What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-10 compared with 2021-11-09 · 264 added, 518 removed, 325 unchanged (71% of the section changed)

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CORONAVIRUS (“COVID-19”)

During 2020, the COVID-19

During 2020, and to a lesser extent in 2021, the COVID-19

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

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

the impact to the financial services and banking industry;

the impact to the financial services and

banking industry;

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

Refer to our 2021 Form 10-K

and our Form 10-Q

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

for further information regarding (i) the impact of the COVID-19

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

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

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

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

In December 2020, the Economic Aid to Hard-Hit

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

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

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

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

schools and higher education;

the Centers for Disease Control;

public transit;

rental assistance;

and airline industry workers.

On March 27, 2021, the COVID-19

Bankruptcy Relief Extension Act of 2021 was enacted, extending the bankruptcy relief provisions enacted in the CARES Act of 2020 bill until March 27, 2022.

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

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

Impact on our Operations.

In the states where United operates, many jurisdictions declared health emergencies due to the COVID-19

The resulting closures of non-essential

businesses and related economic disruption impacted our operations as well as the operations of our customers.

Financial services were identified as a Critical Infrastructure Sector by the Department of Homeland Security.

Accordingly, our business remained open.

To address the issues arising as a result of COVID-19,

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

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

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

United is currently unable to fully assess or predict the extent of the effects of COVID-19

on its operations in the future as the ultimate impact will depend on factors that are currently unknown and/or beyond our control.

Impact on our Financial Position and Results of Operations.

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

In addition, significant uncertainties related to the COVID-19

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

the impact to the financial services and banking industry;

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

outbreak and its variants or to mitigate its impact.

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

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

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

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

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

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

In keeping with guidance from regulators, the Company actively worked with COVID-19

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

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

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

The Company’s interest income has and could continue to be reduced due to COVID-19.

In keeping with guidance from regulators, the Company continues to work with COVID-19

affected borrowers to defer their payments, interest, and fees.

While interest and fees continue to accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income and fees accrued would be reversed.

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

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

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

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

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

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

Capital and liquidity.

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

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

our reported and regulatory capital ratios could be adversely impacted by further credit loss expense.

We rely on cash on hand as well as dividends from our subsidiary bank to service our debt.

If our capital deteriorates such that our subsidiary bank is unable to pay dividends to us for an extended period of time, we may not be able to service our debt.

We maintain access to multiple sources of liquidity.

Wholesale funding markets have remained open to us.

Rates for short-term funding were volatile throughout 2020, but have been more stable thus far in 2021.

If funding costs become elevated for an extended period of time, it could have an adverse effect on our net interest margin.

If an extended recession caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding.

For a discussion of the United’s liquidity and capital resources in light of the COVID-19

pandemic please refer to the sections with the captions of “Liquidity and Capital Resources” included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

Lending operations and accommodations to borrowers.

In keeping with regulatory guidance to work with borrowers during this unprecedented situation and as outlined in the CARES Act, the Company is executing a payment deferral program for its customers that are adversely affected by the pandemic.

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

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

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

It is possible that these deferrals could be extended further under the CARES Act;

however, the volume of these future potential extensions is unknown.

It is also possible that in spite of our best efforts to assist our borrowers and achieve full collection of our investment, these deferred loans could result in future charge-offs with additional credit loss expense charged to earnings;

however, the amount of any future charge-offs on deferred loans is unknown.

With the passage and extensions of the PPP, administered by the SBA, the Company has actively participated in assisting its customers with applications for resources through the program.

PPP loans generally have a two-year

or five-year term and earn interest at 1%.

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

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

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

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

It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S.

Should those circumstances change, the Company could be required to establish an allowance for credit loss through additional credit loss expense charged to earnings.

Retail operations.

The Company has been committed to assisting our customers and communities during the COVID-19

For much of 2020 and the first part of 2021, most branch locations were converted to drive-thru only in order to ensure the health and safety of our customers and team members.

We continued to serve our customers that needed emergency branch access for account issues, safe deposit access and similar items by appointment.

The Company was able to open and close accounts effectively, through its drive through facility, and our customer service center was successful in managing the volume of incoming calls.

We introduced temporary changes to help with the financial hardship caused by COVID-19

for both our customers and non-customers,

including waiving select deposit account fees including overdraft fees, ATM fees and excessive withdrawal fees for savings and money market accounts.

in 2021, we used a phased-in

approach to reopen our lobbies throughout our footprint.

We have returned to full-service at all retail locations throughout our footprint.

The customer service centers continue to operate at full capacity with more normalized call volumes.

We have continued to offer fee waivers for select deposit accounts to help with the financial hardship caused by the pandemic.

The Company continues to place the utmost importance on the health and safety of our employees and customers.

We also continue to follow the applicable Centers for Disease Control and Prevention (“CDC”) guidance and comply with any local or state mandates.

The Company continues to closely monitor the pandemic and COVID-19

variants and will adjust its retail operations accordingly, as necessary.

On June 2, 2021, United entered into an Agreement and Plan of Reorganization (the “Community Bankers Trust Agreement”) with Community Bankers Trust Corporation (“Community Bankers Trust”), a Virginia corporation headquartered in Richmond, Virginia.

Community Bankers Trust is the holding company for Essex Bank, a Virginia state chartered bank with 24 full-service offices, 18 of which are in Virginia and six of which are in Maryland.

Essex Bank also operates two loan production offices.

In accordance with the Community Bankers Trust Agreement, Community Bankers Trust shall merge with and into United (the “Community Bankers Trust Merger”).

Community Bankers Trust will cease to exist and United shall survive and continue to exist as a West Virginia corporation.

United may at any time prior to the effective time of the Community Bankers Trust Merger change the method of effecting the combination with Community Bankers Trust subject to certain conditions contained in the Community Bankers Trust Agreement.

At the effective time of the Community Bankers Trust Merger, Essex Bank will merge with and into United Bank, a wholly-owned subsidiary of United (the “Essex Bank Merger”).

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

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

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

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

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

Immediately following the merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank (the “CresCom Bank Merger”).

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

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

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

CresCom Bank owned and operated Crescent Mortgage Company (“Crescent”), which is based in Atlanta.

Crescent is approved to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers.

As a result of the merger, Crescent became an indirectly-owned subsidiary of United.

The Carolina Financial merger was accounted for under the acquisition method of accounting.

At consummation, Carolina Financial had assets of $5.00 billion, loans and leases, net of unearned income of $3.29 billion and deposits of $3.87 billion.

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

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

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

As the COVID-19

pandemic continues to be on-going,

there continues to be uncertainties related to its magnitude, duration and persistent effects.

This is particularly the case with the emergence, contagiousness and threat of new and different strains of the virus as well as the availability, acceptance and effectiveness of vaccines.

However, United is currently unable to fully assess or predict the extent of the effects of COVID-19

on its operations and results in the future as the ultimate impact will depend on factors that are currently unknown and/or beyond our control.

On December 3, 2021, United acquired 100% of the outstanding common stock of Community Bankers Trust Corporation (“Community Bankers Trust”), a Virginia corporation headquartered in Richmond, Virginia.

Immediately following the Merger, Essex Bank, a wholly-owned subsidiary of Community Bankers Trust, merged with and into United Bank, a wholly-owned subsidiary of United.

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

The acquisition of Community Bankers Trust enhanced United’s existing presence in the DC Metro MSA and took United into new markets including Baltimore, Annapolis, Lynchburg, Richmond, and the Northern Neck of Virginia.

It also strategically connected our Mid-Atlantic

and Southeast footprints.

The Community Bankers Trust merger was accounted for under the acquisition method of accounting.

At consummation, Community Bankers Trust had assets of $1.79 billion, loans and leases, net of unearned income of $1.28 billion and deposits of $1.52 billion.

The results of operations of Community Bankers Trust are included in the consolidated results of operations from its date of acquisition.

As a result of the Community Bankers Trust acquisitions, the first quarter of 2022 was impacted by increased levels of average balances, income, and expense as compared to the first quarter of 2021.

In addition, the first quarter of 2022 included $536 thousand of merger-related expenses from the the Community Bankers Trust acquisition.

There were no merger-related expenses incurred in the first quarter of 2021.

TRANSITION FROM THE LONDON INTERBANK OFFERED RATE (LIBOR)

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit the rates used to calculate LIBOR after 2021.

ICE Benchmark Administration (the publisher of LIBOR) plans to discontinue publication of the one-week

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced its intention to stop persuading or compelling banks to submit the rates used to calculate LIBOR after 2021.

ICE Benchmark Administration (the publisher of LIBOR) discontinued publication of the one-week

and two-month

Dollar LIBOR settings on December 31, 2021, and to discontinue publication of overnight, one-month,

Dollar LIBOR settings on December 31, 2021, and plans to discontinue publication of overnight, one-month,

three-month, six-month,

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Additionally, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have issued joint supervisory guidance encouraging banks to cease entering into any new contracts using LIBOR by December 31, 2021.

Accordingly, United has taken steps to ensure that no new contracts using LIBOR will be originated after December 31, 2021.

Working groups comprised of various regulators and other industry groups have been formed in the United States and other countries in order to provide guidance on this topic.

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United has formed a project team comprised of individuals across various lines of business throughout the company to identify risks, monitor market developments, evaluate replacement benchmark alternatives, and manage the company’s transition away from LIBOR.

At this time, United intends to prioritize SOFR and Prime as the preferred alternatives to LIBOR;

however, these preferred alternatives could change over time based on market developments.

United has loans, derivative contracts, borrowings, and other financial instruments that are directly or indirectly dependent on LIBOR.

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and its wholly-owned subsidiaries, unless otherwise indicated.

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

Management has evaluated all significant events and transactions that occurred after March 31, 2022, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.

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

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Average tangible equity is calculated as GAAP total shareholders’ equity minus total intangible assets.

Tangible equity can thus be considered the most conservative valuation of the company.

Tangible equity can thus be considered a more conservative valuation of the company.

When considering net income, a return on average tangible equity can be calculated.

Management provides a return on average equity to facilitate the understanding of as well as to assess the quality and composition of United’s capital structure.

By removing the effect of intangible assets that result from merger and acquisition activity, the “permanent” items of shareholders’ equity are presented.

This measure, along with others, is used by management to analyze capital adequacy and performance.

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Actual results could differ from these estimates.

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

These policies, along with the disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan and lease losses, the calculation of the income tax provision, and the use of fair value measurements to account for certain financial instruments to be the accounting areas that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

United’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of March 31, 2022 were unchanged from the policies disclosed in United’s Annual Report on Form 10-K

for the year ended December 31, 2021 within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

FINANCIAL CONDITION

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

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

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

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

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

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

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

Shareholders’ equity increased $133.15 million or 3.10%.

United’s total assets as of March 31, 2022 were $29.37 billion, which was an increase of $36.61 million or less than 1% from December 31, 2021.

This increase was mainly due to an increase of $724.96 million or 16.88% in investment securities, and an increase of $368.44 million or 2.04% in portfolio loans.

These increases in assets were mostly offset by a $955.08 million or 25.41% decrease in cash and cash equivalents and a $164.38 million or 32.59% decrease in loans held for sale.

Total liabilities increased $160.10 million or less than 1% from year-end

Deposits increased $124.04 million or less than 1%, accrued expenses and other liabilities increased $28.48 million or 14.56% and borrowings increased $7.37 million or less than 1%.

Shareholders’ equity decreased $123.49 million or 2.62%.

The following discussion explains in more detail the changes in financial condition by major category.

Cash and Cash Equivalents

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

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

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

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

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

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

Cash and cash equivalents at March 31, 2022 decreased $955.08 million or 25.41% from year-end

In particular, interest-bearing deposits with other banks decreased $1.05 billion or 30.36% as United placed less cash in an interest-bearing account with the Federal Reserve.

Partially offsetting this decrease in cash and cash equivalents was a $99.71 million or 35.25% increase in cash and due from banks.

Federal funds sold increased $118 thousand or 12.73%.

During the first three months of 2022, net cash of $283.61 million and $64.91 million were provided by operating and financing activities, respectively, while net cash of $1.30 billion was used in investing activities.

See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first three months of 2022 and 2021.

Total investment securities at March 31, 2022 increased $724.96 million or 16.88%.

Securities available for sale increased $718.24 million or 17.77%.

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

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

Securities held to maturity declined $219 thousand or 18.07% from year-end

2020 due to maturities and calls of securities.

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

This change in securities available for sale reflects $1.08 billion in purchases, $151.63 million in sales, maturities and calls of securities and a decrease of $202.23 million in market value.

The majority of the purchase activity was related to securities of the U.S.

Treasury and obligations of U.S.

Government corporations and agencies, mortgage-backed securities, and asset-backed securities.

Securities held to maturity were flat from year-end

Equity securities were $12.36 million at March 31, 2022, a decrease of $47 thousand or less than 1% due mainly to a net decline in fair value.

Other investment securities increased $6.78 million or 2.83% from year-end

2020 due mainly to an increase in investment tax credits.

Partially offsetting this increase in investment tax credits was a decrease in Federal Home Loan Bank (“FHLB”) stock.

2021 due to purchases of Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stock as well as investment tax credits.

The following table summarizes the changes in the available for sale securities since year-end

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net of allowance for credit losses of $19 thousand.

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

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

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

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

At March 31, 2022, gross unrealized losses on available for sale securities were $195.58 million.

Securities with the most significant gross unrealized losses at March 31, 2022 consisted primarily of agency residential mortgage-backed securities, state and political subdivision securities, agency commercial mortgage-backed securities, asset-backed securities and other corporate securities.

As of March 31, 2022, United’s available for sale mortgage-backed securities had an amortized cost of $2.23 billion, with an estimated fair value of $2.12 billion.

The portfolio consisted primarily of $1.47 billion in agency residential mortgage-backed securities with a fair value of $1.39 billion, $103.78 million in non-agency

residential mortgage-backed securities with an estimated fair value of $100.10 million, and $653.53 million in commercial agency mortgage-backed securities with an estimated fair value of $627.17 million.

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

As of March 31, 2022, United’s available for sale state and political subdivisions securities had an amortized cost of $838.38 million, with an estimated fair value of $795.51 million.

The portfolio relates to securities issued by various municipalities located throughout the United States, and no securities within the portfolio were rated below investment grade as of March 31, 2022.

As of March 31, 2022, United’s available for sale corporate securities had an amortized cost of $1.51 billion, with an estimated fair value of $1.48 billion.

The portfolio consisted of $17.30 million in single issue trust preferred securities with an estimated fair value of $16.67 million.

In addition to the single issue trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $856.84 million and a fair value of $844.00 million and other corporate securities, with an amortized cost of $632.22 million and a fair value of $616.56 million.

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

United’s available for sale single issue trust preferred securities had a fair value of $16.67 million as of March 31, 2022.

Of the $16.67 million, $8.12 million or 48.65% were investment grade;

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

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

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

During the first quarter of 2022, United did not recognize any credit losses on its available for sale investment securities.

Management does not believe that any individual security with an unrealized loss as of March 31, 2022 is impaired.

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

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

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

As of March 31, 2022, there was no allowance for credit losses related to the Company’s available for sale securities.

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

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Loans held for sale

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

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

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

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

Loans held for sale were $340.04 million at March 31, 2022, a decrease of $164.38 million or 32.59% from year-end

Loan sales in the secondary market exceeded originations during the first three months of 2022.

Loan originations for the first three months of 2022 were $927.80 million while loans sales were $1.11 billion.

Portfolio Loans

Loans, net of unearned income, decreased $847.78 million or 4.82%.

Loans, net of unearned income, increased $368.44 million or 2.04%.

Since year-end

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

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

Partially offsetting these decreases in loans, net of unearned income, was a $282.80 million or 15.48% increase in construction and land development loans.

2021, commercial, financial and agricultural loans increased $126.85 million or 1.14% as a result of a $55.30 million or less than 1 % increase in commercial real estate loans and a $71.55 million or 2.07% increase in commercial loans (not secured by real estate).

Construction and land development loans increased $171.96 million or 8.54%, residential real estate loans increased $13.98 million or less than 1%, and consumer loans increased $55.19 million or 4.63% due to an increase in indirect automobile financing.

The following table summarizes the changes in the major loan classes since year-end

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Other assets increased $57.43 million or 24.80% from year-end

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

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

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

Derivative assets increased $29.29 million due to an increase in fair value and deferred tax assets increased $41.98 million due to a decrease in the fair value of available-for-sale

Partially offsetting these increases were decreases of $18.14 million in income tax receivable due to timing differences, $1.18 million in other real estate owned properties (“OREO”) due to sales and write downs, and $1.38 million in core deposit intangibles due to amortization.

Deposits represent United’s primary source of funding.

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

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

Total deposits at March 31, 2022 increased $124.04 million or less than 1%.

In terms of composition, noninterest-bearing deposits increased $26.41 million or less than 1% while interest-bearing deposits increased $97.62 million or less than 1% from December 31, 2021.

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

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

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

The $26.41 million increase in noninterest-bearing deposits was due mainly to a $99.22 million or 1.41% increase in commercial noninterest-bearing deposits.

Partially offsetting this increase in commercial noninterest-bearing deposits was a decrease in public noninterest-bearing deposits of $8.42 million or 4.28% and a decrease of $62.64 million in items in-process.

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

NOW accounts increased $88.37 billion or 2.37% since year-end

2020 while regular savings accounts increased $168.

99 million or 13.16%.

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

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

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

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

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

2021 as the result of increases of $52.41 million in personal NOW accounts, $12.78 million in commercial NOW accounts, and $23.18 million in public funds NOW accounts.

Regular savings accounts increased $64.09 million or 3.90% mainly as a result of a $58.76 million increase in personal savings accounts and a $5.04 million increase in commercial savings accounts.

Interest-bearing MMDAs increased $186.26 million or 2.93%.

In particular, personal MMDAs increased $67.80 million, commercial MMDAs increased $42.03 million, brokered MMDAs increased $68.78 million, and public funds MMDAs increased $7.65 million.

Time deposits under $100,000 decreased $49.35 million or 4.79% from year-end

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

This decrease in time deposits under $100,000 was the result of a $46.00 million decrease in fixed rate Certificates of Deposits (“CDs”) under $100,000, a $2.60 million decrease in Certificate of Deposit Account Registry Service (“CDARS”) under $100,000, and a $2.31 million decrease in CDs under $100,000 obtained through the use of deposit listing services.

Since year-end

2020, time deposits over $100,000 decreased $544.32 million or 28.23% as fixed rate CDs decreased $254.85 million, brokered certificates of deposits decreased $105.96 million, and public funds CDs over $100,000 decreased $123.34 million.

In addition, Certificate of Deposit Account Registry Service (“CDARS”) CDs decreased $61.20 million.

2021, time deposits over $100,000 decreased $191.75 million or 11.98% as fixed rate CDs decreased $125.09 million, CDARS over $100,000 decreased $33.64 million, brokered certificates of deposits decreased $7.04 million, and public funds CDs over $100,000 decreased $25.74 million.

The table below summarizes the changes by deposit category since year-end

7 unchanged sentences

Total deposits

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

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

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

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

2020 due to a $51.75 million decrease in long-term FHLB advances as payments exceeded new borrowings.

Includes time deposits of $250,000 or more of $556,426 and $640,752 at March 31, 2022 and December 31, 2021, respectively.

Total borrowings at March 31, 2022 increased $7.37 million or less than 1% since year-end

During the first three months of 2022, short-term borrowings increased $7.53 million or 5.84% due to an increase in securities sold under agreements to repurchase.

Long-term borrowings were flat, decreasing $159 thousand or less than 1% from year-end

The table below summarizes the change in the borrowing categories since year-end

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Accrued Expenses and Other Liabilities

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

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

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

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

Accrued expenses and other liabilities at March 31, 2022 increased $28.48 million or 14.56% from year-end

In particular, a $24.66 million liability owed to a derivative counterparty in relation to FHLB swaps was recorded during the first quarter of 2022.

In addition, accounts payable associated with George Mason increased $8.84 million and income tax payable increased $3.18 million, both due to timing differences, while accrued mortgage escrow liabilities increased $3.90 million, and business franchise taxes increased $2.79 million.

Partially offsetting these increases was a decrease of $10.03 million in incentives payables due to payments.

Shareholders’ Equity

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

Shareholders’ equity at March 31, 2022 was $4.60 billion, which was a decrease of $123.49 million or 2.62% from year-end

Retained earnings increased $32.40 million or 2.33% from year-end

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

Earnings net of dividends for the first three months of 2022 were $32.40 million.

Accumulated other comprehensive income decreased $136.80 million or 2,798.77% from year-end

2020 due mainly to a decrease of $36.30 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes.

Partially offsetting this decrease was a $10.32 million increase in the fair of cash flow hedges, net of deferred income taxes.

2021 due to a decrease of $155.11 million in United’s available for sale investment portfolio, net of deferred income taxes.

Partially offsetting this decrease was a $17.67 million increase in the fair value of cash flow hedges, net of deferred income taxes.

The after-tax

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

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

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

accretion of pension costs was $641 thousand for the first quarter of 2022.

Treasury stock increased $26.28 million or 15.41% from year-end

During the first quarter of 2022, United repurchased 710,785 shares of its common stock on the open market under a repurchase plan approved by United’s Board of Directors at a cost of $24.98 million or an average price per share of $35.15.

RESULTS OF OPERATIONS

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

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

Earnings for the third quarter and first nine months of 2021, as compared to the third quarter and first nine months of 2020, were benefited by lower provision for credit losses primarily due to better performance trends within the loan portfolio and an improved future macroeconomic forecast under the Current Expected Credit Loss (“CECL”) accounting standard.

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

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

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

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

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

Net income for the first quarter of 2022 was $81.66 million as compared to earnings of $106.90 million for the first quarter of 2021.

Earnings for the first quarter of 2022, as compared to the first quarter of 2021, decreased primarily due to lower income from mortgage banking activities mainly as a result of the rising rate environment partially offset by lower noninterest expense associated with decreased mortgage banking production.

Diluted earnings per share were $0.60 for the first quarter of 2022 and $0.83 for the first quarter of 2021.

United’s annualized return on average assets for the first three months of 2022 was 1.13% and return on average shareholders’ equity was 6.96% as compared to 1.64% and 9.97%, respectively, for the first three months of 2021.

For the first three months of 2022, United’s annualized return on average tangible equity was 11.63%, as compared to 17.20% for the first three months of 2021.

Three Months Ended

Nine Months Ended

(Dollars in thousands)

September 30,

March 31, 2022

March 31, 2021

Return on Average Tangible Equity:

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Average Total Intangibles

(b) Average Tangible Equity (non-GAAP)

Return on Tangible Equity (non-GAAP)

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

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

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

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

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

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

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

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

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

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

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

impact of a declining locked pipeline.

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

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

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

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

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

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

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

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

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

Net interest income for the first quarter of 2022 was relatively flat from the first quarter of 2021, increasing $542 thousand, or less than 1%, to $191.50 million from net interest income of $190.96 million for the first three months of 2021.

The slight increase of $542 thousand in net interest income occurred because total interest income decreased $2.86 million while total interest expense decreased $3.40 million from the first quarter of 2021.

The provision for credit losses was a net benefit of $3.41 million for the first quarter of 2022 as compared to a provision for credit losses expense of $143 thousand for the first quarter of 2021.

The decrease in the provision for credit losses was mainly due to the impact of better performance trends within the loan portfolio.

Noninterest income was $46.02 million for the first three months of 2022, a decrease of $46.55 million or 50.28% from the first three months of 2021 due mainly to decreased income from mortgage banking activities due to a lower volume of mortgage loan originations and sales in the secondary market mainly the result of a rising interest rate environment.

Noninterest expense for the first three months of 2022 decreased $9.75 million or 6.55% from the first three months of 2021 due mainly to lower employee compensation expense as a result of lower employee commissions, incentives and overtime related to mortgage banking production and lower OREO expense due to fewer declines in the fair value of OREO properties.

Income taxes decreased $7.47 million or 27.09% for the first three months of 2022 as compared to the first three months of 2021 primarily due to lower earnings and a lower effective tax rate.

The effective tax rate was 19.75% and 20.50% for the first quarter of 2022 and 2021, respectively.

Business Segments

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Community Banking

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

Net income attributable to the community banking segment for

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

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

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

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

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

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

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

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

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

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

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

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

deteriorated (“non-PCD”)

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

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

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

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

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

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

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

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

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

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

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

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

Net income attributable to the community banking segment for the first quarter of 2022 was $83.03 million compared to net income of $82.22 million for the first quarter of 2021.

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

Net interest income of $189.68 million for the first quarter of 2022 was an increase of $2.49 million or 1.33% from $187.20 million for the first quarter of 2021.

Generally, net interest income for the first quarter of 2022 increased from the first quarter of 2021 due to an increase in average earning assets as a result of the Community Bankers Trust acquisition and lower interest expense on deposits driven by rate repricing.

The provision for credit losses was a net benefit of $3.41 million for the first quarter of 2022 as compared to a provision for credit losses expense of $143 thousand for the first quarter of 2021, a decrease of $3.55 million.

As previously mentioned, the decrease was due mainly to better performance trends within the loan portfolio.

Noninterest income decreased $1.49 million for the first quarter of 2022 to $24.90 million as compared to $26.39 million for the first quarter of 2021.

The decrease of $1.49 million was due mainly to declines in net gains on the sales and calls of investment securities and net gains on the sales of mortgage loans within the community banking segment.

Partially offsetting these declines were increases in fees from deposit services and income from bank-owned life insurance policies (“BOLI”).

Noninterest expense was $114.54 million for the first quarter of 2022, compared to $110.02 million for the same period of 2021.

The increase of $4.52 million in noninterest expense was primarily attributable to the additional employees and branch offices from the Community Bankers Trust acquisition as most major categories of noninterest expense showed increases.

Mortgage Banking

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

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

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

impact of a declining locked pipeline.

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

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

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

The mortgage banking segment reported net income of $209 thousand for the first quarter of 2022, compared to net income of $23.03 million for the first quarter of 2021.

Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $23.40 million for the first quarter of 2022, compared to $67.51 million for the first quarter of 2021.

The decrease of $44.11 million in the first quarter of 2022 was due mainly to decreased sales of mortgage loans in the secondary market primarily as a result of a rising interest rate environment .

Noninterest expense was $25.45 million for the first three months of 2022 as compared to $41.18 million for the first three months of 2021.

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

Noninterest expense was $31.79 million for the third

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

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

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

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

Consolidated Results of Operations by Major Category

The decrease of $15.74 million in the first quarter of 2022 was due mainly to lower employee commissions, incentives and overtime related to the decreased mortgage banking production.

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

8 unchanged sentences

Income before income taxes

Nine Months Ended

(Dollars in thousands)

Income Statement Summary:

Interest income

Interest expense

Net interest income

Provision for credit losses

Other expense

Income before income taxes

The following discussion explains in more detail the consolidated results of operations by major category.

4 unchanged sentences

Such changes, and their impact on net interest income in 2022 and 2021, are presented below.

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

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

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

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

On a linked-quarter basis,

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

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

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

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

Net interest income for the first quarter of 2022 was $191.50 million, which was relatively flat from the first quarter of 2021, increasing $542 thousand, or less than 1%.

The $542 thousand increase in net interest income occurred because total interest income decreased $2.86 million while total interest expense decreased $3.40 million from the first quarter of 2021.

On a linked-quarter basis, net interest income for the first quarter of 2022 increased $7.82 million, or 4.26%, from the fourth quarter of 2021.

The $7.82 million increase in net interest income occurred because total interest income increased $7.60 million while total interest expense decreased $223 thousand from the fourth quarter of 2021.

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

7 unchanged sentences

Tax-equivalent

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

The decrease in net interest income and tax-equivalent

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

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

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

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

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

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

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

Tax-equivalent

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

net interest income for the first quarter of 2022 was $192.61 million, which was also relatively flat from the first quarter of 2021, increasing $604 thousand, or less than 1%.

The slight increase in net interest income and tax-equivalent

net interest income was primarily due to the impact of higher average earnings assets, driven by the Community Bankers Trust acquisition and lower interest expense on deposits.

These increases were mostly offset by lower accretion on acquired loans, lower fee income from Paycheck Protection Program (“PPP”) loans and higher average interest-bearing deposit balances as a result of the Community Bankers Trust acquisition.

Average earning assets for the first quarter of 2022 increased $2.54 billion, or 10.83% from the first quarter of 2021 due to a $1.49 billion increase in average investment securities, a $739.28 million increase in average short-term investments and a $312.46 million increase in average net loans and loans held for sale.

Average interest-bearing deposits for the first quarter of 2022 increased $1.17 billion, or 8.30%, from the first quarter of 2021;

however, the yield on interest-bearing deposits decreased 13 basis points from the first quarter of 2021 to 0.24% for the first quarter of 2022.

The net interest spread for the first quarter of 2022 decreased 28 basis points from the first quarter of 2021 to 2.86% due to a 40 basis point decrease in the average yield on earning assets partially offset by a 12 basis point decrease in the average cost of funds.

Loan accretion on acquired loans was $4.14 million and $9.80 million for the first quarter of 2022 and 2021, respectively, a decrease of $5.66 million.

Net PPP loan fee income of $4.10 million was recognized in the first quarter of 2022 as compared to $11.31 million for the first quarter of 2021.

The net interest margin of 2.99% for the first quarter of 2022 was a decrease of 31 basis points from the net interest margin of 3.30% for the first quarter of 2021.

On a linked-quarter basis, tax-equivalent

net interest income for the first quarter of 2022 increased $7.90 million, or 4.28%, from the fourth quarter of 2021.

The increase in net interest income and tax-equivalent

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

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

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

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

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

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

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

Tax-equivalent

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

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

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

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

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

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

net interest income was primarily due to an increase in average earning assets due to the full-quarter impact of the Community Bankers Trust acquisition and organic growth partially offset by lower acquired loan accretion and PPP loan fee income.

Average earning assets increased $1.12 billion, or 4.48%, from the fourth quarter of 2021 due to increases in average net loans and loans held for sale of $900.87 million and average securities of $796.29 million partially offset by a decrease in average short-term investments of $580.24 million.

The net interest spread for the first quarter of 2022 of 2.86% increased 4 basis points from the fourth quarter of 2021 due to a 3 basis point increase in the average yield on earning assets and a 1 basis point decrease in the average cost of funds.

Loan accretion on acquired loans decreased $2.10 million from the fourth quarter of 2021.

Net PPP loan fee income for the first quarter of 2022 decreased $936 thousand from the fourth quarter of 2021.

The net interest margin of 2.99% for the first quarter of 2022 was an increase of 5 basis points from the net interest margin of 2.94% for the fourth quarter of 2021.

United’s tax-equivalent

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

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

net interest income for the three months ended March 31, 2022, March 31, 2021 and December 31, 2021:

Three Months Ended

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Long-term borrowings

Nine Months Ended

(Dollars in thousands)

Loan accretion

Certificates of deposit

Long-term borrowings

Tax-equivalent

net interest income

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

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

net interest income for the three months ended March 31, 2022, March 31, 2021 and December 31, 2021.

Three Months Ended

5 unchanged sentences

net interest income

Nine Months Ended

(Dollars in thousands)

Net interest income, GAAP basis

Tax-equivalent

adjustment (1)

Tax-equivalent

net interest income

The tax-equivalent

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

adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months ended March 31, 2022 and 2021 and December 31, 2021.

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

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

The following tables show the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month periods ended March 31, 2022 and 2021, respectively, with the interest and rate earned or paid on such amount.

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

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

basis using the statutory federal income tax rate of 21% for the three-month period ended March 31, 2022 and 2021.

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

Three Months Ended

September 30, 2021

March 31, 2022

Three Months Ended

September 30, 2020

March 31, 2021

(Dollars in thousands)

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SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

NET INTEREST INCOME

INTEREST SPREAD

NET INTEREST MARGIN

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

basis using the statutory federal income tax rate of 21%.

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

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

(Dollars in thousands)

Earning Assets:

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

Investment Securities:

Total Securities

Loans, net of unearned income (2)

Allowance for loan losses

Total earning assets

Interest-Bearing Funds:

Interest-bearing deposits

Short-term borrowings

Long-term borrowings

Total Interest-Bearing Funds

bearing deposits

Accrued expenses and other liabilities

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

NET INTEREST INCOME

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Provision for Credit Losses

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

The provision for credit losses was a net benefit of $3.41 million for the first quarter of 2022 as compared to a provision for credit losses expense of $143 thousand for the first quarter of 2021.

On a linked-quarter basis, the provision for credit losses for the fourth quarter of 2021 was a net benefit of $7.41 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

For the quarter ended March 31, 2022, the provision for loan and lease losses was a net benefit of $3.40 million as compared to provision expense of $294 thousand for the quarter ended March 31, 2021.

The lower amount of provision expense for the first quarter of 2022 compared to the first quarter of 2021 was mainly due to better performance trends within the loan portfolio to include lower historical loss rates, improvements in criticized loan totals and payoff of a large loan with a significant individual allocation as well as improved collateral values on several loans with individual allocations.

Net recoveries were $1.98 million for the first quarter of 2022 compared to net charge-offs of $4.54 million for the first quarter of 2021.

The lower amount of net charge-offs for 2022 as compared to 2021 was primarily due to charge-offs recognized on several large commercial credits in the first quarter of 2021.

On a linked-quarter basis, the provision for loan and lease losses for the fourth quarter of 2021 was a net benefit of $7.38 million.

Net charge-offs were $125 thousand for the fourth quarter of 2021.

Annualized net recoveries as a percentage of average loans were (0.04%) for the first quarter of 2022 compared to annualized net charge-offs of 0.10% for the first quarter of 2021 and 0.003% for the fourth quarter of 2021, respectively.

As of March 31, 2022, nonperforming loans and leases were $79.85 million or 0.43% of loans and leases, net of unearned income as compared to $90.76 million or 0.50% of loans, net of unearned income at December 31, 2021.

The components of nonperforming loans and leases include:

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

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

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

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

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

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

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

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

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

Loans past due 90 days or more were $15.18 million at March 31, 2022, a decrease of $3.70 million or 19.60% from $18.88 million at year-end

This decrease was primarily due to a reduction in past due mortgage and installment loans.

At March 31, 2022, nonaccrual loans were $34.09 million, which was a decrease of $1.94 million or 5.37% from $36.03 million at year-end

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

of three commercial relationships.

Restructured loans were $30.58 million at March 31, 2022, a decrease of $5.27 million or 14.71% from $35.86 million at year-end

The decrease was mainly due to the repayment of two large commercial relationships and removal of TDR status for one commercial relationship during the first quarter of 2022.

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

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

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

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

Total nonperforming assets of $93.50 million, including OREO of $13.64 million at March 31, 2022, represented 0.32% of total assets as compared to non-performing

assets of $105.59 million, including OREO of $14.82 million, or 0.36% of total assets at December 31, 2021.

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

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

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

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

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

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

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

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

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

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

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

At March 31, 2022, the allowance for credit losses was $251.27 million as compared to $247.46 million at December 31, 2021.

At March 31, 2022, the allowance for loan and lease losses was $214.59 million as compared to $216.02 million at December 31, 2021.

The decrease in the allowance for loan and lease losses was due to improved trends within the loan portfolio that included lower historical loss rates and improvements in criticized loan totals.

As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.17% at March 31, 2022 and 1.20% at December 31, 2021.

The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 268.73% and 238.00% at March 31, 2022 and December 31, 2021, respectively.

The increase in this ratio was due mainly to a decline in nonperforming loans.

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

As a result of the COVID-19

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

on each segment and established relevant qualitative adjustment factors.

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

Then, any qualitative adjustments are applied to account for the Company’s view of the future.

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

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

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

The first quarter of 2022 qualitative adjustments include analyses of the following:

– This includes portfolio trends related to business conditions;

2 unchanged sentences

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.

– United considered the impact of inflation, supply chain issues, labor shortages and the conflict in eastern Europe when making determinations related to factor adjustments, such as changes in economic and business conditions, collateral values and external factors.

Reasonable and supportable forecasts

3 unchanged sentences

Assumptions for the economic variables were the following:

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

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

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

The forecast for real GDP shifted downward in the first quarter, from a projection of 4.00% for 2022 at the end of 2021 to 2.80% for 2022 with a more level downward future trendline as compared to the end of 2021.

The unemployment rate remained fairly consistent to the end of 2021 with a steady trend expected throughout 2022 and 2023.

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

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

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

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

reasonable and supportable forecast period.

Allocations are made for specific commercial loans based upon management’s estimate of the borrowers’ ability to repay and other factors impacting collectability.

Other commercial loans and leases not specifically reviewed on an individual basis are evaluated based on historical loss percentages applied to loan pools that have been segregated by risk.

Allocations for loans and leases other than commercial loans and leases are made based upon historical loss experience adjusted for current environmental conditions.

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

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

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

The residential real estate allocation decreased $3.60 million.

The real estate construction and development loan pool allocation decreased $3.99 million.

The consumer loan pool decreased $2.25 million.

Each of these decreases were primarily due to improved economic conditions and improved expectations within the reasonable and supportable forecast.

United’s review of the allowance for loan and lease losses at March 31, 2022 produced increased reserves in three of the four loan categories as compared to December 31, 2021.

The real estate construction and development loan pool reserve increased $2.18 million.

The residential real estate reserve increased $705 thousand.

The consumer loan pool reserve increased $208 thousand.

Each of these increases were primarily due to increased outstanding balances.

The allowance related to the commercial, financial & agricultural loan pool decreased $4.52 million.

This decrease is due to improvement in historical loss rates and a decrease in allocations established for individually assessed loans.

An allowance is established for estimated lifetime losses for loans that are individually assessed.

2 unchanged sentences

Measuring expected credit losses of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates.

Expected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate, the loan’s observable market price or the fair value of collateral if the loan is collateral dependent.

Expected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate or the fair value of collateral if the loan is collateral dependent.

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

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

The allowance for loans and leases that were individually assessed was $4.38 million at March 31, 2022 and $6.53 million at December 31, 2021.

In comparison to the prior year-end,

this element of the allowance decreased by $5.25 million primarily due to charge-off

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

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

this element of the allowance decreased $2.15 million primarily due to repayment of individually assessed loans as well as improved collateral valuations.

Management believes that the allowance for credit losses of $251.27 million at March 31, 2022 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available.

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

The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries.

Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate diversification within the portfolio.

Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate

diversification within the portfolio.

Most of United’s commercial loans are secured by real estate located in West Virginia, southeastern Ohio, Pennsylvania, Virginia, Maryland, North Carolina, South Carolina, and the District of Columbia.

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

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

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

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

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

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

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

The provision for credit losses related to held to maturity securities for the first quarter of 2022 and 2021 was immaterial.

The allowance for credit losses related to held to maturity securities was $19 thousand as of March 31, 2022 and December 31, 2021.

There was no provision for credit losses recorded on available for sale investment securities for the first quarter of 2022 and 2021 and no allowance for credit losses on available for sale investment securities as of March 31, 2022 and December 31, 2021.

Due to loan interest payment deferrals granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans as of March 31, 2022.

As a result of this assessment, United released all of its remaining $8 thousand in reserves for the first quarter of 2022 as compared to the release of $151 thousand in reserves for the first quarter of 2021.

The allowance for accrued interest receivables not expected to be collected as of December 31, 2021 was $8 thousand.

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

3 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This increase was due to an increased volume of transactions.

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

This increase was due to an increase in managed assets.

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

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

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

This increase was due to an increased volume of transactions.

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

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

Noninterest income for the first quarter of 2022 was $46.02 million, a decrease of $46.55 million or 50.28% from the first quarter of 2021.

The decrease was due mainly to a decrease in income from mortgage banking activities primarily as a result of a rising interest rate environment and a lower margin on loans sold in the secondary market.

Income from mortgage banking activities totaled $19.20 million for the first quarter of 2022 compared to $65.40 million for the first quarter of 2021.

The decrease of $46.19 million or 70.64% for the first quarter of 2022 was mainly due to decreased loan sales.

Mortgage loan sales were $1.09 billion in the first quarter of 2022 as compared to $1.84 billion in the first quarter of 2021.

Mortgage loans originated for sale were $927.80 million for the first quarter of 2022 as compared to $1.93 billion for the first quarter of 2021.

Fees from deposit services for the first quarter of 2022 increased $1.25 million or 14.07% from the first quarter of 2021.

The increase was due primarily to higher income from overdraft fees and debit card fee income.

Income from bank-owned life insurance (“BOLI”) for the first quarter of 2022 was $2.19 million, an increase of $791 thousand or 56.38% from the first quarter of 2021 due to mainly to purchases of $85 million in BOLI policies since March 31, 2021 and the addition of approximately $31 million in BOLI from the Community Bankers Trust acquisition.

In addition, United recognized death benefits from BOLI of $287 thousand for the first quarter of 2022.

On a linked-quarter basis, noninterest income for the first quarter of 2022 decreased $8.03 million, or 14.85%, from the fourth quarter of 2021.

The decrease in noninterest income was primarily driven by a decrease of $8.13 million in income from mortgage banking activities mainly due to lower mortgage loan origination and sale volume driven by the rising interest rate environment and a lower loan pipeline valuation.

BOLI income increased $971 thousand from the fourth quarter of 2021 to $2.19 million mainly due to the addition of BOLI from the Community Bankers Trust acquisition and the death benefits of $287 thousand for the first quarter of 2022.

Fees from brokerage services increased $853 thousand from the fourth quarter of 2021 to $4.55 million as a result of increased volume.

Other Expenses

1 unchanged sentence

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Noninterest expense for the first quarter of 2022 was $139.17 million, which was a decrease of $9.75 million or 6.55% from the first quarter of 2021.

Employee compensation for the first quarter of 2022 decreased $9.79 million or 13.52% when compared to the first quarter of 2021.

This decrease was due mainly to lower employee commissions, incentives and overtime related to a decline in mortgage banking production partially offset by additional employees from the Community Bankers Trust acquisition.

Employee benefits expense for the first quarter of 2022 decreased $2.60 million or 16.82% from the first quarter of 2021.

This decrease was primarily due to lower amounts of expense for postretirement benefits.

OREO expense for the first quarter of 2022 decreased $3.48 million or 95.94% due mainly to fewer declines in the fair value of OREO properties.

Equipment expense increased $1.29 million or 21.36% for the first quarter of 2022, as compared to the same time period in 2021.

The increase was due mainly to higher maintenance costs and depreciation expense primarily due to the Community Bankers Trust acquisition.

Mortgage loan servicing expense and impairment for the first quarter of 2022 decreased $1.53 million or 48.28% from the same time period in 2021 due to the recovery of past temporary impairment and lower amortization expense of mortgage servicing rights.

Federal Deposit Insurance Corporation (“FDIC”) expense increased $673 thousand or 33.65% from the first quarter of 2021 due a higher assessment base.

Other expense for the first quarter of 2022 increased $5.07 million or 18.20% from the first quarter of 2021.

Within other expenses, the most significant increases were the expense for the reserve for unfunded loan commitments of $4.46 million, consulting and legal expenses of $521 thousand and merger-related expenses associated with the Community Bankers Trust acquisition of $508 thousand.

On a linked-quarter basis, noninterest expense for the first quarter of 2022 decreased $12.62 million, or 8.31%, from the fourth quarter of 2021 primarily due to a decrease of $8.92 million in employee compensation and $3.48 million in data processing.

The decrease in employee compensation was primarily due to fewer employees as well as lower employee commissions, incentives and overtime related to lower mortgage banking production.

The fourth quarter of 2021 also included $2.53 million of merger-related employee compensation expenses from the Community Bankers Trust acquisition.

The decrease in data processing expense was primarily due to $3.47 million of merger-related expenses associated with the Community Bankers Trust acquisition recognized in the fourth quarter of 2021.

For the first quarter of 2022, income tax expense was $20.10 million as compared to $27.57 million for the first quarter of 2021.

The decrease of $7.47 million was primarily due to lower earnings and a lower effective tax rate.

On a linked-quarter basis, income tax expense increased $607 thousand primarily due to higher earnings partially offset by a lower effective tax rate.

United’s effective tax rate was 19.75% for the first quarter of 2022, 20.50% for the first quarter of 2021 and 20.88% for the fourth quarter of 2021.

Liquidity and Capital Resources

In the opinion of management, United maintains liquidity that is sufficient to satisfy its depositors’ requirements and the credit needs of its customers.

In the opinion of management, United maintains liquidity that is sufficient to satisfy its depositors’ requirements and the

credit needs of its customers.

Like all banks, United depends upon its ability to renew maturing deposits and other liabilities on a daily basis and to acquire new funds in a variety of markets.

15 unchanged sentences

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

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

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

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

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

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

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

For the three months ended March 31, 2022, cash of $283.61 million was provided by operating activities due mainly to the addition of $164.38 million in net cash from mortgage banking activities as proceeds from the sales of mortgage loans in the secondary market exceeded originations.

In addition, net income was $81.66 million for the quarter and accrued expenses increased $27.37 million.

Net cash of $1.30 billion was used in investing activities which was primarily due to $936.33 million of purchases of investment securities over proceeds from sales and portfolio loan growth of $366.41 million.

During the first three months of 2022, net cash of $64.91 million was provided by financing activities due primarily to net growth of $125.08 million in deposits.

These funding activities were partially offset by cash dividends paid of $46.66 million and net repurchases of $26.06 million in treasury stock for the quarter.

The net effect of the cash flow activities was a decrease in cash and cash equivalents of $955.08 million for the first three months of 2022.

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

7 unchanged sentences

United is well-capitalized based upon regulatory guidelines.

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

The September 30, 2021 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve

Board and other federal banking agencies in response to the COVID-19

United’s risk-based capital ratio is 15.13% at March 31, 2022 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.00%, 13.00% and 10.42%, respectively.

The March 31, 2022 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19

pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period.

The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.

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

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

Partially offsetting this increase was a decrease of $23.61 million in accumulated other comprehensive income due mainly to an after-tax

decrease in the fair value of available for sale securities.

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

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

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

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

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

Total shareholders’ equity was $4.60 billion at March 31, 2022, which was a decrease of $123.49 million or 2.62% from December 31, 2021.

This decrease is primarily due to a decrease of $136.80 million in accumulated other comprehensive income due mainly to an after-tax

decrease in the fair value of available for sale securities as a result of a rising interest rate environment.

In addition, treasury stock increased $26.28 million or 15.41% due to the repurchase of 710,785 shares of United common stock under a stock repurchase plan approved by United’s Board of Directors in November of 2019.

Partially offsetting these decreases was an increase of $32.40 million in retained earnings (net income less dividends declared).

United’s equity to assets ratio was 15.65% at March 31, 2022 as compared to 16.09% at December 31, 2021.

The primary capital ratio, capital and reserves to total assets and reserves, was 16.36% at March 31, 2022 as compared to 16.79% at December 31, 2021.

United’s average equity to average asset ratio was 16.22% for the first quarter of 2022 as compared to 16.41% the first quarter of 2021.

All of these financial measurements reflect a financially sound position.

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

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

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

During the first quarter of 2022, United’s Board of Directors declared a cash dividend of $0.36 per share.

Total cash dividends declared were $49.27 million for the first quarter of 2022 which was an increase of $4.01 million or 8.87% from dividends declared of $45.25 million for the first quarter of 2021.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis