0000729986 usbi:BusinessAssetsMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-09-30ConstructionLoansMember 2020-12-31
Table of Contents

FORM
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
OR
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________
to _________
Commission File Number:
Number:    002-86947

United Bankshares, Inc.
(Exact name of registrant as specified in its charter)
 

West Virginia
Virginia
 
55-0641179
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
  
300 United Center
500 Virginia Street, East
Charleston, West Virginia
 
25301
(Address of principal executive offices)
 
Zip Code
Registrant’s telephone number, including area code: (304)
424-8716
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $2.50 per share
 
UBSI
 
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes
☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Yes
  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer ☒  Accelerated filer ☐
    
Non-accelerated filer ☐  Smaller reporting company ☐
    
     Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act).    Yes  ☐    
No
  
☒
As of
October
April 
30
3, 2022
1, 2021
, the registrant had
129,203,167
135,292,084
shares of common stock, $2.50 par value per share, outstanding.
Table of Contents
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM
10-Q
TABLE OF CONTENTS
 
   
Page
 
PART I. FINANCIAL INFORMATION
  
Item 1. Financial Statements
  
Consolidated Balance Sheets (Unaudited) September 30, 2021March 31, 2022 and December 31, 20202021
   4 
Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30,March 31, 2022 and 2021 and 2020
   5 
Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30,March 31, 2022 and 2021 and 2020
   7 
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30,March 31, 2022 and 2021 and 2020
   8 
Condensed Consolidated Statements of Cash Flows (Unaudited) for the NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
   109 
Notes to Consolidated Financial Statements
   1110 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
   6056 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
   8474 
Item 4. Controls and Procedures
   8676 
PART II. OTHER INFORMATION
  
Item 1. Legal Proceedings
   8878 
Item 1A. Risk Factors
   8878 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   8878 
Item 3. Defaults Upon Senior Securities
   8878 
Item 4. Mine Safety Disclosures
   8979 
Item 5. Other Information
   8979 
Item 6. Exhibits
   8979 
Signatures
   9081 
 
2
Table of Contents
PART I - FINANCIAL INFORMATION
 
Item 1.
FINANCIAL STATEMENTS (UNAUDITED)
The September 30, 2021March 31, 2022 and December 31, 2020,2021, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries (“United” or the “Company”), consolidated statements of income and comprehensive income for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, the related consolidated statement of changes in shareholders’ equity for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, the related condensed consolidated statements of cash flows for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, and the notes to consolidated financial statements appear on the following pages.
 
3
Table of Contents
CONSOLIDATED BALANCE SHEETS (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
 
(Dollars in thousands, except par value)
  
September 30

2021
  
December 31

2020
 
   
(Unaudited)
  
(Note 1)
 
Assets
         
Cash and due from banks
  $289,690  $297,369 
Interest-bearing deposits with other banks
   3,742,944   1,910,876 
Federal funds sold
   927   823 
   
 
 
  
 
 
 
Total cash and cash equivalents
   4,033,561   2,209,068 
Securities available for sale at estimated fair value (amortized cost-$3,372,304 at September 30, 2021 and $2,868,346 at December 31, 2020, allowance for credit losses of $0 at September 30, 2021 and December 31, 2020)
   3,409,984   2,953,359 
Securities held to maturity, net of allowance for credit losses of $27 at September 30, 2021 and $23 at December 31, 2020 (estimated fair value-$1,020 at September 30, 2021 and $1,235 at December 31, 2020)
   993   1,212 
Equity securities at estimated fair value
   11,984   10,718 
Other investment securities
   223,104   220,895 
Loans held for sale (
measured using the
fair value
 option
-$493,299 at September 30, 2021 and $698,341 at December 31,
2020)
   493,299   718,937 
Loans and leases
   16,771,332   17,622,583 
Less: Unearned income
   (27,703)   (31,170) 
   
 
 
  
 
 
 
Loans and leases, net of unearned income
   16,743,629   17,591,413 
Less: Allowance for loan and lease losses
   (210,891)   (235,830) 
   
 
 
  
 
 
 
Net loans and leases
   16,532,738   17,355,583 
Bank premises and equipment
   171,935   175,824 
Operating lease
right-of-use
assets
   75,593   69,520 
Goodwill
   1,810,040   1,796,848 
Mortgage servicing rights, net of valuation allowance of $1,383 at September 30, 2021 and at December 31, 2020
   22,836   20,955 
Accrued interest receivable, net of allowance for credit losses of $26 at September 30, 2021 and $250 at December 31, 2020
   58,181   66,832 
Other assets
   663,269   584,496 
   
 
 
  
 
 
 
   
TOTAL ASSETS
  $27,507,517  $26,184,247 
   
 
 
  
 
 
 
   
Liabilities
         
Deposits:
         
Noninterest-bearing
  $8,490,191  $7,405,260 
Interest-bearing
   13,332,418   13,179,900 
   
 
 
  
 
 
 
Total deposits
   21,822,609   20,585,160 
Borrowings:
         
Securities sold under agreements to repurchase
   123,018   142,300 
Federal Home Loan Bank (“FHLB”) borrowings
   532,782   584,532 
Other long-term borrowings
   281,069   279,837 
Reserve for lending-related commitments
   25,191   19,250 
Operating lease liabilities
   80,518   73,213 
Accrued expenses and other liabilities
   211,564   202,335 
   
 
 
  
 
 
 
   
TOTAL LIABILITIES
   23,076,751   21,886,627 
   
Shareholders’ Equity
         
Preferred stock, $1.00 par value;
Authorized-50,000,000
shares, NaNissued
   0   0 
Common stock, $2.50 par value;
Authorized-200,000,000
shares;
issued-134,167,380
and 133,809,374 at September 30, 2021 and December 31, 2020, respectively, including 4,963,606 and 4,620,867 shares in treasury at September 30, 2021 and December 31, 2020, respectively
   335,419   334,523 
Surplus
   2,903,576   2,894,471 
Retained earnings
   1,363,488   1,205,395 
Accumulated other comprehensive
(loss) 
gain
   (1,239)   22,370 
Treasury stock, at cost
   (170,478)   (159,139) 
   
 
 
  
 
 
 
TOTAL SHAREHOLDERS’ EQUITY
   4,430,766   4,297,620 
   
 
 
  
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $27,507,517  $26,184,247 
   
 
 
  
 
 
 
(Dollars in thousands, except par value)
  
March 31

2022
  
December 31
2021
 
Assets
   
Cash and due from banks
  $382,592  $282,878 
Interest-bearing deposits with other banks
   2,419,456   3,474,365 
Federal funds sold
   1,045   927 
   
 
 
  
 
 
 
Total cash and cash equivalents
   2,803,093   3,758,170 
Securities available for sale at estimated fair value (amortized cost-$4,951,963 at March 31, 2022 and $4,031,494 at December 31, 2021, allowance for credit losses of $0 at March 31, 2022 and December 31, 2021)
   4,760,934   4,042,699 
Securities held to maturity, net of allowance for credit losses of $19 at March 31, 2022 and December 31, 2021 (estimated fair value-$1,020 at March 31, 2022 and December 31, 2021)
   1,001   1,001 
Equity securities at estimated fair value
   12,357   12,404 
Other investment securities
   246,420   239,645 
Loans held for sale measured using fair value option
   340,040   504,416 
Loans and leases
   18,419,280   18,051,307 
Less: Unearned income
   (27,194)   (27,659) 
   
 
 
  
 
 
 
Loans and leases, net of unearned income
   18,392,086   18,023,648 
Less: Allowance for loan and lease losses
   (214,594)   (216,016) 
   
 
 
  
 
 
 
Net loans and leases
   18,177,492   17,807,632 
Bank premises and equipment
   200,167   197,220 
Operating lease
right-of-use
assets
   77,097   81,942 
Goodwill
   1,889,244   1,886,494 
Mortgage servicing rights, net of valuation allowance of $0 at March 31, 2022 and $883 at December 31, 2021
   23,089   23,144 
Bank-owned life insurance (“BOLI”)
   479,064   478,067 
Accrued interest receivable, net of allowance for credit losses of $0 at March 31, 2022 and $8 at December 31, 2021
   66,528   64,512 
Other assets
   288,985   231,556 
   
 
 
  
 
 
 
TOTAL ASSETS
  $29,365,511  $29,328,902 
   
 
 
  
 
 
 
Liabilities
         
Deposits:
         
Noninterest-bearing
  $9,006,961  $8,980,547 
Interest-bearing
   14,467,340   14,369,716 
   
 
 
  
 
 
 
Total deposits
   23,474,301   23,350,263 
Borrowings:
         
Securities sold under agreements to repurchase
   136,370   128,844 
Federal Home Loan Bank (“FHLB”) borrowings
   531,615   532,199 
Other long-term borrowings
   285,620   285,195 
Reserve for lending-related commitments
   36,679   31,442 
Operating lease liabilities
   81,678   86,703 
Accrued expenses and other liabilities
   224,108   195,628 
   
 
 
  
 
 
 
TOTAL LIABILITIES
   24,770,371   24,610,274 
   
Shareholders’ Equity
         
Preferred stock, $1.00 par value;
Authorized-50,000,000
shares, 0ne issued
   0   0 
Common stock, $2.50 par value;
Authorized-200,000,000
shares;
issued-141,783,032
and 141,360,266 at March 31, 2022 and December 31, 2021, respectively, including 5,714,593 and 4,967,508 shares in treasury at March 31, 2022 and December 31, 2021, respectively
   354,458   353,402 
Surplus
   3,156,101   3,149,955 
Retained earnings
   1,423,175   1,390,777 
Accumulated other comprehensive loss
   (141,692)   (4,888) 
Treasury stock, at cost
   (196,902)   (170,618) 
   
 
 
  
 
 
 
TOTAL SHAREHOLDERS’ EQUITY
   4,595,140   4,718,628 
   
 
 
  
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $29,365,511  $29,328,902 
   
 
 
  
 
 
 
See notes to consolidated unaudited financial statements.statements
 
4
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
 
(Dollars in thousands, except per share data)
  
Three Months Ended
September 30
   
Nine Months Ended
September 30
 
   
2021
  
2020
   
2021
  
2020
 
Interest income
                  
Interest and fees on loans and leases
  $176,695  $192,266   $548,109  $530,431 
Interest on federal funds sold and other short-term investments
   2,548   2,060    6,198   7,893 
Interest and dividends on securities:
                  
Taxable
   12,999   14,448    40,371   47,658 
Tax-exempt
   1,838   1,495    5,245   3,486 
   
 
 
  
 
 
   
 
 
  
 
 
 
Total interest income
   194,080   210,269    599,923   589,468 
     
Interest expense
                  
Interest on deposits
   9,803   17,726    32,800   64,452 
Interest on short-term borrowings
   167   172    527   826 
Interest on long-term borrowings
   2,531   6,707    7,540   26,406 
   
 
 
  
 
 
   
 
 
  
 
 
 
Total interest expense
   12,501   24,605    40,867   91,684 
   
 
 
  
 
 
   
 
 
  
 
 
 
Net interest income
   181,579   185,664    559,056   497,784 
Provision for credit losses
   (7,829)   16,781    (16,565)   89,811 
   
 
 
  
 
 
   
 
 
  
 
 
 
Net interest income after provision for credit losses
   189,408   168,883    575,621   407,973 
     
Other income
                  
Fees from trust services
   4,269   3,574    12,225   10,318 
Fees from brokerage services
   3,883   3,066    11,860   8,633 
Fees from deposit services
   9,888   9,320    28,180   25,332 
Bankcard fees and merchant discounts
   1,473   1,226    3,905   2,937 
Other service charges, commissions, and fees
   703   715    2,237   1,843 
Income from bank-owned life insurance
   2,556   2,059    5,617   5,738 
Income from mortgage banking activities
   42,012   109,457    144,350   195,301 
Mortgage loan servicing income
   2,429   2,345    7,170   3,879 
Net gain on the sale of bank premises
   0   2,229    0   2,229 
Net investment securities gains
   82   860    2,715   2,566 
Other income
   1,329   617    5,784   1,888 
   
 
 
  
 
 
   
 
 
  
 
 
 
Total other income
   68,624   135,468    224,043   260,664 
     
Other expense
                  
Employee compensation
   67,459   84,455    208,428   197,660 
Employee benefits
   13,132   13,202    43,052   36,767 
Net occupancy expense
   10,339   10,944    31,381   30,324 
Other real estate owned (“OREO”) expense
   387   1,166    4,384   2,679 
Equipment expense
   7,286   5,616    19,160   14,465 
Data processing expense
   6,612   6,708    20,594   28,140 
Mortgage loan servicing expense and impairment
   3,253   3,301    10,029   5,949 
Bankcard processing expense
   422   450    1,300   1,319 
FDIC insurance expense
   1,920   2,700    5,720   7,882 
FHLB prepayment penalties
   0   10,385    0   10,385 
Other expense
   31,466   32,666    86,106   86,530 
   
 
 
  
 
 
   
 
 
  
 
 
 
Total other expense
   142,276   171,593    430,154   422,100 
   
 
 
  
 
 
   
 
 
  
 
 
 
Income before income taxes
   115,756   132,758    369,510   246,537 
Income taxes
   23,604   28,974    75,624   49,884 
   
 
 
  
 
 
   
 
 
  
 
 
 
Net income
  $92,152  $103,784   $293,886  $196,653 
   
 
 
  
 
 
   
 
 
  
 
 
 
(Dollars in thousands, except per share data)
  
Three Months Ended March 31
 
   
2022
  
2021
 
Interest income
   
Interest and fees on loans
  $180,837  $188,673 
Interest on federal funds sold and other short-term investments
   2,329   1,893 
Interest and dividends on securities:
         
Taxable
   17,505   13,526 
Tax-exempt
   2,124   1,565 
   
 
 
  
 
 
 
Total interest income
   202,795   205,657 
Interest expense
         
Interest on deposits
   8,561   11,985 
Interest on short-term borrowings
   181   178 
Interest on long-term borrowings
   2,551   2,534 
   
 
 
  
 
 
 
Total interest expense
   11,293   14,697 
   
 
 
  
 
 
 
Net interest income
   191,502   190,960 
Provision for credit losses
   (3,410)   143 
   
 
 
  
 
 
 
Net interest income after provision for credit losses
   194,912   190,817 
Other income
         
Fees from trust services
   4,127   3,763 
Fees from brokerage services
   4,552   4,323 
Fees from deposit services
   10,148   8,896 
Bankcard fees and merchant discounts
   1,379   1,064 
Other service charges, commissions, and fees
   759   759 
Income from bank-owned life insurance
   2,194   1,403 
Income from mortgage banking activities
   19,203   65,395 
Mortgage loan servicing income
   2,387   2,355 
Net investment securities (losses) gains
   (251)   2,609 
Other income
   1,525   2,006 
   
 
 
  
 
 
 
Total other income
   46,023   92,573 
Other expense
         
Employee compensation
   62,621   72,412 
Employee benefits
   12,851   15,450 
Net occupancy expense
   11,187   10,941 
Other real estate owned (“OREO”) expense
   147   3,625 
Equipment expense
   7,335   6,044 
Data processing expense
   7,371   7,026 
Mortgage loan servicing expense and impairment
   1,643   3,177 
Bankcard processing expense
   424   400 
FDIC insurance expense
   2,673   2,000 
Other expense
   32,921   27,852 
   
 
 
  
 
 
 
Total other expense
   139,173   148,927 
   
 
 
  
 
 
 
Income before income taxes
   101,762   134,463 
Income taxes
   20,098   27,565 
   
 
 
  
 
 
 
Net income
  $81,664  $106,898 
   
 
 
  
 
 
 
 
5
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) –- continued
UNITED BANKSHARES, INC. AND SUBSIDIARIES
 
(Dollars in thousands, except per share data)
  
Three Months Ended

September 30
   
Nine Months Ended

September 30
 
   
2021
   
2020
   
2021
   
2020
 
Earnings per common share:
                    
Basic
  $0.71   $0.80   $2.28   $1.68 
   
 
 
   
 
 
   
 
 
   
 
 
 
Diluted
  $0.71   $0.80   $2.27   $1.68 
   
 
 
   
 
 
   
 
 
   
 
 
 
Average outstanding shares:
                    
Basic
   128,762,815    129,373,154    128,716,450    116,876,402 
Diluted
   128,960,220    129,454,966    128,934,282    116,944,594 
(Dollars in thousands, except per share data)
  
Three Months Ended March 31
 
   
2022
   
2021
 
Earnings per common share:
    
Basic
  $0.60   $0.83 
  
 
 
   
 
 
 
Diluted
  $0.60   $0.83 
  
 
 
   
 
 
 
Average outstanding shares:
    
Basic
   136,058,328    128,635,740 
Diluted
   136,435,229    128,890,861 
See notes to consolidated unaudited financial statements
 
6
Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
 
(Dollars in thousands)
  
Three Months Ended
September 30
   
Nine Months Ended
September 30
 
   
2021
  
2020
   
2021
  
2020
 
Net income
  $92,152  $103,784   $293,886  $196,653 
Change in net unrealized (loss) gain on
available-for-sale
(“AFS”) securities, net of tax
   (13,777)   8,180    (36,305)   53,600 
Change in net unrealized gain (loss) on cash flow hedge, net of tax
   1,377   678    10,320   (594) 
Change in pension plan assets, net of tax
   638   988    2,376   3,213 
   
 
 
  
 
 
   
 
 
  
 
 
 
Comprehensive income, net of tax
  $80,390  $113,630   $270,277  $252,872 
   
 
 
  
 
 
   
 
 
  
 
 
 
(Dollars in thousands)
  
Three Months Ended
March 31
 
   
2022
  
2021
 
Net income
  $81,664  $106,898 
Change in net unrealized loss on available for sale
(“
AFS
”)
securities, net of tax
   (155,113)   (36,365) 
Change in net unrealized gain on cash flow hedge, net of tax
   17,668   14,987 
Change in defined benefit pension plan, net of tax
   641   869 
   
 
 
  
 
 
 
Comprehensive (loss) income, net of tax
  $(55,140)  $86,389 
   
 
 
  
 
 
 
See notes to consolidated unaudited financial statements
 
7
Table of Contents
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
 
(Dollars in thousands, except per share data)
(Dollars in thousands, except per share data)
             
(Dollars in thousands, except per share data)
                   
  
Three Months Ended March 31, 2022
 
  
Common Stock
   
Surplus
   
Retained
Earnings
 
Accumulated
Other

Comprehensive
(Loss) Income
 
Treasury
Stock
 
Total

Shareholders’
Equity
 
  
Shares
   
Par

Value
 
Balance at January 1, 2022
   141,360,266   $353,402   $3,149,955  $1,390,777  $(4,888)  $(170,618)  $4,718,628 
Comprehensive income:
                 
Net income
   0    0    0   81,664   0   0   81,664 
Other comprehensive
loss
, net of tax
   0    0    0   0   (136,804)   0   (136,804) 
                
 
 
Total comprehensive
loss
, net of tax
                 (55,140) 
Stock based compensation expense
   0    0    2,061   0   0   0   2,061 
Stock grant forfeiture (6,212 shares)
   0    0    223   0   0   (223)   0 
Purchase of treasury stock (740,873 shares)
   0    0    0   0   0   (26,061)   (26,061) 
Cash dividends ($0.36 per share)
   0    0    0   (49,266)   0   0   (49,266) 
Net issuance of common stock under stock-based
compensation plans
(422,766 shares)
   422,766    1,056    3,862   0   0   0   4,918 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
 
Balance at March 31, 2022
   141,783,032   $354,458   $3,156,101  $1,423,175  $(141,692)  $(196,902)  $4,595,140 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
 
 
  
Three Months Ended March 31, 2021
 
  
Nine Months Ended September 30, 2021
   
Common Stock
   
Surplus
   
Retained

Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury

Stock
 
Total

Shareholders’

Equity
 
  
Common Stock
   
Surplus
 
Retained
Earnings
 
Accumulated
Other

Comprehensive
Income (Loss)
 
Treasury
Stock
 
Total

Shareholders’
Equity
   
Shares
   
Par

Value
 
  
Shares
   
Par Value
 
Balance at January 1, 2021
   133,809,374   $334,523   $2,894,471  $1,205,395  $22,370  $(159,139)  $4,297,620    133,809,374   $334,523   $2,894,471  $1,205,395  $22,370  $(159,139)  $4,297,620 
Comprehensive income:
                                  
Net income
   0    0    0   106,898   0   0   106,898    0    0    0   106,898   0   0   106,898 
Other comprehensive income, net of tax
   0    0    0   0   (20,509)   0   (20,509)    0    0    0   0   (20,509)   0   (20,509) 
                
 
                 
 
 
Total comprehensive income, net of tax
                 86,389                  86,389 
Stock based compensation expense
   0    0    1,688   0   0   0   1,688    0    0    1,688   0   0   0   1,688 
Purchase of treasury stock (339,229 shares)
   0    0    0   0   0   (11,210)   (11,210)    0    0    0   0   0   (11,210)   (11,210) 
Cash dividends ($0.35 per share)
   0    0    0   (45,254)   0   0   (45,254)    0    0    0   (45,254)   0   0   (45,254) 
Grant of restricted stock (180,901 shares)
   180,901    452    (452)   0   0   0   0 
Common stock options exercised (145,621 shares)
   145,621    365    3,100   0   0   0   3,465 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
 
Net issuance of common stock under stock-based
compensation plans
(326,522 shares)
   326,522    817    2,648   0   0   0   3,465 
   
 
   
 
   
 
  
 
  
 
  
 
  
 
 
Balance at March 31, 2021
   134,135,896    335,340    2,898,807   1,267,039   1,861   (170,349)   4,332,698    134,135,896   $335,340   $2,898,807  $1,267,039  $1,861  $(170,349)  $4,332,698 
Comprehensive income:
                 
Net income
   0    0    0   94,836   0   0   94,836 
Other comprehensive income, net of tax
   0    0    0   0   8,662   0   8,662 
                
 
   
 
   
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive income, net of tax
                 103,498 
Stock based compensation expense
   0    0    1,892   0   0   0   1,892 
Cash dividends ($0.35 per share)
   0    0    0   (45,268)   0   0   (45,268) 
Stock grant forfeiture (1,971 shares)
   0    0    73   0   0   (73)   0 
Grant of restricted stock (1,443 shares)
   1,443    4    (4)   0   0   0   0 
Common stock options exercised (28,324 shares)
   28,324    70    823   0   0   0   893 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
 
 
Balance at June 30, 2021
   134,165,663    335,414    2,901,591   1,316,607   10,523   (170,422)   4,393,713 
Comprehensive income:
                 
Net income
   0    0    0   92,152   0   0   92,152 
Other comprehensive income, net of tax
   0    0    0   0   (11,762)   0   (11,762) 
                
 
 
Total comprehensive income, net of tax
                 80,390 
Stock based compensation expense
   0    0    1,912   0   0   0   1,912 
Cash dividends ($0.35 per share)
   0    0    0   (45,271)   0   0   (45,271) 
Stock grant forfeiture (1,531 shares)
   0    0    56   0   0   (56)   0 
Common stock options exercised (1,717 shares)
   1,717    5    17   0   0   0   22 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
 
 
Balance at September 30, 2021
   134,167,380   $335,419   $2,903,576  $1,363,488  $(1,239)  $(170,478)  $4,430,766 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
 
See notes to consolidated unaudited financial statements.statements
 
8
Table of Contents
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
                 
   
Nine Months Ended September 30, 2020
 
   
Common Stock
   
Surplus
  
Retained

Earnings
  
Accumulated
Other

Comprehensive

Income (Loss)
  
Treasury

Stock
  
Total

Shareholders’

Equity
 
   
Shares
   
Par

Value
 
 
        
Balance at January 1, 2020
   105,494,290   $263,736   $2,140,175  $1,132,579  $(34,869)  $(137,788)  $3,363,833 
Cumulative effect of adopting Accounting Standard Update
2016-13
   0    0    0   (44,331)   0   0   (44,331) 
Comprehensive income:
                               
Net income
   0    0    0   40,183   0   0   40,183 
Other comprehensive income, net of tax
   0    0    0   0   18,698   0   18,698 
                             
 
 
 
Total comprehensive income, net of tax
                             58,881 
Stock based compensation expense
   0    0    1,253   0   0   0   1,253 
Purchase of treasury stock (19,314 shares)
   0    0    0   0   0   (608)   (608) 
Cash dividends ($0.35 per share)
   0    0    0   (35,604)   0   0   (35,604) 
Grant of restricted stock (175,495 shares)
   175,495    439    (439)   0   0   0   0 
Forfeiture of restricted stock (946 shares)
   0    0    35   0   0   (35)   0 
Common stock options exercised (14,694 shares)
   14,694    36    242   0   0   0   278 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
        
Balance at March 31, 2020
   105,684,479    264,211    2,141,266   1,092,827   (16,171)   (138,431)   3,343,702 
Comprehensive income:
                               
Net income
   0    0    0   52,686   0   0   52,686 
Other comprehensive income, net of tax
   0    0    0   0   27,675   0   27,675 
                             
 
 
 
Total comprehensive income, net of tax
                             80,361 
Stock based compensation expense
   0    0    1,369   0   0   0   1,369 
Acquisition of Carolina Financial Corporation (28,031,501 shares)
   28,031,501    70,079    747,751   0   0   0   817,830 
Purchase of treasury stock (6 shares)
   0    0    0   0   0   0   0 
Cash dividends ($0.35 per share)
   0    0    0   (45,416)   0   0   (45,416) 
Common stock options exercised (300 shares)
   300    1    8   0   0   0   9 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
        
Balance at June 30, 2020
   133,716,280    334,291    2,890,394   1,100,097   11,504   (138,431)   4,197,855 
Comprehensive income:
                               
Net income
   0    0    0   103,784   0   0   103,784 
Other comprehensive income, net of tax
   0    0    0   0   9,846   0   9,846 
                             
 
 
 
Total comprehensive income, net of tax
                             113,630 
Stock based compensation expense
   0    0    1,369   0   0   0   1,369 
Distribution of treasury stock for deferred compensation plan (29 shares)
   0    0    0   0   0   1   1 
Purchase of treasury stock (6 shares)
   0    0    0   0   0   0   0 
Cash dividends ($0.35 per share)
   0    0    0   (45,414)   0   0   (45,414) 
Grant of restricted stock (6,930 shares)
   6,930    17    (17)   0   0   0   0 
Common stock options exercised (0 shares)
   0    0    0   0   0   0   0 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at September 30, 2020
   133,723,210   $334,308   $2,891,746  $1,158,467  $21,350  $(138,430)  $4,267,441 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
9
Table of Contents
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
 
(Dollars in thousands)
            
  
Nine Months Ended

September 30
   
Three Months Ended
March 31
 
  
2021
 
2020
   
2022
 
2021
 
 
NET CASH PROVIDED BY
(USED IN)
OPERATING ACTIVITIES
  $553,195  $(45,337) 
NET CASH PROVIDED BY OPERATING ACTIVITIES
  $283,607  $80,584 
  
INVESTING ACTIVITIES
          
Proceeds from maturities and calls of securities held to maturity
   215   210    0   215 
Proceeds from sales of securities available for sale
   49,145   192,010    150   39,182 
Proceeds from maturities and calls of securities available for sale
   519,368   370,889    151,477   230,347 
Purchases of securities available for sale
   (1,081,798)   (278,082)    (1,077,461)   (536,570) 
Proceeds from sales of equity securities
   1,250   1,043    149   852 
Purchases of equity securities
   (1,808)   (896)    (353)   (478) 
Proceeds from sales and redemptions of other investment securities
   7,961   145,394    1,295   7,178 
Purchases of other investment securities
   (18,992)   (127,950)    (11,591)   (8,208) 
Purchases of bank-owned life insurance policies
   (85,000)   0 
Redemption of bank-owned life insurance policies
   0   1,186    778   0 
Purchases of bank premises and equipment
   (11,363)   (14,348)    (3,509)   (2,734) 
Proceeds from sales of bank premises and equipment
   1,604   4,391    557   2 
Proceeds from the sales of OREO properties
   4,501   9,438    1,325   1,262 
Acquisition of Carolina Financial Corporation, net of cash paid
   0   629,107 
Net change in loans
   864,282   (957,029) 
Net change in loans and leases
   (366,414)   229,967 
  
 
  
 
   
 
  
 
 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
   249,365   (24,637) 
  
 
  
 
 
NET CASH USED IN INVESTING ACTIVITIES
   (1,303,597)   (38,985) 
   
 
  
 
 
FINANCING ACTIVITIES
          
Cash dividends paid
   (135,988)   (117,290)    (46,655)   (45,447) 
Acquisition of treasury stock
   (11,210)   (608)    (26,061)   (11,210) 
Proceeds from exercise of stock options
   4,361   288    5,027   3,465 
Repayment of long-term Federal Home Loan Bank borrowings
   (550,000)   (1,787,000)    (0)   (550,000) 
Proceeds from issuance of long-term Federal Home Loan Bank borrowings
   500,000   500,000    0   500,000 
Distribution of treasury stock for deferred compensation plan
   0   1 
Changes in:
          
Deposits
   1,234,052   2,519,920    125,076   812,763 
Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings
   (19,282)  (226,297)    7,526  2,900 
  
 
  
 
   
 
  
 
 
NET CASH PROVIDED BY FINANCING ACTIVITIES
   1,021,933   889,014    64,913   712,471 
  
 
  
 
   
 
  
 
 
 
Increase in cash and cash equivalents
   1,824,493   819,040 
(Decrease)
Increase in cash and cash equivalents
   (955,077)   754,070 
  
Cash and cash equivalents at beginning of year
   2,209,068   837,493    3,758,170   2,209,068 
  
 
  
 
   
 
  
 
 
 
Cash and cash equivalents at end of period
  $4,033,561  $1,656,533   $2,803,093  $2,963,138 
  
 
  
 
 
   
 
  
 
 
Supplemental information
          
Noncash investing activities:
          
Transfers of loans to OREO
  $2,531  $22,262   $186  $810 
Acquisition of Carolina Financial:
     
Transfers of loans to bank premises and equipment
  
4,541

   
0

 
Acquisitions:
     
Assets acquired, net of cash
   (7,190)   4,174,573    (128)   0 
Liabilities assumed
   6,002   4,302,722    2,622   0 
Goodwill
   13,192   316,872    2,750   0 
See notes to consolidated unaudited financial statements
.
 
109

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated interim financial statements of United Bankshares, Inc. and Subsidiaries (“United” or “the Company”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States (“GAAP”) and with the instructions for Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, the financial statements do not contain all of the information and footnotes required by accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements presented as of September 30,March 31, 2022 and 2021 and 2020 and for the three-month and nine-month periods then ended have not been audited. The consolidated balance sheet as of December 31, 2020 has been extracted from the audited financial statements included in United’s 2020 Annual Report to Shareholders. The Notes to Consolidated Financial Statements appearing in United’s 20202021 Annual Report on Form
10-K,
which includes descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. In the opinion of management, any adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature.
The accompanying consolidated interim financial statements include the accounts of United and its wholly owned subsidiaries. United operates in two business segments: community banking and mortgage banking. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Information is presented in these notes to the unaudited consolidated interim financial statements with dollars expressed in thousands, except per share or unless otherwise noted.
New Accounting Standards
In July 2021,March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2022-02,
“Troubled Debt Restructurings and Vintage Disclosures”. ASU
2022-02
updates the requirements for accounting for credit losses under ASC 326, eliminates the accounting guidance on troubled debt restructurings for creditors in ASC
310-40,
and enhances creditors’ disclosure requirements related to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU
2022-02
also amends the guidance on “vintage disclosures” to require disclosure of gross write-offs by year of origination. ASU
No. 2022-02
is effective for public business entities that have adopted Topic 326 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendment is permitted. The Company is assessing the impact ASU
No. 2022-02
will have on the Company’s disclosures, financial condition or results of operations.
In March 2022, the FASB issued ASU
No. 2022-01,
“Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method”. ASU
2022-01
further aligns risk management objectives with hedge accounting results on the application of the
last-of-layer
method, which was first introduced in ASU
No. 2017-12.
The enhanced guidance further improves the
last-of-layer
concepts to expand to nonprepayable financial assets and allows more flexibility in the derivative structures used to hedge the interest rate risk. ASU
2022-01
also provides guidance on the relationship between the portfolio layer method requirements and other areas of GAAP. ASU
No. 2022-01
is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendment is permitted if an entity has adopted ASU
2017-12
for the corresponding period. ASU
No. 2022-01
is not expected to have a material impact on the Company’s financial condition or results of operations.
In October 2021, the FASB issued ASU
No. 2021-08,
“Business Combinations (Topic 805): Accounting for contract assets and contract liabilities from contracts with customers”. ASU
2021-08
amends ASC 805 to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an entity acquirer recognize and measure contract assets and contract liabilities acquired in a business
10
Table of Contents
combination in accordance with Topic 606. As a result of these amendments, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its preacquisition financial statements. ASU
No. 2021-08
is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted. ASU
No. 2021-08
is not expected to have a material impact on the Company’s financial condition or results of operations.
In July 2021, the FASB issued ASU
No. 2021-05,
“Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments (Topic 848)”. This new guidance requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if the lease would have been classified as a sales-type lease or direct financing lease in accordance with the classification criteria in ASC
842-10-25-2
and
25-3,
respectively and if the lessor would have recognized a selling loss at lease commencement. When applying the guidance in ASC
842-10-24-3A,
the lessor would not derecognize the underlying asset over its useful life. ASU
No. 2021-05
is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities may elect to adopt the amendments through either a retrospective application to leases that commenced or were modified after the beginning of the period in which ASC 842 was adopted or a prospective application to leases that commence or are modified subsequent to the date the amendments in ASU
2021
-052021-05
are first applied. ASU
No. 2021-05
iswas adopted by United on January 1, 2022 on a prospective basis. The adoption did not expected to have a material impact on the Company’s financial condition or results of operations.
In January 2021, the FASB issued ASU
No. 2021-01,
“Reference Rate Reform (Topic 848).” This update to ASU
No. 2020-04,
“Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” refines the scope of ASC Topic 848 and permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by change in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. ASU
No. 2021-01
is effective for public business entities upon issuance through December 31, 2022. United is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU
No. 2021-01
In addition, United has taken steps to ensure that no new contracts using LIBOR will be originated after December 31, 2021. At this time, United intends to prioritize the Secured Overnight Financing Rate (“SOFR”) and its impactPrime as the preferred alternatives to LIBOR; however, these preferred alternatives could change over time based on the Company’s transition away from LIBOR for its loan and other financial instruments.
market developments.
11
Table of Contents
In August 2020, the FASB issued ASU
No. 2020-06,
“Debt – Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic
815-40).”
The amendments in the ASU remove certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. The ASU also amends the derivative scope exception guidance for contracts in an entity’s own equity. The amendments remove three settlement conditions that are required for equity contracts to qualify for the derivative scope exception. In addition, the ASU expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted
earnings-per-share
calculations that are impacted by the amendments. ASU
No. 2020-06
is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities may elect to adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition. ASU
No. 2020-06
iswas adopted by United on January 1, 2022. The adoption did not expected to have a material impact on the Company’s financial condition or results of operations.
In March 2020, the FASB issued ASU
No. 2020-04,
“Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” TheThis ASU provides “optional expedients and exceptions for applying generally accepted accounting principles under ASC Topic 848 to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.” ASU
No. 2020-04
is effective for public business entities on March 12, 2020 through December 31, 2022. United is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessingSee information above under ASU
No. 2020-042021-01
and its impactfor an update on the Company’ssteps United has taken to transition away from LIBOR for its loan and other financial instruments.
In January 2020, the FASB issued ASU
No. 2020-01,
“Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The new guidance addresses accounting for the transition into and out
1
1
Table of the equity method and measuring certain purchased options and forward contracts to acquire investments. ASU
No. 2020-01Contents
is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU
No. 2020-01
was adopted by United on January 1, 2021. The adoption did not have a material impact on the Company’s financial condition or results of operations.
In August 2018, the FASB issued ASU
No. 2018-14
“Compensation – Retirement Benefits - Defined Benefits – General (Topic
715-20):
Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” This update amends ASC Topic 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other post retirement plans. The ASU’s changes related to disclosures are part of the FASB’s disclosure framework project, which the FASB launched in 2014 to improve effectiveness of disclosures in notes to financial statements. ASU
No. 2018-14
is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU
No. 2018-14
was adopted by United on January 1, 2021. The adoption did not have a material impact on the Company’s financial condition or results of operations.
2. MERGERS AND ACQUISITIONS
Community Bankers Trust Corporation
On June 2,December 3, 2021
 (the “Acquisition Date”),
United entered into an Agreement and Plancompleted its acquisition of Reorganization (the “Community Bankers Trust Agreement”) with Community Bankers Trust Corporation (“Community Bankers Trust”), a Virginia corporation headquartered in Richmond, Virginia. In accordance with the. Community Bankers Trust Agreement, Community Bankers Trust will mergewas merged with and into United (the “Community Bankers Trust Merger”“Merger”)., pursuant to the terms of the Agreement and Plan of Reorganization, dated June 2, 2021, by and between United and Community Bankers Trust will cease to exist and United shall survive and continue to exist as a West Virginia corporation. United may at any time prior to(the “Agreement”).
Under the effective timeterms of the Community Bankers Trust Merger change the method of effecting the combination with Community Bankers Trust subject to certain conditions contained in the Community Bankers Trust Agreement.
12
Table of Contents
The Community Bankers Trust Agreement, provides that upon consummation of the Community Bankers Trust Merger, each outstanding share of common stock of Community Bankers Trust will bewas converted into the right to receive
0.3173
shares of United common stock, par value $
2.50
$2.50 per share. PursuantAlso, pursuant to the Community Bankers Trust Agreement, at the effective time of the Community Bankers Trust Merger, each outstanding Community Bankers Trust stock option granted under a Community Bankers Trust stock plan, whether vested or unvested as of the date of the Community Bankers Trust Agreement, will vest onlyMerger, vested as provided pursuant to the terms of such Community Bankers Trust stock plan and convertconverted into an option to acquire United common stock adjusted based on the
0.3173
exchange ratio. Also, at the effective time of the Community Bankers Trust Merger, each restricted stock unit granted under a Community Bankers Trust stock plan that iswas outstanding immediately prior to the effective time of the Community Bankers Trust Merger will vest onlyvested in accordance with the formula and other terms of the Community Bankers Trust stock plan and convertconverted into the right to receive shares of United common stock based on the
0.3173
exchange ratio.
AtImmediately following the effective time of the Community Bankers Trust Merger, Essex Bank, a wholly-owned subsidiary of Community Bankers Trust, will mergemerged with and into United Bank, a wholly-owned subsidiary of United (the “Essex Bank“Bank Merger”). pursuant to an Agreement and Plan of Merger, dated June 2, 2021. United Bank will survivesurvived the Essex Bank Merger and continuecontinues to exist as a Virginia banking corporation.
The
Merger was accounted for under the acquisition method of accounting. The results of operations of Community Bankers Trust are included in the consolidated results of operations from the Acquisition Date. The acquisition of Community Bankers Trust will enhanceenhanced United’s existing presence in the DC Metro MSA and will taketook United into new markets including Baltimore, Annapolis, Lynchburg, Richmond, and the Northern Neck of Virginia. It also strategically connectsconnected our
Mid-Atlantic
and Southeast footprints. As of September 30, 2021,the Acquisition Date, Community Bankers Trust had $1,771,300$1,788,230 in total assets, $1,246,660 in gross loans and
 $1,498,802 in deposits. For the third quarter and first nine months of 2021, United recorded acquisition-related costs for the announced Community Bankers Trust merger of $845 and $1,027.
All requisite regulatory approvals for the merger have been received from the Board of Governors of the Federal Reserve System and from the Virginia State Corporation Commission. United has filed an amended Form
S-4
with the Securities and Exchange Commission regarding the proposed merger with Community Bankers Trust. The merger is expected to close in the fourth quarter of 2021, subject to satisfaction of customary closing conditions including approval by the shareholders of Community Bankers Trust.
Carolina Financial Corporation
On May 1, 2020 (“Acquisition Date”), United acquired 100% of the outstanding shares of Carolina Financial Corporation (“Carolina Financial”), a Delaware corporation headquartered in Charleston, South Carolina. Carolina Financial was merged with and into United (the “Carolina Financial Merger”), pursuant to the terms of the Agreement and Plan of Merger, dated November 17, 2019, by and between United and Carolina Financial (the “Carolina Financial Agreement”). Upon completion of the Carolina Financial Merger, Carolina Financial ceased to exist and United survived and continues to exist as a West Virginia corporation.
Under the terms of the Carolina Financial Agreement, each outstanding share of common stock of Carolina Financial was converted into the right to receive 1.13 shares of United common stock, par value $2.50 per share. Also pursuant to the Carolina Financial Agreement, as of the effective time of the Carolina Financial Merger, each outstanding Carolina Financial stock option, whether vested or unvested as of the date of the Carolina Financial Merger, at such option holder’s election, (i) vested and converted into an option to acquire United common stock adjusted based on the 1.13 exchange ratio, or (ii) was entitled to receive cash consideration equal to the difference between (a) the option’s exercise price and (b) $28.99, representing the volume weighted average trading price of the Carolina Financial common stock on NASDAQ for the twenty full trading days ending on the second trading day immediately preceding the closing date (the “CFC Closing Price”) multiplied by the number of shares of Carolina Financial common stock subject to such stock option. Also, at the effective time of the Carolina Financial Merger, each restricted stock grant, restricted stock unit grant or any other award of a share of Carolina Financial common stock subject to vesting, repurchase or other lapse restriction under a Carolina Financial stock plan (other than a stock option) (each, a “Stock Award”) that was outstanding immediately prior to the effective time of the Carolina Financial Merger, vested in accordance with the terms of the Carolina Financial stock plan and at the election of the holder (i) converted into the right to receive shares of United common stock based on the 1.13 exchange ratio or (ii) converted into cash in an amount equal to the CFC Closing Price multiplied by the shares of Carolina Financial common stock subject to the Stock Award.
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Table of Contents
Immediately following the Carolina Financial Merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank, a wholly-owned subsidiary of United (the “CresCom Bank Merger”). United Bank survived the CresCom Bank Merger and continues to exist as a Virginia banking corporation. CresCom Bank owned and operated Crescent Mortgage Company (“Crescent”), which is based in Atlanta, Georgia. As a result of the CresCom Bank Merger, Crescent is now a wholly-owned subsidiary of United Bank. For the third quarter and first nine months of 2021, United did not record any acquisition-related costs associated with the Carolina Financial Merger as compared to acquisition-related costs of $5,673 and $53,682 for the third quarter and first nine months of 2020.
The Carolina Financial Merger was accounted for under the acquisition method of accounting. The results of operations of Carolina Financial are included in the consolidated results of operations from the Acquisition Date. The acquisition of Carolina Financial affords United the opportunity to expand its existing footprint in North Carolina and South Carolina. As of the Acquisition Date, Carolina Financial had $5,004,990 in total assets, $3,292,635$1,282,997 in loans and leases, net of unearned income and $3,873,183$1,517,502 in deposits.
The aggregate purchase price was $817,877,$260,304, including common stock valued at $815,997,$252,321, stock options assumed valued at $1,833,$7,958, and cash paid for fractional shares of $47.$25. The number of shares issued in the transaction was 28,031,501,7,135,771, which were valued based on the closing market price of $29.11$35.36 for United’s common shares on May 1, 2020.December 3, 2021. The preliminary purchase price has been allocated to the identifiable tangible and intangible assets resulting in preliminary additions to goodwill and core deposit intangibles of $79,204 and the Crescent trade name intangible of $332,026, $3,408, and $196,$3,398, respectively. The goodwill recognized results from the expected synergies and potential earnings from the combination of United and Carolina Financial.Community Bankers Trust. The core deposit intangible is beingexpected to be amortized on an accelerated basis over ten years. The Crescent trade name provides a source of market recognition to attract potential clients and retain existing relationships. United believes the Crescent trade name provides a competitive advantage and is likely going to be used into perpetuity and thus will not be subject to amortization, but rather be evaluated for impairment.
Because the consideration paid was greater than the net fair value of the acquired assets and liabilities, the Company recorded goodwill as part of the acquisition. None of the goodwill from the Carolina FinancialCommunity Bankers Trust acquisition is expected to be deductible for tax purposes. United used an independent third party to help determine the fair values of the assets and liabilities acquired from Carolina Financial.Community Bankers Trust. As a result of the merger, United recorded preliminary fair value discounts of $47,425$7,744 on the loans and leases acquired, $620$230 on land acquired, $50 on OREO properties acquired and $415 on a trust preferred issuance, and premiums of $6,766 on investment securities $272 on OREO, $4,831 on trust preferred issuances and $135 on subordinated notes, respectively, and premiums of $5,908acquired, $492 on buildings acquired, $4,357 on land acquired, $12,818$2,741 on interest-bearing deposits, and $468$457 on long-term FHLB advances, respectively. United also recorded an allowance for credit losses, including a reserve for unfunded commitments, of $50,562$25,920 on the loans and commitments acquired split between $19,797$12,788 for purchased credit deteriorated (“PCD”) loans which is part of the acquisition date fair value, and $30,765$13,132 for
non-PCD
loans.loans recorded to the provision for credit losses. The discounts and premium amounts, except for discount on the land, OREO and OREOFHLB advances acquired, are being accreted or amortized on an accelerated or straight-line basis, based on the type of asset or liability, over each asset’s or liability’s estimated remaining life at the time of acquisition. The FHLB advances acquired were subsequently repaid prior to
year-end.
At September 30, 2021,March 31, 2022, the discountsdiscount on subordinated debt andthe trust preferred issuancesissuance had an average estimated remaining life of 6.2512.00 years and 15.50 years, respectively, and the premiums on the buildings, and interest-bearing deposits each had an average estimated remaining life of 30.2531.00 years, and 3.855.00 years, respectively. The estimated fair values
1
2
Table of the acquired assets and assumed liabilities, including identifiable intangible assets and goodwill were considered final as of
JuneContents
 30, 2021.
Portfolio loans and leases acquired from Carolina FinancialCommunity Bankers Trust were recorded at their fair value at the Acquisition Date based on a discounted cash flow methodology. The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from the perspective of a market participant. Also, acquired portfolio loans and leases were evaluated upon acquisition and classified as either PCD, which indicates that the loan has experienced a more-than-insignificant deterioration in credit quality since origination, or
non-PCD.
United considered a variety of factors in evaluating the acquired loans and leases for a more-than-insignificant deterioration in credit quality, including but not limited to risk grades, delinquency, nonperforming status, current or previous troubled debt restructurings or bankruptcies, watch list credits and other qualitative factors that indicated a deterioration in credit quality since origination. For PCD loans and leases, an initial allowance is determined based on the same methodology as other portfolio loans and leases. This initial allowance for credit losses is allocated to individual PCD loans and leases and added to the acquisition date fair values to establish the initial amortized cost basis for the PCD loans
14
Table of Contents
and leases. The difference between the unpaid principal balance (“UPB”), or par value, of PCD loans and leases and the amortized cost basis is considered to relate to noncredit factors and resulted in a discount of $7,212$3,559 at
the 
Acquisition Date. This discount is beingwill be recognized through interest income on a level-yield method over the life of the loans which is estimated to be a weighted-average of 4.65.5 years. For
non-PCD
acquired loans and leases, the differences between the initial fair value and the UPB, or par value, are recognized as interest income on a level-yield basis over the lives of the related loans and leases which is estimated to be a weighted-average of 7.35.6 years. The total fair value mark on the
non-PCD
loans and leases at the Acquisition Date was $40,213.$4,186. At the Acquisition Date, an initial allowance for expected credit losses of $28,948$12,288 was recorded with a corresponding charge to the provision for credit losses in the Consolidated Statements of Income. Subsequent changes in the allowance for credit losses related to PCD and
non-PCD
loans and leases are recognized in the provision for credit losses.
The following table provides a reconciliation of the difference between the purchase price and the par value of portfolio PCD loans and leases acquired from Carolina FinancialCommunity Bankers Trust as of the Acquisition Date:
 
Purchase price of PCD loans and leases at acquisition
  $1,023,531   $360,638 
Allowance for credit losses at acquisition
   18,635    12,629 
Non-credit
discount at acquisition
   7,212    3,559 
  
 
   
 
 
Par value (UPB) of acquired PCD loans and leases at acquisition
  $1,049,378   $376,826 
  
 
   
 
 
The consideration paid for Carolina Financial’sCommunity Bankers Trust’s common equity and the preliminary amounts of acquired identifiable assets and liabilities assumed as of the Acquisition Date were as follows:
 
Purchase price:
     
Value of common shares issued (28,031,501 shares)
  $815,997 
Fair value of stock options assumed
   1,833 
Cash for fractional shares
   47 
   
 
 
 
Total purchase price
   817,877 
   
 
 
 
  
Identifiable assets:
     
Cash and cash equivalents
   629,154 
Investment securities
   580,791 
Loans held for sale
   65,757 
Net loans and leases
   3,246,940 
Premises and equipment
   79,127 
Operating lease
right-of-use
asset
   9,861 
Crescent trade name intangible
   196 
Core deposit intangible
   3,408 
Mortgage servicing rights
   20,123 
Other assets
   159,218 
   
 
 
 
Total identifiable assets
  $4,794,575 
   
 
 
 
  
Identifiable liabilities:
     
Deposits
  $3,884,977 
Short-term borrowings
   332,000 
Long-term borrowings
   42,738 
Operating lease liability
   9,861 
Other liabilities
   39,148 
   
 
 
 
Total identifiable liabilities
   4,308,724 
   
 
 
 
Fair value of net assets acquired including identifiable intangible assets
   485,851 
   
 
 
 
Resulting goodwill
  $332,026 
   
 
 
 
Purchase price:
  
Value of common shares issued (7,135,771 shares)
  $252,321 
Fair value of stock options assumed
   7,958 
Cash for fractional shares
   25 
   
 
 
 
Total purchase price
   260,304 
   
 
 
 
Identifiable assets:
     
Cash and cash equivalents
   39,445 
Investment securities
   395,249 
Net loans and leases
   1,280,016 
Premises and equipment
   25,857 
Operating lease
right-of-use
asset
   8,127 
Core deposit intangible
   3,398 
Other assets
   51,069 
   
 
 
 
Total identifiable assets
  $1,803,161 
   
 
 
 
Identifiable liabilities:
     
Deposits
  $1,520,243 
Short-term borrowings
   26,755 
Long-term borrowings
   51,500 
Operating lease liability
   8,127 
Other liabilities
   15,436 
   
 
 
 
Total identifiable liabilities
   1,622,061 
   
 
 
 
Preliminary fair value of net assets acquired including identifiable intangible assets
   181,100 
   
 
 
 
Preliminary resulting goodwill
  $79,204 
   
 
 
 
1
3
Table of Contents
The operating results of United include operating results of acquired assets and assumed liabilities subsequent to the Acquisition Date. The operations of United’s North Carolina and South Carolina geographic area,central region of Virginia, which includes most of the acquired operations of Carolina Financial and Crescent MortgageCommunity Bankers Trust provided $152,276$9,805 in total revenues (net interest income plus other income), and $77,456$6,096 in net income for the first ninethree months of 2021.ended March 31, 2022. These amounts are included in United’s consolidated financial statements as of and for the ninefirst three months
ended September 30, 2021. Carolina Financial’s
March 31, 2022. Community Bankers Trust’s results of operations prior to the Acquisition Date are not included in United’s consolidated results of operations.
The following table presents certain unaudited pro forma information for the results of operations for the first three months of 2021, as if the Merger had occurred on January 1, 2021. These results combine the historical results of Community Bankers Trust into United’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of Community Bankers Trust’s provision for credit losses for the first three months of 2021 that may not have been necessary had the acquired loans and leases been recorded at fair value as of the beginning of 2021. Additionally, United expects to achieve operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts.
   
Proforma

Three Months Ended

March 31, 2021
 
Total Revenues
(1)
  $301,478 
Net Income
   115,211 
 
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Table of Contents
(1)
Represents net interest income plus other income
3. INVESTMENT SECURITIES
Securities Available for Sale
Securities held for indefinite periods of time are classified as available for sale and carried at estimated fair value. The amortized cost, estimated fair values, and allowance for credit losses of securities available for sale are summarized as follows.
 
   
September 30, 2021
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Allowance
For Credit
Losses
   
Estimated
Fair
Value
 
U.S. Treasury securities and obligations of U.S.

Government corporations and agencies
  $12,919   $129   $3   $0   $13,045 
State and political subdivisions
   604,224    18,899    2,436    0    620,687 
Residential mortgage-backed securities
                         
Agency
   1,028,691    14,161    8,838    0    1,034,014 
Non-agency
   38,383    9    323    0    38,069 
Commercial mortgage-backed securities
                         
Agency
   617,651    18,101    4,704    0    631,048 
Asset-backed securities
   535,422    814    1,225    0    535,011 
Single issue trust preferred securities
   17,281    188    987    0    16,482 
Other corporate securities
   517,733    5,216    1,321    0    521,628 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $3,372,304   $57,517   $19,837   $0   $3,409,984 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
   
December 31, 2020
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Allowance
For Credit
Losses
   
Estimated
Fair
Value
 
U.S. Treasury securities and obligations of U.S. Government corporations
 and
agencies
  $65,804   $543   $3   $0   $66,344 
State and political subdivisions
   538,082    27,330    252    0    565,160 
Residential mortgage-backed securities
                         
Agency
   905,230    24,134    473    0    928,891 
Non-agency
   21,639    137    0    0    21,776 
Commercial mortgage-backed securities
                         
Agency
   644,774    31,009    638    0    675,145 
Asset-backed securities
   297,834    204    3,415    0    294,623 
Single issue trust preferred securities
   18,230    167    1,370    0    17,027 
Other corporate securities
   376,753    7,648    8    0    384,393 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $2,868,346   $91,172   $6,159   $0   $2,953,359 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
March 31, 2022
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Allowance
For Credit
Losses
   
Estimated
Fair Value
 
U.S.
 
Treasury
 
securities
 
and
 
obligations
 
of
 
U.S.
 
Government
 
corporations
 
and
agencies
  $377,085   $0   $5,693   $0   $371,392 
State and political subdivisions
   838,384    1,199    44,071    0    795,512 
Residential mortgage-backed securities
                         
Agency
   1,472,822    1,002    84,289    0    1,389,535 
Non-agency
   103,779    103    3,785    0    100,097 
Commercial mortgage-backed securities
                         
Agency
   653,526    1,121    27,479    0    627,168 
Asset-backed securities
   856,840    19    12,860    0    843,999 
Single issue trust preferred securities
   17,304    141    776    0    16,669 
Other corporate securities
   632,223    967    16,628    0    616,562 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $4,951,963   $4,552   $195,581   $0   $4,760,934 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the adoption
1
4
Table of ASC Topic 326, “Financial Instruments—Credit Losses,” Contents
   
December 31, 2021
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Allowance
For Credit
Losses
   
Estimated
Fair
Value
 
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
  $82,136   $51   $337   $0   $81,850 
State and political subdivisions
   831,499    19,608    3,809    0    847,298 
Residential mortgage-backed securities
                         
Agency
   1,120,423    9,173    15,822    0    1,113,774 
Non-agency
   74,965    306    726    0    74,545 
Commercial mortgage-backed securities
                         
Agency
   633,802    12,731    6,608    0    639,925 
Asset-backed securities
   659,830    49    3,307    0    656,572 
Single issue trust preferred securities
   17,291    146    626    0    16,811 
Other corporate securities
   611,548    3,558    3,182    0    611,924 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $4,031,494   $45,622   $34,417   $0   $4,042,699 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
United made a policy election to exclude excludes
accrued interest from the amortized cost basis of
available-for-sale
debt securities and report accrued interest separately in “Accrued interest receivable” in the consolidated balance sheets.
Available-for-sale
debt securities are placed on
non-accrual
status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on
non-accrual
status. Accordingly, United does not currently recognize an allowance for credit loss against accrued interest receivable on
available-for-sale
debt securities. The table above excludes accrued interest receivable of $12,896$17,425 and $10,663$15,353 at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, that is recorded in “Accrued interest receivable.”
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Table of Contents
The following is a summary of securities available for sale which were in an unrealized loss position at September 30, 2021March 31, 2022 and December 31, 2020.2021.
   
Less than 12 months
   
12 months or longer
   
Total
 
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
March 31, 2022
                              
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
  $371,210   $5,690   $182   $3   $371,392   $5,693 
State and political subdivisions
   654,992    38,224    41,938    5,847    696,930    44,071 
Residential mortgage-backed securities
                              
Agency
   1,102,349    62,008    192,698    22,281    1,295,047    84,289 
Non-agency
   75,230    3,785    0    0    75,230    3,785 
Commercial mortgage-backed securities
                              
Agency
   327,316    14,407    97,085    13,072    424,401    27,479 
Asset-backed securities
   757,203    11,156    78,736    1,704    835,939    12,860 
Single issue trust preferred securities
   0    0    13,452    776    13,452    776 
Other corporate securities
   392,778    15,693    22,754    935    415,532    16,628 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $3,681,078   $150,963   $446,845   $44,618   $4,127,923   $195,581 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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5
Table of Contents
  
Less than 12 months
   
12 months or longer
   
Total
   
Less than 12 months
   
12 months or longer
   
Total
 
  
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
September 30, 2021
            
December 31, 2021
                  
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
  $0   $0   $231   $3   $231   $3   $75,106   $334   $213   $3   $75,319   $337 
State and political subdivisions
   97,193    1,725    21,887    711    119,080    2,436    223,754    2,872    24,067    937    247,821    3,809 
Residential mortgage-backed securities
                                    
Agency
   545,634    8,838    0    0    545,634    8,838    680,320    13,167    71,392    2,655    751,712    15,822 
Non-agency
   36,990    323    0    0    36,990    323    55,336    726    0    0    55,336    726 
Commercial mortgage-backed securities
                                    
Agency
   113,565    2,874    37,735    1,830    151,300    4,704    136,071    2,912    70,543    3,696    206,614    6,608 
Asset-backed securities
   376,883    812    83,813    413    460,696    1,225    532,373    2,620    82,222    687    614,595    3,307 
Single issue trust preferred securities
   0    0    13,227    987    13,227    987    0    0    13,594    626    13,594    626 
Other corporate securities
   134,486    1,321    0    0    134,486    1,321    307,912    3,182    0    0    307,912    3,182 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total
  $1,304,751   $15,893   $156,893   $3,944   $1,461,644   $19,837   $2,010,872   $25,813   $262,031   $8,604   $2,272,903   $34,417 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
   
Less than 12 months
   
12 months or longer
   
Total
 
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
 
December 31, 2020
            
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
  $297   $3   $0   $0   $297   $3 
State and political subdivisions
   30,480    252    0    0    30,480    252 
Residential mortgage-backed securities
                              
Agency
   131,114    467    3,867    6    134,981    473 
Non-agency
   0    0    0    0    0    0 
Commercial mortgage-backed securities
                              
Agency
   83,395    638    0    0    83,395    638 
Asset-backed securities
   0    0    266,104    3,415    266,104    3,415 
Trust preferred collateralized debt obligations
   0    0    0    0    0    0 
Single issue trust preferred securities
   0    0    13,804    1,370    13,804    1,370 
Other corporate securities
   8,494    8    0    0    8,494    8 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $253,780   $1,368   $283,775   $ 4,791   $537,555   $6,159 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table shows the proceeds from maturities, sales and calls of available for sale securities and the gross realized gains and losses on sales and calls of those securities that have been included in earnings as a result of any sales and calls. Gains or losses on sales and calls of available for sale securities were recognized by the specific identification method.
 
17
Table of Contents
  
Three Months Ended

September 30
   
Nine Months Ended

September 30
   
Three Months Ended

March 31
 
  
2021
   
2020
   
2021
   
2020
   
2022
 
2021
 
Proceeds from sales and calls
  $167,520   $149,193   $568,513   $562,899   $151,627  $269,529 
Gross realized gains
   125    2,800    1,667    4,618    0   1,542 
Gross realized losses
   (17)    (1,939)    (115)    (2,116)    0   98 
At September 30, 2021,March 31, 2022, gross unrealized losses on available for sale securities were $19,837$195,581 on 1811,174 securities of a total portfolio of 9941,546 available for sale securities. Securities with the most significant gross unrealized losses at September 30, 2021March 31, 2022 consisted primarily of agency residential mortgage-backed securities and agency commercial mortgage-backed securities.
In determining whether or not a security is impaired, management considered the severity of the loss in conjunction with United’s positive intent and the more likely than not ability to hold these securities to recovery of their cost basis or maturity. Generally, the significant amount of gross unrealized losses on available for sale securities at March 31, 2022 was the result of rising interest rates.
State and political subdivisions
United’s state and political subdivisions portfolio relates to securities issued by various municipalities located throughout the United States. The total amortized cost of available for sale state and political subdivision securities was $604,224$838,384 at September 30, 2021.March 31, 2022. As of September 30, 2021,March 31, 2022, approximately 59%53% of the portfolio was supported by the general obligation of the issuing municipality, which allows for the securities to be repaid by any means available to the municipality. The majority of the portfolio was rated AA or higher, and no securities within the portfolio were rated below investment grade as of September 30, 2021.March 31, 2022. In addition to monitoring the credit ratings of these securities, management also evaluates the financial performance of the underlying issuers on an ongoing basis. Based upon management’s analysis and judgment, it was determined that none of the state and political subdivision securities had credit losses at September 30, 2021.March 31, 2022.
Agency mortgage-backed securities
United’s agency mortgage-backed securities portfolio relates to securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae. The total amortized cost of available for sale agency mortgage-backed securities was $1,646,342$2,126,348 at September 30, 2021. March 31, 2022.
16
Table of Contents
Of the $1,646,342$2,126,348 amount, $617,651$653,526 was related to agency commercial mortgage-backed securities and $1,028,691$1,472,822 was
related to agency residential mortgage-backed securities. Each of the agency mortgage-backed securities provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based upon management’s analysis and judgment, it was determined that none of the agency mortgage-backed securities had credit losses at September 30, 2021.March 
31
,
2022
.
Non-agency
residential mortgage-backed securities
United’s
non-agency
residential mortgage-backed securities portfolio relates to securities of various private label issuers. The total amortized cost of available for sale
non-agency
residential mortgage-backed securities was $38,383$103,779 at September 30, 2021.March 31, 2022. Of the $38,383,$103,779, 100% was rated AAA. Based upon management’s analysis and judgment, it was determined that 0ne of the
non-agency
residential mortgage-backed securities had credit losses at September 30, 2021.March 31, 2022.
Asset-backed securities
As of September 30, 2021,March 31, 2022, United’s asset-backed securities portfolio had a total amortized cost balance of $535,422. The entire$856,840. 100% of the portfolio was investment grade rated AA+ or better as of September 30, 2021.March 31, 2022. Approximately 49%35% of the portfolio relates to securities that are backed by Federal Family Education Loan Program (“FFELP”) student loan collateral which includes a minimum of a 97% government repayment guaranty, as well as additional credit support and subordination in excess of the government guaranteed portion. Approximately 47%65% of the portfolio relates to collateralized loan obligation securities that are all AAA rated. The remaining 4% of the portfolio relates to various other asset-backed securities that are all
AAA
rated.
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Table of Contents
Upon reviewing this portfolio for the thirdfirst quarter of 2021,2022, it was determined that 0ne of the asset-backed securities had credit losses.
Single issue trust preferred securities
The majority of United’s single issue trust preferred portfolio consists of obligations from large cap banks (i.e. banks with market capitalization in excess of $10 billion). All single issue trust preferred securities are currently receiving interest payments. The amortized cost of available for sale single issue trust preferred securities as of September 30, 2021March 31, 2022 consisted of $8,453$8,458 in investment grade bonds, $3,067$3,075 in split rated bonds, and $5,761$5,771 in unrated bonds. Management reviews each issuer’s current and projected earnings trends, asset quality, capitalization levels, and other key factors. Upon completing the review for the thirdfirst quarter of 2021,2022, it was determined that none of the single issue trust preferred securities had credit losses.
Corporate securities
As of September 30, 2021,March 31, 2022, United’s
corporate
Corporate securities portfolio had a total amortized cost balance of $517,733.$632,223. The majority of the portfolio consisted of debt issuances of corporations representing a variety of industries, including financial institutions. Of the $517,733$632,223 total amortized cost balance, 90% had at least one rating above81% was investment grade 2%rated, 1% was below investment grade rated, 1% was split rated, and 8%17% was unrated. For corporate securities, management has evaluated the near-term prospects of the investment in relation to the severity of any unrealized loss. Based upon management’s analysis and judgment, it was determined that none of the corporate securities had credit losses at September 30, 2021.March 31, 2022.
The amortized cost and estimated fair value of securities available for sale at September 30, 2021March 31, 2022 and December 31, 20202021 by contractual maturity are shown as follows. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties.


   
March 31, 2022
   
December 31, 2021
 
   
Amortized
Cost
   
Estimated
Fair
Value
   
Amortized
Cost
   
Estimated
Fair
Value
 
Due in one year or less
  $197,154   $197,158   $126,032   $126,564 
Due after one year through five years
   862,425    852,043    661,627    670,298 
Due after five years through ten years
   1,009,895    958,958    940,031    941,640 
Due after ten years
   2,882,489    2,752,775    2,303,804    2,304,197 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $4,951,963   $4,760,934   $4,031,494   $4,042,699 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
   
September 30, 2021
   
December 31, 2020
 
   
Amortized
Cost
   
Estimated
Fair Value
   
Amortized
Cost
   
Estimated
Fair Value
 
Due in one year or less
  $94,138   $95,067   $150,575   $151,651 
Due after one year through five years
   566,739    580,168    495,922    514,441 
Due after five years through ten years
   757,597    766,611    688,264    714,416 
Due after ten years
   1,953,830    1,968,138    1,533,585    1,572,851 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $3,372,304   $3,409,984   $2,868,346   $2,953,359 
   
 
 
   
 
 
   
 
 
   
 
 
 
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Equity securities at fair value
Equity securities consist mainly of equity securities of financial institutions and mutual funds within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. The fair value of United’s equity securities was $11,984$12,357 at September 30, 2021March 31, 2022 and $10,718$12,404 at December 31, 2020.2021.
 
   
Three Months Ended

September 30
   
Nine Months Ended

September 30
 
   
2021
   
2020
   
2021
   
2020
 
Net gains recognized during the period on equity securities sold
  $0   $2   $788   $9 
Unrealized gains recognized during the period on equity securities still held at period end
   2    0    53    114 
Unrealized losses recognized during the period on equity securities still held at period end
   (27)    (2)    (132)    (58) 
Net gains recognized during the period
  $(25)   $0   $709   $65 
19
   
Three Months Ended
March 31
 
   
2022
   
2021
 
Net gains recognized during the period on equity securities sold
  
$

0   
$

788 
Unrealized gains recognized during the period on equity securities still held at period end
   19    27 
Unrealized losses recognized during the period on equity securities still held at period end
   (270)    (105) 
   
 
 
   
 
 
 
Net (losses) gains recognized during the period
  $(251)   $710 
   
 
 
   
 
 
 
Table of Contents
Other investment securities
During the thirdfirst quarter of 2021,2022, United evaluated all of its cost method investments to determine if certain events or changes in circumstances during the thirdfirst quarter of 20212022 had a significant adverse effect on the fair value of any of its cost method securities. United determined that there was no individual security that experienced an adverse event during the thirdfirst quarter. There were no other events or changes in circumstances during the thirdfirst quarter which would have an adverse effect on the fair value of its cost method securities.securities
The carrying value of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $1,819,897$1,794,895 and $1,942,087$1,871,328 at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
4. LOANS AND LEASES
Major classes of loans and leases are as follows:
 
  
September 30, 2021
   
December 31, 2020
 
  
March 31, 2022
   
December 31, 2021
 
Commercial, financial and agricultural:
            
Owner-occupied commercial real estate
  $1,542,555   $1,622,687   $1,697,910   $1,733,176 
Nonowner-occupied commercial real estate
   5,198,547    5,017,727    6,047,856    5,957,288 
Other commercial
   3,229,471    4,054,418    3,533,910    3,462,361 
  
 
   
 
   
 
   
 
 
Total commercial, financial & agricultural
   9,970,573    10,694,832    11,279,676    11,152,825 
Residential real estate
   3,514,228    3,899,885    3,705,535    3,691,560 
Construction & land development
   2,109,149    1,826,349    2,186,126    2,014,165 
Consumer:
            
Bankcard
   8,178    8,937    8,398    8,913 
Other consumer
   1,169,204    1,192,580    1,239,545    1,183,844 
Less: Unearned income
   (27,703)    (31,170)    (27,194)    (27,659) 
  
 
   
 
   
 
   
 
 
Total gross loans
  $16,743,629   $17,591,413   $18,392,086   $18,023,648 
  
 
   
 
   
 
   
 
 
The table above does not include loans held for sale of $493,299$340,040 and $718,937$504,416 at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market.
United’s
subsidiary bank has made loans to the directors and officers of United and its subsidiaries, and to their affiliates. The aggregate dollar amount of these loans was $32,882 $
32,639
and $35,756 $
32,990
at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
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Table of Contents
5. CREDIT QUALITY
Management monitors the credit quality of its loans and leases on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan. United considers a loan to be past due when it is 30 days or more past its contractual payment due date.
For all loan classes, past due loans and leases are reviewed on a monthly basis to identify loans and leases for nonaccrual status. Generally, when collection in full of the principal and interest is jeopardized, the loan is placed on nonaccrual status. The accrual of interest income on commercial and most consumer loans generally is discontinued when a loan becomes 90 to 120 days past due as to principal or interest. However, regardless of delinquency status, if a loan is fully secured and in the process of collection and resolution of collection is expected in the near term (generally less than 90 days), then the loan will not be placed on nonaccrual status. When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for credit losses. United’s method of income recognition for loans and leases that are classified as nonaccrual is to recognize interest income on a cash basis or apply the cash receipt to principal when the ultimate collectibility of principal is in doubt. Nonaccrual loans and leases will not normally be returned to accrual status unless all past due principal and interest has been paid and the borrower has evidenced their ability to meet the contractual provisions of the note. Generally, a loan is categorized as a TDR if a concession is granted and there is deterioration in the financial condition of the borrower. The portfolio of TDR loans is monitored monthly.
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Table of Contents
A loan is categorized as a troubled debt restructuring (“TDR”) if a concession is granted and there is deterioration in the financial condition of the borrower. A loan classified as a TDR will generally retain such classification until the loan is paid in full. However, a
one-to-four-family
residential mortgage TDR loan that yields a market rate and demonstrates the ability to pay under the terms of the restructured note through a sustained period of repayment performance, which is generally one year, is removed from the TDR classification. Interest income on TDRs is accrued at the reduced rate and the loan is returned to performing status once the borrower demonstrates the ability to pay under the terms of the restructured note through a sustained period of repayment performance, which is generally six months. TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans and leases with market terms on one loan and concessionary terms on the other loan, receipts of assets from a debtor in partial or full satisfaction of a loan, the extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement, or the reduction of accrued interest or any other concessionary type of renegotiated debt. Under United’s current loan policy, a loan is not recognized as a TDR until it becomes probable that the loan will be a TDR.
In response to the coronavirus
(“COVID-19”)
pandemic and its economic impact on our customers, United has implemented a short-term modification program that compliescomplied with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide temporary payment relief , primarily deferral of payments, to those borrowers directly impacted by
COVID-19
who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments from the period beginning March 1, 2020 until the earlier ofended on January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the
COVID-19
outbreak terminates.2022. As provided for under the CARES Act, these loan modifications are exempt by law from classification as a TDR as defined by GAAP. As of September 30, 2021,March 31, 2022, United has 14661 eligible loan modifications in deferral under section 4013, “Temporary Relief from Troubled Debt Restructurings,” of the CARES Act on $51,926$3,034 of loans outstanding, down significantly from 1,002compared to 188 eligible loan modifications in deferral on $399,857$18,039 of loans outstanding at December 31, 2020.2021.
As of September 30, 2021,March 31, 2022, United had TDRs of $37,752$30,582 as compared to $55,657$35,856 as of December 31, 2020.2021. Of the $37,752$30,582 aggregate balance of TDRs at September 30, 2021, $24,662March 31, 2022, $13,568 was on nonaccrual and $292$4,882 was
30-89
days past due. Of the $55,657$35,856 aggregate balance of TDRs at December 31, 2020, $41,1852021, $22,421 was on nonaccrual and $197$102 was
30-89
90 days or more days
past due. All these amounts are included in the appropriate categories in the “Age Analysis of Past Due Loans” table on a subsequent page. As of September 30, 2021,March 31, 2022, there was a commitment to lend additional funds of $112$49 to a debtor owing a receivable whose terms have been modified in a TDR. During the first ninethree months of 2021,2022, advances totaling $13of $61 were made to this debtor under a loan that had been previously modified. NaN advances were made to this debtor during the third quarter
1
9
Table of 2021 under a loan that had been previously modified.Contents
The following tables sets forth the balances of TDRs at September 30, 2021March 31, 2022 and December 31, 20202021 and the reasons for modification:
Reason for modification
  
September 30, 2021
   
December 31, 2020
 
Interest rate reduction
  $3,164   $ 10,774 
Interest rate reduction and change in terms
   473    2,346 
Forgiveness of principal
   194    214 
Concession of principal and term
   19    22 
Transfer of asset
   5,407    0 
Extended maturity
   4,299    4,414 
Change in terms
   24,196    37,887 
   
 
 
   
 
 
 
Total
  $ 37,752   $55,657 
   
 
 
   
 
 
 
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Table of Contents
The following table sets forth United’s troubled debt restructurings that have been restructured during the three months ended September 30, 2021 and 2020, segregated by class of loans:
 
   
Troubled Debt Restructurings

For the Three Months Ended
 
   
September 30, 2021
   
September 30, 2020
 
   
Number
of
Contracts
   
Pre-Modification

Outstanding
Recorded
Investment
   
Post-
Modification
Outstanding
Recorded
Investment
   
Number
of
Contracts
   
Pre-Modification

Outstanding
Recorded
Investment
   
Post-
Modification
Outstanding
Recorded
Investment
 
Commercial real estate:
                              
Owner-occupied
   1   $ 103   $ 103    0   $0   $0 
Nonowner-occupied
   0    0    0    0    0    0 
Other commercial
   0    0    0    1    39    38 
Residential real estate
   1    473    473    3    381    381 
Construction & land
development
   0    0    0    0    0    0 
Consumer:
                              
Bankcard
   0    0    0    0    0    0 
Other consumer
   0    0    0    0    0    0 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
   2   $576   $576    4   $ 420   $ 419 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Reason for modification
  
March 31, 2022
   
December 31, 2021
 
Interest rate reduction
  $2,214   $3,163 
Interest rate reduction and change in terms
   1,265    1,412 
Concession of principal and term
   18    19 
Extended maturity
   4,990    4,831 
Transfer of asset
   0    5,407 
Change in terms
   22,095    21,024 
   
 
 
   
 
 
 
Total
  $30,582   $35,856 
   
 
 
   
 
 
 
The following table sets forth United’s troubled debt restructurings that were restructured during the three months ended March 31, 2022 and 2021, segregated by class of loans.
   
Troubled Debt Restructurings
For the Three Months Ended
 
   
March 31, 2022
   
March 31, 2021
 
   
Number of
Contracts
   
Pre-

Modification
Outstanding
Recorded
Investment
   
Post-
Modification
Outstanding
Recorded
Investment
   
Number of
Contracts
   
Pre-

Modification
Outstanding
Recorded
Investment
   
Post-
Modification
Outstanding
Recorded
Investment
 
Commercial real estate:
            
Owner-occupied
   1   $2,801   $2,788    1   $940   $922 
Nonowner-occupied
   0    0    0    1    937    937 
Other commercial
   0    0    0    0    0    0 
Residential real estate
   0    0    0    0    0    0 
Construction & land
 
development
   0    0    0    0    0    0 
Consumer:
                              
Bankcard
   0    0    0    0    0    0 
Other consumer
   0    0    0    0    0    0 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
   1   $2,801   $2,788    2   $1,877   $1,859 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
��  
 
 
 
The following table sets forth United’s troubled debt restructurings, based on their post-modification outstanding recorded balance, that have been restructured during the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, segregated by classthe reason for modification:
   
Three Months Ended
 
Reason for modification
  
March 31,
2022
   
March 31,
2021
 
Interest rate reduction
  $0   $0 
Interest rate reduction and change in terms
   0    0 
Forgiveness of principal
   0    0 
Concession of principal and term
   0    0 
Transfer of asset
   0    0 
Extended maturity
   0    0 
Change in terms
   2,788    1,859 
   
 
 
   
 
 
 
Total
  $2,788   $1,859 
   
 
 
   
 
 
 
The loans and leases were evaluated individually for allocation within United’s allowance for loan losses. The modifications had an immaterial impact on the financial condition and results of loans:operations for United.
20
   
Troubled Debt Restructurings
 
   
For the Nine Months Ended
 
   
September 30, 2021
   
September 30, 2020
 
   
Number
of
Contracts
   
Pre-Modification

Outstanding
Recorded
Investment
   
Post-
Modification
Outstanding
Recorded
Investment
   
Number
of
Contracts
   
Pre-Modification

Outstanding
Recorded
Investment
   
Post-
Modification
Outstanding
Recorded
Investment
 
Commercial real estate:
                              
Owner-occupied
   2   $1,043   $1,196    21   $18,579   $17,210 
Nonowner-occupied
   2    6,349    6,136    6    2,258    2,225 
Other commercial
   1    181    181    19    3,706    2,873 
Residential real estate
   1    473    473    22    4,271    3,495 
Construction & land
development
   0    0    0    12    4,607    4,392 
Consumer:
                              
Bankcard
   0    0    0    0    0    0 
Other consumer
   0    0    0    3    69    21 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
   6   $ 8,046   $ 7,986    83   $ 33,490   $ 30,216 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Table of Contents
The following table presents troubled debt restructurings, by class of loan, that were restructured during the twelve-month period ended September 30, 2021andMarch 31, 2022 and March 31, 2021 and had charge-offs during the three monthsthe first quarter of 2022 and nine months ended September 30, 2021.2021, respectively. The recorded investment amounts presented were as of the September 30,March 31, 2022 and 2021 balance sheet date.
   
Three Months Ended

September 30, 2021
   
Nine Months Ended

September 30, 2021
 
   
Number of
Contracts
   
Recorded
Investment
   
Number of
Contracts
   
Recorded
Investment
 
Troubled Debt Restructurings
                
Commercial real estate:
                    
Owner-occupied
   0   $ 0    0   $ 0 
Nonowner-occupied
   0    0    0    0 
Other commercial
   0    0    0    0 
Residential real estate
   0    0    1    0 
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Table of Contents
   
Three Months Ended

September 30, 2021
   
Nine Months Ended

September 30, 2021
 
   
Number of
Contracts
   
Recorded
Investment
   
Number of
Contracts
   
Recorded
Investment
 
Troubled Debt Restructurings
                
Construction & land development
   0    0    2    0 
Consumer:
                    
Bankcard
   0    0    0    0 
Other consumer
   0    0    0    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
   0   $0    3   $0 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table presents troubled debt restructurings, by class of loan, that were restructured during the twelve-month period ended September 30, 2020 and had charge-offs during the three and nine months ended September 30, 2020. The recorded investment amounts presented were as of the September 30, 2020 balance sheet date.dates.
 
  
Three Months Ended

September 30, 2020
   
Nine Months Ended

September 30, 2020
   
Three Months Ended

March 31, 2022
   
Three Months Ended

March 31, 2021
 
  
Number of
Contracts
   
Recorded
Investment
   
Number of
Contracts
   
Recorded
Investment
   
Number of
Contracts
   
Recorded
Investment
   
Number of
Contracts
   
Recorded
Investment
 
Troubled Debt Restructurings
                                
Commercial real estate:
                        
Owner-occupied
   0   $0    0   $0    0   $0    0   $0 
Nonowner-occupied
   0    0    0    0    0    0    0    0 
Other commercial
   2    86    2    86    1    114    0    0 
Residential real estate
   0    0    0    0    0    0    0    0 
Construction & land development
   0    0    1    690    0    0    2    550 
Consumer:
                        
Bankcard
   0    0    0    0    0    0    0    0 
Other consumer
   0    0    0    0    0    0    0    0 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total
   2   $ 86    3   $ 776    1   $114    2   $550 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
The following table sets forth United’s age analysis of its past due loans and leases, segregated by class of loans:
Age Analysis of Past Due Loans and Leases
 
As of September 30, 2021
 
   
30-89 
Days

Past Due
   
90 Days 
or
 
more
Past
 
Due
   
Total Past
Due
   
Current &
Other
   
Total

Financing
Receivables
   
90 Days or
More Past
Due &
Accruing
 
Commercial real estate:
                              
Owner-occupied
  $6,648   $10,816   $17,464   $1,525,091   $1,542,555   $257 
Nonowner-occupied
   5,028    27,640    32,668    5,165,879    5,198,547    1,826 
Other commercial
   20,814    11,204    32,018    3,197,453    3,229,471    2,268 
Residential real estate
   19,835    21,474    41,309    3,472,919    3,514,228    7,886 
Construction & land
development
   823    3,607    4,430    2,104,719    2,109,149    505 
Consumer:
                              
Bankcard
   96    97    193    7,985    8,178    97 
Other consumer
   14,229    2,340    16,569    1,152,635    1,169,204    1,988 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $67,473   $77,178   $144,651   $16,626,681   $16,771,332   $14,827 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Age Analysis of Past Due Loans and Leases
 
As of December 31, 2020
 
   
30-89 
Days

Past Due
   
90 Days 
or
 
more
Past
 
Due
   
Total 
Past
 
Due
   
Current &
Other
   
Total

Financing
Receivables
   
90 Days or
More Past
Due &
Accruing
 
Commercial real estate:
                              
Owner-occupied
  $4,556   $28,479   $33,035   $1,589,652   $1,622,687   $0 
Nonowner-occupied
   6,837    29,292    36,129    4,981,598    5,017,727    1,284 
Other commercial
   13,796    26,274    40,070    4,014,348    4,054,418    1,001 
 
Age Analysis of Past Due Loans and Leases
As of March 31, 2022
 
   
30-89 Days

Past Due
   
90 Days or
more Past
Due
   
Total Past
Due
   
Current &
Other
   
Total

Financing
Receivables
   
90 Days or
More Past
Due &
Accruing
 
Commercial real estate:
            
Owner-occupied
  $8,569   $12,190   $20,759   $1,677,151   $1,697,910   $271 
Nonowner-occupied
   7,984    10,590    18,574    6,029,282    6,047,856    0 
Other commercial
   30,964    14,722    45,686    3,488,224    3,533,910    6,326 
Residential real estate
   21,196    19,588    40,784    3,664,751    3,705,535    6,365 
Construction & land development
   2,806    3,420    6,226    2,179,900    2,186,126    533 
Consumer:
                              
Bankcard
   124    79    203    8,195    8,398    79 
Other consumer
   17,979    2,251    20,230    1,219,315    1,239,545    1,605 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $89,622   $62,840   $152,462   $18,266,818   $18,419,280   $15,179 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
23
Age Analysis of Past Due Loans and Leases
As of December 31, 2021
 
   
30-89 Days

Past Due
   
90 Days or
more Past
Due
   
Total Past
Due
   
Current &
Other
   
Total

Financing
Receivables
   
90 Days or
More Past
Due &
Accruing
 
Commercial real estate:
            
Owner-occupied
  $7,522   $13,325   $20,847   $1,712,329   $1,733,176   $611 
Nonowner-occupied
   5,791    18,829    24,620    5,932,668    5,957,288    545 
Other commercial
   21,444    15,883    37,327    3,425,034    3,462,361    6,569 
Residential real estate
   19,488    23,495    42,983    3,648,577    3,691,560    8,241 
Construction & land development
   6,599    3,096    9,695    2,004,470    2,014,165    383 
Consumer:
                              
Bankcard
   100    187    287    8,626    8,913    187 
Other consumer
   17,264    2,615    19,879    1,163,965    1,183,844    2,445 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $78,208   $77,430   $155,638   $17,895,669   $18,051,307   $18,981 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
2
1
Table of Contents
Age Analysis of Past Due Loans and Leases
 
As of December 31, 2020
 
   
30-89

Days
Past Due
   
90 Days or
more Past
Due
   
Total Past
Due
   
Current &
Other
   
Total

Financing
Receivables
   
90 Days or
More Past
Due &
Accruing
 
Residential real estate
   32,743    24,892    57,635    3,842,250    3,899,885    8,574 
Construction & land
development
   1,919    5,885    7,804    1,818,545    1,826,349    461 
Consumer:
                              
Bankcard
   362    156    518    8,419    8,937    156 
Other consumer
   14,765    2,757    17,522    1,175,058    1,192,580    2,356 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 74,978   $ 117,735   $ 192,713   $ 17,429,870   $ 17,622,583   $ 13,832 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table sets forth United’s nonaccrual loans and leases, segregated by class of loans:
 
   
At September 30, 2021
   
At December 31, 2020
 
   
Nonaccruals
   
With No
Related
Allowance
for Credit
Losses
   
90 Days or
More Past
Due &
Accruing
   
Nonaccruals
   
With No
Related
Allowance
for Credit
Losses
   
90 Days or
More Past
Due &
Accruing
 
Commercial Real Estate:
                              
Owner-occupied
  $10,559   $10,559   $257   $28,479   $28,479   $0 
Nonowner-occupied
   25,814    22,374    1,826    28,008    16,070    1,284 
Other Commercial
   8,936    6,349    2,268    25,273    13,149    1,001 
Residential Real Estate
   13,588    13,588    7,886    16,318    14,769    8,574 
Construction
   3,102    3,102    505    5,424    4,484    461 
Consumer:
                              
Bankcard
   0    0    97    0    0    156 
Other consumer
   352    352    1,988    401    401    2,356 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 62,351   $ 56,324   $ 14,827   $ 103,903   $ 77,352   $ 13,832 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
At March 31, 2022
   
At December 31, 2021
 
   
Nonaccruals
   
With No
Related
Allowance
for Credit
Losses
   
90 Days or
More Past
Due &
Accruing
   
Nonaccruals
   
With No
Related
Allowance
for Credit
Losses
   
90 Days or
More Past
Due &
Accruing
 
Commercial Real Estate:
                              
Owner-occupied
  $11,919   $11,919   $271   $12,714   $12,714   $611 
Nonowner-occupied
   10,590    7,452    0    18,284    18,284    545 
Other Commercial
   8,396    7,333    6,326    9,314    8,261    6,569 
Residential Real Estate
   13,223    11,793    6,365    15,254    14,298    8,241 
Construction
   2,887    2,887    533    2,713    2,713    383 
Consumer:
                              
Bankcard
   0    0    79    0    0    187 
Other consumer
   646    646    1,605    170    170    2,445 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $47,661   $42,030   $15,179   $58,449   $56,440   $18,981 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
InterestNo interest income was recognized on United’s nonaccrual loans was insignificant duringand leases for the first three months of 2022 and nine months ended September 30, 2021 and 2020.2021.
For the adoption of ASC Topic 326, United elected the practical expedient to measure expected credit losses on collateral dependent loans and leases based on the difference between the loan’s amortized cost and the collateral’s fair value, adjusted for selling costs. ​​​​​​​​​​​​​​The following table presents the amortized cost basis of collateral-dependent loans and leases in which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty, by class of loans and leases as of September 30, 2021March 31, 2022 and December 31, 2020:
2021:
 
  
Collateral Dependent Loans and Leases
 
  
At September 30, 2021
   
Collateral Dependent Loans and Leases
 
  
Residential
Property
   
Business
Assets
   
Land
   
Commercial
Property
   
Other
   
Total
   
At March 31, 2022
 
  
Residential
Property
   
Business
Assets
   
Land
   
Commercial
Property
   
Other
   
Total
 
Commercial real estate:
Commercial real estate:
 
                                 
Owner-occupied
  $0   $42   $0   $10,025   $9,975   $20,042   $0   $30   $0   $9,490   $10,194   $19,714 
Nonowner-occupied
   12,045    0    2,061    8,702    21,390    44,198    7,069    0    0    7,990    46,847    61,906 
Other commercial
   0    11,695    0    0    770    12,465    2,093    11,860    0    0    1,100    15,053 
Residential real estate
   16,858    0    0    0    0    16,858    16,386    0    0    0    0    16,386 
Construction & land
development
   0    0    4,966    0    1,064    6,030    0    0    3,288    0    2,397    5,685 
Consumer:
                                    
Bankcard
   0    0    0    0    0    0    0    0    0    0    0    0 
Other consumer
   0    0    0    0    0    0    0    0    0    0    0    0 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
Total
  $ 28,903   $ 11,737   $ 7,027   $ 18,727   $ 33,199   $ 99,593   $25,548   $11,890   $3,288   $17,480   $60,538   $118,744 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
   
Collateral Dependent Loans and Leases
 
   
At December 31, 2021
 
   
Residential
Property
   
Business
Assets
   
Land
   
Commercial
Property
   
Other
   
Total
 
Commercial real estate:
                              
Owner-occupied
  $0   $38   $0   $9,775   $11,223   $21,036 
Nonowner-occupied
   7,085    0    703    8,665    52,299    68,752 
Other commercial
   2,093    15,225    0    0    732    18,050 
Residential real estate
   16,749    0    0    0    0    16,749 
Construction & land development
   0    0    4,770    0    1,103    5,873 
Consumer:
                              
Bankcard
   0    0    0    0    0    0 
Other consumer
   0    0    0    0    0    0 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $25,927   $15,263   $5,473   $18,440   $65,357   $130,460 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
242
2
Table of Contents
   
Collateral Dependent Loans and Leases
 
   
At December 31, 2020
 
   
Residential
Property
   
Business
Assets
   
Land
   
Commercial
Property
   
Other
   
Total
 
Commercial real estate:
 
                         
Owner-occupied
  $1,480   $138   $0   $18,097   $21,737   $41,452 
Nonowner-occupied
   16,400    0    2,898    10,167    18,230    47,695 
Other commercial
   5,424    20,429    0    258    2,345    28,456 
Residential real estate
   21,006    229    34    0    803    22,072 
Construction & land
development
   39    0    17,408    0    746    18,193 
Consumer:
                              
Bankcard
   0    0    0    0    0    0 
Other consumer
   0    0    0    0    1    1 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
       
Total
  $44,349   $20,796   $20,340   $28,522   $43,862   $157,869 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
United categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt: current financial information, historical payment experience, credit documentation, underlying collateral (if any), public information and current economic trends, among other factors.
United uses the following definitions for risk ratings:
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
For United’s loans with a corporate credit exposure, United analyzes loans individually to classify the loans as to credit risk. Review and analysis of criticized (special mention-rated loans in the amount of $1,000 or greater) and classified (substandard-rated and worse in the amount of $500 and greater) loans is completed once per quarter. Review of notes with committed exposure of $2,000 or greater is completed at least annually. For loans with a consumer credit exposure, United internally assigns a grade based upon an individual loan’s delinquency status. United reviews and updates, as necessary, these grades on a quarterly basis.
Special mention loans, with a corporate credit exposure, have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or in the Company’s credit position at some future date. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or an ill proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a special mention rating. Nonfinancial reasons for rating a credit exposure special mention include management problems, pending litigation, an ineffective loan agreement or other material structural weakness, and any other significant deviation from prudent lending practices. For loans with a consumer credit exposure, loans that are past due
30-
8930-89
days are generally considered special mention.
A substandard loan with a corporate credit exposure is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt by the borrower. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. They require more intensive supervision by management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some substandard loans, the likelihood of full collection of interest and principal may be in doubt and thus, placed on nonaccrual. For loans with a consumer credit exposure, loans that are 90 days or more past due or that have been placed on nonaccrual are considered substandard.
25
Table of Contents
A loan with corporate credit exposure is classified as doubtful if it has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, highly questionable. A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the loan, its classification as loss is deferred. Doubtful borrowers are usually in d
e
fault,default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, there are not any loans with a consumer credit exposure that are classified as doubtful. Usually, they are
charged-off
prior to such a classification.
2
3
Table of Contents
Based on the most recent analysis performed, the risk category of loans and leases by class of loans is as follows:
Commercial Real Estate – Owner-occupied
 
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of March 31, 2022
 
2022
  
2021
  
2020
  
2019
  
2018
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $53,351  $ 343,436  $ 294,872  $ 150,285  $ 130,636  $ 638,377  $ 36,446  $ 389  $ 1,647,792 
Special Mention
  0   0   0   129   2,976   20,651   950   0   24,706 
Substandard
  0   0   51   30   657   24,132   0   244   25,114 
Doubtful
  0   0   0   0   0   298   0   0   298 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $53,351  $343,436  $294,923  $150,444  $134,269  $683,458  $37,396  $633  $1,697,910 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period charge-offs
  0   0   0   0   0   (31)   0   0   (31) 
Current-period recoveries
  0   0   0   0   0   6   0   0   6 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period net charge-offs
 $0  $0  $0  $0  $0  $(25)  $0  $0  $(25) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
     
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans and leases

converted to
term loans
  
Total
 
As of December 31, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $319,007  $310,893  $161,075  $135,472  $168,874  $539,640  $39,117  $401  $1,674,479 
Special Mention
  0   0   51   5,399   712   20,672   959   0   27,793 
Substandard
  0   55   38   661   1,304   27,458   839   244   30,599 
Doubtful
  0   0   0   0   0   305   0   0   305 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $319,007  $310,948  $161,164  $141,532  $170,890  $588,075  $40,915  $645  $1,733,176 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD charge-offs
  0   0   0   0   (44)   (370)   0   0   (414) 
YTD recoveries
  0   0   0   0   13   856   0   0   869 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $(31)  $486  $0  $0  $455 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of September 30, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $155,334  $283,246  $148,710  $133,675  $171,027  $575,677  $22,067  $414  $1,490,150 
Special Mention
  0   0   0   2,144   723   18,660   974   0   22,501 
Substandard
  0   59   42   0   1,355   27,187   700   248   29,591 
Doubtful
  0   0   0   0   0   313   0   0   313 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $155,334  $283,305  $148,752  $135,819  $173,105  $621,837  $23,741  $662  $1,542,555 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                     
YTD charge-offs
  0   0   0   0   (44)   (325)   0   0   (369) 
YTD recoveries
  0   0   0   0   12   695   0   0   707 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $(32)  $370  $0  $0  $338 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
     
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving
loans
converted to
term loans
  
Total
 
As of December 31, 2020
 
2020
  
2019
  
2018
  
2017
  
2016
  
Prior
 
          
Internal Risk Grade:
                                    
Pass
 $280,779  $152,851  $162,027  $198,610  $282,214  $443,312  $22,303  $0  $1,542,096 
Special Mention
  0   1,206   3,772   754   2,013   20,792   0   453   28,990 
Substandard
  1,935   62   0   1,117   3,788   43,354   864   149   51,269 
Doubtful
  0   0   0   0   0   332   0   0   332 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $ 282,714  $ 154,119  $ 165,799  $ 200,481  $ 288,015  $ 507,790  $ 23,167  $ 602  $ 1,622,687 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   0   0   0   (2,195)   0   0   (2,195) 
YTD recoveries
  0   0   0   0   0   795   0   0   795 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $0  $(1,400)  $0  $0  $(1,400) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
    
Commercial Real Estate – Nonowner-occupied
          
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of September 30, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
          
Internal Risk Grade:
                                    
Pass
 $924,821  $838,776  $554,807  $477,322  $431,061  $ 1,571,022  $ 104,675  $ 2,058  $4,904,542 
Special Mention
  0   0   113,718   0   378   49,693   0   0   163,789 
Substandard
  0   725   13,610   21,382   1,110   93,389   0   0   130,216 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $924,821  $839,501  $682,135  $498,704  $432,549  $1,714,104  $104,675  $2,058  $5,198,547 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   0   0   0   (3,140)   0   0   (3,140) 
YTD recoveries
  0   0   0   0   0   393   0   0   393 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $0  $(2,747)  $0  $0  $(2,747) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Commercial Real Estate – Nonowner-occupied
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of March 31, 2022
 
2022
  
2021
  
2020
  
2019
  
2018
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $363,243  $1,636,772  $ 865,579  $ 641,763  $ 439,994  $ 1,704,382  $ 111,896  $160  $ 5,763,789 
Special Mention
  634   0   2,934   83,137   5,762   32,705   0   0   125,172 
Substandard
  0   0   709   34,079   28,325   95,782   0   0   158,895 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $363,877  $1,636,772  $869,222  $758,979  $474,081  $1,832,869  $111,896  $160  $6,047,856 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period charge-offs
  0   0   0   0   0   0   0   0   0 
Current-period recoveries
  0   0   0   0   0   75   0   0   75 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period net charge-offs
 $0  $0  $0  $0  $0  $75  $0  $0  $75 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
     
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans and
leases

converted to
term loans
  
Total
 
As of December 31, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $ 1,558,474  $925,508  $707,570  $460,660  $397,003  $1,490,548  $102,561  $ 2,039  $5,644,363 
Special Mention
  819   2,953   113,655   5,826   372   40,534   2,793   0   166,952 
Substandard
  0   714   13,042   28,411   1,095   102,711   0   0   145,973 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $1,559,293  $929,175  $834,267  $494,897  $398,470  $1,633,793  $105,354  $2,039  $5,957,288 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD charge-offs
  0   0   0   0   0   (3,531)   0   0   (3,531) 
YTD recoveries
  0   0   0   0   0   1,907   0   0   1,097 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $0  $(1,624)  $0  $0  $(1,624) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                     
 
262
4
Table of Contents
Other commercial
  
Term Loans and leases

Origination Year
  
Revolving loans
and leases
amortized cost
basis
  
Revolving

loans and leases

converted to
term loans
  
Total
 
As of March 31, 2022
 
2022
  
2021
  
2020
  
2019
  
2018
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $ 372,103  $ 833,601  $ 483,501  $ 280,431  $98,020  $ 253,471  $ 1,013,277  $ 1,935  $ 3,336,339 
Special Mention
  15,000   3,428   0   1,056   2,908   30,114   76,935   55   129,496 
Substandard
  261   775   207   1,400   4,571   19,194   41,502   165   68,075 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $387,364  $837,804  $483,708  $282,887  $ 105,499  $302,779  $1,131,714  $2,155  $3,533,910 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period charge-offs
  0   (5)   0   0   (9)   (259)   0   0   (273) 
Current-period recoveries
  0   0   0   2   705   1,442   0   0   2,149 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period net charge-offs
 $0  $(5)  $0  $2  $696  $1,183  $0  $0  $1,876 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
     
  
Term Loans and leases

Origination Year
  
Revolving loans
and leases
amortized cost
basis
  
Revolving

loans and leases

converted to
term loans
  
Total
 
As of December 31, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $924,726  $557,422  $306,945  $107,426  $87,090  $76,032  $1,211,865  $2,038  $3,273,544 
Special Mention
  1,880   0   31,614   3,012   1,801   3,390   76,987   61   118,745 
Substandard
  793   11   1,561   4,930   2,146   18,963   41,357   205   69,966 
Doubtful
  0   0   0   0   0   106   0   0   106 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $927,399  $557,433  $340,120  $115,368  $91,037  $98,491  $1,330,209  $2,304  $3,462,361 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD charge-offs
  0   (87)   (31)   (200)   (174)   (5,650)   (40)   0   (6,182) 
YTD recoveries
  0   3   30   86   34   4,154   0   0   4,307 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $(84)  $(1)  $(114)  $(140)  $(1,496)  $(40)  $0  $(1,875) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                     
Residential Real Estate
  
Term Loans

Origination Year
  
Revolving loans
amortized

cost basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of March 31, 2022
 
2022
  
2021
  
2020
  
2019
  
2018
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $ 117,042  $ 877,631  $ 528,389  $ 350,569  $ 284,900  $1,070,761  $ 440,663  $ 2,932  $ 3,672,887 
Special Mention
  0   0   0   0   220   5,246   2,206   0   7,672 
Substandard
  0   2,689   68   554   802   19,327   1,536   0   24,976 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $117,042  $880,320  $528,457  $351,123  $285,922  $ 1,095,334  $444,405  $2,932  $3,705,535 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period charge-offs
  0   0   0   0   (224)   (270)   0   0   (494) 
Current-period recoveries
  0   0   0   0   2   878   0   0   880 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period net charge-offs
 $0  $0  $0  $0  $(222)  $608  $0  $0  $386 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of December 31, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $ 815,693  $ 568,323  $ 383,250  $ 315,211  $ 178,101  $ 931,730  $ 455,705  $ 2,972  $ 3,650,985 
Special Mention
  0   0   0   223   91   12,251   2,339   0   14,904 
Substandard
  464   0   444   617   2,763   19,773   1,497   113   25,671 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $816,157  $568,323  $383,694  $316,051  $180,955  $963,754  $459,541  $3,085  $3,691,560 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD charge-offs
  0   0   (37)   (38)   (167)   (5,774)   0   0   (6,016) 
YTD recoveries
  0   0   0   0   3   2,384   13   0   2,400 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $(37)  $(38)  $(164)  $(3,390)  $13  $0  $(3,616) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
2
5
Table of Contents
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

connverted to
term loans
  
Total
 
As of December 31, 2020
 
2020
  
2019
  
2018
  
2017
  
2016
  
Prior
 
          
Internal Risk Grade:
                                    
Pass
 $929,001  $592,109  $596,260  $481,894  $502,417  $1,496,135  $118,404  $2,112  $4,718,332 
Special Mention
  0   105,104   0   391   8,902   78,591   0   0   192,988 
Substandard
  392   14,620   7,435   1,564   10,824   71,572   0   0   106,407 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $929,393  $711,833  $603,695  $483,849  $522,143  $1,646,298  $118,404  $2,112  $5,017,727 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  (38)   0   (300)   0   (3,394)   (2,402)   0   0   (6,134) 
YTD recoveries
  0   0   0   0   0   1,023   0   0   1,023 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $(38)  $0  $(300)  $0  $(3,394)  $(1,379)  $0  $0  $(5,111) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
    
Other commercial
          
  
Term Loans and leases

Origination Year
  
Revolving loans
and leases
amortized cost
basis
  
Revolving
loans and
leases
converted to
term loans
  
Total
 
As of September 30, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $838,912  $580,174  $313,046  $103,079  $89,668  $123,875  $950,605  $2,139  $3,001,498 
Special Mention
  25   0   31,047   1,161   870   3,374   116,423   67   152,967 
Substandard
  735   1,003   766   1,191   212   20,059   50,685   245   74,896 
Doubtful
  0   0   0   0   0   110   0   0   110 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $839,672  $581,177  $344,859  $105,431  $90,750  $147,418  $1,117,713  $2,451  $3,229,471 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   (86)   (32)   (200)   (173)   (2,858)   (40)   0   (3,389) 
YTD recoveries
  0   0   17   78   20   2,488   0   0   2,603 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $(86)  $(15)  $(122)  $(153)  $(370)  $(40)  $0  $(786) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
     
  
Term Loans and leases

Origination Year
  
Revolving loans
and leases
amortized cost
basis
  
Revolving

loans and
leases

converted to
term loan
s
  
Total
 
As of December 31, 2020
 
2020
  
2019
  
2018
  
2017
  
2016
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $1,702,787  $370,059  $200,588  $112,170  $119,582  $257,638  $1,172,699  $2,668  $3,938,191 
Special Mention
  333   384   4,754   1,300   138   8,231   40,048   86   55,274 
Substandard
  1,649   830   2,241   2,606   6,565   30,308   16,222   360   60,781 
Doubtful
  0   0   0   0   37   135   0   0   172 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $1,704,769  $371,273  $207,583  $116,076  $126,322  $296,312  $1,228,969  $3,114  $4,054,418 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   (959)   (23)   (3,525)   (12,843)   0   0   (17,350) 
YTD recoveries
  94   864   18   12   684   2,789   0   0   4,461 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $94  $864  $(941)  $(11)  $(2,841)  $(10,054)  $0  $0  $(12,889) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
    
Residential Real Estate
          
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loan
s
  
Total
 
As of September 30, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
          
Internal Risk Grade:
                                    
Pass
 $583,623  $587,834  $426,827  $357,744  $187,516  $951,339  $388,470  $3,007  $3,486,360 
Special Mention
  0   0   0   0   175   4,333   737   0   5,245 
Substandard
  473   0   386   176   2,703   18,741   31   113   22,623 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $584,096  $587,834  $427,213  $357,920  $190,394  $974,413  $389,238  $3,120  $3,514,228 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   (37)   (38)   (166)   (5,687)   0   0   (5,928) 
YTD recoveries
  0   0   0   0   3   1,997   13   0   2,013 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $(37)  $(38)  $(163)  $(3,690)  $13  $0  $(3,915) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Construction and Land Development
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of March 31, 2022
 
2022
  
2021
  
2020
  
2019
  
2018
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $ 78,543  $ 866,127  $ 516,349  $ 261,445  $ 150,981  $ 91,506  $ 208,309  $ 0  $ 2,173,260 
Special Mention
  0   0   68   3,260   0   1,225   991   0   5,544 
Substandard
  0   304   0   341   917   5,354   406   0   7,322 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $78,543  $866,431  $516,417  $265,046  $151,898  $98,085  $209,706  $0  $2,186,126 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period charge-offs
  0   0   0   0   0   (2)   0   0   (2) 
Current-period recoveries
  0   0   0   0   0   184   0   0   184 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period net charge-offs
 $0  $0  $0  $0  $0  $182  $0  $0  $182 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                     
 
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of December 31, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $ 767,351  $ 518,291  $ 278,020  $ 152,062  $ 18,371  $ 74,532  $ 192,421  $ 0  $ 2,001,048 
Special Mention
  0   69   3,261   0   0   1,237   995   0   5,562 
Substandard
  332   0   280   925   0   5,272   746   0   7,555 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $767,683  $518,360  $281,561  $152,987  $18,371  $81,041  $194,162  $0  $2,014,165 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD charge-offs
  0   0   0   0   (177)   (383)   0   0   (560) 
YTD recoveries
  0   0   0   0   133   471   0   0   604 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $(44)  $88  $0  $0  $44 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Bankcard
27
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
   
Total
 
As of March 31, 2022
 
2022
  
2021
  
2020
  
2019
  
2018
  
Prior
 
Internal Risk Grade:
                                     
Pass
 $0  $0  $0  $0  $0  $0  $ 8,194  $ 0   $ 8,194 
Special Mention
  0   0   0   0   0   0   124   0    124 
Substandard
  0   0   0   0   0   0   80   0    80 
Doubtful
  0   0   0   0   0   0   0   0    0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Total
 $0  $0  $0  $0  $0  $0  $8,398  $0   $8,398 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Current-period charge-offs
  0   0   0   0   0   0   (143)   0    (143) 
Current-period recoveries
  0   0   0   0   0   0   1   0    1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Current-period net charge-offs
 $0  $0  $0  $0  $0  $0  $(142)  $0   $(142) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
     
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
   
Total
 
As of December 31, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                     
Pass
 $ 0  $ 0  $ 0  $ 0  $ 0  $ 0  $8,626  $0   $8,626 
Special Mention
  0   0   0   0   0   0   100   0    100 
Substandard
  0   0   0   0   0   0   187   0    187 
Doubtful
  0   0   0   0   0   0   0   0    0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Total
 $0  $0  $0  $0  $0  $0  $8,913  $0   $8,913 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
YTD charge-offs
  0   0   0   0   0   0   (190)   0    (190) 
YTD recoveries
  0   0   0   0   0       42   0    42 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $0  $0  $(148)  $0   $(148) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
                                      
2
6
Table of Contents
  
Term Loans

Origination Year
  
Revolving
 
loans
amortized
 
cost basis
  
Revolving

loans

converted
 
to
term loans
  
Total
 
As of December 31, 2020
 
2020
  
2019
  
2018
  
2017
  
2016
  
Prior
 
          
Internal Risk Grade:
                                    
Pass
 $603,714  $624,142  $640,535  $292,700  $282,547  $975,913  $436,728  $4,224  $3,860,503 
Special Mention
  0   267   0   192   2,325   6,623   800   0   10,207 
Substandard
  0   282   440   3,263   3,516   20,967   201   227   28,896 
Doubtful
  0   0   0   0   0   279   0   0   279 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $603,714  $624,691  $640,975  $296,155  $288,388  $1,003,782  $437,729  $4,451  $3,899,885 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   0   0   (1)   (1,759)   0   0   (1,760) 
YTD recoveries
  0   0   0   101   0   961   1   0   1,063 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $101  $(1)  $(798)  $1  $0  $(697) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 

 		   
Construction and Land Development
          
  
Term Loans

Origination Year
  
Revolving
 
loans
amortized
 
cost basis
  
Revolving

loans 
converted
 
to term loans
  
Total
 
As of September 30, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $525,527  $554,346  $461,772  $233,922  $76,435  $69,165  $175,047  $0  $2,096,214 
Special Mention
  0   0   0   2,409   0   1,207   995   0   4,611 
Substandard
  359   0   278   933   0   6,008   746   0   8,324 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $525,886  $554,346  $462,050  $237,264  $76,435  $76,380  $176,788  $0  $2,109,149 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   0   0   0   (383)   0   0   (383) 
YTD recoveries
  0   0   0   0   123   284   0   0   407 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $123  $(99)  $0  $0  $24 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
     
  
Term Loans

Origination Year
  
Revolving
 
loans
amortized
 
cost basis
  
Revolving
loans
converted
 
to term loans
  
Total
 
As of December 31, 2020
 
2020
  
2019
  
2018
  
2017
  
2016
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $420,977  $663,113  $304,579  $127,377  $83,252  $53,713  $145,431  $0  $1,798,442 
Special Mention
  0   0   4,689   557   0   1,420   995   0   7,661 
Substandard
  0   250   1,535   0   216   17,499   746   0   20,246 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $420,977  $663,363  $310,803  $127,934  $83,468  $72,632  $147,172  $0  $1,826,349 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   0   0   0   (2,027)   0   0   (2,027) 
YTD recoveries
  0   0   0   0   0   1,513   0   0   1,513 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $0  $(514)  $0  $0  $(514) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
    
Bankcard
          
  
Term Loans

Origination Year
  
 Revolving
 
loans
amortized cost
basis 
  
Revolving

loans

converted to
term loans
  
Total
 
As of September 30, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $0  $0  $0  $0  $0  $0  $7,985  $0  $7,985 
Special Mention
  0   0   0   0   0   0   96   0   96 
Substandard
  0   0   0   0   0   0   97   0   97 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $0  $0  $0  $0  $0  $0  $8,178  $0  $8,178 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
          
YTD charge-offs
  0   0   0   0   0   0   (153)    0   (153) 
YTD recoveries
  0   0   0   0   0   0   38   0   38 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $0  $0  $0  $0  $0  $0  $(115)   $0  $(115) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other Consumer
 
28
Table of Contents
  
Term Loans

Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of December 31, 2020
 
2020
  
2019
  
2018
  
2017
  
2016
  
Prior
 
Internal Risk Grade:
                                      
Pass
  $0  $0  $0  $0  $0  $0  $8,419  $0   $8,419 
Special Mention
   0   0   0   0   0   0   362   0    362 
Substandard
   0   0   0   0   0   0   156   0    156 
Doubtful
   0   0   0   0   0   0   0   0    0 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Total
  $0  $0  $0  $0  $0  $0  $8,937  $0   $8,937 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
          
YTD charge-offs
   0   0   0   0   0   0   (221)   0    (221) 
YTD recoveries
   0   0   0   0   0   0   52   0    52 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
YTD net charge-offs
  $0  $0  $0  $0  $0  $0  $(169)  $0   $(169) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
    
Other Consumer
           
   
Term Loans

Origination Year
  
 
Revolving
 
loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
   
Total
 
As of September 30, 2021
  
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
          
Internal Risk Grade:
                                      
Pass
  $359,777  $337,360  $271,110  $143,594  $38,743  $15,543  $3,065  $0   $1,169,192 
Special Mention
   0   0   0   0   0   6   4   0    10 
Substandard
   0   2   0   0   0   0   0   0    2 
Doubtful
   0   0   0   0   0   0   0   0    0 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Total
  $359,777  $337,362  $271,110  $143,594  $38,743  $15,549  $3,069  $0   $1,169,204 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
          
YTD charge-offs
   (4)   (549)   (580)   (313)   (102)   (176)   (6)   0    (1,730) 
YTD recoveries
   0   76   44   65   18   132   2   0    337 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
YTD net charge-offs
  $(4)  $(473)  $(536)  $(248)  $(84)  $(44)  $(4)  $0   $(1,393) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
     
   
Term Loans

Origination Year
  
Revolving
 
loans
amortized
cost basis
  
Revolving

loans

converted to
term loans
   
Total
 
As of December 31, 2020
  
2020
  
2019
  
2018
  
2017
  
2016
  
Prior
 
          
Internal Risk Grade:
                                      
Pass
  $419,768  $401,958  $231,172  $74,550  $34,435  $7,466  $6,110  $0   $1,175,459 
Special Mention
   0   0   0   0   0   14,763   2   0    14,765 
Substandard
   3   0   0   0   0   2,352   0   0    2,355 
Doubtful
   0   0   0   0   0   1   0   0    1 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Total
  $419,771  $401,958  $231,172  $74,550  $34,435  $24,582  $6,112  $0   $1,192,580 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
          
YTD charge-offs
   (136)   (1,013)   (1,040)   (393)   (228)   (484)   (2)   0    (3,296) 
YTD recoveries
   3   74   113   30   43   216   0   0    479 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
YTD net charge-offs
  $(133)  $(939)  $(927)  $(363)  $(185)  $(268)  $(2)  $0   $(2,817) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
                                       
  
Term Loans Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of March 31, 2022
 
2022
  
2021
  
2020
  
2019
  
2018
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $ 197,844  $ 458,116  $264,408  $ 204,698  $ 102,665  $8,512  $ 3,284  $ 0  $ 1,239,527 
Special Mention
  0   0   0   2   0   9   7   0   18 
Substandard
  0   0   0   0   0   0   0   0   0 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $197,844  $458,116  $264,408  $204,700  $102,665  $8,521  $3,291  $0  $1,239,545 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period charge-offs
  0   (135)   (181)   (117)   (47)   (52)   (1)   0   (533) 
Current-period recoveries
  0   1   19   46   26   69   0   0   161 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current-period net charge-offs
 $0  $(134)  $(162)  $(71)  $(21)  $17  $(1)  $0  $(372) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
     
  
Term Loans Origination Year
  
Revolving loans
amortized cost
basis
  
Revolving

loans

converted to
term loans
  
Total
 
As of December 31, 2021
 
2021
  
2020
  
2019
  
2018
  
2017
  
Prior
 
Internal Risk Grade:
                                    
Pass
 $479,933  $299,582  $ 237,742  $121,924  $30,288  $ 10,878  $3,475  $0  $1,183,822 
Special Mention
  0   0   2   1   0   10   8   0   21 
Substandard
  0   1   0   0   0   0   0   0   1 
Doubtful
  0   0   0   0   0   0   0   0   0 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $479,933  $299,583  $237,744  $121,925  $30,288  $10,888  $3,483  $0  $1,183,844 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD charge-offs
  (101)   (776)   (709)   (483)   (126)   (203)   (6)   0   (2,404) 
YTD recoveries
  5   86   51   101   18   186   2   0   449 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
YTD net charge-offs
 $(96)  $(690)  $(658)  $(382)  $(108)  $(17)  $(4)  $0  $(1,955) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                     
At September 30, 2021March 31, 2022 and December 31, 2020,2021, other real estate owned (“OREO”) included in other assets in the Consolidated Balance Sheets was $16,696$13,641 and $22,595,$14,823, respectively. OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Any adjustment to the fair value at the date of transfer is charged against the allowance for loan losses. Any subsequent valuation adjustments as well as any costs relating to operating, holding or disposing of the property are recorded in other expense in the period incurred. At September 30, 2021, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $17. There were0consumerMarch 31, 2022, there were 0consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as ofcompared to $13 at December 31, 2020.2021.
6. ALLOWANCE FOR CREDIT LOSSES
As of January 1, 2020, United adopted the CECL methodology for measuring credit losses as of January 1, 2020. All disclosures as of
 March 31, 2022 and December 31, 2021
and for the three months ended March 31, 2022 and 2021 are presented in accordance with ASC Topic 326.
Under ASC Topic 326, theThe allowance for loan losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance
29
Table of Contents
is based on the cr
e
ditcredit losses expected to arise over the life of the asset (contractual term). Assets are charged off when United determines that such financial assets are deemed uncollectible or based on regulatory requirements, whichever is earlier. Charge-offs are recognized as a deduction from the allowance for credit losses. Expected recoveries of amounts previously
charged-off,
not to exceed the aggregate of the amount previously
charged-off,
are included in determining the necessary reserve at the balance sheet date.
United made a policy election to present the accrued interest receivable balance separately in its consolidated balance sheets from the amortized cost of a loan. Accrued interest receivable netwas $48,764 (0 allowance for credit losses) and $49,029 (net of an allowance for credit losses of $45,130 and $56,143$8) at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, related to loans and leases are included separately in “Accrued interest receivable” in the consolidated balance sheets. Due to loan interest payment deferrals granted by United under the CARES Act, United assessed the collectability of the accrued interest receivables on these deferring loans and leases. As a result of this assessment, United recorded
did not record
an allowance for credit losses
2
7
Table of $26 and $250Contents
losses for accrued interest receivables not expected to be collected as of September 30, 2021 andMarch 31, 2022 as compared to an allowance for credit losses of $8 as of December 31, 2020, respectively.2021. For all classes of loans and leases receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has 
become 90 days past due, unless the loan is well secured and in the process of collection. Interest received on nonaccrual loans and leases, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal.
The following table represents the accrued interest receivable as of September 30, 2021March 31, 2022 and December 31, 2020:2021:
 
  
Accrued Interest Receivable
   
Accrued Interest Receivable
 
  
At September 30, 2021
   
At December 31, 2020
   
At March 31, 2022
   
At December 31, 2021
 
Commercial Real Estate:
            
Owner-occupied
  $3,343   $5,001   $3,742   $4,172 
Nonowner-occupied
   13,760    15,989    17,305    14,901 
Other Commercial
   9,031    12,320    8,544    9,335 
Residential Real Estate
   9,185    12,558    9,205    10,347 
Construction
   6,859    7,314    7,337    7,411 
Consumer:
            
Bankcard
   0    0    0    0 
Other consumer
   2,978    3,211    2,631    2,871 
  
 
   
 
   
 
   
 
 
  $45,156   $56,393   $ 48,764   $ 49,037 
Less: Allowance for credit losses
   (26)    (250)    (0)    (8) 
  
 
   
 
   
 
   
 
 
Total
  $45,130   $56,143   $48,764   $49,029 
  
 
   
 
   
 
   
 
 
The following table represents the accrued interest receivables written off by reversing interest income for the three months ended March 31, 2022 and nine months ended September 30, 2021 and 2020:2021:
   
Accrued Interest Receivables Written Off by Reversing Interest Income
 
   
Three Months Ended

September 30
   
Nine Months Ended

September 30
 
   
2021
   
2020
   
2021
   
2020
 
Commercial real estate:
                    
Owner-occupied
  $17   $16   $29   $116 
Nonowner-occupied
   59    30    99    75 
Other commercial
   5    40    14    85 
Residential real estate
   8    31    57    165 
Construction & land development
   3    508    3    508 
Consumer:
                    
Bankcard
   0    0    0    0 
Other consumer
   31    29    137    96 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $123   $654   $339   $1,045 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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Table of Contents
   
Accrued Interest Receivables Written Off
by Reversing Interest Income
 
   
Three Months Ended
 
   
March 31
 
   
2022
   
2021
 
Commercial Real Estate:
          
Owner-occupied
  $0   $1 
Nonowner-occupied
   0    36 
Other Commercial
   1    6 
Residential Real Estate
   20    28 
Construction
   0    0 
Consumer:
          
Bankcard
   0    0 
Other consumer
   67    64 
   
 
 
   
 
 
 
Total
  $ 88   $ 135 
   
 
 
   
 
 
 
United estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values or other relevant factors. A reversion to historical loss data occurs via a straight-line method during the year following the
one-year
reasonable and supportable forecast period.
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8
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United pools its loans and leases based on similar risk characteristics in estimating expected credit losses. United has identified the following portfolio segments and measures the allowance for credit losses using the following methods:
 
Method: Probability of Default/Loss Given Default (PD/LGD)
Commercial Real Estate Owner-Occupied
Commercial Real Estate Nonowner-Occupied
Commercial Other
 
Method: Cohort
Residential Real Estate
Construction & Land Development
Consumer
Bankcard
Risk characteristics of commercial real estate owner-occupied loans and commercial other loans and leases are similar in that they are normally dependent upon the borrower’s internal cash flow from operations to service debt. Commercial real estate nonowner-occupied loans differ in that cash flow to service debt is normally dependent on external income from third parties for use of the real estate such as rents, leases and room rates. Residential real estate loans are dependent upon individual borrowers who are affected by changes in general economic conditions, demand for housing and resulting residential real estate valuation. Construction and land development loans are impacted mainly by demand whether for new residential housing or for retail, industrial, office and other types of commercial construction within a given area. Consumer loan pool risk characteristics are influenced by general, regional and local economic conditions.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, but may also include other
non-performing
loans or TDRs, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. These individually evaluated loans are removed from their respective pools and typically represent collateral dependent loans. In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a loan expected to be classified as a TDR.
Expected credit losses are estimated over the contractual term of the loans and leases, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by United.
For past loans and leases acquired through the completion of a transfer, including loans and leases acquired in a business combination, that had evidence of deterioration of credit quality since origination (“PCI”) and accounted for under ASC Topic 310, an entity did not have to reassess whether any loans and leases previously accounted for as PCI meet the definition of purchased credit deteriorated (“PCD”) loans and leases upon adoption of ASC Topic 326. Any changes in the allowance for credit losses for these loans and leases were accounted for as an adjustment to the loan’s amortized cost basis and not as a cumulative-effect adjustment to an entity’s beginning retained earnings.
Non-PCI
loans and leases are now classified as
non-PCD
loans and leases with the adoption of ASC Topic 326. In accordance with ASC Topic 326 guidance, United calculated a PCD rate adjustment for all PCD loans and leases at adoption. Such adjustment created a discount balance for any excess amount not deemed to be credit-related between the PCD recorded balance at the adoption date and the contractual principal and interest balances outstanding.
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Table of Contents
At the acquisition date, an initial allowance for expected credit losses for
non-PCD
loans is estimated and recorded as credit loss expense. The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans. For allowance for credit losses under ASC Topic 326 calculation purposes, United includes its acquired loans and leases in their relevant pool unless they meet the criteria for specific review.
United maintains an allowance for loan losses and a reserve for lending-related commitments such as unfunded loan commitments and letters of credit. The reserve for lending-related commitments of $25,191$36,679 and $19,250$31,442 at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, is separately classified on the balance sheet and is included in other liabilities. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses.
As of September 30, 2021,March 31, 2022, the allowance for credit losses decreased from December 31, 20202021 primarily due to better performance trends within the loan portfolio and improved macroeconomic factors surrounding the
COVID-19
pandemic considered in the determination of the allowance for loan and lease losses at September 30, 2021.portfolio. Reserves are initially determined based on losses identified from the PD/LGD and Cohort models which utilize the Company’s historical information. Then any qualitative adjustments are applied to account for the Company’s view of the future. If current conditions underlying any qualitative adjustment factor were deemed to be materially different than historical conditions, then an adjustment was made for that factor.
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9
Table of Contents
The thirdfirst quarter of 20212022 qualitative adjustments include analyses of the following:
 
Past events
– This includes portfolio trends related to business conditions; past due, nonaccrual, and graded loans and leases; and concentrations.
 
Current conditions
– United considered the continued impact of
COVID-19
on inflation, supply chain issues, labor shortages and the economy as well as loan deferrals and modifications madeconflict in light of the pandemiceastern Europe when making determinations related to factor adjustments, such as changes in economic and business conditions, collateral values and external factors and past due loans and leases.factors.
 
Reasonable and supportable forecasts
– The forecast is determined on a
portfolio-by-portfolio
basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables. The reasonable and supportable forecast selection is subjective in nature and requires more judgment compared to the other components of the allowance. Assumptions for the economic variables were the following:
 
The forecast for real GDP shifted downward in the first quarter, from a projection decreased
from the second quarter of
 2021 but increased 4.00% for 2022 and 2023.at the end of 2021 to 2.80% for 2022 with a more level downward future trendline as compared to the end of 2021. The unemployment rate projection increased slightly
fromremained fairly consistent to the second quarterend of
2021 but was flat for 2022 and 2023. This indicateswith a weakening of the economy for the remainder of the year with the rebound continuing insteady trend expected throughout 2022 and 2023.
 
Greater risk of loss is probable in the hotel and accommodations portfolio due to weakened economic conditions brought on by the pandemic and labor shortages which resulted in a more negative forecast relative to other portfolios and a longer projected recovery period to extend into late 2023 or 2024.
 
Consideration was given to the $1.9 trillion American Rescue Plan (effective March 11, 2021) during the forecast selection process as it is likely this stimulus package continues to have some positive impact on the economy. However, we acknowledge the impact of the stimulus has been fading and will likely have no further impact by the end of the year.
Reversion to historical loss data occurs via a straight-line method during the year following the
one-year
reasonable and supportable forecast period.
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Table of Contents
A progression of the allowance for loan and lease losses, by portfolio segment, for the periods indicated is summarized as follows:
Allowance for Loan and Lease Losses and Carrying Amount of Loans and
Leases For the Three Months Ended March 31, 2022
 
   
Commercial Real Estate
  
Other
Commercial
  
Residential
Real
Estate
  
Construction

& Land
Development
  
Bankcard
  
Other
Consumer
  
Allowance
for
Estimated
Imprecision
   
Total
 
  
Owner-
occupied
  
Nonowner-
occupied
 
Allowance for Loan and Lease Losses:
                                      
Beginning balance
  $ 14,443  $ 42,156  $ 78,432  $ 26,404  $ 39,395  $317  $ 14,869  $ 0   $ 216,016 
Charge-offs
   (31)   (0)   (273)   (494)   (2)   (143)   (533)   0    (1,476) 
Recoveries
   6   75   2,149   880   184   1   161   0    3,456 
Provision
   (1,059)   (5,566)   179   319   2,002   146   577   0    (3,402) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Ending balance
  $13,359  $36,665  $80,487  $27,109  $41,579  $321  $15,074  $0   $214,594 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
 
Allowance for Loan Losses and Carrying Amount of Loans
 
For the Three Months Ended September 30, 2021
 
   
Commercial Real Estate
  
Other
Commercial
  
Residential
Real
Estate
  
Construction
 
&
Land
Development
  
Bankcard
     
Allowance
for
Estimated
Imprecision
  
Total
 
  
Owner-
occupied
  
Nonowner-
occupied
  
Other
Consumer
 
Allowance for Loan Losses:
                                     
Beginning balance
  $19,303  $42,046  $79,881  $26,051  $35,147  $254  $14,863  $0  $217,545 
Charge-offs
   (159)   (39)   (765)   (522)   (128)   (47)   (344)   0   (2,004) 
Recoveries
   623   90   774   1,192   359   8   127   0   3,173 
Provision
   (4,573)   (3,177)   1,539   (1,198)   (292)   38   (160)   0   (7,823) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
  $15,194  $38,920  $81,429  $25,523  $35,086  $253  $14,486  $0  $210,891 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
Allowance for Loan Losses and Carrying Amount of Loans
 
For the Nine Months Ended September 30, 2021
 
   
Commercial Real Estate
  
Other
Commercial
  
Residential
Real
Estate
  
Construction
 
&
Land
Development
  
Bankcard
     
Allowance
for
Estimated
Imprecision
  
Total
 
  
Owner-
occupied
  
Nonowner-
occupied
  
Other
Consumer
 
Allowance for Loan Losses:
                                     
Beginning balance
  $23,354  $49,150  $78,138  $29,125  $39,077  $322  $16,664  $0  $235,830 
Charge-offs
   (369)   (3,140)   (3,389)   (5,928)   (383)   (153)   (1,730)   0   (15,092) 
Recoveries
   707   393   2,603   2,013   407   38   337   0   6,498 
Provision
   (8,498)   (7,483)   4,077   313   (4,015)   46   (785)   0   (16,345) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
  $15,194  $38,920  $81,429  $25,523  $35,086  $253  $14,486  $0  $210,891 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
Allowance for Loan and Lease Losses and Carrying Amount of Loans and Leases
 
For the Year Ended December 31, 2020
 
   
Commercial Real Estate
  
Other
Commercial
  
Residential
Real
Estate
  
Construction
 
&
Land
Development
  
Bankcard
     
Allowance
for
Estimated
Imprecision
  
Total
 
  
Owner-
occupied
  
Nonowner-
occupied
  
Other
Consumer
 
Allowance for Loan and Lease Losses:
                                     
Beginning balance
  $5,554  $8,524  $47,325  $8,997  $3,353  $74  $2,933  $297  $77,057 
Impact of the adoption of ASU
2016-13
on January 1, 2020
   9,737   9,023   (4,829)   13,097   14,817   28   10,745   (297)   52,321 
Impact of the adoption of ASU
2016-13
for PCD loans on
January 1, 2020
   1,843   121   938   174   2,045   0   0   0   5,121 
Initial allowance for PCD loans (acquired during the period)
   1,955   6,418   7,032   652   2,570   0   8   0   18,635 
Charge-offs
   (2,195)   (6,134)   (17,350)   (1,760)   (2,027)   (221)   (3,296)   0   (32,983) 
Recoveries
   795   1,023   4,461   1,063   1,513   52   479   0   9,386 
Provision
   5,665   30,175   40,561   6,902   16,806   389   5,795   0   106,293 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
  $23,354  $49,150  $78,138  $29,125  $39,077  $322  $16,664  $0  $235,830 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Allowance for Loan and Lease Losses and Carrying Amount of Loans and Leases
For the Year Ended December 31, 2021
 
   
Commercial Real Estate
  
Other
Commercial
  
Residential
Real
Estate
  
Construction

& Land
Development
  
Bankcard
  
Other
Consumer
  
Allowance
for
Estimated
Imprecision
   
Total
 
  
Owner-
occupied
  
Nonowner-
occupied
 
Allowance for Loan and Lease Losses:
                                      
Beginning balance
  $23,354  $49,150  $78,138  $29,125  $
 
39,077  $322  $
 
16,664  $0   $
 
235,830 
Allowance for PCD loans (acquired during the period)
   1,241   4,363   5,009   1,192   823   0   1   0    12,629 
Charge-offs
   (414)   (3,531)   (6,182)   (6,016)   (560)   (190)   (2,404)   0    (19,297) 
Recoveries
   869   1,907   4,307   2,400   604   42   449   0    10,578 
Provision
   (10,607)   (9,733)   (2,840)   (297)   (549)   143   159   0    (23,724) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Ending balance
  $14,443  $42,156  $78,432  $26,404  $39,395  $317  $14,869  $0   $216,016 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
 
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7. INTANGIBLE ASSETS
The following is a summary of intangible assets subject to amortization and those not subject to amortization:
 
  
September 30, 2021
   
March 31, 2022
 
  
Community Banking
 
Mortgage Banking
   
Total
   
Community Banking
 
Mortgage Banking
   
Total
 
  
Gross
Carrying
Amount
   
Accumulated
Amortization
 
Gross
Carrying
Amount
   
Accumulated
Amortization
   
Gross
Carrying
Amount
   
Accumulated
Amortization
   
Gross
Carrying
Amount
   
Accumulated
Amortization
 
Gross
Carrying
Amount
   
Accumulated
Amortization
   
Gross
Carrying
Amount
   
Accumulated
Amortization
 
Amortized intangible assets:
                                  
Core deposit intangible assets
  $101,767   ($80,519)  $0   $0   $101,767   ($80,519)   $105,165   ($83,407)  $0   $        0   $105,165   ($83,407) 
  
 
   
 
  
 
   
 
   
 
   
 
   
 
   
 
  
 
   
 
   
 
   
 
 
Non-amortized
intangible assets:
                                  
George Mason trade name
  $0     $1,080      $1,080      $0     $1,080      $1,080    
Crescent trade name
   0      196       196       0      196       196    
  
 
     
 
      
 
      
 
     
 
      
 
    
Total
  $0     $1,276      $1,276      $0     $1,276      $1,276    
  
 
     
 
      
 
      
 
     
 
      
 
    
Goodwill not subject to amortization
  $1,804,725     $5,315      $1,810,040      $1,883,929     $5,315      $1,889,244    
  
 
     
 
      
 
      
 
     
 
      
 
    
 
  
December 31, 2020
 
  
Community Banking
 
Mortgage Banking
   
Total
 
  
Gross
Carrying
Amount
   
Accumulated
Amortization
 
Gross
Carrying
Amount
   
Accumulated
Amortization
   
Gross
Carrying
Amount
   
Accumulated
Amortization
 
Amortized intangible assets:
                 
Core deposit intangible assets
  $101,767   ($76,120)  $0   $0   $101,767   ($76,120) 
  
 
   
 
  
 
   
 
   
 
   
 
 
Non-amortized
intangible assets:
                 
George Mason trade name
  $0     $1,080      $1,080    
Crescent trade name
   0      196       196    
  
 
     
 
      
 
    
Total
  $0     $1,276      $1,276    
  
 
     
 
      
 
    
Goodwill not subject to amortization
  $1,791,533     $5,315      $1,796,848    
  
 
     
 
      
 
    

                         
   
December 31, 2021
 
   
Community Banking
  
Mortgage Banking
   
Total
 
   
Gross
Carrying
Amount
   
Accumulated
Amortization
  
Gross
Carrying
Amount
   
Accumulated

Amortization
   
Gross

Carrying

Amount
   
Accumulated

Amortization
 
Amortized intangible assets:
                             
Core deposit intangible assets
  $105,165   (
$
82,028)  $0   $        0   $105,165   (
$
82,028) 
   
 
 
   
 
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Non-amortized
intangible assets:
                             
George Mason trade name
  $0       $1,080        $1,080      
Crescent trade name
   0        196         196      
   
 
 
       
 
 
        
 
 
      
Total
  $0       $1,276        $1,276      
   
 
 
       
 
 
        
 
 
      
Goodwill not subject to amortization
  $1,881,179       $5,315        $1,886,494      
   
 
 
       
 
 
        
 
 
      
United incurred amortization expense of $1,466$1,379 and $4,399$1,466 for the threequarters ended March 31, 2022 and nine months ended September 30, 2021, as compared to $1,691 and $4,914 for the three and nine months ended September 30, 2020, respectively.
For the first nine months of 2021, goodwill of $13,192 was recorded for the Carolina Financial acquisition due to
 measurement period 
adjustments in current and deferred income taxes. The following table provides a reconciliation of goodwill:
 
   
Community
Banking
   
Mortgage
Banking
   
Total
 
Goodwill at December 31, 2020
  $1,791,533   $5,315   $1,796,848 
Goodwill from Carolina Financial acquisition
   13,192    0    13,192 
   
 
 
   
 
 
   
 
 
 
Goodwill at September 30, 2021
  $1,804,725   $5,315   $1,810,040 
   
 
 
   
 
 
   
 
 
 
             
   
Community
Banking
   
Mortgage
Banking
   
Total
 
Goodwill at December 31, 2021
  $1,881,179   $5,315   $1,886,494 
Addition
to goodwill from Community Bankers Trust acquisition
   2,750    0    2,750 
   
 
 
   
 
 
   
 
 
 
Goodwill at March 31, 2022
  $1,883,929   $5,315   $1,889,244 
   
 
 
   
 
 
   
 
 
 
 
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The addition during the first quarter of 2022 to goodwill from the Community Bankers Trust acquisiton was due mainly to establish a reserve for income tax contingencies.
The following table sets forth the anticipated amortization expense for intangible assets for the years subsequent to 2020:​​​​​​​
2021:
 
  
Year
  
Amount
   
Amount
 
2021
  $5,866 
2022
   4,983   $5,516 
2023
   4,680    5,116 
2024
   3,255    3,639 
2025
   2,942    3,282 
2026 and thereafter
   3,921 
2026
   2,758 
2027 and thereafter
   2,826 
8. MORTGAGE SERVICING RIGHTS
Mortgage loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The value of mortgage servicing rights (“MSRs”) is included on the Company’s Consolidated Balance Sheets.
The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“MSRs”) at fair value, if practicable. For subsequent measurement purposes, the Company measures servicing assets and liabilities based on the lower of cost or market using the amortization method. MSRs are amortized in proportion to, and over the period of, estimated net servicing income. The amortization of the MSRs is analyzed periodically and is adjusted to reflect changes in prepayment rates and other estimates.
The Company evaluates potential impairment of MSRs based on the difference between the carrying amount and current estimated fair value of the servicing rights. In determining impairment, the Company aggregates all servicing rights and stratifies them into tranches based on predominant risk characteristics. If impairment exists, a valuation allowance is established for any excess of amortized cost over the current estimated fair value by a charge to income. If the Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income.
Service fee income is recorded for fees earned for servicing mortgage loans under servicing agreements with the Federal Nationalnational Mortgage Association (“FNMA”), the Federal Home Loanhome loan Mortgage Corporation (“FHLMC”), Government Nationalnational Mortgage Association (“GNMA”) and certain private investors. The fees are based on a contractual percentage of the outstanding principal balance of the loans serviced and are recorded in noninterest income. Amortization of MSRs and mortgage servicing costs are charged to expense when incurred.
The
unpaid principal balances of loans serviced for others were approximately $3,723,206 $
3,623,207
at September 30, 2021 March 
31
,
2022
and $3,587,953 $
3,698,998
at December 
31 2020.
,
2021
.
The estimated fair value of the mortgage servicing rights was $26,005$37,740 and $20,955$27,355 at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The estimated fair value of servicing rights at September 30, 2021March 31, 2022 was determined using a net servicing fee of 0.26%, average discount rates ranging from 10.50% to 12.00%10.98% with a weighted average discount rate of 10.61%, average constant prepayment rates (“CPR”) ranging from 11.48%8.02% to 21.71%13.24% with a weighted average prepayment rate of 16.59%9.79%, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.96%2.65%. The estimated fair value of servicing rights at December 31, 20202021 was determined using a net servicing fee of 0.26%, average discount rates ranging from 9.50%10.50% to 14.07%11.71% with a weighted average discount rate of 10.62%10.60%, average CPRconstant prepayment rates (“CPR”) ranging from 7.98%12.59% to 18.42%21.20% with a weighted average prepayment rate of 14.60%16.56%, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.88%2.09%. Please refer to Note 1415 in these Notes to Consolidated Financial Statements for additional information concerning the fair value of MSRs.
As disclosed in Note 2 of these Notes to Consolidated Financial Statements, the Company acquired $20,123 of mortgage servicing rights from its acquisition of Carolina Financial Corporation on May 1, 2020.
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The following presents the activity in mortgage servicing rights, including their valuation allowance for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:
 
  
Three Months Ended

September 30
   
Nine Months Ended

September 30
     
  
2021
   
2020
   
2021
   
2020
   
Three Months Ended

March 31, 2022
   
Three Months Ended

March 31, 2021
 
MSRs beginning balance
  $24,173   $20,910   $22,338   $0   $24,027   $22,338 
Addition from acquisition of subsidiary
   0    0    0    20,123 
Amount capitalized
   2,524    2,500    8,859    4,391    687    3,224 
Amount amortized
   (2,478)    (1,887)    (6,978)    (2,991)    (1,625)    (2,161) 
  
 
   
 
   
 
   
 
   
 
   
 
 
MSRs ending balance
  $24,219   $21,523   $24,219   $21,523   $23,089   $23,401 
  
 
   
 
   
 
   
 
   
 
   
 
 
MSRs valuation allowance beginning balance
  $(1,633)   $(710)   $(1,383)   $0   $(883)   $(1,383) 
Aggregate additions charged and recoveries credited to operations
   250    0    629    0    883    0 
MSRs impairment
   0    (400)    (629)    (1,110)    (0)    (0) 
  
 
   
 
   
 
   
 
   
 
   
 
 
MSRs valuation allowance ending balance
  $(1,383)   $(1,110)   $(1,383)   $(1,110)   $(0)   $(1,383) 
  
 
   
 
   
 
   
 
   
 
   
 
 
MSRs, net of valuation allowance
  $22,836   $20,413   $22,836   $20,413   $23,089   $22,018 
  
 
   
 
   
 
   
 
   
 
   
 
 
In determining impairment, theThe Company aggregates alldid not record any temporary impairments on mortgage servicing rights for the three months ended March 31, 2022 and stratifies them into tranches based on predominant risk characteristics. 2021.
The estimated amortization expense is based on current information regarding future loan payments and prepayments. Amortization expense could change in future periods based on changes in the volume of prepayments and economic factors.
9. LEASES
United determines if an arrangement is a lease at inception. United and certain subsidiaries have entered into various noncancelable-operating leases for branch and loan production offices as well as operating facilities. Operating leases are included in operating lease
right-of-use
(“ROU”) assets and operating lease liabilities on the Consolidated Balance Sheets. Operating leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. Presently, United does not have any finance leases.
United’s operating leases are subject to renewal options under various terms. United’s operating leases have remaining terms of 1 to 1116 years, some of which include options to extend leases generally for periods of 5 years. United rents or subleases certain real estate to third parties. Our sublease portfolio generally consists of operating leases to other organizations for former branch offices.
ROU assets represent United’s right to use an underlying asset for the lease term and lease liabilities represent United’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of United’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend the lease when it is reasonably certain that United will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The components of lease expense were as follows:
 
     
Three Months Ended
 
  
Classification
  
Three Months
Ended

September 30, 
2021
   
Three Months
Ended

September 30, 
2020
   
Classification
  
March 31, 2022
   
March 31, 2021
 
Operating lease cost
  Net occupancy expense  $5,360   $5,704   Net occupancy expense  $5,129   $5,349 
Sublease income
  Net occupancy expense   (291)    (102)   Net occupancy expense   (168)    (297) 
     
 
   
 
      
 
   
 
 
Net lease cost
     $5,069   $5,602      $4,961   $5,052 
     
 
   
 
      
 
   
 
 
 
   
Classification
  
Nine Months

Ended

September 30, 
2021
   
Nine Months

Ended

September 30, 
2020
 
Operating lease cost
  Net occupancy expense  $16,037   $16,665 
Sublease income
  Net occupancy expense   (946)    (496) 
      
 
 
   
 
 
 
Net lease cost
     $15,091   $16,169 
      
 
 
   
 
 
 
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Supplemental balance sheet information related to leases was as follows:
 
  
Classification
  
September 30, 
2021
   
December 31, 
2020
   
Classification
  
March 31, 2022
   
December 31, 2021
 
Operating lease
right-of-use
assets
  
Operating lease right-of-use assets
  $75,593   $69,520   Operating lease
right-of-use
assets		  $77,097   $81,942 
Operating lease liabilities
  Operating lease liabilities  $80,518   $73,213   Operating lease liabilities  $81,678   $86,703 
Other information related to leases was as follows:
 
   
September 30, 2021March 31, 2022
 
Weighted-average remaining lease term:
     
Operating leases
   6.56.83 years 
Weighted-average discount rate:
     
Operating leases
   2.202.12% 
Supplemental cash flow information related to leases was as follows:
 
  
Three Months Ended
   
Three Months Ended
 
  
September 30,
 2021
   
September 30, 
2020
   
March 31, 2022
   
March 31, 2021
 
Cash paid for amounts in the measurement of lease liabilities:
            
Operating cash flows from operating leases
  $5,533   $5,854   $5,310   $5,446 
ROU assets obtained in the exchange for lease liabilities
   13,606    7,148 
 
  
Nine Months Ended
 
  
September 30, 2021
   
September 30, 2020
 
Cash paid for amounts in the measurement of lease liabilities:
      
Operating cash flows from operating leases
  $16,560   $16,593 
ROU assets obtained in the exchange for lease liabilities
   19,888    19,480 
ROU assets obtained in the exchange for lease liabilties
   1,601    4,443 
Maturities of lease liabilities by year and in the aggregate, under operating leases with initial or remaining terms of one year or more, for years subsequent to December 31, 2020,2021, consists of the following as of September 30, 2021 and DecemberMarch 31, 2020:2022:
 
   
Amount
 
Year
  
As of

September 30, 2021
   
As of

December 31, 2020
 
2021
  $5,168   $20,172 
2022
   18,395    16,196 
2023
   15,354    12,723 
2024
   10,830    8,242 
2025
   8,026    5,516 
Thereafter
   28,217    15,330 
   
 
 
   
 
 
 
Total lease payments
   85,990    78,179 
Less: imputed interest
   (5,472)    (4,966) 
   
 
 
   
 
 
 
Total
  $80,518   $73,213 
   
 
 
   
 
 
 
Year
  
Amount
 
2022
  $14,371 
2023
   17,243 
2024
   12,382 
2025
   9,256 
2026
   7,947 
Thereafter
   26,324 
   
 
 
 
Total lease payments
   87,523 
Less: imputed interest
   (5,845) 
   
 
 
 
Total
  $81,678 
   
 
 
 
10. SHORT-TERM BORROWINGS
Federal funds purchased
At March 31, 2022 and securities December 31, 2021, short-term borrowings were as follows:
   
As of

March 31, 2022
   
As of

December 31, 2021
 
Federal funds purchased
  $0   $0 
Securities sold under agreements to repurchase
   136,370    128,844 
   
 
 
   
 
 
 
Total short-term borrowings
  $136,370   $128,844 
   
 
 
   
 
 
 
Securities
sold under agreements to repurchase arehave been a significant source of funds for the Company. company. The securities sold under agreements to repurchase were accounted for as collateralized financial transactions. They were recorded at the amounts at which the securities were acquired or sold plus accrued interest.
United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $230,000. These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions. At September 30, 2021, United did 0t have any federal funds purchased while total securities sold under agreements to repurchase (“REPOs”) were $123,018. The securities sold under agreements to repurchase were accounted for as collateralized financial transactions. They were recorded at the amounts at which the securities were acquired or sold plus accrued interest.
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United
has a $20,000 $
20,000
line of credit with an unrelated financial institution to provide for general liquidity needs. The line is an unsecured, revolving line of credit. The line will beis renewable on a
360
360-day
day basis and will carrycarries an indexed, floating-rate of interest. The line requires compliance with various financial and nonfinancial covenants. At September 30, 2021,March 
31
,
2022
, United had 0outstanding
0
outstanding balance under this line of credit.
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11. LONG-TERM BORROWINGS
United’s subsidiary bank is a member of the Federal Home Loan Bank (“FHLB”). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a mix of single-family residential mortgage loans, commercial loans and investment securities. At September 30, 2021,March 31, 2022, United had an unused borrowing amount of approximately $7,060,714$7,668,153 available subject to delivery of collateral after certain trigger points. Advances may be called by the FHLB or redeemed by United based on predefined factors and penalties.
At September 30, 2021, $532,782March 31, 2022, $531,615 of FHLB advances with a weighted-average contractual interest rate of 0.34%0.48% and a weighted-average effective interest rate of 0.55% are scheduled to mature within the next four years. The weighted-average effective rate considers the effect of any interest rate swaps designated as
cash flow
hedges outstanding at March 31, 2022 to manage interest rate risk on its long-term debt.
The scheduled maturities of these FHLB borrowings are as follows:
 
Year
  
Amount
 
2021
  $500,000 
2022
   21,648 
2023
   0 
2024
   0 
2025 and thereafter
   11,134 
   
 
 
 
Total
  $532,782 
   
 
 
 
Year
  
Amount
 
2022
  $520,625 
2023
   0 
2024
   0 
2025
   10,990 
2026 and thereafter
   0 
   
 
 
 
Total
  $531,615 
   
 
 
 
At September 30, 2021,
March 31, 2022, United had a total of19statutoryof twenty statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (“Capital Securities”) with the proceeds invested in junior subordinated debt securities (“Debentures”) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. At September 30, 2021 and December 31, 2020,United assumed $4,124 in aggregate principal amount of a LIBOR-indexed floating rate subordinated note in the outstanding balance of the Debentures was $271,201 and $269,972, respectively.Community Bankers Trust merger. United 
also assumed $10,000 in aggregate principal amount of
fixed-to-floating
rate subordinated notes in the Carolina Financial
Corporation 
acquisition. At September 30, 2021March 31, 2022 and December 31, 2020,2021, the outstanding balance of the subordinated notes was $9,868$9,877 and $9,865. The amounts for$9,872, respectively. At March 31, 202
2
 and December 31, 2021, the outstanding balance of the Debentures was $275,743 and the subordinated notes are$275,323, respectively, and was included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.” The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities.
Under the provisions of the junior subordinated debt, United has the right to defer payment of interest on the junior subordinated debt at any time, or from time to time, for periods not exceeding five years. If interest payments on the junior subordinated debt are deferred, the dividends on the Capital Securities are also deferred. Interest on the junior subordinated debt is cumulative.
In accordance with the fully-phased in “Basel III Capital Rules” as published by United’s primary federal regulator, the Federal Reserve, United is unable to consider the Capital Securities or the subordinated notes as Tier 1 capital, but rather the Capital Securities and subordinated notes are included as a component of United’s Tier 2 capital. United can include the Capital Securities and subordinated notes in its Tier 2 capital on a permanent basis.

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12. COMMITMENTS AND CONTINGENT LIABILITIES
Lending-related Commitments
United is a party to financial instruments with
off-balance-sheet
risk in the normal course of business to meet the financing needs of its customers and to alter its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby letters of credit, and interest rate swap agreements. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements.
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United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for
on-balance
sheet instruments. Collateral may be obtained, if deemed necessary, based on management’s credit evaluation of the counterparty.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily, and historically do not, represent future cash requirements. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation of the counterparty. United had approximately $6,964,784$7,117,518 and $5,730,876$6,847,550 of loan commitments outstanding as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, approximately 43%35% of which contractually expire within one year. IncludedExcluded in the September 30,March 31, 2022 and December 31, 2021 amountamounts above are commitments to extend credit of $686,233$714,634 and $571,792, respectively, related to mortgage loan funding commitments of United’s mortgage banking segment andwhich are of a short-term nature.
Commercial and standby letters of credit are agreements used by United’s customers as a means of improving their credit standing in their dealings with others. Under these agreements, United guarantees certain financial commitments of its customers. A commercial letter of credit is issued specifically to facilitate trade or commerce. Typically, under the terms of a commercial letter of credit, a commitment is drawn upon when the underlying transaction is consummated as intended between the customer and a third party. As of March 31, 2022 and December 31, 2021, United had $3,055$17,408 and $5,092$14,774 of commercial letters of credit outstanding, as of September 30, 2021 and December 31, 2020, respectively. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of $164,061$155,933 and $134,916$164,743 as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. In accordance with the Contingencies Topic of the FASB Accounting Standards Codification, United has determined that substantially all of its letters of credit are renewed on an annual basis and the fees associated with these letters of credit are immaterial.
Mortgage Repurchase Reserve
United’s mortgage banking segment provides for its estimated exposure to repurchase loans previously sold to investors for which borrowers failed to provide full and accurate information on their loan application or for which appraisals have not been acceptable or where the loan was not underwritten in accordance with the loan program specified by the loan investor, and for other exposure to its investors related to loan sales activities. United evaluates the merits of each claim and estimates its reserve based on actual and expected claims received and considers the historical amounts paid to settle such claims. United’s mortgage banking segment had a reserve of $1,209 and $1,216$1,150 as of September 30, 2021March 31, 2022 and December 31, 2020, respectively.2021.
United has derivative counter-party risk that may arise from the possible inability of United’s mortgage banking segment’s third party investors to meet the terms of their forward sales contracts. United’s mortgage banking segment works with third-party investors that are generally well-capitalized, are investment grade and exhibit strong financial performance to mitigate this risk. United does not expect any third-party investor to fail to meet its obligation.
Legal Proceedings
United and its subsidiaries are currently involved in various legal proceedings in the normal course of business. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position.
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Table of Contents
Regulatory Matters
A variety of consumer products, including mortgage and deposit products, and certain fees and charges related to such products, have come under increased regulatory scrutiny. It is possible that regulatory authorities could bring enforcement actions, including civil money penalties, or take other actions against United in regard to these consumer products. United
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Table of Contents
could also determine of its own accord, or be required by regulators, to refund or otherwise make remediation payments to customers in connection with these products. It is not possible at this time for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss related to such matters.
13. DERIVATIVE FINANCIAL INSTRUMENTS
United accounts for its derivative financial instruments in accordance with ASC Topic 815 which requires alluses derivative instruments to be carried at fair valuehelp aid against adverse price changes or interest rate movements on the balance sheet.value of certain assets or liabilities and on future cash flows. These derivatives may consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. United has designated certainalso executes derivative instruments usedwith its commercial banking customers to manage interest rate risk as hedge relationships with certain assets, liabilities or cash flows being hedged. Certain derivatives used for interest ratefacilitate its risk management are not designated in a hedge relationship.strategies.
Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
United uses derivative instruments to help aid against adverse price changes or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives may consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. United also executes derivative instruments with its commercial banking customers to facilitate its risk management strategies.
During the second quarter of 2020, United entered into a new interest rate swap derivative designated as a cash flow hedge. The notional amount of the cash flow hedge derivative totaled $250,000. The derivative is intended to hedge the changes in cash flows associated with floating rate FHLB borrowings. United is required to
pay-fixed
0.59% and receive-variable
1-month
LIBOR with monthly resets. The tenor of the interest rate swap derivative is 10 years with an expiration date in June 2030. During the third quarter of 2020, United entered into an additional interest rate swap derivative designated as a cash flow hedge. The notional amount of the cash flow hedge derivative totaled $250,000. The derivative is intended to hedge the changes in cash flows associated with floating rate FHLB borrowings. United is required to
pay-fixed
0.19%
and receive-variable
1-month
LIBOR with monthly resets. The tenor of the interest rate swap derivative is 4 years with an expiration date in August 2024. As of September 30, 2021,March 31, 2022, United has determined that no forecasted transactions related to its cash flow hedges resulted in gains or losses pertaining to cash flow hedge reclassification from AOCI to income because the forecasted transactions became probable of not occurring. United estimates that $1,384$6,425 will be reclassified from AOCI as an increase to interest expense over the next
12-months
following September 30, 2021March 31, 2022 related to the cash flow hedges. As of September 30, 2021,March 31, 2022, the maximum length of time over which forecasted transactions are hedged is nine years.

At inception of a hedge relationship, United formally documents the hedged item, the particular risk management objective, the nature of the risk being hedged, the derivative being used, how effectiveness of the hedge will be assessed and how the ineffectiveness of the hedge will be measured. United also assesses hedge effectiveness at inception and on an ongoing basis using regression analysis. Hedge ineffectiveness is measured by using the change in fair value method. The change in fair value method compares the change in the fair value of the hedging derivative to the change in the fair value of the hedged exposure, attributable to changes in the benchmark rate.
United through its mortgage banking subsidiaries enters into interest rate lock commitments to finance residential mortgage loans with its customers. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by United. Interest

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rate risk arises on these commitments and subsequently closed loans if interest rates change between the time of the interest rate lock and the delivery of the loan to the investor. Market risk on interest rate lock commitments and mortgage loans held for sale is managed using corresponding forward mortgage loan sales contracts. United is a party to these forward mortgage loan sales contracts to sell loans servicing released and short sales of mortgage-backed securities. When the interest rate is locked with the borrower, the rate lock commitment, forward sale agreement, and mortgage-backed security position are undesignated derivatives and marked to fair value through earnings. The fair value of the rate lock derivative includes the servicing premium and the interest spread for the difference between retail and wholesale mortgage rates. Income from mortgage banking activities includes the gain recognized for the period presented and associated elements of fair value.
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Table of Contents
United is subject to the Dodd-Frank Act clearing requirement for eligible derivatives. United has executed and cleared eligible derivatives through the London Clearing House (“LCH”). Variation margin at the LCH is distinguished as
settled-to-market
and settled daily based on the prior day value, rather than
collateralized-to-market.
The total notional amount of interest rate swap derivatives cleared through the LCH include $500,000 for asset derivatives as of September 30, 2021.March 31, 2022. The related fair value on a net basis approximate 0.
The following tables disclose the derivative instruments’ location on the Company’s Consolidated Balance Sheets and the notional amount and fair value of those instruments at September 30, 2021March 31, 2022 and December 31, 2020.2021.

 
   
Asset Derivatives
 
   
September 30, 2021
   
December 31, 2020
 
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
 
Cash Flow Hedges:
                              
Interest rate swap contracts
(hedging FHLB borrowings)
   Other assets   $500,000   $17,833    Other assets   $500,000   $4,378 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total Cash Flow Hedges
       $500,000   $17,833        $500,000   $4,378 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives designated as hedging instruments
       $500,000   $17,833        $500,000   $4,378 
        
 
 
   
 
 
        
 
 
   
 
 
 
Derivatives not designated as hedging instruments
                              
Forward loan sales commitments
   Other assets   $34,891   $262    Other assets   $62,418   $1,581 
TBA mortgage-backed securities
   Other assets    727,521    4,194    Other assets    0    0 
Interest rate lock commitments
   Other assets    684,170    14,447    Other assets    973,350    38,332 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives not designated as hedging instruments
       $1,446,582   $18,903        $1,035,768   $39,913 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total asset derivatives
       $1,946,582   $36,736        $1,535,768   $44,291 
        
 
 
   
 
 
        
 
 
   
 
 
 
  
   
Liability Derivatives
 
   
September 30, 2021
   
December 31, 2020
 
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
 
Derivatives designated as hedging instruments
                              
Fair Value Hedges:
                              
Interest rate swap contracts
(hedging commercial loans)
   Other liabilities   $73,606   $3,879    Other liabilities   $77,011   $6,782 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total Fair Value Hedges
       $73,606   $3,879        $77,011   $6,782 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives designated as hedging instruments
       $73,606   $3,879        $77,011   $6,782 
        
 
 
   
 
 
        
 
 
   
 
 
 
Derivatives not designated as hedging instruments
                              
Forward loan sales commitments
   Other liabilities   $31,504   $222    Other liabilities   $0   $0 
Interest rate lock commitments
   Other liabilities    474,719    130         789,000    6,276 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives not designated as hedging instruments
       $506,223   $352        $789,000   $6,276 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total liability derivatives
       $579,829   $4,231        $866,011   $13,058 
        
 
 
   
 
 
        
 
 
   
 
 
 
   
Asset Derivatives
 
   
March 31, 2022
   
December 31, 2021
 
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
 
Derivatives designated as hedging instruments
                              
Fair Value Hedges:
                              
Interest rate swap contracts (hedging commercial loans)
   Other assets   $44,167   $136    Other assets   $0   $0 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total Fair Value Hedges
       $44,167   $136        $0   $0 
Cash Flow Hedges:
                              
Interest rate swap contracts (hedging FHLB borrowings)
   Other assets   $500,000   $44,364    Other assets   $500,000   $21,328 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total Cash Flow Hedges
       $500,000   $44,364        $500,000   $21,328 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives designated as hedging instruments
       $544,167   $44,500        $500,000   $21,328 
        
 
 
   
 
 
        
 
 
   
 
 
 
Derivatives not designated as hedging instruments
                              
Forward loan sales commitments
   Other assets   $0   $0    Other assets   $33,349   $430 
TBA mortgage-backed securities
   Other assets    546,450    11,067    Other assets    133,747    127 
Interest rate lock commitments
   Other assets    316,944    5,984    Other assets    467,472    10,380 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives not designated as hedging instruments
       $863,394   $17,051        $634,568   $10,937 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total asset derivatives
       $1,407,561   $61,551        $1,134,568   $32,265 
        
 
 
   
 
 
        
 
 
   
 
 
 
 
   
Liability Derivatives
 
   
March 31, 2022
   
December 31, 2021
 
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
 
Derivatives designated as hedging instruments
                              
Fair Value Hedges:
                              
Interest rate swap contracts (hedging commercial loans)
   Other liabilities   $14,144   $84    Other liabilities   $72,447   $3,197 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total Fair Value Hedges
       $14,144   $84        $72,447   $3,197 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives designated as hedging instruments
       $14,144   $84        $72,447   $3,197 
        
 
 
   
 
 
        
 
 
   
 
 
 
41
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Liability Derivatives
 
   
March 31, 2022
   
December 31, 2021
 
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
   
Balance

Sheet

Location
   
Notional

Amount
   
Fair

Value
 
Derivatives not designated as hedging instruments
            
Forward loan sales commitments
   Other liabilities   $38,757   $655    Other liabilities   $15,005   $36 
TBA mortgage-backed securities
   
Oth
er liabilities

    0    0    
Other liabilities
    550,000    470 
Interest rate lock commitments
   Other liabilities    412,808    4,867    
Other liabilities
    24,743    25 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total derivatives not designated as hedging instruments
       $451,565   $5,522        $589,748   $531 
        
 
 
   
 
 
        
 
 
   
 
 
 
Total liability derivatives
       $465,709   $5,606        $662,195   $3,728 
        
 
 
   
 
 
        
 
 
   
 
 
 
The following table represents the carrying a
m
ountamount of the hedged assets/(liabilities) and the cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities) that are designated as a fair value accounting relationship as of September 30, 2021March 31, 2022 and December 31, 2020.2021.
 
     
September 30, 2021
 
Derivatives in Fair Value
Hedging Relationships
  
Location in the Statement
 
of

Condition
  
March 31, 2022
Carrying Amount of
 
the

Hedged
 
Assets/(Liabilities)
  
Cumulative Amount of Fair
Value Hedging Adjustment
Included in the Carrying
Amount of the Hedged
Assets/(Liabilities)
  
Cumulative Amount of Fair
Value Hedging Adjustment
Remaining for any Hedged
Assets/ (Liabilities) for
which Hedge Accounting
has been Discontinued
  
Location in the Statement
of Condition
  
Carrying Amount of
the Hedged

Assets/(Liabilities)
   
Cumulative Amount
of Fair Value Hedging
Adjustment Included
in the Carrying
Amount of the Hedged
Assets/(Liabilities)
   
Cumulative Amount of
Fair Value Hedging
Adjustment Remaining for
any Hedged Assets/
(Liabilities) for which
Hedge Accounting has
been Discontinued
 
Interest rate swaps
  Loans, net of unearned income  $74,368   $(3,879)   $0   Loans, net of unearned income  $ 59,047  $ 53  $ 0
    
     
December 31, 2020
 
Derivatives in Fair Value
Hedging Relationships
  
Location in the Statement
 
of Condition
  
December 31, 2021
Carrying Amount of
 
the

Hedged
 
Assets/(Liabilities)
  
Cumulative Amount of Fair
Value Hedging Adjustment
Included in the Carrying
Amount of the Hedged
Assets/(Liabilities)
  
Cumulative Amount of Fair
Value Hedging Adjustment
Remaining for any Hedged
Assets/ (Liabilities) for
which Hedge Accounting
has been Discontinued
  
Location in the Statement
of Condition
  
Carrying Amount of
the Hedged
Assets/(Liabilities)
   
Cumulative Amount
of Fair Value Hedging
Adjustment Included
in the Carrying
Amount of the Hedged
Assets/(Liabilities)
   
Cumulative Amount of
Fair Value Hedging
Adjustment Remaining for
any Hedged Assets/
(Liabilities) for which
Hedge Accounting has
been Discontinued
 
Interest rate swaps
  Loans, net of unearned income  $77,810   $(6,782)   $0   Loans, net of unearned income  $ 73,232  $ (3,197)  $ 0
Derivative
contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Credit risk arises from the possible inability of counterparties to meet m
eet
the terms of their contracts. United’s exposure is limited to the replacement value of the contracts rather than the notional amount of the contract. The Company’s agreements generally contain provisions that limit the unsecured exposure up to an agreed upon threshold. Additionally, the Company attempts to minimize credit risk through certain approval processes established by management.
The effect of United’s derivative financial instruments on its unaudited Consolidated Statements of Income for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 are presented as follows:
 
      
Three Months Ended
 
   
Income Statement
Location
  
September 30,
2021
   
September 30,
2020
 
Derivatives in hedging relationships
             
Cash flow Hedges:
             
Interest rate swap contracts
  Interest on long-term borrowings  $(382)   $0 
Fair Value Hedges:
             
Interest rate swap contracts
  Interest and fees on loans  $(447)   $(409) 
      
 
 
   
 
 
 
Total derivatives in hedging relationships
     $(829)   $(409) 
      
 
 
   
 
 
 
Derivatives not designated as hedging instruments
             
Forward loan sales commitments
  Income from Mortgage Banking Activities  $(257)   $246 
TBA mortgage-backed securities
  Income from Mortgage Banking Activities   5,766    1,604 
Interest rate lock commitments
  Income from Mortgage Banking Activities   (1,305)    20,915 
      
 
 
   
 
 
 
Total derivatives not designated as hedging instruments
     $4,204   $22,765 
      
 
 
   
 
 
 
Total derivatives
     $3,375   $22,356 
      
 
 
   
 
 
 
      
Three Months Ended
 
   
Income Statement
Location
  
March 31,
2022
  
March 31,
2021
 
Derivatives in hedging relationships
            
Fair Value Hedges:
            
Interest rate swap contracts
  Interest and fees on loans  $(601)  $(235) 
Cash flow Hedges:
            
Interest rate swap contracts  Interest on long-term borrowings  $(342)  $(223) 
      
 
 
  
 
 
 
Total derivatives in hedging relationships
     $(943)  $(458) 
      
 
 
  
 
 
 
 
42
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Income Statement
Location
  
Nine Months Ended
      
Three Months Ended
 
September 30,
2021
   
September 30,
2020
 
Derivatives in hedging relationships
         
Cash flow Hedges:
         
Interest rate swap contracts
  Interest on long-term borrowings  $(968)   $0 
Fair Value Hedges:
         
Interest rate swap contracts
  Interest and fees on loans  $(1,240)   $(1,129) 
     
 
   
 
 
Total derivatives in hedging relationships
     $(2,208)   $(1,129) 
     
 
   
 
   
Income Statement
Location
  
March 31,
2022
 
March 31,
2021
 
Derivatives not designated as hedging instruments
                 
Forward loan sales commitments
  Income from Mortgage Banking Activities  $(1,541)   $(315)   Income from Mortgage Banking Activities  $(1,049)  $(2,990) 
TBA mortgage-backed securities
  Income from Mortgage Banking Activities   10,470    (167)   Income from Mortgage Banking Activities   11,410   24,163 
Interest rate lock commitments
  Income from Mortgage Banking Activities   (17,292)    33,084   Income from Mortgage Banking Activities   (3,704)   (6,991) 
     
 
   
 
      
 
  
 
 
Total derivatives not designated as hedging instruments
     $(8,363)   $32,602      $6,657  $14,182 
     
 
   
 
      
 
  
 
 
Total derivatives
     $(10,571)   $31,473      $5,714  $13,724 
     
 
   
 
      
 
  
 
 
14. FAIR VALUE MEASUREMENTS
United determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which also clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect United’s market assumptions.
The three levels of the fair value hierarchy based on these two types of inputs are as follows:
 
Level 1  -  Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2  -  Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
Level 3  -  Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.
When determining the fair value measurements for assets and liabilities, United looks to active and observable markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are 0t traded in active markets, United looks to market observable data for similar assets and liabilities and classifies such items as Level 2. Nevertheless, certain assets and liabilities are 0t actively traded in observable markets and United must use alternative valuation techniques using unobservable inputs to determine a fair value and classifies such items as Level 3. For assets and liabilities that are 0t actively traded, the fair value measurement is based primarily upon estimates that require significant judgment. Therefore, the results may 0t be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there are inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement.
In accordance with ASC Topic 820, the following describes the valuation techniques used by United to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.
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Table of Contents
Securities available for sale and equity securities
: Securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (“Level 1”). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Using a market approach valuation methodology, third party vendors compile prices based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, and “To Be Announced” prices (“Level 
40
Table of Contents
2”). Management internally reviews the fair values provided by third party vendors on a monthly basis. Management also performs a quarterly price testing analysis at the individual security level which compares the pricing provided by the third party vendors to an independent pricing source’s valuation of the same securities. Variances that are deemed to be material are reviewed by management. Additionally, to further assess the reliability of the information received from third party vendors, management obtains documentation from third party vendors related to the sources, methodologies, and inputs utilized in valuing securities classified as Level 2. Management analyzes this information to ensure the underlying assumptions appear reasonable. Management also obtains an independent service auditor’s report from third party vendors to provide reasonable assurance that appropriate controls are in place over the valuation process. Upon completing its review of the pricing from third party vendors at September 30, 2021,March 31, 2022, management determined that the prices provided by its third party pricing sourcesources were reasonable and in line with management’s expectations for the market values of these securities. Therefore, prices obtained from third party vendors that did not reflect forced liquidation or distressed sales were not adjusted materially by management at September 30, 2021.March 31, 2022. Management utilizes a number of factors to determine if a market is inactive, all of which may require a significant level of judgment. Factors that management considers include: a significant widening of the
bid-ask
spread, a considerable decline in the volume and level of trading activity in the instrument, a significant variance in prices among market participants, and a significant reduction in the level of observable inputs. Any securities available for sale not valued based upon quoted market prices or third party pricing models that consider observable market data are considered Level 3. Currently, United does not have any
available-for-sale
securities considered as Level 3.
Loans held for sale
: For residential mortgage loans sold in the mortgage banking segment, the loans closed are recorded at fair value using the fair value option which is measured using valuations from investors for loans with similar characteristics as well as considering the probability of the loan closing (i.e. the “pull-through” rate) (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated pricing (“Level 3”). The unobservable input for Level 3 valuations is the Company’s historical sales prices. For September 30, 2021,March 31, 2022, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.10%0.07% to 0.34%0.65% with a weighted average increase of 0.23%0.13%.
Derivatives
: United utilizes interest rate swaps to hedge exposure to interest rate risk and variability of cash flows associated to changes in the underlying interest rate of the hedged item. These hedging interest rate swaps are classified as either a fair value hedge or a cash flow hedge. United utilizes third-party vendors for derivative valuation purposes. These vendors determine the appropriate fair value based on a net present value calculation of the cash flows related to the interest rate swaps using primarily observable market inputs such as interest rate yield curves (“Level 2”). Valuation adjustments to derivative fair values for liquidity and credit risk are also taken into consideration, as well as the likelihood of default by United and derivative counterparties, the net counterparty exposure and the remaining maturities of the positions. Values obtained from third party vendors are typically not adjusted by management. Management internally reviews the derivative values provided by third party vendors on a quarterly basis. All derivative values are tested for reasonableness by management utilizing a net present value calculation.
For a fair value hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge are offset in current period earnings either in interest income or interest expense depending on the nature of the hedged financial instrument. For a cash flow hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to accumulated other comprehensive income within shareholders’ equity, net of tax. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a cash flow hedge are offset to accumulated other comprehensive income, net of tax and reclassified into earnings in the same line associated with the forecasted transaction when the forecasted transaction affects earnings.
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Table of Contents
The Company records its interest rate lock commitments and forward loan sales commitments at fair value determined as the amount that would be required to settle each of these derivative financial instruments at the balance sheet date. In the normal course of business, United’s mortgage banking subsidiaries enter into contractual interest rate lock commitments to extend credit to borrowers with fixed expiration dates. The commitments become effective when the borrowers
“lock-in”
a specified interest rate within the timeframes established by the mortgage companies. All borrowers are evaluated for credit
41
Table of Contents
worthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to the investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, United’s mortgage banking subsidiaries enter into either a forward sales contract to sell loans to investors when using best efforts or a TBA mortgage-backed security under mandatory delivery. AsFair values of TBA mortgage-backed securities are actively traded in an open market, TBAmeasured using valuations from investors for mortgage-backed securities fall into a with similar characteristics (“Level 1 category.2”). The forward sales contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. Under the Company’s best efforts model, the rate lock commitments to borrowers and the forward sales contracts to investors through to the date the loan closes are undesignated derivatives and accordingly, are marked to fair value through earnings. These valuations fall into a Level 2 category. For residential mortgage loans sold in the mortgage banking segment, the interest rate lock commitments are recorded at fair value which is measured using valuations from investors for loans with similar characteristics (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated pricing (“Level 3”). The unobservable input for Level 3 valuations is the Company’s historical sales prices. For September 30, 2021,March 31, 2022, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.10%0.07% to 0.34%0.65% with a weighted average increase of 0.23%0.13%.
For interest rate swap derivatives that are not designated in a hedge relationship, changes in the fair value of the derivatives are recognized in earnings in the same period as the change in the fair value. Unrealized gains and losses due to changes in the fair value of other derivative financial instruments not in hedge relationship are included in noninterest income and noninterest expense, respectively.

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021March 31, 2022 and December 31, 2020,2021, segregated by the level of the valuation inputs within the fair value hierarchy.
 
       
Fair Value at September 30, 2021 Using
 
Description
  
Balance as of

September 30,

2021
   
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Assets
                    
Available for sale debt securities:
                    
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies
  $13,045   $0   $13,045   $0 
State and political subdivisions
   620,687    0    620,687    0 
Residential mortgage-backed securities
                    
Agency
   1,034,014    0    1,034,014    0 
Non-agency
   38,069    0    38,069    0 
Commercial mortgage-backed securities
                    
Agency
   631,048    0    631,048    0 
Asset-backed securities
   535,011    0    535,011    0 
Single issue trust preferred securities
   16,482    0    16,482    0 
Other corporate securities
   521,628    5,833    515,795    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available for sale securities
   3,409,984    5,833    3,404,151    0 
Equity securities:
                    
Financial services industry
   170    170    0    0 
Equity mutual funds (1)
   5,948    5,948    0    0 
Other equity securities
   5,866    5,866    0    0 
Total
equity securities
  
11,984
   
11,984
   
0
   
0
 
Description
  
Balance as of

March 31,

2022
   
Fair Value at March 31, 2022 Using
 
  
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Assets
                    
Available for sale debt securities:
                    
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
  $371,392   $0   $371,392   $0 
State and political subdivisions
   795,512    0    795,512    0 
Residential mortgage-backed securities
                    
Agency
   1,389.535    0    1,389,535    0 
Non-agency
   100,097    0    100,097    0 
Commercial mortgage-backed securities
                    
Agency
   627,168    0    627,168    0 
Asset-backed securities
   843,999    0    843,999    0 
Single issue trust preferred securities
   16,669    0    16,669    0 
Other corporate securities
   616,562    5,608    610,954    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available for sale securities
   4,760,934    5,608    4,755,326    0 
Equity securities:
                    
Financial services industry
   205    205    0    0 
Equity mutual funds
(1)
   6,611    6,611    0    0 
Other equity securities
   5,541    5,541    0    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total equity securities
   12,357    12,357    0    0 
Loans held for sale
   340,040    0    31,690    308,350 
Derivative financial assets:
                    
Interest rate swap contracts
   44,500    0    44,500    0 
Forward sales commitments
   0    0    0    0 
TBA mortgage-backed securities
   11,067    0    1,932    9,135 
 
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Table of Contents
       
Fair Value at September 30, 2021 Using
 
Description
  
Balance as of

September 30,

2021
   
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Loans held for sale
   493,299    0    45,462    447,837 
Derivative financial assets:
                    
Interest rate swap contracts
   17,833    0    17,833    0 
Forward sales commitments
   262    0    262    0 
TBA mortgage-backed securities
   4,194    0    1,029    3,165 
Interest rate lock commitments
   14,447    0    1,522    12,925 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative financial assets
   36,736    0    20,646    16,090 
Liabilities
                    
Derivative financial liabilities:
                    
Interest rate swap contracts
   3,879    0    3,879    0 
Forward sales commitments
   222    0    0    222 
Interest rate lock commitments
   130    0    0    130 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative financial liabilities
   4,231    0    3,879    352 
 
(1)   The equity mutual funds are within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries.
    
   
       
Fair Value at December 31, 2020 Using
 
Description
  
Balance as of
December 31,
2020
   
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
 
Assets
                    
Available for sale debt securities:
                    
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies
  $66,344   $0   $66,344   $0 
State and political subdivisions
   565,160    0    565,160    0 
Residential mortgage-backed securities
                    
Agency
   928,891    0    928,891    0 
Non-agency
   21,776    0    21,776    0 
Commercial mortgage-backed securities
                    
Agency
   675,145    0    675,145    0 
Asset-backed securities
   294,623    0    294,623    0 
Single issue trust preferred securities
   17,027    0    17,027    0 
Other corporate securities
   384,393    6,207    378,186    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available for sale securities
   2,953,359    6,207    2,947,152    0 
Equity securities:
                    
Financial services industry
   134    134    0    0 
Equity mutual funds (1)
   4,602    4,602    0    0 
Other equity securities
   5,982    5,982    0    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total equity securities
   10,718    10,718    0    0 
Loans held for sale
   698,341    0    43,608    654,733 
Derivative financial assets:
                    
Interest rate swap contracts
   4,378    0    4,378    0 
Forward sales commitments
   1,581    0    1,581    0 
TBA mortgage-backed securities
   0    0    0    0 
Interest rate lock commitments
   38,332    0    6,321    32,011 
                 
Total derivative financial assets
   44,291    0    12,280    32,011 
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Fair Value at December 31, 2020 Using
 
Description
  
Balance as of

December 31,

2020
   
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Liabilities
                    
Derivative financial liabilities:
                    
Interest rate swap contracts
   6,782    0    6,782    0 
TBA mortgage-backed securities
   6,276    0    6,276    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative financial liabilities
   13,058    0    13,058    0 
(1)   The equity mutual funds are w
i
thin a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries.
Description
  
Balance as of

March 31,

2022
   
Fair Value at March 31, 2022 Using
 
  
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Interest rate lock commitments
   5,984    0    192    5,792 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative financial assets
   61,551    0    46,624    14,927 
Liabilities
                    
Derivative financial liabilities:
                    
Interest rate swap contracts
   84    0    84    0 
Forward sales commitments
   655    0    258    397 
TBA mortgage-backed securities
   0    0    0    0 
Interest rate lock commitments
   4,867    0    169    4,698 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative financial liabilities
   5,606    0    511    5,095 
       
Fair Value at December 31, 2021 Using
 
Description
  
Balance as of

December 31,

2021
   
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Assets
        
Available for sale debt securities:
        
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
  $81,850   $0   $81,850   $0 
State and political subdivisions
   847,298    0    847,298    0 
Residential mortgage-backed securities
                    
Agency
   1,113,774    0    1,113,774    0 
Non-agency
   74,545    0    74,545    0 
Commercial mortgage-backed securities
                    
Agency
   639,925    0    639,925    0 
Asset-backed securities
   656,572    0    656,572    0 
Single issue trust preferred securities
   16,811    0    16,811    0 
Other corporate securities
   611,924    5,758    606,166    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available for sale securities
   4,042,699    5,758    4,036,941    0 
Equity securities:
                    
Financial services industry
   187    187    0    0 
Equity mutual funds
(1)
   6,406    6,406    0    0 
Other equity securities
   5,811    5,811    0    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total equity securities
   12,404    12,404    0    0 
Loans held for sale
   504,416    0    40,307    464,109 
Derivative financial assets:
                    
Interest rate swap contracts
   21,328    0    21,328    0 
Forward sales commitments
   430    0    430    0 
TBA mortgage-backed securities
   127    0    66    61 
Interest rate lock commitments
   10,380    0    936    9,444 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative financial assets
   32,265    0    22,760    9,505 
Liabilities
                    
Derivative financial liabilities:
                    
Interest rate swap contracts
   3,197    0    3,197    0 
Forward sales commitments
   36    0    0    36 
TBA mortgage-backed securities
   470    0    0    470 
Interest rate lock commitments
   25    0    0    25 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative financial liabilities
   3,728    0    3,197    531 
There
were 0 transfers between Level 1 and Level 2 for financial assets and liabilities measured at fair value on a recurring basis during the ninethree months ended September 30, 2021March 31, 2022 and the year ended December 31, 2020.2021.
The following table presentstables present additional information about financial assets and liabilities measured at fair value at September 30,March 31, 2022 and December 31, 2021 and December��31, 2020 on a recurring basis and for which United has utilized Level 3 inputs to determine fair value:value.

 
   
Loans held for sale
 
   
September 30,

2021
   
December 31,
2020
 
Balance, beginning of period
  $654,733   $384,375 
Originations
   3,978,453    5,699,581 
Sales
   (4,300,868)    (5,652,693) 
Total gains or losses during the period recognized in earnings
   115,519    223,470 
Transfers in and/or out of Level 3
   (0)    (0) 
   
 
 
   
 
 
 
Balance, end of period
  $447,837   $654,733 
   
 
 
   
 
 
 
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
  $0   $0 
  
   
Derivative Financial Assets

TBA Securities
 
   
September 30,

2021
   
December 31,
2020
 
Balance, beginning of period
  $0   $0 
Transfers other
   3,165    0 
   
 
 
   
 
 
 
Balance, end of period
  $3,165   $0 
   
 
 
   
 
 
 
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
  $0   $0 
  
   
Derivative Financial Assets

Interest Rate Lock 
Commitments
 
   
September 30,

2021
   
December 31,
2020
 
Balance, beginning of period
  $32,011   $4,518 
Transfers other
   (19,086)    27,493 
   
 
 
   
 
 
 
Balance, end of period
  $12,925   $32,011 
   
 
 
   
 
 
 
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
  $0   $0 
47
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Derivative Financial Liabilities

Forward Sales Commitments
 
   
September 30,

2021
   
December 31,
2020
 
Balance, beginning of period
  $0   $0 
Transfers other
   222    0 
   
 
 
   
 
 
 
Balance, end of period
  $222   $0 
   
 
 
   
 
 
 
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date  $0   $0 
  
   
Derivative Financial Liabilities

Interest Rate Lock 
Commitments
 
   
September 30,

2021
   
December 31,
2020
 
Balance, beginning of period
  $0   $0 
Transfers other
   130    0 
   
 
 
   
 
 
 
Balance, end of period
  $130   $0 
   
 
 
   
 
 
 
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date  $0   $0 
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses related to assets still held at the reporting date are recorded in Income from mortgage banking activities in the Consolidated Statements of Income.
   
Loans held for sale
 
   
March 31,

2022
   
December 31,
2021
 
Balance, beginning of period
  $464,109   $654,733 
Originations
   803,186    4,984,363 
Sales
   (975,130)    (5,313,758) 
Total gains or losses during the period recognized in earnings
   16,185    138,771 
   
 
 
   
 
 
 
Balance, end of period
  $308,350   $464,109 
   
 
 
   
 
 
 
The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
  $(1,295)   $10,506 
   
Derivative Financial Assets

TBA Securities
 
   
March 31,

2022
   
December 31,
2021
 
Balance, beginning of period
  $61   $0 
Transfers other
   9,074    61 
   
 
 
   
 
 
 
Balance, end of period
  $9,135   $61 
   
 
 
   
 
 
 
The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
  $9,135   $61 

   
Derivative Financial Assets

Interest Rate Lock
Commitments
 
   
March 31,

2022
   
December 31,
2021
 
Balance, beginning of period
  $9,444   $32,011 
Transfers other
   (3,652)    (22,567) 
   
 
 
   
 
 
 
Balance, end of period
  $5,792   $9,444 
   
 
 
   
 
 
 
The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
  $5,792   $9,444 
  
   
Derivative Financial Liabilities

Forward Sales Commitments
 
   
March 31,

2022
   
December 31,
2021
 
Balance, beginning of period
  $36   $0 
Transfers other
   361    36 
   
 
 
   
 
 
 
Balance, end of period
  $397   $36 
   
 
 
   
 
 
 
The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
  $397   $36 

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Derivative Financial Liabilities

TBA Securities
 
   
March 31,

2022
   
December 31,
2021
 
Balance, beginning of period
  $470   $0 
Transfers other
   (470)    470 
   
 
 
   
 
 
 
Balance, end of period
  $0   $470 
The amount of total gains for the period included in earnings (or
changes in net assets) attributable to the change in unrealized gains
or losses relating to assets still held at reporting date
  $0   $470 
   
Derivative Financial Liabilities

Interest Rate Lock

Commitments
 
   
March 31,

2022
   
December 31,
2021
 
Balance, beginning of period
  $25   $0 
Transfers other
   4,673    25 
Balance, end of period
  $4,698   $25 
The amount of total gains for the period included in earnings (or
changes in net assets) attributable to the change in unrealized gains
or losses relating to assets still held at reporting date
  $4,698   $25 
Fair Value Option
As of January 1, 2021, United elected the fair value option for new loans held for sale originated in its community banking segment after that date to mitigate a divergence between accounting losses and economic exposure. Prior to January 1, 2021, United elected the fair value option only for its loans held for sale in its mortgage banking segment.
The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected:
 
Description
  
Three Months Ended

September 30, 2021
   
Three Months Ended

September 30, 2020
   
Three Months Ended

March 31, 2022
   
Three Months Ended

March 31, 2021
 
Income from mortgage banking activities
  $(4,577)   $7,807   $(11,882)   $(17,851) 
 
Description
  
Nine Months Ended

September 30, 2021
   
Nine Months Ended

September 30, 2020
 
Income from mortgage banking activities
  $(16,353)   $18,278 
The following table reflects the difference between the aggregate fair value and the remaining contractual principal outstanding for financial instruments for which the fair value option has been elected:
 
 
  
September 30, 2021
   
December 31, 2020
   
March 31, 2022
 
December 31, 2021
 
Description
  
Unpaid
Principal
Balance
   
Fair
Value
   
Fair Value
Over/(Under)
Unpaid
Principal
Balance
   
Unpaid
Principal
Balance
   
Fair
Value
   
Fair Value
Over/(Under)
Unpaid
Principal
Balance
   
Unpaid
Principal
Balance
   
Fair
Value
   
Fair Value
Over/(Under)
Unpaid
Principal
Balance
 
Unpaid
Principal
Balance
   
Fair Value
   
Fair Value
Over/(Under)
Unpaid
Principal
Balance
 
Loans held for sale
  $483,239   $493,299   $10,060   $672,458   $698,341   $25,883   $341,284   $340,040   $(1,244)  $493,340   $504,416   $11,076 
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain financial assets are measured
a
t at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to
the fair value of these assets usually result from the application of
lower-of-cost-or-market
accounting or write-downs of individual assets.
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The following describes the valuation techniques used by United to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements.
Loans held for sale
: Prior to January 1, 2021, loansLoans held for sale within the community banking segment that wereare delivered on a best efforts basis wereare carried at the lower of cost or fair value. As previously mentioned, United elected theThe fair value option for all loans held for sale as of January 1, 2021. Under the lower of cost or fair value accounting method, the fair value of loans held for sale within the community banking segment wasis based on the price secondary markets offered at the timeare currently offering for similar loans using observable market data which wasis not materially different than cost due to the short duration between
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Table of Contents
origination and sale (“Level 2”). As such, United recordedrecords any fair value adjustments for these loans held for sale on a nonrecurring basis. NaN nonrecurring fair value adjustments were recorded on loans held for sale during the year ended March 31, 2022. Gains and losses on sale of loans wereare recorded within income from mortgage banking activities on the Consolidated Statements of Income.
Individually assessed loans
: In the determination of the allowance for loan losses, loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Fair value is measured using a market approach based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an appraisal conducted by an independent, licensed appraiser outside of the Company using comparable property sales (“Level 2”). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (“Level 3”). For individually assessed loans, a specific reserve is established through the allowance for loan losses, if necessary, by estimating the fair value of the underlying collateral on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses expense on the Consolidated Statements of Income.
OREO
: OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried on the balance sheet at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Fair value is determined by one of two market approach methods depending on whether the property has been vacated and an appraisal can be conducted. If the property has yet to be vacated and thus an appraisal cannot be performed, a Broker’sBrokers Price Opinion (i.e. BPO), is obtained. A BPO represents a best estimate valuation performed by a realtor based on knowledge of current property values and a visual examination of the exterior condition of the property. Once the property is subsequently vacated, a formal appraisal is obtained and the recorded asset value appropriately adjusted. On the other hand, if the OREO property has been vacated and an appraisal can be conducted, the fair value of the property is determined based upon the appraisal using a market approach. An authorized independent appraiser conducts appraisals for United. Appraisals for property other than ongoing construction are based on consideration of comparable property sales (“Level 2”). In contrast, valuation of ongoing construction assets requires some degree of professional judgment. In conducting an appraisal for ongoing construction property, the appraiser develops two appraised amounts: an “as is” appraised value and a “completed” value. Based on professional judgment and their knowledge of the particular situation, management determines the appropriate fair value to be utilized for such property (“Level 3”). As a matter of policy, valuations are reviewed at least annually and appraisals are generally updated on a
bi-annual
basis with values lowered as necessary.
Intangible Assets
: For United, intangible assets consist primarily of goodwill and core deposit intangibles. Goodwill is tested for impairment at least annually or sooner if indicators of impairment exist. Goodwill impairment would be defined as the difference between the recorded value of goodwill (i.e. book value) and the implied fair value of goodwill. In determining the implied fair value of goodwill for purposes of evaluating goodwill impairment, United determines the fair
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Table of Contents
value of the reporting unit and compares the fair value to its carrying value. United may elect to perform a qualitative analysis to determine whether or not it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount. If United elects to bypass this qualitative analysis, or concludes via qualitative analysis that it is
more-likely-than-not
that the fair value of a reporting unit is less than its carrying value, United may use either a market or income quantitative approach whichever is more practical, to determine the fair value of the reporting unit to compare to its carrying value as step one.unit. If the fair value is greater than the carrying value, thenof the reporting unit’s goodwill is deemed not to be impaired. If the fair valueunit is less than theits carrying value, then a second step is performed which measuresan impairment charge would be recorded for the difference, not to exceed the amount of impairment by comparinggoodwill allocated to the carrying amount of the goodwill to its implied fair value. If the implied fair value of the goodwill exceeds the carrying amount, there is no impairment. If the carrying amount exceeds the implied fair value of goodwill, an impairment charge is recorded for the excess.reporting unit. At each reporting date, the Company considers potential indicators of impairment. United performed its annual goodwill impairment test on the Company’s reporting units as of September 30, 2021. The goodwill impairment test did not identify any goodwill impairment. In subsequent periods, economic uncertainty and volatility surrounding
COVID-19
and the performance of the Company’s stock as well as possible other impairment indicators could cause us to perform a goodwill impairment test which could result in an impairment charge being recorded for that period if the carrying value of goodwill was found to exceed fair value. Core deposit intangibles relate to the estimated value of the deposit base of acquired institutions. Management reviews core deposit intangible assets on an annual basis, or sooner if indicators of impairment exist, and evaluates changes in facts and circumstances that may indicate impairment in the carrying value.
NaN other fair value measurement of intangible assets was made during the first ninethree months of 20212022 and 2020 other than those intangible assets recorded in the acquisition2021.
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Table of Carolina Financial in the second quarter of 2020.Contents
Mortgage Servicing Rights (
“
MSRs
”
(“MSRs”):
A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“mortgage servicing rights”) at fair value, if practicable.value. For subsequent measurement purposes, the Company measures servicing assets and liabilities based onusing the lower of cost or market quarterlyamortization method on a nonrecurringquarterly basis. The quarterly determination of fair value of servicing rights is provided by a third party and is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy. The unobservable inputs for Level 3 valuations are market discount rates, anticipated prepayment speeds, projected delinquency rates, and ancillary fee income net of servicing costs. For September 30, 2021, the average rangeunobservable inputs used in the valuation of discount rates was 10.50% to 12.00% with a weighted average discount rate of 10.61%; the average range of constant prepayment rates was 11.48% to 21.71% with a weighted average prepayment rate of 16.59%; the net servicing fee was 0.26%; and the delinquency rate, including loans on forbearance was 2.96%. For December 31, 2020, the average range of discount rates was 9.50% to 14.07% with a weighted average discount rate of 10.62%; the average range of constant prepayment rates was 7.98% to 18.42% with a weighted average prepayment rate of 14.60%; the net servicing fee was 0.26%; and the delinquency rate, including loans on forbearance was 2.88%.
The Company recorded a
net of recovery of $250 on mortgage servicing rights in the third quarterat March 31, 2022 and December 31, 2021, refer to Note 8 of 2021.these Notes to Consolidated Financial Statements. The Company recorded a $400did 0t record any temporary impairment of mortgage servicing rights in the third quarter of 2020. NaN net impairment on mortgage servicing rights was recorded in the first nine months ofended March 31, 2022 and 2021. For the first nine months of 2020, the Company recorded a $1,110 temporary impairment of mortgage servicing rights. The Company does not hedge the mortgage servicing rights positions and the impact of falling long-term interest rates increased prepayment speed assumptions reducing the value of MSRs asset in 2020.
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The following table summarizes United’s financial assets that were measured at fair value on a nonrecurring basis during the period:​​​​​​​
 
Description
  
Balance as of

March 31, 2022
   
Carrying value at March 31, 2022
   
YTD Gains

(Losses)
 
  
Balance as of

September 30, 2021
   
Carrying value at September 30, 2021
   
YTD Gains

(Losses)
 
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
  
Assets
                              
Individually assessed loans
  $49,679   $0   $43,694   $5,985   $(65)   $24,261   $0   $8,393   $15,868   $(255) 
OREO
   16,696    0    5,772    10,924    (3,489)    13,641    0    13,475    166    (75) 
Mortgage servicing rights
   26,005    0    0    26,005    (629)    37,740    0    0    37,740    883 
   
Description
  
Balance as of

December 31, 2021
   
Carrying value at December 31, 2021
   
YTD
 
Gains

(Losses)
 
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
 
Assets
               
Individually assessed loans
  $65,431   $0   $46,830   $18,601   $(601
)
 
OREO
   14,823    0    3,209    11,614    (4,020) 
Mortgage servicing rights
   27,355    0    0    27,355    (629) 
Description
  
Balance as of

December 31, 2020
   
Carrying value at December 31, 2020
   
YTD Gains

(Losses)
 
  
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
Assets
                         
Loans held for sale
  $20,596   $0   $20,596   $0   $(197) 
Individually assessed loans
   37,498    0    14,467    23,031    1,318 
OREO
   22,595    0    22,595    0    (1,618) 
Mortgage servicing rights
   20,955    0    0    20,955    (1,383) 
Fair Value of Other Financial Instruments
The following methods and assumptions were used by United in estimating its fair value disclosures for other financial instruments:
Cash and Cash Equivalents:
The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.
Securities held to maturity and other securities
: The estimated fair values of securities held to maturity are based on quoted market prices, where available. If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the
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Table of Contents
fair value of identical or similar securities by using pricing models that consider observable market data. Any securities held to maturity, not valued based upon the methods above, are valued based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks. Other securities consist mainly of shares of Federal Home Loan Bank and Federal Reserve Bank stock that do not have readily determinable fair values and are carried at cost.
Loans and leases
: The fair values of certain mortgage loans (e.g.,
one-to-four
family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values of other loans and leases (e.g., commercial real estate and rental property mortgage loans, commercial and industrial loans, financial institution loans and agricultural loans) are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans and leases with similar terms to borrowers of similar creditworthiness, which include adjustments for liquidity concerns. For acquired PCD loans, fair value is assumed to equal United’s carrying value, which represents the present value of expected future principal and interest cash flows, as adjusted for any Allowance for Credit Losses recorded for these loans.
Deposits
: The fair values of demand deposits (e.g., interest and noninterest checking, regular savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit
approximate their fair values at the reporting date. Fair values of fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.
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Table of Contents
Short-term Borrowings:
The carrying amounts of federal funds purchased, borrowings under repurchase agreements and any other short-term borrowings approximate their fair values.
Long-term Borrowings:
The fair values of United’s Federal Home Loan Bank borrowings and trust preferred securities are estimated using discounted cash flow analyses, based on United’s current incremental borrowing rates for similar types of borrowing arrangements.
Summary of Fair Values for All Financial Instruments
The estimated fair values of United’s financial instruments are summarized below:
 
          
Fair Value Measurements
           
Fair Value Measurements
 
  
Carrying
Amount
   
Fair Value
   
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
   
Carrying
Amount
   
Fair Value
   
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
September 30, 2021
               
March 31, 2022
               
Cash and cash equivalents
  $4,033,561   $4,033,561   $0   $4,033,561   $0   $2,803,093   $2,803,093   $0   $2,803,093   $0 
Securities available for sale
   3,409,984    3,409,984    5,833    3,404,151    0    4,760,934    4,760,934    5,608    4,755,326    0 
Securities held to maturity
   993    1,020    0    0    1,020    1,001    1,020    0    0    1,020 
Equity securities
   11,984    11,984    11,984    0    0    12,357    12,357    12,357    0    0 
Other securities
   223,104    211,949    0    0    211,949    246,420    234,099    0    0    234,099 
Loans held for sale
   493,299    493,299    0    45,462    447,837    340,040    340,040    0    31,690    308,350 
Net loans
   16,532,738    16,072,885    0    0    16,072,885    18,177,492    17,323,530    0    0    17,323,530 
Derivative financial assets
   36,736    36,736    0    20,646    16,090    61,551    61,551    0    46,624    14,927 
Mortgage servicing rights
   22,836    26,005    0    0    26,005    23,089    37,740    0    0    37,740 
Deposits
   21,822,609    21,805,200    0    21,805,200    0    23,474,301    23,455,019    0    0    23,455,019 
Short-term borrowings
   123,018    123,018    0    123,018    0    136,370    136,370    0    136,370    0 
Long-term borrowings
   813,851    768,918    0    768,918    0    817,235    775,896    0    775,896    0 
Derivative financial liabilities
   4,231    4,231    0    3,879    352    5,606    5,606    0    511    5,095 
  
December 31, 2020
               
Cash and cash equivalents
  $2,209,068   $2,209,068   $0   $2,209,068   $0 
Securities available for sale
   2,953,359    2,953,359    6,207    2,947,152    0 
Securities held to maturity
   1,212    1,235    0    215    1,020 
Equity securities
   10,718    10,718    10,718    0    0 
Other securities
   220,895    209,850    0    0    209,850 
Loans held for sale
   718,937    718,937    0    64,204    654,733 
Net loans
   17,355,583    16,559,797    0    0    16,559,797 
Derivative financial assets
   44,291    44,291    0    12,280    32,011 
Mortgage servicing rights
   20,955    20,955    0    0    20,955 
Deposits
   20,585,160    20,583,607    0    20,583,607    0 
Short-term borrowings
   142,300    142,300    0    142,300    0 
Long-term borrowings
   864,369    815,991    0    815,991    0 
Derivative financial liabilities
   13,058    13,058    0    13,058    0 
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Fair Value Measurements
 
   
Carrying
Amount
   
Fair Value
   
Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)
   
Significant

Other

Observable

Inputs

(Level 2)
   
Significant

Unobservable

Inputs

(Level 3)
 
 
                    
December 31, 2021
                         
Cash and cash equivalents
  $3,758,170   $3,758,170   $0   $3,758,170   $0 
Securities available for sale
   4,042,699    4,042,699    5,758    4,036,941    0 
Securities held to maturity
   1,001    1,020    0    0    1,020 
Equity securities
   12,404    12,404    12,404    0    0 
Other securities
   239,645    227,663    0    0    227,663 
Loans held for sale
   504,416    504,416    0    40,307    464,109 
Net loans
   17,807,632    17,119,202    0    0    17,119,202 
Derivative financial assets
   32,265    32,265    0    22,760    9,505 
Mortgage servicing rights
   23,144    27,355    0    0    27,355 
Deposits
   23,350,263    23,334,431    0    23,334,431    0 
Short-term borrowings
   128,844    128,844    0    128,844    0 
Long-term borrowings
   817,394    773,291    0    773,291    0 
Derivative financial liabilities
   3,728    3,728    0    3,197    531 
15. STOCK BASED COMPENSATION
On May 12, 2020, United’s shareholders approved the 2020 Long-Term Incentive Plan (“2020 LTI Plan”). The 2020 LTI Plan became effective May 13, 2020. An award granted under the 2020 LTI Plan may consist of any
non-qualified
stock
options or incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance
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units or other-stock-based award. These awards all relate to the common stock of United. The maximum number of shares of United common stock which may be issued under the 2020 LTI Plan
i
s is 2,300,000. The 2020 LTI Plan will be administered by a board committee appointed by United’s Board of Directors (the “Board”). Unless otherwise determined by the Board, the Compensation Committee of the Board (the “Committee”) shall administer the 2020 LTI Plan. The maximum number of options and stock appreciation rights, in the aggregate, which may be awarded to any individual key employee during any calendar year is 100,000. The maximum number of options and stock appreciation rights, in the aggregate, which may be awarded to any
non-employee
director during any calendar year is 10,000 or, if such Award is payable in cash, the Fair Market Value equivalent thereof. The maximum number of shares of restricted stock or shares subject to a restricted stock units award that may be granted during any calendar year is 225,000 shares to any individual key employee and 10,000 shares to any individual
non-employee
director. Subject to certain change in control provisions, the 2020 LTI Plan provides that all awards of will vest as the Committee determines in the award agreement, provided that no awards will vest sooner than 1/3 per year over the first three anniversaries of the award. United adopted a clawback policy that applies to named executive officers and other executive officers and permits the Committee to cancel certain awards and to recoup gains realized from previous awards should United be required to prepare an accounting restatement due to materially inaccurate performance metrics. A Form
S-8
was filed on May 29, 2020 with the Securities and Exchange Commission to register all the shares which were available for th
e
the 2020 LTI Plan. The 2020 LTI Plan replaces the 2016 LTI Plan.
Compensation expense of $1,912$2,061 and $5,492$1,688 related to the nonvested awards under United’s Long-Term Incentive Plans was incurred for the thirdfirst quarter of 2022 and first nine months of 2021, respectively, as compared to the compensation expense of $1,369 and $3,991 related to the nonvested awards under United’s Long-Term Incentive Plans incurred for the
third
quarter and first nine months of 2020, respectively. Compensation expense was included in employee compensation in the unaudited Consolidated Statements of Income.
Stock Options
United currently has options outstanding from various option plans other than the 2020 LTI Plan (the “Prior Plans”); however, 0 common shares of United stock are available for grants under the Prior Plans as these plans have expired. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms. The maximum term for options granted under the plans is ten (10) years.
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A summary of activity under United’s stock option plans as of September 30, 2021,March 
31
,
2022
, and the changes during the first ninethree months of 2021
2022
are presented below:
 
   
Nine Months Ended September 30, 2021
 
           
Weighted Average
 
   
Shares
   
Aggregate
Intrinsic
Value
   
Remaining
Contractual
Term (Yrs.)
   
Exercise
Price
 
Outstanding at January 1, 2021
   1,904,557             $34.14 
Granted
   49,978              32.51 
Exercised
   (175,662)              28.49 
Forfeited or expired
   (111,757)              28.66 
   
 
 
             
 
 
 
Outstanding at September 30, 2021
   1,667,116   $5,196    5.1   $35.05 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
Exercisable at September 30, 2021
   1,312,880   $4,520    4.4   $34.96 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
Three Months Ended March 31, 2022
 
   
Shares
   
Aggregate
Intrinsic
Value
   
Weighted Average
 
   
Remaining
Contractual
Term (Yrs.)
   
Exercise

Price
 
Outstanding at January 1, 2022
   2,149,117             $32.01 
Exercised
   (258,574)              22.37 
Forfeited or expired
   (82,088)              29.51 
   
 
 
             
 
 
 
Outstanding at March 31, 2022
   1,808,455   $6,720    5.0   $33.50 
   
 
 
   
 
 
   
 
 
   
 
 
 
Exercisable at March 31, 2022
   1,637,092   $6,449    4.7   $33.40 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the status of United’s nonvested stock option awards during the first ninethree months of 2021:2022:
 
   
Shares
   
Weighted-Average
Grant Date Fair Value
Per Share
 
Nonvested at January 1, 2021
   544,905   $6.93 
Granted
   49,978    5.65 
Vested
   (239,659)    7.32 
Forfeited or expired
   (988)    6.59 
   
 
 
   
 
 
 
Nonvested at September 30, 2021
   354,236   $6.49 
   
 
 
   
 
 
 
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Shares
   
Weighted-Average

Grant Date Fair Value
Per Share
 
Nonvested at January 1, 2022
   395,034   $7.33 
Vested
   (215,926)    8.11 
Forfeited or expired
   (7,745)    11.35 
   
 
 
   
 
 
 
Nonvested at March 31, 2022
   171,363   $6.16 
   
 
 
   
 
 
 
During the ninethree months ended September 30,March 31, 2022 and 2021, 258,574 and 2020, 175,662 and 14,994145,621 shares, respectively, were issued in connection with stock option exercises. All shares issued in connection with stock option exercises for the ninethree months ended September 30,March 31, 2022 and 2021 and 2020 were issued from authorized and unissued stock. The total intrinsic value of options exercised under the Plans during the ninethree months ended September 30,March 31, 2022 and 2021 was $3,856 and 2020 was $1,685 and $249$1,408 respectively.

Restricted Stock
Under the 2020 LTI Plan, United may award restricted common shares to key employees and
non-employee
directors. Restricted shares granted to participants will vest no sooner than 1/3 per year over the first three anniversaries of the award. Unless determined by the Committee or the Board and provided in the award agreement, recipients of restricted shares do not pay any consideration to United for the shares, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested. Presently, these nonvested participating securities have an immaterial impact on diluted earnings per share.
The following summarizes the changes to United’s nonvested restricted common shares for the period ended September 30, 2021:March 31, 2022:
 
  
Shares
   
Weighted-Average

Grant
 
Date
 
Fair
 
Value
Per Share
   
Shares
   
Weighted-Average

Grant Date Fair Value
Per Share
 
Nonvested at January 1, 2021
   340,976   $35.41 
Nonvested at January 1, 2022
   383,971   $35.21 
Granted
   182,344    35.97    154,568    36.26 
Vested
   (131,694)    36.73    (149,811)    35.79 
Forfeited
   (3,502)    36.61    (6,212)    35.85 
  
 
   
 
   
 
   
 
 
Nonvested at September 30, 2021
   388,124   $35.22 
Nonvested at March 31, 2022
   382,516   $35.40 
  
 
   
 
   
 
   
 
 
Restricted Stock Units
Under the 2020 LTI Plan, United may grant restricted stock units (“RSUs”) to key employees. These awards help align the interests of these employees with the interests of the shareholders of United by providing economic value directly related to the performance of the Company. These RSU grants could be time-vested RSUs, performance-vested RSUs, or a
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combination of both. Currently, time-vested RSUs vest ratably over three years from the date of grant. Performance-vested RSUs cliff-vest after assessment of the Company’s performance over a period of three years. The number of performance-vested RSUs that vest is determined by two metrics measured relative to peers: Return on Average Tangible Common Equity (“ROATCE”) and Total Shareholder Return (“TSR”). Based on ASC Topic 718, the ROATCE comparison is considered a performance condition while the TSR comparison is considered a market condition. There will be no payout of the performance-vested awards if the threshold performance is not achieved. United communicates the specific threshold, target, and maximum performance-vested RSU awards and performance targets to the applicable key employees at the beginning of a performance period. Dividends are accrued but not paid in respect to the awards until the RSUs vest. The holder does not have the right to vote the shares during the time and performance periods. The value of the time-vested RSUs and the performance-vested, based on the performance condition, RSUs awarded is established as the fair market value of the stock at the time of the grant. The value of the performance-vested, based on the market condition, RSUs awarded is estimated through the use of a Monte Carlo valuation model as of the grant date. The Company recognizes expense on the RSUs in accordance with ASC Topic 718.
The following table summarizes the status of United’s nonvested RSUs during the first ninethree months of 2021:2022:
 
   
Shares
   
Weighted-Average

Grant
 
Date
 
Fair
 
Value
Per Share
 
Nonvested at January 1, 2021
   0   $0.00 
Granted
   136,896    35.65 
Vested
   0    0.00 
Forfeited or expired
   0    0.00 
   
 
 
   
 
 
 
Nonvested at September 30, 2021
   136,896   $35.65 
   
 
 
   
 
 
 
   
Shares
   
Weighted-Average

Grant Date Fair Value
Per Share
 
Nonvested at January 1, 2022
   136,896   $35.65 
Granted
   147,511    35.46 
Vested
   (18,248)    37.05 
   
 
 
   
 
 
 
Nonvested at March 31, 2022
   266,159   $35.45 
   
 
 
   
 
 
 
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16. EMPLOYEE BENEFIT PLANS
United has a defined benefit retirement plan covering qualified employees hired prior to October 1, 2007. Pension benefits are based on years of service and the average of the employee’s highest five consecutive plan years of basic compensation paid during the ten plan years preceding the date of determination. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. NaN discretionary contributions were made during the first nine monthsquarter of 2022 and 2021. United did make a discretionary contribution of $20,000 during the first nine months of 2020.
Included in accumulated other comprehensive income at December 31, 20202021 are unrecognized actuarial losses of $65,426$44,370 ($50,18234,032 net of tax) that have not yet been recognized in net periodic pension cost.
Net periodic pension cost for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 included the following components:
 
   
Three Months Ended

September 30
  
Nine Months Ended

September 30
 
   
2021
  
2020
  
2021
  
2020
 
Service cost
  $688  $722  $2,196  $2,152 
Interest cost
   1,121   1,301   3,172   3,874 
Expected return on plan assets
   (3,000)   (2,658)   (8,881)   (7,917) 
Recognized net actuarial loss
   1,903   1,458   5,064   4,342 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net periodic pension cost
  $712  $823  $1,551  $2,451 
   
 
 
  
 
 
  
 
 
  
 
 
 
     
Weighted-average assumptions:
                 
Discount rate
   2.81%   3.42%   2.81%   3.42% 
Expected return on assets
   6.25%   6.75%   6.25%   6.75% 
Rate of compensation increase (prior to age 40)
   5.00%   5.00%   5.00%   5.00% 
Rate of compensation increase (ages
40-54)
   4.00%   4.00%   4.00%   4.00% 
Rate of compensation increase (otherwise)
   3.50%   3.50%   3.50%   3.50% 
   
Three Months Ended March 31
 
   
2022
  
2021
 
Service cost
  $703  $750 
Interest cost
   1,208   1,020 
Expected return on plan assets
   (3,193)   (2,924) 
Recognized net actuarial loss
   824   1,572 
   
 
 
  
 
 
 
Net periodic pension (benefit) cost
  $(458)  $418 
   
 
 
  
 
 
 
Weighted-Average Assumptions:
         
Discount Rate
   3.08%   2.81% 
Expected return on assets
   6.25%   6.25% 
Rate of Compensation Increase (prior to age 40)
   5.00%   5.00% 
Rate of Compensation Increase (ages
40-54)
   4.00%   4.00% 
Rate of Compensation Increase (prior to age 45)
   
n/
a
   
n/
a
 
Rate of Compensation Increase (otherwise)
   3.50%   3.50% 
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17. INCOME TAXES
United records a liability for uncertain income tax positions based on a recognition threshold of
more-likely-than-not,
and a measurement attribute for all tax positions taken on a tax return, in order for those tax positions to be recognized in the financial statements.
As of September 30,March 31, 2022 and 2021, and 2020, the total amount of accrued interest related to uncertain tax positions was $748$753 and $931,$695, respectively. United accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.
United is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2018, 2019 and 2020 and certain State Taxing authorities for the years ended December 31, 2018 through 2020.
United’s effective tax rate was 20.39% and 20.47%19.75% for the thirdfirst quarter of 2022 and first nine months of 2021 and 21.82% and 20.23%20.50% for the thirdfirst quarter and first nine months of 2020.2021.
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18. COMPREHENSIVE INCOME
The components of total comprehensive income for the thr
e
e and ninethree months ended September 30,March 31, 2022 and 2021 and 2020 are as follows:
   
Three Months Ended
 
   
March 31
 
   
2022
   
2021
 
Net Income
  
$
81,664
 
  
$
106,898
 
Available for sale (“AFS”) securities:
          
Change in net unrealized loss on AFS securities arising during the period
   (202,234)    (45,967) 
Related income tax effect
   47,121    10,710 
Net reclassification adjustment for gains included in net income
   (0)    (1,444) 
Related income tax effect
   0    336 
   
 
 
   
 
 
 
    (155,113)    (36,365) 
   
 
 
   
 
 
 
Net effect of AFS securities on other comprehensive income
  
 
(155,113
) 
  
 
(36,365
) 
Cash flow hedge derivatives:
          
Unrealized gain on cash flow hedge before reclassification to interest expense
   22,694    19,317 
Related income tax effect
   (5,288)    (4,501) 
Net reclassification adjustment for losses included in net income
   342    223 
Related income tax effect
   (80)    (52) 
   
 
 
   
 
 
 
Net effect of cash flow hedge derivatives on other comprehensive income
  
 
17,668
 
  
 
14,987
 
Pension plan:
          
Recognized net actuarial loss
   824    1,572 
Related income tax benefit
   (183)    (703) 
   
 
 
   
 
 
 
Net effect of change in pension plan asset on other comprehensive income
  
 
641
 
  
 
869
 
   
 
 
   
 
 
 
Total change in other comprehensive income
  
 
(136,804
) 
  
 
(20,509
) 
   
 
 
   
 
 
 
Total Comprehensive Income
  
$
(55,140
) 
  
$
86,389
 
   
 
 
   
 
 
 
 
   
Three Months Ended
September 30
   
Nine Months Ended
September 30
 
   
2021
   
2020
   
2021
   
2020
 
Net Income
  
$
92,152
 
  
$
103,784
 
  
$
293,886
 
  
$
196,653
 
Available for sale (“AFS”) securities:
                    
Change in net unrealized gain on AFS securities arising during the period
   (17,855)    11,526    (45,782)    72,385 
Related income tax effect
   4,160    (2,686)    10,667    (16,866) 
Net reclassification adjustment for gains included in net income
   (108)    (861)    (1,552)    (2,502) 
Related income tax expense
   26    201    362    583 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net effect of AFS securities on other comprehensive income
  
 
(13,777
) 
  
 
8,180
 
  
 
(36,305
) 
  
 
53,600
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Cash flow hedge derivatives:
                    
Unrealized gain on cash flow hedge before reclassification to interest expense
   1,414    884    12,488    (775) 
Related income tax effect
   (330)    (206)    (2,910)    181 
Net reclassification adjustment for losses included in net income
   382    0    968    0 
Related income tax effect
   (89)    0    (226)    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net effect of cash flow hedge derivatives on other comprehensive income
  
 
1,377
 
  
 
678
 
  
 
10,320
 
  
 
(594
) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Pension plan:
                    
Recognized net actuarial loss
   1,903    1,458    5,064    4,342 
Related income tax benefit
   (1,265)    (470)    (2,688)    (1,129) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net effect of change in pension plan asset on other comprehensive income
  
 
638
 
  
 
988
 
  
 
2,376
 
  
 
3,213
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total change in other comprehensive income
  
 
(11,762
) 
  
 
9,846
 
  
 
(23,609
) 
  
 
56,219
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total Comprehensive Income
  
$
80,390
 
  
$
113,630
 
  
$
270,277
 
  
$
252,872
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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The components of accumulated other comprehensive income for the ninethree months ended September 30, 2021March 31, 2022 are as follows:
Changes in Accumulated Other Comprehensive Income (AOCI) by Component
(a)
 
For the Three Months Ended March 31, 2022
 
   
Unrealized
Gains/
Losses on
AFS
Securities
   
Unrealized
Gains/
Losses on
Cash Flow
Hedges
   
Defined
Benefit
Pension

Items
   
Total
 
Balance at January 1, 2022
  $8,594   $16,359   $(29,841)   $(4,888) 
Other comprehensive income before reclassification
   (155,113)    17,406    0    (137,707) 
Amounts reclassified from accumulated other comprehensive income
   (0)    262    641    903 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net current-period other comprehensive income, net of tax
   (155,113)    17,668    641    (136,804) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2022
  $(146,519)   $34,027   $(29,200)   $(141,692) 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Changes in Accumulated Other Comprehensive Income (AOCI) by Component
(a)
 
For the Nine Months Ended September 30, 2021
 
   
Unrealized
Gains/Losses
on
 
AFS
Securities
   
Unrealized
Gains/Losses
on
 
Cash
 
Flow
Hedges
   
Defined
Benefit
Pension

Items
   
Total
 
Balance at January 1, 2021
  $65,205   $3,358   $(46,193)   $22,370 
Other comprehensive income before reclassification
   (35,115)    9,578    0    (25,537) 
Amounts reclassified from accumulated other comprehensive income
   (1,190)    742    2,376    1,928 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net current-period other comprehensive income, net of tax
   (36,305)    10,320    2,376    (23,609) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
  $28,900   $13,678   $(43,817)   $(1,239) 
   
 
 
   
 
 
   
 
 
   
 
 
 
(a)
All amounts are
net-of-tax.
 
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Reclassifications out of Accumulated Other Comprehensive Income (AOCI)
For the Three Months Ended March 31, 2022
Details about AOCI Components
  
Amount
Reclassified
from AOCI
     
Affected Line Item in the Statement Where
Net Income is Presented
Available for sale (“AFS”) securities:
           
Net reclassification adjustment for gains included in net income
  $(0)      Net investment securities gains
   
 
 
       
    (0)      Total before tax
Related income tax effect
   0      Income taxes
   
 
 
       
    (0)      Net of tax
Cash flow hedge:
           
Net reclassification adjustment for losses included in net income
  $342      Interest expense
   
 
 
       
    342      Total before tax
Related income tax effect
   (80)      Income taxes
   
 
 
       
    262      Net of tax
   
 
 
       
Pension plan:
           
Recognized net actuarial loss
   824   (a)   
   
 
 
       
    824      Total before tax
Related income tax effect
   (183)      Income taxes
   
 
 
       
    641      Net of tax
   
 
 
       
Total reclassifications for the period
  $903       
   
 
 
       
Reclassifications out of Accumulated Other Comprehensive Income (AOCI)
For the Nine Months Ended September 30, 2021
Details about AOCI Components
  
Amount
Reclassified
from AOCI
      
Affected Line Item in the Statement Where
Net Income is Presented
Available for sale (“AFS”) securities:
           
Net reclassification adjustment for
gains included in net income
  $(1,552)      Net investment securities gains
   
 
 
       
    (1,552)      Total before tax
Related income tax effect
   362      Tax expense
   
 
 
       
    (1,190)      Net of tax
Cash flow hedge:
           
Net reclassification adjustment for
losses included in net income
  $968      Interest expense
   
 
 
       
    968      Total before tax
Related income tax effect
   (226)      Tax expense
   
 
 
       
    742      Net of tax
   
 
 
       
Pension plan:
           
Recognized net actuarial loss
   5,064   (a)   
   
 
 
       
    5,064      Total before tax
Related income tax effect
   (2,688)      Tax expense
   
 
 
       
    2,376      Net of tax
   
 
 
       
Total reclassifications for the period
  $1,928       
   
 
 
       
 
(a)
This AOCI component is included in the computation of changes in plan assets (see Note 16, Employee Benefit Plans)
19. EARNINGS PER SHARE
The reconciliation of the numerator and denominator of basic earnings per share with that of diluted earnings per share is presented as follows:
 
  
Three Months Ended
   
Nine Months Ended
 
  
September 30
   
September 30
   
Three Months Ended
 
  
2021
   
2020
   
2021
   
2020
   
March 31
 
   
2022
   
2021
 
Distributed earnings allocated to common stock
  $45,084   $45,295   $135,237   $126,080   $49,056   $45,068 
 
Undistributed earnings allocated to common stock
   46,803    58,229    157,810    70,064    32,392    61,531 
  
 
   
 
   
 
   
 
   
 
   
 
 
Net earnings allocated to common shareholders
  $91,887   $103,524   $293,047   $196,144   $81,448   $106,599 
  
 
   
 
   
 
   
 
   
 
   
 
 
 
Average common shares outstanding
   128,762,815    129,373,154    128,716,450    116,876,402    136,058,328    128,635,740 
Equivalents from stock
awards
   197,405    81,812    217,832    68,192 
  
 
   
 
   
 
   
 
 
Common stock equivalents
   376,901    255,121 
   
 
   
 
 
Average diluted shares outstanding
   128,960,220    129,454,966    128,934,282    116,944,594    136,435,229    128,890,861 
  
 
   
 
   
 
   
 
   
 
   
 
 
 
Earnings per basic common share
  $0.71   $0.80   $2.28   $1.68   $0.60   $0.83 
 
Earnings per diluted common share
  $0.71   $0.80   $2.27   $1.68   $0.60   $0.83 
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Antidilutive stock options and restricted stock outstanding
of 1,239,529 and 984,803
1,143,182 for the three months and nine months ended September 30, 2021, respectively,March 31, 2022 were excluded from the earnings per diluted common share calculation as compared to
2,138,750 and 1,983,557
1,373,241 for the three months and nine months ended September 30, 2020, respectively.
March 31, 2021.
20. VARIABLE INTEREST ENTITIES
Variable interest entities (“VIEs”) are entities that either have a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions, through voting rights, right to receive the expected residual returns of the entity, and obligation to absorb the expected losses of the entity). VIEs can be st
r
ucturedstructured as corporations, trusts, partnerships, or other legal entities. United’s business practices include relationships with certain VIEs. For United, the business purpose of these relationships primarily consists of funding activities in the form of issuing trust preferred securities.
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United currently sponsors 1920 statutory business trusts that were created for the purpose of raising funds that originally qualified for Tier I regulatory capital. As previously discussed, these trusts now are considered Tier II regulatory capital. These trusts, of which several were acquired through bank acquisitions, issued or participated in pools of trust preferred capital securities to third-party investors with the proceeds invested in junior subordinated debt securities of United. The Company, through a small capital contribution, owns 100% of the voting equity shares of each trust. The assets, liabilities, operations, and cash flows of each trust are solely related to the issuance, administration, and repayment of the preferred equity securities held by third-party investors. United fully and unconditionally guarantees the obligations of each trust and is obligated to redeem the junior subordinated debentures upon maturity.
United does not consolidate these trusts as it is not the primary beneficiary of these entities because United’s wholly owned and indirect wholly owned statutory trust subsidiaries do not have a controlling financial interest in the VIEs. A controlling financial interest is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE.
Information related to United’s statutory trusts is presented in the table below:
Description
  
Issuance Date
  
Amount of
Capital
Securities Issued
   
Stated Interest Rate
  
Maturity Date
United Statutory Trust III
  December 17, 2003  $20,000   
3-month
LIBOR + 2.85%		  December 17, 2033
United Statutory Trust IV
  December 19, 2003  $25,000   
3-month
LIBOR + 2.85%		  January 23, 2034
United Statutory Trust V
  July 12, 2007  $50,000   
3-month
LIBOR + 1.55%		  October 1, 2037
United Statutory Trust VI
  September 20, 2007  $30,000   
3-month
LIBOR + 1.30%		  December 15, 2037
Premier Statutory Trust II
  September 25, 2003  $6,000   
3-month
LIBOR + 3.10%		  October 8, 2033
Premier Statutory Trust III
  May 16, 2005  $8,000   
3-month
LIBOR + 1.74%		  June 15, 2035
Premier Statutory Trust IV
  June 20, 2006  $14,000   
3-month
LIBOR + 1.55%		  September 23, 2036
Premier Statutory Trust V
  December 14, 2006  $10,000   
3-month
LIBOR + 1.61%		  March 1, 2037
Centra Statutory Trust I
  September 20, 2004  $10,000   
3-month
LIBOR + 2.29%		  September 20, 2034
Centra Statutory Trust II
  June 15, 2006  $10,000   
3-month
LIBOR + 1.65%		  July 7, 2036
Virginia Commerce Trust II
  December 19, 2002  $15,000   
6-month
LIBOR + 3.30%		  December 19, 2032
Virginia Commerce Trust III
  December 20, 2005  $25,000   
3-month
LIBOR + 1.42%		  February 23, 2036
Cardinal Statutory Trust I
  July 27, 2004  $20,000   
3-month
LIBOR + 2.40%		  September 15, 2034
UFBC Capital Trust I
  December 30, 2004  $5,000   
3-month
LIBOR + 2.10%		  March 15, 2035
Carolina Financial Capital Trust I
  December 19, 2002  $5,000   Prime + 0.50%  December 31, 2032
 
Description
  
Issuance Date
  
Amount of
Capital Securities Issued
   
Stated Interest Rate
  
Maturity Date
United Statutory Trust III
  December 17, 2003  $20,000   3-month LIBOR + 2.85%  December 17, 2033
United Statutory Trust IV
  December 19, 2003  $25,000   
3-month
LIBOR + 2.85%		  January 23, 2034
United Statutory Trust V
  July 12, 2007  $50,000   
3-month
LIBOR + 1.55%		  October 1, 2037
United Statutory Trust VI
  September 20, 2007  $30,000   
3-month
LIBOR + 1.30%		  December 15, 2037
Premier Statutory Trust II
  September 25, 2003  $6,000   
3-month
LIBOR + 3.10%		  October 8, 2033
Premier Statutory Trust III
  May 16, 2005  $8,000   
3-month
LIBOR + 1.74%		  June 15, 2035
Premier Statutory Trust IV
  June 20, 2006  $14,000   
3-month
LIBOR + 1.55%		  September 23, 2036
Premier Statutory Trust V
  December 14, 2006  $10,000   
3-month
LIBOR + 1.61%		  March 1, 2037
Centra Statutory Trust I
  September 20, 2004  $10,000   
3-month
LIBOR + 2.29%		  September 20, 2034
Centra Statutory Trust II
  June 15, 2006  $10,000   
3-month
LIBOR + 1.65%		  July 7, 2036
Virginia Commerce Trust II
  December 19, 2002  $15,000   
6-month
LIBOR + 3.30%		  December 19, 2032
Virginia Commerce Trust III
  December 20, 2005  $25,000   
3-month
LIBOR + 1.42%		  February 23, 2036
Cardinal Statutory Trust I
  July 27, 2004  $20,000   
3-month
LIBOR + 2.40%		  September 15, 2034
UFBC Capital Trust I
  December 30, 2004  $5,000   
3-month
LIBOR + 2.10%		  March 15, 2035
Carolina Financial Capital Trust 
I
  December 19, 2002  $5,000   Prime + 0.50%  December 31, 2032
Carolina Financial Capital Trust
II
  November 5, 2003  $10,000   
3-month
LIBOR + 3.05%		  January 7, 2034
Greer Capital Trust I
  October 12, 2004  $6,000   
3-month
LIBOR + 2.20%		  October 18, 2034
Greer Capital Trust II
  December 28, 2006  $5,000   
3-month
LIBOR + 1.73%		  January 30, 2037
First South Preferred Trust I
  September 26, 2003  $10,000   
3-month
LIBOR + 2.95%		  September 30, 2033
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Description
  
Issuance Date
  
Amount of
Capital
Securities Issued
   
Stated Interest Rate
  
Maturity Date
Carolina Financial Capital Trust II
  November 5, 2003  $10,000   
3-month
LIBOR + 3.05%		  January 7, 2034
Greer Capital Trust I
  October 12, 2004  $6,000   
3-month
LIBOR + 2.20%		  October 18, 2034
Greer Capital Trust II
  December 28, 2006  $5,000   
3-month
LIBOR + 1.73%		  January 30, 2037
First South Preferred Trust I
  September 26, 2003  $10,000   
3-month
LIBOR + 2.95%		  September 30, 2033
BOE Statutory Trust I
  December 12, 2003  $4,000   
3-month
LIBOR + 3.00%		  December 12, 2033
United, through its banking subsidiary, also makes limited partner equity investments in various low income housing and community development partnerships sponsored by independent third-parties. United invests in these partnerships to either realize tax credits on its consolidated federal income tax return or for purposes of earning a return on its investment. These partnerships are considered VIEs as the limited partners lack a controlling financial interest in the entities through their inability to make decisions that have a significant effect on the operations and success of the partnerships. United’s limited partner interests in these entities is immaterial, however; these partnerships are not consolidated as United is not deemed to be the primary beneficiary.
The following table summarizes quantitative information about United’s significant involvement in unconsolidated VIEs:
 
   
As of September 30, 2021
   
As of December 31, 2020
 
   
Aggregate

Assets
   
Aggregate

Liabilities
   
Risk Of

Loss
(1)
   
Aggregate

Assets
   
Aggregate

Liabilities
   
Risk Of

Loss
(1)
 
Trust preferred securities
  $295,412   $284,632   $10,780   $295,466   $284,788   $10,678 
   
As of March 31, 2022
   
As of December 31, 2021
 
   
Aggregate

Assets
   
Aggregate

Liabilities
   
Risk Of

Loss
(1)
   
Aggregate

Assets
   
Aggregate

Liabilities
   
Risk Of

Loss
(1)
 
Trust preferred securities
  $299,720   $288,653   $11,067   $299,531   $288,499   $11,032 
 
(1)
Represents investment in VIEs.
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21. SEGMENT INFORMATION
United operates in 2two business segments: community banking and mortgage banking. Through its community banking segment, United offers a full range of products and services through various delivery channels. In particular, the community banking segment includes both commercial and consumer lending and provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. In addition, this segment provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit as well as investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning, and investment management. The mortgage banking segment engages primarily in the origination and acquisition of residential mortgages for sale into the secondary market though United’s mortgage banking subsidiaries, George Mason and Crescent. Crescent may retain servicing rights on their mortgage loans sold. At certain times, Crescent may purchase rights to service loans from third parties. These rights, which are known as mortgage servicing rights, and provide the owner with the contractual right to receive a stream of cash flows in exchange for performing specified mortgage servicing functions.
The community banking segment provides the mortgage banking segment (George Mason and Crescent) with short-term funds to originate mortgage loans through a warehouse line of credit and charges the m
o
rtgagemortgage banking segment interest based on the
30-day
LIBOR rate. These transactions are eliminated in the consolidation process.
The Company does not have any operating segments other than those reported. The “Other” category consists of financial information not directly attributable to a specific segment, including interest income from investments and net securities gains or losses of parent companies and their
non-banking
subsidiaries, interest expense related to subordinated notes of unconsolidated subsidiaries as well as the elimination of
non-segment
related intercompany transactions such as management fees. The “Other” represents an overhead function rather than an operating segment.
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Information about the reportable segments and reconciliation of this information to the consolidated financial statements at and for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 is as follows:
   
At and For the Three Months Ended March 31, 2022
 
   
Community
Banking
  
Mortgage
Banking
   
Other
  
Intersegment

Eliminations
  
Consolidated
 
Net interest income
  $189,682  $2,317   $(2,125)  $1,628  $191,502 
Provision for credit losses
   (3,410)   0    0   0   (3,410) 
Other income
   24,899   23,397    (60)   (2,213)   46,023 
Other expense
   114,537   25,448    (227)   (585)   139,173 
Income taxes
   20,429   57    (388)   0   20,098 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Net income (loss)
  $83,025  $209   $(1,570)  $0  $81,664 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Total assets (liabilities)
  $29,030,100  $589,503   $39,940  $(294,032)  $29,365,511 
Average assets (liabilities)
   29,023,901   475,243    33,357   (187,979)   29,344,522 
 
   
At and For the Three Months Ended September 30, 2021
 
   
Community
Banking
  
Mortgage
Banking
   
Other
  
Intersegment

Eliminations
  
Consolidated
 
Net interest income
  $179,444  $2,367   $(2,072)  $1,840  $181,579 
Provision for credit losses
   (7,829)   0    0   0   (7,829) 
Other income
   24,711   45,023    815   (1,925)   68,624 
Other expense
   109,134   31,787    1,440   (85)   142,276 
Income taxes
   20,969   3,179    (544)   0   23,604 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Net income (loss)
  $81,881  $12,424   $(2,153)  $0  $92,152 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
      
Total assets (liabilities)
  $27,129,820  $643,171   $34,546  $(300,020)  $27,507,517 
Average assets (liabilities)
   27,089,160   572,450    28,381   (252,281)   27,437,710 
  
  
 
 
   
At and For the Three Months Ended September 30, 2020
 
   
Community
Banking
  
Mortgage
Banking
   
Other
  
Intersegment

Eliminations
  
Consolidated
 
Net interest income
  $182,187  $2,740   $(2,241)  $2,978  $185,664 
Provision for credit losses
   16,781   0    0   0   16,781 
Other income
   26,615   110,900    33   (2,080)   135,468 
Other expense
   125,681   43,417    1,597   898   171,593 
Income taxes
   15,053   14,823    (902)   0   28,974 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Net income (loss)
  $51,287  $55,400   $(2,903)  $0  $103,784 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
      
Total assets (liabilities)
  $25,620,814  $953,531   $27,841  $(670,878)  $25,931,308 
Average assets (liabilities)
   26,148,305   763,170    22,239   (518,091)   26,415,623 
   
At and For the Three Months Ended March 31, 2021
 
   
Community
Banking
   
Mortgage
Banking
   
Other
  
Intersegment

Eliminations
  
Consolidated
 
Net interest income
  $187,197   $2,650   $(2,138)  $3,251  $190,960 
Provision for credit losses
   143    0    0   0   143 
Other income
   26,388    67,507    1,521   (2,843)   92,573 
Other expense
   110,017    41,183    (2,681)   408   148,927 
Income taxes
   21,202    5,940    423   0   27,565 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Net income (loss)
  $82,223   $23,034   $1,641  $0  $106,898 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Total assets (liabilities)
  $26,625,449   $930,481   $40,862  $(566,037)  $27,030,755 
Average assets (liabilities)
   26,154,094    716,744    23,029   (402,751)   26,491,116 
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At and For the Nine Months Ended September 30, 2021
 
   
Community
Banking
  
Mortgage
Banking
   
Other
  
Intersegment

Eliminations
  
Consolidated
 
Net interest income
  $550,041  $7,888   $(6,316)  $7,443  $559,056 
Provision for credit losses
   (16,565)   0    0   0   (16,565)
Other income
   75,171   152,295    3,468   (6,891)   224,043 
Other expense
   322,580   109,361    (2,339)   552   430,154 
Income taxes
   65,320   10,399    (95)   0   75,624 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Net income (loss)
  $253,877  $40,423   $(414)  $0  $293,886 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
      
Total assets (liabilities)
  $27,129,820  $643,171   $34,546  $
 
(300,020)  $27,507,517 
Average assets (liabilities)
   26,638,303   672,263    26,014   (354,693)   26,981,887 
  
   
At and For the Nine Months Ended September 30, 2020
 
   
Community
Banking
  
Mortgage
Banking
   
Other
  
Intersegment

Eliminations
  
Consolidated
 
Net interest income
  $490,311  $5,935   $(7,487)  $9,025  $497,784 
Provision for credit losses
   89,811   0    0   0   89,811 
Other income
   66,483   203,103    89   (9,011)   260,664 
Other expense
   312,621   99,435    10,030   14   422,100 
Income taxes
   31,245   22,042    (3,403)   0   49,884 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Net income (loss)
  $123,117  $87,561   $(14,025)  $0  $196,653 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
      
Total assets (liabilities)
  $25,620,814  $953,531   $27,841  $(670,878)  $25,931,308 
Average assets (liabilities)
   23,294,069   597,057    4,101   (422,920)   23,472,307 
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Congress passed the Private Securities Litigation Act of 1995 to encourage corporations to provide investors with information about the company’s anticipated future financial performance, goals, and strategies. The act provides a safe haven for such disclosure; in other words, protection from unwarranted litigation if actual results are not the same as management expectations.
United desires to provide its shareholders with sound information about past performance and future trends. Consequently, any forward-looking statements contained in this report, in a report incorporated by reference to this report, or made by management of United in this report, in any other reports and filings, in press releases and in oral statements, involve numerous assumptions, risks and uncertainties. Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning. Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect, such as statements about the potential impacts of the
COVID-19
pandemic. Therefore, undue reliance should not be placed upon these estimates and statements. United cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” United undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.
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
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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 20202021 Form
10-K
and our Form
10-Q
for the quarter ended June 30, 2021 for further information regarding (i) the impact of the
COVID-19
pandemic on our operations and our results thereof, as well as the impact on our financial position and (ii) legislative and regulatory actions taken related to the
COVID-19
pandemic, particularly as they relate to the banking and financial services industry.
As the
COVID-19
pandemic continues to be
on-going,
60
Tablethere continues to be uncertainties related to its magnitude, duration and persistent effects. This is particularly the case with the emergence, contagiousness and threat of Contents
The CARES Act was enacted in March 2020new and among other provisions, authorized the Small Business Administration (“SBA”) to guarantee loans under the Paycheck Protection Program (“PPP”) for small businesses that meet eligibility requirements in order to keep their workers on the payroll and fund specified operating expenses. Subsequent legislation extended the authoritydifferent strains of the SBA to guaranty loans under the PPP through August 8, 2020. In December 2020, the Economic Aid to
Hard-Hit
Small Businesses, Nonprofits, and Venues Act reauthorized the SBA to guarantee loans under the PPP through March 31, 2021, and the PPP Extension Act of 2021 extended that authorization through June 30, 2021 for applications received by the SBA prior to June 1, 2021.
On March 11, 2021, the American Rescue Plan Act of 2021 (the “ARP Act”) was enacted, implementing a $1.9 trillion package of stimulus and relief proposals. Among other things, the ARP Act provides (i) additional funding for the PPP program and an expansion of the program for the benefit of certain nonprofits, (ii) funding for the SBA to make targeted grants for restaurants and similar establishments, (iii) direct cash payments of up to $1,400 to individuals, subject to income provisions, (iv) an increase in the maximum annual Child Tax Credit, subject to income limitation provisions, (v) $300 a week in expanded unemployment insurance lasting through September 6, 2021 and makes $10,200 in unemployment benefits tax free for households, subject to income limitation provisions, (vi) tax relief making any student loan forgiveness incurred between December 31, 2020, and January 1, 2026
non-taxable
income, and (vii) funding to support state and local governments;
K-12
schools and higher education; the Centers for Disease Control; public transit; rental assistance; child care; and airline industry workers.
On March 27, 2021, the
COVID-19
Bankruptcy Relief Extension Act of 2021 was enacted, extending the bankruptcy relief provisions enacted in the CARES Act of 2020 bill until March 27, 2022. These provisions provide financially distressed small businesses and individuals greater access to bankruptcy relief. We are continuing to monitor the potential development of additional legislation and further actions taken by the U.S. government.
Impact on our Operations.
In the states where United operates, many jurisdictions declared health emergencies due to the
COVID-19
pandemic. The resulting closures of
non-essential
businesses and related economic disruption impacted our operationsvirus as well as the operationsavailability, acceptance and effectiveness of our customers. Financial services were identified as a Critical Infrastructure Sector by the Department of Homeland Security. Accordingly, our business remained open. To address the issues arising as a result of
COVID-19,
United implemented several policies in order to facilitate the continued delivery of essential services while maintaining a high level of safety for our customers as well as our employees.
As of September 30, 2021, United does not anticipate significant challenges to our ability to maintain our systems and controls in light of the measures we have taken regarding the
COVID-19
pandemic. The Company does not currently face any material resource constraint through the implementation of our business continuity plans.
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.
Impact on our Financial Position and Results of Operations.
Although economic conditions have improved in the first nine months of 2021, our business continues to be impacted by the
COVID-19
pandemic. In addition, significant uncertainties related to the
COVID-19
pandemic still exist including, among other things, the ongoing impact to our customers, employees, vendors, counterparties and service providers; the impact to the financial services and banking industry; and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken, or inaction by governmental authorities to contain the
COVID-19
outbreak and its variants or to mitigate its impact. Certain industries continue to be impacted more severely than others, although all businesses have been impacted by the
COVID-19
pandemic to some degree during the first nine months of 2021 as they were in 2020. The economic pressures, existing and forecasted, as of end of each quarter during 2020, coupled with the implementation of an expected loss methodology for determining United’s provision for credit losses as required by CECL contributed to an increased provision for credit losses for the year of 2020. Due to better performance trends within the loan portfolio and the improved reasonable and supportable forecasts
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ACQUISITION
Table of Contents
for future macroeconomic scenarios used in the estimated of expected credit losses under the CECL accounting standard, sinceOn December 31, 2020, our provision for credit losses significantly decreased for the nine months ended September 30,3, 2021, resulting in a net benefit of $16.57 million as compared to an expense of $89.81 million for the nine months ended September 30, 2020.
The Company’s fee income has been reduced due to
COVID-19.
In keeping with guidance from regulators, the Company actively worked with
COVID-19
affected customers during 2020 to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. Should the pandemic and the global response escalate further as outbreaks and variants occur, it is possible that the Company could reduce such fees in future periods; however, at this time, the Company is unable to project the materiality of such an impact on the results of operations in future periods.
The Company’s interest income has and could continue to be reduced due to
COVID-19.
In keeping with guidance from regulators, the Company continues to work with
COVID-19
affected borrowers to defer their payments, interest, and fees. While interest and fees continue to accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income and fees accrued would be reversed. In such a scenario, interest income in future periods could be negatively impacted. The Company assessed the collectabilityUnited acquired 100% of the accrued interest receivables on the loans deferred under the CARES Act asoutstanding common stock of September 30, 2021. Based on this assessment, the Company released reserves of $224 thousand for the first nine months of 2021 resulting in the allowance for accrued interest receivables not expected to be collected of $26 thousand as of September 30, 2021 as compared to $250 thousand as of December 31, 2020. At this time, the Company is unable to project the materiality of such an impact on future deferrals to
COVID-19
affected borrowers, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods. In addition, the net interest margin continues to be impacted by the decreases in market interest rates and the Company expects that interest rates will remain low as a result of the continuing economic disruption caused by
COVID-19.
Capital and liquidity.
As of September 30, 2021, all of our capital ratios, and our subsidiary bank’s capital ratios, were in excess of all regulatory requirements. While we believe that we have sufficient capital to withstand a second economic recession brought about by
COVID-19,
our reported and regulatory capital ratios could be adversely impacted by further credit loss expense. We rely on cash on hand as well as dividends from our subsidiary bank to service our debt. If our capital deteriorates such that our subsidiary bank is unable to pay dividends to us for an extended period of time, we may not be able to service our debt.
We maintain access to multiple sources of liquidity. Wholesale funding markets have remained open to us. Rates for short-term funding were volatile throughout 2020, but have been more stable thus far in 2021. If funding costs become elevated for an extended period of time, it could have an adverse effect on our net interest margin. If an extended recession caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding.
For a discussion of the United’s liquidity and capital resources in light of the
COVID-19
pandemic please refer to the sections with the captions of “Liquidity and Capital Resources” included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).
Lending operations and accommodations to borrowers.
In keeping with regulatory guidance to work with borrowers during this unprecedented situation and as outlined in the CARES Act, the Company is executing a payment deferral program for its customers that are adversely affected by the pandemic. Depending on the demonstrated need of the client and within the guidance of the CARES Act, the Company is deferring either the full loan payment or the principal component of the loan payment for stated period of time. As of September 30, 2021, United has 146 eligible loan modifications in deferral under section 4013, “Temporary Relief from Troubled Debt Restructurings,” of the CARES Act on $51.93 million of loans outstanding, down from 1,002 eligible loan modifications in deferral on $399.86 million of loans outstanding at December 31, 2020. In accordance with the CARES Act, these deferrals are not considered troubled debt restructurings. It is possible that these deferrals could be extended further under the CARES Act; however, the volume of these future potential extensions is unknown. It is also possible that in spite of our best efforts to assist our borrowers and achieve full collection of our investment, these deferred loans could result in future charge-offs with additional credit loss expense charged to earnings; however, the amount of any future charge-offs on deferred loans is unknown.
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With the passage and extensions of the PPP, administered by the SBA, the Company has actively participated in assisting its customers with applications for resources through the program. PPP loans generally have a
two-year
or five-year term and earn interest at 1%. The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of September 30, 2021, the Company had 4,024 of PPP loans with a balance of approximately $411.63 million. The Company recognized approximately $7.85 million and $28.18 million in net fees on PPP loans during the third quarter and first nine months ended September 30, 2021 as compared to $4.80 million and $9.28 million for the third quarter and first nine months ended September 30, 2020. Remaining fees due from the SBA will be amortized and recognized over the life of the associated loans. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to establish an allowance for credit loss through additional credit loss expense charged to earnings.
Retail operations.
The Company has been committed to assisting our customers and communities during the
COVID-19
pandemic. For much of 2020 and the first part of 2021, most branch locations were converted to drive-thru only in order to ensure the health and safety of our customers and team members. We continued to serve our customers that needed emergency branch access for account issues, safe deposit access and similar items by appointment. The Company was able to open and close accounts effectively, through its drive through facility, and our customer service center was successful in managing the volume of incoming calls. We introduced temporary changes to help with the financial hardship caused by
COVID-19
for both our customers and
non-customers,
including waiving select deposit account fees including overdraft fees, ATM fees and excessive withdrawal fees for savings and money market accounts.
From
mid-May
to
mid-June
in 2021, we used a
phased-in
approach to reopen our lobbies throughout our footprint. We have returned to full-service at all retail locations throughout our footprint. The customer service centers continue to operate at full capacity with more normalized call volumes. We have continued to offer fee waivers for select deposit accounts to help with the financial hardship caused by the pandemic.
The Company continues to place the utmost importance on the health and safety of our employees and customers. We also continue to follow the applicable Centers for Disease Control and Prevention (“CDC”) guidance and comply with any local or state mandates. The Company continues to closely monitor the pandemic and
COVID-19
variants and will adjust its retail operations accordingly, as necessary.
ACQUISITIONS
On June 2, 2021, United entered into an Agreement and Plan of Reorganization (the “Community Bankers Trust Agreement”) with Community Bankers Trust Corporation (“Community Bankers Trust”), a Virginia corporation headquartered in Richmond, Virginia. Immediately following the Merger, Essex Bank, a wholly-owned subsidiary of Community Bankers Trust, is the holding company for Essex Bank, a Virginia state chartered bank with 24 full-service offices, 18 of which are in Virginia and six of which are in Maryland. Essex Bank also operates two loan production offices. In accordance with the Community Bankers Trust Agreement, Community Bankers Trust shall merge with and into United (the “Community Bankers Trust Merger”). Community Bankers Trust will cease to exist and United shall survive and continue to exist as a West Virginia corporation. United may at any time prior to the effective time of the Community Bankers Trust Merger change the method of effecting the combination with Community Bankers Trust subject to certain conditions contained in the Community Bankers Trust Agreement. At the effective time of the Community Bankers Trust Merger, Essex Bank will mergemerged with and into United Bank, a wholly-owned subsidiary of United (the “Essex Bank Merger”). United Bank will survive the Essex Bank Merger and continue to exist as a Virginia banking corporation. All requisite regulatory approvals for the merger have been received from the Board of Governors of the Federal Reserve System and from the Virginia State Corporation Commission. The merger is expected to close in the fourth quarter of 2021, subject to satisfaction of customary closing conditions including approval by the shareholders of Community Bankers Trust. Community Bankers Trust had approximately $1.77 billion in assets as of September 30, 2021.
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On May 1, 2020, United acquired 100% of the outstanding common stock of Carolina Financial Corporation (“Carolina Financial”), headquartered in Charleston, South Carolina. Immediately following the merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank (the “CresCom Bank Merger”).United. United Bank survived the CresCom Bank Merger and continues to exist as a Virginia banking corporation. The acquisition of Carolina Financial afforded United the opportunity to expand itsCommunity Bankers Trust enhanced United’s existing footprint in North Carolina and South Carolina. The merger resulted in a combined company with more than 200 locations in some of the best banking marketspresence in the DC Metro MSA and took United States. CresCom Bank ownedinto new markets including Baltimore, Annapolis, Lynchburg, Richmond, and operated Crescent Mortgage Company (“Crescent”), which is based in Atlanta. Crescent is approved to originate loans in 48 states partnering with community banks, credit unions the Northern Neck of Virginia. It also strategically connected our
Mid-Atlantic
and mortgage brokers. As a result of the merger, Crescent became an indirectly-owned subsidiary of United.Southeast footprints. The Carolina FinancialCommunity Bankers Trust merger was accounted for under the acquisition method of accounting. At consummation, Carolina FinancialCommunity Bankers Trust had assets of $5.00$1.79 billion, loans and leases, net of unearned income of $3.29$1.28 billion and deposits of $3.87$1.52 billion.
The results of operations of Carolina FinancialCommunity Bankers Trust are included in the consolidated results of operations from its date of acquisition. As a result of the Carolina Financial acquisition,Community Bankers Trust acquisitions, the first nine monthsquarter of 2021 were2022 was impacted by increased levels of average balances, income, and expense as compared to the first nine monthsquarter of 2020.2021. In addition, the thirdfirst quarter and first nine months of 20202022 included $5.67 million and $53.68 million, respectively,$536 thousand of merger-related expenses from the Carolina Financialthe Community Bankers Trust acquisition. There were no merger-related expenses incurred in the first quarter of 2021.
TRANSITION FROM THE LONDON INTERBANK OFFERED RATE (“LIBOR”)(LIBOR)
In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intendsits intention to stop persuading or compelling banks to submit the rates used to calculate LIBOR after 2021. ICE Benchmark Administration (the publisher of LIBOR) plans to discontinuediscontinued publication of the
one-week
and
two-month
U.S. Dollar LIBOR settings on December 31, 2021, and plans to discontinue publication of overnight,
one-month,
three-month,
six-month,
and twelve-month U.S. Dollar LIBOR settings on June 30, 2023. It is assumed that LIBOR will either cease to be provided by any administrator or will no longer be representative of an acceptable market benchmark after these respective dates. Additionally, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have issued joint supervisory guidance encouraging banks to cease entering into any new contracts using LIBOR by December 31, 2021. Accordingly, United has taken steps to ensure that no new contracts using LIBOR will be originated after December 31, 2021.
Working groups comprised of various regulators and other industry groups have been formed in the United States and other countries in order to provide guidance on this topic. In particular, the Alternative Reference Rates Committee (“ARRC”) has been formed in the United States by the Federal Reserve Board and the Federal Reserve Bank of New York. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative reference rate for U.S. Dollar LIBOR. The ARRC has also published recommended fall-back language for LIBOR-linked financial instruments, among numerous other areas of guidance. At this time, however, it is unclear to what extent these recommendations will be broadly accepted by industry participants, whether they will continue to evolve, and what other alternatives may be adopted by the broader markets that utilize LIBOR as a reference rate. United has formed a project team comprised of individuals across various lines of business throughout the company to identify risks, monitor market developments, evaluate replacement benchmark alternatives, and manage the company’s transition away from LIBOR. At this time, United intends to prioritize SOFR and Prime as the preferred alternatives to LIBOR; however, these preferred alternatives could change over time based on market developments.
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United has loans, derivative contracts, borrowings, and other financial instruments that are directly or indirectly dependent on LIBOR. The transition from LIBOR will cause changes to payment calculations for existing contracts that use LIBOR as the reference rate. These changes will create various risks surrounding the financial, operational, compliance and legal aspects associated with changing certain elements of existing contracts. United will also be subject to risks surrounding changes to models and systems that currently use LIBOR reference rates, as well as market and strategic risks that could arise from the use of alternative reference rates. Additionally, United could face reputational risks if this transition is not managed appropriately with its customers. While the full impact of the transition is not yet known, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.
INTRODUCTION
The following discussion and analysis presents the significant changes in financial condition and the results of operations of United and its subsidiaries for the periods indicated below. This discussion and the unaudited consolidated financial statements and the notes to unaudited Consolidated Financial Statements include the accounts of United Bankshares, Inc.
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and its wholly-owned subsidiaries, unless otherwise indicated. Management has evaluated all significant events and transactions that occurred after September 30, 2021,March 31, 2022, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.
This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and accompanying notes thereto, which are included elsewhere in this document.
USE OF
NON-GAAP
FINANCIAL MEASURES
This discussion and analysis contains certain financial measures that are not recognized under GAAP. Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each
“non-GAAP”
financial measure, certain additional information, including a reconciliation of the
non-GAAP
financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the
non-GAAP
financial measure.
Generally, United has presented a
non-GAAP
financial measure because it believes that this measure provides meaningful additional information to assist in the evaluation of United’s results of operations or financial position. Presentation of a
non-GAAP
financial measure is consistent with how United’s management evaluates its performance internally and this
non-GAAP
financial measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the banking industry. Specifically, this discussion contains certain references to financial measures identified as
tax-equivalent
(“FTE”) net interest income and return on average tangible equity. Management believes these
non-GAAP
financial measures to be helpful in understanding United’s results of operations or financial position.
Net interest income is presented in this discussion on a
tax-equivalent
basis. The
tax-equivalent
basis adjusts for the
tax-favored
status of income from certain loans and investments. Although this is a
non-GAAP
measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and
tax-exempt
sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition.
Average tangible equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible equity can thus be considered the mosta more conservative valuation of the company. When considering net income, a return on average tangible equity can be calculated. Management provides a return on average equity to facilitate the understanding of as well as to assess the quality and composition of United’s capital structure. By removing the effect of intangible assets that result from merger and acquisition activity, the “permanent” items of shareholders’ equity are presented. This measure, along with others, is used by management to analyze capital adequacy and performance.
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However, this
non-GAAP
information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP. Where the
non-GAAP
financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the
non-GAAP
financial measure, can be found within this discussion and analysis. Investors should recognize that United’s presentation of this
non-GAAP
financial measure might not be comparable to a similarly titled measure at other companies.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The accounting and reporting policies of United conform with U.S. generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments, which are reviewed with the Audit Committee of the Board of Directors, are based on information available as of the date of the financial statements. Actual results could differ from these estimates. These policies, along with the disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan and lease losses, the calculation of the income tax provision, and the use of fair value measurements to account for certain financial instruments to be the accounting areas that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.
United’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2021March 31, 2022 were unchanged from the policies disclosed in United’s Annual Report on Form
10-K
for the year ended December 31, 20202021 within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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FINANCIAL CONDITION
United’s total assets as of September 30, 2021March 31, 2022 were $27.51$29.37 billion, which was an increase of $1.32 billion$36.61 million or 5.05%less than 1% from December 31, 2020.2021. This increase was mainly due to an increase of $1.82 billion$724.96 million or 82.59%16.88% in investment securities, and an increase of $368.44 million or 2.04% in portfolio loans. These increases in assets were mostly offset by a $955.08 million or 25.41% decrease in cash and cash equivalents and an increase of $459.88a $164.38 million or 14.43% in investment securities. These increases in assets were partially offset by a $847.78 million or 4.82% decrease in portfolio loans and a $225.64 million or 31.38%32.59% decrease in loans held for sale. Total liabilities increased $1.19 billion$160.10 million or 5.44%less than 1% from
year-end
2020 mainly due to a $1.24 billion2021. Deposits increased $124.04 million or 6.01% increase in deposits. In addition,less than 1%, accrued expenseexpenses and other liabilities increased $9.23 million of 4.56% while operating lease liabilities increased $7.31$28.48 million or 9.98%. Partially offsetting these increases in liabilities, was a $69.8014.56% and borrowings increased $7.37 million or 6.93% decrease in borrowings.less than 1%. Shareholders’ equity increased $133.15decreased $123.49 million or 3.10%2.62%.
The following discussion explains in more detail the changes in financial condition by major category.
Cash and Cash Equivalents
Cash and cash equivalents at September 30, 2021 increased $1.82 billionMarch 31, 2022 decreased $955.08 million or 82.59%25.41% from
year-end
2020.2021. In particular, interest-bearing deposits with other banks increased $1.83decreased $1.05 billion or 95.88%30.36% as United placed moreless cash in an interest-bearing account with the Federal Reserve. CashPartially offsetting this decrease in cash and cash equivalents decreased $7.68was a $99.71 million or 2.58% while federal35.25% increase in cash and due from banks. Federal funds sold increased $104$118 thousand or 12.64%12.73%. During the first ninethree months of 2021,2022, net cash of $553.20$283.61 million and $249.37$64.91 million were provided by operating and investingfinancing activities, respectively, while net cash of $1.02$1.30 billion was provided by financingused in investing activities. See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first ninethree months of 20212022 and 2020.2021.
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Securities
Total investment securities at September 30, 2021March 31, 2022 increased $459.88$724.96 million or 14.43% from December 31, 2020.16.88%. Securities available for sale increased $456.63$718.24 million or 15.46%17.77%. This change in securities available for sale reflects $566.96$1.08 billion in purchases, $151.63 million in sales, maturities and calls of securities $1.08 billion in purchases, and a decrease of $47.33$202.23 million in market value. The majority of the purchase activity was related to securities of the U.S. Treasury and obligations of U.S. Government corporations and agencies, mortgage-backed securities, corporate securities,and asset-backed securities and state and political subdivisions securities. Securities held to maturity declined $219 thousand or 18.07%were flat from
year-end
2020 due to maturities and calls of securities.2021. Equity securities were $11.98$12.36 million at September 30, 2021, an increaseMarch 31, 2022, a decrease of $1.27 million$47 thousand or 11.81%less than 1% due mainly to a net purchases.decline in fair value. Other investment securities increased $2.21$6.78 million or 1.00%2.83% from
year-end
20202021 due mainly to an increase in investment tax credits. Partially offsetting this increase in investment tax credits was a decrease inpurchases of Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stock.stock as well as investment tax credits.
The following table summarizes the changes in the available for sale securities since
year-end
2020:2021:
 
(Dollars in thousands)
  
September 30
2021
   
December 31
2020
   
$ Change
   
% Change
   
March 31
2022
   
December 31
2021
   
$ Change
 
% Change
 
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies
  $13,045   $66,344   $(53,299)    (80.34%)   $371,392   $81,850   $289,542   353.75% 
State and political subdivisions
   620,687    565,160    55,527    9.83%    795,512    847,298    (51,786)   (6.11%) 
Mortgage-backed securities
   1,703,131    1,625,812    77,319    4.76%    2,116,800    1,828,244    288,556   15.78% 
Asset-backed securities
   535,011    294,623    240,388    81.59%    843,999    656,572    187,427   28.55% 
Single issue trust preferred securities
   16,482    17,027    (545)    (3.20%)    16,669    16,811    (142)   (0.84%) 
Corporate securities
   521,628    384,393    137,235    35.70%    616,562    611,924    4,638   0.76% 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
  
 
 
Total available for sale securities, at fair value
  $3,409,984   $2,953,359   $456,625    15.46%   $4,760,934   $4,042,699   $718,235   17.77% 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
  
 
 
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The following table summarizes the changes in the held to maturity securities since
year-end
2020:2021:
 
(Dollars in thousands)
  
September 30
2021
       
December 31
2020
       
$ Change
   
% Change
   
March 31
2022
 
December 31
2021
 
$ Change
   
% Change
 
State and political subdivisions
  $973    (1)   $1,192    (2)   $(219)    (18.37%)   $981 (1)  $981 (1)  $        0    0.00% 
Other corporate securities
   20      20      0    0.00%    20   20   0    0.00% 
  
 
     
 
     
 
   
 
   
 
  
 
  
 
   
 
 
Total held to maturity securities, at amortized cost
  $993     $1,212     $(219)    (18.07%)   $1,001  $1,001  $0    0.00% 
  
 
     
 
     
 
   
 
   
 
  
 
  
 
   
 
 
Note
: (1) net of allowance for credit losses of $27 thousand.
(2) net of allowance for credit losses of $23
(1)
net of allowance for credit losses of $19 thousand.
At September 30, 2021,March 31, 2022, gross unrealized losses on available for sale securities were $19.84$195.58 million. Securities with the most significant gross unrealized losses at September 30, 2021March 31, 2022 consisted primarily of agency residential mortgage-backed securities, state and political subdivision securities, agency commercial mortgage-backed securities, asset-backed securities and other corporate securities.
As of September 30, 2021,March 31, 2022, United’s available for sale mortgage-backed securities had an amortized cost of $1.68$2.23 billion, with an estimated fair value of $1.70$2.12 billion. The portfolio consisted primarily of $1.03$1.47 billion in agency residential mortgage-backed securities with a fair value of $1.03$1.39 billion, $38.38$103.78 million in
non-agency
residential mortgage-backed securities with an estimated fair value of $38.07$100.10 million, and $617.65$653.53 million in commercial agency mortgage-backed securities with an estimated fair value of $631.05$627.17 million.
As of September 30, 2021,March 31, 2022, United’s available for sale state and political subdivisions securities had an amortized cost of $838.38 million, with an estimated fair value of $795.51 million. The portfolio relates to securities issued by various municipalities located throughout the United States, and no securities within the portfolio were rated below investment grade as of March 31, 2022.
As of March 31, 2022, United’s available for sale corporate securities had an amortized cost of $1.07$1.51 billion, with an estimated fair value of $1.07$1.48 billion. The portfolio consisted of $17.28$17.30 million in single issue trust preferred securities with an estimated fair value of $16.48$16.67 million. In addition to the single issue trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $535.42$856.84 million and a fair value of $535.01$844.00 million and other corporate securities, with an amortized cost of $517.73$632.22 million and a fair value of $521.63$616.56 million.
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United’s available for sale single issue trust preferred securities had a fair value of $16.48$16.67 million as of September 30, 2021.March 31, 2022. Of the $16.48$16.67 million, $8.29$8.12 million or 50.30%48.65% were investment grade; $3.25$3.21 million or 19.75%19.29% were split rated; and $4.94$5.34 million or 29.95%32.06% were unrated. The two largest exposures accounted for 74.50%75.76% of the $16.48$16.67 million. These included Truist Bank at $7.34$7.28 million and Emigrant Bank at $4.94$5.34 million. All single issue trust preferred securities are currently receiving full scheduled principal and interest payments.
During the first nine monthsquarter of 2021,2022, 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, 2021March 31, 2022 is impaired. United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not a deterioration of credit. Based on a review of each of the securities in the available for sale investment portfolio, management concluded that it was more likely than not that it would be able to realize the cost basis investment and appropriate interest payments on such securities. United has the intent and the ability to hold these securities until such time as the value recovers or the securities mature. As of September 30, 2021,March 31, 2022, there was no allowance for credit losses related to the Company’s available for sale securities. However, United acknowledges that any securities in an unrealized loss position may be sold in future periods in response to significant, unanticipated changes in asset/liability management decisions, unanticipated future market movements or business plan changes.
Further information regarding the amortized cost and estimated fair value of investment securities, including remaining maturities as well as a more detailed discussion of management’s impairment analysis, is presented in Note 3 to the unaudited Notes to Consolidated Financial Statements.
Loans held for sale
Loans held for sale decreased $225.64were $340.04 million at March 31, 2022, a decrease of $164.38 million or 31.38%32.59% from
year-end
2020.2021. Loan sales in the secondary market exceeded originations during the first ninethree months of 2021. Originations of loans2022. Loan originations for the first ninethree months of 20212022 were $4.94 billion$927.80 million while loans sales of loans were $5.16$1.11 billion. Loans held for sale were $493.30 million at September 30, 2021 as compared to $718.94 million at
year-end
2020.
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Portfolio Loans
Loans, net of unearned income, decreased $847.78increased $368.44 million or 4.82%2.04%. Since
year-end
2020,2021, commercial, financial and agricultural loans decreased $724.26increased $126.85 million or 6.77%1.14% as a result of a $824.95$55.30 million or 20.35% decreaseless than 1 % increase in commercial real estate loans and a $71.55 million or 2.07% increase in commercial loans (not secured by real estate), which was partially offset by a $100.69. Construction and land development loans increased $171.96 million or 1.52% increase in commercial real estate loans. Residential8.54%, residential real estate loans decreased $385.66increased $13.98 million or 9.89% whileless than 1%, and consumer loans decreased $24.14increased $55.19 million or 2.00%4.63% due to a decreasean increase in indirect automobile financing. Partially offsetting these decreases in loans, net of unearned income, was a $282.80 million or 15.48% increase in construction and land development loans.
The following table summarizes the changes in the major loan classes since
year-end
2020:2021:
 
(Dollars in thousands)
  
September 30
2021
   
December 31
2020
   
$ Change
   
% Change
   
March 31
2022
   
December 31
2021
   
$ Change
   
% Change
 
Loans held for sale
  $493,299   $718,937   $(225,638)    (31.38%)   $340,040   $504,416   $(164,376)    (32.59%) 
  
 
   
 
   
 
   
 
 
  
 
   
 
   
 
   
 
 
Commercial, financial, and agricultural:
                
Owner-occupied commercial real estate
  $1,542,555   $1,622,687   $(80,132)    (4.94%)   $1,697,910   $1,733,176   $(35,266)    (2.03%) 
Nonowner-occupied commercial real estate
   5,198,547    5,017,727    180,820    3.60%    6,047,856    5,957,288    90,568    1.52% 
Other commercial loans
   3,229,471    4,054,418    (824,947)    (20.35%)    3,533,910    3,462,361    71,549    2.07% 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total commercial, financial, and agricultural
  $9,970,573   $10,694,832   $(724,259)    (6.77%)   $11,279,676   $11,152,825   $126,851    1.14% 
Residential real estate
   3,514,228    3,899,885    (385,657)    (9.89%)    3,705,535    3,691,560    13,975    0.38% 
Construction & land development
   2,109,149    1,826,349    282,800    15.48%    2,186,126    2,014,165    171,961    8.54% 
Consumer:
                
Bankcard
   8,178    8,937    (759)    (8.49%)    8,398    8,913    (515)    (5.78%) 
Other consumer
   1,169,204    1,192,580    (23,376)    (1.96%)    1,239,545    1,183,844    55,701    4.71% 
  
 
   
 
   
 
   
 
 
  
 
   
 
   
 
   
 
 
Total gross loans
  $16,771,332   $17,622,583   $(851,251)    (4.83%)   $18,419,280   $18,051,307   $367,973    2.04% 
Less: Unearned income
   (27,703)    (31,170)    3,467    (11.12%)    (27,194)    (27,659)    465    (1.68%) 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total Loans, net of unearned income
  $16,743,629   $17,591,413   $(847,784)    (4.82%)   $18,392,086   $18,023,648   $368,438    2.04% 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
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For a further discussion of loans see Note 4 to the unaudited Notes to Consolidated Financial Statements.
Other Assets
Other assets increased $78.77$57.43 million or 13.48%24.80% from
year-end
20202021. Derivative assets increased $29.29 million due to a $90.83 millionan increase in cash surrender life insurance policies as a result of purchases of new policies, totaling $85.00 million, during the first nine months of 2021. In addition,fair value and deferred tax assets increased $3.91$41.98 million due to timing differences.a decrease in the fair value of
available-for-sale
securities. Partially offsetting these increases were decreases of $6.53$18.14 million in derivative assets, $5.90income tax receivable due to timing differences, $1.18 million in other real estate owned properties (“OREO”) due to sales and write downs, $4.40and $1.38 million in core deposit intangibles due to amortization, and $1.78 million in accounts receivables due to timing differences.amortization.
Deposits
Deposits represent United’s primary source of funding. Total deposits at September 30, 2021March 31, 2022 increased $1.24 billion$124.04 million or 6.01% from December 31, 2020.less than 1%. In terms of composition, noninterest-bearing deposits increased $1.08 billion$26.41 million or 14.65%less than 1% while interest-bearing deposits increased $152.52$97.62 million or 1.16%.less than 1% from December 31, 2021.
Noninterest-bearing deposits consist of demand deposit and noninterest bearing money market (“MMDA”) account balances. The $1.08 billion$26.41 million increase in noninterest-bearing deposits was due mainly to increasesa $99.22 million or 1.41% increase in commercial noninterest-bearing deposits. Partially offsetting this increase in commercial noninterest-bearing deposits of $2.85 billion or 70.18%, personal noninterest-bearing deposits of $143.28 million or 13.03% andwas a decrease in public noninterest-bearing deposits of $46.29$8.42 million or 35.44%. Partially offsetting these increases4.28% and a decrease of $62.64 million in noninterest bearing MMDAs was a $1.98 billion decrease in sweep activity.items
in-process.
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Interest-bearing deposits consist of interest-bearing checking (“NOW”), regular savings, interest-bearing MMDA, and time deposit account balances. NOW accounts increased $2.73$88.37 billion or 341.99%2.37% since
year-end
2020 while regular savings accounts increased $168. 992021 as the result of increases of $52.41 million or 13.16%. Excluding sweep activity from NOW accounts to interest-bearing MMDAs to reduce United’s reserve requirement at its Federal Reserve Bank, NOW accounts increased $437.17 million or 14.12% mainly due to a $114.78 million increase in personal NOW accounts, a $152.79$12.78 million increase in commercial NOW accounts, and a $169.60$23.18 million increase in public funds NOW accounts. Partially offsetting these increases in interest-bearing deposits isRegular savings accounts increased $64.09 million or 3.90% mainly as a $2.08 billion or 25.44% decrease in interest-bearing MMDAs. In particular, personal MMDAs decreased $1.06 billion, commercial MMDAs decreased $407.60 million, and public MMDAs decreased $606.03 million. These decreases were due toresult of a $2.30 billion decrease in sweep activity from NOW accounts to interest-bearing MMDAs. The increase of $168.99 million in regular savings was mainly due to a $148.26$58.76 million increase in personal savings accounts and a $19.66$5.04 million increase in commercial savings accounts. Interest-bearing MMDAs increased $186.26 million or 2.93%. In particular, personal MMDAs increased $67.80 million, commercial MMDAs increased $42.03 million, brokered MMDAs increased $68.78 million, and public funds MMDAs increased $7.65 million.
Time deposits under $100,000 decreased $123.41$49.35 million or 12.59%4.79% from
year-end
2020.2021. This decrease in time deposits under $100,000 was the result of a $107.28 $46.00��million decrease in fixed rate Certificates of Deposits (“CDs”) under $100,000, a $2.60 million decrease in Certificate of Deposit Account Registry Service (“CDARS”) under $100,000, and a $16.47$2.31 million decrease in CDs under $100,000 obtained through the use of deposit listing services.
Since
year-end
2020,2021, time deposits over $100,000 decreased $544.32$191.75 million or 28.23%11.98% as fixed rate CDs decreased $254.85$125.09 million, CDARS over $100,000 decreased $33.64 million, brokered certificates of deposits decreased $105.96$7.04 million, and public funds CDs over $100,000 decreased $123.34 million. In addition, Certificate of Deposit Account Registry Service (“CDARS”) CDs decreased $61.20$25.74 million.
The table below summarizes the changes by deposit category since
year-end
2020:2021:
 
(Dollars in thousands)
  
September 30
2021
   
December 31
2020
   
$ Change
   
% Change
   
March 31
2022
   
December 31
2021
   
$ Change
   
% Change
 
Demand deposits
  $8,490,191   $5,428,398   $3,061,793    56.40%   $9,006,961   $8,980,547   $26,414    0.29% 
Interest-bearing checking
   3,534,311    799,635    2,734,676    341.99%    3,822,725    3,734,355    88,370    2.37% 
Regular savings
   1,452,814    1,283,823    168,991    13.16%    1,705,494    1,641,404    64,090    3.90% 
Money market accounts
   6,105,050    10,165,334    (4,060,284)    (39.94%)    6,548,151    6,361,887    186,264    2.93% 
Time deposits under $100,000
   856,577    979,988    (123,411)    (12.59%)    981,662    1,031,008    (49,346)    (4.79%) 
Time deposits over $100,000
(1)
   1,383,666    1,927,982    (544,316)    (28.23%)    1,409,308    1,601,062    (191,754)    (11.98%) 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total deposits
  $21,822,609   $20,585,160   $1,237,449    6.01%   $23,474,301   $23,350,263   $124,038    0.53% 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1)
Includes time deposits of $250,000 or more of $547,761$556,426 and $889,334$640,752 at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
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Borrowings
Total borrowings at September 30, 2021 decreased $69.80March 31, 2022 increased $7.37 million or 6.93%less than 1% since
year-end
2020.2021. During the first ninethree months of 2021,2022, short-term borrowings decreased $19.28increased $7.53 million or 13.55%5.84% due to a declinean increase in short-term securities sold under agreements to repurchase. Long-term borrowings decreased $50.52 millionwere flat, decreasing $159 thousand or 5.84%less than 1% from
year-end
2020 due to a $51.75 million decrease in long-term FHLB advances as payments exceeded new borrowings.2021.
The table below summarizes the change in the borrowing categories since
year-end
2020:2021:
 
(Dollars in thousands)
  
September 30
2021
   
December 31
2020
   
$ Change
   
% Change
   
March 31
2022
   
December 31
2021
   
$ Change
   
% Change
 
Short-term securities sold under agreements to repurchase
  $123,018   $142,300   $(19,282)    (13.55%)   $136,370   $128,844   $7,526    5.84% 
Long-term FHLB advances
   532,782    584,532    (51,750)    (8.85%)    531,615    532,199    (584)    (0.11%) 
Subordinated debt
   9,868    9,865    3    0.03%    9,877    9,872    5    0.05% 
Issuances of trust preferred capital securities
   271,201    269,972    1,229    0.46%    275,743    275,323    420    0.15% 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total borrowings
  $936,869   $1,006,669   $(69,800)    (6.93%)   $953,605   $946,238   $7,367    0.78% 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
For a further discussion of borrowings see Notes 10 and 11 to the unaudited Notes to Consolidated Financial Statements.
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Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at September 30, 2021March 31, 2022 increased $9.23$28.48 million or 4.56%14.56% from
year-end
2020.2021. In particular, a $24.66 million liability owed to a derivative counterparty in relation to FHLB swaps was recorded during the first quarter of 2022. In addition, accounts payable associated with George Mason increased $34.65$8.84 million and income tax payable increased $3.18 million, both due to timing differences, while accrued mortgage escrow liabilities increased $3.90 million, and accrued loan expensesbusiness franchise taxes increased $6.06$2.79 million. Partially offsetting these increases were decreaseswas a decrease of $4.09$10.03 million in income taxes payable and $1.93 million in business franchise taxes, bothincentives payables due to timing differences. In addition, interest payable decreased $2.02 million, accrued employee expenses decreased $8.39 million as a result of a $3.75 million decrease in incentives payable and a $6.09 million decrease in other employee withholdings, and derivative liabilities decreased $9.05 million due to a change in fair value.payments.
Shareholders’ Equity
Shareholders’ equity at September 30, 2021was $4.43March 31, 2022 was $4.60 billion, which was an increasea decrease of $133.15$123.49 million or 3.10%2.62% from
year-end
2020.2021.
Retained earnings increased $158.09$32.40 million or 13.12%2.33% from
year-end
2020.2021. Earnings net of dividends for the first ninethree months of 20212022 were $158.09$32.40 million.
Accumulated other comprehensive income decreased $23.61$136.80 million or 105.54%2,798.77% from
year-end
20202021 due mainly to a decrease of $36.30$155.11 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes. Partially offsetting this decrease was a $10.32$17.67 million increase in the fair value of cash flow hedges, net of deferred income taxes. The
after-tax
accretion of pension costs was $2.38 million$641 thousand for the first nine monthsquarter of 2021.2022.
Treasury stock increased $26.28 million or 15.41% from
year-end
2021. During the fourthfirst quarter of 2020,2022, United began repurchasingrepurchased 710,785 shares of its common stock on the open market under a repurchase plansplan approved by United’s Board of Directors. United repurchased 306,204 shares in the first nine months of 2021Directors at a cost of $9.96$24.98 million or an average price per share of $32.52.$35.15.
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RESULTS OF OPERATIONS
Overview
Net income for the thirdfirst quarter of 20212022 was $92.15$81.66 million or $0.71 per diluted share, as compared to $103.78earnings of $106.90 million or $0.80 per diluted share for the prior year third quarter. Net income for the first nine monthsquarter of 2021 was $293.89 million or $2.27 per diluted share compared to $196.65 million or $1.68 per share2021. Earnings for the first nine monthsquarter of 2020. Earnings for the third quarter and first nine months of 2021, as compared to the third quarter and first nine months of 2020, were benefited by lower provision for credit losses primarily due to better performance trends within the loan portfolio and an improved future macroeconomic forecast under the Current Expected Credit Loss (“CECL”) accounting standard. As a result of the acquisition of Carolina Financial on May 1, 2020, the first nine months of 2021 reflected higher average balances, income, and expense2022, as compared to the first nine months of 2020. In addition, the third quarter and first nine months of 2020 included merger-related expenses of $5.67 million and $53.68 million, respectively, associated with the acquisition of Carolina Financial compared to $845 thousand and $1.03 million of merger-related expenses incurred in the third quarter and first nine months of 2021, respectively, related to the announced Community Bankers Trust acquisition.
For the third quarter of 2021, United’s annualized return on average assets was 1.33% and return on average shareholders’ equity was 8.23%decreased primarily due to lower income from mortgage banking activities mainly as compared to 1.56% and 9.68%a result of the rising rate environment partially offset by lower noninterest expense associated with decreased mortgage banking production. Diluted earnings per share were $0.60 for the thirdfirst quarter of 2020. 2022 and $0.83 for the first quarter of 2021.
United’s annualized return on average assets for the first ninethree months of 20212022 was 1.46%1.13% and return on average shareholders’ equity was 8.95%6.96% as compared to 1.12%1.64% and 6.85%9.97%, respectively, for the first ninethree months of 2020.2021. For the third quarter and first ninethree months of 2021,2022, United’s annualized return on average tangible equity was 14.03% and 15.36%11.63%, respectively, as compared to 16.94% and 12.19%17.20% for the third quarter and first ninethree months of 2020, respectively.2021.
 
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Three Months Ended
 
Nine Months Ended
   
Three Months Ended
 
(Dollars in thousands)
  
September 30,
2021
 
September 30,
2020
 
September 30,
2021
 
September 30,
2020
   
March 31, 2022
 
March 31, 2021
 
Return on Average Tangible Equity:
        
(a) Net Income (GAAP)
  $92,152  $103,784  $293,886  $196,653   $81,664  $106,898 
(b) Number of days
   92   92   273   274    90   90 
Average Total Shareholders’ Equity (GAAP)
  $4,440,107  $4,263,111  $4,389,087  $3,835,617   $4,759,780  $4,346,750 
Less: Average Total Intangibles
   (1,833,449)   (1,826,057)   (1,831,364)   (1,681,202)    (1,911,125)   (1,825,639) 
  
 
  
 
  
 
  
 
   
 
  
 
 
(c) Average Tangible Equity
(non-GAAP)
  $2,606,658  $2,437,054  $2,557,723  $2,154,415 
Return on Tangible Equity
(non-GAAP)
     
[(a) / (b)] x 366 or 365/ (c)
   14.03%   16.94%   15.36%   12.19% 
(b) Average Tangible Equity
(non-GAAP)
  $2,848,655  $2,521,111 
Return on Tangible Equity
(non-GAAP)
[(a) / (b)] x 365/ (c)
   11.63%   17.20% 
Net interest income for the thirdfirst quarter of 2022 was relatively flat from the first quarter of 2021, was $181.58increasing $542 thousand, or less than 1%, to $191.50 million which was a decreasefrom net interest income of $4.09$190.96 million or 2.20%, fromfor the third quarterfirst three months of 2020.2021. The decreaseslight increase of $542 thousand in net interest income occurred because total interest income decreased $16.19$2.86 million while total interest expense decreased $12.10 million from the third quarter of 2020. Net interest income for the first nine months of 2021 was $559.06 million, an increase of $61.27 million or 12.31% from the first nine months of 2020. The increase in net interest income occurred because total interest income increased $10.46 million while total interest expense decreased $50.82$3.40 million from the first nine monthsquarter of 2020.2021.
The provision for credit losses was a net benefit of $7.83 million and $16.57$3.41 million for the thirdfirst quarter andof 2022 as compared to a provision for credit losses expense of $143 thousand for the first nine monthsquarter of 2021, respectively, while2021. The decrease in the provision for credit losses was an expense of $16.78 million and $89.81 million, respectively, for the third quarter and first nine months of 2020. These decreases in the provision for credit losses were mainly due to the impact of better performance trends within the loan portfolio as well
as improved
reasonable and supportable forecastsportfolio. Noninterest income was $46.02 million for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard. In addition, a provision for loan losses of $28.95 million was recorded on purchased
non-PCD
loans from Carolina Financial during the first ninethree months of 2020. For the third quarter of 2021, noninterest income was $68.62 million, which was2022, a decrease of $66.84$46.55 million or 49.34%50.28% from the third quarter of 2020 primarily driven by a decrease in income from mortgage banking activities due primarily to a lower mortgage loan origination and sale volume and the
mark-to-market
impact of a declining locked pipeline. Noninterest income for the first ninethree months of 2021 was $224.04 million which was a decrease of $36.62 million or 14.05% from the first nine months of 2020 which was primarily due mainly to decreased income from mortgage banking activities due primarily to the
mark-to-market
impacta lower volume of a declining locked pipeline althoughmortgage loan originations and sales of mortgage loans in the secondary market increased. Formainly the third quarterresult of a rising interest rate environment. Noninterest expense for the first three months of 2022 decreased $9.75 million or 6.55% from the first three months of 2021 noninterest expense decreased $29.32 million or 17.09% from the third quarter of 2020 primarily due to a decrease in employee compensation duemainly to lower employee compensation expense as a result of lower employee commissions, incentives and commissionsovertime related to mortgage banking production as well as aand lower employee headcount. ForOREO expense due to fewer declines in the fair value of OREO properties. Income taxes decreased $7.47 million or 27.09% for the first ninethree months of 2022 as compared to the first three months of 2021 noninterest expense increased $8.05 million or 1.91% from the first nine months of 2020 due mainly to the Carolina Financial acquisition as well asprimarily due to higher employee incentiveslower earnings and commissions expense mainly related to higher mortgage banking production.
Income taxes for the third quarter of 2021 were $23.60 million as compared to $28.97 million for the third quarter of 2020. For the first nine months of 2021 and 2020 incomea lower effective tax expense was $75.62 million and $49.88 million, respectively. For the quarters ended September 30, 2021 and 2020, United’srate. The effective tax rate was 20.39%19.75% and 21.82%, respectively. The effective tax rate20.50% for the first nine monthsquarter of 20212022 and 2020 was 20.47% and 20.23%,2021, respectively.
Business Segments
United operates in two business segments: community banking and mortgage banking.
Community Banking
Net income attributable to the community banking segment for the thirdfirst quarter of 20212022 was $81.88$83.03 million compared to net income of $51.29 million for the third quarter of 2020. Net income attributable to the community banking segment for
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the first nine months of 2021 was $253.88 million compared to net income of $123.12$82.22 million for the first nine monthsquarter of 2020.2021. The slightly higher net income within the community banking segment was due primarily to the impact of the Community Bankers Trust acquisition and a lower provision for credit losses. The first nine months
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Table of 2021 was also impacted by the Carolina Financial acquisition.Contents
Net interest income decreased $2.74 million to $179.44 million for the third quarter of 2021, compared to $182.19 million for the same period of 2020. A decrease in interest income primarily due to a change in the mix of interest earning assets as well as lower accretion on acquired loans was partially offset by lower interest expense on deposits and borrowings reflecting a decline in market interest rates and higher loan fee income from the PPP. Net interest income increased $59.73 million to $550.04$189.68 million for the first nine monthsquarter of 2021, compared to $490.312022 was an increase of $2.49 million or 1.33% from $187.20 million for the same periodfirst quarter of 2020.2021. Generally, net interest income for the first nine monthsquarter of 20212022 increased from the first nine monthsquarter of 20202021 due to an increase in average earning assets as a result of the Carolina FinancialCommunity Bankers Trust acquisition PPP loan activity and to a larger decline in the average cost of funds as compared to the average yieldlower interest expense on earning assets.deposits driven by rate repricing.
Provision
The provision for credit losses was a net benefit of $7.83$3.41 million for the three months ended September 30, 2021first quarter of 2022 as compared to a provision for credit losses expense of $16.78$143 thousand for the first quarter of 2021, a decrease of $3.55 million. As previously mentioned, the decrease was due mainly to better performance trends within the loan portfolio.
Noninterest income decreased $1.49 million for the first quarter of 2022 to $24.90 million as compared to $26.39 million for the first quarter of 2021. The decrease of $1.49 million was due mainly to declines in net gains on the sales and calls of investment securities and net gains on the sales of mortgage loans within the community banking segment. Partially offsetting these declines were increases in fees from deposit services and income from bank-owned life insurance policies (“BOLI”).
Noninterest expense was $114.54 million for the first quarter of 2022, compared to $110.02 million for the same period of 2020. Provision for credit losses was a net benefit2021. The increase of $16.57$4.52 million for the nine months ended September 30, 2021 compared to a provision expense of $89.81 million for the same period of 2020. The decrease for the third quarter of 2021 was due mainly to the better performance trends within the loan portfolio as well
as improved
reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard. The decrease for the first nine months of 2021 was due mainly to a provision for credit losses of $28.95 million recorded on purchased
non-credit
deteriorated
(“non-PCD”)
loans from Carolina Financial during the second quarter of 2020, the better performance trends within the loan portfolio as well
as improved
reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses under the CECL accounting standard.
Noninterest income decreased $1.90 million for the third quarter of 2021 to $24.71 million as compared to $26.62 million for the third quarter of 2020. The third quarter of 2020 included a $2.23 million gain on the sale of bank premises. Partially offsetting the decrease in noninterest income were increases in fees from brokerage services, fees from trust services and fees from deposit services. Noninterest income for the first nine months of 2021 increased $8.69 million to $75.17 million for the first nine months of 2021 as compared to $66.48 million for the first nine months of 2020. The increase for the first nine months of 2021 was due mainly to increased fees from trust services, fees from brokerage services, fees from deposit services, bankcard fees and merchant discounts and other miscellaneous income.
Noninterest expense was $109.13 million for the third quarter of 2021, compared to $125.68 million for the same period of 2020, a decline of $16.55 million. The third quarter of 2020 included $10.39 million in prepayment penalties on the early payoff of three long-term FHLB advances. In addition, expenses for employee compensation, net occupancy, OREO properties and FDIC insurance declined. Noninterest expense was $322.58 million for the nine months ended September 30, 2021, compared to $312.62 million for the same period of 2020, an increase of $9.96 million. The increase in noninterest expense for the first nine months of 2021 was primarily attributable to the additional employees and branch offices from the Carolina FinancialCommunity Bankers Trust acquisition as most major categories of noninterest expense showed increases.
Mortgage Banking
The mortgage banking segment reported net income of $12.42 million and $40.42 million$209 thousand for the thirdfirst quarter and the first nine months of 2021, respectively, as2022, compared to net income of $55.40 million and $87.56$23.03 million for the thirdfirst quarter and first nine months of 2020.2021. Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $45.02$23.40 million for the thirdfirst quarter of 2021 as2022, compared to $110.90$67.51 million for the thirdfirst quarter of 2020.2021. The decrease of $65.88$44.11 million in the first quarter of 2022 was due mainly to lower originations and sales of mortgage loans and the
mark-to-market
impact of a declining locked pipeline. Noninterest income for the first nine months of 2021 was $152.30 million as compared to $203.10 million for the first nine months of 2020. The decrease of $50.81 million for the first nine months of 2021 was due mainly to the
mark-to-market
impact of a declining locked pipeline although originations anddecreased sales of mortgage loans in the secondary market increased.primarily as a result of a rising interest rate environment . Noninterest expense was $25.45 million for the first three months of 2022 as compared to $41.18 million for the first three months of 2021. Noninterest expense consists mainly of salaries, commissions and benefits of mortgage segment employees. Noninterest expense was $31.79 million for the third
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quarter of 2021 as compared $43.42 million for the third quarter of 2020. The decrease of $11.63$15.74 million was primarily due to a decrease in employee compensation due to lower employee incentives and commissions related to a decrease in mortgage banking production. Noninterest expense was $109.36 million for the first nine monthsquarter of 2021 as compared to $99.44 million for the first nine months of 2020. The increase of $9.93 million for the first nine months of 20212022 was due mainly to higherlower employee commissions, incentives and commissionsovertime related to the increaseddecreased mortgage banking production as well as the additional expense associated with the mortgage banking employees added from the Carolina Financial acquisition.
Consolidated Results of Operations by Major Category
production.
The following table sets forth certain consolidated income statement information of United:
 
   
Three Months Ended
 
(Dollars in thousands)
  
September

2021
   
September

2020
   
June

2021
 
Income Statement Summary:
      
Interest income
  $ 194,080   $ 210,269   $ 200,186 
Interest expense
   12,501    24,605    13,669 
  
 
 
   
 
 
   
 
 
 
Net interest income
   181,579    185,664    186,517 
Provision for credit losses
   (7,829)    16,781    (8,879) 
Other income
   68,624    135,468    62,846 
Other expense
   142,276    171,593    138,951 
  
 
 
   
 
 
   
 
 
 
Income before income taxes
   115,756    132,758    119,291 
Income taxes
   23,604    28,974    24,455 
  
 
 
   
 
 
   
 
 
 
Net income
  $92,152   $103,784   $94,836 
  
 
 
   
 
 
   
 
 
 
  
Nine Months Ended
   
Three Months Ended
 
(Dollars in thousands)
  
September

2021
   
September

2020
   
March

2022
   
March

2021
   
December

2021
 
Income Statement Summary:
    
Income Statement Summary
:
      
Interest income
  $ 599,923   $ 589,468   $202,795   $205,657   $195,194 
Interest expense
   40,867    91,684    11,293    14,697    11,516 
  
 
   
 
   
 
   
 
   
 
 
Net interest income
   559,056    497,784    191,502    190,960    183,678 
Provision for credit losses
   (16,565)    89,811    (3,410)    143    (7,405) 
Other income
   224,043    260,664    46,023    92,573    54,049 
Other expense
   430,154    422,100    139,173    148,927    151,789 
  
 
   
 
   
 
   
 
   
 
 
Income before income taxes
   369,510    246,537    101,762    134,463    93,343 
Income taxes
   75,624    49,884    20,098    27,565    19,491 
  
 
   
 
   
 
   
 
   
 
 
Net income
  $293,886   $196,653   $81,664   $106,898   $73,852 
  
 
   
 
   
 
   
 
   
 
 
The following discussion explains in more detail the consolidated results of operations by major category.
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Net Interest Income
Net interest income represents the primary component of United’s earnings. It is the difference between interest income from earning assets and interest expense incurred to fund these assets. Net interest income is impacted by changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as changes in market interest rates. Such changes, and their impact on net interest income in 20212022 and 2020,2021, are presented below.
Net interest income for the thirdfirst quarter of 2022 was $191.50 million, which was relatively flat from the first quarter of 2021, was $181.58 million, which was a decrease of $4.09 millionincreasing $542 thousand, or 2.20% from the third quarter of 2020.less than 1%. The $4.09 million decrease$542 thousand increase in net interest income occurred because total interest income decreased $16.19$2.86 million while total interest expense decreased $12.10$3.40 million from the thirdfirst quarter of 2020. Net2021. On a linked-quarter basis, net interest income for the first nine monthsquarter of 2021 was $559.06 million, which was an increase of $61.272022 increased $7.82 million, or 12.31%4.26%, from the first nine monthsfourth quarter of 2020.2021. The $61.27$7.82 million increase in net interest income occurred because total interest income increased $10.46$7.60 million while total interest expense decreased $50.82 million$223 thousand from the first nine months of 2020. On a linked-quarter basis,
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net interest income for the third quarter of 2021 decreased $4.94 million or 2.65% from the second quarter of 2021. The $4.94 million decrease in net interest income occurred because total interest income decreased $6.11 million while total interest expense decreased $1.17 million from the secondfourth quarter of 2021.
Generally, interest income for the third quarter of 2021 decreased from the third quarter of 2020 due to a change in the mix of interest earning assets while interest expense decreased due to lower market interest rates which resulted in lower funding costs. Interest income for the first nine months of 2021 increased from the first nine months of 2020 due to an increase in earning assets, mainly as a result of the Carolina Financial acquisition and PPP loan activity, while interest expense decreased primarily due to the decline in market interest rates. For the purpose of this remaining discussion, net interest income is presented on a
tax-equivalent
basis to provide a comparison among all types of interest earning assets. The
tax-equivalent
basis adjusts for the
tax-favored
status of income from certain loans and investments. Although this is a
non-GAAP
measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and
tax-exempt
sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition.
Tax-equivalent
net interest income for the thirdfirst quarter of 2022 was $192.61 million, which was also relatively flat from the first quarter of 2021, was $182.64 million, a decrease of $4.07 millionincreasing $604 thousand, or 2.18% from the third quarter of 2020.less than 1%. The decreaseslight increase in net interest income and
tax-equivalent
net interest income was primarily due to a change in the miximpact of interest earning assets. The decrease was partially offsethigher average earnings assets, driven by the Community Bankers Trust acquisition and lower interest expense on deposits and borrowings reflecting a decline in market interest rates and higher loandeposits. These increases were mostly offset by lower accretion on acquired loans, lower fee income from Paycheck Protection Program (“PPP”) loans and higher average interest-bearing deposit balances as a result of the PPP.Community Bankers Trust acquisition. Average earning assets for the first quarter of 2022 increased $2.54 billion, or 10.83% from the first quarter of 2021 due to a $1.49 billion increase in average investment securities, a $739.28 million increase in average short-term investments and a $312.46 million increase in average net loans and loans held for sale. Average interest-bearing deposits for the first quarter of 2022 increased $1.17 billion, or 8.30%, from the first quarter of 2021; however, the yield on interest-bearing deposits decreased 13 basis points from the first quarter of 2021 to 0.24% for the first quarter of 2022. The net interest spread for the thirdfirst quarter of 20212022 decreased 1028 basis points from the thirdfirst quarter of 20202021 to 2.86% due to a 4140 basis point decrease in the average yield on earning assets partially offset by a 3112 basis point decrease in the average cost of funds. Average earning assetsLoan accretion on acquired loans was $4.14 million and $9.80 million for the thirdfirst quarter of 2022 and 2021, increased $937.44 million, or 4.00%, from the third quarterrespectively, a decrease of 2020 due to a $1.86 billion increase in average short-term investments and a $563.22 million increase in average investment securities, partially offset by a $1.48 billion decrease in average net loans and loans held for sale mainly driven by a decline in PPP loan balances.$5.66 million. Net PPP loan fee income of $7.85$4.10 million was recognized in the thirdfirst quarter of 2021 driven primarily by loan forgiveness,2022 as compared to $4.80$11.31 million for the thirdfirst quarter of 2020. Loan accretion on acquired loans was $8.15 million and $11.74 million for the third quarter of 2021 and 2020, respectively, a decrease of $3.59 million.2021. The net interest margin of 2.98%2.99% for the thirdfirst quarter of 20212022 was a decrease of 2031 basis points from the net interest margin of 3.18%3.30% for the thirdfirst quarter of 2020.2021.
On a linked-quarter basis,
Tax-equivalenttax-equivalent
net interest income for the first nine monthsquarter of 2021 was $562.24 million, an increase of $61.612022 increased $7.90 million, or 12.31%4.28%, from the first nine monthsfourth quarter of 2020.2021. The increase in net interest income and
tax-equivalent
net interest income was primarily due to an increase in average earning assets fromdue to the Carolina Financialfull-quarter impact of the Community Bankers Trust acquisition and organic growth partially offset by lower acquired loan accretion and PPP loans as well as lower interest expense on deposits and borrowings.loan fee income. Average earning assets for the first nine months of 2021 increased $3.15$1.12 billion, or 15.13%4.48%, from the first nine months of 2020 due to a $1.60 billion increase in average short-term investments, a $989.33 million increase in average net loans and loans held for sale and a $558.52 million increase in average investment securities. The net interest spread for the first nine months of 2021 increased 11 basis points from the first nine months of 2020 due to a 54 basis point decrease in the average cost of funds partially offset by a 43 basis point decrease in the average yield on earning assets. Net PPP loan fee income of $28.18 million was recognized in the first nine months of 2021 driven primarily by loan forgiveness, as compared to $9.28 million for the first nine months of 2020. Loan accretion on acquired loans was $27.62 million and $30.84 million for the first nine months of 2021 and 2020, respectively, a decrease of $3.22 million. The net interest margin of 3.14% for the first nine months of 2021 was a decrease of 7 basis points from the net interest margin of 3.21% for the first nine months of 2020.
On a linked-quarter basis, net interest income for the third quarter of 2021 decreased $4.94 million, or 2.65%, from the second quarter of 2021.
Tax-equivalent
net interest income for the third quarter of 2021 decreased $4.95 million, or 2.64%, from the second quarter of 2021. The net interest spread for the third quarter of 2021 of 2.83% decreased 15 basis points from the secondfourth quarter of 2021 due to a 19 basis point decrease in the average yield on earning assets partially offset by a 4 basis point decrease in the average cost of funds. Average earning assets increased approximately $394.59 million, or 1.65%, from the second quarter of 2021 due to increases in average short-term investments of $919.66 million and average investment securities of $111.56 million partially offset by a decrease in average net loans and loans held for sale of $636.63$900.87 million mainly drivenand average securities of $796.29 million partially offset by a declinedecrease in PPP loan balances.average short-term investments of $580.24 million. The net interest spread for the first quarter of 2022 of 2.86% increased 4 basis points from the fourth quarter of 2021 due to a 3 basis point increase in the average yield on earning assets and a 1 basis point decrease in the average cost of funds. Loan accretion on acquired loans decreased $2.10 million from the fourth quarter of 2021. Net PPP loan fee income for the thirdfirst quarter of 20212022 decreased $1.18 million$936 thousand from the second quarter of 2021 to $7.85 million. Loan accretion on acquired loans decreased $1.52 million from the second quarter of 2021 to $8.15 million for the thirdfourth quarter of 2021. The net interest margin of 2.98%2.99% for the thirdfirst quarter of 20212022 was a decreasean increase of 165 basis points from the net interest margin of 3.14%2.94% for the secondfourth quarter of 2021.
 
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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, 2021, September 30, 2020 and June 30,March 31, 2022, March 31, 2021 and the nine months ended September 30, 2021 and September 30, 2020:December 31, 2021:
 
   
Three Months Ended
 
(Dollars in thousands)
  
September 30
2021
   
September 30
2020
   
June 30
2021
 
Loan accretion
  $8,154   $11,743   $9,669 
Certificates of deposit
   898    3,028    1,050 
Long-term borrowings
   170    217    174 
  
 
 
   
 
 
   
 
 
 
Total
  $ 9,222   $ 14,988   $ 10,893 
  
 
 
   
 
 
   
 
 
 
  
Nine Months Ended
   
Three Months Ended
 
(Dollars in thousands)
  
September 30
2021
   
September 30
2020
   
March 31
2022
   
March 31
2021
   
December 31
2021
 
Loan accretion
  $27,623   $30,838   $4,139   $9,800   $6,234 
Certificates of deposit
   3,397    5,780    1,038    1,449    908 
Long-term borrowings
   518    973    159    174    166 
  
 
   
 
   
 
   
 
   
 
 
Tax-equivalent
net interest income
  $ 31,538   $ 37,591 
Total
  $5,336   $11,423   $7,308 
  
 
   
 
   
 
   
 
   
 
 
The following tables reconcile the difference between net interest income and
tax-equivalent
net interest income for the three months ended September 30, 2021, September 30, 2020 and June 30,March 31, 2022, March 31, 2021 and the nine months ended September 30, 2021 and September 30, 2020.December 31, 2021.
 
   
Three Months Ended
 
(Dollars in thousands)
  
September 30
2021
   
September 30
2020
   
June 30
2021
 
Net interest income, GAAP basis
  $ 181,579   $ 185,664   $ 186,517 
Tax-equivalent
adjustment (1)
   1,059    1,046    1,075 
  
 
 
   
 
 
   
 
 
 
Tax-equivalent
net interest income
  $182,638   $186,710   $187,592 
  
 
 
   
 
 
   
 
 
 
  
Nine Months Ended
   
Three Months Ended
 
(Dollars in thousands)
  
September 30
2021
   
September 30
2020
   
March 31
2022
   
March 31
2021
   
December 31
2021
 
Net interest income, GAAP basis
  $ 559,056   $ 497,784   $191,502   $190,960   $183,678 
Tax-equivalent
adjustment (1)
   3,181    2,846    1,109    1,047    1,037 
  
 
   
 
   
 
   
 
   
 
 
Tax-equivalent
net interest income
  $562,237   $500,630   $192,611   $192,007   $184,715 
  
 
   
 
   
 
   
 
   
 
 
 
(1)
The
tax-equivalent
adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months and nine months ended September 30,March 31, 2022 and 2021 and 2020 and the three months ended June 30,December 31, 2021. All interest income on loans and investment securities was subject to state income taxes.
 
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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,March 31, 2022 and 2021, and 2020, 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, 2021March 31, 2022 and 2020.2021. Interest income on all loans and investment securities was subject to state income taxes.
 
  
Three Months Ended

September 30, 2021
 
Three Months Ended

September 30, 2020
   
Three Months Ended
March 31, 2022
 
Three Months Ended
March 31, 2021
 
(Dollars in thousands)
  
Average

Balance
 
Interest

(1)
   
Avg. Rate

(1)
 
Average

Balance
 
Interest

(1)
   
Avg. Rate
(1)
   
Average

Balance
 
Interest 
(1)
   
Avg. Rate 
(1)
 
Average

Balance
 
Interest 
(1)
   
Avg. Rate 
(1)
 
ASSETS
                  
Earning Assets:
                  
Federal funds sold and securities purchased under agreements to resell and other short-term investments
  $3,825,264  $2,548    0.26%  $1,967,791  $2,060    0.42%   $3,028,826  $2,329    0.31%  $2,289,545  $1,893    0.34% 
Investment Securities:
                  
Taxable
   3,215,719   12,999    1.62%   2,749,114   14,448    2.10%    4,264,820   17,505    1.64%   2,921,295   13,526    1.85% 
Tax-exempt
   363,966   2,327    2.56%   267,355   1,893    2.83%    444,542   2,688    2.42%   294,820   1,981    2.69% 
  
 
  
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
  
 
  
 
   
 
 
Total Securities
   3,579,685   15,326    1.71%   3,016,469   16,341    2.17%    4,709,362   20,193    1.72%   3,216,115   15,507    1.93% 
Loans, net of unearned income (2)
   17,174,856   177,265    4.10%   18,655,500   192,914    4.12%    18,530,232   181,382    3.96%   18,237,552   189,304    4.20% 
Allowance for loan losses
   (217,472)      (214,870)       (216,016)      (235,795)    
  
 
     
 
      
 
     
 
    
Net loans
   16,957,384     4.15%   18,440,630     4.17%    18,314,216     4.01%   18,001,757     4.26% 
  
 
  
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
  
 
  
 
   
 
 
Total earning assets
   24,362,333  $ 195,139    3.18%   23,424,890  $ 211,315    3.59%    26,052,404  $203,904    3.16%   23,507,417  $206,704    3.56% 
  
 
  
 
   
 
   
 
   
 
    
 
   
 
   
 
   
 
 
Other assets
   3,075,377      2,990,733       3,292,118      2,983,699    
  
 
     
 
      
 
     
 
    
TOTAL ASSETS
  $27,437,710     $26,415,623      $29,344,522     $26,491,116    
  
 
     
 
      
 
     
 
    
LIABILITIES
                  
Interest-Bearing Funds:
                  
Interest-bearing deposits
  $13,361,016  $9,803    0.29%  $12,951,290  $17,726    0.54%   $14,383,839  $8,561    0.24%  $13,184,728  $11,985    0.37% 
Short-term borrowings
   123,526   167    0.54%   156,502   172    0.44%    133,987   181    0.55%   142,155   178    0.51% 
Long-term borrowings
   813,976   2,531    1.23%   1,616,647   6,707  �� 1.65%    817,363   2,551    1.27%   833,365   2,534    1.23% 
  
 
  
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
  
 
  
 
   
 
 
Total Interest-Bearing Funds
   14,298,518   12,501    0.35%   14,724,439   24,605    0.66%    15,335,189   11,293    0.30%   14,160,248   14,697    0.42% 
   
 
   
 
   
 
   
 
    
 
   
 
   
 
   
 
 
Noninterest-bearing deposits
   8,471,744      7,178,769       8,991,131      7,735,638    
Accrued expenses and other liabilities
   227,341      249,304       258,422      248,480    
  
 
     
 
      
 
     
 
    
TOTAL LIABILITIES
   22,997,603      22,152,512       24,584,742      22,144,366    
SHAREHOLDERS’ EQUITY
   4,440,107      4,263,111       4,759,780      4,346,750    
  
 
     
 
      
 
     
 
    
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
  $27,437,710     $26,415,623      $29,344,522     $26,491,116    
  
 
     
 
      
 
     
 
    
NET INTEREST INCOME
   $182,638     $186,710      $192,611     $192,007   
   
 
     
 
      
 
     
 
   
INTEREST SPREAD
      2.83%      2.93%       2.86%      3.14% 
NET INTEREST MARGIN
      2.98%      3.18%       2.99%      3.30% 
 
(1)
The interest income and the yields on federally nontaxable loans and investment securities are presented on a
tax-equivalent
basis using the statutory federal income tax rate of 21%.
(2)
Nonaccruing loans are included in the daily average loan amounts outstanding.
 
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Nine Months Ended September 30, 2021
  
Nine Months Ended September 30, 2020
 
(Dollars in thousands)
  
Average

Balance
  
Interest

(1)
   
Avg. Rate

(1)
  
Average

Balance
  
Interest

(1)
   
Avg. Rate
(1)
 
ASSETS
         
Earning Assets:
         
Federal funds sold and securities repurchased under agreements to resell and other short-term investments
  $3,012,429  $6,198    0.28%  $1,412,386  $7,893    0.75% 
Investment Securities:
         
Taxable
   3,085,050   40,371    1.74%   2,663,754   47,658    2.39% 
Tax-exempt
   337,590   6,639    2.62%   200,371   4,413    2.94% 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
Total Securities
   3,422,640   47,010    1.83%   2,864,125   52,071    2.42% 
Loans, net of unearned income (2)
   17,742,054   549,896    4.14%   16,698,013   532,350    4.26% 
Allowance for loan losses
   (228,163)      (173,452)    
  
 
 
     
 
 
    
Net loans
   17,513,891     4.20%   16,524,561     4.30% 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
Total earning assets
   23,948,960  $ 603,104    3.37%   20,801,072  $592,314    3.80% 
  
 
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Other assets
   3,032,927      2,671,235    
  
 
 
     
 
 
    
TOTAL ASSETS
  $26,981,887     $23,472,307    
  
 
 
     
 
 
    
LIABILITIES
         
Interest-Bearing Funds:
         
Interest-bearing deposits
  $13,255,751  $32,800    0.33%  $ 11,282,883  $64,452    0.76% 
Short-term borrowings
   134,092   527    0.53%   146,302   826    0.75% 
Long-term borrowings
   820,426   7,540    1.23%   1,895,635   26,406    1.86% 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
Total Interest-Bearing Funds
   14,210,269   40,867    0.38%   13,324,820   91,684    0.92% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Non-interest
bearing deposits
   8,147,540      6,076,683    
Accrued expenses and other liabilities
   234,991      235,187    
  
 
 
     
 
 
    
TOTAL LIABILITIES
   22,592,800      19,636,690    
SHAREHOLDERS’ EQUITY
   4,389,087      3,835,617    
  
 
 
     
 
 
    
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
  $26,981,887     $23,472,307    
  
 
 
     
 
 
    
NET INTEREST INCOME
   $562,237     $ 500,630   
   
 
 
     
 
 
   
INTEREST SPREAD
      2.99%      2.88% 
NET INTEREST MARGIN
      3.14%      3.21% 
(1)
The interest income and the yields on federally nontaxable loans and investment securities are presented on a
tax-equivalent
basis using the statutory federal income tax rate of 21%.
(2)
Nonaccruing loans are included in the daily average loan amounts outstanding.
Provision for Credit Losses
United’sThe provision for credit losses was a net benefit of $7.83 million and $16.57$3.41 million for the thirdfirst quarter andof 2022 as compared to a provision for credit losses expense of $143 thousand for the first nine monthsquarter of 2021, respectively, while2021. On a linked-quarter basis, the provision for credit losses was an expense of $16.78 million and $89.81 million, respectively, for the thirdfourth quarter and first nine months of 2020.2021 was a net benefit of $7.41 million. United’s provision for credit losses relates to its portfolio of loans and leases,
held-to-maturity
securities and interest receivable on loans which are discussed in more detail in the following paragraphs.
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For the quarter ended September 30, 2021,March 31, 2022, the provision for loan and lease losses was a net benefit of $7.82$3.40 million as compared to provision expense of $16.34 million$294 thousand for the quarter ended September 30, 2020.March 31, 2021. The lower amount of provision expense for the first quarter of 2022 compared to the first quarter of 2021 was mainly due to better performance trends within the loan portfolio to include lower historical loss rates, improvements in criticized loan totals and payoff of a large loan with a significant individual allocation as well as improved collateral values on several loans with individual allocations. Net recoveries were $1.98 million for the first quarter of 2022 compared to net charge-offs of $4.54 million for the first quarter of 2021. The lower amount of net charge-offs for 2022 as compared to 2021 was primarily due to charge-offs recognized on several large commercial credits in the first quarter of 2021. On a linked-quarter basis, the provision for loan and lease losses for the first nine monthsfourth quarter of 2021 was a net benefit of $16.35 million as compared to provision expense of $89.36 million for the first nine months of 2020. Net recoveries were $1.17 million for the third quarter of 2021 as compared to net charge-offs of $5.65 million for the same quarter in 2020. Net charge-offs for the first nine months of 2021 were $8.59 million as compared to $16.68 million for the first nine months of 2020. The lower amount of provision expense for 2021 compared to 2020 was mainly due to a provision for loan losses of $28.95 million recorded on purchased
non-PCD
loans from Carolina Financial during the second quarter of 2020 and better performance trends within the loan portfolio as well as improved reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses. On a linked-quarter basis, the provision for loan losses increased $1.05$7.38 million. Net charge-offs were $125 thousand for the third quarter of 2021 decreased $6.39 million from the secondfourth quarter of 2021. Annualized net charge-offsrecoveries as a percentage of average loans and leases, net of unearned income were (0.03%(0.04%) and 0.07% for the thirdfirst quarter andof 2022 compared to annualized net charge-offs of 0.10% for the first nine monthsquarter of 2021 respectively, compared to 0.13% and 0.14%0.003% for the third quarter and first nine months of 2020. Annualized net charge-offs as a percentage of average loans and leases, net of unearned income was 0.12% for the secondfourth quarter of 2021.2021, respectively.
As of September 30, 2021,March 31, 2022, nonperforming loans and leases were $90.27$79.85 million or 0.54%0.43% of loans and leases, net of unearned income as compared to $132.21$90.76 million or 0.75%0.50% of loans, and leases, net of unearned income at December 31, 2020.2021. The components of nonperforming loans and leases include: 1) nonaccrual loans and leases, 2) loans and leases which are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis and 3) loans and leases whose terms have been restructured for economic or legal reasons due to financial difficulties of the borrowers.
Loans and leases past due 90 days or more were $14.83$15.18 million at September 30, 2021, an increaseMarch 31, 2022, a decrease of $995 thousand$3.70 million or 7.19%19.60% from $13.83$18.88 million at
year-end
2020.2021. This increasedecrease was primarily due to several large commercial relationships that have exceeded their stated maturity dates as of September 30, 2021.a reduction in past due mortgage and installment loans. At September 30, 2021,March 31, 2022, nonaccrual loans and leases were $37.69$34.09 million, which was a decrease of $25.03$1.94 million or 39.91%5.37% from $62.72$36.03 million at
year-end
2020.2021. This decrease was due to the repayment of fourthree large commercial nonaccrual loans as well as the
charge-off
of three commercial relationships and troubled debt restructuring designations for three large commercial nonaccrual loans.relationships. Restructured loans were $37.75$30.58 million at September 30, 2021,March 31, 2022, a decrease of $17.91$5.27 million or 32.17%14.71% from $55.66$35.86 million at
year-end
2020.2021. The decrease was mainly due to the repayment of sixtwo large commercial relationships and
charge-off
removal of twoTDR status for one commercial restructured loansrelationship during the first nine monthsquarter of 2021.2022. The loss potential on these loans has been properly evaluated and allocated within the Company’s allowance for loan losses.
Nonperforming assets include nonperforming loans and leases and real estate acquired in foreclosure or other settlement of loans (“OREO”). Total nonperforming assets of $106.96$93.50 million, including OREO of $16.70$13.64 million at September 30, 2021,March 31, 2022, represented 0.39%0.32% of total assets down from $154.80as compared to
non-performing
assets of $105.59 million, including OREO of $14.82 million, or 0.59%0.36% of total assets at December 31, 2020.
2021.
United maintains an allowance for loan and lease losses and a reserve for lending-related commitments. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses. At September 30, 2021,March 31, 2022, the allowance for credit losses was $236.08$251.27 million as compared to $255.08$247.46 million at December 31, 2020.2021.
At September 30, 2021,March 31, 2022, the allowance for loan and lease losses was $210.89$214.59 million as compared to $235.83$216.02 million at December 31, 2020.2021. The decrease in the allowance for loan and lease losses was due to betterimproved trends within the loan portfolio as well
as improved reasonablethat included lower historical loss rates and supportable forecasts for future macroeconomic scenarios usedimprovements in the estimation of expected credit losses.criticized loan totals. As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.26%1.17% at September 30, 2021March 31, 2022 and 1.34%1.20% at December 31, 2020.2021. The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 233.63%268.73% and 178.38%238.00% at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The increase in this ratio was due mainly to a larger decline in nonperforming loans and leases than in the allowance for loan and lease losses.
The reserve for lending-related commitments was $25.19 million, an increase of $5.94 million or 30.86% from December 31, 2020. The increase was due mainly to an increase in loan commitments during the first nine months of 2021 as well as an increase in the utilization rate of the commitments.loans.
 
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United continues to evaluate risks which may impact its loan and lease portfolios. As a result of the
COVID-19
pandemic and resulting economic uncertainty given the rapidly changing economic impact, the Company reviewed its loan and lease portfolio segments, assessing the likely impact of
COVID-19
on each segment and established relevant qualitative adjustment factors. Reserves are initially determined based on losses identified from the PD/LGD and Cohort models which utilize the Company’s historical information. Then, any qualitative adjustments are applied to account for the Company’s view of the future. If current conditions underlying any qualitative adjustment factor were deemed to be materially different than historical conditions, then an adjustment was made for that factor.
The thirdfirst quarter of 20212022 qualitative adjustments include analyses of the following:
 
Past events
– This includes portfolio trends related to business conditions; past due, nonaccrual, and graded loans and leases; and concentrations.
 
Current conditions
– United considered the continued impact of
COVID-19
on inflation, supply chain issues, labor shortages and the economy as well as loan deferrals and modifications madeconflict in light of the pandemiceastern Europe when making determinations related to factor adjustments, such as changes in economic and business conditions, collateral values and external factors and past due loans and leases.factors.
 
Reasonable and supportable forecasts
– The forecast is determined on a
portfolio-by-portfolio
basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables. The reasonable and supportable forecast selection is subjective in nature and requires more judgment compared to the other components of the allowance. Assumptions for the economic variables were the following:
 
The forecast for real GDP shifted downward in the first quarter, from a projection decreased fromof 4.00% for 2022 at the second quarterend of 2021 but increasedto 2.80% for 2022 and 2023.with a more level downward future trendline as compared to the end of 2021. The unemployment rate projection increased slightly fromremained fairly consistent to the second quarterend of 2021 but was flat for 2022 and 2023. This indicateswith a weakening of the economy for the remainder of the year with the rebound continuing insteady trend expected throughout 2022 and 2023.
 
Greater risk of loss is probable in the hotel and accommodations portfolio due to weakened economic conditions brought on by the pandemic and labor shortages which resulted in a more negative forecast relative to other portfolios and a longer projected recovery period to extend into late 2023 or 2024.
 
Consideration was given to the $1.9 trillion American Rescue Plan (effective March 11, 2021) during the forecast selection process as it is likely this stimulus package continues to have some positive impact on the economy. However, we acknowledge the impact of the stimulus has been fading and will likely have no further impact by the end of the year.
Reversion to historical loss data occurs via a straight-line method during the year following the
one-year
reasonable and supportable forecast period.
Allocations are made for specific commercial loans based upon management’s estimate of the borrowers’ ability to repay and other factors impacting collectability. Other commercial loans and leases not specifically reviewed on an individual basis are evaluated based on historical loss percentages applied to loan pools that have been segregated by risk. Allocations for loans and leases other than commercial loans and leases are made based upon historical loss experience adjusted for current environmental conditions. The allowance for credit losses includes estimated lifetime losses within the portfolio due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet fully manifested themselves in loss allocation factors.
United’s review of the allowance for loan and lease losses at September 30, 2021March 31, 2022 produced decreased allocationsincreased reserves in eachthree of the four loan categories as compared to December 31, 2020.2021. The allocationreal estate construction and development loan pool reserve increased $2.18 million. The residential real estate reserve increased $705 thousand. The consumer loan pool reserve increased $208 thousand. Each of these increases were primarily due to increased outstanding balances. The allowance related to the commercial, financial & agricultural loan pool decreased $15.10$4.52 million. The residential real estate allocation decreased $3.60 million. The real estate construction and development loan pool allocation decreased $3.99 million. The consumer loan pool decreased $2.25 million. Each of these decreases were primarilyThis decrease is due to improved economic conditionsimprovement in historical loss rates and improved expectations within the reasonable and supportable forecast.a decrease in allocations established for individually assessed loans.
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An allowance is established for estimated lifetime losses for loans that are individually assessed. Nonperforming commercial loans and leases are regularly reviewed to identify expected credit losses. A loan is individually assessed for expected credit losses when the loan does not share similar characteristics with other loans in the portfolio. Measuring expected credit losses of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Expected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate the loan’s observable market price or the fair value of collateral if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an expected credit loss has occurred. The allowance for loans and leases that were individually assessed was $2.53$4.38 million at September 30, 2021March 31, 2022 and $7.78$6.53 million at December 31, 2020.2021. In comparison to the prior
year-end,
this element of the allowance decreased by $5.25$2.15 million primarily due to
charge-off
repayment of previously recognized allocations for probable credit losses on individually assessed loans as well as repayment of individually assessed loans.improved collateral valuations.
Management believes that the allowance for credit losses of $236.08$251.27 million at September 30, 2021March 31, 2022 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available. United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality. The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries. Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate
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diversification within the portfolio. Most of United’s commercial loans are secured by real estate located in West Virginia, southeastern Ohio, Pennsylvania, Virginia, Maryland, North Carolina, South Carolina, and the District of Columbia. It is the opinion of management that these commercial loans do not pose any unusual risks and that adequate consideration has been given to these loans in establishing the allowance for credit losses.
The provision for credit losses related to held to maturity securities for the first nine monthsquarter of 20212022 and 20202021 was immaterial. The allowance for credit losses related to held to maturity securities was $27$19 thousand as of September 30, 2021 as compared to $23 thousand as ofMarch 31, 2022 and December 31, 2020.2021. There was no provision for credit losses recorded on available for sale investment securities for the first nine monthsquarter of 20212022 and 20202021 and no allowance for credit losses on available for sale investment securities as of September 30, 2021March 31, 2022 and December 30, 2020.31, 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, 2021.March 31, 2022. As a result of this assessment, United released reservesall of $3its remaining $8 thousand and $224 thousandin reserves for the thirdfirst quarter andof 2022 as compared to the release of $151 thousand in reserves for the first nine monthsquarter of 2021. The allowance for accrued interest receivables not expected to be collected as of September 30,December 31, 2021 was $26 thousand as compared to $250 thousand at December 31, 2020.$8 thousand.
Management is not aware of any potential problem loans or leases, trends or uncertainties, which it reasonably expects, will materially impact future operating results, liquidity, or capital resources which have not been disclosed. Additionally, management has disclosed all known material credits, which cause management to have serious doubts as to the ability of such borrowers to comply with the loan repayment schedules.
Other Income
Other income consists of all revenues, which are not included in interest and fee income related to earning assets. Noninterest income has been and will continue to be an important factor for improving United’s profitability. Recognizing the importance, management continues to evaluate areas where noninterest income can be enhanced.
Noninterest income for the thirdfirst quarter of 20212022 was $68.62$46.02 million, a decrease of $66.84$46.55 million or 49.34% from the third quarter of 2020. Noninterest income for the first nine months of 2021 was $224.04 million, a decrease of $36.62 million or 14.05%50.28% from the first nine monthsquarter of 2020. Both differences from the third quarter and first nine months of 2020 were2021. The decrease was due mainly to declinesa decrease in income from mortgage banking activities. In addition,activities primarily as a result of a rising interest rate environment and a lower margin on loans sold in the third quarter of 2020 included a $2.23 million gain on the sale of bank premises.
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secondary market. Income from mortgage banking activities totaled $42.01 million for the third quarter of 2021 compared to $109.46 million for the same period of 2020, a decline of $67.45 million or 61.62%. The decrease was due mainly to lower sales activity and a decline in the fair value of derivatives associated with a declining pipeline. For the three months ended September 30, 2021 and 2020, mortgage loan sales were $1.45 billion and $1.95 billion, respectively. For the first nine months of 2021 and 2020, income from mortgage banking activities was $144.35 million and $195.30 million, respectively. The decrease of $50.95$19.20 million for the first nine monthsquarter of 20212022 compared to $65.40 million for the first quarter of 2021. The decrease of $46.19 million or 70.64% for the first quarter of 2022 was mainly due mainly to the
mark-to-market
impact of a declining locked pipeline although originations and sales of mortgage loans in the secondary market increased. For the nine months ended September 30, 2021 and 2020, mortgagedecreased loan sales. Mortgage loan sales were $5.16$1.09 billion and $4.16in the first quarter of 2022 as compared to $1.84 billion respectively.
in the first quarter of 2021. Mortgage loan servicing incomeloans originated for sale were $927.80 million for the first nine monthsquarter of 2021 increased $3.29 million from2022 as compared to $1.93 billion for the first nine monthsquarter of 2020 due to increased mortgage servicing activity as a result of the Carolina Financial acquisition.
Fees from brokerage services for the third quarter and first nine months of 2021 increased $817 thousand or 26.65% and $3.23 million or 37.38%, respectively, from the third quarter and first nine months of 2020. This increase was due to an increased volume of transactions.
Fees from trust services for the third quarter and first nine months of 2021 increased $695 thousand or 19.45% and $1.91 million or 18.48%, respectively, from the third quarter and first nine months of 2020. This increase was due to an increase in managed assets.2021.
Fees from deposit services for the thirdfirst quarter and first nine months of 20212022 increased $568 thousand or 6.09% and $2.85$1.25 million or 11.24%, respectively,14.07% from the thirdfirst quarter and first nine months of 2020. Generally, the2021. The increase was due primarily to higher income from overdraft fees and debit card fees.fee income.
FeesIncome from bankcard servicesbank-owned life insurance (“BOLI”) for the first nine monthsquarter of 2021 increased $9682022 was $2.19 million, an increase of $791 thousand or 32.96%56.38% from the first nine monthsquarter of 2020. This increase was2021 due to an increased volumemainly to purchases of transactions.$85 million in BOLI policies since March 31, 2021 and the addition of approximately $31 million in BOLI from the Community Bankers Trust acquisition. In addition, United recognized death benefits from BOLI of $287 thousand for the first quarter of 2022.
On a linked-quarter basis, noninterest income for the thirdfirst quarter of 2021 increased $5.782022 decreased $8.03 million, or 9.19%14.85%, from the secondfourth quarter of 20212021. The decrease in noninterest income was primarily due to an increasedriven by a decrease of $5.07$8.13 million in income from mortgage banking activities mainly due primarily to lower mortgage loan origination and sale volume driven by the rising interest rate environment and a higherlower loan pipeline valuation. FeesBOLI income increased $971 thousand from deposit services for the thirdfourth quarter of 2021 were $9.89to $2.19 million an increasemainly due to the addition of $492 thousand or 5.24%BOLI from the linkedCommunity Bankers Trust acquisition and the death benefits of $287 thousand for the first quarter due primarilyof 2022. Fees from brokerage services increased $853 thousand from the fourth quarter of 2021 to higher income from overdraft fees.$4.55 million as a result of increased volume.
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Other Expenses
Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations to reduce costs. Other expenses include all items of expense other than interest expense, the provision for credit losses, and income taxes. Noninterest expense decreased $29.32 million or 17.09% for the thirdfirst quarter of 2021 compared to the same period in 2020. For the first nine months of 2021, noninterest expense2022 was $430.15$139.17 million, which was an increasea decrease of $8.05$9.75 million or 1.91%6.55% from the first nine monthsquarter of 2020.2021.
Employee compensation for the thirdfirst quarter of 20212022 decreased $17.00$9.79 million or 20.12% from13.52% when compared to the thirdfirst quarter of 2020. The2021. This decrease was primarily due to lower employee incentives and commissions related mainly to mortgage banking production as well as a lower employee headcount. Employee compensation for the first nine months of 2021 increased $10.77 million or 5.45% from the first nine months of 2020. The increase for the first nine months of 2021 was due mainly to lower employee commissions, incentives and overtime related to a decline in mortgage banking production partially offset by additional employees from the Carolina FinancialCommunity Bankers Trust acquisition. The remainder of the increase in employee compensation for first nine months of 2021 was due mainly to higher employee commissions and incentives expense primarily related to the increased mortgage banking production.
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Employee benefits expense for the first nine monthsquarter of 2021 increased $6.292022 decreased $2.60 million or 17.09% as compared to16.82% from the first nine monthsquarter of 2020. The increase for the first nine months of 20212021. This decrease was primarily due to higher levelslower amounts of Federal Insurance Contributions Act (“FICA”), health insurance and postretirement expense due mainly to the additional employees from the Carolina Financial acquisition. The increase in FICA expense was due to the higher commissions and incentives expense.
Net occupancy expense for the third quarter of 2021 decreased $605 thousand or 5.53% from the third quarter of 2020. The decrease was due to lower building rental and building maintenance expense. Net occupancy expense increased $1.06 million or 3.49% for the first nine months of 2021 as compared to the same period in 2020. The increases were due primarily to increases in building depreciation and maintenance expenses mainly as a result of the offices added in the Carolina Financial acquisition.postretirement benefits.
OREO expense for the thirdfirst quarter of 20212022 decreased $779 thousand$3.48 million or 95.94% due primarilymainly to a decline in net losses on the sale of OREO properties. OREO expense for the first nine months of 2021 increased $1.71 million asfewer declines in the fair value of OREO properties increased from the first nine months of 2020.properties.
Equipment expense increased $1.67$1.29 million or 29.74% and $4.70 million or 32.46%21.36% for the thirdfirst quarter and first nine months of 2021, respectively,2022, as compared to the same periodstime period in 2020.2021. The increases wereincrease was due mainly to higher maintenance costs and depreciation expense primarily due to the Carolina FinancialCommunity Bankers Trust acquisition.
Data processing expense decreased $7.55 million or 26.82% for the first nine months of 2021 as compared to the first nine months of 2020. The decrease for the first nine months of 2021 was due mainly to a $9.66 million penalty in the second quarter of 2020 to terminate the contract with Carolina Financial’s data processor.
Mortgage loan servicing expense and impairment for the first nine monthsquarter of 2021 increased $4.082022 decreased $1.53 million or 48.28% from the same time period in 2020. The increase was2021 due to an increase inthe recovery of past temporary impairment and lower amortization expense of mortgage servicing activity as a result of the acquisition of Carolina Financial and Crescent Mortgage. In addition, United did not record any temporary impairment charge, net of recoveries on its mortgage servicing rights duringrights.
Federal Deposit Insurance Corporation (“FDIC”) expense increased $673 thousand or 33.65% from the first nine monthsquarter of 2021 as compared todue a temporary impairment charge on its mortgage servicing rights of $1.11 million during the first nine months of 2020.higher assessment base.
Other expense for the thirdfirst quarter of 2021 decreased $1.202022 increased $5.07 million or 3.67%18.20% from the thirdfirst quarter of 2020 due mainly to a decline2021. Within other expenses, the most significant increases were the expense for the reserve for unfunded loan commitments of $2.00$4.46 million, inconsulting and legal expenses of $521 thousand and merger-related expenses partially offset by an increaseassociated with the Community Bankers Trust acquisition of $601 thousand in automated teller machine (“ATM”) fees.$508 thousand.
On a linked-quarter basis, noninterest expense for the thirdfirst quarter of 2021 increased $3.332022 decreased $12.62 million, or 2.39%8.31%, from the secondfourth quarter of 2021 primarily due to an increasea decrease of $4.68$8.92 million in other expense. Within other expense, the largest drivers of the increase were increasesemployee compensation and $3.48 million in the expense for the reserve for unfunded commitments of $3.42 milliondata processing. The decrease in employee compensation was primarily due to an increase in outstanding loan commitmentsfewer employees as well as lower employee commissions, incentives and overtime related to lower mortgage banking production. The fourth quarter of 2021 also included $2.53 million of merger-related employee compensation expenses of $662 thousand associated withfrom the announced Community Bankers Trust acquisition. Partially offsetting the increasesThe decrease in otherdata processing expense were decreases in employee compensation of $1.10 million and employee benefits of $1.34 million,was primarily due to lower commissions, and$3.47 million of merger-related expenses associated FICA taxes, related to mortgage banking production.with the Community Bankers Trust acquisition recognized in the fourth quarter of 2021.
Income Taxes
For the thirdfirst quarter of 2021,2022, income tax expense was $23.60$20.10 million as compared to $28.97$27.57 million for the thirdfirst quarter of 20202021. The decrease of $7.47 million was primarily due to lower earnings and a lower effective tax rate. For the first nine months of 2021, income tax expense was $75.62 million as compared to $49.88 million for the first nine months of 2020 primarily due to higher earnings. On a linked-quarter basis, income tax expense decreased $851increased $607 thousand primarily due to lowerhigher earnings andpartially offset by a slightly lower effective tax rate. United’s effective tax rate was 20.39%19.75% for the thirdfirst quarter of 2022, 20.50% for the first quarter of 2021 21.82%and 20.88% for the thirdfourth quarter of 2020 and 20.50% for the second quarter of 2021. For the first nine months of 2021 and 2020, United’s effective tax rate was 20.47% and 20.23%, respectively. For further details related to income taxes, see Note 17 of the unaudited Notes to Consolidated Financial Statements contained within this document.
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Liquidity and Capital Resources
In the opinion of management, United maintains liquidity that is sufficient to satisfy its depositors’ requirements and the
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credit needs of its customers. Like all banks, United depends upon its ability to renew maturing deposits and other liabilities on a daily basis and to acquire new funds in a variety of markets. A significant source of funds available to United is “core deposits”. Core deposits include certain demand deposits, statement and special savings and NOW accounts. These deposits are relatively stable, and they are the lowest cost source of funds available to United. Short-term borrowings have also been a significant source of funds. These include federal funds purchased and securities sold under agreements to repurchase as well as advances from the FHLB. Repurchase agreements represent funds which are obtained as the result of a competitive bidding process.
Liquid assets are cash and those items readily convertible to cash. All banks must maintain sufficient balances of cash and near-cash items to meet the
day-to-day
demands of customers and United’s cash needs. Other than cash and due from banks, the available for sale securities portfolio and maturing loans are the primary sources of liquidity.
The goal of liquidity management is to ensure the ability to access funding which enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United’s cash needs. Liquidity is managed by monitoring funds’ availability from a number of primary sources. Substantial funding is available from cash and cash equivalents, unused short-term borrowing and a geographically dispersed network of branches providing access to a diversified and substantial retail deposit market.
Short-term needs can be met through a wide array of outside sources such as correspondent and downstream correspondent federal funds and utilization of Federal Home Loan Bank advances.
Other sources of liquidity available to United to provide long-term as well as short-term funding alternatives, in addition to FHLB advances, are long-term certificates of deposit, lines of credit, borrowings that are secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities. In the normal course of business, United through its Asset Liability Committee evaluates these as well as other alternative funding strategies that may be utilized to meet short-term and long-term funding needs.
For the first ninethree months ended September 30, 2021,March 31, 2022, cash of $553.20$283.61 million was provided by operating activities due mainly to the addition of $164.38 million in net income of $293.89 million. In addition,cash from mortgage banking activities added cash of $225.64 million toas proceeds from the net income amount as sales of mortgage loans in the secondary market exceeded originations. In addition, net income was $81.66 million for the quarter and accrued expenses increased $27.37 million. Net cash of $249.37 million$1.30 billion was provided byused in investing activities which was primarily due to net loan repayments of $864.28 million partially offset by $524.66$936.33 million of purchases of investment securities over proceeds from sales and $85.00 millionportfolio loan growth of purchases of bank-owned life insurance policies.$366.41 million. During the first ninethree months of 2021,2022, net cash of $1.02 billion$64.91 million was provided by financing activities due primarily to net growth of $1.23 billion$125.08 million in deposits. These funding activities were partially offset by the net repayment of $50.00 million in long-term FHLB advances, cash dividends paid of $135.99$46.66 million and net repurchases of $11.21$26.06 million of United commonin treasury stock for the first nine months of 2021.quarter. The net effect of the cash flow activities was an increasea decrease in cash and cash equivalents of $1.82 billion$955.08 million for the first ninethree months of 2021.2022.
United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures. United also has lines of credit available. See Notes 10 and 11 to the accompanying unaudited Notes to Consolidated Financial Statements for more details regarding the amounts available to United under lines of credit.
The Asset Liability Committee monitors liquidity to ascertain that a liquidity position within certain prescribed parameters is maintained. No changes are anticipated in the policies of United’s Asset Liability Committee.
United’s capital position is financially sound. United seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings. United has historically generated attractive returns on shareholders’ equity. United is well-capitalized based upon regulatory guidelines. United’s risk-based capital ratio is 15.74%15.13% at September 30, 2021March 31, 2022 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.53%13.00%, 13.53%13.00% and 10.36%10.42%, respectively. The September 30, 2021March 31, 2022 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve
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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%.
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Total shareholders’ equity was $4.43$4.60 billion at September 30, 2021,March 31, 2022, which was an increasea decrease of $133.15$123.49 million or 3.10%2.62% from December 31, 2020.2021. This increasedecrease is primarily due to an increase of $158.09 million in retained earnings (net income less dividends declared). Partially offsetting this increase was a decrease of $23.61$136.80 million in accumulated other comprehensive income due mainly to an
after-tax
decrease in the fair value of available for sale securities. Treasurysecurities as a result of a rising interest rate environment. In addition, treasury stock increased $11.34$26.28 million or 7.13%15.41% due to the repurchase of 306,204710,785 shares of United common stock under a stock repurchase plan approved by United’s Board of directorsDirectors in November of 2019. Partially offsetting these decreases was an increase of $32.40 million in retained earnings (net income less dividends declared).
United’s equity to assets ratio was 16.11%15.65% at September 30, 2021March 31, 2022 as compared to 16.41%16.09% at December 31, 2020.2021. The primary capital ratio, capital and reserves to total assets and reserves, was 16.82%16.36% at September 30, 2021March 31, 2022 as compared to 17.22%16.79% at December 31, 2020.2021. United’s average equity to average asset ratio was 16.18%16.22% for the thirdfirst quarter of 20212022 as compared to 16.14%16.41% the thirdfirst quarter of 2020. United’s average equity to average asset ratio was 16.27% for the first nine months of 2021 as compared to 16.34% the first nine months of 2020.2021. All of these financial measurements reflect a financially sound position.
During the thirdfirst quarter of 2021,2022, United’s Board of Directors declared a cash dividend of $0.35$0.36 per share. Cash dividends were $1.05 per common share for the first nine months of 2021. Total cash dividends declared were $45.27 million for the third quarter of 2021 and $135.79$49.27 million for the first nine months of 2021 as compared to $45.41 million for the third quarter of 2020 and $126.432022 which was an increase of $4.01 million or 8.87% from dividends declared of $45.25 million for the first nine monthsquarter of 2020.2021.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The objective of United’s Asset Liability Management function is to maintain consistent growth in net interest income within United’s policy guidelines. This objective is accomplished through the management of balance sheet liquidity and interest rate risk exposures due to changes in economic conditions, interest rate levels and customer preferences.
Interest Rate Risk
Management considers interest rate risk to be United’s most significant market risk. Interest rate risk is the exposure to adverse changes in United’s net interest income as a result of changes in interest rates. United’s earnings are largely dependent on the effective management of interest rate risk.
Management of interest rate risk focuses on maintaining consistent growth in net interest income within Board-approved policy limits. United’s Asset/Liability Management Committee (“ALCO”), which includes senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk to maintain an acceptable level of change to net interest income as a result of changes in interest rates. Policy established for interest rate risk is stated in terms of the change in net interest income over a
one-year
and
two-year
horizon given an immediate and sustained increase or decrease in interest rates. The current limits approved by the Board of Directors are structured on a staged basis with each stage requiring specific actions.
United employs a variety of measurement techniques to identify and manage its exposure to changing interest rates. One such technique utilizes an earnings simulation model to analyze the sensitivity of net interest income to movements in interest rates. The model is based on actual cash flows and repricing characteristics for on and
off-balance
sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities. The model also includes executive management projections for activity levels in product lines offered by United. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. Rate scenarios could involve parallel or nonparallel shifts in the yield curve, depending on historical, current, and expected conditions, as well as the need to capture any material effects of explicit or embedded options. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management’s strategies.
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Interest sensitive assets and liabilities are defined as those assets or liabilities that mature or are repriced within a designated time frame. The principal function of managing interest rate risk is to maintain an appropriate relationship between those assets and liabilities that are sensitive to changing market interest rates. The difference between rate sensitive assets and rate
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sensitive liabilities for specified periods of time is known as the “GAP.” Earnings-simulation analysis captures not only the potential of these interest sensitive assets and liabilities to mature or reprice, but also the probability that they will do so. Moreover, earnings-simulation analysis considers the relative sensitivities of these balance sheet items and projects their behavior over an extended period of time. United closely monitors the sensitivity of its assets and liabilities on an
on-going
basis and projects the effect of various interest rate changes on its net interest margin.
The following table shows United’s estimated earnings sensitivity profile as of September 30, 2021March 31, 2022 and December 31, 2020:2021:
 
Change in Interest Rates
(basis points)
  
Percentage Change in Net Interest Income
  
Percentage Change in Net Interest Income
 
September 30, 2021
 
December 31, 2020
March 31, 2022
 
December 31, 2021
 
+200
  0.98% (4.32%)   1.40%   4.61% 
+100
  0.32% (2.61%)   1.36%   2.70% 
-100
  (1.08%) 0.03%   (1.59%)   (0.98%) 
-200
  (1.83%) (0.05%)   (6.88%)   (2.42%) 
At September 30, 2021,March 31, 2022, given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 0.32%1.36% over one year as compared to a decrease of 2.61%an increase by 2.70% at December 31, 2020.2021. A 200 basis point immediate, sustained upward shock in the yield curve would increase net interest income by an estimated 0.98%1.40% over one year as of September 30, 2021,March 31, 2022, as compared to a decreasean increase of 4.32%4.61% as of December 31, 2020.2021. A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 1.08%1.59% over one year as of September 30, 2021March 31, 2022 as compared to an increasea decrease of 0.03%0.98%, over one year as of December 31, 2020.2021. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 1.83%6.88% over one year as of September 30, 2021March 31, 2022 as compared to a decrease of 0.05%2.42% over one year as of December 31, 2020.2021.
In addition to the one year earnings sensitivity analysis, a
two-year
analysis is also performed. Compared to the one year analysis, United is projected to show improved performance in year two within the upward rate shock scenarios. Given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 3.75%3.67% in year two as of September 30, 2021.March 31, 2022. A 200 basis point immediate, sustained upward shock in the yield curve would increase net interest income by an estimated 7.38%5.57% in year two as of September 30, 2021.March 31, 2022. A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 5.17%4.23% in year two as of September 30, 2021.March 31, 2022. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 7.09%12.97% in year two as of September 30, 2021.March 31, 2022.
This analysis does not include the potential increased refinancing activities, which should lessen the negative impact on net income from falling rates. While it is unlikely market rates would immediately move 100 or 200 basis points upward or downward on a sustained basis, this is another tool used by management and the Board of Directors to gauge interest rate risk. All of these estimated changes in net interest income are and were within the policy guidelines established by the Board of Directors.
To further aid in interest rate management, United’s subsidiary bank is a member of the Federal Home Loan Bank (“FHLB”). The use of FHLB advances provides United with a low risk means of matching maturities of earning assets and interest-bearing funds to achieve a desired interest rate spread over the life of the earning assets. In addition, United uses credit with large regional banks and trust preferred securities to provide funding.
As part of its interest rate risk management strategy, United may use derivative instruments to protect against adverse price or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives commonly consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. Interest rate swaps obligate two parties to exchange one or more payments generally calculated with reference to a fixed or variable rate of interest applied to the notional amount. United accounts for its derivative activities in accordance with the provisions of ASC Topic 815, “Derivatives and Hedging.”
 
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Extension Risk
A key feature of most mortgage loans is the ability of the borrower to repay principal earlier than scheduled. This is called a prepayment. Prepayments arise primarily due to sale of the underlying property, refinancing, or foreclosure. In general, declining interest rates tend to increase prepayments, and rising interest rates tend to slow prepayments. Like other fixed-income securities, when interest rates rise, the value of mortgage- relatedmortgage-related securities generally declines. The rate of prepayments on underlying mortgages will affect the price and volatility of mortgage-related securities and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If interest rates rise, United’s holdings of mortgage-related securities may experience reduced returns if the borrowers of the underlying mortgages pay off their mortgages later than anticipated. This is generally referred to as extension risk.
At September 30, 2021,March 31, 2022, United’s mortgage related securities portfolio had an amortized cost of $1.7$1.8 billion, of which approximately $716.6$972.7 million or 43%44% were fixed rate collateralized mortgage obligations (CMOs). These fixed rate CMOs consisted primarily of planned amortization class (PACs),
sequential-pay
and accretion directed (VADMs) bonds having an average life of approximately 3.55.6 years and a weighted average yield of 1.75%1.91%, under current projected prepayment assumptions. These securities are expected to have very littlemoderate extension risk in a rising rate environment. Current models show that given an immediate, sustained upward shock of 300 basis points, the average life of these securities would only extend to 5.57 years. The projected price decline of the fixed rate CMO portfolio in rates up 300 basis points would be 13.2%16%, or less than the price decline of a
5-7-
year treasury note. By comparison, the price decline of a
30-year
2%2.50% coupon mortgage backed security (MBS) in rates higher by 300 basis points would be approximately 22.8%21.1%.
United had approximately $574.4$615.9 million in fixed rate Commercial Mortgage Backedmortgage backed Securities (CMBS) with a projected yield of 2.12%2.05% and a projected average life of 5.25.3 years on September 30, 2021.March 31, 2022. This portfolio consisted primarily of Freddie Mac Multifamily K securities and Fannie Mae Delegated Underwriting and Servicing (DUS) securities with a weighted average maturity (WAM) of 88.2 years.
United had approximately $12.4$31.7 million in
15-year
mortgage backed securities with a projected yield of 2.32%2.04% and a projected average life of 2.74.9 years as of September 30, 2021.March 31, 2022. This portfolio consisted of seasoned
15-year
mortgage paper with a weighted average loan age (WALA) of 8.42.9 years and a weighted average maturity (WAM) of 8.112.5 years.
United had approximately $201.6$377.7 million in
20-year
mortgage backed securities with a projected yield of 1.39%1.80% and a projected average life of 4.67.1 years on September 30, 2021.March 31, 2022. This portfolio consisted of seasoned
20-year
mortgage paper with a weighted average loan age (WALA) of 1.51.1 years and a weighted average maturity (WAM) of 18.418.8 years.
United had approximately $146.4$181.4 million in
30-year
mortgage backed securities with a projected yield of 2.15%2.43% and a projected average life of 3.97.7 years on September 30, 2021.March 31, 2022. This portfolio consisted of seasoned
30-year
mortgage paper with a weighted average loan age (WALA) of 3.83 years and a weighted average maturity (WAM) of 23.825.3 years.
The remaining 2% of the mortgage related securities portfolio on September 30, 2021,March 31, 2022, included floating rate CMO, CMBS and mortgage backed securities.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2021,March 31, 2022, an evaluation was performed under the supervision of and with the participation of United’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of United’s disclosure controls and procedures. Based on that evaluation, United’s management, including the CEO and CFO, concluded that United’s disclosure controls and procedures as of September 30, 2021March 31, 2022 were effective in ensuring that information required to be disclosed in the Quarterly Report on Form
10-Q
was recorded, processed, summarized and reported within the time period required by the Securities and Exchange Commission’s rules and forms.
 
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Limitations on the Effectiveness of Controls
United’s management, including the CEO and CFO, does not expect that United’s disclosure controls and internal controls will prevent all errors and fraud. While United’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
Changes in Internal Controls
There have been no changes in United’s internal control over financial reporting (as defined in Rules
13a-15(e)
and
15d-15(f)
under the Exchange Act) that occurred during the quarter ended September 30, 2021,March 31, 2022, or in other factors that have materially affected or are reasonably likely to materially affect United’s internal control over financial reporting.
 
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PART II -– OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
United and its subsidiaries are currently involved in various legal proceedings in the normal course of business. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position.
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, please refer to United’s Annual Report on Form
10-K
for the year ended December 31, 20202021 for disclosures with respect to United’s risk factors which could materially affect United’s business, financial condition or future results. The risks described in the Annual Report on Form
10-K
are not the only risks facing United. Additional risks and uncertainties not currently known to United or that United currently deems to be immaterial also may materially adversely affect United’s business, financial condition and/or operating results.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There have been no United equity securities sales during the quarter ended September 30, 2021March 31, 2022 that were not registered. The table below includes certain information regarding United’s purchase of its common shares during the quarter ended September 30, 2021:March 31, 2022:
 
Period
  
Total Number
of Shares
Purchased
(1) (2)
   
Average
Price Paid
per Share
   
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans (3)
   
Maximum Number
of Shares that May
Yet be Purchased
Under the Plans (3)
 
7/01 – 7/31/2021
   0   $00.00    0    3,033,796 
8/01 – 8/31/2021
   5   $35.02    0    3,033,796 
9/01 – 9/30/2021
   0   $00.00    0    3,033,796 
  
 
 
   
 
 
   
 
 
   
Total
   5   $35.02    0   
  
 
 
   
 
 
   
 
 
   
Period
  
Total Number
of Shares
Purchased 
(1) (2)
   
Average
Price Paid
per Share
   
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans
(3)
   
Maximum Number
of Shares that May
Yet be Purchased
Under the Plans 
(3)
 
1/01 – 1/31/2022
   0   $00.00    0    3,033,796 
2/01 – 2/28/2022
   30,088   $35.84    0    3,033,796 
3/01 – 3/31/2022
   710,785   $35.15    710,785    2,323,011 
  
 
 
   
 
 
   
 
 
   
Total
   740,873   $35.18    710,785   
  
 
 
   
 
 
   
 
 
   
 
(1)
Includes shares exchanged in connection with the exercise of stock options or the vesting of restricted stock under United’s long-term incentive plans. Shares are purchased pursuant to the terms of the applicable plan and not pursuant to a publicly announced stock repurchase plan. For the quarter ended September 30, 2021, noMarch 31, 2022 – 30,085 shares at an average price of $35.84 were exchanged by participants in United’s long-term incentive plans.
(2)
Includes shares purchased in open market transactions by United for a rabbi trust to provide payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. For the quarter ended September 30, 2021,March 31, 2022, the following shares were purchased for the deferred compensation plan: August 2021February 2022 – 53 shares at an average price of $35.02.$37.91.
(3)
In October 2019, United’s Board of Directors approved a repurchase plan to repurchase up to 4,000,000 shares of United’s common stock on the open market (the “2019 Plan”). The timing, price and quantity of purchases under the plans are at the discretion of management and the plan may be discontinued, suspended or restarted at any time depending on the facts and circumstances.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
 
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Item 4. MINE SAFETY DISCLOSURES
None.
Item 5. OTHER INFORMATION
 
 (a)
None.
 
 (b)
No changes were made to the procedures by which security holders may recommend nominees to United’s Board of Directors.
Item 6. EXHIBITS
Index to exhibits required by Item 601 of Regulation
S-K
 
Exhibit
No.
  
Description
    2.1  Agreement and Plan of Merger, dated November 17, 2019, by and between United Bankshares, Inc. and Carolina Financial Corporation (incorporated into this filing by reference to Exhibit 2.1 to the Form 8-K dated November 17, 2019 and filed November 18, 2019 for United Bankshares, Inc., File No. 002-86947)
    2.2  Agreement and Plan of Reorganization, dated June 2, 2021, by and between United Bankshares, Inc. and Community Bankers Trust Corporation (incorporated into this filing by reference to Exhibit 2.1 to the Form 8-K dated June 2,December 3, 2021 and filed JuneDecember 3, 2021 for United Bankshares, Inc., File No. 002-86947)
    3.1  Amended and Restated Articles of Incorporation (incorporated into this filing by reference to aExhibit 3.1 to the Quarterly Report on Form 10-Q dated March 31, 2017 and filed May 9, 2017 for United Bankshares, Inc., File No.002-86947)
    3.2  Restated Bylaws (incorporated into this filing by reference to aExhibit 3.1 to the Current Report on Form 8-K dated and filed on March 20, 2020 for United Bankshares, Inc., File No.002-86947)
    4.1  Description of Registrant’s Securities (incorporated into this filing by reference to anthe Annual Report on Form 10-K dated December 31, 2019 and filed March 2, 2020 for United Bankshares, Inc., File No.002-86947)
  10.1Fifth Amended and Restated Employment Agreement between United Bankshares, Inc. and Richard M. Adams (incorporated into this filing by reference to Exhibit 10.1 to the Current Report on Form 8-K dated February 28, 2022 and filed March 1, 2022 for United Bankshares, Inc., File No. 002-86947)
  31.1  Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer (filed herewith)
  31.2  Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer (filed herewith)
  32.1  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer (furnished herewith)
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Exhibit
No.
Description
  32.2  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer (furnished herewith)
101  Interactive data file (inline XBRL) (filed herewith)
104  Cover Page (embedded in inline XBRL and contained in Exhibit 101)
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  UNITED BANKSHARES, INC.
  (Registrant)
Date:
November 9, 2021
May 10, 2022            
  
/s/ Richard M. Adams, Jr.
  Richard M. Adams, Chairman ofJr.
  the Board and Chief Executive Officer
Date:
November 9, 2021
May 10, 2022            
  
/s/ W. Mark Tatterson
  W. Mark Tatterson, Executive
  Vice President and Chief Financial Officer
 
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