# UNITED BANKSHARES INC/WV (UBSI) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from UNITED BANKSHARES INC/WV's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/729986/000119312524053462/d815282d10k.htm
Accession: 0001193125-24-053462
Filing date: 2024-02-29
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/UBSI/
All MD&A years: /company/UBSI/mda/
Previous year: /company/UBSI/mda/fy2022/ (FY 2022)
Next year: /company/UBSI/mda/fy2024/ (FY 2024)

Item 7. 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. 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.

35

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

RECENT DEVELOPMENTS

United plans to complete a consolidation of its mortgage delivery channels during the early part of 2024. The plan is to consolidate George Mason’s and Crescent’s mortgage origination and sales business with United Bank. As part of the planned consolidation, United exited the third-party origination (“TPO”) business during the fourth quarter of 2023. United will continue to offer mortgage products through its bank mortgage channel and existing George Mason offices (which will be re-branded under the United umbrella). The consolidation will streamline operations and enhance the customer experience.

TRANSITION FROM THE LONDON INTERBANK OFFERED RATE (LIBOR)

As disclosed in the “Transition From The London Interbank Offered Rate (LIBOR)” section within the MD&A of United’s 2022 Annual Report on Form 10-K (the 2022 Form 10-K), as a result of the efforts led by the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, the publication of the one-week and two-month U.S. Dollar LIBOR settings were discontinued on December 31, 2021. Subsequently, publication of the remaining overnight, one-month, three-month, six-month, and twelve-month U.S. Dollar LIBOR settings were discontinued on June 30, 2023. United implemented a comprehensive project plan to execute the transition of its LIBOR-based financial instruments to alternative reference rates. United utilized the Secured Overnight Financing Rate (“SOFR”) and Prime as the preferred alternatives to LIBOR.

INTRODUCTION

The following discussion and analysis presents the more significant changes in financial condition as of December 31, 2023 and 2022 and the results of operations of United and its subsidiaries for each of the years then ended. This discussion and the consolidated financial statements and the notes to Consolidated Financial Statements include the accounts of United Bankshares, Inc. and its wholly-owned subsidiaries, unless otherwise indicated. Management has evaluated all significant events and transactions that occurred after December 31, 2023, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on March 1, 2023 (the 2022 Form 10-K) for a discussion and analysis of the more significant factors that affected periods prior to 2022.

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

USE OF NON-GAAP FINANCIAL MEASURES

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.

36

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 a more conservative valuation of the company. When considering net income, a return on average tangible equity can be calculated. Management provides a return on average equity to facilitate the understanding of as well as to assess the quality and composition of United’s capital structure. This measure, along with others, is used by management to analyze capital adequacy and performance.

However, this non-GAAP information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP. Where the non-GAAP financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure, can be found within this discussion and analysis. Investors should recognize that United’s presentation of this non-GAAP financial measure might not be comparable to a similarly titled measure at other companies.

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. The most significant accounting policies followed by United are presented in Note A, Notes to Consolidated Financial Statements.

Allowance for Loan and Lease Losses

The allowance for loan and lease losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset (contractual term). Determining the allowance for loan and lease losses requires management to make estimates of expected credit losses that are highly uncertain and require a high degree of judgment. At December 31, 2023, the allowance for loan and lease losses was $259.24 million and is subject to periodic adjustment based on management’s assessment of expected credit losses in the loan portfolio. Such adjustment from period to period can have a significant impact on United’s consolidated financial statements. To illustrate the potential effect on the financial statements of our estimates of the allowance for loan and lease losses, a 10% increase in the allowance for loan and lease losses would have required $25.92 million in additional allowance (funded by additional provision for loan and lease losses), which would have negatively impacted the year of 2023 net income by approximately $20.48 million, after-tax or $0.15 diluted earnings per common share. Management’s evaluation of the adequacy of the allowance for loan and lease losses and the appropriate provision for loan and lease losses is based upon a quarterly evaluation of the loan portfolio. This evaluation is inherently subjective and requires significant estimates, including estimates related to the amounts and timing of future cash flows, value of collateral, losses on pools of homogeneous loans and leases based on historical loss experience, and consideration of qualitative factors such as current economic trends, all of which are susceptible to constant and

37

significant change. The allowance allocated to specific credits and loan pools grouped by similar risk characteristics is reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances. In determining the components of the allowance for loan and lease losses, management considers the risk arising in part from, but not limited to, qualitative factors which include charge-off and delinquency trends, current business conditions and reasonable and supportable economic forecasts, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors. The methodology used to determine the allowance for loan and lease losses is described in Note A, Notes to Consolidated Financial Statements. A discussion of the factors leading to changes in the amount of the allowance for loan and lease losses is included in the Provision for Credit Losses section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). For a discussion of concentrations of credit risk, see Item 1, under the caption of Loan Concentrations in this Form 10-K.

Income Taxes

United’s calculation of income tax provision is inherently complex due to the various different tax laws and jurisdictions in which we operate and requires management’s use of estimates and judgments in its determination. The current income tax liability also includes income tax expense related to our uncertain tax positions as required in ASC Topic 740, “Income Taxes.” Changes to the estimated accrued taxes can occur due to changes in tax rates, implementation of new business strategies, resolution of issues with taxing authorities and recently enacted statutory, judicial and regulatory guidance. These changes can be material to the Company’s operating results for any particular reporting period. The analysis of the income tax provision requires the assessments of the relative risks and merits of the appropriate tax treatment of transactions, filing positions, filing methods and taxable income calculations after considering statutes, regulations, judicial precedent and other information. United strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense. United is also subject to audit by federal and state authorities. Because the application of tax laws is subject to varying interpretations, results of these audits may produce indicated liabilities which differ from United’s estimates and provisions. United continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances. The potential impact to United’s operating results for any of the changes cannot be reasonably estimated. See Note N, Notes to Consolidated Financial Statements for information regarding United’s ASC Topic 740 disclosures.

Use of Fair Value Measurements

United determines the fair value of its financial instruments based on the fair value hierarchy established in ASC Topic 820, whereby the 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 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs in the methodology for determining fair value are observable or unobservable. Observable inputs reflect market-based information obtained from independent sources (Level 1 or Level 2), while unobservable inputs reflect management’s estimate of market data (Level 3). For assets and liabilities that are actively traded and have quoted prices or observable market data, a minimal amount of subjectivity concerning fair value is needed. Prices and values obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management. When quoted prices or observable market data are not available, management’s judgment is necessary to estimate fair value.

At December 31, 2023, approximately 13.04% of total assets, or $3.90 billion, consisted of financial instruments recorded at fair value. Of this total, approximately 98.63% or $3.85 billion of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. Approximately 1.37% or $53.60 million of these financial instruments were valued using unobservable market information or Level 3 measurements. Most of these financial instruments valued using unobservable market information were loans held for sale at our mortgage banking segment. At December 31, 2023, only $678 thousand or less than 1% of total liabilities were recorded at fair value. This entire amount was valued using methodologies involving observable market data. United does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on United’s results of operations, liquidity, or capital resources. See Note V for additional information regarding ASC Topic 820 and its impact on United’s financial statements.

38

Any material effect on the financial statements related to these critical accounting areas is further discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

2023 COMPARED TO 2022

United’s total assets as of December 31, 2023 were $29.93 billion, which was an increase of $437.10 million or 1.48% from December 31, 2022. This increase was mainly due to a $800.92 million or 3.90% increase in portfolio loans, a $422.29 million or 35.89% increase in cash and cash equivalents, a $16.53 million or 17.42% increase in interest receivable, and a $15.84 million or 22.27% increase in the operating lease asset. These increases in assets were partially offset by a $746.85 million or 15.33% decrease in investment securities and a $16.47 million or 78.34% decrease in mortgage servicing rights. Total liabilities increased $182.06 million or less than 1% from year-end 2022. This increase was due to a $516.15 million or 2.31% increase in deposits, a $17.14 million or 22.62% increase in the operating lease liability, and a $23.41 million or 12.34% increase in accrued expenses and other liabilities. Partially offsetting these increases in liabilities was a $373.16 million or 15.82% decrease in borrowings. Shareholders’ equity increased $255.05 million or 5.65%.

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

Cash and Cash Equivalents

Cash and cash equivalents at December 31, 2023 increased $422.29 million or 35.89% from year-end 2022. In particular, interest-bearing deposits with other banks increased $459.20 million or 52.10% while cash and due from banks decreased $37.00 million or 12.58%. Federal funds sold increased $91 thousand or 8.43%. During the year of 2023, net cash of $435.24 million and $38.99 million were provided by operating and investing activities, respectively, while net cash of $51.94 million was used in financing activities. Further details related to changes in cash and cash equivalents are presented in the Consolidated Statements of Cash Flows.

Securities

Total investment securities at December 31, 2023 decreased $746.85 million or 15.33%. Securities available for sale decreased $755.55 million or 16.63%. This change in securities available for sale reflects $107.87 million in purchases, $959.87 million in sales, maturities and calls of securities, and an increase of $106.29 million in market value. The majority of the sales activity was related to state and political subdivision securities. Equity securities were $8.95 million at December 31, 2023, an increase of $1.32 million or 17.25% due mainly to net purchases. Other investment securities increased $7.38 million or 2.29% from year-end 2022 due to a $12.53 million increase in investment tax credits partially offset by a $6.14 million decrease in FHLB stock.

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

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","December 31 2023","","","December 31 2022","","","$ Change","","","% Change"],["U.S. Treasury securities and obligations of U.S. Government corporations and agencies","","$","484,950","","","$","529,492","","","$","(44,542",")","","","(8.41","%)"],["State and political subdivisions","","","533,831","","","","709,530","","","","(175,699",")","","","(24.76","%)"],["Mortgage-backed securities","","","1,599,850","","","","1,849,470","","","","(249,620",")","","","(13.50","%)"],["Asset-backed securities","","","860,638","","","","911,611","","","","(50,973",")","","","(5.59","%)"],["Single issue trust preferred securities","","","15,141","","","","16,284","","","","(1,143",")","","","(7.02","%)"],["Other corporate securities","","","291,967","","","","525,538","","","","(233,571",")","","","(44.44","%)"],["Total available for sale securities, at fair value","","$","3,786,377","","","$","4,541,925","","","$","(755,548",")","","","(16.63","%)"]]
[[/GREPCENT_TABLE]]

39

The following table summarizes the changes in the held to maturity securities since year-end 2022:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","December 31 2023","","","December 31 2022","","","$ Change","","","% Change"],["State and political subdivisions","","$","983","(1)","","$","982","(2)","","$","1","","","","0.10","%"],["Other corporate securities","","","20","","","","20","","","","0","","","","0.00","%"],["Total held to maturity securities, at amortized cost","","$","1,003","","","$","1,002","","","$","1","","","","0.10","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1) net of allowance for credit losses of $17 thousand."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(2) net of allowance for credit losses of $18 thousand."]]
[[/GREPCENT_TABLE]]

At December 31, 2023, gross unrealized losses on available for sale securities were $363.60 million. Securities with the most significant gross unrealized losses at December 31, 2023 consisted primarily of agency residential mortgage-backed securities, state and political subdivision securities, agency commercial mortgage-backed securities, asset-backed securities and other corporate securities.

As of December 31, 2023, United’s available for sale mortgage-backed securities had an amortized cost of $1.83 billion, with an estimated fair value of $1.60 billion. The portfolio consisted primarily of $1.22 billion in agency residential mortgage-backed securities with a fair value of $1.05 billion, $100.36 million in non-agency residential mortgage-backed securities with an estimated fair value of $90.61 million, and $511.56 million in commercial agency mortgage-backed securities with an estimated fair value of $459.30 million.

As of December 31, 2023, United’s available for sale state and political subdivisions securities had an amortized cost of $613.59 million, with an estimated fair value of $533.83 million. The portfolio relates to securities issued by various municipalities located throughout the United States, and no securities within the portfolio were rated below investment grade as of December 31, 2023.

As of December 31, 2023, United’s available for sale corporate securities had an amortized cost of $1.21 billion, with an estimated fair value of $1.17 billion. The portfolio consisted of $16.38 million in single issue trust preferred securities with an estimated fair value of $15.14 million. Of the $15.14 million, $6.90 million or 45.59% were investment grade; $2.92 million or 19.30% were split rated; and $5.32 million or 35.11% were unrated. The two largest exposures accounted for 80.70% of the $15.14 million. These included Truist Bank at $6.90 million and Emigrant Bank at $5.32 million. All single issue trust preferred securities are currently receiving full scheduled principal and interest payments. 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 $872.05 million and a fair value of $860.64 million and other corporate securities, with an amortized cost of $325.57 million and a fair value of $291.97 million.

During 2023, United did not recognize any credit losses on its available for sale investment securities. Management does not believe that any individual security with an unrealized loss as of December 31, 2023 is impaired. United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not a deterioration of credit. 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 December 31, 2023, there was no allowance for credit losses related to the Company’s available for sale securities. However, United acknowledges that any securities in an unrealized loss position may be sold in future periods in response to significant, unanticipated changes in asset/liability management decisions, unanticipated future market movements or business plan changes.

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 B, Notes to Consolidated Financial Statements.

Loans Held For Sale

Loans held for sale decreased $618 thousand or 1.09% from year-end 2022. Loan sales in the secondary market exceeded originations during the year of 2023. Originations of loans for the year of 2023 were $860.90 million while sales of loans were $861.52 million. Loans held for sale were $56.26 million at December 31, 2023 as compared to $56.88 million at year-end 2022.

40

Portfolio Loans

Loans, net of unearned income, increased $800.92 million or 3.90%. Since year-end 2022, commercial, financial and agricultural loans increased $264.55 million or 2.28% as a result of a $304.67 million or 3.80% increase in commercial real estate loans which was partially offset by a $40.13 million or 1.11% decrease in commercial loans (not secured by real estate). Construction and land development loans increased $221.27 million or 7.56% and residential real estate loans increased $608.33 million or 13.05%, while consumer loans decreased $301.12 million or 22.05% due to a decrease in indirect automobile financing.

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

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","December 31 2023","","","December 31 2022","","","$ Change","","","% Change"],["Loans held for sale","","$","56,261","","","$","56,879","","","$","(618",")","","","(1.09","%)"],["Commercial, financial, and agricultural:"],["Owner-occupied commercial real estate","","$","1,598,231","","","$","1,724,927","","","$","(126,696",")","","","(7.35","%)"],["Nonowner-occupied commercial real estate","","","6,718,343","","","","6,286,974","","","","431,369","","","","6.86","%"],["Other commercial loans","","","3,572,440","","","","3,612,568","","","","(40,128",")","","","(1.11","%)"],["Total commercial, financial, and agricultural","","$","11,889,014","","","$","11,624,469","","","$","264,545","","","","2.28","%"],["Residential real estate","","","5,271,236","","","","4,662,911","","","","608,325","","","","13.05","%"],["Construction & land development","","","3,148,245","","","","2,926,971","","","","221,274","","","","7.56","%"],["Consumer:"],["Bankcard","","","9,962","","","","9,273","","","","689","","","","7.43","%"],["Other consumer","","","1,054,728","","","","1,356,539","","","","(301,811",")","","","(22.25","%)"],["Total Loans and leases","","$","21,373,185","","","$","20,580,163","","","$","793,022","","","","3.85","%"],["Less: Unearned income","","","(14,101",")","","","(21,997",")","","","7,896","","","","(35.90","%)"],["Total Loans and leases, net of unearned income","","$","21,359,084","","","$","20,558,166","","","$","800,918","","","","3.90","%"]]
[[/GREPCENT_TABLE]]

The following table shows the amount of loans acquired and outstanding by major loan classes as of December 31, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","","December 31, 2022"],["(In thousands)","","Originated","","","Acquired","","","Total","","","Originated","","","Acquired","","","Total"],["Commercial, financial, and agricultural:"],["Owner-occupied commercial real estate","","$","999,471","","","$","598,760","","","$","1,598,231","","","$","1,031,330","","","$","693,597","","","$","1,724,927"],["Nonowner-occupied commercial real estate","","","5,096,074","","","","1,622,269","","","","6,718,343","","","","4,515,059","","","","1,771,915","","","","6,286,974"],["Other commercial loans","","","3,144,321","","","","428,119","","","","3,572,440","","","","3,110,273","","","","502,295","","","","3,612,568"],["Total commercial, financial, and agricultural","","$","9,239,866","","","$","2,649,148","","","$","11,889,014","","","$","8,656,662","","","$","2,967,807","","","$","11,624,469"],["Residential real estate","","","4,731,392","","","","539,844","","","","5,271,236","","","","3,999,088","","","","663,823","","","","4,662,911"],["Construction & land development","","","2,998,152","","","","150,093","","","","3,148,245","","","","2,618,810","","","","308,161","","","","2,926,971"],["Consumer:"],["Bankcard","","","9,962","","","","0","","","","9,962","","","","9,273","","","","0","","","","9,273"],["Other consumer","","","1,048,428","","","","6,299","","","","1,054,728","","","","1,346,699","","","","9,840","","","","1,356,539"],["Total Loans and leases","","$","18,027,801","","","$","3,345,384","","","$","21,373,185","","","$","16,630,532","","","$","3,949,631","","","$","20,580,163"]]
[[/GREPCENT_TABLE]]

41

The following table shows the maturity of loans and leases, outstanding as of December 31, 2023:

[[GREPCENT_TABLE]]
[["(In thousands)","","Less Than One Year","","","One To Five Years","","","Five to Fifteen Years","","","Greater than Fifteen Years","","","Total"],["Commercial, financial and agricultural:"],["Owner-occupied commercial real estate","","$","120,013","","","$","806,380","","","$","646,165","","","$","25,673","","","$","1,598,231"],["Nonowner-occupied commercial real estate","","","1,130,592","","","","3,804,852","","","","1,680,261","","","","102,638","","","","6,718,343"],["Other commercial loans","","","898,817","","","","1,929,157","","","","642,509","","","","101,957","","","","3,572,440"],["Total commercial, financial, and agricultural","","$","2,149,422","","","$","6,540,389","","","$","2,968,935","","","$","230,268","","","$","11,889,014"],["Residential real estate","","","179,087","","","","539,068","","","","578,548","","","","3,974,533","","","","5,271,236"],["Construction & land development","","","843,468","","","","1,986,371","","","","230,291","","","","88,115","","","","3,148,245"],["Consumer:"],["Bankcard","","","1,955","","","","7,900","","","","107","","","","0","","","","9,962"],["Other consumer","","","16,466","","","","762,925","","","","274,020","","","","1,317","","","","1,054,728"],["Total Loans and leases","","$","3,190,398","","","$","9,836,653","","","$","4,051,901","","","$","4,294,233","","","$","21,373,185"]]
[[/GREPCENT_TABLE]]

At December 31, 2023, for loans and leases due after one year, interest rate information is as follows:

[[GREPCENT_TABLE]]
[["(In thousands)","","One To Five Years","","","Five to Fifteen Years","","","Greater than Fifteen Years","","","Total"],["Commercial, financial and agricultural:"],["Owner-occupied commercial real estate"],["Outstanding with fixed interest rates","","$","687,804","","","$","232,859","","","$","8,458","","","$","929,121"],["Outstanding with adjustable interest rates","","","118,576","","","","413,306","","","","17,215","","","","549,097"],["Total owner-occupied","","","806,380","","","","646,165","","","","25,673","","","","1,478,218"],["Nonowner-occupied commercial real estate"],["Outstanding with fixed interest rates","","$","2,895,188","","","$","979,938","","","$","17,601","","","$","3,892,727"],["Outstanding with adjustable interest rates","","","909,664","","","","700,323","","","","85,037","","","","1,695,024"],["Total non-owner occupied","","","3,804,852","","","","1,680,261","","","","102,638","","","","5,587,751"],["Other commercial loans"],["Outstanding with fixed interest rates","","$","1,623,875","","","$","411,164","","","$","66,882","","","$","2,101,921"],["Outstanding with adjustable interest rates","","","305,282","","","","231,345","","","","35,075","","","","571,702"],["Total other commercial","","","1,929,157","","","","642,509","","","","101,957","","","","2,673,623"],["Residential real estate"],["Outstanding with fixed interest rates","","$","338,212","","","$","242,599","","","$","1,974,362","","","$","2,555,173"],["Outstanding with adjustable interest rates","","","200,856","","","","335,949","","","","2,000,171","","","","2,536,976"],["Total residential real estate","","","539,068","","","","578,548","","","","3,974,533","","","","5,092,149"],["Construction"],["Outstanding with fixed interest rates","","$","654,280","","","$","101,523","","","$","73,413","","","$","829,216"],["Outstanding with adjustable interest rates","","","1,332,091","","","","128,768","","","","14,702","","","","1,475,561"],["Total construction","","","1,986,371","","","","230,291","","","","88,115","","","","2,304,777"],["Consumer:"],["Bankcard"],["Outstanding with fixed interest rates","","$","788","","","$","0","","","$","0","","","$","788"],["Outstanding with adjustable interest rates","","","7,112","","","","107","","","","0","","","","7,219"],["Total bankcard","","","7,900","","","","107","","","","0","","","","8,007"],["Other consumer"],["Outstanding with fixed interest rates","","$","762,473","","","$","273,989","","","$","1,317","","","$","1,037,779"],["Outstanding with adjustable interest rates","","","452","","","","31","","","","0","","","","483"],["Total other consumer","","","762,925","","","","274,020","","","","1,317","","","","1,038,262"],["Total outstanding with fixed interest rates","","$","6,962,620","","","$","2,242,072","","","$","2,142,033","","","$","11,346,725"],["Total outstanding with adjustable rates","","$","2,874,033","","","$","1,809,829","","","$","2,152,200","","","$","6,836,062"],["Total","","$","9,836,653","","","$","4,051,901","","","$","4,294,233","","","$","18,182,787"]]
[[/GREPCENT_TABLE]]

42

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

Other Assets

Other assets decreased $28.12 million or 9.23% from year-end 2022. Deferred tax assets decreased $19.62 million due to the increase in the fair value of available-for sale securities, while derivative assets decreased $3.69 million. In addition, dealer reserve decreased $10.01 million due to a decrease in indirect automobile financing and core deposits intangibles decreased $6.39 million due to amortization and impairment of trade name intangibles due to the planned consolidation of George Mason’s and Crescent’s mortgage banking business into United Bank. Partially offsetting these decreases in other assets were a $3.88 million increase in income tax receivable due to timing differences, a $2.66 million increase in accounts receivable due to timing differences, and a $5.82 million increase in the pension asset.

Deposits

Deposits represent United’s primary source of funding. Total deposits at December 31, 2023 increased $516.15 million or 2.31%. In terms of composition, noninterest-bearing deposits decreased $1.05 billion or 14.59% while interest-bearing deposits increased $1.57 billion or 10.37% from December 31, 2022.

Noninterest-bearing deposits consist of demand deposit and noninterest bearing money market (“MMDA”) account balances. The $1.05 billion decrease in noninterest-bearing deposits was due mainly to a $915.32 million or 16.93% decrease in commercial noninterest-bearing deposits, a $127.17 million or 8.51% decrease in personal noninterest-bearing deposits, and a $32.32 million or 17.02% decrease in public noninterest-bearing deposits.

Interest-bearing deposits consist of interest-bearing transaction accounts, regular savings, interest-bearing MMDA, and time deposit account balances. Interest-bearing transaction accounts increased $531.17 million or 10.38% since year-end 2022 as the result of an increase of $1.09 billion in commercial interest-bearing transaction accounts, which was partially offset by a $507.72 million decrease in personal interest-bearing transaction accounts and a $54.03 million decrease in public funds interest-bearing transaction accounts. Regular savings accounts decreased $333.04 million or 19.84% mainly as a result of a $301.42 million decrease in personal savings accounts and a $34.58 million decrease in commercial savings accounts. Interest-bearing MMDAs increased $50.05 million or less than 1%. In particular, personal interest-bearing MMDAs decreased $245.74 million while commercial interest-bearing MMDAs increased $265.10 million. Public funds interest-bearing MMDAs increased $30.68 million.

Time deposits under $100,000 increased $222.14 million or 26.32% from year-end 2022. This increase in time deposits under $100,000 was the result of a $233.17 million increase in fixed rate Certificates of Deposits (“CDs”) under $100,000, and a $3.87 million increase in Certificate of Deposit Account Registry Service (“CDARS”) under $100,000. CDs under $100,000 obtained through the use of deposit listing services decreased $5.17 million.

Since year-end 2022, time deposits over $100,000 increased $1.10 billion or 94.13% as fixed rate CDs increased $759.93 million, brokered certificates of deposits increased $266.45 million, and CDARS over $100,000 increased $72.54 million.

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

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","December 31 2023","","","December 31 2022","","","$ Change","","","% Change"],["Noninterest-bearing accounts","","$","6,149,080","","","$","7,199,678","","","$","(1,050,598",")","","","(14.59","%)"],["Interest-bearing transaction accounts","","","5,648,135","","","","5,116,966","","","","531,169","","","","10.38","%"],["Regular savings","","","1,345,258","","","","1,678,302","","","","(333,044",")","","","(19.84","%)"],["Interest-bearing money market accounts","","","6,349,453","","","","6,299,404","","","","50,049","","","","0.79","%"],["Time deposits under $100,000","","","1,066,092","","","","843,950","","","","222,142","","","","26.32","%"],["Time deposits over $100,000 (1)","","","2,261,301","","","","1,164,866","","","","1,096,435","","","","94.13","%"],["Total deposits","","$","22,819,319","","","$","22,303,166","","","$","516,153","","","","2.31","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","Includes time deposits of $250,000 or more of $842,118 and $454,477 at December 31, 2023 and December 31, 2022, respectively."]]
[[/GREPCENT_TABLE]]

43

At December 31, 2023, the scheduled maturities of time deposits are as follows:

[[GREPCENT_TABLE]]
[["Year","","Amount"],["(In thousands)"],["2024","","$","2,947,581"],["2025","","","278,183"],["2026","","","41,945"],["2027","","","45,424"],["2028 and thereafter","","","14,260"],["TOTAL","","$","3,327,393"]]
[[/GREPCENT_TABLE]]

Maturities of estimated uninsured time deposits of $100,000 or more outstanding at December 31, 2023 are summarized as follows:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","3 months or less","","","Over 3 through 6 months","","","Over 6 through 12 months","","","Over 12 months"],["Time deposits in amounts in excess of the FDIC Insurance limit","","$","115,055","","","$","86,105","","","$","137,316","","","$","63,379"]]
[[/GREPCENT_TABLE]]

The amounts of uninsured time deposits of $100,000 or more outstanding at December 31, 2023 are based on estimates using the same methodologies and assumptions used for regulatory reporting requirements.

The average daily amount of deposits and rates paid on such deposits is summarized for the years ended December 31:

[[GREPCENT_TABLE]]
[["","","2023","","","2022","","","2021"],["","","","","","Interest","","","","","","","","","Interest","","","","","","","","","Interest"],["","","Amount","","","Expense","","","Rate","","","Amount","","","Expense","","","Rate","","","Amount (1)","","","Expense","","","Rate"],["","","(Dollars in thousands)"],["Noninterest-bearing","","$","6,475,051","","","$","0","","","","0.00","%","","$","7,580,624","","","$","0","","","","0.00","%","","$","6,709,510","","","$","0","","","","0.00","%"],["Interest-bearing transaction and money market","","","11,397,302","","","","299,306","","","","2.63","%","","","11,540,192","","","","67,240","","","","0.58","%","","","11,010,496","","","","23,498","","","","0.21","%"],["Regular savings","","","1,520,201","","","","3,128","","","","0.21","%","","","1,744,841","","","","2,427","","","","0.14","%","","","1,455,305","","","","2,085","","","","0.14","%"],["Time deposits","","","2,865,258","","","","88,660","","","","3.09","%","","","2,181,353","","","","10,570","","","","0.48","%","","","2,462,044","","","","16,037","","","","0.65","%"],["TOTAL","","$","22,257,812","","","$","391,094","","","","1.76","%","","$","23,047,010","","","$","80,237","","","","0.35","%","","$","21,637,355","","","$","41,620","","","","0.19","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","For the year of 2021, $1,571,758 was reclassed from noninterest-bearing accounts to interest-bearing transaction accounts."]]
[[/GREPCENT_TABLE]]

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

Borrowings

Total borrowings at December 31, 2023 decreased $373.16 million or 15.82% since year-end 2022. During the year of 2023, short-term borrowings increased $35.40 million or 22.03% due to an increase in securities sold under agreements to repurchase. Long-term borrowings decreased $408.55 million or 18.59% from year-end 2022 due to net repayments of $400.29 million in long-term FHLB advances and the redemption of $9.89 million in subordinated debt during year of 2023.

44

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

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","December 31 2023","","","December 31 2022","","","$ Change","","","% Change"],["Short-term securities sold under agreements to repurchase","","$","196,095","","","$","160,698","","","$","35,397","","","","22.03","%"],["Long-term FHLB advances","","","1,510,487","","","","1,910,775","","","","(400,288",")","","","(20.95","%)"],["Subordinated debt","","","0","","","","9,892","","","","(9,892",")","","","(100.00","%)"],["Issuances of trust preferred capital securities","","","278,616","","","","276,989","","","","1,627","","","","0.59","%"],["Total borrowings","","$","1,985,198","","","$","2,358,354","","","$","(373,156",")","","","(15.82","%)"]]
[[/GREPCENT_TABLE]]

For a further discussion of borrowings see Notes K and L, Notes to Consolidated Financial Statements.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at December 31, 2023 increased $23.41 million or 12.34% from year-end 2022. In particular, interest payable increased $13.19 million due to an increase in CDs, brokered deposits and MMDAs as well as rising interest rates. In addition, other accrued expenses increased $12.50 million due primarily to a special FDIC assessment of $11.99 million during the fourth quarter of 2023. Partially offsetting these increases was a decrease of $3.22 million in deferred compensation, a decrease of $2.98 million in accrued loan expenses, and decreases of $2.23 million and $2.21 million in income tax payable and business franchise taxes, respectively, due to timing differences.

Shareholders’ Equity

Shareholders’ equity at December 31, 2023 was $4.77 billion, which was an increase of $255.05 million or 5.65% from year-end 2022.

Retained earnings increased $170.19 million or 10.80% from year-end 2022. Earnings net of dividends for the year of 2023 were $170.19 million.

Accumulated other comprehensive income increased $73.05 million or 21.95% from year-end 2022 due to an increase of $81.52 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes. In addition, the fair value of cash flow hedges, net of deferred income taxes decreased $13.06 million. The after-tax amortization of the pension net actuarial loss was $2.57 million for the year of 2023.

RESULTS OF OPERATIONS

Overview

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

[[GREPCENT_TABLE]]
[["","","Year Ended"],["Dollars in thousands except per share amounts)","","2023","","","2022","","","2021"],["Interest income","","$","1,401,320","","","$","1,001,990","","","$","795,117"],["Interest expense","","","481,396","","","","105,559","","","","52,383"],["Net interest income","","","919,924","","","","896,431","","","","742,734"],["Provision for credit losses","","","31,153","","","","18,822","","","","(23,970",")"],["Noninterest income","","","135,258","","","","153,261","","","","278,128"],["Noninterest expense","","","560,224","","","","555,087","","","","581,979"],["Income before income taxes","","","463,805","","","","475,783","","","","462,853"],["Income taxes","","","97,492","","","","96,156","","","","95,115"],["Net income","","$","366,313","","","$","379,627","","","$","367,738"],["PER COMMON SHARE:"],["Net income:"],["Basic","","$","2.72","","","$","2.81","","","$","2.84"],["Diluted","","","2.71","","","","2.80","","","","2.83"]]
[[/GREPCENT_TABLE]]

45

Net income for the year 2023 was $366.31 million or $2.71 per diluted share, a decrease of $13.31 million or 3.51% from $379.63 million or $2.80 per diluted share for the year of 2022. Lower net income for the year 2023 compared to the year of 2022 was primarily driven by higher provision for credit losses expense, lower income from mortgage banking and a special FDIC assessment charge.

United’s return on average assets for the year of 2023 was 1.25% and the return on average shareholders’ equity was 7.87% as compared to 1.31% and 8.25% for the year of 2022. For the year of 2023, United’s return on average tangible equity, a non-GAAP measure, was 13.33%, as compared to 14.11% for the year of 2022.

[[GREPCENT_TABLE]]
[["","","Year Ended"],["(Dollars in thousands)","","December 31, 2023","","","December 31, 2022"],["Return on Average Tangible Equity:"],["(a) Net Income (GAAP)","","$","366,313","","","$","379,627"],["Average Total Shareholders\u2019 Equity (GAAP)","","","4,654,103","","","","4,601,440"],["Less: Average Total Intangibles","","","(1,905,390",")","","","(1,910,377",")"],["(b) Average Tangible Equity (non-GAAP)","","$","2,748,713","","","$","2,691,063"],["Return on Tangible Equity (non-GAAP) [(a) / (b)]","","","13.33","%","","","14.11","%"]]
[[/GREPCENT_TABLE]]

Net interest income for the year of 2023 was $919.92 million, an increase of $23.49 million or 2.62% from the prior year. The increase of $23.49 million in net interest income occurred because total interest income increased $399.33 million while total interest expense increased $375.84 million from the year of 2022. Generally, interest income increased in 2023 due to the impact of rising market interest rates on earning assets, organic loan growth and a change in the asset mix to higher earning assets while interest expense increased mainly due to higher funding costs as a result of the rising market interest rates on higher interest-bearing balances.

The provision for credit losses was $31.15 million for the year 2023 as compared to $18.82 million for the year 2022. Noninterest income was $135.26 million for the year of 2023, which was a decrease of $18.00 million or 11.75% from the year of 2022. Noninterest expense for the year of 2023 was $560.22 million, which was flat from the year of 2022, increasing $5.14 million or less than 1%.

Income taxes for the year of 2023 were $97.49 million as compared to $96.16 million for the year of 2022. United’s effective tax rate was approximately 21.0% and 20.2% for years ended December 31, 2023 and 2022, respectively, as compared to 20.6% for 2021.

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 year of 2023 was $387.80 million compared to net income of $397.32 million for the year of 2022. The lower net income within the community banking segment in 2023 was due primarily to a higher provision for credit losses and a special FDIC assessment charge.

Net interest income increased $36.90 million to $927.48 million for the year of 2023, compared to $890.58 million for the same period of 2022. Generally, net interest income for the year of 2023 increased from the year of 2022 due mainly to the impact of rising market interest rates on earning assets, organic loan growth and a change in the asset mix to higher earning assets.

46

Provision for credit losses was $31.15 million for the year of 2023 compared to $18.82 million for the same period of 2022. The increase in the provision for credit losses was mainly due to a change in the impact of the reasonable and supportable forecasts of future macroeconomic conditions and loan growth.

Noninterest income for the year of 2023 decreased $4.60 million to $94.53 million for the year of 2023 as compared to $99.13 million for the year of 2022. This decrease from the year of 2022 was due mainly to net losses on the sales of AFS investment securities and declines in fees from deposit services and income from bank-owned life insurance.

Noninterest expense was $498.54 million for the year ended December 31, 2023, compared to $472.81 million for the same period of 2022. The increase of $25.72 million in noninterest expense was primarily attributable to an increase in FDIC expense due to a special assessment charge and a higher assessment rate.

Mortgage Banking

The mortgage banking segment reported net income of $194 thousand for the year of 2023 as compared to a net loss of $7.22 million for the year of 2022. Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $49.36 million for the year of 2023 as compared to $69.31 million for the year of 2022. This decrease in noninterest income from 2022 was due mainly to decreased sales of mortgage loans in the secondary market primarily as a result of a rising interest rate environment. Noninterest expense was $59.20 million for the year of 2023 as compared to $88.98 million the year of 2022. Noninterest expense consists mainly of salaries, commissions, and benefits of mortgage segment employees. The decrease in 2023 was due mainly to lower employee commissions and incentives related to the decreased mortgage banking production.

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

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 2023 and 2022, are presented below.

Net interest income for the year of 2023 was $919.92 million, which was an increase of $23.49 million or 2.62% from the year of 2022. The $23.49 million increase in net interest income occurred because total interest income increased $399.33 million while total interest expense increased $375.84 million from the year of 2022. For the purpose of this remaining discussion, net interest income is presented on a tax-equivalent basis to provide a comparison among all types of interest earning assets. 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 year of 2023 increased $23.04 million, or 2.56%, from the year of 2022. The increase in tax-equivalent net interest income was primarily due to the impact of rising market interest rates on earning assets, organic loan growth and a change in the asset mix to higher earning assets. These increases were partially offset by higher interest expense primarily driven by deposit rate repricing, higher average balances and the cost of long-term borrowings, lower income from Paycheck Protection Program (“PPP”) loan fees and lower acquired loan accretion income. The yield on average earning assets increased 150 basis points from the year of 2022 to 5.41%. Within the increase in the average yield on earning assets, the yield on short-term investments increased 379 basis points, the yield on net loans, including loans held for sale, increased 131 basis points, and the yield on investment securities increased 110 basis

47

points. Average earning assets for the year of 2023 increased $270.97 million, or 1.05%, from the year of 2022 due to a $1.49 billion increase in average net loans, including loans held for sale, partially offset by a $697.03 million decrease in average short-term investments and a $522.48 million decrease in average investment securities. The average cost of funds increased 205 basis points from the year of 2022 to 2.69% primarily due to increases of 196 basis points and 204 basis points in the cost of average interest-bearing deposits and in the cost of average long-term borrowings, respectively. Average interest-bearing deposits increased $316.38 million and average long-term borrowings increased $909.27 million from the year of 2022. Net PPP loan fee income decreased $9.16 million from the year of 2022. Acquired loan accretion income was $11.55 million and $18.32 million for the year of 2023 and 2022, respectively, a decrease of $6.77 million. The net interest margin of 3.56% for the year of 2023 was an increase of 6 basis points from the net interest margin of 3.50% for the year of 2022.

United’s tax-equivalent net interest income also includes the impact of acquisition accounting fair value adjustments. The following table provides the discount/premium and net accretion impact to tax-equivalent net interest income for the year ended December 31, 2023, 2022 and 2021.

[[GREPCENT_TABLE]]
[["","","Year Ended"],["(Dollars in thousands)","","December 31 2023","","","December 31 2022","","","December 31 2021"],["Loan accretion","","$","11,548","","","$","18,315","","","$","33,857"],["Certificates of deposit","","","1,119","","","","2,765","","","","4,305"],["Long-term borrowings","","","(1,353",")","","","(262",")","","","684"],["Total","","$","11,314","","","$","20,818","","","$","38,846"]]
[[/GREPCENT_TABLE]]

The following table reconciles the difference between net interest income and tax-equivalent net interest income for the year ended December 31, 2023, 2022 and 2021.

[[GREPCENT_TABLE]]
[["","","Year Ended"],["(Dollars in thousands)","","December 31 2023","","","December 31 2022","","","December 31 2021"],["Net interest income (GAAP)","","$","919,924","","","$","896,431","","","$","742,734"],["Tax-equivalent adjustment (non-GAAP) (1)","","","4,014","","","","4,467","","","","4,218"],["Tax-equivalent net interest income (non-GAAP)","","$","923,938","","","$","900,898","","","$","746,952"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(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 2023, 2022, and 2021. All interest income on loans and investment securities was subject to state income taxes."]]
[[/GREPCENT_TABLE]]

48

The following table shows the consolidated daily average balance of major categories of assets and liabilities for each of the three years ended December 31, 2023, 2022, and 2021 with the consolidated interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21% for the years ended December 31, 2023, 2022, and 2021. Interest income on all loans and investment securities was subject to state taxes.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2023","","","Year Ended December 31, 2022","","","Year Ended December 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)"],["ASSETS"],["Earning Assets:"],["Federal funds sold, securities repurchased under agreements to resell & other short-term investments","","$","900,077","","","$","47,069","","","","5.23","%","","$","1,597,108","","","$","22,950","","","","1.44","%","","$","3,162,814","","","$","8,734","","","","0.28","%"],["Investment Securities:"],["Taxable","","","4,125,467","","","","144,420","","","","3.50","%","","","4,532,713","","","","105,780","","","","2.33","%","","","3,193,414","","","","54,678","","","","1.71","%"],["Tax-exempt","","","294,802","","","","8,411","","","","2.85","%","","","410,037","","","","10,983","","","","2.68","%","","","352,843","","","","9,129","","","","2.59","%"],["Total Securities","","","4,420,269","","","","152,831","","","","3.46","%","","","4,942,750","","","","116,763","","","","2.36","%","","","3,546,257","","","","63,807","","","","1.80","%"],["Loans and leases, net of unearned income (2)","","","20,909,248","","","","1,205,434","","","","5.77","%","","","19,389,485","","","","866,744","","","","4.47","%","","","17,714,288","","","","726,794","","","","4.10","%"],["Allowance for credit losses","","","(245,386",")","","","","","","","","","","","(216,104",")","","","","","","","","","","","(225,740",")"],["Net loans and leases","","","20,663,862","","","","","","","","5.83","%","","","19,173,381","","","","","","","","4.52","%","","","17,488,548","","","","","","","","4.16","%"],["Total earning assets","","","25,984,208","","","$","1,405,334","","","","5.41","%","","","25,713,239","","","$","1,006,457","","","","3.91","%","","","24,197,619","","","$","799,335","","","","3.30","%"],["Other assets","","","3,311,450","","","","","","","","","","","","3,360,609","","","","","","","","","","","","3,058,476"],["TOTAL ASSETS","","$","29,295,658","","","","","","","","","","","$","29,073,848","","","","","","","","","","","$","27,256,095"],["LIABILITIES"],["Interest-Bearing Funds:"],["Interest-bearing deposits (3)","","$","15,782,761","","","$","391,094","","","","2.48","%","","$","15,466,386","","","$","80,237","","","","0.52","%","","$","14,927,845","","","$","41,620","","","","0.28","%"],["Short-term borrowings","","","182,936","","","","6,449","","","","3.53","%","","","140,773","","","","1,785","","","","1.27","%","","","132,489","","","","693","","","","0.52","%"],["Long- term borrowings","","","1,923,924","","","","83,853","","","","4.36","%","","","1,014,655","","","","23,537","","","","2.32","%","","","819,440","","","","10,070","","","","1.23","%"],["Total Interest-Bearing Funds","","","17,889,621","","","","481,396","","","","2.69","%","","","16,621,814","","","","105,559","","","","0.64","%","","","15,879,774","","","","52,383","","","","0.33","%"],["Noninterest-bearing deposits (3)","","","6,475,051","","","","","","","","","","","","7,580,624","","","","","","","","","","","","6,709,510"],["Accrued expenses and other liabilities","","","276,883","","","","","","","","","","","","269,970","","","","","","","","","","","","236,123"],["TOTAL LIABILITIES","","","24,641,555","","","","","","","","","","","","24,472,408","","","","","","","","","","","","22,825,407"],["SHAREHOLDERS\u2019 EQUITY","","","4,654,103","","","","","","","","","","","","4,601,440","","","","","","","","","","","","4,430,688"],["TOTAL LIABILITIES AND SHAREHOLDERS\u2019 EQUITY","","$","29,295,658","","","","","","","","","","","$","29,073,848","","","","","","","","","","","$","27,256,095"],["NET INTEREST INCOME","","","","","","$","923,938","","","","","","","","","","","$","900,898","","","","","","","","","","","$","746,952"],["INTEREST SPREAD","","","","","","","","","","","2.72","%","","","","","","","","","","","3.27","%","","","","","","","","","","","2.97","%"],["NET INTEREST MARGIN","","","","","","","","","","","3.56","%","","","","","","","","","","","3.50","%","","","","","","","","","","","3.09","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(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% for 2023, 2022 and 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(2)","Nonaccruing loans and loans held for sale are included in the daily average loan amounts outstanding."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(3)","For the year of 2021, average balances of $1,571,758 were reclassed from noninterest- bearing deposits to interest-bearing deposits."]]
[[/GREPCENT_TABLE]]

49

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

[[GREPCENT_TABLE]]
[["","","2023 Compared to 2022","","","2022 Compared to 2021"],["","","Increase (Decrease) Due to","","","Increase (Decrease) Due to"],["(In thousands)","","Volume","","","Rate","","","Rate/ Volume","","","Total","","","Volume","","","Rate","","","Rate/ Volume","","","Total"],["Interest income:"],["Federal funds sold, securities purchased under agreements to resell and other short-term investments","","$","(10,037",")","","$","60,530","","","$","(26,374",")","","$","24,119","","","$","(4,384",")","","$","36,689","","","$","(18,089",")","","$","14,216"],["Investment securities:"],["Taxable","","","(9,489",")","","","53,033","","","","(4,904",")","","","38,640","","","","22,902","","","","19,799","","","","8,401","","","","51,102"],["Tax-exempt (1)","","","(3,088",")","","","697","","","","(181",")","","","(2,572",")","","","1,481","","","","318","","","","55","","","","1,854"],["Loans (1),(2)","","","67,370","","","","251,171","","","","20,149","","","","338,690","","","","70,089","","","","62,959","","","","6,902","","","","139,950"],["TOTAL INTEREST INCOME","","","44,756","","","","365,431","","","","(11,310",")","","","398,877","","","","90,088","","","","119,765","","","","(2,731",")","","","207,122"],["Interest expense:"],["Interest-bearing deposits","","$","1,645","","","$","303,141","","","$","6,071","","","$","310,857","","","$","1,508","","","$","35,827","","","$","1,282","","","$","38,617"],["Short-term borrowings","","","535","","","","3,181","","","","948","","","","4,664","","","","43","","","","994","","","","55","","","","1,092"],["Long-term borrowings","","","21,095","","","","20,699","","","","18,522","","","","60,316","","","","2,401","","","","8,932","","","","2,134","","","","13,467"],["TOTAL INTEREST EXPENSE","","","23,275","","","","327,021","","","","25,541","","","","375,837","","","","3,952","","","","45,753","","","","3,471","","","","53,176"],["NET INTEREST INCOME","","$","21,481","","","$","38,410","","","$","(36,851",")","","$","23,040","","","$","86,136","","","$","74,012","","","$","(6,202",")","","$","153,946"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","Yields and interest income on federally tax-exempt loans and investment securities are computed on a fully tax-equivalent basis using the statutory federal income tax rate of 21% for 2023, 2022 and 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(2)","Nonaccruing loans and loans held for sale are included in the daily average loan amounts outstanding."]]
[[/GREPCENT_TABLE]]

Provision for Credit Losses

United’s provision for credit losses was $31.15 million for the year of 2023 while the provision for credit losses was $18.82 million for the year of 2022. United’s provision for credit losses relates to its portfolio of loans and leases, held to maturity securities and interest receivable on loans which are discussed in more detail in the following paragraphs.

The provision for loan and lease losses for the year of 2023 was $31.15 million as compared to $18.83 million for the year of 2022. The higher amount of provision expense for the year of 2023 compared to the year of 2022 was mainly due to a change in the reasonable and supportable forecasts of future macroeconomic conditions and loan growth. Net charge-offs for the year of 2023 were $6.66 million as compared to $101 thousand for the year of 2022. The higher amount of net charge-offs for the year of 2023 as compared to year of 2022 was primarily due to an increase in charge-offs in 2023 for the consumer loan segment as well as a lower amount of recoveries in 2023 of previously charged-off amounts for the other commercial loan segment. Net charge-offs as a percentage of average loans and leases were 0.03% and zero for the year of 2023 and 2022, respectively.

50

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

[[GREPCENT_TABLE]]
[["(In thousands)","","December 31 2023","","","December 31 2022"],["Nonaccrual loans","","$","30,919","","","$","23,685"],["Loans past due 90 days of more","","","14,579","","","","15,565"],["Restructured loans (1)","","","n/a","","","","19,388"],["Total nonperforming loans","","$","45,498","","","$","58,638"],["Other real estate owned","","","2,615","","","","2,052"],["Total nonperforming assets","","$","48,113","","","$","60,690"]]
[[/GREPCENT_TABLE]]

Note:

[[GREPCENT_TABLE]]
[["","(1)","On January 1, 2023, United adopted ASU 2022-02, \u201cTroubled Debt Restructurings and Vintage Disclosures\u201d prospectively which eliminated the accounting guidance on troubled debt restructurings and enhanced creditors\u2019 disclosure requirements related to loan refinancings and restructurings for borrowers experiencing financial difficulty. After the adoption of ASU 2022-02, United no longer considers accruing restructured loans that are fewer than 90 days past due as nonperforming loans or nonperforming assets. Nonperforming loans and nonperforming assets at December 31, 2022 included $9,127 of restructured loans that were on accruing status and fewer than 90 days past due but classified as nonperforming loans and nonperforming assets. Restructured loans that are on nonaccrual or 90-day past due are included in the above nonperforming loan and nonperforming asset categories at December 31, 2023."]]
[[/GREPCENT_TABLE]]

Restructured loans with an aggregate balance of $7,186 at December 31, 2022 were on nonaccrual status, but are not included in “Nonaccrual loans” above. Restructured loans with an aggregate balance of $3,075 at December 31, 2022 were 90 days past due, but not included in “Loans past due 90 days or more” above.

United maintains an allowance for loan and lease losses and a reserve for lending-related commitments. The combined allowance for loan and lease losses and reserve for lending-related commitments is considered the allowance for credit losses. At December 31, 2023, the allowance for credit losses was $303.94 million as compared to $280.94 million at December 31, 2022.

At December 31, 2023, the allowance for loan and lease losses was $259.24 million as compared to $234.75 million at December 31, 2022. The increase in the allowance for loan and lease losses was primarily due to increased reserves for the nonowner-occupied commercial real estate and construction and land development loan segments. As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.21% at December 31, 2023 and 1.14% at December 31, 2022. The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 569.78% and 400.33% at December 31, 2023 and December 31, 2022, respectively. The increase in this ratio was due an increase in the allowance for loan losses and a decline in nonperforming loans.

The following table summarizes United’s credit loss experience for loan and leases losses, based on loan categories, for the year of 2023 and 2022:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","2023","","","2022"],["Commercial, financial and agricultural:"],["Owner-occupied commercial real estate"],["Loans & leases charged off","","$","855","","","$","68"],["Recoveries","","","187","","","","489"],["Net loans & leases charged off (recovered)","","$","668","","","$","(421",")"],["Average gross loans & leases outstanding","","","1,687,029","","","","1,716,201"],["Net charge-offs (recoveries) as a percentage of average gross loans & leases outstanding","","","0.04","%","","","(0.02","%)"],["Nonowner-occupied commercial real estate"],["Loans & leases charged off","","$","24","","","$","0"],["Recoveries","","","1,233","","","","234"],["Net loans & leases (recovered) charged off","","$","(1,209",")","","$","(234",")"],["Average gross loans & leases outstanding","","","6,472,608","","","","6,042,221"],["Net (recoveries) charge-offs as a percentage of average gross loans & leases outstanding","","","(0.02","%)","","","0.00","%"]]
[[/GREPCENT_TABLE]]

51

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","2023","","","2022"],["Other Commercial"],["Loans & leases charged off","","$","2,007","","","$","4,308"],["Recoveries","","","1,729","","","","5,367"],["Net loans & leases charged off (recovered)","","$","278","","","$","(1,059",")"],["Average gross loans & leases outstanding","","","3,568,986","","","","3,613,204"],["Net charge-offs (recoveries) as a percentage of average gross loans & leases outstanding","","","0.01","%","","","(0.03","%)"],["Residential Real Estate"],["Loans & leases charged off","","$","785","","","$","1,546"],["Recoveries","","","697","","","","1,507"],["Net loans & leases charged off","","$","88","","","$","39"],["Average gross loans & leases outstanding","","","4,894,091","","","","4,080,515"],["Net charge-offs as a percentage of average gross loans & leases outstanding","","","0.00","%","","","0.00","%"],["Construction"],["Loans & leases charged off","","$","14","","","$","2"],["Recoveries","","","80","","","","1,414"],["Net loans & leases recovered","","$","(66",")","","$","(1,412",")"],["Average gross loans & leases outstanding","","","3,025,815","","","","2,517,561"],["Net recoveries as a percentage of average gross loans & leases outstanding","","","0.00","%","","","(0.06","%)"],["Consumer:"],["Bankcard"],["Loans & leases charged off","","$","263","","","$","355"],["Recoveries","","","28","","","","9"],["Net loans & leases charged off","","$","235","","","$","346"],["Average gross loans & leases outstanding","","","9,290","","","","8,766"],["Net charge-offs as a percentage of average gross loans & leases outstanding","","","2.53","%","","","3.95","%"],["Other consumer"],["Loans & leases charged off","","$","7,356","","","$","3,371"],["Recoveries","","","687","","","","529"],["Net loans & leases charged off","","$","6,669","","","$","2,842"],["Average gross loans & leases outstanding","","","1,211,568","","","","1,309,773"],["Net charge-offs as a percentage of average gross loans & leases outstanding","","","0.55","%","","","0.22","%"],["Total"],["Loans & leases charged off","","$","11,304","","","$","9,650"],["Recoveries","","","4,641","","","","9,549"],["Net loans & leases charged off","","$","6,663","","","$","101"],["Average gross loans & leases outstanding","","","20,869,387","","","","19,288,241"],["Net charge-offs as a percentage of average gross loans & leases outstanding","","","0.03","%","","","0.00","%"],["Nonaccrual loans & leases","","$","30,919","","","$","30,871"],["Allowance for loan & lease losses","","","259,237","","","","234,746"],["Loans & leases (net of unearned income)","","","21,359,084","","","","20,558,166"],["Allowance for loan & lease losses as a percentage of loans (net of unearned income)","","","1.21","%","","","1.14","%"],["Nonaccrual loans as a percentage of loans & leases (net of unearned income)","","","0.14","%","","","0.15","%"],["Allowance for loan & lease losses as a percentage of nonaccrual loans & leases","","","838.45","%","","","760.41","%"]]
[[/GREPCENT_TABLE]]

52

United continues to evaluate risks which may impact its loan and lease portfolios. Reserves are initially determined based on losses identified from the PD/LGD and Cohort models which utilize the Company’s historical information. Then, any qualitative adjustments are applied to account for the Company’s view of the future and other factors. If current conditions underlying any qualitative adjustment factor were deemed to be materially different than historical conditions, an adjustment was made for that factor.

The year of 2023 qualitative adjustments include analyses of the following:

[[GREPCENT_TABLE]]
[["","\u2022","","Current conditions \u2013 United considered the impact of inflation, interest rates, the potential impact of the geopolitical situation, the banking regulatory environment and a potential government shutdown when making determinations related to factor adjustments, such as changes in economic and business conditions; collateral values for dependent loans; past due, nonaccrual and adversely classified loans and leases; concentrations of credit and external factors."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","Reasonable and supportable forecasts \u2013 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:"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u00d8","The forecast for real GDP shifted slightly in the fourth quarter, from a projection of 1.50% for 2024 as of mid-September 2023 to 1.40% for 2024 as of mid-December with a projection of 1.80% for 2025. The unemployment rate forecast for 2024 and 2025 remained the same at 4.10%."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u00d8","Greater risk of loss in the office portfolio due to continued hybrid and remote work that may be exacerbated by future economic conditions and in the commercial other and construction portfolios due to weakened economic conditions."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u00d8","Reversion to historical loss data occurs via a straight-line method during the year following the one-year reasonable and supportable forecast period."]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","2023","","","2022"],["","","(in thousands)"],["Commercial, financial & agricultural:"],["Owner-occupied commercial real estate","","$","11,895","","","$","13,945"],["Nonowner-occupied commercial real estate","","","57,935","","","","38,543"],["Other commercial","","","75,007","","","","79,706"],["Total commercial, financial & agricultural","","","144,837","","","","132,194"],["Residential real estate","","","41,167","","","","36,227"],["Construction & land development","","","59,913","","","","48,390"],["Consumer:"],["Bankcard","","","810","","","","561"],["Other consumer","","","12,510","","","","17,374"],["Allowance for loan losses","","$","259,237","","","$","234,746"],["Reserve for lending-related commitments","","","44,706","","","","46,189"],["Allowance for credit losses","","$","303,943","","","$","280,935"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","2023","","","2022"],["Commercial, financial & agricultural:"],["Owner-occupied commercial real estate","","","7.48","%","","","8.38","%"],["Nonowner-occupied commercial real estate","","","31.43","%","","","30.55","%"],["Other commercial","","","16.72","%","","","17.55","%"],["Total commercial, financial & agricultural","","","55.63","%","","","56.48","%"],["Residential real estate","","","24.66","%","","","22.66","%"],["Construction & land development","","","14.73","%","","","14.22","%"],["Consumer:"],["Bankcard","","","0.05","%","","","0.05","%"],["Other consumer","","","4.93","%","","","6.59","%"],["Total","","","100.00","%","","","100.00","%"]]
[[/GREPCENT_TABLE]]

53

United’s review of the allowance for loan and lease losses at December 31, 2023 produced increased reserves in three of the four loan categories as compared to December 31, 2022. The allowance related to the commercial, financial & agricultural loan pool increased $12.64 million due to increased outstanding balances and increased reasonable and supportable forecast adjustments particularly as it pertains to office loans. The construction and land development loan pool reserve increased $11.52 million due to increased outstanding balances as well as increased risk of loss for collateral value for dependent loans and increased reasonable and supportable forecast adjustments. The residential real estate reserve increased $4.94 million due to increased outstanding balances. The consumer loan pool reserve decreased $4.61 million primarily due to a decrease in outstanding balances.

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 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 $13.15 million at December 31, 2023 and $1.27 million at December 31, 2022. In comparison to the prior year-end, this element of the allowance increased $11.88 million due to a commercial relationship identified in 2023 with a loss potential requiring individually assessed reserves of $12.16 million.

Management believes that the allowance for credit losses of $303.94 million at December 31, 2023 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available. United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality. The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries. Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate diversification within the portfolio. 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 year of 2023 and 2022 was immaterial. The allowance for credit losses related to held to maturity securities was $17 thousand as of December 31, 2023 as compared to $18 thousand as of December 31, 2022. There was no provision for credit losses recorded on available for sale investment securities for the year of 2023 and 2022 and no allowance for credit losses on available for sale investment securities as of December 31, 2023 and 2022.

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

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 year of 2023 was $135.26 million, which was a decrease of $18.00 million or 11.75% from the year of 2022. The decrease was due mainly to net losses recognized on the sales of AFS investment securities, decreases in income from mortgage banking activities and fees from deposit services partially offset by a net gain on the sale of MSRs within mortgage loan servicing income.

54

For the year of 2023, net losses on investment securities were $7.65 million as compared to net gains on investment securities of $776 thousand for the year of 2022. The net losses in 2023 were mainly due to a net loss of $7.24 million on the sale of approximately $187 million of AFS investment securities in the second quarter of 2023. United recognized a net gain of $1.36 million on an equity security without a readily determinable market value and a $589 thousand net loss on equity securities for the year of 2022. United did not recognize any impairment on investment securities for the year of 2023 and 2022.

Income from mortgage banking activities totaled $26.59 million for the year of 2023 compared to $42.69 million for the year of 2022. The decrease of $16.10 million or 37.71% for the year of 2023 was primarily a result of lower mortgage loan originations and sales volume driven by a rising interest rate environment and a lower margin on loans sold in the secondary market. Mortgage loan sales were $861.52 million in the year of 2023 as compared to $2.20 billion in the year of 2022. Mortgage loans originated for sale were $860.90 million for the year of 2023 as compared to $1.90 billion for the year of 2022.

Fees from deposit services for the year of 2023 were $37.08 million, a decrease of $3.48 million or 8.58% from the year of 2022. In particular, overdraft fees were down $2.69 million due to the impact of changes in United’s overdraft policy and account analysis fees declined $2.13 million. Partially offsetting these decreases were increases of $725 thousand and $581 thousand on early withdrawal penalties on CDs and debit card income, respectively.

Mortgage servicing income was $13.75 million for the year of 2023, an increase of $4.51 million or 48.85% from the year of 2022 due primarily to a net gain of $8.31 million on the sale of mortgage servicing rights during 2023.

Fees from trust services for the year of 2023 were $18.32 million, an increase of $1.10 million or 6.40% from the year of 2022 due to an increase in managed assets.

Income from bank-owned life insurance (“BOLI”) for the year of 2023 decreased $858 thousand or 9.34% from the year of 2022 due to a decrease of $2.76 million in death benefits. Death benefits were $571 thousand for the year of 2023 as compared to death benefits of $3.33 million in year of 2022.

Other miscellaneous income for the year of 2023 increased $3.72 million or 50.63% from the year of 2022 due mainly to a net gain of $2.66 million from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative.

Other Expense

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 expense includes all items of expense other than interest expense, the provision for credit losses and income tax expense. Noninterest expense for the year of 2023 was $560.22 million, which was flat from the year of 2022, increasing $5.14 million or less than 1% driven by increases in FDIC insurance expense, employee benefits expense, and net occupancy expense. Partially offsetting these increases were decreases in OREO expenses on as well as net losses from sales of OREO properties, mortgage loan servicing expense and impairment, and other noninterest expense.

Employee compensation for the year of 2023 decreased $11.60 million or 4.78% from the year of 2022. The decrease for 2023 was due mainly to lower employee commissions and incentives related to a decline in mortgage banking production and a decline in base salaries due to a lower employee headcount.

Employee benefits expense for the year of 2023 increased $2.42 million or 5.28% as compared to the year of 2022. For the year of 2023, postretirement expense, which includes expense associated with United’s pension plan, supplemental early retirement plans (“SERPs”) and Savings and Stock Investment Plan (“401K plan”), decreased $2.09 million from the year of 2022. United uses certain valuation methodologies to measure the fair value of the assets within United’s pension plan which are presented in Note O, Notes to Consolidated Financial Statements. The funded status of

55

United’s pension plan is based upon the fair value of the plan assets compared to the projected benefit obligation. The determination of the projected benefit obligation and the associated periodic benefit expense involves significant judgment and estimation of future employee compensation levels, the discount rate and the expected long-term rate of return on plan assets. If United assumes a 1% increase or decrease in the estimation of future employee compensation levels while keeping all other assumptions constant, the benefit cost associated with the pension plan would increase by approximately $604 thousand and decrease by approximately $572 thousand, respectively. If United assumes a 1% increase or decrease in the discount rate while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by approximately $2.18 million and increase by approximately $2.61 million, respectively. If United assumes a 1% increase or decrease in the expected long-term rate of return on plan assets while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by and increase by approximately $1.62 million, respectively.

Net occupancy expense increased $1.30 million or 2.87% for the year of 2023 as compared to the prior year. This increase was primarily due to higher amounts of building rental and depreciation expense partially offset by lower maintenance costs.

OREO expense for the year of 2023 decreased $783 thousand or 36.62% from the year of 2022 due mainly to fewer declines in the fair value of OREO properties.

Net losses on the sales of OREO properties declined $760 thousand or 108.57% for the year of 2023 as compared to the year of 2022.

Mortgage loan servicing expense and impairment for the year of 2023 decreased $1.50 million or 21.17% from the year of 2022. The decrease was due to the recovery of past temporary impairment and lower amortization expense of mortgage servicing rights.

FDIC expense for the year of 2023 increased $18.39 million or 153.39% from the year of 2022. The increase was due mainly to a $11.99 million special assessment fee levied on banking organizations to recover losses to the Deposit Insurance Fund as well as a higher overall assessment rate and base.

Other expense for the year of 2023 decreased $2.39 million or 1.73% from the year of 2022. The decrease in other noninterest expense mainly resulted from a decline $16.23 million in the reserve for unfunded loan commitments. Partially offsetting this decrease were increases in business franchise taxes of $2.66 million, expense of $2.65 million for mortgage loan down payment and closing cost assistance programs, amortization of $1.67 million for tax credit investments, impairment of $1.28 million on trade name tangibles due to the planned consolidation of George Mason’s and Crescent’s mortgage banking business into United Bank, consulting and legal expense of $1.20 million, loan collection expense of $1.03 million as well as higher amounts of certain other general operating expenses.

Income Taxes

For the year ended December 31, 2023, income taxes were $97.49 million, compared to $96.16 million for 2022, an increase of $1.34 million or 1.39%. The increase was due to a higher effective tax rate partially offset by lower earnings. United’s effective tax rate was approximately 21.0% and 20.2% for years ended December 31, 2023 and 2022, respectively. The increase in the effective tax rate for the year of 2023 was primarily driven by increases in the federal and state tax provisions as well as lower benefits related to the issuance of shares in share-based compensation plans. For further details related to income taxes, see Note N, Notes to Consolidated Financial Statements.

Quarterly Results

Net income for the first quarter of 2023 was $98.31 million as compared to earnings of $81.66 million for the first quarter of 2022. Earnings for the first quarter of 2023, as compared to the first quarter of 2022, increased primarily due to higher net interest income as a result of the impact of rising market interest rates on earning assets, organic loan growth and a change in the asset mix to higher earning assets. Diluted earnings per share were $0.73 for the first quarter of 2023 and $0.60 for the first quarter of 2022. Net interest income for the first quarter of 2023 increased $42.82 million,

56

or 22.36%, to $234.32 million from net interest income of $191.50 million for the first three months of 2022. The increase of $42.82 million in net interest income occurred because total interest income increased $126.51 million while total interest expense increased $83.69 million from the first quarter of 2022. The provision for credit losses was $6.89 million for the first quarter of 2023 as compared to a net benefit of $3.41 million for the first quarter of 2022. The increase in the provision for credit losses was mainly due to a change in qualitative factors and the impact of reasonable and supportable forecasts of future macroeconomic conditions. Noninterest income was $32.74 million for the first three months of 2023, a decrease of $13.28 million or 28.86% from the first three months of 2022 due mainly to decreased income from mortgage banking activities primarily due to lower mortgage loan origination and sale volume and a lower margin on loans sold in the secondary market. Noninterest expense for the first three months of 2023 decreased $1.76 million or 1.26% from the first three months of 2022 due mainly to lower employee compensation expense as a result of lower employee commissions and incentives related to mortgage banking production and a lower employee headcount. Income taxes increased $4.35 million or 21.64% for the first three months of 2023 as compared to the first three months of 2022 primarily due to increased earnings and a higher effective tax rate.

Net income for the second quarter of 2023 was $92.46 million or $0.68 per diluted share, as compared to $95.61 million or $0.71 per diluted share for the prior year second quarter. During the second quarter of 2023, United sold MSRs with an aggregate unpaid principal balance of approximately $2 billion at a net gain of $8.15 million. Additionally, during the second quarter of 2023, United sold approximately $187 million of AFS investment securities at a net loss of $7.24 million. Net interest income for the second quarter of 2023 was $227.46 million, which was an increase of $12.56 million, or 5.84%, from the second quarter of 2022. The increase of $12.56 million in net interest income occurred because total interest income increased $118.16 million while total interest expense increased $105.60 million from the second quarter of 2022. The provision for credit losses was $11.44 million for the second quarter of 2023 while the provision for credit losses was a net benefit of $1.81 million for the second quarter 2022. The increase in the provision for credit losses was mainly due to a change in qualitative factors and the impact of reasonable and supportable forecasts of future macroeconomic conditions. For the second quarter of 2023, noninterest income was $35.18 million, which was a decrease of $8.43 million or 19.33% from the second quarter of 2022. The decrease in noninterest income was due mainly to lower mortgage loan origination and sale volume and a lower margin on loans sold in the secondary market as well as the previously mentioned net losses on the sales of securities in 2023. For the second quarter of 2023, noninterest expense decreased $5.89 million or 4.17% from the second quarter of 2022 due mainly to a decrease in the expense for the reserve for unfunded loan commitments within other expenses. Income taxes for the second quarter of 2023 were $23.45 million as compared to $23.53 million for the second quarter of 2022. For the quarters ended June 30, 2023 and 2022, United’s effective tax rate was 20.23% and 19.75%, respectively.

Net income for the third quarter of 2023 was $96.16 million or $0.71 per diluted share, as compared to $102.59 million or $0.76 per diluted share for the prior year third quarter. Net interest income for the third quarter of 2023 was $228.45 million, which was a decrease of $12.17 million, or 5.06%, from the third quarter of 2022. The decrease of $12.17 million in net interest income occurred because total interest income increased $93.23 million while total interest expense increased $105.40 million from the third quarter of 2022. The provision for credit losses was $5.95 million for the third quarter of 2023 while the provision for credit losses was $7.67 million for the third quarter of 2022. The lower amount of provision expense for the third quarter of 2023 as compared to the third quarter of 2022 was mainly due to the impact of reasonable and supportable forecasts of future macroeconomic conditions. For the third quarter of 2023, noninterest income was $33.66 million, which was an increase of $912 thousand or 2.78% from the third quarter of 2022. This increase was primarily due to increases in income from mortgage banking activities and income from BOLI partially offset by a decrease in mortgage loan servicing income. For the third quarter of 2023, noninterest expense decreased $1.97 million or 1.43% from the third quarter of 2022 primarily due to decreases in OREO expense, mortgage loan servicing expense and certain general operating expenses within other noninterest expenses partially offset by increases in employee benefits and FDIC insurance expense. Income taxes for the third quarter of 2023 were $24.78 million as compared to $25.92 million for the third quarter of 2022. For the quarters ended September 30, 2023 and June 30, 2023, United’s effective tax rate was 20.49% and 20.23%, respectively.

Net income for the fourth quarter of 2023 was $79.39 million or $0.59 per diluted share as compared to earnings of $99.77 million or $0.74 per diluted share for the fourth quarter of 2022. Net interest income for the fourth quarter of 2023 was $229.69 million, which was a decrease of $19.71 million or 7.90% from the fourth quarter of 2022. The $19.71 million decrease in net interest income occurred because total interest income increased $61.43 million while total interest

57

expense increased $81.15 million from the fourth quarter of 2022. The provision for credit losses was $6.88 million for the fourth quarter of 2023 as compared to a provision for credit losses of $16.37 million for the fourth quarter of 2022. The decrease in the provision for credit losses was primarily due the impact of reasonable and supportable forecasts of future macroeconomic conditions. Noninterest income for the fourth quarter of 2023 was $33.68 million, which was an increase of $2.80 million, or 9.05% from the fourth quarter of 2022. The increase in noninterest income was driven by an increase of $2.73 million in other noninterest income due to the $2.66 million gain on the from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative. Noninterest expense for the fourth quarter of 2023 was $152.29 million, an increase of $14.75 million, or 10.72%, from the fourth quarter of 2022 primarily due to increases of $13.37 million in FDIC insurance expense due to the $11.99 million special assessment recognized in the fourth quarter of 2023 as well as a higher overall assessment rate. For the fourth quarter of 2023, income tax expense was $24.81 million as compared to $26.61 million for the fourth quarter of 2022. The decrease of $1.80 million was primarily due to lower earnings and partially offset by a higher effective tax rate. United’s effective tax rate was 23.81% for the fourth quarter of 2023 and 21.06% for the fourth quarter of 2022.

Additional quarterly financial data for 2023 and 2022 may be found in Note Y, Notes to Consolidated Financial Statements.

The Effect of Inflation

United’s income statements generally reflect the effects of inflation. Since interest rates, loan demand and deposit levels are impacted by inflation, the resulting changes in the interest-sensitive assets and liabilities are included in net interest income. Similarly, operating expenses such as salaries, rents and maintenance include changing prices resulting from inflation. One item that would not reflect inflationary changes is depreciation expense. Subsequent to the acquisition of depreciable assets, inflation causes price levels to rise; therefore, historically presented dollar values do not reflect this inflationary condition. Inflationary pressure on consumers and uncertainty regarding the economy could result in changes in consumer and business spending, borrowing and savings habits. Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations. Management will monitor the impact of inflation as conditions warrant.

The Effect of Regulatory Policies and Economic Conditions

United’s business and earnings are affected by the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities. The Federal Reserve Board regulates the supply of money in order to influence general economic conditions. Among the instruments of monetary policy available to the Federal Reserve Board are (i) conducting open market operations in United States government obligations, (ii) changing the discount rate on financial institution borrowings, (iii) imposing or changing reserve requirements against financial institution deposits, and (iv) restricting certain borrowings and imposing or changing reserve requirements against certain borrowings by financial institutions and their affiliates. These methods are used in varying degrees and combinations to affect directly the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits.

United’s business and earnings are also affected by general and local economic conditions. Certain credit markets can experience difficult conditions and volatility. Downturns in the credit market can cause a decline in the value of certain loans and securities, a reduction in liquidity and a tightening of credit. A downturn in the credit market often signals a weakening economy that can cause job losses and thus distress on borrowers and their ability to repay loans. Uncertainties in credit markets and the economy present significant challenges for the financial services industry.

Regulatory policies and economic conditions have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future; however, United cannot accurately predict the nature, timing or extent of any effect such policies or economic conditions may have on its future business and earnings.

58

Liquidity and Capital Resources

In the opinion of management, United maintains liquidity that is sufficient to satisfy its depositors’ requirements and the credit needs of its customers. 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. See Notes K and L, Notes to Consolidated Financial Statements.

During the year of 2023, United increased its interest-bearing deposit balance at the FRB by $438.02 million to $1.24 billion. The change in the balance at the FRB was mostly the result of net sales, maturities, and paydowns in the available for sale debt securities portfolio of $952.01 million and an increase in deposits of $516.15 million partially offset by loan growth of $800.97 million and the net repayment of $400.29 million in FHLB advances.

Cash flows provided by operations in 2023 were $435.24 million due mainly to net income of $366.31 million for the year of 2023. In 2022, cash flows provided by operations were $760.82 million due mainly to net income of $379.63 million for the year of 2022. In 2023, net cash of $38.99 million was provided by investing activities which was primarily due to proceeds of $819.87 million from sales, calls and maturities of investment securities over purchases partially offset by loan growth of $800.97 million. In 2022, net cash of $3.45 billion was used in investing activities which was primarily due to loan growth of $2.37 billion and purchases of $1.09 billion of investment securities over proceeds from sales, calls and maturities of investment securities. During the year of 2023, net cash of $51.94 million was used in financing activities due primarily to net repayments of $400.00 million from long-term FHLB borrowings partially offset by an increase of $517.27 million in deposits. Other uses of cash within funding activities for the year of 2023 were $194.73 million for cash dividends paid. During the year of 2022, net cash of $105.32 million was provided by financing activities due primarily to net advances of $1.38 billion from long-term FHLB borrowings partially offset by a decline of $1.04 billion in deposits. Other uses of cash within funding activities for the year of 2022 were $193.04 million for cash dividends paid and $79.46 million for the acquisition of treasury stock. The net effect of the cash flow activities was an increase in cash and cash equivalents of $422.29 million for the year of 2023 as compared to a decrease in cash and cash equivalents of $2.58 billion for the year of 2022. See the Consolidated Statement of Cash Flows in the Consolidated Financial Statements.

59

At December 31, 2023, United had an unused borrowing amount at the FHLB of approximately $6.74 billion subject to delivery of collateral after certain trigger points and $2.67 billion without the delivery of additional collateral. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $230 million, all of which was available at December 31, 2023. United also has a $20 million unsecured, revolving line of credit with an unrelated financial institution to provide for general liquidity needs, all of which were available at December 31, 2023. At December 31, 2023, United’s borrowing capacity for the FRB Discount Window was $2.67 billion. United did not have any borrowings from the FRB’s Discount Window, or its Bank Term Funding Program, during the year of 2023.

United enters into derivative contracts, mainly to protect against adverse interest rate movements on the value of certain assets or liabilities, under which it is required to either pay cash to or receive cash from counterparties depending on changes in interest rates. Derivative contracts are carried at fair value and not notional value on the consolidated balance sheet and therefore do not represent the amounts that may ultimately be paid under these contracts. Further discussion of derivative instruments is included in Note R, Notes to Consolidated Financial Statements.

United is also a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The following table details the amounts of significant commitments and letters of credit as of December 31, 2023:

[[GREPCENT_TABLE]]
[["(In thousands)","","Amount"],["Commitments to extend credit:"],["Revolving open-end secured by 1-4 residential","","$","841,754"],["Credit card and personal revolving lines","","","247,616"],["Commercial","","","5,762,520"],["Total unused commitments","","$","6,851,890"],["Financial standby letters of credit","","$","72,631"],["Performance standby letters of credit","","","75,074"],["Commercial letters of credit","","","16,233"],["Total letters of credit","","$","163,938"]]
[[/GREPCENT_TABLE]]

Commitments generally have fixed expiration dates or other termination clauses, generally within one year, and may require the payment of a fee. Further discussion of commitments is included in Note Q, Notes to Consolidated Financial Statements.

United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures. There are no known trends, demands, commitments, or events that will result in or that are reasonably likely to result in United’s liquidity increasing or decreasing in any material way. United also has lines of credit available. See Notes K and L 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 15.38% at December 31, 2023 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 13.14%, 13.14% and 11.39%, respectively. The December 31, 2023 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19 pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.

60

Total shareholders’ equity was $4.77 billion at December 31, 2023, which was an increase of $255.05 million or 5.65% from December 31, 2022. This increase is primarily due to increases of $170.19 million in net earnings and $73.05 million in accumulated other comprehensive income due mainly to an after-tax increase in the fair value of available for sale securities.

United’s equity to assets ratio was 15.94% at December 31, 2023 as compared to 15.31% at December 31, 2022. The primary capital ratio, capital and reserves to total assets and reserves, was 16.79% at December 31, 2023 as compared to 16.11% at December 31, 2022. United’s average equity to average asset ratio was 15.89% at December 31, 2023 as compared to 15.83% at December 31, 2022. All of these financial measurements reflect a financially sound position.

During the fourth quarter of 2023, United’s Board of Directors declared a cash dividend of $0.37 per share. Dividends per share of $1.45 for the year of 2023 represented an increase over the $1.44 per share paid for 2022. Total cash dividends declared to common shareholders were $196.12 million for the year of 2023 as compared to $194.98 million for the year of 2022. The year 2023 was the fiftieth consecutive year of dividend increases to United shareholders.