What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-09 · 290 added, 362 removed, 269 unchanged (71% of the section changed)

10 unchanged sentences

United cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” United undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

CORONAVIRUS (“COVID-19”) PANDEMIC

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

and global economy.

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

the impact to the financial services and banking industry;

and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken,

or inaction by governmental authorities to contain the outbreak or to mitigate its impact (both economic and health-related).

Refer to our 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.

However, United is currently unable to fully assess or predict the extent of the effects of COVID-19 on its operations and results in the future as the ultimate impact will depend on factors that are currently unknown and/or beyond our control.

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

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

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

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

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

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

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

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

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

TRANSITION FROM THE LONDON INTERBANK OFFERED RATE (LIBOR)

1 unchanged sentence

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

Dollar LIBOR settings on December 31, 2021, and plans to discontinue publication of overnight, one-month, three-month, six-month, and twelve-month U.S.

Dollar LIBOR settings on 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.

4 unchanged sentences

In particular, the Alternative Reference Rates Committee (“ARRC”) has been formed in the United States by the Federal Reserve Board and the Federal Reserve Bank of New York.

The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative reference rate for U.S.

has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative reference rate for U.S.

Dollar LIBOR.

The ARRC has also published recommended fall-back language for LIBOR-linked financial instruments, among numerous other areas of guidance.

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.

11 unchanged sentences

and its wholly-owned subsidiaries, unless otherwise indicated.

Management has evaluated all significant events and transactions that occurred after September 30, 2022, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.

Management has evaluated all significant events and transactions that occurred after March 31, 2023, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.

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

26 unchanged sentences

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

United’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2022 were unchanged from the policies disclosed in United’s Annual Report on Form 10-K for the year ended December 31, 2021 within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

United’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of March 31, 2023 were unchanged from the policies disclosed in United’s Annual Report on Form 10-K for the year ended December 31, 2022 within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

FINANCIAL CONDITION

United’s total assets as of September 30, 2022 were $29.05 billion, which was a decrease of $280.43 million or less than 1% from December 31, 2021.

This decrease was mainly due to a decrease of $2.40 billion or 63.91% in cash and cash equivalents and a decrease of $294.34 million or 58.35% in loans held for sale.

These decreases in assets were partially offset by an increase of $627.95 million or 14.62% in investment securities and an increase of $1.68 billion or 9.30% in portfolio loans and leases.

Total liabilities were flat from year-end 2021, decreasing $1.89 million or less than 1%.

Deposits decreased $486.89 million or 2.09%, accrued expenses and other liabilities decreased $8.85 million or 4.52% and the operating lease liability decreased $7.96 million or 9.17%.

Mostly offsetting these decreases in liabilities was a $493.55 million or 52.16% increase in borrowings and an increase of $8.26 million in the allowance for lending-related commitments.

Shareholders’ equity decreased $278.54 million or 5.90%.

United’s total assets as of March 31, 2023 were $30.18 billion, which was an increase of $692.86 million or 2.35% from December 31, 2022.

This increase was mainly due to an increase of $742.04 million or 63.06% in cash and cash equivalents, an increase of $53.99 million or less than 1% in portfolio loans, and a $11.30 million or 19.86% increase in loans held for sale.

These increases in assets were partly offset by a $95.02 million or 1.95% decrease in investment securities and a $20.57 million or 6.76% decrease in other assets.

Total liabilities increased $602.52 million or 2.41% from year-end 2022.

Deposits decreased $18.58 million or less than 1%, borrowings increased $599.84 million or 25.43%, and accrued expenses and other liabilities increased $13.01 million or 6.86%.

Shareholders’ equity increased $90.34 million or 2.00%.

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

Cash and Cash Equivalents

Cash and cash equivalents at September 30, 2022 decreased $2.40 billion or 63.91% from year-end 2021.

In particular, interest-bearing deposits with other banks decreased $2.44 billion or 70.27% as United placed less cash in an interest-bearing account with the Federal Reserve.

Partially offsetting this decrease in cash and cash equivalents was a $39.44 million or 13.94% increase in cash and due from banks.

Cash and cash equivalents at March 31, 2023 increased $742.04 million or 63.06% from year-end 2022.

In particular, interest-bearing deposits with other banks increased $726.15 million or 82.38% as United placed more cash in an interest-bearing account with the Federal Reserve while cash and due from banks increased $15.86 million or 5.39%.

Federal funds sold increased $34 thousand or 3.15%.

During the first nine months of 2022, net cash of $623.77 million was provided by operating activities while net cash of $2.82 billion and $206.95 million were used in investing and financing activities, respectively.

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

Total investment securities at September 30, 2022 increased $627.95 million or 14.62%.

Securities available for sale increased $605.39 million or 14.97%.

This change in securities available for sale reflects $1.57 billion in purchases, $448.02 million in sales, maturities and calls of securities and a decrease of $505.57 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 $7.31 million at September 30, 2022, a decrease of $5.09 million or 41.04% due mainly to sales.

Other investment securities increased $27.65 million or 11.54% 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.

During the first three months of 2023, net cash of $118.15 million and $91.43 million were provided by operating and investing activities, respectively, while net cash of $532.45 million was provided by financing activities.

See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first three months of 2023 and 2022.

Total investment securities at March 31, 2023 decreased $95.02 million or 1.95%.

Securities available for sale decreased $122.51 million or 2.70%.

This change in securities available for sale reflects $7.86 million in purchases, $186.17 million in sales, maturities and calls of securities and an increase of $58.88 million in market value.

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

Government corporations and agencies.

Equity securities were $7.79 million at March 31, 2023, an increase of $163 thousand or 2.14% due mainly to a net increase in fair value.

Other investment securities increased $27.33 million or 8.49% from year-end 2022 due to purchases of Federal Home Loan Bank (“FHLB”) stock.

The following table summarizes the changes in the available for sale securities since year-end 2022:

6 unchanged sentences

Single issue trust preferred securities

Corporate securities

Other corporate securities

Total available for sale securities, at fair value

5 unchanged sentences

net of allowance for credit losses of $18 thousand.

At September 30, 2022, gross unrealized losses on available for sale securities were $494.53 million.

Securities with the most significant gross unrealized losses at September 30, 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 September 30, 2022, United’s available for sale mortgage-backed securities had an amortized cost of $2.19 billion, with an estimated fair value of $1.92 billion.

At March 31, 2023, gross unrealized losses on available for sale securities were $411.19 million.

Securities with the most significant gross unrealized losses at March 31, 2023 consisted primarily of agency residential mortgage-backed securities, state and political subdivision securities, agency commercial mortgage-backed securities, asset-backed securities and corporate securities.

As of March 31, 2023, United’s available for sale mortgage-backed securities had an amortized cost of $2.05 billion, with an estimated fair value of $1.81 billion.

The portfolio consisted primarily of $1.34 billion in agency residential mortgage-backed securities with a fair value of $1.17 billion, $121.00 million in non-agency residential mortgage-backed securities with an estimated fair value of $110.75 million, and $594.15 million in commercial agency mortgage-backed securities with an estimated fair value of $537.01 million.

As of September 30, 2022, United’s available for sale state and political subdivisions securities had an amortized cost of $827.08 million, with an estimated fair value of $702.45 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 September 30, 2022.

As of September 30, 2022, United’s available for sale corporate securities had an amortized cost of $1.57 billion, with an estimated fair value of $1.50 billion.

As of March 31, 2023, United’s available for sale state and political subdivisions securities had an amortized cost of $812.02 million, with an estimated fair value of $721.97 million.

As of March 31, 2023, United’s available for sale corporate securities had an amortized cost of $1.42 billion, with an estimated fair value of $1.35 billion.

The portfolio consisted of $17.35 million in single issue trust preferred securities with an estimated fair value of $15.84 million.

In addition to the single issue trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $922.89 million and a fair value of $897.13 million and other corporate securities, with an amortized cost of $477.36 million and a fair value of $439.89 million.

United’s available for sale single issue trust preferred securities had a fair value of $16.10 million as of September 30, 2022.

United’s available for sale single issue trust preferred securities had a fair value of $15.84 million as of March 31, 2023.

Of the $15.84 million, $7.69 million or 48.58% were investment grade;

4 unchanged sentences

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

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

Management does not believe that any individual security with an unrealized loss as of September 30, 2022 is impaired.

During the first quarter of 2023, United did not recognize any credit losses on its available for sale investment securities.

Management does not believe that any individual security with an unrealized loss as of March 31, 2023 is impaired.

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

1 unchanged sentence

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

As of September 30, 2022, there was no allowance for credit losses related to the Company’s available for sale securities.

As of March 31, 2023, there was no allowance for credit losses related to the Company’s available for sale securities.

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

1 unchanged sentence

Loans Held for Sale

Loans held for sale were $210.08 million at September 30, 2022, a decrease of $294.34 million or 58.35% from year-end 2021.

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

Loan originations for the first nine months of 2022 were $1.76 billion while loans sales were $2.06 billion.

Loans held for sale were $68.18 million at March 31, 2023, an increase of $11.30 million or 19.86% from year-end 2022.

Loan originations in the secondary market exceeded sales during the first three months of 2023.

Loan originations for the first three months of 2023 were $177.81 million while loans sales were $166.51 million.

Portfolio Loans

Loans, net of unearned income, increased $1.68 billion or 9.30%.

Since year-end 2021, commercial, financial and agricultural loans increased $158.13 million or 1.42%.

In particular, commercial real estate loans increased $82.77 million or 1.08% while commercial loans (not secured by real estate) increased $75.36 million or 2.18%.

Construction and land development loans increased $609.95 million or 30.28%, residential real estate loans increased $699.19 million or 18.94%, and consumer loans increased $203.91 million or 17.10% due to an increase in indirect automobile financing.

Loans, net of unearned income, increased $53.99 million or less than 1%.

Since year-end 2022, commercial, financial and agricultural loans increased $130.26 million or 1.12% as a result of a $231.89 million or 2.89% increase in commercial real estate loans which was partially offset by a $101.63 million or 2.81% decrease in commercial loans (not secured by real estate).

Construction and land development loans decreased $118.72 million or 4.06%, residential real estate loans increased $96.58 million or 2.07%, and consumer loans decreased $57.38 million or 4.20% due to a decrease in indirect automobile financing.

The following table summarizes the changes in the major loan classes since year-end 2022:

13 unchanged sentences

For a further discussion of loans see Note 4 to the unaudited Notes to Consolidated Financial Statements.

Other assets increased $101.88 million or 44.00% from year-end 2021 as a result of a $109.47 million increase in deferred tax assets due to a decrease in the fair value of available-for-sale securities.

Partially offsetting this increase were decreases of $1.25 million in income tax receivable due to timing differences, a $4.04 million in other real estate owned properties (“OREO”) due to sales and write downs, and $4.14 million in core deposit intangibles due to amortization.

Other assets decreased $20.57 million or 6.76% from year-end 2022.

Deferred tax assets decreased $16.60 million due to an increase in the fair value of available-for-sale securities, income tax receivable decreased $5.54 million due to timing differences, and core deposit intangibles decreased $1.28 million due to amortization.

In addition, derivative assets decreased $316 thousand due to a decrease in fair value.

Partially offsetting these decreases was an increase $2.03 million in other real estate owned properties (“OREO”).

Deposits represent United’s primary source of funding.

Total deposits at September 30, 2022 decreased $486.89 million or 2.09%.

In terms of composition, noninterest-bearing deposits increased $122.26 million or 1.63% while interest-bearing deposits decreased $609.15 million or 3.84% from December 31, 2021.

Noninterest-bearing deposits, which consist of noninterest-bearing demand deposit and noninterest-bearing money market (“MMDA”) account balances, increased $122.26 million from year-end 2021 due to a $228.26 million increase in commercial 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 increased $100.70 million or 1.93% since year-end 2021 as the result of an increase of $132.53 million in nonpersonal interest-bearing transaction accounts partially offset by a $72.95 million decrease in personal interest-bearing transaction accounts.

Regular savings accounts increased $100.26 million or 6.11% mainly as a result of a $89.52 million increase in personal savings accounts and a $10.04 million increase in commercial savings accounts.

Total deposits at March 31, 2023 decreased $18.58 million or less than 1%.

In terms of composition, noninterest-bearing deposits decreased $492.02 million or 6.83% while interest-bearing deposits increased $473.44 million or 3.13% from December 31, 2022.

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

The $492.02 million decrease in noninterest-bearing deposits was due mainly to a $400.93 million or 7.41% decrease in commercial noninterest-bearing deposits and a $33.74 million or 2.26% decrease in personal noninterest-bearing deposits.

In addition, items in-process decreased $114.65 million.

Partially offsetting these decreases in noninterest-bearing deposits was an increase in public noninterest-bearing deposits of $13.64 million or 7.18%.

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

NOW accounts decreased $273.97 million or 5.35% since year-end 2022 as the result of decreases of $263.59 million in personal NOW accounts and $58.35 million in public funds NOW accounts, partially offset by a $42.81 million increase in commercial NOW accounts.

Regular savings accounts decreased $99.48 million or 5.81% mainly as a result of a $88.78 million decrease in personal savings accounts and a $10.20 million decrease in commercial savings accounts.

Interest-bearing MMDAs decreased $119.10 million or 1.89%.

In particular, commercial MMDAs decreased $176.66 million, brokered MMDAs decreased $31.85 million, and public funds MMDAs decreased $15.00 million while personal MMDAs increased $63.10 million.

Time deposits under $100,000 decreased $166.66 million or 16.16% from year-end 2021.

This decrease in time deposits under $100,000 was the result of a $162.70 million decrease in fixed rate Certificates of Deposits (“CDs”) under $100,000 and a $5.31 million decrease in CDs under $100,000 obtained through the use of deposit listing services.

Since year-end 2021, time deposits over $100,000 decreased $483.04 million or 30.17% as fixed rate CDs decreased $378.23 million, CDARS over $100,000 decreased $43.01 million, public funds CDs over $100,000 decreased $50.79 million, and brokered certificates of deposits decreased $10.52 million.

In particular, personal MMDAs decreased $250.78 million while commercial MMDAs increased $126.91 million.

Public funds MMDAs increased $4.77 million.

Time deposits under $100,000 increased $77.27 million or 9.16% from year-end 2022.

This increase in time deposits under $100,000 was the result of a $78.24 million increase in fixed rate Certificates of Deposits (“CDs”) under $100,000, and a $2.96 million increase in Certificate of Deposit Account Registry Service (“CDARS”) under $100,000.

CDs under $100,000 obtained through the use of deposit listing services decreased $1.87 million.

Since year-end 2022, time deposits over $100,000 increased $887.84 million or 76.22% as brokered certificates of deposits increased $482.60 million, fixed rate CDs increased $365.39 million, and CDARS over $100,000 increased $41.69 million.

The table below summarizes the changes by deposit category since year-end 2022:

(Dollars in thousands)

Noninterest-bearing accounts

Interest-bearing transaction accounts

Demand deposits

Interest-bearing checking

Regular savings

3 unchanged sentences

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 $405,717 and $640,752 at September 30, 2022 and December 31, 2021, respectively.

Total borrowings at September 30, 2022 increased $493.55 million or 52.16% since year-end 2021.

During the first nine months of 2022, short-term borrowings increased $13.63 million or 10.58% due to an increase in securities sold under agreements to repurchase.

Long-term borrowings increased $479.91 million or 58.71% from year-end 2021 due to an increase in FHLB advances of $478.65 million.

Includes time deposits of $250,000 or more of $651,807 and $454,477 at March 31, 2023 and December 31,

2022, respectively.

Total borrowings at March 31, 2023 increased $599.84 million or 25.43% since year-end 2022.

During the first three months of 2023, short-term borrowings increased $9.40 million or 5.85% due to an increase in securities sold under agreements to repurchase.

Long-term borrowings increased $590.45 million or 26.87% from year-end 2022 due to additional advances obtained from the FHLB during the first quarter of 2023.

The table below summarizes the change in the borrowing categories since year-end 2022:

1 unchanged sentence

Short-term securities sold under agreements to repurchase

FHLB advances

Long-term FHLB advances

Subordinated debt

3 unchanged sentences

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at September 30, 2022 decreased $8.85 million or 4.52% from year-end 2021.

In particular, income tax payable decreased $3.21 million, business franchise taxes decreased $2.65 million, both due to timing differences, incentives payables decreased $2.72 million due to payments, and accrued employee expense decreased $5.53 million.

Partially offsetting these decreases was a $1.85 million increase in interest payable due mainly to an increase in FHLB borrowings and rising interest rates, a $7.74 million increase in accrued mortgage escrow liabilities due primarily to a growth in residential real estate loans and a $1.89 million increase in dividends payable.

Accrued expenses and other liabilities at March 31, 2023 increased $13.01 million or 6.86% from year-end 2022.

In particular, interest payable increased $7.32 million due to an increase in CDs and FHLB advances and rising interest rates.

In addition, business franchise taxes increased $3.20 million and accrued mortgage escrow liabilities increased $7.37 million.

Partially offsetting these increases was a decrease of $12.15 million in incentives payables due to payments.

Shareholders’ Equity

Shareholders’ equity at September 30, 2022 was $4.44 billion, which was a decrease of $278.54 million or 5.90% from year-end 2021.

Shareholders’ equity at March 31, 2023 was $4.61 billion, which was an increase of $90.34 million or 2.00% from year-end 2022.

Retained earnings increased $49.59 million or 3.15% from year-end 2022.

Earnings net of dividends for the first nine months of 2022 were $133.49 million.

Accumulated other comprehensive income decreased $347.42 million or 7,107.53% from year-end 2021 due to a decrease of $387.77 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 $38.36 million increase in the fair value of cash flow hedges, net of deferred income taxes.

The after-tax accretion of pension costs was $1.98 million for the first nine months of 2022.

Treasury stock increased $79.78 million or 46.76% from year-end 2021.

During the first nine months 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 $78.37 million or an average price per share of $34.69.

Earnings net of dividends for the first three months of 2023 were $49.59 million.

Accumulated other comprehensive income increased $38.60 million or 11.60% from year-end 2022 due to an increase of $45.16 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes.

Partially offsetting this increase was a $7.16 million decrease in the fair value of cash flow hedges, net of deferred income taxes.

The after-tax accretion of pension costs was $602 thousand for the first quarter of 2023.

RESULTS OF OPERATIONS

Below is a summary of United’s consolidated results of operations for the time periods presented:

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

Three Months Ended

Nine Months Ended

(Dollars in thousands except per share amounts)

(Dollars in thousands)

Income Statement Summary :

Interest income

2 unchanged sentences

Provision for credit losses

Noninterest income

Noninterest expense

Other expense

Income before income taxes

PER COMMON SHARE :

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 income for the second quarter of 2022 was $95.61 million or $0.71 per diluted share.

Net income for the first nine months of 2022 was $279.86 million or $2.06 per diluted share compared to $293.89 million or $2.27 per diluted share for the first nine months of 2021.

Earnings for the third quarter of 2022 as compared to the third quarter of 2021 increased primarily due to the acquisition of Community Bankers Trust Corporation (“Community Bankers Trust”), organic loan growth and a rising interest rate environment.

Earnings for the first nine months of 2022 as compared to the first nine months of 2021 decreased primarily due to lower income from mortgage banking activities primarily as a result of the rising rate environment The increase in earnings for the third quarter of 2022 from the second quarter of 2022 was due mainly to loan growth and net interest margin expansion.

For the third quarter of 2022, United’s annualized return on average assets was 1.41% and return on average shareholders’ equity was 8.96% as compared to 1.33% and 8.23% for the third quarter of 2021.

United’s annualized return on average assets was 1.32% and return on average shareholders’ equity was 8.33% for the second quarter of 2022.

United’s annualized return on average assets for the first nine months of 2022 was 1.29% and return on average shareholders’ equity was 8.07% as compared to 1.46% and 8.95% for the first nine months of 2021.

For the third quarter and first nine months of 2022, United’s annualized return on average tangible equity was 15.46% and 13.73%, respectively, as compared to 14.03% and 15.36% for the third quarter and first nine months of 2021, respectively.

United’s annualized return on average tangible equity was 14.23% for the second quarter of 2022.

Net income for the first quarter of 2023 was $98.31 million as compared to earnings of $81.66 million for the first quarter of 2022.

Earnings for the first quarter of 2023, as compared to the first quarter of 2022, increased primarily due to higher net interest income as a result of the impact of rising market interest rates on earning assets, organic loan growth and a change in the asset mix to higher earning assets..

Diluted earnings per share were $0.73 for the first quarter of 2023 and $0.60 for the first quarter of 2022.

On a linked-quarter basis, net income for the fourth quarter of 2022 was $99.77 million or $0.74 per diluted share.

United’s annualized return on average assets for the first three months of 2023 was 1.35% and return on average shareholders’ equity was 8.72% as compared to 1.13% and 6.96%, respectively, for the first three months of 2022.

On a linked-quarter basis, United’s annualized return on average assets for the fourth quarter of 2022 was 1.36% and return on average shareholders’ equity was 8.80%.

For the first three months of 2023, United’s annualized return on average tangible equity, a non-GAAP measure, was 14.97%, as compared to 11.63% for the first three months of 2022.

On a linked-quarter basis, United’s annualized return on average tangible equity was 15.28% for the fourth quarter of 2022.

Three Months Ended

Nine Months Ended

(Dollars in thousands)

September 30,

Return on Average Tangible Equity:

4 unchanged sentences

Return on Average Tangible Equity (non- GAAP)

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

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.

Net interest income for the first nine months of 2022 was $647.03 million, an increase of $87.97 million or 15.74% from the first nine months of 2021.

Mainly, these increases in net interest income for 2022 compared to 2021 were due to the impact of higher average earning assets, driven primarily by the Community Bankers Trust acquisition and organic loan growth, the impact of rising market interest rates on earning assets and a change in the asset mix to higher earning assets.

Net interest income for the third quarter of 2022 increased $25.72 million, or 11.97%, from the second quarter of 2022.

The increase in net interest income was primarily due to the impact of rising market interest rates on earning assets and a change in the asset mix to higher earning assets.

The provision for credit losses was $7.67 million and $2.45 million for the third quarter and first nine months of 2022, respectively, while the provision for credit losses was a net benefit of $7.83 million and $16.57 million for the third quarter and first nine months of 2021.

The provision for credit losses was a net benefit of $1.81 million for the second quarter of 2022.

The higher amounts for 2022 compared to 2021 were mainly due to an increase in total loans outstanding.

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.

Noninterest income for the first nine months of 2022 was $122.38 million which was a decrease of $101.69 million or 45.38% from the first nine months of 2021.

Noninterest income for the third quarter of 2022 decreased $10.86 million, or 24.90%, from the second quarter of 2022.

These decreases 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 third quarter of 2022, noninterest expense decreased $5.08 million or 3.58% from the third quarter of 2021.

For the first nine months of 2022, noninterest expense decreased $12.64 million or 2.94% from the first nine months of 2021.

These decreases were due mainly to lower employee compensation expense as a result of lower employee commissions, incentives and overtime related to mortgage banking production.

Noninterest expense for the third quarter of 2022 decreased $3.98 million, or 2.82%, from the second quarter of 2022 due mainly to a decrease in the expense for the reserve for unfunded loan commitments.

Income taxes for the third quarter of 2022 were $25.92 million as compared to $23.60 million for the third quarter of 2021.

Income tax expense was $23.53 million for the second quarter of 2022.

For the first nine months of 2022 and 2021 income tax expense was $69.55 million and $75.62 million, respectively.

For the quarters ended September 30, 2022 and June 30, 2022, United’s effective tax rate was 20.17%, and 19.75%, respectively.

For the quarter ended September 30, 2021, United’s effective tax rate was 20.39%.

The effective tax rate for the first nine months of 2022 and 2021 was 19.90% and 20.47%, respectively.

Return on Average Tangible Equity (non-GAAP)\ [(a) / (b)] x 365 / (c)]

Net interest income for the first quarter of 2023 increased $42.82 million, or 22.36%, to $234.32 million from net interest income of $191.50 million for the first three months of 2022.

The increase of $42.82 million in net interest income occurred because total interest income increased $126.51 million while total interest expense increased $83.69 million from the first quarter of 2022.

Net interest income for the first quarter of 2023 decreased $15.08 million, or 6.05%, from the fourth quarter of 2022.

The decrease of $15.08 million in net interest income occurred because total interest income increased $21.56 million while total interest expense increased $36.65 million from the fourth quarter of 2022.

The provision for credit losses was $6.89 million for the first quarter of 2023 as compared to a net benefit of $3.41 million for the first quarter of 2022.

The increase in the provision for credit losses was mainly due to a change in qualitative factors and the impact of reasonable and supportable forecasts of future macroeconomic conditions.

On a linked-quarter basis, the provision for credit losses for the first quarter of 2023 declined $9.48 million from $16.37 million for the fourth quarter of 2022 due mainly to less portfolio loan growth is the first quarter of 2023 as compared to the fourth quarter of 2022.

Noninterest income was $32.74 million for the first three months of 2023, a decrease of $13.28 million or 28.86% from the first three months of 2022 due mainly to decreased 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.

On a linked-quarter basis, noninterest income for the first quarter of 2023 increased $1.87 million, or 6.04%, from the fourth quarter of 2022.

The increase in noninterest income was primarily due to an increase in income from mortgage banking activities mainly due to a higher quarter end loan pipeline valuation.

Noninterest expense for the first three months of 2023 decreased $1.76 million or 1.26% from the first three months of 2022 due mainly to lower employee compensation expense as a result of lower employee commissions and incentives related to mortgage banking production and a lower employee headcount.

On a linked-quarter basis, noninterest expense for the first quarter of 2023 was flat from the fourth quarter of 2022, decreasing $123 thousand, or less than 1%.

Income taxes increased $4.35 million or 21.64% for the first three months of 2023 as compared to the first three months of 2022 primarily due to increased earnings and a higher effective tax rate.

On a linked-quarter basis, income taxes decreased $2.16 million or 8.12% for the first quarter of 2023 as compared to the fourth quarter of 2022 due mainly to lower earnings and effective tax rate.

The effective tax rate was 19.92% and 19.75% and for the first quarter of 2023 and 2022, respectively.

The effective tax rate was 21.06% for the fourth quarter of 2022.

Business Segments

2 unchanged sentences

Community Banking

Net income attributable to the community banking segment for the third quarter of 2022 was $108.66 million compared to net income of $81.88 million for the third quarter of 2021.

Net income attributable to the community banking segment for the first nine months of 2022 was $288.83 million compared to net income of $253.88 million for the first nine months of 2021.

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.

On a linked quarter basis, net income attributable to the community banking segment for the third quarter of 2022 increased $11.52 million from the second quarter of 2022 primarily due to organic loan growth and net interest margin expansion.

Net interest income increased $60.10 million to $239.54 million for the third quarter of 2022, compared to $179.44 million for the same period of 2021.

Net interest income increased $90.78 million to $640.82 million for the first nine months of 2022, compared to $550.04 million for the same period of 2021.

Generally, net interest income for the third quarter and first nine months of 2022 increased from the third quarter and first nine months of 2021 due to an increase in average earning assets as a result of the Community Bankers Trust acquisition and organic loan growth.

On a linked quarter basis, net interest income for the third quarter of 2022 increased $27.95 million from the second quarter of 2022 primarily due to higher interest income on earning assets driven by rising market interest rates and a change in the asset mix to higher earning assets.

Provision for credit losses was $7.67 million for the three months ended September 30, 2022 compared to a net benefit of $7.83 million for the same period of 2021.

Provision for credit losses was $2.45 million for the nine months ended September 30, 2022 compared to a net benefit of $16.57 million for the same period of 2021.

The provision for credit losses was $7.67 million for the third quarter of 2022 as compared to a net benefit of $1.81 million for the second quarter of 2022.

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

Noninterest income decreased $941 thousand for the third quarter of 2022 to $23.78 million as compared to $24.71 million for the third quarter of 2021.

Noninterest income for the first nine months of 2022 was relatively flat from the first nine months of 2021, increasing $374 thousand or less than 1%.

On a linked quarter basis, noninterest income for the third quarter of 2022 decreased $3.12 million from the second quarter of 2022 due mainly to lower income from bank-owned life insurance policies (“BOLI”).

The decrease in BOLI income was primarily due to lower death benefits from the second quarter of 2022 and the impact of lower market values of underlying investments in the third quarter of 2022.

Noninterest expense was $119.57 million for the third quarter of 2022, compared to $109.14 million for the same period of 2021, an increase of $10.43 million.

Noninterest expense was $353.36 million for the nine months ended September 30, 2022, compared to $322.61 million for the same period of 2021, an increase of $30.75 million.

These increases in noninterest expense for the first nine months of 2022 were primarily attributable to the additional employees and branch

offices from the Community Bankers Trust acquisition as most major categories of noninterest expense showed increases.

On a linked quarter basis, noninterest expense for the third quarter of 2022 was relatively flat from the second quarter of 2022, increasing $320 thousand or less than 1% from the second quarter of 2022.

Net income attributable to the community banking segment for the first quarter of 2023 was $104.69 million compared to net income of $83.03 million for the first quarter of 2022.

The higher net income within the community banking segment was due primarily to increased net interest income.

On a linked quarter basis, net income attributable to the community banking segment for the first quarter of 2023 decreased $3.80 million from the fourth quarter of 2022 primarily due to a decrease in net interest income.

Net interest income of $236.26 million for the first quarter of 2023 was an increase of $46.58 million or 24.56% from $189.68 million for the first quarter of 2022.

Generally, net interest income for the first quarter of 2023 increased from the first quarter of 2022 due mainly the impact of rising market interest rates on earning assets, organic loan growth and a change in the asset mix to higher earning assets.

On a linked quarter basis, net interest income for the first quarter of 2023 decreased $13.50 million from the fourth quarter of 2022 primarily due to higher interest expense driven by deposit rate repricing and higher average balances of long-term borrowings.

The provision for credit losses was $6.89 million for the first quarter of 2023 as compared to a net benefit of $3.41 million for the first quarter of 2022, an increase of $10.30 million.

As previously mentioned, the increase in the provision for credit losses was mainly due to a change in qualitative factors and the impact of reasonable and supportable forecasts of future macroeconomic conditions.

On a linked-quarter basis, the provision for credit losses for the first quarter of 2023 declined $9.48 million from $16.37 million for the fourth quarter of 2022 due mainly to less portfolio loan growth in the first quarter of 2023 as compared to the fourth quarter of 2022.

Noninterest income decreased $731 thousand or 2.94% for the first quarter of 2023 to $24.17 million as compared to $24.90 million for the first quarter of 2022.

The decrease was due mainly to declines in fees from deposit services and fees from brokerage services.

On a linked quarter basis, noninterest income for the first quarter of 2023 increased $614 thousand from the fourth quarter of 2022 due mainly to a higher amount of income from bank-owned life insurance (“BOLI”) policies.

Noninterest expense was $122.79 million for the first quarter of 2023, compared to $114.54 million for the same period of 2022.

The increase of $8.25 million in noninterest expense was primarily attributable to an increase in Federal Deposit Insurance Corporation (“FDIC”) expense due to a higher assessment rate.

On a linked quarter basis, noninterest expense for the first quarter of 2023 increased $3.33 million from the fourth quarter of 2022 due mainly to higher employee benefits costs and FDIC insurance expense.

Mortgage Banking

The mortgage banking segment reported net losses of $3.34 million and $4.28 million for the third quarter and the first nine months of 2022, respectively, as compared to net income of $12.42 million and $40.42 million for the third quarter and first nine months 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 $13.75 million for the third quarter of 2022 as compared to $45.02 million for the third quarter of 2021.

Noninterest income for the first nine months of 2022 was $58.61 million as compared to $152.30 million for the first nine months of 2021.

The decreases in 2022 were 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.

The mortgage banking segment reported a net loss of $1.68 million for the first quarter of 2023, compared to net income of $209 thousand for the first quarter of 2022 and a net loss of $2.94 million for the fourth quarter of 2022.

Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $10.86 million for the first quarter of 2023, compared to $23.40 million for the first quarter of 2022.

The decrease of $12.54 million in the first quarter of 2023 was due mainly to decreased sales of mortgage loans in the secondary market primarily as a result of a rising interest rate environment.

On a linked quarter basis, noninterest income for the first quarter of 2023 increased $168 thousand from the fourth quarter mainly due to a higher quarter end loan pipeline valuation.

Noninterest expense was $15.09 million for the first three months of 2023, a decrease of $10.36 million from $25.45 million for the first three months of 2022.

Noninterest expense for the fourth quarter of 2022 was $17.10 million, a decrease of $2.01 million from the first quarter of 2023.

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

Noninterest expense was $20.66 million for the third quarter of 2022 as compared $31.79 million for the third quarter of 2021.

Noninterest expense was $71.89 million for the first nine months of 2022 as compared to $109.36 million for the first nine months of 2021.

These decreases were primarily due to a decrease in employee compensation due to lower employee incentives and commissions related to a decrease in mortgage banking production.

The decreases mentioned above were due mainly to lower employee commissions and incentives related to the decreased mortgage banking production.

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

4 unchanged sentences

Such changes, and their impact on net interest income in 2023 and 2022, are presented below.

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.

Net interest income for the first nine months of 2022 was $647.03 million, which was an increase of $87.97 million or 15.74% from the first nine months of 2021.

The $87.97 million increase in net interest income occurred because total interest income increased $94.33 million while total interest expense increased $6.36 million from the first nine months of 2021.

On a linked-quarter basis, net interest income for the third quarter of 2022 increased $25.72 million or 11.97% from the second quarter of 2022.

The $25.72 million increase in net interest income occurred because total interest income increased $35.91 million while total interest expense increased $10.19 million from the second quarter of 2022.

Net interest income for the first quarter of 2023 was $234.32 million, which was an increase of $42.82 million or 22.36% from the first quarter of 2022.

The $42.82 million increase in net interest income occurred because total interest income increased $126.51 million while total interest expense increased $83.69 million from the first quarter of 2022.

On a linked-quarter basis, net interest income for the first quarter of 2023 decreased $15.08 million, or 6.05%, from the fourth quarter of 2022.

The $15.08 million decrease in net interest income occurred because total interest income increased $21.56 million while total interest expense increased $36.65 million from the fourth quarter of 2022.

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.

2 unchanged sentences

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

Tax-equivalent net interest income for the third quarter of 2022 was $241.73 million, an increase of $59.09 million or 32.35% from the third quarter of 2021.

The increase in tax-equivalent net interest income was primarily due to the impact of higher average earning assets, driven by the Community Bankers Trust acquisition and organic loan growth, the impact of rising market interest rates on earning assets 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

Program (“PPP”) loan fee income and lower acquired loan accretion income.

Average earning assets for the third quarter of 2022 increased $1.08 billion, or 4.42%, from the third quarter of 2021 due to a $2.47 billion increase in average net loans and a $1.51 billion increase in average investment securities partially offset by a $2.91 billion decrease in average short-term investments.

The interest rate spread for the third quarter of 2022 increased 71 basis points from the third quarter of 2021 to 3.58% due to a 96 basis point increase in the average yield on earning assets partially offset by a 25 basis point increase in the average cost of funds.

Net PPP loan fee income was $1.62 million and $7.85 million for the third quarter of 2022 and 2021, respectively, a decrease of $6.23 million.

Acquired loan accretion income was $4.07 million and $8.15 million for the third quarter of 2022 and 2021, respectively, a decrease of $4.09 million.

The net interest margin of 3.78% for the third quarter of 2022 was an increase of 80 basis points from the net interest margin of 2.98% for the third quarter of 2021.

Tax-equivalent net interest income for the first nine months of 2022 was $650.35 million, an increase of $88.11 million or 15.67% from the first nine months of 2021.

This increase in 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, organic loan growth and a change in the asset mix to higher earning assets.

These increases were partially offset by lower PPP loan fee income and lower acquired loan accretion income.

Average earning assets for the first nine months of 2022 increased $1.75 billion, or 7.33%, from the first nine months of 2021 due to a $1.54 billion increase in average investment securities and a $1.34 billion increase in average net loans partially offset by a $1.13 billion decrease in average short-term investments.

The interest rate spread for the first nine months of 2022 increased 22 basis points from the first nine months of 2021 due to a 26 basis point increase in the average yield on earning assets partially offset by a 3 basis point increase in the average cost of funds.

Net PPP loan fee income was $9.28 million and $28.19 million for the first nine months of 2022 and 2021, respectively, a decrease of $18.90 million.

Acquired loan accretion income was $13.60 million and $27.62 million for the first nine months of 2022 and 2021, respectively, a decrease of $14.02 million.

The net interest margin of 3.38% for the first nine months of 2022 was an increase of 24 basis points from the net interest margin of 3.14% for the first nine months of 2021.

On a linked-quarter basis, tax-equivalent net interest income for the third quarter of 2022 increased $25.72 million, or 11.91% from the second quarter of 2022.

The increase in tax-equivalent net interest income was primarily due to higher interest income on earning assets driven by rising market interest rates and a change in the asset mix to higher earning assets.

This increase in tax-equivalent net interest income was partially offset by higher interest expense primarily driven by deposit rate repricing as well as due to lower PPP loan fee income and lower acquired loan accretion.

The interest rate spread of 3.58% for the third quarter of 2022 increased 31 basis points from the second quarter of 2022 due to a 56 basis point increase in the average yield on earning assets partially offset by a 25 basis point increase in the average cost of funds.

Average earning assets for the third quarter of 2022 were relatively flat from the second quarter of 2022, decreasing $188.13 or less than 1% as a decrease of $818.46 million in short-term investments was mostly offset by an increase in higher yielding average net loans of $627.57 million.

Net PPP loan fee income decreased $1.94 million to $1.62 million for the third quarter of 2022.

Acquired loan accretion income decreased $1.33 million to $4.07 million for the third quarter of 2022.

The net interest margin of 3.78% for the third quarter of 2022 was an increase of 40 basis points from the net interest margin of 3.38% for the second quarter of 2022.

Tax-equivalent net interest income for the first quarter of 2023 was $235.46 million, which was an increase of $42.84 million or 22.24% from the first quarter of 2022.

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, 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 and higher average balances of long-term borrowings as well as lower income from Paycheck Protection Program (“PPP”) loan fees and acquired loan accretion.

The interest rate spread for the first quarter of 2023 increased 4 basis points from the first quarter of 2022 to 2.93% due to a 194 basis point increase in the average yield on earning assets partially offset by a 190 basis point increase in the average cost of funds.

Average earning assets for the first quarter of 2023 increased $125.32 million, or less than 1%, from the first quarter of 2022 due to a $2.13 billion increase in average net loans mostly offset by a $2.09 billion decrease in average short-term investments.

The average yield on interest-bearing deposits increased 161 basis points to 1.83% from the first quarter of 2022.

Average long-term borrowings increased $1.60 billion, or 195.83%, from the first quarter of 2022.

Net PPP loan fee income was $210 thousand and $4.10 million for the first quarter of 2023 and 2022, respectively, a decrease of $3.89 million.

Acquired loan accretion income was $3.12 million and $4.14 million for the first quarter of 2023 and 2022, respectively, a decrease of $1.02 million.

The net interest margin of 3.63% for the first quarter of 2023 was an increase of 64 basis points from the net interest margin of 2.99% for the first quarter of 2022.

On a linked-quarter basis, tax-equivalent net interest income for the first quarter of 2023 decreased $15.10 million, or 6.03%, from the fourth quarter of 2022.

The decrease in net interest income and tax-equivalent net interest income was primarily due to higher interest expense driven by deposit rate repricing and higher average balances of long-term borrowings as well as lower acquired loan accretion income.

This decrease in net interest income and tax-equivalent net interest income was partially offset by higher interest income on earning assets driven by rising market interest rates and a change in the asset mix to higher earning assets.

The interest rate spread for the first quarter of 2023 decreased 47 basis points from the fourth quarter of 2022 to 2.93% due to an 80 basis point increase in the average cost of funds partially offset

by a 33 basis point increase in the yield on earning assets.

The average yield on interest-bearing deposits increased 67 basis points to 1.83% from the fourth quarter of 2022.

Average long-term borrowings increased $890.10 million, or 58.26%, from the fourth quarter of 2022.

Acquired loan accretion income decreased $1.59 million to $3.12 million for the first quarter of 2023.

The average yield on net loans and loans held for sale increased 37 basis points to 5.55% from the fourth quarter of 2022.

An increase in average earning assets of $435.44 million, or 1.69%, from the fourth quarter of 2022 was driven by an increase in average net loans of $327.94 million and an increase of $199.98 million in average short-term investments partially offset by a decrease of $92.48 million in average investment securities.

The net interest margin of 3.63% for the first quarter of 2023 was a decrease of 24 basis points from the net interest margin of 3.87% for the fourth quarter of 2022.

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 three months ended September 30, 2022, September 30, 2021 and June 30, 2022 and the nine months ended September 30, 2022 and September 30, 2021:

The following table provides the discount/premium and net accretion impact to tax-equivalent net interest income for the three months ended March 31, 2023, March 31, 2022 and December 31, 2022:

Three Months Ended

3 unchanged sentences

Long-term borrowings

Nine Months Ended

(Dollars in thousands)

Loan accretion

Certificates of deposit

Long-term borrowings

Tax-equivalent net interest income

The following tables reconcile the difference between net interest income and tax-equivalent net interest income for the three months ended September 30, 2022, September 30, 2021 and June 30, 2022 and the nine months ended September 30, 2022 and September 30, 2021.

The following tables reconcile the difference between net interest income and tax-equivalent net interest income for the three months ended March 31, 2023, March 31, 2022 and December 31, 2022.

Three Months Ended

3 unchanged sentences

Tax-equivalent net interest income

Nine Months Ended

(Dollars in thousands)

Net interest income, GAAP basis

Tax-equivalent adjustment (1)

Tax-equivalent net interest income

The tax-equivalent adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months and nine months ended September 30, 2022 and 2021 and the three months ended June 30, 2022.

The tax-equivalent adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months ended March 31, 2023 and 2022 and December 31, 2022.

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

The following tables show the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month and nine-month periods ended September 30, 2022 and 2021, respectively, with the interest and rate earned or paid on such amount.

The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21% for the three-month and nine-month period ended September 30, 2022 and 2021.

The following table shows the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month periods ended March 31, 2023 and 2022, respectively, with the interest and rate earned or paid on such amount.

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

Three Months Ended

March 31, 2023

Three Months Ended

September 30, 2022

September 30, 2021

March 31, 2022

(Dollars in thousands)

5 unchanged sentences

Allowance for loan losses

Net loans (2)(3)

Total earning assets

Interest-Bearing Liabilities:

Interest-Bearing Funds:

Interest-bearing deposits

1 unchanged sentence

Long-term borrowings

Total Interest-Bearing Liabilities

Total Interest-Bearing Funds

Noninterest-bearing deposits

2 unchanged sentences

SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

NET INTEREST INCOME

INTEREST RATE SPREAD

INTEREST SPREAD

NET INTEREST MARGIN

1 unchanged sentence

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

Nine Months Ended

September 30, 2022

September 30, 2021

Loans held for sale and leases are included in the daily average loan amounts outstanding.

The following table shows the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month periods ended March 31, 2023 and December 31, 2022, respectively, with the interest and rate earned or paid on such amount.

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

Three Months Ended

March 31, 2023

Three Months Ended

December 31, 2022

(Dollars in thousands)

Earning Assets:

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

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

Investment Securities:

2 unchanged sentences

Allowance for loan losses

Net loans (2)(3)

Total earning assets

Interest-Bearing Liabilities:

Interest-Bearing Funds:

Interest-bearing deposits

1 unchanged sentence

Long-term borrowings

Total Interest-Bearing Liabilities

Non-interest bearing deposits

Total Interest-Bearing Funds

Noninterest-bearing deposits

Accrued expenses and other liabilities

1 unchanged sentence

SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

NET INTEREST INCOME

INTEREST RATE SPREAD

INTEREST SPREAD

NET INTEREST MARGIN

1 unchanged sentence

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

Loans held for sale and leases are included in the daily average loan amounts outstanding.

Provision for Credit Losses

United’s provision for credit losses was $7.67 million and $2.45 million for the third quarter and first nine months of 2022, respectively, while the provision for credit losses was net benefit of $7.83 million and $16.57 million, respectively, for the third quarter and first nine months of 2021.

The provision for credit losses was $6.89 million for the first quarter of 2023 as compared to a net benefit of $3.41 million for the first quarter of 2022.

On a linked-quarter basis, the provision for credit losses for the fourth quarter of 2022 was $16.37 million.

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

For the quarter ended September 30, 2022, the provision for loan and lease losses was $7.67 million as compared to a net benefit of $7.82 million for the quarter ended September 30, 2021.

The provision for loan and lease losses for the first nine months of 2022 was $2.46 million as compared to a net benefit of $16.34 million for the first nine months 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 were $1.79 million for the third quarter of 2022 as compared to net recoveries of $1.17 million for the same quarter in 2021.

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

Net recoveries for the first nine months of 2022 were $1.13 million as compared to net charge-offs of $8.59 million for the first nine months of 2021.

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

On a linked-quarter basis, the provision for loan and lease losses was a net benefit of $1.81 million for the second quarter of 2022.

Net recoveries were $941 thousand for the second quarter of 2022.

Annualized net charge-offs (recoveries) as a percentage of average loans and leases, net of unearned income were 0.04% and (0.01%) for the third quarter and first nine months of 2022, respectively, compared to (0.03%) and 0.07% for the third quarter and first nine months of 2021.

Annualized net recoveries as a percentage of average loans and leases, net of unearned income was (0.02%) for the second quarter of 2022.

As of September 30, 2022, nonperforming loans and leases were $69.65 million or 0.35% 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 past due 90 days or more were $18.25 million at September 30, 2022, a decrease of $625 thousand or 3.31% from $18.88 million at year-end 2021.

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

At September 30, 2022, nonaccrual loans were $28.24 million, which was a decrease of $7.78 million or 21.60% 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 two commercial relationships.

Restructured loans were $23.15 million at September 30, 2022, a decrease of $12.70 million or 35.42% from $35.86 million at year-end 2021.

The decrease was mainly due to the repayment of five large commercial relationships during the first nine months of 2022.

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

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

Total nonperforming assets of $80.43 million, including OREO of $10.78 million at September 30, 2022, represented 0.28% of total assets as compared to non-performing assets of $105.59 million, including OREO of $14.82 million, or 0.36% of total assets at December 31, 2021.

For the quarter ended March 31, 2023, the provision for loan and lease losses was a $6.89 million as compared to a net benefit of $3.40 million for the quarter ended March 31, 2022.

The higher amount of provision expense for the first quarter of 2023 compared to the first quarter of 2022 was mainly due to an increase in qualitative adjustments pertaining to collateral values for dependent loans and the reasonable and supportable forecasts of future macroeconomic conditions.

Net charge-offs were $1.15 million for the first quarter of 2023 compared to net recoveries of $1.98 million for the first quarter of 2022.

The higher amount of net charge-offs for 2023 as compared to 2022 was primarily due to an increase in charge-offs in 2023 for the consumer loan segment as well as a lower amount of recoveries in 2023 of previously charged-off amounts for the other commercial loan segment.

On a linked-quarter basis, the provision for loan and lease losses for the fourth quarter of 2022 was $16.37 million.

As previously mentioned, the decline of $9.48 million for the first quarter of 2023 from the fourth quarter of 2022 was due mainly to less portfolio loan growth in the first quarter of 2023 as compared to the fourth quarter of 2022.

Net charge-offs were $1.23 million for the fourth quarter of 2022.

Annualized net charge-offs as a percentage of average loans and leases, net of unearned income for the first quarter of 2023 were 0.02% as compared to annualized net recoveries of (0.04)% for the first quarter of 2022 and annualized net charge-offs of 0.02% for the fourth quarter of 2022.

The following table shows a summary of United’s nonperforming assets including nonperforming loans and other real estate owned (“OREO”) at March 31, 2023 and December 31, 2022:

(In thousands)

Nonaccrual loans

Loans past due 90 days of more

Restructured loans (1)

Total nonperforming loans

Other real estate owned

Total nonperforming assets

On January 1, 2023, United adopted ASU 2022-02, “Troubled Debt Restructurings and Vintage Disclosures” prospectively which eliminated the accounting guidance on troubled debt restructurings and enhanced creditors’ disclosure requirements related to loan refinancings and restructurings for borrowers experiencing financial difficulty.

After the adoption of ASU 2022-02, United no longer considers accruing restructured loans that are fewer than 90 days past due as nonperforming loans or nonperforming assets.

Nonperforming loans and nonperforming assets at December 31, 2022 included $9,127 of restructured loans that were on accruing status and fewer than 90 days past due but classified as nonperforming loans and nonperforming assets.

Restructured loans that are on nonaccrual or 90-day past due are included in the above nonperforming loan and nonperforming asset categories at March 31, 2023.

Restructured loans with an aggregate balance of $7,186 at December 31, 2022 were on nonaccrual status, but are not included in “Nonaccrual loans” above.

Restructured loans with an aggregate balance of $3,075 at December 31, 2022 were 90 days past due, but not included in “Loans past due 90 days or more” above.

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

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

At September 30, 2022, the allowance for credit losses was $259.31 million as compared to $247.46 million at December 31, 2021.

At September 30, 2022, the allowance for loan and lease losses was $219.61 million as compared to $216.02 million at December 31, 2021.

The slight increase in the allowance for loan and lease losses was due mainly to an increase in outstanding loans.

As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.11% at September 30, 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 315.29% and 238.00% at September 30, 2022 and December 31, 2021, respectively.

At March 31, 2023, the allowance for credit losses was $289.28 million as compared to $280.94 million at December 31, 2022.

At March 31, 2023, the allowance for loan and lease losses was $240.49 million as compared to $234.75 million at December 31, 2022.

The increase in the allowance for loan and lease losses was due mainly to increased reserves for several loan segments including nonowner-occupied commercial real estate, residential real estate, and construction and loan development.

As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.17% at March 31, 2023 and 1.14% at December 31, 2022.

The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 567.18% and 400.33% at March 31, 2023 and December 31, 2022, respectively.

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

1 unchanged sentence

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, an adjustment was made for that factor.

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

Past events – This includes portfolio trends related to economic and business conditions;

past due, nonaccrual, and adversely classified loans and leases;

Then, any qualitative adjustments are applied to account for the Company’s view of current conditions, the future and other factors.

The first quarter of 2023 qualitative adjustments include analyses of the following:

Current conditions – United considered the impact of inflation, interest rates, the regulatory environment due to recent bank failures and geopolitical conflict when making determinations related to factor adjustments for the external environment.

United also considered portfolio trends related to economic and business conditions, collateral values for dependent loans;

past due, nonaccrual and graded loans and leases;

and concentrations of credit.

Current conditions – United considered the impact of inflation, supply chain disruptions, 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 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.

1 unchanged sentence

Assumptions for the economic variables were the following:

The forecast for real GDP shifted downward in the third quarter, from a projection of 1.70% for 2022 as of mid-June 2022 to 0.20% for 2022 as of mid-September with a steeper increasing future trendline as compared to the second quarter of 2022.

The unemployment rate forecast shifted slightly upward compared to the second quarter of 2022 with an increasing trend expected throughout 2023 and 2024.

The forecast for real GDP in 2023 shifted slightly downward in the first quarter, from a projection of 0.50% for 2023 at the end of 2022 to 0.40% for 2023 with a larger downward shift for 2024, from a projection of 1.60% for 2024 at the end of 2022 to 1.20% for 2024.

The unemployment rate remained fairly consistent to the end of 2022 with a steady trend expected throughout 2023 and 2024.

Greater risk of loss is probable in the office portfolio due to continued hybrid and remote work that may be exacerbated by future economic conditions and in the construction portfolio due to weakened economic conditions.

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

United’s review of the allowance for loan and lease losses at September 30, 2022 produced increased reserves in three of the four loan categories as compared to December 31, 2021.

The residential real estate reserve increased $6.30 million.

The real estate construction and development loan pool reserve increased $2.97 million.

The consumer loan pool reserve increased $2.25 million.

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

The allowance related to the commercial, financial & agricultural loan pool decreased $7.93 million.

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

United’s review of the allowance for loan and lease losses at March 31, 2023 produced increased reserves in three of the four loan categories as compared to December 31, 2022.

The allowance related to the commercial, financial & agricultural loan pool increased $3.04 million due to increased outstanding balances and increased reasonable and supportable forecast adjustment particularly as it pertains to office loans.

The residential real estate reserve increased $2.25 million due to increased outstanding balances and increased risk of loss for past due, nonaccrual and graded loans.

The real estate construction and development loan pool reserve increased $1.65 million due to increased risk of loss for collateral value for dependent loans and increased reasonable and supportable forecast adjustment.

The consumer loan pool reserve decreased $1.19 million primarily due to a decrease in outstanding balances.

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

4 unchanged sentences

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

The allowance for loans and leases that were individually assessed was $2.92 million at September 30, 2022 and $6.53 million at December 31, 2021.

In comparison to the prior year-end, this element of the allowance decreased $3.61 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 $259.31 million at September 30, 2022 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available.

The allowance for loans and

leases that were individually assessed was $977 thousand at March 31, 2023 and $1.27 million at December 31, 2022.

In comparison to the prior year-end, this element of the allowance decreased $293 thousand due to repayment of individually assessed loans and improved borrowers’ financial conditions such that individual assessments were no longer necessary.

Management believes that the allowance for credit losses of $289.28 million at March 31, 2023 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available.

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

3 unchanged sentences

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

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

The allowance for credit losses related to held to maturity securities was $19 thousand as of September 30, 2022 and December 31, 2021.

There was no provision for credit losses recorded on available for sale investment securities for the third quarter and first nine months of 2022 and 2021 and no allowance for credit losses on available for sale investment securities as of September 30, 2022 and December 31, 2021.

Due to loan interest payment deferrals granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans as of September 30, 2022.

As a result of this assessment, United released all of its remaining $8 thousand in reserves in the first nine months of 2022 as compared to the release of $3 thousand and $224 thousand for the third quarter and first nine months of 2021.

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

The provision for credit losses related to held to maturity securities for the first quarter of 2023 and 2022 was immaterial.

The allowance for credit losses related to held to maturity securities was $18 thousand as of March 31, 2023 and December 31, 2022.

There was no provision for credit losses recorded on available for sale investment securities for the first quarter of 2023 and 2022 and no allowance for credit losses on available for sale investment securities as of March 31, 2023 and December 31, 2022.

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

3 unchanged sentences

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

Noninterest income for the third quarter of 2022 was $32.75 million, a decrease of $35.88 million or 52.28% from the third quarter of 2021.

Noninterest income for the first nine months of 2022 was $122.38 million, a decrease of $101.69 million or 45.38% from the first nine months of 2021.

Both differences from the third quarter and first nine months of 2021 were 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 $6.42 million for the third quarter of 2022 compared to $42.01 million for the same period of 2021, a decline of $35.59 million or 84.71%.

For the first nine months of 2022 and 2021, income from mortgage banking activities was $38.07 million and $144.35 million, respectively.

The decreases for 2022 as compared to 2021 were 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.

For the three months ended September 30, 2022 and 2021, mortgage loan sales were $281.76 million and $1.45 billion, respectively.

For the nine months ended September 30, 2022 and 2021, mortgage loan sales were $2.06 billion and $5.16 billion, respectively.

Income from bank-owned life insurance (“BOLI”) for the third quarter of 2022 decreased $1.08 million from the third quarter of 2021.

The decrease was due mainly to the impact of lower market values of underlying investments in the third quarter of 2022.

Income from BOLI for the first nine months of 2022 increased $2.17 million from the first nine months of 2021.

This increase was due mainly to an increase of $2.64 million in proceeds from death benefits and the addition of approximately $31 million in BOLI from the Community Bankers Trust acquisition.

Fees from deposit services for the first nine months of 2022 increased $2.87 million or 10.17% from the first nine months of 2021.

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

Fees from brokerage services for the first nine months of 2022 were $12.68 million, an increase of $823 thousand or 6.94% from the first nine months of 2021.

Bankcard fees and merchant discounts for the first nine months of 2022 increased $1.00 million or 25.66% from the first nine months of 2021.

Both of these increases were due to higher volume.

On a linked-quarter basis, noninterest income for the third quarter of 2022 decreased $10.86 million, or 24.90%, from the second quarter of 2022.

The decrease in noninterest income was primarily due to decreases of $6.02 million in income from mortgage banking activities, $2.65 million in income from BOLI, $1.39 million in net (losses) gains on investment securities and $761 thousand in fees from deposit services.

The decrease in income from mortgage banking activities was mainly due 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.

The decrease in BOLI income was primarily due to lower death benefits from the second quarter of 2022 and the impact of lower market values of underlying investments in the third quarter of 2022.

The decrease in fees from deposit services reflects changes to United’s overdraft policy implemented during the third quarter of 2022.

Noninterest income for the first quarter of 2023 was $32.74 million, a decrease of $13.28 million or 28.86% from the first quarter of 2022.

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

Income from mortgage banking activities totaled $6.38 million for the first quarter of 2023 compared to $19.20 million for the first quarter of 2022.

The decrease of $12.82 million or 66.76% for the first quarter of 2023 was mainly due to decreased loan sales.

Mortgage loan sales were $166.51 million in the first quarter of 2023 as compared to $1.07 billion in the first quarter of 2022.

Mortgage loans originated for sale were $177.81 million for the first quarter of 2023 as compared to $903.61 million for the first quarter of 2022.

Fees from deposit services for the first quarter of 2023 decreased $786 thousand or 7.75% from the first quarter of 2022.

The decrease was due mainly to lower income from overdraft fees primarily as a result of implemented changes to United’s overdraft policy during the third quarter of 2022.

Fees from trust services for the first quarter of 2023 increased $653 thousand or 15.82% from the first quarter of 2022 due to an increase in managed assets.

On a linked-quarter basis, noninterest income for the first quarter of 2023 increased $1.87 million or 6.04% from the fourth quarter of 2022.

This increase was primarily due to an increase of $1.76 million or 38.18% in income from mortgage banking activities mainly due to a higher quarter end loan pipeline valuation.

In addition, income from bank-owned life insurance (“BOLI”) increased $489 thousand or 34.88% due to an increase in cash surrender value and fees from brokerage services increased $471 thousand or 12.63% as a result of increased volume.

Other Expenses

1 unchanged sentence

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

Noninterest expense decreased $5.09 million or 3.58% for the third quarter of 2022 compared to the same period in 2021.

For the first nine months of 2022, noninterest expense was $417.55 million, which was a decrease of $12.64 million or 2.94% from the first nine months of 2021.

Employee compensation for the third quarter and first nine months of 2022 decreased $7.84 million or 11.62% and $23.56 million or 11.30%, respectively, from the third quarter and first nine months of 2021.

The decreases for 2022 were 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 third quarter of 2022 decreased $2.38 million or 18.14% from the third quarter of 2021.

Employee benefits expense for the first nine months of 2022 decreased $7.40 million or 17.20% as compared to the first nine months of 2021.

These decreases were primarily due to lower amounts of expense for postretirement benefits.

Net occupancy expense for the third quarter and first nine months of 2022 increased $942 thousand or 9.11% and $2.29 million or 7.31%, respectively, as compared to the same time periods in 2021.

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

OREO expense for the third quarter of 2022 increased $1.28 million or 299.07% from the third quarter of 2021 due mainly to additional declines in the fair value of OREO properties.

OREO expense for the first nine months of 2022 decreased $2.55 million or 56.81% due mainly to fewer declines in the fair value of OREO properties.

Equipment expense increased $3.29 million or 17.18% for the first nine months of 2022 as compared to the first nine months of 2021.

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

Data processing expense for the third quarter and first nine months of 2022 increased $1.00 million or 15.15% and $1.94 million or 9.42%, respectively, from the third quarter and first nine months of 2021 due additional processing as a result of the Community Bankers Trust acquisition.

Mortgage loan servicing expense and impairment for the third quarter and first nine months of 2022 decreased $1.41 million or 43.22% and $4.76 million or 47.42%, respectively, from the same time periods in 2021 due to the recovery of past temporary impairment and lower amortization expense of mortgage servicing rights.

Federal Deposit Insurance Corporation (“FDIC”) expense for the third quarter and first nine months of 2022 increased $1.14 million or 59.53% and $3.02 million or 52.80%, respectively, from the third quarter and first nine months of 2021 due a higher assessment base.

Other expense for the third quarter of 2022 increased $1.41 million or 4.47% from the third quarter of 2021.

Within other expenses, the most significant increase for third quarter of 2022 as compared to the third quarter of 2021 was an accrual of $5 million related to a litigation matter with a former commercial customer.

Partially offsetting this increase was a decrease of $7.17 million in the expense for the reserve for unfunded loan commitments.

For the first nine months of 2022, other expense increased $15.25 million or 17.71% from the first nine months of 2021.

This increase in other expense for the first nine months of 2022 from the first nine months of 2021 resulted from the previously mentioned litigation accrual in the third quarter of 2022, an increase of $2.31 million in the expense for the reserve for unfunded loan commitments as well higher amounts of certain general operating expenses.

On a linked-quarter basis, noninterest expense for the third quarter of 2022 decreased $3.98 million, or 2.82%, from the second quarter of 2022.

The decrease in noninterest expense was primarily due to decreases of $3.01 million in employee compensation and $2.69 million in other expense.

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

Within other expense, the expense for the reserve for unfunded loan commitments declined $8.78 million, The decrease in the reserve for unfunded loan commitments reflects a decrease in the outstanding balance of loan commitments at quarter-end driven by loan fundings.

Partially offsetting this decrease in other expense was the previously mentioned accrual related to a litigation matter with a former commercial customer included in the third quarter of 2022.

For the third quarter of 2022, income tax expense 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.

For the first nine months of 2022, income tax expense was $69.55 million as compared to $75.62 million for the first nine months of 2021 primarily due to lower earnings and a lower effective tax rate.

On a linked-quarter basis, income tax expense increased $2.39 million primarily due to increased earnings and a slightly higher effective tax rate.

United’s effective tax rate was 20.17% for the third quarter of 2022, 20.39% for the third quarter of 2021 and 19.75% for the second quarter of 2022.

For the first nine months of 2022 and 2021, United’s effective tax rate was 19.90% and 20.47%, respectively.

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

Noninterest expense for the first quarter of 2023 was $137.42 million, which was a decrease of $1.76 million or 1.26% from the first quarter of 2022.

Employee compensation for the first quarter of 2023 decreased $7.21 million or 11.51% when compared to the first quarter of 2022.

This decrease was due mainly to lower employee commissions and incentives related to a decline in mortgage banking production and a decline in employee headcount.

Employee benefits expense for the first quarter of 2023 increased $584 thousand or 4.54% from the first quarter of 2022.

This increase was primarily due to higher amounts of expense for postretirement benefits.

Net occupancy expense for the first quarter of 2023 increased $646 thousand or 5.77% from the first quarter of 2022.

This increase was primarily due to higher amounts of building rental, depreciation and utilities expense partially offset by a decrease in maintenance expense.

FDIC expense increased $1.91 million or 71.60% from the first quarter of 2022 due a higher assessment rate.

Other expense for the first quarter of 2023 increased $1.73 million or 5.26% from the first quarter of 2022.

Within other expenses, the most significant increases were consulting and legal expenses, business franchise taxes and advertising expense.

Partially offsetting these increases were decreases in the expense for the reserve for unfunded commitments and merger expenses.

On a linked-quarter basis, noninterest expense for the first quarter of 2023 was flat from the fourth quarter of 2022, decreasing $123 thousand, or less than 1%.

The decrease in noninterest expense was primarily driven by a decrease in employee compensation of $2.12 million, net losses on the sale of OREO properties of $1.11 million and other expense of $2.42 million.

The decrease in employee compensation was primarily driven by lower employee commissions related to mortgage banking production and lower employee incentives.

The decrease in the other expense was primarily due to a lower reserve for unfunded loan commitments.

These decreases were partially offset by increases in employee benefits of $3.14 million and FDIC insurance expense of $1.34 million.

The increase in employee benefits was due to a combination of higher Federal Insurance Contributions Act (“FICA”) and postretirement plans’ expense.

The increase in FDIC insurance expense was primarily due to a higher assessment rate.

For the first quarter of 2023, income tax expense was $24.45 million as compared to $20.10 million for the first quarter of 2022.

The increase of $4.35 million was primarily due to higher earnings and higher effective tax rate.

On a linked-quarter basis, income tax expense decreased $2.16 million primarily due to lower earnings and lower effective tax rate.

United’s effective tax rate was 19.92% for the first quarter of 2023, 19.75% for the first quarter of 2022 and 21.06% for the fourth quarter of 2022.

Liquidity and Capital Resources

3 unchanged sentences

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

These deposits are relatively stable, and they are the lowest cost source of funds available to United.

These deposits

are relatively stable, and they are the lowest cost source of funds available to United.

Short-term borrowings have also been a significant source of funds.

5 unchanged sentences

The goal of liquidity management is to ensure the ability to access funding which enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United’s cash needs.

Liquidity is managed by monitoring

funds’ availability from a number of primary sources.

Liquidity is managed by monitoring funds’ availability from a number of primary sources.

Substantial funding is available from cash and cash equivalents, unused short-term borrowing and a geographically dispersed network of branches providing access to a diversified and substantial retail deposit market.

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

Other sources of liquidity available to United to provide long-term as well as short-term funding alternatives, in addition to FHLB advances, are long-term certificates of deposit, lines of credit, borrowings that are secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities.

Short-term needs can be met through a wide array of outside sources such as correspondent and downstream correspondent federal funds and utilization of Federal Home Loan Bank (“FHLB”) advances and the Federal Reserve Bank’s (“FRB”) Discount Window or its newly established Bank Term Funding program during the first quarter of 2023.

Other sources of liquidity available to United to provide long-term as well as short-term funding alternatives, in addition to FHLB advances and FRB programs, are long-term certificates of deposit, lines of credit, borrowings that are secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities.

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

For the first nine months ended September 30, 2022, cash of $623.77 million was provided by operating activities due mainly to net income of $279.86 million.

In addition, mortgage banking activities added cash of $294.34 million to the net income amount as sales of mortgage loans in the secondary market exceeded originations.

Net cash of $2.82 billion was used in investing activities which was primarily due to net loan growth of $1.67 billion and purchases of investment securities over proceeds from sales of $1.16 billion.

During the first nine months of 2022, net cash of $206.95 million was used in financing activities due primarily to a net withdrawal of $484.56 million in deposits, cash dividends paid of $144.48 million, net repurchases of $79.46 million in treasury stock partially offset by net advances of $480.00 million in FHLB advances.

The net effect of the cash flow activities was a decrease in cash and cash equivalents of $2.40 billion for the first nine months of 2022.

During the first quarter of 2023, United increased its interest-bearing deposit balance at the FRB by $725.06 million to $1.53 billion.

The change in the balance at the FRB was mostly the result of a $599.93 million increase in FHLB advances and $178.31 million of net sales, maturities, and paydowns in the available for sale debt securities portfolio, partly offset by a $18.58 million decrease in total deposits.

For the three months ended March 31, 2023, cash of $118.15 million was provided by operating activities due mainly to net income of $98.31 million.

In addition, accrued expenses and other liabilities increased $14.85 million.

Net cash of $91.43 million was provided by investing activities which was primarily due to $147.08 million of net proceeds from the sales of investment securities over purchases partially offset by portfolio loan growth of $54.94 million.

During the first three months of 2023, net cash of $532.45 million was provided by financing activities due primarily to net advances of $600.00 million in FHLB borrowings partially offset by cash dividends paid of $48.65 million, a decline in deposits of $18.23 million and cash paid of $10.25 million to redeem subordinated debt during the quarter.

The net effect of the cash flow activities was an increase in cash and cash equivalents of $742.04 million for the first three months of 2023.

At March 31, 2023, United had an unused borrowing amount at the FHLB of approximately $5.82 billion subject to delivery of collateral after certain trigger points, $2.20 billion without the delivery of additional collateral.

United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $230 million, all of which was available at March 31, 2023.

United also has a $20 million unsecured, revolving line of credit with an unrelated financial institution to provide for general liquidity needs, all of which was available at March 31, 2023.

At March 31, 2023, United’s borrowing capacity for the FRB Discount Window was $2.84 billion.

United did not have any borrowings from the FRB’s Discount Window, or its new Bank Term Funding Program, during the first quarter of 2023.

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

7 unchanged sentences

United is well-capitalized based upon regulatory guidelines.

United’s risk-based capital ratio is 14.43% at September 30, 2022 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.39%, 12.39% and 10.67%, respectively.

The September 30, 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.

United’s risk-based capital ratio is 14.70% at March 31, 2023 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.53%, 12.53% and 10.78%, respectively.

The March 31, 2023 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 $4.44 billion at September 30, 2022, which was a decrease of $278.54 million or 5.90% from December 31, 2021.

This decrease is primarily due to a decrease of $347.42 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 $79.78 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 $133.49 million in retained earnings (net income less dividends declared).

United’s equity to assets ratio was 15.29% at September 30, 2022 as compared to 16.09% at December 31, 2021.

The primary capital ratio, capital and reserves to total assets and reserves, was 16.03% at September 30, 2022 as compared to 16.79% at December 31, 2021.

United’s average equity to average asset ratio was 15.75% for the third quarter of 2022 as compared to 16.18% for the third quarter of 2021.

United’s average equity to average asset ratio was 15.95% for the first nine months of 2022 as compared to 16.27% for the first nine months of 2021.

Total shareholders’ equity was $4.61 billion at March 31, 2023, which was an increase of $90.34 million or 2.00% from December 31, 2022.

This increase is primarily due to increases of $49.59 million in retained earnings (net income less dividends declared) and $38.60 million in accumulated other comprehensive income due mainly to an after-tax increase in the fair value of available for sale securities.

United’s equity to assets ratio was 15.26% at March 31, 2023 as compared to 15.31% at December 31, 2022.

The primary capital ratio, capital and reserves to total assets and reserves, was 16.07% at March 31, 2023 as compared to 16.11% at December 31, 2022.

United’s average equity to average asset ratio was 15.49% for the first quarter of 2023 as compared to 16.22% the first quarter of 2022.

All of these financial measurements reflect a financially sound position.

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

Cash dividends were $1.08 per common share for the first nine months of 2022.

Total cash dividends declared were $48.56 million for the third quarter of 2022 and $146.37 million for the first nine months of 2022 as compared to $45.27 million for the third quarter of 2021 and $135.79 million for the first nine months of 2021.

During the first quarter of 2023, United’s Board of Directors declared a cash dividend of $0.36 per share.

Total cash dividends declared were $48.72 million for the first quarter of 2023 which was a decrease of $546 thousand or 1.11% from dividends declared of $49.27 million for the first quarter of 2022.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis