,940 Diluted 128,891 129,034 128,960 131,296 Net income per share: Basic $ 0.83 $ 0.73 $ 0.71 $ 0.56 Diluted $ 0.83 $ 0.73 $ 0.71 $ 0.56 Dividends per share $ 0.35 $ 0.35 $ 0.35 $ 0.36 2020 Interest income $ 180,482 $ 198,717 $ 210,269 $ 208,914 Interest expense 38,964 28,115 24,605 16,925 Net interest income 141,518 170,602 185,664 191,989 Provision for credit losses 27,119 45,911 16,781 16,751 Mortgage banking income 17,631 68,213 109,457 70,793 Securities losses, net 196 1,510 860 589 Other noninterest income 18,979 18,667 25,151 22,700 Noninterest expense 101,133 149,374 171,593 156,117 Income taxes 9,889 11,021 28,974 20,833 Net income (1) 40,183 52,686 103,784 92,370 Per share data: Average shares outstanding (000s): Basic 101,295 119,824 129,373 129,372 Diluted 101,399 119,888 129,455 129,479 Net income per share: Basic $ 0.40 $ 0.44 $ 0.80 $ 0.71 Diluted $ 0.40 $ 0.44 $ 0.80 $ 0.71 Dividends per share $ 0.35 $ 0.35 $ 0.35 $ 0.35 (1) For further information, see the related discussion “Quarterly Results” included in Management’s Discussion and Analysis. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES This item is omitted since it is not applicable.