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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 324 added, 542 removed, 512 unchanged (63% of the section changed)

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Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning.

Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect, such as statements about the potential impacts of the COVID-19

Therefore, undue reliance should not be placed upon these estimates and statements.

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The discussion in Item 1A, “Risk Factors,” lists some of the factors that could cause United’s actual results to vary materially from those expressed or implied by any forward-looking statements, and such discussion is incorporated into this discussion by reference.

CORONAVIRUS (“COVID-19”)

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

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

CORONAVIRUS (“COVID-19”) PANDEMIC

During 2020, and to a lesser extent in 2021, the COVID-19 pandemic had a severe disruptive impact on the U.S.

and global economy.

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

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

As the pandemic is ongoing and dynamic in nature, there are many uncertainties related to COVID-19 including, among other things, the ongoing impact to our customers, employees and vendors;

the impact to the financial services and banking industry;

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

Refer to our 2020 Form 10-K

and our Form 10-Q

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

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

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

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

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

In December 2020, the Economic Aid to Hard-Hit

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

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

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

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

schools and higher education;

the Centers for Disease Control;

public transit;

rental assistance;

and airline industry workers.

On March 27, 2021, the COVID-19

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.

The above-mentioned significant fiscal stimulus and monetary policy actions of the U.S.

government and Federal Reserve have been contributing factors to an inflationary surge during most of 2021.

As a result, in December 2021, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would rise to 0.9% by the end of 2022, to 1.6% by the end of 2023 and to 2.1% by the end of 2024.

While there can be no such assurance that any increases in the federal funds rate will occur, these projections imply three 25 basis point increases in the federal funds rate in 2022, followed by three in 2023 and two in 2024.

Impact on our Operations.

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

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 December 31, 2021, United does not anticipate significant challenges to our ability to maintain our systems and controls in light of the measures we have taken regarding the COVID-19

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

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

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

Impact on our Financial Position and Results of Operations.

Although economic conditions improved in the year of 2021, our business continued to be impacted by the COVID-19

In addition, significant uncertainties related to the COVID-19

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

the impact to the financial services and banking industry;

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

outbreak and its variants or to mitigate its impact.

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

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

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

Due to better performance trends within the loan portfolio and the improved reasonable and supportable forecasts for future macroeconomic scenarios used in the estimated of expected credit losses under the CECL accounting standard, since December 31, 2020, our provision for credit losses significantly decreased for the year of 2021 resulting in a net benefit of $23.97 million as compared to an expense of $106.56 million for the year of 2020.

The sustainability of the economic recovery observed in 2021 remains unclear and significant volatility could continue for a prolonged period as the potential exists for additional variants of COVID-19,

including the recent Omicron variant, to impede the global economic recovery and exacerbate geographic differences in the spread of, and response to, COVID-19.

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

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

affected customers during 2020 and 2021 to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc.

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

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

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

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

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

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

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

The Company assessed the collectability of the accrued interest receivables on the loans deferred under the CARES Act as of December 31, 2021.

Based on this assessment, the Company released reserves of $242 thousand for the year of 2021 resulting in the allowance for accrued interest receivables not expected to be collected of $8 thousand as of December 31, 2021 as compared to $250 thousand as of December 31, 2020.

At this time, the Company is unable to project the materiality of such an impact on any possible future deferrals under new guidance related to COVID-19

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

Capital and liquidity.

As of December 31, 2021, all of our capital ratios, and our subsidiary bank’s capital ratios, were in excess of all regulatory requirements.

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

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

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

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

We maintain access to multiple sources of liquidity.

Wholesale funding markets have remained open to us.

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

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

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

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

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

Lending operations and accommodations to borrowers.

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

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

As of December 31, 2021, United has 188 eligible loan modifications in deferral on $18.04 million of loans outstanding under section 4013, “Temporary Relief from Troubled Debt Restructurings,” of the CARES Act, down from 1,002 eligible loan modifications in deferral on $399.86 million of loans outstanding at December 31, 2020.

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

It is possible that these deferrals could be extended further under any future guidance;

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

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

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

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

PPP loans generally have a two-year

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

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

As of December 31, 2021, the Company had 2,959 of PPP loans with a balance of approximately $302.30 million.

The Company recognized approximately $33.22 million in net fees on PPP loans during the year of 2021 as compared to $16.26 million year of 2020.

At December 31, 2021, remaining fees due from the SBA of $10.41 million will be amortized and recognized over the life of the associated loans.

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

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

The national public health crisis arising from the COVID-19

pandemic (and public expectations about it), combined with other factors, including, but not limited to, inflation, labor shortages, supply chain disruption and further oil price volatility, could, despite improvements in 2021, again destabilize the financial markets and geographies in which we operate.

The resulting economic pressure on consumers and uncertainty regarding the sustainability of any economic improvements could further impact the creditworthiness of potential and current borrowers.

Borrower loan defaults that adversely affect our earnings correlate with deteriorating economic conditions, which, in turn, are likely to impact our borrowers’ creditworthiness and our ability to make loans.

See further information related to the risk exposure of our loan portfolio under the caption “Provision for Credit Losses” elsewhere in this discussion.

Retail operations.

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

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.

As the COVID-19

pandemic continues to be on-going,

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

Refer to our 2021 Form 10-K 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.

As the COVID-19 pandemic continues to be on-going, there continues to be uncertainties related to its magnitude, duration and persistent effects.

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

As such, the COVID-19

pandemic could still, among other things, greatly affect our routine and essential operations due to staff absenteeism, particularly among key personnel;

resulting in limited access to or closures of our branch facilities and other physical offices;

exacerbate operational, technical or security-related risks arising from a remote workforce;

and result in adverse government or regulatory agency orders.

Additionally, we are experiencing an increasingly competitive labor market due to an on-going

labor shortage which has been impacted and could continue to impact or ability to staff open positions and/or retain existing employees and has resulted in and could continue to result in an increase in our staffing costs.

The business and operations of our third-party service providers, many of whom perform critical services for our business, could also be significantly impacted by many of these same issues, which in turn could impact us.

As a result, we continue to be unable to fully assess or predict the extent of the effects of COVID-19

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

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.

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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.

It also strategically connected our Mid-Atlantic and Southeast footprints.

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

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The results of operations of Community Bankers Trust and Carolina Financial are included in the consolidated results of operations from their date of acquisition.

As a result of the Community Bankers Trust and Carolina Financial acquisitions, the year of 2021 was impacted by increased levels of average balances, income, and expense as compared to the year of 2020.

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

As a result of the Community Bankers Trust and Carolina Financial acquisitions, the year of 2021 was impacted by increased levels of average balances, income, and expense from both the Community Bankers Trust and Carolina Financial acquisition as compared to the year of 2020.

In addition, the year of 2021 included $21.42 million of merger-related expenses from Community Bankers Trust acquisition as compared to $54.24 million of merger-related expenses from the Carolina Financial acquisition in the year of 2020.

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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 plans to discontinue publication of overnight, one-month,

three-month, six-month,

and twelve-month U.S.

ICE Benchmark Administration (the publisher of LIBOR) discontinued publication of the one-week and two-month U.S.

Dollar LIBOR settings on December 31, 2021, and will cease the publication of overnight, one-month, three-month, six-month, and twelve-month U.S.

Dollar LIBOR settings on June 30, 2023.

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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.

Accordingly, United took steps to ensure compliance with the joint supervisory guidance, and no new contracts using LIBOR have been 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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The ARRC has also published recommended fall-back language for LIBOR-linked financial instruments, among numerous other areas of guidance.

In addition, the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S.

dollar LIBOR with a benchmark rate based on the Secured Overnight Financing Rate (“SOFR”) for contracts governed by U.S.

law that have no or ineffective fallback, and in December 2022, the Federal Reserve Board adopted related implementing rules.

At this time, however, it is unclear to what extent these recommendations will be broadly accepted by industry participants, whether they will continue to evolve, and what other alternatives may be adopted by the broader markets that utilize LIBOR as a reference rate.

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

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

At this time, United is prioritizing SOFR and Prime as the preferred alternatives to LIBOR;

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

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

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K

filed with the SEC on March 1, 2021 (the 2020 Form 10-K)

for a discussion and analysis of the more significant factors that affected periods prior to 2020.

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on March 1, 2022 (the 2021 Form 10-K) for a discussion and analysis of the more significant factors that affected periods prior to 2021.

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

USE OF NON-GAAP

FINANCIAL MEASURES

USE OF NON-GAAP FINANCIAL MEASURES

This discussion and analysis contains certain financial measures that are not recognized under GAAP.

Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each “non-GAAP”

financial measure, certain additional information, including a reconciliation of the non-GAAP

financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP

financial measure.

Generally, United has presented a non-GAAP

financial measure because it believes that this measure provides meaningful additional information to assist in the evaluation of United’s results of operations or financial position.

Presentation of a non-GAAP

financial measure is consistent with how United’s management evaluates its performance internally and this non-GAAP

financial measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the banking industry.

Specifically, this discussion contains certain references to financial measures identified as tax-equivalent

(“FTE”) net interest income and return on average tangible equity.

Management believes these non-GAAP

financial measures to be helpful in understanding United’s results of operations or financial position.

Net interest income is presented in this discussion on a tax-equivalent

The tax-equivalent

basis adjusts for the tax-favored

status of income from certain loans and investments.

Although this is a non-GAAP

measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt

Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each “non-GAAP” financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure.

Generally, United has presented a non-GAAP financial measure because it believes that this measure provides meaningful additional information to assist in the evaluation of United’s results of operations or financial position.

Presentation of a non-GAAP financial measure is consistent with how United’s management evaluates its performance internally and this non-GAAP financial measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the banking industry.

Specifically, this discussion contains certain references to financial measures identified as tax-equivalent (“FTE”) net interest income and return on average tangible equity.

Management believes these non-GAAP financial measures to be helpful in understanding United’s results of operations or financial position.

Net interest income is presented in this discussion on a tax-equivalent basis.

The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments.

Although this is a non-GAAP measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt sources.

United uses this measure to monitor net interest income performance and to manage its balance sheet composition.

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

However, this non-GAAP

information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP.

Where the non-GAAP

financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP

financial measure, can be found within this discussion and analysis.

Investors should recognize that United’s presentation of this non-GAAP

financial measure might not be comparable to a similarly titled measure at other companies.

However, this non-GAAP information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP.

Where the non-GAAP financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure, can be found within this discussion and analysis.

Investors should recognize that United’s presentation of this non-GAAP financial measure might not be comparable to a similarly titled measure at other companies.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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In preparing the consolidated financial statements, management is required to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes.

These estimates, assumptions and judgments, which are reviewed with the Audit Committee of the Board of Directors, are based on information available as of the date of the financial statements.

These estimates, assumptions and judgments, which are reviewed with the Audit Committee of the Board of Directors, are based on information available as

of the date of the financial statements.

Actual results could differ from these estimates.

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Such allowance is based on the credit losses expected to arise over the life of the asset (contractual term).

Determining the allowance for loan losses requires management to make estimates of expected credit losses that are highly uncertain and require a high degree of

Determining the allowance for loan losses requires management to make estimates of expected credit losses that are highly uncertain and require a high degree of judgment.

At December 31, 2022, the allowance for loan losses was $234.75 million and is subject to periodic adjustment based on management’s assessment of expected credit losses in the loan portfolio.

Such adjustment from period to period can have a significant impact on United’s consolidated financial statements.

To illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses, a 10% increase in the allowance for loan losses would have required $21.60 million in additional allowance (funded by additional provision for loan losses), which would have negatively impacted the year of 2021 net income by approximately $17.07 million, after-tax

or $0.13 diluted per common share.

To illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses, a 10% increase in the allowance for loan losses would have required $23.47 million in additional allowance (funded by additional provision for loan losses), which would have negatively impacted the year of 2022 net income by approximately $18.54 million, after-tax or $0.14 diluted per common share.

Management’s evaluation of the adequacy of the allowance for loan losses and the appropriate provision for loan losses is based upon a quarterly evaluation of the loan portfolio.

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The allowance allocated to specific credits and loan pools grouped by similar risk characteristics is reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances.

In determining the components of the allowance for loan losses, management considers the risk arising in part from, but not limited to, qualitative factors which include charge-off

and delinquency trends, current business conditions and reasonable and supportable economic forecasts, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors.

In determining the components of the allowance for loan losses, management considers the risk arising in part from, but not limited to, qualitative factors which include charge-off and delinquency trends, current business conditions and reasonable and supportable economic forecasts, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors.

The methodology used to determine the allowance for loan losses is described in Note A, Notes to Consolidated Financial Statements.

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Most of these financial instruments valued using unobservable market information were loans held for sale at our mortgage banking segment.

At December 31, 2021, only $3.73 million or less than 1% of total liabilities were recorded at fair value.

At December 31, 2022, only $561 thousand or less than 1% of total liabilities were recorded at fair value.

This entire amount was valued using methodologies involving observable market data.

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2022 COMPARED TO 2021

United’s total assets as of December 31, 2021 were $29.33 billion, which was an increase of $3.14 billion or 12.01% from December 31, 2020.

The acquisition of Community Bankers Trust on December 3, 2021 added $1.80 billion in total assets, including purchase accounting amounts.

Portfolio loans and leases increased $432.24 million or 2.46%, cash and cash equivalents increased $1.55 billion or 70.12%, investment securities increased $1.11 billion or 34.82%, goodwill increased $89.65 million or 4.99%, other assets increased $125.13 million or 21.41%, bank premises and equipment increased $21.40 million or 12.17%, and operating lease right-of-use

assets increased $12.42 million or 17.87%.

Partially offsetting these increases was a decrease of $214.52 million or 29.84% in loans held for sale and a $2.56 million or 3.82% decrease in interest receivable.

Total liabilities increased $2.72 billion or 12.44% from year-end

This increase in total liabilities was due mainly to an increase of $2.77 billion or 13.43% in deposits mainly due to organic growth and the Community Bankers Trust acquisition.

In addition, operating lease right-of-lease

liabilities increased $13.49 million or 18.43% mainly due to the Community Bankers Trust acquisition.

Partially offsetting these increases was a decrease of $60.43 million or 6.00% in borrowings.

Shareholders’ equity increased $421.01 million or 9.80% from year-end

2020 due primarily to the acquisition of Community Bankers Trust and earnings net of dividends.

United’s total assets as of December 31, 2022 were $29.49 billion, which was an increase of $160.48 million or less than 1% from December 31, 2021.

This increase was mainly due to an increase of $2.53 billion or 14.06% in portfolio loans and leases and an increase of $576.86 million or 13.43% in investment securities.

These increases in assets were partially offset by a decrease of $2.58 billion or 68.69% in cash and cash equivalents and a decrease of $447.54 million or 88.72% in loans held for sale.

Total liabilities increased $362.91 million or 1.47% from year-end 2021.

Borrowings increased $1.41 billion or 149.23% and the allowance for lending-related commitments increased $14.75 million or 46.90%.

Mostly offsetting these increases in liabilities was a $1.05 billion or 4.48% decrease in deposits and a $10.95 million or 12.63% decrease in the operating lease liability.

Shareholders’ equity decreased $202.44 million or 4.29%.

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

Cash and Cash Equivalents

Cash and cash equivalents at December 31, 2021 increased $1.55 billion or 70.12% from year-end

Community Bankers Trust added $39.44 million upon consummation of the acquisition.

Interest-bearing deposits with other banks increased $1.56 billion or 81.82% as United increased its liquidity due to the COVID-19

pandemic by placing excess cash in an interest-bearing account with the Federal Reserve.

Cash and due from banks decreased $14.49 million or 4.87% due to a $40.86 million decrease in cash-in-process

with the Federal Reserve which was partially offset by a $24.37 million increase in cash.

Federal funds increased $104 thousand or 12.64%.

During the year of 2021, net cash of $609.54 million and $15.65 million were provided by operating activities and investing activities, respectively, while net cash of $923.91 million was provided by financing activities.

Cash and cash equivalents at December 31, 2022 decreased $2.58 billion or 68.69% from year-end 2021.

In particular, interest-bearing deposits with other banks decreased $2.59 billion or 74.63% as United placed less cash in an interest-bearing account with the Federal Reserve.

Cash and due from banks increased $11.28 million or 3.99% from year-end 2021 while federal funds sold increased $152 thousand or 16.40%.

During the year of 2022, net cash of $760.82 million and $105.32 million were provided by operating and financing activities, respectively, while net cash of $3.45 billion was used in investing activities.

Further details related to changes in cash and cash equivalents are presented in the Consolidated Statements of Cash Flows.

Total investment securities at December 31, 2021 increased $1.11 billion or 34.82% from year-end

Community Bankers Trust added $395.25 million in investment securities, including purchase accounting amounts, upon consummation of the acquisition.

Securities available for sale increased $1.09 billion or 36.88%.

This change in securities available for sale reflects $387.20 million acquired from Community Bankers Trust, $730.35 million in sales, maturities and calls of securities, $1.52 billion in purchases, and a decrease of $73.81 million in market value.

Securities held to maturity declined $211 thousand or 17.41% from year-end

2020 due to maturities and calls of securities.

Equity securities were $12.40 million at December 31, 2021, an increase of $1.69 million or 15.73% due mainly to net purchases.

Other investment securities increased $18.75 million or 8.49% from year-end

2020 due to increases of $14.05 million in investment tax credits and $4.63 million in Federal Reserve Bank (“FRB”) stock due to Community Bankers Trust merger.

Partially offsetting these increases was a decline of $5.90 million in Federal Home Loan Bank (“FHLB”) stock.

Total investment securities at December 31, 2022 increased $576.86 million or 13.43%.

Securities available for sale increased $499.23 million or 12.35%.

This change in securities available for sale reflects $1.57 billion in purchases, $575.75 million in sales, maturities and calls of securities and a decrease of $481.01 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 2021.

Equity securities were $7.63 million at December 31, 2022, a decrease of $4.78 million or 38.50% due mainly to sales.

Other investment securities increased $82.40 million or 34.39% from year-end 2021 due to purchases of Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock as well as investment tax credits.

The following table summarizes the changes in the available for sale securities since year-end 2021:

16 unchanged sentences

At December 31, 2022, gross unrealized losses on available for sale securities were $470.06 million.

Securities with the most significant gross unrealized losses at December 31, 2021 consisted primarily of agency residential mortgage-backed securities and agency commercial mortgage-backed securities.

Securities with the most significant gross unrealized losses at December 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 December 31, 2022, United’s available for sale mortgage-backed securities had an amortized cost of $2.12 billion, with an estimated fair value of $1.85 billion.

The portfolio consisted primarily of $1.12 billion in agency residential mortgage-backed securities with a fair value of $1.11 billion, $74.97 million in non-agency

residential mortgage-backed securities with an estimated fair value of $74.55 million, and $633.80 million in commercial agency mortgage-backed securities with an estimated fair value of $639.93 million.

The portfolio consisted primarily of $1.37 billion in agency residential mortgage-backed securities with a fair value of $1.17 billion, $121.34 million in non-agency residential mortgage-backed securities with an estimated fair value of $111.97 million, and $627.77 million in commercial agency mortgage-backed securities with an estimated fair value of $562.55 million.

As of December 31, 2022, United’s available for sale state and political subdivisions securities had an amortized cost of $820.17 million, with an estimated fair value of $709.53 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 December 31, 2022.

As of December 31, 2022, United’s available for sale corporate securities had an amortized cost of $1.52 billion, with an estimated fair value of $1.45 billion.

9 unchanged sentences

During 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 December 31, 2021 is impaired.

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

Management believes that any decline in value on an individual security with an unrealized loss as of December 31, 2022 resulted from changes in market interest rates, credit spreads and liquidity, not a deterioration of credit.

Based on a review of each of the securities in the available for sale investment portfolio, management concluded that it was more-likely-than-not that it would be able to realize the cost basis investment and appropriate interest payments on such securities.

9 unchanged sentences

Portfolio Loans

Loans and leases, net of unearned income, increased $432.24 million or 2.46% from year-end

2020 mainly as a result of the Community Bankers Trust acquisition which added $1.30 billion, including purchase accounting amounts, in portfolio loans and leases.

Otherwise, portfolio loans and leases, net of unearned income, decreased $882.15 million from year-end

Since year-end

2020, commercial, financial and agricultural loans and leases increased $457.99 million or 4.28% as commercial real estate loans increased $1.05 billion or 15.81% while commercial loans and leases (not secured by real estate) decreased $592.06 million or 14.60%.

In addition, construction and land development loans increased $187.82 million or 10.28%.

Partially offsetting the increases in loans and leases was a decrease of $208.33 million or 5.34% in residential real estate loans.

Consumer loans remained flat, decreasing $8.76 million or less than 1% due to a decrease in indirect automobile financing.

Loans, net of unearned income, increased $2.53 billion or 14.06%.

Since year-end 2021, commercial, financial and agricultural loans increased $471.64 million or 4.23%.

In particular, commercial real estate loans increased $321.44 million or 4.18% while commercial loans (not secured by real estate) increased $150.21 million or 4.34%.

Construction and land development loans increased $912.81 million or 45.32%, residential real estate loans increased $971.35 million or 26.31%, and consumer loans increased $173.06 million or 14.51% due to an increase in indirect automobile financing.

The following table summarizes the changes in the major loan classes since year-end 2021:

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Total Loans, net of unearned income

The following table shows the amount of loans acquired and outstanding by major loan classes as of December 31, 2022 and 2021:

December 31, 2022

December 31, 2021

(In thousands)

Commercial, financial, and agricultural:

Owner-occupied commercial real estate

Nonowner-occupied commercial real estate

Other commercial loans

Total commercial, financial, and agricultural

Residential real estate

Construction & land development

Other consumer

Total gross loans

The following table shows the maturity of loans and leases, outstanding as of December 31, 2022:

3 unchanged sentences

Commercial, financial and agricultural:

Owner-occupied

Nonowner-occupied

Other commercial

Owner-occupied commercial real estate

Nonowner-occupied commercial real estate

Other commercial loans

Total commercial, financial, and agricultural

Residential real estate

6 unchanged sentences

Commercial, financial and agricultural:

Owner-occupied

Owner-occupied commercial real estate

Outstanding with fixed interest rates

1 unchanged sentence

Total owner-occupied

Nonowner-occupied

Nonowner-occupied commercial real estate

Outstanding with fixed interest rates

Outstanding with adjustable interest rates

Total non-owner

Other commercial

Total non-owner occupied

Other commercial loans

Outstanding with fixed interest rates

18 unchanged sentences

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

Other assets increased $125.13 million or 21.41% from year-end

The Community Bankers Trust acquisition added $51.83 million in other assets plus an additional $3.40 million in core deposit intangibles.

The cash surrender value of bank-owned life insurance policies increased $122.78 million, of which $31.32 million was acquired from Community Bankers Trust while the remaining increase was due to purchases of new policies, totaling $85.00 million.

Deferred tax assets increased $10.59 million due mainly to the deferred taxes recorded on the purchase accounting adjustments in the Community Bankers Trust acquisition.

The remainder of the increase in other assets is the result of a $17.23 million net pension asset that was recorded in 2021, previously a liability, due to an increase in the discount rate used in the year-end

evaluation and an increase in fair value of plan assets during 2021.

Partially offsetting these increases were decreases of $7.40 million in income tax receivable, $11.00 million in derivative assets, $7.77 million in other real estate owned properties (”OREO”) due to sales and write downs, and $2.51 million in core deposit intangibles due to amortization.

Other assets increased $72.98 million or 31.52% from year-end 2021 as a result of a $106.31 million increase in deferred tax assets due to a decrease in the fair value of available-for-sale securities.

In addition, dealer reserve increased $4.20 million and net pension asset increased $7.48 million primarily due to an increase in the discount rate used in the year-end valuation.

Partially offsetting these increases in other assets were decreases of $12.60 million in income tax receivable due to timing differences, $12.82 million in other real estate owned properties (“OREO”) due to sales and write downs, $26.67 million in derivative assets, and $5.52 million in core deposit intangibles due to amortization.

Deposits represent United’s primary source of funding.

Total deposits at December 31, 2021 increased $2.77 billion or 13.43%, mainly as the result of the Community Bankers Trust acquisition.

Community Bankers Trust added $1.52 billion in deposits, including purchase accounting amounts.

In terms of composition, noninterest-bearing deposits increased $1.58 billion or 21.27% ($350.39 million added from Community Bankers Trust acquisition) while interest-bearing deposits increased $1.19 billion or 9.03% ($1.17 billion added from Community Bankers Trust acquisition) from December 31, 2020.

Organically, deposits grew $1.24 billion from year-end

2020 due to new customers and the economic stimulus, liquidity concerns as well as a volatile stock market as a result of the COVID-19

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

The $1.58 billion increase in noninterest-bearing deposits was due to increases in commercial noninterest-bearing deposits of $2.97 billion or 73.04%, personal noninterest-bearing deposits of $407.18 million or 37.04% and public noninterest-bearing deposits of $65.86 million or 50.41%.

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

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

NOW accounts increased $2.93 billion or 367.01% since year-end

2020 while regular savings accounts increased $357.58 million or 27.85%, partially as the result of the Community Bankers Trust merger.

Excluding sweep activity from NOW accounts to interest-bearing MMDAs to reduce United’s reserve requirement at its Federal Reserve Bank, NOW accounts increased $637.21 million or 20.57% mainly due to a $363.05 million increase in personal NOW accounts, a $142.26 million increase in commercial NOW accounts, and a $131.90 million increase in public funds NOW accounts.

Partially offsetting these increases in interest-bearing deposits is a $1.83 billion or 22.31% decrease in interest-bearing MMDAs.

In particular, personal MMDAs decreased $789.76 million, commercial MMDAs decreased $409.01 million, and public MMDAs decreased $602.52 million.

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

The increase of $357.58 million in regular savings was mainly due to a $326.72 million increase in personal savings accounts and a $27.51 million increase in commercial savings accounts.

Time deposits under $100,000 increased $51.02 million or 5.21% from year-end

This increase in time deposits under $100,000 was the result of a $79.50 million increase in fixed Certificates of Deposits (“CDs”) under $100,000 as a result of the Community Bankers Trust acquisition.

This increase was partially offset by a $30.50 million decrease in CDs under $100,000 obtained through the use of deposit listing services.

Since year-end

2020, time deposits over $100,000 decreased $326.92 million or 16.96% as fixed rate CDs decreased $34.22 million, brokered certificates of deposits decreased $99.64 million, and public funds CDs over $100,000 decreased $121.19 million.

In addition, Certificate of Deposit Account Registry Service (“CDARS”) CDs decreased $74.35 million.

Total deposits at December 31, 2022 decreased $1.05 billion or 4.48%.

In terms of composition, noninterest-bearing deposits decreased $296.88 million or 3.96% while interest-bearing deposits decreased $750.22 million or 4.73% from December 31, 2021.

Noninterest-bearing deposits, which consist of noninterest-bearing demand deposit and noninterest-bearing money market (“MMDA”) account balances, decreased $296.88 million from year-end 2021 due to a $139.87 million decrease in commercial noninterest-bearing deposits and a $148.83 million decrease in public funds noninterest-bearing deposits.

Interest-bearing deposits consist of interest-bearing transaction accounts, regular savings, interest-bearing MMDA, and time deposit account balances.

Interest-bearing transaction accounts decreased $101.38 million or 1.94% since year-end 2021 as the result of a $182.47 million decrease in personal interest-bearing transaction accounts and a $20.84 million decrease in public funds interest-bearing transaction accounts partially offset by an increase of $101.94 million in nonpersonal interest-bearing transaction accounts.

Regular savings accounts increased $36.90 million or 2.25% mainly as a result of a $43.52 million increase in personal savings accounts.

Interest-bearing MMDAs decreased $62.48 million or less than 1%.

In particular, commercial MMDAs decreased $27.94 million, brokered MMDAs decreased $31.86 million, and public funds MMDAs decreased $43.97 million while personal MMDAs increased $41.30 million.

Time deposits under $100,000 decreased $187.06 million or 18.14% from year-end 2021.

This decrease in time deposits under $100,000 was the result of a $174.13 million decrease in fixed rate Certificates of Deposits (“CDs”) under $100,000, a $8.75 million decrease in CDs under $100,000 obtained through the use of deposit listing services, and a $4.60 million decrease in variable rate CDs.

Since year-end 2021, time deposits over $100,000 decreased $436.20 million or 27.24% as fixed rate CDs decreased $320.18 million, CDARS over $100,000 decreased $52.26 million, public funds CDs over $100,000 decreased $51.74 million, and brokered certificates of deposits decreased $11.27 million.

The table below summarizes the changes by deposit category since year-end 2021:

(Dollars in thousands)

Demand deposits

Interest-bearing checking

Noninterest-bearing accounts

Interest-bearing transaction accounts

Regular savings

Money market accounts

Interest-bearing money market accounts

Time deposits under $100,000

1 unchanged sentence

Total deposits

For December 31, 2021, $1,483,987 was reclassed from noninterest-bearing accounts to interest-bearing transaction accounts.

Includes time deposits of $250,000 or more of $454,477 and $640,752 at December 31, 2022 and December 31, 2021, respectively.

9 unchanged sentences

(Dollars in thousands)

Demand deposits

NOW and money market deposits

Savings deposits

Noninterest-bearing

Interest-bearing transaction and money market

Regular savings

Time deposits

For the year of 2021, $1,571,758 was reclassed from noninterest-bearing accounts to interest-bearing transaction accounts.

For the year of 2020, $1,280,091 was reclassed from noninterest-bearing accounts to interest-bearing transaction accounts.

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

Total borrowings at December 31, 2021 decreased $60.43 million or 6.00% since year-end

During the year of 2021, short-term borrowings decreased $13.46 million or 9.46% due to a $13.46 million decrease in securities sold under agreements to repurchase.

Community Bankers Trust added $6.76 million in short-term borrowings, which were repaid by December 31, 2021.

Long-term borrowings decreased $46.98 million or 5.43% from year-end

2020 due to long-term FHLB advances decreasing $52.33 million as payments exceeded new borrowings while issuances of trust preferred capital securities increased $5.35 million.

Including purchase accounting amounts, Community Bankers Trust added $67.79 million in long-term FHLB advances which were repaid prior to year-end

and $3.71 million in trust preferred capital securities.

Total borrowings at December 31, 2022 increased $1.41 billion or 149.23% since year-end 2021.

During the year of 2022, short-term borrowings increased $31.85 million or 24.72% due to an increase in securities sold under agreements to repurchase.

Long-term borrowings increased $1.38 billion or 168.86% from year-end 2021 due to an increase in FHLB advances.

The table below summarizes the change in the borrowing categories since year-end 2021:

1 unchanged sentence

Short-term securities sold under agreements to repurchase

Long-term FHLB advances

FHLB advances

Subordinated debt

4 unchanged sentences

Accrued expenses and other liabilities at December 31, 2022 decreased $5.90 million or 3.02% from year-end 2021.

In particular, income tax payable decreased $3.55 million due to timing differences and interest payable decreased $2.21 million due to the net repayment of FHLB advances.

In addition, derivative liabilities decreased $9.37 million due to a change in fair value and United’s net pension liability decreased $1.75 million due to an increase in the discount rate used in the year-end

evaluation and an increase in fair value of plan assets during 2021, resulting in a pension asset at year end.

Partially offsetting these decreases were increases of $1.08 million in dividends payable, $7.48 million in deferred compensation, $1.25 million in accrued loan expenses, and $4.65 million in other accrued expenses.

Community Bankers Trust added $12.81 million of accrued expenses and other liabilities.

In particular, accrued employee expenses and deferred compensation decreased $5.48 million and $2.77 million, respectively, and derivative liabilities decreased $3.13 million.

Partially offsetting these decreases was a $7.48 million increase in interest payable due mainly to an increase in FHLB borrowings and rising interest rates.

Shareholders’ Equity

Shareholders’ equity at December 31, 2021 was $4.72 billion, which was an increase of $421.01 million or 9.80% from year-end

2020, mostly as the result of the Community Bankers Trust acquisition and earnings net of dividends.

The Community Bankers Trust transaction added approximately $260.28 million in shareholders’ equity as 7,135,771 shares were issued from United’s authorized but unissued shares for the merger at a cost of approximately $252.32 million.

Shareholders’ equity at December 31, 2022 was $4.52 billion, which was a decrease of $202.44 million or 4.29% from year-end 2021.

Retained earnings increased $184.65 million or 13.28% from year-end 2021.

Earnings net of dividends for the year of 2022 were $184.65 million.

Accumulated other comprehensive income decreased $27.26 million or 121.85% from year-end

2020 due mainly to a decrease of $56.61 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes.

The after-tax

accretion of pension costs was $2.55 million for the year of 2021 while the after-tax

pension accounting adjustment at year-end

2021 resulted in an increase of $13.80 million.

During the year of 2021, United recognized an upward fair value adjustment of $13.00 million on new cash flow hedges.

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

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

Accumulated other comprehensive income decreased $327.84 million or 6,707.12% from year-end 2021 due to a decrease of $368.93 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes, primarily the result of an increase in market interest rates.

Partially offsetting this decrease was a $36.66 million increase in the fair value of cash flow hedges, net of deferred income taxes.

The after-tax accretion of pension costs was $2.75 million for the year of 2022 while the after-tax pension accounting adjustment at year-end 2022 resulted in an increase of $1.68 million.

Treasury stock increased $79.79 million or 46.76% from year-end 2021.

During the year of 2022, United repurchased 2,259,546 shares of its common stock on the open market under repurchase plans approved by United’s Board of Directors at a cost of $78.38 million or an average price per share of $34.69.

RESULTS OF OPERATIONS

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

(Dollars in thousands except per share amounts)

Interest income

Interest expense

Net interest income

Provision for credit losses

Noninterest income

Noninterest expense

Income before income taxes

PER COMMON SHARE:

Net income for the year 2022 was $379.63 million or $2.80 per diluted share, an increase of $11.89 million or 3.23% from $367.74 million or $2.83 per diluted share for the year of 2021.

Higher net income for the year 2021 compared to the year of 2020 was primarily due to lower provision of credit losses due to better performance trends within the loan portfolio and an improved future macroeconomic forecast under the Current Expected Credit Loss (“CECL”) accounting standard, as well as the impact from the Community Bankers Trust and Carolina Financial acquisitions.

As previously mentioned, United completed its acquisition of Community Bankers Trust on December 3, 2021, and of Carolina Financial on May 1, 2020.

The results of operations for both Community Bankers Trust and Carolina Financial are included in the consolidated results of operations from the date of the acquisition.

As a result, the year of 2021 reflected higher average balances, income, and expense as compared to the year of 2020.

In addition, the year of 2021 included merger-related expenses of $21.42 million related to the Community Bankers Trust acquisition compared to merger-related expenses of $54.24 million associated with the acquisition of Carolina Financial in 2020.

Higher net income for the year 2022 compared to the year of 2021 was primarily driven by strong loan growth and net interest margin expansion primarily as a result of a rising rate environment.

As previously mentioned, United completed its acquisition of Community Bankers Trust on December 3, 2021.

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

In addition, the year of 2022 included merger-related expenses of $537 thousand related to the Community Bankers Trust acquisition compared to merger-related expenses of $21.42 million in 2021.

United’s return on average assets for the year of 2022 was 1.31% and the return on average shareholders’ equity was 8.25% as compared to 1.35% and 8.30% for the year of 2021.

United’s Federal Reserve peer group’s (bank holding companies with total assets over $10 billion) most recently reported annualized average return on assets and annualized average return on equity were 1.34% and 12.52%, respectively, for the first nine months of 2021.

For the year of 2021, United’s return on average tangible equity was 14.18%, as compared to 12.90% the year of 2020.

For the year of 2022, United’s return on average tangible equity, a non-GAAP measure, was 14.11%, as compared to 14.18% the year of 2021.

(Dollars in thousands)

4 unchanged sentences

(b) Average Tangible Equity (non-GAAP)

Return on Tangible Equity (non-GAAP)

Return on Tangible Equity (non-GAAP) [(a) / (b)]

Net interest income for the year of 2022 was $896.43 million, an increase of $153.70 million or 20.69% from the prior year.

The increase in net interest income occurred because total interest income was flat, decreasing $3.27 million while total interest expense decreased $56.23 million from the year of 2020.

The provision for credit losses was a benefit of $23.97 million for the year 2021 as compared to an expense of $106.56 million for the year of 2020.

Mainly, this increase in net interest income for 2022 compared to 2021 was due to the impact of rising market interest rates on earning assets, an increase in average earning assets from the Community Bankers Trust acquisition as well as organic loan growth and a change in the asset mix to higher earning assets.

The provision for credit losses was $18.82 million for the year 2022 as compared to a benefit of $23.97 million for the year 2021.

Noninterest income was $153.26 million for the year of 2022 which was a decrease of $124.87 million or 44.90% from the year of 2021.

Noninterest expense was $581.94 million which was flat from the year of 2020, increasing $3.73 million or less than 1%.

Noninterest expense was $555.09 million which was a decrease of $26.89 million or 4.62%.

Income taxes for the year of 2022 were $96.16 million as compared to $95.12 million for the year of 2021.

5 unchanged sentences

Net income attributable to the community banking segment for the year of 2022 was $397.32 million compared to net income of $327.08 million for the year of 2021.

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

The full year of 2021 was impacted by the Carolina Financial acquisition as compared to eight months in 2020.

In addition, the year of 2021 was impacted by one month of the Community Bankers Trust acquisition.

The higher net income within the community banking segment in 2022 was due primarily to the impact of the Community Bankers Trust acquisition, organic loan growth and the positive impact of rising market interest rates on the net interest margin.

The full year of 2022 was impacted by the Community Bankers Trust acquisition as compared to one month in 2021.

Net interest income increased $159.27 million to $890.58 million for the year of 2022, compared to $731.31 million for the same period of 2021.

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

Provision for credit losses was a net benefit of $23.97 million for the year of 2021 compared to a provision expense of $106.56 million for the same period of 2020.

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

deteriorated (“non-PCD”)

loans from Carolina Financial during the second quarter of 2020 which was partially offset by the provision for credit losses of $12.29 million recorded on non-PCD

loans from Community Bankers Trust, the better performance trends within the loan portfolio as well

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

Noninterest income for the year of 2021 increased $9.88 million to $99.97 million as compared to $90.09 million for the year of 2020.

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

Generally, net interest income for the year of 2022 increased from the year of 2021 due to an increase in average earning assets as a result of the Community Bankers Trust acquisition, organic loan growth and an increase in the average yield on earning assets due to rising market interest rates.

Provision for credit losses was $18.82 million for the year of 2022 compared to a net benefit of $23.97 million for the same period of 2021.

The increase in the provision for credit losses was primarily due to an increase in loans outstanding.

Noninterest income for the year of 2022 was relatively flat from the year of 2021, decreasing $877 thousand or less than 1%.

Noninterest expense was $472.81 million for the year ended December 31, 2022, compared to $443.49 million for the same period of 2021.

The increase of $19.52 million in noninterest expense was primarily attributable to the additional employees and branch offices from the Community Bankers Trust and the Carolina Financial acquisitions as most major categories of noninterest expense showed increases.

The increase of $29.32 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 $43.93 million for the year of 2021 as compared to net income of $116.71 million for the year of 2020.

The mortgage banking segment reported a net loss of $7.22 million for the year of 2022 as compared to net income of $43.93 million for the year 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 $69.31 million for the year of 2022 as compared to $183.22 million for the year of 2021.

The decrease in 2021 was due mainly to the mark-to-market

impact of a declining locked pipeline and a lower margin on loans sold in the secondary market.

The decrease of $113.91 million in 2022 was due mainly to lower originations and sales of mortgage loans driven by the rising rate environment and a lower margin on loans sold in the secondary market.

Noninterest expense was $88.98 million for the year of 2022 as compared to $138.51 million the year of 2021.

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

The decrease in 2021 was due mainly to lower employee incentives, overtime and commissions expense related to decreased mortgage banking production.

Consolidated Results of Operations by Major Category

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

(Dollars in thousands)

Income Statement Summary:

Interest income

Interest expense

Net interest income

Provision for credit losses

Other expense

Income before income taxes

The decrease in 2022 was primarily due to a decrease in employee compensation due to lower employee incentives and commissions related to a decrease in mortgage banking production.

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

Net Interest Income

4 unchanged sentences

Net interest income for the year of 2022 was $896.43 million, which was an increase of $153.70 million or 20.69% from the year of 2021.

The $52.96 million increase in net interest income occurred because total interest income was flat, decreasing $3.27 million while total interest expense decreased $56.23 million from the year of 2020.

Generally, interest income for the year of 2021 decreased slightly from the year of 2020 due mainly to a decline in the yield on average earning assets, mainly as a result a decline in market interest rates, especially on investment securities, while interest expense decreased primarily also due to the decline in market interest rates which resulted in lower funding costs.

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

basis to provide a comparison among all types of interest earning assets.

The tax-equivalent

basis adjusts for the tax-favored

status of income from certain loans and investments.

Although this is a non-GAAP

The $153.70 million increase in net interest income occurred because total interest income increased $206.87 million while total interest expense increased $53.18 million from the year of 2021.

Generally, interest income for the year of 2022 increased from the year of 2021 due mainly to a higher amount of interest earning assets, mainly as result of the Community Bankers Trust acquisition and organic loan growth, and an increase in the yield on those earning assets mainly as a result of a rise in market interest rates.

Interest expense increased primarily due to an increase in the amount of interest-bearing funds, mainly as result of the Community Bankers Trust acquisition and to partially fund loan growth, as well as an increase in market interest rates which resulted in higher funding costs.

For the purpose of this remaining discussion, net interest income is presented on a tax-equivalent basis to provide a comparison among all types of interest earning assets.

The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments.

United uses this measure to monitor net interest income performance and to manage its balance sheet composition.

Tax-equivalent

net interest income for the year of 2021 was $746.95 million, an increase of $53.29 million or 7.68% from the year of 2020.

The increase in net interest income and tax-equivalent

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

Average earning assets for the year of 2021 increased $2.81 billion or 13.15% from the year of 2020 due to a $523.90 million or 3.09% increase in average net loans and leases, including loans held for sale, a $1.66 billion or 110.61% increase in average short-term investments and a $628.01 million or 21.52% increase in average investment securities.

The net interest spread for the year of 2021 decreased 2 basis points from the year of 2020 due to a 45 basis point decrease in the average yield on earning assets partially offset by a 43 basis point decrease in the average cost of funds.

Loan accretion on acquired loans and leases was $33.86 million and $41.77 million for the year of 2021 and 2020, respectively, a decrease of $7.91 million.

The net interest margin of 3.09% for the year of 2021 was a decrease of 15 basis points from the net interest margin of 3.24% for the year of 2020.

United’s tax-equivalent

net interest income also includes the impact of acquisition accounting fair value adjustments.

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

net interest income for the year ended December 31, 2021, 2020 and 2019.

Tax-equivalent net interest income for the year of 2022 increased $153.95 million, or 20.61%, from the year of 2021.

The increase in net interest income and tax-equivalent net interest income was primarily due to the impact of rising market interest rates on earning assets, an increase in average earning assets from the Community Bankers Trust acquisition as well as organic loan growth and a change in the asset mix to higher earning assets.

These increases were partially offset by higher interest expense primarily driven by deposit rate repricing, lower Paycheck Protection Plan (“PPP”) loan fee income and lower acquired loan accretion income.

The interest rate spread for the year of 2022 increased 30 basis points from the year of 2021 due to a 61 basis point increase in the average yield on earning assets partially offset by a 31 basis point increase in the average cost of funds.

Average earning assets for the year of 2022 increased $1.52 billion, or 6.26%, from the year of 2021 due to a $1.68 billion increase in average net loans and loans held for sale and a $1.40 billion increase in average investment securities partially offset by a $1.57 billion decrease in average short-term investments.

Net PPP loan fee income was $9.62 million and $33.22 million for the year of 2022 and 2021, respectively, a decrease of $23.59 million.

Acquired loan accretion income was $18.32 million and $33.86 million for the year of 2022 and 2021, respectively, a decrease of $15.54 million.

The net interest margin of 3.50% for the year of 2022 was an increase of 41 basis points from the net interest margin of 3.09% for the year of 2021.

United’s tax-equivalent net interest income also includes the impact of acquisition accounting fair value adjustments.

The following table provides the discount/premium and net accretion impact to tax-equivalent net interest income for the year ended December 31, 2022, 2021 and 2020.

(Dollars in thousands)

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Long-term borrowings

The following table reconciles the difference between net interest income and tax-equivalent

net interest income for the year ended December 31, 2021, 2020 and 2019.

The following table reconciles the difference between net interest income and tax-equivalent net interest income for the year ended December 31, 2022, 2021 and 2020.

(Dollars in thousands)

Net interest income (GAAP)

Tax-equivalent

adjustment (non-GAAP)

Tax-equivalent

net interest income (non-GAAP)

The tax-equivalent

adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for 2021, 2020, and 2019.

Tax-equivalent adjustment (non-GAAP) (1)

Tax-equivalent net interest income (non-GAAP)

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 2022, 2021, and 2020.

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

The following table shows the consolidated daily average balance of major categories of assets and liabilities for each of the three years ended December 31, 2022, 2021 and 2020 with the consolidated interest and rate earned or paid on such amount.

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

basis using the statutory federal income tax rate of 21% for the years ended December 31, 2021, 2020, and 2019.

The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21% for the years ended December 31, 2022, 2021, and 2020.

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

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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% for 2021, 2020 and 2019.

The interest income and the yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21% for 2022, 2021 and 2020.

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

For the years of 2021 and 2020, average balances of $1,571,758 and $1,280,091, respectively, were reclassed from noninterest- bearing deposits to interest-bearing deposits.

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

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Investment securities:

Tax-exempt (1)

Loans (1),(2)

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NET INTEREST INCOME

Yields and interest income on federally tax-exempt

loans and investment securities are computed on a fully tax-equivalent

basis using the statutory federal income tax rate of 21% for 2021, 2020 and 2019.

Yields and interest income on federally tax-exempt loans and investment securities are computed on a fully tax-equivalent basis using the statutory federal income tax rate of 21% for 2022, 2021 and 2020.

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

Provision for Credit Losses

United’s provision for credit losses was a net benefit of $23.97 million for the year of 2021 while the provision for credit losses was an expense of $106.56 million for the year of 2020.

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

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

The provision for loan and lease losses for the year of 2021 was a net benefit of $23.72 million as compared to provision expense of $106.29 million for the year of 2020.

Net charge-offs for the year of 2021 were $8.72 million as compared to $23.60 million for the year of 2020.

The year of 2021 included a provision for loan losses of $12.29 million recorded on purchased non-credit

deteriorated (“non-PCD”)

loans from Community Bankers Trust.

The year of 2020 included a provision for loan losses of $28.95 million recorded on non-PCD

loans from Carolina Financial.

The decrease in the provision in relation to the year of 2020 was primarily driven by improvements in the reasonable and supportable forecasts of future macroeconomic conditions on the estimate of expected credit losses under CECL.

The decrease in the provision in relation to the prior year was also due to the impact of better performance trends within the loan portfolio.

Net charge-offs as a percentage of average loans and leases were 0.05% and 0.14% for the year of 2021 and 2020, respectively.

As of December 31, 2021, nonperforming loans and leases were $90.76 million or 0.50% of loans and leases, net of unearned income as compared to $132.21 million or 0.75% of loans and leases, net of unearned income at December 31, 2020.

United’s provision for credit losses was $18.82 million for the year of 2022 while the provision for credit losses was a net benefit of $23.97 million for the year of 2021.

United’s provision for credit losses relates to its portfolio of loans and leases, held to maturity securities and interest receivable on loans which are discussed in more detail in the following paragraphs.

The provision for loan and lease losses for the year of 2022 was $18.83 million as compared to a net benefit of $23.72 million for the year of 2021.

The higher amount of provision expense for 2022 compared to 2021 was mainly due to an increase in overall loans outstanding.

Net charge-offs for the year of 2022 were $101 thousand as compared to $8.72 million for the year of 2021.

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

Net charge-offs as a percentage of average loans and leases were zero and 0.05% for the year of 2022 and 2021, respectively.

As of December 31, 2022, nonperforming loans and leases were $58.64 million or 0.29% 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 $18.88 million at December 31, 2021, an increase of $5.05 million or 36.49% 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 December 31, 2021.

At December 31, 2021, nonaccrual loans and leases were $36.03 million, which was a decrease of $26.69 million or 42.56% from $62.72 million at year-end

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

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

Loans past due 90 days or more were $15.57 million at December 31, 2022, a decrease of $3.31 million or 17.55% from $18.88 million at year-end 2021.

This decrease was primarily due to a large delinquent commercial credit brought current.

At December 31, 2022, nonaccrual loans were $23.69 million, which was a decrease of $12.34 million or 34.26% from $36.03 million at year-end 2021.

This decrease was due to the repayment of several mid-sized commercial nonaccrual loans as well as the return to accrual status for three commercial relationships.

Restructured loans were $19.39 million at December 31, 2022, a decrease of $16.47 million or 45.93% from $35.86 million at year-end 2021.

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

of three commercial restructured loans during the year of 2021.

The decrease was mainly due to the repayment of six large commercial relationships during the year of 2022.

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

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At December 31, 2022, the allowance for loan and lease losses was $234.75 million as compared to $216.02 million at December 31, 2021.

The decrease in the allowance for loan and lease losses was due mainly to improved reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses offset slightly by the allowance amount recorded for Community Bankers Trust acquisition.

The increase in the allowance for loan and lease losses was due mainly to an increase in outstanding loans as well as lower forecasted Gross Domestic Product (“GDP”) and a higher forecasted unemployment rate within the reasonable and supportable forecast.

This increase was offset slightly due to improvement in historical loss rates and a decrease in allocations established for individually assessed loans.

As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.14% at December 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 400.33% and 238.00% at December 31, 2022 and December 31, 2021, 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 increase in this ratio was due mainly to a decline in nonperforming loans.

The following table summarizes United’s credit loss experience for loan and leases losses, based on loan categories, for the year of 2022 and 2021:

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Commercial, financial and agricultural:

Owner-occupied

Owner-occupied commercial real estate

Loans & leases charged off

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Average gross loans & leases outstanding

Net (recoveries) charge-offs as a percentage of average gross loans & leases outstanding

Nonowner-occupied

Net recoveries as a percentage of average gross loans & leases outstanding

Nonowner-occupied commercial real estate

Loans & leases charged off

Net loans & leases charged off

Net loans & leases (recovered) charged off

Average gross loans & leases outstanding

2 unchanged sentences

Loans & leases charged off

Net loans & leases charged off

Net loans & leases (recovered) charged off

Average gross loans & leases outstanding

Net charge-offs as a percentage of average gross loans & leases outstanding

Net (recoveries) charge-offs as a percentage of average gross loans & leases outstanding

(Dollars in thousands)

Residential Real Estate

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Average gross loans & leases outstanding

Net (recoveries) charge-offs as a percentage of average gross loans & leases outstanding

Net recoveries as a percentage of average gross loans & leases outstanding

Loans & leases charged off

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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.

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 and other factors.

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 year of 2022 qualitative adjustments include analyses of the following:

– This includes portfolio trends related to business conditions;

past due, nonaccrual, and graded loans and leases;

and concentrations.

Current conditions

– United considered the continued impact of COVID-19

on the economy as well as loan deferrals and modifications made in light of the pandemic when making determinations related to factor adjustments, such as changes in economic and business conditions, collateral values, external factors and past due loans and leases.

Reasonable and supportable forecasts

– The forecast is determined on a portfolio-by-portfolio

basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables.

Current conditions – United considered the impact of inflation, rising interest rates, increased oil and gas prices and the potential impact of the geopolitical situation when making determinations related to factor adjustments, such as changes in economic and business conditions;

collateral values for dependent loans;

past due, nonaccrual and adversely classified loans and leases;

concentrations of credit and external factors.

Reasonable and supportable forecasts – The forecast is determined on a portfolio-by-portfolio basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables.

The reasonable and supportable forecast selection is subjective in nature and requires more judgment compared to the other components of the allowance.

Assumptions for the economic variables were the following:

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

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 2021 forecast selection process as the stimulus package had a positive impact on the economy throughout 2021.

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

reasonable and supportable forecast period.

The forecast for real GDP shifted downward in the fourth quarter, from a projection of 1.20% for 2023 as of mid-September 2022 to 0.50% for 2023 as of mid-December with projections of 1.60% for 2024 and 1.80% for 2025.

The unemployment rate forecast shifted slightly upward compared to the third quarter of 2022 with an increasing trend expected throughout 2024 and 2025.

Reversion to historical loss data occurs via a straight-line method during the year following the one-year reasonable and supportable forecast period.

The following table presents the allocation of United’s allowance for credit losses for the years ended December 31:

(in thousands)

Commercial, financial & agricultural:

Owner-occupied commercial real estate

Nonowner-occupied commercial real estate

Other commercial

Total commercial, financial & agricultural

Residential real estate

Construction & land development

Other consumer

Allowance for loan losses

Reserve for lending-related commitments

Allowance for credit losses

The following is a summary of loans and leases outstanding as a percent of gross loans at December 31:

Commercial, financial & agricultural:

Owner-occupied commercial real estate

Nonowner-occupied commercial real estate

Other commercial

Total commercial, financial & agricultural

Residential real estate

Construction & land development

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

Other consumer

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

The residential real estate reserve increased $9.82 million.

The real estate construction and development loan pool reserve increased $8.99 million.

The consumer loan pool reserve increased $2.75 million.

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

The allowance related to the commercial, financial & agricultural loan pool decreased $2.84 million.

The residential real estate reserve decreased $2.72 million.

The consumer loan pool decreased $1.80 million.

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

The real estate construction and development loan pool reserve increased $318 thousand primarily due to increased outstanding balances in the land and land development segment.

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.

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The allowance for loans and leases that were individually assessed was $1.27 million at December 31, 2022 and $6.53 million at December 31, 2021.

In comparison to the prior year-end,

this element of the allowance decreased by $1.25 million primarily due to charge-off

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

In comparison to the prior year-end, this element of the allowance decreased $5.26 million due to repayment of individually assessed loans, improved borrowers’ financial conditions such that individual assessments were no longer necessary and improved collateral valuations.

Management believes that the allowance for credit losses of $280.94 million at December 31, 2022 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available.

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

As a result of this assessment, United released reserves of $242 thousand for the year of 2021.

The allowance for accrued interest receivables not expected to be collected as of December 31, 2021 was $8 thousand as compared to $250 thousand at December 31, 2020.

Loan interest payment deferrals granted by United under the CARES Act ended on of January 1, 2022.

Therefore, United released all of its remaining $8 thousand in reserves in the year of 2022 related to these loan interest payment deferrals granted under the CARES Act as compared to the release of $242 thousand in the year 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.

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Noninterest income for the year of 2022 was $153.26 million, which was a decrease of $124.87 million or 44.90% from the year of 2021.

The decrease was due to a decline in income from mortgage banking activities.

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

Income from mortgage banking activities totaled $42.69 million for the year of 2022 compared to $171.69 million for the year of 2021.

The decrease of $94.40 million or 35.48% for the year of 2021 was due mainly to a decline in the fair value of derivatives associated with a declining pipeline and a lower sales margin.

The decrease of $129.00 million or 75.14% for the year of 2022 was due mainly to lower mortgage loan origination and sale volume driven by the rising rate environment and a lower margin on loans sold in the secondary market.

Mortgage loan sales were $2.20 billion in the year of 2022 as compared to $6.41 billion in the year of 2021.

Mortgage loans originated for sale were $1.90 billion for the year of 2022 as compared to $6.19 billion for the year of 2021.

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

United recognized a net gain of $2.68 million on investment securities’ activity in 2021 as compared to a net gain of $3.16 million on investment securities activity in 2020.

In particular, United recognized net gains of $1.55 million on the sales, calls and redemption of available-for-sale

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

securities investment securities and $578 thousand on equity securities for the year of 2020.

United recognized a net gain of $776 thousand on investment securities’ activity in 2022 as compared to a net gain of $2.68 million on investment securities activity in 2021.

In particular, United recognized a net gain of $1.36 million on an equity security without a readily determinable market value and a $589 thousand net loss on equity securities for the year of 2022 as compared to net gains of $1.55 million on the sales, calls and redemption of available-for-sale securities investment securities, $670 thousand on equity securities and $455 thousand on an equity security without a readily determinable market value for the year of 2021.

In addition, United did not recognize any impairment on investment securities for the year of 2022 and 2021.

Fees from trust services for the year of 2021 were $16.55 million, an increase of $2.65 million or 19.05% from the year of 2020 due to an increase in managed assets.

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

Fees from trust services for the year of 2022 were $17.22 million, an increase of $664 thousand or 4.01% from the year of 2021 due to an increase in managed assets.

Fees from brokerage services for the year of 2022 were $16.41 million, an increase of $853 thousand or 5.48% from the year of 2021 due to increased volume.

Fees from deposit services for the year of 2022 were $40.56 million, an increase of $1.87 million or 4.83% from the year of 2021.

Debit card income increased $1.76 million, overdraft fees increased $866 thousand and account analysis fees increased $759 thousand.

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

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

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

Debit card income increased $741 thousand and overdraft fees increased $713 thousand.

Partially offsetting fees from deposit services was the impact of implemented changes to United’s overdraft policy during the third quarter of 2022.

Bankcard fees for the year of 2022 increased $1.10 million or 19.96% from the year of 2021 due mainly to an increase in interchange income from increased volume.

Income from bank-owned life insurance (“BOLI”) for the year of 2022 increased $2.35 million or 34.33% from the year of 2021 due to an increase of $2.64 million in death benefits and the addition of $30.64 million in BOLI from the Community Bankers Trust acquisition.

Other miscellaneous income decreased $700 thousand or 8.71% mainly due to an decrease in prepayment fees received on Delegated Underwriting and Servicing (“DUS”) securities.

Other Expense

1 unchanged sentence

Other expense includes all items of expense other than interest expense, the provision for credit losses and income tax expense.

Noninterest expense for the year of 2021 was $581.94 million, which was flat from the year of 2020, increasing $3.73 million or less than 1%.

Employee compensation for the year of 2021 increased $5.31 million or 1.93% from the year of 2020.

This increase was due mainly to additional employees from the Community Bankers Trust and Carolina Financial acquisitions partially offset by lower commissions, overtime and incentives expenses primarily related to decreased mortgage banking production.

Employee benefits expense for the year of 2021 increased $5.00 million or 10.23% as compared to the year of 2020.

Federal Insurance Contributions Act (“FICA”) expense for the year of 2021 increased $1.07 million due mainly to the additional employees from the Community Bankers Trust and Carolina Financial acquisitions.

In addition, health insurance expense for the year of 2021 increased $4.34 million due to higher premiums and additional employees from the Community Bankers Trust and Carolina Financial acquisitions.

For the year of 2021, postretirement expense, which includes expense associated with United’s pension plan, supplemental early retirement plans (“SERPs”) and Savings and Stock Investment Plan (“401K plan”), decreased $942 thousand from the year of 2020.

Noninterest expense for the year of 2022 was $555.09 million, which was a decrease of $26.89 million or 4.62% from the year of 2021.

Employee compensation for the year of 2022 decreased $37.56 million or 13.42% from the year of 2021.

The decrease for 2022 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 year of 2022 decreased $7.93 million or 14.71% as compared to the year of 2021.

For the year of 2022, postretirement expense, which includes expense associated with United’s pension plan, supplemental early retirement plans (“SERPs”) and Savings and Stock Investment Plan (“401K plan”), decreased $8.25 million from the year of 2021.

United uses certain valuation methodologies to measure the fair value of the assets within United’s pension plan which are presented in Note P, Notes to Consolidated Financial Statements.

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The determination of the projected benefit obligation and the associated periodic benefit expense involves significant judgment and estimation of future employee compensation levels, the discount rate and the expected long-term rate of return on plan assets.

If United assumes a 1% increase or decrease in the estimation of future employee compensation levels while keeping all other assumptions constant, the benefit cost associated with the pension plan would increase by approximately $901 thousand and decrease by approximately $826 thousand, respectively.

If United assumes a 1% increase or decrease in the estimation of future employee compensation levels while

keeping all other assumptions constant, the benefit cost associated with the pension plan would increase by approximately $909 thousand and decrease by approximately $849 thousand, respectively.

If United assumes a 1% increase or decrease in the discount rate while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by approximately $3.15 million and increase by approximately $3.61 million, respectively.

If United assumes a 1% increase or decrease in the expected long-term rate of return on plan assets while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by approximately $1.90 million and increase by approximately $1.90 million, respectively.

Net occupancy expense increased $731 thousand or 1.77% for the year of 2021 as compared to the prior year.

The increase was due mainly to increases of $3.53 million in building maintenance expense and $1.30 million in depreciation due mainly to the offices added in the Community Bankers Trust and Carolina Financial acquisitions partially offset by a decline of $1.11 million in building rental expense due to the closing of certain leased offices.

If United assumes a 1% increase or decrease in the expected long-term rate of return on plan assets while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease and increase by approximately $2.07 million, respectively.

Net occupancy expense increased $3.10 million or 7.36% for the year of 2022 as compared to the prior year.

The increase was due mainly to increases of $1.17 million in building maintenance expense and $998 thousand in depreciation due mainly to the offices added in the Community Bankers Trust acquisition partially offset by a decline of $479 thousand in building rental expense due to the closing of certain leased offices.

OREO expense for the year of 2022 decreased $3.23 million or 60.19% from the year of 2021 due mainly to fewer declines in the fair value of OREO properties.

Equipment expense increased $3.34 million or 12.86% for the year of 2022 as compared to the year of 2021.

The increase was due mainly to increases in equipment maintenance of $3.53 million and depreciation of $1.91 million due mainly to the Community Bankers Trust and Carolina Financial acquisitions.

The increase was due mainly to higher maintenance costs of $2.32 million and depreciation expense of $684 thousand primarily due to the Community Bankers Trust acquisition.

Data processing expense decreased $1.45 million or 4.61% for the year of 2022 as compared to the year of 2021.

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

Mortgage loan servicing expense and impairment for the year of 2021 increased $2.82 million from the year of 2020.

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

In addition, United recorded a temporary impairment charge, net of recoveries of $500 thousand on its mortgage servicing rights during the year of 2021 as compared to a temporary impairment charge on its mortgage servicing rights of $1.38 million during the year of 2020.

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

United incurred similar penalties of $10.39 million to prepay three long-term FHLB advances during the year of 2020.

The decrease for year of 2022 was due to $3.47 million of merger conversion and Community Bankers Trust contract termination costs included in the year of 2021.

Mortgage loan servicing expense and impairment for the year of 2022 decreased $5.15 million from the year of 2021.

The decrease was due to the recovery of past temporary impairment and lower amortization expense of mortgage servicing rights.

Federal Deposit Insurance Corporation (“FDIC”) expense for the year of 2022 increased $3.64 million or 43.64% from the year of 2021 due to a higher assessment base.

Other expense for the year of 2022 increased $17.48 million or 14.46% from the year of 2021.

Included in other expense for the year of 2021 were merger-related expenses of $3.01 million for the Community Bankers Trust acquisition as compared to $13.07 million for the Carolina Financial acquisition for the year of 2020.

The expense for the reserve for unfunded commitments for the year of 2021 increased $1.69 million from the year of 2020, excluding amounts that are included in the merger-related expenses above.

In addition, the amortization of income tax credits, which reduces the effective tax rate, for the year of 2021 increased $2.90 million and expense on automated teller machine (“ATM”) increased $1.22 million.

Several other general operating expenses increased as well due mainly to the Community Bankers Trust and Carolina Financial acquisitions.

The increase in other noninterest expense mainly resulted from higher amounts of certain general operating expenses primarily related to consulting and legal costs.

Additionally, the expense for the reserve for unfunded loan commitments increased $2.71 million and charitable contributions increased $1.41 million from the year of 2021.

For the year ended December 31, 2022, income taxes were $96.16 million, compared to $95.12 million for 2021, an increase of $1.04 million or 1.09%.

The increase was due to higher earnings.

The increase was due to higher earnings partially offset by a slightly lower effective tax rate.

United’s effective tax rate was approximately 20.2% and 20.6% for years ended December 31, 2022 and 2021, respectively, as compared to 19.7% for 2020.

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Quarterly Results

Net income for the first quarter of 2021 was $106.90 million or $0.83 per diluted share as compared to earnings of $40.18 million or $0.40 per diluted share for the first quarter of 2020.

Higher net income for the first quarter of 2021 compared to the first quarter of 2020 was primarily due to higher income from mortgage banking activities, driven by an elevated volume of mortgage loan originations and sales in the secondary market, the impact of the Carolina Financial acquisition and a lower provision for credit losses primarily due to better performance trends within the loan portfolio and an improved future macroeconomic forecast under the CECL accounting standard.

Net interest income for the first three months of 2021 was $190.96 million, an increase of $49.44 million or 34.94% from net interest income of $141.52 million for the first three months of 2020.

The increase of $49.44 million in net interest income occurred because total interest income increased $25.18 million while total interest expense decreased $24.27 million from the first quarter of 2020.

The provision for credit losses was $143 thousand for the first three months of 2021 as compared to $27.12 million for the first three months of 2020.

This decrease in the provision for credit losses was mainly due to the impact of better performance trends within the loan portfolio as well

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

Noninterest income was $92.57 million for the first three months of 2021, an increase of $55.77 million or 151.52% from the first three months of

2020 due mainly to increased income from mortgage banking activities due to an elevated volume of mortgage loan originations and sales in the secondary market as well as the addition of mortgage banking operations from the Carolina Financial acquisition.

Noninterest expense for the first three months of 2021 increased $47.79 million or 47.26% from the first three months of 2020 due mainly to the Carolina Financial acquisition as well as due to higher employee incentives and commissions expense mainly related to higher mortgage banking production.

Income taxes increased $17.68 million or 178.74% for the first three months of 2021 as compared to the first three months of 2020.

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.

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.

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Net interest income for the second quarter of 2022 was $214.90 million, which was an increase of $28.39 million or 15.22% from the second quarter of 2021.

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

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

This decrease in the provision for credit losses was mainly due to the impact of better performance trends within the loan portfolio as well

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

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

loans from Carolina Financial during the second quarter of 2020.

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

impact of a declining interest rate lock commitment pipeline.

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

The $28.39 million increase in net interest income occurred because total interest income increased $27.59 million while total interest expense decreased $801 thousand from the second quarter of 2021.

United’s provision for credit losses was a net benefit of $1.81 million for the second quarter of 2022 while the provision for credit losses was a net benefit of $8.88 million for the second quarter of 2021.

The lower net benefit amount for 2022 compared to 2021 was mainly due to an increase in total loans outstanding.

For the second quarter of 2022, noninterest income was $43.61 million, which was a decrease of $19.26 million or 30.63% from the second quarter of 2021.

The decrease in noninterest income were primarily due 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.

For the second quarter of 2022, noninterest expense increased $2.21 million or 1.59% from the second quarter of 2021 due mainly to an increase in the expense for the reserve for unfunded loan commitments as well as higher amounts of certain general operating expenses.

Income taxes for the second quarter of 2022 were $23.53 million as compared to $24.46 million for the second quarter of 2021.

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

For the quarters ended June 30, 2022 and June 30, 2021, United’s effective tax rate was 19.75% and 20.50%, respectively.

Net income for the third quarter of 2022 was $102.59 million or $0.76 per diluted share, as compared to $92.15 million or $0.71 per diluted share for the prior year third quarter.

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

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

The provision for credit losses was a net benefit of $7.83 million for the third quarter of 2021, while the provision for credit losses was an expense of $16.78 million, for the third quarter of 2020.

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

impact of a declining locked pipeline.

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

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

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

Net interest income for the third quarter of 2022 was $240.62 million, which was an increase of $59.04 million or 32.52% from the third quarter of 2021.

The $59.04 million increase in net interest income occurred because total interest income increased $69.60 million while total interest expense increased $10.56 million from the third quarter of 2021.

The provision for credit losses was $7.67 million for the third quarter of 2022 while the provision for credit losses was a net benefit of $7.83 million for the third quarter of 2021.

For the third quarter of 2022, noninterest income was $32.75 million, which was a decrease of $35.88 million or 52.28% from the third quarter of 2021 primarily due 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.

For the third quarter of 2022, noninterest expense decreased $5.08 million or 3.58% from the third quarter of 2021 due mainly to lower employee compensation expense as a result of lower employee commissions, incentives and overtime related to mortgage banking production.

Income tax expense for the third quarter of 2022 was $25.92 million as compared to $23.60 million for the third quarter of 2021 primarily due to higher earnings partially offset by a slightly lower effective tax rate.

United’s effective tax rate was 20.17% and 20.39% for the third quarter of 2022 and 2021, respectively.

Net income for the fourth quarter of 2022 was $99.77 million or $0.74 per diluted share as compared to earnings of $73.85 million or $0.56 per diluted share for the fourth quarter of 2021.

Net interest income for the fourth quarter of 2021was $183.68 million, which was a decrease of $8.31 million or 4.33% from the fourth quarter of 2020.

The $8.31 million decrease in net interest income occurred because total interest income decreased $13.72 million while total interest expense decreased $5.41 million from the fourth quarter of 2020.

Tax-equivalent

net interest income, which adjusts for the tax-favored

status of income from certain loans and investments, for the fourth quarter of 2021 was $184.71 million, a decrease of $8.32 million or 4.31% from the fourth quarter of 2020.

Average earning assets for the fourth quarter of 2021 increased $1.81 billion or 7.84% from the fourth quarter of 2020 due to a $862.00 million or 4.72% increase in average net loans, including loans held for sale, a $1.84 billion or 104.14% increase in average short-term investments and a $833.62 million or 27.07% increase in average investment securities.

For the fourth quarter of 2021, the provision for credit losses was a benefit of $7.41 million as compared to an expense of $16.75 million for the fourth quarter of 2020.

The decrease in

the provision in relation to the prior year quarter was driven by the impact of improvements in the reasonable and supportable forecasts of future macroeconomic conditions on the estimate of expected credit losses under CECL partially offset by a provision for loan losses of $12.29 million recorded on purchased non-credit

deteriorated (“non-PCD”)

loans from Community Bankers Trust.

Noninterest income for the fourth quarter of 2021 was $54.05 million, which was a decrease of $40.03 million or 42.55% from the fourth quarter of 2020.

The lower amount of noninterest income was due mainly to a decline of $43.45 million in income from mortgage banking activities due to a lower volume of mortgage loan originations and sales in the secondary market.

Noninterest expense for the fourth quarter of 2021 was $151.79 million, a decrease of $4.33 million or 2.77% from the fourth quarter of 2020.

In particular, employee compensation decreased $5.46 million due to lower employee commissions, incentives and overtime related to mortgage banking production partially offset by $2.53 million of merger-related expenses from the Community Bankers Trust acquisition as well as additional employees from the acquisition.

OREO expense decreased $2.07 million due to a decrease in net losses on the sale of OREO properties and fewer declines in the fair value of OREO properties.

Partially offsetting the decreases in noninterest expense were increases in data processing expense of $3.57 million primarily due to $3.47 million of merger-related expenses associated with the Community Bankers Trust acquisition.

Other expense increased $1.70 million driven by an increase in the reserve for unfunded loan commitments of $2.80 million, including $844 thousand related to loan commitments acquired from Community Bankers Trust.

Net interest income for the fourth quarter of 2022 was $249.40 million, which was an increase of $65.73 million or 35.78% from the fourth quarter of 2021.

The $65.73 million increase in net interest income occurred because total interest income increased $112.55 million while total interest expense increased $46.82 million from the fourth quarter of 2021.

The provision for credit losses was $16.37 million for the fourth quarter of 2022 as compared to a net benefit of $7.41 million for the fourth quarter of 2021.

The increase in the provision for credit losses was primarily due to loan growth and the impact of reasonable and supportable forecasts of future macroeconomic conditions.

Partially offsetting the fourth quarter of 2021 net benefit was a provision for loan losses of $12.29 million recorded on purchased non-credit deteriorated (“non-PCD”) loans from Community Bankers Trust.

Noninterest income for the fourth quarter of 2022 was $30.88 million, which was a decrease of $23.17 million, or 42.87%

from the fourth quarter of 2021.

The decrease in noninterest income was driven primarily by a $22.72 million decrease in income from mortgage banking activities mainly due to lower mortgage loan origination and sale volume and a lower margin on loans sold in the secondary market.

Noninterest expense for the fourth quarter of 2022 was $137.54 million, a decrease of $14.25 million, or 9.39%, from the fourth quarter of 2021 primarily due to decreases of $14.01 million in employee compensation and $3.39 million in data processing expense.

The decrease in employee compensation was primarily due to lower employee commissions and incentives related to mortgage banking production and the impact of $2.53 million of merger-related expenses recognized in the fourth quarter of 2021.

Data processing expense for the fourth quarter of 2021 included $3.47 million of merger-related expenses associated with the Community Bankers Trust acquisition.

For the fourth quarter of 2022, income tax expense was $26.61 million as compared to $19.49 million for the fourth quarter of 2021.

The increase of $7.12 million was primarily due to higher earnings and a slightly higher effective tax rate.

United’s effective tax rate was 21.06% for the fourth quarter of 2022 and 20.88% for the fourth quarter of 2021.

Additional quarterly financial data for 2022 and 2021 may be found in Note Z, Notes to Consolidated Financial Statements.

6 unchanged sentences

therefore, historically presented dollar values do not reflect this inflationary condition.

While recent economic conditions in the United States have seen improving trends since the onset of the COVID-19

pandemic, there can be no assurance that this improvement will continue.

Economic and inflationary pressure on consumers and uncertainty regarding continuing economic improvement could result in changes in consumer and business spending, borrowing and savings habits.

Inflationary pressure on consumers and uncertainty regarding the economy could result in changes in consumer and business spending, borrowing and savings habits.

Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.

15 unchanged sentences

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

A significant source of funds available to United is “core deposits”.

A significant source of funds available to United

is “core deposits”.

Core deposits include certain demand deposits, statement and special savings and NOW accounts.

4 unchanged sentences

Liquid assets are cash and those items readily convertible to cash.

All banks must maintain sufficient balances of cash and near-cash items to meet the day-to-day

demands of customers and United’s cash needs.

All banks must maintain sufficient balances of cash and near-cash items to meet the day-to-day demands of customers and United’s cash needs.

Other than cash and due from banks, the available for sale securities portfolio and maturing loans are the primary sources of liquidity.

8 unchanged sentences

In 2021, cash flows provided by operations were $609.54 million due mainly to net income of $367.74 million for the year of 2021.

In 2022, net cash of $3.45 billion was used in investing activities which was primarily due to net loan growth of $2.37 billion and net purchases of $1.09 billion of investment securities over proceeds from sales of investment securities.

In 2021, net cash of $15.65 million was provided by investing activities which was primarily due to net loan repayments of $882.15 million and net cash of $39.42 million acquired in the Community Bankers Trust merger partially offset by $813.94 million of purchases of investment securities over proceeds from sales of investment securities and the purchase of $85.00 million of bank-owned life insurance policies.

In 2020, net cash of $137.59 million was provided by investing activities which was primarily due to net cash of $629.11 million provided in the acquisition of Carolina Financial and $123.00 million of proceeds from sales of investment securities over purchases.

Partially offsetting these cash inflows from investing activities was loan growth of $619.98 million, mainly from the PPP loans.

During the year of 2022, net cash of $105.32 million was provided by financing activities due primarily to net advances of $1.38 billion from long-term FHLB borrowings partially offset by a decline of $1.04 billion in deposits.

Other uses of cash within funding activities for the year of 2022 were $193.04 million for cash dividends paid and $79.46 million for the acquisition of treasury stock.

During the year of 2021, net cash of $923.91 million was provided by financing activities due primarily to net growth of $1.25 billion in deposits.

This source of cash from funding activities was partially offset by net repayment of $40.21 million in short-term borrowings, net repayment of $97.79 million in long-term FHLB advances and cash dividends paid of $181.28 million for year of 2021.

During the year of 2020, net cash of $1.09 billion was provided by financing activities due primarily to net growth of $2.86 billion in deposits.

This source of cash from funding activities was partially offset by net repayment of $232.35 million in short-term borrowings, net repayment of $1.35 billion in long-term FHLB advances and cash dividends paid of $162.71 million for year of 2020.

The net effect of the cash flow activities was an increase in cash and cash equivalents of $1.55 billion for the year of 2021 as compared to an increase in cash and cash equivalents of $1.37 billion for the year of 2020.

The net effect of the cash flow activities was a decrease in cash and cash equivalents of $2.58 billion for the year of 2022 as compared to an increase in cash and cash equivalents of $1.55 billion for the year of 2021.

See the Consolidated Statement of Cash Flows in the Consolidated Financial Statements.

2 unchanged sentences

Further discussion of derivative instruments is included in Note S, Notes to Consolidated Financial Statements.

United is also a party to financial instruments with off-balance-sheet

risk in the normal course of business to meet the financing needs of its customers.

United is also a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.

These financial instruments include loan commitments and standby letters of credit.

United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments.

United uses the same policies in making commitments and conditional obligations as it does for on-balance

sheet instruments.

United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

2 unchanged sentences

Commitments to extend credit:

Revolving open-end

secured by 1-4

Revolving open-end secured by 1-4 residential

Credit card and personal revolving lines

17 unchanged sentences

United’s risk-based capital ratio is 14.37% at December 31, 2022 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.30%, 12.30% and 10.79%, respectively.

The December 31, 2021 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19

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

The December 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 $4.72 billion at December 31, 2021, increasing $421.01 million or 9.80% from year-end

2020 as a result mainly of the Community Bankers Trust acquisition and earnings net of dividends.

Common stock increased $18.88 million or 5.64% due to 7,135,771 shares issued in the Community Bankers Trust acquisition.

Surplus increased $255.48 million or 8.83% mainly due to the Community Bankers Trust acquisition.

Retained earnings increased $185.38 million or 15.38% due to earnings net of dividends for the year.

Accumulated other comprehensive income

decreased $27.26 million due mainly to an after-tax

decrease in the fair value of available for sale securities.

Treasury stock increased $11.48 million or 7.21% due to the repurchase of 306,204 shares of United common stock under a stock repurchase plan approved by United’s Board of directors in November of 2019.

Total shareholders’ equity was $4.52 billion at December 31, 2022, which was a decrease of $202.44 million or 4.29% from December 31, 2021.

This decrease is primarily due to a decrease of $327.84 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 $79.79 million or 46.76% due to the repurchase of 2,259,546 shares of United common stock under stock repurchase plans approved by United’s Board of Directors.

Partially offsetting these decreases was an increase of $184.65 million in retained earnings (net income less dividends declared).

United’s equity to assets ratio was 15.31% at December 31, 2022 as compared to 16.09% at December 31, 2021.

5 unchanged sentences

Total cash dividends declared to common shareholders were $194.98 million for the year of 2022 as compared to $182.36 million for the year of 2021.

The year 2021 was the forty-eighth consecutive year of dividend increases to United shareholders.

The year 2022 was the forty-nineth consecutive year of dividend increases to United shareholders.

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-K

Item 7. Management’s Discussion and Analysis